Full Text of SB2012 100th General Assembly
SB2012 100TH GENERAL ASSEMBLY |
| | 100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018 SB2012 Introduced 2/10/2017, by Sen. Chuck Weaver SYNOPSIS AS INTRODUCED: |
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Amends the Illinois Income Tax Act. Makes the following changes with respect to the angel investment credit: (1) provides that the credit applies for taxable years ending on or before December 31, 2021 (currently, December 31, 2016); (2) increases the maximum aggregate amount of the angel investment credit from $10,000,000 to $20,000,000; (3) defines "investment" as equity, Simple Agreement for Future Equity (SAFE) Agreements, and convertible notes; (4) provides that each qualified new business venture must renew its registration on an annual basis; (5) provides that, for taxable years ending on or after December 31, 2017, applicants for the credit must make a minimum investment of $10,000 in a qualified new business venture (currently, there is no minimum investment requirement); (6) provides that the maximum amount of an applicant's total investment made directly in any single qualified new business venture that may be used as the basis for a credit under this Section is $2,000,000 (currently, that is the maximum for each investment made in a qualified new business venture); (7) contains recapture provisions; and (8) contains provisions concerning investments in minority-owned businesses, female-owned businesses, or businesses owned by a person with a disability. Effective immediately.
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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 investment | 11 | | in a qualified new business venture. The term "applicant" does | 12 | | not include a corporation, partnership, limited liability | 13 | | company, or a natural person who has a direct or indirect | 14 | | ownership interest of at least 51% in the profits, capital, or | 15 | | value of the investment or a related member. | 16 | | "Claimant" means an applicant certified by the Department | 17 | | who files a claim for a credit under this Section. | 18 | | "Department" means the Department of Commerce and Economic | 19 | | Opportunity. | 20 | | "Investment" means equity, Simple Agreement for Future | 21 | | Equity (SAFE) Agreements, and convertible notes. | 22 | | "Qualified new business venture" means a business that is | 23 | | registered with the Department under this Section. |
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| 1 | | "Related member" means a person that, with respect to the
| 2 | | investment, is any one of the following: | 3 | | (1) An individual, if the individual and the members of | 4 | | the individual's family (as defined in Section 318 of the | 5 | | Internal Revenue Code) own directly, indirectly,
| 6 | | beneficially, or constructively, in the aggregate, at | 7 | | least 50% of the value of the outstanding profits, capital, | 8 | | stock, or other ownership interest in the applicant. | 9 | | (2) A partnership, estate, or trust and any partner or | 10 | | beneficiary, if the partnership, estate, or trust and its | 11 | | partners or beneficiaries own directly, indirectly, | 12 | | beneficially, or constructively, in the aggregate, at | 13 | | least 50% of the profits, capital, stock, or other | 14 | | ownership interest in the applicant. | 15 | | (3) A corporation, and any party related to the | 16 | | corporation in a manner that would require an attribution | 17 | | of stock from the corporation under the attribution rules
| 18 | | of Section 318 of the Internal Revenue Code, if the | 19 | | applicant and any other related member own, in the | 20 | | aggregate, directly, indirectly, beneficially, or | 21 | | constructively, at least 50% of the value of the | 22 | | corporation's outstanding stock. | 23 | | (4) A corporation and any party related to that | 24 | | corporation in a manner that would require an attribution | 25 | | of stock from the corporation to the party or from the
| 26 | | party to the corporation under the attribution rules of |
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| 1 | | Section 318 of the Internal Revenue Code, if the | 2 | | corporation and all such related parties own, in the | 3 | | aggregate, at least 50% of the profits, capital, stock, or | 4 | | other ownership interest in the applicant. | 5 | | (5) A person to or from whom there is attribution of | 6 | | stock ownership in accordance with Section 1563(e) of the | 7 | | Internal Revenue Code, except that for purposes of | 8 | | determining whether a person is a related member under this | 9 | | paragraph, "20%" shall be substituted for "5%" whenever | 10 | | "5%" appears in Section 1563(e) of the Internal Revenue | 11 | | Code. | 12 | | (b) For taxable years beginning after December 31, 2010, | 13 | | and ending on or before December 31, 2021 December 31, 2016 , | 14 | | subject to the limitations provided in this Section, a claimant | 15 | | may claim, as a credit against the tax imposed under | 