Bill Text: IL SB3710 | 2009-2010 | 96th General Assembly | Engrossed

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Bill Title: Amends the Illinois Income Tax Act. Makes a technical change in a Section concerning the short title.

Sponsorship: Partisan Bill (Democrat 14)

Status: (Engrossed - Dead) 2010-06-27 - Pursuant to Senate Rule 3-9(b) / Referred to Assignments [SB3710 Detail]

Download: Illinois-2009-SB3710-Engrossed.html

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AN ACT concerning revenue.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Income Tax Act is amended by adding
Sections 219 and 220 as follows:
(35 ILCS 5/219 new)
Sec. 219. Early stage seed investment credit.
(a) As used in this Section:
"Claimant" means a person who files a claim for a credit
under this Section.
"Department" means the Department of Commerce and Economic
Opportunity.
"Fund manager" means an investment fund manager certified
under subsection (e) of this Section.
(b) For taxable years beginning after December 31, 2010,
subject to the limitations provided under this Section, a
claimant may claim, as a credit against the tax imposed under
subsections (a) and (b) of Section 201 of this Act, an amount
equal to 25% of the amount invested by the claimant with a fund
manager and invested by the fund manager in a business
certified under Section 220 of this Act. The credit under this
Section may not exceed the taxpayer's Illinois income tax
liability for the taxable year. If the amount of the credit

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exceeds the tax liability for the year, the excess may be
carried forward and applied to the tax liability of the 5
taxable years following the excess credit year. The credit
shall be applied to the earliest year for which there is a tax
liability. If there are credits from more than one tax year
that are available to offset a liability, the earlier credit
shall be applied first.
In the case of a partnership or limited liability company,
the computation of the 25% limitation under this subsection
shall be determined at the entity level rather than the
claimant level and may be allocated among the claimants who
make investments in the manner set forth in the entity's
organizational documents. The partnership or limited liability
company shall provide to the Department and the Department of
Revenue the names and tax identification numbers of the
claimants, the amounts of the credits allocated to the
claimants, and the computation of the allocations.
(c) The Illinois adjusted basis of any investment for which
a credit is claimed under this Section shall be reduced by the
amount of the credit that is offset against Illinois income
taxes. The Illinois basis of a partner's interest in a
partnership, a member's interest in a limited liability
company, or stock in an S corporation shall be adjusted to
reflect adjustments made under this subsection.
(d) If an investment for which a claimant claims a credit
under subsection (b) is held by the claimant for less than 3

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years, the claimant shall pay to the Department, in the manner
prescribed by the Department, the amount of the credit that the
claimant received related to the investment.
(e) The Department shall implement a program to certify
investment fund managers for purposes of this Section. An
investment fund manager desiring certification shall submit an
application to the Department. The investment fund manager
shall specify in the application the investment amount that the
manager wishes to raise, and the Department may certify the
manager and determine the amount that qualifies for purposes of
this Section. In determining whether to certify an investment
fund manager, the Department shall consider the investment fund
manager's experience in managing venture capital funds, the
past performance of investment funds managed by the applicant,
the expected level of investment in the investment fund to be
managed by the applicant, and any other relevant factors. The
Department may certify only investment fund managers that
commit to consider placing investments in businesses certified
under Section 220 of this Act.
The Department shall maintain a list of businesses
certified under Section 220 of this Act and investment fund
managers certified under this subsection, and shall permit
public access to the lists through the Department's Internet
website.
The Department shall notify the Department of Revenue of
every certification issued under this subsection and under

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Section 220 of this Act and the date on which any such
certification is revoked or expires.
(f) The Department, in consultation with the Department of
Revenue, shall adopt rules to administer this Section. The
rules shall limit the aggregate amount of the tax credits under
this Section that may be claimed for investments paid to fund
managers certified under subsection (e) at $10,000,000 per
calendar year. The rules shall also provide that no claimant
may receive a credit under this Section unless the claimant's
investment is kept in a certified business, or with a certified
fund manager, for no less than 3 years.
(g) A claimant may sell or otherwise transfer a credit
awarded under this Section to another person who is subject to
the taxes or fees imposed under subsections (a) or (b) of
Section 201, if the transferee receives prior authorization
from the Department and the Department of Revenue and the
Department then notifies the investment fund manager of the
transfer. The Department may charge any person selling or
otherwise transferring a credit under this subsection a fee
equal to 1% of the credit amount sold or transferred.
(h) This Section is exempt from the provisions of Section
250.
(35 ILCS 5/220 new)
Sec. 220. Angel investment credit.
(a) As used in this Section:

