2005 -- S 1121

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LC03347

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2005

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A N A C T

RELATING TO JOBS GROWTH

     Introduced By: Senators J Montalbano, Walaska, Paiva-Weed, Tassoni, and Alves

     Date Introduced: May 19, 2005

     Referred To: Senate Financial, Technology, Regulatory

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 42 of the General Laws entitled "State Affairs and Government" is

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hereby amended by adding thereto the following chapter:

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     CHAPTER 64.11

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JOBS GROWTH ACT

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      42-64.11-1. Short title. -- This chapter may be cited as the "Jobs Growth Act."

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     42-64.11-2. Definitions. – As used in this chapter, unless the context clearly indicates

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otherwise:

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     (a) "Average annual current employment" means, for any test period, the average daily

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number of full-time equivalent active employee employed within the state by an eligible company

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and it affiliated entities.

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     (b) "Affiliated entity" of an eligible company means any partnership, limited liability

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company, trust or corporation having employees in the state: (i) if the eligible corporation owns at

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least fifty percent (50%) of the value of the ownership interests therein; (ii) that owns at least fifty

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percent (50%) of the value of the interests in the eligible company; or (iii) that is under common

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ownership (at the fifty percent (50%) level) with the eligible company. For this purpose, direct,

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indirect, beneficial or constructive ownership shall be considered ownership.

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     (c) "Average compensation of all employees in the state" for any test period means the

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sum of the average quarter wages for total private and government as published by the labor

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market information division of the department of labor and training for the four (4) quarters

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ending with the second quarter of the calendar year ending one year before the end of the test

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period.

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     (d) "Base employment"" means the average daily number of full-time equivalent active

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employees employed within the state by an eligible company and its affiliated entities for the

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calendar year preceding the calendar year in which the eligible company makes an initial

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application to be a certified company as provided in section 42-64.11-3.

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     (e) "Certified company" means an eligible company that has been certified by the Rhode

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Island economic development corporation as meeting the criteria set forth in subsection 42-64.11-

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3(e) for not less than three (3) consecutive years, but does not include a provisionally-certified

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company.

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     (f) "Compensation" means any income, capital gain or preference items realized by an

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employee in connection with the employee's service for an eligible company or affiliated entity

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provided that such compensation would (but for the exclusion provided by section 42-64.11-4) be

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includible in gross income or alternative minimum income for purposes of the Rhode Island

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personal income tax.

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     (g) "Credit year" means any calendar year for which an eligible company has been

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certified under section 42-64.11-3.

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     (h) "De minimus services" means services performed by an employee in the state which

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does not aggregate more than two percent (2%) of the total services (based on hours or days of

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employment) performed by the employee for an eligible company and all of its affiliated entities

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during a calendar year or shorter relevant period.

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     (i) "Eligible company" means any corporation, state bank, federal savings bank, trust

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company, national banking association, bank holding company, loan and investment company,

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mutual savings bank, credit union, building and loan association, insurance company, investment

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company, broker-dealer company, manufacturing company, telecommunications company or

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surety company or an affiliated entity of any of the foregoing. An eligible company does not

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have to be in existence, be qualified to do business in the state or have any employees in this state

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at the time its base employment is determined.

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     (j) "Eligible employee" means any full-time active employee first performing services in

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the state for an eligible company or an affiliate entity after the date the eligible company files its

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initial application for certification; provided, however, that for any eligible company filing its

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initial application in 2005, "eligible employee" means any full-time active employee first

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performing services in the state after June 1, 2005. An employee shall be considered as first

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performing services in the state on a date but only if the employee performs services in the state

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on such date, but did not previously during that calendar year or the immediately preceding

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calendar-year perform services (other than de minimus services) in the state as an employee of

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the eligible company or any affiliated entity. A certified company (but not a provisionally-

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certified company) may elect to treat as eligible employees all employees in the state without

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regard to the date they first performed services in the state.

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     (k) "Full-time active employee" means any employee of an eligible company or an

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affiliate entity who works a minimum of thirty (30) hours per week within the state, with benefits

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typical to the industry of the employer.

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     (l) "New employment" for each test period (for an eligible company seeking qualification

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as a provisionally-certified company) or credit year (for a certified company) means the amount

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of average annual current employment for the test period or credit year (as the case may be)

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minus the amount of base employment, but in no event less than zero; provided, however, no

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eligible company is permitted to transfer, assign or hire employees who are already employed

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within the state by such eligible company from itself or any affiliated entity or utilize any other

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artifice or device for the purpose of artificially creating eligible employees in order to become a

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certified company.

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     (m) "New employment payroll" means the total compensation paid by an employer that is

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a participating company and its affiliated entities times a fraction, the numerator of which is its

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new employment and the denominator of which is its total number of full-time active employees

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employed in Rhode Island.

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     (n) "Participating company" means a provisionally-certified company or a certified

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company.

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     (o) "Performance-based compensation" means any compensation paid by a participating

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company to an eligible employee in consideration of the achievement of individual or company

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performance-based goals, including, for example, but without limitation, bonuses, and income

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derived from employer-granted stock options. Performance-based compensation does not include

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regular fixed periodic compensation, overtime pay, and fringe benefits (including distributions

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from qualified retirement plans) or other compensation paid on the basis of time or longevity and

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without regard to goal-based performance.

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     (p) "Provisionally-certified company" means any company that has been certified under

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section 42-64.11-3 for fewer than three (3) consecutive years.

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     (q) "State" means the State of Rhode Island and Providence Plantations.