16 | | subsections (a) and (b) of Section 201 of this Act, an amount | 17 | | equal to 25% of the claimant's investment made directly in a | 18 | | qualified new business venture. In order for an investment in a | 19 | | qualified new business venture to be eligible for tax credits, | 20 | | the business must have applied for and received certification | 21 | | under subsection (e) for the taxable year in which the | 22 | | investment was made prior to the date on which the investment | 23 | | was made. The credit under this Section may not exceed the | 24 | | taxpayer's Illinois income tax liability for the taxable year. | 25 | | If the amount of the credit exceeds the tax liability for the | 26 | | year, the excess may be carried forward and applied to the tax |
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| 1 | | liability of the 5 taxable years following the excess credit | 2 | | year. The credit shall be applied to the earliest year for | 3 | | which there is a tax liability. If there are credits from more | 4 | | than one tax year that are available to offset a liability, the | 5 | | earlier credit shall be applied first. In the case of a | 6 | | partnership or Subchapter S Corporation, the credit is allowed | 7 | | to the partners or shareholders in accordance with the | 8 | | determination of income and distributive share of income under | 9 | | Sections 702 and 704 and Subchapter S of the Internal Revenue | 10 | | Code. | 11 | | (c) The maximum amount of an applicant's total investment | 12 | | made directly in any single qualified new business venture that | 13 | | may be used as the basis for a credit under this Section is | 14 | | $2,000,000 for each investment made directly in a qualified new | 15 | | business venture . For taxable years ending on or after December | 16 | | 31, 2017, the applicant must make a minimum investment of | 17 | | $10,000 in a qualified new business venture. | 18 | | (d) The Department shall implement a program to certify an | 19 | | applicant for an angel investment credit. Upon satisfactory | 20 | | review, the Department shall issue a tax credit certificate | 21 | | stating the amount of the tax credit to which the applicant is | 22 | | entitled. The Department shall annually certify that (i) each | 23 | | approved applicant remains in the State (and continues to | 24 | | remain in the State for a period of not less than 3 years from | 25 | | the issue date of the last tax credit certificate issued by the | 26 | | Department with respect to that business); and (ii) the |
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| 1 | | claimant's investment has been made and remains in the | 2 | | qualified new business venture for no less than 3 years . | 3 | | If an investment for which a claimant is allowed a credit | 4 | | under subsection (b) is held by the claimant for less than 3 | 5 | | years, other than as a result of a permitted sale of such | 6 | | investment to a person that is not a related member, or, if | 7 | | within that period of time the qualified new business venture | 8 | | is moved from the State of Illinois, the claimant shall pay to | 9 | | the Department of Revenue, in the manner prescribed by the | 10 | | Department of Revenue, the aggregate amount of the disqualified | 11 | | credit that the claimant received related to the subject | 12 | | investment. | 13 | | If the Department determines that a previously approved | 14 | | applicant has moved from the State prior to the date that | 15 | | occurs 3 years from the issue date of the last tax credit | 16 | | certificate issued by the Department with respect to the | 17 | | subject business, that business must pay to the Department of | 18 | | Revenue, in the manner prescribed by the Department of Revenue, | 19 | | the aggregate amount of the disqualified credits that claimants | 20 | | received related to investments in that business. | 21 | | (e) The Department shall implement a program to register | 22 | | qualified new business ventures for purposes of this Section. A | 23 | | business desiring registration shall submit an application to | 24 | | the Department in each taxable year for which the business | 25 | | desires registration. The Department may register the business | 26 | | only if the business satisfies all of the following conditions: |
