2020 -- S 2200 | |
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LC003124 | |
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STATE OF RHODE ISLAND | |
IN GENERAL ASSEMBLY | |
JANUARY SESSION, A.D. 2020 | |
____________ | |
A N A C T | |
RELATING TO STATE AFFAIRS AND GOVERNMENT -- REBUILD RHODE ISLAND | |
TAX CREDIT | |
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Introduced By: Senators Crowley, Nesselbush, Conley, and Cano | |
Date Introduced: February 04, 2020 | |
Referred To: Senate Finance | |
It is enacted by the General Assembly as follows: | |
1 | SECTION 1. Sections 42-64.20-3 and 42-64.20-5 of the General Laws in Chapter 42- |
2 | 64.20 entitled "Rebuild Rhode Island Tax Credit" are hereby amended to read as follows: |
3 | 42-64.20-3. Definitions. |
4 | As used in this chapter: |
5 | (1) "Adaptive reuse" means the conversion of an existing structure from the use for which |
6 | it was constructed to a new use by maintaining elements of the structure and adapting such |
7 | elements to a new use. |
8 | (2) "Affiliate" means an entity that directly or indirectly controls, is under common |
9 | control with, or is controlled by the business. Control exists in all cases in which the entity is a |
10 | member of a controlled group of corporations as defined pursuant to § 1563 of the Internal |
11 | Revenue Code of 1986 (26 U.S.C. § 1563) or the entity is an organization in a group of |
12 | organizations under common control as defined pursuant to subsection (b) or (c) of § 414 of the |
13 | Internal Revenue Code of 1986 (26 U.S.C. § 414). A taxpayer may establish by clear and |
14 | convincing evidence, as determined by the tax administrator, that control exists in situations |
15 | involving lesser percentages of ownership than required by those statutes. An affiliate of a |
16 | business may contribute to meeting either the capital investment or full-time employee |
17 | requirements of a business that applies for a credit under this chapter. |
18 | (3) "Affordable housing" means housing for sale or rent with combined rental costs or |
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1 | combined mortgage loan debt service, property taxes, and required insurance that do not exceed |
2 | thirty percent (30%) of the gross annual income of a household earning up to eighty percent |
3 | (80%) of the area median income, as defined annually by the United States Department of |
4 | Housing and Urban Development. |
5 | (4) "Applicant" means a developer applying for a rebuild Rhode Island tax credit under |
6 | this chapter. |
7 | (5) "Business" means a corporation as defined in § 44-11-1(4), or a partnership, an S |
8 | corporation, a non-profit corporation, a sole proprietorship, or a limited-liability corporation. A |
9 | business shall include an affiliate of the business if that business applies for a credit based upon |
10 | any capital investment made by an affiliate. |
11 | (6) "Capital investment" in a real estate project means expenses by a developer incurred |
12 | after application for: |
13 | (i) Site preparation and construction, repair, renovation, improvement, equipping, or |
14 | furnishing on real property or of a building, structure, facility, or improvement to real property; |
15 | (ii) Obtaining and installing furnishings and machinery, apparatus, or equipment, |
16 | including but not limited to, material goods for the operation of a business on real property or in a |
17 | building, structure, facility, or improvement to real property. |
18 | In addition to the foregoing, if a developer acquires or leases a qualified development |
19 | project, the capital investment made or acquired by the seller or owner, as the case may be, if |
20 | pertaining primarily to the premises of the qualified development project, shall be considered a |
21 | capital investment by the developer and, if pertaining generally to the qualified development |
22 | project being acquired or leased, shall be allocated to the premises of the qualified development |
23 | project on the basis of the gross leasable area of the premises in relation to the total gross leasable |
24 | area in the qualified development project. The capital investment described herein shall be |
25 | defined through rules and regulations promulgated by the commerce corporation. |
26 | (7) "Certified historic structure" means a property located in the state of Rhode Island and |
27 | is |
28 | (i) Listed individually on the national register of historic places; or |
29 | (ii) Listed individually in the state register of historic places; or |
30 | (iii) Located in a registered historic district and certified by either the Rhode Island |
31 | historical preservation and heritage commission created pursuant to § 42-45-2 or the Secretary of |
32 | the Interior as being of historic significance to the district. |
33 | (8) "Commerce corporation" means the Rhode Island commerce corporation established |
34 | pursuant to § 42-64-1 et seq. |
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1 | (9) "Commercial" shall mean non-residential development. |
2 | (10) "Developer" means a person, firm, business, partnership, association, political |
3 | subdivision, or other entity that proposes to divide, divides, or causes to be divided real property |
4 | into a subdivision or proposes to build or builds a building or buildings or otherwise improves |
