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91_SB0011sam004
LRB9101143PTpkam07
1 AMENDMENT TO SENATE BILL 11
2 AMENDMENT NO. . Amend Senate Bill 11, AS AMENDED, by
3 replacing everything after the enacting clause with the
4 following:
5 "Section 1. Short title. This Act may be cited as the
6 Certified Capital Company Act.
7 Section 5. Policy statement. The primary purpose of the
8 Certified Capital Company Act is to provide assistance in the
9 formation of new and expansion of existing businesses that
10 create jobs in the State by providing an incentive for
11 insurance companies to invest in certified capital companies.
12 Section 10. Definitions. For the purpose of this Act:
13 "Affiliate of a certified capital company or insurance
14 company" means:
15 (a) Any person, directly or indirectly beneficially
16 owning, whether through rights, options, convertible
17 interests, or otherwise, controlling, or holding power to
18 vote 25% or more of the outstanding voting securities or
19 other ownership interests of the certified capital
20 company or insurance company, as applicable;
21 (b) Any person 25% or more of whose outstanding
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1 voting securities or other ownership interest are
2 directly or indirectly beneficially owned, whether
3 through rights, options, convertible interests, or
4 otherwise, controlled, or held with power to vote by the
5 certified capital company or insurance company, as
6 applicable;
7 (c) Any person directly or indirectly controlling,
8 controlled by, or under common control with the certified
9 capital company or insurance company, as applicable;
10 (d) A partnership in which the certified capital
11 company or insurance company, as applicable, is a general
12 partner; or
13 (e) Any person who is an officer, director,
14 employee, or agent of the certified capital company or
15 insurance company, as applicable, or an immediate family
16 member of that officer, director, employee, or agent.
17 "Certification date" means the date on which a certified
18 capital company is so designated by the Department.
19 "Certified capital" means an investment of cash by a
20 certified investor in a certified capital company that fully
21 funds the purchase price of either or both its equity
22 interest in the certified capital company or a qualified debt
23 instrument issued by the certified capital company.
24 "Certified capital company" means a partnership,
25 corporation, trust, or limited liability company, whether
26 organized on a profit or not-for-profit basis, that has as
27 its primary business activity the investment of cash in
28 qualified businesses and that is certified by the Department
29 as meeting the criteria of this Act.
30 "Certified investor" means any insurance company that (A)
31 contributes certified capital pursuant to an allocation of
32 privilege tax credits under Section 25 of this Act or (B)
33 becomes irrevocably committed to contribute certified capital
34 by preparing and executing a privilege tax credit allocation
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1 claim.
2 "Department" means the Department of Commerce and
3 Community Affairs.
4 "Person" means any natural person or entity, including a
5 corporation, general or limited partnership, trust, or
6 limited liability company.
7 "Privilege tax credit allocation claim" means a claim for
8 allocation of privilege tax credits prepared and executed by
9 a certified investor on a form provided by the Department and
10 filed by a certified capital company with the Department.
11 The form shall include an affidavit of the certified investor
12 under which the certified investor shall become legally bound
13 and irrevocably committed to make an investment of certified
14 capital in a certified capital company in the amount
15 allocated (even if such amount is less than the amount of the
16 claim), subject only to the receipt of an allocation pursuant
17 to Section 25 of this Act.
18 "Qualified business" means a new or expanding existing
19 business that meets all of the following conditions as of the
20 time of a certified capital company's first investment in the
21 business:
22 (a) It is headquartered in this State, and its
23 principal business operations are located in this State;
24 (b) It is a small business concern as defined in
25 Section 121.201 of the small business size regulations of
26 the U.S. Small Business Administration, 13 CFR 121.201.
27 A business predominantly engaged in professional services
28 provided by accountants, lawyers, or physicians shall not
29 constitute a qualified business.
