State of Illinois
90th General Assembly
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90_SB1685

      New Act
      215 ILCS 5/409            from Ch. 73, par. 1021
          Creates the Certified  Capital  Company  Act  to  provide
      assistance  in the formation of new and expansion of existing
      businesses that create jobs in  the  State  by  providing  an
      incentive,  in  the  form  of tax credits against the State's
      privilege  taxes,  for  insurance  companies  to  invest   in
      certified capital companies.  Provides that the Department of
      Commerce   and   Community   Affairs   shall  implement   the
      provisions of the Act.  Provides that  an  insurance  company
      that  qualifies  as  a certified investor shall earn a vested
      credit against State privilege taxes equal  to  100%  of  the
      investor's  investment of certified capital, of which 10% may
      be taken in any taxable year.  Provides  that  the  aggregate
      amount  of  certified capital for which privilege tax credits
      shall be allowed for all certified investors shall not exceed
      the amount that would entitle all certified investors to take
      aggregate  credits  of  $30,000,000  per  year.   Amends  the
      Illinois Insurance Code to provide that  the  amount  of  the
      credit  earned under the Certified Capital Company Act may be
      deducted from a company's privilege tax liability.  Effective
      immediately.
                                                     LRB9009724KDks
                                               LRB9009724KDks
 1        AN ACT concerning insurance companies.
 2        Be it enacted by the People of  the  State  of  Illinois,
 3    represented in the General Assembly:
 4        Section  1.  Short  title.  This  Act may be cited as the
 5    Certified Capital Company Act.
 6        Section 5. Policy statement. The primary purpose  of  the
 7    Certified Capital Company Act is to provide assistance in the
 8    formation  of  new  and expansion of existing businesses that
 9    create jobs in  the  State  by  providing  an  incentive  for
10    insurance companies to invest in certified capital companies.
11        Section 10. Definitions. For the purpose of this Act:
12        "Affiliate  of  a  certified capital company or insurance
13    company" means:
14        (a)  Any  person,  directly  or  indirectly  beneficially
15    owning  (whether   through   rights,   options,   convertible
16    interests,  or  otherwise),  controlling  or holding power to
17    vote 10% or more of  the  outstanding  voting  securities  or
18    other ownership interests of the certified capital company or
19    insurance company, as applicable;
20        (b)  Any  person  10% or more of whose outstanding voting
21    securities  or  other  ownership  interest  are  directly  or
22    indirectly  beneficially  owned  (whether   through   rights,
23    options,  convertible interests, or otherwise), controlled or
24    held with power to vote by the certified capital  company  or
25    insurance company, as applicable;
26        (c)  Any   person  directly  or  indirectly  controlling,
27    controlled by, or under common  control  with  the  certified
28    capital company or insurance company, as applicable;
29        (d)  A partnership in which the certified capital company
30    or insurance company, as applicable, is a general partner; or
                            -2-                LRB9009724KDks
 1        (e)  Any person who is an officer, director, employee, or
 2    agent  of the certified capital company or insurance company,
 3    as applicable, or an immediate family member of that officer,
 4    director, employee, or agent.
 5        "Certification date" means the date on which a  certified
 6    capital company is so designated by the Department.
 7        "Certified  capital"  means  an  investment  of cash by a
 8    certified investor in a certified capital company that  fully
 9    funds  the  purchase  price  of  either  or  both  its equity
10    interest in the certified capital company or a qualified debt
11    instrument issued by the certified capital company.
12        "Certified  capital   company"   means   a   partnership,
13    corporation,  trust,  or  limited  liability company, whether
14    organized on a profit or not-for-profit basis,  that  has  as
15    its  primary  business  activity  the  investment  of cash in
16    qualified businesses and that is certified by the  Department
17    as meeting the criteria of  this Act.
18        "Certified investor" means any insurance company that (A)
19    contributes  certified  capital  pursuant to an allocation of
20    privilege tax credits under Section 20 of  this  Act  or  (B)
21    becomes irrevocably committed to contribute certified capital
22    by  preparing and executing a privilege tax credit allocation
23    claim.
