THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY SAYLOR, PAYNE, EVANKOVICH, AUMENT, BOYD, DUNBAR, HARRIS, MILNE, RAPP, SCAVELLO, MAJOR, BAKER, CALTAGIRONE, CHRISTIANA, CLYMER, CREIGHTON, CUTLER, DALEY, ELLIS, EVERETT, FARRY, GILLESPIE, GINGRICH, GOODMAN, GROVE, HARHAI, HARKINS, HENNESSEY, HESS, HICKERNELL, HORNAMAN, KAUFFMAN, M. K. KELLER, KILLION, KORTZ, LAWRENCE, LONGIETTI, MARSHALL, MARSICO, MILLER, OBERLANDER, PICKETT, PRESTON, PYLE, READSHAW, ROAE, ROCK, SAINATO, M. SMITH, STEVENSON, SWANGER, TALLMAN, TOOHIL, VULAKOVICH, WAGNER, GIBBONS AND QUINN, MAY 10, 2011

REFERRED TO COMMITTEE ON FINANCE, MAY 10, 2011  

AN ACT

Amending Title 12 (Commerce and Trade) of the Pennsylvania

Consolidated Statutes, providing for an angel investment tax

credit.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Title 12 of the Pennsylvania Consolidated

Statutes is amended by adding a chapter to read:

CHAPTER 38

ANGEL INVESTMENT TAX CREDIT

Sec.

3801.  Scope of chapter.

3802.  Definitions.

3803.  Credit for qualified angel investment.

3804.  Carryover, carryback, refund and assignment.

3805.  Time limitation.

3806.  Limitation on angel investment tax credits.

3807.  Shareholder, owner or member pass-through.

3808.  Reports.

3809.  Termination.

3810.  Regulations.

§ 3801.  Scope of chapter.

This chapter relates to angel investment tax credits.

§ 3802.  Definitions.

The following words and phrases, when used in this chapter,

shall have the meanings given to them in this section, unless

the context clearly indicates otherwise:

"Business plan."  An outline of business structure and a

formal statement of business goals, the reasons why the goals

are believed to be attainable and the plan for reaching those

goals.

"Department."  The Department of Revenue of the Commonwealth.

"Pass-through entity."  Any of the following:

(1)  A partnership, limited partnership, limited

liability company, business trust or other unincorporated

entity that for Federal income tax purposes is taxable as a

partnership.

(2)  A Pennsylvania S corporation.

"Qualified angel investment."  A purchase of equity interest

or any other expenditure made by an individual or a network of

individuals who review new businesses or a proposed business for

potential investment of an individual's money.

"Qualified business venture."  A business plan that satisfies

the following:

(1)  The business has its headquarters in this

Commonwealth.

(2)  At least 51% of the employees employed by the

business are employed in this Commonwealth.

(3)  The success of the business plan depends upon the

development or commercialization of intellectual property for

which either of the following apply:

(i)  Patent protection under 35 U.S.C (relating to

patents) has been secured, is pending or will be sought.

(ii)  A copyright under 17 U.S.C. (relating to

copyrights) has been secured, is pending or will be

sought.

(4)  The business has less than 100 employees.

(5)  The business has been in operation in this

Commonwealth for not more than seven consecutive years.

(6)  The business has not received more than $1,000,000

in investments that have qualified tax credits under this

chapter.

"Qualified tax liability."  The liability for taxes imposed

under Article III, IV or VI of the Tax Reform Code of 1971. The

term shall include the liability for taxes imposed under Article

III of the Tax Reform Code of 1971 on an owner of a pass-through

entity.

"Secretary."  The Secretary of Revenue of the Commonwealth.

"Tax credit."  The angel investment tax credit authorized

under this chapter.

"Tax Reform Code of 1971."  The act of March 4, 1971 (P.L.6,

No.2), known as the Tax Reform Code of 1971.

"Taxpayer."  An entity subject to tax under Article III, IV

or VI of the Tax Reform Code of 1971. The term shall include the

shareholder, owner or member of a pass-through entity that

receives a tax credit.

§ 3803.  Credit for qualified angel investment.

(a)  Application.--A taxpayer with qualified angel investment

in a taxable year may apply for an angel investment tax credit

as provided under this chapter. The department shall establish

appropriate filing deadlines for angel investment tax credits in

a manner that allows for the expeditious utilization of the

angel investment tax credit by the taxpayer.

(b)  Amount.--A taxpayer that is qualified under subsection

(a) shall receive an angel investment tax credit for the taxable

year in the amount of 25% of the taxpayer's qualified angel

investment in a qualified business venture. The Department of

Community and Economic Development shall certify that entities

meet the requirements of a qualified business venture.

(c)  Notification.--By December 16 of the calendar year

following the close of the taxable year during which the

qualified angel investment was made, the department shall notify

the taxpayer of the amount of the taxpayer's angel investment

tax credit approved by the department.

