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Immediate Action Required by Investors Who Invested in 2011 in Innovative Illinois Businesses

Tax Law Alert Terrence W. Stein

Illinois offers an "Angel Investment Tax Credit" to firms or individuals who make an investment, between January 1, 2011 and December 31, 2016, in a "qualified new business venture" headquartered in Illinois.  

In order for a company to be a "qualified new business venture," the company generally (a) must be headquartered in Illinois and employ in Illinois at least 51 percent of all employees of the business; (b) must (i) be principally engaged in innovation in manufacturing, biotechnology; nanotechnology; communications; agricultural sciences; clean energy creation or storage technology; processing or assembling certain product; or (ii) undertake research and development of new products, processes or services that rely on the application of proprietary technology; (c) must not be principally engaged in development of real estate; insurance; banking; lending; lobbying; political consulting; professional services provided by attorneys, accountants, business consultants, physicians or health care consultants; wholesale or retail trade, leisure; hospitality; transportation; or most construction activities; and (d) must satisfy other requirements.

The amount of the Angel Investment Tax Credit generally equals 25 percent of the qualifying investment; provided that the maximum credit which may be received by an eligible investor is $500,000 for any investment; and further provided that the maximum amount of credits given by Illinois in any calendar year may not exceed $10 million. Illinois does not expect to reach the $10 million threshold at any time in 2011.

Various forms and information must be submitted to and received by the Illinois Department of Commerce and Economic Development by December 31, 2011 in order for a business to be registered as a "qualified new business venture" for 2011, and in order for an investor to receive a tax credit certificate for a qualifying investment made in 2011.

For any investor who has made a qualifying investment in 2011 in a "qualified new business venture," fast action and great care will be required to receive Illinois Angel Investment Tax Credit for 2011. For assistance or more information, please contact your Quarles & Brady tax attorney.