2013 -- S 0734 SUBSTITUTE B

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LC02050/SUB B

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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 TAXATION -- RHODE ISLAND ECONOMIC DEVELOPMENT TAX

CREDIT ACCOUNTABILITY ACT OF 2013

     Introduced By: Senators DaPonte, Goodwin, Ruggerio, Paiva Weed, and Lynch

     Date Introduced: March 13, 2013

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 35-1.1-3 of the General Laws in Chapter 35-1.1 entitled "Office of

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Management and Budget" is hereby amended to read as follows:

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     35-1.1-3. Director of management and budget. -- Appointment and responsibilities.

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      (a) Within the department of administration there shall be a director of management and

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budget, who shall be appointed by the director of administration with the approval of the

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governor. The director shall be responsible to the governor and director of administration for

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supervising the office of management and budget and for managing and providing strategic

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leadership and direction to the budget officer, the performance management office, and the

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federal grants management office.

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     (b) The director of management and budget shall be responsible to:

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     (1) Oversee, coordinate and manage the functions of the budget officer as set forth by

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section 35-3, program performance management as set forth by § 35-3-24.1, approval of

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agreements with federal agencies defined by § 35-3-25 and budgeting, appropriation and receipt

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of federal monies as set forth by chapter 42-41;

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     (2) Manage federal fiscal proposals and guidelines, and serve as the State Clearinghouse

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for the application of federal grants; and,

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     (3) Maximize the indirect cost recoveries by state agencies set forth by § 35-4-23.1.

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     (4) To undertake a comprehensive review and inventory of all reports filed by the

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executive office and agencies of the state with the general assembly. The inventory should

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include but not be limited to: the type, title, and summary of reports; the author(s) of the reports;

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the specific audience of the reports; and a schedule of the reports’ release. The inventory shall be

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presented to the general assembly as part of the budget submission on a yearly basis. The office

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of management and budget shall also make recommendations to consolidate, modernize the

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reports, and to make recommendations for elimination or expansion of each report.

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     SECTION 2. Section 35-3-7 of the General Laws in Chapter 35-3 entitled “State Budget”

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is hereby amended to read as follows:

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     35-3-7. Submission of budget to general assembly - Contents. --

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      (a) On or before the third Thursday in January in each year of each January session of

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the general assembly, the governor shall submit to the general assembly a budget containing a

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complete plan of estimated revenues and proposed expenditures, with a personnel supplement

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detailing the number and titles of positions of each agency and the estimates of personnel costs

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for the next fiscal year., and with the inventory required by subsection 35-1.1-3(b)(4). Provided,

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however, in those years that a new governor is inaugurated, the new governor shall submit the

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budget on or before the first Thursday in February. In the budget the governor may set forth in

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summary and detail:

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     (1) Estimates of the receipts of the state during the ensuing fiscal year under laws existing

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at the time the budget is transmitted and also under the revenue proposals, if any, contained in the

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budget, and comparisons with the estimated receipts of the state during the current fiscal year, as

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well as actual receipts of the state for the last two (2) completed fiscal years.

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     (2) Estimates of the expenditures and appropriations necessary in the governor's

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judgment for the support of the state government for the ensuing fiscal year, and comparisons

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with appropriations for expenditures during the current fiscal year, as well as actual expenditures

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of the state for the last two (2) complete fiscal years.

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     (3) Financial statements of the

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     (i) Condition of the treasury at the end of the last completed fiscal year;

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     (ii) The estimated condition of the treasury at the end of the current fiscal year; and

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     (iii) Estimated condition of the treasury at the end of the ensuing fiscal year if the

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financial proposals contained in the budget are adopted.

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     (4) All essential facts regarding the bonded and other indebtedness of the state.

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     (5) A report indicating those program revenues and expenditures whose funding source is

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proposed to be changed from state appropriations to restricted receipts, or from restricted receipts

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to other funding sources.

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     (6) Such other financial statements and data as in the governor's opinion are necessary or

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desirable.

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     (b) Any other provision of the general laws to the contrary notwithstanding, the proposed

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appropriations submitted by the governor to the general assembly for the next ensuing fiscal year

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should not be more than five and one-half percent (5.5%) in excess of total state appropriations,

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excluding any estimated supplemental appropriations, enacted by the general assembly for the

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fiscal year previous to that for which the proposed appropriations are being submitted; provided,

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that the increased state share provisions required to achieve fifty percent (50%) state financing of

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local school operations as provided for in P.L. 1985, ch. 182, shall be excluded from the

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definition of total appropriations.

