2013 -- S 0827

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LC02188

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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

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

     Date Introduced: April 04, 2013

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 3-10-1 of the General Laws in Chapter 3-10 entitled "Taxation of

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Beverages" is hereby amended to read as follows:

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     3-10-1. Manufacturing tax rates - Exemption of religious uses. -- (a) There shall be

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assessed and levied by the tax administrator on all beverages manufactured, rectified, blended, or

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reduced for sale in this state a tax of three dollars ($3.00) on every thirty-one (31) gallons, and a

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tax at a like rate for any other quantity or fractional part. On any beverage manufactured,

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rectified, blended, or reduced for sale in this state consisting in whole or in part of wine, whiskey,

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rum, gin, brandy spirits, ethyl alcohol, or other strong liquors (as distinguished from beer or other

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brewery products) the tax to be assessed and levied is as follows:

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     (1) Still wines (whether fortified or not), sixty cents ($.60) per gallon;

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     (2) Still wines (whether fortified or not) made entirely from fruit grown in this state,

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thirty cents ($.30) per gallon;

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     (3) Sparkling wines (whether fortified or not), seventy five cents ($.75) per gallon;

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     (4) Whiskey, rum, gin, brandy spirits, cordials, and other beverages consisting in whole

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or in part of alcohol which is the product of distillation, three dollars and seventy-five cents

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($3.75) per gallon, except that whiskey, rum, gin, brandy spirits, cordials, and other beverages

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consisting in whole or in part of alcohol which is the product of distillation but which contains

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alcohol measuring thirty (30) proof or less, one dollar and ten cents ($1.10) per gallon;

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     (5) Ethyl alcohol to be used for beverage purposes, seven dollars and fifty cents ($7.50)

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per gallon; and

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     (6) Ethyl alcohol to be used for nonbeverage purposes, eight cents ($.08) per gallon.

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     (b) Sacramental wines are not subject to any tax if sold directly to a member of the clergy

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for use by the purchaser, or his or her congregation for sacramental or other religious purposes.

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     (c) A brewer who brews beer in this state which is actively and directly owned, managed,

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and operated by an authorized legal entity which has owned, managed, and operated a brewery in

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this state for at least twelve (12) consecutive months, shall receive a tax exemption on the first

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one hundred thousand (100,000) barrels of beer that it produces and distributes in this state in any

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calendar year. A barrel of beer is thirty one (31) gallons.

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     (1) For purposes of improving the tax expenditure report filed on a biennial basis

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pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

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any taxpayer benefiting from the tax exemption in subsection (c) above shall report to the

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division of taxation the actual value of the tax exemption and authorize that this information as

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well as the identification of the taxpayer be disclosed as part of the biennial tax expenditure

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report. In order to qualify for the tax exemption in subsection (c) of this section, any taxpayer

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shall comply with the requirements of this subsection. The tax administrator shall prescribe the

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form in which the report required by this subsection shall be filed.

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     SECTION 2. Section 46-64-20 of the General Laws in Chapter 46-20 entitled "Rhode

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Island Economic Development Corporation" is hereby amended to read as follows:

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     42-64-20. Exemption from taxation. -- (a) The exercise of the powers granted by this

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chapter will be in all respects for the benefit of the people of this state, the increase of their

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commerce, welfare, and prosperity and for the improvement of their health and living conditions

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and will constitute the performance of an essential governmental function and the corporation

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shall not be required to pay any taxes or assessments upon or in respect of any project or of any

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property or moneys of the Rhode Island economic development corporation, levied by any

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municipality or political subdivision of the state; provided, that the corporation shall make

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payments in lieu of real property taxes and assessments to municipalities and political

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subdivisions with respect to projects of the corporation located in the municipalities and political

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subdivisions during those times that the corporation derives revenue from the lease or operation

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of the projects. Payments in lieu of taxes shall be in amounts agreed upon by the corporation and

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the affected municipalities and political subdivisions. Failing the agreement, the amounts of

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payments in lieu of taxes shall be determined by the corporation using a formula that shall

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reasonably ensure that the amounts approximate the average amount of real property taxes due

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throughout the state with respect to facilities of a similar nature and size. Any municipality or

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political subdivision is empowered to accept at its option an amount of payments in lieu of taxes

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less than that determined by the corporation. If, pursuant to 42-64-13(f), the corporation shall

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have agreed with a municipality or political subdivision that it shall not provide all of the

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specified services, the payments in lieu of taxes shall be reduced by the cost incurred by the

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corporation or any other person in providing the services not provided by the municipality or

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political subdivision.

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     (b) The corporation shall not be required to pay state taxes of any kind, and the

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corporation, its projects, property, and moneys and, except for estate, inheritance, and gift taxes,

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any bonds or notes issued under the provisions of this chapter and the income (including gain

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from sale or exchange) from these shall at all times be free from taxation of every kind by the

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state and by the municipalities and all political subdivisions of the state. The corporation shall not

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be required to pay any transfer tax of any kind on account of instruments recorded by it or on its

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behalf.

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     (c) For purposes of the exemption from taxes and assessments upon or in respect of any

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project under subsections (a) or (b) of this section, the corporation shall not be required to hold

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legal title to any real or personal property, including any fixtures, furnishings or equipment which

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are acquired and used in the construction and development of the project, but the legal title may

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be held in the name of a lessee (including sublessees) from the corporation. This property, which

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shall not include any goods or inventory used in the project after completion of construction, shall

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be exempt from taxation to the same extent as if legal title of the property were in the name of the

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corporation; provided that the board of directors of the corporation adopts a resolution confirming

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use of the tax exemption for the project by the lessee. Such resolution shall not take effect until

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thirty (30) days from passage. The resolution shall include findings that: (1) the project is a

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project of the corporation under 42-64-3(20), and (2) it is in the interest of the corporation and of

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the project that legal title be held by the lessee from the corporation. In adopting the resolution,

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the board of directors may consider any factors it deems relevant to the interests of the

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corporation or the project including, for example, but without limitation, reduction in potential

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liability or costs to the corporation or designation of the project as a "Project of Critical Economic

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Concern" pursuant to Chapter 117 of this title.

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     (d) For purposes of the exemption from taxes and assessments for any project of the

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corporation held by a lessee of the corporation under subsection (c) of this section, any such

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project shall be subject to the following additional requirements:

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     (1) The total sales tax exemption benefit to the lessee will be implemented through a

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reimbursement process as determined by the division of taxation rather than an up-front purchase

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exemption;

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     (2) The sales tax benefits granted pursuant to RIGL 42-64-20(c) shall only apply to

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project approved prior to July 1, 2011 and shall: (i) only apply to materials used in the

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construction, reconstruction or rehabilitation of the project and to the acquisition of furniture,

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fixtures and equipment, except automobiles, trucks or other motor vehicles, or materials that

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otherwise are depreciable and have a useful life of one year or more, for the project for a period

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not to exceed six (6) months after receipt of a certificate of occupancy for any given phase of the

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project for which sales tax benefits are utilized; and (ii) not exceed an amount equal to the income

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tax revenue received by the state from the new full-time jobs with benefits excluding project

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construction jobs, generated by the project within a period of three (3) years from after the receipt

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of a certificate of occupancy for any given phase of the project. "Full- time jobs with benefits"

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means jobs that require working a minimum of thirty (30) hours per week within the state, with a

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median wage that exceeds by five percent (5%) the median annual wage for the preceding year

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for full-time jobs in Rhode Island, as certified by the department of labor and training with a

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benefit package that is typical of companies within the lessee's industry. The sales tax benefits

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granted pursuant to Rhode Island general laws subsection 42-64-20(c) shall not be effective for

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projects approved on or after July 1, 2011.

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     (3) The corporation shall transmit the analysis required by RIGL 42-64-10(a)(2) to the

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house and senate fiscal committee chairs, the department of labor and training and the division of

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taxation promptly upon completion. Annually thereafter, the department of labor and training

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shall certify to the house and senate fiscal committee chairs, the house and senate fiscal advisors,

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the corporation and the division of taxation the actual number of new full-time jobs with benefits

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created by the project, in addition to construction jobs, and whether such new jobs are on target to

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meet or exceed the estimated number of new jobs identified in the analysis above. This

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certification shall no longer be required when the total amount of new income tax revenue

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received by the state exceeds the amount of the sales tax exemption benefit granted above.

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     (4) The department of labor and training shall certify to the house and senate fiscal

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committee chairs and the division of taxation that jobs created by the project are "new jobs" in the

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state of Rhode Island, meaning that the employees of the project are in addition to, and without a

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reduction of, those employees of the lessee currently employed in Rhode Island, are not relocated

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from another facility of the lessee's in Rhode Island or are employees assumed by the lessee as

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the result of a merger or acquisition of a company already located in Rhode Island. Additionally,

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the corporation, with the assistance of the lessee, the department of labor and training, the

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department of human services and the division of taxation shall provide annually an analysis of

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whether any of the employees of the project qualify for RIte Care or RIte Share benefits and the

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impact such benefits or assistance may have on the state budget.

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     (5) Notwithstanding any other provision of law, the division of taxation, the department

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of labor and training and the department of human services are authorized to present, review and

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discuss lessee specific tax or employment information or data with the corporation, the house and

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senate fiscal committee chairs, and/or the house and senate fiscal advisors for the purpose of

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verification and compliance with this resolution; and

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     (6) The corporation and the project lessee shall agree that, if at any time prior to the state

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recouping the amount of the sales tax exemption through new income tax collections from the

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project, not including construction job income taxes, the lessee will be unable to continue the

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project, or otherwise defaults on its obligations to the corporation, the lessee shall be liable to the

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state for all the sales tax benefits granted to the project plus interest, as determined in RIGL 44-1-

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7, calculated from the date the lessee received the sales tax benefits.

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     (e) For purposes of improving the tax expenditure report filed on a biennial basis

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pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

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any taxpayer benefiting from the tax exemption in this section shall report to the division of

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taxation the actual value of the tax exemption, and authorize that this information, as well as the

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identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In order

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to qualify for the tax exemption in this section, any taxpayer shall comply with the requirements

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of this subsection. The tax administrator shall prescribe the form in which the report required by

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this subsection shall be filed.

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     SECTION 3. Sections 42-64.3-6 and 42-64.3-7 of the General Laws in Chapter 42-64.3

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entitled "Distressed Areas Economic Revitalization Act" are hereby amended to read as follows:

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     42-64.3-6. Business tax credits. -- A qualified business in an enterprise zone is allowed a

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credit against the tax imposed pursuant to chapters 11, 13 (except the taxation of tangible

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personal property under 44-13-13), 14, 17, and 30 of title 44:

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     (1) A credit equal to fifty percent (50%) of the total amount of wages paid to those

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enterprise job employees comprising the five percent (5%) new jobs referenced in 42-64.3-

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3(4)(i)(A). The wages subject to the credit shall be reduced by any direct state or federal wage

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assistance paid to employers for the employee(s) in the taxable year. The maximum credit

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allowed per taxable year under the provisions of this subsection shall be two thousand five

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hundred dollars ($2,500), per employee. A taxpayer who takes this business tax credit shall not be

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eligible for the resident business owner modification pursuant to 42-64.3-7.

