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| PRIOR PRINTER'S NO. 1632 | PRINTER'S NO. 2174 |
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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| SENATE BILL |
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| INTRODUCED BY EARLL, FONTANA, GREENLEAF, VOGEL, PIPPY, WAUGH, GORDNER, McILHINNEY, BOSCOLA, COSTA, FERLO, BROWNE, YUDICHAK, BLAKE AND FARNESE, SEPTEMBER 29, 2011 |
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| SENATOR BRUBAKER, FINANCE, AS AMENDED, MAY 9, 2012 |
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| AN ACT |
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1 | Amending Title 12 (Commerce and Trade) of the Pennsylvania |
2 | Consolidated Statutes, providing for an angel investment tax |
3 | credit. |
4 | The General Assembly of the Commonwealth of Pennsylvania |
5 | hereby enacts as follows: |
6 | Section 1. Title 12 of the Pennsylvania Consolidated |
7 | Statutes is amended by adding a chapter to read: |
8 | CHAPTER 38 |
9 | ANGEL INVESTMENT TAX CREDIT |
10 | Sec. |
11 | 3801. Scope of chapter. |
12 | 3802. Purpose. |
13 | 3803. Definitions. |
14 | 3804. Program established. | <-- |
15 | 3804 3805. Credit for qualified investment. | <-- |
16 | 3805. Carryover, application of tax credit 3806. Application | <-- |
17 | of tax credit, carryover, carryback, refund and |
18 | assignment. |
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1 | 3806 3807. Time limitation. | <-- |
2 | 3807 3808. Limitation on tax credits. | <-- |
3 | 3808 3809. Shareholder, owner or member pass-through. | <-- |
4 | 3809 3810. Repayment and penalty. | <-- |
5 | 3810 3811. Reports. | <-- |
6 | 3811 3812. Termination. | <-- |
7 | 3812 Regulations 3813. Guidelines. | <-- |
8 | § 3801. Scope of chapter. |
9 | This chapter relates to angel investment tax credits. |
10 | § 3802. Purpose. |
11 | The purposes of this chapter are to: |
12 | (1) Create a business environment in this Commonwealth |
13 | that attracts and encourages early stage financing which |
14 | creates business opportunities with the potential for high |
15 | growth. |
16 | (2) Increase capital investment in this Commonwealth. |
17 | (3) Encourage job creation in this Commonwealth. |
18 | § 3803. Definitions. |
19 | The following words and phrases, when used in this chapter, |
20 | shall have the meanings given to them in this section, unless |
21 | the context clearly indicates otherwise: |
22 | "Accredited investor." Any A person who comes within any of | <-- |
23 | the following categories at the time qualified to claim an angel |
24 | investment tax credit: |
25 | (1) Any A natural person whose individual net worth, or | <-- |
26 | joint net worth with that individual's spouse exceeds |
27 | $1,000,000. |
28 | (2) Any A natural person who had an individual income in | <-- |
29 | excess of $200,000 in each of the two most recent years or |
30 | joint income with that individual's spouse in excess of |
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1 | $300,000 in each of those years and has a reasonable |
2 | expectation of reaching the same income level in the current |
3 | year. |
4 | (3) Any An entity in which all of the equity owners are | <-- |
5 | accredited investors persons who satisfy paragraph (1) or | <-- |
6 | (2), or both. For purposes of this paragraph an equity owner |
7 | shall mean the beneficial owner of equity securities or |
8 | equity interest in the entity. |
9 | "Business plan." An outline of business structure and a |
10 | formal statement of business goals, including an explanation of |
11 | how the goals are anticipated to be achieved. At a minimum the |
12 | business goals should indicate the potential for increasing jobs |
13 | in this Commonwealth and increasing and capital investment in | <-- |
14 | this Commonwealth. A plan shall specify that it is based upon |
15 | the development or commercialization of intellectual property |
16 | for which either of the following apply: |
17 | (1) Patent protection under 35 U.S.C. (relating to |
18 | patents) has been secured or is pending. |
19 | (2) A copyright under 17 U.S.C. (relating to copyrights) |
20 | has been secured or is pending. |
21 | "Department." The Department of Community and Economic |
22 | Development of the Commonwealth. |
23 | "Net worth." The value of all long-term assets minus the | <-- |
24 | value of all liabilities of a person, except as follows: |
25 | (1) the person's primary residence shall not be included |
26 | as an asset; and |
27 | (2) indebtedness that is secured by the person's primary |
