2015 -- H 6225

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LC002734

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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 TAXATION -- RHODE ISLAND NEW QUALIFIED JOBS INCENTIVE ACT

OF 2015

     Introduced By: Representatives Shekarchi, Ackerman, Ruggiero, Marshall, and Trillo

     Date Introduced: May 21, 2015

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Title 44 of the General Laws entitled "TAXATION" is hereby amended by

adding thereto the following chapter:

CHAPTER 48.3

RHODE ISLAND NEW QUALIFIED JOBS INCENTIVE ACT OF 2015

     44-48.3-1. Short title. – This chapter shall be known and may be cited as the "Rhode

Island Qualified Jobs Incentive Act of 2015."

     44-48.3-2. Findings and declaration. – (a) It is hereby found and declared that due to

long-term and short-term negative economic trends in Rhode Island, businesses in the state have

found it difficult to make investments that would stimulate economic activity and create new

jobs. This situation has contributed to a rate of unemployment in Rhode Island that is higher than

our neighbors and among the highest in the nation. Consequently, a need exists to promote the

creation of new jobs, attract new business and industry, and stimulate growth in businesses that

are prepared to make meaningful investment and foster job creation in Rhode Island.

     (b) Through the establishment of a jobs incentive program, Rhode Island can take steps to

stimulate business expansion and attraction, create well-paying jobs for its residents, and generate

revenues for necessary state and local governmental services.

     44-48.3-3. Definitions. – As used in this chapter, unless the context clearly indicates

otherwise, the following words and phrases shall have the following meanings:

     (1) "Affiliate" or "affiliated entity" means an entity that directly or indirectly controls, is

under common control with, or is controlled by the business. Control exists in all cases in which

the entity is a member of an affiliated group of corporations as defined pursuant to section 1504

of the Internal Revenue Code of 1986 (26 U.S.C. §1504) or the entity is an organization in a

group of organizations under common control as defined pursuant to subsection (b) or (c) of

section 414 of the Internal Revenue Code of 1986 (26 U.S.C. §414). A taxpayer may establish by

clear and convincing evidence, as determined by the commerce corporation, that control exists in

situations involving lesser percentages of ownership than required by those statutes. An affiliate

of a business may contribute to meeting full-time employee requirements of a business that

applies for a credit under this chapter.

     (2) "Business" means an applicant that is a corporation, state bank, federal savings bank,

trust company, national banking association, bank holding company, loan and investment

company, mutual savings bank, credit union, building and loan association, insurance company,

investment company, broker-dealer company or surety company, limited liability company,

partnership or sole proprietorship.

     (3) "Commerce corporation" means the Rhode Island commerce corporation established

pursuant to chapter 64 of title44.

     (4) "Commitment period" means the period of time that at a minimum is twenty percent

(20%) greater than the eligibility period.

     (5) "Eligibility period" means the period in which a business may claim a tax credit under

the program, beginning at the end of the tax period in which the commerce corporation issues a

certification for the business that it has met the employment requirements of the program and

extending thereafter for a term of not more than ten (10) years.

     (6) "Eligible position" or "full-time job" means a full-time position in a business which

has been filled with a full-time employee who earns no less than the median hourly wage as

reported by the United States Bureau of Labor Statistics for the state of Rhode Island, provided,

that for economically fragile industries such as manufacturing, the commerce corporation may

reduce the wage threshold. An economically fragile industry shall not include retail.

     (7) "Full-time employee" means a person who is employed by a business for

consideration for at least thirty-five (35) hours a week, or who is employed by a professional

employer organization pursuant to an employee leasing agreement between the business and the

professional employer organization for at least thirty-five (35) hours a week, and whose wages

are subject to withholding.

     (8) "Hope community" means municipalities with a percentage of families below the

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poverty level that is greater than the percentage of families below the poverty level for the state as

a whole as determined by the United States Census Bureau's most recent American Community

Survey.

     (9) "Incentive agreement" means the contract between the business and the commerce

corporation, which sets forth the terms and conditions under which the business shall be eligible

to receive the incentives authorized pursuant to the program.

     (10) "Incentive effective date" means the date the commerce corporation issues a

certification for issuance of tax credit based on documentation submitted by a business pursuant

to § 44-48.3-7.

     (11) "New full-time job" means an eligible position created by the business that did not

previously exist in this state and which is created after approval of an application to the

commerce corporation under the program. Such job position cannot be the result of an acquisition

of an existing company located in Rhode Island by purchase, merger, or otherwise. For the

purposes of determining the number of new full-time jobs, the eligible positions of an affiliate

shall be considered eligible positions of the business so long as such eligible position(s) otherwise

meets the requirements of this section.

