2013 -- H 5131

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LC00117

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO EDUCATION - HIGHER EDUCATION - JOB CREATION THROUGH

EDUCATIONAL OPPORTUNITY PROGRAM

     Introduced By: Representatives Blazejewski, Bennett, Ferri, Ajello, and Cimini

     Date Introduced: January 23, 2013

     Referred To: House Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 16 of the General Laws entitled "Education" is hereby amended by

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adding thereto the following chapter:

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     CHAPTER 57.1

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JOB CREATION THROUGH EDUCATIONAL OPPORTUNITIES PROGRAM

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     16-57.1-1. Short title. -- This act shall be known and may be cited as the "Job Creation

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Through Educational Opportunity Program Act of 2013."

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     16-57.1-2. Program established. -- (a) The Job Creation Through Educational

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Opportunity Program, referred to in this chapter as the "program," is created to reimburse

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education-related costs for Rhode Island residents who obtain an associate’s degree or a

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bachelor's degree in this state, and live, work and pay taxes in this state thereafter. The program is

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designed to achieve the following goals:

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     (1) Promote economic opportunity for people in this state by ensuring access to the

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training and higher education that higher-paying jobs require;

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     (2) Bring more and higher-paying jobs to this state by increasing the skill level of this

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state's workforce;

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     (3) Offer educational opportunity and retraining to individuals impacted by job loss,

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workplace injury, disability or other hardship;

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     (4) Keep young people in this state through incentives for educational opportunity and

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creation of more high-paying jobs; and

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     (5) Accomplish all of the goals in this chapter with as little bureaucracy as possible.

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     16-57.1-3. Definitions. -- As used in this chapter the following terms have the following

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meanings unless the context clearly requires otherwise:

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     (1) "Accredited Rhode Island community college, college or university" means an

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institution that is accredited by a regional accrediting association or by one of the specialized

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accrediting agencies recognized by the United States Secretary of Education and is:

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     (i) Any campus of the Rhode Island Community College System;

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     (ii) Any campus of the University of Rhode Island;

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     (iii) Any campus of Rhode Island College;

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     (iv) Any educational institution that is located in this state and has authorization to confer

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an associate’s degree or a bachelor's degree, in accordance with the Rhode Island general laws.

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     (2) "Benchmark loan payment" means the figure described in section 16-57.1-4.

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     (3) "Board" means the board of governors for higher education as established pursuant to

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chapter 16-59.

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     (4) "Educational cost-of-living adjustment" means for any calendar year an amount equal

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to the average tuition and fees at the University of Rhode Island for a bachelor's degree or at

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Rhode Island Community College for an associate's degree for the academic year beginning in

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the prior calendar year, divided by the average tuition and fees for that degree in that system for

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the academic year beginning in the calendar year immediately preceding the prior calendar year.

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     (5) "Educational institution" means an institution of higher learning or a vocational

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school, or an eligible institution as identified by the Rhode Island higher education assistance

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authority pursuant to chapter 16-57.

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     (6) "Educational opportunity tax credit" means the tax credit provided for in this chapter.

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     (7) "Financial aid package" means all financial aid received by a student and includes any

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loans that are certified by an accredited Rhode Island community college, college or university's

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financial aid office, subject to any changes made by that institution's financial aid office. These

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loans may include private loans for the cost of attendance at an accredited Rhode Island

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community college, college or university or less than the full amount of loans under federal

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programs, depending on the practices of the accredited Rhode Island community college, college

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or university.

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     (8) "Rhode Island resident" means an individual who, at the time the individual

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commences the relevant degree program, is registered to vote in the state or occupies a dwelling

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in the state and continues to occupy a dwelling in the state during the school year, except periods

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when it is reasonably necessary for the individual to live elsewhere as part of an accredited Rhode

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Island community college, college or university's academic programs.

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     (9) "Principal cap" means the cap on aid provided for in section 16-57.1-4.