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     (r) "Test period" means, at the election of an eligible company as indicated in an updated

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application under subsection 42-64.11-3(b), either the calendar-year period last ending before the

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filing of that updated application or the two (2) calendar-year period last ending before the filing

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of that updated application.

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     42-64.11-3. Certification. -- (a) An eligible company may submit an initial application

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for certification with the Rhode Island economic development corporation. The application shall

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specify the name of the eligible company, its affiliated entities, and its base employment.

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      (b) To qualify as a provisionally-certified company for a calendar-year, an eligible

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company shall file with the Rhode Island economic development corporation by the January 31

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immediately following such calendar-year an updated application listing, the following for the

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test period ending within the calendar-year:

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      (1) the eligible company and its affiliated entities;

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      (2) their adjusted current employment;

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      (3) the number of eligible employees and the aggregate compensation paid thereto; and

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(4) such other information as the Rhode Island economic development corporation

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determines is reasonably necessary.

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      (c) To qualify as a certified company for a calendar year, an eligible company that was a

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provisionally-certified company for both of the two (2) preceding calendar-years shall file with

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the Rhode Island economic development corporation by the January 31 immediately following

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such calendar year an updated application listing, the following for the test period ending within

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the calendar year:

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     (1) the eligible company and its affiliated entities;

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     (2) their average annual current employment;

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     (3) the number of eligible employees and the aggregate compensation paid thereto; and

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      (4) such other information as the Rhode Island economic development corporation

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determines is reasonably necessary.

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     Once an eligible company has become a certified company, that qualification shall

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continue indefinitely and the certification requirements of subsection (e) shall not apply.

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      (d) For each affiliated entity not included in the list of affiliated entities for the last prior

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updated application (or, if none, the initial application), the updated application shall also indicate

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the base employment of such affiliated entity.

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      (e) Within thirty (30) day after receiving an updated application, the Rhode Island

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economic development corporation shall verify the information submitted with the department of

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labor and training and/or the division of taxation and shall declare the eligible company to be a

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provisionally-certified company or a certified company, as the case may be, if the updated

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application demonstrates:

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      (1) that an eligible company and its affiliated entities have established for the test period

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new employment equal to not less than one hundred (100) full-time active employees and not less

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than ten million dollars ($10,000,000) in new employment payroll; and

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      (2) that the average annual compensation for eligible employees is not less than one

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hundred twenty-five percent (125%) of the average compensation of all employees in the state. A

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declaration that an eligible company is a provisionally-certified company or a certified company

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shall be valid even if made outside the thirty (30) day period.

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      (f) A certified company may abandon its certification by filing written notice of its intent

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to abandon with the Rhode Island economic development corporation and the division of taxation

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at least thirty (30) days before the end of its credit year and such abandonment shall become

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effective for taxable years beginning after the end of the credit year for the certified company and

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all of its affiliated entities.

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      (g) An eligible company that has previously filed an initial application may file a new

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initial application. In such event, the prior application should be of no further effect and the

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calendar year under which the new application is filed shall not be a credit year.

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      42-64.11-4. Partial exclusion of performance-based compensation. -- (a) Fifty percent

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(50%) of the performance-based compensation realized by an eligible employee in any credit year

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is excludable from gross income and from alternative minimum income for purposes of the

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personal income tax.

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      (b) The exclusion provided under subsection (a) of this section shall be taken into account

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in determining withholding under section 44-30-71 to be taken by a certified company with

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respect to performance-based compensation paid to eligible employees.

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      42-64.11-5. Tax on employing unit. – For any taxable year beginning in a credit year,

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each employing unit (within the meaning of subsection 28-42-3(16)) that is a participating

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company or one of its affiliated entities shall each pay a tax equal to five percent (5%) of the

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aggregate performance-based compensation paid to its eligible employees for the credit year. The

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tax shall be reported at the same time as tax on the employing unit may be due to be reported

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under chapter 44-11, 44-13, 44-13.1, 44-14, or 44-17, or, if the employing unit is not taxable

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under those chapters, at such time as the tax administrator may prescribe. The tax imposed by this

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section shall not be offset by credits provided under those sections or any other provision of law.

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      42-64.11-6. Regulatory authority. -- (a) The Rhode Island economic development

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corporation may promulgate such regulations as it deems necessary and appropriate to carry out

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its functions under this chapter.

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      (b) The tax administrator may adopt such regulations as he or she deems necessary and

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appropriate in connection with the taxes imposed and credits granted herein. Appropriate

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adjustments shall be made for short taxable years.

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      (c) All submissions made by an eligible company hereunder shall be subscribed under

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penalties of perjury.

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     (d) By filing an application, the eligible company authorizes the department of labor and

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training and the division of taxation to disclose to the Rhode Island economic development

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corporation such data relating to the eligible company and its affiliated entities as may be

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necessary to verify the information in the initial application or an updated application.

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Information submitted by an eligible company under this chapter to the Rhode Island economic

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development corporation, the division of taxation, or the department of labor and training shall be

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deemed tax return information exempt from disclosure under section 38-2-2(O) (relating to tax

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returns).

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     SECTION 2. This act shall take effect upon passage.

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LC03347

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO JOBS GROWTH

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     This act would allow employees of electing qualified companies to exclude 50% of their

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performance-based compensation from their Rhode Island gross income for purposes of the

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personal income tax. By electing to participate in the program, the company would be required to

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pay a tax equal to 5% of the performance-based compensation paid by the company. During the

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first three years of a company's qualification, only employees hired or brought to the state after

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the date the company files notice of its intent to qualify would be eligible for the exclusion.

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     This act would take effect upon passage.

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LC03347

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