Full Text of HB0445 102nd General Assembly
HB0445 102ND GENERAL ASSEMBLY |
| | 102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022 HB0445 Introduced 2/8/2021, by Rep. Mark L. Walker SYNOPSIS AS INTRODUCED: |
| |
Amends the Illinois Income Tax Act. In a Section concerning the angel investment credit, provides that: (1) the Department of Commerce and Economic Opportunity may charge an application fee of $500; (2) increases the maximum credit amount that may be awarded from $10,000,000 to $20,000,000; (3) of the maximum credit amount that may be awarded, $10,000,000 shall be reserved for priority industries; (4) the term "priority industry" means an industry determined by the Department to have high potential for growth; (5) a person may be considered a "related member" if the person has at least a 33% ownership interest in the qualified new business venture (currently, 50%); (6) an investment that is part of a refinancing of a prior investment in a qualified new business venture is not eligible for the credit; and (7) if the investment is made in a disenfranchised community business, the amount of the credit shall be equal to 40% (currently, 25%) of the claimant's investment. Defines terms.
|
| |
| | | FISCAL NOTE ACT MAY APPLY | |
| | A BILL FOR |
|
| | | HB0445 | | LRB102 02873 HLH 12882 b |
|
| 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 | 11 | | investment in a qualified new business venture. The term | 12 | | "applicant" does not include (i) a corporation, partnership, | 13 | | limited liability company, or a natural person who has a | 14 | | direct or indirect ownership interest of at least 51% in the | 15 | | profits, capital, or value of the qualified new business | 16 | | venture receiving the 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 | | "Disenfranchised community" means an area of severe | 22 | | economic distress, which includes, but is not limited to, | 23 | | census tracts with poverty rates greater than 30%. Additional |
| | | HB0445 | - 2 - | LRB102 02873 HLH 12882 b |
|
| 1 | | criteria may be established by the Department by rule. | 2 | | "Disenfranchised community business" means a qualified new | 3 | | business venture that is located in a disenfranchised | 4 | | community. Procedures for determining whether a qualified new | 5 | | business venture is located within a disenfranchised community | 6 | | shall be established by rule. | 7 | | "Investment" means money (or its equivalent) given to a | 8 | | qualified new business venture, at a risk of loss, in | 9 | | consideration for an equity interest of the qualified new | 10 | | business venture , the proceeds of which are used for | 11 | | legitimate business purposes. An investment that is part of a | 12 | | refinancing of a prior investment in a qualified new business | 13 | | venture is not considered an investment under this Section . | 14 | | The Department may adopt rules to permit certain forms of | 15 | | contingent equity investments to be considered eligible for a | 16 | | tax credit under this Section. | 17 | | "Legitimate business purposes" means that the investment | 18 | | proceeds are used for normal operations of the business and | 19 | | are not used for activities including refinancing any prior | 20 | | investments, paying dividends to shareholders, or other cash | 21 | | distributions to investors, stock repurchases, or other uses | 22 | | as determined by Department by rule. | 23 | | "Priority industries" means industries determined by the | 24 | | Department to have high potential for growth. | 25 | | "Qualified new business venture" means a business that is | 26 | | registered with the Department under this Section. |
| | | HB0445 | - 3 - | LRB102 02873 HLH 12882 b |
|
| 1 | | "Related member" means a person that, with respect to the
| 2 | | applicant, is any one of the following: | 3 | | (1) An individual, if the individual and the members | 4 | | of the individual's family (as defined in Section 318 of | 5 | | the Internal Revenue Code) own directly, indirectly,
| 6 | | beneficially, or constructively, in the aggregate, at | 7 | | least 33% 50% of the value of the outstanding profits, | 8 | | capital, stock, or other ownership interest in the | 9 | | qualified new business venture that is the recipient of | 10 | | the applicant's investment. | 11 | | (2) A partnership, estate, or trust and any partner or | 12 | | beneficiary, if the partnership, estate, or trust and its | 13 | | partners or beneficiaries own directly, indirectly, | 14 | | beneficially, or constructively, in the aggregate, at | 15 | | least 33% 50% of the profits, capital, stock, or other | 16 | | ownership interest in the qualified new business venture | 17 | | that is the recipient of the applicant's investment. | 18 | | (3) A corporation, and any party related to the | 19 | | corporation in a manner that would require an attribution | 20 | | of stock from the corporation under the attribution rules