24        "Department"  means  the  Department  of   Commerce   and
25    Community Affairs.
26        "Person"  means any natural person or entity, including a
27    corporation,  general  or  limited  partnership,  trust,   or
28    limited liability company.
29        "Privilege tax credit allocation claim" means a claim for
30    allocation  of privilege tax credits prepared and executed by
31    a certified investor on a form provided by the Department and
32    filed by a certified capital  company  with  the  Department.
33    The form shall include an affidavit of the certified investor
34    under which the certified investor shall become legally bound
                            -3-                LRB9009724KDks
 1    and  irrevocably committed to make an investment of certified
 2    capital  in  a  certified  capital  company  in  the   amount
 3    allocated (even if such amount is less than the amount of the
 4    claim), subject only to the receipt of an allocation pursuant
 5    to Section 20 of this Act.
 6        "Qualified  business"  means a business that meets all of
 7    the following conditions  as  of  the  time  of  a  certified
 8    capital company's first investment in the business:
 9        (a)  It is headquartered in this State, and its principal
10    business operations are located in this State;
11        (b)  It is a small business concern as defined in Section
12    121.201  of  the  small business size regulations of the U.S.
13    Small Business Administration, 13 CFR 121.201.
14    A business predominantly  engaged  in  professional  services
15    provided  by  accountants,  lawyers,  or physicians shall not
16    constitute a qualified business.
17        "Qualified  debt  instrument"  means  a  debt  instrument
18    issued by a certified capital company,  at  par  value  or  a
19    privilege, with an original maturity date of at least 5 years
20    from date of issuance, a repayment schedule that is no faster
21    than  a  level  principal  amortization  over  5  years,  and
22    interest,  distribution,  or  payment  features  that are not
23    related to the profitability of the certified capital company
24    or  the  performance  of  the  certified  capital   company's
25    investment portfolio.
26        "Qualified   Distribution"   means  any  distribution  or
27    payment to equity holders of a certified capital  company  in
28    connection with the following:
29        (a)  Costs   and   expenses   of   forming,  syndicating,
30    managing,  and  operating  the  certified  capital   company,
31    including reasonable and necessary fees paid for professional
32    services  (such  as legal and accounting services) related to
33    the formation and operation of the certified capital  company
34    and  an  annual  management  fee  in  an amount that does not
                            -4-                LRB9009724KDks
 1    exceed 2% of the value of the assets of the certified capital
 2    company; and
 3        (b)  Any projected increase in federal  or  State  taxes,
 4    including penalties and interest related to State and federal
 5    income  taxes,  of  the  equity owners of a certified capital
 6    company resulting from the earnings or other tax liability of
 7    the certified capital company to the extent that the increase
 8    is related to the ownership, management, or  operation  of  a
 9    certified capital company.
10        "Qualified  Investment" means the investment of cash by a
11    certified capital company in a  qualified  business  for  the
12    purchase  of  any  debt,  equity,  or hybrid security, of any
13    nature  and  description   whatsoever,   including   a   debt
14    instrument  or  security that has the characteristics of debt
15    but that  provides  for  conversion  into  equity  or  equity
16    participation instruments such as options or warrants.
17        "State  privilege  tax  liability"  means  any  liability
18    incurred  by  an  insurance  company  under the provisions of
19    Section 409 of the Illinois Insurance Code.
20        Section 15. Certification.
21        (a)  The Department shall establish by rule or regulation
22    the  procedures  for  making  an  application  to  become   a
23    certified   capital  company.   The  applicant  shall  pay  a
24    non-refundable application fee  of  $7,500  at  the  time  of
25    filing the application with the Department.
26        (b)  A  certified capital company's equity capitalization
27    at the time of seeking certification must be $500,000 or more
28    and must be in the  form  of  unencumbered  cash,  marketable
29    securities, or other liquid assets.
30        (c)  The   Department  shall  review  the  organizational
31    documents  of  each  applicant  for  certification  and   the
32    business  history  of  the applicant and shall determine that
33    the applicant's cash, marketable securities, and other liquid
                            -5-                LRB9009724KDks
 1    assets are at least $500,000.