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     (2) A credit equal to seventy five percent (75%) of the total amount of wages paid to

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those enterprise job employees who are domiciliaries of an enterprise zone comprising the five

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percent (5%) new jobs referenced in 42-64.3-3(4)(i)(A). The wages subject to the credit shall be

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reduced by any direct state or federal wage assistance in the taxable year. The maximum credit

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allowed per taxable year under the provisions of this subdivision shall be five thousand dollars

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($5,000) per employee. A taxpayer who takes this business tax credit is not eligible for the

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resident business owner modification. The council shall promulgate appropriate rules to certify

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that the enterprise job employees are domiciliaries of an enterprise zone and shall advise the

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qualified business and the tax administrator. A taxpayer taking a credit for employees pursuant to

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this subdivision (2) shall not be entitled to a credit pursuant to subdivision (1) of this section for

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the employees.

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     (3) Any tax credit as provided in subdivision (1) or (2) of this section shall not reduce the

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tax below the minimum tax. Fiscal year taxpayers must claim the tax credit in the year into which

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the December 31st of the certification year falls. The credit shall be used to offset tax liability

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pursuant to the provisions of either chapters 11, 13, 14, 17, or 30 of title 44, but not more than

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one chapter.

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     (4) In the case of a corporation, the credit allowed under this section is only allowed

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against the tax of that corporation included in a consolidated return that qualifies for the credit

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and not against the tax of other corporations that may join in the filing of a consolidated tax

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return.

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     (5) In the case of multiple business owners, the credit provided in subdivision (1) or (2)

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of this section is apportioned according to the ownership interests of the qualified business.

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     (6) The tax credits established pursuant to this section may be carried forward for a

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period of three (3) years if in each of the three (3) calendar years a business which has qualified

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for tax credits under this section: (a) does not reduce the number of its employees from the last

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Effective Date of Certification; (b) obtains certificates of good standing from the Rhode Island

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division of taxation, the corporations division of the Rhode Island secretary of state and the

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appropriate municipal tax collector; (c) provides the council an affidavit stating under oath that

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this business has not within the preceding twelve (12) months changed its legal status for the

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purpose of gaining favorable treatment under the provisions of chapter 64.3 of this title; and (d)

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meets any other requirements as may be established by the council in its rules and regulations.

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     (7) For purposes of improving the tax expenditure report filed on a biennial basis

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pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

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any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

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the actual value of the tax credits, and authorize that this information, as well as the identification

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of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

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the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

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The tax administrator shall prescribe the form in which the report required by this subsection

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shall be filed.

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     42-64.3-7. Resident business owner tax modification. -- (a) In computing his or her

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annual tax liability pursuant to the provisions of chapter 11 or 30 of title 44, a domiciliary of an

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enterprise zone who owns and operates a qualified business facility in that zone and which

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business is not required to file under chapter 11,13,14 or 17 of title 44 may:

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     (1) For the first three (3) years after certification, whether or not consecutive, deduct fifty

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thousand dollars ($50,000) per year as a modification reducing federal adjusted gross income; and

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(2) For the fourth and fifth years after certification, whether or not consecutive, deduct

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twenty-five thousand dollars ($25,000) per year as a modification reducing federal adjusted gross

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income.

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     (b) Any modification provided in subdivisions (1) and (2) of subsection (a) shall not be

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available in taxable years other than the year in which the taxpayer qualifies for tax modification.

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(c) In the case of multiple business owners, the modifications provided in subdivisions

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(1) and (2) of subsection (a) shall be apportioned according to the ownership interests of the

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domiciliary owners of the qualified business.

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     (d) A taxpayer who elects this modification shall not be eligible for the business tax

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credits under 42-64.3-6.

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     (e) For purposes of improving the tax expenditure report filed on a biennial basis

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pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

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any taxpayer benefiting from the tax modification in this section shall report to the division of

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taxation the actual value of the tax modification, and authorize that this information, as well as

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the identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In

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order to qualify for the tax modification in this section, any taxpayer shall comply with the

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requirements of this subsection. The tax administrator shall prescribe the form in which the report

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required by this subsection shall be filed.

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     SECTION 4. Section 42-64.5-3 of the General Laws in Chapter 42-64.5 entitled "Jobs

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Development Act" is hereby amended to read as follows:

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     42-64.5-3. Tax rate reduction. -- (a) The rate of tax payable by an eligible company and

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each of its eligible subsidiaries for any taxable year ending on or after July 1, 1995, on its net

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income pursuant to the applicable income tax provisions of the general laws, including the

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provisions of 44-11-2(a), 44-14-3(a), 44-14-4 and 44-17-1, or on its gross earnings pursuant to

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44-13-4(4), shall be reduced by the amount specified in 42-64.5-4; this rate reduction shall be

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applied annually once to those eligible companies which are permitted by law to file a

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consolidated state tax return and in the case of eligible companies not permitted by law to file

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consolidated state tax returns, then the rate reduction shall be applied annually to each eligible

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company and its eligible subsidiaries; provided, however, except as provided in 42-64.5-7, should

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any eligible company fail to maintain in any taxable year after 1997 or, if applicable, the third

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taxable year following the base employment period election set forth in 42-64.5-5, the number of

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units of new employment it reported for its 1997 tax year or, if applicable, the third taxable year

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following the base employment period election set forth in 42-64.5-5;the rate reduction provided

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for in this chapter shall expire permanently.

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     (b) For purposes of improving the tax expenditure report filed on a biennial basis

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pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

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any taxpayer benefiting from the tax reduction in this section shall report to the division of

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taxation the actual value of the tax reduction, and authorize that this information, as well as the

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identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In order

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to qualify for the tax reduction in this section, any taxpayer shall comply with the requirements of

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this subsection. The tax administrator shall prescribe the form in which the report required by this

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subsection shall be filed.

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     SECTION 5. Section 42-64.6-4 of the General Laws in Chapter 42-64.6 entitled "Jobs

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Training Tax Credit Act" is hereby amended to read as follows:

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     42-64.6-4. Determination of credit. – (a) The credit provided in this chapter is equal to

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twenty-five percent (25%) of the qualifying expenses incurred in 1996 and fifty percent (50%) of

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the qualifying expenses incurred after 1996 to provide training and/or retraining for a qualifying

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employee, of which fifty percent (50%) of the credit shall be allowed in the taxable year in which

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the expense is paid and the balance of the credit shall be allowed in the following taxable year.

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The maximum amount of credit per employee shall not exceed five thousand dollars ($5,000) in

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any three (3) year period. The credit allowed pursuant to the provisions of this chapter that is

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attributable to the cost of providing training and/or retraining to a qualifying employee shall be

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recaptured if the employee involuntarily other than as a result of death or disability no longer

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qualifies as a qualifying employee of the employer at any time during the eighteen (18) month

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period following the employee's completion of the program.

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     (b) For purposes of improving the tax expenditure report filed on a biennial basis

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pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

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any taxpayer benefiting from the tax credit in this section shall report to the division of taxation

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the actual value of the tax credit, and authorize that this information, as well as the identification

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of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

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the tax credit in this section, any taxpayer shall comply with the requirements of this subsection.

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The tax administrator shall prescribe the form in which the report required by this subsection

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shall be filed.

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     SECTION 6. Section 42-64.11-4 of the General Laws in Chapter 42-64.11 entitled "Jobs

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Growth Act" is hereby amended to read as follows:

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     42-64.11-4. Partial modification of performance-based compensation.-- (a) Fifty

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percent (50%) of the performance-based compensation realized by an eligible employee in any

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credit year shall be allowed as a modification decreasing adjusted gross income and alternative

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minimum income for purposes of the personal income tax.

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     (b) The modification provided under subsection (a) shall be taken into account in

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determining withholding under 44-30-71 to be deducted by a fully-certified company with respect

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to performance-based compensation paid to eligible employees.

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     (c) The amount of income, otherwise qualifying as performance-based compensation,

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derived from employer granted stock options is subject to the fifty percent (50%) modification

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provided for in subsection (a) only to the extent that the same amount is subject to tax under 42-

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64.11-5.

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     (d) For purposes of improving the tax expenditure report filed on a biennial basis

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pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

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any taxpayer benefiting from the tax modification in this section shall report to the division of

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taxation the actual value of the tax modification, and authorize that this information, as well as

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the identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In

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order to qualify for the tax modification in this section, any taxpayer shall comply with the

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requirements of this subsection. The tax administrator shall prescribe the form in which the report

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required by this subsection shall be filed.

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     SECTION 7. Section 44-11-41 of the General Laws in Chapter 44-11 entitled "Business

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Corporation Act" is hereby amended to read as follows:

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     44-11-41. Tax credit for machine tool, metal trade or plastic process technician

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apprenticeships. -- (a) Any taxpayer who employs a machine tool and metal trade apprentice or

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plastic process technician apprentice duly enrolled and registered under the terms of a qualified

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program (as determined by the state apprenticeship council) is entitled to a tax credit for each

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eligible apprentice for fifty percent (50)% of actual wages paid, or four thousand eight hundred

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dollars ($4,800), whichever is less; provided, that the apprenticeships meet the following

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requirements:

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     (1) The tax credit is limited to qualified Machine Tool, Metal Trade and Plastics Process

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Technician programs with apprenticeship periods of duration which are more than four thousand

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(4,000) hours and less than ten thousand (10,000) hours.

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     (2) The apprentice must be employed on a full-time basis, which is defined as working a

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minimum of one hundred twenty (120) hours per month at the trade. Up to eighty (80) hours may

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be applied during the tax year against the one hundred twenty (120) hour limitation.

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     (3) Pre-apprentices are not counted as apprenticeships begun and wages earned by pre-

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apprentices are not eligible for tax credits under this regulation.

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     (4) The number of apprenticeships for which tax credit is allowed must exceed the

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average number of apprenticeships begun during the five (5) preceding income years.

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     (b) The tax credit is limited to the following trade: machinist, toolmaker, tool and

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diemaker, model maker, gage maker, patternmaker, tool and machine setter, diesinker,

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moldmaker, machine tool repairer, plastic process technician and in similar occupations which, as

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above, involve multiple work processes including the shaping of metals by machine tool

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equipment designed to perform cutting, grinding, milling, turning, drilling, boring, planing,

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hobbing, and abrading operations.

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     (c) For purposes of improving the tax expenditure report filed on a biennial basis

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pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

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any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

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the actual value of the tax credits, and authorize that this information, as well as the identification

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of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

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the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

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The tax administrator shall prescribe the form in which the report required by this subsection

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shall be filed.

