Current through Register Vol. 42, No. 5, February 29, 2024
As used in this chapter, the following terms shall have the
following meanings:
(1) "ACT" means Act
No. 2002-429.
(2) "ADO" means the
Alabama Development Office.
(3)
"AFFILIATE". An affiliate of another person shall include any of the following:
(a) A person who directly or indirectly either:
(i) Beneficially owns fifteen percent (15%) or
more of the outstanding voting securities or other voting ownership interests of
the other person, whether through rights, options, convertible interests, or
otherwise; or
(ii) Controls or holds
power to vote fifteen percent (15%) or more of the outstanding voting securities
or other voting ownership interests of the other person.
(b) A person owning fifteen percent (15%) or
more of the outstanding voting securities or other voting ownership interests of
which are directly or indirectly either:
(i)
Beneficially owned by the other person, whether through rights, options,
convertible interests, or otherwise; or
(ii) Controlled or held with power to vote by
the other person.
(c) A
partnership or limited liability company in which the other person is a general
partner, managing member or manager, as the case may be.
(d) An officer, director, employee, or agent of
the other person, or an immediate family member of the officer, director,
employee, or agent.
(e) The term
affiliate shall include, in addition to the persons listed above in this
subsection, any person, directly or indirectly, controlling, controlled by or
under common control with such person. As used in this definition, the term
"CONTROLS", including the term "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH" means the following:
(i) In
connection with certified investors means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract other
than commercial contract for goods or non-management services, or otherwise,
unless the power is the result of an official position with a corporation or a
corporate office held by the person. Control is presumed to exist if any person,
directly or indirectly, owns, controls, holds with the power to vote, or holds
proxies representing fifteen percent (15%) or more of the voting securities of
any other person.
(ii) In connection
with persons other than certified investors means the possession, directly or
indirectly, of the power to direct the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
Each of a company's officers, directors or partners exercising executive
responsibility (or persons having similar status or functions) is presumed to
control the company. A person is presumed to control a corporation if the person:
(1) directly or indirectly has the right to
vote fifteen percent
(15%) or more of a class of the corporation's voting securities,
or
(2) has the power to sell
or direct the sale of fifteen percent (15%) or more of a class of the
corporation's voting securities. A person is presumed to control a partnership if
the person has the right to receive upon dissolution, or has contributed, fifteen
percent (15%) or more of the capital of the partnership. A person is presumed to
control a limited liability company if the person:
(1) directly or indirectly has the right to
vote fifteen percent (15%) or more of a class of the interests of the limited
liability company;
(2) has the right
to receive upon dissolution, or has contributed, fifteen percent (15%) or more of
the capital of the limited liability company or
(3) is an elected manager of the limited
liability company.
(iii) In addition to the above definitions, if
a person owns or controls less than the threshold of voting securities involved
(15%), that person's relationship with the remaining members in control or
management should be examined to determine if a control block exists, directly or
indirectly.
(iv) In addition to the
test based on status or voting control, an examination of the contractual,
consulting, and other arrangements shall be undertaken to determine if control is
being directly or indirectly exercised.
(4) "ALLOCATION DATE" means the date on which
the certified investors of a CAPCO are allocated certified capital by the ADO
under the Act.
(5) "APPLICANT" means
a Person who applies to be a CAPCO.
(6) "BINDING LETTER OF INTENT" means an
agreement of a certified investor to make an investment of certified capital in a
CAPCO up to a certain specified amount that is subject to an allocation of tax
credits pursuant to the Act and these rules. The amount of the specified
investment may not be subject to reduction for reasons other than application of
the provisions of the Act and these rules.
(7) "BUSINESS DAY" means any day on which the
ADO is open for the transaction of normal business.
(8) "CAPCO" means a certified capital company
as defined below.
(9) "CERTIFIED
CAPITAL" means an investment of cash by a certified investor in a CAPCO that
fully funds the purchase price of an equity interest in the CAPCO or a qualified
debt instrument issued by the CAPCO. As used in this definition,
(a) The term "INVESTMENT IN CASH BY A CERTIFIED
INVESTOR" means a disbursement of cash by a certified investor.
(b) The term "EQUITY INTEREST" means an
interest in a person, other than an individual, that provides a return contingent
on the economic performance of that person that is not a debt interest, including
common stock, preferred stock, partnership interest or membership
interest.
