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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| SENATE BILL |
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| INTRODUCED BY EARLL, FONTANA, GREENLEAF, VOGEL, PIPPY, WAUGH, GORDNER, McILHINNEY, BOSCOLA, COSTA, FERLO, BROWNE, YUDICHAK, BLAKE AND FARNESE, SEPTEMBER 29, 2011 |
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| REFERRED TO FINANCE, SEPTEMBER 29, 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. Purpose. |
13 | 3803. Definitions. |
14 | 3804. Credit for qualified investment. |
15 | 3805. Carryover, application of tax credit, carryback, refund |
16 | and assignment. |
17 | 3806. Time limitation. |
18 | 3807. Limitation on tax credits. |
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1 | 3808. Shareholder, owner or member pass-through. |
2 | 3809. Repayment and penalty. |
3 | 3810. Reports. |
4 | 3811. Termination. |
5 | 3812. Regulations. |
6 | § 3801. Scope of chapter. |
7 | This chapter relates to angel investment tax credits. |
8 | § 3802. Purpose. |
9 | The purposes of this chapter are to: |
10 | (1) Create a business environment in this Commonwealth |
11 | that attracts and encourages early stage financing which |
12 | creates business opportunities with the potential for high |
13 | growth. |
14 | (2) Increase capital investment in this Commonwealth. |
15 | (3) Encourage job creation in this Commonwealth. |
16 | § 3803. Definitions. |
17 | The following words and phrases, when used in this chapter, |
18 | shall have the meanings given to them in this section, unless |
19 | the context clearly indicates otherwise: |
20 | "Accredited investor." Any person who comes within any of |
21 | the following categories at the time qualified to claim an angel |
22 | investment tax credit: |
23 | (1) Any natural person whose individual net worth, or |
24 | joint net worth with that individual's spouse exceeds |
25 | $1,000,000. |
26 | (2) Any natural person who had an individual income in |
27 | excess of $200,000 in each of the two most recent years or |
28 | joint income with that individual's spouse in excess of |
29 | $300,000 in each of those years and has a reasonable |
30 | expectation of reaching the same income level in the current |
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1 | year. |
2 | (3) Any entity in which all of the equity owners are |
3 | accredited investors. |
4 | "Business plan." An outline of business structure and a |
5 | formal statement of business goals, including an explanation of |
6 | how the goals are anticipated to be achieved. At a minimum the |
7 | business goals should indicate the potential for increasing jobs |
8 | in this Commonwealth and increasing capital investment. A plan |
9 | shall specify that it is based upon the development or |
10 | commercialization of intellectual property for which either of |
11 | the following apply: |
12 | (1) Patent protection under 35 U.S.C. (relating to |
13 | patents) has been secured or is pending. |
14 | (2) A copyright under 17 U.S.C. (relating to copyrights) |
15 | has been secured or is pending. |
16 | "Department." The Department of Community and Economic |
17 | Development of the Commonwealth. |
18 | "Pass-through entity." A partnership as defined in section |
19 | 301(n.o) of the act of March 4, 1971 (P.L.6, No.2), known as the |
20 | Tax Reform Code of 1971, or a Pennsylvania S corporation as |
21 | defined in section 301(n.1) of the Tax Reform Code of 1971. |
22 | "Qualified business venture." A business that is based on a |
23 | business plan that satisfies the following requirements: |
24 | (1) The business is headquartered or establishes its |
25 | headquarters in this Commonwealth prior to the time the |
26 | taxpayer is qualified to apply for an angel investment tax |
27 | credit and for at least five years thereafter. |
28 | (2) At least 51% of the employees employed by the |
29 | business are employed in this Commonwealth at the time the |
30 | taxpayer is qualified to apply for an angel investment tax |
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1 | credit and for at least three years thereafter. |
2 | (3) The business has fewer than 100 employees at the |
3 | time the taxpayer is qualified to apply for an angel |
4 | investment tax credit. |
5 | (4) The business has been in operation in this |
6 | Commonwealth for not more than five consecutive years at the |
7 | time the taxpayer is qualified to apply for an angel |
8 | investment tax credit. |
9 | (5) The business has not received, in aggregate, more |
10 | than $5,000,000 in private equity investments. |
11 | "Qualified investment." A private equity interest in a for- |
12 | profit business acquired by the payment of money or its |
13 | equivalent, which is subject to approval by the Department of |
14 | Community and Economic Development for purposes of qualifying |
15 | for this tax credit by an accredited investor or a network of |
16 | accredited investors who review new businesses or a proposed |
17 | business for the purpose of making an initial or subsequent |
18 | investment. |
19 | "Qualified tax liability." The liability for taxes imposed |
20 | under Article III, IV or VI of the act of March 4, 1971 (P.L.6, |
21 | No.2), known as the Tax Reform Code of 1971. The term shall |
22 | include the liability for taxes imposed under Article III of the |
23 | Tax Reform Code of 1971 on an owner of a pass-through entity. |
24 | "Secretary." The Secretary of Community and Economic |
25 | Development of the Commonwealth. |
26 | "Tax credit." The angel investment tax credit authorized |
27 | under this chapter. |
