1Amending Title 12 (Commerce and Trade) of the Pennsylvania
2Consolidated Statutes, providing for an angel investment tax
3credit.

4The General Assembly of the Commonwealth of Pennsylvania
5hereby enacts as follows:

6Section 1. Title 12 of the Pennsylvania Consolidated
7Statutes is amended by adding a chapter to read:

8CHAPTER 38

9ANGEL INVESTMENT TAX CREDIT

10Sec.

113801. Scope of chapter.

123802. Definitions.

133803. Establishment.

143804. Qualified business plans.

153805. Credit for qualified investment.

13806. Carryover, application of tax credit, carryback, refund
2and assignment.

33807. Time limitation.

43808. Limitation on tax credits.

53809. Shareholder, owner or member pass-through.

63810. Repayment and penalty.

73811. Reports.

83812. Termination.

93813. Guidelines.

10§ 3801. Scope of chapter.

11This chapter relates to angel investment tax credits.

12§ 3802. Definitions.

13The following words and phrases, when used in this chapter,
14shall have the meanings given to them in this section, unless
15the context clearly indicates otherwise:

16"Accredited investor." Any of the following:

17(1) An individual whose net worth or joint net worth
18with the individual's spouse exceeds $1,000,000.

19(2) An individual who had individual income in excess of
20$200,000 in each of the two most recent years or joint income
21with that individual's spouse in excess of $300,000 in each
22of those years and has a reasonable expectation of reaching
23the same income level in the current year.

24(3) Any entity in which all of the equity owners meet
25paragraph (1) or (2).

26"Business plan." An outline of business structure and a
27formal statement of business goals, including an explanation of
28how the goals are anticipated to be achieved.

29"Department." The Department of Community and Economic
30Development of the Commonwealth.

1"Pass-through entity." A partnership as defined in section 
2301(n.0) of the act of March 4, 1971 (P.L.6, No.2), known as the 
3Tax Reform Code of 1971, or a Pennsylvania S corporation as 
4defined in section 301(n.1) of the Tax Reform Code of 1971.

5"Qualified business venture." A business that is all of the
6following:

7(1) Headquartered or that will establish its
8headquarters in this Commonwealth prior to the time the
9taxpayer is eligible to apply for the tax credit.

10(2) Maintains its headquarters in this Commonwealth for
11at least five years after the taxpayer applied for the tax
12credit.

13(3) Where at least 51% of its employees are employed in
14this Commonwealth at the time the taxpayer applies for the
15tax credit.

16(4) Has fewer than 100 employees at the time the
17taxpayer applies for the tax credit.

18(5) Has been in operation in this Commonwealth for not
19more than five consecutive years at the time the taxpayer
20applies for the tax credit.

21(6) Has not received more than $5,000,000, in the
22aggregate, in private equity investments.

23"Qualified investment." A payment of money or its equivalent
24for a private equity interest in a qualified business venture.

25"Qualified tax liability." The liability for taxes imposed
26under Article III, IV or VI of the act of March 4, 1971 (P.L.6,
27No.2), known as the Tax Reform Code of 1971. The term shall
28include the liability for taxes imposed under Article III of the
29Tax Reform Code of 1971 on an owner of a pass-through entity.

30"Secretary." The Secretary of Community and Economic

1Development of the Commonwealth.

2"Tax credit." The angel investment tax credit authorized
3under this chapter.

4"Taxpayer." A person subject to tax under Article III, IV or
5VI of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
6Reform Code of 1971. The term shall include the shareholder,
7owner or member of a pass-through entity that receives an angel
8investment tax credit.

9§ 3803. Establishment.

10There is established a tax credit program to be known as the
11Angel Investment Tax Credit. The program shall:

12(1) Create a business environment that attracts and
13encourages early-stage financing for businesses with the
14potential for high growth.

15(2) Increase capital investment.

16(3) Encourage job creation.

17§ 3804. Qualified business plans.

18In order for a business plan to be qualified, the business
19plan shall:

20(1) Indicate the potential for increasing jobs in this
21Commonwealth.