10-25

     SECTION 8. Section 44-30-1.1 of the General Laws in Chapter 44-30 entitled "Personal

10-26

Income Tax" is hereby amended to read as follows:

10-27

     44-30-1.1. Exemption from tax for writers, composers and artists. -- (a) This section

10-28

shall only apply to writers, composers and artists residing within a section of the defined

10-29

economic development zone within the city of Providence, Pawtucket, Woonsocket or Warwick,

10-30

or the economic development zone within the town of Westerly as defined in 44-18-30B(c)(1)(i),

10-31

or within the city of Newport or within the town of Tiverton or the town of Little Compton, or

10-32

within those areas of the town of Warren which are zoned "waterfront district," "special district,"

10-33

"village business district," "manufacturing district," "business district" or "Warren historic

10-34

district", or a tax pass-through entity wholly owned by one or more such individuals and who

11-1

create such work while residing in the zone, or in the case of Newport or the town of Little

11-2

Compton, within those areas of the city or town which are zoned "general business," "waterfront

11-3

business" or "limited business" or have been designated by the city of Newport as part of the arts

11-4

district, or in the case of Warren, within those areas of the town which are zoned "waterfront

11-5

district," "special district," "village business district," "manufacturing district," "business district"

11-6

or "Warren historic district," or in the case of Tiverton with those areas of the town which are

11-7

zoned "business commercial," "business waterfront" or "village commercial." For the purposes of

11-8

this section, a "work" means an original and creative work, whether written, composed, created or

11-9

executed for "one-of-a-kind, limited" production, before or after the passing of this section, which

11-10

falls into one of the following categories: (1) a book or other writing; (2) a play or the

11-11

performance of said play; (3) a musical composition or the performance of said composition; (4)

11-12

a painting or other like picture; (5) a sculpture; (6) traditional and fine crafts; (7) the creation of a

11-13

film or the acting of said film; (8) the creation of a dance or the performance of said dance. For

11-14

purposes of this section, a "work" does not apply to any piece or performance created or executed

11-15

for industry oriented or related production.

11-16

     (b) (1) This section shall apply to any individual:

11-17

     (i) Who is a resident within the section of the economic development zone designated as

11-18

the arts and entertainment district in the downtown areas of the cities of Providence, Woonsocket

11-19

or Pawtucket, and deriving the income exempted from within said district while a resident of said

11-20

zone, or who is a resident within the section of the arts and entertainment district in the town of

11-21

Westerly, as defined in 44-18-30B(c)(1)(i) and who derives the income exempted from within

11-22

said district while a resident of said zone. For the purposes of this section, the "Providence arts

11-23

and entertainment district" is defined as the area bounded by Pine Street to the southeast,

11-24

Dorrance Street to the northeast, Sabin Street to the northwest and Empire Street to the southwest.

11-25

Said Providence arts and entertainment district also includes the area beginning at the point of

11-26

intersection of Acorn Street and Harris Avenue, then turning east onto Atwells Avenue to Service

11-27

Road 7, then turning southerly onto Service Road 7 to Westminster Street, then turning westerly

11-28

onto Westminster Street, continuing until Bridgham, then turning south onto Bridgham to

11-29

Cranston Street, then turning southwesterly onto Cranston Street, then continuing to Messer

11-30

Street, then turning north onto Messer Street to Westminster Street, turning west onto

11-31

Westminster Street to US Hwy 6 off ramp, then heading west on US Hwy 6 to Sheridan Street,

11-32

then heading northeast on Sheridan Street to Aleppo Street, then turning southeast along Aleppo

11-33

Street to Pelham Street, then heading northeast on Pelham Street to Manton Avenue, then

11-34

continuing southeast on Manton Avenue until Delaine Street, then heading northeast on Delaine

12-1

Street until Appleton Street, then continuing northwesterly on Appleton Street until Bowdoin

12-2

Street, then heading north on Bowdoin Street until Barstow Street, then heading east on Barstow

12-3

until Valley Street, then heading northeast on Valley Street to Hemlock Street, then turning

12-4

southeast on Hemlock Street until Promenade Street, then heading east on Promenade Street to

12-5

Acorn Street, then heading south on Acorn Street to the intersection of Acorn Street and Harris

12-6

Avenue. The abovementioned streets shall be included in the district. The "Westerly arts and

12-7

entertainment district" is defined in 44-18-30B(c)(1)(i). The "Pawtucket arts and entertainment

12-8

district" shall be defined as the area beginning at the point of intersection of Dexter Street and the

12-9

Central Falls line, then east along the Central Falls Line to the Blackstone River, then north along

12-10

the city boundary on the Blackstone River to the Cumberland line, then west along the Pawtucket

12-11

city boundary line to I-95, then south along I-95 to Pine Street, then north on Pine Street to

12-12

AMTRAK Right of Way, then northwest along the AMTRAK Right of Way to Dexter Street,

12-13

then north on Dexter Street to the Central Falls line. The abovementioned streets shall be included

12-14

in the district. The "Woonsocket arts and entertainment district" shall be defined as the area

12-15

beginning at a point of land on the southwest bank of the Blackstone River abutting the bridge for

12-16

the Providence & Worcester Railroad and proceeding northerly to a point at the intersection of

12-17

Worrall Street, Clinton Street and Harry S. Truman Drive, then proceeding northwesterly along

12-18

Worrall Street to its intersection with Social Street, then turning westerly on Social Street

12-19

proceeding to its intersection with Main Street, Blackstone Street and North Main Street, then

12-20

turning northwesterly and proceeding along Blackstone Street to its intersection with River Street,

12-21

then turning northerly and proceeding along River Street to its intersection with the northeast

12-22

bank of Blackstone River, then following the riverbank southerly to the bridge at Bernon Street

12-23

and turning easterly crossing the Blackstone River via Bernon Street and proceeding to its

12-24

intersection with Front Street, then turning northeasterly on Front Street and proceeding to its

12-25

intersection with Hamlet Avenue, and to include the former Courthouse on the southerly side of

12-26

Front Street at its intersection with Hamlet Avenue, then turning easterly on Hamlet Avenue and

12-27

proceeding to its intersection with Manville Road, then turning southeasterly on Manville Road

12-28

and proceeding to its intersection with Davison Avenue, then turning northeasterly on Davison

12-29

Avenue and proceeding to a point on the southwest bank of the Blackstone River, then turning

12-30

northerly, following the southerly riverbank to the point of beginning. The abovementioned

12-31

streets are included in the district. The Warwick arts district is defined as that area known as

12-32

Pontiac Village, beginning on Route 5 at the Warwick/Cranston municipal boundary, then south

12-33

to the intersection of Route 5 and the Pawtuxet River, then following the Pawtuxet River in an

12-34

easterly and northerly direction to the municipal boundary in the vicinity of Knight Street, then

13-1

from the intersection of Knight Street and the municipal boundary westerly along the

13-2

Warwick/Cranston municipal boundary to the intersection of Route 5 and Greenwich Avenue.

13-3

The above named streets are included in the district.

13-4

     This section shall also apply to any individual who is a resident of the city of Newport or

13-5

the town of Tiverton or the town of Little Compton and whose income otherwise qualifies for an

13-6

exemption as provided for in this section.

13-7

     This section shall also apply to any individual who is a resident of the town of Warren

13-8

and whose income otherwise qualifies for an exemption as provided for in this section.

13-9

     (ii) Who is determined by the tax administrator, after consideration of any evidence in

13-10

relation to the matter which the individual submits to him or her and after such consultation as

13-11

may seem to him or her to be necessary with such person or body of persons as in his or her

13-12

opinion may be of assistance to him or her, to have written, composed or executed either solely or

13-13

jointly with another individual, a work or works that would fall into one of the categories listed in

13-14

subsection (a) of this section.

13-15

     (c) (1) An individual to whom this section applies and who duly makes a claim to the tax

13-16

administrator in that behalf shall, subject to subdivision (2) of this subsection, be entitled to have

13-17

the profits or gains arising to him or her from the publication, production or sale of a work or

13-18

works in relation to which the tax administrator has made a determination under paragraph

13-19

(b)(1)(ii) of this section to be taken as a modification reducing federal adjusted gross income.

13-20

     (2) The modification authorized by this section shall apply to the year in which the profit

13-21

or gain from the publication, production or sale of a work is realized.

13-22

     (d) The tax administrator may serve on an individual who makes a claim under this

13-23

subsection a notice or notices, in writing, requiring him or her to make available within any time

13-24

that may be specified in the notice of all such books, accounts and documents in his or her

13-25

possession or power as may be requested, being books, accounts and documents relating to the

13-26

publication, production or sale of the work in respect of the profits or gains of which exemption is

13-27

claimed.

13-28

     (e) For the purpose of determining the amount of profits or gains subject to modification

13-29

under this section, the tax administrator may make any apportionment of receipts and expenses

13-30

that may be necessary.

13-31

     (f) Notwithstanding any other provisions of this chapter, any individual seeking relief

13-32

under this section shall file a Rhode Island personal income tax return listing the modification

13-33

reducing federal adjusted gross income relating to profits or gains realized from the works as

13-34

defined in this section.

14-1

     (g) For purposes of improving the tax expenditure report filed on a biennial basis

14-2

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

14-3

any taxpayer benefiting from the tax modification in this section shall report to the division of

14-4

taxation the actual value of the tax modification, and authorize that this information, as well as

14-5

the identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In

14-6

order to qualify for the tax modification in this section, any taxpayer shall comply with the

14-7

requirements of this subsection. The tax administrator shall prescribe the form in which the report

14-8

required by this subsection shall be filed.

14-9

     SECTION 9. Sections 44-31-1, 44-31-1.1 and 44-31-2 of the General Laws in Chapter

14-10

44-31 entitled "Investment Tax Credit" are hereby amended to read as follows:

14-11

     44-31-1. Investment tax credit. -- (a) A taxpayer shall be allowed a credit, to be

14-12

computed as provided in this chapter, against the tax imposed by chapters 11, 14, 17, and 30 of

14-13

this title. The amount of the credit shall be two percent (2%) of the cost or other basis for federal

14-14

income tax purposes of tangible personal property and other tangible property, including

14-15

buildings and structural components of buildings, described in subsection (b) of this section,

14-16

acquired, constructed, reconstructed, or erected after December 31, 1973. Provided, that the

14-17

amount of the credit shall be four percent (4%) of the: (i) cost or other basis for federal income

14-18

tax purposes of tangible personal property and other tangible property, including buildings and

14-19

structural components of buildings, described in subdivision (b)(1) of this section, acquired,

14-20

constructed, reconstructed or erected after December 31, 1993; and (ii) qualified amounts for

14-21

leased assets of tangible personal property and other tangible property described in subdivision

14-22

(b)(1) of this section, acquired, constructed, reconstructed, or erected after January 1, 1998, and

14-23

the amount of the credit shall be ten percent (10%) of the cost or other basis for federal income

14-24

tax purposes, and the qualified amounts for leased assets, of tangible personal property and other

14-25

tangible property described in subdivision (b)(3) of this section, acquired, constructed,

14-26

reconstructed, or erected after January 1, 1998, and with respect to buildings and structural

14-27

components which are acquired, constructed, reconstructed or erected after July 1, 2001, as

14-28

described in subdivision (b)(3) of this section.

