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2018 Illinois Angel Investment Tax Credit

BIG NEWS for startups and angel investors for 2018 – the State of Illinois renewed a sweet tax credit that investors can take advantage of!

Official Angel Tax Credit webpage of Illinois Department of Commerce and Economic Opportunity

What STARTUPS need to know:

Companies must register as a “Qualified New Business Venture” (QNBV). Qualifications are as follows:

  • Principally engaged in innovation
  • Fewer than 100 employees upon submitting application
  • At least 51%  of employees located in Illinois
  • Principal place of business in Illinois
  • In operation in Illinois for no more than 10 consecutive years prior to certification
  • Has the potential to create jobs or capital investments, or both
  • Has not received more than $10 million in aggregate private equity investments, or $4 million in investments that qualified for tax credits
  • Be registered in good standing with the Illinois Secretary of State’s Office to transact business in Illinois
  • If approved and an investment into your business results in the issuance of a tax credit, you are required to submit an annual report for three years following the issue date of late credit.

What INVESTORS need to know:

Investors can get a tax credit worth 25% of an investment made in a QNBV. So, if an investor puts $100,000 into a registered QNBV, she can get a $25,000 credit. What’s more: that tax credit can roll over for five years! Here are more details:

  • Must invest in a registered qualified new business venture. *Investments occurring prior to a business’s eligibility with the Angel program are ineligible to receive a tax credit.
  • Minimum investment amount can be no less than $10,000.
  • Maximum investment amount used toward tax credit is $2,000,000 per investment.
  • Investment must remain in qualified new business venture for at least 3 years and attestation must be submitted 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 to another person or entity.
  • Only equity investments are eligible for tax credits; convertible notes not be accepted until it converts to equity, but must convert in same calendar year.  Exceptions are Simple Agreement for Future Equity (SAFE) Agreements. If you wish to use this agreement, it must follow the approved template, which can be found here under “Investor applications and forms.”
  • Must include proof that funds were transferred to Qualified New Business Venture, documentation from Qualified New Business Venture that investment was made (documentation states type of equity investment) and proof that funds were received from Qualified New Business Venture. Department may request additional documentation.

Use the URL above or click here to go to the official site for registration and application portals and resources.

Be sure to keep an eye out for a live Q&A opportunity with an accounting firm.

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