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Public Act 103-0945


 

Public Act 0945 103RD GENERAL ASSEMBLY

 


 
Public Act 103-0945
 
SB3155 EnrolledLRB103 37139 HLH 67258 b

    AN ACT concerning revenue.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Illinois Income Tax Act is amended by
changing Section 220 as follows:
 
    (35 ILCS 5/220)
    Sec. 220. Angel investment credit.
    (a) As used in this Section:
    "Applicant" means a corporation, partnership, limited
liability company, or a natural person that makes an
investment in a qualified new business venture. The term
"applicant" does not include (i) a corporation, partnership,
limited liability company, or a natural person who has a
direct or indirect ownership interest of at least 51% in the
profits, capital, or value of the qualified new business
venture receiving the investment or (ii) a related member.
    "Claimant" means an applicant certified by the Department
who files a claim for a credit under this Section.
    "Department" means the Department of Commerce and Economic
Opportunity.
    "Investment" means money (or its equivalent) given to a
qualified new business venture, at a risk of loss, in
consideration for an equity interest of the qualified new
business venture. The Department may adopt rules to permit
certain forms of contingent equity investments to be
considered eligible for a tax credit under this Section.
    "Qualified new business venture" means a business that is
registered with the Department under this Section.
    "Related member" means a person that, with respect to the
applicant, is any one of the following:
        (1) An individual, if the individual and the members
    of the individual's family (as defined in Section 318 of
    the Internal Revenue Code) own directly, indirectly,
    beneficially, or constructively, in the aggregate, at
    least 50% of the value of the outstanding profits,
    capital, stock, or other ownership interest in the
    qualified new business venture that is the recipient of
    the applicant's investment.
        (2) A partnership, estate, or trust and any partner or
    beneficiary, if the partnership, estate, or trust and its
    partners or beneficiaries own directly, indirectly,
    beneficially, or constructively, in the aggregate, at
    least 50% of the profits, capital, stock, or other
    ownership interest in the qualified new business venture
    that is the recipient of the applicant's investment.
        (3) A corporation, and any party related to the
    corporation in a manner that would require an attribution
    of stock from the corporation under the attribution rules
    of Section 318 of the Internal Revenue Code, if the
    applicant and any other related member own, in the
    aggregate, directly, indirectly, beneficially, or
    constructively, at least 50% of the value of the
    outstanding stock of the qualified new business venture
    that is the recipient of the applicant's investment.
        (4) A corporation and any party related to that
    corporation in a manner that would require an attribution
    of stock from the corporation to the party or from the
    party to the corporation under the attribution rules of
    Section 318 of the Internal Revenue Code, if the
    corporation and all such related parties own, in the
    aggregate, at least 50% of the profits, capital, stock, or
    other ownership interest in the qualified new business
    venture that is the recipient of the applicant's
    investment.
        (5) A person to or from whom there is attribution of
    ownership of stock in the qualified new business venture
    that is the recipient of the applicant's investment in
    accordance with Section 1563(e) of the Internal Revenue
    Code, except that for purposes of determining whether a
    person is a related member under this paragraph, "20%"
    shall be substituted for "5%" whenever "5%" appears in
    Section 1563(e) of the Internal Revenue Code.
    (b) For taxable years beginning after December 31, 2010,
and ending on or before December 31, 2026, subject to the
limitations provided in this Section, a claimant may claim, as
a credit against the tax imposed under subsections (a) and (b)
of Section 201 of this Act, an amount equal to 25% of the
claimant's investment made directly in a qualified new
business venture. However, the amount of the credit is 35% of
the claimant's investment made directly in the qualified new
business venture if the investment is made in: (1) a qualified
new business venture that is a minority-owned business, a
women-owned business, or a business owned a person with a
disability (as those terms are used and defined in the
Business Enterprise for Minorities, Women, and Persons with
Disabilities Act); or (2) a qualified new business venture in
which the principal place of business is located in a county
with a population of not more than 250,000. In order for an
investment in a qualified new business venture to be eligible
for tax credits, the business must have applied for and
received certification under subsection (e) for the taxable
year in which the investment was made prior to the date on
which the investment was made. The credit under this Section
may not exceed the taxpayer's Illinois income tax liability
for the taxable year. If the amount of the credit exceeds the
tax liability for the year, the excess may be carried forward
and applied to the tax liability of the 5 taxable years
following the excess credit year. The credit shall be applied
to the earliest year for which there is a tax liability. If
there are credits from more than one tax year that are
available to offset a liability, the earlier credit shall be
applied first. In the case of a partnership or Subchapter S
Corporation, the credit is allowed to the partners or
shareholders in accordance with the determination of income
and distributive share of income under Sections 702 and 704
and Subchapter S of the Internal Revenue Code.
    (c) The minimum amount an applicant must invest in any
single qualified new business venture in order to be eligible
for a credit under this Section is $10,000. The maximum amount
of an applicant's total investment made in any single
