2014 -- S 2298 SUBSTITUTE A

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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 TOWNS AND CITIES - STATE AID

     

     Introduced By: Senators Picard, DaPonte, and Cote

     Date Introduced: February 06, 2014

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Section 44-3-3 of the General Laws in Chapter 44-3 entitled "Property

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Subject to Taxation" is hereby amended to read as follows:

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     44-3-3. Property exempt. – (a) The following property is exempt from taxation.

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     (1) Property belonging to the state except as provided in § 44-4-4.1;

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     (2) Lands ceded or belonging to the United States;

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     (3) Bonds and other securities issued and exempted from taxation by the government of

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the United States, or of this state;

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     (4) Real estate, used exclusively for military purposes, owned by chartered or

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incorporated organizations approved by the adjutant general, and composed of members of the

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national guard, the naval militia, or the independent chartered military organizations;

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     (5) Buildings for free public schools, buildings for religious worship, and the land upon

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which they stand and immediately surrounding them, to an extent not exceeding five (5) acres so

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far as the buildings and land are occupied and used exclusively for religious or educational

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purposes;

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     (6) Dwellings houses and the land on which they stand, not exceeding one acre in size, or

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the minimum lot size for zone in which the dwelling house is located, whichever is the greater,

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owned by or held in trust for any religious organization and actually used by its officiating clergy;

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provided, further that in the town of Charlestown, where the property previously described in this

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paragraph is exempt in total, along with dwelling houses and the land on which they stand in

 

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Charlestown, not exceeding one acre in size, or the minimum lot size for zone in which the

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dwelling house is located, whichever is the greater, owned by or held in trust for any religious

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organization and actually used by its officiating clergy, or used as a convent, nunnery, or retreat

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center by its religious order.

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     (7) Intangible personal property owned by, or held in trust for, any religious or charitable

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organization, if the principal or income is used or appropriated for religious or charitable

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purposes;

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     (8) Buildings and personal estate owned by any corporation used for a school, academy,

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or seminary of learning, and of any incorporated public charitable institution, and the land upon

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which the buildings stand and immediately surrounding them to an extent not exceeding one acre,

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so far as they are used exclusively for educational purposes, but no property or estate whatever is

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hereafter exempt from taxation in any case where any part of its income or profits or of the

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business carried on there is divided among its owners or stockholders; provided, however, that

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unless any private nonprofit corporation organized as a college or university located in the town

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of Smithfield reaches a memorandum of agreement with the town of Smithfield, the town of

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Smithfield shall bill the actual costs for police, fire, and rescue services supplied, unless

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otherwise reimbursed, to said corporation commencing March 1, 2014;

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     (9) Estates, persons, and families of the president and professors for the time being of

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Brown University for not more than ten thousand dollars ($10,000) for each officer, the officer's

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estate, person, and family included, but only to the extent that any person had claimed and

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utilized the exemption prior to, and for a period ending either on or after December 31, 1996;

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     (10) Property especially exempt by charter unless the exemption has been waived in

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whole or in part.

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     (11) Lots of land exclusively for burial grounds;

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     (12) Property, real and personal, held for or by an incorporated library, society, or any

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free public library, or any free public library society, so far as the property is held exclusively for

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library purposes, or for the aid or support of the aged poor, or poor friendless children, or the poor

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generally, or for a nonprofit hospital for the sick or disabled.

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     (13) Real or personal estate belonging to or held in trust for the benefit of incorporated

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organizations of veterans of any war in which the United States has been engaged, the parent

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body of which has been incorporated by act of congress, to the extent of four hundred thousand

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dollars ($400,000) if actually used and occupied by the association; provided, that the city council

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of the city of Cranston may by ordinance exempt the real or personal estate as previously

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described in this subdivision located within the city of Cranston to the extent of five hundred

 

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thousand dollars ($500,000);

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     (14) Property, real and personal, held for or by the fraternal corporation, association, or

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body created to build and maintain a building or buildings for its meetings or the meetings of the

