2013 -- H 6050

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LC02450

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

____________

A N A C T

RELATING TO TAXATION -- SALES AND USE TAXES--LIABILITY AND

COMPUTATION

     Introduced By: Representatives Marshall, Ackerman, Ucci, Malik, and Martin

     Date Introduced: April 30, 2013

     Referred To: House Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 44-18-30 of the General Laws in Chapter 44-18 entitled "Sales and

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Use Taxes - Liability and Computation" is hereby amended to read as follows:

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     44-18-30. Gross receipts exempt from sales and use taxes. -- There are exempted from

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the taxes imposed by this chapter the following gross receipts:

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      (1) Sales and uses beyond constitutional power of state. - From the sale and from the

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storage, use, or other consumption in this state of tangible personal property the gross receipts

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from the sale of which, or the storage, use, or other consumption of which, this state is prohibited

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from taxing under the Constitution of the United States or under the constitution of this state.

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      (2) Newspapers.

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      (i) From the sale and from the storage, use, or other consumption in this state of any

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newspaper.

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      (ii) "Newspaper" means an unbound publication printed on newsprint, which contains

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news, editorial comment, opinions, features, advertising matter, and other matters of public

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interest.

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      (iii) "Newspaper" does not include a magazine, handbill, circular, flyer, sales catalog, or

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similar item unless the item is printed for and distributed as a part of a newspaper.

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      (3) School meals. - From the sale and from the storage, use, or other consumption in this

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state of meals served by public, private, or parochial schools, school districts, colleges,

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universities, student organizations, and parent teacher associations to the students or teachers of a

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school, college, or university whether the meals are served by the educational institutions or by a

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food service or management entity under contract to the educational institutions.

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      (4) Containers.

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      (i) From the sale and from the storage, use, or other consumption in this state of:

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      (A) Non-returnable containers, including boxes, paper bags, and wrapping materials

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which are biodegradable and all bags and wrapping materials utilized in the medical and healing

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arts, when sold without the contents to persons who place the contents in the container and sell

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the contents with the container.

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      (B) Containers when sold with the contents if the sale price of the contents is not

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required to be included in the measure of the taxes imposed by this chapter.

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      (C) Returnable containers when sold with the contents in connection with a retail sale of

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the contents or when resold for refilling.

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      (ii) As used in this subdivision, the term "returnable containers" means containers of a

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kind customarily returned by the buyer of the contents for reuse. All other containers are "non-

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returnable containers."

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      (5) (i) Charitable, educational, and religious organizations. - From the sale to as in

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defined in this section, and from the storage, use, and other consumption in this state or any other

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state of the United States of America of tangible personal property by hospitals not operated for a

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profit, "educational institutions" as defined in subdivision (18) not operated for a profit, churches,

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orphanages, and other institutions or organizations operated exclusively for religious or charitable

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purposes, interest free loan associations not operated for profit, nonprofit organized sporting

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leagues and associations and bands for boys and girls under the age of nineteen (19) years, the

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following vocational student organizations that are state chapters of national vocational students

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organizations: Distributive Education Clubs of America, (DECA); Future Business Leaders of

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America, phi beta lambda (FBLA/PBL); Future Farmers of America (FFA); Future Homemakers

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of America/Home Economics Related Occupations (FHA/HERD); and Vocational Industrial

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Clubs of America (VICA), organized nonprofit golden age and senior citizens clubs for men and

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women, and parent teacher associations.

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      (ii) In the case of contracts entered into with the federal government, its agencies or

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instrumentalities, this state or any other state of the United States of America, its agencies, any

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city, town, district, or other political subdivision of the states, hospitals not operated for profit,

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educational institutions not operated for profit, churches, orphanages, and other institutions or

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organizations operated exclusively for religious or charitable purposes, the contractor may

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purchase such materials and supplies (materials and/or supplies are defined as those which are

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essential to the project) that are to be utilized in the construction of the projects being performed

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under the contracts without payment of the tax.

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      (iii) The contractor shall not charge any sales or use tax to any exempt agency,

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institution, or organization but shall in that instance provide his or her suppliers with certificates

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in the form as determined by the division of taxation showing the reason for exemption; and the

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contractor's records must substantiate the claim for exemption by showing the disposition of all

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property so purchased. If any property is then used for a nonexempt purpose, the contractor must

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pay the tax on the property used.

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      (6) Gasoline. - From the sale and from the storage, use, or other consumption in this state

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of: (i) gasoline and other products taxed under chapter 36 of title 31, and (ii) fuels used for the

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propulsion of airplanes.

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      (7) Purchase for manufacturing purposes.

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      (i) From the sale and from the storage, use, or other consumption in this state of

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computer software, tangible personal property, electricity, natural gas, artificial gas, steam,

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refrigeration, and water, when the property or service is purchased for the purpose of being

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manufactured into a finished product for resale, and becomes an ingredient, component, or

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integral part of the manufactured, compounded, processed, assembled, or prepared product, or if

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the property or service is consumed in the process of manufacturing for resale computer software,

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tangible personal property, electricity, natural gas, artificial gas, steam, refrigeration, or water.

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      (ii) "Consumed" means destroyed, used up, or worn out to the degree or extent that the

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property cannot be repaired, reconditioned, or rendered fit for further manufacturing use.

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      (iii) "Consumed" includes mere obsolescence.

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      (iv) "Manufacturing" means and includes manufacturing, compounding, processing,

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assembling, preparing, or producing.

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      (v) "Process of manufacturing" means and includes all production operations performed

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in the producing or processing room, shop, or plant, insofar as the operations are a part of and

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connected with the manufacturing for resale of tangible personal property, electricity, natural gas,

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artificial gas, steam, refrigeration, or water and all production operations performed insofar as the

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operations are a part of and connected with the manufacturing for resale of computer software.

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      (vi) "Process of manufacturing" does not mean or include administration operations such

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as general office operations, accounting, collection, sales promotion, nor does it mean or include

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distribution operations which occur subsequent to production operations, such as handling,

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storing, selling, and transporting the manufactured products, even though the administration and

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distribution operations are performed by or in connection with a manufacturing business.

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      (8) State and political subdivisions. - From the sale to, and from the storage, use, or other

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consumption by, this state, any city, town, district, or other political subdivision of this state.

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Every redevelopment agency created pursuant to chapter 31 of title 45 is deemed to be a

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subdivision of the municipality where it is located.

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      (9) Food and food ingredients. - From the sale and storage, use, or other consumption in

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this state of food and food ingredients as defined in section 44-18-7.1(l).

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      For the purposes of this exemption "food and food ingredients" shall not include candy,

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soft drinks, dietary supplements, alcoholic beverages, tobacco, food sold through vending

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machines or prepared food (as those terms are defined in section 44-18-7.1, unless the prepared

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food is:

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      (i) Sold by a seller whose primary NAICS classification is manufacturing in sector 311,

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except sub-sector 3118 (bakeries);

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      (ii) Sold in an unheated state by weight or volume as a single item;

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      (iii) Bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries,

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donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, tortillas; and

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      is not sold with utensils provided by the seller, including plates, knives, forks, spoons,

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glasses, cups, napkins, or straws.

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      (10) Medicines, drugs and durable medical equipment. - From the sale and from the

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storage, use, or other consumption in this state, of;

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      (i) "Drugs" as defined in section 44-18-7.1(h)(i), sold on prescriptions, medical oxygen,

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and insulin whether or not sold on prescription. For purposes of this exemption drugs shall not

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include over-the-counter drugs and grooming and hygiene products as defined in section 44-18-

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7.1(h)(iii).

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      (ii) Durable medical equipment as defined in section 44-18-7.1(k) for home use only,

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including, but not limited to, syringe infusers, ambulatory drug delivery pumps, hospital beds,

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convalescent chairs, and chair lifts. Supplies used in connection with syringe infusers and

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ambulatory drug delivery pumps which are sold on prescription to individuals to be used by them

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to dispense or administer prescription drugs, and related ancillary dressings and supplies used to

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dispense or administer prescription drugs shall also be exempt from tax.

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      (11) Prosthetic devices and mobility enhancing equipment. - From the sale and from the

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storage, use, or other consumption in this state, of prosthetic devices as defined in section 44-18-

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7.1(t), sold on prescription, including but not limited to, artificial limbs, dentures, spectacles and

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eyeglasses, and artificial eyes; artificial hearing devices and hearing aids, whether or not sold on

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prescription and mobility enhancing equipment as defined in section 44-18-7.1(p) including

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wheelchairs, crutches and canes.

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      (12) Coffins, caskets, and burial garments. - From the sale and from the storage, use, or

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other consumption in this state of coffins or caskets, and shrouds or other burial garments which

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are ordinarily sold by a funeral director as part of the business of funeral directing.

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      (13) Motor vehicles sold to nonresidents.

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      (i) From the sale, subsequent to June 30, 1958, of a motor vehicle to a bona fide

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nonresident of this state who does not register the motor vehicle in this state, whether the sale or

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delivery of the motor vehicle is made in this state or at the place of residence of the nonresident.