30 "Qualified debt instrument" means a debt instrument
31 issued by a certified capital company, at par value or a
32 premium, with an original maturity date of at least 5 years
33 from date of issuance, a repayment schedule that is no faster
34 than a level principal amortization over 5 years, an
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1 annualized internal rate of return (calculated using the
2 purchase price of the qualified debt instrument, all payments
3 of principal and interest, and all future tax credits
4 projected to be received) not to exceed 3.5% over the then
5 current yield of the most recently issued 10-year U.S.
6 Treasury security at the time of issuance of the qualified
7 debt instrument, and contains no equity component (unless the
8 equity component is severable from and not considered a part
9 of the qualified debt instrument) or interest, distribution,
10 or payment features that are related to the profitability of
11 the certified capital company or the performance of the
12 certified capital company's investment portfolio.
13 "Qualified Distribution" means any distribution or
14 payment from a certified capital company in connection with
15 the following:
16 (a) Reasonable costs and expenses of forming,
17 syndicating, managing, and operating the certified
18 capital company, including reasonable and necessary fees
19 paid for professional services (such as legal and
20 accounting services) related to the formation and
21 operation of the certified capital company, provided that
22 no distribution or payment is directly or indirectly made
23 to a certified inventor, and an annual management fee in
24 an amount that does not exceed 2% of the value of the
25 assets of the certified capital company; and
26 (b) Any projected increase in federal or State
27 taxes, including penalties and interest related to State
28 and federal income taxes, of the equity owners of a
29 certified capital company resulting from the earnings or
30 other tax liability of the certified capital company to
31 the extent that the increase is related to the ownership,
32 management, or operation of a certified capital company.
33 "Qualified Investment" means the investment of cash by a
34 certified capital company in a qualified business for the
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1 purchase of any debt, equity, or hybrid security, of any
2 nature and description whatsoever, including a debt
3 instrument or security that has the characteristics of debt
4 but that provides for conversion into equity or equity
5 participation instruments such as options or warrants.
6 "State privilege tax liability" means any liability
7 incurred by an insurance company under the provisions of
8 Section 409 of the Illinois Insurance Code.
9 Section 15. Certification.
10 (a) The Department shall establish by rule or regulation
11 the procedures for making an application to become a
12 certified capital company. The applicant shall pay a
13 non-refundable application fee of $7,500 at the time of
14 filing the application with the Department.
15 (b) A certified capital company's equity capitalization
16 at the time of seeking certification must be $500,000 or more
17 and must be in the form of unencumbered cash, marketable
18 securities, or other liquid assets. The applicant shall
19 submit with its initial application an audited balance sheet
20 with an unqualified opinion from a firm of independent
21 certified public accountants as of a date no more than 35
22 days prior to the date of the application.
23 (c) The Department shall review the organizational
24 documents of each applicant for certification and the
25 business history of the applicant and shall determine that
26 the applicant's cash, marketable securities, and other liquid
27 assets are at least $500,000.
28 (d) The Department shall verify that at least 2
29 principals of the certified capital company or at least 2
30 persons employed to manage the funds of the certified capital
31 company have not less than 2 years of experience in the
32 venture capital industry.
33 (e) Any offering material involving the sale of
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1 securities of the certified capital company shall include the
2 following statement: "By authorizing the formation of a
3 certified capital company, the State does not necessarily
4 endorse the quality of management or the potential for
5 earnings of such company and is not liable for damages or
6 losses to a certified investor in the company. Use of the
7 word 'certified' in an offering does not constitute a
8 recommendation or endorsement of the investment by the
9 Securities Department of the Office of the Secretary of
10 State. In the event applicable provisions of this Act are
11 violated, the State may require forfeiture of unused
12 privilege tax credits and repayment of used privilege tax
13 credits."
14 (f) Within 30 days of application, the Department shall
15 issue the certification or shall refuse the certification and
16 communicate in detail to the applicant the grounds for the
17 refusal, including suggestions for the removal of those
18 grounds. The Department shall review and approve or reject
19 applications in the order submitted, and in the event more
20 than one application is received by the Department on any
21 date, all such applications shall be reviewed and approved
22 simultaneously, except in the case of incomplete applications
23 or applications for which additional information is requested
24 by the Department and is not supplied by the applicant within
25 the allowable time limits established by the Department.