28 | "Taxpayer." An entity subject to tax under Article III, IV |
29 | or VI of the act of March 4, 1971 (P.L.6, No.2), known as the |
30 | Tax Reform Code of 1971. The term shall include the shareholder, |
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1 | owner or member of a pass-through entity that receives an angel |
2 | investment tax credit. |
3 | § 3804. 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 as |
6 | provided under this chapter. The department, in consultation |
7 | with the Department of Revenue, shall establish appropriate |
8 | filing deadlines for tax credits in a manner that allows for the |
9 | expeditious utilization of the tax credit by the taxpayer. The |
10 | application shall be submitted on a form required by the |
11 | department and must be accompanied by the business plan which |
12 | has been certified by the taxpayer applying for the tax credit. |
13 | (b) Approval.--The department may approve the application |
14 | upon being satisfied about the following: |
15 | (1) Upon review of the application for a tax credit, the |
16 | department finds that all requirements have been met, |
17 | including the requirements of a qualified business venture |
18 | and any corresponding guidelines the department establishes |
19 | in the best interest of the Commonwealth. |
20 | (2) The Department of Revenue finds that all taxpayers |
21 | applying for the tax credit have filed all required State tax |
22 | reports and returns for all applicable taxable years and paid |
23 | any balance of State tax due as determined at settlement, |
24 | assessment or determination by the Department of Revenue. |
25 | (c) Amount.--A taxpayer that is approved under subsection |
26 | (b) shall receive a tax credit for the taxable year in the |
27 | amount of 25% of the taxpayer's qualified investment in a |
28 | qualified business venture. |
29 | (d) Notification.--By December 31 of the calendar year |
30 | following the close of the taxable year during which the |
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1 | qualified investment was made, the department shall notify the |
2 | taxpayer of the amount of the taxpayer's tax credit approved by |
3 | the department. |
4 | § 3805. Carryover, application of tax credit, carryback, refund |
5 | and assignment. |
6 | (a) Carryover.--If the taxpayer cannot use the entire amount |
7 | of the tax credit for the taxable year in which the tax credit |
8 | is first approved, the excess may be carried over to succeeding |
9 | taxable years and used as a credit against the qualified tax |
10 | liability of the taxpayer for those taxable years. Each time |
11 | that the tax credit is carried over to a succeeding taxable |
12 | year, it shall be reduced by the amount that was used as a |
13 | credit during the immediately preceding taxable year. The tax |
14 | credit may be carried over and applied to succeeding taxable |
15 | years for no more than seven taxable years following the first |
16 | taxable year for which the taxpayer was entitled to claim the |
17 | tax credit. |
18 | (b) Application of tax credit.--A tax credit approved by the |
19 | department for a qualified investment in a taxable year shall |
20 | first be applied against the taxpayer's qualified tax liability |
21 | for the current taxable year as of the date on which the tax |
22 | credit was approved before the tax credit is applied against any |
23 | tax liability under subsection (a). |
24 | (c) Carryback or refund.--A taxpayer is not entitled to |
25 | carry back or obtain a refund of an unused tax credit. |
26 | (d) Sale or assignment.--A taxpayer, upon application to and |
27 | approval by the department in consultation with the Department |
28 | of Revenue, may sell or assign, in whole or in part, a tax |
29 | credit granted to the taxpayer under this chapter if the |
30 | taxpayer does not have a qualified tax liability against which |
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1 | the tax credit may be applied in the current taxable year. The |
2 | department shall establish guidelines, in consultation with the |
3 | Department of Revenue, for the approval of applications under |
4 | this subsection. Before an application is approved, the |
5 | Department of Revenue shall make a finding that the applicant |
6 | has filed all required State tax reports and returns for all |
7 | applicable taxable years and paid any balance of State tax due |
8 | as determined at settlement, assessment or determination by the |
9 | Department of Revenue. |
10 | (e) Purchasers and assignees.--The purchaser or assignee of |
11 | all or a portion of a tax credit under subsection (d) shall |
12 | immediately claim the credit in the taxable year in which the |
13 | purchase or assignment is made, although the purchaser or |
14 | assignee may carry over unused tax credits to the succeeding |
15 | taxable year for up to two years. The amount of the tax credit |
16 | that a purchaser or assignee may use against any one qualified |
17 | tax liability may not exceed 75% of the qualified tax liability |
18 | for the taxable year. The purchaser or assignee may not carry |
19 | back or obtain a refund of or sell or assign the tax credit. The |
20 | purchaser or assignee shall notify the department, and the |
21 | department shall notify the Department of Revenue of the seller |
22 | or assignor of the tax credit in compliance with procedures |
23 | specified by the department, in consultation with the Department |
24 | of Revenue. |
25 | § 3806. Time limitation. |
26 | A taxpayer shall not be entitled to a tax credit for |
27 | qualified investments incurred in taxable years ending after |
28 | December 31, 2021. |
