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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2022

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A N   A C T

RELATING TO TAXATION -- LEVY AND ASSESSMENT OF LOCAL TAXES

     

     Introduced By: Representative Arthur Handy

     Date Introduced: May 06, 2022

     Referred To: House Municipal Government & Housing

     It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 44-5-3 and 44-5-12 of the General Laws in Chapter 44-5 entitled

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"Levy and Assessment of Local Taxes" are hereby amended to read as follows:

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     44-5-3. Ratable property of a city or town -- Definitions.

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     (a) The ratable property of the city or town consists of the ratable real estate and the ratable

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tangible personal property (which do not include manufacturer's manufacturing machinery and

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equipment of a manufacturer) and the ratable tangible personal property of manufacturers

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consisting of manufacturer's manufacturing machinery and equipment of a manufacturer.

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     (b)(1) For the purposes of this section and §§ 44-5-20, 44-5-22, 44-5-38, and § 9 of chapter

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245, public laws of Rhode Island, 1966, "manufacturing" includes the handling and storage of

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manufacturer's inventories as defined in § 44-3-3(20)(ii).

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     (2) "Manufacturer's machinery and equipment" or "manufacturing machinery and

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equipment" is defined as:

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     (i) Machinery and equipment which is used exclusively in the actual manufacture or

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conversion of materials or goods in the process of manufacture by a manufacturer as defined in §

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44-3-3(20) and machinery, fixtures, and equipment used exclusively by a manufacturer for research

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and development or for quality assurance of its manufactured products; and

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     (ii) Machinery and equipment which is partially used in the actual manufacture or

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conversion of raw materials or goods in the process of manufacture by a manufacturer as defined

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in § 44-3-3(20) and machinery, fixtures, and equipment used by a manufacturer for research and

 

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development or for quality assurance of its manufactured products, to the extent to which the

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machinery and equipment is used for the manufacturing processes, research, and development or

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quality assurance. In the instances where machinery and equipment is used in both manufacturing

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activities, the assessment on machinery and equipment is prorated by applying the percentage of

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usage of the equipment for manufacturing, research, and development and quality assurance

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activity to the value of the machinery and equipment for purposes of taxation, and the portion of

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the value used for manufacturing, research, and development and quality assurance is exempt from

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taxation. The burden of demonstrating this percentage usage of machinery and equipment for

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manufacturing and for research and development and/or quality assurance of its manufactured

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products rests with the manufacturer.

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     (3) This definition of "manufacturing" or "manufacturer's machinery and equipment" does

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not include:

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     (i) Motor vehicles required by law to be registered with the division of motor vehicles;

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     (ii) Store fixtures and other equipment situated in or upon a retail store or other similar

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selling place operated by a manufacturer, whether or not the retail establishment store or other

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similar selling place is located in the same building in which the manufacturer operates his or her

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manufacturing plant; and

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     (iii) Fixtures or other equipment situated in or upon premises used to conduct a business

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which is unrelated to the manufacture of finished products for trade and their sale by the

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manufacturer of the products, whether or not the premises where the unrelated business is

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conducted is in the same building in which the manufacturer has his or her manufacturing plant.

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The levy on tangible personal property of manufacturers consisting of manufacturer's

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manufacturing machinery and equipment of a manufacturer is at the rate provided in § 44-5-38.

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     (c) Notwithstanding any exemption provided by this section, and except for the exemptions

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created by §§ 44-3-3(a)(22), 44-3-3(a)(48) and 44-3-3(a)(49), which exemptions shall remain

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intact, cities and towns may, by ordinance or resolution, tax any renewable energy resources, as

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defined in § 39-26-5, and associated equipment only pursuant to rules and regulations that will be

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established by the office of energy resources in consultation with the division of taxation after the

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rules are adopted, no later than November 30, 2016. The rules will provide consistent and

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foreseeable tax treatment of renewable energy to facilitate and promote installation of grid-

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connected generation of renewable energy and shall consider the following criteria in adopting

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appropriate and reasonable, tangible property tax rates for commercial renewable energy systems:

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     (1) State policy objectives to promote renewable energy development;

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     (2) Tax agreements between municipalities and renewable energy developers executed and

 

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effective after 2011, including net metering or lease agreements that address tax treatment;

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     (3) The valuation of local property tax in the ceiling prices set for the distributed-generation

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standard contract or renewable-energy-growth programs by the distributed-generation board;

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     (4) Assessment practices used by Rhode Island municipal property tax assessors; and

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     (5) Five dollars ($5.00) per kilowatt of nameplate capacity and the average kilowatt value

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of the tax agreements and associated payments executed between municipalities and renewable-

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energy developers between 2011 and 2016 shall be the benchmarks for consideration of reasonable

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revenue generated by a city or town from renewable-energy facilities provided that evidence to the

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contrary may be incorporated in final rules and regulations; and

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     (6) Cities and towns may only assess a tax on the real property upon which a renewable

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energy resource is located pursuant to § 44-5-12 (a)(5) and § 44-27-10.1(b), as applicable.

