Full Text of SB3302 100th General Assembly
SB3302eng 100TH GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning revenue.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Illinois Income Tax Act is amended by | 5 | | changing 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 | 10 | | liability company, or a natural person that makes an investment | 11 | | in a qualified new business venture. The term "applicant" does | 12 | | not include (i) a corporation, partnership, limited liability | 13 | | company, or a natural person who has a direct or indirect | 14 | | ownership interest of at least 51% in the profits, capital, or | 15 | | value of the qualified new business venture receiving the | 16 | | investment or (ii) a related member. | 17 | | "Claimant" means an applicant certified by the Department | 18 | | who files a claim for a credit under this Section. | 19 | | "Department" means the Department of Commerce and Economic | 20 | | Opportunity. | 21 | | "Investment" means money (or its equivalent) given to a | 22 | | qualified new business venture, at a risk of loss, in | 23 | | consideration for an equity interest of the qualified new |
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| 1 | | business venture. The Department may adopt rules to permit | 2 | | certain forms of contingent equity investments to be considered | 3 | | eligible for a tax credit under this Section. | 4 | | "Qualified new business venture" means a business that is | 5 | | registered with the Department under this Section. | 6 | | "Related member" means a person that, with respect to the
| 7 | | applicant, is any one of the following: | 8 | | (1) An individual, if the individual and the members of | 9 | | the individual's family (as defined in Section 318 of the | 10 | | Internal Revenue Code) own directly, indirectly,
| 11 | | beneficially, or constructively, in the aggregate, at | 12 | | least 50% of the value of the outstanding profits, capital, | 13 | | stock, or other ownership interest in the qualified new | 14 | | business venture that is the recipient of the applicant 's | 15 | | investment . | 16 | | (2) A partnership, estate, or trust and any partner or | 17 | | beneficiary, if the partnership, estate, or trust and its | 18 | | partners or beneficiaries own directly, indirectly, | 19 | | beneficially, or constructively, in the aggregate, at | 20 | | least 50% of the profits, capital, stock, or other | 21 | | ownership interest in the qualified new business venture | 22 | | that is the recipient of the applicant 's investment . | 23 | | (3) A corporation, and any party related to the | 24 | | corporation in a manner that would require an attribution | 25 | | of stock from the corporation under the attribution rules
| 26 | | of Section 318 of the Internal Revenue Code, if the |
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| 1 | | applicant and any other related member own, in the | 2 | | aggregate, directly, indirectly, beneficially, or | 3 | | constructively, at least 50% of the value of the | 4 | | corporation's outstanding stock of the qualified new | 5 | | business venture that is the recipient of the applicant's | 6 | | investment . | 7 | | (4) A corporation and any party related to that | 8 | | corporation in a manner that would require an attribution | 9 | | of stock from the corporation to the party or from the
| 10 | | party to the corporation under the attribution rules of | 11 | | Section 318 of the Internal Revenue Code, if the | 12 | | corporation and all such related parties own, in the | 13 | | aggregate, at least 50% of the profits, capital, stock, or | 14 | | other ownership interest in the qualified new business | 15 | | venture that is the recipient of the applicant 's | 16 | | investment . | 17 | | (5) A person to or from whom there is attribution of | 18 | | stock ownership of stock in the qualified new business | 19 | | venture that is the recipient of the applicant's investment | 20 | | in accordance with Section 1563(e) of the Internal Revenue | 21 | | Code, except that for purposes of determining whether a | 22 | | person is a related member under this paragraph, "20%" | 23 | | shall be substituted for "5%" whenever "5%" appears in | 24 | | Section 1563(e) of the Internal Revenue Code. | 25 | | (b) For taxable years beginning after December 31, 2010, | 26 | | and ending on or before December 31, 2021, subject to the |