14-29

     (b) (1) A credit shall be allowed under this section with respect to tangible personal

14-30

property and other tangible property, including buildings and structural components of buildings,

14-31

which are depreciable pursuant to 26 U.S.C. 167, have a useful life of four (4) years or more, are

14-32

acquired by purchase as defined in 26 U.S.C. 179(d) or are acquired by lease as prescribed in

14-33

paragraph (3)(iv) of this subsection, have a situs in this state and are principally used by the

14-34

taxpayer in the production of goods by manufacturing, process, or assembling. The credit shall be

15-1

allowable in the year the property is first placed in service by the taxpayer, which is the year in

15-2

which, under the taxpayer's depreciation practice, the period for depreciation with respect to the

15-3

property begins, or the year in which the property is placed in a condition or state of readiness

15-4

and availability for a specifically assigned function, whichever is earlier. For purposes of this

15-5

paragraph, "manufacturing" means the process of working raw materials into wares suitable for

15-6

use or which gives new shapes, new quality or new combinations to matter that already has gone

15-7

through some artificial process by the use of machinery, tools, appliances, and other similar

15-8

equipment. Property used in the production of goods includes machinery, equipment, or other

15-9

tangible property which is principally used in the repair and service of other machinery,

15-10

equipment, or other tangible property used principally in the production of goods and includes all

15-11

facilities used in the production operation, including storage of material to be used in production

15-12

and of the products that are produced.

15-13

     (2) Within the meaning of subdivision (1) of this subsection, the term "manufacturing"

15-14

means the activities of a "manufacturer" as defined in 44-3-3(20)(iii) and (iv).

15-15

     (3) (i) A credit shall be allowed under this section with respect to tangible personal

15-16

property and other tangible property, (excluding motor vehicles, furniture, buildings and

15-17

structural components of buildings, except as provided in this section), which are depreciable

15-18

pursuant to 26 U.S.C. 167, have a useful life of four (4) years or more, are acquired by purchase

15-19

as defined in 26 U.S.C. 179(d) or acquired by lease as prescribed in paragraph (iv) of this

15-20

subdivision, have a situs in this state and to the extent the property is used by a qualified taxpayer,

15-21

as that term is defined in paragraph (v) of this subdivision, in any of the businesses described in

15-22

major groups 20 through 39, 50 and 51, 60 through 67, 73, 76, 80 through 82, 87 and 89 in the

15-23

standard industrial classification manual prepared by the technical committee on industrial

15-24

classification, office of the statistical standards, executive office of the president, United States

15-25

Bureau of the Budget, as revised from time to time ("SIC Code") and/or any of the businesses

15-26

described in the three (3) digit SIC Code 781.

15-27

     (ii) A credit shall be allowed under this section with respect to buildings and structural

15-28

components that are acquired, constructed, reconstructed, or erected after July 1, 2001, which are

15-29

depreciable pursuant to 26 U.S.C. 167, have a useful life of four (4) years or more, are acquired

15-30

by purchase as defined in 26 U.S.C. 179(d) or acquired by lease for a term of twenty (20) years or

15-31

more, excluding renewal periods, have a situs in this state and to the extent the property is used

15-32

by a high performance manufacturer. The term "high performance manufacturer" means a

15-33

taxpayer: (A) engaged in any of the businesses described in the major groups 28, 30, 34, to 36,

15-34

and 38 of the SIC Codes, (B) that pays its full-time equivalent employees a median annual wage

16-1

above the average annual wage paid by all taxpayers in the state which share the same two-digit

16-2

SIC Code, unless the high performance manufacturer is the only high performance manufacturer

16-3

in the state conducting business in that two-digit SIC Code, in which case this requirement shall

16-4

not apply, and (C)(I) whose expenses for training or retraining its employees exceeds two percent

16-5

(2%) of its total payroll costs, or (II) that pays its full-time equivalent employees a median annual

16-6

wage equal to or greater than one hundred twenty-five percent (125%) of the average annual

16-7

wage paid in this state by employers to employees, or (III) that pays its full-time equivalent

16-8

employees classified as production workers by the Rhode Island department of labor and training

16-9

an average annual wage above the average annual wage paid to the production workers of all

16-10

taxpayers in the state which share the same two-digit SIC Code.

16-11

     (iii) To the extent allowable, the credit allowed under this section is allowed for

16-12

computers, software and telecommunications hardware used by a taxpayer even if the property

16-13

has a useful life of less than four (4) years;

16-14

     (iv) The credit for property acquired by lease is based on the fair market value of the

16-15

property at the inception of the lease times the portion of the depreciable life of the property

16-16

represented by the term of the lease, excluding renewal options. The credit described in this

16-17

subdivision for high performance manufacturers that lease buildings and their structural

16-18

components for a term of twenty (20) years or more, excluding renewal periods, shall be

16-19

calculated in the same manner as for property acquired by purchase; and

16-20

     (v) For purposes of this subsection, a "qualified taxpayer" means a taxpayer in any of the

16-21

businesses described in major groups 20 through 39, 50 and 51, 60 through 67, 73, 76, 80 through

16-22

82, 87 and 89 of the SIC Code, and/or any of the businesses described in the three (3) digit SIC

16-23

Code 781, and which meet the following criteria:

16-24

     (A) The median annual wage paid to a qualified taxpayer's full-time equivalent

16-25

employees must be above the average annual wage paid by all taxpayers in the state which share

16-26

the same two-digit SIC Code, unless that qualified taxpayer is the only qualified taxpayer in the

16-27

state conducting business in that two-digit SIC Code, in which case this requirement does not

16-28

apply; and

16-29

     (B) With respect to major groups 50 and 51, 60 through 67, 73, 76, 80 through 82, 87 and

16-30

89 and/or the three (3) digit SIC Code 781(except for those qualified taxpayers whose businesses

16-31

are described in any of the four (4) digit SIC Codes 7371, 7372 and 7373) only:

16-32

     (I) More than one-half (1/2) of its gross revenues are a result of sales to customers outside

16-33

of the state; or

17-34

     (II) More than one-half (1/2) of its gross revenues are a result of sales to the federal

17-35

government; or

17-36

     (III) More than one-half (1/2) of its gross revenues are a result of a combination of sales

17-37

described in items (I) and (II) of this subparagraph.

17-38

     (4) For purposes of this section, "sales to customers outside the state" means sales to

17-39

individuals, businesses and other entities, as well as divisions and/or branches of businesses and

17-40

other entities, residing or located outside of the state. The requirement of subparagraph (v)(A) of

17-41

this subdivision does not apply to any qualified taxpayer: (i) whose expenses for training or

17-42

retraining its employees exceeds two percent (2%) of these qualified taxpayer's total payroll

17-43

costs; or (ii) whose median annual wage paid to its full-time equivalent employees is equal to or

17-44

greater than one hundred twenty-five percent (125%) of the average annual wage paid in this state

17-45

by employers to employees; or (iii), with respect to major groups 20 through 39 only, the average

17-46

annual wage paid to these qualified taxpayer's full-time equivalent employees, classified as

17-47

production workers by the Rhode Island department of labor and training, is above the average

17-48

annual wage paid to the production workers of all these taxpayers in the state which share the

17-49

same two-digit SIC Code. At the election of a taxpayer, which is made at any time and in any

17-50

manner that may be determined by the tax administrator, the taxpayer's ability in a particular

17-51

fiscal year to qualify as a qualified taxpayer may be based on the expenses and gross receipts of

17-52

the taxpayer for either the prior fiscal year or the immediately proceeding fiscal year rather than

17-53

on the expenses and gross receipts for that fiscal year. For purposes of this chapter, the director of

17-54

the Rhode Island human resource investment council shall certify as to legitimate training and

17-55

retraining expenses in accordance with the guidelines established in chapter 64.6 of title 42, and

17-56

any rules and regulations promulgated under this chapter. For purposes of this subsection, a "full-

17-57

time equivalent employee" means an employee who works a minimum of thirty (30) hours per

17-58

week within the state or two (2) part-time employees who together work a minimum of thirty (30)

17-59

hours per week within the state. For purposes of this subsection, the director of the Rhode Island

17-60

department of labor and training, upon receipt of an application from a qualified taxpayer, shall

17-61

certify whether this qualified taxpayer meets the requirement in subparagraph (v)(A) of this

17-62

subdivision or is exempt from this requirement because the median annual wage it pays its full-

17-63

time equivalent employees is equal to or greater than one hundred twenty-five (125%) percent of

17-64

the average annual wage paid in this state by employers to employees or, with respect to major

17-65

groups 20 through 39 only, the average annual wage paid to this qualified taxpayer's full-time

17-66

equivalent employees, classified as production workers by the Rhode Island department of labor

17-67

and training, is above the average annual wage paid to the production workers of all these

17-68

taxpayers in the state which share the same two-digit SIC Code. The director of the Rhode Island

18-1

department of labor and training shall promulgate rules and regulations as required for the

18-2

implementation of this requirement.

18-3

     (5) To the extent otherwise allowable, the credit provided by paragraphs (3)(i) and (ii) of

18-4

this subsection are also allowed for the property having a situs in Rhode Island and used, however

18-5

acquired, by a property and casualty insurance company.

18-6

     (c) Subject to the provisions of subdivision (b)(3) of this section, a taxpayer is not

18-7

allowed a credit under subsection (a) of this section with respect to tangible personal property and

18-8

other tangible property, including buildings and structural components of buildings, which it

18-9

leases to any other person or corporation and is not allowed a credit under subsection (a) of this

18-10

section with respect to buildings and structural components of buildings it leases from any other

18-11

person or corporation. For the purposes of the preceding sentence, any contract or agreement to

18-12

lease or rent or for a license to use the property is considered a lease, unless a contract or

18-13

agreement is treated for federal income tax purposes as an installment purchase rather than a

18-14

lease.

18-15

     (d) The credit allowed under this section for any taxable year does not reduce the tax due

18-16

for the year by more than fifty percent (50%) of the tax liability that would be payable, and

18-17

further in the case of corporations, to less than the minimum tax as prescribed in 44-11-2(e);

18-18

provided, that in the case of the credit allowed to high performance manufacturers under

18-19

subdivision (b)(3) of this section, the fifty percent (50%) limitation shall not apply. If the amount

18-20

of credit allowable under this section for any taxable year is less than the amount of credit

18-21

available to the taxpayer, any amount of credit not deductible in the taxable year may be carried

18-22

over to the following year or years (not to exceed seven (7) years) and may be deducted from the

18-23

taxpayer's tax for the year or years.

18-24

     (e) At the option of the taxpayer, air or water pollution control facilities which qualify for

18-25

elective amortization deduction may be treated as property principally used by the taxpayer in the

18-26

production of goods by manufacturing, processing, or assembling; provided, that if the property

18-27

qualifies under subsection (b) of this section, in which event, an amortization deduction is not

18-28

allowed.