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| 1 | | (1) it has its headquarters in this State; | 2 | | (2) at least 51% of the employees employed by the | 3 | | business are employed in this State; | 4 | | (3) it has the potential for increasing jobs in this | 5 | | State, increasing capital investment in this State, or | 6 | | both, and either of the following apply: | 7 | | (A) it is principally engaged in innovation in any | 8 | | of the following: manufacturing; biotechnology; | 9 | | nanotechnology; communications; agricultural sciences; | 10 | | clean energy creation or storage technology; | 11 | | processing or assembling products, including medical | 12 | | devices, pharmaceuticals, computer software, computer | 13 | | hardware, semiconductors, other innovative technology | 14 | | products, or other products that are produced using | 15 | | manufacturing methods that are enabled by applying | 16 | | proprietary technology; or providing services that are | 17 | | enabled by applying proprietary technology; or | 18 | | (B) it is undertaking pre-commercialization | 19 | | activity related to proprietary technology that | 20 | | includes conducting research, developing a new product | 21 | | or business process, or developing a service that is | 22 | | principally reliant on applying proprietary | 23 | | technology; | 24 | | (4) it is not principally engaged in real estate | 25 | | development, insurance, banking, lending, lobbying, | 26 | | political consulting, professional services provided by |
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| 1 | | attorneys, accountants, business consultants, physicians, | 2 | | or health care consultants, wholesale or retail trade, | 3 | | leisure, hospitality, transportation, or construction, | 4 | | except construction of power production plants that derive | 5 | | energy from a renewable energy resource, as defined in | 6 | | Section 1 of the Illinois Power Agency Act; | 7 | | (5) at the time it is first certified: | 8 | | (A) it has fewer than 100 employees; | 9 | | (B) it has been in operation in Illinois for not | 10 | | more than 10 consecutive years prior to the year of | 11 | | certification; and | 12 | | (C) it has received not more than $10,000,000 in | 13 | | aggregate private equity investment in cash; | 14 | | (6) (blank); and | 15 | | (7) it has received not more than $4,000,000 in | 16 | | investments that qualified for tax credits under this | 17 | | Section. | 18 | | The Department shall require each qualified new business | 19 | | venture to renew its registration on an annual basis. If, at | 20 | | the time of the renewal, the business fails to satisfy any of | 21 | | the conditions of this subsection, or if the business fails to | 22 | | renew its registration, then the business shall no longer be | 23 | | considered a qualified new business venture. | 24 | | (f) The Department, in consultation with the Department of | 25 | | Revenue, shall adopt rules to administer this Section. The | 26 | | aggregate amount of the tax credits that may be claimed under |
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| 1 | | this Section for investments made in qualified new business | 2 | | ventures shall be limited to $20,000,000 at $10,000,000 per | 3 | | calendar year. | 4 | | (f-5) For taxable years ending on or after December 31, | 5 | | 2017, the Department shall establish a goal of awarding not | 6 | | less than 15% of the total amount of tax credits to investments | 7 | | in qualified new business ventures that would be considered | 8 | | minority-owned businesses, female-owned businesses, or | 9 | | businesses owned by a person with a disability, all as defined | 10 | | in the Business Enterprise for Minorities, Females, and Persons | 11 | | with Disabilities Act. | 12 | | (g) A claimant may not sell or otherwise transfer a credit | 13 | | awarded under this Section to another person. | 14 | | (h) On or before March 1 of each year, the Department shall | 15 | | report to the Governor and to the General Assembly on the tax | 16 | | credit certificates awarded under this Section for the prior | 17 | | calendar year. | 18 | | (1) This report must include, for each tax credit | 19 | | certificate awarded: | 20 | | (A) the name of the claimant and the amount of | 21 | | credit awarded or allocated to that claimant; | 22 | | (B) the name and address of the qualified new | 23 | | business venture that received the investment giving | 24 | | rise to the credit and the county in which the | 25 | | qualified new business venture is located; and | 26 | | (C) the date of approval by the Department of the |
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| 1 | | applications for the tax credit certificate. | 2 | | (2) The report must also include: | 3 | | (A) the total number of applicants and amount for | 4 | | tax credit certificates awarded under this Section in | 5 | | the prior calendar year; | 6 | | (B) the total number of applications and amount for | 7 | | which tax credit certificates were issued in the prior | 8 | | calendar year; and | 9 | | (C) the total tax credit certificates and amount | 10 | | authorized under this Section for all calendar years.
| 11 | | It is the intent of the General Assembly that the credit | 12 | | under this Section applies continuously for all taxable years | 13 | | beginning after December 31, 2010 and ending on or before | 14 | | December 31, 2021. Any actions taken in reliance on the | 15 | | continuation of the credit under this Section are hereby | 16 | | validated. | 17 | | (Source: P.A. 96-939, eff. 1-1-11; 97-507, eff. 8-23-11; | 18 | | 97-1097, eff. 8-24-12.)
| 19 | | Section 99. Effective date. This Act takes effect upon | 20 | | becoming law.
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