2020 -- H 7970

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LC005177

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2020

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A N   A C T

RELATING TO TAXATION -- LEVY AND ASSESSMENT OF LOCAL TAXES

     Introduced By: Representatives Ucci, Williams, Corvese, and Craven

     Date Introduced: March 05, 2020

     Referred To: House Municipal Government

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 44-5-3 and 44-5-12 of the General Laws in Chapter 44-5 entitled

"Levy and Assessment of Local Taxes" are hereby amended to read as follows:

     44-5-3. Ratable property of a city or town -- Definitions.

     (a) The ratable property of the city or town consists of the ratable real estate and the ratable

tangible personal property (which do not include manufacturer's manufacturing machinery and

equipment of a manufacturer) and the ratable tangible personal property of manufacturers

consisting of manufacturer's manufacturing machinery and equipment of a manufacturer.

     (b)(1) For the purposes of this section and §§ 44-5-20, 44-5-22, 44-5-38, and § 9 of chapter

245, public laws of Rhode Island, 1966, "manufacturing" includes the handling and storage of

manufacturer's inventories as defined in § 44-3-3(20)(ii).

     (2) "Manufacturer's machinery and equipment" or "manufacturing machinery and

equipment" is defined as:

     (i) Machinery and equipment which is used exclusively in the actual manufacture or

conversion of materials or goods in the process of manufacture by a manufacturer as defined in §

44-3-3(20) and machinery, fixtures, and equipment used exclusively by a manufacturer for research

and development or for quality assurance of its manufactured products; and

     (ii) Machinery and equipment which is partially used in the actual manufacture or

conversion of raw materials or goods in the process of manufacture by a manufacturer as defined

in § 44-3-3(20) and machinery, fixtures, and equipment used by a manufacturer for research and

development or for quality assurance of its manufactured products, to the extent to which the

machinery and equipment is used for the manufacturing processes, research, and development or

quality assurance. In the instances where machinery and equipment is used in both manufacturing

activities, the assessment on machinery and equipment is prorated by applying the percentage of

usage of the equipment for manufacturing, research, and development and quality assurance

activity to the value of the machinery and equipment for purposes of taxation, and the portion of

the value used for manufacturing, research, and development and quality assurance is exempt from

taxation. The burden of demonstrating this percentage usage of machinery and equipment for

manufacturing and for research and development and/or quality assurance of its manufactured

products rests with the manufacturer.

     (3) This definition of "manufacturing" or "manufacturer's machinery and equipment" does

not include:

     (i) Motor vehicles required by law to be registered with the division of motor vehicles;

     (ii) Store fixtures and other equipment situated in or upon a retail store or other similar

selling place operated by a manufacturer, whether or not the retail establishment store or other

similar selling place is located in the same building in which the manufacturer operates his or her

manufacturing plant; and

     (iii) Fixtures or other equipment situated in or upon premises used to conduct a business

which is unrelated to the manufacture of finished products for trade and their sale by the

manufacturer of the products, whether or not the premises where the unrelated business is

conducted is in the same building in which the manufacturer has his or her manufacturing plant.

The levy on tangible personal property of manufacturers consisting of manufacturer's

manufacturing machinery and equipment of a manufacturer is at the rate provided in § 44-5-38.

     (c) Notwithstanding any exemption provided by this section, and except for the exemptions

created by §§ 44-3-3(a)(22), 44-3-3(a)(48) and 44-3-3(a)(49), which exemptions shall remain

intact, cities and towns may, by ordinance or resolution, tax any renewable energy resources, as

defined in § 39-26-5, and associated equipment only pursuant to rules and regulations that will be

established by the office of energy resources in consultation with the division of taxation after the

rules are adopted, no later than November 30, 2016. The rules will provide consistent and

foreseeable tax treatment of renewable energy to facilitate and promote installation of grid-

connected generation of renewable energy and shall consider the following criteria in adopting

appropriate and reasonable, tangible property tax rates for commercial renewable energy systems:

     (1) State policy objectives to promote renewable energy development;

     (2) Tax agreements between municipalities and renewable energy developers executed and

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effective after 2011, including net metering or lease agreements that address tax treatment;

