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     ARTICLE 16 SUBSTITUTE A AS AMENDED

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     RELATING TO TAXATION

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      SECTION 1. Chapter 27-3 of the General Laws entitled “Agents, Brokers, and Solicitors”

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is hereby amended by adding thereto the following section:

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     27-3-38.1. Insurance independently procured – Duty to report and pay tax. –

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(a) Each insured in this state who procures or continues or renews insurance with an

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insurer not licensed to do an insurance business in this state on properties, risks or

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exposures located or to be performed in whole or in part in this state, other than insurance

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procured through a surplus lines licensee, shall, within thirty (30) days, after the date the

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insurance was so procured, continued or renewed, file a written report with the tax

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administrator, upon forms prescribed by the tax administrator, showing the name and

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address of the insured or insured’s, name and address of the insurer, the subject of the

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insurance, a general description of the coverage, the amount of premium currently

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charged and additional pertinent information reasonably requested by the tax

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administrator.

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     For the purposes of this subsection, properties, risks or exposures only partially

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located or to be performed in this state, which are covered under a multi-state policy

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placed by a surplus lines licensee in another state, shall be deemed to be insurance

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independently procured unless the insurer is licensed to do business in this state.

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     (b) Gross premiums charged for the insurance, less any return premiums, are

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subject to a tax at the rate of three percent (3%). At the time of filing the report required

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in subsection (a) of this section, the insured shall file with the tax administrator, in the

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form that he or she may prescribe, a return under oath or affirmation containing

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information that may be deemed necessary for the determination of the tax imposed by

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this section. The insured shall at the same time pay the tax due to the tax administrator.

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     (c) If an independently procured policy covers properties, risks or exposures only

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partially located or to be performed in this state, the tax payable by the insured shall be

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computed on the portion of the premium properly attributable to the properties, risks or

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exposures located or to be performed in this state.

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     (d) This section does not abrogate or modify Rhode Island general laws section

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27-16-1 et seq. (Unauthorized Insurance Business), or any other provision of title 27.

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     SECTION 2. Section 44-22-1.1 of the General Laws in Chapter 44-22 entitled

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“Estate and Transfer Taxes - Liability and Computation” is hereby amended to read as

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follows:

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     44-22-1.1. Tax on net estate of decedent.--(a)(1) For decedents whose death occurs on

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or after January 1, 1992, but prior to January 1, 2002, a tax is imposed upon the transfer of the net

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estate of every resident or nonresident decedent as a tax upon the right to transfer. The tax is a

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sum equal to the maximum credit for state death taxes allowed by 26 U.S.C. section 2011.

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     (2) For decedents whose death occurs on or after January 1, 2002, a tax is imposed upon

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the transfer of the net estate of every resident or nonresident decedent as a tax upon the right to

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transfer. The tax is a sum equal to the maximum credit for state death taxes allowed by 26 U.S.C.

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Section 2011 as it was in effect as of January 1, 2001, provided, however, any scheduled increase

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in the unified credit provided in 26 U.S.C. Section 2010 in effect on January 1, 2001, or

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thereafter, shall not apply.

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     (b) If the decedent’s estate contains property having a tax situs not within the state, then

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the tax determined by this section is reduced to an amount determined by multiplying the tax by a

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fraction whose numerator is the gross estate excluding all property having a tax situs not within

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the state at the decedent’s death and whose denominator is the gross estate. In determining the

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fraction, no deductions are considered and the gross estate is not reduced by a mortgage or other

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indebtedness for which the decedent’s estate is not liable.

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     (c)(1) The terms “gross estate” or “federal gross estate” used in this chapter or chapter 23

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of this title has the same meaning as when used in a comparable context in the laws of the United

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States, unless a different meaning is clearly required by the provisions of this chapter or chapter

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23 of this title. Any reference in this chapter or chapter 23 of this title to the Internal Revenue

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Code or other laws of the United States means the Internal Revenue Code of 1954, 26 U.S.C. § 1

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et seq.

