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1 | | AN ACT concerning revenue. |
2 | | Be it enacted by the People of the State of Illinois, |
3 | | represented in the General Assembly: |
4 | | Section 5. The Illinois Income Tax Act is amended by |
5 | | changing Section 220 as follows: |
6 | | (35 ILCS 5/220) |
7 | | Sec. 220. Angel investment credit. |
8 | | (a) As used in this Section: |
9 | | "Applicant" means a corporation, partnership, limited |
10 | | liability company, or a natural person that makes an |
11 | | investment in a qualified new business venture. The term |
12 | | "applicant" does not include (i) a corporation, partnership, |
13 | | limited liability company, or a natural person who has a |
14 | | direct or indirect ownership interest of at least 51% in the |
15 | | profits, capital, or value of the qualified new business |
16 | | venture receiving the investment or (ii) a related member. |
17 | | "Claimant" means an applicant certified by the Department |
18 | | who files a claim for a credit under this Section. |
19 | | "Department" means the Department of Commerce and Economic |
20 | | Opportunity. |
21 | | "Investment" means money (or its equivalent) given to a |
22 | | qualified new business venture, at a risk of loss, in |
23 | | consideration for an equity interest of the qualified new |
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1 | | business venture. The Department may adopt rules to permit |
2 | | certain forms of contingent equity investments to be |
3 | | considered eligible for a tax credit under this Section. |
4 | | "Qualified new business venture" means a business that is |
5 | | registered with the Department under this Section. |
6 | | "Related member" means a person that, with respect to the |
7 | | applicant, is any one of the following: |
8 | | (1) An individual, if the individual and the members |
9 | | of the individual's family (as defined in Section 318 of |
10 | | the Internal Revenue Code) own directly, indirectly, |
11 | | beneficially, or constructively, in the aggregate, at |
12 | | least 50% of the value of the outstanding profits, |
13 | | capital, stock, or other ownership interest in the |
14 | | qualified new business venture that is the recipient of |
15 | | the applicant's investment. |
16 | | (2) A partnership, estate, or trust and any partner or |
17 | | beneficiary, if the partnership, estate, or trust and its |
18 | | partners or beneficiaries own directly, indirectly, |
19 | | beneficially, or constructively, in the aggregate, at |
20 | | least 50% of the profits, capital, stock, or other |
21 | | ownership interest in the qualified new business venture |
22 | | that is the recipient of the applicant's investment. |
23 | | (3) A corporation, and any party related to the |
24 | | corporation in a manner that would require an attribution |
25 | | of stock from the corporation under the attribution rules |
26 | | of Section 318 of the Internal Revenue Code, if the |
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1 | | applicant and any other related member own, in the |
2 | | aggregate, directly, indirectly, beneficially, or |
3 | | constructively, at least 50% of the value of the |
4 | | outstanding stock of the qualified new business venture |
5 | | that is the recipient of the applicant's investment. |
6 | | (4) A corporation and any party related to that |
7 | | corporation in a manner that would require an attribution |
8 | | of stock from the corporation to the party or from the |
9 | | party to the corporation under the attribution rules of |
10 | | Section 318 of the Internal Revenue Code, if the |
11 | | corporation and all such related parties own, in the |
12 | | aggregate, at least 50% of the profits, capital, stock, or |
13 | | other ownership interest in the qualified new business |
14 | | venture that is the recipient of the applicant's |
15 | | investment. |
16 | | (5) A person to or from whom there is attribution of |
17 | | ownership of stock in the qualified new business venture |
18 | | that is the recipient of the applicant's investment in |
19 | | accordance with Section 1563(e) of the Internal Revenue |
20 | | Code, except that for purposes of determining whether a |
21 | | person is a related member under this paragraph, "20%" |
22 | | shall be substituted for "5%" whenever "5%" appears in |
23 | | Section 1563(e) of the Internal Revenue Code. |
24 | | (b) For taxable years beginning after December 31, 2010, |
25 | | and ending on or before December 31, 2026, subject to the |
26 | | limitations provided in this Section, a claimant may claim, as |
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1 | | a credit against the tax imposed under subsections (a) and (b) |
2 | | of Section 201 of this Act, an amount equal to 25% of the |
3 | | claimant's investment made directly in a qualified new |
4 | | business venture. However, the amount of the credit is 35% of |
5 | | the claimant's investment made directly in the qualified new |
6 | | business venture if the investment is made in: (1) a qualified |
7 | | new business venture that is a minority-owned business, a |
8 | | women-owned business, or a business owned a person with a |
9 | | disability (as those terms are used and defined in the |
