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Full Text of HB2946  100th General Assembly




State of Illinois
2017 and 2018


Introduced , by Rep. Carol Sente


35 ILCS 5/220

    Amends the Illinois Income Tax Act. Makes the following changes with respect to the angel investment credit: (1) reinstates the credit for taxable years beginning on or after December 31, 2016 and ending on or before December 31, 2021; (2) provides that the term "applicant" includes a corporation, partnership, or limited liability company formed for the purpose of facilitating an offer or sale of a security by an in-State issuer to resident of the State as provided under a particular provision of the Illinois Securities Law of 1953; (3) provides a definition of "investment"; (4) contains a requirement that the applicant must agree to remain in the State for a period of not less than 3 years; and (5) makes changes concerning the allocation of the credit awards. Effective immediately.

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HB2946LRB100 11310 HLH 21673 b

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: (1) a corporation, partnership, or limited
13liability company (other than any such corporation,
14partnership, or limited liability company formed solely for the
15purpose of facilitating an offering conducted pursuant to, and
16in compliance with, paragraph T of Section 4 of the Illinois
17Securities Law of 1953, or a natural person, who has a direct
18or indirect ownership interest of at least 51% in the profits,
19capital, or value of the applicant; or (2) investment or a
20related member of the applicant.
21    "Claimant" means an applicant certified by the Department
22who files a claim for a credit under this Section.
23    "Department" means the Department of Commerce and Economic



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2    "Investment" means money (or its equivalent) given to a
3qualified new business venture in consideration for an equity
4interest of the qualified new business venture (without regard
5to the class, or the distribution or dividend, voting or other
6rights, of such equity interest), an agreement for receipt of a
7future equity interest of the qualified new business venture
8(with warrants or a defined means of equity conversion),
9convertible debt made by the qualified new business venture
10(with a defined means of equity conversion) or some combination
12    "Qualified new business venture" means a business that is
13registered with the Department under this Section.
14    "Related member" means a person that, with respect to the
15subject applicant investment, is any one of the following:
16        (1) An individual, if the individual and the members of
17    the individual's family (as defined in Section 318 of the
18    Internal Revenue Code) own directly, indirectly,
19    beneficially, or constructively, in the aggregate, at
20    least 50% of the value of the outstanding profits, capital,
21    stock, or other ownership interest in the applicant.
22        (2) A partnership, estate, or trust and any partner or
23    beneficiary, if the partnership, estate, or trust and its
24    partners or beneficiaries own directly, indirectly,
25    beneficially, or constructively, in the aggregate, at
26    least 50% of the profits, capital, stock, or other



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1    ownership interest in the applicant.
2        (3) A corporation, and any party related to the
3    corporation in a manner that would require an attribution
4    of stock from the corporation under the attribution rules
5    of Section 318 of the Internal Revenue Code, if the
6    applicant and any other related member own, in the
7    aggregate, directly, indirectly, beneficially, or
8    constructively, at least 50% of the value of the
9    corporation's outstanding stock.
10        (4) A corporation and any party related to that
11    corporation in a manner that would require an attribution
12    of stock from the corporation to the party or from the
13    party to the corporation under the attribution rules of
14    Section 318 of the Internal Revenue Code, if the
15    corporation and all such related parties own, in the
16    aggregate, at least 50% of the profits, capital, stock, or
17    other ownership interest in the applicant.
18        (5) A person to or from whom there is attribution of
19    stock ownership in accordance with Section 1563(e) of the
20    Internal Revenue Code, except that for purposes of
21    determining whether a person is a related member under this
22    paragraph, "20%" shall be substituted for "5%" whenever
23    "5%" appears in Section 1563(e) of the Internal Revenue
24    Code.
25    (b) For taxable years beginning after December 31, 2016
262010, and ending on or before December 31, 2021 2016, subject



