2019 -- S 0671

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LC002105

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2019

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A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT - REBUILD RHODE ISLAND TAX

CREDIT

     

     Introduced By: Senators Crowley, Nesselbush, Conley, and Cano

     Date Introduced: March 21, 2019

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

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     --SECTION 1. Sections 42-64.20-3 and 42-64.20-5 of the General Laws in Chapter 42-

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64.20 entitled "Rebuild Rhode Island Tax Credit" are hereby amended to read as follows:

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     42-64.20-3. Definitions.

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     As used in this chapter:

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     (1) "Adaptive reuse" means the conversion of an existing structure from the use for which

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it was constructed to a new use by maintaining elements of the structure and adapting such

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elements to a new use.

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     (2) "Affiliate" means an entity that directly or indirectly controls, is under common

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

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member of a controlled group of corporations as defined pursuant to § 1563 of the Internal

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Revenue Code of 1986 (26 U.S.C. § 1563) or the entity is an organization in a group of

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organizations under common control as defined pursuant to subsection (b) or (c) of § 414 of the

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

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convincing evidence, as determined by the tax administrator, that control exists in situations

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

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business may contribute to meeting either the capital investment or full-time employee

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requirements of a business that applies for a credit under this chapter.

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     (3) "Affordable housing" means housing for sale or rent with combined rental costs or

 

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combined mortgage loan debt service, property taxes, and required insurance that do not exceed

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thirty percent (30%) of the gross annual income of a household earning up to eighty percent

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(80%) of the area median income, as defined annually by the United States Department of

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Housing and Urban Development.

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     (4) "Applicant" means a developer applying for a rebuild Rhode Island tax credit under

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this chapter.

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     (5) "Business" means a corporation as defined in § 44-11-1(4), or a partnership, an S

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corporation, a non-profit corporation, a sole proprietorship, or a limited liability corporation. A

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business shall include an affiliate of the business if that business applies for a credit based upon

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any capital investment made by an affiliate.

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     (6) "Capital investment" in a real estate project means expenses by a developer incurred

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after application for:

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     (i) Site preparation and construction, repair, renovation, improvement, equipping, or

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furnishing on real property or of a building, structure, facility, or improvement to real property;

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     (ii) Obtaining and installing furnishings and machinery, apparatus, or equipment,

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including but not limited to material goods for the operation of a business on real property or in a

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building, structure, facility, or improvement to real property.

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     In addition to the foregoing, if a developer acquires or leases a qualified development

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project, the capital investment made or acquired by the seller or owner, as the case may be, if

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pertaining primarily to the premises of the qualified development project, shall be considered a

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capital investment by the developer and, if pertaining generally to the qualified development

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project being acquired or leased, shall be allocated to the premises of the qualified development

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project on the basis of the gross leasable area of the premises in relation to the total gross leasable

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area in the qualified development project. The capital investment described herein shall be

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defined through rules and regulations promulgated by the commerce corporation.

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     (7) "Certified historic structure" means a property which is located in the state of Rhode

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Island and is

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     (i) Listed individually on the national register of historic places; or

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     (ii) Listed individually in the state register of historic places; or

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     (iii) Located in a registered historic district and certified by either the Rhode Island

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historical preservation and heritage commission created pursuant to § 42-45-2 or the Secretary of

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the Interior as being of historic significance to the district.

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

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pursuant to § 42-64-1 et seq.

 

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     (9) "Commercial" shall mean non-residential development.

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     (10) "Developer" means a person, firm, business, partnership, association, political

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subdivision, or other entity that proposes to divide, divides, or causes to be divided real property

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into a subdivision or proposes to build, or builds a building or buildings or otherwise improves

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land or existing structures, which division, building, or improvement qualifies for benefits under

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this chapter.

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     (11) "Development" means the improvement of land through the carrying out of building,

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engineering, or other operations in, on, over, or under land, or the making of any material change

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in the use of any buildings or land for the purposes of accommodating land uses.

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     (12) "Eligibility period" means the period in which a developer may claim a tax credit

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under this act, beginning with the tax period in which the commerce corporation accepts

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certification from the developer that it has met the requirements of the act and extending

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thereafter for a term of five (5) years.

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

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consideration for a minimum of at least thirty-five (35) hours per week, or who renders any other

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standard of service generally accepted by custom or practice as full-time employment, or who is

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employed by a professional employer organization pursuant to an employee leasing agreement

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between the business and the professional employer organization for a minimum of thirty-five

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(35) hours per week, or who renders any other standard of service generally accepted by custom

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or practice as full-time employment, and whose wages are subject to withholding.

