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| PRIOR PRINTER'S NOS. 1825, 2635 | PRINTER'S NO. 2690 |
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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| HOUSE BILL |
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| 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, QUINN, BROOKS, TRUITT, COX, GEIST, MURT, BEAR, DENLINGER, FRANKEL AND KAMPF, MAY 10, 2011 |
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| AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES, NOVEMBER 1, 2011 |
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| AN ACT |
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1 | Amending Title 12 (Commerce and Trade) of the Pennsylvania |
2 | Consolidated Statutes, providing for an angel investment tax |
3 | credit. |
4 | The General Assembly of the Commonwealth of Pennsylvania |
5 | hereby enacts as follows: |
6 | Section 1. Title 12 of the Pennsylvania Consolidated |
7 | Statutes is amended by adding a chapter to read: |
8 | CHAPTER 38 |
9 | ANGEL INVESTMENT TAX CREDIT |
10 | Sec. |
11 | 3801. Scope of chapter. |
12 | 3802. Definitions. |
13 | 3803. Establishment. |
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1 | 3804. Qualified business plans. |
2 | 3805. Credit for qualified investment. |
3 | 3806. Carryover, application of tax credit, carryback, refund |
4 | and assignment. |
5 | 3807. Time limitation. |
6 | 3808. Limitation on tax credits. |
7 | 3809. Shareholder, owner or member pass-through. |
8 | 3810. Repayment and penalty. |
9 | 3811. Reports. |
10 | 3812. Termination. |
11 | 3813. Regulations. |
12 | § 3801. Scope of chapter. |
13 | This chapter relates to angel investment tax credits. |
14 | § 3802. Definitions. |
15 | The following words and phrases, when used in this chapter, |
16 | shall have the meanings given to them in this section, unless |
17 | the context clearly indicates otherwise: |
18 | "Accredited investor." Any of the following: |
19 | (1) An individual whose net worth or joint net worth |
20 | with the individual's spouse exceeds $1,000,000. |
21 | (2) An individual who had individual income in excess of |
22 | $200,000 in each of the two most recent years or joint income |
23 | with that individual's spouse in excess of $300,000 in each |
24 | of those years and has a reasonable expectation of reaching |
25 | the same income level in the current year. |
26 | (3) Any entity in which all of the equity owners meet |
27 | paragraph (1) or (2). |
28 | "Business plan." An outline of business structure and a |
29 | formal statement of business goals, including an explanation of |
30 | how the goals are anticipated to be achieved. |
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1 | "Department." The Department of Community and Economic |
2 | Development of the Commonwealth. |
3 | "Pass-through entity." A partnership as defined in section |
4 | 301(n.o) of the act of March 4, 1971 (P.L.6, No.2), known as the |
5 | Tax Reform Code of 1971, or a Pennsylvania S corporation as |
6 | defined in section 301(n.1) of the Tax Reform Code of 1971. |
7 | "Qualified business venture." A business that is all of the |
8 | following: |
9 | (1) Headquartered or that will establish its |
10 | headquarters in this Commonwealth prior to the time the |
11 | taxpayer is eligible to apply for the tax credit. |
12 | (2) Maintains its headquarters in this Commonwealth for |
13 | at least five years after the taxpayer applied for the tax |
14 | credit. |
15 | (3) Where at least 51% of its employees are employed in |
16 | this Commonwealth at the time the taxpayer applies for the |
17 | tax credit. |
18 | (4) Has fewer than 100 employees at the time the |
19 | taxpayer applies for the tax credit. |
20 | (5) Has been in operation in this Commonwealth for not |
21 | more than five consecutive years at the time the taxpayer |
22 | applies for the tax credit. |
23 | (6) Has not received more than $5,000,000, in the |
24 | aggregate, in private equity investments. |
25 | "Qualified investment." A payment of money or its equivalent |
26 | for a private equity interest in a qualified business venture. |
27 | "Qualified tax liability." The liability for taxes imposed |
28 | under Article III, IV or VI of the act of March 4, 1971 (P.L.6, |
29 | No.2), known as the Tax Reform Code of 1971. The term shall |
30 | include the liability for taxes imposed under Article III of the |
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1 | Tax Reform Code of 1971 on an owner of a pass-through entity. |
2 | "Secretary." The Secretary of Community and Economic |
3 | Development of the Commonwealth. |
4 | "Tax credit." The angel investment tax credit authorized |
5 | under this chapter. |
6 | "Taxpayer." A person subject to tax under Article III, IV or |
7 | VI of the act of March 4, 1971 (P.L.6, No.2), known as the Tax |
8 | Reform Code of 1971. The term shall include the shareholder, |
9 | owner or member of a pass-through entity that receives an angel |
10 | investment tax credit. |
11 | § 3803. Establishment. |
12 | There is established a tax credit program to be known as the |
13 | Angel Investment Tax Credit. The program shall: |
14 | (1) Create a business environment that attracts and |
15 | encourages early-stage financing for businesses with the |
16 | potential for high growth. |
17 | (2) Increase capital investment. |
18 | (3) Encourage job creation. |
19 | § 3804. Qualified business plans. |
20 | In order for a business plan to be qualified, the business |
21 | plan shall: |
22 | (1) Indicate the potential for increasing jobs in this |
23 | Commonwealth. |
