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1 | AN ACT concerning revenue.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 1. Short title. This Act may be cited as the Rural | ||||||||||||||||||||||||||
5 | Job Creation Tax Credit Act. | ||||||||||||||||||||||||||
6 | Section 5. Nonrefundable rural job creation tax credit. | ||||||||||||||||||||||||||
7 | (a) For taxable years beginning on or after January 1, | ||||||||||||||||||||||||||
8 | 2020, a taxpayer may claim a nonrefundable tax credit against | ||||||||||||||||||||||||||
9 | the tax imposed by subsections (a) and (b) of Section 201 of | ||||||||||||||||||||||||||
10 | the Illinois Income Tax Act for rural job creation as provided | ||||||||||||||||||||||||||
11 | in this Section. | ||||||||||||||||||||||||||
12 | (b) The tax credit under this Section is the amount listed | ||||||||||||||||||||||||||
13 | as the tax credit amount on a tax credit certificate issued by | ||||||||||||||||||||||||||
14 | the Department to the taxpayer for the taxable year. | ||||||||||||||||||||||||||
15 | (c) A taxpayer may carry forward a tax credit under this | ||||||||||||||||||||||||||
16 | Section for the next 7 taxable years if the amount of the tax | ||||||||||||||||||||||||||
17 | credit exceeds the taxpayer's tax liability under the Illinois | ||||||||||||||||||||||||||
18 | Income Tax Act for the taxable year in which the taxpayer | ||||||||||||||||||||||||||
19 | claims the tax credit. | ||||||||||||||||||||||||||
20 | Section 10. Definitions. As used in this Act: | ||||||||||||||||||||||||||
21 | Affiliate" means a person that directly, or indirectly | ||||||||||||||||||||||||||
22 | through one or more intermediaries, controls, is controlled by, |
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1 | or is under common control with another person. For the | ||||||
2 | purposes of this part, a person controls another person if the | ||||||
3 | person holds, directly or indirectly, the majority voting or | ||||||
4 | ownership interest in the controlled person or has control over | ||||||
5 | the day-to-day operations of the controlled person by contract | ||||||
6 | or by law. | ||||||
7 | "Claimant" means a resident or nonresident person that has | ||||||
8 | taxable income under the Illinois Income Tax Act. | ||||||
9 | "Closing date" means the date on which a rural investment | ||||||
10 | company has collected all of the investments. | ||||||
11 | "Credit-eligible contribution" means an investment of cash | ||||||
12 | by a claimant in a rural investment company that is or will be | ||||||
13 | eligible for a tax credit as evidenced by notification issued | ||||||
14 | by the Department under this Act. The investment shall purchase | ||||||
15 | an equity interest in the rural investment company or purchase, | ||||||
16 | at par value or premium, a debt instrument issued by the rural | ||||||
17 | investment company that has a maturity date at least five years | ||||||
18 | after the closing date. | ||||||
19 | "Department" means the Department of Commerce and Economic | ||||||
20 | Opportunity. | ||||||
21 | "Eligible small business" means a business that at the time | ||||||
22 | of an initial growth investment in the business by a rural | ||||||
23 | investment company: | ||||||
24 | (1) has fewer than 150 employees; | ||||||
25 | (2) has less than $10,000,000 in net income for the | ||||||
26 | preceding taxable year; |
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1 | (3) maintains the business's principal business | ||||||
2 | operations in the State; and | ||||||
3 | (4) is engaged in an industry related to: | ||||||
4 | (A) aerospace; | ||||||
5 | (B) defense; | ||||||
6 | (C) energy and natural resources; | ||||||
7 | (D) financial services; | ||||||
8 | (E) life sciences; | ||||||
9 | (F) outdoor products; | ||||||
10 | (G) software development; | ||||||
11 | (H) information technology; | ||||||
12 | (I) manufacturing; or | ||||||
13 | (J) agribusiness. | ||||||
14 | "Excess return" means the difference between: (i) the | ||||||
15 | present value of all growth investments made by a rural | ||||||
16 | investment company on the day the rural investment company | ||||||
17 | applies to exit the program under Section 63N-4-309, including | ||||||
18 | the present value of all distributions and gains from the | ||||||
19 | growth investments; and (ii) the sum of the amount of the | ||||||
20 | original growth investment and an amount equal to any projected | ||||||
21 | increase in the equity holder's federal or State tax liability, | ||||||
22 | including penalties and interest, related to the equity | ||||||
23 | holder's ownership, management, or operation of the rural | ||||||
24 | investment company. If this calculation is less than zero, then | ||||||
25 | the excess return is equal to zero.
