It is enacted by the General Assembly as follows:

SECTION 1. Chapter 44-30 of the General Laws entitled "Personal Income Tax" is hereby amended by adding thereto the following section:

{ADD 44-30-1.1. Exemption for tax for writers, composers and artists. -- ADD} {ADD (A) This section shall only apply to writers, composers and artists residing within a section of the defined economic development zone within the city of Providence and who create such work while residing in the zone. For the purposes of this section, a "work" shall mean an original and creative work, whether written, composed, created or executed for "one-of-a-kind, limited" production, before or after the passing of this section, which falls into one (1) of the following categories:

(1) a book or other writing;

(2) a play or the performance of said play;

(3) a musical composition or the performance of said composition;

(4) a painting or other like picture;

(5) a sculpture;

(6) traditional and fine crafts;

(7) the creation of a film or the acting of said film;

(8) the creation of a dance or the performance of said dance;

For purposes of this section, a "work" does not apply to any piece or performance created or executed for industry oriented or related production.

(B)(1) This section shall apply to any individual:

(a) who is a resident within the section of the economic development zone designated as the Arts and Entertainment District in the downtown area of the city of Providence and deriving the income exempted from within said district while a resident of said zone. For the purposes of this section, the arts and entertainment district is defined as the area bounded by Pine Street to the southeast, Dorrance Street to the northeast, Sabin Street to the northwest and Empire Street to the southwest. The abovementioned streets shall be included in the district; and

(b) Who is determined by the tax administrator, after consideration of any evidence in relation to the matter which the individual submits to him or her and after such consultation as may seem to him or her to be necessary with such person or body of persons as in his or her opinion may be of assistance to him or her, to have written, composed or executed either solely or jointly with another individual, a work or works which would fall into one (1) of the categories listed in section (A) above.

(C)(1) An individual to whom this section applies and who duly makes a claim to the tax administrator in that behalf shall, subject to paragraph (2) below, be entitled to have the profits or gains arising to him or her from the publication, production or sale of a work or works in relation to which the tax administrator has made a determination under subsection (B)(1)(b) to be taken as a modification reducing federal adjusted gross income. The modification adjusting federal adjusted gross income shall be in effect until December 31, 2000.

(2) The modification authorized by this section shall apply to the year in which the profit or gain from the publication, production or sale of a work is realized.

(D) The tax administrator may serve on an individual who makes a claim under this subsection a notice or notices in writing requiring him or her to make available within such time as may be specified in the notice of all such books, accounts and documents in his or her possession or power as may be requested, being books, accounts and documents relating to the publication, production or sale of the work in respect of the profits or gains of which exemption is claimed.

(E) For the purpose of determining the amount of profits or gains subject to modification under this section, the tax administrator may make such apportionment of receipts and expenses as may be necessary.

(F) Notwithstanding any other provisions of this chapter, any individual seeking relief under this section shall file a Rhode Island personal income tax return listing the modification reducing federal adjusted gross income relating to profits or gains realized from the works as defined herein. ADD}

SECTION 2. Section 44-30-12 of the General Laws in Chapter 44-30 entitled "Personal Income Tax" is hereby amended to read to follows:

44-30-12. Rhode Island income of a resident individual. -- (a) {ADD General ADD} . The Rhode Island income of a resident individual means his or her adjusted gross income for federal income tax purposes, with the modifications specified in this section.

(b) {ADD Modifications increasing federal adjusted gross income ADD} . There shall be added to federal adjusted gross income:

(1) Interest income on obligations of any state, or its political subdivisions, other than Rhode Island or its political subdivisions;

(2) Interest or dividend income on obligations or securities of any authority, commission, or instrumentality of the United States, but not of Rhode Island or its political subdivisions, to the extent exempted by the laws of the United States from federal income tax but not from state income taxes;

(3) The modification described in section 44-30-25(g).

(c) {ADD Modifications reducing federal adjusted gross income ADD} . There shall be subtracted from federal adjusted gross income

(1) any interest income on obligations of the United States and its possessions to the extent includible in gross income for federal income tax purposes, and any interest or dividend income on obligations, or securities of any authority, commission, or instrumentality of the United States to the extent includible in gross income for federal income tax purposes but exempt from state income taxes under the laws of the United States; provided that the amount to be subtracted shall in any case be reduced by any interest on indebtedness incurred or continued to purchase or carry obligations or securities the income of which is exempt from Rhode Island personal income tax, to the extent the interest has been deducted in determining federal adjusted gross income or taxable income; (2) the modification described in section 44-30-25(f) . {ADD ; the modification described in section 44-30-1.1(c)(1). ADD}

(d) {ADD Modification for Rhode Island fiduciary adjustment ADD} . There shall be added to or subtracted from federal adjusted gross income (as the case may be) the taxpayer's share, as beneficiary of an estate or trust, of the Rhode Island fiduciary adjustment determined under section 44-30-17.

(e) {ADD Partners ADD} . The amounts of modifications required to be made under this section by a partner, which relate to items of income or deduction of a partnership, shall be determined under section 44-30-15.

SECTION 3. This act shall take effect January 1, 1997.