2021 -- S 0365

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LC001610

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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 -- REAL ESTATE CONVEYANCE TAX

     

     Introduced By: Senators Kallman, Murray, Goodwin, Cano, Ruggerio, Euer, Acosta,
Seveney, and Mack

     Date Introduced: February 25, 2021

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 44-25-1 and 44-25-2 of the General Laws in Chapter 44-25 entitled

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"Real Estate Conveyance Tax" are hereby amended to read as follows:

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     44-25-1. Tax imposed -- Payment -- Burden.

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     (a) There is imposed, on each deed, instrument, or writing by which any lands, tenements,

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or other realty sold is granted, assigned, transferred, or conveyed to, or vested in, the purchaser or

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purchasers, or any other person or persons, by his or her or their direction, or on any grant,

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assignment, transfer, or conveyance or such vesting, by such persons which has the effect of making

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any real estate company an acquired real estate company, when the consideration paid exceeds one

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hundred dollars ($100), a tax at the rate of (1) two dollars and thirty cents ($2.30) for each five

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hundred dollars ($500) or fractional part of it of the first five hundred thousand dollars ($500,000)

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of the consideration paid, and (2) at the rate of four dollars and sixty cents ($4.60) for each five

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hundred dollars ($500), or fractional part of it, of the consideration paid in excess of five hundred

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thousand dollars ($500,000) which that is paid for the purchase of property or the interest in an

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acquired real estate company (inclusive of the value of any lien or encumbrance remaining at the

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time of the sale, grant, assignment, transfer or conveyance or vesting occurs, or in the case of an

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interest in an acquired real estate company, a percentage of the value of such lien or encumbrance

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equivalent to the percentage interest in the acquired real estate company being granted, assigned,

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transferred, conveyed or vested), which. The tax is payable at the time of making, the execution,

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delivery, acceptance or presentation for recording of any instrument affecting such transfer grant,

 

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assignment, transfer, conveyance or vesting. In the absence of an agreement to the contrary, the tax

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shall be paid by the grantor, assignor, transferor or person making the conveyance or vesting.

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     (b) In the event no consideration is actually paid for the lands, tenements, or realty, the

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instrument or interest in an acquired real estate company of conveyance shall contain a statement

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to the effect that the consideration is such that no documentary stamps are required.

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     (c) The tax administrator shall contribute The tax shall be distributed as follows:

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     (i) With respect to the portion of the tax assessed against the first five hundred thousand

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dollars ($500,000) of the consideration paid: the tax administrator shall contribute to the distressed

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community relief program the sum of thirty cents ($.30) per two dollars and thirty cents ($2.30) of

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the face value of the stamps to be distributed pursuant to § 45-13-12, and to the housing resources

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commission restricted receipts account the sum of thirty cents ($.30) per two dollars and thirty cents

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($2.30) of the face value of the stamps. Funds will be administered by the office of housing and

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community development, through the housing resources commission. The state shall retain sixty

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cents ($.60) for state use. The balance of the tax shall be retained by the municipality collecting the

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tax.

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     (ii) With respect to the portion of the tax assessed against the consideration paid in excess

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of five hundred thousand dollars ($500,000): the tax administrator shall contribute to the distressed

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community relief program the sum of thirty cents ($.30) per four dollars and sixty cents ($4.60) of

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the face value of the stamps to be distributed pursuant to § 45-13-12, to the housing resources

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commission restricted receipt account the sum of thirty cents ($.30) per four dollars and sixty cents

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($4.60) of the face value of the stamps, and to the housing production fund established pursuant to

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§ 42-128-10(b) the sum of two dollars and thirty cents ($2.30) per four dollars and sixty cents

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($4.60) of the face value of the stamps. The state shall retain sixty cents ($.60) for state use. The

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balance of the tax shall be retained by the municipality collecting the tax.

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     (iii) Notwithstanding the above, in the case of the tax on the grant, transfer, assignment or

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conveyance or vesting with respect to an acquired real estate company, the tax shall be collected

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by the tax administrator and shall be distributed to the municipality where the real estate owned by

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the acquired real estate company is located provided, however, in the case of any such tax collected

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by the tax administrator, if the acquired real estate company owns property located in more than

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one municipality, the proceeds of the tax shall be allocated amongst said municipalities in the

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proportion the assessed value of said real estate in each such municipality bears to the total of the

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assessed values of all of the real estate owned by the acquired real estate company in Rhode Island.

