2014 -- S 2217

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LC003830

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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

     Introduced By: Senators Lombardo, Picard, Nesselbush, Miller, and McCaffrey

     Date Introduced: January 30, 2014

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 3-10-1 of the General Laws in Chapter 3-10 entitled "Taxation of

Beverages" is hereby amended to read as follows:

     3-10-1. Manufacturing tax rates -- Exemption of religious uses. -- (a) There shall be

assessed and levied by the tax administrator on all beverages manufactured, rectified, blended, or

reduced for sale in this state a tax of three dollars and thirty cents ($3.30) on every thirty-one (31)

gallons, and a tax at a like rate for any other quantity or fractional part. On any beverage

manufactured, rectified, blended, or reduced for sale in this state consisting in whole or in part of

wine, whiskey, rum, gin, brandy spirits, ethyl alcohol, or other strong liquors (as distinguished

from beer or other brewery products) the tax to be assessed and levied is as follows:

      (1) Still wines (whether fortified or not), one dollar and forty cents ($1.40) per gallon;

      (2) Still wines (whether fortified or not) made entirely from fruit grown in this state,

thirty cents ($.30) per gallon;

      (3) Sparkling wines (whether fortified or not), seventy five cents ($.75) per gallon;

      (4) Whiskey, rum, gin, brandy spirits, cordials, and other beverages consisting in whole

or in part of alcohol which is the product of distillation, five dollars and forty cents ($5.40) per

gallon, except that whiskey, rum, gin, brandy spirits, cordials, and other beverages consisting in

whole or in part of alcohol which is the product of distillation but which contains alcohol

measuring thirty (30) proof or less, one dollar and ten cents ($1.10) per gallon;

      (5) Ethyl alcohol to be used for beverage purposes, seven dollars and fifty cents ($7.50)

per gallon; and

      (6) Ethyl alcohol to be used for nonbeverage purposes, eight cents ($.08) per gallon.

      (b) Sacramental wines are not subject to any tax if sold directly to a member of the

clergy for use by the purchaser, or his or her congregation for sacramental or other religious

purposes.

      (c) A brewer who brews beer in this state which is actively and directly owned,

managed, and operated by an authorized legal entity which has owned, managed, and operated a

brewery in this state for at least twelve (12) consecutive months, shall receive a tax exemption on

the first one hundred thousand (100,000) barrels of beer that it produces and distributes in this

state in any calendar year. A barrel of beer is thirty one (31) gallons.

     (1) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax exemption in subsection (c) above shall report to the

division of taxation the actual value of the tax exemption and authorize that this information as

well as the identification of the taxpayer be disclosed as part of the biennial tax expenditure

report. In order to qualify for the tax exemption in this subsection (c) of this section, any taxpayer

shall comply with the requirements of this subsection. The tax administrator shall prescribe the

form in which the report required by this subsection shall be filed.

     SECTION 2. Section 46-64-20 of the General Laws in Chapter 46-20 entitled "Rhode

Island Economic Development Corporation" is hereby amended to read as follows:

     42-64-20. Exemption from taxation. [Effective January 1, 2014.] -- (a) The exercise of

the powers granted by this chapter will be in all respects for the benefit of the people of this state,

the increase of their commerce, welfare, and prosperity and for the improvement of their health

and living conditions and will constitute the performance of an essential governmental function

and the corporation shall not be required to pay any taxes or assessments upon or in respect of

any project or of any property or moneys of the Rhode Island COMMERCE CORPORATION,

levied by any municipality or political subdivision of the state; provided, that the corporation

shall make payments in lieu of real property taxes and assessments to municipalities and political

subdivisions with respect to projects of the corporation located in the municipalities and political

subdivisions during those times that the corporation derives revenue from the lease or operation

of the projects. Payments in lieu of taxes shall be in amounts agreed upon by the corporation and

the affected municipalities and political subdivisions. Failing the agreement, the amounts of

payments in lieu of taxes shall be determined by the corporation using a formula that shall

reasonably ensure that the amounts approximate the average amount of real property taxes due

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throughout the state with respect to facilities of a similar nature and size. Any municipality or

political subdivision is empowered to accept at its option an amount of payments in lieu of taxes

less than that determined by the corporation. If, pursuant to section 42-64-13(f), the corporation

shall have agreed with a municipality or political subdivision that it shall not provide all of the

specified services, the payments in lieu of taxes shall be reduced by the cost incurred by the

corporation or any other person in providing the services not provided by the municipality or

political subdivision.

      (b) The corporation shall not be required to pay state taxes of any kind, and the

corporation, its projects, property, and moneys and, except for estate, inheritance, and gift taxes,

any bonds or notes issued under the provisions of this chapter and the income (including gain

from sale or exchange) from these shall at all times be free from taxation of every kind by the

state and by the municipalities and all political subdivisions of the state. The corporation shall not

be required to pay any transfer tax of any kind on account of instruments recorded by it or on its

behalf.

      (c) For purposes of the exemption from taxes and assessments upon or in respect of any

project under subsections (a) or (b) of this section, the corporation shall not be required to hold

legal title to any real or personal property, including any fixtures, furnishings or equipment which

are acquired and used in the construction and development of the project, but the legal title may

be held in the name of a lessee (including sublessees) from the corporation. This property, which

shall not include any goods or inventory used in the project after completion of construction, shall

be exempt from taxation to the same extent as if legal title of the property were in the name of the

corporation; provided that the board of directors of the corporation adopts a resolution confirming

use of the tax exemption for the project by the lessee. Such resolution shall not take effect until

thirty (30) days from passage. The resolution shall include findings that: (1) the project is a

project of the corporation under section 42-64-3(20), and (2) it is in the interest of the corporation

and of the project that legal title be held by the lessee from the corporation. In adopting the

resolution, the board of directors may consider any factors it deems relevant to the interests of the

corporation or the project including, for example, but without limitation, reduction in potential

liability or costs to the corporation or designation of the project as a "Project of Critical Economic

Concern" pursuant to Chapter 117 of this title.

      (d) For purposes of the exemption from taxes and assessments for any project of the

corporation held by a lessee of the corporation under subsection (c) of this section, any such

project shall be subject to the following additional requirements:

      (1) The total sales tax exemption benefit to the lessee will be implemented through a

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reimbursement process as determined by the division of taxation rather than an up-front purchase

exemption;

      (2) The sales tax benefits granted pursuant to RIGL 42-64-20(c) shall only apply to

project approved prior to July 1, 2011 and shall: (i) only apply to materials used in the

construction, reconstruction or rehabilitation of the project and to the acquisition of furniture,

fixtures and equipment, except automobiles, trucks or other motor vehicles, or materials that

otherwise are depreciable and have a useful life of one year or more, for the project for a period

not to exceed six (6) months after receipt of a certificate of occupancy for any given phase of the

project for which sales tax benefits are utilized; and (ii) not exceed an amount equal to the income

tax revenue received by the state from the new full-time jobs with benefits excluding project

construction jobs, generated by the project within a period of three (3) years from after the receipt

of a certificate of occupancy for any given phase of the project. "Full- time jobs with benefits"

means jobs that require working a minimum of thirty (30) hours per week within the state, with a

median wage that exceeds by five percent (5%) the median annual wage for the preceding year

for full-time jobs in Rhode Island, as certified by the department of labor and training with a

benefit package that is typical of companies within the lessee's industry. The sales tax benefits

granted pursuant to Rhode Island general laws subsection 42-64-20(c) shall not be effective for

projects approved on or after July 1, 2011.

      (3) The corporation shall transmit the analysis required by RIGL 42-64-10(a)(2) to the

house and senate fiscal committee chairs, the department of labor and training and the division of

taxation promptly upon completion. Annually thereafter, the department of labor and training

shall certify to the house and senate fiscal committee chairs, the house and senate fiscal advisors,

the corporation and the division of taxation the actual number of new full-time jobs with benefits

created by the project, in addition to construction jobs, and whether such new jobs are on target to

meet or exceed the estimated number of new jobs identified in the analysis above. This

certification shall no longer be required when the total amount of new income tax revenue

received by the state exceeds the amount of the sales tax exemption benefit granted above.

      (4) The department of labor and training shall certify to the house and senate fiscal

committee chairs and the division of taxation that jobs created by the project are "new jobs" in the

state of Rhode Island, meaning that the employees of the project are in addition to, and without a

reduction of, those employees of the lessee currently employed in Rhode Island, are not relocated

from another facility of the lessee's in Rhode Island or are employees assumed by the lessee as

the result of a merger or acquisition of a company already located in Rhode Island. Additionally,

the corporation, with the assistance of the lessee, the department of labor and training, the

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department of human services and the division of taxation shall provide annually an analysis of

whether any of the employees of the project qualify for RIte Care or RIte Share benefits and the

impact such benefits or assistance may have on the state budget.

      (5) Notwithstanding any other provision of law, the division of taxation, the department

of labor and training and the department of human services are authorized to present, review and

discuss lessee specific tax or employment information or data with the corporation, the house and

senate fiscal committee chairs, and/or the house and senate fiscal advisors for the purpose of

verification and compliance with this resolution; and

      (6) The corporation and the project lessee shall agree that, if at any time prior to the state

recouping the amount of the sales tax exemption through new income tax collections from the

project, not including construction job income taxes, the lessee will be unable to continue the

project, or otherwise defaults on its obligations to the corporation, the lessee shall be liable to the

state for all the sales tax benefits granted to the project plus interest, as determined in RIGL 44-1-

7, calculated from the date the lessee received the sales tax benefits.

