2013 -- S 0740

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LC02084

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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 - SALES AND USE TAXES - LIABILITY AND

COMPUTATION

     Introduced By: Senators Satchell, and Gallo

     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 44-18-30.C of the General Laws in Chapter 44-18 entitled "Sales

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and Use Taxes - Liability and Computation" is hereby amended to read as follows:

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     44-18-30.C. Exemption from or stabilization of sales and use taxes for municipal

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economic development zones -- West Warwick. -- (a) Findings. - The general assembly makes

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the following findings of fact:

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      (1) Various sections of several towns in the state, including, but not limited to, the town

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of West Warwick, are deteriorated, blighted areas which have created very difficult challenges to

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economic development;

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      (2) Several areas of the state are in a distressed financial condition as defined by section

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45-13-12(b) and cannot finance economic development projects on its own without the

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participation of private enterprise;

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      (3) The general assembly has found that it is nearly impossible for private enterprise

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alone to meet these challenges;

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      (4) In certain sections of financially distressed communities, the serious challenges of

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economic development and/or redevelopment have not been met by private enterprise alone and

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the impact is being felt throughout the community;

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      (5) Legislation enacted to encourage redevelopment of the deteriorated, blighted areas

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through the formation of local redevelopment agencies has had very limited success;

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      (6) Various states, such as New Jersey, Pennsylvania and Michigan have had a great deal

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of success in generating economic development by exercising the authority to exempt and/or

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stabilize taxes;

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      (7) The state of Rhode Island has generated economic growth by redirecting and/or

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exempting certain commercial and retail activity from the imposition of sales, use and income

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taxes with recent examples being the Providence Place Mall, the Arts Districts in the cities of

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Providence, Pawtucket and Westerly, and financial services and acquaculture industries;

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      (8) Most recently, municipalities in our state have had great success in attracting large

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commercial development, including financial services, manufacturing, and major energy

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facilities, due in large part to the authority to exempt and/or stabilize property, tangible and/or

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inventory taxes;

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      (9) Attracting large non-residential developments or encouraging expansion of existing

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commercial entities can be extremely important to municipalities, where the quality of public

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education is largely dependent on the local tax base, thereby expanding the commercial tax base

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and reducing reliance upon the residential tax base;

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      (10) The ability to attract this development and increase the non-residential tax base, in

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turn, improves municipalities' ability to finance school systems, municipal services and

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infrastructure, thereby improving the quality of life;

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      (11) In addition to increasing the local non-residential tax base, this development creates

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construction jobs, permanent jobs, and spurs additional investment by private enterprises; and

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      (12) Providing authority to offer tax exemptions from, or to stabilize, the imposition of

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sales and use taxes will attract and assist in expanding, revitalizing and redeveloping the tax base

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in our municipalities, thereby providing long-term economic benefits and development.

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      (b) Exemption or stabilization of sales and use taxes imposed on sales from businesses

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located in a municipal economic development zone.

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      (1) In order to attract new construction and development in a municipal economic

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development zone (MED) as provided in this section, upon the designation of such a zone as set

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forth in subsection (c) of this section, all businesses engaging in qualifying sales and located in

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new construction in a MED zone (a MED zone business) shall be exempt from the requirement to

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charge and collect fifty percent (50%) of the current sales and use tax pursuant to sections 44-18-

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18 and 44-18-20 for a period of ten (10) years. Sales and use taxes collected in a MED zone shall

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be returned to the same MED zone in accordance with the provisions of this section. The ten (10)

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year exemption period for all MED zone businesses shall begin to run from the latest to occur of:

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(i) the date that is three (3) years from the effective date of the January session 2003 amendments

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[July 17, 2003] or (ii) the date that is two (2) years from the date upon which the city or town

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council designates the MED zone for its municipality; or (iii) the date the first MED zone

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business obtains a certification of exemption as set forth in subdivision (c)(6) of this section.

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      (2) For purposes of this section, "qualifying sales" for a MED zone business shall not

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include gambling activities, or the retail sales of motor vehicles, furniture, home furnishings

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including mattresses and oriental rugs, tobacco products, or packaged alcoholic beverages.

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      (3) "Qualifying sales" shall be sales at which the point of sale is located within the same

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MED zone and point of delivery is located within the same MED zone.

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      (c) Creation of the municipal economic development zone.

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      (1) The city or town council of a financially distressed community may designate in

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accordance with the provisions of this section one MED zone in the municipality, provided that

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the municipality is:

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      (i) A financially distressed community as defined by section 45-13-12(b), using the

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criteria set forth in section 45-13-12(b)(1) through (4);

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      (ii) Has a population less than fifty thousand (50,000) persons; and

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      (iii) The MED zone shall be a parcel of or contiguous parcels of land consisting in total

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of not less than ten (10) acres, but not more than thirty (30) acres in the area served by adequate

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utilities and transportation facilities.

