2019 -- S 0768

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LC002314

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2019

____________

A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- MANUFACTURING AND

ECONOMIC DEVELOPMENT--TAX INCENTIVES

     Introduced By: Senator Roger Picard

     Date Introduced: April 04, 2019

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Title 42 of the General Laws entitled "STATE AFFAIRS AND

GOVERNMENT" is hereby amended by adding thereto the following chapter:

CHAPTER 64.33

THE REFUNDABLE INVESTMENT TAX CREDIT ACT

     42-64.33-1. Short title.

     This chapter shall be known and may be cited as the "Refundable Investment Tax Credit

Act."

     42-64.33-2. Legislative findings.

     Although chapter 31 of title 44 of the Rhode Island general laws (the "investment tax

credit act") establishes tax credits for eligible taxpayers for certain investments for the

construction of facilities, the acquisition of tangible personal property, and the training of

employees, the investment tax credit act does not allow for the taking of these tax credits by

certain business entities, and further does not provide for refunds to the extent that the tax credits

exceed the eligible taxpayers' tax liability. Through the establishment of a refundable investment

tax credit program for manufacturers, Rhode Island can foster further investment by

manufacturing businesses, and thereby encourage businesses to contribute in a meaningful way to

the economic development of this state. In so doing, this program will further advance the

competitiveness of Rhode Island and its companies in the national and global economies and

result in the creation and retention of jobs and tax revenues for the state.

     42-64.33-3. Definitions.

     As used in this chapter:

     (1) "Business" means a manufacturer that is a C corporation, S corporation, partnership,

limited partnership, limited liability partnership, limited liability company, or sole proprietorship;

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

pursuant to chapter 64 of title 42;

     (3) "Eligible taxpayer" means a taxpayer eligible for an investment tax credit pursuant to

§ 44-31-1;

     (4) "Manufacturer" and "Manufacturing" shall have the same meanings as provided in §§

44-31-1(b)(1) and (b)(2) and shall further include any entity described in major groups 20 through

39 in the Standard Industrial Classification Manual prepared by the technical committee on

industrial classification, office of statistical standards, executive office of the president, United

States Bureau of Budget, as revised from time to time;

     (5) "Refund or redemption" means the taking of a tax credit against a tax liability or

obtaining a refund for a tax credit or a portion thereof;

     (6) "Targeted industries" shall have the same meaning as provided in § 42-64.20-3 (the

"rebuild Rhode Island tax credit act") and the regulations promulgated thereunder;

     (7) "Tax liability" means:

     (i) The amount of tax owed to the state of Rhode Island calculated as the Rhode Island

adjusted taxable income minus any Rhode Island tax credit on schedule B-CR other than credits

allowed under this chapter; or

     (ii) The minimum tax for filers of Form RI 11120S; or

     (iii) The Rhode Island annual fee for file.

     42-64.33-4. Establishment of program.

     A refundable investment tax credit program is hereby established as a program under the

jurisdiction of and administered by the commerce corporation.

     42-64.33-5. Refundable tax credits.

     (a) To be eligible to take and redeem tax credits under this chapter, a business must

submit a completed application to the commerce corporation for approval prior to making the

investment that will give rise to the requested tax credit. Such application shall be developed by

the commerce corporation.

     (b) The commerce corporation may take into account the following factors in determining

whether to approve an application for a refundable investment tax credit pursuant to this chapter:

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the nature and amount of the business's investment; the necessity of the investment and/or credit;

whether the business is engaged in a targeted industry; the number of jobs created by the

business's investment; whether the investment took place in a Hope community as defined in §

42-64.20-3 and the regulations promulgated thereunder; and such other factors as the commerce

corporation deems relevant.

     (c) The refundable tax credit shall be available only to the extent that the business's

investment credit exceeds that business's tax liability for the tax year in which the credit is

available.

     (d) The amount of the refundable tax credit available to any business in any given tax

year shall not exceed the sum of one hundred thousand dollars ($100,000).

     (e) Prior to approving an application for refundable credits, the commerce corporation

shall require the business to enter into an incentive agreement setting forth the business's

eligibility to use or redeem the tax credits and the terms and conditions governing the approval

and receipt of the refundable tax credits.

     (f) To take or redeem a refundable tax credit authorized by the corporation, an eligible

business shall apply annually to the commerce corporation for a certification that the business has

met all the requirements of this chapter and the incentive agreement. The commerce corporation

shall either issue a certification to the business or provide a written response detailing any

deficiencies precluding certification. The commerce corporation may deny an applicant for

certification, or declare the incentive agreement null and void if the business does not meet all

requirements of this chapter and any additional terms and conditions of the incentive agreement.