     (e) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax exemption in section shall report to the division of taxation

the actual value of the tax exemption, and authorize that this information as well as the

identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In order

to qualify for the tax exemption in this section, any taxpayer shall comply with the requirements

of this subsection. The tax administrator shall prescribe the form in which the report required by

this subsection shall be filed.

     SECTION 3. Sections 42-64.3-6 and 42-64.3-7 of the General Laws in Chapter 42-64.3

entitled "Distressed Areas Economic Revitalization Act" are hereby amended to read as follows:

     42-64.3-6. Business tax credits. -- A qualified business in an enterprise zone is allowed a

credit against the tax imposed pursuant to chapters 11, 13 (except the taxation of tangible

personal property under 44-13-13), 14, 17, and 30 of title 44:

     (1) A credit equal to fifty percent (50%) of the total amount of wages paid to those

enterprise job employees comprising the five percent (5%) new jobs referenced in 42-64.3-

3(4)(i)(A). The wages subject to the credit shall be reduced by any direct state or federal wage

assistance paid to employers for the employee(s) in the taxable year. The maximum credit

allowed per taxable year under the provisions of this subsection shall be two thousand five

hundred dollars ($2,500), per employee. A taxpayer who takes this business tax credit shall not be

eligible for the resident business owner modification pursuant to 42-64.3-7.

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     (2) A credit equal to seventy five percent (75%) of the total amount of wages paid to

those enterprise job employees who are domiciliaries of an enterprise zone comprising the five

percent (5%) new jobs referenced in 42-64.3-3(4)(i)(A). The wages subject to the credit shall be

reduced by any direct state or federal wage assistance in the taxable year. The maximum credit

allowed per taxable year under the provisions of this subdivision shall be five thousand dollars

($5,000) per employee. A taxpayer who takes this business tax credit is not eligible for the

resident business owner modification. The council shall promulgate appropriate rules to certify

that the enterprise job employees are domiciliaries of an enterprise zone and shall advise the

qualified business and the tax administrator. A taxpayer taking a credit for employees pursuant to

this subdivision (2) shall not be entitled to a credit pursuant to subdivision (1) of this section for

the employees.

     (3) Any tax credit as provided in subdivision (1) or (2) of this section shall not reduce the

tax below the minimum tax. Fiscal year taxpayers must claim the tax credit in the year into which

the December 31st of the certification year falls. The credit shall be used to offset tax liability

pursuant to the provisions of either chapters 11, 13, 14, 17, or 30 of title 44, but not more than

one chapter.

     (4) In the case of a corporation, the credit allowed under this section is only allowed

against the tax of that corporation included in a consolidated return that qualifies for the credit

and not against the tax of other corporations that may join in the filing of a consolidated tax

return.

     (5) In the case of multiple business owners, the credit provided in subdivision (1) or (2)

of this section is apportioned according to the ownership interests of the qualified business.

     (6) The tax credits established pursuant to this section may be carried forward for a

period of three (3) years if in each of the three (3) calendar years a business which has qualified

for tax credits under this section: (a) does not reduce the number of its employees from the last

Effective Date of Certification; (b) obtains certificates of good standing from the Rhode Island

division of taxation, the corporations division of the Rhode Island secretary of state and the

appropriate municipal tax collector; (c) provides the council an affidavit stating under oath that

this business has not within the preceding twelve (12) months changed its legal status for the

purpose of gaining favorable treatment under the provisions of chapter 64.3 of this title; and (d)

meets any other requirements as may be established by the council in its rules and regulations.

     (7) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

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the actual value of the tax credits, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     42-64.3-7. Resident business owner tax modification. -- (a) In computing his or her

annual tax liability pursuant to the provisions of chapter 11 or 30 of title 44, a domiciliary of an

enterprise zone who owns and operates a qualified business facility in that zone and which

business is not required to file under chapter 11,13,14 or 17 of title 44 may:

     (1) For the first three (3) years after certification, whether or not consecutive, deduct fifty

thousand dollars ($50,000) per year as a modification reducing federal adjusted gross income; and

     (2) For the fourth and fifth years after certification, whether or not consecutive, deduct

twenty-five thousand dollars ($25,000) per year as a modification reducing federal adjusted gross

income.

     (b) Any modification provided in subdivisions (1) and (2) of subsection (a) shall not be

available in taxable years other than the year in which the taxpayer qualifies for tax modification.

     (c) In the case of multiple business owners, the modifications provided in subdivisions

(1) and (2) of subsection (a) shall be apportioned according to the ownership interests of the

domiciliary owners of the qualified business.

     (d) A taxpayer who elects this modification shall not be eligible for the business tax

credits under 42-64.3-6.

     (e) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax modification in this section shall report to the division of

taxation the actual value of the tax modification, and authorize that this information, as well as

the identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In

order to qualify for the tax modification in this section, any taxpayer shall comply with the

requirements of this subsection. The tax administrator shall prescribe the form in which the report

required by this subsection shall be filed.

     SECTION 4. Section 42-64.5-3 of the General Laws in Chapter 42-64.5 entitled "Jobs

Development Act" is hereby amended to read as follows:

     42-64.5-3. Tax rate reduction. -- (a) The rate of tax payable by an eligible company and

each of its eligible subsidiaries for any taxable year ending on or after July 1, 1995, on its net

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

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

44-13-4(4), shall be reduced by the amount specified in 42-64.5-4; this rate reduction shall be

applied annually once 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; provided, however, except as provided in 42-64.5-7, should

any eligible company fail to maintain in any taxable year after 1997 or, if applicable, the third

taxable year following the base employment period election set forth in 42-64.5-5, the number of

units of new employment it reported for its 1997 tax year or, if applicable, the third taxable year

following the base employment period election set forth in 42-64.5-5;the rate reduction provided

for in this chapter shall expire permanently.

     (b) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax reduction in this section shall report to the division of

taxation the actual value of the tax reduction, and authorize that this information, as well as the

identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In order

to qualify for the tax reduction in this section, any taxpayer shall comply with the requirements of

this subsection. The tax administrator shall prescribe the form in which the report required by this

subsection shall be filed.

     SECTION 5. Section 42-64.6-4 of the General Laws in Chapter 42-64.6 entitled "Jobs

Training Tax Credit Act" is hereby amended to read as follows:

     42-64.6-4. Determination of credit. – (a) The credit provided in this chapter is equal to

twenty-five percent (25%) of the qualifying expenses incurred in 1996 and fifty percent (50%) of

the qualifying expenses incurred after 1996 to provide training and/or retraining for a qualifying

employee, of which fifty percent (50%) of the credit shall be allowed in the taxable year in which

the expense is paid and the balance of the credit shall be allowed in the following taxable year.

The maximum amount of credit per employee shall not exceed five thousand dollars ($5,000) in

any three (3) year period. The credit allowed pursuant to the provisions of this chapter that is

attributable to the cost of providing training and/or retraining to a qualifying employee shall be

recaptured if the employee involuntarily other than as a result of death or disability no longer

qualifies as a qualifying employee of the employer at any time during the eighteen (18) month

period following the employee's completion of the program.

     (b) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

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any taxpayer benefiting from the tax credit in this section shall report to the division of taxation

the actual value of the tax credit, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credit in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     SECTION 6. Section 42-64.11-4 of the General Laws in Chapter 42-64.11 entitled "Jobs

Growth Act" is hereby amended to read as follows:

     42-64.11-4. Partial modification of performance-based compensation.-- (a) Fifty

percent (50%) of the performance-based compensation realized by an eligible employee in any

credit year shall be allowed as a modification decreasing adjusted gross income and alternative

minimum income for purposes of the personal income tax.

     (b) The modification provided under subsection (a) shall be taken into account in

determining withholding under 44-30-71 to be deducted by a fully-certified company with respect

to performance-based compensation paid to eligible employees.

     (c) The amount of income, otherwise qualifying as performance-based compensation,

derived from employer granted stock options is subject to the fifty percent (50%) modification

provided for in subsection (a) only to the extent that the same amount is subject to tax under 42-

64.11-5.

     (d) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax modification in this section shall report to the division of

taxation the actual value of the tax modification, and authorize that this information, as well as

the identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In

order to qualify for the tax modification in this section, any taxpayer shall comply with the

requirements of this subsection. The tax administrator shall prescribe the form in which the report

required by this subsection shall be filed.

     SECTION 7. Section 44-11-41 of the General Laws in Chapter 44-11 entitled "Business

Corporation Act" is hereby amended to read as follows:

     44-11-41. Tax credit for machine tool, metal trade or plastic process technician

apprenticeships. -- (a) Any taxpayer who employs a machine tool and metal trade apprentice or

plastic process technician apprentice duly enrolled and registered under the terms of a qualified

program (as determined by the state apprenticeship council) is entitled to a tax credit for each

eligible apprentice for fifty percent (50)% of actual wages paid, or four thousand eight hundred

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dollars ($4,800), whichever is less; provided, that the apprenticeships meet the following

requirements:

     (1) The tax credit is limited to qualified Machine Tool, Metal Trade and Plastics Process

Technician programs with apprenticeship periods of duration which are more than four thousand

(4,000) hours and less than ten thousand (10,000) hours.

     (2) The apprentice must be employed on a full-time basis, which is defined as working a

minimum of one hundred twenty (120) hours per month at the trade. Up to eighty (80) hours may

be applied during the tax year against the one hundred twenty (120) hour limitation.