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Provided, however, in fiscal years 2004 and 2005, from the proceeds of this tax, the tax

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administrator shall deposit as general revenues the sum of ninety cents ($.90) per two dollars and

 

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thirty cents ($2.30) of the face value of the stamps. The balance of the tax on the purchase of

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property shall be retained by the municipality collecting the tax. The balance of the tax on the

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transfer with respect to an acquired real estate company, shall be collected by the tax administrator

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and shall be distributed to the municipality where the property for which interest is sold is

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physically located. Provided, however, that in the case of any tax collected by the tax administrator

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with respect to an acquired real estate company where the acquired real estate company owns

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property located in more than one municipality, the proceeds of the tax shall be allocated amongst

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the municipalities in proportion that the assessed value in any such municipality bears to the

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assessed values of all of the real estate owned by the acquired real estate company in Rhode Island.

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With respect to the revenue collected by the division of taxation on behalf of each municipality in

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this section, before distributing said revenue to the municipalities, a two percent (2%)

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administrative fee shall be deducted therefrom and transferred to the general fund.

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     (d) For purposes of this section, the term "acquired real estate company" means a real estate

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company that has undergone a change in ownership interest if (i) such change does not affect the

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continuity of the operations of the company; and (ii) the change, whether alone or together with

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prior changes has the effect of granting, transferring, assigning or conveying or vesting, transferring

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directly or indirectly, 50% or more of the total ownership in the company within a period of three

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(3) years. For purposes of the foregoing subsection (ii) hereof, a grant, transfer, assignment or

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conveyance or vesting, shall be deemed to have occurred within a period of three (3) years of

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another grant(s), transfer(s), assignment(s) or conveyance(s) or vesting(s) if during the period the

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granting, transferring, assigning or conveying or party provides the receiving party a legally binding

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document granting, transferring, assigning or conveying or vesting said realty or a commitment or

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option enforceable at a future date to execute the grant, transfer, assignment or conveyance or

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vesting.

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     (e) A real estate company is a corporation, limited liability company, partnership or other

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legal entity which meets any of the following:

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     (i) Is primarily engaged in the business of holding, selling or leasing real estate, where 90%

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or more of the ownership of said real estate is held by 35 or fewer persons and which company

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either (a) derives 60% or more of its annual gross receipts from the ownership or disposition of real

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estate; or (b) owns real estate the value of which comprises 90% or more of the value of the entity's

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entire tangible asset holdings exclusive of tangible assets which are fairly transferrable and actively

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traded on an established market; or

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     (ii) 90% or more of the ownership interest in such entity is held by 35 or fewer persons and

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the entity owns as 90% or more of the fair market value of its assets a direct or indirect interest in

 

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a real estate company. An indirect ownership interest is an interest in an entity 90% or more of

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which is held by 35 or fewer persons and the purpose of the entity is the ownership of a real estate

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company.

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     (f) In the case of a grant, assignment, transfer or conveyance or vesting which results in a

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real estate company becoming an acquired real estate company, the grantor, assignor, transferor, or

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person making the conveyance or causing the vesting, shall file or cause to be filed with the division

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of taxation, at least five (5) days prior to the grant, transfer, assignment or conveyance or vesting,

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notification of the proposed grant, transfer, assignment, or conveyance or vesting, the price, terms

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and conditions of thereof, and the character and location of all of the real estate assets held by real

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estate company and shall remit the tax imposed and owed pursuant to subsection (a) hereof. Any

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such grant, transfer, assignment or conveyance or vesting which results in a real estate company

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becoming an acquired real estate company shall be fraudulent and void as against the state unless

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the entity notifies the tax administrator in writing of the grant, transfer, assignment or conveyance

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or vesting as herein required in subsection (f) hereof and has paid the tax as required in subsection

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(a) hereof. Upon the payment of the tax by the transferor, the tax administrator shall issue a

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certificate of the payment of the tax which certificate shall be recordable in the land evidence

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records in each municipality in which such real estate company owns real estate. Where the real

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estate company has assets other than interests in real estate located in Rhode Island, the tax shall

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be based upon the assessed value of each parcel of property located in each municipality in the state

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of Rhode Island.

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     44-25-2. Exemptions.

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     (a) The tax imposed by this chapter does not apply to any instrument or writing given to

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secure a debt.

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     (b) The tax imposed by this chapter does not apply to any deed, instrument, or writing

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wherein the United States, the state of Rhode Island, or its political subdivisions are designated the

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grantor.

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     (c) The tax imposed by this chapter does not apply to any deed, instrument, or writing that

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has or shall be executed, delivered, accepted, or presented for recording in furtherance of, or

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pursuant to, that certain master property conveyance contract dated December 29, 1982, and

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recorded in the land evidence records of the city of Providence on January 27, 1983, at 1:30 p.m.