     (3) The valuation of local property tax in the ceiling prices set for the distributed-generation

standard contract or renewable-energy-growth programs by the distributed-generation board;

     (4) Assessment practices used by Rhode Island municipal property tax assessors; and

     (5) Five dollars ($5.00) per kilowatt of nameplate capacity and the average kilowatt value

of the tax agreements and associated payments executed between municipalities and renewable-

energy developers between 2011 and 2016 shall be the benchmarks for consideration of reasonable

revenue generated by a city or town from renewable-energy facilities provided that evidence to the

contrary may be incorporated in final rules and regulations; and

     (6) Cities and towns may only assess a tax on the real property upon which a renewable

energy resource is located pursuant to § 44-5-12 (a)(5) and § 44-27-10.1(b), as applicable.

     (d) The dollar amount adopted through the rules and regulations that municipalities will be

required to use for commercial renewable-energy systems shall be based on the alternating current

(AC) nameplate capacity of the renewable-energy resource.

     (e) Any renewable-energy resource projects that have executed interconnection service

agreements with the electric-distribution company as of December 31, 2016, shall not be subject to

the rules developed under subsection (c) and shall maintain the tax status applicable before the rules

are adopted, unless otherwise agreed pursuant to § 44-3-9(a).

     44-5-12. Assessment at full and fair cash value.

     (a) All real property subject to taxation shall be assessed at its full and fair cash value, or

at a uniform percentage of its value, not to exceed one hundred percent (100%), to be determined

by the assessors in each town or city; provided, that:

     (1) Any residential property encumbered by a covenant recorded in the land records in

favor of a governmental unit or Rhode Island housing and mortgage finance corporation restricting

either or both the rents that may be charged or the incomes of the occupants shall be assessed and

taxed in accordance with § 44-5-13.11;

     (2) In assessing real estate that is classified as farm land, forest, or open space land in

accordance with chapter 27 of this title, the assessors shall consider no factors in determining the

full and fair cash value of the real estate other than those that relate to that use without regard to

neighborhood land use of a more intensive nature;

     (3) Warwick. The city council of the city of Warwick is authorized to provide, by

ordinance, that the owner of any dwelling of one to three (3) family units in the city of Warwick

who makes any improvements or additions on his or her principal place of residence in the amount

up to fifteen thousand dollars ($15,000), as may be determined by the tax assessor of the city of

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Warwick, is exempt from reassessment of property taxes on the improvement or addition until the

next general citywide reevaluation of property values by the tax assessor. For the purposes of this

section, "residence" is defined as voting address. This exemption does not apply to any commercial

structure. The property owner shall supply all necessary plans to the building official for the

improvements or addition and shall pay all requisite building and other permitting fees as now are

required by law; and

     (4) Central Falls. The city council of the city of Central Falls is authorized to provide, by

ordinance, that the owner of any dwelling of one to eight (8) units who makes any improvements

or additions to his or her residential or rental property in an amount not to exceed twenty-five

thousand dollars ($25,000), as determined by the tax assessor of the city of Central Falls, is exempt

from reassessment of property taxes on the improvement or addition until the next general citywide

reevaluation of property values by the tax assessor. The property owner shall supply all necessary

plans to the building official for the improvements or additions and shall pay all requisite building

and other permitting fees as are now required by law.

     (5) Tangible property shall be assessed according to the asset classification table as defined

in § 44-5-12.1. Renewable energy resources shall only be taxed as tangible property under § 44-5-

3(c) and the real property on which they are located shall not be reclassified, revalued or reassessed

due to the presence of renewable energy resources, excepting only reclassification of farmland as

addressed in § 44-27-10.1.

     (6) Provided, however, that, for taxes levied after December 31, 2015, new construction on

development property is exempt from the assessment of taxes under this chapter at the full and fair

cash value of the improvements, as long as:

     (i) An owner of development property files an affidavit claiming the exemption with the

local tax assessor by December 31 each year; and

     (ii) The assessor shall then determine if the real property on which new construction is

located is development property. If the real property is development property, the assessor shall

exempt the new construction located on that development property from the collection of taxes on

improvements, until such time as the real property no longer qualifies as development property, as

defined herein.