qualified new business venture that may be used as the basis
for a credit under this Section is $2,000,000.
    (d) The Department shall implement a program to certify an
applicant for an angel investment credit. Upon satisfactory
review, the Department shall issue a tax credit certificate
stating the amount of the tax credit to which the applicant is
entitled. The Department shall annually certify that: (i) each
qualified new business venture that receives an angel
investment under this Section has maintained a minimum
employment threshold, as defined by rule, in the State (and
continues to maintain a minimum employment threshold in the
State for a period of no less than 3 years from the issue date
of the last tax credit certificate issued by the Department
with respect to such business pursuant to this Section); and
(ii) the claimant's investment has been made and remains,
except in the event of a qualifying liquidity event, in the
qualified new business venture for no less than 3 years.
    If an investment for which a claimant is allowed a credit
under subsection (b) is held by the claimant for less than 3
years, other than as a result of a permitted sale of the
investment to person who is not a related member, the claimant
shall pay to the Department of Revenue, in the manner
prescribed by the Department of Revenue, the aggregate amount
of the disqualified credits that the claimant received related
to the subject investment.
    If the Department determines that a qualified new business
venture failed to maintain a minimum employment threshold in
the State through the date which is 3 years from the issue date
of the last tax credit certificate issued by the Department
with respect to the subject business pursuant to this Section,
except for any 3-year reporting period that includes March 13,
2020 to January 1, 2024, the claimant or claimants shall pay to
the Department of Revenue, in the manner prescribed by the
Department of Revenue, the aggregate amount of the
disqualified credits that claimant or claimants received
related to investments in that business. For tax credits under
this Section involving a 3-year reporting period that includes
March 13, 2020 to January 1, 2024, the repayment of any tax
credits issued shall be determined at the discretion of the
Department.
    (e) The Department shall implement a program to register
qualified new business ventures for purposes of this Section.
A business desiring registration under this Section shall be
required to submit a full and complete application to the
Department. A submitted application shall be effective only
for the taxable year in which it is submitted, and a business
desiring registration under this Section shall be required to
submit a separate application in and for each taxable year for
which the business desires registration. Further, if at any
time prior to the acceptance of an application for
registration under this Section by the Department one or more
events occurs which makes the information provided in that
application materially false or incomplete (in whole or in
part), the business shall promptly notify the Department of
the same. Any failure of a business to promptly provide the
foregoing information to the Department may, at the discretion
of the Department, result in a revocation of a previously
approved application for that business, or disqualification of
the business from future registration under this Section, or
both. The Department may register the business only if all of
the following conditions are satisfied:
        (1) it has its principal place of business in this
    State;
        (2) at least 51% of the employees employed by the
    business are employed in this State;
        (3) the business has the potential for increasing jobs
    in this State, increasing capital investment in this
    State, or both, as determined by the Department, and
    either of the following apply:
            (A) it is principally engaged in innovation in any
        of the following: manufacturing; biotechnology;
        nanotechnology; communications; agricultural
        sciences; clean energy creation or storage technology;
        processing or assembling products, including medical
        devices, pharmaceuticals, computer software, computer
        hardware, semiconductors, other innovative technology
        products, or other products that are produced using
        manufacturing methods that are enabled by applying
        proprietary technology; or providing services that are
        enabled by applying proprietary technology; or
            (B) it is undertaking pre-commercialization
        activity related to proprietary technology that
        includes conducting research, developing a new product
        or business process, or developing a service that is
        principally reliant on applying proprietary
        technology;
        (4) it is not principally engaged in real estate
    development, insurance, banking, lending, lobbying,
    political consulting, professional services provided by
    attorneys, accountants, business consultants, physicians,
    or health care consultants, wholesale or retail trade,
    leisure, hospitality, transportation, or construction,
    except construction of power production plants that derive
    energy from a renewable energy resource, as defined in
    Section 1 of the Illinois Power Agency Act;
        (5) at the time it is first certified:
            (A) it has fewer than 100 employees;
            (B) it has been in operation in Illinois for not
        more than 10 consecutive years prior to the year of
        certification; and
            (C) it has received not more than $10,000,000 in
        aggregate investments;
        (5.1) it agrees to maintain a minimum employment
    threshold in the State of Illinois prior to the date which
    is 3 years from the issue date of the last tax credit
    certificate issued by the Department with respect to that
    business pursuant to this Section;
        (6) (blank); and
        (7) it has received not more than $4,000,000 in
    investments that qualified for tax credits under this
    Section.
    (f) The Department, in consultation with the Department of