5 | land or existing structures, which division, building, or improvement qualifies for benefits under |
6 | this chapter. |
7 | (11) "Development" means the improvement of land through the carrying out of building, |
8 | engineering, or other operations in, on, over, or under land, or the making of any material change |
9 | in the use of any buildings or land for the purposes of accommodating land uses. |
10 | (12) "Eligibility period" means the period in which a developer may claim a tax credit |
11 | under this act, beginning with the tax period in which the commerce corporation accepts |
12 | certification from the developer that it has met the requirements of the act and extending |
13 | thereafter for a term of five (5) years. |
14 | (13) "Full-time employee" means a person who is employed by a business for |
15 | consideration for a minimum of at least thirty-five (35) hours per week, or who renders any other |
16 | standard of service generally accepted by custom or practice as full-time employment, or who is |
17 | employed by a professional employer organization pursuant to an employee leasing agreement |
18 | between the business and the professional employer organization for a minimum of thirty-five |
19 | (35) hours per week, or who renders any other standard of service generally accepted by custom |
20 | or practice as full-time employment, and whose wages are subject to withholding. |
21 | (14) "Hope community" means a municipality for which the five-year (5) average |
22 | percentage of families with income below the federal poverty level exceeds the state five-year (5) |
23 | average percentage, both as most recently reported by the U.S. Department of Commerce, Bureau |
24 | of the Census. |
25 | (15) "Manufacturer" shall mean any entity that: |
26 | (i) Uses any premises within the state primarily for the purpose of transforming raw |
27 | materials into a finished product for trade through any or all of the following operations: |
28 | adapting, altering, finishing, making, processing, refining, metalworking, and ornamenting, but |
29 | shall not include fabricating processes incidental to warehousing or distribution of raw materials, |
30 | such as alteration of stock for the convenience of a customer; or |
31 | (ii) Is described in codes 31-33 of the North American Industry Classification System, as |
32 | revised from time to time. |
33 | (16) "Mixed use" means a development comprising both commercial and residential |
34 | components. |
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1 | (17) "Partnership" means an entity classified as a partnership for federal income tax |
2 | purposes. |
3 | (18) "Placed in service" means the earlier of (i) Substantial construction or rehabilitation |
4 | work has been completed that would allow for occupancy of an entire structure or some |
5 | identifiable portion of a structure, as established in the application approved by the commerce |
6 | corporation board or (ii) Receipt by the developer of a certificate, permit, or other authorization |
7 | allowing for occupancy of the project or some identifiable portion of the project by the municipal |
8 | authority having jurisdiction. |
9 | (19) "Pawtucket-Central Falls station redevelopment district" means the area in the city |
10 | of Pawtucket beginning at the point of intersection of Lonsdale Avenue and Rand Street, turning |
11 | south on Lonsdale Avenue until Beecher Street, then heading east, then south, then east on |
12 | Beecher Street to Coleman Street, then turning south onto Coleman Street to Carpenter Street, |
13 | then heading east onto Carpenter Street to Conant Street, then turning south onto Conant Street to |
14 | Weeden Street, turning west onto Weeden Street to Coleman Street, then turning south onto |
15 | Coleman Street to Centre Street, then turning east onto Centre Street to Conant Street, then |
16 | turning south onto Conant Street to Mineral Spring Avenue, then turning east onto Mineral |
17 | Spring Avenue to Church Street, continuing east onto Church Street to Park Place West, turning |
18 | north onto Park Place West to Dexter Street, continuing north onto Dexter Street to Cross Street, |
19 | then turning west onto Cross Street to Pine Street, then turning north onto Pine Street to Rand |
20 | Street, then turning west onto Rand Street to Lonsdale Avenue. In the City of Central Falls it |
21 | means the area beginning at the point of intersection of Dexter Street and the Central Falls- |
22 | Pawtucket city line, then following the Central Falls-Pawtucket city line to Clay Street, then |
23 | turning east onto Clay Street to Hawes Street, then turning north onto Hawes Street to Cross |
24 | Street, then turning west onto Cross Street to Pine Street, then turning north onto Pine Street to |
25 | Knight Street, then turning east onto Knight Street to Dexter Street, then turning north onto |
26 | Dexter Street to Central Street, then turning west onto Central Street to Pine Street, then turning |
27 | north onto Pine Street to Rand Street, then turning east onto Rand Street to Dexter Street, then |
28 | turning north onto Dexter Street to Mowry Street, then turning west onto Mowry Street to Pine |
29 | Street, then turning south onto Pine Street to Rand Street, then turning west onto Rand Street to |
30 | Lonsdale Avenue, then turning south onto Lonsdale Avenue to the Central Falls-Pawtucket city |
31 | line, then following the Central Falls-Pawtucket city line east to Dexter Street. |
