103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB1755

 

Introduced 2/9/2023, by Sen. Christopher Belt

 

SYNOPSIS AS INTRODUCED:
 
20 ILCS 663/5
20 ILCS 663/20
20 ILCS 663/25
20 ILCS 663/40
20 ILCS 663/45
20 ILCS 663/55

    Amends the New Markets Development Program Act. Provides that the Department of Commerce and Economic Opportunity shall limit the monetary amount of qualified equity investments at no more than $20,000,000 of tax credits for the primary allocation and no more than $12,000,000 of tax credits for the targeted allocation. Provides that, on or after January 1, 2024, but not more than 120 days after the Community Development Financial Institutions Fund of the United States Department of the Treasury announces allocation awards under a Notice of Funding Availability that was published in the Federal Register on November 22, 2022, $250,000,000 of qualified equity investments for the primary allocation and $150,000,000 of qualified equity investments for the targeted allocation shall be allocated by the Department. Makes other changes. Defines terms. Effective immediately.


LRB103 06012 HLH 51037 b

 

 

A BILL FOR

 

SB1755LRB103 06012 HLH 51037 b

1    AN ACT concerning State government.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The New Markets Development Program Act is
5amended by changing Sections 5, 20, 25, 40, 45, and 55 as
6follows:
 
7    (20 ILCS 663/5)
8    Sec. 5. Definitions. As used in this Act:
9    "Applicable percentage" means 0% for each of the first 2
10credit allowance dates, 7% for the third credit allowance
11date, and 8% for the next 4 credit allowance dates.
12    "Credit allowance date" means with respect to any
13qualified equity investment:
14        (1) the date on which the investment is initially
15    made; and
16        (2) each of the 6 anniversary dates of that date
17    thereafter.
18    "Department" means the Department of Commerce and Economic
19Opportunity.
20    "Long-term debt security" means any debt instrument issued
21by a qualified community development entity, at par value or a
22premium, with an original maturity date of at least 7 years
23from the date of its issuance, with no acceleration of

 

 

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1repayment, amortization, or prepayment features prior to its
2original maturity date. Cumulative cash payments of interest
3on the qualified debt instrument during the period commencing
4with the issuance of the qualified debt instrument and ending
5with the seventh anniversary of its issuance shall not exceed
6the sum of such cash interest payments and the cumulative net
7income of the issuing community development entity for the
8same period. This definition in no way limits the holder's
9ability to accelerate payments on the debt instrument in
10situations where the issuer has defaulted on covenants
11designed to ensure compliance with this Act or Section 45D of
12the Internal Revenue Code of 1986, as amended.
13    "Primary allocation" means $250,000,000 in qualified
14equity investment authority to be awarded on or after January
151, 2024 for investment in qualified active low-income
16community businesses.
17    "Purchase price" means the amount paid to the issuer of a
18qualified equity investment for that qualified equity
19investment.
20    "Qualified active low-income community business" has the
21meaning given to that term in Section 45D of the Internal
22Revenue Code of 1986, as amended; except that any business
23that derives or projects to derive 15% or more of its annual
24revenue from the rental or sale of real estate is not
25considered to be a qualified active low-income community
26business. This exception does not apply to a business that is

 

 

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1controlled by or under common control with another business if
2the second business (i) does not derive or project to derive
315% or more of its annual revenue from the rental or sale of
4real estate and (ii) is the primary tenant of the real estate
5leased from the initial business. A business shall be
6considered a qualified active low-income community business
7for the duration of the qualified community development
8entity's investment in or loan to the business if the entity
9reasonably expects, at the time it makes the investment or
10loan, that the business will continue to satisfy the
11requirements for being a qualified active low-income community
12business throughout the entire period of the investment or
13loan.
14    "Qualified community development entity" has the meaning
15given to that term in Section 45D of the Internal Revenue Code
16of 1986, as amended; provided that such entity has entered
17into, or is controlled by an entity that has entered into, an
18allocation agreement with the Community Development Financial
19Institutions Fund of the U.S. Treasury Department with respect
20to credits authorized by Section 45D of the Internal Revenue
21Code of 1986, as amended, that includes the State of Illinois
22within the service area set forth in that allocation
23agreement.
24    "Qualified equity investment" means any equity investment
25in, or long-term debt security issued by, a qualified
26community development entity that:

