§ 44-43-8. Exclusion for qualifying securities.
(a) For purposes of determining the federal income tax liability of a qualifying taxpayer subject to Rhode Island income tax, the Rhode Island income of the taxpayer under §§ 44-30-12 and 44-30-16 shall be determined by excluding any income, gain, or preference items resulting from the transfer of employer securities from a qualified retirement plan, the sale, transfer, or exercise of stock, warrants, options, bonds, notes, or other interests of any corporation; provided, that at the time of the sale, transfer, or exercise the corporation is a qualifying corporation with respect to the qualifying taxpayer.
(b) A qualifying taxpayer is a current or former employee of a qualifying corporation employed for three (3) consecutive months as a full-time employee in accordance with corporate policy, and the estate, heirs and successors of that individual.
(c) A qualifying corporation is any corporation for which:
(1) Any of the securities issued by the corporation are traded publicly on a recognized exchange;
(2) Its headquarters or principal office in North America is located in the state of Rhode Island;
(3) It has at least one hundred (100) full-time employees in the state of Rhode Island or, if greater, at least fifty percent (50%) of its full-time employees in North America are based in Rhode Island, at the time it elects (in a manner that may be determined by the tax administrator) to be a qualifying corporation;
(i) The average annual rate of growth in the number of full-time employees of the corporation in Rhode Island over the five (5) fiscal years preceding the year of the election by the corporation has been at least ten percent (10%) per annum or if the period is shorter, the period of time prior to the election by the corporation that its headquarters or principal office has been located in Rhode Island, has been at least ten percent (10%) per annum; or
(ii) The amount of the capital stock of the corporation covered by qualified and non-qualified stock options issued by the corporation and the amount of capital stock of the corporation owned by any qualified retirement plan organized for the employees of the corporation equals in the aggregate at least five percent (5%) of the authorized capital stock of the corporation and at least fifty percent (50%) of the non-executive employees of the corporation are the holders of options or are eligible to participate in a qualified retirement plan;
(5) Prior to the end of the fiscal year in which it elects to be a qualifying corporation, it shall own any facility it is occupying in the state;
(6) It shall state at the time it files its election to be a qualifying corporation that it intends to maintain its headquarters or principal office in the state of Rhode Island and that at least fifty percent (50%) of its full-time employees in North America will be based in the state of Rhode Island for at least ten (10) years; and
(7) During the year in which the corporation files its election to be treated as a qualifying corporation and in the four (4) fiscal years following that year, the number of Rhode Island based full-time employees of the corporation has either increased on the average by at least fifteen percent (15%) per annum over or in the aggregate has increased by at least seventy-five percent (75%) the level of Rhode Island based full-time employees on the first day of the fiscal year in which the election is filed. The election by a corporation to be treated as a qualifying corporation shall become effective for purposes of this section as of the first day of the fiscal year during which the election is filed; provided, that in no event shall an election be effective prior to January 1, 1993.
(d) For purposes of this section, if a corporation is a member of an "affiliated group" of corporations (as defined in 26 U.S.C. § 1504(a)), it shall be considered to be the employer of the employees of the other members of that group. In the event a corporation fails to maintain the required average annual rate of growth in Rhode Island based full-time employees during the year in which it files its election or in any of its four (4) succeeding fiscal years, or if it fails to thereafter retain the highest level of Rhode Island based full-time employees required under this section or otherwise fails to satisfy the requirements of this section, the corporation ceases being a qualifying corporation, and no exclusion under this section applies. As a condition to the acceptance of its election to be treated as a qualifying corporation, the corporation must agree that if it should fail to meet the requirements in this section in the future that it will recapture and include in its Rhode Island tax liability an amount equal to one hundred percent (100%) of the investment tax credits it claimed against its Rhode Island business corporation tax liability during the prior ten (10) year period.
(e) The director of the Rhode Island economic development corporation is authorized to promulgate regulations establishing standards for employee recruitment and job training.
(P.L. 1993, ch. 371, § 1; P.L. 1995, ch. 323, § 38.)