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     (d) The dollar amount adopted through the rules and regulations that municipalities will be

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required to use for commercial renewable-energy systems shall be based on the alternating current

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(AC) nameplate capacity of the renewable-energy resource.

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     (e) Any renewable-energy resource projects that have executed interconnection service

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agreements with the electric-distribution company as of December 31, 2016, shall not be subject to

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the rules developed under subsection (c) and shall maintain the tax status applicable before the rules

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are adopted, unless otherwise agreed pursuant to § 44-3-9(a).

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     44-5-12. Assessment at full and fair cash value.

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     (a) All real property subject to taxation shall be assessed at its full and fair cash value, as

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of December 31 in the year of the last update or revaluation, or at a uniform percentage thereof, not

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to exceed one hundred percent (100%), to be determined by the assessors in each town or city;

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provided, that:

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     (1) Any residential property encumbered by a covenant recorded in the land records in

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favor of a governmental unit or Rhode Island housing and mortgage finance corporation restricting

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either or both the rents that may be charged or the incomes of the occupants shall be assessed and

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taxed in accordance with § 44-5-13.11;

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     (2) In assessing real estate that is classified as farmland, forest, or open space land in

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accordance with chapter 27 of this title, the assessors shall consider no factors in determining the

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full and fair cash value of the real estate other than those that relate to that use without regard to

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neighborhood land use of a more intensive nature;

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     (3) Warwick. The city council of the city of Warwick is authorized to provide, by

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ordinance, that the owner of any dwelling of one to three (3) family units in the city of Warwick

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who makes any improvements or additions on his or her principal place of residence in the amount

 

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up to fifteen thousand dollars ($15,000), as may be determined by the tax assessor of the city of

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Warwick, is exempt from reassessment of property taxes on the improvement or addition until the

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next general citywide reevaluation of property values by the tax assessor. For the purposes of this

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section, "residence" is defined as voting address. This exemption does not apply to any commercial

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structure. The property owner shall supply all necessary plans to the building official for the

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improvements or addition and shall pay all requisite building and other permitting fees as now are

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required by law; and

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     (4) Central Falls. The city council of the city of Central Falls is authorized to provide, by

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ordinance, that the owner of any dwelling of one to eight (8) units who makes any improvements

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or additions to his or her residential or rental property in an amount not to exceed twenty-five

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thousand dollars ($25,000), as determined by the tax assessor of the city of Central Falls, is exempt

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from reassessment of property taxes on the improvement or addition until the next general citywide

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reevaluation of property values by the tax assessor. The property owner shall supply all necessary

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plans to the building official for the improvements or additions and shall pay all requisite building

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and other permitting fees as are now required by law.

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     (5) Tangible property shall be assessed according to the asset classification table as defined

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in § 44-5-12.1. Renewable energy resources shall only be taxed as tangible property under § 44-5-

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3(c) and the real property on which they are located shall not be reclassified, revalued or reassessed

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due to the presence of renewable energy resources, excepting only reclassification of farmland as

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addressed in § 44-27-10.1. Subject to the aforementioned exception for farmland, all assessments

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of real property with renewable energy resources thereon shall revert to the last assessed value

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immediately prior to the renewable developer's purchasing, leasing, securing an option to purchase

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or lease, or otherwise acquiring any interest in the real property. However, notwithstanding the

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above, but without any limitation on taxpayer rights under § 44-5-26, no municipality shall be liable

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or otherwise responsible for any rebates, refunds, or any other reimbursements for taxes previously

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collected for real property with renewable energy resources thereupon.

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     (6) Provided, however, that, for taxes levied after December 31, 2015, new construction on

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development property is exempt from the assessment of taxes under this chapter at the full and fair

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cash value of the improvements, as long as:

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     (i) An owner of development property files an affidavit claiming the exemption with the

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local tax assessor by December 31 each year; and

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     (ii) The assessor shall then determine if the real property on which new construction is

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located is development property. If the real property is development property, the assessor shall

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exempt the new construction located on that development property from the collection of taxes on

 

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improvements, until such time as the real property no longer qualifies as development property, as

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defined herein.

