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Public Act 100-0408


 

Public Act 0408 100TH GENERAL ASSEMBLY

  
  
  

 


 
Public Act 100-0408
 
SB0652 EnrolledLRB100 06360 HLH 16399 b

    AN ACT concerning revenue.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The New Markets Development Program Act is
amended by changing Sections 5, 20, 25, 40, and 50 and by
adding Sections 43 and 55 as follows:
 
    (20 ILCS 663/5)
    Sec. 5. Definitions. As used in this Act:
    "Applicable percentage" means 0% for each of the first 2
credit allowance dates, 7% for the third credit allowance date,
and 8% for the next 4 credit allowance dates.
    "Credit allowance date" means with respect to any qualified
equity investment:
        (1) the date on which the investment is initially made;
    and
        (2) each of the 6 anniversary dates of that date
    thereafter.
    "Department" means the Department of Commerce and Economic
Opportunity.
    "Long-term debt security" means any debt instrument issued
by a qualified community development entity, at par value or a
premium, with an original maturity date of at least 7 years
from the date of its issuance, with no acceleration of
repayment, amortization, or prepayment features prior to its
original maturity date. Cumulative cash payments of interest on
the qualified debt instrument during the period commencing with
the issuance of the qualified debt instrument and ending with
the seventh anniversary of its issuance shall not exceed the
sum of such cash interest payments and the cumulative net
income of the issuing community development entity for the same
period. This definition in no way limits the holder's ability
to accelerate payments on the debt instrument in situations
where the issuer has defaulted on covenants designed to ensure
compliance with this Act or Section 45D of the Internal Revenue
Code of 1986, as amended.
    "Purchase price" means the amount paid to the issuer of a
qualified equity investment for that qualified equity
investment.
    "Qualified active low-income community business" has the
meaning given to that term in Section 45D of the Internal
Revenue Code of 1986, as amended; except that any business that
derives or projects to derive 15% or more of its annual revenue
from the rental or sale of real estate is not considered to be
a qualified active low-income community business. This
exception does not apply to a business that is controlled by or
under common control with another business if the second
business (i) does not derive or project to derive 15% or more
of its annual revenue from the rental or sale of real estate
and (ii) is the primary tenant of the real estate leased from
the initial business. A business shall be considered a
qualified active low-income community business for the
duration of the qualified community development entity's
investment in or loan to the business if the entity reasonably
expects, at the time it makes the investment or loan, that the
business will continue to satisfy the requirements for being a
qualified active low-income community business throughout the
entire period of the investment or loan.
    "Qualified community development entity" has the meaning
given to that term in Section 45D of the Internal Revenue Code
of 1986, as amended; provided that such entity has entered
into, or is controlled by an entity that has entered into, an
allocation agreement with the Community Development Financial
Institutions Fund of the U.S. Treasury Department with respect
to credits authorized by Section 45D of the Internal Revenue
Code of 1986, as amended, that includes the State of Illinois
within the service area set forth in that allocation agreement.
    "Qualified equity investment" means any equity investment
in, or long-term debt security issued by, a qualified community
development entity that:
        (1) is acquired after the effective date of this Act at
    its original issuance solely in exchange for cash;
        (2) with respect to qualified equity investments made
    before January 1, 2017, has at least 85% of its cash
    purchase price used by the issuer to make qualified
    low-income community investments in the State of Illinois,
    and, with respect to qualified equity investments made on
    or after January 1, 2017, has 100% of the cash purchase
    price used by the issuer to make qualified low-income
    community investments in the State of Illinois; and
        (3) is designated by the issuer as a qualified equity
    investment under this Act; with respect to qualified equity
    investments made on or after January 1, 2017, is designated
    by the issuer as a qualified equity investment under
    Section 45D of the Internal Revenue Code of 1986, as
    amended; and is certified by the Department as not
    exceeding the limitation contained in Section 20.
    This term includes any qualified equity investment that
does not meet the provisions of item (1) of this definition if
the investment was a qualified equity investment in the hands
of a prior holder.
    "Qualified low-income community investment" means any
capital or equity investment in, or loan to, any qualified
active low-income community business. With respect to any one
qualified active low-income community business, the maximum
amount of qualified low-income community investments made in
that business, on a collective basis with all of its affiliates
that may be counted towards the satisfaction of paragraph (2)
of the definition of qualified equity investment, shall be
$10,000,000 whether issued to one or several qualified
community development entities.
    "Tax credit" means a credit against any income, franchise,
or insurance premium taxes, including insurance retaliatory
taxes, otherwise due under Illinois law.
    "Taxpayer" means any individual or entity subject to any
income, franchise, or insurance premium tax under Illinois law.
(Source: P.A. 95-1024, eff. 12-31-08.)
 