     (g) Upon issuance of a certification by the commerce corporation under subsection (f) of

this section, and at the request of the business, the division of taxation shall, on behalf of the state

of Rhode Island issue redemption tax certificate(s) as specified in the certification issued by the

commerce corporation pursuant to subsection (f) of this section.

     (h) A taxpayer shall be entitled to take investment tax credits, up to the limit authorized

in this chapter, against taxes imposed pursuant to chapters 11 and 30 of title 44.

     (i) Subject to annual appropriation in the state budget and upon written request of a

taxpayer, the state shall refund the amount of the tax credit provided under this chapter in whole

or in part up to one hundred percent (100%) of the value of the redemption certificates issued

under subsection (g) of this section reduced by the amount of the tax credit taken, if any;

provided, however, that taxpayer may only claim a refund of a credit amount, in whole or part,

for the year for which the tax credit was issued. Credits carried over pursuant to subsection (j) of

this section shall not be refundable.

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     (j) If 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 that exceeds the taxpayer's tax liability after

taking account any credit taken under this chapter may either be refunded pursuant to subsection

(i) of this section or carried forward for credit against the tax liability for the succeeding years, or

until the tax credit is used in full, whichever occurs first.

     (k) In the case of a corporation that files a consolidated return, this credit shall only be

allowed against the tax of a 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.

     (l) 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, members or owners documenting an alternate distribution method

without regard to their sharing of other tax or economic attributes of such entity.

     (m) Any expenses used for calculating the tax credit under this chapter cannot be used in

calculating a tax credit under any other tax credit program in Rhode Island law.

     (n) In the event any taxpayer seeking a refund under this chapter has outstanding Rhode

Island tax obligations, the division of taxation shall be permitted to apply said refund to the

outstanding tax obligations.

     42-64.33-6. Refundable investment tax credit fund.

     There is hereby established at the commerce corporation a restricted account known as

the refundable investment tax credit fund (the "fund") into which all amounts appropriated in the

state budget for the redemption of tax credits under this chapter shall be deposited. The fund shall

be used to pay for the redemption of investment tax credits pursuant to the provisions of this

chapter and for which a taxpayer is eligible under § 44-31-1. The fund shall be exempt from

attachment, levy or any other process at law or in equity. The director of the department of

revenue shall make a requisition to the commerce corporation for funding during any fiscal year

as may be necessary to pay for the redemption pursuant to this chapter. The commerce

corporation shall pay from the fund such amounts as requested by the director of the department

of revenue necessary to redeem tax credits pursuant to this chapter.

     42-64.33-7. Program integrity.

     (a) 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 approval of redemption of the credits and to

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ensure that authorized redemptions further the objectives of the program.

     (b) The commerce corporation and division of taxation may promulgate such rules and

regulations pursuant to chapter 35 of title 42 (the "administrative procedures act") as deemed

necessary to carry out the intent, purpose and implementation of the program established under

this chapter.

     42-64.33-8. Reporting requirements.

     (a) By September 1, 2019 and each year thereafter, the commerce corporation shall report

the name and address of each business entering into an incentive agreement during the previous

state fiscal year to the division of taxation. The commerce corporation shall also make this

information publicly available on its website. In addition, the commerce corporation shall provide

the division of taxation a copy of each incentive agreement as they are executed.

     (b) By December 1, 2019, and each year thereafter, the office of management and budget

shall provide the governor with the sum, if any, to be appropriated to fund the refundable

investment tax credit program.

     SECTION 2. Sections 42-64.20-3 and 42-64.20-5 of the General Laws in Chapter 42-

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

     42-64.20-3. Definitions.

     As used in this chapter:

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

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

elements to a new use.

     (2) "Affiliate" 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 a controlled group of corporations as defined pursuant to § 1563 of the Internal

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

organizations under common control as defined pursuant to subsection (b) or (c) of § 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 tax administrator, that control exists in situations

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

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

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

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

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

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

Housing and Urban Development.

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

this chapter.

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

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

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

any capital investment made by an affiliate.

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

after application for:

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

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

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

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

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

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

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

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

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

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

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

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

defined through rules and regulations promulgated by the commerce corporation.

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

Island and is

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

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

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

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

the Interior as being of historic significance to the district.

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

pursuant to § 42-64-1 et seq.

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

     (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

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

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

this chapter.

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

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

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

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

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

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

thereafter for a term of five (5) years.