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general assembly of its members, or subordinate bodies of the fraternity, and for the

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accommodation of other fraternal bodies or associations, the entire net income of which real and

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personal property is exclusively applied or to be used to build, furnish, and maintain an asylum or

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asylums, a home or homes, a school or schools, for the free education or relief of the members of

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the fraternity, or the relief, support, and care of worthy and indigent members of the fraternity,

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their wives, widows, or orphans, and any fund given or held for the purpose of public education,

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almshouses, and the land and buildings used in connection therewith;

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     (15) Real estate and personal property of any incorporated volunteer fire engine company

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or incorporated volunteer ambulance or rescue corps in active service;

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     (16) The estate of any person who in the judgment of the assessors is unable from

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infirmity or poverty to pay the tax; providing, that in the town of Burrillville the tax shall

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constitute a lien for five (5) years on the property where the owner is entitled to the exemption. At

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the expiration of five (5) years, the lien shall be abated in full. Provided, if the property is sold or

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conveyed or if debt secured by the property is refinanced during the five (5) year period, the lien

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immediately becomes due and payable; any person claiming the exemption aggrieved by an

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adverse decision of an assessor shall appeal the decision to the local board of tax review, and

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thereafter according to the provisions of § 44-5-26;

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     (17) Household furniture and family stores of a housekeeper in the whole, including

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clothing, bedding, and other white goods, books, and all other tangible personal property items

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which are common to the normal household;

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     (18) Improvements made to any real property to provide a shelter and fallout protection

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from nuclear radiation, to the amount of one thousand five hundred dollars ($1,500); provided,

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that the improvements meet applicable standards for shelter construction established from time to

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time by the Rhode Island emergency management agency. The improvements are deemed to

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comply with the provisions of any building code or ordinance with respect to the materials or the

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methods of construction used and any shelter or its establishment is deemed to comply with the

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provisions of any zoning code or ordinance;

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     (19) Aircraft for which the fee required by § 1-4-6 has been paid to the tax administrator;

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     (20) Manufacturer's inventory

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     (i) For the purposes of §§ 44-4-10, 44-5-3, 44-5-20, and 44-5-38, a person is deemed to

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be a manufacturer within a city or town within this state if that person uses any premises, room,

 

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or place in it primarily for the purpose of transforming raw materials into a finished product for

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trade through any or all of the following operations: adapting, altering, finishing, making, and

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ornamenting; provided, that public utilities, non-regulated power producers commencing

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commercial operation by selling electricity at retail or taking title to generating facilities on or

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after July 1, 1997, building and construction contractors, warehousing operations including

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distribution bases or outlets of out-of-state manufacturers, and fabricating processes incidental to

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warehousing or distribution of raw materials such as alteration of stock for the convenience of a

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customer, are excluded from this definition.

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     (ii) For the purposes of §§ 44-3-3, 44-4-10, and 44-5-38, the term "manufacturer's

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inventory" or any similar term means and includes the manufacturer's raw materials, the

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manufacturer's work in process, and finished products manufactured by the manufacturer in this

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state, and not sold, leased, or traded by the manufacturer or its title or right to possession

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divested; provided, that the term does not include any finished products held by the manufacturer

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in any retail store or other similar selling place operated by the manufacturer whether or not the

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retail establishment is located in the same building in which the manufacturer operates the

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manufacturing plant.

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     (iii) For the purpose of § 44-11-2, a "manufacturer" is a person whose principal business

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in this state consists of transforming raw materials into a finished product for trade through any or

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all of the operations described in paragraph (i) of this subdivision. A person will be deemed to be

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principally engaged if the gross receipts which that person derived from the manufacturing

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operations in this state during the calendar year or fiscal year mentioned in § 44-11-1 amounted to

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more than fifty percent (50%) of the total gross receipts which that person derived from all the

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business activities in which that person engaged in this state during the taxable year. For the

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purpose of computing the percentage, gross receipts derived by a manufacturer from the sale,

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lease, or rental of finished products manufactured by the manufacturer in this state, even though

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the manufacturer's store or other selling place may be at a different location from the location of

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the manufacturer's manufacturing plant in this state, are deemed to have been derived from

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manufacturing.