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A motor vehicle sold to a bona fide nonresident whose state of residence does not allow a like

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exemption to its nonresidents is not exempt from the tax imposed under section 44-18-20. In that

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event the bona fide nonresident pays a tax to Rhode Island on the sale at a rate equal to the rate

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that would be imposed in his or her state of residence not to exceed the rate that would have been

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imposed under section 44-18-20. Notwithstanding any other provisions of law, a licensed motor

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vehicle dealer shall add and collect the tax required under this subdivision and remit the tax to the

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tax administrator under the provisions of chapters 18 and 19 of this title. When a Rhode Island

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licensed motor vehicle dealer is required to add and collect the sales and use tax on the sale of a

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motor vehicle to a bona fide nonresident as provided in this section, the dealer in computing the

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tax takes into consideration the law of the state of the nonresident as it relates to the trade-in of

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motor vehicles.

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      (ii) The tax administrator, in addition to the provisions of sections 44-19-27 and 44-19-

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28, may require any licensed motor vehicle dealer to keep records of sales to bona fide

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nonresidents as the tax administrator deems reasonably necessary to substantiate the exemption

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provided in this subdivision, including the affidavit of a licensed motor vehicle dealer that the

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purchaser of the motor vehicle was the holder of, and had in his or her possession a valid out of

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state motor vehicle registration or a valid out of state driver's license.

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      (iii) Any nonresident who registers a motor vehicle in this state within ninety (90) days

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of the date of its sale to him or her is deemed to have purchased the motor vehicle for use,

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storage, or other consumption in this state, and is subject to, and liable for the use tax imposed

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under the provisions of section 44-18-20.

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      (14) Sales in public buildings by blind people. - From the sale and from the storage, use,

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or other consumption in all public buildings in this state of all products or wares by any person

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licensed under section 40-9-11.1.

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      (15) Air and water pollution control facilities. - From the sale, storage, use, or other

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consumption in this state of tangible personal property or supplies acquired for incorporation into

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or used and consumed in the operation of a facility, the primary purpose of which is to aid in the

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control of the pollution or contamination of the waters or air of the state, as defined in chapter 12

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of title 46 and chapter 25 of title 23, respectively, and which has been certified as approved for

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that purpose by the director of environmental management. The director of environmental

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management may certify to a portion of the tangible personal property or supplies acquired for

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incorporation into those facilities or used and consumed in the operation of those facilities to the

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extent that that portion has as its primary purpose the control of the pollution or contamination of

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the waters or air of this state. As used in this subdivision, "facility" means any land, facility,

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device, building, machinery, or equipment.

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      (16) Camps. - From the rental charged for living quarters, or sleeping or housekeeping

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accommodations at camps or retreat houses operated by religious, charitable, educational, or

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other organizations and associations mentioned in subdivision (5), or by privately owned and

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operated summer camps for children.

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      (17) Certain institutions. - From the rental charged for living or sleeping quarters in an

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institution licensed by the state for the hospitalization, custodial, or nursing care of human beings.

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      (18) Educational institutions. - From the rental charged by any educational institution for

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living quarters, or sleeping or housekeeping accommodations or other rooms or accommodations

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to any student or teacher necessitated by attendance at an educational institution. "Educational

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institution" as used in this section means an institution of learning not operated for profit which is

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empowered to confer diplomas, educational, literary, or academic degrees, which has a regular

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faculty, curriculum, and organized body of pupils or students in attendance throughout the usual

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school year, which keeps and furnishes to students and others records required and accepted for

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entrance to schools of secondary, collegiate, or graduate rank, no part of the net earnings of which

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inures to the benefit of any individual.

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      (19) Motor vehicle and adaptive equipment for persons with disabilities.

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      (i) From the sale of: (A) special adaptations, (B) the component parts of the special

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adaptations, or (C) a specially adapted motor vehicle; provided, that the owner furnishes to the

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tax administrator an affidavit of a licensed physician to the effect that the specially adapted motor

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vehicle is necessary to transport a family member with a disability or where the vehicle has been

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specially adapted to meet the specific needs of the person with a disability. This exemption

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applies to not more than one motor vehicle owned and registered for personal, noncommercial

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use.

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      (ii) For the purpose of this subsection the term "special adaptations" includes, but is not

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limited to: wheelchair lifts; wheelchair carriers; wheelchair ramps; wheelchair securements; hand

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controls; steering devices; extensions, relocations, and crossovers of operator controls; power-

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assisted controls; raised tops or dropped floors; raised entry doors; or alternative signaling

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devices to auditory signals.

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      (iii) From the sale of: (a) special adaptations, (b) the component parts of the special

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adaptations, for a "wheelchair accessible taxicab" as defined in section 39-14-1 and/or a

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"wheelchair accessible public motor vehicle" as defined in section 39-14.1-1.

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      (iv) For the purpose of this subdivision the exemption for a "specially adapted motor

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vehicle" means a use tax credit not to exceed the amount of use tax that would otherwise be due

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on the motor vehicle, exclusive of any adaptations. The use tax credit is equal to the cost of the

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special adaptations, including installation.

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      (20) Heating fuels. - From the sale and from the storage, use, or other consumption in

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this state of every type of fuel used in the heating of homes and residential premises.

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      (21) Electricity and gas. - From the sale and from the storage, use, or other consumption

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in this state of electricity and gas furnished for domestic use by occupants of residential premises.

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      (22) Manufacturing machinery and equipment.

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      (i) From the sale and from the storage, use, or other consumption in this state of tools,

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dies, and molds, and machinery and equipment (including replacement parts), and related items to

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the extent used in an industrial plant in connection with the actual manufacture, conversion, or

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processing of tangible personal property, or to the extent used in connection with the actual

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manufacture, conversion or processing of computer software as that term is utilized in industry

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numbers 7371, 7372, and 7373 in the standard industrial classification manual prepared by the

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technical committee on industrial classification, office of statistical standards, executive office of

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the president, United States bureau of the budget, as revised from time to time, to be sold, or that

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machinery and equipment used in the furnishing of power to an industrial manufacturing plant.

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For the purposes of this subdivision, "industrial plant" means a factory at a fixed location

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primarily engaged in the manufacture, conversion, or processing of tangible personal property to

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be sold in the regular course of business;

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      (ii) Machinery and equipment and related items are not deemed to be used in connection

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with the actual manufacture, conversion, or processing of tangible personal property, or in

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connection with the actual manufacture, conversion or processing of computer software as that

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term is utilized in industry numbers 7371, 7372, and 7373 in the standard industrial classification

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manual prepared by the technical committee on industrial classification, office of statistical

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standards, executive office of the president, United States bureau of the budget, as revised from

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time to time, to be sold to the extent the property is used in administration or distribution

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operations;

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      (iii) Machinery and equipment and related items used in connection with the actual

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manufacture, conversion, or processing of any computer software or any tangible personal

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property which is not to be sold and which would be exempt under subdivision (7) or this

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subdivision if purchased from a vendor or machinery and equipment and related items used

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during any manufacturing, converting or processing function is exempt under this subdivision

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even if that operation, function, or purpose is not an integral or essential part of a continuous

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production flow or manufacturing process;

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      (iv) Where a portion of a group of portable or mobile machinery is used in connection

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with the actual manufacture, conversion, or processing of computer software or tangible personal

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property to be sold, as previously defined, that portion, if otherwise qualifying, is exempt under

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this subdivision even though the machinery in that group is used interchangeably and not

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otherwise identifiable as to use.

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      (23) Trade-in value of motor vehicles. - From the sale and from the storage, use, or other

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consumption in this state of so much of the purchase price paid for a new or used automobile as is

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allocated for a trade-in allowance on the automobile of the buyer given in trade to the seller, or of

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the proceeds applicable only to the automobile as are received from the manufacturer of

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automobiles for the repurchase of the automobile whether the repurchase was voluntary or not

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towards the purchase of a new or used automobile by the buyer. For the purpose of this

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subdivision, the word "automobile" means a private passenger automobile not used for hire and

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does not refer to any other type of motor vehicle.

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      (24) Precious metal bullion.

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      (i) From the sale and from the storage, use, or other consumption in this state of precious

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metal bullion, substantially equivalent to a transaction in securities or commodities.

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      (ii) For purposes of this subdivision, "precious metal bullion" means any elementary

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precious metal which has been put through a process of smelting or refining, including, but not

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limited to, gold, silver, platinum, rhodium, and chromium, and which is in a state or condition

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that its value depends upon its content and not upon its form.

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      (iii) The term does not include fabricated precious metal which has been processed or

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manufactured for some one or more specific and customary industrial, professional, or artistic

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uses.

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      (25) Commercial vessels. - From sales made to a commercial ship, barge, or other vessel

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of fifty (50) tons burden or over, primarily engaged in interstate or foreign commerce, and from

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the repair, alteration, or conversion of the vessels, and from the sale of property purchased for the

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use of the vessels including provisions, supplies, and material for the maintenance and/or repair

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of the vessels.