22(2) Indicate the potential for increasing capital
23investment in this Commonwealth.

24(3) Specify that the plan is based upon the development
25or commercialization of intellectual property for which
26either of the following apply:

27(i) patent protection under 35 U.S.C. (relating to
28patents) has been secured or is pending; or

29(ii) a copyright under 17 U.S.C. (relating to
30copyrights) has been secured or is pending.

1§ 3805. Credit for qualified investment.

2(a) Application.--A taxpayer that made a qualified
3investment in a taxable year may apply for a tax credit. The
4application must be on a form required by the department and
5shall include all of the following:

6(1) The name and address of the applicant.

7(2) The name and address of the business in which the
8taxpayer has invested.

9(3) A certified copy of the qualified business plan.

10(4) Documentation that the applicant is an accredited
11investor.

12(5) Documentation that the business in which the
13taxpayer has invested is a qualified business venture.

14(6) Documentation that the qualified investment has been
15made by the applicant.

16(7) Any other information required by the department.

17(b) Review.--The department, in conjunction with the
18Department of Revenue, shall review the application and
19determine if:

20(1) All requirements established under this chapter have
21been met.

22(2) The applicant has filed all required State tax
23reports and returns for all taxable years and paid any
24balance of State tax due as determined by the Department of
25Revenue.

26(c) Approval.--Upon being satisfied under subsection (b),
27the department shall approve the application and award the
28taxpayer a tax credit for the taxable year in the amount equal
29to 25% of the taxpayer's qualified investment made during the
30taxable year.

1(d) Notification.--The department shall notify the taxpayer
2of the amount of the taxpayer's tax credit within 30 days after
3approval by the department.

4§ 3806. Carryover, application of tax credit, carryback, refund
5and assignment.

6(a) Carryover.--If the taxpayer cannot use the entire amount
7of the tax credit for the taxable year in which the tax credit
8is first approved, the excess may be carried over to succeeding
9taxable years and used as a credit against the qualified tax
10liability of the taxpayer for those taxable years. Each time
11that the tax credit is carried over to a succeeding taxable
12year, it shall be reduced by the amount that was used as a
13credit during the immediately preceding taxable year. The tax
14credit may be carried over and applied to succeeding taxable
15years for no more than seven taxable years following the first
16taxable year for which the taxpayer was entitled to claim the
17tax credit.

18(b) Application of tax credit.--A tax credit approved by the
19department for a qualified investment in a taxable year shall
20first be applied against the taxpayer's qualified tax liability
21for the current taxable year as of the date on which the tax
22credit was approved before the tax credit is applied against any
23tax liability under subsection (a).

24(c) Carryback or refund.--A taxpayer is not entitled to
25carry back or obtain a refund of an unused tax credit.

26(d) Sale or assignment.--A taxpayer, upon application to and 
27approval by the department in consultation with the Department 
28of Revenue, may sell or assign, in whole or in part, a tax 
29credit granted to the taxpayer under this chapter if the 
30taxpayer does not have a qualified tax liability against which 

1the tax credit may be applied in the current taxable year. The 
2department shall establish guidelines, in consultation with the 
3Department of Revenue, for the approval of applications under 
4this subsection. Before an application is approved, the 
5Department of Revenue shall make a finding that the taxpayer and 
6its assignee have filed all required State tax reports and 
7returns for all taxable years and paid any balance of State tax 
8due as determined by the Department of Revenue.

9(e) Purchasers and assignees.--The purchaser or assignee of
10all or a portion of a tax credit under subsection (d) shall
11immediately claim the credit in the taxable year in which the
12purchase or assignment is made, although the purchaser or
13assignee may carry over unused tax credits to the succeeding
14taxable year for up to two years. The amount of the tax credit
15that a purchaser or assignee may use against any one qualified
16tax liability may not exceed 75% of the qualified tax liability
17for the taxable year. The purchaser or assignee may not carry
18back or obtain a refund of or sell or assign the tax credit. The
19purchaser or assignee shall notify the department, and the
20department shall notify the Department of Revenue of the seller
21or assignor of the tax credit in compliance with procedures
22specified by the department, in consultation with the Department
23of Revenue.