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26 | "Federally licensed rural business investment company" |
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1 | means a person licensed as a rural business investment company | ||||||
2 | under 7 U.S.C. 2009cc.
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3 | "Federally licensed small business investment company" | ||||||
4 | means a person licensed as a small business investment company | ||||||
5 | under 15 U.S.C. 681. | ||||||
6 | "Investment authority" means the minimum amount of | ||||||
7 | investment a rural investment company must make in eligible | ||||||
8 | small businesses in order for credit-eligible contributions to | ||||||
9 | the rural investment company to qualify for a rural job | ||||||
10 | creation tax credit. | ||||||
11 | "Rural county" means a county designated as a rural county | ||||||
12 | by the Department. | ||||||
13 | "Rural investment company" means a company approved by the | ||||||
14 | Department. | ||||||
15 | "State reimbursement amount" means the difference between: | ||||||
16 | (i) 50% of the rural investment company's credit-eligible | ||||||
17 | capital contributions; and (ii) the product of: (A) the total | ||||||
18 | sum of new annual jobs reported to the State in the rural | ||||||
19 | investment company's exit report; and (B) $20,000. If the | ||||||
20 | amount calculated is less than zero, the State reimbursement | ||||||
21 | amount is equal to zero. | ||||||
22 | Section 15. Application, approval, and allocations. | ||||||
23 | (a) A person seeking approval as a rural investment company | ||||||
24 | shall submit an application to the Department. | ||||||
25 | (b) The Department shall begin accepting applications on |
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1 | November 1, 2019. Applications shall be in the form and manner | ||||||
2 | required by the Department, by rule, and shall include the | ||||||
3 | following: | ||||||
4 | (1) the total investment authority sought by the | ||||||
5 | applicant, which may not exceed $42,000,000; | ||||||
6 | (2) a copy of the applicant's or an affiliate of the | ||||||
7 | applicant's license as a federally
licensed rural business | ||||||
8 | investment company or as a federally licensed small | ||||||
9 | business investment company; | ||||||
10 | (3) evidence that, before the date the application is | ||||||
11 | submitted, the applicant or affiliates of the applicant | ||||||
12 | have invested at least $50,000,000 in nonpublic companies | ||||||
13 | located in counties in the United States with fewer than | ||||||
14 | 50,000 inhabitants; | ||||||
15 | (4) a signed affidavit from each claimant that commits | ||||||
16 | to make a credit-eligible capital contribution to the | ||||||
17 | applicant, stating the amount of that commitment; and | ||||||
18 | (5) the sum of all credit-eligible capital | ||||||
19 | contribution commitments under paragraph (4), which must | ||||||
20 | equal 58% of the total investment authority sought by the | ||||||
21 | applicant. | ||||||
22 | (c) The Department shall: | ||||||
23 | (1) review and evaluate the applications submitted | ||||||
24 | under this Section within 30 days of receipt in the order | ||||||
25 | in which the applications are received; and | ||||||
26 | (2) consider applications received on the same day to |
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1 | have been received simultaneously. | ||||||
2 | (d) If, after review and evaluation of an application, the | ||||||
3 | Department determines that the application does not meet the | ||||||
4 | requirements of subsection (b), the Department shall: (i) deny | ||||||
5 | the application; or (ii) notify the applicant that the | ||||||
6 | application was inadequate and allow the applicant to provide | ||||||
7 | additional information to the Department to complete, clarify, | ||||||
8 | or cure defects identified by the Department in the application | ||||||
9 | and inform the applicant that the additional information must | ||||||
10 | be received by the Department within 5 days of the notice in | ||||||
11 | order to be considered. | ||||||
12 | If an applicant submits additional information to the | ||||||
13 | Department, the Department shall consider the application to | ||||||
14 | have been received on the date it was originally received by | ||||||
15 | the Department and review and evaluate the additional | ||||||
16 | information within 10 days of receiving the additional | ||||||
17 | information. If, after review and evaluation of an application | ||||||
