Bill Text: IL HB2946 | 2017-2018 | 100th General Assembly | Introduced
Bill Title: Amends the Illinois Income Tax Act. Makes the following changes with respect to the angel investment credit: (1) reinstates the credit for taxable years beginning on or after December 31, 2016 and ending on or before December 31, 2021; (2) provides that the term "applicant" includes a corporation, partnership, or limited liability company formed for the purpose of facilitating an offer or sale of a security by an in-State issuer to resident of the State as provided under a particular provision of the Illinois Securities Law of 1953; (3) provides a definition of "investment"; (4) contains a requirement that the applicant must agree to remain in the State for a period of not less than 3 years; and (5) makes changes concerning the allocation of the credit awards. Effective immediately.
Spectrum: Slight Partisan Bill (Democrat 3-1)
Status: (Failed) 2019-01-08 - Session Sine Die [HB2946 Detail]
Download: Illinois-2017-HB2946-Introduced.html
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1 | AN ACT concerning revenue.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Illinois Income Tax Act is amended by | |||||||||||||||||||
5 | changing Section 220 as follows:
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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 : (1) a corporation, partnership, or limited | |||||||||||||||||||
13 | liability company (other than any such corporation, | |||||||||||||||||||
14 | partnership, or limited liability company formed solely for the | |||||||||||||||||||
15 | purpose of facilitating an offering conducted pursuant to, and | |||||||||||||||||||
16 | in compliance with, paragraph T of Section 4 of the Illinois | |||||||||||||||||||
17 | Securities Law of 1953 , or a natural person , who has a direct | |||||||||||||||||||
18 | or indirect ownership interest of at least 51% in the profits, | |||||||||||||||||||
19 | capital, or value of the applicant; or (2) investment or a | |||||||||||||||||||
20 | related member of the applicant . | |||||||||||||||||||
21 | "Claimant" means an applicant certified by the Department | |||||||||||||||||||
22 | who files a claim for a credit under this Section. | |||||||||||||||||||
23 | "Department" means the Department of Commerce and Economic |
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1 | Opportunity. | ||||||
2 | "Investment" means money (or its equivalent) given to a | ||||||
3 | qualified new business venture in consideration for an equity | ||||||
4 | interest of the qualified new business venture (without regard | ||||||
5 | to the class, or the distribution or dividend, voting or other | ||||||
6 | rights, of such equity interest), an agreement for receipt of a | ||||||
7 | future equity interest of the qualified new business venture | ||||||
8 | (with warrants or a defined means of equity conversion), | ||||||
9 | convertible debt made by the qualified new business venture | ||||||
10 | (with a defined means of equity conversion) or some combination | ||||||
11 | thereof. | ||||||
12 | "Qualified new business venture" means a business that is | ||||||
13 | registered with the Department under this Section. | ||||||
14 | "Related member" means a person that, with respect to the | ||||||
15 | subject applicant
investment , is any one of the following: | ||||||
16 | (1) An individual, if the individual and the members of | ||||||
17 | the individual's family (as defined in Section 318 of the | ||||||
18 | Internal Revenue Code) own directly, indirectly,
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19 | beneficially, or constructively, in the aggregate, at | ||||||
20 | least 50% of the value of the outstanding profits, capital, | ||||||
21 | stock, or other ownership interest in the applicant. | ||||||
22 | (2) A partnership, estate, or trust and any partner or | ||||||
23 | beneficiary, if the partnership, estate, or trust and its | ||||||
24 | partners or beneficiaries own directly, indirectly, | ||||||
25 | beneficially, or constructively, in the aggregate, at | ||||||
26 | least 50% of the profits, capital, stock, or other |
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1 | ownership interest in the applicant. | ||||||
2 | (3) A corporation, and any party related to the | ||||||
3 | corporation in a manner that would require an attribution | ||||||
4 | of stock from the corporation under the attribution rules
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5 | of Section 318 of the Internal Revenue Code, if the | ||||||
6 | applicant and any other related member own, in the | ||||||
7 | aggregate, directly, indirectly, beneficially, or | ||||||
8 | constructively, at least 50% of the value of the | ||||||
9 | corporation's outstanding stock. | ||||||
10 | (4) A corporation and any party related to that | ||||||
