Title 44
Taxation

Chapter 11
Business Corporation Tax

§ 44-11-4.1. Combined reporting. [Effective until January 1, 2025.]

(a) For tax years beginning on or after January 1, 2015, each C corporation which is part of an unitary business with one or more other corporations must file a return, in a manner prescribed by the tax administrator, for the combined group containing the combined income, determined under this section, of the combined group.

(b) An affiliated group of C corporations, as defined in section 1504 of the Internal Revenue Code, may elect to be treated as a combined group with respect to the combined reporting requirement imposed by § 44-11-4.1(a) for the taxable year in lieu of an unitary business group. The election shall be upon the condition that all C corporations which at any time during the taxable year have been members of the affiliated group consent to be included in such group. The filing of a consolidated return for the combined group shall be considered as such consent. Such election may not be revoked in less than five (5) years unless approved by the tax administrator.

(c) The use of a combined report does not disregard the separate identities of the taxpayer members of the combined group. Each taxpayer member is responsible for tax based on its taxable income or loss apportioned to this state.

(d) Members of a combined group shall exclude as a member and disregard the income and apportionment factors of any corporation not incorporated in the United States (a “non US corporation”) if the sales factors outside the United States is eighty percent (80%) or more. If a non US corporation is includible as a member in the combined group, to the extent that such non US corporation’s income is subject to the provisions of a federal income tax treaty, such income is not includible in the combined group net income. Such member shall also not include in the combined report any expenses or apportionment factors attributable to income that is subject to the provisions of a federal income tax treaty. For purposes of this chapter, “federal income tax treaty” means a comprehensive income tax treaty between the United States and a foreign jurisdiction, other than a foreign jurisdiction which is defined as a tax haven; provided, however, that if the tax administrator determines that a combined group member non US corporation is organized in a tax haven that has a federal income treaty with the United States, its income subject to a federal income tax treaty, and any expenses or apportionment factors attributable to such income, shall not be included in the combined group net income or combined report if: (i) the transactions conducted between such non US corporation and other members of the combined group are done on an arm’s length basis and not with the principal purpose to avoid the payment of taxes due under this chapter; or (ii) the member establishes that the inclusion of such net income in combined group net income is unreasonable.

(e) Net operating losses. A tracing protocol shall apply to net operating losses created before January l, 2015. Such net operating losses shall be allowed to offset only the income of the corporation that created the net operating loss; the net operating loss cannot be shared with other members of the combined group. No deduction is allowable for a net operating loss sustained during any taxable year in which a taxpayer was not subject to Rhode Island business corporation tax. For net operating losses created in tax years beginning on or after January 1, 2015 such loss allowed shall be the same as the net operating loss deduction allowed under section 172 of the internal revenue code for the combined group, except that:

(1) Any net operating loss included in determining the deduction shall be adjusted to reflect the inclusions and exclusions from entire net income required by § 44-11-11 (a) and § 44-11-11.1;

(2) The deduction shall not include any net operating loss sustained during any taxable year in which the member was not subject to the tax imposed by this chapter; and

(3) The deduction shall not exceed the deduction for the taxable year allowable under section 172 of the internal revenue code; provided, that the deduction for a taxable year may not be carried back to any other taxable year for Rhode Island purposes but shall only be allowable on a carry forward basis for the five (5) succeeding taxable years.

(f) Tax credits and tax rate reduction.

(1) A tracing protocol shall apply to Rhode Island tax credits earned before tax years beginning on or before January 1, 2015. Such Rhode Island tax credits shall be allowed to offset only the tax liability of the corporation that earned the credits; the Rhode Island tax credits cannot be shared with other members of the combined group. Rhode Island tax credits earned in tax years beginning on or after January 1, 2015, may be applied to other members of the group.

(2) The tax rate reductions authorized under chapter 64.5 of title 42 (Jobs Development Act) and chapter 64.14 of title 42 (I-195 Redevelopment Act of 2011) shall be allowed against the net income of the entire combined group.

(g) The tax administrator shall prescribe and amend, from time to time, rules and regulations as he or she may deem necessary in order that the tax liability of any group of corporations filing as a combined group and each corporation in the combined group, liable to taxation under this chapter, may be determined, computed, assessed, collected, and adjusted in a manner as to clearly reflect the combined income of the combined group and the individual income of each member of the combined group. Such rules and regulations, shall include but are not be limited to, issues such as the inclusion or exclusion of a corporation in the combined group, the characterization and sourcing of each member’s income, and whether certain common activities constitute the conduct of a unitary business.

(h) The tax administrator shall on or before March 15, 2018, based upon the actual tax filings of companies under this act for a two year period, submit a report to the chairperson of the house finance committee and the senate finance committee and the house fiscal advisor and the senate fiscal advisor analyzing the policy and fiscal ramifications of the changes enacted to business corporations tax statutes, as enacted in budget article 12 of the Fiscal Year 2015 appropriations act. The report shall include but not be limited to the impact upon categories of business, size of business and similar information as contained in § 44-11-45 [repealed], which required the original report.

§ 44-11-4.1. Combined reporting. [Effective January 1, 2025.]

(a) For tax years beginning on or after January 1, 2015, each C corporation which is part of an unitary business with one or more other corporations must file a return, in a manner prescribed by the tax administrator, for the combined group containing the combined income, determined under this section, of the combined group.

