2013 -- H 5302

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LC00968

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO TAXATION - RHODE ISLAND NEW QUALIFIED JOBS INCENTIVE ACT

OF 2013

     Introduced By: Representatives Shekarchi, Serpa, Bennett, Costa, and McNamara

     Date Introduced: February 07, 2013

     Referred To: House Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 44 of the General Laws entitled "TAXATION" is hereby amended by

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adding thereto the following chapter:

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     CHAPTER 68

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RHODE ISLAND NEW QUALIFIED JOBS INCENTIVE ACT OF 2013

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     44-68-1. Short title. – This chapter shall be known and may be cited as the "Rhode

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Island Qualified Jobs Incentive Act of 2013.

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     44-68-2. Definitions. – As used in this chapter, unless the context clearly indicates

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otherwise, the following words and phrases shall have the following meanings:

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     (1) “Adjusted current employment” means, for any taxable year ending on or after June

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30, 2013, the aggregate of the average daily number of qualified full-time equivalent active

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employees employed within the state by an eligible company during such taxable year.

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     (2) “Affiliated entity” means any entity owned or controlled by the same persons or

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shareholders who own or control an eligible company.

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     (3) “Base employment” means, the aggregate number of qualified full-time equivalent

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active employees employed within the state by an eligible company and its eligible subsidiaries

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on July 1,2013.

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     (4) “Eligible company” means any corporation (including a subchapter S corporation as

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defined in 26 U.S.C. section 1361), state bank, federal savings bank, trust company, national

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banking association, bank holding company, loan and investment company, mutual savings bank,

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credit union, building and loan association, insurance company, investment company, broker-

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dealer company or surety company, limited liability company partnership (including an eligible

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subsidiary of any of the foregoing), or sole proprietorship.

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     (5) “Eligible subsidiary” means each entity eighty percent (80%) or more of the

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outstanding voting equity of which is owned by an eligible company.

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     (6) “Qualified full-time equivalent active employee” means any employee of an eligible

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company who: (i) Works a minimum of thirty (30) hours per week within the state, or two (2) or

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more part-time employees whose combined weekly hours equal or exceed thirty (30) hours per

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week within the state; (ii) Earns health care benefits; and (iii) Earns no less than two hundred fifty

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percent (250%) of the hourly minimum wage prescribed by Rhode Island law. The first tax year

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that an eligible company qualifies for a rate reduction pursuant to section 44-68-3, for purposes of

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this section, two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode

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Island law shall mean two hundred fifty percent (250%) of the hourly minimum wage prescribed

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by Rhode Island law at: (A) The time the employee was first treated as a full-time equivalent

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active employee during a tax year that the eligible company qualified for a rate reduction

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pursuant to section 44-68-3, or, if later, (B) The time the employee first earned at least two

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hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law as an

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employee of the eligible company.

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     (7) “Initial new employment level” means the number of units of new employment

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reported by an eligible company reported in 2015.

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     (8) “New employment” means for each taxable year the amount of adjusted current

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employment for each taxable year (determined as of December 31 of each year) minus the

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

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

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

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device for the purpose of artificially creating new employees in order to qualify for the rate

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reduction provided for in this chapter. “New employment” shall not include employees already

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employed in this state who becomes employees of an eligible company as a result of an

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acquisition of an existing company by purchase, merger, or otherwise, if such existing company

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was eligible for a rate reduction under the provisions of chapters 42-64.5 or the provisions of this

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chapter.

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     (9) “Rate reduction” means the reduction in tax rate specified in section 44-68-4.

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     (10) “Small business concern” means any eligible company which has a base

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employment level of less than one hundred (100) employees.

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     (11) “State” means the state of Rhode Island and Providence Plantations.

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     (12) “Total employment” for an eligible company as of any date means the total number

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of qualified full-time equivalent active employees employed within the state by the eligible

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company.

