Full Text of HB1251 103rd General Assembly
HB1251 103RD GENERAL ASSEMBLY |
| | 103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024 HB1251 Introduced 1/31/2023, by Rep. Margaret Croke SYNOPSIS AS INTRODUCED: |
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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.
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| | 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 | 5 | | changing 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 | 10 | | liability company, or a natural person that makes an | 11 | | investment in a qualified new business venture. The term | 12 | | "applicant" does not include (i) a corporation, partnership, | 13 | | limited liability company, or a natural person who has a | 14 | | direct or indirect ownership interest of at least 51% in the | 15 | | profits, capital, or value of the qualified new business | 16 | | venture receiving the investment or (ii) a related member. | 17 | | "Claimant" means an applicant certified by the Department | 18 | | who files a claim for a credit under this Section. | 19 | | "Department" means the Department of Commerce and Economic | 20 | | Opportunity. | 21 | | "Investment" means money (or its equivalent) given to a | 22 | | qualified new business venture, at a risk of loss, in | 23 | | consideration for an equity interest of the qualified new |
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| 1 | | business venture. The Department may adopt rules to permit | 2 | | certain forms of contingent equity investments to be | 3 | | considered eligible for a tax credit under this Section. | 4 | | "Qualified new business venture" means a business that is | 5 | | registered with the Department under this Section. | 6 | | "Related member" means a person that, with respect to the
| 7 | | applicant, 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, | 25 | | and ending on or before December 31, 2026, subject to the | 26 | | limitations provided in this Section, a claimant may claim, as |
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| 1 | | a credit against the tax imposed under subsections (a) and (b) | 2 | | of Section 201 of this Act, an amount equal to 25% of the | 3 | | claimant's investment made directly in a qualified new | 4 | | business venture. However, the amount of the credit is 35% of | 5 | | the claimant's investment made directly in the qualified new | 6 | | business venture if the investment is made in: (1) a qualified | 7 | | new business venture that is a minority-owned business, a | 8 | | women-owned business, or a business owned a person with a | 9 | | disability (as those terms are used and defined in the | 10 | | Business Enterprise for Minorities, Women, and Persons with | 11 | | Disabilities Act); or (2) a qualified new business venture in | 12 | | which the principal place of business is located in a county | 13 | | with a population of not more than 250,000. In order for an | 14 | | investment in a qualified new business venture to be eligible | 15 | | for tax credits, the business must have applied for and | 16 | | received certification under subsection (e) for the taxable | 17 | | year in which the investment was made prior to the date on | 18 | | which the investment was made. The credit under this Section | 19 | | may not exceed the taxpayer's Illinois income tax liability | 20 | | for the taxable year. If the amount of the credit exceeds the | 21 | | tax liability for the year, the excess may be carried forward | 22 | | and applied to the tax liability of the 5 taxable years | 23 | | following the excess credit year. The credit shall be applied | 24 | | to the earliest year for which there is a tax liability. If | 25 | | there are credits from more than one tax year that are | 26 | | available to offset a liability, the earlier credit shall be |
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| 1 | | applied first. In the case of a partnership or Subchapter S | 2 | | Corporation, the credit is allowed to the partners or | 3 | | shareholders in accordance with the determination of income | 4 | | and distributive share of income under Sections 702 and 704 | 5 | | and Subchapter S of the Internal Revenue Code. | 6 | | (c) The minimum amount an applicant must invest in any | 7 | | single qualified new business venture in order to be eligible | 8 | | for a credit under this Section is $10,000. The maximum amount | 9 | | of an applicant's total investment made in any single | 10 | | qualified new business venture that may be used as the basis | 11 | | for a credit under this Section is $2,000,000. | 12 | | (d) The Department shall implement a program to certify an | 13 | | applicant for an angel investment credit. Upon satisfactory | 14 | | review, the Department shall issue a tax credit certificate | 15 | | stating the amount of the tax credit to which the applicant is | 16 | | entitled. The Department shall annually certify that: (i) each | 17 | | qualified new business venture that receives an angel | 18 | | investment under this Section has maintained a minimum | 19 | | employment threshold, as defined by rule, in the State (and | 20 | | continues to maintain a minimum employment threshold in the | 21 | | State for a period of no less than 3 years from the issue date | 22 | | of the last tax credit certificate issued by the Department | 23 | | with respect to such business pursuant to this Section); and | 24 | | (ii) the claimant's investment has been made and remains, | 25 | | except in the event of a qualifying liquidity event, in the | 26 | | qualified 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 | 2 | | under subsection (b) is held by the claimant for less than 3 | 3 | | years, other than as a result of a permitted sale of the | 4 | | investment to person who is not a related member, the claimant | 5 | | shall pay to the Department of Revenue, in the manner | 6 | | prescribed by the Department of Revenue, the aggregate amount | 7 | | of the disqualified credits that the claimant received related | 8 | | to the subject investment. | 9 | | If the Department determines that a qualified new business | 10 | | venture failed to maintain a minimum employment threshold in | 11 | | the State through the date which is 3 years from the issue date | 12 | | of the last tax credit certificate issued by the Department | 13 | | with respect to the subject business pursuant to this Section, | 14 | | the claimant or claimants shall pay to the Department of | 15 | | Revenue, in the manner prescribed by the Department of | 16 | | Revenue, the aggregate amount of the disqualified credits that | 17 | | claimant or claimants received related to investments in that | 18 | | business. | 19 | | (e) The Department shall implement a program to register | 20 | | qualified new business ventures for purposes of this Section. | 21 | | A business desiring registration under this Section shall be | 22 | | required to submit a full and complete application to the | 23 | | Department. A submitted application shall be effective only | 24 | | for the taxable year in which it is submitted, and a business | 25 | | desiring registration under this Section shall be required to | 26 | | submit a separate application in and for each taxable year for |