11 | corporation in a manner that would require an attribution | ||||||
12 | of stock from the corporation to the party or from the
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13 | party to the corporation under the attribution rules of | ||||||
14 | Section 318 of the Internal Revenue Code, if the | ||||||
15 | corporation and all such related parties own, in the | ||||||
16 | aggregate, at least 50% of the profits, capital, stock, or | ||||||
17 | other ownership interest in the applicant. | ||||||
18 | (5) A person to or from whom there is attribution of | ||||||
19 | stock ownership in accordance with Section 1563(e) of the | ||||||
20 | Internal Revenue Code, except that for purposes of | ||||||
21 | determining whether a person is a related member under this | ||||||
22 | paragraph, "20%" shall be substituted for "5%" whenever | ||||||
23 | "5%" appears in Section 1563(e) of the Internal Revenue | ||||||
24 | Code. | ||||||
25 | (b) For taxable years beginning after December 31, 2016 | ||||||
26 | 2010 , and ending on or before December 31, 2021 2016 , subject |
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1 | to the limitations provided in this Section, a claimant may | ||||||
2 | claim, as a credit against the tax imposed under subsections | ||||||
3 | (a) and (b) of Section 201 of this Act, an amount equal to : 25% | ||||||
4 | of the claimant's investment made directly in a qualified new | ||||||
5 | business venture pursuant to subparagraph (A) of paragraph (3) | ||||||
6 | of subsection (e) or item (i) of subparagraph (B) of paragraph | ||||||
7 | (3) of subsection (e) below; and (ii) 10% of the claimant's | ||||||
8 | investment made directly in a qualified new business venture | ||||||
9 | pursuant to item (i) of subparagraph (B) of paragraph (3) of | ||||||
10 | subsection (e) below . In order for an investment in a qualified | ||||||
11 | new business venture to be eligible for tax credits, the | ||||||
12 | business must have applied for and received certification under | ||||||
13 | subsection (e) for the taxable year in which the investment was | ||||||
14 | made prior to the date on which the investment was made. The | ||||||
15 | credit under this Section may not exceed the taxpayer's | ||||||
16 | Illinois income tax liability for the taxable year. If the | ||||||
17 | amount of the credit exceeds the tax liability for the year, | ||||||
18 | the excess may be carried forward and applied to the tax | ||||||
19 | liability of the 5 taxable years following the excess credit | ||||||
20 | year. The credit shall be applied to the earliest year for | ||||||
21 | which there is a tax liability. If there are credits from more | ||||||
22 | than one tax year that are available to offset a liability, the | ||||||
23 | earlier credit shall be applied first. In the case of a | ||||||
24 | partnership or Subchapter S Corporation, the credit is allowed | ||||||
25 | to the partners or shareholders in accordance with the | ||||||
26 | determination of income and distributive share of income under |
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1 | Sections 702 and 704 and Subchapter S of the Internal Revenue | ||||||
2 | Code. | ||||||
3 | (c) The maximum amount of an applicant's investment that | ||||||
4 | may be used as the basis for a credit under this Section is | ||||||
5 | $2,000,000 for each investment made directly in a qualified new | ||||||
6 | business venture. | ||||||
7 | (d) The Department shall implement a program to certify an | ||||||
8 | applicant for an angel investment credit. Upon satisfactory | ||||||
9 | review, the Department shall issue a tax credit certificate | ||||||
10 | stating the amount of the tax credit to which the applicant is | ||||||
11 | entitled. The Department shall annually certify that (i) each | ||||||
12 | approved applicant remains in the State of Illinois (and | ||||||
13 | continues to remain in the State for a period of no less than 3 | ||||||
14 | years from the issue date of the last tax credit certificate | ||||||
15 | issued by the Department with respect to such business); and | ||||||
16 | (ii) the claimant's investment has been made and remains in the | ||||||
17 | qualified new business venture for no less than 3 years . | ||||||
18 | If an investment for which a claimant is allowed a credit | ||||||
19 | under subsection (b) is held by the claimant for less than 3 | ||||||
20 | years, other than as a result of a permitted sale of such | ||||||
21 | investment to person which is not a related member or, if | ||||||
22 | within that period of time the qualified new business venture | ||||||
23 | is moved from the State of Illinois , the claimant shall pay to | ||||||
24 | the Department of Revenue, in the manner prescribed by the | ||||||
25 | Department of Revenue, the aggregate amount of the disqualified | ||||||
26 | credits credit that the claimant received related to the |
