2014 -- S 2146

========

LC003861

========

     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

____________

A N   A C T

RELATING TO TAXATION - SALES AND USE TAXES - LIABILITY AND

COMPUTATION

     Introduced By: Senators Picard, and Cote

     Date Introduced: January 29, 2014

     Referred To: Senate Finance

     (by request)

It is enacted by the General Assembly as follows:

     SECTION 1. Section 44-18-30.C of the General Laws in Chapter 44-18 entitled "Sales

and Use Taxes - Liability and Computation" is hereby amended to read as follows:

     44-18-30.C. Exemption from or stabilization of sales and use taxes for municipal

economic development zones -- West Warwick. -- Exemption from or stabilization of sales

and use taxes for municipal economic development zones -- West Warwick and

Woonsocket. -- (a) Findings. - The general assembly makes the following findings of fact:

      (1) Various sections of several towns in the state, including, but not limited to, the town

of West Warwick and the city of Woonsocket, are deteriorated, blighted areas which have created

very difficult challenges to economic development;

      (2) Several areas of the state are in a distressed financial condition as defined by section

45-13-12(b) and cannot finance economic development projects on its own without the

participation of private enterprise;

      (3) The general assembly has found that it is nearly impossible for private enterprise

alone to meet these challenges;

      (4) In certain sections of financially distressed communities, the serious challenges of

economic development and/or redevelopment have not been met by private enterprise alone and

the impact is being felt throughout the community;

      (5) Legislation enacted to encourage redevelopment of the deteriorated, blighted areas

through the formation of local redevelopment agencies has had very limited success;

      (6) Various states, such as New Jersey, Pennsylvania and Michigan have had a great deal

of success in generating economic development by exercising the authority to exempt and/or

stabilize taxes;

      (7) The state of Rhode Island has generated economic growth by redirecting and/or

exempting certain commercial and retail activity from the imposition of sales, use and income

taxes with recent examples being the Providence Place Mall, the Arts Districts in the cities of

Providence, Pawtucket and Westerly, and financial services and acquaculture industries;

      (8) Most recently, municipalities in our state have had great success in attracting large

commercial development, including financial services, manufacturing, and major energy

facilities, due in large part to the authority to exempt and/or stabilize property, tangible and/or

inventory taxes;

      (9) Attracting large non-residential developments or encouraging expansion of existing

commercial entities can be extremely important to municipalities, where the quality of public

education is largely dependent on the local tax base, thereby expanding the commercial tax base

and reducing reliance upon the residential tax base;

      (10) The ability to attract this development and increase the non-residential tax base, in

turn, improves municipalities' ability to finance school systems, municipal services and

infrastructure, thereby improving the quality of life;

      (11) In addition to increasing the local non-residential tax base, this development creates

construction jobs, permanent jobs, and spurs additional investment by private enterprises; and

      (12) Providing authority to offer tax exemptions from, or to stabilize, the imposition of

sales and use taxes will attract and assist in expanding, revitalizing and redeveloping the tax base

in our municipalities, thereby providing long-term economic benefits and development.

      (b) Exemption or stabilization of sales and use taxes imposed on sales from businesses

located in a municipal economic development zone.

      (1) In order to attract new construction and development in a municipal economic

development zone (MED) as provided in this section, upon the designation of such a zone as set

forth in subsection (c) of this section, all businesses engaging in qualifying sales and located in

new construction in a MED zone (a MED zone business) shall be exempt from the requirement to

charge and collect fifty percent (50%) of the current sales and use tax pursuant to sections 44-18-

18 and 44-18-20 for a period of ten (10) years. Sales and use taxes collected in a MED zone shall

be returned to the same MED zone in accordance with the provisions of this section. The ten (10)

year exemption period for all MED zone businesses shall begin to run from the latest to occur of:

LC003861 - Page 2 of 6

(i) the date that is three (3) years from the effective date of the January session 2003 amendments

[July 17, 2003] or (ii) the date that is two (2) years from the date upon which the city or town

council designates the MED zone for its municipality; or (iii) the date the first MED zone

business obtains a certification of exemption as set forth in subdivision (c)(6) of this section.

      (2) For purposes of this section, "qualifying sales" for a MED zone business shall not

include gambling activities, or the retail sales of motor vehicles, furniture, home furnishings

including mattresses and oriental rugs, tobacco products, or packaged alcoholic beverages.

      (3) "Qualifying sales" shall be sales at which the point of sale is located within the same

MED zone and point of delivery is located within the same MED zone.

      (c) Creation of the municipal economic development zone.