18 | submitted under this Section and any additional information | ||||||
19 | submitted, the Department determines that the application | ||||||
20 | meets the requirements of subsection (b), the Department shall: | ||||||
21 | (i) determine the amount of investment authority to award the | ||||||
22 | applicant, (ii) provide to the applicant a written notice of | ||||||
23 | approval as a rural investment company specifying the amount of | ||||||
24 | the applicant's investment authority, and (iii) notify each | ||||||
25 | claimant whose affidavit was included in the application that | ||||||
26 | the claimant qualifies for a tax credit. |
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1 | (e) The Department may not approve more than $42,000,000 in | ||||||
2 | total investment authority and not more than $24,360,000 in | ||||||
3 | total credit-eligible contributions under this Section. | ||||||
4 | Subject to the provisions of this subsection, if an application | ||||||
5 | is approved, the Department shall approve the amount of | ||||||
6 | investment authority requested on the application. The | ||||||
7 | Department may continue to accept applications under this | ||||||
8 | Section until the amount of approved investment authority | ||||||
9 | reaches $42,000,000. If the Department approves multiple | ||||||
10 | applications received simultaneously and the total amount of | ||||||
11 | investment authority requested on those applications exceeds | ||||||
12 | the amount of investment authority remaining, the Department | ||||||
13 | shall proportionally reduce the investment authority and | ||||||
14 | credit-eligible capital contributions for each of these | ||||||
15 | applications as necessary to avoid exceeding the amount of | ||||||
16 | investment authority and credit-eligible capital contributions | ||||||
17 | remaining. | ||||||
18 | (f) Within 65 days after the day on which a rural | ||||||
19 | investment company receives approval of an application under | ||||||
20 | this Section, the rural investment company shall: | ||||||
21 | (1) collect the total amount of committed | ||||||
22 | credit-eligible capital contributions from each claimant | ||||||
23 | whose affidavit was included in the application; | ||||||
24 | (2) collect one or more cash equity investments | ||||||
25 | contributed by affiliates of the rural investment company, | ||||||
26 | including employees, officers, and directors of such |
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1 | affiliates, that equal at least 10% of the rural investment | ||||||
2 | company's investment authority; | ||||||
3 | (3) collect one or more cash investments that, when | ||||||
4 | added to the amounts collected under paragraphs (1) and | ||||||
5 | (2), equal the rural investment company's investment | ||||||
6 | authority; and | ||||||
7 | (4) send sufficient documentation to the Department to | ||||||
8 | prove that the amounts described in this subsection have | ||||||
9 | been collected. | ||||||
10 | (g) If the rural investment company fails to fully comply | ||||||
11 | with subsection (f), the rural investment company's approval | ||||||
12 | shall lapse and the corresponding investment authority and | ||||||
13 | credit-eligible capital contributions shall not count toward | ||||||
14 | the limits on the program size. If the Department awards lapsed | ||||||
15 | investment authority to a rural investment company, the | ||||||
16 | Department shall first award lapsed investment authority pro | ||||||
17 | rata to each rural investment company that was awarded less | ||||||
18 | than the requested investment authority, which a rural | ||||||
19 | investment company may allocate to the rural investment | ||||||
20 | company's investors at the company's discretion. The | ||||||
21 | Department may award any remaining investment authority to new | ||||||
22 | applicants. | ||||||
23 | Section 20. Tax credit. | ||||||
24 | (a) On the closing date, a claimant whose affidavit was | ||||||
25 | included in an approved application submitted under Section 15 |
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1 | shall earn a credit against the taxes imposed by subsections | ||||||
2 | (a) and (b) of Section 201 equal to the amount of the | ||||||
3 | claimant's credit-eligible capital contribution to the rural | ||||||
4 | investment company. | ||||||
5 | (b) In each of the taxable years that includes the fourth | ||||||
6 | through seventh anniversaries of the closing date, the | ||||||