 

 

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1        (1) is acquired after the effective date of this Act
2    at its original issuance solely in exchange for cash;
3        (2) with respect to qualified equity investments made
4    before January 1, 2024 2017, has at least 85% of its cash
5    purchase price used by the issuer to make qualified
6    low-income community investments in the State of Illinois,
7    and, with respect to qualified equity investments made on
8    or after January 1, 2024 2017, has 100% of the cash
9    purchase price used by the issuer to make qualified
10    low-income community investments in the State of Illinois;
11    and
12        (3) is designated by the issuer as a qualified equity
13    investment under this Act; with respect to qualified
14    equity investments made on or after January 1, 2024 2017,
15    is designated by the issuer as a qualified equity
16    investment under Section 45D of the Internal Revenue Code
17    of 1986, as amended; and is certified by the Department as
18    not exceeding the limitation contained in Section 20.
19    This term includes any qualified equity investment that
20does not meet the provisions of item (1) of this definition if
21the investment was a qualified equity investment in the hands
22of a prior holder.
23    "Qualified low-income community investment" means any
24capital or equity investment in, or loan to, any qualified
25active low-income community business. With respect to any one
26qualified active low-income community business, the maximum

 

 

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1amount of qualified low-income community investments made in
2that business, on a collective basis with all of its
3affiliates that may be counted towards the satisfaction of
4paragraph (2) of the definition of qualified equity
5investment, shall be $10,000,000 whether issued to one or
6several qualified community development entities.
7    "Targeted allocation" means $150,000,000 in qualified
8equity investment authority to be awarded for investment in
9qualified active low-income community businesses engaged in
10targeted industries.
11    "Targeted industries" means any business engaged in an
12activity classified by the North American Industry
13Classification System (NAICS) as Sector 11, 31-33, or 2211.
14    "Tax credit" means a credit against any income, franchise,
15or insurance premium taxes, including insurance retaliatory
16taxes, otherwise due under Illinois law.
17    "Taxpayer" means any individual or entity subject to any
18income, franchise, or insurance premium tax under Illinois
19law.
20(Source: P.A. 100-408, eff. 8-25-17.)
 
21    (20 ILCS 663/20)
22    Sec. 20. Annual cap on credits. The Department shall limit
23the monetary amount of qualified equity investments permitted
24under this Act to a level necessary to limit tax credit use at
25no more than $20,000,000 of tax credits for the primary

 

 

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1allocation and no more than $12,000,000 of tax credits for the
2targeted allocation in any fiscal year. This limitation on
3qualified equity investments shall be based on the anticipated
4use of credits without regard to the potential for taxpayers
5to carry forward tax credits to later tax years.
6(Source: P.A. 100-408, eff. 8-25-17.)
 
7    (20 ILCS 663/25)
8    Sec. 25. Certification of qualified equity investments.
9    (a) A qualified community development entity that seeks to
10have an equity investment or long-term debt security
11designated as a qualified equity investment and eligible for
12tax credits under this Section shall apply to the Department.
13The qualified community development entity must submit an
14application on a form that the Department provides that
15includes:
16        (1) The name, address, tax identification number of
17    the entity, and evidence of the entity's certification as
18    a qualified community development entity.
19        (2) A copy of the allocation agreement executed by the
20    entity, or its controlling entity, and the Community
21    Development Financial Institutions Fund.
22        (3) A certificate executed by an executive officer of
23    the entity attesting that the allocation agreement remains
24    in effect and has not been revoked or cancelled by the
25    Community Development Financial Institutions Fund.

 

 

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1        (4) A description of the proposed amount, structure,
2    and purchaser of the equity investment or long-term debt
3    security and, for applications submitted after January 1,
4    2024, whether qualified equity investment authority is
5    sought under the primary allocation or the targeted
6    allocation.
7        (5) The name and tax identification number of any
8    taxpayer eligible to utilize tax credits earned as a
9    result of the issuance of the qualified equity investment.
10        (6) Information regarding the proposed use of proceeds
11    from the issuance of the qualified equity investment.
12        (7) A nonrefundable application fee of $5,000. This
13    fee shall be paid to the Department and shall be required
14    of each application submitted.
15        (7.5) For applications submitted after January 1,
16    2024, a description of whether a qualified community
17    development entity is applying for the primary allocation
18    or the targeted allocation.
19        (8) With respect to qualified equity investments made
20    on or after January 1, 2017, the amount of qualified
21    equity investment authority the applicant agrees to
22    designate as a federal qualified equity investment under
23    Section 45D of the Internal Revenue Code, including a copy
24    of the screen shot from the Community Development
25    Financial Institutions Fund's Allocation Tracking System
26    of the applicant's remaining federal qualified equity