     (3) Pre-apprentices are not counted as apprenticeships begun and wages earned by pre-

apprentices are not eligible for tax credits under this regulation.

     (4) The number of apprenticeships for which tax credit is allowed must exceed the

average number of apprenticeships begun during the five (5) preceding income years.

     (b) The tax credit is limited to the following trade: machinist, toolmaker, tool and

diemaker, model maker, gage maker, patternmaker, tool and machine setter, diesinker,

moldmaker, machine tool repairer, plastic process technician and in similar occupations which, as

above, involve multiple work processes including the shaping of metals by machine tool

equipment designed to perform cutting, grinding, milling, turning, drilling, boring, planing,

hobbing, and abrading operations.

     (c) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

the actual value of the tax credits, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     SECTION 8. Section 44-30-1.1 of the General Laws in Chapter 44-30 entitled "Personal

Income Tax" is hereby amended to read as follows:

     44-30-1.1. Exemption from tax for writers, composers and artists. -- (a) This section

shall only apply to writers, composers and artists residing within a section of the defined

economic development zone within the city of Providence, Pawtucket, Woonsocket or Warwick,

or the economic development zone within the town of Westerly as defined in 44-18-30B(c)(1)(i),

or within the city of Newport or within the town of Tiverton or the town of Little Compton, or

within those areas of the town of Warren which are zoned "waterfront district," "special district,"

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"village business district," "manufacturing district," "business district" or "Warren historic

district", or a tax pass-through entity wholly owned by one or more such individuals and who

create such work while residing in the zone, or in the case of Newport or the town of Little

Compton, within those areas of the city or town which are zoned "general business," "waterfront

business" or "limited business" or have been designated by the city of Newport as part of the arts

district, or in the case of Warren, within those areas of the town which are zoned "waterfront

district," "special district," "village business district," "manufacturing district," "business district"

or "Warren historic district," or in the case of Tiverton with those areas of the town which are

zoned "business commercial," "business waterfront" or "village commercial." For the purposes of

this section, a "work" means an original and creative work, whether written, composed, created or

executed for "one-of-a-kind, limited" production, before or after the passing of this section, which

falls into one of the following categories: (1) a book or other writing; (2) a play or the

performance of said play; (3) a musical composition or the performance of said composition; (4)

a painting or other like picture; (5) a sculpture; (6) traditional and fine crafts; (7) the creation of a

film or the acting of said film; (8) the creation of a dance or the performance of said dance. For

purposes of this section, a "work" does not apply to any piece or performance created or executed

for industry oriented or related production.

     (b) (1) This section shall apply to any individual:

     (i) Who is a resident within the section of the economic development zone designated as

the arts and entertainment district in the downtown areas of the cities of Providence, Woonsocket

or Pawtucket, and deriving the income exempted from within said district while a resident of said

zone, or who is a resident within the section of the arts and entertainment district in the town of

Westerly, as defined in 44-18-30B(c)(1)(i) and who derives the income exempted from within

said district while a resident of said zone. For the purposes of this section, the "Providence arts

and entertainment district" is defined as the area bounded by Pine Street to the southeast,

Dorrance Street to the northeast, Sabin Street to the northwest and Empire Street to the southwest.

Said Providence arts and entertainment district also includes the area beginning at the point of

intersection of Acorn Street and Harris Avenue, then turning east onto Atwells Avenue to Service

Road 7, then turning southerly onto Service Road 7 to Westminster Street, then turning westerly

onto Westminster Street, continuing until Bridgham, then turning south onto Bridgham to

Cranston Street, then turning southwesterly onto Cranston Street, then continuing to Messer

Street, then turning north onto Messer Street to Westminster Street, turning west onto

Westminster Street to US Hwy 6 off ramp, then heading west on US Hwy 6 to Sheridan Street,

then heading northeast on Sheridan Street to Aleppo Street, then turning southeast along Aleppo

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Street to Pelham Street, then heading northeast on Pelham Street to Manton Avenue, then

continuing southeast on Manton Avenue until Delaine Street, then heading northeast on Delaine

Street until Appleton Street, then continuing northwesterly on Appleton Street until Bowdoin

Street, then heading north on Bowdoin Street until Barstow Street, then heading east on Barstow

until Valley Street, then heading northeast on Valley Street to Hemlock Street, then turning

southeast on Hemlock Street until Promenade Street, then heading east on Promenade Street to

Acorn Street, then heading south on Acorn Street to the intersection of Acorn Street and Harris

Avenue. The abovementioned streets shall be included in the district. The "Westerly arts and

entertainment district" is defined in 44-18-30B(c)(1)(i). The "Pawtucket arts and entertainment

district" shall be defined as the area beginning at the point of intersection of Dexter Street and the

Central Falls line, then east along the Central Falls Line to the Blackstone River, then north along

the city boundary on the Blackstone River to the Cumberland line, then west along the Pawtucket

city boundary line to I-95, then south along I-95 to Pine Street, then north on Pine Street to

AMTRAK Right of Way, then northwest along the AMTRAK Right of Way to Dexter Street,

then north on Dexter Street to the Central Falls line. The abovementioned streets shall be included

in the district. The "Woonsocket arts and entertainment district" shall be defined as the area

beginning at a point of land on the southwest bank of the Blackstone River abutting the bridge for

the Providence & Worcester Railroad and proceeding northerly to a point at the intersection of

Worrall Street, Clinton Street and Harry S. Truman Drive, then proceeding northwesterly along

Worrall Street to its intersection with Social Street, then turning westerly on Social Street

proceeding to its intersection with Main Street, Blackstone Street and North Main Street, then

turning northwesterly and proceeding along Blackstone Street to its intersection with River Street,

then turning northerly and proceeding along River Street to its intersection with the northeast

bank of Blackstone River, then following the riverbank southerly to the bridge at Bernon Street

and turning easterly crossing the Blackstone River via Bernon Street and proceeding to its

intersection with Front Street, then turning northeasterly on Front Street and proceeding to its

intersection with Hamlet Avenue, and to include the former Courthouse on the southerly side of

Front Street at its intersection with Hamlet Avenue, then turning easterly on Hamlet Avenue and

proceeding to its intersection with Manville Road, then turning southeasterly on Manville Road

and proceeding to its intersection with Davison Avenue, then turning northeasterly on Davison

Avenue and proceeding to a point on the southwest bank of the Blackstone River, then turning

northerly, following the southerly riverbank to the point of beginning. The abovementioned

streets are included in the district. The Warwick arts district is defined as that area known as

Pontiac Village, beginning on Route 5 at the Warwick/Cranston municipal boundary, then south

LC003830 - Page 12 of 37

to the intersection of Route 5 and the Pawtuxet River, then following the Pawtuxet River in an

easterly and northerly direction to the municipal boundary in the vicinity of Knight Street, then

from the intersection of Knight Street and the municipal boundary westerly along the

Warwick/Cranston municipal boundary to the intersection of Route 5 and Greenwich Avenue.

The above named streets are included in the district.

     This section shall also apply to any individual who is a resident of the city of Newport or

the town of Tiverton or the town of Little Compton and whose income otherwise qualifies for an

exemption as provided for in this section.

     This section shall also apply to any individual who is a resident of the town of Warren

and whose income otherwise qualifies for an exemption as provided for in this section.

     (ii) Who is determined by the tax administrator, after consideration of any evidence in

relation to the matter which the individual submits to him or her and after such consultation as

may seem to him or her to be necessary with such person or body of persons as in his or her

opinion may be of assistance to him or her, to have written, composed or executed either solely or

jointly with another individual, a work or works that would fall into one of the categories listed in

subsection (a) of this section.

     (c) (1) An individual to whom this section applies and who duly makes a claim to the tax

administrator in that behalf shall, subject to subdivision (2) of this subsection, be entitled to have

the profits or gains arising to him or her from the publication, production or sale of a work or

works in relation to which the tax administrator has made a determination under paragraph

(b)(1)(ii) of this section to be taken as a modification reducing federal adjusted gross income.

     (2) The modification authorized by this section shall apply to the year in which the profit

or gain from the publication, production or sale of a work is realized.

     (d) The tax administrator may serve on an individual who makes a claim under this

subsection a notice or notices, in writing, requiring him or her to make available within any time

that may be specified in the notice of all such books, accounts and documents in his or her

possession or power as may be requested, being books, accounts and documents relating to the

publication, production or sale of the work in respect of the profits or gains of which exemption is

claimed.

     (e) For the purpose of determining the amount of profits or gains subject to modification

under this section, the tax administrator may make any apportionment of receipts and expenses

that may be necessary.

     (f) Notwithstanding any other provisions of this chapter, any individual seeking relief

under this section shall file a Rhode Island personal income tax return listing the modification

LC003830 - Page 13 of 37

reducing federal adjusted gross income relating to profits or gains realized from the works as

defined in this section.

     (g) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax modification in this section shall report to the division of

taxation the actual value of the tax modification, and authorize that this information, as well as

the identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In

order to qualify for the tax modification in this section, any taxpayer shall comply with the

requirements of this subsection. The tax administrator shall prescribe the form in which the report

required by this subsection shall be filed.