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     (iv) Within the meaning of the preceding paragraphs of this subdivision, the term

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"manufacturer" also includes persons who are principally engaged in any of the general activities

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coded and listed as establishments engaged in manufacturing in the standard industrial

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classification manual prepared by the technical committee on industrial classification, office of

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statistical standards, executive office of the president, United States bureau of the budget, as

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revised from time to time, but eliminating as manufacturers those persons, who, because of their

 

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limited type of manufacturing activities, are classified in the manual as falling within the trade

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rather than an industrial classification of manufacturers. Among those thus eliminated, and

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accordingly also excluded as manufacturers within the meaning of this paragraph, are persons

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primarily engaged in selling, to the general public, products produced on the premises from which

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they are sold, such as neighborhood bakeries, candy stores, ice cream parlors, shade shops, and

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custom tailors, except, that a person who manufactures bakery products for sale primarily for

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home delivery, or through one or more non-baking retail outlets, and whether or not retail outlets

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are operated by person, is a manufacturer within the meaning of this paragraph.

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     (v) The term "Person" means and includes, as appropriate, a person, partnership, or

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corporation.

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     (vi) The department of revenue shall provide to the local assessors any assistance that is

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necessary in determining the proper application of the definitions in this subdivision.

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     (21) Real and tangible personal property acquired to provide a treatment facility used

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primarily to control the pollution or contamination of the waters or the air of the state, as defined

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in chapter 12 of title 46 and chapter 25 of title 23, respectively, the facility having been

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constructed, reconstructed, erected, installed, or acquired in furtherance of federal or state

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requirements or standards for the control of water or air pollution or contamination, and certified

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as approved in an order entered by the director of environmental management. The property is

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exempt as long as it is operated properly in compliance with the order of approval of the director

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of environmental management; provided, that any grant of the exemption by the director of

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environmental management in excess of ten (10) years is approved by the city or town in which

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the property is situated. This provision applies only to water and air pollution control properties

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and facilities installed for the treatment of waste waters and air contaminants resulting from

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industrial processing; furthermore, it applies only to water or air pollution control properties and

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facilities placed in operation for the first time after April 13, 1970;

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     (22) New manufacturing machinery and equipment acquired or used by a manufacturer

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and purchased after December 31, 1974. Manufacturing machinery and equipment is defined as:

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     (i) Machinery and equipment used exclusively in the actual manufacture or conversion of

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raw materials or goods in the process of manufacture by a manufacturer as defined in subdivision

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(20) of this section, and machinery, fixtures, and equipment used exclusively by a manufacturer

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for research and development or for quality assurance of its manufactured products;

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     (ii) Machinery and equipment which is partially used in the actual manufacture or

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conversion of raw materials or goods in process of manufacture by a manufacturer as defined in

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subdivision (20) of this section, and machinery, fixtures, and equipment used by a manufacturer

 

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for research and development or for quality assurance of its manufactured products, to the extent

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to which the machinery and equipment is used for the manufacturing processes, research and

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development or quality assurance. In the instances where machinery and equipment is used in

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both manufacturing and/or research, and development, and/or quality assurance activities and

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non-manufacturing activities, the assessment on machinery and equipment is prorated by

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applying the percentage of usage of the equipment for the manufacturing, research, and

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development and quality assurance activity to the value of the machinery and equipment for

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purposes of taxation, and the portion of the value used for manufacturing, research, and

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development, and quality assurance is exempt from taxation. The burden of demonstrating this

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percentage usage of machinery and equipment for manufacturing and for research, and

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development and/or quality assurance of its manufactured products rests with the manufacturer;

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and

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     (iii) Machinery and equipment described in § 44-18-30(7) and (22) that was purchased