 2        (d)  The  Department  shall  verify  that  at   least   2
 3    principals  of  the  certified  capital company or at least 2
 4    persons employed to manage the funds of the certified capital
 5    company have not less than  2  years  of  experience  in  the
 6    venture capital industry.
 7        (e)  Any   offering   material   involving  the  sale  of
 8    securities of the certified capital company shall include the
 9    following statement:  "By  authorizing  the  formation  of  a
10    certified  capital  company,  the  State does not necessarily
11    endorse the  quality  of  management  or  the  potential  for
12    earnings  of  such  company  and is not liable for damages or
13    losses to a certified investor in the company.   Use  of  the
14    word  'certified'  in  an  offering  does  not  constitute  a
15    recommendation  or  endorsement  of  the  investment  by  the
16    Securities  Department  of  the  Office  of  the Secretary of
17    State.  In the event applicable provisions of  this  Act  are
18    violated,   the   State  may  require  forfeiture  of  unused
19    privilege tax credits and repayment  of  used  privilege  tax
20    credits."
21        (f)  Within  30 days of application, the Department shall
22    issue the certification or shall refuse the certification and
23    communicate in detail to the applicant the  grounds  for  the
24    refusal,  including  suggestions  for  the  removal  of those
25    grounds. The Department shall review and  approve  or  reject
26    applications  in  the  order submitted, and in the event more
27    than one application is received by  the  Department  on  any
28    date,  all  such  applications shall be reviewed and approved
29    simultaneously, except in the case of incomplete applications
30    or applications for which additional information is requested
31    by the Department and is not supplied by the applicant within
32    the allowable time limits established by the Department.
33        (g)  No  insurance  company  or  any  affiliate   of   an
34    insurance  company  shall,  directly  or indirectly, manage a
                            -6-                LRB9009724KDks
 1    certified  capital  company  or  control  the  direction   of
 2    investments  for a certified capital company.  This provision
 3    shall not preclude an certified investor, insurance  company,
 4    or  any  other  party  from  exercising  its legal rights and
 5    remedies (which may include interim management of a certified
 6    capital company)  in  the  event  that  a  certified  capital
 7    company  is  in  default  of its statutory obligations or its
 8    contractual obligations to such certified investor, insurance
 9    company, or other party.
10        Section 20. Privilege tax credit.
11        (a)  Any certified investor who makes  an  investment  of
12    certified  capital pursuant to an allocation of privilege tax
13    credits under Section 25 of this Act shall, in  the  year  of
14    investment,  earn a vested credit against State privilege tax
15    liability  equal  to  100%  of   the   certified   investor's
16    investment  of certified capital.  A certified investor shall
17    be entitled to take up to 10% of  the  vested  privilege  tax
18    credit in any taxable year of the certified investor.
19        (b)  The credit to be applied against State privilege tax
20    liability  in any one year may not exceed the State privilege
21    tax liability of the  certified  investor  for  that  taxable
22    year.    All  unused  credits  against  State  privilege  tax
23    liability may  be  carried  forward  indefinitely  until  the
24    privilege tax credits are utilized.
25        (c)  A certified investor claiming a credit against State
26    privilege  tax  liability  earned  through an investment in a
27    certified capital company shall not be required  to  pay  any
28    additional  retaliatory tax levied pursuant to Section 444 of
29    the Illinois Insurance Code as  a  result  of  claiming  that
30    credit.
31        Section 30.  Aggregate limitations on credits.
32        (a)  The  aggregate amount of certified capital for which
                            -7-                LRB9009724KDks
 1    privilege tax credits shall  be  allowed  for  all  certified
 2    investors  under  this  Act  shall not exceed the amount that
 3    would entitle all certified investors  in  certified  capital
 4    companies  to take aggregate credits of $30,000,000 per year.
 5    No certified capital company may file  privilege  tax  credit
 6    allocation   claims  in  excess  of  the  maximum  amount  of
 7    certified capital for which  privilege  tax  credits  may  be
 8    allowed as provided in this subsection.