     SECTION 9. Sections 44-31-1, 44-31-1.1 and 44-31-2 of the General Laws in Chapter

44-31 entitled "Investment Tax Credit" are hereby amended to read as follows:

     44-31-1. Investment tax credit. -- (a) A taxpayer shall be allowed a credit, to be

computed as provided in this chapter, against the tax imposed by chapters 11, 14, 17, and 30 of

this title. The amount of the credit shall be two percent (2%) of the cost or other basis for federal

income tax purposes of tangible personal property and other tangible property, including

buildings and structural components of buildings, described in subsection (b) of this section,

acquired, constructed, reconstructed, or erected after December 31, 1973. Provided, that the

amount of the credit shall be four percent (4%) of the: (i) cost or other basis for federal income

tax purposes of tangible personal property and other tangible property, including buildings and

structural components of buildings, described in subdivision (b)(1) of this section, acquired,

constructed, reconstructed or erected after December 31, 1993; and (ii) qualified amounts for

leased assets of tangible personal property and other tangible property described in subdivision

(b)(1) of this section, acquired, constructed, reconstructed, or erected after January 1, 1998, and

the amount of the credit shall be ten percent (10%) of the cost or other basis for federal income

tax purposes, and the qualified amounts for leased assets, of tangible personal property and other

tangible property described in subdivision (b)(3) of this section, acquired, constructed,

reconstructed, or erected after January 1, 1998, and with respect to buildings and structural

components which are acquired, constructed, reconstructed or erected after July 1, 2001, as

described in subdivision (b)(3) of this section.

     (b) (1) A credit shall be allowed under this section with respect to tangible personal

property and other tangible property, including buildings and structural components of buildings,

which are depreciable pursuant to 26 U.S.C. 167, have a useful life of four (4) years or more, are

acquired by purchase as defined in 26 U.S.C. 179(d) or are acquired by lease as prescribed in

LC003830 - Page 14 of 37

paragraph (3)(iv) of this subsection, have a situs in this state and are principally used by the

taxpayer in the production of goods by manufacturing, process, or assembling. The credit shall be

allowable in the year the property is first placed in service by the taxpayer, which is the year in

which, under the taxpayer's depreciation practice, the period for depreciation with respect to the

property begins, or the year in which the property is placed in a condition or state of readiness

and availability for a specifically assigned function, whichever is earlier. For purposes of this

paragraph, "manufacturing" means the process of working raw materials into wares suitable for

use or which gives new shapes, new quality or new combinations to matter that already has gone

through some artificial process by the use of machinery, tools, appliances, and other similar

equipment. Property used in the production of goods includes machinery, equipment, or other

tangible property which is principally used in the repair and service of other machinery,

equipment, or other tangible property used principally in the production of goods and includes all

facilities used in the production operation, including storage of material to be used in production

and of the products that are produced.

     (2) Within the meaning of subdivision (1) of this subsection, the term "manufacturing"

means the activities of a "manufacturer" as defined in 44-3-3(20)(iii) and (iv).

     (3) (i) A credit shall be allowed under this section with respect to tangible personal

property and other tangible property, (excluding motor vehicles, furniture, buildings and

structural components of buildings, except as provided in this section), which are depreciable

pursuant to 26 U.S.C. 167, have a useful life of four (4) years or more, are acquired by purchase

as defined in 26 U.S.C. 179(d) or acquired by lease as prescribed in paragraph (iv) of this

subdivision, have a situs in this state and to the extent the property is used by a qualified taxpayer,

as that term is defined in paragraph (v) of this subdivision, in any of the businesses described in

major groups 20 through 39, 50 and 51, 60 through 67, 73, 76, 80 through 82, 87 and 89 in the

standard industrial classification manual prepared by the technical committee on industrial

classification, office of the statistical standards, executive office of the president, United States

Bureau of the Budget, as revised from time to time ("SIC Code") and/or any of the businesses

described in the three (3) digit SIC Code 781.

     (ii) A credit shall be allowed under this section with respect to buildings and structural

components that are acquired, constructed, reconstructed, or erected after July 1, 2001, which are

depreciable pursuant to 26 U.S.C. 167, have a useful life of four (4) years or more, are acquired

by purchase as defined in 26 U.S.C. 179(d) or acquired by lease for a term of twenty (20) years or

more, excluding renewal periods, have a situs in this state and to the extent the property is used

by a high performance manufacturer. The term "high performance manufacturer" means a

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taxpayer: (A) engaged in any of the businesses described in the major groups 28, 30, 34, to 36,

and 38 of the SIC Codes, (B) that pays its full-time equivalent employees a median annual wage

above the average annual wage paid by all taxpayers in the state which share the same two-digit

SIC Code, unless the high performance manufacturer is the only high performance manufacturer

in the state conducting business in that two-digit SIC Code, in which case this requirement shall

not apply, and (C)(I) whose expenses for training or retraining its employees exceeds two percent

(2%) of its total payroll costs, or (II) that pays its full-time equivalent employees a median annual

wage equal to or greater than one hundred twenty-five percent (125%) of the average annual

wage paid in this state by employers to employees, or (III) that pays its full-time equivalent

employees classified as production workers by the Rhode Island department of labor and training

an average annual wage above the average annual wage paid to the production workers of all

taxpayers in the state which share the same two-digit SIC Code.

     (iii) To the extent allowable, the credit allowed under this section is allowed for

computers, software and telecommunications hardware used by a taxpayer even if the property

has a useful life of less than four (4) years;

     (iv) The credit for property acquired by lease is based on the fair market value of the

property at the inception of the lease times the portion of the depreciable life of the property

represented by the term of the lease, excluding renewal options. The credit described in this

subdivision for high performance manufacturers that lease buildings and their structural

components for a term of twenty (20) years or more, excluding renewal periods, shall be

calculated in the same manner as for property acquired by purchase; and

     (v) For purposes of this subsection, a "qualified taxpayer" means a taxpayer in any of the

businesses described in major groups 20 through 39, 50 and 51, 60 through 67, 73, 76, 80 through

82, 87 and 89 of the SIC Code, and/or any of the businesses described in the three (3) digit SIC

Code 781, and which meet the following criteria:

     (A) The median annual wage paid to a qualified taxpayer's full-time equivalent

employees must be above the average annual wage paid by all taxpayers in the state which share

the same two-digit SIC Code, unless that qualified taxpayer is the only qualified taxpayer in the

state conducting business in that two-digit SIC Code, in which case this requirement does not

apply; and

     (B) With respect to major groups 50 and 51, 60 through 67, 73, 76, 80 through 82, 87 and

89 and/or the three (3) digit SIC Code 781(except for those qualified taxpayers whose businesses

are described in any of the four (4) digit SIC Codes 7371, 7372 and 7373) only:

     (I) More than one-half (1/2) of its gross revenues are a result of sales to customers outside

LC003830 - Page 16 of 37

of the state; or

     (II) More than one-half (1/2) of its gross revenues are a result of sales to the federal

government; or

     (III) More than one-half (1/2) of its gross revenues are a result of a combination of sales

described in items (I) and (II) of this subparagraph.

     (4) For purposes of this section, "sales to customers outside the state" means sales to

individuals, businesses and other entities, as well as divisions and/or branches of businesses and

other entities, residing or located outside of the state. The requirement of subparagraph (v)(A) of

this subdivision does not apply to any qualified taxpayer: (i) whose expenses for training or

retraining its employees exceeds two percent (2%) of these qualified taxpayer's total payroll

costs; or (ii) whose median annual wage paid to its full-time equivalent employees is equal to or

greater than one hundred twenty-five percent (125%) of the average annual wage paid in this state

by employers to employees; or (iii), with respect to major groups 20 through 39 only, the average

annual wage paid to these qualified taxpayer's full-time equivalent employees, classified as

production workers by the Rhode Island department of labor and training, is above the average

annual wage paid to the production workers of all these taxpayers in the state which share the

same two-digit SIC Code. At the election of a taxpayer, which is made at any time and in any

manner that may be determined by the tax administrator, the taxpayer's ability in a particular

fiscal year to qualify as a qualified taxpayer may be based on the expenses and gross receipts of

the taxpayer for either the prior fiscal year or the immediately proceeding fiscal year rather than

on the expenses and gross receipts for that fiscal year. For purposes of this chapter, the director of

the Rhode Island human resource investment council shall certify as to legitimate training and

retraining expenses in accordance with the guidelines established in chapter 64.6 of title 42, and

any rules and regulations promulgated under this chapter. For purposes of this subsection, a "full-

time equivalent employee" means an employee who works a minimum of thirty (30) hours per

week within the state or two (2) part-time employees who together work a minimum of thirty (30)

hours per week within the state. For purposes of this subsection, the director of the Rhode Island

department of labor and training, upon receipt of an application from a qualified taxpayer, shall

certify whether this qualified taxpayer meets the requirement in subparagraph (v)(A) of this

subdivision or is exempt from this requirement because the median annual wage it pays its full-

time equivalent employees is equal to or greater than one hundred twenty-five (125%) percent of

the average annual wage paid in this state by employers to employees or, with respect to major

groups 20 through 39 only, the average annual wage paid to this qualified taxpayer's full-time

equivalent employees, classified as production workers by the Rhode Island department of labor

LC003830 - Page 17 of 37

and training, is above the average annual wage paid to the production workers of all these

taxpayers in the state which share the same two-digit SIC Code. The director of the Rhode Island

department of labor and training shall promulgate rules and regulations as required for the

implementation of this requirement.

     (5) To the extent otherwise allowable, the credit provided by paragraphs (3)(i) and (ii) of

this subsection are also allowed for the property having a situs in Rhode Island and used, however

acquired, by a property and casualty insurance company.