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      (26) Commercial fishing vessels. - From the sale and from the storage, use, or other

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consumption in this state of vessels and other water craft which are in excess of five (5) net tons

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and which are used exclusively for "commercial fishing", as defined in this subdivision, and from

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the repair, alteration, or conversion of those vessels and other watercraft, and from the sale of

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property purchased for the use of those vessels and other watercraft including provisions,

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supplies, and material for the maintenance and/or repair of the vessels and other watercraft and

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the boats nets, cables, tackle, and other fishing equipment appurtenant to or used in connection

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with the commercial fishing of the vessels and other watercraft. "Commercial fishing" means the

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taking or the attempting to take any fish, shellfish, crustacea, or bait species with the intent of

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disposing of them for profit or by sale, barter, trade, or in commercial channels. The term does

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not include subsistence fishing, i.e., the taking for personal use and not for sale or barter; or sport

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fishing; but shall include vessels and other watercraft with a Rhode Island party and charter boat

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license issued by the department of environmental management pursuant to section 20-2-27.1

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which meet the following criteria: (i) the operator must have a current U.S.C.G. license to carry

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passengers for hire; (ii) U.S.C.G. vessel documentation in the coast wide fishery trade; (iii)

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U.S.C.G. vessel documentation as to proof of Rhode Island home port status or a Rhode Island

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boat registration to prove Rhode Island home port status; (iv) the vessel must be used as a

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commercial passenger carrying fishing vessel to carry passengers for fishing. The vessel must be

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able to demonstrate that at least fifty percent (50%) of its annual gross income derives from

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charters or provides documentation of a minimum of one hundred (100) charter trips annually; (v)

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the vessel must have a valid Rhode Island party and charter boat license. The tax administrator

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shall implement the provisions of this subdivision by promulgating rules and regulations relating

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thereto.

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      (27) Clothing and footwear. - From the sales of articles of clothing, including footwear,

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intended to be worn or carried on or about the human body for sales prior to October 1, 2012.

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Effective October 1, 2012, the exemption will apply to the sales of articles of clothing, including

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footwear, intended to be worn or carried on or about the human body up to two hundred and fifty

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dollars ($250) of the sales price per item. For the purposes of this section, "clothing or footwear"

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does not include clothing accessories or equipment or special clothing or footwear primarily

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designed for athletic activity or protective use as these terms are defined in section 44-18-7.1(f).

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In recognition of the work being performed by the Streamlined Sales and Use Tax Governing

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Board, upon any federal law which requires remote sellers to collect and remit taxes, effective the

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first (1st) day of the first (1st) state fiscal quarter following the change, this exemption will apply

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as it did prior to October 1, 2012.

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      (28) Water for residential use. - From the sale and from the storage, use, or other

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consumption in this state of water furnished for domestic use by occupants of residential

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premises.

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      (29) Bibles. - [Unconstitutional; see Ahlburn v. Clark, 728 A.2d 449 (R.I. 1999); see

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Notes to Decisions.]From the sale and from the storage, use, or other consumption in the state of

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any canonized scriptures of any tax-exempt nonprofit religious organization including, but not

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limited to, the Old Testament and the New Testament versions.

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      (30) Boats.

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      (i) From the sale of a boat or vessel to a bona fide nonresident of this state who does not

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register the boat or vessel in this state, or document the boat or vessel with the United States

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government at a home port within the state, whether the sale or delivery of the boat or vessel is

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made in this state or elsewhere; provided, that the nonresident transports the boat within thirty

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(30) days after delivery by the seller outside the state for use thereafter solely outside the state.

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      (ii) The tax administrator, in addition to the provisions of sections 44-19-17 and 44-19-

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28, may require the seller of the boat or vessel to keep records of the sales to bona fide

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nonresidents as the tax administrator deems reasonably necessary to substantiate the exemption

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provided in this subdivision, including the affidavit of the seller that the buyer represented

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himself or herself to be a bona fide nonresident of this state and of the buyer that he or she is a

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nonresident of this state.

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      (31) Youth activities equipment. - From the sale, storage, use, or other consumption in

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this state of items for not more than twenty dollars ($20.00) each by nonprofit Rhode Island

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eleemosynary organizations, for the purposes of youth activities which the organization is formed

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to sponsor and support; and by accredited elementary and secondary schools for the purposes of

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the schools or of organized activities of the enrolled students.

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      (32) Farm equipment. - From the sale and from the storage or use of machinery and

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equipment used directly for commercial farming and agricultural production; including, but not

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limited to, tractors, ploughs, harrows, spreaders, seeders, milking machines, silage conveyors,

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balers, bulk milk storage tanks, trucks with farm plates, mowers, combines, irrigation equipment,

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greenhouses and greenhouse coverings, graders and packaging machines, tools and supplies and

10-32

other farming equipment, including replacement parts, appurtenant to or used in connection with

10-33

commercial farming and tools and supplies used in the repair and maintenance of farming

10-34

equipment. "Commercial farming" means the keeping or boarding of five (5) or more horses or

11-1

the production within this state of agricultural products, including, but not limited to, field or

11-2

orchard crops, livestock, dairy, and poultry, or their products, where the keeping, boarding, or

11-3

production provides at least two thousand five hundred dollars ($2,500) in annual gross sales to

11-4

the operator, whether an individual, a group, a partnership, or a corporation for exemptions issued

11-5

prior to July 1, 2002; for exemptions issued or renewed after July 1, 2002, there shall be two (2)

11-6

levels. Level I shall be based on proof of annual gross sales from commercial farming of at least

11-7

twenty-five hundred dollars ($2,500) and shall be valid for purchases subject to the exemption

11-8

provided in this subdivision except for motor vehicles with an excise tax value of five thousand

11-9

dollars ($5,000) or greater; Level II shall be based on proof of annual gross sales from

11-10

commercial farming of at least ten thousand dollars ($10,000) or greater and shall be valid for

11-11

purchases subject to the exemption provided in this subdivision including motor vehicles with an

11-12

excise tax value of five thousand dollars ($5,000) or greater. For the initial issuance of the

11-13

exemptions, proof of the requisite amount of annual gross sales from commercial farming shall be

11-14

required for the prior year; for any renewal of an exemption granted in accordance with this

11-15

subdivision at either Level I or Level II, proof of gross annual sales from commercial farming at

11-16

the requisite amount shall be required for each of the prior two (2) years. Certificates of

11-17

exemption issued or renewed after July 1, 2002, shall clearly indicate the level of the exemption

11-18

and be valid for four (4) years after the date of issue. This exemption applies even if the same

11-19

equipment is used for ancillary uses, or is temporarily used for a non-farming or a non-

11-20

agricultural purpose, but shall not apply to motor vehicles acquired after July 1, 2002, unless the

11-21

vehicle is a farm vehicle as defined pursuant to section 31-1-8 and is eligible for registration

11-22

displaying farm plates as provided for in section 31-3-31.

11-23

      (33) Compressed air. - From the sale and from the storage, use, or other consumption in

11-24

the state of compressed air.

11-25

      (34) Flags. - From the sale and from the storage, consumption, or other use in this state

11-26

of United States, Rhode Island or POW-MIA flags; provided, however, that said flags are

11-27

manufactured within the United States.

11-28

      (35) Motor vehicle and adaptive equipment to certain veterans. - From the sale of a

11-29

motor vehicle and adaptive equipment to and for the use of a veteran with a service-connected

11-30

loss of or the loss of use of a leg, foot, hand, or arm, or any veteran who is a double amputee,

11-31

whether service connected or not. The motor vehicle must be purchased by and especially

11-32

equipped for use by the qualifying veteran. Certificate of exemption or refunds of taxes paid is

11-33

granted under rules or regulations that the tax administrator may prescribe.

12-34

      (36) Textbooks. - From the sale and from the storage, use, or other consumption in this

12-35

state of textbooks by an "educational institution" as defined in subdivision (18) of this section and

12-36

as well as any educational institution within the purview of section 16-63-9(4) and used textbooks

12-37

by any purveyor.

12-38

      (37) Tangible personal property and supplies used in on-site hazardous waste recycling,

12-39

reuse, or treatment. - From the sale, storage, use, or other consumption in this state of tangible

12-40

personal property or supplies used or consumed in the operation of equipment, the exclusive

12-41

function of which is the recycling, reuse, or recovery of materials (other than precious metals, as

12-42

defined in subdivision (24)(ii) of this section) from the treatment of "hazardous wastes", as

12-43

defined in section 23-19.1-4, where the "hazardous wastes" are generated in Rhode Island solely

12-44

by the same taxpayer and where the personal property is located at, in, or adjacent to a generating

12-45

facility of the taxpayer in Rhode Island. The taxpayer shall procure an order from the director of

12-46

the department of environmental management certifying that the equipment and/or supplies as

12-47

used, or consumed, qualify for the exemption under this subdivision. If any information relating

12-48

to secret processes or methods of manufacture, production, or treatment is disclosed to the

12-49

department of environmental management only to procure an order, and is a "trade secret" as

12-50

defined in section 28-21-10(b), it is not open to public inspection or publicly disclosed unless

12-51

disclosure is required under chapter 21 of title 28 or chapter 24.4 of title 23.