 9        (b)  Certified  capital  for  which privilege tax credits
10    are allowed will  be  allocated  to  certified  investors  in
11    certified  capital  companies in the order that privilege tax
12    credit allocation claims are filed  with  the  Department  by
13    such certified capital companies on behalf of their certified
14    investors.  All filings made on the same day shall be treated
15    as having been made contemporaneously.
16        (c)  In  the  event  that  2  or  more  certified capital
17    companies file privilege tax credit  allocation  claims  with
18    the  Department  on  behalf  of  their  respective  certified
19    investors  on  the same day, and the amount of such privilege
20    tax credit allocation claims exceeds  in  the  aggregate  the
21    limit  of  available tax credits under the provisions of this
22    Section, capital for which privilege tax credits are  allowed
23    shall  be  allocated  among  the certified investors on a pro
24    rata basis with respect to the amounts claimed.  The pro rata
25    allocation for  any  one  certified  investor  shall  be  the
26    product  of  a fraction, the numerator of which is the amount
27    of the privilege tax credit allocation claim filed on  behalf
28    of  such  certified  investor and the denominator of which is
29    the total of all privilege tax credit allocation claims filed
30    on behalf of  all  certified  investors,  multiplied  by  the
31    aggregate limitation as provided in subsection (a).
32        (d)  Within 5 business days after the Department receives
33    a  privilege tax credit allocation claim filed by a certified
34    capital company on behalf of one or  more  of  its  certified
                            -8-                LRB9009724KDks
 1    investors,  the Department shall notify the certified capital
 2    company of the amount of tax credits allocated to each of the
 3    certified investors in the certified capital company.
 4        (e)  In the event a certified capital  company  does  not
 5    receive  an  investment  of  certified  capital  equaling the
 6    amount of privilege tax  credits  allocated  to  a  certified
 7    investor for which it filed a privilege tax credit allocation
 8    claim  within  5  business  days  of its receipt of notice of
 9    allocation,  that  portion  of  the  privilege  tax   credits
10    allocated  to the certified investor in the certified capital
11    company will be forfeited, and the Department will reallocate
12    that certified capital among the other certified investors in
13    all certified capital companies on  a  pro  rata  basis  with
14    respect  to  the privilege tax credit allocation claims filed
15    on behalf  of  such  certified  investors  by  all  certified
16    capital companies.
17        (f)  The  maximum  amount  of certified capital for which
18    privileges tax credits shall be allowed to any one  certified
19    investor  (and  its  affiliates)  in  one  or  more certified
20    capital companies in any year shall not  exceed  10%  of  the
21    aggregate limitation as provided in subsection (a).
22        Section    35.     Requirements    for   continuance   of
23    certification.
24        (a)  To continue to be  certified,  a  certified  capital
25    company  must  make  qualified  investments  according to the
26    following schedule:
27             (1)  Within the period  ending  3  years  after  its
28        certification date, a certified capital company must have
29        made  qualified  investments cumulatively equal to 30% of
30        its certified capital.
31             (2)  Within the period  ending  5  years  after  its
32        certification date, a certified capital company must have
33        made  qualified  investments cumulatively equal to 50% of
                            -9-                LRB9009724KDks
 1        its certified capital.
 2        (b)  The aggregate cumulative  amount  of  all  qualified
 3    investments  made  by  the certified capital company from its
 4    certification date will be considered in the  calculation  of
 5    the  percentage  requirements  under  this Act.  Any proceeds
 6    received from a  qualified  investment  may  be  invested  in
 7    another  qualified  investment  and  shall  count  toward any
 8    requirement in  this  Act  with  respect  to  investments  of
 9    certified capital.
10        (c)  Any  business  that  is  classified  as  a qualified
11    business at the time of the first investment in the  business
12    by  a  certified capital company shall remain classified as a
13    qualified business and may receive follow-on investments from
14    any certified capital company or any of its  affiliates,  and
15    such  follow-on  investments  shall  be qualified investments
16    even though such business may not meet the  definition  of  a
17    qualified business at the time of such follow-on investments.