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1 | subject investment. | ||||||
2 | If the Department determines that a previously approved | ||||||
3 | applicant has moved from the State of Illinois prior to the | ||||||
4 | date which is 3 years from the issue date of the last tax | ||||||
5 | credit certificate issued by the Department with respect to the | ||||||
6 | subject business, such business shall pay to the Department of | ||||||
7 | Revenue, in the manner prescribed by the Department of Revenue, | ||||||
8 | the aggregate amount of the disqualified credits that claimants | ||||||
9 | received related to investments in such business. | ||||||
10 | (e) The Department shall implement a program to register | ||||||
11 | qualified new business ventures for purposes of this Section. A | ||||||
12 | business desiring registration shall submit an application to | ||||||
13 | the Department in each taxable year for which the business | ||||||
14 | desires registration. The Department may register the business | ||||||
15 | only if the business satisfies all of the following conditions: | ||||||
16 | (1) it has its headquarters in this State; | ||||||
17 | (2) at least 51% of the employees employed by the | ||||||
18 | business are employed in this State; | ||||||
19 | (3) it has the potential for increasing jobs in this | ||||||
20 | State, increasing capital investment in this State, or | ||||||
21 | both, as determined by the Department, and either of the | ||||||
22 | following apply: | ||||||
23 | (A) the business it is : | ||||||
24 | (i) principally engaged in innovation in any | ||||||
25 | of the following: manufacturing; biotechnology; | ||||||
26 | nanotechnology; communications; agricultural |
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1 | sciences; clean energy creation or storage | ||||||
2 | technology; processing or assembling products, | ||||||
3 | including medical devices, pharmaceuticals, | ||||||
4 | computer software, computer hardware, | ||||||
5 | semiconductors, other innovative technology | ||||||
6 | products, or other products that are produced | ||||||
7 | using manufacturing methods that are enabled by | ||||||
8 | applying proprietary technology; or providing | ||||||
9 | services that are enabled by applying proprietary | ||||||
10 | technology; or | ||||||
11 | (ii) (B) it is undertaking | ||||||
12 | pre-commercialization activity related to | ||||||
13 | proprietary technology that includes conducting | ||||||
14 | research, developing a new product or business | ||||||
15 | process, or developing a service that is | ||||||
16 | principally reliant on applying proprietary | ||||||
17 | technology; or | ||||||
18 | (B) the funding transaction of the qualified new | ||||||
19 | business venture giving rise to the subject | ||||||
20 | investment: | ||||||
21 | (i) is an offering: | ||||||
22 | (1) where the available investment | ||||||
23 | interests have been publicly offered for sale | ||||||
24 | solely to residents of the State; | ||||||
25 | (2) where at least 25% of the offered | ||||||
26 | investment interests have been reserved for |
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1 | sale to non-accredited investors (whether or | ||||||
2 | not the same are resultantly sold to such | ||||||
3 | investors); | ||||||
4 | (3) which is held open for sale a period of | ||||||
5 | at least 5 months (or until fully funded, if | ||||||
6 | sooner); and | ||||||
7 | (4) which is conducted pursuant to, and in | ||||||
8 | full compliance with, paragraph T of Section 4 | ||||||
9 | of the Illinois Securities Law of 1953, and all | ||||||
10 | other applicable federal and state laws and | ||||||
11 | regulations; or | ||||||
12 | (ii) is an offering: | ||||||
13 | (1) which is made in conjunction with, | ||||||
14 | within one month from the commencement of, and | ||||||
15 | as part of a single plan of financing which | ||||||
16 | includes, an offering of the type described in | ||||||
17 | item (i) above; | ||||||
18 | (2) where the aggregate amount of | ||||||
19 | available investment interests being sold as | ||||||
20 | part of such offering does not exceed ten times | ||||||
21 | the aggregate amount of investment interests | ||||||
22 | being sold in the related offering of the type | ||||||
23 | described in item (i) above; | ||||||
24 | (3) where the rights, with respect to | ||||||
25 | distributions and payments only, of the | ||||||
26 | available investment interests being sold are |
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1 | equal, or junior, in terms of priority to the | ||||||
2 | respective rights of the investment interests | ||||||
3 | being sold in the related offering of the type | ||||||
4 | described in item (i) above; and | ||||||
5 | (4) which is conducted pursuant to, and in | ||||||
6 | full compliance with, all applicable federal | ||||||