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     (2) For decedents whose death occurs on or after January 1, 2002 the terms “gross estate”

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or “federal gross estate” used in this chapter or chapter 23 of this title has the same meaning as

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when used in a comparable context in the laws of the United States, unless a different meaning is

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clearly required by the provisions of this chapter or chapter 23 of this title. Any reference in this

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chapter or chapter 23 of this title to the Internal Revenue Code or other laws of the United States

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means the Internal Revenue Code of 1954, 26 U.S.C. Section 1 et seq., as they were in effect as

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of January 1, 2001.

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     (d) All values are as finally determined for federal estate tax purposes.

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     (e) Property has a tax situs within the state of Rhode Island:

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     (1) If it is real estate or tangible personal property and has actual situs within the state of

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Rhode Island; or

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     (2) If it is intangible personal property and the decedent was a resident.

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     SECTION 3. Title 44 of the General Laws entitled “Taxation” is hereby amended by

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adding the following chapter:

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     CHAPTER 60

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     RELATING TO DEPRECIATION OF ASSETS AND NET OPERATING LOSS

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DEDUCTION

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     44-60-1. Depreciation of assets. – (a) For purposes of depreciation of assets under

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chapters 11, 14 and 30 of title 44, the bonus depreciation provided by the Job Creation and

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Worker Assistance Act of 2002 (P.L. 107-147) for federal tax purposes shall not be allowed for

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Rhode Island tax purposes. In the year that such assets are placed in service and in all subsequent

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years, depreciation for Rhode Island tax purposes shall be allowed on such assets as it would have

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been computed prior to the enactment of the Job Creation and Worker Assistance Act of 2002.

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     (b) The gain resulting from any subsequent disposition of such asset(s) shall be computed

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using a basis consistent with the Rhode Island depreciation allowed under subsection (a).

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     SECTION 4. Chapter 30 of Title 44 of the General Laws entitled “Personal Income Tax”

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is hereby amended by adding the following section:

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     44-30-2.8. Net operating loss deduction. – For purposes of net operating losses under

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chapter 30 of title 44, the five (5) year carryback provision provided by the Job Creation and

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Worker Assistance Act of 2002 (P.L. 107-147) for federal tax purposes shall not be allowed for

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Rhode Island tax purposes.

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     SECTION 5. In the event that the United States Congress passes legislation that provides

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this state with full federal reimbursement for the tax losses incurred by the provisions of the Job

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Creation and Worker Assistance Act of 2002 (P.L. 107-147), relating to bonus depreciation

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and/or five (5) year carryback of net operating losses, then the respective chapter and/or section

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of this article to which the reimbursement applied shall be repealed in its entirety.

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     SECTION 6. Chapter 44-30 of the General Laws entitled “Personal Income Tax” is

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hereby amended by adding thereto the following section:

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     44-30-87.1. Net operating loss – Limitation. – A net operating loss deduction shall be

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allowed which shall be the same as the net operating loss deduction allowed under section 172 of

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the Internal Revenue Code [26 U.S.C.], except that (1) any net operating loss included in

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determining such deduction shall be adjusted to reflect the modifications increasing and

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decreasing adjusted gross income required by sections 44-30-12 and 44-30-32; (2) such deduction

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shall not include any net operating loss sustained during any taxable year beginning in which the

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taxpayer was not subject to the tax imposed by this chapter; and (3) such deduction shall not

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exceed the deduction for the taxable year allowable under section 172 of the Internal Revenue

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Code [26 U.S.C.], provided, however, notwithstanding any other provision of law such deduction

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for a taxable year may not be carried back to any other taxable year for Rhode Island purposes but

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shall only be allowable on a carry forward basis for the number of succeeding taxable years

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allowed under section 172 of the Internal Revenue Code [26 U.S.C.].

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      SECTION 7. Section 44-18-7 of the General Laws in Chapter 44-18 entitled “Sales and

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Use Taxes — Liability and Computation” is hereby amended to read as follows:

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     44187. Additional definitions.(a)"Hotel" means every building or other structure

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kept, used, maintained, advertised as or held out to the public to be a place where living quarters

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are supplied for pay to transient or permanent guests and tenants and includes a motel.

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     (b) "Living quarters" means sleeping rooms, sleeping or housekeeping accommodations,

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or any other room or accommodation in any part of the hotel, rooming house or tourist camp

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which is available for or rented out for hire in the lodging of guests.