28 | residence, up to the estimated fair market value of the |
29 | primary residence at the time qualified to claim an angel |
30 | investment tax credit, shall not be included as a liability, |
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1 | except that if the amount of such indebtedness outstanding at |
2 | the time qualified to claim an angel investment tax credit |
3 | exceeds the amount outstanding 60 days before such time, |
4 | other than as a result of the acquisition of the primary |
5 | residence, the amount of such excess shall be included in a |
6 | liability. |
7 | "Pass-through entity." A partnership as defined in section |
8 | 301(n.o) of the act of March 4, 1971 (P.L.6, No.2), known as the |
9 | Tax Reform Code of 1971, or a Pennsylvania S corporation as |
10 | defined in section 301(n.1) of the Tax Reform Code of 1971. |
11 | "Qualified business venture." A business that is based on a |
12 | business plan that satisfies the following requirements all of | <-- |
13 | the following: |
14 | (1) The business is headquartered or establishes its | <-- |
15 | headquarters in this Commonwealth prior to at the time the | <-- |
16 | taxpayer is qualified to apply for an applies for the angel | <-- |
17 | investment tax credit and for at least five years thereafter. | <-- |
18 | (2) The business maintains its headquarters in this | <-- |
19 | Commonwealth for at least five years after the taxpayer |
20 | applied for the angel investment tax credit. |
21 | (2) (3) At least 51% of the employees employed by of the | <-- |
22 | business are employed in this Commonwealth at the time the |
23 | taxpayer is qualified to apply for an applies for the angel | <-- |
24 | investment tax credit and for at least three years |
25 | thereafter. |
26 | (3) (4) The business has fewer than 100 employees at the | <-- |
27 | time the taxpayer is qualified to apply for an applies for | <-- |
28 | the angel investment tax credit. |
29 | (4) (5) The business has been in operation in this | <-- |
30 | Commonwealth for not more than five consecutive years at the |
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1 | time the taxpayer is qualified to apply for an applies for | <-- |
2 | the angel investment tax credit. |
3 | (5) (6) The business has not received, in aggregate, | <-- |
4 | more than $5,000,000, in the aggregate, in private equity | <-- |
5 | investments at the time the taxpayer applies for the angel | <-- |
6 | investment tax credit. |
7 | "Qualified investment." A private equity interest in a for- |
8 | profit business acquired by the payment of money or its |
9 | equivalent, which is subject to approval by the Department of |
10 | Community and Economic Development for purposes of qualifying |
11 | for this tax credit by an accredited investor or a network of |
12 | accredited investors who review new businesses or a proposed | <-- |
13 | business businesses for the purpose of making an initial or | <-- |
14 | subsequent investment. |
15 | "Qualified tax liability." The liability for taxes imposed |
16 | under Article III, IV or VI of the act of March 4, 1971 (P.L.6, |
17 | No.2), known as the Tax Reform Code of 1971. The term shall |
18 | include the liability for taxes imposed under Article III of the |
19 | Tax Reform Code of 1971 on an owner a member, owner or | <-- |
20 | shareholder of a pass-through entity. |
21 | "Secretary." The Secretary of Community and Economic |
22 | Development of the Commonwealth. |
23 | "Tax credit." The angel investment tax credit authorized |
24 | under this chapter. |
25 | "Taxpayer." An entity A person subject to tax under Article | <-- |
26 | III, IV or VI of the act of March 4, 1971 (P.L.6, No.2), known |
27 | as the Tax Reform Code of 1971. The term shall include the | <-- |
28 | shareholder, owner or member a member, owner or shareholder of a | <-- |
29 | pass-through entity that receives an angel investment tax |
30 | credit. |
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1 | § 3804. Program established. | <-- |
2 | The Angel Investment Tax Credit program is established in the |
3 | department. |
4 | § 3804 3805. Credit for qualified investment. | <-- |
5 | (a) Application.--A taxpayer that made a qualified |
6 | investment in a taxable year may apply for a tax credit as | <-- |
7 | provided under this chapter. The department, in consultation |
8 | with the Department of Revenue, shall establish appropriate |
9 | application filing deadlines for tax credits in a manner that | <-- |
10 | allows for the expeditious utilization of the tax credit by the |
