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:

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

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

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CHAPTER 64.20

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JUMPSTART RI

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

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"JUMPSTART RI".

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

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

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

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criteria:

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     (i) Is new to the state;

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

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

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acquisition of assets of another business;

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

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

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

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

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transferred from employment with a related person in this state;

 

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

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preceding sixty (60) months by a related person;

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

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

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

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than six (6) months.

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

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

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application to participate in the JUMPSTART RI program;

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

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

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

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chapter 44-11;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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the enterprise, and which has no substantial operating history.

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

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

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

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

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approval board.

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     (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.

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

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liability company or sole proprietorship.

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

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

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

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

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

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

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

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business submits its application to participate in the program.

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

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headcount in Rhode Island on an annual basis.

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

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

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

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

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

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

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new net jobs to the state.

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

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JUMPSTART RI program:

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     (1) Retail and wholesale businesses;

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     (2) Restaurants;

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     (3) Real estate brokers;

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     (4) Law, accounting or business consulting firms;

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     (5) Medical or dental practices;

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     (6) Real estate management companies;

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     (7) Hospitality;

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     (8) Businesses providing personal services;

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     (9) Businesses providing utilities;

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

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

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     (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

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

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

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

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

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

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

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

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

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exemption for these charges is permitted.

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

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

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taxes due under chapter 44-18.

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

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

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corporate franchise tax under chapter 44-12.

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

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

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property tax assessed or taxed under chapter 44-5.

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

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

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

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

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

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

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JUMPSTART RI program.

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

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

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

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

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

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

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

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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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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employees from the local workforce.

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

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

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

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

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

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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

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

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

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

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

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

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

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

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

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

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purpose whatsoever shall be guilty of a misdemeanor.

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

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

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secretary of commerce or designee;

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

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the secretary of commerce or designee;

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

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the department may require to monitor compliance;

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

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

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

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the business:

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

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more tax years as specified in such application;

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

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

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as specified;

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

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

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

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statements;

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

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

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partnership;

 

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

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

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

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

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eligibility requirements to participate in the JUMPSTART RI program.

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

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

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

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

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

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

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success of this program.

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

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

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

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

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

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

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necessary to evaluate the progress of the JUMPSTART RI program.

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

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

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

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

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

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

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

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

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

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

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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

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to new businesses eligible for this program.

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     This act would take effect upon passage.

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