10 | | Business Enterprise for Minorities, Women, and Persons with |
11 | | Disabilities Act); or (2) a qualified new business venture in |
12 | | which the principal place of business is located in a county |
13 | | with a population of not more than 250,000. In order for an |
14 | | investment in a qualified new business venture to be eligible |
15 | | for tax credits, the business must have applied for and |
16 | | received certification under subsection (e) for the taxable |
17 | | year in which the investment was made prior to the date on |
18 | | which the investment was made. The credit under this Section |
19 | | may not exceed the taxpayer's Illinois income tax liability |
20 | | for the taxable year. If the amount of the credit exceeds the |
21 | | tax liability for the year, the excess may be carried forward |
22 | | and applied to the tax liability of the 5 taxable years |
23 | | following the excess credit year. The credit shall be applied |
24 | | to the earliest year for which there is a tax liability. If |
25 | | there are credits from more than one tax year that are |
26 | | available to offset a liability, the earlier credit shall be |
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1 | | applied first. In the case of a partnership or Subchapter S |
2 | | Corporation, the credit is allowed to the partners or |
3 | | shareholders in accordance with the determination of income |
4 | | and distributive share of income under Sections 702 and 704 |
5 | | and Subchapter S of the Internal Revenue Code. |
6 | | (c) The minimum amount an applicant must invest in any |
7 | | single qualified new business venture in order to be eligible |
8 | | for a credit under this Section is $10,000. The maximum amount |
9 | | of an applicant's total investment made in any single |
10 | | qualified new business venture that may be used as the basis |
11 | | for a credit under this Section is $2,000,000. |
12 | | (d) The Department shall implement a program to certify an |
13 | | applicant for an angel investment credit. Upon satisfactory |
14 | | review, the Department shall issue a tax credit certificate |
15 | | stating the amount of the tax credit to which the applicant is |
16 | | entitled. The Department shall annually certify that: (i) each |
17 | | qualified new business venture that receives an angel |
18 | | investment under this Section has maintained a minimum |
19 | | employment threshold, as defined by rule, in the State (and |
20 | | continues to maintain a minimum employment threshold in the |
21 | | State for a period of no less than 3 years from the issue date |
22 | | of the last tax credit certificate issued by the Department |
23 | | with respect to such business pursuant to this Section); and |
24 | | (ii) the claimant's investment has been made and remains, |
25 | | except in the event of a qualifying liquidity event, in the |
26 | | qualified new business venture for no less than 3 years. |
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1 | | If an investment for which a claimant is allowed a credit |
2 | | under subsection (b) is held by the claimant for less than 3 |
3 | | years, other than as a result of a permitted sale of the |
4 | | investment to person who is not a related member, the claimant |
5 | | shall pay to the Department of Revenue, in the manner |
6 | | prescribed by the Department of Revenue, the aggregate amount |
7 | | of the disqualified credits that the claimant received related |
8 | | to the subject investment. |
9 | | If the Department determines that a qualified new business |
10 | | venture failed to maintain a minimum employment threshold in |
11 | | the State through the date which is 3 years from the issue date |
12 | | of the last tax credit certificate issued by the Department |
13 | | with respect to the subject business pursuant to this Section, |
14 | | except for any 3-year reporting period that includes March 13, |
15 | | 2020 to January 1, 2024, the claimant or claimants shall pay to |
16 | | the Department of Revenue, in the manner prescribed by the |
17 | | Department of Revenue, the aggregate amount of the |
18 | | disqualified credits that claimant or claimants received |
19 | | related to investments in that business. For tax credits under |
20 | | this Section involving a 3-year reporting period that includes |
21 | | March 13, 2020 to January 1, 2024, the repayment of any tax |
22 | | credits issued shall be determined at the discretion of the |
23 | | Department. |
24 | | (e) The Department shall implement a program to register |
25 | | qualified new business ventures for purposes of this Section. |
26 | | A business desiring registration under this Section shall be |
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1 | | required to submit a full and complete application to the |
2 | | Department. A submitted application shall be effective only |
3 | | for the taxable year in which it is submitted, and a business |
4 | | desiring registration under this Section shall be required to |
5 | | submit a separate application in and for each taxable year for |
6 | | which the business desires registration. Further, if at any |
7 | | time prior to the acceptance of an application for |
8 | | registration under this Section by the Department one or more |
9 | | events occurs which makes the information provided in that |