12-52

      (38) Promotional and product literature of boat manufacturers. - From the sale and from

12-53

the storage, use, or other consumption of promotional and product literature of boat

12-54

manufacturers shipped to points outside of Rhode Island which either: (i) accompany the product

12-55

which is sold, (ii) are shipped in bulk to out of state dealers for use in the sale of the product, or

12-56

(iii) are mailed to customers at no charge.

12-57

      (39) Food items paid for by food stamps. - From the sale and from the storage, use, or

12-58

other consumption in this state of eligible food items payment for which is properly made to the

12-59

retailer in the form of U.S. government food stamps issued in accordance with the Food Stamp

12-60

Act of 1977, 7 U.S.C. section 2011 et seq.

12-61

      (40) Transportation charges. - From the sale or hiring of motor carriers as defined in

12-62

section 39-12-2(l) to haul goods, when the contract or hiring cost is charged by a motor freight

12-63

tariff filed with the Rhode Island public utilities commission on the number of miles driven or by

12-64

the number of hours spent on the job.

12-65

      (41) Trade-in value of boats. - From the sale and from the storage, use, or other

12-66

consumption in this state of so much of the purchase price paid for a new or used boat as is

12-67

allocated for a trade-in allowance on the boat of the buyer given in trade to the seller or of the

12-68

proceeds applicable only to the boat as are received from an insurance claim as a result of a stolen

13-1

or damaged boat, towards the purchase of a new or used boat by the buyer.

13-2

      (42) Equipment used for research and development. - From the sale and from the

13-3

storage, use, or other consumption of equipment to the extent used for research and development

13-4

purposes by a qualifying firm. For the purposes of this subdivision, "qualifying firm" means a

13-5

business for which the use of research and development equipment is an integral part of its

13-6

operation, and "equipment" means scientific equipment, computers, software, and related items.

13-7

      (43) Coins. - From the sale and from the other consumption in this state of coins having

13-8

numismatic or investment value.

13-9

      (44) Farm structure construction materials. - Lumber, hardware and other materials used

13-10

in the new construction of farm structures, including production facilities such as, but not limited

13-11

to, farrowing sheds, free stall and stanchion barns, milking parlors, silos, poultry barns, laying

13-12

houses, fruit and vegetable storages, rooting cellars, propagation rooms, greenhouses, packing

13-13

rooms, machinery storage, seasonal farm worker housing, certified farm markets, bunker and

13-14

trench silos, feed storage sheds, and any other structures used in connection with commercial

13-15

farming.

13-16

      (45) Telecommunications carrier access service. - Carrier access service or

13-17

telecommunications service when purchased by a telecommunications company from another

13-18

telecommunications company to facilitate the provision of telecommunications service.

13-19

      (46) Boats or vessels brought into the state exclusively for winter storage, maintenance,

13-20

repair or sale. - Notwithstanding the provisions of sections 44-18-10, 44-18-11, 44-18-20, the tax

13-21

imposed by section 44-18-20 is not applicable for the period commencing on the first day of

13-22

October in any year to and including the 30th day of April next succeeding with respect to the use

13-23

of any boat or vessel within this state exclusively for purposes of: (i) delivery of the vessel to a

13-24

facility in this state for storage, including dry storage and storage in water by means of apparatus

13-25

preventing ice damage to the hull, maintenance, or repair; (ii) the actual process of storage,

13-26

maintenance, or repair of the boat or vessel; or (iii) storage for the purpose of selling the boat or

13-27

vessel.

13-28

      (47) Jewelry display product. - From the sale and from the storage, use, or other

13-29

consumption in this state of tangible personal property used to display any jewelry product;

13-30

provided, that title to the jewelry display product is transferred by the jewelry manufacturer or

13-31

seller and that the jewelry display product is shipped out of state for use solely outside the state

13-32

and is not returned to the jewelry manufacturer or seller.

13-33

      (48) Boats or vessels generally. - Notwithstanding the provisions of this chapter, the tax

13-34

imposed by sections 44-18-20 and 44-18-18 shall not apply with respect to the sale and to the

14-1

storage, use, or other consumption in this state of any new or used boat. The exemption provided

14-2

for in this subdivision does not apply after October 1, 1993, unless prior to October 1, 1993, the

14-3

federal ten percent (10%) surcharge on luxury boats is repealed.

14-4

      (49) Banks and Regulated investment companies interstate toll-free calls. -

14-5

Notwithstanding the provisions of this chapter, the tax imposed by this chapter does not apply to

14-6

the furnishing of interstate and international, toll-free terminating telecommunication service that

14-7

is used directly and exclusively by or for the benefit of an eligible company as defined in this

14-8

subdivision; provided, that an eligible company employs on average during the calendar year no

14-9

less than five hundred (500) "full-time equivalent employees", as that term is defined in section

14-10

42-64.5-2. For purposes of this section, an "eligible company" means a "regulated investment

14-11

company" as that term is defined in the Internal Revenue Code of 1986, 26 U.S.C. section 1 et

14-12

seq., or a corporation to the extent the service is provided, directly or indirectly, to or on behalf of

14-13

a regulated investment company, an employee benefit plan, a retirement plan or a pension plan or

14-14

a state chartered bank.

14-15

      (50) Mobile and manufactured homes generally. - From the sale and from the storage,

14-16

use, or other consumption in this state of mobile and/or manufactured homes as defined and

14-17

subject to taxation pursuant to the provisions of chapter 44 of title 31.

14-18

      (51) Manufacturing business reconstruction materials.

14-19

      (i) From the sale and from the storage, use or other consumption in this state of lumber,

14-20

hardware, and other building materials used in the reconstruction of a manufacturing business

14-21

facility which suffers a disaster, as defined in this subdivision, in this state. "Disaster" means any

14-22

occurrence, natural or otherwise, which results in the destruction of sixty percent (60%) or more

14-23

of an operating manufacturing business facility within this state. "Disaster" does not include any

14-24

damage resulting from the willful act of the owner of the manufacturing business facility.

14-25

      (ii) Manufacturing business facility includes, but is not limited to, the structures housing

14-26

the production and administrative facilities.

14-27

      (iii) In the event a manufacturer has more than one manufacturing site in this state, the

14-28

sixty percent (60%) provision applies to the damages suffered at that one site.

14-29

      (iv) To the extent that the costs of the reconstruction materials are reimbursed by

14-30

insurance, this exemption does not apply.

14-31

      (52) Tangible personal property and supplies used in the processing or preparation of

14-32

floral products and floral arrangements. - From the sale, storage, use, or other consumption in this

14-33

state of tangible personal property or supplies purchased by florists, garden centers, or other like

14-34

producers or vendors of flowers, plants, floral products, and natural and artificial floral

15-1

arrangements which are ultimately sold with flowers, plants, floral products, and natural and

15-2

artificial floral arrangements or are otherwise used in the decoration, fabrication, creation,

15-3

processing, or preparation of flowers, plants, floral products, or natural and artificial floral

15-4

arrangements, including descriptive labels, stickers, and cards affixed to the flower, plant, floral

15-5

product or arrangement, artificial flowers, spray materials, floral paint and tint, plant shine, flower

15-6

food, insecticide and fertilizers.

15-7

      (53) Horse food products. - From the sale and from the storage, use, or other

15-8

consumption in this state of horse food products purchased by a person engaged in the business of

15-9

the boarding of horses.

15-10

      (54) Non-motorized recreational vehicles sold to nonresidents.

15-11

      (i) From the sale, subsequent to June 30, 2003, of a non-motorized recreational vehicle to

15-12

a bona fide nonresident of this state who does not register the non-motorized recreational vehicle

15-13

in this state, whether the sale or delivery of the non-motorized recreational vehicle is made in this

15-14

state or at the place of residence of the nonresident; provided, that a non-motorized recreational

15-15

vehicle sold to a bona fide nonresident whose state of residence does not allow a like exemption

15-16

to its nonresidents is not exempt from the tax imposed under section 44-18-20; provided, further,

15-17

that in that event the bona fide nonresident pays a tax to Rhode Island on the sale at a rate equal

15-18

to the rate that would be imposed in his or her state of residence not to exceed the rate that would

15-19

have been imposed under section 44-18-20. Notwithstanding any other provisions of law, a

15-20

licensed non-motorized recreational vehicle dealer shall add and collect the tax required under

15-21

this subdivision and remit the tax to the tax administrator under the provisions of chapters 18 and

15-22

19 of this title. Provided, that when a Rhode Island licensed non-motorized recreational vehicle

15-23

dealer is required to add and collect the sales and use tax on the sale of a non-motorized

15-24

recreational vehicle to a bona fide nonresident as provided in this section, the dealer in computing

15-25

the tax takes into consideration the law of the state of the nonresident as it relates to the trade-in

15-26

of motor vehicles.