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     (c) Notwithstanding the provisions of subsection 35-3-7(a), the governor shall submit to

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the general assembly a budget for the fiscal year ending June 30, 2006 not later than the fourth

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(4th) Thursday in January 2005.

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     (d) Notwithstanding the provisions of subsection 35-3-7(a), the governor shall submit to

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the general assembly a supplemental budget for the fiscal year ending June 30, 2006 and/or a

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budget for the fiscal year ending June 30, 2007 not later than Thursday, January 26, 2006.

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     (e) Notwithstanding the provisions of subsection 35-3-7(a), the governor shall submit to

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the general assembly a supplemental budget for the fiscal year ending June 30, 2007 and/or a

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budget for the fiscal year ending June 30, 2008 not later than Wednesday, January 31, 2007.

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     (f) Notwithstanding the provisions of subsection 35-3-7(a), the governor shall submit to

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the general assembly a budget for the fiscal year ending June 30, 2012 not later than Thursday,

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March 10, 2011.

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     (g) Notwithstanding the provisions of subsection 35-3-7(a), the governor shall submit to

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the general assembly a budget for the fiscal year ending June 30, 2013 not later than Tuesday,

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January 31, 2012.

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     SECTION 3. Section 22-12-3 of the General Laws in Chapter 22-12 entitled “Fiscal

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Notes” is hereby amended to read as follows:

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     22-12-3. Request for fiscal notes.-- (a) Fiscal notes shall only be requested by the

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chairperson of the house or senate finance committee upon being notified by another committee

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chairperson, the sponsor of the bill or resolution, or in the case of bills or resolutions affecting

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cities or towns, by the Rhode Island League of Cities and Towns in addition to the individuals

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referred to in this section, of the existence of any bill or resolution described in § 22-12-1.

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Requests shall be made in the form and substance as may be requested by the finance committee

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chairperson, and shall be forwarded through the house or senate fiscal adviser to the state budget

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officer, who shall determine the agency or agencies affected by the bill, or for bills affecting cities

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and towns to the chief executive official of the cities and the towns, the Rhode Island League of

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Cities and Towns, and the department of revenue. The budget officer shall then be responsible, in

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cooperation with these agencies, for the preparation of the fiscal note, except that the department

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of administration, in consultation and cooperation with the Rhode Island League of Cities and

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Towns, shall be responsible for the preparation of the fiscal note for bills affecting cities and

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towns.

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     (b) The chairperson of either the house finance or senate finance committee may also

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require executive branch agencies to provide performance metrics when legislation affecting an

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agency’s program or policy has an economic impact.

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     SECTION 4. Section 42-146-6 of the General Laws in Chapter 42-142 entitled

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“Department of Revenue” is hereby amended to read as follows:

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     42-142-6. Annual unified economic development report. -- (a) The director of the

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department of revenue shall, no later than January 15th of each state fiscal year, compile and

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publish, in printed and electronic form, including on the Internet, an annual unified economic

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development report which shall provide the following comprehensive information regarding the

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tax credits or other tax benefits conferred pursuant to §§ 42-64-10, 44-63-3, 42-64.5-5, 42-64.3-1,

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and 44-31.2-6.1 during the preceding fiscal year:

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     (1) The name of each recipient of any such tax credit or other tax benefit; the dollar

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amount of each such tax credit or other tax benefit; and summaries of the number of full-time and

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part-time jobs created or retained, an overview of benefits offered, and the degree to which job

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creation and retention, wage and benefit goals and requirements of recipient and related

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corporations, if any, have been met. The report shall include aggregate dollar amounts of each

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category of tax credit or other tax benefit; to the extent possible, the amounts of tax credits and

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other tax benefits by geographical area; the number of recipients within each category of tax

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credit or retained; overview of benefits offered; and the degree to which job creation and

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retention, wage and benefit rate goals and requirements have been met within each category of

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tax credit or other tax benefit;

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     (2) The cost to the state and the approving agency for each tax credit or other tax benefits

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conferred pursuant to §§ 42-64-10, 44-63-3, 42-64.5-5, 42-64.3-1, and 44-31.2-6.1 during the

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preceding fiscal year;

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     (3) To the extent possible, the amounts of tax credits and other tax benefits by

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geographical area; and

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     (4) The extent to which any employees of and recipients of any such tax credits or other

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tax benefits has received RIte Care or RIte Share benefits or assistance.; and

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     (5) To the extent the data exists, a cost-benefit analysis prepared by the office of revenue

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analysis based upon the collected data under sections 42-64-10, 44-63-3, 42-64.5-5, 42-64-3.1,

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and 44-31.2-6.1, and required for the preparation of the unified economic development report.

