Texas Insurance Code - Not Codified - Article 4.51. Definitions
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Art. 4.51. DEFINITIONS. In this subchapter:
(1) "Affiliate" of another person means:
(A) a person who is an affiliate for purposes of Section 2,
Article 21.49-1 of this code;
(B) a person who directly or indirectly:
(i) beneficially owns 10 percent or more of the outstanding
voting securities or other voting or management interests of the
other person, whether through rights, options, convertible
interests, or otherwise; or
(ii) controls or holds power to vote 10 percent or more of
the outstanding voting securities or other voting or management
interests of the other person;
(C) a person 10 percent or more of the outstanding voting
securities or other voting or management interests of which are
directly or indirectly:
(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;
(D) a partnership in which the other person is a general
partner; or
(E) an officer, director, employee, or agent of the other
person, or an immediate family member of the officer, director,
employee, or agent.
(2) "Allocation date" means the date on which the certified
investors of a certified capital company are allocated premium tax
credits by the comptroller under this subchapter.
(3) "Certified capital" means an investment of cash by a
certified investor in a certified capital company that fully funds
the purchase price of an equity interest in the company or a
qualified debt instrument issued by the certified capital company.
(4) "Certified capital company" means a partnership,
corporation, or 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
businesses and that is certified as meeting the criteria of this
subchapter.
(5) "Certified investor" means an insurance company or
other person that has state premium tax liability and that
contributes certified capital pursuant to an allocation of premium
tax credits under this subchapter.
(6) "Early stage business" means a qualified business that
satisfies at least one of the following criteria:
(A) is involved, at the time of a certified capital
company's first investment, in activities related to the
development of initial product or service offerings, such as
prototype development or establishment of initial production or
service processes;
(B) was initially organized less than two years before the
date of the certified capital company's first investment; or
(C) during the fiscal year immediately preceding the year of
the certified capital company's first investment had, on a
consolidated basis with its affiliates, gross revenues of not more
than $2 million as determined in accordance with generally accepted
accounting principles.
(7) "Person" means a natural person or entity, including a
corporation, general or limited partnership, or trust or limited
liability company.
(8) "Premium tax credit allocation claim" means a claim for
allocation of premium tax credits.
(9) "Qualified business" means a business that, at the time
of a certified capital company's first investment in the business:
(A) is headquartered in this state and intends to remain in
this state after receipt of the investment by the certified capital
company;
(B) has its principal business operations located in this
state and intends to maintain business operations in this state
after receipt of the investment by the certified capital company;
(C) has agreed to use the qualified investment primarily to:
(i) support business operations in this state, other than
advertising, promotion, and sales operations which may be conducted
outside of this state; or
(ii) in the case of a start-up company, establish and
support business operations in this state, other than advertising,
promotion, and sales operations which may be conducted outside of
this state;
(D) has not more than 100 employees and:
(i) employs at least 80 percent of its employees in this
state; or
(ii) pays 80 percent of its payroll to employees in this
state;
(E) is primarily engaged in:
(i) manufacturing, processing, or assembling products;
(ii) conducting research and development; or
(iii) providing services; and
(F) is not primarily engaged in:
(i) retail sales;
(ii) real estate development;
(iii) the business of insurance, banking, or lending; or
(iv) the provision of professional services provided by
accountants, attorneys, or physicians.
(10) "Qualified debt instrument" means a debt instrument
issued by a certified capital company, at par value or a premium,
that:
(A) has an original maturity date of at least five years
after the date of issuance;
(B) has a repayment schedule that is not faster than a level
principal amortization over five years; and
(C) has no interest, distribution, or payment features that
are related to the profitability of the certified capital company
or the performance of the certified capital company's investment
portfolio.
(11) "Qualified distribution" means any distribution or
payment from certified capital by a certified capital company in
connection with:
(A) the reasonable costs and expenses of forming,
syndicating, managing, and operating the company, provided that the
distribution or payment is not made directly or indirectly to a
certified investor, including:
(i) reasonable and necessary fees paid for professional
services, including legal and accounting services, related to the
formation and operation of the company; and
(ii) an annual management fee in an amount that does not
exceed two and one-half percent of the certified capital of the
company; and
(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 company resulting from the
earnings or other tax liability of the company to the extent that
the increase is related to the ownership, management, or operation
of the company.
(12) "Qualified investment" means the investment of cash by
a certified capital company in a qualified 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.
(13) "State premium tax liability" means:
(A) any liability incurred by any person under Chapter 221,
222, 223, or 224 of this code; or
(B) if the tax liability imposed under Chapter 221, 222,
223, or 224 of this code is eliminated or reduced, any tax liability
imposed on an insurance company or other person that had premium tax
liability under Subchapter A of this chapter or Article 9.59 of this
code as those laws existed on January 1, 2003.
(14) "Strategic investment area" means an area of this state
that qualifies as a strategic investment area under Subchapter O,
Chapter 171, Tax Code, or, after the expiration of that subchapter,
an area that qualified as a strategic investment area under that
subchapter immediately before its expiration.
(15) "Strategic investment business" means a qualified
business that has its principal business operations located in one
or more strategic investment areas and intends to maintain business
operations in the strategic investment areas after receipt of the
investment by the certified capital company.
Added by Acts 2001, 77th Leg., ch. 437, Sec. 1, eff. May 28, 2001.
Subd. (2) amended by Acts 2003, 78th Leg., ch. 1310, Sec. 69, eff.
June 20, 2003; Subd. (13) amended by Acts 2003, 78th Leg., ch.
1310, Sec. 69, eff. June 20, 2003; Subsecs. (5), (13) amended by
Acts 2005, 79th Leg., ch. 99, Sec. 1, eff. Sept. 1, 2005.
Article: 3.51-4 3.51-5 3.51-7 3.56 3.70-3D 4.01 4.11A 4.51 4.52 4.53 4.54 4.55 4.56 4.57 4.58
Last modified: August 11, 2007
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