10 | | application materially false or incomplete (in whole or in |
11 | | part), the business shall promptly notify the Department of |
12 | | the same. Any failure of a business to promptly provide the |
13 | | foregoing information to the Department may, at the discretion |
14 | | of the Department, result in a revocation of a previously |
15 | | approved application for that business, or disqualification of |
16 | | the business from future registration under this Section, or |
17 | | both. The Department may register the business only if all of |
18 | | the following conditions are satisfied: |
19 | | (1) it has its principal place of business in this |
20 | | State; |
21 | | (2) at least 51% of the employees employed by the |
22 | | business are employed in this State; |
23 | | (3) the business has the potential for increasing jobs |
24 | | in this State, increasing capital investment in this |
25 | | State, or both, as determined by the Department, and |
26 | | either of the following apply: |
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1 | | (A) it is principally engaged in innovation in any |
2 | | of the following: manufacturing; biotechnology; |
3 | | nanotechnology; communications; agricultural |
4 | | sciences; clean energy creation or storage technology; |
5 | | processing or assembling products, including medical |
6 | | devices, pharmaceuticals, computer software, computer |
7 | | hardware, semiconductors, other innovative technology |
8 | | products, or other products that are produced using |
9 | | manufacturing methods that are enabled by applying |
10 | | proprietary technology; or providing services that are |
11 | | enabled by applying proprietary technology; or |
12 | | (B) it is undertaking pre-commercialization |
13 | | activity related to proprietary technology that |
14 | | includes conducting research, developing a new product |
15 | | or business process, or developing a service that is |
16 | | principally reliant on applying proprietary |
17 | | technology; |
18 | | (4) it is not principally engaged in real estate |
19 | | development, insurance, banking, lending, lobbying, |
20 | | political consulting, professional services provided by |
21 | | attorneys, accountants, business consultants, physicians, |
22 | | or health care consultants, wholesale or retail trade, |
23 | | leisure, hospitality, transportation, or construction, |
24 | | except construction of power production plants that derive |
25 | | energy from a renewable energy resource, as defined in |
26 | | Section 1 of the Illinois Power Agency Act; |
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1 | | (5) at the time it is first certified: |
2 | | (A) it has fewer than 100 employees; |
3 | | (B) it has been in operation in Illinois for not |
4 | | more than 10 consecutive years prior to the year of |
5 | | certification; and |
6 | | (C) it has received not more than $10,000,000 in |
7 | | aggregate investments; |
8 | | (5.1) it agrees to maintain a minimum employment |
9 | | threshold in the State of Illinois prior to the date which |
10 | | is 3 years from the issue date of the last tax credit |
11 | | certificate issued by the Department with respect to that |
12 | | business pursuant to this Section; |
13 | | (6) (blank); and |
14 | | (7) it has received not more than $4,000,000 in |
15 | | investments that qualified for tax credits under this |
16 | | Section. |
17 | | (f) The Department, in consultation with the Department of |
18 | | Revenue, shall adopt rules to administer this Section. For |
19 | | taxable years beginning before January 1, 2024, the aggregate |
20 | | amount of the tax credits that may be claimed under this |
21 | | Section for investments made in qualified new business |
22 | | ventures shall be limited to $10,000,000 per calendar year, of |
23 | | which $500,000 shall be reserved for investments made in |
24 | | qualified new business ventures which are minority-owned |
25 | | businesses, women-owned businesses, or businesses owned by a |
26 | | person with a disability (as those terms are used and defined |
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1 | | in the Business Enterprise for Minorities, Women, and Persons |
2 | | with Disabilities Act), and an additional $500,000 shall be |
3 | | reserved for investments made in qualified new business |
4 | | ventures with their principal place of business in counties |
5 | | with a population of not more than 250,000. For taxable years |
6 | | beginning on or after January 1, 2024, the aggregate amount of |
7 | | the tax credits that may be claimed under this Section for |
8 | | investments made in qualified new business ventures shall be |
9 | | limited to $15,000,000 per calendar year, of which $2,500,000 |
10 | | shall be reserved for investments made in qualified new |
11 | | business ventures that are minority-owned businesses (as the |
12 | | term is defined in the Business Enterprise for Minorities, |
13 | | Women, and Persons with Disabilities Act), $1,250,000 shall be |
14 | | reserved for investments made in qualified new business |
15 | | ventures that are women-owned businesses or businesses owned |
16 | | by a person with a disability (as those terms are defined in |
