98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
SB2373

 

Introduced 2/15/2013, by Sen. Michael W. Frerichs

 

SYNOPSIS AS INTRODUCED:
 
New Act
30 ILCS 105/5.826 new
35 ILCS 5/224 new

    Creates the Emerging Technology Industries Act. Requires the Department of Commerce and Economic Opportunity to establish and maintain a program to award grants to emerging technology enterprises in the State. Sets forth eligibility requirements and funding priorities for awarding the grants, and sets forth procedures for awarding the grants. Requires written contracts in which the emerging technology enterprise guarantees that it will perform the actions expected to be performed. Sets dollar limits on matching funds for federal Small Business Innovative Research (SBIR) grants and total grant matching funds per year. Limits total credits to $15,000,000 in any one State fiscal year. Amends the State Finance Act to create the Emerging Technology Grant Fund. Amends the Illinois Income Tax Act. Creates an income tax credit for qualified investors who make an investment in an emerging technology enterprise in the State. Provides that the Department of Commerce and Economic Opportunity must certify the amount of the credit and sets forth the procedures for the application and certification of the credit. Sets forth provisions for the revocation and recapture of the tax credit. Contains other provisions. 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 1. Short title. This Act may be cited as the
5Emerging Technology Industries Act.
 
6    Section 5. Purpose. It is the purpose of this Act to
7develop and diversify the economy of the State of Illinois by:
8        (1) expediting the innovation and commercialization of
9    research;
10        (2) attracting, creating, or expanding private-sector
11    entities that will promote a substantial increase in
12    high-quality jobs; and
13        (3) increasing higher education applied technology
14    research capabilities.
 
15    Section 10. Definitions. As used in this Act:
16    "Department" means the Department of Commerce and Economic
17Opportunity.
18    "Emerging technology enterprise" means a business concern
19that is primarily engaged in an emerging technology industry.
20    "Emerging technology industry" includes, without
21limitation, any industry related to:
22        (1) agricultural science;

 

 

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1        (2) computer and software technology;
2        (3) biotechnology;
3        (4) medicine;
4        (5) life sciences;
5        (6) nanotechnology;
6        (7) energy;
7        (8) manufactured energy systems;
8        (9) aerospace;
9        (10) petroleum;
10        (11) micro-electromechanical systems;
11        (12) defense;
12        (13) semiconductors; or
13        (14) any other pursuit that is determined by the
14    Department to be an emerging technology industry.
15    "Fund" means the Emerging Technology Grant Fund
16established under Section 20 of this Act.
17    "Investment" means the contribution of property, at a risk
18of loss, to a qualified Illinois emerging technology enterprise
19in exchange for stock, a partnership interest, or other
20ownership interest in the qualified company. For the purposes
21of this definition, an investment is at risk of loss if its
22repayment depends entirely upon the success of the business
23operations of the qualified Illinois emerging technology
24enterprise.
25    "Qualified investor" means an investor who is:
26        (1) an individual who invests at least $25,000 in a

 

 

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1    qualified Illinois emerging technology enterprise;
2        (2) an Illinois corporation that invests at least
3    $250,000 in a qualified Illinois emerging technology
4    enterprise; or
5        (3) a qualified Illinois venture capital firm.
6    "Qualified Illinois emerging technology enterprise" means
7a company that has:
8        (1) its headquarters and base of operations in
9    Illinois;
10        (2) fewer than 50 full-time employees;
11        (3) been in active business no longer than 10 years;
12    and
13        (4) been certified in writing as an emerging technology
14    enterprise by the Department.
15    "Qualified Illinois venture capital firm" means an entity
16that:
17        (1) is organized for the purpose of investing funds in
18    privately held companies engaged in the research,
19    development, or commercialization of innovative and
20    propriety technology;
21        (2) has at least 2 principals who each have at least 5
22    years of venture capital experience;
23        (3) has at least one year of experience investing in
24    emerging technology industries; and
25        (4) has its headquarters and principal place of
26    operations in Illinois.
 

 

 

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1    Section 15. Eligibility. An emerging technology enterprise
2is eligible to receive a grant under this Act if the activity
3to be funded: (i) will result in the creation of new jobs in
4this State; and (ii) has the potential to result in the
5advancement of medicine or science.
 
6    Section 20. The Emerging Technology Grant Fund. The
7Emerging Technology Grant Fund is created as a special fund in
8the State treasury. From appropriations to the Department from
9the Fund, the Department shall make grants to emerging
10technology enterprises in the State as set forth under this
11Act. Moneys received for the purposes of this Section,
12including, without limitation, appropriations, repayments of
13grant moneys, and gifts, grants, and awards from any public or
14private entity, must be deposited into the Fund. Any interest
15earnings that are attributable to moneys in the Fund must be
16deposited into the Fund.
 
