Illinois General Assembly - Full Text of SB2012
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Full Text of SB2012  100th General Assembly


Sen. Chuck Weaver

Filed: 4/27/2017





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2    AMENDMENT NO. ______. Amend Senate Bill 2012 by replacing
3everything after the enacting clause with the following:
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 investment
11in a qualified new business venture. The term "applicant" does
12not include a corporation, partnership, limited liability
13company, or a natural person who has a direct or indirect
14ownership interest of at least 51% in the profits, capital, or
15value of the investment or a related member.
16    "Claimant" means an applicant certified by the Department



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1who files a claim for a credit under this Section.
2    "Department" means the Department of Commerce and Economic
4    "Investment" means money (or its equivalent) given to a
5qualified new business venture, at a risk of loss, in
6consideration for an equity interest of the qualified new
7business venture. The Department may adopt rules to permit
8certain forms of contingent equity investments to be considered
9eligible for a tax credit under this Section.
10    "Qualified new business venture" means a business that is
11registered with the Department under this Section.
12    "Related member" means a person that, with respect to the
13applicant investment, is any one of the following:
14        (1) An individual, if the individual and the members of
15    the individual's family (as defined in Section 318 of the
16    Internal Revenue Code) own directly, indirectly,
17    beneficially, or constructively, in the aggregate, at
18    least 50% of the value of the outstanding profits, capital,
19    stock, or other ownership interest in the applicant.
20        (2) A partnership, estate, or trust and any partner or
21    beneficiary, if the partnership, estate, or trust and its
22    partners or beneficiaries own directly, indirectly,
23    beneficially, or constructively, in the aggregate, at
24    least 50% of the profits, capital, stock, or other
25    ownership interest in the applicant.
26        (3) A corporation, and any party related to the



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1    corporation in a manner that would require an attribution
2    of stock from the corporation under the attribution rules
3    of Section 318 of the Internal Revenue Code, if the
4    applicant and any other related member own, in the
5    aggregate, directly, indirectly, beneficially, or
6    constructively, at least 50% of the value of the
7    corporation's outstanding stock.
8        (4) A corporation and any party related to that
9    corporation in a manner that would require an attribution
10    of stock from the corporation to the party or from the
11    party to the corporation under the attribution rules of
12    Section 318 of the Internal Revenue Code, if the
13    corporation and all such related parties own, in the
14    aggregate, at least 50% of the profits, capital, stock, or
15    other ownership interest in the applicant.
16        (5) A person to or from whom there is attribution of
17    stock ownership in accordance with Section 1563(e) of the
18    Internal Revenue Code, except that for purposes of
19    determining whether a person is a related member under this
20    paragraph, "20%" shall be substituted for "5%" whenever
21    "5%" appears in Section 1563(e) of the Internal Revenue
22    Code.
23    (b) For taxable years beginning after December 31, 2010,
24and ending on or before December 31, 2021 December 31, 2016,
25subject to the limitations provided in this Section, a claimant
26may claim, as a credit against the tax imposed under



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1subsections (a) and (b) of Section 201 of this Act, an amount
2equal to 25% of the claimant's investment made directly in a
3qualified new business venture. In order for an investment in a
4qualified new business venture to be eligible for tax credits,
5the business must have applied for and received certification
6under subsection (e) for the taxable year in which the
7investment was made prior to the date on which the investment
8was made. The credit under this Section may not exceed the
9taxpayer's Illinois income tax liability for the taxable year.
10If the amount of the credit exceeds the tax liability for the
11year, the excess may be carried forward and applied to the tax
12liability of the 5 taxable years following the excess credit
13year. The credit shall be applied to the earliest year for
14which there is a tax liability. If there are credits from more
15than one tax year that are available to offset a liability, the
16earlier credit shall be applied first. In the case of a
17partnership or Subchapter S Corporation, the credit is allowed
18to the partners or shareholders in accordance with the
19determination of income and distributive share of income under
20Sections 702 and 704 and Subchapter S of the Internal Revenue
22    (c) The minimum amount an applicant must invest in any
23single qualified new business venture in order to be eligible
24for a credit under this Section is $10,000. The maximum amount
25of an applicant's total investment made in any single qualified
26new business venture that may be used as the basis for a credit