32 | (19)(20) "Project" means qualified development project as defined under subsection |
33 | (23)(24). |
34 | (20)(21) "Project area" means land or lands under common ownership or control in which |
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1 | a qualified development project is located. |
2 | (21)(22) "Project cost" means the costs incurred in connection with the qualified |
3 | development project or qualified residential or mixed use project by the applicant until the |
4 | issuance of a permanent certificate of occupancy, or until such other time specified by the |
5 | commerce corporation, for a specific investment or improvement, as defined through rules and |
6 | regulations promulgated by the commerce corporation. |
7 | (22)(23) "Project financing gap" means: |
8 | (i) The part of the total project cost that remains to be financed after all other sources of |
9 | capital have been accounted for (the sources will include, but not be limited to, developer- |
10 | contributed capital), which shall be defined through rules and regulations promulgated by the |
11 | commerce corporation; or |
12 | (ii) The amount of funds that the state may invest in a project to gain a competitive |
13 | advantage over a viable and comparable location in another state by means described in this |
14 | chapter. |
15 | (23)(24) "Qualified development project" means a specific construction project or |
16 | improvement, including lands, buildings, improvements, real and personal property or any |
17 | interest therein, including lands under water, riparian rights, space rights and air rights, acquired, |
18 | owned, leased, developed or redeveloped, constructed, reconstructed, rehabilitated or improved, |
19 | undertaken by a developer, owner or tenant, or both, within a specific geographic area, meeting |
20 | the requirements of this chapter, as set forth in an application made to the commerce corporation. |
21 | (24)(25) "Recognized historical structure" means a property located in the state of Rhode |
22 | Island and commonly considered to be of historic or cultural significance as determined by the |
23 | commerce corporation in consultation with the state historic preservation officer. |
24 | (25)(26) "Residential" means a development of residential dwelling units. |
25 | (26)(27) "Targeted industry" means any advanced, promising, or otherwise prioritized |
26 | industry identified in the economic development vision and policy promulgated pursuant to § 42- |
27 | 64.17-1 or, until such time as any such economic development vision and policy is promulgated, |
28 | as identified by the commerce corporation. |
29 | (27)(28) "Transit-oriented development area" means an area in proximity to transit |
30 | infrastructure that will be further defined by regulation of the commerce corporation in |
31 | consultation with the Rhode Island department of transportation. |
32 | (28)(29) "Workforce housing" means housing for sale or rent with combined rental costs |
33 | or combined mortgage loan debt service, property taxes, and required insurance that do not |
34 | exceed thirty percent (30%) of the gross annual income of a household earning between eighty |
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1 | percent (80%) and one hundred and forty percent (140%) of the area median income, as defined |
2 | annually by the United States Department of Housing and Urban Development. |
3 | 42-64.20-5. Tax credits. |
4 | (a) An applicant meeting the requirements of this chapter may be allowed a credit as set |
5 | forth hereinafter against taxes imposed upon such person under applicable provisions of title 44 |
6 | of the general laws for a qualified development project. |
7 | (b) To be eligible as a qualified development project entitled to tax credits, an applicant's |
8 | chief executive officer or equivalent officer shall demonstrate to the commerce corporation, at the |
9 | time of application, that: |
10 | (1) The applicant has committed a capital investment or owner equity of not less than |
11 | twenty percent (20%) of the total project cost; |
12 | (2) There is a project financing gap in which after taking into account all available private |
13 | and public funding sources, the project is not likely to be accomplished by private enterprise |
14 | without the tax credits described in this chapter; and |
15 | (3) The project fulfills the state's policy and planning objectives and priorities in that: |
16 | (i) The applicant will, at the discretion of the commerce corporation, obtain a tax |
17 | stabilization agreement from the municipality in which the real estate project is located on such |
18 | terms as the commerce corporation deems acceptable; |
19 | (ii) It (A) Is a commercial development consisting of at least 25,000 square feet occupied |
20 | by at least one business employing at least 25 full-time employees after construction or such |
21 | additional full-time employees as the commerce corporation may determine; (B) Is a multi-family |
22 | residential development in a new, adaptive reuse, certified historic structure, or recognized |
23 | historical structure consisting of at least 20,000 square feet and having at least 20 residential units |
24 | in a hope community; or (C) Is a mixed-use development in a new, adaptive reuse, certified |
25 | historic structure, or recognized historical structure consisting of at least 25,000 square feet |
