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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: | ||||||
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 (i) 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 qualified new business venture receiving the | ||||||
16 | 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 considered | ||||||
3 | 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
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7 | applicant, is any one of the following: | ||||||
8 | (1) An individual, if the individual and the members of | ||||||
9 | the individual's family (as defined in Section 318 of the | ||||||
10 | Internal Revenue Code) own directly, indirectly,
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11 | beneficially, or constructively, in the aggregate, at | ||||||
12 | least 50% of the value of the outstanding profits, capital, | ||||||
13 | stock, or other ownership interest in the qualified new | ||||||
14 | business venture that is the recipient of the applicant 's | ||||||
15 | 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
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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 | corporation's outstanding stock of the qualified new | ||||||
5 | business venture that is the recipient of the applicant's | ||||||
6 | investment . | ||||||
7 | (4) A corporation and any party related to that | ||||||
8 | corporation in a manner that would require an attribution | ||||||
9 | of stock from the corporation to the party or from the
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10 | party to the corporation under the attribution rules of | ||||||
11 | Section 318 of the Internal Revenue Code, if the | ||||||
12 | corporation and all such related parties own, in the | ||||||
13 | aggregate, at least 50% of the profits, capital, stock, or | ||||||
14 | other ownership interest in the qualified new business | ||||||
15 | venture that is the recipient of the applicant 's | ||||||
16 | investment . | ||||||
17 | (5) A person to or from whom there is attribution of | ||||||
18 | stock ownership of stock in the qualified new business | ||||||
19 | venture that is the recipient of the applicant's investment | ||||||
20 | in accordance with Section 1563(e) of the Internal Revenue | ||||||
21 | Code, except that for purposes of determining whether a | ||||||
22 | person is a related member under this paragraph, "20%" | ||||||
23 | shall be substituted for "5%" whenever "5%" appears in | ||||||
24 | Section 1563(e) of the Internal Revenue Code. | ||||||
25 | (b) For taxable years beginning after December 31, 2010, | ||||||
26 | and ending on or before December 31, 2021, subject to the |
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1 | limitations provided in this Section, a claimant may claim, as | ||||||
2 | a credit against the tax imposed under subsections (a) and (b) | ||||||
3 | of Section 201 of this Act, an amount equal to 25% of the | ||||||
4 | claimant's investment made directly in a qualified new business | ||||||
5 | venture. In order for an investment in a qualified new business | ||||||
6 | venture to be eligible for tax credits, the business must have | ||||||
7 | applied for and received certification under subsection (e) for | ||||||
8 | the taxable year in which the investment was made prior to the | ||||||
9 | date on which the investment was made. The credit under this | ||||||
10 | Section may not exceed the taxpayer's Illinois income tax | ||||||
11 | liability for the taxable year. If the amount of the credit | ||||||
12 | exceeds the tax liability for the year, the excess may be | ||||||
13 | carried forward and applied to the tax liability of the 5 | ||||||
14 | taxable years following the excess credit year. The credit | ||||||
15 | shall be applied to the earliest year for which there is a tax | ||||||
16 | liability. If there are credits from more than one tax year | ||||||
17 | that are available to offset a liability, the earlier credit | ||||||
18 | shall be applied first. In the case of a partnership or | ||||||
19 | Subchapter S Corporation, the credit is allowed to the partners | ||||||
20 | or shareholders in accordance with the determination of income | ||||||
21 | and distributive share of income under Sections 702 and 704 and | ||||||
22 | Subchapter S of the Internal Revenue Code. | ||||||
23 | (c) The minimum amount an applicant must invest in any | ||||||
24 | single qualified new business venture in order to be eligible | ||||||
25 | for a credit under this Section is $10,000. The maximum amount | ||||||
26 | of an applicant's total investment made in any single qualified |
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1 | new business venture that may be used as the basis for a credit | ||||||
2 | under this Section is $2,000,000. | ||||||
3 | (d) The Department shall implement a program to certify an | ||||||
4 | applicant for an angel investment credit. Upon satisfactory | ||||||
5 | review, the Department shall issue a tax credit certificate | ||||||
6 | stating the amount of the tax credit to which the applicant is | ||||||
7 | entitled. The Department shall annually certify that: (i) each | ||||||
8 | qualified new business venture that receives an angel | ||||||
9 | investment under this Section has maintained a minimum | ||||||
10 | employment threshold, as defined by rule, in the State (and | ||||||
11 | continues to maintain a minimum employment threshold in the | ||||||
12 | State for a period of no less than 3 years from the issue date | ||||||
13 | of the last tax credit certificate issued by the Department | ||||||
14 | with respect to such business pursuant to this Section); and | ||||||
15 | (ii) the claimant's investment has been made and remains, | ||||||
16 | except in the event of a qualifying liquidity event, 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 the | ||||||
21 | investment to person who is not a related member, the claimant | ||||||