     (c) Subject to the provisions of subdivision (b)(3) of this section, a taxpayer is not

allowed a credit under subsection (a) of this section with respect to tangible personal property and

other tangible property, including buildings and structural components of buildings, which it

leases to any other person or corporation and is not allowed a credit under subsection (a) of this

section with respect to buildings and structural components of buildings it leases from any other

person or corporation. For the purposes of the preceding sentence, any contract or agreement to

lease or rent or for a license to use the property is considered a lease, unless a contract or

agreement is treated for federal income tax purposes as an installment purchase rather than a

lease.

     (d) The credit allowed under this section for any taxable year does not reduce the tax due

for the year by more than fifty percent (50%) of the tax liability that would be payable, and

further in the case of corporations, to less than the minimum tax as prescribed in 44-11-2(e);

provided, that in the case of the credit allowed to high performance manufacturers under

subdivision (b)(3) of this section, the fifty percent (50%) limitation shall not apply. If the amount

of credit allowable under this section for any taxable year is less than the amount of credit

available to the taxpayer, any amount of credit not deductible in the taxable year may be carried

over to the following year or years (not to exceed seven (7) years) and may be deducted from the

taxpayer's tax for the year or years.

     (e) At the option of the taxpayer, air or water pollution control facilities which qualify for

elective amortization deduction may be treated as property principally used by the taxpayer in the

production of goods by manufacturing, processing, or assembling; provided, that if the property

qualifies under subsection (b) of this section, in which event, an amortization deduction is not

allowed.

     (f) With respect to property which is disposed of or ceases to be in qualified use prior to

the end of the taxable year in which the credit is to be taken, the amount of the credit shall be that

portion of the credit provided for in subsection (a) of this section, which represents the ratio

which the months of qualified use bear to the months of useful life. If property on which credit

LC003830 - Page 18 of 37

has been taken is disposed of or ceases to be in qualified use prior to the end of its useful life, the

difference between the credit taken and the credit allowed for actual use must be added back in

the year of disposition. If this property is disposed of or ceases to be in qualified use after it has

been in qualified use for more than twelve (12) consecutive years, it is not necessary to add back

the credit as provided in this subsection. A credit allowed to a qualified taxpayer is not recaptured

merely because the taxpayer subsequently fails to retain the classification as a qualified taxpayer.

The amount of credit allowed for actual use shall be determined by multiplying the original credit

by the ratio, which the months of qualified use bear to the months of useful life. For purposes of

this subsection, "useful life of property" is the same as the taxpayer (or in the case of property

acquired by lease, the owner of the property) uses for depreciation purposes when computing his

or her federal income tax liability. Comparable rules are used in the case of property acquired by

lease to determine the amount of credit, if any, that will be recaptured if the lease terminates

prematurely or if the property covered by the lease otherwise fails to be in qualified use.

     (g) The credit allowed under this section is only allowed against the tax of that

corporation included in a consolidated return that qualifies for the credit and not against the tax of

other corporations that may join in the filing of a consolidated tax return.

     (h) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

the actual value of the tax credits, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     44-31-1.1. Biotechnology investment tax credit. -- (a) Any company primarily engaged

in commercial biological research and development or manufacturing and sale of biotechnology

products or active pharmaceutical ingredients which pays its employees that work a minimum of

thirty (30) hours per week within the state a median annual wage equal or greater than one

hundred and twenty-five percent (125%) of the average annual wage paid by all employers in the

state to employees that work a minimum of thirty (30) hours per week within the state, and

provides benefits typical to the biotechnology industry, shall be allowed a credit of ten percent

(10%) of the cost or other basis for federal tax purposes of tangible personal property and other

tangible property, including buildings and structural components of buildings acquired,

constructed, reconstructed, or leased with situs in Rhode Island and principally used in the

LC003830 - Page 19 of 37

production of biotechnology products after December 31, 2001.

     (1) "Biotechnology products" means those products that are applicable to the prevention,

treatment, or cure of a disease or condition of human beings, and that are produced using living

organisms, or materials derived from living organisms, or cellular, sub cellular, or molecular

component of living organisms.

     (2) "Principally" means the company's sales of biotechnology products or costs related to

the development of biotechnology products constitute at least fifty percent of its overall receipts

or its overall costs respectively.

     (3) "Tangible personal property" and "other tangible property" includes buildings and

structural components of buildings acquired, constructed, reconstructed, or leased with situs in

Rhode Island and principally used in the production of biotechnology products after December

31, 2001 that:

     (A) is depreciable pursuant to 26 USC. Section 167,

     (B) has a useful life of four (4) years or more, and

     (C) is acquired by purchase as defined in 26 U.S.C. 179(d), or

     (D) is acquired by lease based on the fair market value of the property at the inception of

the lease times the portion of the depreciable life of the property represented by the term of the

lease, excluding renewal options, for a term of twenty (20) years; and

     (E) does not include vehicles or furniture.

     (4) "Wages" means all remuneration paid for personal services, including commissions

and bonuses and the cash value of all remuneration paid in any medium other than cash and all

other remuneration which is defined as taxable wages by the Internal Revenue Service, as

certified by the department of labor and training.

     (b) If the amount of credit allowable for any taxable year is less than the amount of credit

available to the taxpayer, any amount of credit not used in the taxable year will be available the

following year or years not to exceed fifteen (15) years and may be deducted from the taxpayer's

tax for the year or years.

     (1) The credit may be extended beyond seven (7) years only in a year in which:

     (A) The company maintains an average quarterly number of employees for each calendar

year that is nine and one half percent (9.5%) greater than average quarter number of employees in

the fourth year of the initial credit. Employees are defined as those that work a minimum of thirty

(30) hours per week within the state with benefits typical to the biotechnology industry;

     (B) The company's average quarterly median wage is not less than the company's average

of its quarterly median wage for the three (3) previous calendar years;

LC003830 - Page 20 of 37

     (C) The company pays its employees a median annual wage equal or greater than one

hundred and twenty-five percent (125%) of the average annual wage paid by all employers in the

state. Employees are defined as those that work a minimum of thirty (30) hours per week within

the state with benefits typical to the biotechnology industry; and

     (D) The department of labor and training certifies to the tax administrator that the criteria

in (A) - (C) have been met.

     (2) Unused credits after the seventh year are forfeited permanently if any of these wage

and employment criteria are unmet after the seventh year.

     (3) The company may determine the order in which the credits generated in different tax

years are utilized, provided that credits available for more than seven (7) years may not reduce

current year liability by more than seventy-five percent (75%); and provided further that in no

event, can liability be reduced below the minimum tax prescribed in 44-11-2.

     (c) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

the actual value of the tax credits and, authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

the tax administrator shall prescribe the form in which the report required by this subsection shall

be filed.

     44-31-2. Specialized investment tax credit. -- (a) A certified building owner, as

provided in chapter 64.7 of title 42,may be allowed a specialized investment tax credit against the

tax imposed by chapters 11, 14, 17 and 30 of this title.

     (b) The taxpayer may claim credit for the rehabilitation and reconstruction costs of a

certified building, which has been substantially rehabilitated. Once substantial rehabilitation is

established by the taxpayer, the taxpayer may claim credit for all rehabilitation and reconstruction

costs incurred with respect to the certified building within five (5) years from the date of final

designation of the certified building by the council pursuant to 42-64.7-6.

     (c) The credit shall be ten percent (10%) of the rehabilitation and reconstruction costs of

the certified building. The credit shall be allowable in the year the substantially rehabilitated

certified building is first placed into service, which is the year in which, under the taxpayer's

depreciation practice, the period for depreciation with respect to such property begins, or the year

in which the property is placed in a condition or state of readiness and availability for its

specifically assigned function, whichever is earlier.

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     (d) The credit shall not offset any tax liability in taxable years other than the year or years

in which the taxpayer qualifies for the credit. The credit shall not reduce the tax below the

minimum. Amounts of unused credit for this taxpayer may be carried over and offset against this

taxpayer's tax for a period not to exceed the following seven (7) taxable years.

     (e) In the case of a corporation, this credit is only allowed against the tax of that of a

corporation included in a consolidated return that qualifies for the credit and not against the tax of

other corporations that may join in the filing of a consolidated tax return.

     (f) For purposes of improving the tax expenditure report filed on a biennial basis pursuant

to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue, any

taxpayer benefiting from the tax credits in this section shall report to the division of taxation the

actual value of the tax credits, and authorize that this information, as well as the identification of

the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for the

tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     SECTION 10. Section 44-31.2-of the General Laws in Chapter 44-31.2 entitled "Motion

Picture Production Tax Credits" is hereby amended to read as follows:

     44-31.2-5. Motion picture production company tax credit. -- (a) A motion picture

production company shall be allowed a credit to be computed as provided in this chapter against a

tax imposed by chapters 11, 14, 17 and 30 of this title. The amount of the credit shall be twenty-

five percent (25%) of the state certified production costs incurred directly attributable to activity

within the state, provided that the primary locations are within the state of Rhode Island and the

total production budget as defined herein is a minimum of one hundred thousand dollars

($100,000). The credit shall be earned in the taxable year in which production in Rhode Island is

completed, as determined by the film office in final certification pursuant to subsection 44-31.2-

6(c).

     (b) For the purposes of this section: "total production budget" means and includes the

motion picture production company's pre-production, production and post-production costs

incurred for the production activities of the motion picture production company in Rhode Island

in connection with the production of a state-certified production. The budget shall not include

costs associated with the promotion or marketing of the film, video or television product.

