(1) (a) "Affiliate", with respect to a certified capital company or insurance company, means:

(I) Any person who, directly or indirectly, beneficially owns (whether through rights, options, convertible interests, or otherwise), controls, or holds power to vote fifteen percent or more of the outstanding voting securities or other voting ownership interests of the certified capital company or insurance company, as applicable;

(II) Any person, fifteen percent or more of whose outstanding voting securities or other voting ownership interests are directly or indirectly beneficially owned (whether through rights, options, convertible interests, or otherwise), controlled, or held with power to vote by the certified capital company or insurance company, as applicable;

(III) Any person who, directly or indirectly, controls, is controlled by, or is under common control with the certified capital company or insurance company, as applicable;

(IV) A partnership in which the certified capital company or insurance company, as applicable, is a general partner; or

(V) Any person who is an officer, director, employee, or agent of the certified capital company or insurance company, as applicable, or an immediate family member of such officer, director, employee, or agent.

(b) Notwithstanding paragraph (a) of this subsection (1), an investment by a certified investor in a certified capital company pursuant to an allocation of premium tax credits in accordance with section 10-3.5-106 shall not cause such certified capital company to become an affiliate of such certified investor.

(2) "Allocation date" means the date on which the office allocates premium tax credits to the certified investors of a certified capital company.

(3) "Certified capital" means an amount of cash that:

(a) Is invested by a certified investor in a certified capital company; and

(b) Fully funds the purchase price of either or both the certified investor's equity interest in the certified capital company or a qualified debt instrument issued by the certified capital company.

(4) "Certified capital company" means a partnership, corporation, trust, or limited liability company, organized on a for-profit basis, that has its principal office located or is headquartered in Colorado, that has as its primary business activity the investment of cash in qualified businesses or qualified rural businesses, and that is certified by the office as meeting the criteria of this article.

(5) "Certified investor" means any insurance company that contributes certified capital pursuant to an allocation of premium tax credits as set forth in section 10-3.5-106.

(6) "Designated rural county" means any county, but not any city and county, in this state that, as of June 9, 2001, has a population of not more than one hundred fifty thousand people and, if the county's population exceeds twenty thousand people, that has a growth rate that does not exceed the statewide average for the period 1990-2000 by more than twenty-five percent as defined in the two most recent decennial censuses.

(7) "Distressed urban community" means any county or portion of a county in this state as defined by the office.

(8) "Office" means the Colorado office of economic development, created in section 24-48.5-101, C.R.S.

(9) "Person" means any natural person or entity, including without limitation a corporation, general or limited partnership, trust, or limited liability company.

(10) "Premium tax credit allocation claim" means a claim for allocation of premium tax credits prepared and executed by a certified investor on a form provided by the office and filed by a certified capital company with the office. The form shall indicate whether the premium tax credit allocation claim is for an allocation of premium tax credits pursuant to section 10-3.5-106 (2)(a)(I) or (2)(a)(II) and shall include an affidavit of the certified investor pursuant to which such certified investor shall become legally bound and irrevocably committed to make an investment of certified capital in a certified capital company in the amount allocated, even if such amount is less than the amount of the claim, subject only to the receipt of an allocation pursuant to section 10-3.5-106.

(11) "Qualified business" means a business that:

(a) Meets all of the following conditions as of the time of a certified capital company's first investment in the business if that investment occurred before May 27, 2004:

(I) It is headquartered in this state, and its principal business operations are located in this state;

(II) It is a small business concern as described in the small business size regulations of the United States small business administration, 13 CFR 121.201; and

(III) It is not a business predominantly engaged in professional services provided by accountants or lawyers.

(b) Subject to paragraph (c) of this subsection (11), meets all of the following conditions as of the time of a certified capital company's first investment in the business if that investment occurs on or after May 27, 2004:

(I) Either of the following:

(A) It is headquartered in this state, its principal business operations are located in this state, and the certified capital company has a reasonable expectation, based upon an affidavit of one of the principal officers of the business or other comparable evidence, that the business intends to preserve its headquarters and principal place of business in Colorado for at least three years after the qualified investment and that it will expend substantially all of the qualified investment within Colorado pursuant to criteria adopted by the office by rule. If a business meets some but not all of the criteria of this sub-subparagraph (A), the business may nevertheless be deemed to be a qualified business if the Colorado economic development commission determines that an investment of certified capital proposed by a certified capital company pursuant to this article will further the economic development of the state.

(B) It has entered into a contract with the certified capital company to comply, within ninety days after finalization of the contract, with sub-subparagraph (A) of this subparagraph (I), and the contract contains enforceable provisions requiring a return of any investment of certified capital if the business fails to so comply.

