Section 531.20  Definitions

The following definitions are applicable to the Angel Investment Credit Program.

"Act" means the Illinois Income Tax Act [35 ILCS 5].

"Applicant" means a corporation, partnership, limited liability company, or a natural person that makes an investment in a qualified new business venture that applies to the Angel Investment Tax Credit. The term "applicant" does not include a corporation, partnership, limited liability company, or a natural person who has a direct or indirect ownership interest of at least 51% in the profits, capital, or value of the qualified new business venture receiving the investment or a related member. [35 ILCS 5/220(a)]

"Claimant" means an applicant certified by the Department who files a claim for a credit under Section 531.50. [35 ILCS 5/220(a)]

"Contingent equity investment" means money (or its equivalent) given to a qualified new business venture in consideration for a future equity interest that matures or converts to equity within three years after the investment. If the agreement governing investment does not provide for mandatory and unconditional conversion within three years after the investment, the investment will not be considered a contingent equity investment. Contingent equity investments that have features of a debt instrument may be ineligible for a tax credit if the agreement contains unreasonable risk mitigation provisions, as determined by the Department.

"Department" means the Illinois Department of Commerce and Economic Opportunity. [35 ILCS 5/220(a)]

"Employee" means an individual who is employed for consideration for at least 35 hours each week or who renders any other standard of service generally accepted by industry custom or practice as full-time employment. Annually scheduled periods for inventory or repairs, vacations, holidays and paid time for sick leave, vacation or other leave is included in this computation of full-time employment.  An individual for whom a W-2 is issued by a Professional Employer Organization (PEO) is a full-time employee if employed in the service of the applicant for consideration for at least 35 hours each week or who renders to the applicant any other standard of service generally accepted by industry custom or practice as full-time employment. For example, an employee who works 25 hours per week meets the industry standard for full-time in the package delivery industry, and an employee who is employed for a least 35 hours per week during the historical seasonal production meets the industry standard for full-time in the candy manufacturing industry.

"Full-time equivalent job" means the number of hours worked by multiple employees to equal the number of hours worked by one full-time employee.  For purposes of this definition, full-time employee means a person who works a minimum of 35 hours per week for a minimum of 13 consecutive weeks to be counted toward full-time equivalency.

"Investment" means money (or its equivalent) given to a qualified new business venture, at a risk of loss, in consideration for an equity interest of the qualified new business venture. [35 ILCS 5/220(a)]  For the purposes of this definition, an investment is at risk of loss if its repayment depends entirely upon the success of the business operations of the qualified new business venture. A contingent equity investment is an investment.

"Liquidity event" means any event that would be considered an exit for an illiquid investment, including any event that allows the equity holders of the business (or any material portion of the business) to cash out some or all of their respective equity interests. [35 ILCS 5/220(i)(3)]

"Minimum employment threshold" means:

at least 51% of the business' employee positions are in Illinois; or

the principal place of business is in Illinois.

"Principal place of business" means the place where the business' high-level officers direct, control, and coordinate the business' activities.

"Qualified new business venture" means a business that is registered with the Department under Section 531.60. [35 ILCS 5/220(a)]

"Qualifying liquidity event" means a liquidity event in which the claimant does not convey an equity interest to the qualified new business venture or a related member of the qualified new business venture.

"Related member" means a person that, with respect to the term "applicant", is any one of the following:

An individual, if the individual and the members of the individual's family (as defined in section 318 of the Internal Revenue Code (26 U.S.C. 318)) own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50% of the value of the outstanding profits, capital, stock, or other ownership interest in the recipient of the applicant's investment.

A partnership, estate or trust and any partner or beneficiary, if the partnership, estate or trust and its partners or beneficiaries own directly, indirectly, beneficially, or constructively, in the aggregate, at least 50% of the profits, capital, stock or other ownership interest in the recipient of the applicant's investment.

A corporation and any party related to the corporation in a manner that would require an attribution of stock from the corporation under the attribution rules of section 318 of the Internal Revenue Code (26 U.S.C. 318), if the applicant and any other related member own, in the aggregate, directly, indirectly, beneficially, or constructively, at least 50% of the value of the outstanding stock of the recipient of the applicant's investment.

A corporation and any party related to that corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of section 318 of the Internal Revenue Code if the corporation and all such related parties own, in the aggregate, at least 50% of the profits, capital, stock, or other ownership interest in the recipient of the applicant's investment.

A person to or from whom there is attribution of ownership of the stock of the recipient of the applicant's investment in accordance with section 1563(e) of the Internal Revenue Code (26 U.S.C. 1563(e)), except that, for purposes of determining whether a person is a related member under this paragraph, "20%" shall be substituted for "5%" whenever "5%" appears in section 1563(e) of the Internal Revenue Code. [35 ILCS 5/220(a)]

"Unreasonable risk mitigation provisions" means investment terms that remove a significant degree of the risk of loss, as determined by the Department, during the three years following the investment. Examples of these provisions include provisions for interest payments, security, and priority in the event of liquidation.

(Source:  Amended at 48 Ill. Reg. 11949, effective July 29, 2024)