103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB0304

 

Introduced 2/2/2023, by Sen. Suzy Glowiak Hilton

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/220

    Amends the Illinois Income Tax Act. In provisions concerning the angel investment credit, provides that the amount of the credit is 35% (rather than 25%) of the claimant's investment made directly in the qualified new business venture if the investment is made in (1) a qualified new business venture that is a minority-owned business, a women-owned business, or a business owned a person with a disability or (2) a qualified new business venture in which the principal place of business is located in a county with a population of not more than 250,000. Increases the aggregate amount of angel investment credits that may be claimed in a taxable year.


LRB103 27554 HLH 53929 b

 

 

A BILL FOR

 

SB0304LRB103 27554 HLH 53929 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 Illinois Income Tax Act is amended by
5changing 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
10liability company, or a natural person that makes an
11investment in a qualified new business venture. The term
12"applicant" does not include (i) a corporation, partnership,
13limited liability company, or a natural person who has a
14direct or indirect ownership interest of at least 51% in the
15profits, capital, or value of the qualified new business
16venture receiving the investment or (ii) a related member.
17    "Claimant" means an applicant certified by the Department
18who files a claim for a credit under this Section.
19    "Department" means the Department of Commerce and Economic
20Opportunity.
21    "Investment" means money (or its equivalent) given to a
22qualified new business venture, at a risk of loss, in
23consideration for an equity interest of the qualified new

 

 

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1business venture. The Department may adopt rules to permit
2certain forms of contingent equity investments to be
3considered eligible for a tax credit under this Section.
4    "Qualified new business venture" means a business that is
5registered with the Department under this Section.
6    "Related member" means a person that, with respect to the
7applicant, is any one of the following:
8        (1) An individual, if the individual and the members
9    of the individual's family (as defined in Section 318 of
10    the Internal Revenue Code) own directly, indirectly,
11    beneficially, or constructively, in the aggregate, at
12    least 50% of the value of the outstanding profits,
13    capital, stock, or other ownership interest in the
14    qualified new business venture that is the recipient of
15    the applicant's 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
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    outstanding stock of the qualified new business venture
5    that is the recipient of the applicant's investment.
6        (4) A corporation and any party related to that
7    corporation in a manner that would require an attribution
8    of stock from the corporation to the party or from the
9    party to the corporation under the attribution rules of
10    Section 318 of the Internal Revenue Code, if the
11    corporation and all such related parties own, in the
12    aggregate, at least 50% of the profits, capital, stock, or
13    other ownership interest in the qualified new business
14    venture that is the recipient of the applicant's
15    investment.
16        (5) A person to or from whom there is attribution of
17    ownership of stock in the qualified new business venture
18    that is the recipient of the applicant's investment in
19    accordance with Section 1563(e) of the Internal Revenue
20    Code, except that for purposes of determining whether a
21    person is a related member under this paragraph, "20%"
22    shall be substituted for "5%" whenever "5%" appears in
23    Section 1563(e) of the Internal Revenue Code.
24    (b) For taxable years beginning after December 31, 2010,
25and ending on or before December 31, 2026, subject to the
26limitations provided in this Section, a claimant may claim, as

 

 

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1a credit against the tax imposed under subsections (a) and (b)
2of Section 201 of this Act, an amount equal to 25% of the
3claimant's investment made directly in a qualified new
4business venture. However, the amount of the credit is 35% of
5the claimant's investment made directly in the qualified new
6business venture if the investment is made in: (1) a qualified
7new business venture that is a minority-owned business, a
8women-owned business, or a business owned a person with a
9disability (as those terms are used and defined in the
10Business Enterprise for Minorities, Women, and Persons with
11Disabilities Act); or (2) a qualified new business venture in
12which the principal place of business is located in a county
13with a population of not more than 250,000. In order for an
14investment in a qualified new business venture to be eligible
15for tax credits, the business must have applied for and
16received certification under subsection (e) for the taxable
17year in which the investment was made prior to the date on
18which the investment was made. The credit under this Section
19may not exceed the taxpayer's Illinois income tax liability
20for the taxable year. If the amount of the credit exceeds the
21tax liability for the year, the excess may be carried forward
22and applied to the tax liability of the 5 taxable years
23following the excess credit year. The credit shall be applied
24to the earliest year for which there is a tax liability. If
25there are credits from more than one tax year that are
26available to offset a liability, the earlier credit shall be

