96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB3969

 

Introduced 2/26/2009, by Rep. Mark L. Walker

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/218 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.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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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 adding
5 Section 218 as follows:
 
6     (35 ILCS 5/218 new)
7     Sec. 218. Venture capital investment credit.
8     (a) Definitions. In this Section:
9         (1) "Equity investment" means a purchase of an equity
10     interest, or any other investment expenditure, in a
11     qualified new business venture either directly or through a
12     certified investment fund manager as determined by
13     subsection (e).
14         (2) "Claimant" means an individual who files a claim
15     for credit under this subsection.
16         (3) "Qualified new business venture" means a business
17     that is certified under subsection (d).
18         (4) "Certified investment fund manager" means a
19     business that is certified under subsection (e).
20         (5) "Department" means the Department of Commerce and
21     Economic Opportunity, unless otherwise specifically
22     provided.
23     (b) Filing claims for credit. A claimant may claim as a

 

 

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1 credit against the tax imposed under subsections (a) and (b) of
2 Section 201 of this Act an amount equal to 25% of the
3 claimant's equity investment made directly to a qualified new
4 business venture in the taxable year, or made to a certified
5 fund manager if the fund manager invests in a business
6 certified under subsection (d).
7     (c) Limitations.
8         (1) The maximum amount of the credits that may be
9     claimed under this Section for all taxable years combined
10     is $50,000,000.
11         (2) The maximum amount of a claimant's investment that
12     may be used as the basis for a credit under this Section is
13     $500,000 for each investment made directly to a business
14     certified under subsection (d).
15         (3) If an investment for which a claimant claims a
16     credit under subsection (b) is held by the claimant for
17     less than one year, the claimant shall pay to the
18     Department, in the manner prescribed by the Department, the
19     amount of the credit that the claimant received related to
20     the investment.
21         (4) Any credit allowed under this Section that is
22     unused in the year the credit is earned may be carried
23     forward to each of the 5 taxable years following the year
24     for which the credit is first computed until it is used.
25     This credit shall be applied first to the earliest year for
26     which there is a liability. If there is a credit under this

 

 

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1     Section from more than one tax year that is available to
2     offset a liability, then the earliest credit arising under
3     this Section shall be applied first.
4         (5) A partnership may elect to pass through to its
5     partners the credits to which the partnership is entitled
6     under this Section for the taxable year. A partner may use
7     the credit allocated to him or her under this paragraph
8     only against the tax imposed in subsections (a) and (b) of
9     Section 201 of this Act. If the partnership makes that
10     election, those credits shall be allocated among the
11     partners in the partnership in accordance with the rules
12     set forth in Section 704(b) of the Internal Revenue Code,
13     and the rules promulgated under that Section, and the
14     allocated amount of the credits shall be allowed to the
15     partners for that taxable year.
16     (d) Qualified new business ventures. The Department shall
17 implement a program to certify businesses for purposes of this
18 credit. A business desiring certification shall submit an
19 application to the Department in each taxable year for which
20 the business desires certification. Unless otherwise provided
21 under the rules of the Department, a business may be certified
22 under this subsection and may maintain that certification only
23 if the business satisfies all of the following conditions:
24         (1) It has its headquarters in this State.
25         (2) At least 51% of the employees employed by the
26     business are employed in this State.

 

 

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1         (3) It is engaged in, or has committed to engage in,
2     manufacturing, agriculture, or processing or assembling
3     products and conducting research and development or
4     developing a new product or business process.
5         (4) It is not engaged in real estate development,
6     insurance, banking, lending, lobbying, political
7     consulting, professional services provided by attorneys,
8     accountants, business consultants, physicians, or health
9     care consultants, wholesale or retail trade, leisure,
10     hospitality, transportation, or construction.
11         (5) It has fewer than 100 employees.
12         (6) It has been in operation in this State for not more
13     than 7 consecutive years.
14         (7) It has not received more than $1,000,000 in
15     investments that have qualified for tax credits under this
16     Section.
17     The Department shall maintain a list of certified
18 businesses and shall permit public access to the lists through
19 the Department's Internet website.
20     (e) Certified investment fund managers. The Department
21 shall implement a program to certify investment fund managers
22 for purposes of this Section. An investment fund manager
23 desiring certification shall submit an application to the
24 Department. In determining whether to certify an investment
25 fund manager, the Department shall consider the investment fund
26 manager's experience in managing venture capital funds, the

 

 

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1 past performance of investment funds managed by the applicant,
2 the expected level of investment in the investment fund to be
3 managed by the applicant, and any other relevant factors. The
4 Department may certify only investment fund managers that
5 commit to placing investments in businesses certified under
6 subsection (d). The Department shall maintain a list of
7 certified investment fund managers and shall permit public
8 access to the lists through the Department's Internet website.
9     (f) The Department shall notify the Department of Revenue
10 of every certification issued under this Section and the date
11 on which any such certification is revoked or expires.
12     (g) Annual report. Annually, no later than February 1, the
13 Department shall submit a report to the General Assembly for
14 distribution to legislators, listing all of the following
15 information:
16         (1) The total amount of tax credits claimed under this
17     Section.
18         (2) The name of each business in which investments
19     qualifying for those tax credits were made, the amount of
20     the tax credits, and the amount of the investment.
21         (3) Any other information the Department considers
22     reasonable to include.
23     (h) Rules. The Department, in consultation with the
24 Department of Revenue, shall promulgate rules to administer
25 this Section.