2012 -- S 2045

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LC00270

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO TAXATION - BUSINESS CORPORATION TAX AND FRANCHISE TAX

     Introduced By: Senators Kettle, Pinga, Ottiano, Shibley, and Algiere

     Date Introduced: January 11, 2012

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 44-11-2 of the General Laws in Chapter 44-11 entitled "Business

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Corporation Tax" is hereby amended to read as follows:

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     44-11-2. Imposition of tax. -- (a) Each corporation shall annually pay to the state a tax

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equal to nine percent (9%) of net income, as defined in section 44-11-11, qualified in section 44-

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11-12, and apportioned to this state as provided in sections 44-11-13 -- 44-11-15, for the taxable

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year.

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      (b) A corporation shall pay the amount of any tax as computed in accordance with

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subsection (a) of this section after deducting from "net income," as used in this section, fifty

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percent (50%) of the excess of capital gains over capital losses realized during the taxable year, if

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for the taxable year:

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      (1) The corporation is engaged in buying, selling, dealing in, or holding securities on its

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own behalf and not as a broker, underwriter, or distributor;

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      (2) Its gross receipts derived from these activities during the taxable year amounted to at

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least ninety percent (90%) of its total gross receipts derived from all of its activities during the

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year. "Gross receipts" means all receipts, whether in the form of money, credits, or other valuable

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consideration, received during the taxable year in connection with the conduct of the taxpayer's

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activities.

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      (c) A corporation shall not pay the amount of the tax computed on the basis of its net

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income under subsection (a) of this section, but shall annually pay to the state a tax equal to ten

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cents ($.10) for each one hundred dollars ($100) of gross income for the taxable year or a tax of

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one hundred dollars ($100), whichever tax shall be the greater, if for the taxable year the

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corporation is either a "personal holding company" registered under the federal Investment

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Company Act of 1940, 15 U.S.C. section 80a-1 et seq., "regulated investment company", or a

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"real estate investment trust" as defined in the federal income tax law applicable to the taxable

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year. "Gross income" means gross income as defined in the federal income tax law applicable to

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the taxable year, plus:

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      (1) Any interest not included in the federal gross income; minus

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      (2) Interest on obligations of the United States or its possessions, and other interest

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exempt from taxation by this state; and minus

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      (3) Fifty percent (50%) of the excess of capital gains over capital losses realized during

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the taxable year.

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      (d) (1) A small business corporation having an election in effect under subchapter S, 26

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U.S.C. section 1361 et seq., shall not be subject to the Rhode Island income tax on corporations,

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except that the corporation shall be subject to the provisions of subsection (a), to the extent of the

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income that is subjected to federal tax under subchapter S.

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      (2) The shareholders of the corporation who are residents of Rhode Island shall include

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in their income their proportionate share of the corporation's federal taxable income.

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      (3) [Deleted by P.L. 2004, ch. 595. art. 29, section 1.]

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      (4) [Deleted by P.L. 2004, ch. 595, art. 29, section 1.]

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      (e) Minimum tax. - The tax imposed upon any corporation under this section shall not be

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less than five hundred dollars ($500).

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     SECTION 2. Section 44-12-1 of the General Laws in Chapter 44-12 entitled "Franchise

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Tax" is hereby amended to read as follows:

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     44-12-1. Tax imposed -- Corporations liable -- Credit for tax on income -- Reduced

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rate where no business done. -- (a) Every corporation, joint-stock company, or association

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incorporated in this state or qualified to do business in this state, whether or not doing business

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for profit, all referred to in this section under the term "corporation", except those enumerated in

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section 44-12-11, shall pay an annual franchise tax to the state upon its authorized capital stock of

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two dollars fifty cents ($2.50) for each ten thousand dollars ($10,000) of such stock or fractional

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part, or the sum of five hundred dollars ($500), whichever is greater. thereof.

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      (b) In the case of corporations liable to a tax under chapter 11 of this title, only the

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amount by which the franchise tax exceeds the tax payable under that chapter shall be assessed.

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      (c) If a corporation shall show by supplemental affidavit attached to the prescribed return

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and signed in the manner provided for each return that it has not, at any time during its preceding

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taxable year, been engaged within the state in any business activities, it shall only pay an annual

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franchise tax upon its authorized capital stock at the following rates: five hundred dollars ($500)

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where the stock does not exceed one million dollars ($1,000,000); and the further sum rate of

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twelve dollars fifty cents ($12.50) for each additional one million dollars ($1,000,000) or

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fractional part of the stock.

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     SECTION 3. This act shall take effect upon passage and shall apply to all returns and

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payments which would otherwise be required for the calendar year 2012 and thereafter.

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LC00270

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION - BUSINESS CORPORATION TAX AND FRANCHISE TAX

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     This act would repeal the minimum business corporation tax and the minimum franchise

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tax.

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     This act would take effect upon passage and would apply to all returns and payments

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which would otherwise be required for the calendar year 2012 and thereafter.

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LC00270

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