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     For the purposes of this section, "development property" means: (A) Real property on

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which a single-family residential dwelling or residential condominium is situated and said single-

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family residential dwelling or residential condominium unit is not occupied, has never been

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occupied, is not under contract, and is on the market for sale; or (B) Improvements and/or

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rehabilitation of single-family residential dwellings or residential condominiums that the owner of

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such development property purchased out of a foreclosure sale, auction, or from a bank, and which

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property is not occupied. Such property described in subsection (a)(6)(ii) of this section shall

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continue to be taxed at the assessed value at the time of purchase until such time as such property

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is sold or occupied and no longer qualifies as development property. As to residential

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condominiums, this exemption shall not affect taxes on the common areas and facilities as set forth

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in § 34-36-27. In no circumstance shall such designation as development property extend beyond

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two (2) tax years and a qualification as a development property shall only apply to property that

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applies for, or receives, construction permits after July 1, 2015. Further, the exemptions set forth

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in this section shall not apply to land.

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     (b) Municipalities shall make available to every land owner whose property is taxed under

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the provisions of this section a document that may be signed before a notary public containing

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language to the effect that they are aware of the additional taxes imposed by the provisions of § 44-

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5-39 in the event that they use land classified as farm, forest, or open space land for another purpose.

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     (c) Pursuant to the provisions of § 44-3-29.1, all wholesale and retail inventory subject to

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taxation is assessed at its full and fair cash value, or at a uniform percentage of its value, not to

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exceed one hundred percent (100%), for fiscal year 1999, by the assessors in each town and city.

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Once the fiscal year 1999 value of the inventory has been assessed, this value shall not increase.

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The phase-out rate schedule established in § 44-3-29.1(d) applies to this fixed value in each year

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of the phase out.

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     SECTION 2. Section 44-27-10.1 of the General Laws in Chapter 44-27 entitled "Taxation

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of Farm, Forest, and Open Space Land" is hereby amended to read as follows:

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     44-27-10.1. Land withdrawn from classification for commercial renewable-energy

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production -- Effect on obligation and the land use change tax.

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     (a) Farmlands classified in the farm, forest, or open-space program in chapter 27 of title 44

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shall not be subject to a land use change tax if the landowner converts no more than twenty percent

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(20%) of the total acreage of land that is actively devoted to agricultural or horticultural use to

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install a renewable-energy system. Any acreage used for a renewable-energy system that is

 

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designated for dual use under subsection (c) of this section shall not be included in the calculation

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of the twenty percent (20%) restriction. For purposes of this section, land that is actively devoted

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to agricultural or horticultural use shall be defined by rules and regulations established by the

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department of environmental management in consultation with the office of energy resources and

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shall include, at a minimum, any land that is actively devoted to agricultural or horticultural use

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that was previously used to install a renewable-energy system. Those rules shall also define

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renewable-energy system to include, at a minimum, any buffers, access roads, and other supporting

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infrastructure associated with the generation of renewable energy.

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     (b) The tax assessor shall only withdraw from farmland classification the actual acreage of

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the farmland used for a renewable-energy system that is not concurrently used as farmland. The

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rest of the farmland shall remain eligible as long as it still meets the program qualification criteria.

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This reclassification of farmlands shall not be considered an exception to the tax treatment for

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renewable-energy systems prescribed by § 44-5-3(c) and reclassified farmland shall only be

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reclassified, revalued and taxed to the classification and tax that predated the farmland

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classification.

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     (c) The dual purpose designation for installing a renewable-energy system and utilizing the

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land below and surrounding the system for agriculture purposes, shall be determined pursuant to

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rules and regulations that will be established by the department of environmental management in

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consultation with the office of energy resources. The regulations shall be adopted no later than

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December 30, 2017.

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     SECTION 3. This act shall take effect upon passage and shall apply to property assessed

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on and after December 31, 2022.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION -- LEVY AND ASSESSMENT OF LOCAL TAXES

***

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     This act would require cities and towns to assess renewable energy resources to be taxed

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as tangible property and the real property on which the renewable energy sources are located shall

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not be reclassified, revalued or reassessed, except farmland, which may only be reclassified if more

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than twenty percent (20%) of the total acreage of land used for agriculture is converted to be used

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as a renewable energy system.

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     This act would take effect upon passage and would apply to property assessed on and after

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December 31, 2022.

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