      (1) The city or town council of a financially distressed community may designate in

accordance with the provisions of this section one MED zone in the municipality, provided that

the municipality is:

      (i) A financially distressed community as defined by section 45-13-12(b), using the

criteria set forth in section 45-13-12(b)(1) through (4);

      (ii) Has a population less than fifty thousand (50,000) persons; and

      (iii) The MED zone shall be a parcel of or contiguous parcels of land consisting in total

of not less than ten (10) acres, but not more than thirty (30) acres in the area served by adequate

utilities and transportation facilities.

      (2) The city or town council of any financially distressed city or town, as set forth in

subdivision (1) of this subsection, in creating a MED zone, shall have the power and authority of

a redevelopment agency, as provided in chapter 32 of title 45, to undertake the redevelopment of

a MED zone.

      (3) The city or town council, in designating a MED zone, shall after public notice,

hearing and vote as provided by section 45-32-4, comply with the plan requirements of section

45-32-8 and shall be responsible for carrying on the plan. The city or town council in

implementing the MED zone plan shall have the power of eminent domain as set forth in section

45-32-24, and the provisions of sections 45-32-25 -- 45-32-41 shall apply to all such

condemnations.

      (4) All sales and use taxes collected within a MED zone shall be reimbursed to the

municipality in which the MED zone is located, and may be expended by the municipality to

implement the capital improvement component of the MED zone plan for MED zone property or

for property located within one mile of the MED zone or for such other capital improvements as

the municipality may determine are required to mitigate MED zone impacts.

LC003861 - Page 3 of 6

      (5) West Warwick. - The following area or portions of them of the town of West

Warwick may be designated as the town's municipal economic development zone by the town

council of the town of West Warwick after public notice, hearing and vote as provided in section

45-32-4:

      The area bounded generally by the East Coast Bike Path in the east, Archambault and

Gardner Avenue in the north, Payan Street to Curson Street, Curson Street to McNiff, McNiff to

Barnes Street, Barnes Street to Nowicki Street to East Street, East Street to Blanchard Street,

Blanchard Street to West Street in the west, West Street to Washington Street, Washington Street

to Nolan Street, Nolan Street to the East Coast Bike Path in the south, all as more particularly

described on the West Warwick municipal economic development zone map on file with the town

clerk.

      (6) The tax administrator shall issue a certification of exemption to the MED zone

business at the time the business applies for its permit to make sales at retail and provides the tax

administrator with a MED zone business certificate issued by the town clerk stating that the

business is located in new construction in the MED zone. The duration of the certificate shall be

determined in accordance with subdivision (b)(1) of this section.

      (7) No business shall be permitted to become a MED zone business or to receive a

certificate of exemption pursuant to subdivision (6) of this subsection by relocating from any area

within the state of Rhode Island but outside the MED zone to new construction within the MED

zone, unless the relocation results in the creation of new permanent employment positions that

increase the total employment of the business by not less than fifty percent (50%) of its average

total employment for the two (2) year period immediately preceding the year in which it applies

for its certificate of exemption. Any business that expands its operations by adding a new location

within the MED zone and then ceases to operate any of its locations within the state of Rhode

Island that existed prior to the establishment of the MED zone location shall immediately have its

certificate of exemption for the MED zone location revoked.

     (8) Woonsocket. The entire area of the city of Woonsocket may be designated as the

city's municipal economic development zone by the city council of the city of Woonsocket after

public notice, hearing, and vote as provided in § 45-32-4. This provision shall be repealed and

expire ten (10) years after passage.

     (d) The director of the department of revenue shall perform an annual review of all

municipal economic development zones created pursuant to this section regarding compliance

with their MED zone plans, the receipt and the expenditure of funds, the status of any capital

improvement projects and the names of any businesses granted a tax certificate of exemption.

LC003861 - Page 4 of 6

This annual review shall be performed on or before December 31 of each year and provided to

the chairpersons of the house and senate finance committees on or before February 1 of each

year. The general assembly can expand the municipal economic development zone or create

additional MED zones, or both, if there is favorable economic progress in the zone, based upon

the annual review provided by the director of the department of revenue.

     SECTION 2. This act shall take effect upon passage.

========

LC003861

========

LC003861 - Page 5 of 6

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION - SALES AND USE TAXES - LIABILITY AND

COMPUTATION

***

     This act would authorize the creation of a municipal economic development zone

consisting of the entire city of Woonsocket and require that the director of the department of

revenue perform an annual review of all MED zones and transmit said review to the chairpersons

of the house and senate finance committees.

     This act would take effect upon passage.

========

LC003861

========

LC003861 - Page 6 of 6