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after July 1, 1997; provided that the city or town council of the city or town in which the

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machinery and equipment is located adopts an ordinance exempting the machinery and equipment

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from taxation. For purposes of this subsection, city councils and town councils of any

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municipality may by ordinance wholly or partially exempt from taxation the machinery and

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equipment discussed in this subsection for the period of time established in the ordinance and

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may by ordinance establish the procedures for taxpayers to avail themselves of the benefit of any

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exemption permitted under this section; provided, that the ordinance does not apply to any

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machinery or equipment of a business, subsidiary or any affiliated business which locates or

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relocates from a city or town in this state to another city or town in the state.

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     (23) Precious metal bullion, meaning any elementary metal which has been put through a

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process of melting or refining, and which is in a state or condition that its value depends upon its

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content and not its form. The term does not include fabricated precious metal which has been

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processed or manufactured for some one or more specific and customary industrial, professional,

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or artistic uses;

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     (24) Hydroelectric power generation equipment, which includes, but is not limited to,

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turbines, generators, switchgear, controls, monitoring equipment, circuit breakers, transformers,

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protective relaying, bus bars, cables, connections, trash racks, headgates, and conduits. The

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hydroelectric power generation equipment must have been purchased after July 1, 1979, and

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acquired or used by a person or corporation who owns or leases a dam and utilizes the equipment

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to generate hydroelectric power;

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     (25) Subject to authorization by formal action of the council of any city or town, any real

 

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or personal property owned by, held in trust for, or leased to an organization incorporated under

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chapter 6 of title 7, as amended, or an organization meeting the definition of "charitable trust" set

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out in § 18-9-4, as amended, or an organization incorporated under the not for profits statutes of

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another state or the District of Columbia, the purpose of which is the conserving of open space, as

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that term is defined in chapter 36 of title 45, as amended, provided the property is used

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exclusively for the purposes of the organization;

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     (26) Tangible personal property, the primary function of which is the recycling, reuse, or

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recovery of materials (other than precious metals, as defined in § 44-18-30(24)(ii) and (iii)), from

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or the treatment of "hazardous wastes", as defined in § 23-19.1-4, where the "hazardous wastes"

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are generated primarily by the same taxpayer and where the personal property is located at, in, or

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adjacent to a generating facility of the taxpayer. The taxpayer may, but need not, procure an order

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from the director of the department of environmental management certifying that the tangible

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personal property has this function, which order effects a conclusive presumption that the tangible

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personal property qualifies for the exemption under this subdivision. If any information relating

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to secret processes or methods of manufacture, production, or treatment is disclosed to the

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department of environmental management only to procure an order, and is a "trade secret" as

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defined in § 28-21-10(b), it shall not be open to public inspection or publicly disclosed unless

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disclosure is otherwise required under chapter 21 of title 28 or chapter 24.4 of title 23;

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     (27) Motorboats as defined in § 46-22-2 for which the annual fee required in § 46-22-4

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has been paid;

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     (28) Real and personal property of the Providence performing arts center, a non-business

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corporation as of December 31, 1986;

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     (29) Tangible personal property owned by, and used exclusively for the purposes of, any

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religious organization located in the city of Cranston;

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     (30) Real and personal property of the Travelers Aid Society of Rhode Island, a nonprofit

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corporation, the Union Mall Real Estate Corporation, and any limited partnership or limited

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liability company which is formed in connection with, or to facilitate the acquisition of, the

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Providence YMCA Building; and

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     (31) Real and personal property of Meeting Street Center or MSC Realty, Inc., both not-

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for-profit Rhode Island corporations, and any other corporation, limited partnership, or limited

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liability company which is formed in connection with, or to facilitate the acquisition of, the

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properties designated as the Meeting Street National Center of Excellence on Eddy Street in

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Providence, Rhode Island.

