2014 -- H 7139

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LC003551

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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 -- BUSINESS CORPORATION TAX

     Introduced By: Representatives Ruggiero, Gallison, Craven, Serpa, and Trillo

     Date Introduced: January 21, 2014

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 44-11-2 of the General Laws in Chapter 44-11 entitled "Business

Corporation Tax" is hereby amended to read as follows:

     44-11-2. Imposition of tax. -- (a) Each corporation shall annually pay to the state a tax

equal to nine percent (9%) of net income, as defined in section 44-11-11, qualified in section 44-

11-12, and apportioned to this state as provided in sections 44-11-13 -- 44-11-15, for the taxable

year.

      (b) A corporation shall pay the amount of any tax as computed in accordance with

subsection (a) of this section after deducting from "net income," as used in this section, fifty

percent (50%) of the excess of capital gains over capital losses realized during the taxable year, if

for the taxable year:

      (1) The corporation is engaged in buying, selling, dealing in, or holding securities on its

own behalf and not as a broker, underwriter, or distributor;

      (2) Its gross receipts derived from these activities during the taxable year amounted to at

least ninety percent (90%) of its total gross receipts derived from all of its activities during the

year. "Gross receipts" means all receipts, whether in the form of money, credits, or other valuable

consideration, received during the taxable year in connection with the conduct of the taxpayer's

activities.

      (c) A corporation shall not pay the amount of the tax computed on the basis of its net

income under subsection (a) of this section, but shall annually pay to the state a tax equal to ten

cents ($.10) for each one hundred dollars ($100) of gross income for the taxable year or a tax of

one hundred dollars ($100), whichever tax shall be the greater, if for the taxable year the

corporation is either a "personal holding company" registered under the federal Investment

Company Act of 1940, 15 U.S.C. section 80a-1 et seq., "regulated investment company", or a

"real estate investment trust" as defined in the federal income tax law applicable to the taxable

year. "Gross income" means gross income as defined in the federal income tax law applicable to

the taxable year, plus:

      (1) Any interest not included in the federal gross income; minus

      (2) Interest on obligations of the United States or its possessions, and other interest

exempt from taxation by this state; and minus

      (3) Fifty percent (50%) of the excess of capital gains over capital losses realized during

the taxable year.

      (d) (1) A small business corporation having an election in effect under subchapter S, 26

U.S.C. section 1361 et seq., shall not be subject to the Rhode Island income tax on corporations,

except that the corporation shall be subject to the provisions of subsection (a), to the extent of the

income that is subjected to federal tax under subchapter S.

      (2) The shareholders of the corporation who are residents of Rhode Island shall include

in their income their proportionate share of the corporation's federal taxable income.

      (3) [Deleted by P.L. 2004, ch. 595. art. 29, section 1.]

      (4) [Deleted by P.L. 2004, ch. 595, art. 29, section 1.]

      (e) Minimum tax. - The tax imposed upon any corporation under this section shall not be

less than five hundred dollars ($500); provided, however, that a corporation shall not be subject to

the minimum tax for the first three (3) years following the date of incorporation.

     SECTION 2. Section 44-12-1 of the General Laws in Chapter 44-12 entitled "Franchise

Tax" is hereby amended to read as follows:

     44-12-1. Tax imposed -- Corporations liable -- Credit for tax on income -- Reduced

rate where no business done. -- (a) Every corporation, joint-stock company, or association

incorporated in this state or qualified to do business in this state, whether or not doing business

for profit, all referred to in this section under the term "corporation", except those enumerated in

section 44-12-11, shall pay an annual franchise tax to the state upon its authorized capital stock of

two dollars fifty cents ($2.50) for each ten thousand dollars ($10,000) or fractional part, or the

sum of five hundred dollars ($500), whichever is greater; provided, however, that a corporation

shall not be subject to the minimum tax for the first three (3) years following the date of

incorporation.

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      (b) In the case of corporations liable to a tax under chapter 11 of this title, only the

amount by which the franchise tax exceeds the tax payable under that chapter shall be assessed.

      (c) If a corporation shall show by supplemental affidavit attached to the prescribed return

and signed in the manner provided for each return that it has not, at any time during its preceding

taxable year, been engaged within the state in any business activities, it shall only pay an annual

franchise tax upon its authorized capital stock at the following rates: five hundred dollars ($500)

where the stock does not exceed one million dollars ($1,000,000); and the further sum of twelve

dollars fifty cents ($12.50) for each additional one million dollars ($1,000,000) or fractional part

of the stock.

     SECTION 3. This act shall take effect upon passage and shall apply to all tax years

beginning on or after January 1, 2014.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION -- BUSINESS CORPORATION TAX

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     This act would provide that only corporate entities in existence for three (3) years or

greater be taxed under this section.

     This act would take effect upon passage and would apply to all tax years beginning on or

after January 1, 2014.

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