22 | shall pay to the Department of Revenue, in the manner | ||||||
23 | prescribed by the Department of Revenue, the aggregate amount | ||||||
24 | of the disqualified credits that the claimant received related | ||||||
25 | to the subject investment. | ||||||
26 | If the Department determines that a qualified new business |
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1 | venture failed to maintain a minimum employment threshold in | ||||||
2 | the State through the date which is 3 years from the issue date | ||||||
3 | of the last tax credit certificate issued by the Department | ||||||
4 | with respect to the subject business pursuant to this Section, | ||||||
5 | the claimant or claimants shall pay to the Department of | ||||||
6 | Revenue, in the manner prescribed by the Department of Revenue, | ||||||
7 | the aggregate amount of the disqualified credits that claimant | ||||||
8 | or claimants received related to investments in that business. | ||||||
9 | (e) The Department shall implement a program to register | ||||||
10 | qualified new business ventures for purposes of this Section. A | ||||||
11 | business desiring registration under this Section shall be | ||||||
12 | required to submit a full and complete application to the | ||||||
13 | Department. A submitted application shall be effective only for | ||||||
14 | the taxable year in which it is submitted, and a business | ||||||
15 | desiring registration under this Section shall be required to | ||||||
16 | submit a separate application in and for each taxable year for | ||||||
17 | which the business desires registration. Further, if at any | ||||||
18 | time prior to the acceptance of an application for registration | ||||||
19 | under this Section by the Department one or more events occurs | ||||||
20 | which makes the information provided in that application | ||||||
21 | materially false or incomplete (in whole or in part), the | ||||||
22 | business shall promptly notify the Department of the same. Any | ||||||
23 | failure of a business to promptly provide the foregoing | ||||||
24 | information to the Department may, at the discretion of the | ||||||
25 | Department, result in a revocation of a previously approved | ||||||
26 | application for that business, or disqualification of the |
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1 | business from future registration under this Section, or both. | ||||||
2 | The Department may register the business only if all of the | ||||||
3 | following conditions are satisfied: | ||||||
4 | (1) it has its principal place of business in this | ||||||
5 | State; | ||||||
6 | (2) at least 51% of the employees employed by the | ||||||
7 | business are employed in this State; | ||||||
8 | (3) the business has the potential for increasing jobs | ||||||
9 | in this State, increasing capital investment in this State, | ||||||
10 | or both, as determined by the Department, and either of the | ||||||
11 | following apply: | ||||||
12 | (A) it is principally engaged in innovation in any | ||||||
13 | of the following: manufacturing; biotechnology; | ||||||
14 | nanotechnology; communications; agricultural sciences; | ||||||
15 | clean energy creation or storage technology; | ||||||
16 | processing or assembling products, including medical | ||||||
17 | devices, pharmaceuticals, computer software, computer | ||||||
18 | hardware, semiconductors, other innovative technology | ||||||
19 | products, or other products that are produced using | ||||||
20 | manufacturing methods that are enabled by applying | ||||||
21 | proprietary technology; or providing services that are | ||||||
22 | enabled by applying proprietary technology; or | ||||||
23 | (B) it is undertaking pre-commercialization | ||||||
24 | activity related to proprietary technology that | ||||||
25 | includes conducting research, developing a new product | ||||||
26 | or business process, or developing a service that is |
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1 | principally reliant on applying proprietary | ||||||
2 | technology; | ||||||
3 | (4) it is not principally engaged in real estate | ||||||
4 | development, insurance, banking, lending, lobbying, | ||||||
5 | political consulting, professional services provided by | ||||||
6 | attorneys, accountants, business consultants, physicians, | ||||||
7 | or health care consultants, wholesale or retail trade, | ||||||
8 | leisure, hospitality, transportation, or construction, | ||||||
9 | except construction of power production plants that derive | ||||||
10 | energy from a renewable energy resource, as defined in | ||||||
11 | Section 1 of the Illinois Power Agency Act; | ||||||
12 | (5) at the time it is first certified: | ||||||
13 | (A) it has fewer than 100 employees; | ||||||
14 | (B) it has been in operation in Illinois for not | ||||||
15 | more than 10 consecutive years prior to the year of | ||||||
16 | certification; and | ||||||
17 | (C) it has received not more than $10,000,000 in | ||||||
18 | aggregate investments; | ||||||
19 | (5.1) it agrees to maintain a minimum employment | ||||||
20 | threshold in the State of Illinois prior to the date which | ||||||
21 | is 3 years from the issue date of the last tax credit | ||||||
22 | certificate issued by the Department with respect to that | ||||||
23 | business pursuant to this Section; | ||||||
24 | (6) (blank); and | ||||||
25 | (7) it has received not more than $4,000,000 in | ||||||
26 | investments that qualified for tax credits under this |
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1 | Section. | ||||||
2 | (f) The Department, in consultation with the Department of | ||||||
3 | Revenue, shall adopt rules to administer this Section. The | ||||||
4 | aggregate amount of the tax credits that may be claimed under | ||||||
5 | this Section for investments made in qualified new business | ||||||
6 | ventures shall be limited at $10,000,000 per calendar year, of | ||||||
7 | which $500,000 shall be reserved for investments made in | ||||||