18-29

     (f) With respect to property which is disposed of or ceases to be in qualified use prior to

18-30

the end of the taxable year in which the credit is to be taken, the amount of the credit shall be that

18-31

portion of the credit provided for in subsection (a) of this section, which represents the ratio

18-32

which the months of qualified use bear to the months of useful life. If property on which credit

18-33

has been taken is disposed of or ceases to be in qualified use prior to the end of its useful life, the

18-34

difference between the credit taken and the credit allowed for actual use must be added back in

19-1

the year of disposition. If this property is disposed of or ceases to be in qualified use after it has

19-2

been in qualified use for more than twelve (12) consecutive years, it is not necessary to add back

19-3

the credit as provided in this subsection. A credit allowed to a qualified taxpayer is not recaptured

19-4

merely because the taxpayer subsequently fails to retain the classification as a qualified taxpayer.

19-5

The amount of credit allowed for actual use shall be determined by multiplying the original credit

19-6

by the ratio, which the months of qualified use bear to the months of useful life. For purposes of

19-7

this subsection, "useful life of property" is the same as the taxpayer (or in the case of property

19-8

acquired by lease, the owner of the property) uses for depreciation purposes when computing his

19-9

or her federal income tax liability. Comparable rules are used in the case of property acquired by

19-10

lease to determine the amount of credit, if any, that will be recaptured if the lease terminates

19-11

prematurely or if the property covered by the lease otherwise fails to be in qualified use.

19-12

     (g) The credit allowed under this section is only allowed against the tax of that

19-13

corporation included in a consolidated return that qualifies for the credit and not against the tax of

19-14

other corporations that may join in the filing of a consolidated tax return.

19-15

     (h) For purposes of improving the tax expenditure report filed on a biennial basis

19-16

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

19-17

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

19-18

the actual value of the tax credits, and authorize that this information, as well as the identification

19-19

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

19-20

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

19-21

The tax administrator shall prescribe the form in which the report required by this subsection

19-22

shall be filed.

19-23

     44-31-1.1. Biotechnology investment tax credit. -- (a) Any company primarily engaged

19-24

in commercial biological research and development or manufacturing and sale of biotechnology

19-25

products or active pharmaceutical ingredients which pays its employees that work a minimum of

19-26

thirty (30) hours per week within the state a median annual wage equal or greater than one

19-27

hundred and twenty-five percent (125%) of the average annual wage paid by all employers in the

19-28

state to employees that work a minimum of thirty (30) hours per week within the state, and

19-29

provides benefits typical to the biotechnology industry, shall be allowed a credit of ten percent

19-30

(10%) of the cost or other basis for federal tax purposes of tangible personal property and other

19-31

tangible property, including buildings and structural components of buildings acquired,

19-32

constructed, reconstructed, or leased with situs in Rhode Island and principally used in the

19-33

production of biotechnology products after December 31, 2001.

20-34

     (1) "Biotechnology products" means those products that are applicable to the prevention,

20-35

treatment, or cure of a disease or condition of human beings, and that are produced using living

20-36

organisms, or materials derived from living organisms, or cellular, sub cellular, or molecular

20-37

component of living organisms.

20-38

     (2) "Principally" means the company's sales of biotechnology products or costs related to

20-39

the development of biotechnology products constitute at least fifty percent of its overall receipts

20-40

or its overall costs respectively.

20-41

     (3) "Tangible personal property" and "other tangible property" includes buildings and

20-42

structural components of buildings acquired, constructed, reconstructed, or leased with situs in

20-43

Rhode Island and principally used in the production of biotechnology products after December

20-44

31, 2001 that:

20-45

     (A) is depreciable pursuant to 26 USC. Section 167,

20-46

     (B) has a useful life of four (4) years or more, and

20-47

     (C) is acquired by purchase as defined in 26 U.S.C. 179(d), or

20-48

     (D) is acquired by lease based on the fair market value of the property at the inception of

20-49

the lease times the portion of the depreciable life of the property represented by the term of the

20-50

lease, excluding renewal options, for a term of twenty (20) years; and

20-51

     (E) does not include vehicles or furniture.

20-52

     (4) "Wages" means all remuneration paid for personal services, including commissions

20-53

and bonuses and the cash value of all remuneration paid in any medium other than cash and all

20-54

other remuneration which is defined as taxable wages by the Internal Revenue Service, as

20-55

certified by the department of labor and training.

20-56

     (b) If the amount of credit allowable for any taxable year is less than the amount of credit

20-57

available to the taxpayer, any amount of credit not used in the taxable year will be available the

20-58

following year or years not to exceed fifteen (15) years and may be deducted from the taxpayer's

20-59

tax for the year or years.

20-60

     (1) The credit may be extended beyond seven (7) years only in a year in which:

20-61

     (A) The company maintains an average quarterly number of employees for each calendar

20-62

year that is nine and one half percent (9.5%) greater than average quarter number of employees in

20-63

the fourth year of the initial credit. Employees are defined as those that work a minimum of thirty

20-64

(30) hours per week within the state with benefits typical to the biotechnology industry;

20-65

     (B) The company's average quarterly median wage is not less than the company's average

20-66

of its quarterly median wage for the three (3) previous calendar years;

20-67

     (C) The company pays its employees a median annual wage equal or greater than one

20-68

hundred and twenty-five percent (125%) of the average annual wage paid by all employers in the

21-1

state. Employees are defined as those that work a minimum of thirty (30) hours per week within

21-2

the state with benefits typical to the biotechnology industry; and

21-3

     (D) The department of labor and training certifies to the tax administrator that the criteria

21-4

in (A) - (C) have been met.

21-5

     (2) Unused credits after the seventh year are forfeited permanently if any of these wage

21-6

and employment criteria are unmet after the seventh year.

21-7

     (3) The company may determine the order in which the credits generated in different tax

21-8

years are utilized, provided that credits available for more than seven (7) years may not reduce

21-9

current year liability by more than seventy-five percent (75%); and provided further that in no

21-10

event, can liability be reduced below the minimum tax prescribed in 44-11-2.

21-11

     (c) For purposes of improving the tax expenditure report filed on a biennial basis

21-12

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

21-13

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

21-14

the actual value of the tax credits and, authorize that this information, as well as the identification

21-15

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

21-16

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

21-17

the tax administrator shall prescribe the form in which the report required by this subsection shall

21-18

be filed.

21-19

     44-31-2. Specialized investment tax credit. -- (a) A certified building owner, as

21-20

provided in chapter 64.7 of title 42,may be allowed a specialized investment tax credit against the

21-21

tax imposed by chapters 11, 14, 17 and 30 of this title.

21-22

     (b) The taxpayer may claim credit for the rehabilitation and reconstruction costs of a

21-23

certified building, which has been substantially rehabilitated. Once substantial rehabilitation is

21-24

established by the taxpayer, the taxpayer may claim credit for all rehabilitation and reconstruction

21-25

costs incurred with respect to the certified building within five (5) years from the date of final

21-26

designation of the certified building by the council pursuant to 42-64.7-6.

21-27

     (c) The credit shall be ten percent (10%) of the rehabilitation and reconstruction costs of

21-28

the certified building. The credit shall be allowable in the year the substantially rehabilitated

21-29

certified building is first placed into service, which is the year in which, under the taxpayer's

21-30

depreciation practice, the period for depreciation with respect to such property begins, or the year

21-31

in which the property is placed in a condition or state of readiness and availability for its

21-32

specifically assigned function, whichever is earlier.

21-33

     (d) The credit shall not offset any tax liability in taxable years other than the year or years

21-34

in which the taxpayer qualifies for the credit. The credit shall not reduce the tax below the

22-1

minimum. Amounts of unused credit for this taxpayer may be carried over and offset against this

22-2

taxpayer's tax for a period not to exceed the following seven (7) taxable years.

22-3

     (e) In the case of a corporation, this credit is only allowed against the tax of that of a

22-4

corporation included in a consolidated return that qualifies for the credit and not against the tax of

22-5

other corporations that may join in the filing of a consolidated tax return.

22-6

     (f) For purposes of improving the tax expenditure report filed on a biennial basis pursuant

22-7

to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue, any

22-8

taxpayer benefiting from the tax credits in this section shall report to the division of taxation the

22-9

actual value of the tax credits, and authorize that this information, as well as the identification of

22-10

the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for the

22-11

tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

22-12

The tax administrator shall prescribe the form in which the report required by this subsection

22-13

shall be filed.

22-14

     SECTION 10. Section 44-31.2-of the General Laws in Chapter 44-31.2 entitled "Motion

22-15

Picture Production Tax Credits" is hereby amended to read as follows:

22-16

     44-31.2-5. Motion picture production company tax credit. -- (a) A motion picture

22-17

production company shall be allowed a credit to be computed as provided in this chapter against a

22-18

tax imposed by chapters 11, 14, 17 and 30 of this title. The amount of the credit shall be twenty-

22-19

five percent (25%) of the state certified production costs incurred directly attributable to activity

22-20

within the state, provided that the primary locations are within the state of Rhode Island and the

22-21

total production budget as defined herein is a minimum of one hundred thousand dollars

22-22

($100,000). The credit shall be earned in the taxable year in which production in Rhode Island is

22-23

completed, as determined by the film office in final certification pursuant to subsection 44-31.2-

22-24

6(c).

22-25

     (b) For the purposes of this section: "total production budget" means and includes the

22-26

motion picture production company's pre-production, production and post-production costs

22-27

incurred for the production activities of the motion picture production company in Rhode Island

22-28

in connection with the production of a state-certified production. The budget shall not include

22-29

costs associated with the promotion or marketing of the film, video or television product.

22-30

     (c) Notwithstanding subsection (a), the credit shall not exceed five million dollars

22-31

($5,000,000) and shall be allowed against the tax for the taxable period in which the credit is

22-32

earned and can be carried forward for not more than three (3) succeeding tax years. Pursuant to

22-33

rules promulgated by the tax administrator, the administrator may issue a waiver of the five

22-34

million dollar ($5,000,000) tax credit cap for any feature-length film or television series up to the

23-1

remaining funds available pursuant to section (e).

23-2

     (d) Credits allowed to a motion picture production company, which is a subchapter S

23-3

corporation, partnership, or a limited liability company that is taxed as a partnership, shall be

23-4

passed through respectively to persons designated as partners, members or owners on a pro rata

23-5

basis or pursuant to an executed agreement among such persons designated as subchapter S

23-6

corporation shareholders, partners, or members documenting an alternate distribution method

23-7

without regard to their sharing of other tax or economic attributes of such entity.

23-8

     (e) No more than fifteen million dollars ($15,000,000) in total may be issued for any tax

23-9

year beginning after December 31, 2007 for motion picture tax credits pursuant to this chapter

23-10

and/or musical and theatrical production tax credits pursuant to chapter 31.3 of this title. Said

23-11

credits shall be equally available to motion picture productions and musical and theatrical

23-12

productions. No specific amount shall be set aside for either type of production.