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1under this Section is $2,000,000 for each investment made
2directly in a qualified new business venture.
3    (d) The Department shall implement a program to certify an
4applicant for an angel investment credit. Upon satisfactory
5review, the Department shall issue a tax credit certificate
6stating the amount of the tax credit to which the applicant is
7entitled. The Department shall annually certify that: (i) each
8qualified new business venture that receives an angel
9investment under this Section has maintained a minimum
10employment threshold, as defined by rule, in the State (and
11continues to maintain a minimum employment threshold in the
12State for a period of no less than 3 years from the issue date
13of the last tax credit certificate issued by the Department
14with respect to such business pursuant to this Section); and
15(ii) the claimant's investment has been made and remains,
16except in the event of a qualifying liquidity event, in the
17qualified new business venture for no less than 3 years.
18    If an investment for which a claimant is allowed a credit
19under subsection (b) is held by the claimant for less than 3
20years, other than as a result of a permitted sale of the
21investment to person who is not a related member, or, if within
22that period of time the qualified new business venture is moved
23from the State of Illinois, the claimant shall pay to the
24Department of Revenue, in the manner prescribed by the
25Department of Revenue, the aggregate amount of the disqualified
26credits credit that the claimant received related to the



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1subject investment.
2    If the Department determines that a qualified new business
3venture failed to maintain a minimum employment threshold in
4the State through the date which is 3 years from the issue date
5of the last tax credit certificate issued by the Department
6with respect to the subject business pursuant to this Section,
7the claimant or claimants shall pay to the Department of
8Revenue, in the manner prescribed by the Department of Revenue,
9the aggregate amount of the disqualified credits that claimant
10or claimants received related to investments in that business.
11    (e) The Department shall implement a program to register
12qualified new business ventures for purposes of this Section. A
13business desiring registration under this Section shall be
14required to submit a full and complete an application to the
15Department in each taxable year for which the business desires
16registration. A submitted application shall be effective only
17for the taxable year in which it is submitted, and a business
18desiring registration under this Section shall be required to
19submit a separate application in and for each taxable year for
20which the business desires registration. Further, if at any
21time prior to the acceptance of an application for registration
22under this Section by the Department one or more events occurs
23which makes the information provided in that application
24materially false or incomplete (in whole or in part) the
25business shall promptly notify the Department of the same. Any
26failure of a business to promptly provide the foregoing



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1information to the Department may, at the discretion of the
2Department, result in a revocation of a previously approved
3application for that business, or disqualification of the
4business from future registration under this Section, or both.
5The Department may register the business only if the business
6satisfies all of the following conditions are satisfied:
7        (1) it has its principal place of business headquarters
8    in this State;
9        (2) at least 51% of the employees employed by the
10    business are employed in this State;
11        (3) the business it has the potential for increasing
12    jobs in this State, increasing capital investment in this
13    State, or both, as determined by the Department, and either
14    of the following apply:
15            (A) it is principally engaged in innovation in any
16        of the following: manufacturing; biotechnology;
17        nanotechnology; communications; agricultural sciences;
18        clean energy creation or storage technology;
19        processing or assembling products, including medical
20        devices, pharmaceuticals, computer software, computer
21        hardware, semiconductors, other innovative technology
22        products, or other products that are produced using
23        manufacturing methods that are enabled by applying
24        proprietary technology; or providing services that are
25        enabled by applying proprietary technology; or
26            (B) it is undertaking pre-commercialization



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1        activity related to proprietary technology that
2        includes conducting research, developing a new product
3        or business process, or developing a service that is
4        principally reliant on applying proprietary
5        technology;
6        (4) it is not principally engaged in real estate
7    development, insurance, banking, lending, lobbying,
8    political consulting, professional services provided by
9    attorneys, accountants, business consultants, physicians,
10    or health care consultants, wholesale or retail trade,
11    leisure, hospitality, transportation, or construction,
12    except construction of power production plants that derive
13    energy from a renewable energy resource, as defined in
14    Section 1 of the Illinois Power Agency Act;
15        (5) at the time it is first certified:
16            (A) it has fewer than 100 employees;
17            (B) it has been in operation in Illinois for not
18        more than 10 consecutive years prior to the year of
19        certification; and
20            (C) it has received not more than $10,000,000 in
21        aggregate investments private equity investment in
22        cash;
23        (5.1) it agrees to maintain a minimum employment
24    threshold in the State of Illinois prior to the date which
25    is 3 years from the issue date of the last tax credit
26    certificate issued by the Department with respect to that



