Rhode Island Code of Regulations › Title 870 - Rhode Island Commerce Corporation › Chapter 30 - Tax Credits and Exemptions › Subchapter 00 - N/A › Part 8 - Rules and Regulations for the Rhode Island Small Business Development Fund › Section 870-RICR-30-00-8.5 - Definitions

Current through June 14, 2024
A. The following words and terms, when used in these Rules, shall have the following meanings, unless the context clearly indicates otherwise.
1. "Act" means R.I. Gen. Laws Chapter 42-64.33 known as the Small Business Development Fund Act.
2. "Affiliate" means as set forth in the Act.
3. "Applicant" means an entity that applies for Certification pursuant to these Rules.
4. "Application" means a document and additional materials in the form prescribed by the Corporation submitted by an Applicant to the Corporation as provided in the Rules.
5. "Board" means the Board of Directors of the Corporation, or, at the election of such directors, a committee thereof.
6. "Bond" means a financial guarantee bond in the amount of the Capital Investment authority requested by the Applicant, or such lesser amount set forth in the Certification issued to the Applicant, having terms and conditions acceptable to the Corporation and issued by a company that is registered to do business in the State and not an investor in a Small Business Development Fund.
7. "Business plan" means as set forth in §
											8.6(A)(8)     of this Part.
8. "Capital investment" means any Equity Investment or Debt Investment in a Small Business Development Fund by a Small Business Fund Investor that:
a. is acquired after the effective date of this chapter at its original issuance solely in exchange for cash;
b. has one hundred percent (100%) of its cash Purchase Price used by the Small Business Development Fund to make Qualified Investments in Eligible Businesses located in this State within three (3) years of the initial Credit Allowance Date; and
c. is designated by the Small Business Development Fund as a capital investment under the Act and is certified by the Corporation pursuant to this Part. This term shall include any capital investment that does not meet the provisions of this Part if the investment was a capital investment in the hands of a prior holder.
9. "Certificate of good standing" means a certificate of good standing issued by the Rhode Island Secretary of State.
10. "Certification" means the document issued to an Applicant by the Corporation after Board approval of a complete Application.
11. "Corporation" means the Rhode Island Commerce Corporation established under the Corporation Act.
12. "Corporation act" means R.I. Gen. Laws §
											42-64-1
et seq
.
13. "Credit allowance date" means the date on which a Capital Investment is made and each of the five (5) anniversary dates of the date thereafter.
14. "Debt investment" means a loan with a term of not less than six years.
15. "Depository institution" means a financial institution that:
a. is in the business of regularly accepting deposits from the public,
b. is a national bank or federal savings association regulated by the United Stated Department of Treasury, Office of Comptroller of the Currency, credit union regulated by the National Credit Union Administration, or other bank or financial institution regulated or insured by the Federal Deposit Insurance Corporation, Federal Reserve Board, or Conference of State Bank Supervisors, and
c. is registered with the Rhode Island Secretary of State, the Department of Business Regulation or is otherwise licensed to conduct business in the State and has a physical branch location in the State that accepts deposits from its customers.
16. "Eligible business" means a business that,
a. At the time of the initial Qualified Investment in the company:
(1) has less than two hundred fifty (250) Employees;
(2) has not more than fifteen million dollars ($15,000,000) in net income from the preceding tax year;
(3) has its Principal Business Operations in this State; and
(4) is engaged in industries related to clean energy, biomedical innovation, life sciences, information technology, software, cyber physical systems, cybersecurity, data analytics, defense, shipbuilding, maritime, composites, advanced business services, design, food, manufacturing, transportation, distribution, logistics, arts, education, hospitality, tourism, or, if not engaged in the industries, the Corporation makes a determination that the investment will be beneficial to the economic growth of the State; and
b. Maintains its Principal Business Operations in the State during the term of a Qualified Investment to such business.
17. "Eligible distribution" means as set forth in the Act.
18. "Employee" means an individual employed for remuneration.
19. "Equity investment" means an investment of funds in exchange for an ownership stake in a business.
20. "Jobs created" means a newly created position of employment that was not previously located in the State at the time of the Qualified Investment in the Eligible Business and requiring a minimum of thirty five (35) hours worked each week, measured each year by subtracting the number of fulltime thirty five (35) hours per week employment positions at the time of the initial Qualified Investment in the Eligible Business from the monthly average of full-time thirty five (35) hours per week employment positions for the applicable year. The number shall not be less than zero.
21. "Jobs retained" means a position requiring a minimum of thirty-five (35) hours worked each week that existed prior to the initial Qualified Investment. Retained jobs shall be counted each year based on the monthly average of full-time thirty-five (35) hours per week employment positions for the applicable year. The number shall not exceed the initial amount of retained jobs reported and shall be reduced each year if employment at the Eligible Business concern drops below that number.
22. "Letter of good standing" means a letter from the Division of Taxation certifying that the taxpayer is in good standing for purposes of financing transactions.
23. "Minority business enterprise" means as set forth in the Act.
24. "Nationally-Recognized economic forecasting firm" means one or more nationally recognized firms as certified by the Corporation in its sole discretion. Certification will be accordance with criteria set forth in the Application. An Applicant may seek to have a firm certified prior to submitting an Application.
25. "Nonpublic companies" means a corporation, limited liability company, partnership, or limited partnership that does not offer or trade its stocks or membership interests to the public on any stock market exchange, which entity is organized under the laws of United States America or a political subdivision thereof.
