100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
SB2012

 

Introduced 2/10/2017, by Sen. Chuck Weaver

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/220

    Amends the Illinois Income Tax Act. Makes the following changes with respect to the angel investment credit: (1) provides that the credit applies for taxable years ending on or before December 31, 2021 (currently, December 31, 2016); (2) increases the maximum aggregate amount of the angel investment credit from $10,000,000 to $20,000,000; (3) defines "investment" as equity, Simple Agreement for Future Equity (SAFE) Agreements, and convertible notes; (4) provides that each qualified new business venture must renew its registration on an annual basis; (5) provides that, for taxable years ending on or after December 31, 2017, applicants for the credit must make a minimum investment of $10,000 in a qualified new business venture (currently, there is no minimum investment requirement); (6) provides that the maximum amount of an applicant's total investment made directly in any single qualified new business venture that may be used as the basis for a credit under this Section is $2,000,000 (currently, that is the maximum for each investment made in a qualified new business venture); (7) contains recapture provisions; and (8) contains provisions concerning investments in minority-owned businesses, female-owned businesses, or businesses owned by a person with a disability. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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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    "Investment" means equity, Simple Agreement for Future
21Equity (SAFE) Agreements, and convertible notes.
22    "Qualified new business venture" means a business that is
23registered with the Department under this Section.

 

 

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

 

 

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1    Section 318 of the Internal Revenue Code, if the
2    corporation and all such related parties own, in the
3    aggregate, at least 50% of the profits, capital, stock, or
4    other ownership interest in the applicant.
5        (5) A person to or from whom there is attribution of
6    stock ownership in accordance with Section 1563(e) of the
7    Internal Revenue Code, except that for purposes of
8    determining whether a person is a related member under this
9    paragraph, "20%" shall be substituted for "5%" whenever
10    "5%" appears in Section 1563(e) of the Internal Revenue
11    Code.
12    (b) For taxable years beginning after December 31, 2010,
13and ending on or before December 31, 2021 December 31, 2016,
14subject to the limitations provided in this Section, a claimant
15may claim, as a credit against the tax imposed under
16subsections (a) and (b) of Section 201 of this Act, an amount
17equal to 25% of the claimant's investment made directly in a
18qualified new business venture. In order for an investment in a
19qualified new business venture to be eligible for tax credits,
20the business must have applied for and received certification
21under subsection (e) for the taxable year in which the
22investment was made prior to the date on which the investment
23was made. The credit under this Section may not exceed the
24taxpayer's Illinois income tax liability for the taxable year.
25If the amount of the credit exceeds the tax liability for the
26year, the excess may be carried forward and applied to the tax

 

 

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1liability of the 5 taxable years following the excess credit
2year. The credit shall be applied to the earliest year for
3which there is a tax liability. If there are credits from more
4than one tax year that are available to offset a liability, the
5earlier credit shall be applied first. In the case of a
6partnership or Subchapter S Corporation, the credit is allowed
7to the partners or shareholders in accordance with the
8determination of income and distributive share of income under
9Sections 702 and 704 and Subchapter S of the Internal Revenue
10Code.
11    (c) The maximum amount of an applicant's total investment
12made directly in any single qualified new business venture that
13may be used as the basis for a credit under this Section is
14$2,000,000 for each investment made directly in a qualified new
15business venture. For taxable years ending on or after December
1631, 2017, the applicant must make a minimum investment of
17$10,000 in a qualified new business venture.
18    (d) The Department shall implement a program to certify an
19applicant for an angel investment credit. Upon satisfactory
20review, the Department shall issue a tax credit certificate
21stating the amount of the tax credit to which the applicant is
22entitled. The Department shall annually certify that (i) each
23approved applicant remains in the State (and continues to
24remain in the State for a period of not less than 3 years from
25the issue date of the last tax credit certificate issued by the
26Department with respect to that business); and (ii) the

 

 