     For the purposes of this section, "development property" means: (A) Real property on

which a single-family residential dwelling or residential condominium is situated and said single-

family residential dwelling or residential condominium unit is not occupied, has never been

occupied, is not under contract, and is on the market for sale; or (B) Improvements and/or

rehabilitation of single-family residential dwellings or residential condominiums that the owner of

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such development property purchased out of a foreclosure sale, auction, or from a bank, and which

property is not occupied. Such property described in § 44-5-12(a)(6)(ii) shall continue to be taxed

at the assessed value at the time of purchase until such time as such property is sold or occupied

and no longer qualifies as development property. As to residential condominiums, this exemption

shall not affect taxes on the common areas and facilities as set forth in § 34-36-27. In no

circumstance shall such designation as development property extend beyond two (2) tax years and

a qualification as a development property shall only apply to property that applies for, or receives,

construction permits after July 1, 2015. Further, the exemptions set forth in this section shall not

apply to land.

     The exemptions set forth in this subsection (a)(6) for development property shall expire as

of December 31, 2021.

     (b) Municipalities shall make available to every land owner whose property is taxed under

the provisions of this section a document that may be signed before a notary public containing

language to the effect that they are aware of the additional taxes imposed by the provisions of § 44-

5-39 in the event that they use land classified as farm, forest, or open space land for another purpose.

     (c) Pursuant to the provisions of § 44-3-29.1, all wholesale and retail inventory subject to

taxation is assessed at its full and fair cash value, or at a uniform percentage of its value, not to

exceed one hundred percent (100%), for fiscal year 1999, by the assessors in each town and city.

Once the fiscal year 1999 value of the inventory has been assessed, this value shall not increase.

The phase-out rate schedule established in § 44-3-29.1(d) applies to this fixed value in each year

of the phase out.

     SECTION 2. Section 44-27-10.1 of the General Laws in Chapter 44-27 entitled "Taxation

of Farm, Forest, and Open Space Land" is hereby amended to read as follows:

     44-27-10.1. Land withdrawn from classification for commercial renewable-energy

production -- Effect on obligation and the land use change tax.

     (a) Farmlands classified in the farm, forest, or open-space program in chapter 27 of title 44

shall not be subject to a land use change tax if the landowner converts no more than twenty percent

(20%) of the total acreage of land that is actively devoted to agricultural or horticultural use to

install a renewable-energy system. Any acreage used for a renewable-energy system that is

designated for dual use under subsection (c) of this section shall not be included in the calculation

of the twenty percent (20%) restriction. For purposes of this section, land that is actively devoted

to agricultural or horticultural use shall be defined by rules and regulations established by the

department of environmental management in consultation with the office of energy resources and

shall include, at a minimum, any land that is actively devoted to agricultural or horticultural use

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that was previously used to install a renewable-energy system. Those rules shall also define

renewable-energy system to include, at a minimum, any buffers, access roads, and other supporting

infrastructure associated with the generation of renewable energy.

     (b) The tax assessor shall only withdraw from farmland classification the actual acreage of

the farmland used for a renewable-energy system that is not concurrently used as farmland. The

rest of the farmland shall remain eligible as long as it still meets the program qualification criteria.

This reclassification of farmlands shall not be considered an exception to the tax treatment for

renewable-energy systems prescribed by § 44-5-3(c) and reclassified farmland shall only be

reclassified, revalued and taxed to the classification and tax that predated the farmland

classification.

     (c) The dual purpose designation for installing a renewable-energy system and utilizing the

land below and surrounding the system for agriculture purposes, shall be determined pursuant to

rules and regulations that will be established by the department of environmental management in

consultation with the office of energy resources. The regulations shall be adopted no later than

December 30, 2017.

     SECTION 3. This act shall take effect upon passage and shall apply retroactively.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION -- LEVY AND ASSESSMENT OF LOCAL TAXES

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     This act would require cities and towns to assess renewable energy resources to be taxed

as tangible property and the real property on which it is located shall not be reclassified, revalued

or reassessed, except farmland, which shall be reclassified, revalued and taxed at the predated

farmland classification.

     This act would take effect upon passage and would apply retroactively.

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