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1 | AN ACT concerning economic development.
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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 New | ||||||
5 | Markets Development Program Act. | ||||||
6 | Section 5. Definitions. As used in this Act:
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7 | "Applicable percentage" means 0% for each of the first 2 | ||||||
8 | credit allowance dates, 7% for the third credit allowance date, | ||||||
9 | and 8% for the next 4 credit allowance dates.
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10 | "Credit allowance date" means with respect to any qualified | ||||||
11 | equity investment:
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12 | (1) the date on which the investment is initially made; | ||||||
13 | and | ||||||
14 | (2) each of the 6 anniversary dates of that date | ||||||
15 | thereafter. | ||||||
16 | "Department" means the Department of Commerce and Economic | ||||||
17 | Opportunity. | ||||||
18 | "Direct tracing" means the tracking, by accepted | ||||||
19 | accounting methods, of the proceeds of qualified equity | ||||||
20 | investments into qualified low-income community investments. | ||||||
21 | "Long-term debt security" means any debt instrument issued | ||||||
22 | by a qualified community development entity, at par value or a | ||||||
23 | premium, with an original maturity date of at least 7 years |
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1 | from the date of its issuance, with no acceleration of | ||||||
2 | repayment, amortization, or prepayment features prior to its | ||||||
3 | original maturity date, and with no distribution, payment, or | ||||||
4 | interest features related to the profitability of the qualified | ||||||
5 | community development entity or the performance of the | ||||||
6 | qualified community development entity's investment portfolio. | ||||||
7 | This definition in no way limits the holder's ability to | ||||||
8 | accelerate payments on the debt instrument in situations where | ||||||
9 | the issuer has defaulted on covenants designed to ensure | ||||||
10 | compliance with this Act or Section 45D of the Internal Revenue | ||||||
11 | Code of 1986, as amended. | ||||||
12 | "Purchase price" means the amount paid to the issuer of a | ||||||
13 | qualified equity investment for that qualified equity | ||||||
14 | investment. | ||||||
15 | "Qualified active low-income community business" has the | ||||||
16 | meaning given to that term in Section 45D of the Internal | ||||||
17 | Revenue Code of 1986, as amended; except that any business that | ||||||
18 | derives or projects to derive 15% or more of its annual revenue | ||||||
19 | from the rental or sale of real estate is not considered to be | ||||||
20 | a qualified active low-income community business. | ||||||
21 | "Qualified community development entity" has the meaning | ||||||
22 | given to that term in Section 45D of the Internal Revenue Code | ||||||
23 | of 1986, as amended; provided that such entity has entered into | ||||||
24 | an allocation agreement with the Community Development | ||||||
25 | Financial Institutions Fund of the U.S. Treasury Department | ||||||
26 | with respect to credits authorized by Section 45D of the |
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1 | Internal Revenue Code of 1986, as amended, that includes the | ||||||
2 | State of Illinois within the service area set forth in that | ||||||
3 | allocation agreement. | ||||||
4 | "Qualified equity investment" means any equity investment | ||||||
5 | in, or long-term debt security issued by, a qualified community | ||||||
6 | development entity that:
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7 | (1) is acquired after the effective date of this Act at | ||||||
8 | its original issuance solely in exchange for cash; | ||||||
9 | (2) has at least 85% of its cash purchase price used by | ||||||
10 | the issuer to make qualified low-income community | ||||||
11 | investments; and | ||||||
12 | (3) is designated by the issuer as a qualified equity | ||||||
13 | investment under this
Act and is certified by the | ||||||
14 | Department as not exceeding the limitation contained in | ||||||
15 | Section 20. | ||||||
16 | This term includes any qualified equity investment that | ||||||
17 | does not meet the provisions of item (1) of this definition if | ||||||
18 | the investment was a qualified equity investment in the hands | ||||||
19 | of a prior holder. | ||||||
20 | "Qualified low-income community investment" means any | ||||||
21 | capital or equity investment in, or loan to, any qualified | ||||||
22 | active low-income community business. With respect to any one | ||||||
23 | qualified active low-income community business, the maximum | ||||||
24 | amount of qualified low-income community investments made in | ||||||
25 | that business, on a collective basis with all of its | ||||||
26 | affiliates, shall be $10,000,000 whether issued to one or |
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1 | several qualified community development entities. | ||||||
2 | "Tax credit" means a credit against any income, franchise, | ||||||
3 | or insurance premium taxes otherwise due under Illinois law.