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     (10) "Tax administrator" or "state tax administrator" means the tax administrator within

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the department of revenue appointed by the director of revenue with the approval of the governor

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pursuant to section 44-1-1.

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     16-57.1-4. Principal cap. -- (a) The principal cap limits the loan principal for purposes of

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claiming the educational opportunity tax credit. The University of Rhode Island, Rhode Island

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College, and the Rhode Island Community College shall publish on their respective publicly

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accessible websites the average in-state tuition and mandatory fees applicable to their respective

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programs and provide those figures to the state tax administrator and all accredited Rhode Island

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community colleges, colleges and universities by September 1st each year.

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     (1) For an individual graduating in calendar year 2013, the individual's principal cap is

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five thousand dollars ($5,000) for a bachelor's degree earner or two thousand dollars ($2,000) for

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an associate’s degree earner, multiplied by the number of years of full-time attendance to obtain

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the relevant degree.

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     (2) Beginning in calendar year 2014, by November 1st annually the state tax administrator

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shall multiply the educational cost-of-living adjustment by the principal cap applicable to

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individuals who graduate in that calendar year; the result is the principal cap for individuals who

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graduate during the following calendar year.

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     (3) For an individual earning a degree from an accredited Rhode Island community

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college, college or university, the relevant accredited Rhode Island community college, college or

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university shall certify, once the individual has earned the degree, the total principal of loans the

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individual received as part of that individual's financial aid package.

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     (4) For an individual whose student loans exceed the principal cap, a benchmark loan

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payment must be calculated as described in this paragraph. The state tax administrator shall

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annually calculate by November 1st what the monthly payment would be on a loan for the amount

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of the principal cap, to be paid over ten (10) years, at the interest rate offered for federally

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subsidized Stafford loans under 20 United States Code, Section 1077a, during the individual's last

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year of enrollment at an accredited Rhode Island community college, college or university.

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     16-57.1-5. Eligibility for the program. -- To be eligible to participate in the program:

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     (1) An individual must be a Rhode Island resident;

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     (2) An individual must attend and obtain an associate’s degree or a bachelor's degree

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from an accredited Rhode Island community college, college or university. The individual need

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not obtain the degree from the institution in which that individual originally enrolled, as long as

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all course work toward the degree is performed at an accredited Rhode Island community college,

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college or university;

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     (3) An individual must live in this state while pursuing the degree, excepting periods

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when it is reasonably necessary for the individual to live elsewhere as part of the relevant

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institution's academic programs. The individual must also agree to live in this state after obtaining

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the degree during any period when that individual seeks to take advantage of the educational

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opportunity tax credit; and

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     (4) An individual must maintain records relating to loan payments claimed under the

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educational opportunity tax credit for five (5) years after those payments are claimed.

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     16-57.1-6. Educational loans. -- The following provisions apply with respect to an

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individual's educational loans:

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     (1) The individual may claim the educational opportunity tax credit only with respect to

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loans that are part of that individual's financial aid package and that have a term of at least eight

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(8) years;

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     (2) If the individual makes any prepayment, that prepayment is not eligible for the

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educational opportunity tax credit;

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     (3) The individual, including an individual who has graduated from an accredited Rhode

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Island community college, college or university after September 1, 2013, may refinance

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educational loans only if they remain separate from other debt, whether noneducational debt or

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educational debt incurred in a program other than the degree program for which the educational

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opportunity tax credit is claimed.