     (c) Notwithstanding subsection (a), the credit shall not exceed five million dollars

($5,000,000) and shall be allowed against the tax for the taxable period in which the credit is

earned and can be carried forward for not more than three (3) succeeding tax years. Pursuant to

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rules promulgated by the tax administrator, the administrator may issue a waiver of the five

million dollar ($5,000,000) tax credit cap for any feature-length film or television series up to the

remaining funds available pursuant to section (e).

     (d) Credits allowed to a motion picture production company, which is a subchapter S

corporation, partnership, or a limited liability company that is taxed as a partnership, shall be

passed through respectively to persons designated as partners, members or owners on a pro rata

basis or pursuant to an executed agreement among such persons designated as subchapter S

corporation shareholders, partners, or members documenting an alternate distribution method

without regard to their sharing of other tax or economic attributes of such entity.

     (e) No more than fifteen million dollars ($15,000,000) in total may be issued for any tax

year beginning after December 31, 2007 for motion picture tax credits pursuant to this chapter

and/or musical and theatrical production tax credits pursuant to chapter 31.3 of this title. Said

credits shall be equally available to motion picture productions and musical and theatrical

productions. No specific amount shall be set aside for either type of production.

     (f) For purposes of improving the tax expenditure report filed on a biennial basis pursuant

to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue, any

taxpayer benefiting from the tax credits in this section shall report to the division of taxation the

actual value of the tax credits, and authorize that this information, as well as the identification of

the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for the

tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     SECTION 11. Sections 44-32-1, 44-32-2 and 44-32-3 of the General Laws in Chapter

44-32 entitled "Elective Deduction For Research And Development Facilities” are hereby

amended to read as follows:

     44-32-1. Elective deduction against allocated entire net income. (a) General. Except

as provided in subsection (c) of this section, at the election of a taxpayer who is subject to the

income tax imposed by chapters 11 or 30 of this title, there shall be deducted from the portion of

its entire net income allocated within the state the items prescribed in subsection (b) of this

section, in lieu of depreciation or investment tax credit.

     (b) One-year write-off of new research and development facilities.

     (1) Expenditures paid or incurred during the taxable year for the construction,

reconstruction, erection or acquisition of any new, not used, property as described in subsection

(c) of this section, which is used or to be used for purposes of research and development in the

LC003830 - Page 23 of 37

experimental or laboratory sense. The purposes are not deemed to include the ordinary testing or

inspection of materials or products for quality control, efficiency surveys, management studies,

consumer surveys, advertising, promotion, or research in connection with literary, historical, or

similar projects. The deduction shall be allowed only on condition that the entire net income for

the taxable year and all succeeding taxable years is computed without the deduction of any

expenditures and without any deduction for depreciation of the property, except to the extent that

its basis may be attributable to factors other than the expenditures, (expenditures and depreciation

deducted for federal income tax purposes shall be added to the entire net income allocated to

Rhode Island), or in case a deduction is allowable pursuant to this subdivision for only a part of

the expenditures, on condition that any deduction allowed for federal income tax purposes on

account of the expenditures or on account of depreciation of the property is proportionately

reduced in computing the entire net income for the taxable year and all succeeding taxable years.

Concerning property that is used or to be used for research and development only in part, or

during only part of its useful life, a proportionate part of the expenditures shall be deductible. If

all or part of the expenditures concerning any property has been deducted as provided in this

section, and the property is used for purposes other than research and development to a greater

extent than originally reported, the taxpayer shall report the use in its report for the first taxable

year during which it occurs, and the tax administrator may recompute the tax for the year or years

for which the deduction was allowed, and may assess any additional tax resulting from the

recomputation as a current tax, within three (3) years of the reporting of the change to the tax

administrator. Any change in use of the property in whole or in part from that, which originally

qualified the property for the deduction, requires a recomputation. The tax administrator has the

authority to promulgate regulations to prevent the avoidance of tax liability.

     (2) The deduction shall be allowed only where an election for amortization of air or water

pollution control facilities has not been exercised in respect to the same property.

     (3) The tax as a result of recomputation of a prior year's deduction is due as an additional

tax for the year the property ceases to qualify.

     (c) Property covered by deductions. The deductions shall be allowed only with respect to

tangible property which is new, not used, is depreciable pursuant to 26 U.S.C. 167, was acquired

by purchase as defined in 26 U.S.C. 179(d), has a situs in this state, and is used in the taxpayer's

trade or business. For the taxable years beginning on or after July 1, 1974, a taxpayer is not

allowed a deduction under this section with respect to tangible property leased by it to any other

person or corporation or leased from any other person or corporation. For purposes of the

preceding sentence, any contract or agreement to lease or rent or for a license to use the property

LC003830 - Page 24 of 37

is considered a lease, unless the contract or agreement is treated for federal income tax purposes

as an installment purchase rather than a lease. With respect to property that the taxpayer uses

itself for purposes other than leasing for part of a taxable year and leases for a part of a taxable

year, the taxpayer shall be allowed a deduction under this section in proportion to the part of the

year it uses the property.

     (d) Entire net income. "Entire net income", as used in this section, means net income

allocated to this state.

     (e) Carry-over of excess deductions. If the deductions allowable for any taxable

yearpursuant to this section exceed the portion of the taxpayer's entire net income allocated to this

state for that year, the excess may be carried over to the following taxable year or years, not to

exceed three (3) years, and may be deducted from the portion of the taxpayer's entire net income

allocated to this state for that year or years.

     (f) Gain or loss on sale or disposition of property. In any taxable year when property is

sold or disposed of before the end of its useful life, with respect to which a deduction has been

allowed pursuant to subsection (b) of this section, the gain or loss on this entering into the

computation of federal taxable income is disregarded in computing the entire net income, and

there is added to or subtracted from the portion of the entire net income allocated within the state

the gain or loss upon the sale or other disposition. In computing the gain or loss, the basis of the

property sold or disposed of is adjusted to reflect the deduction allowed with respect to the

property pursuant to subsection (b) of this section; provided, that no loss is recognized for the

purpose of this subsection with respect to a sale or other disposition of property to a person whose

acquisition of this property is not a purchase as defined in 26 U.S.C. 179(d).

     (g) Investment credit not allowed on research and development property. No investment

credit under chapter 31 of this title shall be allowed on the research and development property for

which accelerated write-off is adopted under this section.

     (h) Consolidated returns. The research and development deduction shall only be allowed

against the entire net income of the corporation included in a consolidated return and shall not be

allowed against the entire net income of other corporations that may join in the filing of a

consolidated state tax return.

     (i) For purposes of improving the tax expenditure report filed on a biennial basis pursuant

to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue, any

taxpayer benefiting from the tax modification in this section shall report to the division of

taxation the actual value of the tax modification, and authorize that this information, as well as

the identification of the taxpayer be disclosed as part of the biennial tax expenditure report. In

LC003830 - Page 25 of 37

order to qualify for the tax modification in this section, any taxpayer shall comply with the

requirements of this subsection. The tax administrator shall prescribe the form in which the report

required by this subsection shall be filed.

     44-32-2. Credit for research and development property acquired, constructed, or

reconstructed or erected after July 1, 1994. -- (a) A taxpayer shall be allowed a credit against

the tax imposed by chapters 11, 17, or 30 of this title. The amount of the credit shall be ten

percent (10%) of the cost or other basis for federal income tax purposes of tangible personal

property, and other tangible property, including buildings and structural components of buildings,

described in subsection (b) of this section; acquired, constructed or reconstructed, or erected after

July 1, 1994.

     (b) A credit shall be allowed under this section with respect to tangible personal property

and other tangible property, including buildings and structural components of buildings which

are: depreciable pursuant to 26 U.S.C. 167 or recovery property with respect to which a deduction

is allowable under 26 U.S.C. 168, have a useful life of three (3) years or more, are acquired by

purchase as defined in 26 U.S.C. 179(d), have a situs in this state and are used principally for

purposes of research and development in the experimental or laboratory sense which shall also

include property used by property and casualty insurance companies for research and

development into methods and ways of preventing or reducing losses from fire and other perils.

The credit shall be allowable in the year the property is first placed in service by the taxpayer,

which is the year in which, under the taxpayer's depreciation practice, the period for depreciation

with respect to the property begins, or the year in which the property is placed in a condition or

state of readiness and availability for a specifically assigned function, whichever is earlier. These

purposes shall not be deemed to include the ordinary testing or inspection of materials or products

for quality control, efficiency surveys, management studies, consumer surveys, advertising,

promotions, or research in connection with literary, historical or similar projects.

     (c) A taxpayer shall not be allowed a credit under this section with respect to any

property described in subsections (a) and (b) of this section, if a deduction is taken for the

property under 44-32-1.

     (d) A taxpayer shall not be allowed a credit under this section with respect to tangible

personal property and other tangible property, including buildings and structural components of

buildings, which it leases to any other person or corporation. For purposes of the preceding

sentence, any contract or agreement to lease or rent or for a license to use the property is

considered a lease.

     (e) The credit allowed under this section for any taxable year does not reduce the tax due

LC003830 - Page 26 of 37

for that year, in the case of corporations, to less than the minimum fixed by 44-11-2(e). If the

amount of credit allowable under this section for any taxable year is less than the amount of credit

available to the taxpayer, any amount of credit not credited in that taxable year may be carried

over to the following year or years, up to a maximum of seven (7) years, and may be credited

against the taxpayer's tax for the following year or years. For purposes of chapter 30 of this title,

if the credit allowed under this section for any taxable year exceeds the taxpayer's tax for that

year, the amount of credit not credited in that taxable year may be carried over to the following

year or years, up to a maximum of seven (7) years, and may be credited against the taxpayer's tax

for the following year or years.