18        (d)  No  qualified  investment may be made at a cost to a
19    certified capital company  greater  than  15%  of  the  total
20    certified  capital  of  the  certified capital company at the
21    time of investment.
22        (e)  At its option, a certified capital company, prior to
23    making a proposed investment  in  a  specific  business,  may
24    request  from  the  Department  a  written  opinion  that the
25    business in which it proposes to invest should be  considered
26    a  qualified  business.   Upon  receiving such a request, the
27    Department shall have 10 working days to determine whether or
28    not the business meets the definition of a qualified business
29    and notify the certified capital company of its determination
30    and an explanation  thereof.   If  the  Department  fails  to
31    notify  the  certified  capital  company  with respect to the
32    proposed investment within  the  10-working-day  period,  the
33    business  in  which the certified capital company proposes to
34    invest shall be deemed to be a qualified  business.   If  the
                            -10-               LRB9009724KDks
 1    Department   determines   that  the  business  in  which  the
 2    certified capital company proposes to invest  does  not  meet
 3    all  of  the  criteria  of  a qualified business set forth in
 4    Section 15, the  Department  may  nevertheless  consider  the
 5    business  a  qualified business and approve the investment if
 6    the Department determines that the proposed  investment  will
 7    further State economic development.
 8        (f)  All  certified  capital  not  currently  invested in
 9    qualified investments by the certified capital  company  must
10    be  invested  in  cash  deposited  with  a  federally-insured
11    financial   institution,   certificates   of   deposit  in  a
12    federally-insured    financial    institution,     investment
13    securities  that  are  obligations  of the United States, its
14    agencies  or  instrumentalities,  or  obligations  that   are
15    guaranteed  fully  as to principal and interest by the United
16    States, investment-grade instruments  (rated  in  the  top  4
17    rating   categories   by   a   nationally  recognized  rating
18    organization), obligations of this State, any municipality in
19    this State, or any political subdivision of  this  State;  or
20    any  other  investments approved in advance and in writing by
21    the Department.
22        (g)  Each certified  capital  company  shall  report  the
23    following to the Department:
24             (1)  As  soon  as  practicable  after the receipt of
25        certified capital, each certified capital  company  shall
26        report  the following to the Department:  (A) the name of
27        each certified investor from which the certified  capital
28        was   received,   including   such  certified  investor's
29        insurance privilege tax identification  number,  (B)  the
30        amount   of   each  certified  investor's  investment  of
31        certified capital and privilege tax credits, and (C)  the
32        date on which the certified capital was received.
33             (2)  On  an annual basis, on or before January 31st,
34        (A)  the  amount  of  the  certified  capital   company's
                            -11-               LRB9009724KDks
 1        certified capital at the end of the immediately preceding
 2        year,  (B)  whether  or not the certified capital company
 3        has invested more than 15% of its total certified capital
 4        in any one business, and (C)  all  qualified  investments
 5        that  the  certified  capital  company  made  during  the
 6        previous calendar year.
 7             (3)  Each certified capital company shall provide to
 8        the Department annual audited financial statements, which
 9        shall  include  the  opinion  of an independent certified
10        public accountant, within 90 days of  the  close  of  the
11        fiscal  year.   The  audit  shall  address the methods of
12        operation and conduct of the business  of  the  certified
13        capital  company  to  determine  if the certified capital
14        company is complying with the statutes and program  rules
15        and  that  the  funds  received  by the certified capital
16        company have been invested as required  within  the  time
17        limits provided by subsection (a) of Section 30.
18             (4)  On  or  before  January  31  of each year, each
19        certified  capital   company   shall   pay   an   annual,
20        non-refundable   certification   fee  of  $5,000  to  the
21        Department; provided, that no such fee shall be  required
22        within  6  months  of the initial certification date of a
23        certified capital company.