26 | occupied by at least one business, subject to further definition through rules and regulations |
27 | promulgated by the commerce corporation; and |
28 | (iii) Involves a total project cost of not less than $5,000,000, except for a qualified |
29 | development project located in a hope community or redevelopment area designated under § 45- |
30 | 32-4 in which event the commerce corporation shall have the discretion to modify the minimum |
31 | project cost requirement. |
32 | (c) The commerce corporation shall develop separate, streamlined application processes |
33 | for the issuance of rebuild RI tax credits for each of the following: |
34 | (1) Qualified development projects that involve certified historic structures; |
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1 | (2) Qualified development projects that involve recognized historical structures; |
2 | (3) Qualified development projects that involve at least one manufacturer; and |
3 | (4) Qualified development projects that include affordable housing or workforce housing. |
4 | (d) Applications made for a historic structure or recognized historic structure tax credit |
5 | under chapter 33.6 of title 44 shall be considered for tax credits under this chapter. The division |
6 | of taxation, at the expense of the commerce corporation, shall provide communications from the |
7 | commerce corporation to those who have applied for and are in the queue awaiting the offer of |
8 | tax credits pursuant to chapter 33.6 of title 44 regarding their potential eligibility for the rebuild |
9 | RI tax credit program. |
10 | (e) Applicants (1) Who have received the notice referenced in subsection (d) above and |
11 | who may be eligible for a tax credit pursuant to chapter 33.6 of title 44, (2) Whose application |
12 | involves a certified historic structure or recognized historical structure, or (3) Whose project is |
13 | occupied by at least one manufacturer shall be exempt from the requirements of subsections |
14 | (b)(3)(ii) and (b)(3)(iii). The following procedure shall apply to such applicants: |
15 | (i) The division of taxation shall remain responsible for determining the eligibility of an |
16 | applicant for tax credits awarded under chapter 33.6 of title 44; |
17 | (ii) The commerce corporation shall retain sole authority for determining the eligibility of |
18 | an applicant for tax credits awarded under this chapter; and |
19 | (iii) The commerce corporation shall not award in excess of fifteen percent (15%) of the |
20 | annual amount authorized in any fiscal year to applicants seeking tax credits pursuant to this |
21 | subsection (e). |
22 | (f) Maximum project credit. |
23 | (1) For qualified development projects, the maximum tax credit allowed under this |
24 | chapter shall be the lesser of (i) Thirty percent (30%) of the total project cost; or (ii) The amount |
25 | needed to close a project financing gap (after taking into account all other private and public |
26 | funding sources available to the project), as determined by the commerce corporation. |
27 | (2) The credit allowed pursuant to this chapter, inclusive of any sales and use tax |
28 | exemptions allowed pursuant to this chapter, shall not exceed fifteen million dollars |
29 | ($15,000,000) for any qualified development project under this chapter; except as provided in |
30 | subsection (f)(3) of this section; provided however, any qualified development project that |
31 | exceeds the project cap upon passage of this act shall be deemed not to exceed the cap, shall not |
32 | be reduced, nor shall it be further increased. No building or qualified development project to be |
33 | completed in phases or in multiple projects shall exceed the maximum project credit of fifteen |
34 | million dollars ($15,000,000) for all phases or projects involved in the rehabilitation of the |
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1 | building. Provided, however, that for purposes of this subsection and no more than once in a |
2 | given fiscal year, the commerce corporation may consider the development of land and buildings |
3 | by a developer on the "I-195 land" as defined in § 42-64.24-3(6) as a separate, qualified |
4 | development project from a qualified development project by a tenant or owner of a commercial |
5 | condominium or similar legal interest including leasehold improvement, fit out, and capital |
6 | investment. Such qualified development project by a tenant or owner of a commercial |
7 | condominium or similar legal interest on the I-195 land may be exempted from subsection |
8 | (f)(1)(i) of this section. |
9 | (3) The credit allowed pursuant to this chapter, inclusive of any sales and use tax |
10 | exemptions allowed pursuant to this chapter, shall not exceed twenty-five million dollars |
11 | ($25,000,000) for the project for which the I-195 redevelopment district was authorized to enter |
12 | into a purchase and sale agreement for parcels 42 and P4 on December 19, 2018, provided that |
13 | project is approved for credits pursuant to this chapter by the commerce corporation. |
14 | (g) Credits available under this chapter shall not exceed twenty percent (20%) of the |
15 | project cost, provided, however, that the applicant shall be eligible for additional tax credits of not |
16 | more than ten percent (10%) of the project cost, if the qualified development project meets any of |
