2021 -- H 6036

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2021

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A N   A C T

RELATING TO TAXATION -- BUSINESS CORPORATION TAX

     

     Introduced By: Representatives Fenton-Fung, and Casimiro

     Date Introduced: February 26, 2021

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Section 44-11-2 of the General Laws in Chapter 44-11 entitled "Business

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Corporation Tax" is hereby amended to read as follows:

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     44-11-2. Imposition of tax.

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     (a) Each corporation shall annually pay to the state a tax equal to nine percent (9%) of net

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income, as defined in § 44-11-11, qualified in § 44-11-12, and apportioned to this state as provided

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in §§ 44-11-13 -- 44-11-15, for the taxable year. For tax years beginning on or after January 1,

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2015, each corporation shall annually pay to the state a tax equal to seven percent (7.0%) of net

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income, as defined in § 44-11-13 -- 44-11-15, for the taxable year.

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     (b) A corporation shall pay the amount of any tax as computed in accordance with

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subsection (a) after deducting from "net income," as used in this section, fifty percent (50%) of the

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excess of capital gains over capital losses realized during the taxable year, if for the taxable year:

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     (1) The corporation is engaged in buying, selling, dealing in, or holding securities on its

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own behalf and not as a broker, underwriter, or distributor;

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     (2) Its gross receipts derived from these activities during the taxable year amounted to at

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least ninety percent (90%) of its total gross receipts derived from all of its activities during the year.

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"Gross receipts" means all receipts, whether in the form of money, credits, or other valuable

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consideration, received during the taxable year in connection with the conduct of the taxpayer's

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activities.

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     (c) A corporation shall not pay the amount of the tax computed on the basis of its net

 

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income under subsection (a), but shall annually pay to the state a tax equal to ten cents ($.10) for

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each one hundred dollars ($100) of gross income for the taxable year or a tax of one hundred dollars

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($100), whichever tax shall be the greater, if for the taxable year the corporation is either a "personal

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holding company" registered under the federal Investment Company Act of 1940, 15 U.S.C. § 80a-

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1 et seq., "regulated investment company," or a "real estate investment trust" as defined in the

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federal income tax law applicable to the taxable year. "Gross income" means gross income as

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defined in the federal income tax law applicable to the taxable year, plus:

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     (1) Any interest not included in the federal gross income; minus

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     (2) Interest on obligations of the United States or its possessions, and other interest exempt

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from taxation by this state; and minus

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     (3) Fifty percent (50%) of the excess of capital gains over capital losses realized during the

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taxable year.

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     (d)(1) A small business corporation having an election in effect under subchapter S, 26

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U.S.C. § 1361 et seq., shall not be subject to the Rhode Island income tax on corporations, except

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that the corporation shall be subject to the provisions of subsection (a), to the extent of the income

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that is subjected to federal tax under subchapter S. Effective for tax years beginning on or after

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January 1, 2015, a small business corporation having an election in effect under subchapter S, 26

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U.S.C. § 1361 et seq., shall be subject to the minimum tax under § 44-11-2(e).

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     (2) The shareholders of the corporation who are residents of Rhode Island shall include in

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their income their proportionate share of the corporation's federal taxable income.

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     (3) [Deleted by P.L. 2004, ch. 595, art. 29, § 1.]

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     (4) [Deleted by P.L. 2004, ch. 595, art. 29, § 1.]

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     (e) Minimum tax. The tax imposed upon any corporation under this section, including a

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small business corporation having an election in effect under subchapter S, 26 U.S.C. § 1361 et

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seq., shall not be less than four hundred fifty dollars ($450). For tax years beginning on or after

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January 1, 2017, the tax imposed shall not be less than four hundred dollars ($400).

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     (f) For income earned during tax year 2021 only, no tax shall be imposed by this section

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on small businesses with less than fifty (50) full-time employees provided that the small business:

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     (i) Derived greater than fifty percent (50%) of their annual income from weddings/special

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events earned during tax year 2019 and reported on their 2020 tax return; and

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     (ii) Returns to and maintains, for the last three (3) months of 2021, staffing levels at eighty

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percent (80%) or above of their full-time employee staffing levels as of December 31, 2019,

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including the minimum tax imposed by subsection (e) of this section. If the small business was not

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operational during 2019, the staffing level requirement would be calculated based on eighty percent

 

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(80%) of the maximum full-time employee staffing level as of March 1, 2021.

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     (iii) Businesses eligible for this type of exemption as provided for in this subsection shall

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include florists, disc jockeys and bands, lighting specialists, photographers, caterers, event

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planners, stationary, calligraphers, banquet halls and wedding and special event clothiers,

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including, but not limited to, dress shops and tuxedo rental shops.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION -- BUSINESS CORPORATION TAX

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     This act would prohibit the imposition of any tax liability upon wedding and special events

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businesses with less than fifty (50) full-time employees if those businesses return to and maintain

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for the last three (3) months of 2021 staffing levels of eighty percent (80%) percent of the full-time

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employee staffing level employed as of December 31, 2019 and who earned greater than fifty

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percent (50%) of their income from weddings and special events earned during 2019 and reported

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on their 2020 tax return for the 2021 tax year only. This act would also apply to businesses not

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operational during 2019 who return to and maintain a staffing level of eighty percent (80%) of their

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maximum staffing level as of March 1, 2021.

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     This act would take effect upon passage.

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