§ 44-43-1. Definitions.
For the purpose of this chapter:
(1) "Average annual gross revenue� means the average of the amounts received or accrued
by a qualifying business entity determined on an annualized basis from the sale of
goods or services prior to diminution by the cost of those sales or services. The
determination is limited to amounts, if any, received or accrued during the four (4)
taxable years of the business entity, or a lesser period as may be applicable, immediately
preceding the taxable year during which the entity applied to the department for certification
as a qualifying business entity.
(2) "Certified venture capital partnership� means any partnership formed under the laws
of Rhode Island that:
(i) Has at least three (3) partners each of whom has contributed at least five thousand
dollars ($5,000) and who have contributed in the aggregate at least two hundred fifty
thousand dollars ($250,000) to the partnership;
(ii) Employs a professional manager who is an individual with prior experience managing
venture capital funds;
(iii) Is organized and operated to invest at least ninety percent (90%) of the amounts contributed
to its capital in qualifying activities and is registered or exempt from registration
under the securities laws of Rhode Island;
(iv) Has bonding of its employees to fully cover all funds received from partners;
(v) Has filed with the department information as may be requested describing its organization,
operation, and programs and has received certification and annual recertification
from the department pursuant to rules and regulations promulgated by the department,
that its organization, operation, and proposed programs comply with the requirements
of this chapter; and
(vi) Has not violated the requirements prescribed in this chapter, or the conditions and
requirements imposed by the department.
(3) "Department� means the Rhode Island economic development corporation.
(4) "Entrepreneur� means any individual in the employ on a full-time basis of a qualifying
business entity who owns an interest in the entity equal to at least five percent
(5%) in value of the entity.
(5) "Qualifying activities� means to provide capital:
(i) To invest in one or more qualifying business entities whose principal office and the
majority of whose assets are located in Rhode Island;
(ii) To invest a portion of its funds, as stated in this section, in one or more qualifying
business entities whose principal office is located outside of Rhode Island and who
have entered into binding commitments to establish, expand, or increase its operations
at a regular place of business in Rhode Island; or
(iii) To invest a portion of its funds, as stated in this section, in research and experimental
expenditures (as defined in 26 U.S.C. § 174) conducted in Rhode Island to assist those qualifying business entities in which
the partnership has or would be able to invest. A certified venture capital partnership
commencing with its first year of operation, or after there has been a forty percent
(40%) change in ownership or the admission of new partners whose contributions have
increased the capital of the partnership by at least sixty-five percent (65%), may
invest in the aggregate up to the following total portion of its investments made
during each year in the types of investments described in subdivisions (6)(ii) and
(6)(iii) of this section.
| Year |
Portion |
| 1 |
50% |
| 2 |
40% |
| 3 |
30% |
| 4 |
30% |
| 5 |
30% |
| 6 and subsequent years |
20% |
(6) "Qualifying business entity� means any corporation, partnership or other business
entity that meets all of the following criteria and the predecessors and successors
of any corporation, partnership or other business entity:
(i) Whose average annual gross revenue is less than two million five hundred thousand
dollars ($2,500,000);
(ii) Which has been in business for less than four (4) years; and
(iii) Which will expend an amount which is not less than the amounts allowed as a deduction
under § 44-43-2 to establish, expand or increase its operations at a regular place of business in
Rhode Island or to purchase the interest of one or more prior owners of the entity
if the entity has entered into binding commitments to expend an amount not less than
the amount paid to establish, expand or increase the entity's operations at a regular
place of business in Rhode Island; and
(iv) Has received certification and annual recertification from the department, pursuant
to rules and regulations promulgated by the department, that the preceding requirements
have been satisfied.
(7) "Qualifying investment� means that portion, determined based on a taxpayer's interest
in a certified venture capital partnership under 26 U.S.C. § 702(a)(8), of the taxpayer's investment in the partnership that is invested by the partnership
in qualifying activities during the taxpayer's taxable year.