SB2606 93RD GENERAL ASSEMBLY

LRB093 20314 MKM 46082 b

93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
SB2606

Introduced 2/4/2004, by Patrick Welch

SYNOPSIS AS INTRODUCED:

35 ILCS 5/1410 new

Amends the Income Tax Act. Provides that a start-up business may apply to the Department of Revenue for a deferment of taxable income for the first 3 years that the business is in operation. Requires the taxpayer business to pay the deferred amounts in 5 equal annual installments in the 5 tax years after the 3-year deferment period. Requires the Department to approve the application if certain requirements have been met. Authorizes the Department to promulgate rules necessary for the administration of the deferment program. Effective January 1, 2005.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning taxes.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Income Tax Act is amended by adding Section 1410 as follows:

(35 ILCS 5/1410 new)

Sec. 1410. Start-up business tax deferment.

(a) In this Section:

"Commercial domicile" means the principal place from which the trade or business of the taxpayer is directed or managed.

"Start-up business" does not include any of the following:

(1) an existing business locating in this State from another state or from another location in this State.

(2) a newly created subsidiary that is the result of the merger of 2 or more businesses.

(3) a previously existing business that has been dissolved and reincorporated.

(4) an existing business operating under a different name and located in a different location.

(5) a newly created partnership owned by 2 or more of the same partners as an existing business and engaging in similar business activity as the existing business.

(6) A business entity that reorganizes or experiences a change in either the legal or trade name of the business.

(7) A joint venture.

"Venture capital moneys" means an equity investment from an individual or a private seed and venture capital fund whose only business is investing in seed and venture capital opportunities. "Venture capital moneys" does not mean a loan or other non-equity financing from a person, financial institution, or other entity.

(b) In order to qualify under this Section for a deferment of taxable income and the tax to be imposed on it, a taxpayer must meet all of the following criteria:

(1) the taxpayer is a business that is a wholly new start-up business beginning operations during the first tax year for which the deferment of taxable income is claimed;

(2) the business has its commercial domicile in the State;

(3) the operations of the business are at least 25% funded by venture capital moneys; and

(4) the taxpayer does not have any delinquent taxes or other debt outstanding and owed to the State.

(c) A taxpayer who meets the criteria in subsection (b) may submit a request to the Department of Revenue for the deferment of taxable income for the first 3 tax years that the taxpayer business is in operation. If a deferment is approved by the Department, the taxpayer shall pay taxes on the deferred taxable income in 5 equal installments during the 5 tax years following the 3 years of taxable income deferment. The provisions of Article 11 of this Act shall apply if the taxpayer refuses or neglects to pay the taxes owed on the deferred taxable income in the manner provided in this Section. A taxpayer receiving a deferment shall file a return for each tax year in which a deferment is approved. If the taxpayer has a net loss during a tax year during the 3-year period in which taxable income is deferred, the loss may be applied to any deferred taxable income during that period.

(d) Upon a determination that the criteria in subsection (b) have been met, the Department shall approve a request for deferment of taxable income.

(e) For purposes of assessing penalty and interest, the tax on any deferred taxable income is not due and payable until the tax years in which the annual installments, as provided in subsection (c), are due and payable.

(f) The Department shall promulgate rules necessary for the administration of this Section.

Section 99. Effective date. This Act takes effect January 1, 2005.