(10) "CERTIFIED
CAPITAL COMPANY" means a partnership, corporation, trust or limited liability
company, whether organized on a profit or not-for-profit basis, that has as its
primary business activity the investment of cash in qualified technology
businesses and that is certified as meeting the criteria of the Act.
(11) "CERTIFIED INVESTOR" means an insurance
company or other person that has state premium tax liability, that contributes
certified capital pursuant to an allocation of premium tax credits under the
Act.
(12) "COMPLETE CONTACT
INFORMATION" means the physical address, mailing address, telephone number,
facsimile number and e-mail address of a person.
(13) "DIRECTOR" means the Director of the
ADO.
(14) "ENTERPRISE WITH WHICH THE
PERSON IS ASSOCIATED" means any enterprise of which the person or a member of his
or her family is an officer, director, partner, managing member, or beneficial
owner of more than 10% of the ownership interests of the enterprise.
(15) "FAMILY MEMBER OF THE PUBLIC EMPLOYEE"
means the spouse or a dependent of the public employee.
(16) "FAMILY MEMBER OF THE PUBLIC OFFICIAL"
means the spouse, a dependent, an adult child and his or her spouse, a parent, a
spouse's parents, a sibling and his or her spouse, of the public
official.
(17) "FULLY FUNDS" means an
amount alone that is sufficient to satisfy the certified investor's obligations
relating to the purchase of an equity interest in, or qualified debt instrument
issued by, a CAPCO or a CAPCO's obligations relating to the purchase of an equity
interest in, or debt instrument issued by, a qualified technology business, as
the case may be.
(18) "GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES" means those conventions, rules and procedures
that constitute accepted accounting practices in the United States, as determined
by the Financial Accounting Standards Board and any successor organization
thereto that is charged with the promulgation of such conventions, rules and
procedures.
(19) "GENERALLY ACCEPTED
AUDITING STANDARDS" means those conventions, rules and procedures that constitute
accepted auditing practices in the United States, as determined by the American
Institute of Certified Public Accountants and any successor organization thereto
that is charged with the promulgation of such conventions, rules and
procedures.
(20) "INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT" means any of the certified public accountants listed
on the Division of Purchasing Professional Provider List maintained by the State
of Alabama Department of Finance.
(21) "KEY EMPLOYEES" means the two (2)
principals or persons employed or engaged to manage the funds of the applicant as
required by Section 3(c)(2) of the Act.
(22) "MANAGERS" means all of the persons that
are, or will be, involved in the management of an applicant or a CAPCO, as the
case may be.
(23) "ORGANIZATIONAL
DOCUMENTS" means the documents pursuant to which an applicant was formed and its
business will be conducted. For example, the organization documents for a limited
liability company include the certificate of organization, the operating
agreement and any agreements between the persons having an ownership in the
limited liability company.
(24)
"PERSON" means a natural person or entity, including a corporation, general or
limited partnership, trust or limited liability company.
(25) "PREMIUM TAX CREDIT ALLOCATION CLAIM"
means a claim for allocation of premium tax credits.
(26) "PRIME RATE" shall be the rate of interest
published in the Wall Street Journal as the prime rate.
(27) "PUBLIC EMPLOYEE" means any person
employed at the state, county, or municipal level of government or their
instrumentalities in the State of Alabama, including governmental corporations
and authorities, but excluding employees of hospitals or other health care
corporations including contract employees of those hospitals or other health care
corporations, who is paid in whole or in part from state, county or municipal
funds. For purposes of this chapter, a public employee does not include a person
employed on a part-time basis whose employment is limited to providing
professional services other than lobbying, the compensation for which constitutes
less than 50 percent of the part-time employee's income. For purposes of this
Act, a person shall retain his or her status as a public employee for a period of
two (2) years after her or she leaves public employment.
(28) "PUBLIC OFFICIAL" means any person elected
to public office in the State of Alabama, whether or not that person has taken
office, by the vote of the people at state, county, or municipal level of
government or their instrumentalities, including governmental corporations, and
any person appointed to a position at the state, county, or municipal level of
government or their instrumentalities, including governmental corporations. For
purposes of this Act, a public official includes the chairs and vice-chairs or
the equivalent offices of each state political party as defined in Section
17-16-2. For purposes of this Act, a
person shall retain his or her status as a public official for a period of two
(2) years after he or she leaves public office.
