2014 -- H 7729

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LC004064

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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 STATE AFFAIRS AND GOVERNMENT -- JUMPSTART RI

     Introduced By: Representatives Giarrusso, Costa, Chippendale, Newberry, and Morgan

     Date Introduced: February 27, 2014

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Title 42 of the General Laws entitled "STATE AFFAIRS AND

GOVERNMENT" is hereby amended by adding thereto the following chapter:

CHAPTER 64.20

JUMPSTART RI

     42-64.20-1. Short title. – This chapter shall be known and may be cited as

"JUMPSTART RI".

     42-64.20-2. Definitions. – As used in this chapter, the following words and terms shall

have the following meanings, unless the context indicates another or different meaning or intent:

     (1) "Net new job" means a job created in Rhode Island that satisfies all of the following

criteria:

     (i) Is new to the state;

     (ii) Has not been transferred from employment with another business located in the state,

through an acquisition, merger, consolidation or other reorganization of businesses or the

acquisition of assets of another business;

     (iii) Has not caused individuals to transfer from existing employment with a related

person located in the state to similar employment with the business, unless such business has

received approval for such transfers from the secretary of commerce, or its designee, after

demonstrating that the related person has not eliminated those existing positions or has not been

transferred from employment with a related person in this state;

     (iv) Is not filled by an individual employed within the state within the immediately

preceding sixty (60) months by a related person;

     (v) Is either a full-time wage-paying job or equivalent to a full-time wage-paying job

requiring at least thirty-five (35) hours per week; and

     (vi) Is a job which continues in existence with the employing business filled for more

than six (6) months.

     (2) "New business" means a business that satisfies all of the following tests:

     (i) The business must not be operating or located within the state at the time it submits its

application to participate in the JUMPSTART RI program;

     (ii) The business must not be moving existing jobs from another area in the state;

     (iii) The ownership of the business is not substantially similar to ownership of a business

entity (or entities) taxable, or previously taxable within the last five (5) taxable years, under

chapter 44-11;

     (iv) The business must not have caused individuals to transfer from existing employment

with a related person located in the state to similar employment with the business, unless such

business has received approval for such transfers from the secretary of commerce or its designee

after demonstrating that the related person has not eliminated those existing positions.

     (3) Related person" means a "related person" pursuant to subparagraph (c) of paragraph

(3) of subsection (b) of section 465 of the Internal Revenue Code.

     (4) "JUMPSTART RI approval board" or "board" means a board consisting of four (4)

members, one each appointed by the governor, the speaker of the house, the president of the

senate and the Rhode Island secretary of commerce. Each member of the JUMPSTART RI

approval board must have significant expertise and experience in business management or

economic development and must recuse themselves from any decision in which they have a

personal interest of any kind in any project that comes before the board.

     (5) "Startup" is a company first formed in Rhode Island, with a minimum of two (2)

employees who are residents of Rhode Island, each owning at least twenty-five percent (25%) of

the enterprise, and which has no substantial operating history.

     42-64.20-3. Eligibility for businesses. – (a) In order to participate in the JUMPSTART

RI program, a business must satisfy all of the following criteria:

     (1) The business operation must not be involved in manufacturing, production or

customer service as its principal mission, without the express approval of the JUMPSTART RI

approval board.

     (2) Except for startup companies as defined, at the time it submits its application for the

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JUMPSTART RI program, the business must be a new business to the state.

     (3) The business must be organized as a Rhode Island corporation, partnership, limited

liability company or sole proprietorship.

     (4) The business, when approved for participation, must certify a minimum of three (3)

employees who are, or certify that they are in the process of establishing Rhode Island residency.

     (5) The business must demonstrate that it will, in its first year of operation, create net new

jobs. After its first year of operation, the business must maintain net new jobs. In addition, the

average number of employees of the business and its related persons in the state during the year

must equal or exceed the sum of the average number of employees of the business operation and

its related persons in the state during the year immediately preceding the year in which the

business submits its application to participate in the program.

     (6) Companies approved for participation in the program must re-certify employee

headcount in Rhode Island on an annual basis.

     (7) Upon completion of its first year in the JUMPSTART RI program and every year

thereafter, the business must complete and timely file the annual report required hereunder.

     (8) If a business does not satisfy the eligibility standards set forth in subdivisions (1)

through (3) of this subsection, the secretary of commerce or its designee may grant that business

permission to apply to participate in the JUMPSTART RI program if the secretary of commerce

or its designee determines that the business has demonstrated that it will substantially contribute

new net jobs to the state.