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     (c) "Rooming house" means every house, boat, vehicle, motor court or other structure

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kept, used, maintained, advertised or held out to the public to be a place where living quarters are

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supplied for pay to transient or permanent guests or tenants, whether in one or adjoining

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buildings.

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     (d) "Sales" means and includes:

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     (1) Any transfer of title or possession, exchange, barter, lease, or rental, conditional or

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otherwise, in any manner or by any means of tangible personal property for a consideration.

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"Transfer of possession," "lease," or "rental" includes transactions found by the tax administrator

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to be in lieu of a transfer of title, exchange, or barter.

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     (2) The producing, fabricating, processing, printing, or imprinting of tangible personal

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property for a consideration for consumers who furnish either directly or indirectly the materials

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used in the producing, fabricating, processing, printing, or imprinting.

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     (3) The furnishing and distributing of tangible personal property for a consideration by

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social, athletic, and similar clubs and fraternal organizations to their members or others.

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     (4) The furnishing, preparing, or serving for a consideration of food, meals, or drinks,

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including any cover, minimum, entertainment, or other charge in connection therewith.

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     (5) A transaction whereby the possession of tangible personal property is transferred but

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the seller retains the title as security for the payment of the price.

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     (6) Any withdrawal, except a withdrawal pursuant to a transaction in foreign or interstate

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commerce, of tangible personal property from the place where it is located for delivery to a point

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in this state for the purpose of the transfer of title or possession, exchange, barter, lease, or rental,

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conditional or otherwise, in any manner or by any means whatsoever, of the property for a

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consideration.

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     (7) A transfer for a consideration of the title or possession of tangible personal property

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which has been produced, fabricated, or printed to the special order of the customer, or any

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publication.

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     (8) The furnishing and distributing of electricity, natural gas, artificial gas, steam,

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refrigeration, and water.

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     (9)(a) The furnishing for consideration of telecommunications service which includes

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local exchange service, intrastate toll service, interstate and international toll service, including

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cellular mobile telephone or telecommunications service, specialized mobile radio and pagers and

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paging service including any form of mobile twoway communication and including the

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furnishing, rental or leasing of all equipment or services pertaining or incidental thereto, provided

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such service is: rendered in its entirety within this state, originated in this state and terminated in

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another state or a foreign country and with respect to which such service is charged to a telephone

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number, customer or account located in this state or to the account of any transmission instrument

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in this state, originated in another state or a foreign country and terminated in this state and is

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charged to a telephone number, customer or account located in this state at which such service is

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terminated, or to the account of any transmission instrument in this state at which such service is

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terminated, provided, however, that such service shall not include receipts except as otherwise

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provided in sections 44188 and 441812. Telecommunications service shall not include service

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rendered using a prepaid telephone calling arrangement.

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     (b) Notwithstanding the provisions of subsection (a), in accordance with the Mobile

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Telecommunications Sourcing Act (4 USC 116-126), subject to the specific exemptions described

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in 4 USC 116(c), and the exemptions provided in R.I. General Laws sections 44-18-8 and 44-18-

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12, mobile telecommunications services that are deemed to be provided by the customer’s home

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service provider are subject to tax under this chapter if the customer’s place of primary use is in

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this state regardless of where the mobile telecommunications services originate, terminate or pass

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through. Mobile telecommunications services provided to a customer, the charges for which are

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billed by or for the customer’s home service provider, shall be deemed to be provided by the

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customer’s home service provider. For the purposes of this subsection:

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      (1) “Customer” means either (a) a person or entity that contracts with a home service

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provider for mobile telecommunications services or (b) if the end user of mobile

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telecommunications services is not the contracting party, the end user of the mobile

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telecommunication service, but this clause applies only for the purpose of determining the place

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of primary use. Customer does not include a reseller of mobile telecommunications services or a

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serving carrier that is under an arrangement to serve the customer outside the home service

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provider’s licensed service area.

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     (2) “Home service provider” means a facilities-based carrier or reseller with which the

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customer contracts for the provision of mobile telecommunications services.

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     (3) “Mobile telecommunications service” means commercial mobile radio service as

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defined in section 20.3 of title 47 of the Code of Federal Regulations in effect on June 1, 1999.

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     (4) “Place of primary use” means the street address representative of where the

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customer’s use of the mobile telecommunications service primarily occurs, which must be (a) the

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residential street address or the primary business street address of the customer; and (b) within the

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licensed service area of the home service provider.