7 | and State laws and regulations; | ||||||
8 | (4) it is not principally engaged in real estate | ||||||
9 | development (except for development projects anticipated | ||||||
10 | to take more than 3 years to complete) , insurance, banking, | ||||||
11 | lending, lobbying, political consulting, professional | ||||||
12 | services provided by attorneys, accountants, business | ||||||
13 | consultants, physicians, or health care consultants, | ||||||
14 | wholesale or retail trade, leisure, hospitality, | ||||||
15 | transportation, or construction , ( except for construction | ||||||
16 | projects anticipated to take more than 3 years to complete | ||||||
17 | or with respect to the construction of power production | ||||||
18 | plants that derive energy from a renewable energy resource, | ||||||
19 | as defined in Section 1 of the Illinois Power Agency Act; | ||||||
20 | (5) at the time it is first certified: | ||||||
21 | (A) it has fewer than 100 employees; | ||||||
22 | (B) it has been in operation in Illinois for more | ||||||
23 | than one year but not more than 10 consecutive years | ||||||
24 | prior to the year of certification; and | ||||||
25 | (C) it has received not more than $10,000,000 in | ||||||
26 | aggregate private equity investment in cash; |
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1 | (6) it agrees not to move its operations from the State | ||||||
2 | of Illinois prior to the date which is 3 years from the | ||||||
3 | issue date of the last tax credit certificate issued by the | ||||||
4 | Department with respect to such business (blank) ; and | ||||||
5 | (7) it has received not more than $4,000,000 in | ||||||
6 | investments that qualified for tax credits under this | ||||||
7 | Section. | ||||||
8 | (f) The Department, in consultation with the Department of | ||||||
9 | Revenue, shall adopt rules to administer this Section. The | ||||||
10 | aggregate amount of the tax credits that may be claimed under | ||||||
11 | this Section for investments made in qualified new business | ||||||
12 | ventures shall be limited at $20,000,000 $10,000,000 per | ||||||
13 | calendar year. The $20,000,000 annual allowable amount shall be | ||||||
14 | allocated by the Department, on a per calendar quarter basis | ||||||
15 | and prior to the commencement of each calendar year, in such | ||||||
16 | proportion as determined by the Department, provided that: (i) | ||||||
17 | the amount initially allocated by the Department for any one | ||||||
18 | calendar quarter shall not exceed 35% of the total allowable | ||||||
19 | amount; and (ii) any portion of the allocated allowable amount | ||||||
20 | remaining unused as of the end of any of the first 3 calendar | ||||||
21 | quarters of a given calendar year shall be rolled into, and | ||||||
22 | added to, the total allocated amount for the next available | ||||||
23 | calendar quarter. | ||||||
24 | (g) A claimant may not sell or otherwise transfer a credit | ||||||
25 | awarded under this Section to any another person (or entity | ||||||
26 | other than a related member) . |
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1 | (h) On or before March 1 of each year, the Department shall | ||||||
2 | report to the Governor and to the General Assembly on the tax | ||||||
3 | credit certificates awarded under this Section for the prior | ||||||
4 | calendar year. | ||||||
5 | (1) This report must include, for each tax credit | ||||||
6 | certificate awarded: | ||||||
7 | (A) the name of the claimant and the amount of | ||||||
8 | credit awarded or allocated to that claimant; | ||||||
9 | (B) the name and address of the qualified new | ||||||
10 | business venture that received the investment giving | ||||||
11 | rise to the credit and the county in which the | ||||||
12 | qualified new business venture is located; and | ||||||
13 | (C) the date of approval by the Department of the | ||||||
14 | applications for the tax credit certificate. | ||||||
15 | (2) The report must also include: | ||||||
16 | (A) the total number of applicants and amount for | ||||||
17 | tax credit certificates awarded under this Section in | ||||||
18 | the prior calendar year; | ||||||
19 | (B) the total number of applications and amount for | ||||||
20 | which tax credit certificates were issued in the prior | ||||||
21 | calendar year; and | ||||||
22 | (C) the total tax credit certificates and amount | ||||||
23 | authorized under this Section for all calendar years.
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24 | (Source: P.A. 96-939, eff. 1-1-11; 97-507, eff. 8-23-11; | ||||||
25 | 97-1097, eff. 8-24-12.)
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26 | Section 99. Effective date. This Act takes effect upon |
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1 | becoming law.
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