     (b) The following types of businesses are prohibited from participating in the

JUMPSTART RI program:

     (1) Retail and wholesale businesses;

     (2) Restaurants;

     (3) Real estate brokers;

     (4) Law, accounting or business consulting firms;

     (5) Medical or dental practices;

     (6) Real estate management companies;

     (7) Hospitality;

     (8) Businesses providing personal services;

     (9) Businesses providing utilities;

     (10) Businesses engaged in the generation or distribution of electricity, the distribution of

natural gas, or the production of steam associated with the generation of electricity; and

     (11) Businesses providing business administrative or support services, unless such

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business has received permission from the secretary of commerce, or designee, to apply to

participate in the JUMPSTART RI program upon demonstration that the business would create

no fewer than one hundred (100) net new jobs.

     42-64.20-4. Jumpstart RI tax benefits. – (a) Employees of businesses accepted into the

JUMPSTART RI program that locate in Rhode Island, employees of a qualified start up, or new

employees hired by qualified businesses or start up before the one hundred eighty (180) day of

their operation in the state, shall be exempt from all personal income taxes for a period of seven

(7) years; provided the business continues to meet certification requirements and files all required

reports. Workmen's compensation and temporary disability are considered insurances, and no

exemption for these charges is permitted.

     (b) For a period of seven (7) years from the approved company's commencement of

operations in Rhode Island, companies approved for the program shall be exempt from all sales

taxes due under chapter 44-18.

     (c) For a period of seven (7) years from the approved company's commencement of

operations in Rhode Island, companies approved for the program shall be exempt from the

corporate franchise tax under chapter 44-12.

     (d) For a period of seven (7) years from the approved company's commencement of

operations in Rhode Island, approved companies shall be exempt from any tangible personal

property tax assessed or taxed under chapter 44-5.

     (e) In the event the business constructs or purchases real estate in which to house its

operations, it shall be exempt from all local property taxes proportionate to the actual space used

for its own business operations for a period not to exceed seven (7) years from the date it

commences business in Rhode Island. The state of Rhode Island will remit to the affected

municipality fifty percent (50%) of the taxes due based on current assessments and for the

proportionate space used for business operations for the period in which the business is part of the

JUMPSTART RI program.

     (f) The aggregate number of net new jobs approved for personal income tax benefits

under this chapter shall not exceed one thousand (1,000) jobs per year during the period in which

applications are accepted. The secretary of commerce, or designee, shall allocate to each

approved business accepted to locate in a tax-free area a maximum number of net new jobs that

shall be eligible for the personal income tax benefits based on the schedule of job creation

included in the application of such business. At such time as the total number of net new jobs

under such approved applications reaches the applicable allowable total of aggregate net new jobs

for tax benefits for the year in which the application is accepted, the secretary of commerce, or its

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designee, shall stop granting eligibility for personal income tax benefits for net new jobs until the

next year. Any business not granted such personal income tax benefits for net new jobs for such

reason shall be granted such benefits in the next year prior to the consideration of new applicants.

In addition, if the total number of net new jobs approved for tax benefits in any given year is less

than the maximum allowed under this subsection, the difference shall be carried over to the next

year. A business may amend its schedule of job creation in the same manner that it applied for

participation in the JUMPSTART RI program, and any increase in eligibility for personal income

tax benefits on behalf of additional net new jobs shall be subject to the limitations of this section.

If the business accepted creates more net new jobs than for which it is allocated personal income

tax benefits, the personal income tax benefits it is allocated shall be provided to those individuals

employed in those net new jobs based on the employees' dates of hire.

     (g) Current residents of Rhode Island at the time of an approved business start of

operations may be employed by the business and will be eligible to tax benefits; provided if

employed within the first one hundred eighty (180) calendar days of the businesses operation in

Rhode Island. Rhode Island residents employed subsequent to one hundred eighty (180) calendar

days of operation shall not be eligible for tax benefits provided.

     42-64.20-5. Businesses locating in Rhode Island. – (a) Businesses locating in Rhode

Island shall provide the application and all supporting documentation to the secretary of

commerce, or designee, for review. Such application shall be in a form prescribed by the

secretary of commerce or designee and shall contain all information the secretary of commerce or

designee determines is necessary to properly evaluate the business's application, including, but

not limited to, the name, address, and employer identification number of the business; a

description of the land or space the business will use, and whether or not the land or space being

used by the business is being transferred or sublet to the business from some other business. The

application must include a certification by the business that it meets the eligibility criteria that the

business's participation in the JUMPSTART RI program will have positive community and

economic benefits. The application must include a description of how the business plans to recruit

employees from the local workforce.