    (20 ILCS 663/20)
    Sec. 20. Annual cap on credits. The Department shall limit
the monetary amount of qualified equity investments permitted
under this Act to a level necessary to limit tax credit use at
no more than $20,000,000 of tax credits in any fiscal year.
This limitation on qualified equity investments shall be based
on the anticipated use of credits without regard to the
potential for taxpayers to carry forward tax credits to later
tax years.
(Source: P.A. 95-1024, eff. 12-31-08; 96-939, eff. 7-1-10.)
 
    (20 ILCS 663/25)
    Sec. 25. Certification of qualified equity investments.
    (a) A qualified community development entity that seeks to
have an equity investment or long-term debt security designated
as a qualified equity investment and eligible for tax credits
under this Section shall apply to the Department. The qualified
community development entity must submit an application on a
form that the Department provides that includes:
        (1) The name, address, tax identification number of the
    entity, and evidence of the entity's certification as a
    qualified community development entity.
        (2) A copy of the allocation agreement executed by the
    entity, or its controlling entity, and the Community
    Development Financial Institutions Fund.
        (3) A certificate executed by an executive officer of
    the entity attesting that the allocation agreement remains
    in effect and has not been revoked or cancelled by the
    Community Development Financial Institutions Fund.
        (4) A description of the proposed amount, structure,
    and purchaser of the equity investment or long-term debt
    security.
        (5) The name and tax identification number of any
    taxpayer eligible to utilize tax credits earned as a result
    of the issuance of the qualified equity investment.
        (6) Information regarding the proposed use of proceeds
    from the issuance of the qualified equity investment.
        (7) A nonrefundable application fee of $5,000. This fee
    shall be paid to the Department and shall be required of
    each application submitted.
        (8) With respect to qualified equity investments made
    on or after January 1, 2017, the amount of qualified equity
    investment authority the applicant agrees to designate as a
    federal qualified equity investment under Section 45D of
    the Internal Revenue Code, including a copy of the screen
    shot from the Community Development Financial Institutions
    Fund's Allocation Tracking System of the applicant's
    remaining federal qualified equity investment authority.
    (b) Within 30 days after receipt of a completed application
containing the information necessary for the Department to
certify a potential qualified equity investment, including the
payment of the application fee, the Department shall grant or
deny the application in full or in part. If the Department
denies any part of the application, it shall inform the
qualified community development entity of the grounds for the
denial. If the qualified community development entity provides
any additional information required by the Department or
otherwise completes its application within 15 days of the
notice of denial, the application shall be considered completed
as of the original date of submission. If the qualified
community development entity fails to provide the information
or complete its application within the 15-day period, the
application remains denied and must be resubmitted in full with
a new submission date.
    (c) If the application is deemed complete, the Department
shall certify the proposed equity investment or long-term debt
security as a qualified equity investment that is eligible for
tax credits under this Section, subject to the limitations
contained in Section 20. The Department shall provide written
notice of the certification to the qualified community
development entity. The notice shall include the names of those
taxpayers who are eligible to utilize the credits and their
respective credit amounts. If the names of the taxpayers who
are eligible to utilize the credits change due to a transfer of
a qualified equity investment or a change in an allocation
pursuant to Section 15, the qualified community development
entity shall notify the Department of such change.
    (d) With respect to applications received before January 1,
2017, the The Department shall certify qualified equity
investments in the order applications are received by the
Department. Applications received on the same day shall be
deemed to have been received simultaneously. For applications
received on the same day and deemed complete, the Department
shall certify, consistent with remaining tax credit capacity,
qualified equity investments in proportionate percentages
based upon the ratio of the amount of qualified equity
investment requested in an application to the total amount of
qualified equity investments requested in all applications
received on the same day.
    (d-5) With respect to applications received on or after
January 1, 2017, the Department shall certify applications by
applicants that agree to designate qualified equity
investments as federal qualified equity investments in
accordance with item (8) of subsection (a) of this Section in
proportionate percentages based upon the ratio of the amount of
qualified equity investments requested in an application to be
designated as federal qualified equity investments to the total
amount of qualified equity investments to be designated as
federal qualified equity investments requested in all
applications received on the same day.
    (d-10) With respect to applications received on or after
January 1, 2017, after complying with subsection (d-5), the
Department shall certify the qualified equity investments of
all other applicants, including the remaining qualified equity
investment authority requested by applicants not designated as
federal qualified equity investments in accordance with item
(8) of subsection (a) of this Section, in proportionate
percentages based upon the ratio of the amount of qualified
equity investments requested in the applications to the total
amount of qualified equity investments requested in all
applications received on the same day.
    (e) Once the Department has certified qualified equity
investments that, on a cumulative basis, are eligible for
$20,000,000 in tax credits, the Department may not certify any
more qualified equity investments. If a pending request cannot
be fully certified, the Department shall certify the portion
that may be certified unless the qualified community
development entity elects to withdraw its request rather than
receive partial credit.
    (f) Within 30 days after receiving notice of certification,
the qualified community development entity shall (i) issue the
qualified equity investment and receive cash in the amount of
the certified amount and (ii) with respect to qualified equity
investments made on or after January 1, 2017, if applicable,
designate the required amount of qualified equity investment
authority as a federal qualified equity investment. The
qualified community development entity must provide the
Department with evidence of the receipt of the cash investment
within 10 business days after receipt and, with respect to
qualified equity investments made on or after January 1, 2017,
if applicable, provide evidence that the required amount of
qualified equity investment authority was designated as a
federal qualified equity investment. If the qualified
community development entity does not receive the cash
investment and issue the qualified equity investment within 30
days following receipt of the certification notice, the
certification shall lapse and the entity may not issue the
qualified equity investment without reapplying to the
Department for certification. A certification that lapses
reverts back to the Department and may be reissued only in
accordance with the application process outline in this Section
25.
    (g) Allocation rounds enabled by this Act shall be applied
for according to the following schedule:
        (1) on January 2, 2019, $125,000,000 of qualified
    equity investments; and
        (2) on January 2, 2020, $125,000,000 of qualified
    equity investments.
(Source: P.A. 95-1024, eff. 12-31-08; 96-939, eff. 7-1-10.)
 
