2015 -- H 5885

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LC002038

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2015

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A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- DISTRESSED AREAS

ECONOMIC REVITALIZATION ACT

     Introduced By: Representatives Marshall, Serpa, Costantino, Casey, and Shekarchi

     Date Introduced: March 13, 2015

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 42-64.3-3 and 42-64.3-6 of the General Laws in Chapter 42-64.3

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

     42-64.3-3. Definitions. -- As used in this chapter, the following words and terms shall

have the following meanings unless the context shall indicate another or different meaning or

intent:

      (1) "Council" or "enterprise zone council" means the governmental agency created

pursuant to § 42-64.3-3.1.

      (2) "Enterprise zone," "economic revitalization zone," or "zone" means an economically

distressed United States bureau of the census division or delineation in need of expansion of

business and industry, and the creation of jobs, which is designated to be eligible for the benefits

of this chapter.

      (3) "Governing authority" means the governing body of a state, city or town within

which a qualified United States bureau of the census division or delineation lies.

      (4) (i) "Qualified business" or "business facility" means any business corporation, sole

proprietorship, partnership, or limited partnership, or limited liability company, limited liability

partnership, or any other form of business entity which:

      (A) After the date of its original application for membership in the enterprise zone

program or the date annual membership is renewed creates and hires a minimum of five percent

(5%) new or additional enterprise jobs or in the case of a company having twenty (20) employees

or less, this requirement shall be that the company create and hire one new or additional

enterprise job, in the respective zone during the same certification year; and

      (B) Whose total Rhode Island wages including those Rhode Island wages for additional

enterprise jobs, exceeds the total Rhode Island wages paid to its employees in the prior calendar

year; and

      (C) 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

authority at the time of certification; and

      (D) Provides the council with an affidavit stating under oath that the entity seeking

certification as a qualified business has not within the preceding twelve (12) months from the date

of application for certification changed its legal status for the purpose of gaining favorable

treatment under the provisions of chapter 64.3 of this title; and

      (E) Meets certain other requirements as set forth by the council; and

      (F) Has received certification from the council pursuant to the rules and regulations

promulgated by the council.

      (ii) In the event that an applicant for certification meets the criteria of subdivisions

(4)(i)(A) and (4)(i)(C) to (F), but fails to meet the requirements of subdivision (4)(i)(B) solely

because the amount of wages paid to the owner or owners of the business has decreased from the

prior calendar year, the Council may, for good cause shown, certify the applicant as a qualified

business. The applicant shall have the burden to show, notwithstanding its failure to meet the

requirements of subdivision (4)(i)(B) above, that the applicant has met the intent of this chapter.

For the purposes of this provision, owner shall mean a person who has at least twenty percent

(20%) of the indicia of ownership of the applicant.

      (5) "Effective date of certification" means the date upon which the qualified business

meets the tests imposed in subdivisions (4)(i)(A) through (F) above and applies to the calendar

year for which these tests were performed.

      (6) "Enterprise job employees" means those full-time employees whose annual salary

compensation is not less than the sum of forty thousand dollars ($40,000) and whose business

activity originates and terminates from within the enterprise zone business and facility on a daily

basis, and who are domiciled residents of the state (or who, in the case of employees of a high

performance manufacturer as that term is defined in § 44-31-1(b)(3)(i), pay personal income taxes

to the state) and hired (or transferred, in the case of existing out-of-state employees) and

employed by the qualified business in the enterprise zone after the effective date of certification

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or annual recertification in excess of those full-time employees employed by the qualified

business in any Rhode Island enterprise zone in the prior calendar year. An employee who is

hired and terminated in the same certification period does not constitute an enterprise job

employee.

      (7) "Wages" means wages, tips and other compensation as defined in the Internal

Revenue Code of 1986, 26 U.S.C. § 1 et seq.

     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) fifteen thousand dollars ($15,000), 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.

      (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) fifteen thousand dollars ($15,000) 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, or to offset tax liability incurred in connection with capital improvements.

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

LC002038 - Page 3 of 5

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.

     SECTION 2. Chapter 42-64.3 of the General Laws entitled "Distressed Areas Economic

Revitalization Act" is hereby amended by adding thereto the following section:

     42-64.3-14. Designation of the state of Rhode Island as an enterprise zone. – In

addition to the existing enterprise zones designated by the council pursuant to this chapter, the

remainder of the census tracts or delineations of the state of Rhode Island that are not designated

as an enterprise zone shall temporarily be deemed and designated as such pursuant to the

provisions of this chapter; with such expanded designation to be in effect until such time as the

state unemployment rate meets or falls below the national unemployment rate, as published by

the United States Department of Labor, Bureau of Labor Statistics. Notwithstanding these

provisions, the expiration of the enterprise zone designation shall not apply to any enterprise zone

previously in existence or to any zone which has an application already filed and pending at the

time of the effective date of this section.

     SECTION 3. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- DISTRESSED AREAS

ECONOMIC REVITALIZATION ACT

***

     This act would temporarily designate the entire state an enterprise zone, increase the

amount of tax credits allowed to fifteen thousand dollars ($15,000) per employee, and amend the

definition of eligible employees to those who make a minimum salary of forty thousand dollars

($40,000).

     This act would take effect upon passage.

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