23-13

     (f) For purposes of improving the tax expenditure report filed on a biennial basis pursuant

23-14

to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue, any

23-15

taxpayer benefiting from the tax credits in this section shall report to the division of taxation the

23-16

actual value of the tax credits, and authorize that this information, as well as the identification of

23-17

the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for the

23-18

tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

23-19

The tax administrator shall prescribe the form in which the report required by this subsection

23-20

shall be filed.

23-21

     SECTION 11. Sections 44-32-1, 44-32-2 and 44-32-3 of the General Laws in Chapter

23-22

44-32 entitled "Elective Deduction For Research And Development Facilities” are hereby

23-23

amended to read as follows:

23-24

     44-32-1. Elective deduction against allocated entire net income. (a) General. Except

23-25

as provided in subsection (c) of this section, at the election of a taxpayer who is subject to the

23-26

income tax imposed by chapters 11 or 30 of this title, there shall be deducted from the portion of

23-27

its entire net income allocated within the state the items prescribed in subsection (b) of this

23-28

section, in lieu of depreciation or investment tax credit.

23-29

     (b) One-year write-off of new research and development facilities.

23-30

     (1) Expenditures paid or incurred during the taxable year for the construction,

23-31

reconstruction, erection or acquisition of any new, not used, property as described in subsection

23-32

(c) of this section, which is used or to be used for purposes of research and development in the

23-33

experimental or laboratory sense. The purposes are not deemed to include the ordinary testing or

23-34

inspection of materials or products for quality control, efficiency surveys, management studies,

24-1

consumer surveys, advertising, promotion, or research in connection with literary, historical, or

24-2

similar projects. The deduction shall be allowed only on condition that the entire net income for

24-3

the taxable year and all succeeding taxable years is computed without the deduction of any

24-4

expenditures and without any deduction for depreciation of the property, except to the extent that

24-5

its basis may be attributable to factors other than the expenditures, (expenditures and depreciation

24-6

deducted for federal income tax purposes shall be added to the entire net income allocated to

24-7

Rhode Island), or in case a deduction is allowable pursuant to this subdivision for only a part of

24-8

the expenditures, on condition that any deduction allowed for federal income tax purposes on

24-9

account of the expenditures or on account of depreciation of the property is proportionately

24-10

reduced in computing the entire net income for the taxable year and all succeeding taxable years.

24-11

Concerning property that is used or to be used for research and development only in part, or

24-12

during only part of its useful life, a proportionate part of the expenditures shall be deductible. If

24-13

all or part of the expenditures concerning any property has been deducted as provided in this

24-14

section, and the property is used for purposes other than research and development to a greater

24-15

extent than originally reported, the taxpayer shall report the use in its report for the first taxable

24-16

year during which it occurs, and the tax administrator may recompute the tax for the year or years

24-17

for which the deduction was allowed, and may assess any additional tax resulting from the

24-18

recomputation as a current tax, within three (3) years of the reporting of the change to the tax

24-19

administrator. Any change in use of the property in whole or in part from that, which originally

24-20

qualified the property for the deduction, requires a recomputation. The tax administrator has the

24-21

authority to promulgate regulations to prevent the avoidance of tax liability.

24-22

     (2) The deduction shall be allowed only where an election for amortization of air or water

24-23

pollution control facilities has not been exercised in respect to the same property.

24-24

     (3) The tax as a result of recomputation of a prior year's deduction is due as an additional

24-25

tax for the year the property ceases to qualify.

24-26

     (c) Property covered by deductions. The deductions shall be allowed only with respect to

24-27

tangible property which is new, not used, is depreciable pursuant to 26 U.S.C. 167, was acquired

24-28

by purchase as defined in 26 U.S.C. 179(d), has a situs in this state, and is used in the taxpayer's

24-29

trade or business. For the taxable years beginning on or after July 1, 1974, a taxpayer is not

24-30

allowed a deduction under this section with respect to tangible property leased by it to any other

24-31

person or corporation or leased from any other person or corporation. For purposes of the

24-32

preceding sentence, any contract or agreement to lease or rent or for a license to use the property

24-33

is considered a lease, unless the contract or agreement is treated for federal income tax purposes

24-34

as an installment purchase rather than a lease. With respect to property that the taxpayer uses

25-1

itself for purposes other than leasing for part of a taxable year and leases for a part of a taxable

25-2

year, the taxpayer shall be allowed a deduction under this section in proportion to the part of the

25-3

year it uses the property.

25-4

     (d) Entire net income. "Entire net income", as used in this section, means net income

25-5

allocated to this state.

25-6

     (e) Carry-over of excess deductions. If the deductions allowable for any taxable

25-7

yearpursuant to this section exceed the portion of the taxpayer's entire net income allocated to this

25-8

state for that year, the excess may be carried over to the following taxable year or years, not to

25-9

exceed three (3) years, and may be deducted from the portion of the taxpayer's entire net income

25-10

allocated to this state for that year or years.

25-11

     (f) Gain or loss on sale or disposition of property. In any taxable year when property is

25-12

sold or disposed of before the end of its useful life, with respect to which a deduction has been

25-13

allowed pursuant to subsection (b) of this section, the gain or loss on this entering into the

25-14

computation of federal taxable income is disregarded in computing the entire net income, and

25-15

there is added to or subtracted from the portion of the entire net income allocated within the state

25-16

the gain or loss upon the sale or other disposition. In computing the gain or loss, the basis of the

25-17

property sold or disposed of is adjusted to reflect the deduction allowed with respect to the

25-18

property pursuant to subsection (b) of this section; provided, that no loss is recognized for the

25-19

purpose of this subsection with respect to a sale or other disposition of property to a person whose

25-20

acquisition of this property is not a purchase as defined in 26 U.S.C. 179(d).

25-21

     (g) Investment credit not allowed on research and development property. No investment

25-22

credit under chapter 31 of this title shall be allowed on the research and development property for

25-23

which accelerated write-off is adopted under this section.

25-24

     (h) Consolidated returns. The research and development deduction shall only be allowed

25-25

against the entire net income of the corporation included in a consolidated return and shall not be

25-26

allowed against the entire net income of other corporations that may join in the filing of a

25-27

consolidated state tax return.

25-28

     (i) For purposes of improving the tax expenditure report filed on a biennial basis pursuant

25-29

to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue, any

25-30

taxpayer benefiting from the tax modification in this section shall report to the division of

25-31

taxation the actual value of the tax modification, and authorize that this information, as well as

25-32

the identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In

25-33

order to qualify for the tax modification in this section, any taxpayer shall comply with the

25-34

requirements of this subsection. The tax administrator shall prescribe the form in which the report

26-1

required by this subsection shall be filed.

26-2

     44-32-2. Credit for research and development property acquired, constructed, or

26-3

reconstructed or erected after July 1, 1994. -- (a) A taxpayer shall be allowed a credit against

26-4

the tax imposed by chapters 11, 17, or 30 of this title. The amount of the credit shall be ten

26-5

percent (10%) of the cost or other basis for federal income tax purposes of tangible personal

26-6

property, and other tangible property, including buildings and structural components of buildings,

26-7

described in subsection (b) of this section; acquired, constructed or reconstructed, or erected after

26-8

July 1, 1994.

26-9

     (b) A credit shall be allowed under this section with respect to tangible personal property

26-10

and other tangible property, including buildings and structural components of buildings which

26-11

are: depreciable pursuant to 26 U.S.C. 167 or recovery property with respect to which a deduction

26-12

is allowable under 26 U.S.C. 168, have a useful life of three (3) years or more, are acquired by

26-13

purchase as defined in 26 U.S.C. 179(d), have a situs in this state and are used principally for

26-14

purposes of research and development in the experimental or laboratory sense which shall also

26-15

include property used by property and casualty insurance companies for research and

26-16

development into methods and ways of preventing or reducing losses from fire and other perils.

26-17

The credit shall be allowable in the year the property is first placed in service by the taxpayer,

26-18

which is the year in which, under the taxpayer's depreciation practice, the period for depreciation

26-19

with respect to the property begins, or the year in which the property is placed in a condition or

26-20

state of readiness and availability for a specifically assigned function, whichever is earlier. These

26-21

purposes shall not be deemed to include the ordinary testing or inspection of materials or products

26-22

for quality control, efficiency surveys, management studies, consumer surveys, advertising,

26-23

promotions, or research in connection with literary, historical or similar projects.

26-24

     (c) A taxpayer shall not be allowed a credit under this section with respect to any

26-25

property described in subsections (a) and (b) of this section, if a deduction is taken for the

26-26

property under 44-32-1.

26-27

     (d) A taxpayer shall not be allowed a credit under this section with respect to tangible

26-28

personal property and other tangible property, including buildings and structural components of

26-29

buildings, which it leases to any other person or corporation. For purposes of the preceding

26-30

sentence, any contract or agreement to lease or rent or for a license to use the property is

26-31

considered a lease.

26-32

     (e) The credit allowed under this section for any taxable year does not reduce the tax due

26-33

for that year, in the case of corporations, to less than the minimum fixed by 44-11-2(e). If the

26-34

amount of credit allowable under this section for any taxable year is less than the amount of credit

27-1

available to the taxpayer, any amount of credit not credited in that taxable year may be carried

27-2

over to the following year or years, up to a maximum of seven (7) years, and may be credited

27-3

against the taxpayer's tax for the following year or years. For purposes of chapter 30 of this title,

27-4

if the credit allowed under this section for any taxable year exceeds the taxpayer's tax for that

27-5

year, the amount of credit not credited in that taxable year may be carried over to the following

27-6

year or years, up to a maximum of seven (7) years, and may be credited against the taxpayer's tax

27-7

for the following year or years.

27-8

     (f) (1) With respect to property which is depreciable pursuant to 26 U.S.C. 167 and which

27-9

is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the

27-10

credit is to be taken, the amount of the credit is that portion of the credit provided for in this

27-11

section which represents the ratio which the months of qualified use bear to the months of useful

27-12

life. If property on which credit has been taken is disposed of or ceases to be in qualified use prior

27-13

to the end of its useful life, the difference between the credit taken and the credit allowed for

27-14

actual use must be added back in the year of disposition. If the property is disposed of or ceases to

27-15

be in qualified use after it has been in qualified use for more than twelve (12) consecutive years,

27-16

it is not necessary to add back the credit as provided in this subdivision. The amount of credit

27-17

allowed for actual use is determined by multiplying the original credit by the ratio which the

27-18

months of qualified use bear to the months of useful life. For purposes of this subdivision, "useful

27-19

life of property" is the same as the taxpayer uses for depreciation purposes when computing his

27-20

federal income tax liability.