24 | (2) Indicate the potential for increasing capital |
25 | investment in this Commonwealth. |
26 | (3) Specify that the plan is based upon the development |
27 | or commercialization of intellectual property for which |
28 | either of the following apply: |
29 | (i) patent protection under 35 U.S.C. (relating to |
30 | patents) has been secured or is pending; or |
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1 | (ii) a copyright under 17 U.S.C. (relating to |
2 | copyrights) has been secured or is pending. |
3 | § 3805. Credit for qualified investment. |
4 | (a) Application.--A taxpayer that made a qualified |
5 | investment in a taxable year may apply for a tax credit. The |
6 | application must be on a form required by the department and |
7 | shall include all of the following: |
8 | (1) The name and address of the applicant. |
9 | (2) The name and address of the business in which the |
10 | taxpayer has invested. |
11 | (3) A certified copy of the qualified business plan. |
12 | (4) Documentation that the applicant is an accredited |
13 | investor. |
14 | (5) Documentation that the business in which the |
15 | taxpayer has invested is a qualified business venture. |
16 | (6) Documentation that the qualified investment has been |
17 | made by the applicant. |
18 | (7) Any other information required by the department. |
19 | (b) Review.--The department, in conjunction with the |
20 | Department of Revenue, shall review the application and |
21 | determine if: |
22 | (1) All requirements established under this chapter have |
23 | been met. |
24 | (2) The applicant has filed all required State tax |
25 | reports and returns for all applicable taxable years and paid | <-- |
26 | any balance of State tax due as determined at settlement, | <-- |
27 | assessment or determination by the Department of Revenue. |
28 | (c) Approval.--Upon being satisfied under subsection (b), |
29 | the department shall approve the application and award the |
30 | taxpayer a tax credit for the taxable year in the amount equal |
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1 | to 25% of the taxpayer's qualified investment made during the |
2 | taxable year. |
3 | (d) Notification.--The department shall notify the taxpayer |
4 | of the amount of the taxpayer's tax credit within 30 days after |
5 | approval by the department. |
6 | § 3806. Carryover, application of tax credit, carryback, refund |
7 | and assignment. |
8 | (a) Carryover.--If the taxpayer cannot use the entire amount |
9 | of the tax credit for the taxable year in which the tax credit |
10 | is first approved, the excess may be carried over to succeeding |
11 | taxable years and used as a credit against the qualified tax |
12 | liability of the taxpayer for those taxable years. Each time |
13 | that the tax credit is carried over to a succeeding taxable |
14 | year, it shall be reduced by the amount that was used as a |
15 | credit during the immediately preceding taxable year. The tax |
16 | credit may be carried over and applied to succeeding taxable |
17 | years for no more than seven taxable years following the first |
18 | taxable year for which the taxpayer was entitled to claim the |
19 | tax credit. |
20 | (b) Application of tax credit.--A tax credit approved by the |
21 | department for a qualified investment in a taxable year shall |
22 | first be applied against the taxpayer's qualified tax liability |
23 | for the current taxable year as of the date on which the tax |
24 | credit was approved before the tax credit is applied against any |
25 | tax liability under subsection (a). |
26 | (c) Carryback or refund.--A taxpayer is not entitled to |
27 | carry back or obtain a refund of an unused tax credit. |
28 | (d) Sale or assignment.--A taxpayer, upon application to and |
29 | approval by the department in consultation with the Department |
30 | of Revenue, may sell or assign, in whole or in part, a tax |
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1 | credit granted to the taxpayer under this chapter if the |
2 | taxpayer does not have a qualified tax liability against which |
3 | the tax credit may be applied in the current taxable year. The |
4 | department shall establish guidelines, in consultation with the |
5 | Department of Revenue, for the approval of applications under |
6 | this subsection. Before an application is approved, the |
7 | Department of Revenue shall make a finding that the taxpayer and |
8 | its assignee have filed all required State tax reports and |
9 | returns for all applicable taxable years and paid any balance of | <-- |
10 | State tax due as determined at settlement, assessment or | <-- |
11 | determination by the Department of Revenue. |
12 | (e) Purchasers and assignees.--The purchaser or assignee of |
13 | all or a portion of a tax credit under subsection (d) shall |
14 | immediately claim the credit in the taxable year in which the |
15 | purchase or assignment is made, although the purchaser or |
16 | assignee may carry over unused tax credits to the succeeding |
17 | taxable year for up to two years. The amount of the tax credit |
18 | that a purchaser or assignee may use against any one qualified |
19 | tax liability may not exceed 75% of the qualified tax liability |
20 | for the taxable year. The purchaser or assignee may not carry |
21 | back or obtain a refund of or sell or assign the tax credit. The |
22 | purchaser or assignee shall notify the department, and the |
23 | department shall notify the Department of Revenue of the seller |
24 | or assignor of the tax credit in compliance with procedures |
25 | specified by the department, in consultation with the Department |