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1    business pursuant to this Section;
2        (6) (blank); and
3        (7) it has received not more than $4,000,000 in
4    investments that qualified for tax credits under this
5    Section.
6    (f) The Department, in consultation with the Department of
7Revenue, shall adopt rules to administer this Section. The
8aggregate amount of the tax credits that may be claimed under
9this Section for investments made in qualified new business
10ventures shall be limited at $10,000,000 per calendar year, of
11which $500,000 shall be reserved for investments made in
12qualified new business ventures which are "minority owned
13businesses", "female owned businesses", or "businesses owned
14by a person with a disability" (as those terms are used and
15defined in the Business Enterprise for Minorities, Females, and
16Persons with Disabilities Act), and an additional $500,000
17shall be reserved for investments made in qualified new
18business ventures with their principal place of business in
19counties with a population of not more than 250,000. The
20foregoing annual allowable amounts shall be allocated by the
21Department, on a per calendar quarter basis and prior to the
22commencement of each calendar year, in such proportion as
23determined by the Department, provided that: (i) the amount
24initially allocated by the Department for any one calendar
25quarter shall not exceed 35% of the total allowable amount; and
26(ii) any portion of the allocated allowable amount remaining



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1unused as of the end of any of the first 2 calendar quarters of
2a given calendar year shall be rolled into, and added to, the
3total allocated amount for the next available calendar quarter.
4    (g) A claimant may not sell or otherwise transfer a credit
5awarded under this Section to another person.
6    (h) On or before March 1 of each year, the Department shall
7report to the Governor and to the General Assembly on the tax
8credit certificates awarded under this Section for the prior
9calendar year.
10        (1) This report must include, for each tax credit
11    certificate awarded:
12            (A) the name of the claimant and the amount of
13        credit awarded or allocated to that claimant;
14            (B) the name and address (including the county) of
15        the qualified new business venture that received the
16        investment giving rise to the credit, the North
17        American Industry Classification System (NAICS)
18        applicable to that qualified new business venture, and
19        the number of employees of the the qualified new
20        business venture that received the investment giving
21        rise to the credit and the county in which the
22        qualified new business venture is located; and
23            (C) the date of approval by the Department of each
24        claimant's the applications for the tax credit
25        certificate.
26        (2) The report must also include:



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1            (A) the total number of applicants and the total
2        number of claimants, including the amount of each tax
3        credit certificate and amount for tax credit
4        certificates awarded to a claimant under this Section
5        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 the total number of
12        applications and amount for which tax credit
13        certificates were issued in the prior calendar year;
14        and
15            (C) the total amount of tax credit certificates
16        sought by applicants, the amount of each tax credit
17        certificate issued to a claimant, the aggregate amount
18        of all tax credit certificates issued in the prior
19        calendar year and the aggregate amount of tax credit
20        certificates issued as authorized under this Section
21        for all calendar years the total tax credit
22        certificates and amount authorized under this Section
23        for all calendar years.
24    (i) For each businesses seeking registration under this
25Section after December 31, 2016, the Department shall require
26the business to include in its application the North American



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1Industry Classification System (NAICS) code applicable to the
2business and the number of employees of the business at the
3time of application. Each business registered by the Department
4as a qualified new business venture that receives an investment
5giving rise to the issuance of a tax credit certificate
6pursuant to this Section shall, for each of the 3 years
7following the issue date of the last tax credit certificate
8issued by the Department with respect to such business pursuant
9to this Section, report to the Department the following:
10        (1) the number of employees and the location at which
11    those employees are employed, both as of the end of each
12    year;
13        (2) the amount of additional new capital investment
14    raised as of the end of each year, if any; and
15        (3) the terms of any liquidity event occurring during
16    such year; for the purposes of this Section, a "liquidity
17    event" means any event that would be considered an exit for
18    an illiquid investment, including any event that allows the
19    equity holders of the business (or any material portion
20    thereof) to cash out some or all of their respective equity
21    interests.
22(Source: P.A. 96-939, eff. 1-1-11; 97-507, eff. 8-23-11;
2397-1097, eff. 8-24-12.)".