(II) It is a small business concern as described in the small business size regulations of the United States small business administration, 13 CFR 121.201; and

(III) It is not a business predominantly engaged in:

(A) Professional services provided by accountants, doctors, or lawyers;

(B) Banking or lending;

(C) Real estate development;

(D) Insurance;

(E) Oil and gas exploration;

(F) Direct gambling activities, which shall not include ancillary gambling equipment and other indirect gambling activities, as defined by the office; or

(G) Businesses that make loans to or invest in a certified capital company or an affiliate of a certified capital company or insurance company.

(c) Any business that is classified as a qualified business pursuant to paragraph (b) of this subsection (11) at the time of the first qualified investment in said business shall remain classified as a qualified business, may receive continuing qualified investments, and such continuing investments shall be qualified investments even though such business may not meet the definition of a qualified business at the time of such continuing investments; except that, unless otherwise determined by the economic development commission, such business shall not be eligible to receive further qualified investments if:

(I) It has relocated its headquarters or principal business operations outside of this state; or

(II) It has not expended substantially all of its prior qualified investments within Colorado pursuant to criteria adopted by the office by rule; except that this limitation shall not be deemed to either:

(A) Preclude the purchase of services or goods from outside of Colorado if such services are performed and such goods are used in Colorado; or

(B) Apply retroactively to disqualify a qualified investment previously approved by the office after the qualified investment has been made.

(12) "Qualified debt instrument" means a debt instrument issued by a certified capital company, at par value or a premium, with an original maturity date of at least five years after the date of issuance, a repayment schedule that is no faster than a level principal amortization over five years, and interest, distribution, or payment features that are not related to the profitability of the certified capital company or the performance of the certified capital company's investment portfolio.

(13) "Qualified distribution" means any distribution out of certified capital in connection with any of the following:

(a) Reasonable costs and expenses of forming, syndicating, and organizing the certified capital company, including reasonable and necessary fees paid for professional services, including, but not limited to, legal and accounting services, related to the formation of the certified capital company, and the cost of financing and insuring the obligations of the certified capital company;

(b) Reasonable costs and expenses of managing and operating the certified capital company, including an annual management fee in an amount that does not exceed two and one-half percent of certified capital; except that:

(I) No such cost or expense shall be paid to a certified investor or affiliate of a certified investor;

(II) No such cost or expense shall be paid for federal or state taxes, including penalties and interest related to state and federal income taxes, of the equity owners of a certified capital company resulting from a tax liability of the certified capital company; and

(III) Such costs and expenses in the aggregate shall not exceed five percent of certified capital in any one year;

(c) Reasonable and necessary fees in accordance with industry custom for professional services, including but not limited to legal and accounting services, related to the operation of the certified capital company; except that such professional services shall not be construed to include litigation challenging the validity or effect of this article, lobbying, or governmental relations.

(d) (Deleted by amendment, L. 2004, p. 1, § 1, effective January 20, 2004.)

(14) (a) "Qualified investment" means the investment of cash by a certified capital company in a qualified business or qualified rural business for the purchase of any debt, debt participation, equity, or hybrid security, including a debt instrument or security that has the characteristics of debt but provides for conversion into equity or equity participation instruments, including, but not limited to, options or warrants; except that, with respect to all certified capital invested pursuant to an allocation of tax credits pursuant to section 10-3.5-106 (2)(a)(I), the investment shall be made in a qualified rural business.

(b) Unless previously approved by the office based upon unique circumstances, a certified capital company shall not make a loan on or after May 27, 2004, to a qualified business or qualified rural business unless the business has received two written loan rejection letters from two different commercial banks that are federally or state chartered in Colorado and that make small business loans, at least one of which banks is a preferred or certified lender designated by the federal small business administration. Any such loan by a certified capital company shall not be made through or in connection with any guaranteed loan program. Additionally, a certified capital company shall not make a loan on or after May 27, 2004, to a qualified business or qualified rural business unless the state's revolving loan fund that covers the area where the business is located has declined the loan.

(15) "Qualified rural business" means a qualified business that has its principal business operations in a designated rural county.

(15.5) "Seed or early stage", in reference to a qualified business, means that the qualified business, at the time of the initial qualified investment, either:

(a) Had less than five hundred thousand dollars in total revenues for the fiscal year immediately preceding the initial qualified investment;

(b) Has received no more than one investment from a professional venture capital firm with funds raised from institutional investors; or

(c) Does not have positive operational cash flow for the fiscal year immediately preceding the initial qualified investment.

(16) "State premium tax liability" means any liability incurred by an insurance company under the provisions of sections 10-3-209 and 10-6-128, or, in the case of a repeal or reduction by the state of the liability imposed by section 10-3-209 or 10-6-128, any other tax liability imposed upon an insurance company by the state.