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1to the limitations provided in this Section, a claimant may
2claim, as a credit against the tax imposed under subsections
3(a) and (b) of Section 201 of this Act, an amount equal to: 25%
4of the claimant's investment made directly in a qualified new
5business venture pursuant to subparagraph (A) of paragraph (3)
6of subsection (e) or item (i) of subparagraph (B) of paragraph
7(3) of subsection (e) below; and (ii) 10% of the claimant's
8investment made directly in a qualified new business venture
9pursuant to item (i) of subparagraph (B) of paragraph (3) of
10subsection (e) below. In order for an investment in a qualified
11new business venture to be eligible for tax credits, the
12business must have applied for and received certification under
13subsection (e) for the taxable year in which the investment was
14made prior to the date on which the investment was made. The
15credit under this Section may not exceed the taxpayer's
16Illinois income tax liability for the taxable year. If the
17amount of the credit exceeds the tax liability for the year,
18the excess may be carried forward and applied to the tax
19liability of the 5 taxable years following the excess credit
20year. The credit shall be applied to the earliest year for
21which there is a tax liability. If there are credits from more
22than one tax year that are available to offset a liability, the
23earlier credit shall be applied first. In the case of a
24partnership or Subchapter S Corporation, the credit is allowed
25to the partners or shareholders in accordance with the
26determination of income and distributive share of income under



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1Sections 702 and 704 and Subchapter S of the Internal Revenue
3    (c) The maximum amount of an applicant's investment that
4may be used as the basis for a credit under this Section is
5$2,000,000 for each investment made directly in a qualified new
6business venture.
7    (d) The Department shall implement a program to certify an
8applicant for an angel investment credit. Upon satisfactory
9review, the Department shall issue a tax credit certificate
10stating the amount of the tax credit to which the applicant is
11entitled. The Department shall annually certify that (i) each
12approved applicant remains in the State of Illinois (and
13continues to remain in the State for a period of no less than 3
14years from the issue date of the last tax credit certificate
15issued by the Department with respect to such business); and
16(ii) the claimant's investment has been made and remains in the
17qualified new business venture for no less than 3 years.
18    If an investment for which a claimant is allowed a credit
19under subsection (b) is held by the claimant for less than 3
20years, other than as a result of a permitted sale of such
21investment to person which is not a related member or, if
22within that period of time the qualified new business venture
23is moved from the State of Illinois, the claimant shall pay to
24the Department of Revenue, in the manner prescribed by the
25Department of Revenue, the aggregate amount of the disqualified
26credits credit that the claimant received related to the



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1subject investment.
2    If the Department determines that a previously approved
3applicant has moved from the State of Illinois prior to the
4date which is 3 years from the issue date of the last tax
5credit certificate issued by the Department with respect to the
6subject business, such business shall pay to the Department of
7Revenue, in the manner prescribed by the Department of Revenue,
8the aggregate amount of the disqualified credits that claimants
9received related to investments in such business.
10    (e) The Department shall implement a program to register
11qualified new business ventures for purposes of this Section. A
12business desiring registration shall submit an application to
13the Department in each taxable year for which the business
14desires registration. The Department may register the business
15only if the business satisfies all of the following conditions:
16        (1) it has its headquarters in this State;
17        (2) at least 51% of the employees employed by the
18    business are employed in this State;
19        (3) it has the potential for increasing jobs in this
20    State, increasing capital investment in this State, or
21    both, as determined by the Department, and either of the
22    following apply:
23            (A) the business it is:
24                (i) principally engaged in innovation in any
25            of the following: manufacturing; biotechnology;
26            nanotechnology; communications; agricultural



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1            sciences; clean energy creation or storage
2            technology; processing or assembling products,
3            including medical devices, pharmaceuticals,
4            computer software, computer hardware,
5            semiconductors, other innovative technology
6            products, or other products that are produced
7            using manufacturing methods that are enabled by
8            applying proprietary technology; or providing
9            services that are enabled by applying proprietary
10            technology; or
11                (ii) (B) it is undertaking
12            pre-commercialization activity related to
13            proprietary technology that includes conducting
14            research, developing a new product or business
15            process, or developing a service that is
16            principally reliant on applying proprietary
17            technology; or
18            (B) the funding transaction of the qualified new
19        business venture giving rise to the subject
20        investment:
21                (i) is an offering:
22                    (1) where the available investment
23                interests have been publicly offered for sale
24                solely to residents of the State;
25                    (2) where at least 25% of the offered
26                investment interests have been reserved for



