HB3318 101ST GENERAL ASSEMBLY

LRB101 05873 HLH 50893 b

101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB3318

Introduced , by Rep. Mark L. Walker

SYNOPSIS AS INTRODUCED:

35 ILCS 5/229 new

Amends the Illinois Income Tax Act. Provides for a credit in an amount equal to 25% of the taxpayer's equity investment in a qualified new business venture, including investments made through a certified fund manager. Sets forth limitations on the credit.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning revenue.

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 229 as follows:

(35 ILCS 5/229 new)

Sec. 229. Venture capital investment credit.

(a) Definitions. As used in this Section:

"Certified investment fund manager" means a business that is certified under subsection (e).

"Claimant" means an individual who files a claim for credit under this Section.

"Department" means the Department of Commerce and Economic Opportunity, unless otherwise specifically provided.

"Equity investment" means a purchase of an equity interest, or any other investment expenditure, in a qualified new business venture either directly or through a certified investment fund manager as determined by subsection (e).

"Qualified new business venture" means a business that is certified under subsection (d).

(b) Filing claims for credit. A claimant may claim as a credit against the tax imposed under subsections (a) and (b) of Section 201 of this Act an amount equal to 25% of the claimant's equity investment made directly to a qualified new business venture in the taxable year, or made to a certified fund manager if the fund manager invests in a business certified under subsection (d).

(c) Limitations.

(1) The maximum amount of the credits that may be claimed under this Section for all taxable years combined is $50,000,000.

(2) The maximum amount of a claimant's investment that may be used as the basis for a credit under this Section is $500,000 for each investment made directly to a business certified under subsection (d).

(3) If an investment for which a claimant claims a credit under subsection (b) is held by the claimant for less than one year, then the claimant shall pay to the Department, in the manner prescribed by the Department, the amount of the credit that the claimant received related to the investment.

(4) Any credit allowed under this Section that is unused in the year the credit is earned may be carried forward to each of the 5 taxable years following the year for which the credit is first computed until it is used. This credit shall be applied first to the earliest year for which there is a liability. If there is a credit under this Section from more than one tax year that is available to offset a liability, then the earliest credit arising under this Section shall be applied first.

(5) A partnership may elect to pass through to its partners the credits to which the partnership is entitled under this Section for the taxable year. A partner may use the credit allocated to him or her under this paragraph only against the tax imposed in subsections (a) and (b) of Section 201 of this Act. If the partnership makes that election, those credits shall be allocated among the partners in the partnership in accordance with the rules set forth in Section 704(b) of the Internal Revenue Code, and the rules promulgated under that Section, and the allocated amount of the credits shall be allowed to the partners for that taxable year.

(d) Qualified new business ventures. The Department shall implement a program to certify businesses for purposes of this credit. A business desiring certification shall submit an application to the Department in each taxable year for which the business desires certification. Unless otherwise provided under the rules of the Department, a business may be certified under this subsection and may maintain that certification only if the business satisfies all of the following conditions:

(1) it has its headquarters in this State;

(2) at least 51% of the employees employed by the business are employed in this State;

(3) it is engaged in, or has committed to engage in, manufacturing, agriculture, or processing or assembling products and conducting research and development or developing a new product or business process;

(4) it is not engaged in real estate development, insurance, banking, lending, lobbying, political consulting, professional services provided by attorneys, accountants, business consultants, physicians, or health care consultants, wholesale or retail trade, leisure, hospitality, transportation, or construction;

(5) it has fewer than 100 employees;

(6) it has been in operation in this State for not more than 7 consecutive years; and

(7) it has not received more than $1,000,000 in investments that have qualified for tax credits under this Section.

The Department shall maintain a list of certified businesses and shall permit public access to the lists through the Department's Internet website.

(e) Certified investment fund managers. The Department shall implement a program to certify investment fund managers for purposes of this Section. An investment fund manager desiring certification shall submit an application to the Department. In determining whether to certify an investment fund manager, the Department shall consider the investment fund manager's experience in managing venture capital funds, the past performance of investment funds managed by the applicant, the expected level of investment in the investment fund to be managed by the applicant, and any other relevant factors. The Department may certify only investment fund managers that commit to placing investments in businesses certified under subsection (d). The Department shall maintain a list of certified investment fund managers and shall permit public access to the lists through the Department's Internet website.

(f) The Department shall notify the Department of Revenue of every certification issued under this Section and the date on which any such certification is revoked or expires.

(g) Annual report. Annually, no later than February 1, the Department shall submit a report to the General Assembly for distribution to legislators, listing all of the following information:

(1) the total amount of tax credits claimed under this Section;

(2) the name of each business in which investments qualifying for those tax credits were made, the amount of the tax credits, and the amount of the investment; and

(3) any other information the Department considers reasonable to include.

(h) Rules. The Department, in consultation with the Department of Revenue, shall adopt rules to administer this Section.