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     16-57.1-7. Administration. -- The program must be administered as described in this

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section:

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     (1) The board of governors for higher education, in consultation with the state tax

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administrator, shall make information about the program available on the board's publicly

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accessible website. The board shall refer any questions regarding the program to the relevant

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accredited Rhode Island community college, college or university's financial aid office. The

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assessor shall provide to an accredited Rhode Island community college, college or university

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information that is necessary to document a student's eligibility for the educational opportunity

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tax credit;

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     (2) A Rhode Island resident who enrolls in an accredited Rhode Island community

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college, college or university and receives financial aid in the form of loans must have the

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opportunity to participate in the program. An accredited Rhode Island community college, college

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or university shall, at a minimum, provide information about the program in financial aid award

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materials, entrance interviews, exit interviews, materials listing financial aid resources and, as

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appropriate, any promotional materials provided by state agencies, to the extent such contacts

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with students are already part of the accredited Rhode Island community college, college or

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university's procedures;

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     (3) An accredited Rhode Island community college, college or university must document

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for the student information required for purposes of the educational opportunity tax credit. The

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accredited Rhode Island community college, college or university shall provide an original or

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certified copy to the student and shall retain a copy of the documentation in its files for at least

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ten (10) years after the student graduates;

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     (4) An individual may take advantage of any forbearance or deferment provisions in the

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relevant loan agreements without forfeiting the right to claim the educational opportunity tax

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credit when the individual resumes repayment. This paragraph applies to a student that obtained a

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bachelor's or associate’s degree from an accredited Rhode Island community college, college or

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university after September 1, 2013.

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     16-57.1-8. Effective date; participation by individual already enrolled in degree

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program. -- The program must commence for the first semester that begins after the effective

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date of this chapter. A Rhode Island resident who, when the program commences, is enrolled in

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an associate’s or a bachelor's degree program at an accredited Rhode Island community college,

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college or university may participate, subject to the same essential terms as other program

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participants. Such an individual need only meet the eligibility requirements in this chapter from

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September 1, 2013 forward. Provided, that in calculating the benefits available to the person

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under this chapter, including, but not limited to, credits and reimbursements, only education

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undertaken and expenses incurred on or after the effective date of this chapter may be considered

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for calculating the amount of the principal cap and/or any other additional benefits under this

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chapter.

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     16-57.1-9. Promotion by state agencies. -- The board, the higher education assistance

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authority established pursuant to chapter 16-57, the department of economic development, and

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any other agency engaging in education-related outreach shall integrate promotion of the program

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into existing educational opportunity outreach efforts to the extent possible in a manner consistent

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with the scope of the program and its centrality to the state's efforts to raise educational

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attainment.

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     16-57.1-10. Effect on funding or higher education. -- It is the intent of the legislature

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that neither the existence of the program nor the benefits provided under the educational

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opportunity tax credit shall serve as justification to decrease other funds appropriated or allocated

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to the Rhode Island Community College, Rhode Island College, the University of Rhode Island,

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and/or to any other accredited Rhode Island community college, college, or university.

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     16-57.1-11. Credit for educational opportunity. -- (a) Definitions. -- As used in this

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section, unless the context otherwise indicates, the following terms have the following meanings:

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     (1) "Employer" means a person, business, partnership, association, corporation, including

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a municipal corporation, trust or nonprofit entity that employs the services of one or more

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individual persons;

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     (2) "Full-time" employment means employment with a normal workweek of thirty-two

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(32) hours or more;

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     (3) “Part-time” employment means employment with a normal workweek of between

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sixteen (16) and thirty-two (32) hours;

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     (4) "Qualified employee" means an employee who is eligible for the credit provided in

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this section and who is employed at least part- time;

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     (5) "Opportunity program participant" means an individual who obtains the specified

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degree and complies with the requirements under this chapter;

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     (6) "Resident individual" has the same meaning as “Rhode Island resident” as defined in

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this chapter;

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     (7) "Seasonal employment" means employment in an industry in which, because of the

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seasonal nature thereof, it is customary to operate only during a regularly recurring period or

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periods of less than twenty-six (26) weeks in a calendar year;

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     (8) "Term of employment" includes all months when the individual is actually employed.

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It includes time periods when an individual is on leave or vacation. It extends to the full year for

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individuals working for employers who customarily operate only during a regularly recurring

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period of nine (9) months or more in a calendar year. For individuals working for employers who

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customarily operate only during regularly recurring periods of less than nine (9) months in a

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calendar year, including seasonal employment, the term of employment extends only to time

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periods when the individual is actually working.