17 | | the Business Enterprise for Minorities, Women, and Persons |
18 | | with Disabilities Act), and $1,250,000 shall be reserved for |
19 | | investments made in qualified new business ventures with their |
20 | | principal place of business in a county with a population of |
21 | | not more than 250,000. The annual allowable amounts set forth |
22 | | in this Section shall be allocated by the Department, on a per |
23 | | calendar quarter basis and prior to the commencement of each |
24 | | calendar year, in such proportion as determined by the |
25 | | Department, provided that: (i) the amount initially allocated |
26 | | by the Department for any one calendar quarter shall not |
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1 | | exceed 35% of the total allowable amount; (ii) any portion of |
2 | | the allocated allowable amount remaining unused as of the end |
3 | | of any of the first 3 calendar quarters of a given calendar |
4 | | year shall be rolled into, and added to, the total allocated |
5 | | amount for the next available calendar quarter; and (iii) the |
6 | | reservation of tax credits for investments in minority-owned |
7 | | businesses, women-owned businesses, businesses owned by a |
8 | | person with a disability, and in businesses in counties with a |
9 | | population of not more than 250,000 is limited to the first 3 |
10 | | calendar quarters of a given calendar year, after which they |
11 | | may be claimed by investors in any qualified new business |
12 | | venture. |
13 | | (g) A claimant may not sell or otherwise transfer a credit |
14 | | awarded under this Section to another person. |
15 | | (h) On or before March 1 of each year, the Department shall |
16 | | report to the Governor and to the General Assembly on the tax |
17 | | credit certificates awarded under this Section for the prior |
18 | | calendar year. |
19 | | (1) This report must include, for each tax credit |
20 | | certificate awarded: |
21 | | (A) the name of the claimant and the amount of |
22 | | credit awarded or allocated to that claimant; |
23 | | (B) the name and address (including the county) of |
24 | | the qualified new business venture that received the |
25 | | investment giving rise to the credit, the North |
26 | | American Industry Classification System (NAICS) code |
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1 | | applicable to that qualified new business venture, and |
2 | | the number of employees of the qualified new business |
3 | | venture; and |
4 | | (C) the date of approval by the Department of each |
5 | | claimant's tax credit certificate. |
6 | | (2) The report must also include: |
7 | | (A) the total number of applicants and the total |
8 | | number of claimants, including the amount of each tax |
9 | | credit certificate awarded to a claimant under this |
10 | | Section in the prior calendar year; |
11 | | (B) the total number of applications from |
12 | | businesses seeking registration under this Section, |
13 | | the total number of new qualified business ventures |
14 | | registered by the Department, and the aggregate amount |
15 | | of investment upon which tax credit certificates were |
16 | | issued in the prior calendar year; and |
17 | | (C) the total amount of tax credit certificates |
18 | | sought by applicants, the amount of each tax credit |
19 | | certificate issued to a claimant, the aggregate amount |
20 | | of all tax credit certificates issued in the prior |
21 | | calendar year and the aggregate amount of tax credit |
22 | | certificates issued as authorized under this Section |
23 | | for all calendar years. |
24 | | (i) For each business seeking registration under this |
25 | | Section after December 31, 2016, the Department shall require |
26 | | the business to include in its application the North American |
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1 | | Industry Classification System (NAICS) code applicable to the |
2 | | business and the number of employees of the business at the |
3 | | time of application. Each business registered by the |
4 | | Department as a qualified new business venture that receives |
5 | | an investment giving rise to the issuance of a tax credit |
6 | | certificate pursuant to this Section shall, for each of the 3 |
7 | | years following the issue date of the last tax credit |
8 | | certificate issued by the Department with respect to such |
9 | | business pursuant to this Section, report to the Department |
10 | | the following: |
11 | | (1) the number of employees and the location at which |
12 | | those employees are employed, both as of the end of each |
13 | | year; |
14 | | (2) the amount of additional new capital investment |
15 | | raised as of the end of each year, if any; and |
16 | | (3) the terms of any liquidity event occurring during |
17 | | such year; for the purposes of this Section, a "liquidity |
18 | | event" means any event that would be considered an exit |
19 | | for an illiquid investment, including any event that |
20 | | allows the equity holders of the business (or any material |
21 | | portion thereof) to cash out some or all of their |
22 | | respective equity interests. |
23 | | (Source: P.A. 102-16, eff. 6-17-21; 103-9, eff. 1-1-24 .) |
24 | | Section 99. Effective date. This Act takes effect upon |
25 | | becoming law. |