7 | Department shall issue a tax credit certificate to each | ||||||
8 | approved claimant, specifying a tax credit amount for the | ||||||
9 | taxable year equal to 25% of the claimant's total | ||||||
10 | credit-eligible capital contribution. | ||||||
11 | (c) A claimant may not claim a tax credit under this | ||||||
12 | Section unless the claimant has a tax credit certificate issued | ||||||
13 | by the Department. A claimant claiming a credit under this | ||||||
14 | Section shall retain a tax credit certificate the claimant | ||||||
15 | receives from the Department for the same time period a person | ||||||
16 | is required to keep books and records under the Illinois Income | ||||||
17 | Tax Act. The Department shall adopt rules for the | ||||||
18 | administration of this program. | ||||||
19 | Section 25. Revocation of tax credit certificates. | ||||||
20 | (a) Except as provided in subsection (b), the Department | ||||||
21 | shall revoke a tax credit certificate issued under Section 20 | ||||||
22 | if the rural investment company in which the credit-eligible | ||||||
23 | capital contribution was made does any of the following before | ||||||
24 | the rural investment company exits the program in accordance | ||||||
25 | with Section 30: |
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1 | (1) fails to invest 100% of the rural investment | ||||||
2 | company's investment authority in
growth investments in | ||||||
3 | this state within three years of the closing date;
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4 | (2) fails to maintain growth investments in this State | ||||||
5 | equal to 100% of the rural investment company's investment | ||||||
6 | authority until the seventh anniversary of the closing date | ||||||
7 | in accordance with this section; | ||||||
8 | (3) makes a distribution or payment that results in the | ||||||
9 | rural investment company having less than 100% of the rural | ||||||
10 | investment company's investment authority invested in | ||||||
11 | growth investments in this state or available for | ||||||
12 | investment in growth investments and held in cash and
other | ||||||
13 | marketable securities; | ||||||
14 | (4) fails to maintain growth investments equal to 70% | ||||||
15 | of the rural investment company's investment authority in | ||||||
16 | eligible small businesses that maintain their principal | ||||||
17 | business operations in a rural county; | ||||||
18 | (5) invests more than $5,000,000 from the investment | ||||||
19 | authority in the same eligible small business, including | ||||||
20 | amounts invested in affiliates of the eligible small | ||||||
21 | business, exclusive of growth investments made with repaid | ||||||
22 | or redeemed growth investments or interest or profits | ||||||
23 | realized on the repaid or redeemed growth investments; or | ||||||
24 | (6) makes a growth investment in an eligible small | ||||||
25 | business that directly, or indirectly through an | ||||||
26 | affiliate: (i) owns or has the right to acquire an |
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1 | ownership interest in the rural investment company, an | ||||||
2 | affiliate of the rural investment company, or an investor | ||||||
3 | in the rural investment company; or (ii) makes a loan to or | ||||||
4 | an investment in the rural investment company, an affiliate | ||||||
5 | of the rural investment company, or an investor in the | ||||||
6 | rural investment company. | ||||||
7 | (b) For the purposes of subsection (a), an investment is | ||||||
8 | maintained even if the investment is sold or repaid if the | ||||||
9 | rural investment company reinvests an amount equal to the | ||||||
10 | capital returned or recovered by the fund from the original | ||||||
11 | investment, exclusive of any profits realized, in other growth | ||||||
12 | investments in this State within 12 months of the receipt of | ||||||
13 | such capital. Amounts received periodically by a rural | ||||||
14 | investment company are treated as continually invested in | ||||||
15 | growth investments if the amounts are reinvested in one or more | ||||||
16 | growth investments by the end of the following calendar year. A | ||||||
17 | rural investment company is not required to reinvest capital | ||||||
18 | returned from growth investments after the sixth anniversary of | ||||||
19 | the closing date and such growth investments are considered as | ||||||
20 | being held continuously by the rural investment company through | ||||||
21 | the seventh anniversary of the closing date. Paragraph (6) of | ||||||