27-21

     (2) Except with respect to that property to which subdivision (3) of this subsection

27-22

applies, with respect to three (3) year property, as defined in 26 U.S.C. 168(c), which is disposed

27-23

of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be

27-24

taken, the amount of the credit shall be that portion of the credit provided for in this section which

27-25

represents the ratio which the months of qualified use bear to thirty-six (36). If property on which

27-26

credit has been taken is disposed of or ceases to be in qualified use prior to the end of thirty-six

27-27

(36) months, the difference between the credit taken and the credit allowed for actual use must be

27-28

added back in the year of disposition. The amount of credit allowed for actual use is determined

27-29

by multiplying the original credit by the ratio that the months of qualified use bear to thirty-six

27-30

(36).

27-31

     (3) With respect to any recovery property to which 26 U.S.C. 168 applies, which is a

27-32

building or a structural component of a building and which is disposed of or ceases to be in

27-33

qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of

27-34

the credit is that portion of the credit provided for in this section which represents the ratio which

28-1

the months of qualified use bear to the total number of months over which the taxpayer chooses

28-2

to deduct the property under 26 U.S.C. 168. If property on which credit has been taken is

28-3

disposed of or ceases to be in qualified use prior to the end of the period over which the taxpayer

28-4

chooses to deduct the property under 26 U.S.C. 168, the difference between the credit taken and

28-5

the credit allowed for actual use must be added back in the year of disposition. If the property is

28-6

disposed of or ceases to be in qualified use after it has been in qualified use for more than twelve

28-7

(12) consecutive years, it is not necessary to add back the credit as provided in this subdivision.

28-8

The amount of credit allowed for actual use is determined by multiplying the original credit by

28-9

the ratio that the months of qualified use bear to the total number of months over which the

28-10

taxpayer chooses to deduct the property under 26 U.S.C. 168.

28-11

     (g) No deduction for research and development facilities under 44-32-1 shall be allowed

28-12

for research and development property for which the credit is allowed under this section.

28-13

     (h) No investment tax credit under 44-31-1shall be allowed for research and development

28-14

property for which the credit is allowed under this section.

28-15

     (i) The investment tax credit allowed by 44-31-1shall be taken into account before the

28-16

credit allowed under this section.

28-17

     (j) The credit allowed under this section only allowed against the tax of that corporation

28-18

included in a consolidated return that qualifies for the credit and not against the tax of other

28-19

corporations that may join in the filing of a consolidated return.

28-20

     (k) In the event that the taxpayer is a partnership, joint venture or small business

28-21

corporation, the credit shall be divided in the same manner as income.

28-22

     (l) For purposes of improving the tax expenditure report filed on a biennial basis pursuant

28-23

to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue, any

28-24

taxpayer benefiting from the tax credits in this section shall report to the division of taxation the

28-25

actual value of the tax credits, and authorize that this information, as well as the identification of

28-26

the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for the

28-27

tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

28-28

The tax administrator shall prescribe the form in which the report required by this subsection

28-29

shall be filed.

28-30

     44-32-3. Credit for qualified research expenses. -- (a) A taxpayer shall be allowed a

28-31

credit against the tax imposed by chapters 11, 17 or 30 of this title. The amount of the credit shall

28-32

be five percent (5%)(and in the case of amounts paid or accrued after January 1, 1998, twenty-

28-33

two and one-half percent (22.5%) for the first twenty-five thousand dollars ($25,000) worth of

28-34

credit and sixteen and nine-tenths percent (16.9%) for the amount of credit above twenty-five

29-1

thousand dollars ($25,000)) of the excess, if any, of:

29-2

     (1) The qualified research expenses for the taxable year, over

29-3

     (2) The base period research expenses.

29-4

     (b) (1) "Qualified research expenses" and "base period research expenses" have the same

29-5

meaning as defined in 26 U.S.C. 41; provided, that the expenses have been incurred in this state

29-6

after July 1, 1994.

29-7

     (2) Notwithstanding the provisions of subdivision (1) of this subsection, "qualified

29-8

research expenses" also includes amounts expended for research by property and casualty

29-9

insurance companies into methods and ways of preventing or reducing losses from fire and other

29-10

perils.

29-11

     (c) The credit allowed under this section for any taxable year shall not reduce the tax due

29-12

for that year by more than fifty percent (50%) of the tax liability that would be payable, and in the

29-13

case of corporations, to less than the minimum fixed by 44-11-2(e). If the amount of credit

29-14

allowable under this section for any taxable year is less than the amount of credit available to the

29-15

taxpayer any amount of credit not credited in that taxable year may be carried over to the

29-16

following year or years, up to a maximum of seven (7) years, and may be credited against the

29-17

taxpayer's tax for that year or years. For purposes of chapter 30 of this title, if the credit allowed

29-18

under this section for any taxable year exceeds the taxpayer's tax for that year, the amount of

29-19

credit not credited in that taxable year may be carried over to the following year or years, up to a

29-20

maximum of seven (7) years, and may be credited against the taxpayer's tax for that year or years.

29-21

For purposes of determining the order in which carry-overs are taken into consideration, the

29-22

credit allowed by 44-32-2 is taken into account before the credit allowed under this section.

29-23

     (d) The investment tax credit allowed by 44-31-1shall be taken into account before the

29-24

credit allowed under this section.

29-25

     (e) The credit allowed under this section shall only be allowed against the tax of that

29-26

corporation included in a consolidated return that qualifies for the credit and not against the tax of

29-27

other corporations that may join in the filing of a consolidated return.

29-28

     (f) In the event the taxpayer is a partnership, joint venture or small business corporation,

29-29

the credit is divided in the same manner as income.

29-30

     (g) For purposes of improving the tax expenditure report filed on a biennial basis

29-31

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

29-32

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

29-33

the actual value of the tax credits, and authorize that this information, as well as the identification

29-34

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

30-1

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

30-2

The tax administrator shall prescribe the form in which the report required by this subsection

30-3

shall be filed.

30-4

     SECTION 12. Section 44-39.1-1 of the General Laws in Chapter 44-39.1 entitled

30-5

"Employment Tax Credit" is hereby amended to read as follows:

30-6

     44-39.1-1. Employment tax credit. -- (a) An employer who participates in the bonus

30-7

program in conjunction with chapter 6.3 of title 40 shall be eligible for a tax credit as set forth in

30-8

section 40-6.3-4.

30-9

     (b) For purposes of improving the tax expenditure report filed on a biennial basis

30-10

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

30-11

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

30-12

the actual value of the tax credits, and authorize that this information, as well as the identification

30-13

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

30-14

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

30-15

The tax administrator shall prescribe the form in which the report required by this subsection

30-16

shall be filed.

30-17

     SECTION 13. Section 44-42-2 of the General Laws in Chapter 44-42 entitled "Education

30-18

Assistance and Development Tax Credit" is hereby amended to read as follows:

30-19

     44-42-2. Tax credit. -- (a) A taxpayer shall be allowed a credit against the tax imposed

30-20

by chapters 11, 13 (except section 44-13-13), 14 and 17 of this title. The amount of the credit

30-21

shall be eight percent (8%) of:

30-22

      (1) The amount in excess of ten thousand dollars ($10,000) in any taxable year

30-23

contributed to an institution of higher education for the establishment or maintenance of a faculty

30-24

chair, department, or program for scientific research or education;

30-25

      (2) The amount in excess of ten thousand dollars ($10,000) in any taxable year

30-26

contributed to an institution of higher education for a work fellowship program that is providing

30-27

training connected with scientific research or education and is established by an institution of

30-28

higher education for the students of an institution; and

30-29

      (3) The cost or other basis for federal income tax purposes, determined immediately

30-30

prior to the contributions, in excess of ten thousand dollars ($10,000) in any taxable year of

30-31

tangible personal property contributed to an institution of higher education for use in an

30-32

educational, training, or research program for scientific research or education conducted by an

30-33

institution in this state, excluding sale discounts and sale-gift or similar arrangements pertaining

30-34

to the purchase of equipment.

31-1

     (b) For purposes of improving the tax expenditure report filed on a biennial basis

31-2

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

31-3

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

31-4

the actual value of the tax credits, and authorize that this information, as well as the identification

31-5

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

31-6

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

31-7

The tax administrator shall prescribe the form in which the report required by this subsection

31-8

shall be filed.

31-9

     SECTION 14. Section 44-43-2 of the General Laws in Chapter 44-43 entitled "Tax

31-10

Incentives for Capital Investment in Small Businesses" is hereby amended to read as follows:

31-11

     44-43-2. Deduction or modification. -- (a) In the year in which a taxpayer first makes a

31-12

qualifying investment in a certified venture capital partnership or the year in which an

31-13

entrepreneur first makes an investment in a qualifying entity, the taxpayer or the entrepreneur

31-14

shall be allowed:

31-15

      (1) A deduction for purposes of computing net income or net worth in accordance with

31-16

chapter 11 of this title; or

31-17

      (2) A deduction from gross earnings for purposes of computing the public service

31-18

corporation tax in accordance with chapter 13 of this title; or

31-19

      (3) A deduction for the purposes of computing net income in accordance with chapter 14

31-20

of this title; or

31-21

      (4) A deduction for the purposes of computing gross premiums in accordance with

31-22

chapter 17 of this title; or

31-23

      (5) A modification reducing federal adjusted gross income in accordance with chapter 30

31-24

of this title.

31-25

      (b) The deduction or modification shall be in an amount equal to the taxpayer's

31-26

qualifying investment in a certified venture capital partnership or an entrepreneur's investment in

31-27

a qualifying business entity and shall be measured at the year end of the certified venture capital

31-28

partnership, the year end of the qualifying business entity, or the year end of the investing

31-29

taxpayer, whichever comes first.

31-30

     (c) For purposes of improving the tax expenditure report filed on a biennial basis

31-31

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

31-32

any taxpayer benefiting from the tax deduction or modification in this section shall report to the

31-33

division of taxation the actual value of the tax deduction or modification, and authorize that this

31-34

information, as well as the identification of the taxpayer be disclosed as part of the biennial tax

32-1

expenditure report. In order to qualify for the tax deduction or modification in this section, any

32-2

taxpayer shall comply with the requirements of this subsection. The tax administrator shall

32-3

prescribe the form in which the report required by this subsection shall be filed.

32-4

     SECTION 15. Section 44-46-3 of the General Laws in Chapter 44-46 entitled "Adult

32-5

Education Tax Credit" is hereby amended to read as follows:

32-6

     44-46-3. Credits. -- (a) An employer shall be allowed a credit as provided in section 44-

32-7

46-1 up to a maximum credit of three hundred dollars ($300) against taxes otherwise due under

32-8

provisions of chapters 11, 13, 14, 15, 17 and 30 of this title per paid employee. The employee

32-9

must remain in the employ of the business for a minimum period of thirteen (13) consecutive

32-10

weeks, and a minimum of four hundred and fifty-five (455) hours of paid employment before the

32-11

employer can become eligible for the income credit. The credit shall not reduce the tax under

32-12

chapter 11 of this title to less than one hundred dollars ($100). The credit is not refundable. Any

32-13

amount of credit not deductible in that taxable year may not be carried over to the following year.

