Attn: Illinois Business Owners,
Originally scheduled to expire at the end of 2016, Illinois has extended the Illinois Angel Investment Credit through 2021 with a few key changes. Similar to the original law, investors receive a tax credit equal to 25% of their investment (up to $2M) in a Qualified New Business Venture (QNBV). The credit offsets a taxpayer’s Illinois income tax liability; unused credit is carried forward for up to five years. The Illinois Department of Commerce and Economic Opportunity (DCEO) administers the program and annually allocates $10M of credits to qualified investors, with up to $1M reserved for certain classes of minority-owned businesses and those located in rural counties.
Under the new statutes, tax credits will be awarded quarterly throughout the year on a first-come, first-serve basis, with no more than 35% of total available credits allocated in any one quarter. The new rules encourage investment in diverse businesses and provide companies with late-year fundraising goals access to tax credits that would have been extinguished under the former program. Though not yet formalized through administrative regulations, the state intends to clarify the availability of credits for equity-converting investments. Per discussion with the program representative, convertible note investments will qualify for a credit at the time of conversion only if the note converts in the same calendar year as the original investment. A Simple Agreement for Future Equity (SAFE) investment will qualify immediately but must follow the DCEO’s approved template.
Businesses seeking the QNBV designation must annually complete an application which can be found on the DCEO website: Businesses must meet the following criteria to be eligible:
- must be principally engaged in innovation;
- have potential for creating jobs or increasing capital investment in Illinois;
- have a principal place of business in Illinois;
- employ fewer than 100 employees;
- have at least 51% of its employees in Illinois;
- have been in operations for less than 10 years;
- have received less than $10 million in aggregate investments or less than $4 million that have qualified for the tax credits;
- be in good standing with Illinois; and
- agree to maintain a minimum employment threshold in Illinois for three years from the date of the last qualifying investment. Failure to maintain this threshold could amount to disqualified credits that claimants received related to the investments in the QNBV.
The DCEO is currently accepting QNBV applications for the 2018 calendar year. Applications are generally reviewed by the state bi-weekly, so applicants should expect a decision within two weeks.
After a business has received its QNBV designation and annual certification, Investors should email their completed credit application to the state promptly and should receive a response within two weeks of submission. The DCEO will release the 2018 claimant application next month.
Please contact Lisa Pallen at 312.461.0513 or email@example.com if you have any questions or require any assistance.