26 | of Revenue. |
27 | § 3807. Time limitation. |
28 | A taxpayer shall not be entitled to a tax credit for |
29 | qualified investments incurred in taxable years ending after |
30 | December 31, 2021. |
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1 | § 3808. Limitation on tax credits. |
2 | (a) Total amount.--The total amount of tax credits approved |
3 | by the department in any calendar year shall not exceed the |
4 | amount of keystone innovation zone tax credits authorized but |
5 | unissued under section 3706 (relating to keystone innovation |
6 | zone tax credits) as of December 15 of the prior calendar year. |
7 | On or before December 20 of each calendar year the department |
8 | shall post on its publicly accessible Internet website the |
9 | amount available for the tax credit authorized under this |
10 | chapter. |
11 | (b) Allocation.--Tax credits shall be allocated by the |
12 | department on a first-come-first-served basis. |
13 | § 3809. Shareholder, owner or member pass-through. |
14 | (a) Shareholder entitlement.--If a Pennsylvania S |
15 | corporation does not have an eligible tax liability against |
16 | which the tax credit may be applied, a shareholder of the |
17 | Pennsylvania S corporation shall be entitled to a tax credit |
18 | equal to the tax credit determined for the Pennsylvania S |
19 | corporation for the taxable year multiplied by the percentage of |
20 | the Pennsylvania S corporation's distributive income to which |
21 | the shareholder is entitled. |
22 | (b) Pass-through entity entitlement.--If a pass-through |
23 | entity other than a Pennsylvania S corporation does not have tax |
24 | liability against which the tax credit may be applied, an owner |
25 | or member of the pass-through entity shall be entitled to a tax |
26 | credit equal to the tax credit determined for the pass-through |
27 | entity for the taxable year multiplied by the percentage of the |
28 | pass-through entities' distributive income to which the owner or |
29 | member is entitled. |
30 | (c) Additional credit.-- |
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1 | (1) Except as provided under paragraph (2), the tax |
2 | credit provided under subsections (a) or (b) shall be in |
3 | addition to any other tax credit to which a shareholder, |
4 | owner or member of a pass-through entity is otherwise |
5 | entitled under this chapter. |
6 | (2) A pass-through entity and a shareholder, owner or |
7 | member of a pass-through entity shall not claim a tax credit |
8 | under this chapter for the same qualified investment. |
9 | § 3810. Repayment. |
10 | The department shall require the taxpayer to repay any tax | <-- |
11 | credit received and any monetary value received from the sale or |
12 | assignment of a tax credit where it has been determined that the |
13 | recipient taxpayer did not satisfy the requirements of the |
14 | qualified business plan submitted by the applicant or received |
15 | such as the result of fraud. |
16 | The department shall require the taxpayer to repay any tax | <-- |
17 | credit received under this chapter where the department, in |
18 | conjunction with the Department of Revenue, determines that any |
19 | of the following conditions exists: |
20 | (1) That the qualified business venture did not satisfy |
21 | the requirements of the qualified business plan submitted at |
22 | the time of application. |
23 | (2) That the business in which the taxpayer made the |
24 | qualified investment is no longer a qualified business |
25 | venture. |
26 | (3) That the taxpayer received the tax credit as a |
27 | result of fraud. |
28 | § 3811. Reports. |
29 | The secretary shall submit an annual report to the chair and |
30 | minority chair of the standing committees in the Senate and the |
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1 | chair and minority chair of the standing committees in the House |
2 | of Representatives with jurisdiction over the department and the |
3 | Department of Revenue indicating the effectiveness of the tax |
4 | credit provided under this chapter no later than March 15 |
5 | following the fiscal year in which the tax credits were |
6 | approved. Notwithstanding any law providing for the |
7 | confidentiality of tax records, the report shall include the |
8 | names of all taxpayers awarded the tax credits, all taxpayers |
9 | utilizing the tax credits, the amount of tax credits approved |
10 | and utilized by each taxpayer and the names and locations of the |
11 | qualified business ventures for which the tax credits were |
12 | awarded. The report may also include any recommendations for |
13 | changes in the calculation or administration of the tax credit. |
14 | The report and the information contained in it shall be |
15 | considered a public record under section 102 of the act of |
16 | February 14, 2008 (P.L.6, No.3), known as the Right-to-Know Law. |
17 | § 3812. Termination. |
18 | The department shall not approve a tax credit for qualified |
19 | investments incurred in taxable years ending after December 31, |
20 | 2021. |
21 | § 3813. Guidelines. |
22 | The department, in consultation with the Department of |
23 | Revenue, shall develop written guidelines for the implementation |
24 | and administration of this chapter. The guidelines shall be |
25 | posted on the department's publicly accessible Internet website: |
26 | Section 2. The addition of 12 Pa.C.S. Ch. 38 shall apply to |
27 | qualified investments made in taxable years beginning after |
28 | December 31, 2011. |
29 | Section 3. This act shall take effect immediately. |
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