24§ 3807. Time limitation.

25A taxpayer shall not be entitled to a tax credit for
26qualified investments incurred in taxable years ending after
27December 31, <-2021 2023.

28§ 3808. Limitation on tax credits.

29(a) Total amount.--The total amount of tax credits approved
30by the department in any calendar year shall not exceed the

1amount of keystone innovation zone tax credits authorized but
2unissued under section 3706 (relating to keystone innovation
3zone tax credits) as of December 15 of the prior calendar year.
4On or before December 20 of each calendar year the department
5shall post on its publicly accessible Internet website the
6amount available for the tax credit authorized under this
7chapter.

8(b) Allocation.--Tax credits shall be allocated by the
9department on a first-come-first-served basis.

10§ 3809. Shareholder, owner or member pass-through.

11(a) Shareholder entitlement.--If a Pennsylvania S
12corporation does not have an eligible tax liability against
13which the tax credit may be applied, a shareholder of the
14Pennsylvania S corporation shall be entitled to a tax credit
15equal to the tax credit determined for the Pennsylvania S
16corporation for the taxable year multiplied by the percentage of
17the Pennsylvania S corporation's distributive income to which
18the shareholder is entitled.

19(b) Pass-through entity entitlement.--If a pass-through
20entity other than a Pennsylvania S corporation does not have tax
21liability against which the tax credit may be applied, an owner
22or member of the pass-through entity shall be entitled to a tax
23credit equal to the tax credit determined for the pass-through
24entity for the taxable year multiplied by the percentage of the
25pass-through entities' distributive income to which the owner or
26member is entitled.

27(c) Additional credit.--

28(1) Except as provided under paragraph (2), the tax
29credit provided under subsection (a) or (b) shall be in
30addition to any other tax credit to which a shareholder,

1owner or member of a pass-through entity is otherwise
2entitled under this chapter.

3(2) A pass-through entity and a shareholder, owner or
4member of a pass-through entity shall not claim a tax credit
5under this chapter for the same qualified investment.

6§ 3810. Repayment.

7The department shall require the taxpayer to repay any tax
8credit received under this chapter where the department, in
9conjunction with the Department of Revenue, determines that any
10of the following conditions exists:

11(1) That the qualified business venture did not satisfy
12the requirements of the qualified business plan submitted at
13the time of application.

14(2) That the business in which the taxpayer made the
15qualified investment is no longer a qualified business
16venture.

17(3) That the taxpayer received the tax credit as a
18result of fraud.

19§ 3811. Reports.

20The secretary shall submit an annual report to the chair and
21minority chair of the standing committees in the Senate and the
22chair and minority chair of the standing committees in the House
23of Representatives with jurisdiction over the department and the
24Department of Revenue indicating the effectiveness of the tax
25credit provided under this chapter no later than March 15
26following the fiscal year in which the tax credits were
27approved. Notwithstanding any law providing for the
28confidentiality of tax records, the report shall include the
29names of all taxpayers awarded the tax credits, all taxpayers
30utilizing the tax credits, the amount of tax credits approved

1and utilized by each taxpayer and the names and locations of the
2qualified business ventures for which the tax credits were
3awarded. The report may also include any recommendations for
4changes in the calculation or administration of the tax credit.
5The report and the information contained in it shall be
6considered a public record under section 102 of the act of
7February 14, 2008 (P.L.6, No.3), known as the Right-to-Know Law.

8§ 3812. Termination.

9The department shall not approve a tax credit for qualified
10investments incurred in taxable years ending after December 31,
<-112021 2023.

12§ 3813. Guidelines.

13The department, in consultation with the Department of
14Revenue, shall develop written guidelines for the implementation
15and administration of this chapter. The guidelines shall be
16posted on the department's publicly accessible Internet
17website:.<-

18Section 2. The addition of 12 Pa.C.S. Ch. 38 shall apply to
19qualified investments made in taxable years beginning after
20December 31, <-2011 2013.

21Section 3. This act shall take effect immediately.