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

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

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

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

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

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

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

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

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

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

of the Census.

     (15) "Manufacturer" means any entity that:

     (i) Uses any premises within the state primarily for the purpose of transforming raw

materials into a finished product for trade through any or all of the following operations:

adapting, altering, finishing, making, processing, refining, metalworking, and ornamenting, but

shall not include fabricating processes incidental to warehousing or distribution of raw materials,

such as alteration of stock for the convenience of a customer; or

     (ii) Is described in codes 31-33 of the North American Industry Classification System, as

revised from time to time.

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

components.

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

purposes.

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

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

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

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

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

the municipal authority having jurisdiction.

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

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

a qualified development project is located.

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

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

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

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

regulations promulgated by the commerce corporation.

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

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

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

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

commerce corporation, or

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

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

chapter.

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

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

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

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

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

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

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

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

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

officer.

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

     (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-

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

as identified by the commerce corporation.

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

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

consultation with the Rhode Island department of transportation.

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

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

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

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

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

     42-64.20-5. Tax credits.

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

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

of the general laws for a qualified development project.

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

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

time of application, that:

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

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

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

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

without the tax credits described in this chapter; and

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

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

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

terms as the commerce corporation deems acceptable;

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

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

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

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

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

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

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

promulgated by the commerce corporation; and

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

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

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

project cost requirement.

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

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

shall apply to such applicants:

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

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

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

an applicant for tax credits awarded under this chapter; and

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

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

subsection (c).

     (d) Applicants whose project is occupied by at least one manufacturer shall be exempt

from the requirements of subsections (b)(3)(ii) and (b)(3)(iii) of this section, and the commerce

corporation may establish minimum project cost amounts required for eligibility under this

section.

     (d)(e) Maximum project credit.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

structure;

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

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

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

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

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

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

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

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

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

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

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

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

which the project is placed in service.

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

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

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

allowable for any taxable year, except for projects with a project financing gap of less than five

hundred thousand dollars ($500,000).

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

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

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

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

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

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

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

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

     (k)(l) 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. 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 of the general laws, as applicable, for the year of revocation, or adjustment,

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

     (l)(m) 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 may be used as a credit

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

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

owners of property.

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

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.

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

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

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

regulation a redemption process for tax credits.

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

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

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

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

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

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

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

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

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

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tax credit.

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

grant any benefits under this chapter.

     SECTION 3. Sections 44-48.3-3 and 44-48.3-4 of the General Laws in Chapter 44-48.3

entitled "Rhode Island New Qualified Jobs Incentive Act 2015" are hereby amended to read as

follows:

     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 § 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 § 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 title 42.

     (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

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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

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) "Manufacturer" means any entity that:

     (i) Uses any premises within the state primarily for the purpose of transforming raw

materials into a finished product for trade through any or all of the following operations:

adapting, altering, finishing, making, processing, refining, metalworking, and ornamenting, but

shall not include fabricating processes incidental to warehousing or distribution of raw materials,

such as alteration of stock for the convenience of a customer; or

     (ii) Is described in codes 31-33 of the North American Industry Classification System, as

revised from time to time.

     (11)(12) "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)(13) "Partnership" means an entity classified as a partnership for federal income tax

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purposes.

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

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

vision and policy promulgated under § 42-64.17-1 or, until such time as any economic

development vision and policy is promulgated, as identified by the commerce corporation.

     (15)(16) "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)(17) "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

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)

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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; or

     (5) Notwithstanding subsections (c)(1) through (c)(4) of this section, for a manufacturer,

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

manufacturer'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) The commerce corporation shall establish, by regulation, the documentation an

applicant shall be required to provide under this subsection. Such documentation may include

documentation showing that the applicant could reasonably locate the new positions outside of

this state, or that the applicant is considering locating the positions outside of this state, or that it

would not be financially feasible for the applicant to create the positions without the tax credits

provided in this chapter.

     (f) 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

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.

     (g) The definition of manufacturer in this chapter is limited to the eligibility for the

program in this chapter only and shall not modify or define the legal standing of a manufacturer

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for any other purpose set forth in title 44.

     SECTION 4. 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 -- MANUFACTURING AND

ECONOMIC DEVELOPMENT--TAX INCENTIVES

***

     This act would establish the "refundable investment tax credit act" to provide for a

refundable investment tax credit for certain investments in the construction of facilities,

acquisition of tangible property, and the training of employees in the state. The refundable tax

credit program to be established by this act would be administered by the commerce corporation.

     This act would take effect upon passage.

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