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Creating an Incentivized Environment
The Illinois Angel Investment Tax Credit Program encourages investment in innovative, early-stage companies to help obtain the working capital needed to further the growth of their company in Illinois. Investors in companies that are certified as Qualified New Business Ventures (QNBVs) can receive a state tax credit equal to 25% of their investment (up to $2 million).
Tax Incentive Allocations
A total of $10 million in Angel Investment tax credits are allocated in CY 2019, 2020 and 2021. Credits will be released by quarter, on a first-come first-served basis. Once tax incentive credits for a particular quarter are exhausted, no further credits can be allocated until the subsequent quarter.
Businesses must register for each taxable year in which they desire to be a qualified new business venture (QNBV). QNBV applications are reviewed by a committee on a rolling basis throughout the calendar year. The current list of QNBVs certified for calendar year 2019 is located at the top of this page.
Businesses seeking eligibility as a QNBV must meet all of the following conditions:
- it has its principal place of business in Illinois;
- it must be registered in good standing with the Illinois Secretary of State's Office to transact business in Illinois;
- at least 51% of the employees employed by the business are located in Illinois;
- the business has the potential for increasing jobs, increasing capital investment in Illinois, or both;
- it is principally engaged in innovation in a qualifying sector as defined in the statute;
- it is not principally engaged in and disqualifying sector as defined by statute;
- it has fewer than 100 employees;
- it has been in operation in Illinois for not more than 10 consecutive years;
- it has received not more than $10,000,000 in aggregate investments; or it has received not more than $4,000,000 in investments that qualified for tax credits;
- it agrees to maintain a minimum employment threshold in the State of Illinois for 3 years from the issue date of the last tax credit certificate.
Qualified New Business Venture
The 2018 Angel legislation created two specific set-asides. The Registration Notice provided to each QNBV upon certification indicates which, if any, apply.
$500,000 in tax credits are set-aside for investments made in QNBVs which are “minority owned businesses", "$500,000 in tax credits are reserved for investments made in QNBVs which are “minority owned businesses", "women owned businesses", or "businesses owned by a person with a disability." The legislation specifies that these terms be defined as they are used in the Business Enterprise for Minorities, owned businesses", or "businesses owned by a person with a disability." The legislation specifies that these terms be defined as they are used in the Business Enterprise for Minorities, Women, and Persons with Disabilities Act. More information on that Act can be found at http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=550&.
$500,000 in tax credits are set-aside for investments made in QNBVs with their principal place of business in counties with a population of not more than 250,000.
The Illinois Angel Investment Tax Credit Program offers tax credits to qualifying claimants in an amount equal to 25% of the claimant’s eligible investment made directly in a qualified new business venture. While the tax credit may not exceed the taxpayer's Illinois income tax liability for the taxable year, the credit may be carried forward up to 5 years following the excess credit year.
Angel investors must adhere to the following requirements:
Investments must be made in a certified QNBV.
Investments must be made on or after the date the QNBV was certified to participate in the program in the eligible CY.
Investments must be given at a risk of loss and in consideration for an equity interest of the QNBV. For the purposes of this definition, an investment is at risk of loss if its repayment depends entirely upon the success of the business operations of the qualified new business venture.
$10,000 is the minimum amount an applicant must invest in any single QNBV to be used as the basis for a credit.
$2,000,000 is the maximum amount an applicant may invest in a single QNBV to be used as the basis for a credit.
Investments must remain in the QNBV for a minimum of 3 years. Investors must attest their investment remains in the QNBV on the first, second and third anniversary of investment. Attestation forms will be accepted within 30 days prior to the anniversary of the investment.
Tax credits cannot be sold or otherwise transferred.
Only equity investments are eligible for tax credits.
The Department may accept a Simple Agreement for Future Equity (SAFE agreement) as an eligible investment if the agreement has certain provisions that keep a SAFE investor in more or less the same position as a non-SAFE equity investor in terms of risk exposure and the SAFE must convert automatically and unconditionally within three years from the investment date.
Investors must submit proof that funds were transferred and received by the QNBV. Acceptable documentation may include front and back of cancelled check, incoming wire documentation from the QNBV. The Department may request additional documentation as needed.
ANGEL INVESTOR INFORMATION AND FORMS
Angel Investor Memo
Angel Investor FAQ
Angel Investor Instructions/Guidelines
Angel Investor Application
Angel Investor Certification
INVESTOR ANNUAL ATTESTATION INFORMATION AND FORMS
Investor Annual Attestation Form
List of all QNBVs for Attestation form