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.

163806.  Carryover, application of tax credit, carryback, refund

1and assignment.

23807.  Time limitation.

33808.  Limitation on tax credits.

43809.  Shareholder, owner or member pass-through.

53810.  Repayment and penalty.

63811.  Reports.

73812.  Termination.

83813.  Guidelines.

9§ 3801.  Scope of chapter.

10This chapter relates to angel investment tax credits.

11§ 3802.  Definitions.

12The following words and phrases, when used in this chapter,
13shall have the meanings given to them in this section, unless
14the context clearly indicates otherwise:

15"Accredited investor."  Any of the following:

16(1)  An individual whose net worth or joint net worth
17with the individual's spouse exceeds $1,000,000.

18(2)  An individual who had individual income in excess of
19$200,000 in each of the two most recent years or joint income
20with that individual's spouse in excess of $300,000 in each
21of those years and has a reasonable expectation of reaching
22the same income level in the current year.

23(3)  Any entity in which all of the equity owners meet
24paragraph (1) or (2).

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

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

30"Pass-through entity."  A partnership as defined in section 

1301(n.0) of the act of March 4, 1971 (P.L.6, No.2), known as the 
2Tax Reform Code of 1971, or a Pennsylvania S corporation as 
3defined in section 301(n.1) of the Tax Reform Code of 1971.

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

6(1)  Headquartered or that will establish its
7headquarters in this Commonwealth prior to the time the
8taxpayer is eligible to apply for the tax credit.

9(2)  Maintains its headquarters in this Commonwealth for
10at least five years after the taxpayer applied for the tax
11credit.

12(3)  Where at least 51% of its employees are employed in
13this Commonwealth at the time the taxpayer applies for the
14tax credit.

15(4)  Has fewer than 100 employees at the time the
16taxpayer applies for the tax credit.

17(5)  Has been in operation in this Commonwealth for not
18more than five consecutive years at the time the taxpayer
19applies for the tax credit.

20(6)  Has not received more than $5,000,000, in the
21aggregate, in private equity investments.

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

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

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

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

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

8§ 3803.  Establishment.

9There is established a tax credit program to be known as the
10Angel Investment Tax Credit. The program shall:

11(1)  Create a business environment that attracts and
12encourages early-stage financing for businesses with the
13potential for high growth.

14(2)  Increase capital investment.

15(3)  Encourage job creation.

16§ 3804.  Qualified business plans.

17In order for a business plan to be qualified, the business
18plan shall:

19(1)  Indicate the potential for increasing jobs in this
20Commonwealth.

21(2)  Indicate the potential for increasing capital
22investment in this Commonwealth.

23(3)  Specify that the plan is based upon the development
24or commercialization of intellectual property for which
25either of the following apply:

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

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

30§ 3805.  Credit for qualified investment.

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

5(1)  The name and address of the applicant.

6(2)  The name and address of the business in which the
7taxpayer has invested.

8(3)  A certified copy of the qualified business plan.

9(4)  Documentation that the applicant is an accredited
10investor.

11(5)  Documentation that the business in which the
12taxpayer has invested is a qualified business venture.

13(6)  Documentation that the qualified investment has been
14made by the applicant.

15(7)  Any other information required by the department.

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

19(1)  All requirements established under this chapter have
20been met.

21(2)  The applicant has filed all required State tax
22reports and returns for all taxable years and paid any
23balance of State tax due as determined by the Department of
24Revenue.

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

30(d)  Notification.--The department shall notify the taxpayer

1of the amount of the taxpayer's tax credit within 30 days after
2approval by the department.

3§ 3806.  Carryover, application of tax credit, carryback, refund
4and assignment.

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

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

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

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

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

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

23§ 3807.  Time limitation.

24A taxpayer shall not be entitled to a tax credit for
25qualified investments incurred in taxable years ending after
26December 31, 2021.

27§ 3808.  Limitation on tax credits.

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

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

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

9§ 3809.  Shareholder, owner or member pass-through.

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

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

26(c)  Additional credit.--

27(1)  Except as provided under paragraph (2), the tax
28credit provided under subsection (a) or (b) shall be in
29addition to any other tax credit to which a shareholder,
30owner or member of a pass-through entity is otherwise

1entitled under this chapter.

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

5§ 3810.  Repayment.

6The department shall require the taxpayer to repay any tax
7credit received under this chapter where the department, in
8conjunction with the Department of Revenue, determines that any
9of the following conditions exists:

10(1)  That the qualified business venture did not satisfy
11the requirements of the qualified business plan submitted at
12the time of application.

13(2)  That the business in which the taxpayer made the
14qualified investment is no longer a qualified business
15venture.

16(3)  That the taxpayer received the tax credit as a
17result of fraud.

18§ 3811.  Reports.

19The secretary shall submit an annual report to the chair and
20minority chair of the standing committees in the Senate and the
21chair and minority chair of the standing committees in the House
22of Representatives with jurisdiction over the department and the
23Department of Revenue indicating the effectiveness of the tax
24credit provided under this chapter no later than March 15
25following the fiscal year in which the tax credits were
26approved. Notwithstanding any law providing for the
27confidentiality of tax records, the report shall include the
28names of all taxpayers awarded the tax credits, all taxpayers
29utilizing the tax credits, the amount of tax credits approved
30and utilized by each taxpayer and the names and locations of the

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

7§ 3812.  Termination.

8The department shall not approve a tax credit for qualified
9investments incurred in taxable years ending after December 31,
102021.

11§ 3813.  Guidelines.

12The department, in consultation with the Department of
13Revenue, shall develop written guidelines for the implementation
14and administration of this chapter. The guidelines shall be
15posted on the department's publicly accessible Internet website:

16Section 2.  The addition of 12 Pa.C.S. Ch. 38 shall apply to
17qualified investments made in taxable years beginning after
18December 31, 2011.

19Section 3.  This act shall take effect immediately.