Full Text of SB3710 96th General Assembly
SB3710eng 96TH GENERAL ASSEMBLY
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| AN ACT concerning revenue.
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| Be it enacted by the People of the State of Illinois, | 3 |
| represented in the General Assembly:
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| Section 5. The Illinois Income Tax Act is amended by adding | 5 |
| Sections 219 and 220 as follows: | 6 |
| (35 ILCS 5/219 new) | 7 |
| Sec. 219. Early stage seed investment credit. | 8 |
| (a) As used in this Section: | 9 |
| "Claimant" means a person who files a claim for a credit | 10 |
| under this Section. | 11 |
| "Department" means the Department of Commerce and Economic | 12 |
| Opportunity. | 13 |
| "Fund manager" means an investment fund manager certified | 14 |
| under subsection (e) of this Section. | 15 |
| (b) For taxable years beginning after December 31, 2010, | 16 |
| subject to the limitations provided under this Section, a | 17 |
| claimant may claim, as a credit against the tax imposed under | 18 |
| subsections (a) and (b) of Section 201 of this Act, an amount | 19 |
| equal to 25% of the amount invested by the claimant with a fund | 20 |
| manager and invested by the fund manager in a business | 21 |
| certified under Section 220 of this Act. The credit under this | 22 |
| Section may not exceed the taxpayer's Illinois income tax | 23 |
| liability for the taxable year. If the amount of the credit |
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| exceeds the tax liability for the year, the
excess may be | 2 |
| carried forward and applied to the tax liability of the 5 | 3 |
| taxable
years following the excess credit year. The credit
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| shall be applied to the earliest year for which there is a tax | 5 |
| liability. If
there are credits from more than one tax year | 6 |
| that are available to offset a
liability, the earlier credit | 7 |
| shall be applied first. | 8 |
| In the case of a partnership or limited liability company, | 9 |
| the computation of the 25% limitation under this subsection | 10 |
| shall be determined at the entity level rather than the | 11 |
| claimant level and may be allocated among the claimants who | 12 |
| make investments in the manner set forth in the entity's | 13 |
| organizational documents. The partnership or limited liability | 14 |
| company shall provide to the Department and the Department of | 15 |
| Revenue the names and tax identification numbers of the | 16 |
| claimants, the amounts of the credits allocated to the | 17 |
| claimants, and the computation of the allocations. | 18 |
| (c) The Illinois adjusted basis of any investment for which | 19 |
| a credit is claimed under this Section shall be reduced by the | 20 |
| amount of the credit that is offset against Illinois income | 21 |
| taxes. The Illinois basis of a partner's interest in a | 22 |
| partnership, a member's interest in a limited liability | 23 |
| company, or stock in an S corporation shall be adjusted to | 24 |
| reflect adjustments made under this subsection. | 25 |
| (d) If an investment for which a claimant claims a credit | 26 |
| under subsection (b) is held by the claimant for less than 3 |
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| years, the claimant shall pay to the Department, in the manner | 2 |
| prescribed by the Department, the amount of the credit that the | 3 |
| claimant received related to the investment. | 4 |
| (e) The Department shall implement a program to certify | 5 |
| investment fund managers for purposes of this Section. An | 6 |
| investment fund manager desiring certification shall submit an | 7 |
| application to the Department. The investment fund manager | 8 |
| shall specify in the application the investment amount that the | 9 |
| manager wishes to raise, and the Department may certify the | 10 |
| manager and determine the amount that qualifies for purposes of | 11 |
| this Section. In determining whether to certify an investment | 12 |
| fund manager, the Department shall consider the investment fund | 13 |
| manager's experience in managing venture capital funds, the | 14 |
| past performance of investment funds managed by the applicant, | 15 |
| the expected level of investment in the investment fund to be | 16 |
| managed by the applicant, and any other relevant factors. The | 17 |
| Department may certify only investment fund managers that | 18 |
| commit to consider placing investments in businesses certified | 19 |
| under Section 220 of this Act. | 20 |
| The Department shall maintain a list of businesses | 21 |
| certified under Section 220 of this Act and investment fund | 22 |
| managers certified under this subsection, and shall permit | 23 |
| public access to the lists through the Department's Internet | 24 |
| website. | 25 |
| The Department shall notify the Department of Revenue of | 26 |
| every certification issued under this subsection and under |
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| Section 220 of this Act and the date on which any such | 2 |
| certification is revoked or expires. | 3 |
| (f) The Department, in consultation with the Department of | 4 |
| Revenue, shall adopt rules to administer this Section. The | 5 |
| rules shall limit the aggregate amount of the tax credits under | 6 |
| this Section that may be claimed for investments paid to fund | 7 |
| managers certified under subsection (e) at $10,000,000 per | 8 |
| calendar year. The rules shall also provide that no claimant | 9 |
| may receive a credit under this Section unless the claimant's | 10 |
| investment is kept in a certified business, or with a certified | 11 |
| fund manager, for no less than 3 years. | 12 |
| (g) A claimant may sell or otherwise transfer a credit | 13 |
| awarded under this Section to another person who is subject to | 14 |
| the taxes or fees imposed under subsections (a) or (b) of | 15 |
| Section 201, if the transferee receives prior authorization | 16 |
| from the Department and the Department of Revenue and the | 17 |
| Department then notifies the investment fund manager of the | 18 |
| transfer. The Department may charge any person selling or | 19 |
| otherwise transferring a credit under this subsection a fee | 20 |
| equal to 1% of the credit amount sold or transferred. | 21 |
| (h) This Section is exempt from the provisions of Section | 22 |
| 250. | 23 |
| (35 ILCS 5/220 new) | 24 |
| Sec. 220. Angel investment credit. | 25 |
| (a) As used in this Section: |