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4 | "Taxpayer" means any individual or entity subject to any | ||||||
5 | income, franchise, or insurance premium tax under Illinois law. | ||||||
6 | Section 10. Credit established. A taxpayer that makes a | ||||||
7 | qualified equity investment earns a vested right to tax credits | ||||||
8 | as follows: | ||||||
9 | (1) on each credit allowance date of the qualified | ||||||
10 | equity investment, the taxpayer, or subsequent holder of | ||||||
11 | the qualified equity investment, is entitled to a tax | ||||||
12 | credit during the taxable year including that credit | ||||||
13 | allowance date; | ||||||
14 | (2) the tax credit amount shall be equal to the | ||||||
15 | applicable percentage multiplied by the purchase price | ||||||
16 | paid to the issuer of the qualified equity investment; and | ||||||
17 | (3) the amount of the tax credit claimed shall not | ||||||
18 | exceed the amount of the taxpayer's State tax liability for | ||||||
19 | the tax year for which the tax credit is claimed. | ||||||
20 | Section 15. Transferability. No tax credit claimed under | ||||||
21 | this Act shall be refundable or saleable on the open market. | ||||||
22 | Tax credits earned by a partnership, limited liability company, | ||||||
23 | S corporation, or other "pass-through" entity may be allocated | ||||||
24 | to the partners, members, or shareholders of that entity for |
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1 | their direct use in accordance with the provisions of any | ||||||
2 | agreement among the partners, members, or shareholders. Any | ||||||
3 | amount of tax credit that the taxpayer is prohibited from | ||||||
4 | claiming in a taxable year may be carried forward to any of the | ||||||
5 | taxpayer's 5 subsequent taxable years. | ||||||
6 | Section 20. Annual cap on credits. The Department shall | ||||||
7 | limit the monetary amount of qualified equity investments | ||||||
8 | permitted under this Act to a level necessary to limit tax | ||||||
9 | credit use at no more than $40,000,000 of tax credits in any | ||||||
10 | fiscal year. This limitation on qualified equity investments | ||||||
11 | shall be based on the anticipated use of credits without regard | ||||||
12 | to the potential for taxpayers to carry forward tax credits to | ||||||
13 | later tax years. | ||||||
14 | Section 25. Twelve-month investment window. The issuer of | ||||||
15 | the qualified equity investment shall certify to the Department | ||||||
16 | the anticipated dollar amount of those investments to be made | ||||||
17 | in this State during the first 12-month period following the | ||||||
18 | initial credit allowance date. If, on the second credit | ||||||
19 | allowance date, the actual dollar amount of those investments | ||||||
20 | is different than the amount estimated, the Department shall | ||||||
21 | adjust the credits arising on the second allowance date to | ||||||
22 | account for that difference.