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| 1 | | limitations provided in this Section, a claimant may claim, as | 2 | | a credit against the tax imposed under subsections (a) and (b) | 3 | | of Section 201 of this Act, an amount equal to 25% of the | 4 | | claimant's investment made directly in a qualified new business | 5 | | venture. In order for an investment in a qualified new business | 6 | | venture to be eligible for tax credits, the business must have | 7 | | applied for and received certification under subsection (e) for | 8 | | the taxable year in which the investment was made prior to the | 9 | | date on which the investment was made. The credit under this | 10 | | Section may not exceed the taxpayer's Illinois income tax | 11 | | liability for the taxable year. If the amount of the credit | 12 | | exceeds the tax liability for the year, the excess may be | 13 | | carried forward and applied to the tax liability of the 5 | 14 | | taxable years following the excess credit year. The credit | 15 | | shall be applied to the earliest year for which there is a tax | 16 | | liability. If there are credits from more than one tax year | 17 | | that are available to offset a liability, the earlier credit | 18 | | shall be applied first. In the case of a partnership or | 19 | | Subchapter S Corporation, the credit is allowed to the partners | 20 | | or shareholders in accordance with the determination of income | 21 | | and distributive share of income under Sections 702 and 704 and | 22 | | Subchapter S of the Internal Revenue Code. | 23 | | (c) The minimum amount an applicant must invest in any | 24 | | single qualified new business venture in order to be eligible | 25 | | for a credit under this Section is $10,000. The maximum amount | 26 | | of an applicant's total investment made in any single qualified |
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| 1 | | new business venture that may be used as the basis for a credit | 2 | | under this Section is $2,000,000. | 3 | | (d) The Department shall implement a program to certify an | 4 | | applicant for an angel investment credit. Upon satisfactory | 5 | | review, the Department shall issue a tax credit certificate | 6 | | stating the amount of the tax credit to which the applicant is | 7 | | entitled. The Department shall annually certify that: (i) each | 8 | | qualified new business venture that receives an angel | 9 | | investment under this Section has maintained a minimum | 10 | | employment threshold, as defined by rule, in the State (and | 11 | | continues to maintain a minimum employment threshold in the | 12 | | State for a period of no less than 3 years from the issue date | 13 | | of the last tax credit certificate issued by the Department | 14 | | with respect to such business pursuant to this Section); and | 15 | | (ii) the claimant's investment has been made and remains, | 16 | | except in the event of a qualifying liquidity event, in the | 17 | | qualified new business venture for no less than 3 years. | 18 | | If an investment for which a claimant is allowed a credit | 19 | | under subsection (b) is held by the claimant for less than 3 | 20 | | years, other than as a result of a permitted sale of the | 21 | | investment to person who is not a related member, the claimant | 22 | | shall pay to the Department of Revenue, in the manner | 23 | | prescribed by the Department of Revenue, the aggregate amount | 24 | | of the disqualified credits that the claimant received related | 25 | | to the subject investment. | 26 | | If the Department determines that a qualified new business |
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| 1 | | venture failed to maintain a minimum employment threshold in | 2 | | the State through the date which is 3 years from the issue date | 3 | | of the last tax credit certificate issued by the Department | 4 | | with respect to the subject business pursuant to this Section, | 5 | | the claimant or claimants shall pay to the Department of | 6 | | Revenue, in the manner prescribed by the Department of Revenue, | 7 | | the aggregate amount of the disqualified credits that claimant | 8 | | or claimants received related to investments in that business. | 9 | | (e) The Department shall implement a program to register | 10 | | qualified new business ventures for purposes of this Section. A | 11 | | business desiring registration under this Section shall be | 12 | | required to submit a full and complete application to the | 13 | | Department. A submitted application shall be effective only for | 14 | | the taxable year in which it is submitted, and a business | 15 | | desiring registration under this Section shall be required to | 16 | | submit a separate application in and for each taxable year for | 17 | | which the business desires registration. Further, if at any | 18 | | time prior to the acceptance of an application for registration | 19 | | under this Section by the Department one or more events occurs | 20 | | which makes the information provided in that application | 21 | | materially false or incomplete (in whole or in part), the | 22 | | business shall promptly notify the Department of the same. Any | 23 | | failure of a business to promptly provide the foregoing | 24 | | information to the Department may, at the discretion of the | 25 | | Department, result in a revocation of a previously approved | 26 | | application for that business, or disqualification of the |