 

 

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1    investment authority.
2    (b) Within 30 days after receipt of a completed
3application containing the information necessary for the
4Department to certify a potential qualified equity investment,
5including the payment of the application fee, the Department
6shall grant or deny the application in full or in part. If the
7Department denies any part of the application, it shall inform
8the qualified community development entity of the grounds for
9the denial. If the qualified community development entity
10provides any additional information required by the Department
11or otherwise completes its application within 15 days of the
12notice of denial, the application shall be considered
13completed as of the original date of submission. If the
14qualified community development entity fails to provide the
15information or complete its application within the 15-day
16period, the application remains denied and must be resubmitted
17in full with a new submission date.
18    (c) If the application is deemed complete, the Department
19shall certify the proposed equity investment or long-term debt
20security as a qualified equity investment that is eligible for
21tax credits under this Section, subject to the limitations
22contained in Section 20. The Department shall provide written
23notice of the certification to the qualified community
24development entity. The notice shall include the names of
25those taxpayers who are eligible to utilize the credits and
26their respective credit amounts. If the names of the taxpayers

 

 

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1who are eligible to utilize the credits change due to a
2transfer of a qualified equity investment or a change in an
3allocation pursuant to Section 15, the qualified community
4development entity shall notify the Department of such change.
5    (d) With respect to applications received before January
61, 2017, the Department shall certify qualified equity
7investments in the order applications are received by the
8Department. Applications received on the same day shall be
9deemed to have been received simultaneously. For applications
10received on the same day and deemed complete, the Department
11shall certify, consistent with remaining tax credit capacity,
12qualified equity investments in proportionate percentages
13based upon the ratio of the amount of qualified equity
14investment requested in an application to the total amount of
15qualified equity investments requested in all applications
16received on the same day.
17    (d-5) With respect to applications received on or after
18January 1, 2017, the Department shall certify applications by
19applicants that agree to designate qualified equity
20investments as federal qualified equity investments in
21accordance with item (8) of subsection (a) of this Section in
22proportionate percentages based upon the ratio of the amount
23of qualified equity investments requested in an application to
24be designated as federal qualified equity investments to the
25total amount of qualified equity investments to be designated
26as federal qualified equity investments requested in all

 

 

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1applications received on the same day.
2    (d-10) With respect to applications received on or after
3January 1, 2017, after complying with subsection (d-5), the
4Department shall certify the qualified equity investments of
5all other applicants, including the remaining qualified equity
6investment authority requested by applicants not designated as
7federal qualified equity investments in accordance with item
8(8) of subsection (a) of this Section, in proportionate
9percentages based upon the ratio of the amount of qualified
10equity investments requested in the applications to the total
11amount of qualified equity investments requested in all
12applications received on the same day.
13    (e) Once the Department has certified qualified equity
14investments that, on a cumulative basis, are eligible for
15$20,000,000 in tax credits for the primary allocation and
16$12,000,000 in tax credits for the targeted allocation, the
17Department may not certify any more qualified equity
18investments. If a pending request cannot be fully certified,
19the Department shall certify the portion that may be certified
20unless the qualified community development entity elects to
21withdraw its request rather than receive partial credit.
22    (f) Within 30 days after receiving notice of
23certification, the qualified community development entity
24shall (i) issue the qualified equity investment and receive
25cash in the amount of the certified amount and (ii) with
26respect to qualified equity investments made on or after

 

 

