97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB5793

 

Introduced 2/16/2012, by Rep. Richard Morthland

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/220

    Amends the Illinois Income Tax Act. Raises the limit on angel investment tax credits from $10 million to $20 million in total income tax credits per year. Raises the limit on an applicant's eligible investment from $2 million to $4 million. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB5793LRB097 18179 HLH 63403 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 220 as follows:
 
6    (35 ILCS 5/220)
7    Sec. 220. Angel investment credit.
8    (a) As used in this Section:
9    "Applicant" means a corporation, partnership, limited
10liability company, or a natural person that makes an investment
11in a qualified new business venture. The term "applicant" does
12not include a corporation, partnership, limited liability
13company, or a natural person who has a direct or indirect
14ownership interest of at least 51% in the profits, capital, or
15value of the investment or a related member.
16    "Claimant" means an applicant certified by the Department
17who files a claim for a credit under this Section.
18    "Department" means the Department of Commerce and Economic
19Opportunity.
20    "Qualified new business venture" means a business that is
21registered with the Department under this Section.
22    "Related member" means a person that, with respect to the
23investment, is any one of the following:

 

 

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1        (1) An individual, if the individual and the members of
2    the individual's family (as defined in Section 318 of the
3    Internal Revenue Code) own directly, indirectly,
4    beneficially, or constructively, in the aggregate, at
5    least 50% of the value of the outstanding profits, capital,
6    stock, or other ownership interest in the applicant.
7        (2) A partnership, estate, or trust and any partner or
8    beneficiary, if the partnership, estate, or trust and its
9    partners or beneficiaries own directly, indirectly,
10    beneficially, or constructively, in the aggregate, at
11    least 50% of the profits, capital, stock, or other
12    ownership interest in the applicant.
13        (3) A corporation, and any party related to the
14    corporation in a manner that would require an attribution
15    of stock from the corporation under the attribution rules
16    of Section 318 of the Internal Revenue Code, if the
17    applicant and any other related member own, in the
18    aggregate, directly, indirectly, beneficially, or
19    constructively, at least 50% of the value of the
20    corporation's outstanding stock.
21        (4) A corporation and any party related to that
22    corporation in a manner that would require an attribution
23    of stock from the corporation to the party or from the
24    party to the corporation under the attribution rules of
25    Section 318 of the Internal Revenue Code, if the
26    corporation and all such related parties own, in the

 

 

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1    aggregate, at least 50% of the profits, capital, stock, or
2    other ownership interest in the applicant.
3        (5) A person to or from whom there is attribution of
4    stock ownership in accordance with Section 1563(e) of the
5    Internal Revenue Code, except that for purposes of
6    determining whether a person is a related member under this
7    paragraph, "20%" shall be substituted for "5%" whenever
8    "5%" appears in Section 1563(e) of the Internal Revenue
9    Code.
10    (b) For taxable years beginning after December 31, 2010,
11and ending on or before December 31, 2016, subject to the
12limitations provided in this Section, a claimant may claim, as
13a credit against the tax imposed under subsections (a) and (b)
14of Section 201 of this Act, an amount equal to 25% of the
15claimant's investment made directly in a qualified new business
16venture. The credit under this Section may not exceed the
17taxpayer's Illinois income tax liability for the taxable year.
18If the amount of the credit exceeds the tax liability for the
19year, the excess may be carried forward and applied to the tax
20liability of the 5 taxable years following the excess credit
21year. The credit shall be applied to the earliest year for
22which there is a tax liability. If there are credits from more
23than one tax year that are available to offset a liability, the
24earlier credit shall be applied first. In the case of a
25partnership or Subchapter S Corporation, the credit is allowed
26to the partners or shareholders in accordance with the

 

 