     (12) "Partnership" means an entity classified as a partnership for federal income tax

purposes.

     (13) "Program" means the incentive program established pursuant to this chapter.

     (14) "Targeted industry" means any industry identified in the economic development

vision and policy promulgated under § 42-64.17-1.

     (15) "Taxpayer" means a business granted a tax credit under this chapter or such person

entitled to the tax credit because the business is a pass through entity such as a partnership, S

corporation, sole proprietorship or limited liability company taxed as a partnership.

     (16) "Transit oriented development area" means an area in proximity to mass-transit

infrastructure including, but not limited to, an airport, rail or intermodal facility that will be

further defined by regulation of the commerce corporation in consultation with the Rhode Island

department of transportation.

     44-48.3-4. Rhode Island qualified jobs incentive program. – (a) The Rhode Island

qualified jobs incentive program is hereby established as a program under the jurisdiction of and

shall be administered by the commerce corporation. The program may provide tax credits to

eligible businesses for an eligibility period not to exceed ten (10) years.

     (b) An eligible business under the program shall be entitled to a credit against taxes

imposed pursuant to chapters 11, 13, 14, 17 or 30 of title 44 as further provided under this

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chapter.

     (c) The minimum number of new full-time jobs required to be eligible for a tax credit

under this program shall be as follows:

     (1) For a business in a targeted industry that employs not more than one hundred (100)

full-time employees on the date of application to the commerce corporation, the creation of at

least ten (10) new full-time jobs in this state;

     (2) For a business in a targeted industry that employs more than one hundred (100) full-

time employees on the date of application to the commerce corporation, either the creation of new

full-time jobs in this state in an amount not less than ten percent (10%) of the business's existing

number of full-time employees or the creation of at least one hundred (100) new full-time jobs in

this state;

     (3) For a business in a non-targeted industry that employs not more than two hundred

(200) full-time employees on the date of application to the commerce corporation, the creation of

at least twenty (20) new full-time jobs in this state; or

     (4) For a business in a non-targeted industry that employs more than two hundred (200)

full-time employees on the date of application to the commerce corporation, either the creation of

new full-time jobs in this state in an amount not less than ten percent (10%) of the business's

existing number of full-time employees or the creation of at least one hundred (100) new full-

time jobs in this state.

     (d) When a business applies for an incentive under this chapter, in order to assist the

commerce corporation in determining whether the business is eligible for the incentives under

this chapter, the business's chief executive officer, or equivalent officer, shall attest under oath:

     (1) That any projected creation of new full-time jobs would not occur, or would not occur

in the state of Rhode Island, but for the provision of tax credits under the program;

     (2) The business will create new full-time jobs in an amount equal to or greater than the

applicable number set forth in subsection (c) of this section;

     (3) That the business's chief executive officer, or equivalent officer, has reviewed the

information submitted to the commerce corporation and that the representations contained therein

are accurate and complete.

     (e) In the event that this attestation by the business's chief executive officer, or equivalent

officer, required under subsection (d) of this section is found to be willfully false, the commerce

corporation may revoke any award of tax credits in their entirety, which revocation shall be in

addition to any other criminal or civil penalties that the business and/or the officer may be subject

to under applicable law. Additionally, the commerce corporation may revoke any award of tax

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credits in its entirety if the eligible business is convicted of bribery, fraud, theft, embezzlement,

misappropriation, and/or extortion involving the state, any state agency or political subdivision of

the state.

     44-48.3-5. Incentive agreement required prior to issuance of tax credits. – (a) The

commerce corporation shall require an eligible business to enter into an incentive agreement prior

to the issuance of tax credits. The incentive agreement shall include, but shall not be limited to,

the following:

     (1) A detailed description of the proposed job creation including industry sectors and the

number of new full-time jobs that are sought to be approved for tax credits;

     (2) The eligibility period of the tax credits, including the first year for which the tax

credits may be claimed;

     (3) A requirement that the applicant maintain the project at a location in Rhode Island for

the commitment period, with at least the minimum number of full-time employees as required by

this program;

     (4) A method for the business to annually certify that it has met the employment

requirements of the program for each year of the commitment period;

     (5) A provision permitting an audit of the payroll records of the business from time to

time, as the commerce corporation deems necessary;

     (6) A provision establishing the conditions under which the agreement may be

terminated;

     (7) A provision that if, in any tax period, the business reduces the total number of full-

time employees in its statewide workforce in the last tax period prior to the credit amount

approval under this program by more than twenty percent (20%) of jobs for which a credit was

granted under this chapter as described in the business's incentive agreement(s), then the business

shall forfeit all credit amounts described in the business's incentive agreement(s) for that tax

period and each subsequent tax period, until the first tax period for which documentation

demonstrating the restoration of the business's statewide workforce to the threshold levels

required by the incentive agreement(s) has been reviewed and approved by the commerce

corporation, for which tax period and each subsequent tax period the full amount of the credit

shall be allowed; and

     (8) A provision that during the commitment period, if the business ceases operations in

the state or transfers more than fifty percent (50%) of the jobs for which a credit was granted

under this chapter to another state, the tax credit shall cease pursuant to this section and the

business shall be liable to the state for, at a minimum, twenty percent (20%) of all tax benefits

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granted to the business under this chapter calculated from the date of the incentive agreement.