24        Section 40.  Distributions.  A certified capital  company
25    may  make  qualified  distributions at any time.  In order to
26    make a distribution to  its  equity  holders,  other  than  a
27    qualified distribution, a certified capital company must have
28    made qualified investments in an amount cumulatively equal to
29    100%  of  its certified capital.  A certified capital company
30    may, however, make repayments of principal  and  interest  on
31    its   indebtedness   without   any   restriction  whatsoever,
32    including repayments of indebtedness of the certified capital
33    company on which certified  investors  earned  privilege  tax
                            -12-               LRB9009724KDks
 1    credits.
 2        Section 45.  Decertification.
 3        (a)  The  Department  shall  conduct  an annual review of
 4    each certified capital company to determine if the  certified
 5    capital   company   is   abiding   by   the  requirements  of
 6    certification, to advise the certified capital company as  to
 7    the  eligibility  status of its qualified investments, and to
 8    ensure that no investment has been made in violation of  this
 9    Act.   The  cost  of  the annual review shall be paid by each
10    certified capital  company  according  to  a  reasonable  fee
11    schedule adopted by the Department.
12        (b)  Any  material  violation  of  Section  30  shall  be
13    grounds for decertification of the certified capital company.
14    If the Department determines that a certified capital company
15    is  not in compliance with the requirements of Section 30, it
16    shall,  by  written  notice,  inform  the  officers  of   the
17    certified  capital company that the certified capital company
18    may be subject to decertification in 120 days from  the  date
19    of  mailing  of  the  notice,  unless  the  deficiencies  are
20    corrected  and  the  certified  capital  company  is again in
21    compliance with all requirements for certification.
22        (c)  At the end of  the  120-day  grace  period,  if  the
23    certified  capital  company  is  still not in compliance with
24    Section  30,  the   Department   may   send   a   notice   of
25    decertification  to  the certified capital company and to all
26    other appropriate State agencies.
27        (d)  Decertification of a certified capital  company  may
28    cause  the  recapture  of  privilege  tax  credits previously
29    claimed and the forfeiture of future privilege tax credits to
30    be claimed  by  certified  investors  with  respect  to  such
31    certified capital company, as follows:
32             (1)  Decertification  of a certified capital company
33        within 3 years of its certification date shall cause  the
                            -13-               LRB9009724KDks
 1        recapture of all privilege tax credits previously claimed
 2        and the forfeiture of all future privilege tax credits to
 3        be  claimed  by  certified investors with respect to such
 4        certified capital company.
 5             (2)  When a  certified  capital  company  meets  all
 6        requirements  for continued certification under paragraph
 7        (1) of subsection (a) of  Section  30  (and  subsequently
 8        fails    to   meet   the   requirements   for   continued
 9        certification under the provisions of  paragraph  (2)  of
10        subsection (a) of Section 30, those privilege tax credits
11        that  have  been  or will be taken by certified investors
12        within  3  years  from  the  certification  date  of  the
13        certified  capital  company  will  not  be   subject   to
14        recapture  or  forfeiture;  however,  all  privilege  tax
15        credits  that  have  been  or  will be taken by certified
16        investors   after   the   third   anniversary   of    the
17        certification date of the certified capital company shall
18        be subject to recapture or forfeiture.
19             (3)  Once  a  certified  capital company has met all
20        requirements for continued certification under paragraphs
21        (1) and (2) of subsection  (a)  of  Section  30,  and  is
22        subsequently  decertified,  those  privilege  tax credits
23        that have been or will be taken  by  certified  investors
24        within  5  years  from  the  certification  date  of  the
25        certified   capital   company  will  not  be  subject  to
26        recapture or forfeiture. Those privilege tax  credits  to
27        be  taken  subsequent  to the fifth year of certification
28        shall be subject to  forfeiture  only  if  the  certified
29        capital  company  is  decertified within 5 years from its
30        certification date.
31             (4)  Once a certified capital company  has  invested
32        an  amount  cumulatively  equal  to 100% of its certified
33        capital  in  qualified  investments,  all  privilege  tax
34        credits  claimed  or  to  be  claimed  by  its  certified
                            -14-               LRB9009724KDks
 1        investors shall no longer  be  subject  to  recapture  or
 2        forfeiture.
