39-22-303.7–1 Definitions for Sourcing Sales of Mutual Fund Service Corporations.

In addition to the definitions provided in §39-22-303.7, C.R.S., and for the purpose of implementing §§ 39-22-303.5, 39-22-303.6, 39-22-304, and 39-22-303.7, C.R.S., and related rules, the following terms are defined or further defined as follows: (1) “Affiliate of” or “affiliated with” another person means any person directly or indirectly controlling, controlled by, or under common control with such other person. (2) “Affiliated regulated investment company” or “affiliated RIC” means a regulated investment company that (1) is a shareholder in another regulated investment company and (2), in common with such other regulated investment company, obtains management or distribution services, as described in (4)(a) and (4)(b), from the same provider of such services or a related provider. (3) “Direct” and “indirect” services: (a) Direct services. Amounts are derived directly from the performance of management, distribution, or administration services when they are received as compensation for providing such services to a RIC or to a RIC’s officers, directors or trustees acting on behalf of the RIC. For example, the fee received by a person hired by a RIC’s trustees to manage the RIC’s assets is derived directly from the performance of management services. (b) Indirect services. Amounts are derived indirectly from the performance of management, distribution, or administration services when they are received as compensation for providing such services to a person who is directly responsible for providing management, distribution or administration services to a RIC pursuant to a contract between such person and the RIC or the RIC’s officers, directors, or trustees acting on behalf of the RIC. For example, the fee received by a brokerage firm hired by a person that is under contract to provide management services to a RIC is derived indirectly from the performance of management services. (4) “Mutual Fund Sales” means gross receipts derived, directly or indirectly, from the performance of the following services: (a) “Management services.” The term management services includes, but is not limited to, the rendering of investment advice or investment research to or on behalf of a RIC, making determinations as to when sales and purchases of securities are to be made on behalf of the RIC, or the selling or purchasing of securities constituting assets of a RIC. Such activities must be performed: (i) pursuant to a contract with the RIC entered into pursuant to 15 U.S.C. section 80a-15(a); (ii) for a person that has entered into a contract referred to in subsection i) with the RIC; or (iii) for a person that is affiliated with a person that has entered into a contract referred to in i) with the RIC. (b) “Distribution services.” The term distribution services includes, but is not limited to, advertising, servicing, marketing or selling shares of a RIC, including the receipt of contingent deferred sales charges and fees received pursuant to 17 CFR § 270.12b-1 (Sept. 9, 2004), which is incorporated herein by reference, but such incorporation by reference does not include later amendments or editions of this referenced material. Certified copies of this material are available for review in the Office of Tax Policy Analysis at the Colorado Department of Revenue at 1881 Pierce Street, Lakewood, CO 80214. Additionally, a copy of this material may be examined at any state publications depository library. (i) In the case of an open end company, advertising, servicing or marketing shares must be performed by a person who is either engaged in or affiliated with a person that is engaged in the services of selling shares of a RIC. The service of selling shares of a RIC must be performed pursuant to a contract entered into pursuant to 15 U.S.C. section 80a-15(b). (ii) In the case of a closed end company, advertising, servicing or marketing shares must be performed by a person who was either engaged in or affiliated with a person that was engaged in the services of selling shares of a RIC. (c) “Administration services.” The term administration services includes, but is not limited to, clerical, fund or shareholder accounting, participant record keeping, transfer agency, bookkeeping, data processing, custodial, internal auditing, legal and tax services performed for a RIC. The provider of administration services must also provide or be affiliated with a person that provides management or distribution services to any RIC. (5) “Average Number of Shares” means the average of the number of shares owned by a class of shareholders at the beginning of each year and by the same class of shareholders at the end of the year, where “the year” refers to the RIC’s taxable year that ends with or within the mutual fund service corporation’s taxable year. (6) “RIC” or “regulated investment company” or “fund” means a regulated investment company as defined in section 851 of the federal internal revenue code of 1986, as amended. For purposes § 39-22-303.6(9), C.R.S., and these rules, if the mutual fund service corporation principally provides management, distribution, or administration services to regulated investment companies as defined in section 851 of the federal internal revenue code, such terms also include pension and employee retirement plans and foreign entities similar to regulated investment companies as defined in section 851 of the federal internal revenue code. (7) “Shareholder factor” or “Colorado shareholder factor” means the Average Number of Shares owned by the RIC’s shareholders domiciled in Colorado divided by the Average Number of Shares owned by the RIC’s shareholders everywhere.