| 21 | | of Section 318 of the Internal Revenue Code, if the | 22 | | applicant and any other related member own, in the | 23 | | aggregate, directly, indirectly, beneficially, or | 24 | | constructively, at least 33% 50% of the value of the | 25 | | outstanding stock of the qualified new business venture | 26 | | that is the recipient of the applicant's investment. |
| | | HB0445 | - 4 - | LRB102 02873 HLH 12882 b |
|
| 1 | | (4) A corporation and any party related to that | 2 | | corporation in a manner that would require an attribution | 3 | | of stock from the corporation to the party or from the
| 4 | | party to the corporation under the attribution rules of | 5 | | Section 318 of the Internal Revenue Code, if the | 6 | | corporation and all such related parties own, in the | 7 | | aggregate, at least 33% 50% of the profits, capital, | 8 | | stock, or other ownership interest in the qualified new | 9 | | business venture that is the recipient of the applicant's | 10 | | investment. | 11 | | (5) A person to or from whom there is attribution of | 12 | | ownership of stock in the qualified new business venture | 13 | | that is the recipient of the applicant's investment in | 14 | | accordance with Section 1563(e) of the Internal Revenue | 15 | | Code, except that for purposes of determining whether a | 16 | | person is a related member under this paragraph, "20%" | 17 | | shall be substituted for "5%" whenever "5%" appears in | 18 | | Section 1563(e) of the Internal Revenue Code. | 19 | | (6) A person who receives or has received compensation | 20 | | from the applicant in exchange for services provided to | 21 | | the applicant as an employee, officer, director, manager, | 22 | | or independent contractor within one year before the date | 23 | | of the investment or whose family member (as defined in | 24 | | Section 318 of the Internal Revenue Code) or an entity | 25 | | affiliated with the person has received such compensation. | 26 | | (b) For taxable years beginning after December 31, 2010, |
| | | HB0445 | - 5 - | LRB102 02873 HLH 12882 b |
|
| 1 | | and ending on or before December 31, 2021, subject to the | 2 | | limitations provided in this Section, a claimant may claim, as | 3 | | a credit against the tax imposed under subsections (a) and (b) | 4 | | of Section 201 of this Act, an amount equal to 25% of the | 5 | | claimant's investment made directly in a qualified new | 6 | | business venture. However, if the investment is made in a | 7 | | disenfranchised community business, the amount of the credit | 8 | | shall be equal to 40% of the claimant's investment for an | 9 | | investment made directly in a business that registers as a | 10 | | disenfranchised community business. In order for an investment | 11 | | in a qualified new business venture to be eligible for tax | 12 | | credits, the business must have applied for and received | 13 | | certification under subsection (e) for the taxable year in | 14 | | which the investment was made prior to the date on which the | 15 | | investment was made. The credit under this Section may not | 16 | | exceed the taxpayer's Illinois income tax liability for the | 17 | | taxable year. If the amount of the credit exceeds the tax | 18 | | liability for the year, the excess may be carried forward and | 19 | | applied to the tax liability of the 5 taxable years following | 20 | | the excess credit year. The credit shall be applied to the | 21 | | earliest year for which there is a tax liability. If there are | 22 | | credits from more than one tax year that are available to | 23 | | offset a liability, the earlier credit shall be applied first. | 24 | | In the case of a partnership or Subchapter S Corporation, the | 25 | | credit is allowed to the partners or shareholders in | 26 | | accordance with the determination of income and distributive |
| | | HB0445 | - 6 - | LRB102 02873 HLH 12882 b |
|