29 | § 3807. Limitation on tax credits. |
30 | (a) Total amount.--The total amount of tax credits approved |
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1 | by the department in a fiscal year shall be equal to the |
2 | difference between $25,000,000 and the total amount of keystone |
3 | innovation zone tax credits issued under section 3706 (relating |
4 | to keystone innovation zone tax credits) through December 15th |
5 | of each year. |
6 | (b) Allocation.--Tax credits shall be allocated by the |
7 | department on a first-come-first-served basis. |
8 | § 3808. Shareholder, owner or member pass-through. |
9 | (a) Shareholder entitlement.--If a Pennsylvania S |
10 | corporation does not have an eligible tax liability against |
11 | which the tax credit may be applied, a shareholder of the |
12 | Pennsylvania S corporation shall be entitled to a tax credit |
13 | equal to the tax credit determined for the Pennsylvania S |
14 | corporation for the taxable year multiplied by the percentage of |
15 | the Pennsylvania S corporation's distributive income to which |
16 | the shareholder is entitled. |
17 | (b) Pass-through entity entitlement.--If a pass-through |
18 | entity other than a Pennsylvania S corporation does not have tax |
19 | liability against which the tax credit may be applied, an owner |
20 | or member of the pass-through entity shall be entitled to a tax |
21 | credit equal to the tax credit determined for the pass-through |
22 | entity for the taxable year multiplied by the percentage of the |
23 | pass-through entities' distributive income to which the owner or |
24 | member is entitled. |
25 | (c) Additional credit.-- |
26 | (1) Except as provided under paragraph (2), the tax |
27 | credit provided under subsections (a) or (b) shall be in |
28 | addition to any tax credit to which a shareholder, owner or |
29 | member of a pass-through entity is otherwise entitled under |
30 | this chapter. |
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1 | (2) A pass-through entity and a shareholder, owner or |
2 | member of a pass-through entity shall not claim a tax credit |
3 | under this chapter for the same qualified investment. |
4 | § 3809. Repayment and penalty. |
5 | (a) Imposition.--Except as provided in subsection (b), the |
6 | department shall require the taxpayer to repay any tax credit |
7 | received and any monetary value received from the sale or |
8 | assignment of a tax credit and shall impose a penalty of 10% |
9 | where it has been determined that the recipient taxpayer did not |
10 | meet the requirements of the taxpayer's certified qualified |
11 | business plan or received such as the result of fraud and false |
12 | pretenses. |
13 | (b) Exception.--The department may waive the repayment of a |
14 | tax credit or penalty required in subsection (a) if the |
15 | department determines that the failure to meet the requirements |
16 | of the certified qualified business plan was due to |
17 | circumstances outside the recipient taxpayer's control. |
18 | § 3810. Reports. |
19 | (a) Annual report to General Assembly.--The secretary shall |
20 | submit an annual report to the chair and minority chair of the |
21 | standing committees in the Senate and the chair and minority |
22 | chair of the standing committees in the House of Representatives |
23 | with jurisdiction over the department and the Department of |
24 | Revenue indicating the effectiveness of the tax credit provided |
25 | under this chapter no later than March 15 following the fiscal |
26 | year in which the tax credits were approved. Notwithstanding any |
27 | law providing for the confidentiality of tax records, the report |
28 | shall include the names of all taxpayers utilizing the tax |
29 | credit as of the date of the report and the amount of the tax |
30 | credits approved and utilized by each taxpayer. The report may |
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1 | also include any recommendations for changes in the calculation |
2 | or administration of the angel investment tax credit. The report |
3 | and the information contained in it shall be considered a public |
4 | record under section 102 of the act of February 14, 2008 (P.L.6, |
5 | No.3), known as the Right-to-Know Law. |
6 | (b) Reports to General Assembly.--The department shall |
7 | submit a report to the the chair and minority chair of the |
8 | standing committees in the Senate and the chair and minority |
9 | chair of the standing committees in the House of Representatives |
10 | with jurisdiction over the department and the Department of |
11 | Revenue indicating the effectiveness of the tax credit by |
12 | December 31, 2013, and by December 31, 2016. Notwithstanding any |
13 | law providing for the confidentiality of tax records, the report |
14 | shall include the names of all taxpayers awarded the tax |
15 | credits, all taxpayers utilizing the tax credits, the amount of |
16 | tax credits approved and utilized by each taxpayer and the |
17 | locations of the qualified business awarded the tax credits. The |
18 | report and the information contained in it shall be considered a |
19 | public record. |
20 | § 3811. Termination. |
21 | The department shall not approve a tax credit for qualified |
22 | investments incurred in taxable years ending after December 31, |
23 | 2021. |
24 | § 3812. Regulations. |
25 | The secretary, in consultation with the Secretary of Revenue, |
26 | shall promulgate regulations necessary for the implementation |
27 | and administration of this chapter. |
28 | Section 2. This act shall take effect immediately. |
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