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The cost-benefit analysis may include but shall not be limited to the cost to the state for the

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revenues reductions, cost to administer the credit, projected revenues gained from the credit, and

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other metrics which can be measured along with a baseline assessment of the original intent of

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the legislation. The office of revenue analysis shall also indicate the purpose of the credit to the

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extent that it is provided in the enabling legislation, or note the absence of such information, and

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any measureable goals established by the granting authority of the credit. Where possible, the

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analysis shall cover a five (5) year period projecting the cost and benefits over this period. The

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office of revenue analysis may utilize outside services or sources for development of the

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methodology and modeling techniques. The unified economic development report shall include

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the cost-benefit analysis starting January 15, 2014. The office of revenue analysis shall work in

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conjuncture with Rhode Island economic corporation as established chapter 42-64.

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     (b) After the initial report, the division of taxation will perform reviews of each recipient

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of this tax credit or other tax benefits to ensure the accuracy of the employee data submitted. The

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division of taxation will include a summary of the reviews performed along with any adjustments,

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modifications and/or allowable recapture of tax credit amounts and data included on prior year

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reports.

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     SECTION 5. Title 44 of the General Laws entitled "TAXATION" is hereby amended by

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adding thereto the following chapter:

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     CHAPTER 48.2

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"RHODE ISLAND ECONOMIC DEVELOPMENT TAX INCENTIVES EVALUATION ACT

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OF 2013"

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     44-48.2-1. Short title. -- This chapter shall be known and may be cited as the "Economic

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Development Tax Incentives Evaluation Act of 2013."

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     44-48.2-2. Legislative findings and purpose. -- The general assembly finds and declares

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that:

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     (1) The state of Rhode Island relies on a number of tax incentives, including credits,

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exemptions, and deductions, to encourage businesses to locate, hire employees, expand, invest,

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and/or remain in the state;

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     (2) These various tax incentives are intended as a tool for economic development,

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promoting new jobs and business growth in Rhode Island;

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     (3) The state needs a systematic approach for evaluating whether incentives are fulfilling

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their intended purposes in a cost-effective manner;

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     (4) In order to improve state government's effectiveness in serving the residents of this

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state, the legislature finds it necessary to provide for the systematic and comprehensive analysis

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of economic development tax incentives, and for those analyses to be incorporated into the

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budget and policymaking processes.

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     44-48.2-3. Economic development tax incentive defined. -- (a) As used in this section,

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the term "economic development tax incentive" shall include:

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     (1) Those tax credits, deductions, exemptions, exclusions, and other preferential tax

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benefits associated with sections 42-64.3-6, 42-64.3-7, 42-64.5-3, 42-64.6-4, 42-64.11-4, 44-30-

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1.1, 44-31-1, 44-31-1.1, 44-31-2, 44-31.2-5, 44-32-1, 44-32-2, 44-32-3, 44-39.1-1, 44-43-2, 44-

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43-3, and 44-63-2, and;

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     (2) Any future incentives enacted after the effective date of this section for the purpose of

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recruitment or retention of businesses in the state of Rhode Island.

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     (b) In determining whether a future tax incentive is enacted for "the purpose of

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recruitment or retention of businesses," the office of revenue analysis shall consider legislative

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intent, including legislative statements of purpose and goals, and may also consider whether the

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tax incentive is promoted as a business incentive by the state’s economic development agency or

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other relevant state agency.

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     44-48.2-4. Economic Development Tax Incentive Evaluations, Schedule. -- (a) In

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accordance with the following schedule, the tax expenditure report produced by the chief of the

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office of revenue analysis pursuant to section 44-48.1-1, shall include an additional analysis

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component, consistent with section 44-48.2-5 and produced in consultation with the director of

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the economic development corporation, the director of the office of management and budget, and

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the director of the department of labor and training:

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     (1) Analyses of economic development tax incentives as listed in subdivision 44-48.2-

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3(1) shall be completed at least once between July 1, 2014 and June 30, 2017, and no less than

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once every three (3) years thereafter;

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     (2) Analyses of any economic development tax incentives created after July 1, 2013, shall

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be completed within five (5) years of taking effect, and no less than once every three (3) years

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thereafter;

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     (b) No later than the tenth (10th) of January each year, beginning in 2014, the office of

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revenue analysis will submit to the chairs of the senate and house finance committees a three (3)

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year plan for evaluating economic development tax incentives.

