2013 -- S 0734 SUBSTITUTE A

=======

LC02050/SUB A

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

____________

A N A C T

RELATING TO TAXATION -- RHODE ISLAND ECONOMIC DEVELOPMENT TAX

INCENTIVES EVALUATION ACT OF 2013

     Introduced By: Senators DaPonte, Goodwin, Ruggerio, Paiva Weed, and Lynch

     Date Introduced: March 13, 2013

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

1-1

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

1-2

adding thereto the following chapter:

1-3

     CHAPTER 48.2

1-4

"RHODE ISLAND ECONOMIC DEVELOPMENT TAX INCENTIVES EVALUATION ACT

1-5

OF 2013"

1-6

     44-48.2-1. Short title. -- This chapter shall be known and may be cited as the "Economic

1-7

Development Tax Incentives Evaluation Act of 2013."

1-8

     44-48.2-2. Legislative findings and purpose. -- The general assembly finds and declares

1-9

that:

1-10

     (1) The state of Rhode Island relies on a number of tax incentives, including credits,

1-11

exemptions, and deductions, to encourage businesses to locate, hire employees, expand, invest,

1-12

and/or remain in the state;

1-13

     (2) These various tax incentives are intended as a tool for economic development,

1-14

promoting new jobs and business growth in Rhode Island;

1-15

     (3) The state needs a systematic approach for evaluating whether incentives are fulfilling

1-16

their intended purposes in a cost-effective manner;

1-17

     (4) In order to improve state government's effectiveness in serving the residents of this

1-18

state, the legislature finds it necessary to provide for the systematic and comprehensive analysis

1-19

of economic development tax incentives, and for those analyses to be incorporated into the

2-1

budget and policymaking processes.

2-2

     44-48.2-3. Economic development tax incentive defined. -- (a) As used in this section,

2-3

the term "economic development tax incentive" shall include:

2-4

     (1) Those tax credits, deductions, exemptions, exclusions, and other preferential tax

2-5

benefits associated with sections 42-64.3-6, 42-64.3-7, 42-64.5-3, 42-64.6-4, 42-64.11-4, 44-30-

2-6

1.1, 44-31-1, 44-31-1.1, 44-31-2, 44-31.2-5, 44-32-1, 44-32-2, 44-32-3, 44-39.1-1, 44-43-2, 44-

2-7

43-3, and 44-63-2, and;

2-8

     (2) Any future incentives enacted after the effective date of this section for the purpose of

2-9

recruitment or retention of businesses in the state of Rhode Island.

2-10

     (b) In determining whether a future tax incentive is enacted for "the purpose of

2-11

recruitment or retention of businesses," the office of revenue analysis shall consider legislative

2-12

intent, including legislative statements of purpose and goals, and may also consider whether the

2-13

tax incentive is promoted as a business incentive by the state’s economic development agency or

2-14

other relevant state agency.

2-15

     44-48.2-4. Economic Development Tax Incentive Evaluations, Schedule. -- (a) In

2-16

accordance with the following schedule, the tax expenditure report produced by the chief of the

2-17

office of revenue analysis pursuant to section 44-48.1-1, shall include an additional analysis

2-18

component, consistent with section 44-48.2-5 and produced in consultation with the director of

2-19

the economic development corporation, the director of the office of management and budget, and

2-20

the director of the department of labor and training:

2-21

     (1) Analyses of economic development tax incentives as listed in subdivision 44-48.2-

2-22

3(1) shall be completed at least once between July 1, 2014 and June 30, 2017, and no less than

2-23

once every three (3) years thereafter;

2-24

     (2) Analyses of any economic development tax incentives created after July 1, 2013, shall

2-25

be completed within five (5) years of taking effect, and no less than once every three (3) years

2-26

thereafter;

2-27

     (b) No later than the tenth (10th) of January each year, beginning in 2014, the office of

2-28

revenue analysis will submit to the chairs of the senate and house finance committees a three (3)

2-29

year plan for evaluating economic development tax incentives.

