See other bills
under the
same topic
PRINTER'S NO. 376
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
223
Session of
2015
INTRODUCED BY FONTANA, GREENLEAF, BREWSTER, BOSCOLA, VULAKOVICH,
YUDICHAK, MENSCH, GORDNER, SCHWANK, HUGHES, COSTA, BROWNE,
SMITH, WILEY AND BLAKE, FEBRUARY 12, 2015
REFERRED TO FINANCE, FEBRUARY 12, 2015
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. Purpose.
3803. Definitions.
3804. Program established.
3805 . Credit for qualified investment.
3806. Application of tax credit, carryover , carryback, refund
and assignment.
3807 . Time limitation.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
3808 . Limitation on tax credits.
3809 . Shareholder, owner or member pass-through.
3810 . Repayment and penalty.
3811 . Reports.
3812 . Termination.
3813 . Guidelines.
§ 3801. Scope of chapter.
This chapter relates to angel investment tax credits.
§ 3802. Purpose.
The purposes of this chapter are to:
(1) Create a business environment in this Commonwealth
that attracts and encourages early stage financing which
creates business opportunities with the potential for high
growth.
(2) Increase capital investment in this Commonwealth.
(3) Encourage job creation in this Commonwealth.
§ 3803. 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:
"Accredited investor." A person who comes within any of the
following categories at the time qualified to claim an angel
investment tax credit:
(1) A natural person whose individual net worth, or
joint net worth with that individual's spouse, exceeds
$1,000,000.
(2) A natural person who had an individual income in
excess of $200,000 in each of the two most recent years or
joint income with that individual's spouse in excess of
$300,000 in each of those years and has a reasonable
20150SB0223PN0376 - 2 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
expectation of reaching the same income level in the current
year.
(3) An entity in which all of the equity owners are
persons who satisfy paragraph (1) or (2), or both. For
purposes of this paragraph, an "equity owner" shall mean the
beneficial owner of equity securities or equity interest in
the entity .
"Business plan." An outline of business structure and a
formal statement of business goals, including an explanation of
how the goals are anticipated to be achieved. At a minimum the
business goals should indicate the potential for increasing jobs
and capital investment in this Commonwealth. A plan shall
specify that it is based upon the development or
commercialization of intellectual property for which either of
the following apply:
(1) Patent protection under 35 U.S.C. (relating to
patents) has been secured or is pending.
(2) A copyright under 17 U.S.C. (relating to copyrights)
has been secured or is pending.
"Department." The Department of Community and Economic
Development of the Commonwealth.
"Net worth." The value of all long-term assets minus the
value of all liabilities of a person, except as follows:
(1) the person's primary residence shall not be included
as an asset; and
(2) indebtedness that is secured by the person's primary
residence, up to the estimated fair market value of the
primary residence at the time qualified to claim an angel
investment tax credit, shall not be included as a liability,
except that, if the amount of such indebtedness outstanding
20150SB0223PN0376 - 3 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
at the time qualified to claim an angel investment tax credit
exceeds the amount outstanding 60 days before such time,
other than as a result of the acquisition of the primary
residence, the amount of such excess shall be included in a
liability.
"Pass-through entity." A partnership as defined in section
301(n.0) of the act of March 4, 1971 (P.L.6, No.2), known as the
Tax Reform Code of 1971, or a Pennsylvania S corporation as
defined in section 301(n.1) of the Tax Reform Code of 1971.
"Qualified business venture." A business that is based on a
business plan that satisfies all of the following :
(1) The business is headquartered in this Commonwealth
at the time the taxpayer applies for the angel investment tax
credit.
(2) The business maintains its headquarters in this
Commonwealth for at least five years after the taxpayer
applied for the angel investment tax credit.
(3) At least 51% of the employees of the business are
employed in this Commonwealth at the time the taxpayer
applies for the angel investment tax credit and for at least
three years thereafter.
(4) The business has fewer than 100 employees at the
time the taxpayer applies for the angel investment tax
credit.
(5) The business has been in operation in this
Commonwealth for not more than five consecutive years at the
time the taxpayer applies for the angel investment tax
credit.