11 | taxpayer. The application shall be submitted on a form required |
12 | by the department and must be accompanied by the business plan |
13 | which has been certified by the taxpayer applying for the tax |
14 | credit. |
15 | (b) Approval.--The department may approve the application |
16 | upon being satisfied about the following: |
17 | (1) Upon review of the application for a tax credit, the |
18 | department finds that all requirements have been met, |
19 | including the requirements of a qualified business venture |
20 | and any corresponding guidelines the department establishes |
21 | in the best interest of the Commonwealth. |
22 | (2) The Department of Revenue finds that all taxpayers |
23 | applying for the tax credit have filed all required State tax | <-- |
24 | reports and returns for all applicable taxable years and paid |
25 | applying for the tax credit have: | <-- |
26 | (i) filed all required State tax reports and returns |
27 | for all taxable years; and |
28 | (ii) entered into a payment plan under which |
29 | payments have been maintained or paid any balance of |
30 | State tax due as determined at settlement, assessment or | <-- |
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1 | determination by the Department of Revenue. |
2 | (c) Amount.--A taxpayer that is approved under subsection |
3 | (b) shall receive a tax credit for the taxable year in the |
4 | amount of 25% of the taxpayer's qualified investment in a |
5 | qualified business venture. |
6 | (d) Notification.--By December 31 of the calendar year |
7 | following the close of the taxable year during which the |
8 | qualified investment was made, the department shall notify the |
9 | taxpayer of the amount of the taxpayer's tax credit approved by |
10 | the department. |
11 | § 3805. Carryover, application of tax credit 3806. Application | <-- |
12 | of tax credit, carryover, carryback, refund and |
13 | assignment. |
14 | (a) Application of tax credit.--A tax credit approved by the | <-- |
15 | department for a qualified investment in a taxable year shall |
16 | first be applied against the taxpayer's qualified tax liability |
17 | for the current taxable year as of the date on which the tax |
18 | credit was approved before the tax credit is applied against any |
19 | tax liability under subsection (b). |
20 | (a) (b) Carryover.--If the taxpayer cannot use the entire | <-- |
21 | amount of the tax credit for the taxable year in which the tax |
22 | credit is first approved, the excess may be carried over to |
23 | succeeding taxable years and used as a credit against the |
24 | qualified tax liability of the taxpayer for those taxable years. |
25 | Each time that the tax credit is carried over to a succeeding |
26 | taxable year, it shall be reduced by the amount that was used as |
27 | a credit during the immediately preceding taxable year. The tax |
28 | credit may be carried over and applied to succeeding taxable |
29 | years for no more than seven taxable years following the first |
30 | taxable year for which the taxpayer was entitled to claim the |
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1 | tax credit. |
2 | (b) Application of tax credit.--A tax credit approved by the | <-- |
3 | department for a qualified investment in a taxable year shall |
4 | first be applied against the taxpayer's qualified tax liability |
5 | for the current taxable year as of the date on which the tax |
6 | credit was approved before the tax credit is applied against any |
7 | tax liability under subsection (a). |
8 | (c) Carryback or refund.--A taxpayer is not entitled to |
9 | carry back or obtain a refund of an unused tax credit. |
10 | (d) Sale or assignment.--A taxpayer, upon application to and | <-- |
11 | (d) Sale or assignment.-- | <-- |
12 | (1) A taxpayer, upon application to and approval by the |
13 | department in consultation with the Department of Revenue, |
14 | may sell or assign, in whole or in part, a tax credit granted |
15 | to the taxpayer under this chapter if the taxpayer does not |
16 | have a qualified tax liability against which the tax credit |
17 | may be applied in the current taxable year. The department |
18 | shall establish guidelines, in consultation with the |
19 | Department of Revenue, for the approval of applications under |
20 | this subsection. Before an application is approved, the | <-- |
21 | this subsection. | <-- |
22 | (2) Before an application is approved, the Department of |
23 | Revenue shall make a finding that the applicant has filed all | <-- |
24 | required State tax reports and returns for all applicable |