17    Section 25. Grant contracts.
18    (a) Before awarding a grant under this Act, the Department
19shall enter into a written contract with the emerging
20technology enterprise to be awarded the grant money. In the
21contract, the emerging technology enterprise shall guarantee
22that it will perform the actions expected to be performed. The
23contract may specify that:

 

 

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1        (1) If all or any portion of the amount of the grant is
2    used to build a capital improvement:
3            (A) the State retains a lien or other interest in
4        the capital improvement in proportion to the
5        percentage of the grant amount used to pay for the
6        capital improvement; and
7            (B) the recipient of the grant shall, if the
8        capital improvement is sold, (i) repay to the State the
9        grant money used to pay for the capital improvement,
10        with interest at the rate and according to the other
11        terms provided by the agreement, and (ii) share with
12        the State a proportionate amount of any profit realized
13        from the sale; and
14        (2) If, as of the date certain provided in the
15    contract, the grant recipient has not used grant money
16    awarded under this Act for the purposes for which the grant
17    was intended, then the recipient shall repay that amount
18    and any related interest applicable under the agreement to
19    the State at the agreed rate and on the agreed terms.
20    (b) If an emerging technology enterprise fails to perform
21an action guaranteed by contract before a time specified by
22contract, then the enterprise shall return all moneys received
23from the Fund.
24    (c) The provisions of this Section take precedence over any
25conflicting requirements of the Illinois Grant Funds Recovery
26Act.
 

 

 

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1    Section 30. Funding priority. In awarding money from the
2Fund under this Act, priority shall be given to proposals that:
3        (1) involve emerging scientific or technology fields
4    that have a reasonable probability of enhancing the State's
5    national and global economic competitiveness;
6        (2) may result in a medical or scientific advancement;
7        (3) are collaborative between any combination of
8    private or nonprofit entities and public or private
9    agencies or institutions in the State;
10        (4) are matched with other available funds, including
11    funds from the private or nonprofit entity or institution
12    of higher education collaborating on the project; or
13        (5) have an economic development benefit to the State.
 
14    Section 35. Research grant matching. Amounts allocated
15from the Fund for use as provided by this Act must be reserved
16to match funding from research sponsors other than this State,
17including federal research sponsors. The Department shall
18determine proposals eligible for funding under this Act. If
19amounts allocated from the Fund are used to match a federal
20Small Business Innovative Research (SBIR) grant, then the State
21matching funds from the Fund for all phases of that SBIR grant
22shall not exceed $600,000. Not more than $10,000,000 of moneys
23from the Fund shall be used by the Department in any one fiscal
24year as grant matching funds under this Act.
 

 

 

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1    Section 40. Documentation of benefits.
2    (a) An emerging technology enterprise that receives a grant
3under this Act must document specific benefits that the State
4may expect to gain as a result of the grant award. This
5documentation must be completed and provided to the Department
6before the emerging technology enterprise may enter into a
7contract to receive funding under Section 25.
8    (b) The Department may terminate funding to an emerging
9technology enterprise if the enterprise fails to realize a
10benefit specified in the contract, as determined by a periodic
11review conducted by the Department.
 
12    Section 45. Income tax credit. A qualified investor may
13claim a credit against the tax imposed under subsections (a)
14and (b) of Section 201 of the Illinois Income Tax Act, as
15provided in this Act and Section 221 of the Illinois Income Tax
16Act. The amount of the credit is an amount equal to the final
17credit certificate approved by the Department for an investment
18in a qualified emerging technology enterprise, as provided
19under Sections 50 and 55 of this Act.
20    This credit is exempt from the provisions of Section 250 of
21the Illinois Income Tax Act.
 
22    Section 50. Tax credit application; certification.
23    (a) In order to receive the tax credit under this Act, the

 

 

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1qualified investor must submit an application to the Department
2on forms provided by the Department at least 30 days prior to
3making an investment in a qualified Illinois emerging
4technology enterprise for which the qualified investor is
5eligible for an initial tax credit certificate.
6    (b) The Department shall approve all applications that
7qualify for credits under this Act on a first-come first-served
8basis. Within 30 days after its receipt of an application, the
9Department must certify the amount of any approved tax credits
10to a qualified investor.
11    (c) The qualified investor must make an investment in a
12qualified Illinois emerging technology enterprise within 30
13days after the Department has issued a tax credit certificate
14under subsection (b). Within 10 days after making the
15investment, the qualified investor must provide written notice
16to the Department. If the qualified investor fails to provide
17this written notice within 40 days after the issuance of the
18tax credit certificate, then the Department shall rescind the
19certificate.
 