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     44-48.2-5. Economic Development Tax Incentive Evaluations, Analysis. --

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     (a) The additional analysis as required by section 44-48.2-4 shall include, but not be

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limited to:

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     (1) A baseline assessment of the tax incentive, including, if applicable, the number of

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aggregate jobs associated with the taxpayers receiving such tax incentive and the aggregate

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annual revenue that such taxpayers generate for the state through the direct taxes applied to them

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and through taxes applied to their employees;

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     (2) The statutory and programmatic goals and intent of the tax incentive, if said goals and

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intentions are included in the incentive’s enabling statute or legislation;

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     (3) The number of taxpayers granted the tax incentive during the previous twelve (12)

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month period;

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     (4) The value of the tax incentive granted, and ultimately claimed, listed by the North

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American Industrial Classification System (NAICS) Code associated with the taxpayers receiving

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such benefit, if such NAICS Code is available;

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     (5) An assessment and five (5) year projection of the potential impact on the state's

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revenue stream from carry forwards allowed under such tax incentive;

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     (6) An estimate of the economic impact of the tax incentive including, but not limited to:

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     (i) A cost-benefit comparison of the revenue foregone by allowing the tax incentive

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compared to tax revenue generated by the taxpayer receiving the credit, including direct taxes

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applied to them and taxes applied to their employees;

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     (ii) An estimate of the number of jobs that were the direct result of the incentive; and

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     (iii) A statement by the director of the economic development corporation as to whether,

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in his or her judgment, the statutory and programmatic goals of the tax benefit are being met, with

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obstacles to such goals identified, if possible;

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     (7) The estimated cost to the state to administer the tax incentive, if such information is

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available;

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     (8) An estimate of the extent to which benefits of the tax incentive remained in state or

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flowed outside the state, if such information is available;

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     (9) In the case of economic development tax incentives where measuring the economic

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impact is significantly limited due to data constraints, whether any changes in statute would

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facilitate data collection in a way that would allow for better analysis;

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     (10) Whether the effectiveness of the tax incentive could be determined more definitively

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if the general assembly were to clarify or modify the tax incentive’s goals and intended purpose;

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     (11) A recommendation as to whether the tax incentive should be continued, modified or

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terminated, the basis for such recommendation, and the expected impact of such recommendation

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on the state’s economy;

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     (12) The methodology and assumptions used in carrying out the assessments, projections

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and analyses required pursuant to subdivisions (1) through (8) of this section.

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     (b) All departments, offices, boards, and agencies of the state shall cooperate with the

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chief of the office of revenue analysis and shall provide to the office of revenue analysis any

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records, information (documentary and otherwise), data, and data analysis as may be necessary

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to complete the report required pursuant to this section.

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     44-48.2-6. Consideration by the governor. -- The governor's budget submission as

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required under chapter 35-3 shall identify each economic development tax incentive for which an

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evaluation was completed in accordance with this chapter in the period since the governor's

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previous budget submission. For each evaluated tax incentive, the governor's budget submission

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shall include a recommendation as to whether the tax incentive should be continued, modified, or

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terminated.

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     SECTION 6. Sections 1, 2, 3 and 4 of this act shall take effect January 1, 2014. Section 5

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of this act shall take effect sixty (60) days after passage.

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LC02050/SUB B

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION -- RHODE ISLAND ECONOMIC DEVELOPMENT TAX

CREDIT ACCOUNTABILITY ACT OF 2013

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     This act would require the director management and budge to prepare a comprehensive

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review and inventory of all reports from the executive office and other state agencies that are filed

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with the general assembly. This act would also provide that this inventory would be presented to

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the general assembly as part of the annual budget submission. This act would also require that a

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cost-benefit analysis be incorporated into the annual unified economic development report that is

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prepared by the office of revenue analysis. This act would also create the "Rhode Island

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Economic Development Tax Incentives Evaluation Act of 2013" to provide an assessment of the

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state's tax incentive programs.

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     Sections 1, 2, 3 and 4 of this act would take effect January 1, 2014. Section 5 of this act

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would take effect sixty (60) days after passage.

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LC02050/SUB B

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