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| "Bona fide angel investment" means a purchase of an equity | 2 |
| interest, or any other expenditure, as determined by rule under | 3 |
| this Section, that is made by: | 4 |
| (1) a person who reviews new businesses or proposed new | 5 |
| businesses for potential investment of the person's money; | 6 |
| or | 7 |
| (2) a network of persons each of whom satisfies item | 8 |
| (1). | 9 |
| "Claimant" means an individual who files a claim for a | 10 |
| credit under this Section. | 11 |
| "Department" means the Department of Commerce and Economic | 12 |
| Opportunity. | 13 |
| "Person" means a partnership or limited liability company | 14 |
| that is a non-operating entity, as determined by the | 15 |
| Department, a natural person, or fiduciary. | 16 |
| "Qualified new business venture" means a business that is | 17 |
| certified under this Section. | 18 |
| (b) For taxable years beginning after December 31, 2010, | 19 |
| subject to the limitations provided in this Section, a claimant | 20 |
| may claim, as a credit against the tax imposed under | 21 |
| subsections (a) and (b) of Section 201 of this Act, an amount | 22 |
| equal to 25% of the claimant's bona fide angel investment made | 23 |
| directly in a qualified new business venture. The credit under | 24 |
| this Section may not exceed the taxpayer's Illinois income tax | 25 |
| liability for the taxable year. If the amount of the credit | 26 |
| exceeds the tax liability for the year, the
excess may be |
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| carried forward and applied to the tax liability of the 5 | 2 |
| taxable
years following the excess credit year. The credit
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| shall be applied to the earliest year for which there is a tax | 4 |
| liability. If
there are credits from more than one tax year | 5 |
| that are available to offset a
liability, the earlier credit | 6 |
| shall be applied first. | 7 |
| (c) The maximum amount of a claimant's investment that may | 8 |
| be used as the basis for a credit under this Section is | 9 |
| $2,000,000 for each investment made directly in a business | 10 |
| certified under this Section. | 11 |
| (d) If an investment for which a claimant claims a credit | 12 |
| under subsection (b) is held by the claimant for less than 3 | 13 |
| years, the claimant shall pay to the Department, in the manner | 14 |
| prescribed by the Department, the amount of the credit that the | 15 |
| claimant received related to the investment. | 16 |
| (e) The Illinois adjusted basis of any investment for which | 17 |
| a credit is claimed under subsection (b) shall be reduced by | 18 |
| the amount of the credit that is offset against Illinois income | 19 |
| taxes. | 20 |
| (f) The Department shall implement a program to certify | 21 |
| businesses for purposes of this Section. A business desiring | 22 |
| certification shall submit an application to the Department in | 23 |
| each taxable year for which the business desires certification. | 24 |
| The business shall specify in its application the investment | 25 |
| amount it wishes to raise, and the Department may certify the | 26 |
| business and determine the amount that qualifies for purposes |
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| of this Section. Unless otherwise provided under the rules of | 2 |
| the Department, a business may be certified under this | 3 |
| subsection, and may maintain such certification, only if the | 4 |
| business satisfies all of the following conditions: | 5 |
| (1) it has its headquarters in this State; | 6 |
| (2) at least 51% of the employees employed by the | 7 |
| business are employed in this State; | 8 |
| (3) it has the potential for increasing jobs in this | 9 |
| State, increasing capital investment in this State, or | 10 |
| both, and any of the following apply: | 11 |
| (A) it is engaged in, or has committed to engage | 12 |
| in, innovation in any of the following: manufacturing; | 13 |
| biotechnology; nanotechnology; communications; | 14 |
| agriculture; clean energy creation or storage | 15 |
| technology; processing or assembling products, | 16 |
| including medical devices, pharmaceuticals, computer | 17 |
| software, computer hardware, semiconductors, other | 18 |
| innovative technology products, or other products that | 19 |
| are produced using manufacturing methods that are | 20 |
| enabled by applying proprietary technology; or | 21 |
| providing services that are enabled by applying | 22 |
| 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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| principally reliant on applying proprietary | 2 |
| technology. | 3 |
| (4) it is not primarily 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) it has less than 100 employees; | 13 |
| (6) it has been in operation in Illinois for not more | 14 |
| than 10 consecutive years prior to the year of | 15 |
| certification; and | 16 |
| (7) prior to certification, it has received not more | 17 |
| than (i) $2,000,000 in investments that qualified for tax | 18 |
| credits under this Section, (ii) $10,000,000 in aggregate | 19 |
| private equity investment in cash, and (iii) $4,000,000 in | 20 |
| investments that qualified for tax credits under this | 21 |
| Section or Section 219 of this Act. | 22 |
| (g) The Department, in consultation with the Department of | 23 |
| Revenue, shall adopt rules to administer this Section. The | 24 |
| rules shall further define "bona fide angel investment" for | 25 |
| purposes of this Section. The rules shall limit the aggregate | 26 |
| amount of the tax credits that may be claimed under this |
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| Section for investments made in qualified new business ventures | 2 |
| at $10,000,000 per calendar year. | 3 |
| (h) A claimant may sell or otherwise transfer a credit | 4 |
| awarded under this Section to another person who is subject to | 5 |
| the taxes or fees imposed under subsections (a) or (b) of | 6 |
| Section 201, if the transferee receives prior authorization | 7 |
| from the Department and the Department of Revenue. The | 8 |
| Department may charge any person selling or otherwise | 9 |
| transferring a credit under this subsection a fee equal to 1% | 10 |
| of the credit amount sold or transferred. | 11 |
| (i) This Section is exempt from the provisions of Section | 12 |
| 250.
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| Section 99. Effective date. This Act takes effect upon | 14 |
| becoming law.
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