| 1 | | share of income under Sections 702 and 704 and Subchapter S of | 2 | | the Internal Revenue Code. | 3 | | (c) The minimum amount an applicant must invest in any | 4 | | single qualified new business venture in order to be eligible | 5 | | for a credit under this Section is $10,000. The maximum amount | 6 | | of an applicant's total investment made in any single | 7 | | qualified new business venture that may be used as the basis | 8 | | for a credit under this Section is $2,000,000. | 9 | | (d) The Department shall implement a program to certify an | 10 | | applicant for an angel investment credit. Upon satisfactory | 11 | | review, the Department shall issue a tax credit certificate | 12 | | stating the amount of the tax credit to which the applicant is | 13 | | entitled. The Department shall annually certify that: (i) each | 14 | | qualified new business venture that receives an angel | 15 | | investment under this Section has maintained a minimum | 16 | | employment threshold, as defined by rule, in the State (and | 17 | | continues to maintain a minimum employment threshold in the | 18 | | State for a period of no less than 3 years from the issue date | 19 | | of the last tax credit certificate issued by the Department | 20 | | with respect to such business pursuant to this Section); and | 21 | | (ii) the claimant's investment has been made and remains, | 22 | | except in the event of a qualifying liquidity event, in the | 23 | | qualified new business venture for no less than 3 years. | 24 | | If an investment for which a claimant is allowed a credit | 25 | | under subsection (b) is held by the claimant for less than 3 | 26 | | years, other than as a result of a permitted sale of the |
| | | HB0445 | - 7 - | LRB102 02873 HLH 12882 b |
|
| 1 | | investment to person who is not a related member, the claimant | 2 | | shall pay to the Department of Revenue, in the manner | 3 | | prescribed by the Department of Revenue, the aggregate amount | 4 | | of the disqualified credits that the claimant received related | 5 | | to the subject investment. | 6 | | If the Department determines that a qualified new business | 7 | | venture failed to maintain a minimum employment threshold in | 8 | | the State through the date which is 3 years from the issue date | 9 | | of the last tax credit certificate issued by the Department | 10 | | with respect to the subject business pursuant to this Section, | 11 | | the claimant or claimants shall pay to the Department of | 12 | | Revenue, in the manner prescribed by the Department of | 13 | | Revenue, the aggregate amount of the disqualified credits that | 14 | | claimant or claimants received related to investments in that | 15 | | business. If the Department determines that a disenfranchised | 16 | | community business has relocated within the State of Illinois | 17 | | but outside of a disenfranchised community within 3 years of | 18 | | the investment, the claimant shall pay to the Department of | 19 | | Revenue, in the manner prescribed by the Department of | 20 | | Revenue, the amount by which aggregate amount of the | 21 | | disqualified credits that claimant or claimants received | 22 | | related to the investment in that business exceed 25% of the of | 23 | | the investment. | 24 | | (e) The Department shall implement a program to register | 25 | | qualified new business ventures for purposes of this Section. | 26 | | A business desiring registration under this Section shall be |
| | | HB0445 | - 8 - | LRB102 02873 HLH 12882 b |
|
| 1 | | required to submit a full and complete application to the | 2 | | Department. A submitted application shall be effective only | 3 | | for the taxable year in which it is submitted, and a business | 4 | | desiring registration under this Section shall be required to | 5 | | submit a separate application in and for each taxable year for | 6 | | which the business desires registration. Further, if at any | 7 | | time prior to the acceptance of an application for | 8 | | registration under this Section by the Department one or more | 9 | | events occurs which makes the information provided in that | 10 | | application materially false or incomplete (in whole or in | 11 | | part), the business shall promptly notify the Department of | 12 | | the same. Any failure of a business to promptly provide the | 13 | | foregoing information to the Department may, at the discretion | 14 | | of the Department, result in a revocation of a previously | 15 | | approved application for that business, or disqualification of | 16 | | the business from future registration under this Section, or | 17 | | both. The Department may register the business only if all of | 18 | | the following conditions are satisfied: | 19 | | (1) it has its principal place of business in this | 20 | | State; | 21 | | (2) at least 51% of the employees employed by the | 22 | | business are employed in this State; | 23 | | (3) the business has the potential for increasing jobs | 24 | | in this State, increasing capital investment in this | 25 | | State, or both, as determined by the Department, and | 26 | | either of the following apply: |
