2024 -- S 3028

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2024

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A N   A C T

RELATING TO TAXATION -- LOW-INCOME HOUSING IMPROVEMENT TAX CREDIT

     Introduced By: Senator Meghan E. Kallman

     Date Introduced: May 02, 2024

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

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

adding thereto the following chapter:

CHAPTER 72

LOW-INCOME HOUSING IMPROVEMENT TAX CREDIT

     44-72-1. Short title.

     This chapter shall be known and may be cited as the "Low-Income Improvement Housing

Tax Credit Act."

     44-72-2. Findings and declarations.

     It is hereby found and declared that the state is facing significant housing challenges, which

must be addressed for the welfare of the state's residents. The purpose of the Rhode Island low-

income housing improvement tax credit established pursuant to this chapter is to encourage and

incentivize improvements to affordable housing in the state.

     44-72-3. Definitions.

     As used in this chapter:

     (1) "Applicant" means a property owner applying for a Rhode Island low-income housing

improvement tax credit.

     (2) "Compliance period" means the period of fifteen (15) taxable years beginning with the

taxable year in which the improvements to low-income housing are completed.

     (3) "Department" means the department of housing established pursuant to § 42-64.34-1.

     (4) "Eligibility statement" means a statement authorized and issued by the department

certifying that a given project is a qualified Rhode Island project and setting forth the annual amount

of the Rhode Island low-income housing improvement tax credit allocated to the project. The

eligibility statement shall be on a form promulgated by the department in consultation with the

division of taxation.

     (5) "Federal low-income housing tax credit" means the federal tax credit as provided in

section 42 of the 1986 Internal Revenue Code, as amended and in effect for the taxable year.

     (6) "Low-income project" means a qualified low-income housing project, as defined in

section 42 of the 1986 Internal Revenue Code, as amended and in effect for the taxable year, which

has restricted rents.

     (7) "Property owner" means a person, firm, business, partnership, association, political

subdivision, or other entity that owns twelve (12) or fewer rental units within the state that proposes

to improve or make improvements to a qualified Rhode Island project.

     (8) "Qualified Rhode Island project" means a project where improvements are made to a

qualified low-income housing project, as defined in section 42 of the 1986 Internal Revenue Code,

as amended and in effect for the taxable year, which is located in the State of Rhode Island, which

meets the requirements of this chapter, and whose property owner enters into a tax credit agreement

with the department.

     (9) "Rhode Island low-income improvement housing tax credit" means the tax credit

established pursuant to this chapter.

     (10) "Tax credit agreement" means an agreement between the property owner and the

department and filed as an affordable housing restriction in the land records of the city or town

where the real estate lies that requires the project to be operated in accordance with the requirements

of this chapter for not less than thirty (30) years from the expiration date of the compliance period.

     (11) "Taxpayer" means a person, firm, partnership, trust, estate, limited liability company,

corporation (whether for profit or nonprofit) or other entity having an ownership interest in a

qualified Rhode Island project, either directly or through one or more pass-through entities, that is

subject to the taxes imposed on such person or entity pursuant to chapters 11, 13, 14, 17 or 30 of

this title.

     44-72-4. Establishment of Rhode Island low-income housing tax credit program.

     The Rhode Island low-income housing improvement tax credit program is hereby

established as a program under the jurisdiction and administration of the department. The program

may provide tax credits for a period of five (5) years to applicants that are competitively selected

and that meet the requirements of this chapter. The department shall not obligate Rhode Island low-

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income housing tax credits that cumulatively total in excess of ten million dollars ($10,000,000) in

any fiscal year.

     44-72-5. Rhode Island low-income housing tax credit.

     (a) A taxpayer owning an interest in a qualified Rhode Island project may be allowed a

Rhode Island low-income housing tax credit against the taxes imposed pursuant to chapters 11, 13,

14, 17 or 30 of this title with respect to that qualified Rhode Island project in an amount authorized,

determined, and allocated by the department based on the qualified Rhode Island project's need for

the credit for economic feasibility; provided that, the department issues an eligibility statement for

that qualified Rhode Island project.

     (b) At the time of application to the department for an eligibility statement, an applicant

shall, through its chief executive officer or equivalent authorized officer, demonstrate to the

department:

     (1) That the project is a qualified Rhode Island project;

     (2) A detailed description of proposed improvements to be made;

     (3) The owner of the qualified Rhode Island project has entered into a tax credit agreement

with the department; and

     (4) The applicant satisfies other additional criteria determined by the department from time

to time.