26 (g) No insurance company, group of insurance companies,
27 affiliate of an insurance company, group of affiliates of an
28 insurance company, or combination of insurance companies,
29 affiliates, or groups shall, directly or indirectly, manage a
30 certified capital company, beneficially own 10% or more,
31 whether through rights, options, convertible interests, or
32 otherwise, of the outstanding voting securities of a
33 certified capital company, or control the direction of
34 investments for a certified capital company. This provision
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1 shall not preclude an insurance company or affiliate of an
2 insurance company from possessing voting rights with respect
3 to certain extraordinary issues, or certified investor,
4 insurance company, or any other party from exercising its
5 legal rights and remedies (which may include interim
6 management of a certified capital company) in the event that
7 a certified capital company is in default of its statutory
8 obligations or its contractual obligations to such certified
9 investor, insurance 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 levied pursuant to Section 409 of the Illinois
16 Insurance Code equal to 100% of the certified investor's
17 investment of certified capital. A certified investor shall
18 be entitled to take up to 10% of the vested privilege tax
19 credit in any taxable year of the certified investor.
20 (b) The credit to be applied against State privilege tax
21 liability in any one year may not exceed the State privilege
22 tax liability of the certified investor for that taxable
23 year. All unused credits against State privilege tax
24 liability may be carried forward until the privilege tax
25 credits are utilized or privilege tax filings for the
26 calendar year 2015, whichever is sooner; provided that in no
27 one taxable year may the certified investor together with its
28 affilliates utilize privilege tax credits which in the
29 aggregate equal more than 10% of the certified investor's
30 total vested privilege tax credit.
31 (c) A certified investor claiming a credit against State
32 privilege tax liability earned through an investment in a
33 certified capital company shall not be required to pay any
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1 additional retaliatory tax levied pursuant to Section 444 of
2 the Illinois Insurance Code as a result of claiming that
3 credit.
4 (d) A certified investor or any holder of a transferred
5 credit claiming a credit against State privilege tax
6 liability shall provide to the Department of Insurance
7 information, including, but not limited to, the amount of
8 certified capital investment and the certified capital
9 company where investment was made, as may be required by the
10 Department of Insurance by regulation adopted pursuant to the
11 authority set forth in Section 55 of this Act and Section 401
12 of the Illinois Insurance Code.
13 Section 25. Aggregate limitations on credits.
14 (a) The aggregate amount of certified capital for which
15 privilege tax credits shall be allowed for all certified
16 investors under this Act shall not exceed the amount that
17 would entitle all certified investors in certified capital
18 companies to take aggregate credits of $30,000,000 per year.
19 No certified capital company (together with its affiliates)
20 may file privilege tax credit allocation claims in excess of
21 the maximum amount of certified capital for which privilege
22 tax credits may be allowed as provided in this subsection.
23 (b) Certified capital for which privilege tax credits
24 are allowed will be allocated to certified investors in
25 certified capital companies in the order that privilege tax
26 credit allocation claims are filed with the Department by
27 such certified capital companies on behalf of their certified
28 investors. All filings made on the same day shall be treated
29 as having been made contemporaneously.
30 (c) In the event that 2 or more certified capital
31 companies file privilege tax credit allocation claims with
32 the Department on behalf of their respective certified
33 investors on the same day, and the amount of such privilege
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1 tax credit allocation claims exceeds in the aggregate the
2 remaining amount of available tax credits under the
3 provisions of this Section after giving effect to all
4 privilege tax credit allocation claims filed (and not
5 forfeited) prior to the claims, capital for which privilege
6 tax credits are allowed shall be allocated among the
7 certified investors of the submitting certified capital
8 companies on a pro rata basis with respect to the amounts
9 claimed. The pro rata allocation for any one certified
10 investor shall be the product of a fraction, the numerator of
11 which is the amount of the privilege tax credit allocation
12 claim filed on behalf of such certified investor and the
13 denominator of which is the total of all privilege tax credit
14 allocation claims filed on behalf of all certified investors
15 on the same day, multiplied by the remaining amount of
16 available tax credits under the provisions of this Section
17 after giving effect to all privilege tax credit allocation
18 claims filed (and not forfeited) prior to the claims.