20    Section 55. Amount of the tax credit. The tax credit
21allowed in a tax credit certificate issued under this Act is
2225% of the investment in a qualified Illinois emerging
23technology enterprise, but not to exceed:
24        (1) $50,000 for a qualified investor that is an
25    individual; or

 

 

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1        (2) $250,000 for a qualified investor that is a
2    corporation or a qualified Illinois venture capital firm.
 
3    Section 57. Limit on total tax credits. Total tax credits
4allowed under this Act shall not exceed $15,000,000 in any one
5State fiscal year.
 
6    Section 60. Recapture of the tax credit.
7    (a) If, within 2 taxable years after the close of the
8taxable year in which a credit under Section 45 of this Act is
9approved, the qualified investor sells, transfers, or
10otherwise disposes of the ownership interest in the qualified
11Illinois emerging technology enterprise that gave rise to the
12credit, then the credit must be recaptured.
13    (b) The amount required to be recaptured under this Section
14is:
15        (1) 100% of the amount of the credit if the disposition
16    occurs during the taxable year in which the tax credit is
17    approved;
18        (2) 67% of the amount of the credit if the disposition
19    occurs during the first taxable year after the close of the
20    taxable year for which the tax is approved; or
21        (3) 33% of the amount of the credit if the disposition
22    occurs more than one taxable year but not more than 2
23    taxable years after the close of the taxable year for which
24    the tax credit is approved.

 

 

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1    (c) The qualified investor who claimed the credit shall pay
2the recaptured amount as taxes payable to the State for the
3taxable year in which the disposition occurred.
 
4    Section 65. Revocation of the credit.
5    (a) The Department may revoke its certification of an
6approved credit under this Act if any representation in
7connection with the application for the certification proves to
8have been false when made.
9    (b) The revocation may be in full or in part as the
10Department determines and, subject to subsection (c), must be
11communicated in writing to the qualified investor and the
12Department of Revenue.
13    (c) The Department of Revenue may make an assessment
14against the qualified investor to recapture any amount of the
15tax credit that the qualified investor has already claimed.
 
16    Section 70. Annual report.
17    (a) On or before January 10 of each year, the Department
18shall report to the Governor and to the General Assembly on the
19tax credit certificates awarded under this Act for the prior
20calendar year.
21    (b) This report must include, for each tax credit
22certificate awarded:
23        (1) the name of the qualified investor and the amount
24    of credit awarded or allocated to that investor;

 

 

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1        (2) the name and address of the qualified Illinois
2    emerging technology enterprise that received the
3    investment giving rise to the credit and the county in
4    which the qualified Illinois emerging technology
5    enterprise is located; and
6        (3) the dates of receipt and approval by the Department
7    of the applications for the tax credit certificate.
8    (c) The report must summarize for each category of
9qualified investors:
10        (1) the total number of applicants for initial tax
11    credit certificates under this Act in the prior calendar
12    year;
13        (2) the total number of applications for which initial
14    tax credit certificates were issued in the prior calendar
15    year; and
16        (3) the total tax credit certificates authorized under
17    this Act for all calendar years.
 
18    Section 75. Rules. The Department shall adopt any rule
19necessary for the administration of this Act, except that the
20Department of Revenue shall prescribe rules in accordance with
21subsection (d) of Section 221 of the Illinois Income Tax Act.
 
22    Section 90. The State Finance Act is amended by adding
23Section 5.826 as follows:
 

 

 

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1    (30 ILCS 105/5.826 new)
2    Sec. 5.826. The Emerging Technology Grant Fund.
 
3    Section 95. The Illinois Income Tax Act is amended by
4adding Section 224 as follows:
 
5    (35 ILCS 5/224 new)
6    Sec. 224. Emerging Technology Investment Tax Credit.
7    (a) For tax years beginning on or after January 1, 2013, a
8taxpayer who has been awarded a tax credit under the Emerging
9Technology Industries Act is entitled to a credit against the
10taxes imposed under subsections (a) and (b) of Section 201 of
11this Act in an amount determined by the Department of Commerce
12and Economic Opportunity under the Emerging Technology
13Industries Act.
14    (b) If the taxpayer is a partnership or Subchapter S
15corporation, the credit is allowed to the partners or
16shareholders in accordance with the determination of income and
17distributive share of income under Sections 702 and 704 and
18Subchapter S of the Internal Revenue Code.
19    (c) The credit may not be carried forward or back.
20    (d) The Department, in cooperation with the Department of
21Commerce and Economic Opportunity, may prescribe rules to
22enforce and administer the provisions of this Section.
23    (e) The credit established under this Section and Sections
2445 through 65 of the Emerging Technology Industries Act is

 

 

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1exempt from the provisions of Section 250 of this Act.
 
2    Section 99. Effective date. This Act takes effect upon
3becoming law.