Revenue, shall adopt rules to administer this Section. For
taxable years beginning before January 1, 2024, the aggregate
amount of the tax credits that may be claimed under this
Section for investments made in qualified new business
ventures shall be limited to $10,000,000 per calendar year, of
which $500,000 shall be reserved for investments made in
qualified new business ventures which are minority-owned
businesses, women-owned businesses, or businesses owned by a
person with a disability (as those terms are used and defined
in the Business Enterprise for Minorities, Women, and Persons
with Disabilities Act), and an additional $500,000 shall be
reserved for investments made in qualified new business
ventures with their principal place of business in counties
with a population of not more than 250,000. For taxable years
beginning on or after January 1, 2024, the aggregate amount of
the tax credits that may be claimed under this Section for
investments made in qualified new business ventures shall be
limited to $15,000,000 per calendar year, of which $2,500,000
shall be reserved for investments made in qualified new
business ventures that are minority-owned businesses (as the
term is defined in the Business Enterprise for Minorities,
Women, and Persons with Disabilities Act), $1,250,000 shall be
reserved for investments made in qualified new business
ventures that are women-owned businesses or businesses owned
by a person with a disability (as those terms are defined in
the Business Enterprise for Minorities, Women, and Persons
with Disabilities Act), and $1,250,000 shall be reserved for
investments made in qualified new business ventures with their
principal place of business in a county with a population of
not more than 250,000. The annual allowable amounts set forth
in this Section shall be allocated by the Department, on a per
calendar quarter basis and prior to the commencement of each
calendar year, in such proportion as determined by the
Department, provided that: (i) the amount initially allocated
by the Department for any one calendar quarter shall not
exceed 35% of the total allowable amount; (ii) any portion of
the allocated allowable amount remaining unused as of the end
of any of the first 3 calendar quarters of a given calendar
year shall be rolled into, and added to, the total allocated
amount for the next available calendar quarter; and (iii) the
reservation of tax credits for investments in minority-owned
businesses, women-owned businesses, businesses owned by a
person with a disability, and in businesses in counties with a
population of not more than 250,000 is limited to the first 3
calendar quarters of a given calendar year, after which they
may be claimed by investors in any qualified new business
venture.
    (g) A claimant may not sell or otherwise transfer a credit
awarded under this Section to another person.
    (h) On or before March 1 of each year, the Department shall
report to the Governor and to the General Assembly on the tax
credit certificates awarded under this Section for the prior
calendar year.
        (1) This report must include, for each tax credit
    certificate awarded:
            (A) the name of the claimant and the amount of
        credit awarded or allocated to that claimant;
            (B) the name and address (including the county) of
        the qualified new business venture that received the
        investment giving rise to the credit, the North
        American Industry Classification System (NAICS) code
        applicable to that qualified new business venture, and
        the number of employees of the qualified new business
        venture; and
            (C) the date of approval by the Department of each
        claimant's tax credit certificate.
        (2) The report must also include:
            (A) the total number of applicants and the total
        number of claimants, including the amount of each tax
        credit certificate awarded to a claimant under this
        Section in the prior calendar year;
            (B) the total number of applications from
        businesses seeking registration under this Section,
        the total number of new qualified business ventures
        registered by the Department, and the aggregate amount
        of investment upon which tax credit certificates were
        issued in the prior calendar year; and
            (C) the total amount of tax credit certificates
        sought by applicants, the amount of each tax credit
        certificate issued to a claimant, the aggregate amount
        of all tax credit certificates issued in the prior
        calendar year and the aggregate amount of tax credit
        certificates issued as authorized under this Section
        for all calendar years.
    (i) For each business seeking registration under this
Section after December 31, 2016, the Department shall require
the business to include in its application the North American
Industry Classification System (NAICS) code applicable to the
business and the number of employees of the business at the
time of application. Each business registered by the
Department as a qualified new business venture that receives
an investment giving rise to the issuance of a tax credit
certificate pursuant to this Section shall, for each of the 3
years following the issue date of the last tax credit
certificate issued by the Department with respect to such
business pursuant to this Section, report to the Department
the following:
        (1) the number of employees and the location at which
    those employees are employed, both as of the end of each
    year;
        (2) the amount of additional new capital investment
    raised as of the end of each year, if any; and
        (3) the terms of any liquidity event occurring during
    such year; for the purposes of this Section, a "liquidity
    event" means any event that would be considered an exit
    for an illiquid investment, including any event that
    allows the equity holders of the business (or any material
    portion thereof) to cash out some or all of their
    respective equity interests.
(Source: P.A. 102-16, eff. 6-17-21; 103-9, eff. 1-1-24.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 8/9/2024