     (f) (1) With respect to property which is depreciable pursuant to 26 U.S.C. 167 and which

is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the

credit is to be taken, the amount of the credit is that portion of the credit provided for in this

section which represents the ratio which the months of qualified use bear to the months of useful

life. If property on which credit has been taken is disposed of or ceases to be in qualified use prior

to the end of its useful life, the difference between the credit taken and the credit allowed for

actual use must be added back in the year of disposition. If the property is disposed of or ceases to

be in qualified use after it has been in qualified use for more than twelve (12) consecutive years,

it is not necessary to add back the credit as provided in this subdivision. The amount of credit

allowed for actual use is determined by multiplying the original credit by the ratio which the

months of qualified use bear to the months of useful life. For purposes of this subdivision, "useful

life of property" is the same as the taxpayer uses for depreciation purposes when computing his

federal income tax liability.

     (2) Except with respect to that property to which subdivision (3) of this subsection

applies, with respect to three (3) year property, as defined in 26 U.S.C. 168(c), which is disposed

of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be

taken, the amount of the credit shall be that portion of the credit provided for in this section which

represents the ratio which the months of qualified use bear to thirty-six (36). If property on which

credit has been taken is disposed of or ceases to be in qualified use prior to the end of thirty-six

(36) months, the difference between the credit taken and the credit allowed for actual use must be

added back in the year of disposition. The amount of credit allowed for actual use is determined

by multiplying the original credit by the ratio that the months of qualified use bear to thirty-six

(36).

     (3) With respect to any recovery property to which 26 U.S.C. 168 applies, which is a

building or a structural component of a building and which is disposed of or ceases to be in

LC003830 - Page 27 of 37

qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of

the credit is that portion of the credit provided for in this section which represents the ratio which

the months of qualified use bear to the total number of months over which the taxpayer chooses

to deduct the property under 26 U.S.C. 168. If property on which credit has been taken is

disposed of or ceases to be in qualified use prior to the end of the period over which the taxpayer

chooses to deduct the property under 26 U.S.C. 168, the difference between the credit taken and

the credit allowed for actual use must be added back in the year of disposition. If the property is

disposed of or ceases to be in qualified use after it has been in qualified use for more than twelve

(12) consecutive years, it is not necessary to add back the credit as provided in this subdivision.

The amount of credit allowed for actual use is determined by multiplying the original credit by

the ratio that the months of qualified use bear to the total number of months over which the

taxpayer chooses to deduct the property under 26 U.S.C. 168.

     (g) No deduction for research and development facilities under 44-32-1 shall be allowed

for research and development property for which the credit is allowed under this section.

     (h) No investment tax credit under 44-31-1shall be allowed for research and development

property for which the credit is allowed under this section.

     (i) The investment tax credit allowed by 44-31-1shall be taken into account before the

credit allowed under this section.

     (j) The credit allowed under this section only allowed against the tax of that corporation

included in a consolidated return that qualifies for the credit and not against the tax of other

corporations that may join in the filing of a consolidated return.

     (k) In the event that the taxpayer is a partnership, joint venture or small business

corporation, the credit shall be divided in the same manner as income.

     (l) For purposes of improving the tax expenditure report filed on a biennial basis pursuant

to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue, any

taxpayer benefiting from the tax credits in this section shall report to the division of taxation the

actual value of the tax credits, and authorize that this information, as well as the identification of

the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for the

tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     44-32-3. Credit for qualified research expenses. -- (a) A taxpayer shall be allowed a

credit against the tax imposed by chapters 11, 17 or 30 of this title. The amount of the credit shall

be five percent (5%)(and in the case of amounts paid or accrued after January 1, 1998, twenty-

LC003830 - Page 28 of 37

two and one-half percent (22.5%) for the first twenty-five thousand dollars ($25,000) worth of

credit and sixteen and nine-tenths percent (16.9%) for the amount of credit above twenty-five

thousand dollars ($25,000)) of the excess, if any, of:

     (1) The qualified research expenses for the taxable year, over

     (2) The base period research expenses.

     (b) (1) "Qualified research expenses" and "base period research expenses" have the same

meaning as defined in 26 U.S.C. 41; provided, that the expenses have been incurred in this state

after July 1, 1994.

     (2) Notwithstanding the provisions of subdivision (1) of this subsection, "qualified

research expenses" also includes amounts expended for research by property and casualty

insurance companies into methods and ways of preventing or reducing losses from fire and other

perils.

     (c) The credit allowed under this section for any taxable year shall not reduce the tax due

for that year by more than fifty percent (50%) of the tax liability that would be payable, and in the

case of corporations, to less than the minimum fixed by 44-11-2(e). If the amount of credit

allowable under this section for any taxable year is less than the amount of credit available to the

taxpayer any amount of credit not credited in that taxable year may be carried over to the

following year or years, up to a maximum of seven (7) years, and may be credited against the

taxpayer's tax for that year or years. For purposes of chapter 30 of this title, if the credit allowed

under this section for any taxable year exceeds the taxpayer's tax for that year, the amount of

credit not credited in that taxable year may be carried over to the following year or years, up to a

maximum of seven (7) years, and may be credited against the taxpayer's tax for that year or years.

For purposes of determining the order in which carry-overs are taken into consideration, the

credit allowed by 44-32-2 is taken into account before the credit allowed under this section.

     (d) The investment tax credit allowed by 44-31-1shall be taken into account before the

credit allowed under this section.

     (e) The credit allowed under this section shall only be allowed against the tax of that

corporation included in a consolidated return that qualifies for the credit and not against the tax of

other corporations that may join in the filing of a consolidated return.

     (f) In the event the taxpayer is a partnership, joint venture or small business corporation,

the credit is divided in the same manner as income.

     (g) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

LC003830 - Page 29 of 37

the actual value of the tax credits, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     SECTION 12. Section 44-39.1-1 of the General Laws in Chapter 44-39.1 entitled

"Employment Tax Credit" is hereby amended to read as follows:

     44-39.1-1. Employment tax credit. -- (a) An employer who participates in the bonus

program in conjunction with chapter 6.3 of title 40 shall be eligible for a tax credit as set forth in

section 40-6.3-4.

     (b) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

the actual value of the tax credits, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     SECTION 13. Section 44-42-2 of the General Laws in Chapter 44-42 entitled "Education

Assistance and Development Tax Credit" is hereby amended to read as follows:

     44-42-2. Tax credit. -- (a) A taxpayer shall be allowed a credit against the tax imposed

by chapters 11, 13 (except section 44-13-13), 14 and 17 of this title. The amount of the credit

shall be eight percent (8%) of:

      (1) The amount in excess of ten thousand dollars ($10,000) in any taxable year

contributed to an institution of higher education for the establishment or maintenance of a faculty

chair, department, or program for scientific research or education;

      (2) The amount in excess of ten thousand dollars ($10,000) in any taxable year

contributed to an institution of higher education for a work fellowship program that is providing

training connected with scientific research or education and is established by an institution of

higher education for the students of an institution; and

      (3) The cost or other basis for federal income tax purposes, determined immediately

prior to the contributions, in excess of ten thousand dollars ($10,000) in any taxable year of

tangible personal property contributed to an institution of higher education for use in an

educational, training, or research program for scientific research or education conducted by an

LC003830 - Page 30 of 37

institution in this state, excluding sale discounts and sale-gift or similar arrangements pertaining

to the purchase of equipment.

     (b) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

the actual value of the tax credits, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     SECTION 14. Section 44-43-2 of the General Laws in Chapter 44-43 entitled "Tax

Incentives for Capital Investment in Small Businesses" is hereby amended to read as follows:

     44-43-2. Deduction or modification. -- (a) In the year in which a taxpayer first makes a

qualifying investment in a certified venture capital partnership or the year in which an

entrepreneur first makes an investment in a qualifying entity, the taxpayer or the entrepreneur

shall be allowed:

      (1) A deduction for purposes of computing net income or net worth in accordance with

chapter 11 of this title; or

      (2) A deduction from gross earnings for purposes of computing the public service

corporation tax in accordance with chapter 13 of this title; or

      (3) A deduction for the purposes of computing net income in accordance with chapter 14

of this title; or

      (4) A deduction for the purposes of computing gross premiums in accordance with

chapter 17 of this title; or

      (5) A modification reducing federal adjusted gross income in accordance with chapter 30

of this title.

      (b) The deduction or modification shall be in an amount equal to the taxpayer's

qualifying investment in a certified venture capital partnership or an entrepreneur's investment in

a qualifying business entity and shall be measured at the year end of the certified venture capital

partnership, the year end of the qualifying business entity, or the year end of the investing

taxpayer, whichever comes first.

     (c) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax deduction or modification in this section shall report to the

LC003830 - Page 31 of 37

division of taxation the actual value of the tax deduction or modification, and authorize that this

information, as well as the identification of the taxpayer be disclosed as part of the biennial tax

expenditure report. In order to qualify for the tax deduction or modification in this section, any

taxpayer shall comply with the requirements of this subsection. The tax administrator shall

prescribe the form in which the report required by this subsection shall be filed.