25 | taxable years and paid any balance of State tax due taxpayer | <-- |
26 | and assignee, if any, have: |
27 | (i) filed all required State tax reports and returns |
28 | for all taxable years; and |
29 | (ii) entered into a payment plan under which |
30 | payments have been maintained or paid any balance of |
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1 | State tax due as determined at settlement, assessment or |
2 | determination by the Department of Revenue. |
3 | (e) Purchasers and assignees.--The purchaser or assignee of |
4 | all or a portion of a tax credit under subsection (d) shall |
5 | immediately claim the credit in the taxable year in which the |
6 | purchase or assignment is made, although the purchaser or |
7 | assignee may carry over unused tax credits to the succeeding |
8 | taxable year for up to two years. The amount of the tax credit |
9 | that a purchaser or assignee may use against any one qualified |
10 | tax liability may not exceed 75% of the qualified tax liability |
11 | for the taxable year. The purchaser or assignee may not carry |
12 | back or obtain a refund of or sell or assign the tax credit. The |
13 | purchaser or assignee shall notify the department, and the |
14 | department shall notify the Department of Revenue of the seller |
15 | or assignor of the tax credit in compliance with procedures |
16 | specified by the department, in consultation with the Department |
17 | of Revenue. |
18 | (f) Taxpayer's adjusted basis in a qualified investment.-- | <-- |
19 | (1) A taxpayer's adjusted basis in a qualified |
20 | investment must be reduced by an amount equal to the tax |
21 | credit approved under section 3805(c) (relating to credit for |
22 | qualified investment). |
23 | (2) Except for the reduction in adjusted basis required |
24 | in paragraph (1), a taxpayer's adjusted basis in a qualified |
25 | investment is determined under the act of March 4, 1971 |
26 | (P.L.6, No.2), known as the Tax Reform Code of 1971, and the |
27 | regulations promulgated thereunder. |
28 | § 3806 3807. Time limitation. | <-- |
29 | A taxpayer shall not be entitled to a tax credit for |
30 | qualified investments incurred made in taxable years ending | <-- |
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1 | after December 31, 2021. |
2 | § 3807 3808. Limitation on tax credits. | <-- |
3 | (a) Total amount.--The total amount of tax credits approved |
4 | by the department in a fiscal year shall be equal to the |
5 | difference between $25,000,000 and the total amount of keystone |
6 | innovation zone tax credits issued under section 3706 (relating |
7 | to keystone innovation zone tax credits) through December 15th |
8 | of each year. |
9 | (b) Allocation.--Tax credits shall be allocated by the |
10 | department on a first-come-first-served basis. |
11 | § 3808 3809. Shareholder, owner or member pass-through. | <-- |
12 | (a) Shareholder entitlement.--If a Pennsylvania S |
13 | corporation does not have an eligible a qualified tax liability | <-- |
14 | against which the tax credit may be applied, a shareholder of |
15 | the Pennsylvania S corporation shall be entitled to a tax credit |
16 | equal to the tax credit determined for the Pennsylvania S |
17 | corporation for the taxable year multiplied by the percentage of |
18 | the Pennsylvania S corporation's distributive income to which |
19 | the shareholder is entitled. |
20 | (b) Pass-through entity entitlement.--If a pass-through |
21 | entity other than a Pennsylvania S corporation does not have a | <-- |
22 | qualified tax liability against which the tax credit may be |
23 | applied, an owner or member of the pass-through entity shall be |
24 | entitled to a tax credit equal to the tax credit determined for |
25 | the pass-through entity for the taxable year multiplied by the |
26 | percentage of the pass-through entities' distributive income to |
27 | which the owner or member is entitled. |
28 | (c) Additional credit.-- |
29 | (1) Except as provided under paragraph (2), the tax |
30 | credit provided under subsections (a) or (b) shall be in |
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1 | addition to any tax credit to which a shareholder, owner or |
2 | member of a pass-through entity is otherwise entitled under |
3 | this chapter. |
4 | (2) A pass-through entity and a shareholder, owner or |
5 | member of a pass-through entity shall not claim a tax credit |
6 | under this chapter for the same qualified investment. |
7 | § 3809 3810. Repayment and penalty. | <-- |
8 | (a) Imposition.--Except as provided in subsection (b), the |
9 | department shall require the taxpayer to repay any tax credit |