(b) An affiliated group of C corporations, as defined in section 1504 of the Internal Revenue Code, may elect to be treated as a combined group with respect to the combined reporting requirement imposed by subsection (a) of this section for the taxable year in lieu of an unitary business group. The election shall be upon the condition that all C corporations which at any time during the taxable year have been members of the affiliated group consent to be included in such group. The filing of a consolidated return for the combined group shall be considered as such consent. Such election may not be revoked in less than five (5) years unless approved by the tax administrator.

(c) The use of a combined report does not disregard the separate identities of the taxpayer members of the combined group. Each taxpayer member is responsible for tax based on its taxable income or loss apportioned to this state.

(d) Members of a combined group shall exclude as a member and disregard the income and apportionment factors of any corporation not incorporated in the United States (a “non-U.S. corporation”) if the sales factors outside the United States is eighty percent (80%) or more. If a non-U.S. corporation is includible as a member in the combined group, to the extent that such non-U.S. corporation’s income is subject to the provisions of a federal income tax treaty, such income is not includible in the combined group net income. Such member shall also not include in the combined report any expenses or apportionment factors attributable to income that is subject to the provisions of a federal income tax treaty. For purposes of this chapter, “federal income tax treaty” means a comprehensive income tax treaty between the United States and a foreign jurisdiction, other than a foreign jurisdiction which is defined as a tax haven; provided, however, that if the tax administrator determines that a combined group member non-U.S. corporation is organized in a tax haven that has a federal income treaty with the United States, its income subject to a federal income tax treaty, and any expenses or apportionment factors attributable to such income, shall not be included in the combined group net income or combined report if: (i) The transactions conducted between such non-U.S. corporation and other members of the combined group are done on an arm’s length basis and not with the principal purpose to avoid the payment of taxes due under this chapter; or (ii) The member establishes that the inclusion of such net income in combined group net income is unreasonable.

(e) Net operating losses. A tracing protocol shall apply to net operating losses created before January l, 2015. Such net operating losses shall be allowed to offset only the income of the corporation that created the net operating loss; the net operating loss cannot be shared with other members of the combined group. No deduction is allowable for a net operating loss sustained during any taxable year in which a taxpayer was not subject to Rhode Island business corporation tax. For net operating losses created in tax years beginning on or after January 1, 2015, such loss allowed shall be the same as the net operating loss deduction allowed under section 172 of the Internal Revenue Code for the combined group, except that:

(1) Any net operating loss included in determining the deduction shall be adjusted to reflect the inclusions and exclusions from entire net income required by §§ 44-11-11(a) and 44-11-11.1;

(2) The deduction shall not include any net operating loss sustained during any taxable year in which the member was not subject to the tax imposed by this chapter; and

(3) Limitation on 26 U.S.C. § 172 deduction.

(i) The deduction shall not exceed the deduction for the taxable year allowable under section 172 of the Internal Revenue Code; provided, that the deduction for a taxable year may not be carried back to any other taxable year for Rhode Island purposes but shall only be allowable on a carry forward basis for the five (5) succeeding taxable years; and

(ii) For any taxable year beginning on or after January 1, 2025, the deduction shall not exceed the deduction for the taxable year allowable under 26 U.S.C. § 172; provided that, the deduction for a taxable year may not be carried back to any other taxable year for Rhode Island purposes, but shall only be allowable on a carry forward basis for the twenty (20) succeeding taxable years.

(f) Tax credits and tax rate reduction.

(1) A tracing protocol shall apply to Rhode Island tax credits earned before tax years beginning on or before January 1, 2015. Such Rhode Island tax credits shall be allowed to offset only the tax liability of the corporation that earned the credits; the Rhode Island tax credits cannot be shared with other members of the combined group. Rhode Island tax credits earned in tax years beginning on or after January 1, 2015, may be applied to other members of the group.

(2) The tax rate reductions authorized under chapter 64.5 of title 42 (Jobs Development Act) and chapter 64.14 of title 42 (I-195 Redevelopment Act of 2011) shall be allowed against the net income of the entire combined group.

(g) The tax administrator shall prescribe and amend, from time to time, rules and regulations as the tax administrator may deem necessary in order that the tax liability of any group of corporations filing as a combined group and each corporation in the combined group, liable to taxation under this chapter, may be determined, computed, assessed, collected, and adjusted in a manner as to clearly reflect the combined income of the combined group and the individual income of each member of the combined group. Such rules and regulations shall include, but are not limited to, issues such as the inclusion or exclusion of a corporation in the combined group, the characterization and sourcing of each member’s income, and whether certain common activities constitute the conduct of a unitary business.

(h) The tax administrator shall on or before March 15, 2018, based upon the actual tax filings of companies under this act for a two-year period, submit a report to the chairperson of the house finance committee and the senate finance committee and the house fiscal advisor and the senate fiscal advisor analyzing the policy and fiscal ramifications of the changes enacted to business corporations tax statutes, as enacted in budget article 12 of the Fiscal Year 2015 appropriations act. The report shall include but not be limited to the impact upon categories of business, size of business, and similar information as contained in § 44-11-45 [repealed], which required the original report.