     (b) The secretary of commerce, or designee, shall review such application and

documentation within sixty (60) days and may reject such application upon a determination that

the business does not meet the eligibility criteria in § 42-64.20-3, has submitted an incomplete

application, has failed to comply with subsection (c) of this section, or has failed to demonstrate

that the business's participation in the JUMPSTART RI program will have positive community

and economic benefits. If the secretary of commerce or designee rejects such application, it shall

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provide notice of such rejection to the business. If the secretary of commerce or its designee does

not reject such application within sixty (60) days, such business is accepted to locate in Rhode

Island, and the application of such business shall constitute a contract between such business and

the state of Rhode Island. Businesses shall be provided with documentation of their acceptances

in such form as prescribed by the secretary of commerce or designee which will be used to

demonstrate such business's eligibility for the tax benefits specified.

     (c) Except as otherwise provided in this chapter, proprietary information or supporting

documentation submitted by a business shall only be utilized for the purpose of evaluating such

business's application or compliance with the provisions of this article and shall not be otherwise

disclosed. Any person who willfully discloses such information to a third party for any other

purpose whatsoever shall be guilty of a misdemeanor.

     (d) The business submitting the application, as part of the application, must:

     (1) Agree to allow the department of taxation to share its tax information with the

secretary of commerce or designee;

     (2) Agree to allow the department of labor to share its tax and employer information with

the secretary of commerce or designee;

     (3) Allow the secretary of commerce or designee access to any and all books and records

the department may require to monitor compliance;

     (4) Include performance benchmarks, including the number of net new jobs that must be

created, the schedule for creating those jobs, and details on job titles and expected salaries. The

application must specify the consequences for failure to meet such benchmarks, as determined by

the business:

     (i) Suspension of such business's participation in the JUMPSTART RI program for one or

more tax years as specified in such application;

     (ii) Termination of such business's participation in the JUMPSTART RI program; and/or

     (iii) Proportional recovery of tax benefits awarded under the JUMPSTART RI program

as specified;

     (5) Provide the following information to the department upon request:

     (i) The prior three (3) years of federal and state income or franchise tax returns,

unemployment insurance quarterly returns, real property tax bills and audited financial

statements;

     (ii) The employer identification or social security numbers for all related persons to the

business, including those of any members of a limited liability company or partners in a

partnership;

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     (6) Provide a clear and detailed presentation of all related persons to the business to

assure the department that jobs are not being shifted within the state; and

     (7) Certify, under penalty of perjury, that it is in substantial compliance with all

environmental, worker protection, and local, state, and federal tax laws, and that it satisfies all the

eligibility requirements to participate in the JUMPSTART RI program.

     42-64.20-6. Disclosure authorization and reporting requirements. – (a) The secretary

of commerce or designee shall disclose publicly the names and addresses of the businesses

located within Rhode Island. In addition, the secretary of commerce or designee shall disclose

publicly and include in the annual report required under subsection (b) of this section such other

information contained in such businesses' applications and annual reports, including the projected

number of net new jobs to be created, as they determine is relevant and necessary to evaluate the

success of this program.

     (b)(1) The secretary of commerce or designee shall prepare an annual report to the

governor and the legislature. Such report shall include the number of business applicants, number

of businesses approved, the names and addresses of the businesses located within a tax-free area,

total amount of benefits distributed, benefits received per business, number of net new jobs

created, net new jobs created per business, new investment per business, the types of industries

represented and such other information as the secretary of commerce or designee determines is

necessary to evaluate the progress of the JUMPSTART RI program.

     (2) Any business located in Rhode Island must submit an annual report to the secretary of

commerce or designee in a form and at such time and with such information as prescribed by the

secretary of commerce or designee in consultation with the secretary of commerce or designee of

taxation and finance. Such information shall be sufficient for the secretary of commerce or

designee and the secretary of commerce or designee of taxation and finance to:

     (i) Monitor the continued eligibility of the business and its employees to participate in the

JUMPSTART RI program and receive the tax benefits described in § 42-64.20-4;

     (ii) Evaluate the progress of the JUMPSTART RI program; and

     (iii) Prepare the annual report required by subsection (a) of this section. Such annual

report shall also include information regarding the wages paid during the year to its employees

employed in the net new jobs created and maintained in Rhode Island.

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     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 STATE AFFAIRS AND GOVERNMENT -- JUMPSTART RI

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     This act would establish the JUMPSTART RI program which would award tax benefits

to new businesses eligible for this program.

     This act would take effect upon passage.

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LC004064

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