32-14

In the event that the employer is a partnership, joint venture or small business corporation, the

32-15

credit shall be divided in the same manner as income. This credit may not be applied against the

32-16

tax until all other credits available to this taxpayer for the taxable year have been applied.

32-17

     (b) For purposes of improving the tax expenditure report filed on a biennial basis

32-18

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

32-19

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

32-20

the actual value of the tax credits, and authorize that this information, as well as the identification

32-21

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

32-22

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

32-23

The tax administrator shall prescribe the form in which the report required by this subsection

32-24

shall be filed.

32-25

     SECTION 16. Section 44-47-1 of the General Laws in Chapter 44-47 entitled "Adult and

32-26

Child Day Care Assistance and Development Tax Credit" is hereby amended to read as follows:

32-27

     44-47-1. Tax credit. -- (a) A taxpayer that pays for or provides adult or child day care

32-28

services to its employees or to the employees of its commercial tenants, or that provides real

32-29

property or dedicates rental space for child day care services, is allowed a credit, to be computed

32-30

as provided in this chapter, against the tax imposed by chapters 11 and 13, except section 44-13-

32-31

13, and chapters 14, 17, 30 of this title. The amount of the credit shall be:

32-32

      (1) Thirty percent (30%) of the total amount expended in the state of Rhode Island

32-33

during the taxable year by a taxpayer for day care services purchased to provide care for the

32-34

dependent children or dependent adult family members of the taxpayer's employees or employees

33-1

of commercial tenants of the taxpayer during the employees' hours of employment;

33-2

      (2) Thirty percent (30%) of the total amount expended during the taxable year by a

33-3

taxpayer in the establishment and/or operation of a day care facility in the state of Rhode Island

33-4

used primarily by the dependent children of the taxpayer's employees or employees of

33-5

commercial tenants of the taxpayer during the employees' hours of employment;

33-6

      (3) Thirty percent (30%) of the total amount expended during the taxable year by a

33-7

taxpayer in conjunction with one or more other taxpayers for the establishment and/or operation

33-8

of a day care facility in the state of Rhode Island used primarily by the dependent children of the

33-9

taxpayer's employees or employees of commercial tenants of the taxpayer during that employee's

33-10

hours of employment;

33-11

      (4) Thirty percent (30%) of the total amount foregone in rent or lease payments related to

33-12

the dedication of rental or lease space to child day care services. The amount foregone shall be

33-13

the difference between fair market rental and actual rental.

33-14

      (b) No credit shall be allowed pursuant to this chapter unless the child day care facility is

33-15

licensed pursuant to chapter 72.1 of title 42, and agrees to accept children whose child care

33-16

services are paid for in full or in part by the Rhode Island department of human services; and/or

33-17

the adult day care facility is certified by the department of elderly affairs.

33-18

     (c) For purposes of improving the tax expenditure report filed on a biennial basis

33-19

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

33-20

any taxpayer benefiting from the tax credit in this section shall report to the division of taxation

33-21

the actual value of the tax credit, and authorize that this information, as well as the identification

33-22

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

33-23

the tax credit in this section, any taxpayer shall comply with the requirements of this subsection.

33-24

The tax administrator shall prescribe the form in which the report required by this subsection

33-25

shall be filed.

33-26

     SECTION 17. Section 44-54-1 of the General Laws in Chapter 44-54 entitled "Disabled

33-27

Access Credit For Small Businesses" is hereby amended to read as follows:

33-28

     44-54-1. Tax credit. -- (a) A small business taxpayer that pays for or incurs expenses to

33-29

provide access to persons with disabilities shall be allowed a credit, to be computed against the

33-30

tax imposed by chapters 11 and 13 of this title. The expenses must be paid or incurred to enable

33-31

the small business to comply with federal or state laws protecting the rights of persons with

33-32

disabilities. The credit is equal to ten percent (10%) of the total amount expended in the state of

33-33

Rhode Island during the taxable year but in no event shall exceed the sum of one thousand dollars

33-34

($1,000) for:

34-1

      (1) Removing architectural, communication, physical, or transportation barriers;

34-2

      (2) Providing qualified interpreters or other effective methods of delivering aurally

34-3

delivered materials to persons with hearing impairments;

34-4

      (3) Providing readers, tapes or other effective means of making visually delivered

34-5

materials available to persons with visual impairments;

34-6

      (4) Providing job coaches or other effective methods of supporting workers with severe

34-7

impairments in competitive employment;

34-8

      (5) Providing specialized transportation services to employees or customers with

34-9

mobility impairments;

34-10

      (6) Buying or modifying equipment for persons with disabilities; and

34-11

      (7) Providing similar services, modifications, material or equipment for persons with

34-12

disabilities;

34-13

      (b) As used in this chapter, the following words have the following meanings:

34-14

      (1) "Small business" is one that for the preceding year had thirty (30) or fewer full-time

34-15

employees, or had one million dollars ($1,000,000) or less in gross receipts.

34-16

      (2) "Full-time employee" is one employed at least thirty (30) hours a week for twenty

34-17

(20) or more calendar weeks in the preceding year.

34-18

      (3) "Federal or state laws protecting the rights of persons with disabilities" includes but

34-19

is not limited to the: Americans with Disabilities Act of 1990, 42 U.S.C. section 12101 et. seq.;

34-20

Title V of the Rehabilitation Act of 1973, 29 U.S.C. section 794; Declaration of Certain

34-21

Constitutional Rights and Principles -- Discrimination, R.I. Const. art. 1, section 2; Civil Rights

34-22

of People with Disabilities, chapter 87 of title 42; Open Meeting Handicapped Accessibility for

34-23

persons with disabilities, section 42-46-13; Access for persons with disabilities, section 37-8-15;

34-24

and AIDS Discrimination Prohibited, section 23-6.3-11.

34-25

      (4) "Amount expended" means the actual sum of money spent.

34-26

     (c) For purposes of improving the tax expenditure report filed on a biennial basis

34-27

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

34-28

any taxpayer benefiting from the tax credit in this section shall report to the division of taxation

34-29

the actual value of the tax credit, and authorize that this information, as well as the identification

34-30

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

34-31

the tax credit in this section, any taxpayer shall comply with the requirements of this subsection.

34-32

The tax administrator shall prescribe the form in which the report required by this subsection

34-33

shall be filed.

35-34

     SECTION 18. Section 44-55-4.1 of the General Laws in Chapter 44-55 entitled "Tax

35-35

Incentives for Employers" is hereby amended to read as follows:

35-36

     44-55-4.1. Incentive provisions. -- (a) The deduction or modification is not refundable

35-37

but may be used by the claimant business for the tax against it pursuant to chapters 11, 13, 14, 15,

35-38

17, and 30 of this title, not including any tax imposed under section 44-13-13 or other similar

35-39

provisions in the following manner:

35-40

      (1) A deduction for purposes of computing net income in accordance with chapter 11 of

35-41

this title;

35-42

      (2) A deduction from gross earnings for purposes of computing the public service

35-43

corporation tax in accordance with chapter 13 of this title;

35-44

      (3) A deduction for the purposes of computing net income in accordance with chapter 14

35-45

of this title;

35-46

      (4) A deduction for the purposes of computing deposits in accordance with chapter 15 of

35-47

this title;

35-48

      (5) A deduction for the purposes of computing gross premiums in accordance with

35-49

chapter 17 of this title; or

35-50

      (6) A modification reducing federal adjusted gross income in accordance with chapter 30

35-51

of this title.

35-52

      (b) The modification allowed under this chapter for any taxable year shall not reduce the

35-53

tax due for that year to below the minimum tax imposed under the applicable chapter of this title.

35-54

Any amount of modification not used in that taxable year may not be carried over to the

35-55

following year.

35-56

      (c) In the event that the claimant business is electing a subchapter S corporation, limited

35-57

liability company, partnership, or a joint venture, the incentive shall be divided as income.

35-58

      (d) In the event that the taxpayer is liable for taxes imposed under both chapters 14 and

35-59

15 of this title, the taxpayer must elect the tax against which it wishes to claim the incentive. This

35-60

election shall be made as part of the taxpayer's filings in accordance with sections 44-14-6 and

35-61

44-15-5. The taxpayer may not divide the incentive for any year between the two (2) tax

35-62

liabilities for which it is liable.

35-63

      (e) In the event that the hiring of the employee is used to obtain any other tax incentive

35-64

or tax benefit for the business, then the business will not be eligible for the incentive available in

35-65

this chapter.

35-66

     (f) For purposes of improving the tax expenditure report filed on a biennial basis pursuant

35-67

to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue, any

35-68

taxpayer benefiting from the tax deduction or modification in this section shall report to the

36-1

division of taxation the actual value of the tax deduction or modification, and authorize that this

36-2

information, as well as the identification of the taxpayer be disclosed as part of the biennial tax

36-3

expenditure report. In order to qualify for the tax deduction or modification in this section, any

36-4

taxpayer shall comply with the requirements of this subsection. The tax administrator shall

36-5

prescribe the form in which the report required by this subsection shall be filed.

36-6

     SECTION 19. Section 44-63-2 of the General Laws in Chapter 44-63 entitled "Incentives

36-7

for Innovation and Growth" is hereby amended to read as follows:

36-8

     44-63-2. Innovation credit. [Repealed effective December 31, 2016 pursuant to

36-9

section 44-63-5.] -- (a) An eligible qualified innovative company may apply to the division of

36-10

taxation for a tax credit certificate in an amount equal to fifty percent (50%) of any investment

36-11

made in the company, but in no case shall the amount of the tax credit certificate exceed one

36-12

hundred thousand dollars ($100,000). The tax credit certificate may be issued in the name of the

36-13

eligible company, or an executive employee or employees of the company, an investor in the

36-14

company, or any combination thereof as requested by the company, and may be applied against

36-15

state tax liability arising under chapters 44-11, 44-12, or 44-30 by the holders of the certificates.

36-16

If not applied in full at the time of the next following tax filing period, the certificate(s) or the

36-17

remaining value thereof may be carried forward for a period not to exceed three (3) years.

36-18

     (b) For purposes of improving the tax expenditure report filed on a biennial basis

36-19

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

36-20

any taxpayer benefiting from the tax credit in this section shall report to the division of taxation

36-21

the actual value of the tax credit, and authorize that this information, as well as the identification

36-22

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

36-23

the tax credit in this section, any taxpayer shall comply with the requirements of this subsection.

36-24

The tax administrator shall prescribe the form in which the report required by this subsection

36-25

shall be filed.

36-26

     SECTION 20. This act shall take effect upon passage.

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LC02188

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION

***

37-1

     This act would require increased transparency for certain existing tax credits, deductions

37-2

and exemptions. The biennial tax expenditure report would require more information about these

37-3

tax benefits, including the name of recipients, and the value of foregone revenue to the state. The

37-4

division of taxation would be responsible for collecting the information as part of a taxpayer's tax

37-5

return.

37-6

     This act would take effect upon passage.

=======

LC02188

=======