PRINTER'S NO. 96
THE GENERAL ASSEMBLY OF PENNSYLVANIA
INTRODUCED BY FONTANA, FARNESE, KASUNIC, SCHWANK, GREENLEAF, VULAKOVICH, BROWNE, YUDICHAK, FERLO, SMITH, BREWSTER, GORDNER, COSTA AND BOSCOLA, JANUARY 15, 2013
REFERRED TO FINANCE, JANUARY 15, 2013
9ANGEL INVESTMENT TAX CREDIT
113801. Scope of chapter.
143804. Program established.
153805. Credit for qualified investment.
183807. Time limitation.
13808. Limitation on tax credits.
23809. Shareholder, owner or member pass-through.
33810. Repayment and penalty.
7§ 3801. Scope of chapter.
8This chapter relates to angel investment tax credits.
9§ 3802. Purpose.
10The purposes of this chapter are to:
15(2) Increase capital investment in this Commonwealth.
16(3) Encourage job creation in this Commonwealth.
17§ 3803. Definitions.
27(2) A natural person who had an individual income in
28excess of $200,000 in each of the two most recent years or
29joint income with that individual's spouse in excess of
30$300,000 in each of those years and has a reasonable
3(3) An entity in which all of the equity owners are
4persons who satisfy paragraph (1) or (2), or both. For
5purposes of this paragraph an equity owner shall mean the
6beneficial owner of equity securities or equity interest in
8"Business plan." An outline of business structure and a
9formal statement of business goals, including an explanation of
10how the goals are anticipated to be achieved. At a minimum the
11business goals should indicate the potential for increasing jobs
12and capital investment in this Commonwealth. A plan shall
13specify that it is based upon the development or
14commercialization of intellectual property for which either of
15the following apply:
26(2) indebtedness that is secured by the person's primary
27residence, up to the estimated fair market value of the
28primary residence at the time qualified to claim an angel
29investment tax credit, shall not be included as a liability,
30except that if the amount of such indebtedness outstanding at
1the time qualified to claim an angel investment tax credit
2exceeds the amount outstanding 60 days before such time,
3other than as a result of the acquisition of the primary
4residence, the amount of such excess shall be included in a
6"Pass-through entity." A partnership as defined in section
7301(n.0) of the act of March 4, 1971 (P.L.6, No.2), known as the
8Tax Reform Code of 1971, or a Pennsylvania S corporation as
9defined in section 301(n.1) of the Tax Reform Code of 1971.
18(3) At least 51% of the employees of the business are
19employed in this Commonwealth at the time the taxpayer
20applies for the angel investment tax credit and for at least
21three years thereafter.
1the taxpayer applies for the angel investment tax credit.
2"Qualified investment." A private equity interest in a for-
3profit business acquired by the payment of money or its
4equivalent, which is subject to approval by the Department of
5Community and Economic Development for purposes of qualifying
6for this tax credit by an accredited investor or a network of
7accredited investors who review new businesses or proposed
8businesses for the purpose of making an initial or subsequent
10"Qualified tax liability." The liability for taxes imposed
11under Article III, IV or VI of the act of March 4, 1971 (P.L.6,
12No.2), known as the Tax Reform Code of 1971. The term shall
13include the liability for taxes imposed under Article III of the
14Tax Reform Code of 1971 on a member, owner or shareholder of a
20"Taxpayer." A person subject to tax under Article III, IV or
21VI of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
22Reform Code of 1971. The term shall include a member, owner or
23shareholder of a pass-through entity that receives an angel
24investment tax credit.
25§ 3804. Program established.
28§ 3805. Credit for qualified investment.
1department, in consultation with the Department of Revenue,
2shall establish appropriate application filing deadlines for tax
3credits in a manner that allows for the expeditious utilization
4of the tax credit by the taxpayer. The application shall be
5submitted on a form required by the department and must be
6accompanied by the business plan which has been certified by the
7taxpayer applying for the tax credit.
10(1) Upon review of the application for a tax credit, the
11department finds that all requirements have been met,
12including the requirements of a qualified business venture
13and any corresponding guidelines the department establishes
14in the best interest of the Commonwealth.
22(c) Amount.--A taxpayer that is approved under subsection
23(b) shall receive a tax credit for the taxable year in the
24amount of 25% of the taxpayer's qualified investment in a
25qualified business venture.
26(d) Notification.--By December 31 of the calendar year
27following the close of the taxable year during which the
28qualified investment was made, the department shall notify the
29taxpayer of the amount of the taxpayer's tax credit approved by
3(a) Application of tax credit.--A tax credit approved by the
4department for a qualified investment in a taxable year shall
5first be applied against the taxpayer's qualified tax liability
6for the current taxable year as of the date on which the tax
7credit was approved before the tax credit is applied against any
8tax liability under subsection (b).