15-27

      (ii) The tax administrator, in addition to the provisions of sections 44-19-27 and 44-19-

15-28

28, may require any licensed non-motorized recreational vehicle dealer to keep records of sales to

15-29

bona fide nonresidents as the tax administrator deems reasonably necessary to substantiate the

15-30

exemption provided in this subdivision, including the affidavit of a licensed non-motorized

15-31

recreational vehicle dealer that the purchaser of the non-motorized recreational vehicle was the

15-32

holder of, and had in his or her possession a valid out-of-state non-motorized recreational vehicle

15-33

registration or a valid out-of-state driver's license.

16-34

      (iii) Any nonresident who registers a non-motorized recreational vehicle in this state

16-35

within ninety (90) days of the date of its sale to him or her is deemed to have purchased the non-

16-36

motorized recreational vehicle for use, storage, or other consumption in this state, and is subject

16-37

to, and liable for the use tax imposed under the provisions of section 44-18-20.

16-38

      (iv) "Non-motorized recreational vehicle" means any portable dwelling designed and

16-39

constructed to be used as a temporary dwelling for travel, camping, recreational, and vacation use

16-40

which is eligible to be registered for highway use, including, but not limited to, "pick-up coaches"

16-41

or "pick-up campers," "travel trailers," and "tent trailers" as those terms are defined in chapter 1

16-42

of title 31.

16-43

      (55) Sprinkler and fire alarm systems in existing buildings. - From the sale in this state of

16-44

sprinkler and fire alarm systems, emergency lighting and alarm systems, and from the sale of the

16-45

materials necessary and attendant to the installation of those systems, that are required in

16-46

buildings and occupancies existing therein in July 2003, in order to comply with any additional

16-47

requirements for such buildings arising directly from the enactment of the Comprehensive Fire

16-48

Safety Act of 2003, and that are not required by any other provision of law or ordinance or

16-49

regulation adopted pursuant to that Act. The exemption provided in this subdivision shall expire

16-50

on December 31, 2008.

16-51

      (56) Aircraft. - Notwithstanding the provisions of this chapter, the tax imposed by

16-52

sections 44-18-18 and 44-18-20 shall not apply with respect to the sale and to the storage, use, or

16-53

other consumption in this state of any new or used aircraft or aircraft parts.

16-54

      (57) Renewable energy products. - Notwithstanding any other provisions of Rhode

16-55

Island general laws the following products shall also be exempt from sales tax: solar photovoltaic

16-56

modules or panels, or any module or panel that generates electricity from light; solar thermal

16-57

collectors, including, but not limited to, those manufactured with flat glass plates, extruded

16-58

plastic, sheet metal, and/or evacuated tubes; geothermal heat pumps, including both water-to-

16-59

water and water-to-air type pumps; wind turbines; towers used to mount wind turbines if

16-60

specified by or sold by a wind turbine manufacturer; DC to AC inverters that interconnect with

16-61

utility power lines; manufactured mounting racks and ballast pans for solar collector, module or

16-62

panel installation. Not to include materials that could be fabricated into such racks; monitoring

16-63

and control equipment, if specified or supplied by a manufacturer of solar thermal, solar

16-64

photovoltaic, geothermal, or wind energy systems or if required by law or regulation for such

16-65

systems but not to include pumps, fans or plumbing or electrical fixtures unless shipped from the

16-66

manufacturer affixed to, or an integral part of, another item specified on this list; and solar storage

16-67

tanks that are part of a solar domestic hot water system or a solar space heating system. If the tank

16-68

comes with an external heat exchanger it shall also be tax exempt, but a standard hot water tank is

17-1

not exempt from state sales tax.

17-2

      (58) Returned property. - The amount charged for property returned by customers upon

17-3

rescission of the contract of sale when the entire amount exclusive of handling charges paid for

17-4

the property is refunded in either cash or credit, and where the property is returned within one

17-5

hundred twenty (120) days from the date of delivery.

17-6

      (59) Dietary Supplements. - From the sale and from the storage, use or other

17-7

consumption of dietary supplements as defined in section 44-18-7.1(l)(v), sold on prescriptions.

17-8

      (60) Blood. - From the sale and from the storage, use or other consumption of human

17-9

blood.

17-10

      (61) Agricultural products for human consumption. - From the sale and from the storage,

17-11

use or other consumption of livestock and poultry of the kinds of products of which ordinarily

17-12

constitute food for human consumption and of livestock of the kind the products of which

17-13

ordinarily constitute fibers for human use.

17-14

      (62) Diesel emission control technology. - From the sale and use of diesel retrofit

17-15

technology that is required by section 31-47.3-4 of the general laws.

17-16

      (63) Feed for certain animals used in commercial farming. - From the sale of feed for

17-17

animals as described in subsection 44-18-30(61).

17-18

     SECTION 2. Section 44-30-2.6 of the General Laws in Chapter 44-30 entitled "Personal

17-19

Income Tax" is hereby amended to read as follows:

17-20

     44-30-2.6. Rhode Island taxable income -- Rate of tax. -- (a) "Rhode Island taxable

17-21

income" means federal taxable income as determined under the Internal Revenue Code, 26 U.S.C.

17-22

section 1 et seq., not including the increase in the basic standard deduction amount for married

17-23

couples filing joint returns as provided in the Jobs and Growth Tax Relief Reconciliation Act of

17-24

2003 and the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), and as

17-25

modified by the modifications in section 44-30-12.

17-26

     (b) Notwithstanding the provisions of sections 44-30-1 and 44-30-2, for tax years

17-27

beginning on or after January 1, 2001, a Rhode Island personal income tax is imposed upon the

17-28

Rhode Island taxable income of residents and nonresidents, including estates and trusts, at the rate

17-29

of twenty-five and one-half percent (25.5%) for tax year 2001, and twenty-five percent (25%) for

17-30

tax year 2002 and thereafter of the federal income tax rates, including capital gains rates and any

17-31

other special rates for other types of income, except as provided in section 44-30-2.7, which were

17-32

in effect immediately prior to enactment of the Economic Growth and Tax Relief Reconciliation

17-33

Act of 2001 (EGTRRA); provided, rate schedules shall be adjusted for inflation by the tax

17-34

administrator beginning in taxable year 2002 and thereafter in the manner prescribed for

18-1

adjustment by the commissioner of Internal Revenue in 26 U.S.C. section 1(f). However, for tax

18-2

years beginning on or after January 1, 2006, a taxpayer may elect to use the alternative flat tax

18-3

rate provided in section 44-30-2.10 to calculate his or her personal income tax liability.

18-4

     (c) For tax years beginning on or after January 1, 2001, if a taxpayer has an alternative

18-5

minimum tax for federal tax purposes, the taxpayer shall determine if he or she has a Rhode

18-6

Island alternative minimum tax. The Rhode Island alternative minimum tax shall be computed by

18-7

multiplying the federal tentative minimum tax without allowing for the increased exemptions

18-8

under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (as redetermined on federal

18-9

form 6251 Alternative Minimum Tax-Individuals) by twenty-five and one-half percent (25.5%)

18-10

for tax year 2001, and twenty-five percent (25%) for tax year 2002 and thereafter, and comparing

18-11

the product to the Rhode Island tax as computed otherwise under this section. The excess shall be

18-12

the taxpayer's Rhode Island alternative minimum tax. (1) For tax years beginning on or after

18-13

January 1, 2005 and thereafter the exemption amount for alternative minimum tax, for Rhode

18-14

Island purposes, shall be adjusted for inflation by the tax administrator in the manner prescribed

18-15

for adjustment by the commissioner of Internal Revenue in 26 U.S.C. section 1(f).

18-16

     (2) For the period January 1, 2007 through December 31, 2007, and thereafter, Rhode

18-17

Island taxable income shall be determined by deducting from federal adjusted gross income as

18-18

defined in 26 U.S.C. section 62 as modified by the modifications in section 44-30-12 the Rhode

18-19

Island itemized deduction amount and the Rhode Island exemption amount as determined in this

18-20

section.

18-21

     (A) Tax imposed.