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      (2) The city or town council of any financially distressed city or town, as set forth in

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subdivision (1) of this subsection, in creating a MED zone, shall have the power and authority of

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a redevelopment agency, as provided in chapter 32 of title 45, to undertake the redevelopment of

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a MED zone.

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      (3) The city or town council, in designating a MED zone, shall after public notice,

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hearing and vote as provided by section 45-32-4, comply with the plan requirements of section

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45-32-8 and shall be responsible for carrying on the plan. The city or town council in

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implementing the MED zone plan shall have the power of eminent domain as set forth in section

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45-32-24, and the provisions of sections 45-32-25 -- 45-32-41 shall apply to all such

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condemnations.

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      (4) All sales and use taxes collected within a MED zone shall be reimbursed to the

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municipality in which the MED zone is located, and may be expended by the municipality to

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implement the capital improvement component of the MED zone plan for MED zone property or

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for property located within one mile of the MED zone or for such other capital improvements as

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the municipality may determine are required to mitigate MED zone impacts.

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      (5) West Warwick. – In order to provide incentives for the expansion and rehabilitation

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of existing buildings in a municipal economic development zone (MED) in the town of West

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Warwick, as provided in this section, upon the designation of such a zone as set forth in

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subsection (c) of this section, all businesses engaging in qualifying sales and located in an

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existing structure in which a developer or property owner invests in the complete renovation of

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the proposed retail space at a total construction investment cost equal to or greater than the

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median cost per square foot for retail construction and complete significant façade improvements

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in accordance with Arctic Design Control guidelines in an existing building or structure located in

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the MED zone (a MED zone business) shall be exempt from the requirement to charge and collect

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fifty percent (50%) of the current sales and use tax pursuant to sections 44-18-18 and 44-18-20

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for a period of ten (10) years. Sales and use taxes collected in a MED zone shall be returned to

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the same MED zone in accordance with the provisions of this section. The ten (10) year

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exemption shall begin to run from the date the MED zone business obtains a certification of

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exemption as set forth in subdivision (c)(6) of this section. Business located in existing

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rehabilitated buildings or structures shall have five (5) years following completion of said

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rehabilitation to apply.

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     The following area or portions of them of the town of West Warwick may be designated

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as the town's municipal economic development zone by the town council of the town of West

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Warwick after public notice, hearing and vote as provided in section 45-32-4:

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      The area bounded generally by the East Coast Bike Path in the east, Archambault and

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Gardner Avenue in the north, Payan Street to Curson Street, Curson Street to McNiff, McNiff to

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Barnes Street, Barnes Street to Nowicki Street to East Street, East Street to Blanchard Street,

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Blanchard Street to West Street in the west, West Street to Washington Street, Washington Street

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to Nolan Street, Nolan Street to the East Coast Bike Path in the south, all as more particularly

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described on the West Warwick municipal economic development zone map on file with the town

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clerk.

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      (6) The tax administrator shall issue a certification of exemption to the MED zone

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business at the time the business applies for its permit to make sales at retail and provides the tax

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administrator with a MED zone business certificate issued by the town clerk stating that the

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business is located in new construction in the MED zone. The duration of the certificate shall be

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determined in accordance with subdivision (b)(1) of this section.

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      (7) No business shall be permitted to become a MED zone business or to receive a

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certificate of exemption pursuant to subdivision (6) of this subsection by relocating from any area

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within the state of Rhode Island but outside the MED zone to new construction within the MED

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zone, unless the relocation results in the creation of new permanent employment positions that

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increase the total employment of the business by not less than fifty percent (50%) of its average

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total employment for the two (2) year period immediately preceding the year in which it applies

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for its certificate of exemption. Any business that expands its operations by adding a new location

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within the MED zone and then ceases to operate any of its locations within the state of Rhode

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Island that existed prior to the establishment of the MED zone location shall immediately have its

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certificate of exemption for the MED zone location revoked.

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     SECTION 2. This act shall take effect upon passage.

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LC02084

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION - SALES AND USE TAXES - LIABILITY AND

COMPUTATION

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     This act would allow a business engaged in qualifying sales and located in an existing

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structure in which a developer or property owner invests in the complete renovation of the

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proposed retail space at a total construction investment cost equal to or greater than the median

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cost per square foot for retail construction located in a MED zone in the town of West Warwick

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to receive MED zone tax credits.

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     This act would take effect upon passage.

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LC02084

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