Illinois General Assembly - Full Text of SB0652
Illinois General Assembly

Previous General Assemblies

Full Text of SB0652  100th General Assembly

SB0652 100TH GENERAL ASSEMBLY

  
  

 


 
100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
SB0652

 

Introduced 1/25/2017, by Sen. James F. Clayborne, Jr.

 

SYNOPSIS AS INTRODUCED:
 
20 ILCS 663/5
20 ILCS 663/20
20 ILCS 663/25
20 ILCS 663/40
20 ILCS 663/43 new
20 ILCS 663/50
20 ILCS 663/55 new

    Amends the New Markets Development Program Act. Provides that, to be considered a "qualified equity investment" under the Act, 100% (currently, 85%) of the cash purchase price of the investment must be used by the issuer to make qualified low-income community investments in the State of Illinois. Requires qualified community development entities to submit an annual job creation report. Provides that the application for certification as a qualified community development entity must include 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. Provides that 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 the Act 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 or (ii) loan to or invest in a qualified community development entity or member or affiliate of a qualified community development entity. Provides that the annual cap on credits under the Act is $50,000,000 (currently, $20,000,000). Effective immediately.


LRB100 06360 HLH 16399 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB0652LRB100 06360 HLH 16399 b

1    AN ACT concerning revenue.
 
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, and 50 and by
6adding Sections 43 and 55 as follows:
 
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 date,
11and 8% for the next 4 credit allowance dates.
12    "Credit allowance date" means with respect to any qualified
13equity investment:
14        (1) the date on which the investment is initially made;
15    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

 

 

SB0652- 2 -LRB100 06360 HLH 16399 b

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

 

 

SB0652- 3 -LRB100 06360 HLH 16399 b

1the initial business. A business shall be considered a
2qualified active low-income community business for the
3duration of the qualified community development entity's
4investment in or loan to the business if the entity reasonably
5expects, at the time it makes the investment or loan, that the
6business will continue to satisfy the requirements for being a
7qualified active low-income community business throughout the
8entire period of the investment or loan.
9    "Qualified community development entity" has the meaning
10given to that term in Section 45D of the Internal Revenue Code
11of 1986, as amended; provided that such entity has entered
12into, or is controlled by an entity that has entered into, an
13allocation agreement with the Community Development Financial
14Institutions Fund of the U.S. Treasury Department with respect
15to credits authorized by Section 45D of the Internal Revenue
16Code of 1986, as amended, that includes the State of Illinois
17within the service area set forth in that allocation agreement.
18    "Qualified equity investment" means any equity investment
19in, or long-term debt security issued by, a qualified community
20development entity that:
21        (1) is acquired after the effective date of this Act at
22    its original issuance solely in exchange for cash;
23        (2) with respect to qualified equity investments made
24    before January 1, 2017, has at least 85% of its cash
25    purchase price used by the issuer to make qualified
26    low-income community investments in the State of Illinois,

 

 

SB0652- 4 -LRB100 06360 HLH 16399 b

1    and, with respect to qualified equity investments made
2    after on or after January 1, 2017, has 100% of the cash
3    purchase price used by the issuer to make qualified
4    low-income community investments in the State of Illinois;
5    and
6        (3) is designated by the issuer as a qualified equity
7    investment under this Act; with respect to qualified equity
8    investments made on or after January 1, 2017, is designated
9    by the issuer as a qualified equity investment under
10    Section 45D of the Internal Revenue Code of 1986, as
11    amended; and is certified by the Department as not
12    exceeding the limitation contained in Section 20.
13    This term includes any qualified equity investment that
14does not meet the provisions of item (1) of this definition if
15the investment was a qualified equity investment in the hands
16of a prior holder.
17    "Qualified low-income community investment" means any
18capital or equity investment in, or loan to, any qualified
19active low-income community business. With respect to any one
20qualified active low-income community business, the maximum
21amount of qualified low-income community investments made in
22that business, on a collective basis with all of its affiliates
23that may be counted towards the satisfaction of paragraph (2)
24of the definition of qualified equity investment, shall be
25$10,000,000 whether issued to one or several qualified
26community development entities.

 

 

SB0652- 5 -LRB100 06360 HLH 16399 b

1    "Tax credit" means a credit against any income, franchise,
2or insurance premium taxes, including insurance retaliatory
3taxes, otherwise due under Illinois law.
4    "Taxpayer" means any individual or entity subject to any
5income, franchise, or insurance premium tax under Illinois law.
6(Source: P.A. 95-1024, eff. 12-31-08.)
 