2-30

     44-48.2-5. Economic Development Tax Incentive Evaluations, Analysis. --

2-31

     (a) The additional analysis as required by section 44-48.2-4 shall include, but not be

2-32

limited to:

2-33

     (1) A baseline assessment of the tax incentive, including, if applicable, the number of

2-34

aggregate jobs associated with the taxpayers receiving such tax incentive and the aggregate

3-1

annual revenue that such taxpayers generate for the state through the direct taxes applied to them

3-2

and through taxes applied to their employees;

3-3

     (2) The statutory and programmatic goals and intent of the tax incentive, if said goals and

3-4

intentions are included in the incentive’s enabling statute or legislation;

3-5

     (3) The number of taxpayers granted the tax incentive during the previous twelve (12)

3-6

month period;

3-7

     (4) The value of the tax incentive granted, and ultimately claimed, listed by the North

3-8

American Industrial Classification System (NAICS) Code associated with the taxpayers receiving

3-9

such benefit, if such NAICS Code is available;

3-10

     (5) An assessment and five (5) year projection of the potential impact on the state's

3-11

revenue stream from carry forwards allowed under such tax incentive;

3-12

     (6) An estimate of the economic impact of the tax incentive including, but not limited to:

3-13

     (i) A cost-benefit comparison of the revenue foregone by allowing the tax incentive

3-14

compared to tax revenue generated by the taxpayer receiving the credit, including direct taxes

3-15

applied to them and taxes applied to their employees;

3-16

     (ii) An estimate of the number of jobs that were the direct result of the incentive; and

3-17

     (iii) A statement by the director of the economic development corporation as to whether,

3-18

in his or her judgment, the statutory and programmatic goals of the tax benefit are being met, with

3-19

obstacles to such goals identified, if possible;

3-20

     (7) The estimated cost to the state to administer the tax incentive, if such information is

3-21

available;

3-22

     (8) An estimate of the extent to which benefits of the tax incentive remained in state or

3-23

flowed outside the state, if such information is available;

3-24

     (9) In the case of economic development tax incentives where measuring the economic

3-25

impact is significantly limited due to data constraints, whether any changes in statute would

3-26

facilitate data collection in a way that would allow for better analysis;

3-27

     (10) Whether the effectiveness of the tax incentive could be determined more definitively

3-28

if the general assembly were to clarify or modify the tax incentive’s goals and intended purpose;

3-29

     (11) A recommendation as to whether the tax incentive should be continued, modified or

3-30

terminated, the basis for such recommendation, and the expected impact of such recommendation

3-31

on the state’s economy;

3-32

     (12) The methodology and assumptions used in carrying out the assessments, projections

3-33

and analyses required pursuant to subdivisions (1) through (8) of this section.

4-34

     (b) All departments, offices, boards, and agencies of the state shall cooperate with the

4-35

chief of the office of revenue analysis and shall provide to the office of revenue analysis any

4-36

records, information (documentary and otherwise), data, and data analysis as may be necessary

4-37

to complete the report required pursuant to this section.

4-38

     44-48.2-6. Consideration by the governor. -- The governor's budget submission as

4-39

required under chapter 35-3 shall identify each economic development tax incentive for which an

4-40

evaluation was completed in accordance with this chapter in the period since the governor's

4-41

previous budget submission. For each evaluated tax incentive, the governor's budget submission

4-42

shall include a recommendation as to whether the tax incentive should be continued, modified, or

4-43

terminated.

4-44

     SECTION 2. This act shall take effect sixty (60) days after passage.

=======

LC02050/SUB A

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION -- RHODE ISLAND ECONOMIC DEVELOPMENT TAX

INCENTIVES EVALUATION ACT OF 2013

***

5-1

     This act would create the "Rhode Island Economic Development Tax Incentives

5-2

Evaluation Act of 2013" to provide an assessment of the state's tax incentive programs.

5-3

     This act would take effect sixty (60) days after passage.

=======

LC02050/SUB A

=======