18-22

     (1) There is hereby imposed on the taxable income of married individuals filing joint

18-23

returns and surviving spouses a tax determined in accordance with the following table:

18-24

     If taxable income is: The tax is:

18-25

     Not over $53,150 3.75% of taxable income

18-26

     Over $53,150 but not over $128,500 $1,993.13 plus 7.00% of the excess over $53,150

18-27

     Over $128,500 but not over $195,850 $7,267.63 plus 7.75% of the excess over $128,500

18-28

     Over $195,850 but not over $349,700 $12,487.25 plus 9.00% of the excess over $195,850

18-29

     Over $349,700 $26,333.75 plus 9.90% of the excess over $349,700

18-30

      (2) There is hereby imposed on the taxable income of every head of household a tax

18-31

determined in accordance with the following table:

18-32

     If taxable income is: The tax is:

18-33

     Not over $42,650 3.75% of taxable income

19-34

     Over $42,650 but not over $110,100 $1,599.38 plus 7.00% of the excess over $42,650

19-35

     Over $110,100 but not over $178,350 $6,320.88 plus 7.75% of the excess over $110,100

19-36

     Over $178,350 but not over $349,700 $11,610.25 plus 9.00% of the excess over $178,350

19-37

     Over $349,700 $27,031.75 plus 9.90% of the excess over $349,700

19-38

      (3) There is hereby imposed on the taxable income of unmarried individuals (other than

19-39

surviving spouses and heads of households) a tax determined in accordance with the following

19-40

table:

19-41

     If taxable income is: The tax is:

19-42

     Not over $31,850 3.75% of taxable income

19-43

     Over $31,850 but not over $77,100 $1,194.38 plus 7.00% of the excess over $31,850

19-44

     Over $77,100 but not over $160,850 $4,361.88 plus 7.75% of the excess over $77,100

19-45

     Over $160,850 but not over $349,700 $10,852.50 plus 9.00% of the excess over $160,850

19-46

     Over $349,700 $27,849.00 plus 9.90% of the excess over $349,700

19-47

      (4) There is hereby imposed on the taxable income of married individuals filing separate

19-48

returns and bankruptcy estates a tax determined in accordance with the following table:

19-49

     If taxable income is: The tax is:

19-50

     Not over $26,575 3.75% of taxable income

19-51

     Over $26,575 but not over $64,250 $996.56 plus 7.00% of the excess over $26,575

19-52

     Over $64,250 but not over $97,925 $3,633.81 plus 7.75% of the excess over $64,250

19-53

     Over $97,925 but not over $174,850 $6,243.63 plus 9.00% of the excess over $97,925

19-54

     Over $174,850 $13,166.88 plus 9.90% of the excess over $174,850

19-55

      (5) There is hereby imposed a taxable income of an estate or trust a tax determined in

19-56

accordance with the following table:

19-57

     If taxable income is: The tax is:

19-58

     Not over $2,150 3.75% of taxable income

19-59

     Over $2,150 but not over $5,000 $80.63 plus 7.00% of the excess over $2,150

19-60

     Over $5,000 but not over $7,650 $280.13 plus 7.75% of the excess over $5,000

19-61

     Over $7,650 but not over $10,450 $485.50 plus 9.00% of the excess over $7,650

19-62

     Over $10,450 $737.50 plus 9.90% of the excess over $10,450

19-63

      (6) Adjustments for inflation. The dollars amount contained in paragraph (A) shall be

19-64

increased by an amount equal to:

19-65

     (a) Such dollar amount contained in paragraph (A) in the year 1993, multiplied by;

19-66

     (b) The cost-of-living adjustment determined under section (J) with a base year of 1993;

19-67

     (c) The cost-of-living adjustment referred to in subparagraph (a) and (b) used in making

19-68

adjustments to the nine percent (9%) and nine and nine tenths percent (9.9%) dollar amounts shall

20-1

be determined under section (J) by substituting "1994" for "1993."

20-2

     (B) Maximum capital gains rates

20-3

     (1) In general

20-4

     If a taxpayer has a net capital gain for tax years ending prior to January 1, 2010, the tax

20-5

imposed by this section for such taxable year shall not exceed the sum of:

20-6

     (a) 2.5 % of the net capital gain as reported for federal income tax purposes under section

20-7

26 U.S.C. 1(h)(1)(a) and 26 U.S.C. 1(h)(1)(b).

20-8

     (b) 5% of the net capital gain as reported for federal income tax purposes under 26 U.S.C.

20-9

1(h)(1)(c).

20-10

     (c) 6.25% of the net capital gain as reported for federal income tax purposes under 26

20-11

U.S.C. 1(h)(1)(d).

20-12

     (d) 7% of the net capital gain as reported for federal income tax purposes under 26 U.S.C.

20-13

1(h)(1)(e).

20-14

     (2) For tax years beginning on or after January 1, 2010 the tax imposed on net capital

20-15

gain shall be determined under subdivision 44-30-2.6(c)(2)(A).

20-16

     (C) Itemized deductions.

20-17

     (1) In general

20-18

     For the purposes of section (2) "itemized deductions" means the amount of federal

20-19

itemized deductions as modified by the modifications in section 44-30-12.

20-20

     (2) Individuals who do not itemize their deductions In the case of an individual who does

20-21

not elect to itemize his deductions for the taxable year, they may elect to take a standard

20-22

deduction.

20-23

     (3) Basic standard deduction.

20-24

     The Rhode Island standard deduction shall be allowed in accordance with the following

20-25

table:

20-26

     Filing status
Amount

20-27

     Single
$5,350

20-28

     Married filing jointly or qualifying widow(er)
$8,900

20-29

     Married filing separately
$4,450

20-30

     Head of Household
$7,850

20-31

      (4) Additional standard deduction for the aged and blind. An additional standard

20-32

deduction shall be allowed for individuals age sixty-five (65) or older or blind in the amount of

20-33

$1,300 for individuals who are not married and $1,050 for individuals who are married.

21-34

     (5) Limitation on basic standard deduction in the case of certain dependents.

21-35

     In the case of an individual to whom a deduction under section (E) is allowable to another

21-36

taxpayer, the basic standard deduction applicable to such individual shall not exceed the greater

21-37

of:

21-38

     (a) $850;

21-39

     (b) The sum of $300 and such individual's earned income; (6) Certain individuals not

21-40

eligible for standard deduction.

21-41

     In the case of:

21-42

     (a) A married individual filing a separate return where either spouse itemizes deductions;

21-43

     (b) Nonresident alien individual;

21-44

     (c) An estate or trust;

21-45

     The standard deduction shall be zero.

21-46

     (7) Adjustments for inflation.

21-47

     Each dollars amount contained in paragraphs (3), (4) and (5) shall be increased by an

21-48

amount equal to:

21-49

      (a) Such dollar amount contained in paragraphs (3), (4) and (5) in the year 1988,

21-50

multiplied by

21-51

     (b) The cost-of-living adjustment determined under section (J) with a base year of 1988.

21-52

     (D) Overall limitation on itemized deductions

21-53

     (1) General rule.

21-54

     In the case of an individual whose adjusted gross income as modified by section 44-30-12

21-55

exceeds the applicable amount, the amount of the itemized deductions otherwise allowable for the

21-56

taxable year shall be reduced by the lesser of:

21-57

     (a) Three percent (3%) of the excess of adjusted gross income as modified by section 44-

21-58

30-12 over the applicable amount; or

21-59

     (b) Eighty percent (80%) of the amount of the itemized deductions otherwise allowable

21-60

for such taxable year.

21-61

     (2) Applicable amount.

21-62

     (a) In general.

21-63

     For purposes of this section, the term "applicable amount" means $156,400 ($78,200 in

21-64

the case of a separate return by a married individual)

21-65

     (b) Adjustments for inflation.

21-66

     Each dollar amount contained in paragraph (a) shall be increased by an amount equal to:

21-67

     (i) Such dollar amount contained in paragraph (a) in the year 1991, multiplied by

22-68

     (ii) The cost-of-living adjustment determined under section (J) with a base year of 1991.

22-69

     (3) Phase-out of Limitation.

22-70

     (a) In general.

22-71

     In the case of taxable year beginning after December 31, 2005, and before January 1,

22-72

2010, the reduction under section (1) shall be equal to the applicable fraction of the amount which

22-73

would be the amount of such reduction.

22-74

     (b) Applicable fraction.

22-75

     For purposes of paragraph (a), the applicable fraction shall be determined in accordance

22-76

with the following table:

22-77

     For taxable years beginning in calendar year The applicable fraction is

22-78

     2006 and 2007 2/3

22-79

     2008 and 2009 1/3

22-80

      (E) Exemption amount

22-81

     (1) In general.

22-82

     Except as otherwise provided in this subsection, the term "exemption amount" mean

22-83

$3,400.

22-84

     (2) Exemption amount disallowed in case of certain dependents.

22-85

     In the case of an individual with respect to whom a deduction under this section is

22-86

allowable to another taxpayer for the same taxable year, the exemption amount applicable to such

22-87

individual for such individual's taxable year shall be zero.

22-88

     (3) Adjustments for inflation.

22-89

     The dollar amount contained in paragraph (1) shall be increased by an amount equal to:

22-90

     (a) Such dollar amount contained in paragraph (1) in the year 1989, multiplied by

22-91

     (b) The cost-of-living adjustment determined under section (J) with a base year of 1989.

22-92

     (4) Limitation.

22-93

     (a) In general. In the case of any taxpayer whose adjusted gross income as modified for

22-94

the taxable year exceeds the threshold amount shall be reduced by the applicable percentage.