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1January 1, 2017, if applicable, designate the required amount
2of qualified equity investment authority as a federal
3qualified equity investment. The qualified community
4development entity must provide the Department with evidence
5of the receipt of the cash investment within 10 business days
6after receipt and, with respect to qualified equity
7investments made on or after January 1, 2017, if applicable,
8provide evidence that the required amount of qualified equity
9investment authority was designated as a federal qualified
10equity investment. If the qualified community development
11entity does not receive the cash investment and issue the
12qualified equity investment within 30 days following receipt
13of the certification notice, the certification shall lapse and
14the entity may not issue the qualified equity investment
15without reapplying to the Department for certification. A
16certification that lapses reverts back to the Department and
17may be reissued only in accordance with the application
18process outline in this Section 25.
19    (g) Allocation rounds enabled by this Act shall be applied
20for according to the following schedule:
21        (1) on January 2, 2019, $125,000,000 of qualified
22    equity investments; and
23        (2) not less than 45 days after but not more than 90
24    days after the Community Development Financial
25    Institutions Fund of the United States Department of the
26    Treasury announces allocation awards under a Notice of

 

 

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1    Funding Availability that is published in the Federal
2    Register after September 6, 2019, $125,000,000 of
3    qualified equity investments.
4        (3) on or after January 1, 2024, but not more than 120
5    days after the Community Development Financial
6    Institutions Fund of the United States Department of the
7    Treasury announces allocation awards under a Notice of
8    Funding Availability that was published in the Federal
9    Register on November 22, 2022, $250,000,000 of qualified
10    equity investments for the primary allocation and
11    $150,000,000 of qualified equity investments for the
12    targeted allocation.
13(Source: P.A. 100-408, eff. 8-25-17; 101-604, eff. 12-13-19.)
 
14    (20 ILCS 663/40)
15    Sec. 40. Recapture. The Department of Revenue shall
16recapture, from the taxpayer that claimed the credit on a
17return, the tax credit allowed under this Act if:
18        (1) any amount of the federal tax credit available
19    with respect to a qualified equity investment that is
20    eligible for a tax credit under this Act is recaptured
21    under Section 45D of the Internal Revenue Code of 1986, as
22    amended. In that case, the Department of Revenue's
23    recapture shall be proportionate to the federal recapture
24    with respect to that qualified equity investment;
25        (2) the issuer redeems or makes principal repayment

 

 

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1    with respect to a qualified equity investment prior to the
2    7th anniversary of the issuance of the qualified equity
3    investment. In that case, the Department of Revenue's
4    recapture shall be proportionate to the amount of the
5    redemption or repayment with respect to the qualified
6    equity investment;
7        (3) the issuer fails to invest at least 85% of the cash
8    purchase price of the qualified equity investment with
9    respect to qualified equity investments made before
10    January 1, 2017 and 100% of the cash purchase price of the
11    qualified equity investment with respect to qualified
12    equity investments made on or after January 1, 2017 in
13    qualified low-income community investments in the State of
14    Illinois within 12 months of the issuance of the qualified
15    equity investment and maintain such level of investment in
16    qualified low-income community investments in Illinois
17    until the last credit allowance date for such qualified
18    equity investment, provided that with respect to qualified
19    equity investments made after January 1, 2024 pursuant to
20    the targeted allocation, the issuer must invest 100% of
21    the cash purchase price of the qualified equity investment
22    in qualified low-income community investments in the State
23    of Illinois in qualified active low-income community
24    businesses engaged in a targeted industry within 12 months
25    of the issuance of the qualified equity investment and
26    maintain such level of investment in qualified low-income

 

 

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1    community investments in such targeted industries until
2    the last credit allowance date; or
3        (4) with respect to qualified equity investments made
4    on or after January 1, 2017, the issuer violates Section
5    43 of this Act.
6    For purposes of this Section, an investment shall be
7considered held by an issuer even if the investment has been
8sold or repaid; provided that the issuer reinvests an amount
9equal to the capital returned to or recovered by the issuer
10from the original investment, exclusive of any profits
11realized, in another qualified low-income community investment
12in this State within 12 months after the receipt of that
13capital. An issuer is not required to reinvest capital
14returned from qualified low-income community investments after
15the 6th anniversary of the issuance of the qualified equity
16investment, the proceeds of which were used to make the
17qualified low-income community investment, and the qualified
18low-income community investment shall be considered held by
19the issuer through the 7th anniversary of the qualified equity
20investment's issuance.
21    The Department of Revenue shall provide notice to the
22qualified community development entity of any proposed
23recapture of tax credits pursuant to this Section. The entity
24shall have 90 days to cure any deficiency indicated in the
25Department of Revenue's original recapture notice and avoid
26such recapture. If the entity fails or is unable to cure such

 

 

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1deficiency with the 90-day period, the Department of Revenue
2shall provide the entity and the taxpayer from whom the credit
3is to be recaptured with a final order of recapture. Any tax
4credit for which a final recapture order has been issued shall
5be recaptured by the Department of Revenue from the taxpayer
6who claimed the tax credit on a tax return.
7(Source: P.A. 100-408, eff. 8-25-17.)
 