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     (c) All other definitions and provisions of the Mobile Telecommunications Act as

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provided in Title 4, Sections 116-126 of the United States Code are adopted.

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     (10) The furnishing of service for transmission of messages by telegraph, cable or radio

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and the furnishing of community antenna television subscription television and cable television

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services.

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     (11) The rental of living quarters in any hotel, rooming house or tourist camp.

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     (12) The transfer for consideration of prepaid telephone calling arrangements and the

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recharge of prepaid telephone calling arrangements. If the transfer or recharge of a prepaid

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telephone calling arrangement does not take place at a vendor's place of business, the transfer or

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recharge shall be conclusively determined to take place at the customer's shipping address, or if

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there is no item shipped, at the customer's billing address or the location associated with the

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customer's mobile telephone number. "Prepaid telephone calling arrangement" means and

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includes a prepaid telephone calling card and/or the right to exclusively purchase

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telecommunications services, that must be paid for in advance, that enables the origination of

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calls using an access number and/or authorization code, whether manually or electronically

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dialed.

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     (e) "Tourist camp" means a place where tents or tent houses, or camp cottages, or cabins

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or other structures are located and offered to the public or any segment thereof for human

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habitation.

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     SECTION 8. Section 44-13-10 of the General Laws in Chapter 44-13 entitled “Public

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Service Corporation Tax” is hereby amended to read as follows:

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     44-13-10. Apportionment of earnings from business partially within state.--In the

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case of every corporation carrying on business both within and without this state its entire gross

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earnings from its operation for the preceding calendar year, or for the portion of such year that

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such corporation has carried on business within this state, shall be apportioned to this state as

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follows:

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     (1) In the case of an express corporation carrying on its business on steamboats, steam or

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electric railroads, or street railways, and in the case of a corporation the principal business of

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which is a steamboat or ferryboat business as a common carrier, the total amount of gross

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earnings from all sources within this state for the calendar year or portion thereof next preceding;

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     (2) In the case of a common carrier steam or electric railroad or street railway corporation

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such a proportion as the total mileage of tracks operated by such corporation for steam or electric

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railroad or street railway purposes within this state, exclusive of sidings and turnouts, on

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December 31st next preceding, bears to the total mileage of such tracks then operated by said

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corporation for such purposes, both within and without this state;

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     (3) in the case of any corporation operating as a common carrier dining, sleeping, chair,

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or parlor cars, but not in the case of such a public steam or electric railroad or street railway

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corporation operating such cars as a part of or incidental to its railroad or railway business within

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this state, such a proportion as the number of miles such cars were operated in this state during

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the year ending December 31st next preceding bears to the total number of miles such cars were

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then operated for such purposes both within and without this state;

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     (4) In the case of a public service telegraph, cable, or telecommunications corporation or

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corporation which is manufacturing, selling, distributing and/or transmitting to the public currents

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of electricity to be used for light, heat, or motive power, the total amount of gross earnings within

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this state for the calendar year; provided, however, that gross earnings from providing mobile

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telecommunications services shall be apportioned to this state where the customer’s primary place

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of use, as determined in accordance with the mobile Telecommunications Sourcing Act (4 USC

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116-126), is within this state.

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     (5) In the case of a corporation the principal business of which is manufacturing, selling,

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and/or distributing to the public illuminating or heating gas or water, such a proportion as the

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total miles of mains or wires operated by such corporation within this state on December 31st next

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preceding bears to the total mileage of such mains or wires then operated by such corporation

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both within and without this state;

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     (6) In any case to which these proportions are not equitably applicable, in such proportion

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as is equitable.

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     SECTION 9. If a court of competent jurisdiction enters a final judgment on the merits

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that: (1) is based on federal law; (2) that is no longer subject to appeal; and (3) that invalidates

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Sections 116 to 126, inclusive, of Title 4 of the United States Code, then subsection 44-18-7(9)(a)

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shall apply to the sales taxation of mobile telecommunications services that are rendered on or

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after the date of entry of such judgment.