22-95

     (b) Applicable percentage.

22-96

     In the case of any taxpayer whose adjusted gross income for the taxable year exceeds the

22-97

threshold amount, the exemption amount shall be reduced by two (2) percentage points for each

22-98

$2,500 (or fraction thereof) by which the taxpayer's adjusted gross income for the taxable year

22-99

exceeds the threshold amount. In the case of a married individual filing a separate return, the

22-100

preceding sentence shall be applied by substituting "$1,250" for "$2,500." In no event shall the

22-101

applicable percentage exceed one hundred percent (100%).

23-102

     (c) Threshold Amount.

23-103

     For the purposes of this paragraph, the term "threshold amount" shall be determined with

23-104

the following table:

23-105

     Filing status
Amount

23-106

     Single
$156,400

23-107

     Married filing jointly of qualifying widow(er)
$234,600

23-108

     Married filing separately
$117,300

23-109

     Head of Household
$195,500

23-110

      (d) Adjustments for inflation.

23-111

     Each dollars amount contain in paragraph (b) shall be increased by an amount equal to:

23-112

     (i) Such dollar amount contained in paragraph (b) in the year 1991, multiplied by

23-113

     (ii) The cost-of-living adjustment determined under section (J) with a base year of 1991.

23-114

     (5) Phase-out of Limitation.

23-115

     (a) In general.

23-116

     In the case of taxable years beginning after December 31, 2005, and before January 1,

23-117

2010, the reduction under section 4 shall be equal to the applicable fraction of the amount which

23-118

would be the amount of such reduction.

23-119

     (b) Applicable fraction.

23-120

     For the purposes of paragraph (a), the applicable fraction shall be determined in

23-121

accordance with the following table:

23-122

     For taxable years beginning in calendar year The applicable fraction is

23-123

     2006 and 2007 2/3

23-124

     2008 and 2009 1/3

23-125

      (F) Alternative minimum tax

23-126

     (1) General rule. - There is hereby imposed (in addition to any other tax imposed by this

23-127

subtitle) a tax equal to the excess (if any) of:

23-128

     (a) The tentative minimum tax for the taxable year, over

23-129

     (b) The regular tax for the taxable year.

23-130

     (2) The tentative minimum tax for the taxable year is the sum of:

23-131

     (a) 6.5 percent of so much of the taxable excess as does not exceed $175,000, plus (b)

23-132

7.0 percent of so much of the taxable excess above $175,000.

23-133

     (3) The amount determined under the preceding sentence shall be reduced by the

23-134

alternative minimum tax foreign tax credit for the taxable year.

23-135

     (4) Taxable excess. - For the purposes of this subsection the term "taxable excess" means

23-136

so much of the federal alternative minimum taxable income as modified by the modifications in

24-1

section 44-30-12 as exceeds the exemption amount.

24-2

     (5) In the case of a married individual filing a separate return, subparagraph (2) shall be

24-3

applied by substituting "$87,500" for $175,000 each place it appears.

24-4

     (6) Exemption amount.

24-5

      For purposes of this section "exemption amount" means:

24-6

     Filing status Amount

24-7

     Single $39,150

24-8

     Married filing jointly or qualifying widow(er) $53,700

24-9

     Married filing separately $26,850

24-10

     Head of Household $39,150

24-11

     Estate or trust $24,650

24-12

     (7) Treatment of unearned income of minor children

24-13

     (a) In general.

24-14

     In the case of a minor child, the exemption amount for purposes of section (6) shall not

24-15

exceed the sum of:

24-16

     (i) Such child's earned income, plus

24-17

     (ii) $6,000.

24-18

     (8) Adjustments for inflation.

24-19

     The dollar amount contained in paragraphs (6) and (7) shall be increased by an amount

24-20

equal to:

24-21

     (a) Such dollar amount contained in paragraphs (6) and (7) in the year 2004, multiplied

24-22

by

24-23

     (b) The cost-of-living adjustment determined under section (J) with a base year of 2004.

24-24

     (9) Phase-out.

24-25

     (a) In general.

24-26

     The exemption amount of any taxpayer shall be reduced (but not below zero) by an

24-27

amount equal to twenty-five percent (25%) of the amount by which alternative minimum taxable

24-28

income of the taxpayer exceeds the threshold amount.

24-29

     (b) Threshold amount. For purposes of this paragraph, the term "threshold amount" shall

24-30

be determined with the following table:

24-31

     Filing status
Amount

24-32

     Single
$123,250

24-33

     Married filing jointly or qualifying widow(er)
$164,350

25-34

     Married filing separately
$82,175

25-35

     Head of Household
$123,250

25-36

     Estate or Trust
$82,150

25-37

      (c) Adjustments for inflation

25-38

     Each dollar amount contained in paragraph (9) shall be increased by an amount equal to:

25-39

     (i) Such dollar amount contained in paragraph (9) in the year 2004, multiplied by

25-40

     (ii) The cost-of-living adjustment determined under section (J) with a base year of 2004.

25-41

     (G) Other Rhode Island taxes

25-42

     (1) General rule. - There is hereby imposed (in addition to any other tax imposed by this

25-43

subtitle) a tax equal to twenty-five percent (25%) of:

25-44

     (a) The Federal income tax on lump-sum distributions.

25-45

     (b) The Federal income tax on parents' election to report child's interest and dividends.

25-46

     (c) The recapture of Federal tax credits that were previously claimed on Rhode Island

25-47

return.

25-48

     (H) Tax for children under 18 with investment income

25-49

     (1) General rule. - There is hereby imposed a tax equal to twenty-five percent (25%) of:

25-50

     (a) The Federal tax for children under the age of 18 with investment income.

25-51

     (I) Averaging of farm income

25-52

     (1) General rule. - At the election of an individual engaged in a farming business or

25-53

fishing business, the tax imposed in section 2 shall be equal to twenty-five percent (25%) of:

25-54

     (a) The Federal averaging of farm income as determined in IRC section 1301.

25-55

     (J) Cost-of-living adjustment

25-56

     (1) In general.

25-57

     The cost-of-living adjustment for any calendar year is the percentage (if any) by which:

25-58

     (a) The CPI for the preceding calendar year exceeds

25-59

     (b) The CPI for the base year.

25-60

     (2) CPI for any calendar year.

25-61

     For purposes of paragraph (1), the CPI for any calendar year is the average of the

25-62

Consumer Price Index as of the close of the twelve (12) month period ending on August 31 of

25-63

such calendar year.

25-64

     (3) Consumer Price Index For purposes of paragraph (2), the term "consumer price

25-65

index" means the last consumer price index for all urban consumers published by the department

25-66

of labor. For purposes of the preceding sentence, the revision of the consumer price index which

25-67

is most consistent with the consumer price index for calendar year 1986 shall be used.

26-68

     (4) Rounding.

26-69

     (a) In general.

26-70

     If any increase determined under paragraph (1) is not a multiple of $50, such increase

26-71

shall be rounded to the next lowest multiple of $50.

26-72

     (b) In the case of a married individual filing a separate return, subparagraph (a) shall be

26-73

applied by substituting "$25" for $50 each place it appears.

26-74

     (K) Credits against tax. - For tax years beginning on or after January 1, 2001, a taxpayer

26-75

entitled to any of the following federal credits enacted prior to January 1, 1996 shall be entitled to

26-76

a credit against the Rhode Island tax imposed under this section:

26-77

     (1) [Deleted by P.L. 2007, ch. 73, art. 7, section 5_.

26-78

     (2) Child and dependent care credit;

26-79

     (3) General business credits;

26-80

     (4) Credit for elderly or the disabled;

26-81

     (5) Credit for prior year minimum tax;

26-82

     (6) Mortgage interest credit;

26-83

     (7) Empowerment zone employment credit;

26-84

     (8) Qualified electric vehicle credit.

26-85

     (L) Credit against tax for adoption. - For tax years beginning on or after January 1, 2006,

26-86

a taxpayer entitled to the federal adoption credit shall be entitled to a credit against the Rhode

26-87

Island tax imposed under this section if the adopted child was under the care, custody, or

26-88

supervision of the Rhode Island department of children, youth and families prior to the adoption.

26-89

     (M) The credit shall be twenty-five percent (25%) of the aforementioned federal credits

26-90

provided there shall be no deduction based on any federal credits enacted after January 1, 1996,

26-91

including the rate reduction credit provided by the federal Economic Growth and Tax

26-92

Reconciliation Act of 2001 (EGTRRA). In no event shall the tax imposed under this section be

26-93

reduced to less than zero. A taxpayer required to recapture any of the above credits for federal tax

26-94

purposes shall determine the Rhode Island amount to be recaptured in the same manner as

26-95

prescribed in this subsection.

26-96

     (N) Rhode Island earned income credit

26-97

     (1) In general.

26-98

     A taxpayer entitled to a federal earned income credit shall be allowed a Rhode Island

26-99

earned income credit equal to twenty-five percent (25%) of the federal earned income credit.