19 (d) Within 5 business days after the Department receives
20 a privilege tax credit allocation claim filed by a certified
21 capital company on behalf of one or more of its certified
22 investors, the Department shall notify the certified capital
23 company of the amount of tax credits allocated to each of the
24 certified investors in the certified capital company.
25 (e) In the event a certified capital company does not
26 receive an investment of certified capital equaling the
27 amount of privilege tax credits allocated to a certified
28 investor for which it filed a privilege tax credit allocation
29 claim within 5 business days of its receipt of notice of
30 allocation, that portion of the privilege tax credits
31 allocated to the certified investor in the certified capital
32 company will be forfeited, and the Department will reallocate
33 that certified capital among the other certified investors in
34 all certified capital companies on a pro rata basis with
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1 respect to the privilege tax credit allocation claims filed
2 on behalf of such certified investors by all certified
3 capital companies.
4 (f) The maximum amount of certified capital for which
5 privileges tax credits shall be allowed to any one certified
6 investor (and its affiliates) in one or more certified
7 capital companies in any year shall not exceed 10% of the
8 aggregate limitation as provided in subsection (a).
9 Section 30. Requirements for continuance of
10 certification.
11 (a) To continue to be certified, a certified capital
12 company must make qualified investments according to the
13 following schedule:
14 (1) Within the period ending 3 years after its
15 certification date, a certified capital company must have
16 made qualified investments cumulatively equal to 30% of
17 its certified capital.
18 (2) Within the period ending 5 years after its
19 certification date, a certified capital company must have
20 made qualified investments cumulatively equal to 50% of
21 its certified capital.
22 (b) The aggregate cumulative amount of all qualified
23 investments made by the certified capital company from its
24 certification date will be considered in the calculation of
25 the percentage requirements under this Act. Any proceeds
26 received from a qualified investment may be invested in
27 another qualified investment and shall count toward any
28 requirement in this Act with respect to investments of
29 certified capital.
30 (c) Any business that is classified as a qualified
31 business at the time of the first investment in the business
32 by a certified capital company shall remain classified as a
33 qualified business and may receive follow-on investments from
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1 any certified capital company or any of its affiliates, and
2 such follow-on investments shall be qualified investments
3 even though such business may not meet the definition of a
4 qualified business at the time of such follow-on investments;
5 provided that at the time of the follow-on investment the
6 business is headquartered and has its principal business
7 operations located in the State.
8 (d) No qualified investment may be made at a cost to a
9 certified capital company greater than 15% of the total
10 certified capital of the certified capital company at the
11 time of investment.
12 (e) At its option, a certified capital company, prior to
13 making a proposed investment in a specific business, may
14 request from the Department a written opinion that the
15 business in which it proposes to invest should be considered
16 a qualified business. Upon receiving such a request, the
17 Department shall determine whether or not the business meets
18 the definition of a qualified business and notify the
19 certified capital company of its determination and an
20 explanation thereof.
21 (f) All certified capital not currently invested in
22 qualified investments by the certified capital company must
23 be invested in cash deposited with a federally-insured
24 financial institution, certificates of deposit in a
25 federally-insured financial institution, investment
26 securities that are obligations of the United States, its
27 agencies or instrumentalities, or obligations that are
28 guaranteed fully as to principal and interest by the United
29 States, investment-grade instruments (rated in the top 4
30 rating categories by a nationally recognized rating
31 organization), obligations of this State, any municipality in
32 this State, or any political subdivision of this State; or
33 any other investments approved in advance and in writing by
34 the Department.