7    (20 ILCS 663/20)
8    Sec. 20. Annual cap on credits. The Department shall limit
9the monetary amount of qualified equity investments permitted
10under this Act to a level necessary to limit tax credit use at
11no more than $50,000,000 $20,000,000 of tax credits in any
12fiscal year. This limitation on qualified equity investments
13shall be based on the anticipated use of credits without regard
14to the potential for taxpayers to carry forward tax credits to
15later tax years.
16(Source: P.A. 95-1024, eff. 12-31-08; 96-939, eff. 7-1-10.)
 
17    (20 ILCS 663/25)
18    Sec. 25. Certification of qualified equity investments.
19    (a) A qualified community development entity that seeks to
20have an equity investment or long-term debt security designated
21as a qualified equity investment and eligible for tax credits
22under this Section shall apply to the Department. The qualified
23community development entity must submit an application on a
24form that the Department provides that includes:

 

 

SB0652- 6 -LRB100 06360 HLH 16399 b

1        (1) The name, address, tax identification number of the
2    entity, and evidence of the entity's certification as a
3    qualified community development entity.
4        (2) A copy of the allocation agreement executed by the
5    entity, or its controlling entity, and the Community
6    Development Financial Institutions Fund.
7        (3) A certificate executed by an executive officer of
8    the entity attesting that the allocation agreement remains
9    in effect and has not been revoked or cancelled by the
10    Community Development Financial Institutions Fund.
11        (4) A description of the proposed amount, structure,
12    and purchaser of the equity investment or long-term debt
13    security.
14        (5) The name and tax identification number of any
15    taxpayer eligible to utilize tax credits earned as a result
16    of the issuance of the qualified equity investment.
17        (6) Information regarding the proposed use of proceeds
18    from the issuance of the qualified equity investment.
19        (7) A nonrefundable application fee of $5,000. This fee
20    shall be paid to the Department and shall be required of
21    each application submitted.
22        (8) With respect to qualified equity investments made
23    on or after January 1, 2017, the amount of qualified equity
24    investment authority the applicant agrees to designate as a
25    federal qualified equity investment under Section 45D of
26    the Internal Revenue Code, including a copy of the screen

 

 

SB0652- 7 -LRB100 06360 HLH 16399 b

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

 

 

SB0652- 8 -LRB100 06360 HLH 16399 b

1taxpayers who are eligible to utilize the credits and their
2respective credit amounts. If the names of the taxpayers who
3are eligible to utilize the credits change due to a transfer of
4a qualified equity investment or a change in an allocation
5pursuant to Section 15, the qualified community development
6entity shall notify the Department of such change.
7    (d) With respect to applications received before January 1,
82017, the The Department shall certify qualified equity
9investments in the order applications are received by the
10Department. Applications received on the same day shall be
11deemed to have been received simultaneously. For applications
12received on the same day and deemed complete, the Department
13shall certify, consistent with remaining tax credit capacity,
14qualified equity investments in proportionate percentages
15based upon the ratio of the amount of qualified equity
16investment requested in an application to the total amount of
17qualified equity investments requested in all applications
18received on the same day.
19    (d-5) With respect to applications received on or after
20January 1, 2017, the Department shall certify applications by
21applicants that agree to designate qualified equity
22investments as federal qualified equity investments in
23accordance with item (8) of subsection (a) of this Section in
24proportionate percentages based upon the ratio of the amount of
25qualified equity investments requested in an application to be
26designated as federal qualified equity investments to the total

 

 

SB0652- 9 -LRB100 06360 HLH 16399 b

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

 

 

SB0652- 10 -LRB100 06360 HLH 16399 b

1investments made on or after January 1, 2017, if applicable,
2designate the required amount of qualified equity investment
3authority as a federal qualified equity investment. The
4qualified community development entity must provide the
5Department with evidence of the receipt of the cash investment
6within 10 business days after receipt and, with respect to
7qualified equity investments made on or after January 1, 2017,
8if applicable, provide evidence that the required amount of
9qualified equity investment authority was designated as a
10federal qualified equity investment. If the qualified
11community development entity does not receive the cash
12investment and issue the qualified equity investment within 30
13days following receipt of the certification notice, the
14certification shall lapse and the entity may not issue the
15qualified equity investment without reapplying to the
16Department for certification. A certification that lapses
17reverts back to the Department and may be reissued only in
18accordance with the application process outline in this Section
1925.
20(Source: P.A. 95-1024, eff. 12-31-08; 96-939, eff. 7-1-10.)
 