(6) The business has not received more than $5,000,000,
in the aggregate, in private equity investments at the time
20150SB0223PN0376 - 4 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
the taxpayer applies for the angel investment tax credit.
"Qualified investment." A private equity interest in a for-
profit business acquired by the payment of money or its
equivalent, which is subject to approval by the Department of
Community and Economic Development for purposes of qualifying
for this tax credit by an accredited investor or a network of
accredited investors who review new businesses or proposed
businesses for the purpose of making an initial or subsequent
investment.
"Qualified tax liability." The liability for taxes imposed
under Article III, IV or VI of the act of March 4, 1971 (P.L.6,
No.2), known as 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 a member, owner or shareholder of a
pass-through entity.
"Secretary." The Secretary of Community and Economic
Development of the Commonwealth.
"Tax credit." The angel investment tax credit authorized
under this chapter.
"Taxpayer." A person subject to tax under Article III, IV or
VI of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
Reform Code of 1971. The term shall include a member, owner or
shareholder of a pass-through entity that receives an angel
investment tax credit.
§ 3804. Program established.
The Angel Investment Tax Credit Program is established in the
department.
§ 3805 . Credit for qualified investment.
(a) Application.--A taxpayer that made a qualified
investment in a taxable year may apply for a tax credit. The
20150SB0223PN0376 - 5 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
department, in consultation with the Department of Revenue,
shall establish appropriate application filing deadlines for tax
credits in a manner that allows for the expeditious utilization
of the tax credit by the taxpayer. The application shall be
submitted on a form required by the department and must be
accompanied by the business plan which has been certified by the
taxpayer applying for the tax credit.
(b) Approval.--The department may approve the application
upon being satisfied about the following:
(1) Upon review of the application for a tax credit, the
department finds that all requirements have been met,
including the requirements of a qualified business venture
and any corresponding guidelines the department establishes
in the best interest of the Commonwealth.
(2) The Department of Revenue finds that all taxpayers
applying for the tax credit have:
(i) filed all required State tax reports and returns
for all taxable years; and
(ii) entered into a payment plan under which
payments have been maintained or paid any balance of
State tax due as determined by the Department of Revenue.
(c) Amount.--A taxpayer that is approved under subsection
(b) shall receive a tax credit for the taxable year in the
amount of 25% of the taxpayer's qualified investment in a
qualified business venture.
(d) Notification.--By December 31 of the calendar year
following the close of the taxable year during which the
qualified investment was made, the department shall notify the
taxpayer of the amount of the taxpayer's tax credit approved by
the department.
20150SB0223PN0376 - 6 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
§ 3806. Application of tax credit, carryover , carryback, refund
and assignment.
(a) Application of tax credit.--A tax credit approved by the
department for a qualified investment in a taxable year shall
first be applied against the taxpayer's qualified tax liability
for the current taxable year as of the date on which the tax
credit was approved before the tax credit is applied against any
tax liability under subsection (b).
(b) Carryover.--If the taxpayer cannot use the entire amount
of the tax credit for the taxable year in which the 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 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 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
tax credit.
(c) Carryback or refund.--A taxpayer is not entitled to
carry back or obtain a refund of an unused tax credit.
(d) Sale or assignment.--
(1) A taxpayer, upon application to and approval by the
department in consultation with the Department of Revenue,
may sell or assign, in whole or in part, a tax credit granted
to the taxpayer under this chapter if the taxpayer does not
have a qualified tax liability against which the tax credit
may be applied in the current taxable year. The department
shall establish guidelines, in consultation with the
20150SB0223PN0376 - 7 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Department of Revenue, for the approval of applications under
this subsection.
(2) Before an application is approved, the Department of
Revenue shall make a finding that the taxpayer and assignee,
if any, have:
(i) filed all required State tax reports and returns
for all taxable years; and
(ii) entered into a payment plan under which
payments have been maintained or paid any balance of
State tax due as determined at settlement, assessment or
determination by the Department of Revenue.