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| 1 | | business from future registration under this Section, or both. | 2 | | The Department may register the business only if all of the | 3 | | following conditions are satisfied: | 4 | | (1) it has its principal place of business in this | 5 | | State; | 6 | | (2) at least 51% of the employees employed by the | 7 | | business are employed in this State; | 8 | | (3) the business has the potential for increasing jobs | 9 | | in this State, increasing capital investment in this State, | 10 | | or both, as determined by the Department, and either of the | 11 | | following apply: | 12 | | (A) it is principally engaged in innovation in any | 13 | | of the following: manufacturing; biotechnology; | 14 | | nanotechnology; communications; agricultural sciences; | 15 | | clean energy creation or storage technology; | 16 | | processing or assembling products, including medical | 17 | | devices, pharmaceuticals, computer software, computer | 18 | | hardware, semiconductors, other innovative technology | 19 | | products, or other products that are produced using | 20 | | manufacturing methods that are enabled by applying | 21 | | proprietary technology; or providing services that are | 22 | | enabled by applying proprietary technology; or | 23 | | (B) it is undertaking pre-commercialization | 24 | | activity related to proprietary technology that | 25 | | includes conducting research, developing a new product | 26 | | or business process, or developing a service that is |
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| 1 | | principally reliant on applying proprietary | 2 | | technology; | 3 | | (4) it is not principally engaged in real estate | 4 | | development, insurance, banking, lending, lobbying, | 5 | | political consulting, professional services provided by | 6 | | attorneys, accountants, business consultants, physicians, | 7 | | or health care consultants, wholesale or retail trade, | 8 | | leisure, hospitality, transportation, or construction, | 9 | | except construction of power production plants that derive | 10 | | energy from a renewable energy resource, as defined in | 11 | | Section 1 of the Illinois Power Agency Act; | 12 | | (5) at the time it is first certified: | 13 | | (A) it has fewer than 100 employees; | 14 | | (B) it has been in operation in Illinois for not | 15 | | more than 10 consecutive years prior to the year of | 16 | | certification; and | 17 | | (C) it has received not more than $10,000,000 in | 18 | | aggregate investments; | 19 | | (5.1) it agrees to maintain a minimum employment | 20 | | threshold in the State of Illinois prior to the date which | 21 | | is 3 years from the issue date of the last tax credit | 22 | | certificate issued by the Department with respect to that | 23 | | business pursuant to this Section; | 24 | | (6) (blank); and | 25 | | (7) it has received not more than $4,000,000 in | 26 | | investments that qualified for tax credits under this |
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| 1 | | Section. | 2 | | (f) The Department, in consultation with the Department of | 3 | | Revenue, shall adopt rules to administer this Section. The | 4 | | aggregate amount of the tax credits that may be claimed under | 5 | | this Section for investments made in qualified new business | 6 | | ventures shall be limited at $10,000,000 per calendar year, of | 7 | | which $500,000 shall be reserved for investments made in | 8 | | qualified new business ventures which are " minority-owned | 9 | | minority owned businesses", " women-owned female owned | 10 | | businesses", or "businesses owned by a person with a | 11 | | disability " (as those terms are used and defined in the | 12 | | Business Enterprise for Minorities, Women Females , and Persons | 13 | | with Disabilities Act), and an additional $500,000 shall be | 14 | | reserved for investments made in qualified new business | 15 | | ventures with their principal place of business in counties | 16 | | with a population of not more than 250,000. The foregoing | 17 | | annual allowable amounts shall be allocated by the Department, | 18 | | on a per calendar quarter basis and prior to the commencement | 19 | | of each calendar year, in such proportion as determined by the | 20 | | Department, provided that: (i) the amount initially allocated | 21 | | by the Department for any one calendar quarter shall not exceed | 22 | | 35% of the total allowable amount; and (ii) any portion of the | 23 | | allocated allowable amount remaining unused as of the end of | 24 | | any of the first 3 2 calendar quarters of a given calendar year | 25 | | shall be rolled into, and added to, the total allocated amount | 26 | | for the next available calendar quarter ; and (iii) the |
