Definitions

SECTION 18.     AMENDATORY     68 O.S. 2001, Section 2357.72, as last amended by Section 19, Chapter 479, O.S.L. 2005 (68 O.S. Supp. 2005, Section 2357.72), is amended to read as follows:

Section 2357.72  Definitions.

As used in this act:

1.  "Acquisition" means the use of capital by an Oklahoma rural small business venture within six (6) months after obtaining the capital to purchase fifty-one percent (51%) or more of the voting interest entitled to elect the governing board, or its equivalent, of any other legal entity, regardless of the legal form of the entity.  As used in this act, "acquisition" does not mean the right to participate in the proceeds from sale of goods or services, whether denominated a royalty, royalty interest or otherwise, and does not mean the right to intellectual property, whether the rights arise from copyright, trademark or patent law;

2.  "Capitalization" means the amount of:

a.           any funds that have actually been contributed to the corporation, limited liability company or partnership qualified rural small business capital company,

b.           any contractual commitment to provide funds to the corporation, limited liability company or partnership qualified rural small business capital company to the extent that such commitment is payable on demand and has substantial economic penalties for breach of the commitment to provide such funds, and

c.            any allocation of tax credit authority awarded to the corporation, limited liability company or partnership qualified rural small business capital company by the Community Development Financial Institutions Fund pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, to the extent such allocation has not been previously designated by the corporation, limited liability company or partnership qualified rural small business capital company as contemplated by Section 45D(b)(1)(C) of the Internal Revenue Code of 1986, as amended, and

d.            any funds loaned to the qualified rural small business capital company, which is licensed as a rural business investment company under 7 U.S.C., Section 2009cc et seq., or any successor statute, by the U.S. Small Business Administration or U.S. Department of Agriculture;

3.  "Equity and near-equity security" means common stock, preferred stock, warrants or other rights to subscribe to stock or its equivalent, or an interest in a limited liability company, partnership, or subordinated debt that is convertible into, or entitles the holder to receive upon its exercise, common stock, preferred stock, a royalty or net profits interest, or an interest in a limited liability company or partnership;

4.  "Financial lending institution" means a bank, credit union, savings and loan, commercial finance company or other entity principally engaged in the extension of credit;

5.  Nonmetropolitan area means an area which is not an urbanized area as defined by the United States Bureau of the Census.  An urbanized area comprises one or more places (central places) and the adjacent densely settled surrounding territory (urban fringe) that together have a minimum of fifty thousand (50,000) persons.  An urban fringe generally consists of contiguous territory having a density of at least one thousand (1,000) persons per square mile.  An urban fringe also includes outlying territory of such density if it was connected to the core of the contiguous area by road and is within one and one-half road miles of that core, or within five (5) road miles of the core but separated by water or other undevelopable territory.  Other territory with a population density of fewer than one thousand (1,000) people per square mile is included within an urban fringe if it eliminates an enclave or closes an indentation in the boundary of the urbanized area all areas of the state except a county having a population in excess of one hundred thousand (100,000) persons according to the most recent Federal Decennial Census;

6.  "Oklahoma rural small business venture" means a business, incorporated or unincorporated, which:

a.         has or will have, immediately after a loan or within one hundred eighty (180) days after a qualified investment is made by a qualified rural small business capital company, at least fifty percent (50%) of its employees or assets located in Oklahoma,

Loophhole: No requirement to invest the other 50%

b.         needs financial assistance in order to commence or expand such business which provides or intends to provide goods or services,

c.         has its principal place of business within a nonmetropolitan area of the state and conducts the activity resulting in at least seventy-five percent (75%) of its gross annual revenue from a nonmetropolitan area of the state,

d.         except as otherwise provided by this subparagraph, is engaged in a lawful business activity under any Industry Number appearing under any Major Group Number of Divisions A, C, D, E, F or I of the Standard Industrial Classification Manual, 1987 revision with the following exceptions:

(1)          Major Group 1 of Division A, and

(2)          Major Group 2 of Division A, and

e.         qualifies as a small business as defined by the federal Small Business Administration, and

f.           expends within eighteen (18) months after the date of the qualified investment at least fifty percent (50%) of the proceeds of the qualified investment for the acquisition of tangible or intangible assets which are used in the active conduct of the trade or business for which the determination of the small business qualification pursuant to subparagraph e of this paragraph was made.  Provided, that the Oklahoma Tax Commission, upon request and demonstration by a qualified rural small business capital company or an Oklahoma rural small business venture, or an investor or an authorized agent of any such entities, may extend the 18-month period otherwise required by this subparagraph for a period not to exceed six (6) months.  Provided, the expenditure of the invested funds by the Oklahoma rural small business shall otherwise comply with the requirements applicable to the usage of tax credits for qualified investment in the Oklahoma rural small business venture.  As used in this subparagraph, tangible assets shall include the acquisition of real property and the construction of improvements upon real property if such acquisition and construction otherwise comply with the requirements applicable to the usage of tax credits for qualified investment in the Oklahoma rural small business venture, and intangible assets shall be limited to computer software, licenses, patents, copyrights and similar items;

Loophhole: No requirement to invest the other 50%

7.  "Qualified investment" means an investment of funds in the form of "equity" and "near-equity" as defined in paragraph 3 of this section or "subordinated debt" as defined in paragraph 9 of this section; provided, an investment which is contingent upon the occurrence of an event or which is subject to being refunded or returned in the absence of such event shall only be deemed to have been made upon the occurrence of the event;

8.  "Qualified rural small business capital company" means a C corporation or a subchapter S corporation, as defined by the Internal Revenue Code of 1986, as amended, incorporated pursuant to the laws of Oklahoma, limited liability company or a registered business partnership with a certificate of partnership filed as required by law, which meets the following criteria:

a.         the corporation, limited liability company or partnership is organized to provide the direct investment of equity and near-equity funds to companies within this state,

b.         the principal place of business of the corporation, limited liability company or partnership is located within this state,

c.         the capitalization of the corporation, limited liability company or partnership is not less than Five Hundred Thousand Dollars ($500,000.00), and

d.         the corporation, limited liability company or partnership has investment of not more than twenty-five percent (25%) of its capitalization in any one company at any time during the calendar year of the corporation, limited liability company or partnership; and

9.  "Subordinated debt" means indebtedness with a maturity date of not less than five (5) years that is subordinated to all other indebtedness of the issuer that has been issued or is to be issued to a financial lending institution.  The indebtedness shall not have a repayment schedule that is faster than a level principal amortization over five (5) years.