10 | received and any monetary value received from the sale or |
11 | assignment, if any, of a tax credit and shall impose a penalty | <-- |
12 | of 10% where it has been determined that the recipient taxpayer | <-- |
13 | did not meet the requirements of the taxpayer's certified |
14 | qualified business plan or received such as the result of fraud |
15 | and false pretenses. based on the total amount of the tax credit | <-- |
16 | received, where the department, in conjunction with the |
17 | Department of Revenue, determines that any of the following |
18 | conditions exists: |
19 | (1) The qualified business venture did not satisfy the |
20 | requirements of the certified qualified business plan. |
21 | (2) The business in which the taxpayer made the |
22 | qualified investment is no longer a qualified business |
23 | venture. |
24 | (3) The taxpayer received the tax credit as a result of |
25 | fraud or false pretenses. |
26 | (b) Exception.--The department may waive the repayment of a |
27 | tax credit or and any monetary value received from the sale or | <-- |
28 | assignment, if any, of the tax credit and may waive the penalty |
29 | required in by subsection (a) if the department determines that | <-- |
30 | the failure to meet the requirements of the certified qualified |
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1 | business plan was due to circumstances outside the recipient |
2 | taxpayer's control. |
3 | § 3810 3811. Reports. | <-- |
4 | (a) Annual report to General Assembly.--The secretary shall | <-- |
5 | submit an annual report to the chair and minority chair of the |
6 | standing committees in the Senate and the chair and minority |
7 | chair of the standing committees in the House of Representatives |
8 | with jurisdiction over the department and the Department of |
9 | Revenue indicating the effectiveness of the tax credit provided |
10 | under this chapter no later than March 15 following the fiscal |
11 | year in which the tax credits were approved. Notwithstanding any |
12 | law providing for the confidentiality of tax records, the report |
13 | shall include the names of all taxpayers awarded the tax credit, | <-- |
14 | utilizing the tax credit as of the date of the report and, the | <-- |
15 | amount of the tax credits approved and utilized by each taxpayer |
16 | and the names and locations of the qualified business ventures | <-- |
17 | for which the tax credits were awarded. The report may also |
18 | include any recommendations for changes in the calculation or |
19 | administration of the angel investment tax credit. The report | <-- |
20 | and the information contained in it shall be considered a public |
21 | record under section 102 of the act of February 14, 2008 (P.L.6, |
22 | No.3), known as the Right-to-Know Law. |
23 | (b) Reports to General Assembly.--The department shall | <-- |
24 | submit a report to the the chair and minority chair of the |
25 | standing committees in the Senate and the chair and minority |
26 | chair of the standing committees in the House of Representatives |
27 | with jurisdiction over the department and the Department of |
28 | Revenue indicating the effectiveness of the tax credit by |
29 | December 31, 2013, and by December 31, 2016. Notwithstanding any |
30 | law providing for the confidentiality of tax records, the report |
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1 | shall include the names of all taxpayers awarded the tax |
2 | credits, all taxpayers utilizing the tax credits, the amount of |
3 | tax credits approved and utilized by each taxpayer and the |
4 | locations of the qualified business awarded the tax credits. The |
5 | report and the information contained in it shall be considered a |
6 | public record. |
7 | § 3811 3812. Termination. | <-- |
8 | The department shall not approve a tax credit for qualified |
9 | investments incurred made in taxable years ending after December | <-- |
10 | 31, 2021. |
11 | § 3812. Regulations. | <-- |
12 | The secretary, in consultation with the Secretary of Revenue, |
13 | shall promulgate regulations necessary for the implementation |
14 | and administration of this chapter. |
15 | § 3813. Guidelines. | <-- |
16 | The department, in conjunction with the Department of |
17 | Revenue, shall develop written guidelines for the implementation |
18 | and administration of this chapter. The guidelines shall be |
19 | posted on the department's publicly accessible Internet website. |
20 | Section 2. This act shall take effect immediately. |
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