| | | HB0445 | - 9 - | LRB102 02873 HLH 12882 b |
|
| 1 | | (A) it is principally engaged in innovation in any | 2 | | of the following: manufacturing; biotechnology; | 3 | | nanotechnology; communications; agricultural | 4 | | sciences; clean energy creation or storage technology; | 5 | | processing or assembling products, including medical | 6 | | devices, pharmaceuticals, computer software, computer | 7 | | hardware, semiconductors, other innovative technology | 8 | | products, or other products that are produced using | 9 | | manufacturing methods that are enabled by applying | 10 | | proprietary technology; or providing services that are | 11 | | enabled by applying proprietary technology; or | 12 | | (B) it is undertaking pre-commercialization | 13 | | activity related to proprietary technology that | 14 | | includes conducting research, developing a new product | 15 | | or business process, or developing a service that is | 16 | | principally reliant on applying proprietary | 17 | | technology; | 18 | | (4) it is not principally engaged in real estate | 19 | | development, insurance, banking, lending, speculative | 20 | | investing or property trading, lobbying, political | 21 | | consulting, professional services provided by attorneys, | 22 | | accountants, business consultants, physicians, or health | 23 | | care consultants, wholesale or retail trade, leisure, | 24 | | hospitality, transportation, or construction, except | 25 | | construction of power production plants that derive energy | 26 | | from a renewable energy resource, as defined in Section 1 |
| | | HB0445 | - 10 - | LRB102 02873 HLH 12882 b |
|
| 1 | | of the Illinois Power Agency Act; | 2 | | (5) at the time it is first certified: | 3 | | (A) it has fewer than 100 employees; | 4 | | (B) it has been in operation in Illinois for not | 5 | | more than 10 consecutive years prior to the year of | 6 | | certification; and | 7 | | (C) it has received not more than $10,000,000 in | 8 | | aggregate investments; | 9 | | (5.1) it agrees to maintain a minimum employment | 10 | | threshold in the State of Illinois prior to the date which | 11 | | is 3 years from the issue date of the last tax credit | 12 | | certificate issued by the Department with respect to that | 13 | | business pursuant to this Section; | 14 | | (6) (blank); and | 15 | | (7) it has received not more than $4,000,000 in | 16 | | investments that qualified for tax credits under this | 17 | | Section. | 18 | | (f) The Department, in consultation with the Department of | 19 | | Revenue, shall adopt rules to administer this Section. The | 20 | | Department may charge an applicant an application fee of $500. | 21 | | The aggregate amount of the tax credits that may be claimed | 22 | | under this Section for investments made in qualified new | 23 | | business ventures shall be limited at $20,000,000 $10,000,000 | 24 | | per calendar year, of which $10,000,000 shall be reserved for | 25 | | priority industries, $500,000 shall be reserved for | 26 | | investments made in qualified new business ventures which are |
| | | HB0445 | - 11 - | LRB102 02873 HLH 12882 b |
|
| 1 | | minority-owned businesses, women-owned businesses, or | 2 | | businesses owned by a person with a disability (as those terms | 3 | | are used and defined in the Business Enterprise for | 4 | | Minorities, Women, and Persons with Disabilities Act), and an | 5 | | additional $500,000 shall be reserved for investments made in | 6 | | qualified new business ventures with their principal place of | 7 | | business in counties with a population of not more than | 8 | | 250,000. The foregoing annual allowable amounts shall be | 9 | | allocated by the Department, on a per calendar quarter basis | 10 | | and prior to the commencement of each calendar year, in such | 11 | | proportion as determined by the Department, provided that: (i) | 12 | | the amount initially allocated by the Department for any one | 13 | | calendar quarter shall not exceed 35% of the total allowable | 14 | | amount; (ii) any portion of the allocated allowable amount | 15 | | remaining unused as of the end of any of the first 3 calendar | 16 | | quarters of a given calendar year shall be rolled into, and | 17 | | added to, the total allocated amount for the next available | 18 | | calendar quarter; and (iii) the reservation of tax credits for | 19 | | investments in priority industries, minority-owned businesses, | 20 | | women-owned businesses, businesses owned by a person with a | 21 | | disability, and in businesses in counties with a population of | 22 | | not more than 250,000 is limited to the first 3 calendar | 23 | | quarters of a given calendar year, after which they may be | 24 | | claimed by investors in any qualified new business venture. | 25 | | (g) A claimant may not sell or otherwise transfer a credit | 26 | | awarded under this Section to another person. |
| | | HB0445 | - 12 - | LRB102 02873 HLH 12882 b |
|
| 1 | | (h) On or before March 1 of each year, the Department shall | 2 | | report to the Governor and to the General Assembly on the tax | 3 | | credit certificates awarded under this Section for the prior | 4 | | calendar year. | 5 | | (1) This report must include, for each tax credit | 6 | | certificate awarded: | 7 | | (A) the name of the claimant and the amount of | 8 | | credit awarded or allocated to that claimant; | 9 | | (B) the name and address (including the county) of | 10 | | the qualified new business venture that received the | 11 | | investment giving rise to the credit, the North | 12 | | American Industry Classification System (NAICS) code | 13 | | applicable to that qualified new business venture, and | 14 | | the number of employees of the qualified new business | 15 | | venture; and | 16 | | (C) the date of approval by the Department of each | 17 | | claimant's tax credit certificate. | 18 | | (2) The report must also include: | 19 | | (A) the total number of applicants and the total | 20 | | number of claimants, including the amount of each tax | 21 | | credit certificate awarded to a claimant under this | 22 | | Section in the prior calendar year; | 23 | | (B) the total number of applications from | 24 | | businesses seeking registration under this Section, | 25 | | the total number of new qualified business ventures | 26 | | registered by the Department, and the aggregate amount |
| | | HB0445 | - 13 - | LRB102 02873 HLH 12882 b |
|
| 1 | | of investment upon which tax credit certificates were | 2 | | issued in the prior calendar year; and | 3 | | (C) the total amount of tax credit certificates | 4 | | sought by applicants, the amount of each tax credit | 5 | | certificate issued to a claimant, the aggregate amount | 6 | | of all tax credit certificates issued in the prior | 7 | | calendar year and the aggregate amount of tax credit | 8 | | certificates issued as authorized under this Section | 9 | | for all calendar years.
| 10 | | (i) For each business seeking registration under this | 11 | | Section after December 31, 2016, the Department shall require | 12 | | the business to include in its application the North American | 13 | | Industry Classification System (NAICS) code applicable to the | 14 | | business and the number of employees of the business at the | 15 | | time of application. Each business registered by the | 16 | | Department as a qualified new business venture that receives | 17 | | an investment giving rise to the issuance of a tax credit | 18 | | certificate pursuant to this Section shall, for each of the 3 | 19 | | years following the issue date of the last tax credit | 20 | | certificate issued by the Department with respect to such | 21 | | business pursuant to this Section, report to the Department | 22 | | the following: | 23 | | (1) the number of employees and the location at which | 24 | | those employees are employed, both as of the end of each | 25 | | year; | 26 | | (2) the amount of additional new capital investment |
| | | HB0445 | - 14 - | LRB102 02873 HLH 12882 b |
|
| 1 | | raised as of the end of each year, if any; and | 2 | | (3) the terms of any liquidity event occurring during | 3 | | such year; for the purposes of this Section, a "liquidity | 4 | | event" means any event that would be considered an exit | 5 | | for an illiquid investment, including any event that | 6 | | allows the equity holders of the business (or any material | 7 | | portion thereof) to cash out some or all of their | 8 | | respective equity interests. | 9 | | (Source: P.A. 100-328, eff. 1-1-18; 100-686, eff. 1-1-19; | 10 | | 100-863, eff. 8-14-18; 101-81, eff. 7-12-19.)
|
|