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1                sale to non-accredited investors (whether or
2                not the same are resultantly sold to such
3                investors);
4                    (3) which is held open for sale a period of
5                at least 5 months (or until fully funded, if
6                sooner); and
7                    (4) which is conducted pursuant to, and in
8                full compliance with, paragraph T of Section 4
9                of the Illinois Securities Law of 1953, and all
10                other applicable federal and state laws and
11                regulations; or
12                (ii) is an offering:
13                    (1) which is made in conjunction with,
14                within one month from the commencement of, and
15                as part of a single plan of financing which
16                includes, an offering of the type described in
17                item (i) above;
18                    (2) where the aggregate amount of
19                available investment interests being sold as
20                part of such offering does not exceed ten times
21                the aggregate amount of investment interests
22                being sold in the related offering of the type
23                described in item (i) above;
24                    (3) where the rights, with respect to
25                distributions and payments only, of the
26                available investment interests being sold are



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1                equal, or junior, in terms of priority to the
2                respective rights of the investment interests
3                being sold in the related offering of the type
4                described in item (i) above; and
5                    (4) which is conducted pursuant to, and in
6                full compliance with, all applicable federal
7                and State laws and regulations;
8        (4) it is not principally engaged in real estate
9    development (except for development projects anticipated
10    to take more than 3 years to complete), insurance, banking,
11    lending, lobbying, political consulting, professional
12    services provided by attorneys, accountants, business
13    consultants, physicians, or health care consultants,
14    wholesale or retail trade, leisure, hospitality,
15    transportation, or construction, (except for construction
16    projects anticipated to take more than 3 years to complete
17    or with respect to the construction of power production
18    plants that derive energy from a renewable energy resource,
19    as defined in Section 1 of the Illinois Power Agency Act;
20        (5) at the time it is first certified:
21            (A) it has fewer than 100 employees;
22            (B) it has been in operation in Illinois for more
23        than one year but not more than 10 consecutive years
24        prior to the year of certification; and
25            (C) it has received not more than $10,000,000 in
26        aggregate private equity investment in cash;



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1        (6) it agrees not to move its operations from the State
2    of Illinois prior to the date which is 3 years from the
3    issue date of the last tax credit certificate issued by the
4    Department with respect to such business (blank); and
5        (7) it has received not more than $4,000,000 in
6    investments that qualified for tax credits under this
7    Section.
8    (f) The Department, in consultation with the Department of
9Revenue, shall adopt rules to administer this Section. The
10aggregate amount of the tax credits that may be claimed under
11this Section for investments made in qualified new business
12ventures shall be limited at $20,000,000 $10,000,000 per
13calendar year. The $20,000,000 annual allowable amount shall be
14allocated by the Department, on a per calendar quarter basis
15and prior to the commencement of each calendar year, in such
16proportion as determined by the Department, provided that: (i)
17the amount initially allocated by the Department for any one
18calendar quarter shall not exceed 35% of the total allowable
19amount; and (ii) any portion of the allocated allowable amount
20remaining unused as of the end of any of the first 3 calendar
21quarters of a given calendar year shall be rolled into, and
22added to, the total allocated amount for the next available
23calendar quarter.
24    (g) A claimant may not sell or otherwise transfer a credit
25awarded under this Section to any another person (or entity
26other than a related member).



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1    (h) On or before March 1 of each year, the Department shall
2report to the Governor and to the General Assembly on the tax
3credit certificates awarded under this Section for the prior
4calendar 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 of the qualified new
10        business venture that received the investment giving
11        rise to the credit and the county in which the
12        qualified new business venture is located; and
13            (C) the date of approval by the Department of the
14        applications for the tax credit certificate.
15        (2) The report must also include:
16            (A) the total number of applicants and amount for
17        tax credit certificates awarded under this Section in
18        the prior calendar year;
19            (B) the total number of applications and amount for
20        which tax credit certificates were issued in the prior
21        calendar year; and
22            (C) the total tax credit certificates and amount
23        authorized under this Section for all calendar years.
24(Source: P.A. 96-939, eff. 1-1-11; 97-507, eff. 8-23-11;
2597-1097, eff. 8-24-12.)
26    Section 99. Effective date. This Act takes effect upon



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1becoming law.