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"Bona fide angel investment" means a purchase of an equity
interest, or any other expenditure, as determined by rule under
this Section, that is made by:
(1) a person who reviews new businesses or proposed new
businesses for potential investment of the person's money;
or
(2) a network of persons each of whom satisfies item
(1).
"Claimant" means an individual who files a claim for a
credit under this Section.
"Department" means the Department of Commerce and Economic
Opportunity.
"Person" means a partnership or limited liability company
that is a non-operating entity, as determined by the
Department, a natural person, or fiduciary.
"Qualified new business venture" means a business that is
certified under this Section.
(b) For taxable years beginning after December 31, 2010,
subject to the limitations provided in this Section, a claimant
may claim, as a credit against the tax imposed under
subsections (a) and (b) of Section 201 of this Act, an amount
equal to 25% of the claimant's bona fide angel investment made
directly in a qualified new business venture. The credit under
this Section may not exceed the taxpayer's Illinois income tax
liability for the taxable year. If the amount of the credit
exceeds the tax liability for the year, the excess may be

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carried forward and applied to the tax liability of the 5
taxable years following the excess credit year. The credit
shall be applied to the earliest year for which there is a tax
liability. If there are credits from more than one tax year
that are available to offset a liability, the earlier credit
shall be applied first.
(c) The maximum amount of a claimant's investment that may
be used as the basis for a credit under this Section is
$2,000,000 for each investment made directly in a business
certified under this Section.
(d) If an investment for which a claimant claims a credit
under subsection (b) is held by the claimant for less than 3
years, the claimant shall pay to the Department, in the manner
prescribed by the Department, the amount of the credit that the
claimant received related to the investment.
(e) The Illinois adjusted basis of any investment for which
a credit is claimed under subsection (b) shall be reduced by
the amount of the credit that is offset against Illinois income
taxes.
(f) The Department shall implement a program to certify
businesses for purposes of this Section. A business desiring
certification shall submit an application to the Department in
each taxable year for which the business desires certification.
The business shall specify in its application the investment
amount it wishes to raise, and the Department may certify the
business and determine the amount that qualifies for purposes

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of this Section. Unless otherwise provided under the rules of
the Department, a business may be certified under this
subsection, and may maintain such certification, only if the
business satisfies all of the following conditions:
(1) it has its headquarters in this State;
(2) at least 51% of the employees employed by the
business are employed in this State;
(3) it has the potential for increasing jobs in this
State, increasing capital investment in this State, or
both, and any of the following apply:
(A) it is engaged in, or has committed to engage
in, innovation in any of the following: manufacturing;
biotechnology; nanotechnology; communications;
agriculture; clean energy creation or storage
technology; processing or assembling products,
including medical devices, pharmaceuticals, computer
software, computer hardware, semiconductors, other
innovative technology products, or other products that
are produced using manufacturing methods that are
enabled by applying proprietary technology; or
providing services that are enabled by applying
proprietary technology; or
(B) it is undertaking pre-commercialization
activity related to proprietary technology that
includes conducting research, developing a new product
or business process, or developing a service that is

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principally reliant on applying proprietary
technology.
(4) it is not primarily engaged in real estate
development, insurance, banking, lending, lobbying,
political consulting, professional services provided by
attorneys, accountants, business consultants, physicians,
or health care consultants, wholesale or retail trade,
leisure, hospitality, transportation, or construction,
except construction of power production plants that derive
energy from a renewable energy resource, as defined in
Section 1 of the Illinois Power Agency Act;
(5) it has less than 100 employees;
(6) it has been in operation in Illinois for not more
than 10 consecutive years prior to the year of
certification; and
(7) prior to certification, it has received not more
than (i) $2,000,000 in investments that qualified for tax
credits under this Section, (ii) $10,000,000 in aggregate
private equity investment in cash, and (iii) $4,000,000 in
investments that qualified for tax credits under this
Section or Section 219 of this Act.
(g) The Department, in consultation with the Department of
Revenue, shall adopt rules to administer this Section. The
rules shall further define "bona fide angel investment" for
purposes of this Section. The rules shall limit the aggregate
amount of the tax credits that may be claimed under this

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Section for investments made in qualified new business ventures
at $10,000,000 per calendar year.
(h) A claimant may sell or otherwise transfer a credit
awarded under this Section to another person who is subject to
the taxes or fees imposed under subsections (a) or (b) of
Section 201, if the transferee receives prior authorization
from the Department and the Department of Revenue. The
Department may charge any person selling or otherwise
transferring a credit under this subsection a fee equal to 1%
of the credit amount sold or transferred.
(i) This Section is exempt from the provisions of Section
250.
Section 99. Effective date. This Act takes effect upon
becoming law.