     44-48.3-6. Total amount of tax credit for eligible business. – (a) The base amount of

the tax credit for an eligible business for each new full-time job shall be up to:

     (1) Two thousand five hundred dollars ($2,500) annually for applications received by the

commerce corporation from 2015 through 2018; and

     (2) One thousand five hundred dollars ($1,500) annually for applications received by the

commerce corporation from 2019 through 2020.

     (b) The total tax credit amount shall be calculated and credited to the business annually

for each year of the eligibility period after the commerce corporation, in consultation with the

division of taxation, has verified that the jobs covered by the tax credit have generated sufficient

personal income taxes to comply with subsection (e) of this section.

     (c) In addition to the base amount of the tax credit, the amount of the tax credit to be

awarded for each new full-time job may be increased, pursuant to the provisions of subsection (d)

of this section, if the business meets any of the following criteria or such other additional criteria

determined by the commerce corporation from time to time in response to evolving economic or

market conditions:

     (1) For a business located within a hope community;

     (2) For a targeted industry;

     (3) For a business located within a transit oriented development area; and

     (4) For an out-of-state business that relocates a business unit or units or creates a

significant number of new full-time jobs during the commitment period.

     (d) The gross amount of the tax credit for an eligible business shall be subject to the

following limitations:

     (1) For any application made to the commerce corporation from 2015 through 2018, the

tax credit for an eligible business for each new full-time job shall not exceed seven thousand five

hundred dollars ($7,500) annually; or

     (2) For any application made to the commerce corporation from 2019 through 2020, the

tax credit for an eligible business for each new full-time job shall not exceed five thousand dollars

($5,000) annually.

     (e) Notwithstanding the provisions of subsections (a) through (d) of this section, for each

application approved by the commerce corporation, the amount of tax credits available to be

obtained by the business annually shall not exceed:

     (1) The reasonable W-2 withholding received by the state for each new full-time job

created by a business for applications received by the commerce corporation in 2015 through

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2018; and

     (2) Ninety percent (90%) of the reasonable W-2 withholding received by the state for

each new full-time job created by the business for applications received by the commerce

corporation in 2019 through 2020.

     (f) The commerce corporation shall establish regulations regarding the conditions under

which a business may submit more than one application for tax credits over time. The commerce

corporation may place limits on repeat applications.

     44-48.3-7. Documentation. – (a) A business shall submit an application for tax credits on

or before December 31, 2020.

     The commerce corporation shall not approve an application for tax credits if the

application was submitted after December 31, 2020.

     (b) A business shall submit documentation indicating that it has met the employment

requirements specified in the incentive agreement for certification of its tax credit amount within

three (3) years following the date of approval of its application by the commerce corporation. The

commerce corporation, after a finding of good cause, may grant two (2) six (6) month extensions

of this deadline. In no event shall the incentive effective date occur later than four (4) years

following the date of approval of an application by the commerce corporation.

     (c) Full-time employment for an accounting or privilege period shall be determined as the

average of the monthly full-time employment for the period.

     (d) In conducting its annual review of a business, the commerce corporation may require

a business to submit any information determined by the commerce corporation to be necessary

and relevant to its review.

     (e) The credit amount for any tax period for which the documentation of a business's

credit amount remains uncertified as of a date one year after the closing date of that period shall

be forfeited, although credit amounts for the remainder of the years of the eligibility period shall

remain available to the business.

     44-48.3-8. Carry forward, transfer or redemption of tax credits, redemption fund. –

(a) If the amount of the tax credit allowed under this chapter exceeds the taxpayer's total tax

liability for the year in which the credit is allowed, the amount of such credit that exceeds the

taxpayer's tax liability may be carried forward and applied against the taxes imposed for the

succeeding four (4) years, or until the full credit is used, whichever occurs first. Credits allowed

to a partnership, a limited liability company taxed as a partnership, or multiple owners of property

shall be passed through to the persons designated as partners, members or owners respectively

pro rata or pursuant to an executed agreement among such persons designated as partners,

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members or owners documenting an alternate distribution method without regard to their sharing

of other tax or economic attributes of such entity.