 

 

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1applied first. In the case of a partnership or Subchapter S
2Corporation, the credit is allowed to the partners or
3shareholders in accordance with the determination of income
4and distributive share of income under Sections 702 and 704
5and Subchapter S of the Internal Revenue Code.
6    (c) The minimum amount an applicant must invest in any
7single qualified new business venture in order to be eligible
8for a credit under this Section is $10,000. The maximum amount
9of an applicant's total investment made in any single
10qualified new business venture that may be used as the basis
11for a credit under this Section is $2,000,000.
12    (d) The Department shall implement a program to certify an
13applicant for an angel investment credit. Upon satisfactory
14review, the Department shall issue a tax credit certificate
15stating the amount of the tax credit to which the applicant is
16entitled. The Department shall annually certify that: (i) each
17qualified new business venture that receives an angel
18investment under this Section has maintained a minimum
19employment threshold, as defined by rule, in the State (and
20continues to maintain a minimum employment threshold in the
21State for a period of no less than 3 years from the issue date
22of the last tax credit certificate issued by the Department
23with respect to such business pursuant to this Section); and
24(ii) the claimant's investment has been made and remains,
25except in the event of a qualifying liquidity event, in the
26qualified new business venture for no less than 3 years.

 

 

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1    If an investment for which a claimant is allowed a credit
2under subsection (b) is held by the claimant for less than 3
3years, other than as a result of a permitted sale of the
4investment to person who is not a related member, the claimant
5shall pay to the Department of Revenue, in the manner
6prescribed by the Department of Revenue, the aggregate amount
7of the disqualified credits that the claimant received related
8to the subject investment.
9    If the Department determines that a qualified new business
10venture failed to maintain a minimum employment threshold in
11the State through the date which is 3 years from the issue date
12of the last tax credit certificate issued by the Department
13with respect to the subject business pursuant to this Section,
14the claimant or claimants shall pay to the Department of
15Revenue, in the manner prescribed by the Department of
16Revenue, the aggregate amount of the disqualified credits that
17claimant or claimants received related to investments in that
18business.
19    (e) The Department shall implement a program to register
20qualified new business ventures for purposes of this Section.
21A business desiring registration under this Section shall be
22required to submit a full and complete application to the
23Department. A submitted application shall be effective only
24for the taxable year in which it is submitted, and a business
25desiring registration under this Section shall be required to
26submit a separate application in and for each taxable year for

 

 

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1which the business desires registration. Further, if at any
2time prior to the acceptance of an application for
3registration under this Section by the Department one or more
4events occurs which makes the information provided in that
5application materially false or incomplete (in whole or in
6part), the business shall promptly notify the Department of
7the same. Any failure of a business to promptly provide the
8foregoing information to the Department may, at the discretion
9of the Department, result in a revocation of a previously
10approved application for that business, or disqualification of
11the business from future registration under this Section, or
12both. The Department may register the business only if all of
13the following conditions are satisfied:
14        (1) it has its principal place of business in this
15    State;
16        (2) at least 51% of the employees employed by the
17    business are employed in this State;
18        (3) the business has the potential for increasing jobs
19    in this State, increasing capital investment in this
20    State, or both, as determined by the Department, and
21    either of the following apply:
22            (A) it is principally engaged in innovation in any
23        of the following: manufacturing; biotechnology;
24        nanotechnology; communications; agricultural
25        sciences; clean energy creation or storage technology;
26        processing or assembling products, including medical

 

 

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1        devices, pharmaceuticals, computer software, computer
2        hardware, semiconductors, other innovative technology
3        products, or other products that are produced using
4        manufacturing methods that are enabled by applying
5        proprietary technology; or providing services that are
6        enabled by applying proprietary technology; or
7            (B) it is undertaking pre-commercialization
8        activity related to proprietary technology that
9        includes conducting research, developing a new product
10        or business process, or developing a service that is
11        principally reliant on applying proprietary
12        technology;
13        (4) it is not principally engaged in real estate
14    development, insurance, banking, lending, lobbying,
15    political consulting, professional services provided by
16    attorneys, accountants, business consultants, physicians,
17    or health care consultants, wholesale or retail trade,
18    leisure, hospitality, transportation, or construction,
19    except construction of power production plants that derive
20    energy from a renewable energy resource, as defined in
21    Section 1 of the Illinois Power Agency Act;
22        (5) at the time it is first certified:
23            (A) it has fewer than 100 employees;
24            (B) it has been in operation in Illinois for not
25        more than 10 consecutive years prior to the year of
26        certification; and