(29) "QUALIFIED TECHNOLOGY BUSINESS" means a
business that, at the time of a CAPCO's first investment in the business:
(a) Is headquartered in the State of Alabama
and intends to remain in the State of Alabama after receipt of the investment by
the CAPCO, or is headquartered in another state and intends to relocate its
headquarters to the State of Alabama after receipt of the investment by the
CAPCO. As used in this definition, the terms "HEADQUARTERED" and "HEADQUARTERS"
mean:
(i) The office from which the material
investment and administrative functions of the qualified technology business
physically are conducted; and
(ii)
The physical location in which the material books and records of the qualified
technology business are maintained.
(b) Has its principal business operations
located in the State of Alabama and intends to maintain business operations in
the State of Alabama after receipt of the investment by the CAPCO, or has its
principal business operations located in another state, and intends to relocate
business operations to the State of Alabama within ninety (90) days after receipt
of investment by the CAPCO. As used in this definition, the term "PRINCIPAL
BUSINESS OPERATIONS" means:
(i) The physical
location in which the material operations of the qualified technology business
are conducted; and
(ii) That one of
the following applies to the business:
(A) a
minimum of forty percent (40%) of the annual expenditures of the qualified
technology business are spent or proposed to spent in the State of
Alabama;
(B) a minimum of forty
percent (40%) of the assets of the qualified technology business are located or
held in the State of Alabama; or
(C)
a minimum of forty percent (40%) of the revenues generated or proposed to be
generated by the qualified technology business are generated or proposed to be
generated by services performed from or products manufactured or assembled in the
State of Alabama.
(c) Has agreed to use the qualified investment
primarily to either support business operations in the State of Alabama, or in
the case of a start-up company, establish and support business operations in the
State of Alabama, except in each case, advertising, sales and promotional
operations which may be conducted outside of the State of Alabama. As used in
this definition, the term "SUPPORT BUSINESS OPERATIONS" means the expansion,
modernization or retention of current operations. The term "SUPPORT BUSINESS
OPERATIONS" will not generally include the relocation of business operations from
one location in the State of Alabama to another, unless it can be documented to
the satisfaction of the ADO that (i) there is a legitimate business reason for
such relocation or (ii) but for the CAPCO's investment, the business would
relocate to another state.
(d) Has
not more than one hundred (100) employees and either employs at least eighty
percent (80%) of its employees in the State of Alabama, or pays at least eighty
percent (80) percent of its payroll to employees in the State of Alabama. As used
in this definition, the term "EMPLOYEES IN THE STATE OF ALABAMA" means employees
that are residents of the State of Alabama, as determined for purposes of Alabama
income taxation, and the term "EMPLOYEES" means natural persons that are engaged
by a qualified technology business for wages for a minimum of 2,080 hours per
year.
(e) Is primarily engaged in any
of the following:
(i) Manufacturing, processing,
or assembling products.
(ii)
Conducting research and development.
(iii) Providing services.
(f) Is not primarily engaged in any of the
following:
(i) Retail sales.
(ii) Real estate development.
(iii) The business of insurance, banking,
lending, lobbying, or political consulting.
(iv) The provision of professional services
provided by accountants, attorneys, or physicians.
(g) As used in subsections (e) and (f) of this
section, the term "PRIMARILY" means over fifty percent (50%) of the revenues of
an enterprise for the preceding fiscal year, as determined in accordance with
generally accepted accounting principles, or, in the case of a new enterprise,
over fifty percent (50%) of the projected revenues of an enterprise.
(30) "QUALIFIED DEBT INSTRUMENT"
means a debt instrument issued by a CAPCO to a Certified Investor, at par value
or a premium, that:
(a) Has an original
maturity date of at least five (5) years after the date of issuance.
(b) Has a repayment schedule that is not faster
than a level principal amortization over five (5) years. A repayment schedule is
NOT FASTER THAN A LEVEL PRINCIPAL AMORTIZATION OVER FIVE (5) YEARS if the
repayment schedule for the debt instrument issued by the CAPCO has a scheduled
outstanding principal balance greater than a hypothetical note with the same
price and yield as the CAPCO's debt instrument which provides for principal to be
amortized over equal, consecutive daily payments, where payments are first
allocated to accrued interest and then to principal. For purposes of determining
compliance with the preceding two sentences, insignificant deviations from the
five (5) year level principal amortization standard shall be disregarded. An
"insignificant deviation" is any acceleration of the five (5) year principal
amortization standard that lasts less than ninety (90) days.