 3        (e)  Once  a  certified  capital  company has invested an
 4    amount cumulatively equal to 100% of its certified capital in
 5    qualified investments, the certified capital company shall no
 6    longer be subject to regulation by the Department.
 7        (f)  The Department shall  send  written  notice  to  the
 8    address of each certified investor whose privilege tax credit
 9    has  been  subject  to  recapture  or  forfeiture,  using the
10    address last shown on the last privilege tax filing.
11        (g)  The Department shall have the authority to waive any
12    recapture or forfeiture of credits if, after considering  all
13    facts  and circumstances, it determines that such waiver will
14    have the effect of furthering State economic development.
15        Section 50. Transferability.  The  privilege  tax  credit
16    established  by  this  Act  may  be transferred or sold.  The
17    Department shall adopt rules to facilitate  the  transfer  or
18    sale  of  the  privilege  tax  credits.  Any transfer or sale
19    shall not affect the time schedule for taking  the  privilege
20    tax  credit  as  provided  in  this  Act.   Any privilege tax
21    credits recaptured under Section 40 shall be the liability of
22    the taxpayer that actually claimed the privilege tax credits.
23        Section 55.  Rules.  The  Department  shall  adopt  rules
24    necessary  to  carry out the provisions of this Act within 60
25    days after the effective date of this Act.  The  rules  shall
26    provide   that   the   Department   shall   begin   accepting
27    applications for certification as a certified capital company
28    not  later than 90 days after the effective date of this Act.
29    The rules shall further provide that  any  certified  capital
30    company  may  file  privilege tax credit allocation claims on
31    behalf of its certified investors at any time on or after its
32    certification date and that privilege tax  credits  shall  be
                            -15-               LRB9009724KDks
 1    earned  by  and  vested in certified investors at the time of
 2    such investment of certified capital, although the  privilege
 3    tax credits may not be claimed or utilized until 1999.
 4        Section  80.   The  Illinois Insurance Code is amended by
 5    changing Section 409 as follows:
 6        (215 ILCS 5/409) (from Ch. 73, par. 1021)
 7        Sec. 409.  Annual privilege tax  payable  by  foreign  or
 8    alien companies.
 9        (1)  Every  foreign  or  alien company doing an insurance
10    business in this State, except fraternal  benefit  societies,
11    shall,  for  the privilege of doing business in this State by
12    renewal of certificate of authority as  provided  in  Section
13    114,  pay  to the Director for the State treasury a State tax
14    equal to 2 per  cent  of  the  net  taxable  premium  income,
15    together  with  any  amounts  due  under  Section 444.  Every
16    domestic  insurance  company,  except  a  fraternal   benefit
17    society,  which  fails to comply with all the requirements of
18    subsection (4) of this Section must pay to the  Director  for
19    payment  into  the  State Treasury a State tax equal to 2 per
20    cent of the net taxable premium income and upon  the  failure
21    of  any company to pay any such tax due, the Director may, by
22    order, revoke the company's certificate  of  authority  after
23    giving  20  days  written  notice  to the company.  The gross
24    taxable premium income shall be the gross amount of  premiums
25    received  on  direct  business  during the preceding calendar
26    year on  contracts  covering  risks  in  this  State,  except
27    premiums on annuities  and except premiums on group insurance
28    contracts awarded after the effective date of this amendatory
29    Act  of 1976 under the State Employees Group Insurance Act of
30    1971, and except premiums for deferred compensation plans for
31    employees of the State, units of local government  or  school
32    districts.  The net taxable premium income shall be the gross
                            -16-               LRB9009724KDks
 1    taxable premium income reduced only by the following:
 2             (a)  the  amount  of premiums returned thereon which
 3        shall  be  limited  to  premiums  returned   during   the
 4        preceding  calendar year and shall not include the return
 5        of cash  surrender  values  or  death  benefits  on  life
 6        policies;
 7             (b)  dividends  on  such  direct  business that have
 8        been paid in cash, applied in reduction  of  premiums  or
 9        left  to  accumulate  to  the  credit of policyholders or
10        annuitants.  In the case of life insurance, no  deduction
11        shall  be made for the payment of deferred dividends paid
12        in cash to policyholders on maturing policies;  dividends
13        left  to  accumulate  to  the  credit of policyholders or
14        annuitants shall be included  as  gross  taxable  premium
15        income  when  such  dividend accumulations are applied to
16        purchase paid-up insurance or to shorten the endowment or
17        premium paying period.