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1 (g) Each certified capital company shall report the
2 following to the Department:
3 (1) As soon as practicable after the receipt of
4 certified capital, each certified capital company shall
5 report the following to the Department: (A) the name of
6 each certified investor from which the certified capital
7 was received, including such certified investor's
8 insurance privilege tax identification number, (B) the
9 amount of each certified investor's investment of
10 certified capital and privilege tax credits, and (C) the
11 date on which the certified capital was received.
12 (2) On an annual basis, on or before January 31st,
13 (A) the amount of the certified capital company's
14 certified capital at the end of the immediately preceding
15 year, (B) whether or not the certified capital company
16 has invested more than 15% of its total certified capital
17 in any one business, and (C) all qualified investments
18 that the certified capital company made during the
19 previous calendar year.
20 (3) Each certified capital company shall provide to
21 the Department annual audited financial statements, which
22 shall include the opinion of an independent certified
23 public accountant, within 90 days of the close of the
24 fiscal year. The audit shall address the methods of
25 operation and conduct of the business of the certified
26 capital company to determine if the certified capital
27 company is complying with the statutes and program rules
28 and that the funds received by the certified capital
29 company have been invested as required within the time
30 limits provided by subsection (a) of Section 30.
31 (4) On or before January 31 of each year, each
32 certified capital company shall pay an annual,
33 non-refundable certification fee of $5,000 to the
34 Department; provided, that no such fee shall be required
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1 within 6 months of the initial certification date of a
2 certified capital company.
3 Section 35. Distributions. A certified capital company
4 may make qualified distributions at any time. In order to
5 make a distribution or payment, other than a qualified
6 distribution, a certified capital company must have made
7 qualified investments in an amount cumulatively equal to 100%
8 of its certified capital. A certified capital company may,
9 however, make repayments of principal and interest on its
10 indebtedness without any restriction whatsoever, including
11 repayments of indebtedness of the certified capital company
12 on which certified investors earned privilege tax credits.
13 Cumulative distributions to equity holders of the certified
14 capital company, other than qualified distributions, in
15 excess of the certified capital company's original certified
16 capital and any additional capital contributed to the
17 certified capital company shall be subject to audit by a
18 nationally recognized certified public accounting firm
19 acceptable to the Department at the expense of the certified
20 capital company. The audit shall determine whether aggregate
21 cumulative distributions to all investors and equity holders
22 (including all payments of principal and interest on
23 qualified debt instruments), other than qualified
24 distributions, when combined with all tax credits utilized by
25 the certified investors of the certified capital company
26 pursuant to this Act, have resulted in an annual internal
27 rate of return of 15% computed on the sum of total original
28 certified capital of the certified capital company and any
29 additional capital contributed to the certified capital
30 company. Thirty percent of any distributions made to the
31 equity holders of the certified capital company, other than
32 qualified distributions, in excess of the amount required to
33 produce a 15% annual internal rate of return, as determined
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1 by the audit, shall be annually payable by December 1 of each
2 calendar year by the certified capital company to the State
3 Treasurer for deposit in the State Pension Fund in the State
4 Treasury.
5 Section 40. Decertification.
6 (a) The Department shall conduct an annual review of
7 each certified capital company to determine if the certified
8 capital company is abiding by the requirements of
9 certification, to advise the certified capital company as to
10 the eligibility status of its qualified investments, and to
11 ensure that no investment has been made in violation of this
12 Act. The cost of the annual review shall be paid by each
13 certified capital company according to a reasonable fee
14 schedule adopted by the Department.
15 (b) Any material violation of Section 30 shall be
16 grounds for decertification of the certified capital company.
17 If the Department determines that a certified capital company
18 is not in compliance with the requirements of Section 30, it
19 shall, by written notice, inform the officers of the
20 certified capital company that the certified capital company
21 may be subject to decertification in 120 days from the date
22 of mailing of the notice, unless the deficiencies are
23 corrected and the certified capital company is again in
24 compliance with all requirements for certification.
25 (c) At the end of the 120-day grace period, if the
26 certified capital company is still not in compliance with
27 Section 30, the Department may send a notice of
28 decertification to the certified capital company and to all
29 other appropriate State agencies.