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     (14) "Hope community" means a municipality for which the five-year (5) average

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percentage of families with income below the federal poverty level exceeds the state five-year (5)

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average percentage, both as most recently reported by the U.S. Department of Commerce, Bureau

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of the Census.

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     (15) "Mixed use" means a development comprising both commercial and residential

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components.

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

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purposes.

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     (17) "Pawtucket-Central Falls station redevelopment district" means the area in the city

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of Pawtucket beginning at the point of intersection of Lonsdale Avenue and Rand Street, turning

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south on Lonsdale Avenue until Beecher Street, then heading east, then south, then east on

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Beecher Street to Coleman Street, then turning south onto Coleman Street to Carpenter Street,

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then heading east onto Carpenter Street to Conant Street, then turning south onto Conant Street to

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Weeden Street, turning west onto Weeden Street to Coleman Street, then turning south onto

 

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Coleman Street to Centre Street, then turning east onto Centre Street to Conant Street, then

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turning south onto Conant Street to Mineral Spring Avenue, then turning east onto Mineral

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Spring Avenue to Church Street, continuing east onto Church Street to Park Place West, turning

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north onto Park Place West to Dexter Street, continuing north onto Dexter Street to Cross Street,

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then turning west onto Cross Street to Pine Street, then turning north onto Pine Street to Rand

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Street, then turning west onto Rand Street to Lonsdale Avenue. In the City of Central Falls it

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means the area beginning at the point of intersection of Dexter Street and the Central Falls-

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Pawtucket city line, then following the Central Falls-Pawtucket city line to Clay Street, then

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turning east onto Clay Street to Hawes Street, then turning north onto Hawes Street to Cross

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Street, then turning west onto Cross Street to Pine Street, then turning north onto Pine Street to

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Knight Street, then turning east onto Knight Street to Dexter Street, then turning north onto

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Dexter Street to Central Street, then turning west onto Central Street to Pine Street, then turning

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north onto Pine Street to Rand Street, then turning east onto Rand Street to Dexter Street, then

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turning north onto Dexter Street to Mowry Street, then turning west onto Mowry Street to Pine

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Street, then turning south onto Pine Street to Rand Street, then turning west onto Rand Street to

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Lonsdale Avenue, then turning south onto Lonsdale Avenue to the Central Falls-Pawtucket city

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line, then following the Central Falls-Pawtucket city line east to Dexter Street.

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     (17)(18) "Placed in service" means the earlier of i) substantial construction or

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rehabilitation work has been completed which would allow for occupancy of an entire structure or

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some identifiable portion of a structure, as established in the application approved by the

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commerce corporation board or ii) receipt by the developer of a certificate, permit or other

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authorization allowing for occupancy of the project or some identifiable portion of the project by

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the municipal authority having jurisdiction.

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     (18)(19) "Project" means qualified development project as defined under subsection (22).

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     (19)(20) "Project area" means land or lands under common ownership or control in which

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a qualified development project is located.

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     (20)(21) "Project cost" means the costs incurred in connection with the qualified

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development project or qualified residential or mixed use project by the applicant until the

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issuance of a permanent certificate of occupancy, or until such other time specified by the

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commerce corporation, for a specific investment or improvement, as defined through rules and

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regulations promulgated by the commerce corporation.

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     (21)(22) "Project financing gap" means

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     (i) The part of the total project cost that remains to be financed after all other sources of

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capital have been accounted for (such sources will include, but not be limited to, developer-

 

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contributed capital), which shall be defined through rules and regulations promulgated by the

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commerce corporation, or

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     (ii) The amount of funds that the state may invest in a project to gain a competitive

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advantage over a viable and comparable location in another state by means described in this

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chapter.

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     (22)(23) "Qualified development project" means a specific construction project or

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improvement, including lands, buildings, improvements, real and personal property or any

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interest therein, including lands under water, riparian rights, space rights and air rights, acquired,

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owned, leased, developed or redeveloped, constructed, reconstructed, rehabilitated or improved,

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undertaken by a developer, owner or tenant, or both, within a specific geographic area, meeting

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the requirements of this chapter, as set forth in an application made to the commerce corporation.

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     (23)(24) "Recognized historical structure" means a property which is located in the state

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of Rhode Island and is commonly considered to be of historic or cultural significance as

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determined by the commerce corporation in consultation with the state historic preservation

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officer.

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     (24)(25) "Residential" means a development of residential dwelling units.