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     (32) The buildings, personal property and land upon which the buildings stand, located

 

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on Pomham Island, East Providence, currently identified as Assessor's Map 211, Block 01, Parcel

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001.00, which consists of approximately twenty-one thousand three hundred (21,300) square feet

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and is located approximately eight hundred sixty feet (860'), more or less, from the shore, and

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limited exclusively to these said buildings personal estate and land, provided that said property is

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owned by a qualified 501(c)(3) organization, such as the American Lighthouse Foundation, and is

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used exclusively for a lighthouse.

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     (33) The Stadium Theatre Performing Arts Centre building located in Monument Square,

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Woonsocket, Rhode Island, so long as said Stadium Theatre Performing Arts Center is owned by

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the Stadium Theatre Foundation, a Rhode Island nonprofit corporation.

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     (34) Real and tangible personal property of St. Mary Academy – Bay View, located in

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East Providence, Rhode Island.

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     (35) Real and personal property of East Bay Community Action Program and its

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predecessor, Self Help, Inc; provided, that the organization is qualified as a tax exempt

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corporation under section 501(c)(3) of the United States Internal Revenue Code.

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     (36) Real and personal property, located within the city of East Providence of the

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Columbus Club of East Providence, a Rhode Island charitable nonprofit corporation.

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     (37) Real and personal property, located within the city of East Providence of the

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Columbus Club of Barrington, a Rhode Island charitable nonprofit corporation.

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     (38) Real and personal property, located within the city of East Providence of Lodge

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2337 BPO Elks, a Rhode Island nonprofit corporation.

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     (39) Real and personal property, located within the city of East Providence of the St.

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Andrews Lodge No. 39, a Rhode Island charitable nonprofit corporation.

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     (40) Real and personal property, located within the city of East Providence of the

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Trustees of Methodist Health and Welfare service a/k/a United Methodist Elder Care, a Rhode

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Island nonprofit corporation.

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     (41) Real and personal property, located on the first floor of 90 Leonard Avenue, within

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the city of East Providence of the Zion Gospel Temple, Inc., a religious nonprofit corporation.

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     (42) Real and personal property, located within the city of East Providence of the Cape

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Verdean Museum Exhibit, a Rhode Island nonprofit corporation.

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     (43) The real and personal property owned by a qualified 501(c)(3) organization that is

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affiliated and in good standing with a national congressionally chartered organization and thereby

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adheres to that organization's standards and provides activities designed for recreational,

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educational and character building purposes for children from ages six (6) years to seventeen (17)

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years.

 

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     (44) Real and personal property of the Rhode Island Philharmonic Orchestra and Music

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School; provided, that the organization is qualified as a tax exempt corporation under section

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501(c)(3) of the United States Internal Revenue Code.

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     (b) Except as provided below, when a city or town taxes a for-profit hospital facility, the

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value of its real property shall be the value determined by the most recent full revaluation or

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statistical property update performed by the city or town; provided, however, in the year a

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nonprofit hospital facility converts to or otherwise becomes a for-profit hospital facility, or a for-

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profit hospital facility is initially established, the value of the real property and personal property

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of the for-profit hospital facility shall be determined by a valuation performed by the assessor for

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the purpose of determining an initial assessed value of real and personal property, not previously

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taxed by the city or town, as of the most recent date of assessment pursuant to § 44-5-1, subject to

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a right of appeal by the for-profit hospital facility which shall be made to the city or town tax

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assessor with a direct appeal from an adverse decision to the Rhode Island superior court,

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business calendar.

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     A "for-profit hospital facility" includes all real and personal property affiliated with any

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hospital as identified in an application filed pursuant to chapters 23-17 and/or 23-17.14.

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Notwithstanding the above, a city or town may enter into a stabilization agreement with a for-

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profit hospital facility under § 44-3-9 or other laws specific to the particular city or town relating

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to stabilization agreements. In a year in which a nonprofit hospital facility converts to or

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otherwise becomes a for-profit hospital facility, or a for-profit hospital facility is otherwise

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established, in that year only the amount levied by the city or town and/or the amount payable

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under the stabilization agreement for that year related to the for-profit hospital facility shall not be

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counted towards determining the maximum tax levy permitted under § 44-5-2.