30 (d) Decertification of a certified capital company may
31 cause the recapture of privilege tax credits previously
32 claimed and the forfeiture of future privilege tax credits to
33 be claimed by certified investors with respect to such
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1 certified capital company, as follows:
2 (1) Decertification of a certified capital company
3 within 3 years of its certification date shall cause the
4 recapture of all privilege tax credits previously claimed
5 and the forfeiture of all future privilege tax credits to
6 be claimed by certified investors with respect to such
7 certified capital company.
8 (2) When a certified capital company meets all
9 requirements for continued certification under paragraph
10 (1) of subsection (a) of Section 30 and subsequently
11 fails to meet the requirements for continued
12 certification under the provisions of paragraph (2) of
13 subsection (a) of Section 30, those privilege tax credits
14 that have been or will be taken by certified investors
15 within 3 years from the certification date of the
16 certified capital company will not be subject to
17 recapture or forfeiture; however, all privilege tax
18 credits that have been or will be taken by certified
19 investors after the third anniversary of the
20 certification date of the certified capital company shall
21 be subject to recapture or forfeiture.
22 (3) Once a certified capital company has met all
23 requirements for continued certification under paragraphs
24 (1) and (2) of subsection (a) of Section 30, and is
25 subsequently decertified, those privilege tax credits
26 that have been or will be taken by certified investors
27 within 5 years from the certification date of the
28 certified capital company will not be subject to
29 recapture or forfeiture. Those privilege tax credits to
30 be taken subsequent to the fifth year of certification
31 shall be subject to forfeiture only if the certified
32 capital company is decertified within 5 years from its
33 certification date.
34 (4) Once a certified capital company has invested
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1 an amount cumulatively equal to 100% of its certified
2 capital in qualified investments, all privilege tax
3 credits claimed or to be claimed by its certified
4 investors shall no longer be subject to recapture or
5 forfeiture.
6 (e) The Department shall send written notice to the
7 address of each certified investor whose privilege tax credit
8 has been subject to recapture or forfeiture, using the
9 address last shown on the last privilege tax filing.
10 (f) The Department shall have the authority to waive any
11 recapture or forfeiture of credits if, after considering all
12 facts and circumstances, it determines that such waiver will
13 have the effect of furthering State economic development.
14 Section 45. Transferability. The privilege tax credit
15 established by this Act may be transferred or sold. The
16 Department shall adopt rules to facilitate the transfer or
17 sale of the privilege tax credits. Any transfer or sale
18 shall not affect the time schedule for taking the privilege
19 tax credit as provided in this Act or the limitation of using
20 10% of the certified investor's investment as credit in any
21 year as provided in Section 20 of this Act. Any privilege
22 tax credits recaptured under Section 40 shall be the
23 liability of the taxpayer that actually claimed the privilege
24 tax credits.
25 Section 50. Impact of tax credits claimed by a certified
26 investor on insurance rates. A certified investor shall not
27 be required to reduce the provision for privilege tax
28 included in ratemaking for any insurance contract written in
29 Illinois on account of a reduction in its Illinois privilege
30 tax derived from the tax credit granted under this Act.
31 Section 55. Rules.
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1 (a) The Department shall adopt rules necessary to carry
2 out the provisions of this Act within 60 days after the
3 effective date of this Act. The rules shall provide that the
4 Department shall begin accepting applications for
5 certification as a certified capital company not later than
6 90 days after the effective date of this Act. The rules shall
7 further provide that any certified capital company may file
8 privilege tax credit allocation claims on behalf of its
9 certified investors at any time on or after its certification
10 date and that privilege tax credits shall be earned by and
11 vested in certified investors at the time of such investment
12 of certified capital, although the privilege tax credits may
13 not be claimed or utilized until 2000.
14 (b) The Department of Insurance shall adopt rules to
15 carry out the collection of State privilege tax as it is
16 associated with the credit provided in Section 20 of this
17 Act. Such authority is limited to the collection of
18 information necessary to maintain the proper use of vested
19 credits generated pursuant to this Act.