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| 1 | | reservation of tax credits for investments in minority-owned | 2 | | businesses, women-owned businesses, businesses owned by a | 3 | | person with a disability, and in businesses in counties with a | 4 | | population of not more than 250,000 is limited to the first 3 | 5 | | calendar quarters of a given calendar year, after which they | 6 | | may be claimed by investors in any qualified new business | 7 | | venture . | 8 | | (g) A claimant may not sell or otherwise transfer a credit | 9 | | awarded under this Section to another person. | 10 | | (h) On or before March 1 of each year, the Department shall | 11 | | report to the Governor and to the General Assembly on the tax | 12 | | credit certificates awarded under this Section for the prior | 13 | | calendar year. | 14 | | (1) This report must include, for each tax credit | 15 | | certificate awarded: | 16 | | (A) the name of the claimant and the amount of | 17 | | credit awarded or allocated to that claimant; | 18 | | (B) the name and address (including the county) of | 19 | | the qualified new business venture that received the | 20 | | investment giving rise to the credit, the North | 21 | | American Industry Classification System (NAICS) code | 22 | | applicable to that qualified new business venture, and | 23 | | the number of employees of the qualified new business | 24 | | venture; and | 25 | | (C) the date of approval by the Department of each | 26 | | claimant's tax credit certificate. |
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| 1 | | (2) The report must also include: | 2 | | (A) the total number of applicants and the total | 3 | | number of claimants, including the amount of each tax | 4 | | credit certificate awarded to a claimant under this | 5 | | Section in the prior calendar year; | 6 | | (B) the total number of applications from | 7 | | businesses seeking registration under this Section, | 8 | | the total number of new qualified business ventures | 9 | | registered by the Department, and the aggregate amount | 10 | | of investment upon which tax credit certificates were | 11 | | issued in the prior calendar year; and | 12 | | (C) the total amount of tax credit certificates | 13 | | sought by applicants, the amount of each tax credit | 14 | | certificate issued to a claimant, the aggregate amount | 15 | | of all tax credit certificates issued in the prior | 16 | | calendar year and the aggregate amount of tax credit | 17 | | certificates issued as authorized under this Section | 18 | | for all calendar years.
| 19 | | (i) For each business seeking registration under this | 20 | | Section after December 31, 2016, the Department shall require | 21 | | the business to include in its application the North American | 22 | | Industry Classification System (NAICS) code applicable to the | 23 | | business and the number of employees of the business at the | 24 | | time of application. Each business registered by the Department | 25 | | as a qualified new business venture that receives an investment | 26 | | giving rise to the issuance of a tax credit certificate |
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| 1 | | pursuant to this Section shall, for each of the 3 years | 2 | | following the issue date of the last tax credit certificate | 3 | | issued by the Department with respect to such business pursuant | 4 | | to this Section, report to the Department the following: | 5 | | (1) the number of employees and the location at which | 6 | | those employees are employed, both as of the end of each | 7 | | year; | 8 | | (2) the amount of additional new capital investment | 9 | | raised as of the end of each year, if any; and | 10 | | (3) the terms of any liquidity event occurring during | 11 | | such year; for the purposes of this Section, a "liquidity | 12 | | event" means any event that would be considered an exit for | 13 | | an illiquid investment, including any event that allows the | 14 | | equity holders of the business (or any material portion | 15 | | thereof) to cash out some or all of their respective equity | 16 | | interests. | 17 | | (Source: P.A. 100-328, eff. 1-1-18; revised 12-14-17.)
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