97-H 5917
Effective Without the Governor's Signature
Jul. 8, 1997


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:



{ADD 44-39.3-1. Exclusion for qualifying options. -- ADD} {ADD For purposes of determining the federal income tax liability of a taxpayer subject to Rhode Island income tax, the Rhode Island income of the taxpayer under sections 44-30-12 and 44-30-16 shall be determined by excluding any income, gain, or preference items resulting from the sale, transfer, or exercise of qualified and non-qualified stock options, the stock issued or transferred on the exercise of any such option, and warrants issued with respect to such options and/or stock, of a qualifying corporation provided that the taxpayer was a qualifying taxpayer and the taxpayer's employer who issued the option was a qualifying corporation at the time the taxpayer acquired a vested interest in such option and exercised such option. ADD}

{ADD 44-39.3-2. Residency. -- ADD} {ADD A qualifying taxpayer is a resident of Rhode Island who has been employed at a location in Rhode Island for at least three (3) consecutive months as a full-time employee of a qualifying corporation in accordance with corporate policy and the estate, heirs and successors of any such individual. ADD}

{ADD 44-39.3-3. Qualifying corporation. -- ADD} {ADD A qualifying corporation is any corporation that (i) annually elects (in such manner as may be determined by the tax administrator) to be a qualifying corporation, (ii) has at least ten (10) full time equivalent active employees in this state, and (iii) is engaged principally in one (1) or more of the business activities described in industry numbers 7371, 7372 and 7373 in the standard industrial classification, office of the statistical standards, executive office of the president, United States bureau of the budget, as revised from time to time. For purposes of this section, full time equivalent active employee shall mean any employee who works a minimum of thirty (30) hours per week in this state, or two (2) or more part-time employees whose combined weekly hours equal or exceed thirty (30) hours per week in this state. The annual election by a corporation to be treated as a qualifying corporation for a fiscal year shall become effective for purposes of this section as of the first day of the fiscal year for which the election is filed and must be filed with the tax administrator on or before the due date prescribed by law (including any extensions) for the filing of the corporation's tax return with the tax administrator for such fiscal year, provided that in no event shall an election be effective for fiscal years commencing prior to January 1, 1997, and in no event shall the exclusion available under the provisions of this chapter be available to options that were issued prior to January 1, 1997. ADD}

SECTION 2. This act shall take effect on January 1, 1998.

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