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     (b) Credit allowed. --  A taxpayer constituting an opportunity program participant or an

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employer of a qualified employee is allowed a credit against the state personal or business

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corporation tax, whichever is appropriate, for each taxable year under the terms established in this

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section. The credit is created to implement the Job Creation Through Educational Opportunity

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Program established under this chapter 16-57.1.

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     (c) Credit not to reduce tax to less than zero. -- The credit may not reduce the tax

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otherwise due under this section to less than zero dollars ($0.00). A taxpayer entitled to the credit

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for any taxable year may carry over and apply to the tax liability for any one or more of the next

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succeeding ten (10) years the portion, as reduced from year to year, of any unused credits. More

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than one taxpayer may claim a credit based on loan payments actually made to a relevant lender

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or lenders to benefit a single opportunity program participant, but no two (2) taxpayers may claim

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the credit based on the same payment.

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     (d) Calculation of the credit. --  The credit in this section is determined on the basis of the

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amount under paragraph (b) or paragraph (c), whichever is less, multiplied by the proration

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factor. For purposes of this subsection, the proration factor is the amount derived by dividing the

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total number of academic credit hours earned for a bachelor's or associate’s degree after

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December 31, 2012 by the total number of academic credit hours earned for the bachelor's or

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associate’s degree.

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     (1) If the benchmark loan payment is less than the actual monthly amount, then the credit

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claimed may not exceed the product of the benchmark loan payment and the number of months

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during the taxable year in which the taxpayer made loan payments.

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     (2) If the opportunity program participant's actual monthly loan payment amount is less

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than the benchmark loan payment, the credit must be based on the actual loan payments made

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during the taxable year.

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     (e) Conditions for an opportunity program participant claiming the credit. -- An

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opportunity program participant may claim the credit only if the participant is a resident

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individual. The participant may claim the credit based only on regular payments made during

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months in which the individual was working for an employer located in this state. A married

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couple filing jointly under may claim the credit only to the extent that the spouse on whose behalf

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the credit is claimed meets these requirements.

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     (f) Conditions for an employer claiming the credit. -- (1) A taxpayer who is an employer

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may claim the credit under this section under the following circumstances. The employer may

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undertake to make partial or full loan payments directly to the relevant lender or lenders on behalf

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of a qualified employee, having taken reasonable steps to ascertain that the employee is in fact a

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qualified employee, and may claim a credit based on amounts that came due and were paid by the

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employer during the term of employment. To receive the credit, the employer must retain for five

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(5) years any proof of eligibility that the employee or independent contractor provides.

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     (2) The employer may claim a credit against the business corporation tax liability or, for

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an unincorporated employer, against business income or personal income tax liability, but not

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both, for the amount that the qualified employee could have claimed during any months when the

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qualified employee was employed, had the qualified employee made the partial or full loan

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payments instead, under conditions where the qualified employee had sufficient income to claim

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the full credit for the taxable year. If the qualified employee is employed only on a part-time

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basis, the employer may claim a credit only up to half of the total that the qualified employee

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could have claimed had the qualified employee made all payments and earned sufficient income

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to claim the full credit for the taxable year, but the amount the employer claims must still be

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based on amounts actually paid.

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     SECTION 2. This act shall take effect upon passage.

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LC00117

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO EDUCATION - HIGHER EDUCATION - JOB CREATION THROUGH

EDUCATIONAL OPPORTUNITY PROGRAM

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     This act would establish the "Job Creation Through Educational Opportunity Program

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Act of 2013." The purpose of this program would be to create incentives for individual residents

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of this state to pursue higher education and to remain within this state after attaining a post-

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secondary degree or certificate. One of the key components of this program would be an

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educational opportunity tax credit which could be claimed for certain expenses associated with

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post-secondary education, as calculated by the mechanisms provided in the act.

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     This act would take effect upon passage.

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LC00117

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