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      SECTION 10. Section 31-34.1-2 of the General Laws in Chapter 31-34.1 entitled

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"Rental Vehicle Surcharge" is hereby amended to read as follows:

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     31-34.1-2. Rental vehicle surcharge. -- (a) Each rental company shall collect, on each

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rental contract and at the time a motor vehicle is rented in this state, a surcharge equal to six

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percent (6.0%) of gross receipts per vehicle for each of the first ten (10) thirty (30) consecutive

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days. The surcharge shall be computed prior to the assessment of any applicable sales taxes, but is

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subject to the sales tax.

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      (b) The surcharge shall be included on the rental contract and collected in accordance

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with the terms of it. Fifty percent (50%) of the surcharge shall be retained by the rental company,

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and fifty percent (50%) shall be remitted to the state for deposit in the general fund. This

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remittance shall be made on a quarterly basis in accordance with a schedule adopted by the tax

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administration. Each rental company collecting and retaining surcharge amounts may reimburse

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itself from the funds retained for the total amount of motor vehicle licensing fees, title fees,

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registration fees, and transfer fees paid to the state, and for excise taxes imposed upon the rental

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companies' motor vehicles during the prior calendar year. However, rental companies shall not be

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authorized to reimburse themselves unless these fees and taxes have been assessed and paid in

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full to the state or appropriate city or town prior to any reimbursement. No reimbursement is

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allowed upon the prepayment of any fees or excise taxes.

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      (c) At a date to be set by the state tax administrator, but not later than February 15th of

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any calendar year, each rental company, in addition to filing a quarterly remittance form, shall file

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a report with the state tax administrator on a form prescribed by him or her, stating the total

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amount of motor vehicle licensing, transfer, title, and registration fees and excise taxes paid by

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the rental company in the previous year. The amount, if any, by which the surcharge collections

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exceed the amount of fees and taxes paid shall be remitted by the rental company to the state for

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deposit in the general fund.

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     SECTION 11. Sections 44-2-12, 44-20-12.1, and 44-20-13 of the General Laws

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in Chapter 44-20 entitled “Cigarette Tax” are hereby amended to read a follows:

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     44-20-12 Tax imposed on cigarettes sold. – A tax is imposed on all cigarettes

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sold or held for sale in the state by any person, the payment of the tax to be evidenced by

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stamps affixed to the packages containing the cigarettes and as required by the

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administrator. Any cigarettes on which the proper amount of tax provided for in this

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chapter has been paid, payment being evidenced by the stamp, is not subject to a further

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tax under this chapter. The tax is at the rate of fifty (50) sixty-six (66) mills for each

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cigarette. The tax shall further increase by 9 mills for each cigarette on July 1, 2003 and

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shall further increase by 5 mills for each cigarette on July 1, 2004 and each July 1

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thereafter through July 1, 2008.

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     44-20-12.1 Cigarette floor stock tax. Floor stock tax on cigarettes and stamps.

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– (a) Whenever used in this section, unless the context requires:

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     (1) "Cigarette" means and includes any cigarette as defined in § 44-20-1(2);

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     (2) "Person" means and includes each individual, firm, fiduciary, partnership,

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corporation, trust, or association however formed.

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     (b) Each person engaging in the business of selling cigarettes at wholesale or

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retail in this state pays a tax or excise to the state for the privilege of engaging in that

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business during any part of the calendar years 2001 2003 through 2008. The tax is

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measured by the number of cigarettes held by the person in this state at 12:01 a.m. on

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July 1, 2001 and is computed at the rate of fourteen and one-half (14.5) mills per

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cigarette. In calendar years 2003 through 2008, the tax shall be measured by the number

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of cigarettes held by the person in this state at 12:01 a.m. on each July 1 and is computed

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at the rate of 9 mills for each cigarette on July 1, 2003 and is computed at the rate of 5

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mills for each cigarette on July 1, 2004, and each July 1 thereafter through July 1, 2008.