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     (25)(26) "Targeted industry" means any advanced, promising, or otherwise prioritized

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industry identified in the economic development vision and policy promulgated pursuant to § 42-

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64.17-1 or, until such time as any such economic development vision and policy is promulgated,

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as identified by the commerce corporation.

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     (26)(27) "Transit oriented development area" means an area in proximity to transit

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infrastructure that will be further defined by regulation of the commerce corporation in

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consultation with the Rhode Island department of transportation.

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     (27)(28) "Workforce housing" means housing for sale or rent with combined rental costs

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or combined mortgage loan debt service, property taxes, and required insurance that do not

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exceed thirty percent (30%) of the gross annual income of a household earning between eighty

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percent (80%) and one hundred and forty percent (140%) of the area median income, as defined

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annually by the United States Department of Housing and Urban Development.

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     42-64.20-5. Tax credits.

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     (a) An applicant meeting the requirements of this chapter may be allowed a credit as set

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forth hereinafter against taxes imposed upon such person under applicable provisions of title 44

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of the general laws for a qualified development project.

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     (b) To be eligible as a qualified development project entitled to tax credits, an applicant's

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chief executive officer or equivalent officer shall demonstrate to the commerce corporation, at the

 

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time of application, that:

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     (1) The applicant has committed capital investment or owner equity of not less than

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twenty percent (20%) of the total project cost;

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     (2) There is a project financing gap in which after taking into account all available private

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and public funding sources, the project is not likely to be accomplished by private enterprise

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without the tax credits described in this chapter; and

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     (3) The project fulfills the state's policy and planning objectives and priorities in that:

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     (i) The applicant will, at the discretion of the commerce corporation, obtain a tax

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stabilization agreement from the municipality in which the real estate project is located on such

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terms as the commerce corporation deems acceptable;

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     (ii) It (A) is a commercial development consisting of at least 25,000 square feet occupied

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by at least one business employing at least 25 full-time employees after construction or such

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additional full-time employees as the commerce corporation may determine; (B) is a multi-family

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residential development in a new, adaptive reuse, certified historic structure, or recognized

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historical structure consisting of at least 20,000 square feet and having at least 20 residential units

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in a hope community; or (C) is a mixed-use development in a new, adaptive reuse, certified

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historic structure, or recognized historical structure consisting of at least 25,000 square feet

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occupied by at least one business, subject to further definition through rules and regulations

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promulgated by the commerce corporation; and

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     (iii) Involves a total project cost of not less than $5,000,000, except for a qualified

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development project located in a hope community or redevelopment area designated under § 45-

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32-4 in which event the commerce corporation shall have the discretion to modify the minimum

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project cost requirement.

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     (c) Applicants qualifying for a tax credit pursuant to chapter 33.6 of title 44 shall be

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exempt from the requirements of subparagraphs (b)(3)(ii) and (b)(3)(iii). The following procedure

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shall apply to such applicants:

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     (1) The division of taxation shall remain responsible for determining the eligibility of an

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applicant for tax credits awarded under chapter 33.6 of title 44;

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     (2) The commerce corporation shall retain sole authority for determining the eligibility of

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an applicant for tax credits awarded under this chapter; and

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     (3) The commerce corporation shall not award in excess of fifteen percent (15%) of the

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annual amount appropriated in any fiscal year to applicants seeking tax credits pursuant to

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subsection (c).

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     (d) Maximum project credit.

 

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     (i) For qualified development projects, the maximum tax credit allowed under this

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chapter shall be the lesser of (1) thirty percent (30%) of the total project cost; or (2) the amount

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needed to close a project financing gap (after taking into account all other private and public

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funding sources available to the project), as determined by the commerce corporation.

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     (ii) The credit allowed pursuant to this chapter shall not exceed fifteen million dollars

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($15,000,000) for any qualified development project under this chapter. No building or qualified

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development project to be completed in phases or in multiple projects shall exceed the maximum

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project credit of fifteen million dollars ($15,000,000) for all phases or projects involved in the

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rehabilitation of such building. Provided, however, that for purposes of this subsection and no

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more than once in a given fiscal year, the commerce corporation may consider the development

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of land and buildings by a developer on the "I-195 land" (as defined in § 42-64.24-3(6) of the

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general laws) as a separate, qualified development project from a qualified development project

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by a tenant or owner of a commercial condominium or similar legal interest including leasehold

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improvement, fit out, and capital investment. Such qualified development project by a tenant or

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owner of a commercial condominium or similar legal interest on the I-195 land may be exempted

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from subparagraph (d)(i)(1).

