2014 -- H 7090

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LC003105

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO TAXATION - RHODE ISLAND NEW QUALIFIED JOBS INCENTIVE ACT

OF 2014

     Introduced By: Representatives Shekarchi, Ackerman, Finn, Serpa, and McNamara

     Date Introduced: January 15, 2014

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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

adding thereto the following chapter:

CHAPTER 69

RHODE ISLAND NEW QUALIFIED JOBS INCENTIVE ACT OF 2014

     44-69-1. Short title. – This chapter shall be known and may be cited as the "Rhode

Island Qualified Jobs Incentive Act of 2014".

     44-69-2. Definitions. – As used in this chapter, unless the context clearly indicates

otherwise, the following words and phrases shall have the following meanings:

     (1) “Adjusted current employment” means, for any taxable year ending on or after June

30, 2014, the aggregate of the average daily number of qualified full-time equivalent active

employees employed within the state by an eligible company during such taxable year.

     (2) "Affiliated entity" means any entity owned or controlled by the same persons or

shareholders who own or control an eligible company.

     (3) "Base employment" means the aggregate number of qualified full-time equivalent

active employees employed within the state by an eligible company and its eligible subsidiaries

on July 1, 2014.

     (4) "Eligible company" means any corporation (including a subchapter S corporation as

defined in 26 U.S.C. section 1361), state bank, federal savings bank, trust company, national

banking association, bank holding company, loan and investment company, mutual savings bank,

credit union, building and loan association, insurance company, investment company, broker-

dealer company or surety company, limited liability company partnership (including an eligible

subsidiary of any of the foregoing), or sole proprietorship.

     (5) "Eligible subsidiary" means each entity eighty percent (80%) or more of the

outstanding voting equity of which is owned by an eligible company.

     (6) "Qualified full-time equivalent active employee" means any employee of an eligible

company who: (i) Works a minimum of thirty (30) hours per week within the state, or two (2) or

more part-time employees whose combined weekly hours equal or exceed thirty (30) hours per

week within the state; (ii) Earns health care benefits; and (iii) Earns no less than two hundred fifty

percent (250%) of the hourly minimum wage prescribed by Rhode Island law. The first tax year

that an eligible company qualifies for a rate reduction pursuant to section 44-69-3, for purposes of

this section, two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode

Island law shall mean two hundred fifty percent (250%) of the hourly minimum wage prescribed

by Rhode Island law at: (A) The time the employee was first treated as a full-time equivalent

active employee during a tax year that the eligible company qualified for a rate reduction

pursuant to section 44-69-3, or, if later; (B) The time the employee first earned at least two

hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law as an

employee of the eligible company.

     (7) "Initial new employment level" means the number of units of new employment

reported by an eligible company reported in 2016.

     (8) "New employment" means for each taxable year the amount of adjusted current

employment for each taxable year (determined as of December 31 of each year) minus the

amount of base employment, but in no event less than zero; provided, however, no eligible

company is permitted to transfer, assign or hire employees who are already employed within the

state by such eligible company from itself or any affiliated entity or utilize any other artifice or

device for the purpose of artificially creating new employees in order to qualify for the rate

reduction provided for in this chapter. “New employment” shall not include employees already

employed in this state who become employees of an eligible company as a result of an acquisition

of an existing company by purchase, merger, or otherwise, if such existing company was eligible

for a rate reduction under the provisions of chapter 42-64.5, or the provisions of this chapter.

     (9) "Rate reduction" means the reduction in the tax rate specified in section 44-69-4.

     (10) "Small business concern" means an eligible company which has a base employment

level of less than one hundred (100) employees.

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     (11) "State" means the state of Rhode Island and Providence Plantations.

     (12) "Total employment" for an eligible company as of any date means the total number

of qualified full-time equivalent active employees employed within the state by the eligible

company.

     (13) "Units of new employment" means:

     (i) For eligible companies which are not small business concerns, the amount of new

employment divided by fifty (50), rounded down to the nearest multiple of fifty (50); and

     (ii) For eligible companies which are small business concerns, the amount of new

employment divided by ten (10), rounded down to the nearest multiple of ten (10).

     44-69-3. Tax rate reduction. – The rate of tax payable by an eligible company and each

of its eligible subsidiaries for any taxable year ending on or after June 30, 2014, on its net income

pursuant to the applicable income tax provisions of the general laws, including the provisions of

sections 44-11-2(a), 44-14-3(a), 44-14-4 and 44-17-1, or on its gross earnings pursuant to sections

44-13-4(4), 44-30-2.6, or 44-30-2.10 shall be reduced by the amount specified in section 44-69-4;

this rate reduction shall be applied once annually to those eligible companies which are permitted

by law to file a consolidated state tax return and in the case of eligible companies not permitted

by law to file consolidated state tax returns, then the rate reduction shall be applied annually to

each eligible company and its eligible subsidiaries; in the case of an eligible company the income

of which is subject to tax pursuant to sections 44-30-2.6 or 44-30-2.10, the rate reduction shall be

applied annually only to the portion of net income of such taxpayer attributable to the eligible

company; provided, however, should any eligible company fail to maintain in any taxable year on

or after December 31, 2016, the number of units of new employment it reported for such 2015 tax

year, the rate reduction provided for in this chapter shall expire permanently.

     44-69-4. Reduction rate schedule. – The amount of the rate reduction specified in

section 44-69-3 for any eligible company for each taxable year ending on or after June 30, 2014,

shall be based upon the aggregate amount of new employment of the eligible company and its

eligible subsidiaries for such taxable year, and shall be determined by multiplying the numerical

equivalent of one-quarter of one percent (.25%) by the number of units of new employment for

each such taxable year through the taxable year ending on or before December 31, 2016 and for

each taxable year thereafter, the number of units of new employment reported for such taxable

year ending in 2016; provided, however, the amount of each rate reduction shall in no event be

greater than six (6) percentage points for the applicable income tax rate or greater than three (3)

percentage points for the applicable personal income tax rate.

     44-69-5. Rule of construction. – This chapter is to be construed in a manner consistent

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with and complementary to provisions of chapter 42-64.5 of the general laws. The rate reduction

received under the provisions of this chapter shall be in addition to the rate reduction, if any, that

an eligible company shall be entitled to receive under the provisions of said chapter 42-64.5 of

the general laws.

     44-69-6. Reporting requirement. – (a) By August 15th of each year the division of

taxation shall report the name, address, and amount of tax credit received for each eligible

company during the previous state fiscal year to the chairpersons of the house and senate finance

committees, the house and senate fiscal advisors, and the division of taxation. This report shall be

available to the public for inspection by any person and shall be published by the tax

administrator on the tax division website.

     (b) On or before September 1, 2014, and every September 1 thereafter, all eligible

companies qualifying for a rate reduction pursuant to section 44-69-3 shall file an annual report

with the tax administrator to determine if an eligible company is entitled to the rate reduction

provided for in this chapter. Said report shall contain each full-time equivalent active employee’s

name, date of hire, and hourly wage as of the immediately preceding July 1 and such other

information deemed necessary by the tax administrator. The report shall be filed on a form and in

a manner prescribed by the tax administrator.

     44-69-7. Severability. – If any provision of this chapter or the application of any section

or part of this chapter to any person or circumstance is held invalid, the invalidity shall not affect

other provisions or applications of this chapter which can be given effect without the invalid

provision or application.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION - RHODE ISLAND NEW QUALIFIED JOBS INCENTIVE ACT

OF 2014

***

     This act would create a financial incentive for business entities to create new jobs by

offering a business tax reduction.

     This act would take effect upon passage.

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