8 | qualified new business ventures which are " minority-owned | ||||||
9 | minority owned businesses", " women-owned female owned | ||||||
10 | businesses", or "businesses owned by a person with a | ||||||
11 | disability " (as those terms are used and defined in the | ||||||
12 | Business Enterprise for Minorities, Women Females , and Persons | ||||||
13 | with Disabilities Act), and an additional $500,000 shall be | ||||||
14 | reserved for investments made in qualified new business | ||||||
15 | ventures with their principal place of business in counties | ||||||
16 | with a population of not more than 250,000. The foregoing | ||||||
17 | annual allowable amounts shall be allocated by the Department, | ||||||
18 | on a per calendar quarter basis and prior to the commencement | ||||||
19 | of each calendar year, in such proportion as determined by the | ||||||
20 | Department, provided that: (i) the amount initially allocated | ||||||
21 | by the Department for any one calendar quarter shall not exceed | ||||||
22 | 35% of the total allowable amount; and (ii) any portion of the | ||||||
23 | allocated allowable amount remaining unused as of the end of | ||||||
24 | any of the first 3 2 calendar quarters of a given calendar year | ||||||
25 | shall be rolled into, and added to, the total allocated amount | ||||||
26 | for the next available calendar quarter ; and (iii) the |
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1 | reservation of tax credits for investments in minority-owned | ||||||
2 | businesses, women-owned businesses, businesses owned by a | ||||||
3 | person with a disability, and in businesses in counties with a | ||||||
4 | population of not more than 250,000 is limited to the first 3 | ||||||
5 | calendar quarters of a given calendar year, after which they | ||||||
6 | may be claimed by investors in any qualified new business | ||||||
7 | venture . | ||||||
8 | (g) A claimant may not sell or otherwise transfer a credit | ||||||
9 | awarded under this Section to another person. | ||||||
10 | (h) On or before March 1 of each year, the Department shall | ||||||
11 | report to the Governor and to the General Assembly on the tax | ||||||
12 | credit certificates awarded under this Section for the prior | ||||||
13 | calendar year. | ||||||
14 | (1) This report must include, for each tax credit | ||||||
15 | certificate awarded: | ||||||
16 | (A) the name of the claimant and the amount of | ||||||
17 | credit awarded or allocated to that claimant; | ||||||
18 | (B) the name and address (including the county) of | ||||||
19 | the qualified new business venture that received the | ||||||
20 | investment giving rise to the credit, the North | ||||||
21 | American Industry Classification System (NAICS) code | ||||||
22 | applicable to that qualified new business venture, and | ||||||
23 | the number of employees of the qualified new business | ||||||
24 | venture; and | ||||||
25 | (C) the date of approval by the Department of each | ||||||
26 | claimant's tax credit certificate. |
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1 | (2) The report must also include: | ||||||
2 | (A) the total number of applicants and the total | ||||||
3 | number of claimants, including the amount of each tax | ||||||
4 | credit certificate awarded to a claimant under this | ||||||
5 | Section in the prior calendar year; | ||||||
6 | (B) the total number of applications from | ||||||
7 | businesses seeking registration under this Section, | ||||||
8 | the total number of new qualified business ventures | ||||||
9 | registered by the Department, and the aggregate amount | ||||||
10 | of investment upon which tax credit certificates were | ||||||
11 | issued in the prior calendar year; and | ||||||
12 | (C) the total amount of tax credit certificates | ||||||
13 | sought by applicants, the amount of each tax credit | ||||||
14 | certificate issued to a claimant, the aggregate amount | ||||||
15 | of all tax credit certificates issued in the prior | ||||||
16 | calendar year and the aggregate amount of tax credit | ||||||
17 | certificates issued as authorized under this Section | ||||||
18 | for all calendar years.
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19 | (i) For each business seeking registration under this | ||||||
20 | Section after December 31, 2016, the Department shall require | ||||||
21 | the business to include in its application the North American | ||||||
22 | Industry Classification System (NAICS) code applicable to the | ||||||
23 | business and the number of employees of the business at the | ||||||
24 | time of application. Each business registered by the Department | ||||||
25 | as a qualified new business venture that receives an investment | ||||||
26 | giving rise to the issuance of a tax credit certificate |
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1 | pursuant to this Section shall, for each of the 3 years | ||||||
2 | following the issue date of the last tax credit certificate | ||||||
3 | issued by the Department with respect to such business pursuant | ||||||
4 | to this Section, report to the Department the following: | ||||||
5 | (1) the number of employees and the location at which | ||||||
6 | those employees are employed, both as of the end of each | ||||||
7 | year; | ||||||
8 | (2) the amount of additional new capital investment | ||||||
9 | raised as of the end of each year, if any; and | ||||||
10 | (3) the terms of any liquidity event occurring during | ||||||
11 | such year; for the purposes of this Section, a "liquidity | ||||||
12 | event" means any event that would be considered an exit for | ||||||
13 | an illiquid investment, including any event that allows the | ||||||
14 | equity holders of the business (or any material portion | ||||||
15 | thereof) to cash out some or all of their respective equity | ||||||
16 | interests. | ||||||
17 | (Source: P.A. 100-328, eff. 1-1-18; revised 12-14-17.)
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