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in book 1241 at page 849, and relating to the capital center project in the city of Providence.

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     (d) The qualified sale of a mobile or manufactured home community to a resident-owned

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organization as defined in § 31-44-1 is exempt from the real estate conveyance tax imposed under

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this chapter.

 

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     (e) No transfer tax or fee shall be imposed by a land trust or municipality upon the

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acquisition of real estate by the state of Rhode Island or any of its political subdivisions.

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     (f) Nothing in § 44-25-1(a) shall be construed to impose a tax upon any grant, assignment,

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transfer, conveyance or vesting of any interest, direct or indirect, among owners, members or

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partners in any real estate company with respect to an affordable housing development where:

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     (i) The housing development has been financed in whole or in part with federal low-income

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tax credits pursuant to §42 of the Internal Revenue Code; or

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     (ii) At least one of the owners, members or partners of the company is a Rhode Island

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nonprofit corporation or an entity exempt from tax under § 501(c)(3) of the Internal Revenue Code,

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or is owned by a Rhode Island nonprofit corporation or an entity that is exempt from tax under §

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501(c)(3) of the Internal Revenue Code, and the housing development is subject to a recorded deed

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restriction or declaration of land use restrictive covenants in favor of the Rhode Island housing and

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mortgage finance corporation, the state of Rhode Island housing resources commission, the federal

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home loan bank or any of its members, or any other state or local government instrumentality under

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an affordable housing program. No such real estate company shall be an acquired real estate

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company under this section.

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     SECTION 2. Section 42-128-10 of the General Laws in Chapter 42-128 entitled "Rhode

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Island Housing Resources Act of 1998" is hereby amended to read as follows:

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     42-128-10. Appropriations.

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     (a) The general assembly shall annually appropriate any sums it may deem necessary to

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enable the commission to carry out its assigned purposes; and the state controller is authorized and

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directed to draw his or her orders upon the general treasurer for the payment of any sums

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appropriated or so much as may be from time to time required, upon receipt by him or her of proper

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vouchers approved by the chairperson or the executive director.

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     (b) There is hereby established a restricted receipt account within the general fund of the

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state, to be known as the “housing production fund”. Funds from this account shall be administered

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by the Rhode Island housing and mortgage finance corporation, subject to all program and reporting

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guidelines adopted by the housing resources commission, for housing production initiatives,

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including:

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     (1) Financial assistance by loan, grant, or otherwise, for the planning, production, or

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preservation of housing opportunities in Rhode Island, including housing affordable to workers and

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located near major workforce centers; or

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     (2) Technical and financial assistance for cities and towns to support increased local

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housing production, including by reducing regulatory barriers.

 

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     SECTION 3. Chapter 42-128 of the General Laws entitled "Rhode Island Housing

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Resources Act of 1998" is hereby amended by adding thereto the following section:

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     42-128-10.1. Restrictions on the use of the Housing Production Fund.

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     (a) Notwithstanding any laws to the contrary, any project funded in total or in part under §

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42-128-10(b)(1) shall include a requirement that any contractor and subcontractor working on the

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project shall have an apprenticeship program as defined herein for all apprenticeable crafts that will

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be employed on the project at the time of bid. The provisions of the section shall only apply to

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contractors and subcontractors with five (5) or more employees. For purposes of this section, an

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apprenticeship program is one that is registered with and approved by the United States Department

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of Labor in conformance with 29 C.F.R. 29 and 29 C.F.R. 30; and

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     (1) The department of labor and training must provide information and technical assistance

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to affected governmental, quasi-governmental agencies, and any contractors awarded projects

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relative to their obligations under this statute.

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     (2) The department of labor and training may also impose a penalty of up to five hundred

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dollars ($500) for each calendar day of noncompliance with this section, as determined by the

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director of labor and training. Mere errors and/or omissions shall not be grounds for imposing a

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penalty under this subsection.

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     (3) Any penalties assessed under this statute shall be paid to the housing production fund.

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     (4) To the extent that any of the provisions contained in § 37-13-3.2 conflict with the

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requirements for federal aid contracts, federal law and regulations shall control.

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     (b) Projects funded under § 42-128-10(b)(1) with total costs valued at five-million dollars

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($5,000,000) or more shall be deemed public works and be subject to requirements set forth in §37-

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13.

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     (c) In administering the housing production fund, RI housing shall fund new housing

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construction projects and rental assistance in roughly equal proportion.

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     SECTION 4. 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 -- REAL ESTATE CONVEYANCE TAX

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     This act would provide that a portion of the real estate conveyance tax be apportioned to a

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newly established restricted receipt account known as the housing production fund.

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     This act would take effect upon passage.

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