(c) Has no interest, distribution, or payment
features that are related to the profitability of the CAPCO or the performance of
the CAPCO's investment portfolio.
In the event a CAPCO redeems or repurchases a qualified debt
instrument within five (5) years of issuance, any premium tax credits used by the
investor applicable to the qualified debt instrument redeemed or repurchased
shall be immediately repaid to the ADO. The foregoing sentence shall not apply
(i) to any repurchase or redemption made after a CAPCO has made cumulative
qualified investments equal to at least 100% of its certified capital and (ii) to
any principal or interest payments made with respect to a qualified debt
instrument that are made in accordance with the requirements of subsections (b)
and (c) of this definition.
(31) "QUALIFIED DISTRIBUTION" means any
distribution or payment from certified capital by a CAPCO in connection with the
following:
(a)
(i) The reasonable costs and expenses of
forming, organizing and syndicating the certified capital company, including the
costs of financing and insuring the obligations of the certified capital company
so long as, at the time the certified capital company initially receives its
investment of certified capital from its certified investors, the certified
capital company has cash or Permissible Investments equal to at least fifty
percent (50%) of the amount of certified capital such certified capital company
initially received as investment from its certified investors and
(ii) the reasonable costs and expenses of
managing and operating the certified capital company, including but not limited
to reasonable and necessary fees paid for professional services (such as legal
and accounting services) related to the operation of the certified capital
company and an annual management fee in an amount that does not exceed two and
one-half percent (2 1\2%) of the certified capital of the certified capital
company; provided that no distribution or payment authorized by this paragraph
(a) be made directly or indirectly to a certified investor, except for
distributions or payments made in consideration for a guaranty, indemnity, bond,
insurance policy or other payment undertaking described by Section 4(b) of the
Act, and other costs of financing and insuring the obligations of the
CAPCO.
(b) Any projected
increase in federal or state taxes, including penalties and interest related to
state and federal income taxes, of the equity owners of the CAPCO resulting from
the earnings or other tax liability of the CAPCO to the extent that the increase
is related to the ownership, management, or operation of the CAPCO.
(32) "QUALIFIED INVESTMENT" means
the investment of cash by a CAPCO in a qualified technology business for the
purchase of any debt, debt participation, equity or hybrid security of any nature
or description, including a debt instrument or security that has the
characteristics of debt but that provides for conversion into equity or equity
participation instruments such as options or warrants. As used in this
subsection, the term "INVESTMENT OF CASH BY A CAPCO" means a disbursement of cash
by a CAPCO in a qualified technology business that fully funds the purchase price
of any of the interests listed above in the qualified technology business and
that would be considered a venture capital investment as defined in Regulation
281-2-1-.02(2)(c).
For purposes of determining the amount of a particular qualified investment, any
fees, charges or other compensation (other than interest, dividends, profit
distributions or other similar forms of payment) paid by a qualified technology
business to a CAPCO shall reduce the amount of the CAPCO's qualified investment
in the qualified technology business.
(33) "REASONABLE" means fair, proper, just or
suitable under the circumstances.
(34) "STATE PREMIUM TAX LIABILITY" includes:
(a) Any liability incurred by any person under
Chapter 4A of Title 27 of the Code of Ala. 1975, the
Alabama Insurance Code.
(b) If the
tax liability imposed under Chapter 4A of Title 27, the Alabama Insurance Code,
on January 1, 2002, is eliminated or reduced, any tax liability imposed on an
insurance company or other person that had premium tax liability under Chapter 4A
of Title 27, the Alabama Insurance Code, on that date.
(c) Any tax liability incurred by any person
under Section 31 of Chapter 10 of Title 27 of the Code of Ala.
1975, the Alabama Insurance Code.
(d) If the tax liability imposed under Section
31 of Chapter 10 of Title 27 of the Code of Ala. 1975,
the Alabama Insurance Code, on January 1, 2002, is eliminated or reduced, any tax
liability imposed on an insurance company or other person that had premium tax
liability under Section 31 of Chapter 10 of Title 27 of the Code of
Ala. 1975, the Alabama Insurance Code, on that date.
(35) "VOTING SECURITIES OR OTHER
VOTING INTERESTS" means securities or other interests, the holders of which are
presently entitled to vote for the election of directors or the appointment or
election of managers, other than interim management as permitted in Regulation
281-2-1-.05(4).
F. Neal Wade
Statutory Authority:
Code of Ala.
1975, as amended; Act 2002-429.