26-100

Such credit shall not exceed the amount of the Rhode Island income tax.

26-101

     (2) Refundable portion.

27-102

     In the event the Rhode Island earned income credit allowed under section (J) exceeds the

27-103

amount of Rhode Island income tax, a refundable earned income credit shall be allowed.

27-104

     (a) For purposes of paragraph (2) refundable earned income credit means fifteen percent

27-105

(15%) of the amount by which the Rhode Island earned income credit exceeds the Rhode Island

27-106

income tax.

27-107

     (O) The tax administrator shall recalculate and submit necessary revisions to paragraphs

27-108

(A) through (J) to the general assembly no later than February 1, 2010 and every three (3) years

27-109

thereafter for inclusion in the statute.

27-110

     (3) For the period January 1, 2011 through December 31, 2011, and thereafter, "Rhode

27-111

Island taxable income" means federal adjusted gross income as determined under the Internal

27-112

Revenue Code, 26 U.S.C. 1 et seq., and as modified for Rhode Island purposes pursuant to

27-113

section 44-30-12 less the amount of Rhode Island Basic Standard Deduction allowed pursuant to

27-114

subparagraph 44-30-2.6(c)(3)(B), and less the amount of personal exemption allowed pursuant of

27-115

subparagraph 44-30-2.6(c)(3)(C).

27-116

     (A) Tax imposed.

27-117

     (I) There is hereby imposed on the taxable income of married individuals filing joint

27-118

returns, qualifying widow(er), every head of household, unmarried individuals, married

27-119

individuals filing separate returns and bankruptcy estates, a tax determined in accordance with the

27-120

following table:

27-121

     Rhode Island Taxable Income Rhode Island Income Tax

27-122

     Over But not over Pay + Excess on the amount over

27-123

     $ 0 - $ 55,000 $ 0 + 3.75% $ 0

27-124

     55,000 - 125,000 2,063 + 4.75% 55,000

27-125

     125,000 - 5,388 + 5.99% 125,000

27-126

      (II) There is hereby imposed on the taxable income of an estate or trust a tax determined

27-127

in accordance with the following table:

27-128

     Rhode Island Taxable Income Rhode Island Income Tax

27-129

     Over But not over Pay + Excess on the amount over

27-130

     $ 0 - $ 2,230 $ 0 + 3.75% $ 0

27-131

     2,230 - 7,022 84 + 4.75% 2,230

27-132

     7,022 - 312 + 5.99% 7,022

27-133

      (B) Deductions:

27-134

     (I) Rhode Island Basic Standard Deduction. Only the Rhode Island standard deduction

27-135

shall be allowed in accordance with the following table:

28-136

     Filing status:
Amount

28-137

     Single
$7,500

28-138

     Married filing jointly or qualifying widow(er)
$15,000

28-139

     Married filing separately
$7,500

28-140

     Head of Household
$11,250

28-141

      (II) Nonresident alien individuals, estates and trusts are not eligible for standard

28-142

deductions.

28-143

     (III) In the case of any taxpayer whose adjusted gross income, as modified for Rhode

28-144

Island purposes pursuant to section 44-30-12, for the taxable year exceeds one hundred seventy-

28-145

five thousand dollars ($175,000), the standard deduction amount shall be reduced by the

28-146

applicable percentage. The term "applicable percentage" means twenty (20) percentage points for

28-147

each five thousand dollars ($5,000) (or fraction thereof) by which the taxpayer's adjusted gross

28-148

income for the taxable year exceeds one hundred seventy-five thousand dollars ($175,000).

28-149

     (C) Exemption Amount:

28-150

     (I) The term "exemption amount" means three thousand five hundred dollars ($3,500)

28-151

multiplied by the number of exemptions allowed for the taxable year for federal income tax

28-152

purposes.

28-153

     (II) Exemption amount disallowed in case of certain dependents. In the case of an

28-154

individual with respect to whom a deduction under this section is allowable to another taxpayer

28-155

for the same taxable year, the exemption amount applicable to such individual for such

28-156

individual's taxable year shall be zero.

28-157

     (D) In the case of any taxpayer whose adjusted gross income, as modified for Rhode

28-158

Island purposes pursuant to section 33-30-12, for the taxable year exceeds one hundred seventy-

28-159

five thousand dollars ($175,000), the exemption amount shall be reduced by the applicable

28-160

percentage. The term "applicable percentage" means twenty (20) percentage points for each five

28-161

thousand dollars ($5,000) (or fraction thereof) by which the taxpayer's adjusted gross income for

28-162

the taxable year exceeds one hundred seventy-five thousand dollars ($175,000).

28-163

     (E) Adjustment for inflation. - The dollar amount contained in subparagraphs 44-30-

28-164

2.6(c)(3)(A), 44-30-2.6(c)(3)(B) and 44-30-2.6(c)(3)(C) shall be increased annually by an amount

28-165

equal to:

28-166

     (I) Such dollar amount contained in subparagraphs 44-30-2.6(c)(3)(A), 44-30-

28-167

2.6(c)(3)(B) and 44-30-2.6(c)(3)(C) adjusted for inflation using a base tax year of 2000,

28-168

multiplied by;

28-169

     (II) The cost-of-living adjustment with a base year of 2000.

29-170

     (III) For the purposes of this section the cost-of-living adjustment for any calendar year is

29-171

the percentage (if any) by which the consumer price index for the preceding calendar year

29-172

exceeds the consumer price index for the base year. The consumer price index for any calendar

29-173

year is the average of the consumer price index as of the close of the twelve (12) month period

29-174

ending on August 31, of such calendar year.

29-175

     (IV) For the purpose of this section the term "consumer price index" means the last

29-176

consumer price index for all urban consumers published by the department of labor. For the

29-177

purpose of this section the revision of the consumer price index which is most consistent with the

29-178

consumer price index for calendar year 1986 shall be used.

29-179

     (V) If any increase determined under this section is not a multiple of fifty dollars

29-180

($50.00), such increase shall be rounded to the next lower multiple of fifty dollars ($50.00). In the

29-181

case of a married individual filing separate return, if any increase determined under this section is

29-182

not a multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower

29-183

multiple of twenty-five dollars ($25.00).

29-184

     (E) Credits against tax.

29-185

     (I) Notwithstanding any other provisions of Rhode Island Law, for tax years beginning on

29-186

or after January 1, 2011, the only credits allowed against a tax imposed under this chapter shall be

29-187

as follows:

29-188

     (a) Rhode Island Earned Income Credit: Credit shall be allowed for earned income credit

29-189

pursuant to subparagraph 44-30-2.6(c)(2)(N).

29-190

     (b) Property Tax Relief Credit: Credit shall be allowed for property tax relief as provided

29-191

in section 44-33-1 et seq.

29-192

     (c) Lead Paint Credit: Credit shall be allowed for residential lead abatement income tax

29-193

credit as provided in section 44-30.3-1 et seq.

29-194

     (d) Credit for income taxes of other states. - Credit shall be allowed for income tax paid

29-195

to other states pursuant to section 44-30-74.

29-196

     (e) Historic Structures Tax Credit: Credit shall be allowed for historic structures tax

29-197

credit as provided in section 44-33.2-1 et seq.

29-198

     (f) Motion Picture Productions Tax Credit: Credit shall be allowed for motion picture

29-199

production tax credit as provided in section 44-31.2-1 et seq.

29-200

     (g) Child and Dependent Care: Credit shall be allowed for twenty-five percent (25%) of

29-201

the federal child and dependent care credit allowable for the taxable year for federal purposes;

29-202

provided, however, such credit shall not exceed the Rhode Island tax liability.

29-203

     (h) Tax credits for contributions to Scholarship Organizations: Credit shall be allowed for

29-204

contributions to scholarship organizations as provided in section 44-62 et seq.

30-1

     (i) Credit for tax withheld. - Wages upon which tax is required to be withheld shall be

30-2

taxable as if no withholding were required, but any amount of Rhode Island personal income tax

30-3

actually deducted and withheld in any calendar year shall be deemed to have been paid to the tax

30-4

administrator on behalf of the person from whom withheld, and the person shall be credited with

30-5

having paid that amount of tax for the taxable year beginning in that calendar year. For a taxable

30-6

year of less than twelve (12) months, the credit shall be made under regulations of the tax

30-7

administrator.

30-8

     (j) United States flags. - A tax credit shall be given in the amount of the purchase price

30-9

for flags manufactured within the United States.

30-10

     (2) Except as provided in section 1 above, no other state and federal tax credit shall be

30-11

available to the taxpayers in computing tax liability under this chapter.

30-12

     SECTION 3. This act shall take effect upon passage.

=======

LC02450

=======

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION -- SALES AND USE TAXES--LIABILITY AND

COMPUTATION

***

31-1

     This act would provide for a sales tax exemption and income tax credit for United States

31-2

flags manufactured within the United States.

31-3

     This act would take effect upon passage.

=======

LC02450

=======