§ 3804.  Carryover, carryback, refund and assignment.

(a)  Carryover.--If the taxpayer cannot use the entire amount

of the angel investment tax credit for the taxable year in which

the angel investment tax credit is first approved, the excess

may be carried over to succeeding taxable years and used as a

credit against the qualified tax liability of the taxpayer for

those taxable years. Each time that the angel investment tax

credit is carried over to a succeeding taxable year, it shall be

reduced by the amount that was used as a credit during the

immediately preceding taxable year. The angel investment tax

credit may be carried over and applied to succeeding taxable

years for no more than seven taxable years following the first

taxable year for which the taxpayer was entitled to claim the

angel investment tax credit.

(b)  Application.--An angel investment tax credit approved by

the department for a qualified angel investment in a taxable

year first shall be applied against the taxpayer's qualified tax

liability for the current taxable year as of the date on which

the angel investment tax credit was approved before the angel

investment tax credit is applied against any tax liability under

subsection (a).

(c)  Carryback or refund.--A taxpayer is not entitled to

carry back or obtain a refund of an unused angel investment tax

credit.

§ 3805.  Time limitation.

A taxpayer shall not be entitled to an angel investment tax

credit for qualified angel investments incurred in taxable years

ending after December 31, 2021.

§ 3806.  Limitation on angel investment tax credits.

(a)  Total amount.--The total amount of angel investment tax

credits approved by the department in a fiscal year shall be

equal to the greater of:

(1)  $3,000,000; or

(2)  The difference between $25,000,000 and the total

amount of keystone innovation zone tax credits issued under

section 3706 (relating to keystone innovation zone tax

credits) through December 15th of the fiscal year.

(b)  Sale or assignment.--A taxpayer, upon application to and

approval by the department, may sell or assign, in whole or in

part, an angel investment tax credit granted to the taxpayer

under this chapter. The department shall establish guidelines

for the approval of applications under this subsection.

§ 3807.  Shareholder, owner or member pass-through.

(a)  Shareholder entitlement.--If a Pennsylvania S

corporation does not have an eligible tax liability against

which the angel investment tax credit may be applied, a

shareholder of the Pennsylvania S corporation shall be entitled

to an angel investment tax credit equal to the angel investment

tax credit determined for the Pennsylvania S corporation for the

taxable year multiplied by the percentage of the Pennsylvania S

corporation's distributive income to which the shareholder is

entitled.

(b)  Pass-through entity entitlement.--If a pass-through

entity other than a Pennsylvania S corporation does not have an

eligible tax liability against which the angel investment tax

credit may be applied, an owner or member of the pass-through

entity is entitled to an angel investment tax credit equal to

the angel investment tax credit determined for the pass-through

entity for the taxable year multiplied by the percentage of the

pass-through entities' distributive income to which the owner or

member is entitled.

(c)  Additional credit.--

(1)  Except as provided under paragraph (2), the angel

investment tax credit provided under subsections (a) or (b)

shall be in addition to any tax credit to which a

shareholder, owner or member of a pass-through entity is

otherwise entitled under this chapter.

(2)  A pass-through entity and a shareholder, owner or

member of a pass-through entity may not claim an angel

investment tax credit under this chapter for the same

qualified angel investment.

§ 3808.  Reports.

(a)  Report to General Assembly.--The secretary shall submit

an annual report to the General Assembly indicating the

effectiveness of the angel investment tax credit provided under

this chapter no later than March 15 following the year in which

the angel investment tax credits were approved. The report shall

include the names of all taxpayers utilizing the angel

investment tax credit as of the date of the report and the

amount of the angel investment tax credits approved and utilized

by each taxpayer. Notwithstanding any law providing for the

confidentiality of tax records, the information contained in the

report shall be public information. The report may also include

any recommendations for changes in the calculation or

administration of the angel investment tax credit.

(b)  Report to Secretary of the Senate and the Chief Clerk of

the House of Representatives.--The department shall submit a

report to the Secretary of the Senate and the Chief Clerk of the

House of Representatives indicating the effectiveness of the

angel investment tax credit by December 31, 2013 and by December

31, 2016. Notwithstanding any law providing for the

confidentiality of tax records, the report shall include the

names of all taxpayers awarded the angel investment tax credits,

all taxpayers utilizing the angel investment tax credits, the

amount of angel investment tax credits approved and utilized by

each taxpayer and the locations of the keystone innovation zone

companies as defined in section 3702 (relating to definitions)

awarded the angel investment tax credits. The report shall be

considered a public record under section 102 of the act of

February 14, 2008 (P.L.6, No.3), known as the Right-to-Know Law.

§ 3809.  Termination.

The department shall not approve an angel investment tax

credit for taxable years ending after December 31, 2021.

§ 3810.  Regulations.

The secretary shall promulgate regulations necessary for the

implementation and administration of this chapter.

Section 2.  This act shall take effect immediately.