     SECTION 15. Section 44-46-3 of the General Laws in Chapter 44-46 entitled "Adult

Education Tax Credit" is hereby amended to read as follows:

     44-46-3. Credits. -- (a) An employer shall be allowed a credit as provided in section 44-

46-1 up to a maximum credit of three hundred dollars ($300) against taxes otherwise due under

provisions of chapters 11, 13, 14, 15, 17 and 30 of this title per paid employee. The employee

must remain in the employ of the business for a minimum period of thirteen (13) consecutive

weeks, and a minimum of four hundred and fifty-five (455) hours of paid employment before the

employer can become eligible for the income credit. The credit shall not reduce the tax under

chapter 11 of this title to less than one hundred dollars ($100). The credit is not refundable. Any

amount of credit not deductible in that taxable year may not be carried over to the following year.

In the event that the employer is a partnership, joint venture or small business corporation, the

credit shall be divided in the same manner as income. This credit may not be applied against the

tax until all other credits available to this taxpayer for the taxable year have been applied.

     (b) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credits in this section shall report to the division of taxation

the actual value of the tax credits, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credits in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     SECTION 16. Section 44-47-1 of the General Laws in Chapter 44-47 entitled "Adult and

Child Day Care Assistance and Development Tax Credit" is hereby amended to read as follows:

     44-47-1. Tax credit. -- (a) A taxpayer that pays for or provides adult or child day care

services to its employees or to the employees of its commercial tenants, or that provides real

property or dedicates rental space for child day care services, is allowed a credit, to be computed

as provided in this chapter, against the tax imposed by chapters 11 and 13, except section 44-13-

13, and chapters 14, 17, 30 of this title. The amount of the credit shall be:

      (1) Thirty percent (30%) of the total amount expended in the state of Rhode Island

LC003830 - Page 32 of 37

during the taxable year by a taxpayer for day care services purchased to provide care for the

dependent children or dependent adult family members of the taxpayer's employees or employees

of commercial tenants of the taxpayer during the employees' hours of employment;

      (2) Thirty percent (30%) of the total amount expended during the taxable year by a

taxpayer in the establishment and/or operation of a day care facility in the state of Rhode Island

used primarily by the dependent children of the taxpayer's employees or employees of

commercial tenants of the taxpayer during the employees' hours of employment;

      (3) Thirty percent (30%) of the total amount expended during the taxable year by a

taxpayer in conjunction with one or more other taxpayers for the establishment and/or operation

of a day care facility in the state of Rhode Island used primarily by the dependent children of the

taxpayer's employees or employees of commercial tenants of the taxpayer during that employee's

hours of employment;

      (4) Thirty percent (30%) of the total amount foregone in rent or lease payments related to

the dedication of rental or lease space to child day care services. The amount foregone shall be

the difference between fair market rental and actual rental.

      (b) No credit shall be allowed pursuant to this chapter unless the child day care facility is

licensed pursuant to chapter 72.1 of title 42, and agrees to accept children whose child care

services are paid for in full or in part by the Rhode Island department of human services; and/or

the adult day care facility is certified by the department of elderly affairs.

     (c) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credit in this section shall report to the division of taxation

the actual value of the tax credit, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credit in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     SECTION 17. Section 44-54-1 of the General Laws in Chapter 44-54 entitled "Disabled

Access Credit For Small Businesses" is hereby amended to read as follows:

     44-54-1. Tax credit. -- (a) A small business taxpayer that pays for or incurs expenses to

provide access to persons with disabilities shall be allowed a credit, to be computed against the

tax imposed by chapters 11 and 13 of this title. The expenses must be paid or incurred to enable

the small business to comply with federal or state laws protecting the rights of persons with

disabilities. The credit is equal to ten percent (10%) of the total amount expended in the state of

LC003830 - Page 33 of 37

Rhode Island during the taxable year but in no event shall exceed the sum of one thousand dollars

($1,000) for:

      (1) Removing architectural, communication, physical, or transportation barriers;

      (2) Providing qualified interpreters or other effective methods of delivering aurally

delivered materials to persons with hearing impairments;

      (3) Providing readers, tapes or other effective means of making visually delivered

materials available to persons with visual impairments;

      (4) Providing job coaches or other effective methods of supporting workers with severe

impairments in competitive employment;

      (5) Providing specialized transportation services to employees or customers with

mobility impairments;

      (6) Buying or modifying equipment for persons with disabilities; and

      (7) Providing similar services, modifications, material or equipment for persons with

disabilities;

      (b) As used in this chapter, the following words have the following meanings:

      (1) "Small business" is one that for the preceding year had thirty (30) or fewer full-time

employees, or had one million dollars ($1,000,000) or less in gross receipts.

      (2) "Full-time employee" is one employed at least thirty (30) hours a week for twenty

(20) or more calendar weeks in the preceding year.

      (3) "Federal or state laws protecting the rights of persons with disabilities" includes but

is not limited to the: Americans with Disabilities Act of 1990, 42 U.S.C. section 12101 et. seq.;

Title V of the Rehabilitation Act of 1973, 29 U.S.C. section 794; Declaration of Certain

Constitutional Rights and Principles -- Discrimination, R.I. Const. art. 1, section 2; Civil Rights

of People with Disabilities, chapter 87 of title 42; Open Meeting Handicapped Accessibility for

persons with disabilities, section 42-46-13; Access for persons with disabilities, section 37-8-15;

and AIDS Discrimination Prohibited, section 23-6.3-11.

      (4) "Amount expended" means the actual sum of money spent.

     (c) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credit in this section shall report to the division of taxation

the actual value of the tax credit, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credit in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

LC003830 - Page 34 of 37

shall be filed.

     SECTION 18. Section 44-55-4.1 of the General Laws in Chapter 44-55 entitled "Tax

Incentives for Employers" is hereby amended to read as follows:

     44-55-4.1. Incentive provisions. -- (a) The deduction or modification is not refundable

but may be used by the claimant business for the tax against it pursuant to chapters 11, 13, 14, 15,

17, and 30 of this title, not including any tax imposed under section 44-13-13 or other similar

provisions in the following manner:

      (1) A deduction for purposes of computing net income in accordance with chapter 11 of

this title;

      (2) A deduction from gross earnings for purposes of computing the public service

corporation tax in accordance with chapter 13 of this title;

      (3) A deduction for the purposes of computing net income in accordance with chapter 14

of this title;

      (4) A deduction for the purposes of computing deposits in accordance with chapter 15 of

this title;

      (5) A deduction for the purposes of computing gross premiums in accordance with

chapter 17 of this title; or

      (6) A modification reducing federal adjusted gross income in accordance with chapter 30

of this title.

      (b) The modification allowed under this chapter for any taxable year shall not reduce the

tax due for that year to below the minimum tax imposed under the applicable chapter of this title.

Any amount of modification not used in that taxable year may not be carried over to the

following year.

      (c) In the event that the claimant business is electing a subchapter S corporation, limited

liability company, partnership, or a joint venture, the incentive shall be divided as income.

      (d) In the event that the taxpayer is liable for taxes imposed under both chapters 14 and

15 of this title, the taxpayer must elect the tax against which it wishes to claim the incentive. This

election shall be made as part of the taxpayer's filings in accordance with sections 44-14-6 and

44-15-5. The taxpayer may not divide the incentive for any year between the two (2) tax

liabilities for which it is liable.

      (e) In the event that the hiring of the employee is used to obtain any other tax incentive

or tax benefit for the business, then the business will not be eligible for the incentive available in

this chapter.

     (f) For purposes of improving the tax expenditure report filed on a biennial basis pursuant

LC003830 - Page 35 of 37

to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue, any

taxpayer benefiting from the tax deduction or modification in this section shall report to the

division of taxation the actual value of the tax deduction or modification, and authorize that this

information, as well as the identification of the taxpayer be disclosed as part of the biennial tax

expenditure report. In order to qualify for the tax deduction or modification in this section, any

taxpayer shall comply with the requirements of this subsection. The tax administrator shall

prescribe the form in which the report required by this subsection shall be filed.

     SECTION 19. Section 44-63-2 of the General Laws in Chapter 44-63 entitled "Incentives

for Innovation and Growth" is hereby amended to read as follows:

     44-63-2. Innovation credit. [Repealed effective December 31, 2016 pursuant to

section 44-63-5.] -- (a) An eligible qualified innovative company may apply to the division of

taxation for a tax credit certificate in an amount equal to fifty percent (50%) of any investment

made in the company, but in no case shall the amount of the tax credit certificate exceed one

hundred thousand dollars ($100,000). The tax credit certificate may be issued in the name of the

eligible company, or an executive employee or employees of the company, an investor in the

company, or any combination thereof as requested by the company, and may be applied against

state tax liability arising under chapters 44-11, 44-12, or 44-30 by the holders of the certificates.

If not applied in full at the time of the next following tax filing period, the certificate(s) or the

remaining value thereof may be carried forward for a period not to exceed three (3) years.

     (b) For purposes of improving the tax expenditure report filed on a biennial basis

pursuant to chapter 44-48.1, and improving the reliability of the estimates of foregone revenue,

any taxpayer benefiting from the tax credit in this section shall report to the division of taxation

the actual value of the tax credit, and authorize that this information, as well as the identification

of the taxpayer be disclosed as part of the biennial tax expenditure report. In order to qualify for

the tax credit in this section, any taxpayer shall comply with the requirements of this subsection.

The tax administrator shall prescribe the form in which the report required by this subsection

shall be filed.

     SECTION 20. 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

***

     This act would require increased transparency for certain existing tax credits, deductions

and exemptions by improving the biennial tax expenditure report to include more information

about these tax benefits, including the name of recipients, and the value of foregone revenue to

the state. The division of taxation would be responsible for collecting the information as part of a

taxpayer's tax return.

     This act would take effect upon passage.

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