18        (2)  There shall be deducted from the tax thus  computed,
19    but  only  to  the  extent  thereof, the amount, if any, paid
20    during the preceding calendar year: (a) for  the  benefit  of
21    organized fire departments, to cities, villages, incorporated
22    towns and fire protection districts of this State as a tax on
23    premiums  received  by such company in such cities, villages,
24    incorporated towns and fire protection districts, and (b)  as
25    a tax to this State or any subdivision thereof on or measured
26    by  net  income,  and  (c)  as  a  tax  to  this State or any
27    subdivision thereof on  or  measured  by  the  value  of  the
28    company  in excess of the value of its tangible property, and
29    (d) as a fee or charge for the valuation  of  life  insurance
30    policies,  and (e) if the company is not an Illinois domestic
31    company, as a financial regulation fee under  subsection  (7)
32    of  Section 408 of this Code for the examination and analysis
33    of financial condition, and the remainder shall  be  paid  by
34    such  company  as  its annual privilege tax, and (f) for fees
                            -17-               LRB9009724KDks
 1    paid pursuant to Section 408 (1) (jj).   In  addition,  there
 2    shall  be  deducted from the tax thus computed the tax credit
 3    provided for in Section 20 of the Certified  Capital  Company
 4    Act.
 5        (3)  If  a  company  survives  or was formed by a merger,
 6    consolidation,   reorganization   or   reincorporation,   the
 7    premiums received, and  amounts  returned  or  paid,  by  all
 8    foreign   or   alien   companies   parties  to  such  merger,
 9    consolidation, reorganization or reincorporation, shall,  for
10    the  purposes of determining the amount of the tax imposed by
11    this Section, be regarded as received, returned  or  paid  by
12    such surviving or new company.
13        (4)  A  domestic  company  must  pay  the  State  tax  in
14    subsection (1) of this Section unless:
15             (a)  it maintains its principal place of business in
16        this State; and
17             (b)  it   maintains   in  this  State  officers  and
18        personnel  knowledgeable  of  and  responsible  for   the
19        company's  operation, books, records, administration, and
20        annual statement; and
21             (c)  it conducts in this State substantially all  of
22        its  underwriting, policy issuing, and serving operations
23        relating  to  Illinois  policyholders   and   certificate
24        holders; and
25             (d)  it  complies with the provisions of Section 133
26        (2) of this Code.
27        Payments shall be due on an estimated basis  for  all  of
28    calendar year 1969 on or before September 1, 1969.  Effective
29    January  1,  1970,  a company shall make an annual return for
30    the preceding calendar year on or before  March  1st  setting
31    forth  such  information  on  such  forms as the Director may
32    reasonably require.  Payments of  quarterly  installments  of
33    the  taxpayer's  total estimated tax for the current calendar
34    year shall be  due  on  or  before  April  15th,  June  15th,
                            -18-               LRB9009724KDks
 1    September  15th  and  December  15th, unless for the calendar
 2    year  1971,  and  each  calendar  year  thereafter,  insurers
 3    transacting insurance in this State whose annual tax for  the
 4    preceding calendar year was less than $5,000, shall then make
 5    only  an  annual  return.   Failure  of  a  company  to  make
 6    quarterly  payments,  if  required, of at least one-fourth of
 7    either (a) the total tax paid during  the  previous  calendar
 8    year  or  (b)  80% of the actual tax for the current calendar
 9    year shall subject it to the penalty provisions set forth  in
10    Section 412 of this Act.
11    (Source: P.A. 86-753; 87-108.)
12        Section  99.   Effective date. This Act takes effect upon
13    becoming law.

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