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     (13) “Units of new employment” means: (i) For eligible companies which are not small

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business concerns, the amount of new employment divided by fifty (50), rounded down to the

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nearest multiple of fifty (50); and (ii) For eligible companies which are small business concerns

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the amount of new employment divided by ten (10), rounded down to the nearest multiple of ten

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(10).

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     44-68-3. Tax rate reduction. – The rate of tax payable by an eligible company and each

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of its eligible subsidiaries for any taxable year ending on or after June 30, 2013, on its net income

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pursuant to the applicable income tax provisions of the general laws, including the provisions of

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sections 44-11-2(a), 44-14-3(a), 44-14-4 and 44-17-1, or on its gross earnings pursuant to sections

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44-13-4(4), 44-30-2.6, or 44-30-2.10 shall be reduced by the amount specified in section 44-68-4;

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this rate reduction shall be applied once annually to those eligible companies which are permitted

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by law to file a consolidated state tax return and in the case of eligible companies not permitted

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by law to file consolidated state tax returns, then the rate reduction shall be applied annually to

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each eligible company and its eligible subsidiaries; in the case of an eligible company the income

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of which is subject to tax pursuant to sections 44-30-2.6 or 44-30-2.10, the rate reduction shall be

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applied annually only to the portion of net income of such taxpayer attributable to the eligible

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company; provided, however, should any eligible company fail to maintain in any taxable year on

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or after December 31, 2015, the number of units of new employment it reported for such 2014 tax

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year, the rate reduction provided for in this chapter shall expire permanently.

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     44-68-4. Reduction rate schedule. – The amount of the rate reduction specified in

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section 44-68-3 for any eligible company for each taxable year ending on or after June 30, 2013,

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shall be based upon the aggregate amount of new employment of the eligible company and its

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eligible subsidiaries for such taxable year, and shall be determined by multiplying the numerical

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equivalent of one-quarter of one percent (.25%) by the number of units of new employment for

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each such taxable year through the taxable year ending on or before December 31, 2015 and for

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each taxable year thereafter, the number of units of new employment reported for such taxable

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year ending in 2015. Provided, however, the amount of each rate reduction shall in no event be

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greater than six (6) percentage points for the applicable income tax rate or greater than three (3)

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percentage points for the applicable personal income tax rate.

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     44-68-5. Rule of construction. – This chapter is to be construed in a manner consistent

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with and complementary to provisions of chapter 42-64.5 of the general laws. The rate reduction

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received under the provisions of this chapter shall be in addition to the rate reduction, if any, that

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an eligible company shall be entitled to receive under the provisions of said chapter 42-64.5 of

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the general laws.

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     44-68-6. Severability. – If any provision of this chapter or the application of any section

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or part of this chapter to any person or circumstance is held invalid, the invalidity shall not affect

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other provisions or applications of this chapter which can be given effect without the invalid

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provision or application.

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     44-68-7. Reporting requirement. – (a) By August 15th of each year the division of

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taxation shall report the name, address, and amount of tax credit received for each eligible

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company during the previous state fiscal year to the chairpersons of the house and senate finance

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committees, the house and senate fiscal advisors, and the division of taxation. This report shall be

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available to the public for inspection by any person and shall be published by the tax

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administrator on the tax division website.

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     (b) On or before September 1, 2013, and every September 1 thereafter, all eligible

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companies qualifying for a rate reduction pursuant to section 44-68-3 shall file an annual report

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with the tax administrator to determine if an eligible company is entitled to the rate reduction

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provided for in this chapter. Said report shall contain each full-time equivalent active employee’s

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name, date of hire, and hourly wage as of the immediately preceding July 1 and such other

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information deemed necessary by the tax administrator. The report shall be filed on a form and in

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a manner prescribed by the tax administrator.

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     SECTION 2. This act shall take effect upon passage.

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LC00968

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION - RHODE ISLAND NEW QUALIFIED JOBS INCENTIVE ACT

OF 2013

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     This act would create a financial incentive for business entities to create new jobs by

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offering a business tax reduction.

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     This act would take effect upon passage.

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LC00968

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