20 Section 60. Reporting. Within 90 days of the fifth
21 anniversary of the effective date of this Act, the Department
22 shall prepare and present a report to the General Assembly of
23 this State that sets forth the following:
24 (a) the total dollar amount each certified capital
25 company received from all certified investors, the identity
26 of certified investors, and the total amount of privilege tax
27 credits used by each certified investor through the date of
28 the report;
29 (b) the total dollar amount invested by each certified
30 capital company and that portion invested in qualified
31 businesses, the identity and location of those businesses,
32 the amount invested in each qualified business, and the total
33 number of total permanent, full-time jobs created or retained
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1 by each qualified business; and
2 (c) such other information with respect to the economic
3 benefits to the State that have resulted from investments by
4 certified capital companies as the Department deems
5 appropriate and informative.
6 Section 105. The Illinois Insurance Code is amended by
7 changing Section 409 as follows:
8 (215 ILCS 5/409) (from Ch. 73, par. 1021)
9 Sec. 409. Annual privilege tax payable by companies.
10 (1) As of January 1, 1999 for all health maintenance
11 organization premiums written; as of July 1, 1998 for all
12 premiums written as accident and health business, voluntary
13 health service plan business, dental service plan business,
14 or limited health service organization business; and as of
15 January 1, 1998 for all other types of insurance premiums
16 written, every company doing any form of insurance business
17 in this State, including, but not limited to, every risk
18 retention group, and excluding all fraternal benefit
19 societies, all farm mutual companies, all religious
20 charitable risk pooling trusts, and excluding all statutory
21 residual market and special purpose entities in which
22 companies are statutorily required to participate, whether
23 incorporated or otherwise, shall pay, for the privilege of
24 doing business in this State, to the Director for the State
25 treasury a State tax equal to 0.5% of the net taxable premium
26 written, together with any amounts due under Section 444 of
27 this Code, except that the tax to be paid on any premium
28 derived from any accident and health insurance or on any
29 insurance business written by any company operating as a
30 health maintenance organization, voluntary health service
31 plan, dental service plan, or limited health service
32 organization shall be equal to 0.4% of such net taxable
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1 premium written, together with any amounts due under Section
2 444. Upon the failure of any company to pay any such tax
3 due, the Director may, by order, revoke or suspend the
4 company's certificate of authority after giving 20 days
5 written notice to the company, or commence proceedings for
6 the suspension of business in this State under the procedures
7 set forth by Section 401.1 of this Code. The gross taxable
8 premium written shall be the gross amount of premiums
9 received on direct business during the calendar year on
10 contracts covering risks in this State, except premiums on
11 annuities, premiums on which State premium taxes are
12 prohibited by federal law, premiums paid by the State for
13 health care coverage for Medicaid eligible insureds as
14 described in Section 5-2 of the Illinois Public Aid Code,
15 premiums paid for health care services included as an element
16 of tuition charges at any university or college owned and
17 operated by the State of Illinois, premiums on group
18 insurance contracts under the State Employees Group Insurance
19 Act of 1971, and except premiums for deferred compensation
20 plans for employees of the State, units of local government,
21 or school districts. The net taxable premium shall be the
22 gross taxable premium written reduced only by the following:
23 (a) the amount of premiums returned thereon which
24 shall be limited to premiums returned during the same
25 preceding calendar year and shall not include the return
26 of cash surrender values or death benefits on life
27 policies including annuities;
28 (b) dividends on such direct business that have
29 been paid in cash, applied in reduction of premiums or
30 left to accumulate to the credit of policyholders or
31 annuitants. In the case of life insurance, no deduction
32 shall be made for the payment of deferred dividends paid
33 in cash to policyholders on maturing policies; dividends
34 left to accumulate to the credit of policyholders or
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1 annuitants shall be included as gross taxable premium
2 written when such dividend accumulations are applied to
3 purchase paid-up insurance or to shorten the endowment or
4 premium paying period.