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1claimant's investment has been made and remains in the
2qualified new business venture for no less than 3 years.
3    If an investment for which a claimant is allowed a credit
4under subsection (b) is held by the claimant for less than 3
5years, other than as a result of a permitted sale of such
6investment to a person that is not a related member, or, if
7within that period of time the qualified new business venture
8is moved from the State of Illinois, the claimant shall pay to
9the Department of Revenue, in the manner prescribed by the
10Department of Revenue, the aggregate amount of the disqualified
11credit that the claimant received related to the subject
12investment.
13    If the Department determines that a previously approved
14applicant has moved from the State prior to the date that
15occurs 3 years from the issue date of the last tax credit
16certificate issued by the Department with respect to the
17subject business, that business must pay to the Department of
18Revenue, in the manner prescribed by the Department of Revenue,
19the aggregate amount of the disqualified credits that claimants
20received related to investments in that business.
21    (e) The Department shall implement a program to register
22qualified new business ventures for purposes of this Section. A
23business desiring registration shall submit an application to
24the Department in each taxable year for which the business
25desires registration. The Department may register the business
26only if the business satisfies all of the following conditions:

 

 

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

 

 

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1    attorneys, accountants, business consultants, physicians,
2    or health care consultants, wholesale or retail trade,
3    leisure, hospitality, transportation, or construction,
4    except construction of power production plants that derive
5    energy from a renewable energy resource, as defined in
6    Section 1 of the Illinois Power Agency Act;
7        (5) at the time it is first certified:
8            (A) it has fewer than 100 employees;
9            (B) it has been in operation in Illinois for not
10        more than 10 consecutive years prior to the year of
11        certification; and
12            (C) it has received not more than $10,000,000 in
13        aggregate private equity investment in cash;
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    The Department shall require each qualified new business
19venture to renew its registration on an annual basis. If, at
20the time of the renewal, the business fails to satisfy any of
21the conditions of this subsection, or if the business fails to
22renew its registration, then the business shall no longer be
23considered a qualified new business venture.
24    (f) The Department, in consultation with the Department of
25Revenue, shall adopt rules to administer this Section. The
26aggregate amount of the tax credits that may be claimed under

 

 

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1this Section for investments made in qualified new business
2ventures shall be limited to $20,000,000 at $10,000,000 per
3calendar year.
4    (f-5) For taxable years ending on or after December 31,
52017, the Department shall establish a goal of awarding not
6less than 15% of the total amount of tax credits to investments
7in qualified new business ventures that would be considered
8minority-owned businesses, female-owned businesses, or
9businesses owned by a person with a disability, all as defined
10in the Business Enterprise for Minorities, Females, and Persons
11with Disabilities Act.
12    (g) A claimant may not sell or otherwise transfer a credit
13awarded under this Section to another person.
14    (h) On or before March 1 of each year, the Department shall
15report to the Governor and to the General Assembly on the tax
16credit certificates awarded under this Section for the prior
17calendar year.
18        (1) This report must include, for each tax credit
19    certificate awarded:
20            (A) the name of the claimant and the amount of
21        credit awarded or allocated to that claimant;
22            (B) the name and address of the qualified new
23        business venture that received the investment giving
24        rise to the credit and the county in which the
25        qualified new business venture is located; and
26            (C) the date of approval by the Department of the

 

 

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1        applications for the tax credit certificate.
2        (2) The report must also include:
3            (A) the total number of applicants and amount for
4        tax credit certificates awarded under this Section in
5        the prior calendar year;
6            (B) the total number of applications and amount for
7        which tax credit certificates were issued in the prior
8        calendar year; and
9            (C) the total tax credit certificates and amount
10        authorized under this Section for all calendar years.
11    It is the intent of the General Assembly that the credit
12under this Section applies continuously for all taxable years
13beginning after December 31, 2010 and ending on or before
14December 31, 2021. Any actions taken in reliance on the
15continuation of the credit under this Section are hereby
16validated.
17(Source: P.A. 96-939, eff. 1-1-11; 97-507, eff. 8-23-11;
1897-1097, eff. 8-24-12.)
 
19    Section 99. Effective date. This Act takes effect upon
20becoming law.