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| 1 | | which the business desires registration. Further, if at any | 2 | | time prior to the acceptance of an application for | 3 | | registration under this Section by the Department one or more | 4 | | events occurs which makes the information provided in that | 5 | | application materially false or incomplete (in whole or in | 6 | | part), the business shall promptly notify the Department of | 7 | | the same. Any failure of a business to promptly provide the | 8 | | foregoing information to the Department may, at the discretion | 9 | | of the Department, result in a revocation of a previously | 10 | | approved application for that business, or disqualification of | 11 | | the business from future registration under this Section, or | 12 | | both. The Department may register the business only if all of | 13 | | the 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 | 13 | | Revenue, shall adopt rules to administer this Section. For | 14 | | taxable years beginning before January 1, 2024, the The | 15 | | aggregate amount of the tax credits that may be claimed under | 16 | | this Section for investments made in qualified new business | 17 | | ventures shall be limited to at $10,000,000 per calendar year, | 18 | | of which $500,000 shall be reserved for investments made in | 19 | | qualified new business ventures which are minority-owned | 20 | | businesses, women-owned businesses, or businesses owned by a | 21 | | person with a disability (as those terms are used and defined | 22 | | in the Business Enterprise for Minorities, Women, and Persons | 23 | | with Disabilities Act), and an additional $500,000 shall be | 24 | | reserved for investments made in qualified new business | 25 | | ventures with their principal place of business in counties | 26 | | with a population of not more than 250,000. For taxable years |
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| 1 | | beginning on or after January 1, 2024, the aggregate amount of | 2 | | the tax credits that may be claimed under this Section for | 3 | | investments made in qualified new business ventures shall be | 4 | | limited to $25,000,000 per calendar year, of which $5,000,000 | 5 | | shall be reserved for investments made in qualified new | 6 | | business ventures that are minority-owned businesses (as the | 7 | | term is defined in the Business Enterprise for Minorities, | 8 | | Women, and Persons with Disabilities Act), $2,500,000 shall be | 9 | | reserved for investments made in qualified new business | 10 | | ventures that are women-owned businesses or businesses owned | 11 | | by a person with a disability (as those terms are defined in | 12 | | the Business Enterprise for Minorities, Women, and Persons | 13 | | with Disabilities Act), and $2,500,000 shall be reserved for | 14 | | investments made in qualified new business ventures with their | 15 | | principal place of business in a county with a population of | 16 | | not more than 250,000. The foregoing annual allowable amounts | 17 | | set forth in this Section shall be allocated by the | 18 | | Department, on a per calendar quarter basis and prior to the | 19 | | commencement of each calendar year, in such proportion as | 20 | | determined by the Department, provided that: (i) the amount | 21 | | initially allocated by the Department for any one calendar | 22 | | quarter shall not exceed 35% of the total allowable amount; | 23 | | (ii) any portion of the allocated allowable amount remaining | 24 | | unused as of the end of any of the first 3 calendar quarters of | 25 | | a given calendar year shall be rolled into, and added to, the | 26 | | total allocated amount for the next available calendar |
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| 1 | | quarter; and (iii) the reservation of tax credits for | 2 | | investments in minority-owned businesses, women-owned | 3 | | businesses, businesses owned by a person with a disability, | 4 | | and in businesses in counties with a population of not more | 5 | | than 250,000 is limited to the first 3 calendar quarters of a | 6 | | given calendar year, after which they may be claimed by | 7 | | investors in any qualified new business venture. | 8 | | (g) A claimant may not sell or otherwise transfer a credit | 9 | | awarded under this Section to another person. | 10 | | (h) On or before March 1 of each year, the Department shall | 11 | | report to the Governor and to the General Assembly on the tax | 12 | | credit certificates awarded under this Section for the prior | 13 | | calendar 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 | 20 | | Section after December 31, 2016, the Department shall require | 21 | | the business to include in its application the North American | 22 | | Industry Classification System (NAICS) code applicable to the | 23 | | business and the number of employees of the business at the | 24 | | time of application. Each business registered by the | 25 | | Department as a qualified new business venture that receives | 26 | | an investment giving rise to the issuance of a tax credit |
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| 1 | | certificate pursuant to this Section shall, for each of the 3 | 2 | | years following the issue date of the last tax credit | 3 | | certificate issued by the Department with respect to such | 4 | | business pursuant to this Section, report to the Department | 5 | | the 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.)
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