2017 -- H 5563

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LC001052

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2017

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A N   A C T

RELATING TO TAXATION - PERSONAL INCOME TAX

     

     Introduced By: Representatives Regunberg, Slater, Lima, Donovan, and Kazarian

     Date Introduced: February 16, 2017

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Chapter 44-30 of the General Laws entitled "Personal Income Tax" is

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hereby amended by adding thereto the following section:

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     44-30-2.7.1. Capital gains rates for investment management services interest.

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     (a) For purposes of this section:

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     (1) "Investment management services" means providing a substantial quantity of any of

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the following services, directly or indirectly, to a partnership, S corporation or any type of

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business entity:

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     (i) Advising the partnership, S corporation, or business entity as to the advisability of

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investing in, purchasing, or selling any specified asset;

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     (ii) Managing, acquiring, or disposing of any specified asset;

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     (iii) Arranging financing with respect to acquiring specified assets; or

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     (iv) Any activity in support of any service described in this subsection.

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     (2) "Specified asset" means securities (as defined §475(c)(2) of the Internal Revenue

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Code, as amended), real estate held for rental or investment, interests in partnerships,

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commodities (as defined in §475(e)(2) of the Internal Revenue Code, as amended), or options or

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derivative contracts with respect to any of the foregoing.

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     (b) Income from investment management services shall be subject to a nineteen percent

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(19%) "carried interest fairness fee" payable to the state of Rhode Island until such time as the

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department of revenue has notified the general assembly that the United States Congress has

 

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passed and the President of the United States has signed legislation having an identical effect with

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this section applicable to such income earned in all of the states and territories.

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     (c) A partner or shareholder shall not be deemed to be providing investment management

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services if at least eighty percent (80%) of the average fair market value of the specified assets of

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the partnership, S corporation or other business entity during the taxable year consists of real

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estate.

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     SECTION 2. This act shall take effect upon enactment into law by the states of

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Connecticut, New Jersey and Massachusetts of legislation having an identical effect with this act,

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but if the states of Connecticut, New Jersey and Massachusetts shall have already enacted such

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legislation, this act shall take effect immediately; provided, that the department of revenue shall

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notify the general assembly of the enactment of such legislation by the states of Connecticut, New

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Jersey and Massachusetts in furtherance of effectuating the provisions of this act.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION - PERSONAL INCOME TAX

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     This act would establish a nineteen percent (19%) carried interest fairness fee for

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investment management services in order to tax the carried interest income of hedge fund and

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private equity investors as traditional ordinary earned income.

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     This act would take effect upon enactment into law by the states of Connecticut, New

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Jersey and Massachusetts of legislation having an identical effect with this act, but if the states of

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Connecticut, New Jersey and Massachusetts shall have already enacted such legislation, this act

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would take effect immediately; provided, that the department of revenue would notify the general

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assembly of the enactment of such legislation by the states of Connecticut, New Jersey and

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Massachusetts in furtherance of effectuating the provisions of this act.

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