     (c) The Rhode Island low-income housing improvement tax credit allocated to a taxpayer

with respect to a qualified Rhode Island project shall be taken against the taxpayer's taxes imposed

pursuant to chapters 11, 13, 14, 17 or 30 of this title. The amount of a tax credit allowed under this

chapter shall be allowable to the taxpayer in five (5) equal annual increments. If the portion of the

tax credit allowed under this chapter exceeds the taxpayer's total tax liability for the year in which

the relevant portion of the credit is taken, the amount that exceeds the taxpayer's tax liability may

be carried forward for credit against the taxes imposed for the succeeding four (4) years, or until

the full credit is used, whichever occurs first.

     (d) A qualified Rhode Island project that receives other incentives or tax credits available

under the general laws of this state is also eligible to receive an allocation of Rhode Island low-

income housing tax credits pursuant to this chapter.

     (e) Upon request of a taxpayer and subject to annual appropriation, the state shall redeem

this credit, in whole or in part, for ninety percent (90%) of the value of the tax credit. The division

of taxation, in consultation with the department, shall establish by regulation a redemption process

for tax credits.

     44-72-6. Administration.

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     (a) Upon issuance of the eligibility statement the department shall, on behalf of the State

of Rhode Island, award tax credits and issue tax credit certificates in the amount authorized and

allocated in accordance with the eligibility statement and the tax credit agreement. The department

shall provide copies of eligibility statements and tax credit certificates to the division of taxation

within thirty (30) days of issuance, including copies of all eligibility statements and tax credit

certificates that are reissued, transferred, sold, or assigned.

     (b) The owner of a qualified Rhode Island project eligible for the Rhode Island low-income

housing improvement tax credit shall submit, at the time of filing the property owner's state tax

return, the original tax credit certificate issued by the department with respect to such qualified

Rhode Island project. In the case of failure to attach the tax credit certificate, a credit under this

chapter shall not be allowed with respect to such qualified Rhode Island project for that year until

the original tax credit certificate is provided to the division of taxation.

     44-72-7. Recapture.

     (a) If under Section 42 of the 1986 Internal Revenue Code, as amended, a portion of any

federal low-income housing tax credits taken on improvements to a low-income project is required

to be recaptured, the Rhode Island low-income housing improvement tax credit authorized with

respect to such qualified Rhode Island project shall also be recaptured. The state recapture amount

shall be equal to the amount of the Rhode Island low-income housing improvement tax credits

previously claimed times a fraction, the numerator of which shall be the amount of recaptured

federal low-income housing tax credits and the denominator of which shall be the amount of federal

low-income housing tax credits previously claimed.

     (b) The department shall provide notification of recapture determinations to the division of

taxation within thirty (30) days. Such notifications shall include the proportion of the Rhode Island

low-income housing improvement tax credit to be recaptured, the identity of each taxpayer subject

to the recapture and the amount of credit previously allocated to such taxpayer.

     44-72-8. Transferability.

     All or any portion of unused tax credits issued in accordance with the provisions of this

chapter may be transferred, sold, or assigned to taxpayers eligible under the provisions of this

chapter.

     44-72-9. Rules and regulations.

     The department, in consultation with the division of taxation, shall adopt guidelines,

directives, criteria, and rules and regulations pursuant to chapter 35 of title 42 to implement the

purposes of the Rhode Island low-income housing improvement tax credit program.

     44-72-10. Reporting.

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     By November 1, 2025, and each year thereafter, the department shall report to the governor,

the chairpersons of the house and senate finance committees, and the house and senate fiscal

advisors, the amount of Rhode Island low-income housing improvement tax credits that were

approved during the prior fiscal year. A summary of any tax credit agreements entered into under

this chapter by the department and applicants shall be sent to the division of taxation, shall be public

and shall be published by the tax administrator on the tax division website.

     44-72-11. Low-income housing tax credit fund.

     There is hereby established, at the department, a restricted account known as the low-

income housing improvement tax credit fund (the "fund") in which all amounts appropriated for

the program authorized in this chapter shall be deposited. The fund shall be used for the purpose of

securing payment for the redemption of tax credits or to reimbursement to the state for tax credits

applied against a taxpayer's liability.

     44-72-12. Sunset.

     No credits shall be authorized to be reserved pursuant to this chapter after June 30, 2029.

     SECTION 2. This act shall take effect on July 1, 2024.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION -- LOW-INCOME HOUSING IMPROVEMENT TAX CREDIT

***

     This act establishes the Rhode Island low-income housing improvement tax credit program

providing tax credits for a period of five (5) years to applicants that are competitively selected and

that meet the requirements of this chapter.

     This act would take effect on July 1, 2024.

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