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.

(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.