21    (20 ILCS 663/40)
22    Sec. 40. Recapture. The Department of Revenue shall
23recapture, from the taxpayer that claimed the credit on a
24return, the tax credit allowed under this Act if:
25        (1) any amount of the federal tax credit available with

 

 

SB0652- 11 -LRB100 06360 HLH 16399 b

1    respect to a qualified equity investment that is eligible
2    for a tax credit under this Act is recaptured under Section
3    45D of the Internal Revenue Code of 1986, as amended. In
4    that case, the Department of Revenue's recapture shall be
5    proportionate to the federal recapture with respect to that
6    qualified equity investment;
7        (2) the issuer redeems or makes principal repayment
8    with respect to a qualified equity investment prior to the
9    7th anniversary of the issuance of the qualified equity
10    investment. In that case, the Department of Revenue's
11    recapture shall be proportionate to the amount of the
12    redemption or repayment with respect to the qualified
13    equity investment; or
14        (3) the issuer fails to invest at least 85% of the cash
15    purchase price of the qualified equity investment with
16    respect to qualified equity investments made before
17    January 1, 2017 and 100% of the cash purchase price of the
18    qualified equity investment with respect to qualified
19    equity investments made on or after January 1, 2017 in
20    qualified low-income community investments in the State of
21    Illinois within 12 months of the issuance of the qualified
22    equity investment and maintain such level of investment in
23    qualified low-income community investments in Illinois
24    until the last credit allowance date for such qualified
25    equity investment; or .
26        (4) with respect to qualified equity investments made

 

 

SB0652- 12 -LRB100 06360 HLH 16399 b

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

 

 

SB0652- 13 -LRB100 06360 HLH 16399 b

1credit for which a final recapture order has been issued shall
2be recaptured by the Department of Revenue from the taxpayer
3who claimed the tax credit on a tax return.
4(Source: P.A. 95-1024, eff. 12-31-08.)
 
5    (20 ILCS 663/43 new)
6    Sec. 43. Prohibited activities and interests. For
7qualified equity investments made on or after January 1, 2017,
8no qualified active low-income community business that
9receives a qualified low-income community investment from a
10qualified community development entity that issues qualified
11equity investments under this Act, or any affiliates of such a
12qualified active low-income community business, may directly
13or indirectly (i) own or have the right to acquire an ownership
14interest in a qualified community development entity or member
15or affiliate of a qualified community development entity,
16including, but not limited to, a holder of a qualified equity
17investment issued by the qualified community development
18entity or (ii) loan to or invest in a qualified community
19development entity or member or affiliate of a qualified
20community development entity, including, but not limited to, a
21holder of a qualified equity investment issued by a qualified
22community development entity, where the proceeds of such loan
23or investment are directly or indirectly used to fund or
24refinance the purchase of a qualified equity investment under
25this Act. For purposes of this Section, "affiliate" means an

 

 

SB0652- 14 -LRB100 06360 HLH 16399 b

1entity that directly, or indirectly through one or more
2intermediaries controls, is controlled by, or is under common
3control with another entity. For purposes of this Section, an
4entity is "controlled by" another entity if the controlling
5person holds, directly or indirectly, the majority voting or
6ownership interest in the controlled person or has control over
7the day-to-day operations of the controlled person by contract
8or law, provided that a qualified community development entity
9shall not be considered an affiliate of a qualified active
10low-income community business solely as a result of its
11qualified low-income community investment in such business.
 
12    (20 ILCS 663/50)
13    Sec. 50. Sunset. For fiscal years following fiscal year
142021 2017, qualified equity investments shall not be made under
15this Act unless reauthorization is made pursuant to this
16Section. For all fiscal years following fiscal year 2021 2017,
17unless the General Assembly adopts a joint resolution granting
18authority to the Department to approve qualified equity
19investments for the Illinois new markets development program
20and clearly describing the amount of tax credits available for
21the next fiscal year, or otherwise complies with the provisions
22of this Section, no qualified equity investments may be
23permitted to be made under this Act. The amount of available
24tax credits contained in such a resolution shall not exceed the
25limitation provided under Section 20. Nothing in this Section

 

 

SB0652- 15 -LRB100 06360 HLH 16399 b

1precludes a taxpayer who makes a qualified equity investment
2prior to the expiration of authority to make qualified equity
3investments from claiming tax credits relating to that
4qualified equity investment for each applicable credit
5allowance date.
6(Source: P.A. 97-636, eff. 6-1-12.)
 
7    (20 ILCS 663/55 new)
8    Sec. 55. Annual job creation report. Each qualified
9community development entity shall submit an annual job
10creation report to the Department within 45 days after the
11beginning of the calendar year during the compliance period. No
12annual report shall be due prior to the first anniversary of
13the initial credit allowance date. The report shall include,
14but is not limited to, the following:
15        (1) the number of employment positions created and
16    retained as a result of qualified low-income community
17    investments; and
18        (2) the average annual salary of positions described in
19    item (1).
20    The qualified community development entity is not required
21to provide the annual report set forth in this Section for
22qualified low-income community investments that have been
23redeemed or repaid.
 
24    Section 99. Effective date. This Act takes effect upon
25becoming law.