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     (c) Each distributor licensed to do business in this state pursuant to this chapter

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shall pay a tax or excise to the state for the privilege of engaging in business during any

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part of the calendar years 2002 through 2008. The tax is measured by the number of

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stamps, whether affixed or to be affixed to packages of cigarettes, as required by section

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44-20-28. In calendar year 2002 the tax is measured by the number of stamps, as defined

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in subsection 44-20-1(10), whether affixed or to be affixed, held by the distributor at

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12:01 a.m. on May 1, 2002 and is computed at the rate of 16 mills per cigarette in the

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package to which the stamps are affixed or to be affixed. In calendar years 2003 through

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2008 the tax shall be measured by the number of stamps, as defined in section 44-20-

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1(10), whether affixed or to be affixed, held by the distributor at 12:01 a.m. on each July

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1, and is computed at the rate of 9 mills per cigarette in the package to which the stamps

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are affixed or to be affixed on July 1, 2003, and computed at the rate of 5 mills per

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cigarette in the package to which the stamps are affixed or to be affixed on each July 1

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thereafter through July 1, 2008.

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     (c) (d) Each person subject to the payment of the tax imposed by this section

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shall, on or before July 16, 2001 June 17, 2002, July 16, 2003 and each July 16 thereafter

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through July 16, 2008, file a return, under oath or certified under the penalties of perjury,

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with the tax administrator on forms furnished by him or her, showing the amount of

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cigarettes or stamps in that person's possession in this state at 12:01 a.m. on July 1, 2001

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May 1, 2002, July 1, 2003 and each July 1 thereafter through July 1, 2008, and the

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amount of tax due, and shall at the time of filing the return pay the tax to the tax

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administrator. Failure to obtain forms shall not be an excuse for the failure to make a

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return containing the information required by the tax administrator.

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     (d) (e) The tax administrator may prescribe rules and regulations, not inconsistent

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with law, with regard to the assessment and collection of the tax imposed by this section.

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     44-20-13 Tax imposed on unstamped cigarettes. – A tax is imposed at the rate

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of fifty (50) sixty-six (66) mills for each cigarette upon the storage or use within this state

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of any cigarettes not stamped in accordance with the provisions of this chapter in the

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possession of any person other than a licensed distributor or dealer, or a carrier for transit

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from without this state to a licensed distributor or dealer within this state. The tax shall

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further increase by 9 mills for each cigarette on July 1, 2003 and shall further increase by

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5 mills for each cigarette on July 1, 2004, and each July 1 thereafter through July 1, 2008.

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     SECTION 12. Section 44-25-1 of the General Laws in Chapter 44-25 entitled "Real

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Estate Conveyance Tax" is hereby amended to read as follows:

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     44-25-1. Tax imposed -- Payment -- Burden. -- (a) There is imposed, on each deed,

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instrument, or writing by which any lands, tenements, or other realty sold is granted, assigned,

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transferred, or conveyed to, or vested in, the purchaser or purchasers, or any other person or

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persons, by his or her or their direction, when the consideration paid exceeds one hundred dollars

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($100), a tax at the rate of one dollar and forty cents ($1.40) two dollars ($2.00) for each five

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hundred dollars ($500) or fractional part of it which is paid for the purchase of the property

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(inclusive of the value of any lien or encumbrance remaining at the time of sale), which tax is

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payable at the time of making, execution, delivery, acceptance or presenting for recording of the

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instrument. In the absence of an agreement to the contrary, the tax shall be paid by the grantor.

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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 of conveyance shall contain a statement to the effect that the consideration is such that

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no documentary stamps are required.

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      (c) The tax administrator contributes to the distressed community relief program the sum

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of thirty cents ($.30) per one dollar and forty cents ($1.40) two dollars ($2.00) of the face value of

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the stamps to be distributed pursuant to section 45-13-12. The state shall retain sixty cents ($.60)

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for state use. The balance of the tax is retained by the municipality collecting the tax.

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     SECTION 13. Sections 1, 5, and 10 of this article shall take effect upon passage.

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Section 2 of this article shall take effect upon passage and shall apply to persons who have died

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on or after January 1, 2002. Section 3 shall take effect upon passage and apply to assets acquired

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after September 10, 2001 and before September 11, 2004, and Section 4 shall take effect upon

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passage and apply to taxable years ending in 2001 and 2002. Section 6 of this article shall take

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effect upon passage and apply to losses incurred for taxable years beginning on or after January 1,

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2002. Sections 7, 8 and 9 shall take effect on August 2, 2002. Section 11 shall take effect upon

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passage and be retroactive to May 1, 2002. Section 12 shall take effect on July 1, 2002.