    (20 ILCS 663/40)
    Sec. 40. Recapture. The Department of Revenue shall
recapture, from the taxpayer that claimed the credit on a
return, the tax credit allowed under this Act if:
        (1) any amount of the federal tax credit available with
    respect to a qualified equity investment that is eligible
    for a tax credit under this Act is recaptured under Section
    45D of the Internal Revenue Code of 1986, as amended. In
    that case, the Department of Revenue's recapture shall be
    proportionate to the federal recapture with respect to that
    qualified equity investment;
        (2) the issuer redeems or makes principal repayment
    with respect to a qualified equity investment prior to the
    7th anniversary of the issuance of the qualified equity
    investment. In that case, the Department of Revenue's
    recapture shall be proportionate to the amount of the
    redemption or repayment with respect to the qualified
    equity investment; or
        (3) the issuer fails to invest at least 85% of the cash
    purchase price of the qualified equity investment with
    respect to qualified equity investments made before
    January 1, 2017 and 100% of the cash purchase price of the
    qualified equity investment with respect to qualified
    equity investments made on or after January 1, 2017 in
    qualified low-income community investments in the State of
    Illinois within 12 months of the issuance of the qualified
    equity investment and maintain such level of investment in
    qualified low-income community investments in Illinois
    until the last credit allowance date for such qualified
    equity investment; or .
        (4) with respect to qualified equity investments made
    on or after January 1, 2017, the issuer violates Section 43
    of this Act.
    For purposes of this Section, an investment shall be
considered held by an issuer even if the investment has been
sold or repaid; provided that the issuer reinvests an amount
equal to the capital returned to or recovered by the issuer
from the original investment, exclusive of any profits
realized, in another qualified low-income community investment
in this State within 12 months after the receipt of that
capital. An issuer is not required to reinvest capital returned
from qualified low-income community investments after the 6th
anniversary of the issuance of the qualified equity investment,
the proceeds of which were used to make the qualified
low-income community investment, and the qualified low-income
community investment shall be considered held by the issuer
through the 7th anniversary of the qualified equity
investment's issuance.
    The Department of Revenue shall provide notice to the
qualified community development entity of any proposed
recapture of tax credits pursuant to this Section. The entity
shall have 90 days to cure any deficiency indicated in the
Department of Revenue's original recapture notice and avoid
such recapture. If the entity fails or is unable to cure such
deficiency with the 90-day period, the Department of Revenue
shall provide the entity and the taxpayer from whom the credit
is to be recaptured with a final order of recapture. Any tax
credit for which a final recapture order has been issued shall
be recaptured by the Department of Revenue from the taxpayer
who claimed the tax credit on a tax return.
(Source: P.A. 95-1024, eff. 12-31-08.)
 