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1determination of income and distributive share of income under
2Sections 702 and 704 and Subchapter S of the Internal Revenue
3Code.
4    (c) The maximum amount of an applicant's investment that
5may be used as the basis for a credit under this Section is
6$4,000,000 $2,000,000 for each investment made directly in a
7qualified new business venture.
8    (d) The Department shall implement a program to certify an
9applicant for an angel investment credit. Upon satisfactory
10review, the Department shall issue a tax credit certificate
11stating the amount of the tax credit to which the applicant is
12entitled. The Department shall annually certify that the
13claimant's investment has been made and remains in the
14qualified new business venture for no less than 3 years. If an
15investment for which a claimant is allowed a credit under
16subsection (b) is held by the claimant for less than 3 years,
17or, if within that period of time the qualified new business
18venture is moved from the State of Illinois, the claimant shall
19pay to the Department of Revenue, in the manner prescribed by
20the Department of Revenue, the amount of the credit that the
21claimant received related to the investment.
22    (e) The Department shall implement a program to register
23qualified new business ventures for purposes of this Section. A
24business desiring registration shall submit an application to
25the Department in each taxable year for which the business
26desires registration. The Department may register the business

 

 

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1only if the business satisfies all of the following conditions:
2        (1) it has its headquarters in this State;
3        (2) at least 51% of the employees employed by the
4    business are employed in this State;
5        (3) it has the potential for increasing jobs in this
6    State, increasing capital investment in this State, or
7    both, and either of the following apply:
8            (A) it is principally engaged in innovation in any
9        of the following: manufacturing; biotechnology;
10        nanotechnology; communications; agricultural sciences;
11        clean energy creation or storage technology;
12        processing or assembling products, including medical
13        devices, pharmaceuticals, computer software, computer
14        hardware, semiconductors, other innovative technology
15        products, or other products that are produced using
16        manufacturing methods that are enabled by applying
17        proprietary technology; or providing services that are
18        enabled by applying proprietary technology; or
19            (B) it is undertaking pre-commercialization
20        activity related to proprietary technology that
21        includes conducting research, developing a new product
22        or business process, or developing a service that is
23        principally reliant on applying proprietary
24        technology;
25        (4) it is not principally engaged in real estate
26    development, insurance, banking, lending, lobbying,

 

 

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1    political consulting, professional services provided by
2    attorneys, accountants, business consultants, physicians,
3    or health care consultants, wholesale or retail trade,
4    leisure, hospitality, transportation, or construction,
5    except construction of power production plants that derive
6    energy from a renewable energy resource, as defined in
7    Section 1 of the Illinois Power Agency Act;
8        (5) it has fewer than 100 employees;
9        (6) it has been in operation in Illinois for not more
10    than 10 consecutive years prior to the year of
11    certification; and
12        (7) it has received not more than (i) $10,000,000 in
13    aggregate private equity investment in cash or (ii)
14    $4,000,000 in investments that qualified for tax credits
15    under this Section.
16    (f) The Department, in consultation with the Department of
17Revenue, shall adopt rules to administer this Section. The
18aggregate amount of the tax credits that may be claimed under
19this Section for investments made in qualified new business
20ventures shall be limited at $20,000,000 $10,000,000 per
21calendar year.
22    (g) A claimant may not sell or otherwise transfer a credit
23awarded under this Section to another person.
24    (h) On or before March 1 of each year, the Department shall
25report to the Governor and to the General Assembly on the tax
26credit certificates awarded under this Section for the prior

 

 

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1calendar year.
2        (1) This report must include, for each tax credit
3    certificate awarded:
4            (A) the name of the claimant and the amount of
5        credit awarded or allocated to that claimant;
6            (B) the name and address of the qualified new
7        business venture that received the investment giving
8        rise to the credit and the county in which the
9        qualified new business venture is located; and
10            (C) the date of approval by the Department of the
11        applications for the tax credit certificate.
12        (2) The report must also include:
13            (A) the total number of applicants and amount for
14        tax credit certificates awarded under this Section in
15        the prior calendar year;
16            (B) the total number of applications and amount for
17        which tax credit certificates were issued in the prior
18        calendar year; and
19            (C) the total tax credit certificates and amount
20        authorized under this Section for all calendar years.
21(Source: P.A. 96-939, eff. 1-1-11; 97-507, eff. 8-23-11.)
 
22    Section 99. Effective date. This Act takes effect upon
23becoming law.