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23 | Section 30. Direct tracing. |
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1 | (1) Provided that the proceeds of a qualified equity | ||||||
2 | investment are invested completely in qualified low-income | ||||||
3 | community investments in Illinois, the purchase price, for the | ||||||
4 | purpose of calculating the credit created by this Act, shall | ||||||
5 | equal 100% of the qualified equity investment, regardless of | ||||||
6 | the location of investments made with the proceeds of other | ||||||
7 | qualified equity investments issued by the same community | ||||||
8 | development entity. | ||||||
9 | (2) To the extent a portion of a qualified equity | ||||||
10 | investment is not invested in Illinois, the purchase price | ||||||
11 | shall be reduced by the same ratio, independently of the | ||||||
12 | location of investments made with proceeds of other qualified | ||||||
13 | equity investments issued by the same community development | ||||||
14 | entity. In that case, the burden is on the community | ||||||
15 | development entity to establish the extent to which the | ||||||
16 | qualified equity investments are fully invested in Illinois, | ||||||
17 | either by establishing that the community development entity | ||||||
18 | itself invests exclusively in Illinois, or otherwise | ||||||
19 | establishing, through direct tracing, the portion of a | ||||||
20 | qualified equity investment invested solely in Illinois. | ||||||
21 | Section 35. Recapture. The Department shall recapture, | ||||||
22 | from the taxpayer that claimed the credit on a return, the tax | ||||||
23 | credit allowed under this Act if: | ||||||
24 | (1) any amount of the federal tax credit available with | ||||||
25 | respect to a qualified equity investment that is eligible |
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1 | for a tax credit under this Act is recaptured under Section | ||||||
2 | 45D of the Internal Revenue Code of 1986, as amended. In | ||||||
3 | that case, the Department's recapture shall be | ||||||
4 | proportionate to the federal recapture with respect to that | ||||||
5 | qualified equity investment; or | ||||||
6 | (2) the issuer redeems or makes principal repayment | ||||||
7 | with respect to a qualified equity investment prior to the | ||||||
8 | 7th anniversary of the issuance of the qualified equity | ||||||
9 | investment. In that case, the Department's recapture shall | ||||||
10 | be proportionate to the amount of the redemption or | ||||||
11 | repayment with respect to the qualified equity investment. | ||||||
12 | Section 40. Recapture avoided for re-investment. An | ||||||
13 | exception to the provisions of item (2) of Section 35 shall | ||||||
14 | exist wherein an investment shall be considered held by an | ||||||
15 | issuer even if the investment has been sold or repaid; provided | ||||||
16 | that the issuer reinvests an amount equal to the capital | ||||||
17 | returned to or recovered by the issuer from the original | ||||||
18 | investment, exclusive of any profits realized, in another | ||||||
19 | qualified low-income community investment within 12 months | ||||||
20 | after the receipt of that capital. An issuer is not required to | ||||||
21 | reinvest capital returned from qualified low-income community | ||||||
22 | investments after the 6th anniversary of the issuance of the | ||||||
23 | qualified equity investment, the proceeds of which were used to | ||||||
24 | make the qualified low-income community investment, and the | ||||||
25 | qualified low-income community investment shall be considered |
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1 | held by the issuer through the 7th anniversary of the qualified | ||||||
2 | equity investment's issuance. | ||||||
3 | Section 45. Rules. The Department may promulgate rules to | ||||||
4 | implement the provisions of this Act and to administer the | ||||||
5 | allocation of tax credits issued for qualified equity | ||||||
6 | investments, which shall be conducted on a first-come, | ||||||
7 | first-serve basis. | ||||||
8 | Section 50. Sunset. For fiscal years following fiscal year | ||||||
9 | 2012, qualified equity investments shall not be made under this | ||||||
10 | Act unless reauthorization is made pursuant to this Section. | ||||||
11 | For all fiscal years following fiscal year 2012, unless the | ||||||
12 | General Assembly adopts a joint resolution granting authority | ||||||
13 | to the Department to approve qualified equity investments for | ||||||
14 | the Illinois new markets development program and clearly | ||||||
15 | describing the amount of tax credits available for the next | ||||||
16 | fiscal year, or otherwise complies with the provisions of this | ||||||
17 | Section, no qualified equity investments may be permitted to be | ||||||
18 | made under this Act. The amount of available tax credits | ||||||
19 | contained in such a resolution shall not exceed the limitation | ||||||
20 | provided under Section 20. Nothing in this Section precludes a | ||||||
21 | taxpayer who makes a qualified equity investment prior to the | ||||||
22 | expiration of authority to make qualified equity investments | ||||||
23 | from claiming tax credits relating to that qualified equity | ||||||
24 | investment for each applicable credit allowance date.
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1 | Section 99. Effective date. This Act takes effect upon | ||||||
2 | becoming law.
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