9(b) Carryover.--If the taxpayer cannot use the entire amount
10of the tax credit for the taxable year in which the tax credit
11is first approved, the excess may be carried over to succeeding
12taxable years and used as a credit against the qualified tax
13liability of the taxpayer for those taxable years. Each time
14that the tax credit is carried over to a succeeding taxable
15year, it shall be reduced by the amount that was used as a
16credit during the immediately preceding taxable year. The tax
17credit may be carried over and applied to succeeding taxable
18years for no more than seven taxable years following the first
19taxable year for which the taxpayer was entitled to claim the
23(d) Sale or assignment.--
24(1) A taxpayer, upon application to and approval by the
25department in consultation with the Department of Revenue,
26may sell or assign, in whole or in part, a tax credit granted
27to the taxpayer under this chapter if the taxpayer does not
28have a qualified tax liability against which the tax credit
29may be applied in the current taxable year. The department
30shall establish guidelines, in consultation with the
8(ii) entered into a payment plan under which
9payments have been maintained or paid any balance of
10State tax due as determined at settlement, assessment or
11determination by the Department of Revenue.
12(e) Purchasers and assignees.--The purchaser or assignee of
13all or a portion of a tax credit under subsection (d) shall
14immediately claim the credit in the taxable year in which the
15purchase or assignment is made, although the purchaser or
16assignee may carry over unused tax credits to the succeeding
17taxable year for up to two years. The amount of the tax credit
18that a purchaser or assignee may use against any one qualified
19tax liability may not exceed 75% of the qualified tax liability
20for the taxable year. The purchaser or assignee may not carry
21back or obtain a refund of or sell or assign the tax credit. The
22purchaser or assignee shall notify the department, and the
23department shall notify the Department of Revenue of the seller
24or assignor of the tax credit in compliance with procedures
25specified by the department, in consultation with the Department
27(f) Taxpayer's adjusted basis in a qualified investment.--
2(2) Except for the reduction in adjusted basis required
3in paragraph (1), a taxpayer's adjusted basis in a qualified
4investment is determined under the act of March 4, 1971
5(P.L.6, No.2), known as the Tax Reform Code of 1971, and the
6regulations promulgated thereunder.
7§ 3807. Time limitation.
11§ 3808. Limitation on tax credits.
12(a) Total amount.--The total amount of tax credits approved
13by the department in a fiscal year shall be equal to the
14difference between $25,000,000 and the total amount of keystone
15innovation zone tax credits issued under section 3706 (relating
16to keystone innovation zone tax credits) through December 15th
17of each year.
20§ 3809. Shareholder, owner or member pass-through.
21(a) Shareholder entitlement.--If a Pennsylvania S
22corporation does not have a qualified tax liability against
23which the tax credit may be applied, a shareholder of the
24Pennsylvania S corporation shall be entitled to a tax credit
25equal to the tax credit determined for the Pennsylvania S
26corporation for the taxable year multiplied by the percentage of
27the Pennsylvania S corporation's distributive income to which
28the shareholder is entitled.
1qualified tax liability against which the tax credit may be
2applied, an owner or member of the pass-through entity shall be
3entitled to a tax credit equal to the tax credit determined for
4the pass-through entity for the taxable year multiplied by the
5percentage of the pass-through entities' distributive income to
6which the owner or member is entitled.
7(c) Additional credit.--
8(1) Except as provided under paragraph (2), the tax
9credit provided under subsection (a) or (b) shall be in
10addition to any tax credit to which a shareholder, owner or
11member of a pass-through entity is otherwise entitled under
16§ 3810. Repayment and penalty.
17(a) Imposition.--Except as provided in subsection (b), the
18department shall require the taxpayer to repay any tax credit
19received and any monetary value received from the sale or
20assignment, if any, of a tax credit and shall impose a penalty
21of 10% based on the total amount of the tax credit received,
22where the department, in conjunction with the Department of
23Revenue, determines that any of the following conditions exists:
1(b) Exception.--The department may waive the repayment of a
2tax credit and any monetary value received from the sale or
3assignment, if any, of the tax credit and may waive the penalty
4required by subsection (a) if the department determines that the
5failure to meet the requirements of the certified qualified
6business plan was due to circumstances outside the recipient
8§ 3811. Reports.
9The secretary shall submit an annual report to the chair and
10minority chair of the standing committees in the Senate and the
11chair and minority chair of the standing committees in the House
12of Representatives with jurisdiction over the department and the
13Department of Revenue indicating the effectiveness of the tax
14credit provided under this chapter no later than March 15
15following the fiscal year in which the tax credits were
16approved. Notwithstanding any law providing for the
17confidentiality of tax records, the report shall include the
18names of all taxpayers awarded the tax credit, utilizing the tax
19credit as of the date of the report, the amount of the tax
20credits approved and utilized by each taxpayer and the names and
21locations of the qualified business ventures for which the tax
22credits were awarded. The report may also include any
23recommendations for changes in the calculation or administration
24of the tax credit. The report and the information contained in
25it shall be considered a public record under section 102 of the
26act of February 14, 2008 (P.L.6, No.3), known as the Right-to-
28§ 3812. Termination.
2§ 3813. Guidelines.
3The department, in conjunction with the Department of
4Revenue, shall develop written guidelines for the implementation
5and administration of this chapter. The guidelines shall be
6posted on the department's publicly accessible Internet website.
7Section 2. This act shall take effect immediately.