(e) Purchasers and assignees.--The purchaser or assignee of
all or a portion of a tax credit under subsection (d) shall
immediately claim the credit in the taxable year in which the
purchase or assignment is made, although the purchaser or
assignee may carry over unused tax credits to the succeeding
taxable year for up to two years. The amount of the tax credit
that a purchaser or assignee may use against any one qualified
tax liability may not exceed 75% of the qualified tax liability
for the taxable year. The purchaser or assignee may not carry
back or obtain a refund of or sell or assign the tax credit. The
purchaser or assignee shall notify the department, and the
department shall notify the Department of Revenue of the seller
or assignor of the tax credit in compliance with procedures
specified by the department, in consultation with the Department
of Revenue.
(f) Taxpayer's adjusted basis in a qualified investment.--
(1) A taxpayer's adjusted basis in a qualified
investment must be reduced by an amount equal to the tax
credit approved under section 3805(c) (relating to credit for
20150SB0223PN0376 - 8 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
qualified investment).
(2) Except for the reduction in adjusted basis required
in paragraph (1), a taxpayer's adjusted basis in a qualified
investment is determined under the act of March 4, 1971
(P.L.6, No.2), known as the Tax Reform Code of 1971, and the
regulations promulgated thereunder.
§ 3807 . Time limitation.
A taxpayer shall not be entitled to a tax credit for
qualified investments made in taxable years ending after
December 31, 2021.
§ 3808 . Limitation on tax credits.
(a) Total amount.--The total amount of tax credits approved
by the department in a fiscal year shall be equal to 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 each year.
(b) Allocation.--Tax credits shall be allocated by the
department on a first-come-first-served basis.
§ 3809 . Shareholder, owner or member pass-through.
(a) Shareholder entitlement.--If a Pennsylvania S
corporation does not have a qualified tax liability against
which the tax credit may be applied, a shareholder of the
Pennsylvania S corporation shall be entitled to a tax credit
equal to the 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 a
20150SB0223PN0376 - 9 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
qualified tax liability against which the tax credit may be
applied, an owner or member of the pass-through entity shall be
entitled to a tax credit equal to the 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 tax
credit provided under subsection (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 shall not claim a tax credit
under this chapter for the same qualified investment.
§ 3810 . Repayment and penalty.
(a) Imposition.--Except as provided in subsection (b), the
department shall require the taxpayer to repay any tax credit
received and any monetary value received from the sale or
assignment, if any, of a tax credit and shall impose a penalty
of 10% based on the total amount of the tax credit received,
where the department, in conjunction with the Department of
Revenue, determines that any of the following conditions exists:
(1) The qualified business venture did not satisfy the
requirements of the certified qualified business plan.
(2) The business in which the taxpayer made the
qualified investment is no longer a qualified business
venture.
(3) The taxpayer received the tax credit as a result of
fraud or false pretenses.
20150SB0223PN0376 - 10 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(b) Exception.--The department may waive the repayment of a
tax credit and any monetary value received from the sale or
assignment, if any, of the tax credit and may waive the penalty
required by subsection (a) if the department determines that the
failure to meet the requirements of the certified qualified
business plan was due to circumstances outside the recipient
taxpayer's control.
§ 3811 . Reports.
The secretary shall submit an annual report to the chair and
minority chair of the standing committees in the Senate and the
chair and minority chair of the standing committees in the House
of Representatives with jurisdiction over the department and the
Department of Revenue indicating the effectiveness of the tax
credit provided under this chapter no later than March 15
following the fiscal year in which the tax credits were
approved. Notwithstanding any law providing for the
confidentiality of tax records, the report shall include the
names of all taxpayers awarded the tax credit and utilizing the
tax credit as of the date of the report , the amount of the tax
credits approved and utilized by each taxpayer and the names and
locations of the qualified business ventures for which the tax
credits were awarded. The report may also include any
recommendations for changes in the calculation or administration
of the tax credit. The report and the information contained in
it 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.
§ 3812 . Termination.
The department shall not approve a tax credit for qualified
investments made in taxable years ending after December 31,
20150SB0223PN0376 - 11 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
2021.
§ 3813. Guidelines.
The department, in conjunction with the Department of
Revenue, shall develop written guidelines for the implementation
and administration of this chapter. The guidelines shall be
posted on the department's publicly accessible Internet website.
Section 2. This act shall take effect immediately.
20150SB0223PN0376 - 12 -
1
2
3
4
5
6
7