26. "Positive economic impact" means:
a. as used in §
												8.10(C)(2)     of this Part, the projected State tax revenue to be generated as a result of an Applicant's Qualified Investments is in excess of the tax credits to be awarded to the Applicant under the Program,
b. as used in §
												8.14(A)(1)     of this Part, the actual performance of an Applicant's Qualified Investments have resulted in State tax revenues that are in excess of the tax credits that have been certified.
27. "Principal business operations" means the location where at least sixty percent (60%) of a business's Employees work or where Employees who are paid at least sixty percent (60%) percent of the business's payroll work. A business that has agreed to relocate Employees using the proceeds of a Qualified Investment to establish its principal business operations in a new location shall be deemed to have its principal business operations in the new location if it satisfies these requirements no later than one hundred eighty (180) days after receiving a Qualified Investment.
28. "Program" means the Small Business Development Fund program created under the Act.
29. "Purchase price" means the amount paid to the Small Business Development Fund that issues a Capital Investment which shall not exceed the amount of Capital Investment authority certified pursuant to this Part.
30. "Qualified investment" means any Equity Investment in or Qualified Loan to an Eligible Business; provided that, with respect to any one Eligible Business, the maximum amount of Equity Investments and/or Qualified Loans made in the business by one or more Small Business Development Funds, on a collective basis with all of the businesses' affiliates, with the proceeds of Capital Investments shall be twenty percent (20%) of the Small Business Development Fund's Capital Investment authority, exclusive of investments made with repaid or redeemed investments or interest or profits realized thereon. An Eligible Business, on a collective basis with all of the businesses' affiliates, is prohibited from receiving more than four million dollars ($4,000,000) in Equity Investments and/or Qualified Loans from one or more Small Business Development Funds with the proceeds of Capital Investments.
31. "Qualified Loan" means a loan with a maturity of not less than one year from the date of the loan, excluding revolving lines of credit and debt secured by a first mortgage on any real estate or ground lease; provided, however, revolving lines of credit and debt secured by a first mortgage on real estate or ground lease with a term of more than one year made to an Eligible Business are permitted if such Eligible Business has received a Refusal Letter or a Referral Letter from a Depository Institution.
32. "Referral letter" means an official letter from a Depository Institution referring an Eligible Business to a Small Business Development Fund and certifying that Depository Institution would not be able to make any loan to the Eligible Business either alone or in combination with the Small Business Development Fund to accomplish the funding needs requested by the Eligible Business for a revolving line of credit or senior secured loan due solely to issues of creditworthiness.
33. "Refusal letter" means an official letter from a Depository Institution denying an Eligible Business a loan based on standard commercial terms in the market for an equivalent borrower and certifying that Depository Institution has denied such application for business reasons and not at the request of the Eligible Business or any representative of a Small Business Development Fund.
34. "Request for determination" means a request by a Small Business Development Fund to the Corporation for determination that a business in which an investment is being made is an Eligible Business.
35. "Request to exit" means the request to exit from the Program made by a Small Business Development Fund.
36. "Revenue impact assessment" means a prospective assessment of an Applicant's Qualified Investments on the State's economy and on State and local tax revenues completed by a Nationally-Recognized Economic Forecasting Firm, which shall include the following:
a. An analysis of the direct and indirect impacts of the proposed Qualified Investments on employment, earnings, value added and output in Rhode Island, using a nationally recognized and commonly used economic modeling system, excluding therefrom any measurement of induced impacts.
b. The analysis shall be based on the Applicant's anticipated mix of Qualified Investments in the State by industry, type of financing (equity investments or loans) and purpose (property acquisition, construction, equipment financing, working capital etc.), as presented in the Business Plan. The analysis will not be based on prior revenue impact assessments or similar prospective analyses prepared for a similar program.
c. Economic and tax revenue impacts shall be based on new Jobs Created and Jobs Retained as a result of the anticipated Qualified Investments; provided, however, that Jobs Retained will only be considered by the Corporation for the purpose of this analysis on the basis of evidence satisfactory to the Corporation that in the absence of such investment a proposed recipient of Small Business Development Fund financing:
(1) Would no longer be doing business in the State; or
(2) Would have reduced its employment in the State by at least the number of claimed Jobs Retained.
d. An analysis submitted in relation to a Qualified Investment made for the principal purpose of financing construction shall only relate to the period of construction and no longer unless the Applicant can demonstrate by evidence satisfactory to the Corporation that such construction was needed to support expansion or retention of the recipient's ongoing operations in the State and that in the absence of such investment a proposed recipient of Small Business Development Fund financing:
(1) Would no longer be doing business in the State; or
(2) Would have reduced its employment in the State by at least the number of claimed Jobs Retained.
e. Financing for acquisition of real property will not be considered a Qualified Investment under such analysis unless it can be demonstrated by evidence satisfactory to the Corporation that such acquisition is needed to support the creation or retention of jobs in the State and that in the absence of such investment a proposed recipient of Small Business Development Fund financing:
(1) Would no longer be doing business in the State; or
(2) Would have reduced its employment in the State by at least the number of claimed Jobs Retained.
f. The analysis must include evidence that the projected outcomes set forth therein are credible.
37. "Rules" means the rules and regulations promulgated by the Corporation pursuant to the Act as amended from time to time.
38. "Small business development fund" means an entity certified by the Corporation under this Part.
39. "Small business fund investor" means an entity that makes a Capital Investment in a Small Business Development Fund.
40. "State" means the state of Rhode Island and Providence Plantations.
41. "State tax liability" means as set forth in the Act.