 

 

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1            (C) it has received not more than $10,000,000 in
2        aggregate investments;
3        (5.1) it agrees to maintain a minimum employment
4    threshold in the State of Illinois prior to the date which
5    is 3 years from the issue date of the last tax credit
6    certificate issued by the Department with respect to that
7    business pursuant to this Section;
8        (6) (blank); and
9        (7) it has received not more than $4,000,000 in
10    investments that qualified for tax credits under this
11    Section.
12    (f) The Department, in consultation with the Department of
13Revenue, shall adopt rules to administer this Section. For
14taxable years beginning before January 1, 2024, the The
15aggregate amount of the tax credits that may be claimed under
16this Section for investments made in qualified new business
17ventures shall be limited to at $10,000,000 per calendar year,
18of which $500,000 shall be reserved for investments made in
19qualified new business ventures which are minority-owned
20businesses, women-owned businesses, or businesses owned by a
21person with a disability (as those terms are used and defined
22in the Business Enterprise for Minorities, Women, and Persons
23with Disabilities Act), and an additional $500,000 shall be
24reserved for investments made in qualified new business
25ventures with their principal place of business in counties
26with a population of not more than 250,000. For taxable years

 

 

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1beginning on or after January 1, 2024, the aggregate amount of
2the tax credits that may be claimed under this Section for
3investments made in qualified new business ventures shall be
4limited to $25,000,000 per calendar year, of which $5,000,000
5shall be reserved for investments made in qualified new
6business ventures that are minority-owned businesses (as the
7term is defined in the Business Enterprise for Minorities,
8Women, and Persons with Disabilities Act), $2,500,000 shall be
9reserved for investments made in qualified new business
10ventures that are women-owned businesses or businesses owned
11by a person with a disability (as those terms are defined in
12the Business Enterprise for Minorities, Women, and Persons
13with Disabilities Act), and $2,500,000 shall be reserved for
14investments made in qualified new business ventures with their
15principal place of business in a county with a population of
16not more than 250,000. The foregoing annual allowable amounts
17set forth in this Section shall be allocated by the
18Department, on a per calendar quarter basis and prior to the
19commencement of each calendar year, in such proportion as
20determined by the Department, provided that: (i) the amount
21initially allocated by the Department for any one calendar
22quarter shall not exceed 35% of the total allowable amount;
23(ii) any portion of the allocated allowable amount remaining
24unused as of the end of any of the first 3 calendar quarters of
25a given calendar year shall be rolled into, and added to, the
26total allocated amount for the next available calendar

 

 

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1quarter; and (iii) the reservation of tax credits for
2investments in minority-owned businesses, women-owned
3businesses, businesses owned by a person with a disability,
4and in businesses in counties with a population of not more
5than 250,000 is limited to the first 3 calendar quarters of a
6given calendar year, after which they may be claimed by
7investors in any qualified new business venture.
8    (g) A claimant may not sell or otherwise transfer a credit
9awarded under this Section to another person.
10    (h) On or before March 1 of each year, the Department shall
11report to the Governor and to the General Assembly on the tax
12credit certificates awarded under this Section for the prior
13calendar 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.
19    (i) For each business seeking registration under this
20Section after December 31, 2016, the Department shall require
21the business to include in its application the North American
22Industry Classification System (NAICS) code applicable to the
23business and the number of employees of the business at the
24time of application. Each business registered by the
25Department as a qualified new business venture that receives
26an investment giving rise to the issuance of a tax credit

 

 

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1certificate pursuant to this Section shall, for each of the 3
2years following the issue date of the last tax credit
3certificate issued by the Department with respect to such
4business pursuant to this Section, report to the Department
5the following:
6        (1) the number of employees and the location at which
7    those employees are employed, both as of the end of each
8    year;
9        (2) the amount of additional new capital investment
10    raised as of the end of each year, if any; and
11        (3) the terms of any liquidity event occurring during
12    such year; for the purposes of this Section, a "liquidity
13    event" means any event that would be considered an exit
14    for an illiquid investment, including any event that
15    allows the equity holders of the business (or any material
16    portion thereof) to cash out some or all of their
17    respective equity interests.
18(Source: P.A. 101-81, eff. 7-12-19; 102-16, eff. 6-17-21.)