8    (20 ILCS 663/45)
9    Sec. 45. Examination and Rulemaking.
10    (a) The Department may conduct examinations to verify that
11the tax credits under this Act have been received and applied
12according to the requirements of this Act and to verify that no
13event has occurred that would result in a recapture of tax
14credits under Section 40.
15    (b) Neither the Department nor the Department of Revenue
16shall have the authority to promulgate rules under the Act,
17but, with respect to qualified equity investments issued
18before January 1, 2024, the Department and the Department of
19Revenue shall have the authority to issue advisory letters to
20individual qualified community development entities and their
21investors that are limited to the specific facts outlined in
22an advisory letter request from a qualified community
23development entity. Such rulings cannot be relied upon by any
24person or entity other than the qualified community
25development entity that requested the letter and the taxpayers

 

 

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1that are entitled to any tax credits generated from
2investments in such entity. For purposes of this subsection,
3"rules" is given the meaning contained in Section 1-70 of the
4Illinois Administrative Procedure Act.
5    (c) In rendering advisory letters and making other
6determinations under this Act prior to January 1, 2024, to the
7extent applicable, the Department and the Department of
8Revenue shall look for guidance to Section 45D of the Internal
9Revenue Code of 1986, as amended, and the rules and
10regulations issued thereunder.
11    (d) It is the intent of the General Assembly that
12qualified equity investment structures allowed pursuant to
13advisory letters and other determinations by the Department
14and the Department of Revenue prior to January 1, 2024 shall be
15allowed under the primary allocation and the targeted
16allocation and that qualified community development entities
17may rely on the rules and regulations issued under Section 45D
18of the Internal Revenue Code of 1986, as amended, where
19applicable.
20(Source: P.A. 95-1024, eff. 12-31-08.)
 
21    (20 ILCS 663/55)
22    Sec. 55. Annual report. Each qualified community
23development entity shall submit an annual report to the
24Department within 45 days after the beginning of each calendar
25year during the compliance period. No annual report shall be

 

 

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1due prior to the first anniversary of the initial credit
2allowance date. The report shall include, but is not limited
3to, the following:
4        (1) an attestation from an authorized officer of the
5    qualified community development entity that the entity has
6    not been the subject of any investigation by a government
7    agency relating to tax credits or financial services
8    during the preceding calendar year;
9        (2) information with respect to all qualified
10    low-income community investments made by the qualified
11    community development entity, including:
12            (A) the date and amount of, and bank statements or
13        wire transfer reports documenting, such qualified
14        low-income community investments;
15            (B) the name, address, and EIN, and the North
16        American Industry Classification System (NAICS) code
17        for the targeted allocation, of each qualified active
18        low-income community business funded by the qualified
19        community development entity, the number of persons
20        employed by such business at the time of the initial
21        investment, and a brief description of the business,
22        the financing, and community benefits of the
23        financing; and
24            (C) the number of employment positions maintained
25        by each qualified active low-income community business
26        as of the date of report or the end of the preceding

 

 

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1        calendar year and the average annual salaries of such
2        positions; and
3            (D) the total number of employment positions
4        created and retained as a result of qualified
5        low-income community investments and the average
6        annual salaries of those positions; and
7        (3) any changes with respect to the taxpayers entitled
8    to claim tax credits with respect to qualified equity
9    investments issued by the qualified community development
10    entity since its last report pursuant to this Section.
11    The qualified community development entity is not required
12to provide the annual report set forth in this Section for
13qualified low-income community investments that have been
14redeemed or repaid.
15(Source: P.A. 100-408, eff. 8-25-17.)
 
16    Section 99. Effective date. This Act takes effect upon
17becoming law.