5 (2) The annual privilege tax payment due from a company
6 under subsection (4) of this Section may be reduced by: (a)
7 the excess amount, if any, by which the aggregate income
8 taxes paid by the company, on a cash basis, for the preceding
9 calendar year under subsections (a) through (d) of Section
10 201 of the Illinois Income Tax Act exceed 1.5% of the
11 company's net taxable premium written for that prior calendar
12 year, as determined under subsection (1) of this Section; and
13 (b) the amount of any fire department taxes paid by the
14 company during the preceding calendar year under Section
15 11-10-1 of the Illinois Municipal Code. Any deductible
16 amount or offset allowed under items (a) and (b) of this
17 subsection for any calendar year will not be allowed as a
18 deduction or offset against the company's privilege tax
19 liability for any other taxing period or calendar year. In
20 addition, there shall be deducted from the tax payment due
21 the tax credit provided for in Section 20 of the Certified
22 Capital Company Act.
23 (3) If a company survives or was formed by a merger,
24 consolidation, reorganization, or reincorporation, the
25 premiums received and amounts returned or paid by all
26 companies party to the merger, consolidation, reorganization,
27 or reincorporation shall, for purposes of determining the
28 amount of the tax imposed by this Section, be regarded as
29 received, returned, or paid by the surviving or new company.
30 (4)(a) All companies subject to the provisions of this
31 Section shall make an annual return for the preceding
32 calendar year on or before March 15 setting forth such
33 information on such forms as the Director may reasonably
34 require. Payments of quarterly installments of the
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1 taxpayer's total estimated tax for the current calendar year
2 shall be due on or before April 15, June 15, September 15,
3 and December 15 of such year, except that all companies
4 transacting insurance in this State whose annual tax for the
5 immediately preceding calendar year was less than $5,000
6 shall make only an annual return. Failure of a company to
7 make the annual payment, or to make the quarterly payments,
8 if required, of at least 25% of either (i) the total tax paid
9 during the previous calendar year or (ii) 80% of the actual
10 tax for the current calendar year shall subject it to the
11 penalty provisions set forth in Section 412 of this Code.
12 (b) Notwithstanding the foregoing provisions, no annual
13 return shall be required or made on March 15, 1998, under
14 this subsection. For the calendar year 1998:
15 (i) each health maintenance organization shall have
16 no estimated tax installments;
17 (ii) all companies subject to the tax as of July 1,
18 1998 as set forth in subsection (1) shall have estimated
19 tax installments due on September 15 and December 15 of
20 1998 which installments shall each amount to no less than
21 one-half of 80% of the actual tax on its net taxable
22 premium written during the period July 1, 1998, through
23 December 31, 1998; and
24 (iii) all other companies shall have estimated tax
25 installments due on June 15, September 15, and December
26 15 of 1998 which installments shall each amount to no
27 less than one-third of 80% of the actual tax on its net
28 taxable premium written during the calendar year 1998.
29 In the year 1999 and thereafter all companies shall make
30 annual and quarterly installments of their estimated tax as
31 provided by paragraph (a) of this subsection.
32 (5) In addition to the authority specifically granted
33 under Article XXV of this Code, the Director shall have such
34 authority to adopt rules and establish forms as may be
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1 reasonably necessary for purposes of determining the
2 allocation of Illinois corporate income taxes paid under
3 subsections (a) through (d) of Section 201 of the Illinois
4 Income Tax Act amongst members of a business group that files
5 an Illinois corporate income tax return on a unitary basis,
6 for purposes of regulating the amendment of tax returns, for
7 purposes of defining terms, and for purposes of enforcing the
8 provisions of Article XXV of this Code. The Director shall
9 also have authority to defer, waive, or abate the tax imposed
10 by this Section if in his opinion the company's solvency and
11 ability to meet its insured obligations would be immediately
12 threatened by payment of the tax due.
13 (Source: P.A. 90-583, eff. 5-29-98.)
14 Section 999. Effective date. This Act takes effect upon
15 becoming law.".