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     (e) Credits available under this chapter shall not exceed twenty percent (20%) of the

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project cost, provided, however, that the applicant shall be eligible for additional tax credits of not

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more than ten percent (10%) of the project cost, if the qualified development project meets any of

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the following criteria or other additional criteria determined by the commerce corporation from

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time to time in response to evolving economic or market conditions:

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     (1) The project includes adaptive reuse or development of a recognized historical

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structure;

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     (2) The project is undertaken by or for a targeted industry;

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     (3) The project is located in a transit-oriented development area;. Notwithstanding the

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provisions of any general or special law to the contrary, applicants applying for tax credits for

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projects located in a transit-oriented development area located in the Pawtucket-Central Falls

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station redevelopment district shall be eligible for credits not exceeding fifty percent (50%) of the

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project cost;

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     (4) The project includes residential development of which at least twenty percent (20%)

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of the residential units are designated as affordable housing or workforce housing;

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     (5) The project includes the adaptive reuse of property subject to the requirements of the

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industrial property remediation and reuse act, § 23-19.14-1 et seq.; or

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     (6) The project includes commercial facilities constructed in accordance with the

 

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minimum environmental and sustainability standards, as certified by the commerce corporation

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pursuant to Leadership in Energy and Environmental Design or other equivalent standards.

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     (f) Maximum aggregate credits. The aggregate sum authorized pursuant to this chapter

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shall not exceed one hundred and fifty million dollars ($150,000,000).

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     (g) Tax credits shall not be allowed under this chapter prior to the taxable year in which

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the project is placed in service.

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     (h) The amount of a tax credit allowed under this chapter shall be allowable to the

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taxpayer in up to five, annual increments; no more than thirty percent (30%) and no less than

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fifteen percent (15%) of the total credits allowed to a taxpayer under this chapter may be

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allowable for any taxable year.

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

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tax liability for the year in which the relevant portion of the credit is allowed, the amount that

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exceeds the taxpayer's tax liability may be carried forward for credit against the taxes imposed for

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

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

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

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

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partners, members, or owners documenting an alternate distribution method without regard to

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their sharing of other tax or economic attributes of such entity.

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     (j) The commerce corporation in consultation with the division of taxation shall establish,

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by regulation, the process for the assignment, transfer, or conveyance of tax credits.

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

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

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

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

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

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the event that the seller is not a natural person, the seller's tax calculation under chapters 11, 13,

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14, or 17 of title 44 of the general laws, as applicable, for the year of revocation, or adjustment,

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shall be increased by including the total amount of the sales proceeds without proration.

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

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income taxes imposed under chapters 11, 13, 14, or 17, of title 44, or may be used as a credit

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against personal income taxes imposed under chapter 30 of title 44 for owners of pass-through

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entities such as a partnership, a limited liability company taxed as a partnership, or multiple

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owners of property.

 

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

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

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

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     (n) Upon request of a taxpayer and subject to annual appropriation, the state shall redeem

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such credit, in whole or in part, for ninety percent (90%) of the value of the tax credit. The

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division of taxation, in consultation with the commerce corporation, shall establish by regulation

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a redemption process for tax credits.

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     (o) Projects eligible to receive a tax credit under this chapter may, at the discretion of the

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commerce corporation, be exempt from sales and use taxes imposed on the purchase of the

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following classes of personal property only to the extent utilized directly and exclusively in such

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project: (1) Furniture, fixtures and equipment, except automobiles, trucks, or other motor

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vehicles; or (2) Such other materials, including construction materials and supplies, that are

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depreciable and have a useful life of one year or more and are essential to the project.

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     (p) The commerce corporation shall promulgate rules and regulations for the

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administration and certification of additional tax credit under subsection (e), including criteria for

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the eligibility, evaluation, prioritization, and approval of projects that qualify for such additional

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tax credit.

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     (q) The commerce corporation shall not have any obligation to make any award or grant

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any benefits under this chapter.

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     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 STATE AFFAIRS AND GOVERNMENT - REBUILD RHODE ISLAND TAX

CREDIT

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     This act would amend certain provisions of the "Rebuild Rhode Island Tax Credit Act",

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and would create the Pawtucket-Central Falls station redevelopment district with a metes and

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bounds description. The act would also provide that tax credits may be available for certain

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projects located in the transit-oriented development area located in the Pawtucket-Central Falls

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station redevelopment district for an amount not to exceed fifty percent (50%) of the project cost.

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     This act would take effect upon passage.

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