     (b) The commerce corporation shall establish, by regulation, the process for the

assignment, transfer or conveyance of tax credits.

     (c) For purposes of this chapter, any assignment or sales proceeds received by the

taxpayer for its assignment or sale of the tax credits allowed pursuant to this section shall be

exempt from taxation under title 44. If a tax credit is subsequently revoked or adjusted, the

seller's tax calculation for the year of revocation or adjustment shall be increased by the total

amount of the sales proceeds, without proration, as a modification under chapter 30 of title 44 of

the general laws. In the event that the seller is not a natural person, the seller's tax calculation

under chapters 11, 13, 14, or 17 of title 44, as applicable, for the year of revocation, or

adjustment, shall be increased by including the total amount of the sales proceeds without

proration.

     (d) The tax credit allowed under this chapter may be used as a credit against corporate

income taxes imposed under chapters 11, 13, 14, or 17 of title 44, or as determined by the

commerce corporation may be used as a credit against personal income taxes imposed under

chapter 30 of title 44. No more than the amount of tax credits equal to the total credit amount

divided by the duration of the eligibility period in years may be taken in any tax period.

     (e) Prior to assignment or transfer of a tax credit granted under this chapter, the division

of taxation shall, at the request of the business, redeem such credit in whole or in part for ninety

percent (90%) of the value of the tax credit with monies in the jobs tax credit redemption fund

created under subsection (f) of this section. The division of taxation shall establish by regulation a

redemption process for tax credits.

     (f) The division of taxation is hereby authorized and empowered to segregate taxes

collected as a result of the creation of new full-time jobs under this chapter and transfer such

amounts to the general treasurer for deposit in a restricted account known as the jobs tax credit

redemption fund. The jobs tax credit redemption fund shall be used solely to pay for the

redemption of tax credits granted under this chapter. The director of the department of revenue

shall annually determine if a surplus exists in the job tax credit redemption fund over amounts

necessary to redeem tax credits in a fiscal year and may authorize the general treasurer to transfer

any surplus to the general fund.

     (g) The unexpended balance of such sum of money received and appropriated for the jobs

tax credit redemption fund remaining in the treasury at the close of each fiscal year, shall be

continued to and is hereby annually appropriated for the same account for the ensuing year.

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     (h) The commerce corporation shall have no obligation to make any award or grant any

benefits under this chapter.

     44-48.3-9. Documentation. – (a) The commerce corporation may adopt implementation

guidelines, directives, criteria, rules and regulations pursuant to chapter 35 of title 42

("administrative procedures act") as are necessary to implement this chapter, including, but not

limited to: the enumeration of specific targeted industries; specific delineation of the incentive

areas; the promulgation of procedures and forms necessary to apply for a tax credit, including the

enumeration of the certification procedures and allocation of tax credits; and provisions for tax

credit applicants to be charged an initial application fee, and ongoing service fees, to cover the

administrative costs related to the tax credit.

     (b) For businesses adding jobs on the basis of a future federal procurement, the

commerce corporation shall establish specific procedures.

     (c) The division of taxation shall adopt rules as are necessary to implement this chapter.

     44-48.3-10. Limitations. – The incentives provided under this chapter shall not be

granted in combination with any other job specific benefit provided by the state, the commerce

corporation, or any other state agency, board, commission, quasi-public corporation or similar

entity without the express authorization of the commerce corporation.

     44-48.3-11. Program integrity. – Program integrity being of paramount importance, the

commerce corporation shall establish procedures to ensure ongoing compliance with the terms

and conditions of the program established herein, including procedures to safeguard the

expenditure of public funds and to ensure that the funds further the objectives of the program. At

a minimum these procedures will include an audit, at least every three (3) years, of the process

the commerce corporation followed in the administration of the program.

     44-48.3-12. Discontinuance of further rate reductions and future beneficiaries under

the jobs development act. – (a) The rate reduction(s) provided pursuant to chapter 64.5 of title

42 of the general laws shall be discontinued effective July 1, 2015, except as provided in

subsection (b) of this section.

     (b) Any company that has qualified for a rate reduction pursuant to chapter 64.5 of title

42 prior to July 1, 2015, shall be entitled to maintain the rate reduction in effect as of June 30,

2015, and no additional rate reduction shall be permitted. All obligations of the company required

under chapter 64.5 of title 42 to retain a rate reduction shall remain in full force and effect.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION -- RHODE ISLAND NEW QUALIFIED JOBS INCENTIVE ACT

OF 2015

***

     This act would create a tax credit program for new full-time jobs created in the state for a

period ending in 2020, and would be limited to a tax credit based upon the reasonable W-2

withholding by the state for each new full-time job created.

     This act would take effect upon passage.

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