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     SECTION 2. Section 45-13-5.1 of the General Laws in Chapter 45-13 entitled "State

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Aid" is hereby amended to read as follows:

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     45-13-5.1. General assembly appropriations in lieu of property tax from certain

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exempt private and state properties. -- (a) In lieu of the amount of local real property tax on

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real property owned by any private nonprofit institution of higher education, or any nonprofit

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hospital facility, or any state owned and operated hospital, veterans’ residential facility, or

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correctional facility occupied by more than one hundred (100) residents, which may have been or

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will be exempted from taxation by applicable state law, exclusive of any facility operated by the

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federal government, the state of Rhode Island, or any of its subdivisions, the general assembly

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shall annually appropriate for payment to the several cities and towns in which the property lies a

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sum equal to twenty-seven percent (27%) of all tax that would have been collected had the real

 

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property been taxable; provided, however, said percentage shall be subject to adjustment pursuant

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to subsection (e) of this section.

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     (b) In no event shall any city or town record in a fiscal year both: (1) Taxes and/or

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payments under a stabilization agreement with a for-profit hospital facility; and (2) Distributions

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of appropriations under this section attributable to the prior nonprofit status of said for-profit

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hospital facility.

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     (b)(c) As used in this section, "private nonprofit institution of higher education" means

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any institution engaged primarily in education beyond the high school level, the property of

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which is exempt from property tax under any of the subdivisions, and "nonprofit hospital facility"

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means any nonprofit hospital licensed by the state and which is used for the purpose of general

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medical, surgical, or psychiatric care and treatment.

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     (c)(d) The grant payable to any municipality under the provision of this section shall be

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equal to twenty-seven percent (27%) of the property taxes which, except for any exemption to

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any institution of higher education or general hospital facility, would have been paid with respect

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to that exempt real property on the assessment list in the municipality for the assessment date of

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December 31, 1986 and with respect to such exempt real property appearing on an assessment list

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in the municipality on succeeding assessment dates. Provided however that the grant paid for the

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fiscal year ending June 30, 2008 shall be based upon the assessment list in the municipality as of

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December 31, 2004.

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     (d)(e) The state budget offices shall include the amount of the annual grant appropriation

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in the state budget for the fiscal year commencing July 1, 1988 and each fiscal year thereafter.

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The amount of the annual grant distribution of appropriation payable to each eligible municipality

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in any year in accordance with this section shall be reduced proportionately in the event that the

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total of the annual grants in any year exceeds the amount appropriated that year for the purposes

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of this section appropriation in the state budget is insufficient to pay the eligible municipalities

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the amounts otherwise payable to said communities pursuant to subsection (a) of this section.

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     (e)(f) Distribution of appropriations shall be made by the state on or before July 31 of

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1988 and each July 31 thereafter, and the payments may be counted as a receivable by any city or

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town for a fiscal year ending the preceding June 30.

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     (f)(g) Any act or omission by the state with respect to this chapter shall in no way

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diminish the duty of any town or municipality to provide public safety or other ordinary services

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to the properties or facilities of the type listed in subsection (a).

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     (g)(h) Provided, that payments authorized pursuant to this section shall be reduced pro

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rata, for that period of time that the municipality suspends or reduces essential services to eligible

 

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facilities. For the purposes of this section "essential services" include, but are not to be limited to,

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police, fire and rescue.

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     SECTION 3. This act shall take effect upon passage and shall apply retroactively to

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December 31, 2013.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TOWNS AND CITIES - STATE AID

***

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     This act would grant cities and towns the right to and the method by which they may: (1)

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Tax the real and personal property of a for-profit hospital facility; and/or (2) Enter into a

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stabilization agreement with a for-profit hospital facility.

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     This act would take effect upon passage and would apply retroactively to December 31,

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2013.

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