    (20 ILCS 663/43 new)
    Sec. 43. Prohibited activities and interests. For
qualified equity investments made on or after January 1, 2017,
no qualified active low-income community business that
receives a qualified low-income community investment from a
qualified community development entity that issues qualified
equity investments under this Act, or any affiliates of such a
qualified active low-income community business, may directly
or indirectly (i) own or have the right to acquire an ownership
interest in a qualified community development entity or member
or affiliate of a qualified community development entity,
including, but not limited to, a holder of a qualified equity
investment issued by the qualified community development
entity or (ii) loan to or invest in a qualified community
development entity or member or affiliate of a qualified
community development entity, including, but not limited to, a
holder of a qualified equity investment issued by a qualified
community development entity, where the proceeds of such loan
or investment are directly or indirectly used to fund or
refinance the purchase of a qualified equity investment under
this Act. For purposes of this Section, "affiliate" means an
entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with another entity. For purposes of this Section, an
entity is "controlled by" another entity if the controlling
person holds, directly or indirectly, the majority voting or
ownership interest in the controlled person or has control over
the day-to-day operations of the controlled person by contract
or law, provided that a qualified community development entity
shall not be considered an affiliate of a qualified active
low-income community business solely as a result of its
qualified low-income community investment in such business.
This Section is not intended to affect ownership or affiliate
interests that arise following the sixth anniversary of the
issuance of the qualified equity investment.
 
    (20 ILCS 663/50)
    Sec. 50. Sunset. For fiscal years following fiscal year
2021 2017, qualified equity investments shall not be made under
this Act unless reauthorization is made pursuant to this
Section. For all fiscal years following fiscal year 2021 2017,
unless the General Assembly adopts a joint resolution granting
authority to the Department to approve qualified equity
investments for the Illinois new markets development program
and clearly describing the amount of tax credits available for
the next fiscal year, or otherwise complies with the provisions
of this Section, no qualified equity investments may be
permitted to be made under this Act. The amount of available
tax credits contained in such a resolution shall not exceed the
limitation provided under Section 20. Nothing in this Section
precludes a taxpayer who makes a qualified equity investment
prior to the expiration of authority to make qualified equity
investments from claiming tax credits relating to that
qualified equity investment for each applicable credit
allowance date.
(Source: P.A. 97-636, eff. 6-1-12.)
 
    (20 ILCS 663/55 new)
    Sec. 55. Annual report. Each qualified community
development entity shall submit an annual report to the
Department within 45 days after the beginning of each calendar
year during the compliance period. No annual report shall be
due prior to the first anniversary of the initial credit
allowance date. The report shall include, but is not limited
to, the following:
        (1) an attestation from an authorized officer of the
    qualified community development entity that the entity has
    not been the subject of any investigation by a government
    agency relating to tax credits or financial services during
    the preceding calendar year;
        (2) information with respect to all qualified
    low-income community investments made by the qualified
    community development entity, including:
            (A) the date and amount of, and bank statements or
        wire transfer reports documenting, such qualified
        low-income community investments;
            (B) the name, address, and EIN of each qualified
        active low-income community business funded by the
        qualified community development entity, the number of
        persons employed by such business at the time of the
        initial investment, and a brief description of the
        business, the financing, and community benefits of the
        financing; and
            (C) the number of employment positions maintained
        by each qualified active low-income community business
        as of the date of report or the end of the preceding
        calendar year and the average annual salaries of such
        positions; and
            (D) the total number of employment positions
        created and retained as a result of qualified
        low-income community investments and the average
        annual salaries of those positions; and
        (3) any changes with respect to the taxpayers entitled
    to claim tax credits with respect to qualified equity
    investments issued by the qualified community development
    entity since its last report pursuant to this Section.
    The qualified community development entity is not required
to provide the annual report set forth in this Section for
qualified low-income community investments that have been
redeemed or repaid.
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 8/25/2017