22 | subsection (a) does not apply to investments in publicly-traded | ||||||
23 | securities by an eligible small business or an owner or | ||||||
24 | affiliate of an eligible small business. A rural investment | ||||||
25 | company is not considered an affiliate of a business concern | ||||||
26 | solely as a result of the rural investment company's growth |
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1 | investment. A growth investment in an eligible small business | ||||||
2 | that is not located in a rural county may count toward the | ||||||
3 | requirements of paragraph (4) of subsection (a) if the | ||||||
4 | Department determines that the eligible small business is | ||||||
5 | located in an economically disadvantaged rural area, as defined | ||||||
6 | by rules adopted by the Department. | ||||||
7 | (c) Before revoking one or more tax credit certificates | ||||||
8 | under this section, the Department shall notify the rural | ||||||
9 | investment company of the reasons for the pending revocation. | ||||||
10 | If the rural investment company corrects any violation outlined | ||||||
11 | in the notice to the satisfaction of the Department within 90 | ||||||
12 | days after the day on which the notice was sent, the Department | ||||||
13 | may not revoke the tax credit certificate. If tax credit | ||||||
14 | certificates are revoked under this Section, the rural | ||||||
15 | investment company shall make a cash distribution to the | ||||||
16 | Department in an amount equal to the sum of all tax credits | ||||||
17 | awarded to persons that have made credit-eligible | ||||||
18 | contributions to the rural investment company, if the rural | ||||||
19 | investment company is able to provide documentation to the | ||||||
20 | Department that proves that a tax credit has not been claimed, | ||||||
21 | the amount owed shall be reduced by the amount of the unclaimed | ||||||
22 | tax credit. The rural investment company's investment | ||||||
23 | authority and credit-eligible capital contributions will not | ||||||
24 | count toward the limits on the program size. | ||||||
25 | Section 30. Exit. On or after the seventh anniversary of |
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1 | the closing date, a rural investment company may apply to the | ||||||
2 | Department to exit the program and no longer be subject to this | ||||||
3 | Act. An application submitted this Section shall be in a form | ||||||
4 | and in accordance with procedures prescribed by the Department | ||||||
5 | and shall include a calculation of the State reimbursement | ||||||
6 | amount. In evaluating the exit application, if no tax credit | ||||||
7 | certificates have been revoked and the rural investment company | ||||||
8 | has not received a notice of revocation that has remained | ||||||
9 | uncorrected, the rural investment company is eligible for exit. | ||||||
10 | The Department shall respond to the application within 30 days | ||||||
11 | of receipt and include confirmation of the State reimbursement | ||||||
12 | amount. The Department shall not unreasonably deny an | ||||||
13 | application submitted under this Section. If the Department | ||||||
14 | denies the application, the Department shall provide the | ||||||
15 | reasons for the determination to the rural investment company. | ||||||
16 | Within 60 days after the day on which the confirmation of the | ||||||
17 | State reimbursement amount is received by the rural investment | ||||||
18 | company, the rural investment company shall make a cash | ||||||
19 | distribution to the State in an amount equal to the lesser of: | ||||||
20 | (i) the State reimbursement amount; or (ii) the excess return. | ||||||
21 | The Department shall notify the rural investment company once | ||||||
22 | payments have been received. Any amounts collected under this | ||||||
23 | Section shall be deposited into the General Revenue Fund. | ||||||
24 | Section 900. The Illinois Income Tax Act is amended by | ||||||
25 | adding Section 229 as follows: |
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1 | (35 ILCS 5/229 new) | ||||||
2 | Sec. 229. Rural Job Creation Tax Credit Act. A taxpayer is | ||||||
3 | entitled to a credit against the taxes imposed by subsections | ||||||
4 | (a) and (b) of Section 201 as provided in the Rural Job | ||||||
5 | Creation Tax Credit Act.
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6 | Section 999. Effective date. This Act takes effect upon | ||||||
7 | becoming law.
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