17 | the following criteria or other additional criteria determined by the commerce corporation from |
18 | time to time in response to evolving economic or market conditions: |
19 | (1) The project includes adaptive reuse or development of a recognized historical |
20 | structure; |
21 | (2) The project is undertaken by or for a targeted industry; |
22 | (3) The project is located in a transit-oriented development area. Notwithstanding the |
23 | provisions of any general or special law to the contrary, applicants applying for tax credits for |
24 | projects located in a transit-oriented development area located in the Pawtucket-Central Falls |
25 | station redevelopment district shall be eligible for credits not exceeding fifty percent (50%) of the |
26 | project cost; |
27 | (4) The project includes residential development of which at least twenty percent (20%) |
28 | of the residential units are designated as affordable housing or workforce housing; |
29 | (5) The project includes the adaptive reuse of property subject to the requirements of the |
30 | industrial property remediation and reuse act, § 23-19.14-1 et seq.; or |
31 | (6) The project includes commercial facilities constructed in accordance with the |
32 | minimum environmental and sustainability standards, as certified by the commerce corporation |
33 | pursuant to Leadership in Energy and Environmental Design or other equivalent standards. |
34 | (h) Maximum aggregate credits. The aggregate sum authorized pursuant to this chapter, |
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1 | inclusive of any sales and use tax exemptions allowed pursuant to this chapter, shall not exceed |
2 | two hundred ten million dollars ($210,000,000), excluding any tax credits allowed pursuant to |
3 | subsection (f)(3) of this section. |
4 | (i) Tax credits shall not be allowed under this chapter prior to the taxable year in which |
5 | the project is placed in service. |
6 | (j) The amount of a tax credit allowed under this chapter shall be allowable to the |
7 | taxpayer in up to five, annual increments; no more than thirty percent (30%) and no less than |
8 | fifteen percent (15%) of the total credits allowed to a taxpayer under this chapter may be |
9 | allowable for any taxable year. |
10 | (k) If the portion of the tax credit allowed under this chapter exceeds the taxpayer's total |
11 | tax liability for the year in which the relevant portion of the credit is allowed, the amount that |
12 | exceeds the taxpayer's tax liability may be carried forward for credit against the taxes imposed for |
13 | the succeeding four (4) years, or until the full credit is used, whichever occurs first. Credits |
14 | allowed to a partnership, a limited-liability company taxed as a partnership, or multiple owners of |
15 | property shall be passed through to the persons designated as partners, members, or owners |
16 | respectively pro rata or pursuant to an executed agreement among persons designated as partners, |
17 | members, or owners documenting an alternate distribution method without regard to their sharing |
18 | of other tax or economic attributes of such entity. |
19 | (l) The commerce corporation, in consultation with the division of taxation, shall |
20 | establish, by regulation, the process for the assignment, transfer, or conveyance of tax credits. |
21 | (m) For purposes of this chapter, any assignment or sales proceeds received by the |
22 | taxpayer for its assignment or sale of the tax credits allowed pursuant to this section shall be |
23 | exempt from taxation under title 44. If a tax credit is subsequently revoked or adjusted, the |
24 | seller's tax calculation for the year of revocation or adjustment shall be increased by the total |
25 | amount of the sales proceeds, without proration, as a modification under chapter 30 of title 44. In |
26 | the event that the seller is not a natural person, the seller's tax calculation under chapter 11, 13, |
27 | 14, or 17 of title 44, as applicable, for the year of revocation, or adjustment, shall be increased by |
28 | including the total amount of the sales proceeds without proration. |
29 | (n) The tax credit allowed under this chapter may be used as a credit against corporate |
30 | income taxes imposed under chapter 11, 13, 14, or 17, of title 44, or may be used as a credit |
31 | against personal income taxes imposed under chapter 30 of title 44 for owners of pass-through |
32 | entities such as a partnership, a limited-liability company taxed as a partnership, or multiple |
33 | owners of property. |
34 | (o) In the case of a corporation, this credit is only allowed against the tax of a corporation |
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1 | included in a consolidated return that qualifies for the credit and not against the tax of other |
2 | corporations that may join in the filing of a consolidated tax return. |
3 | (p) Upon request of a taxpayer and subject to annual appropriation, the state shall redeem |
4 | this credit, in whole or in part, for ninety percent (90%) of the value of the tax credit. The division |
5 | of taxation, in consultation with the commerce corporation, shall establish by regulation a |
6 | redemption process for tax credits. |
7 | (q) Projects eligible to receive a tax credit under this chapter may, at the discretion of the |
8 | commerce corporation, be exempt from sales and use taxes imposed on the purchase of the |
9 | following classes of personal property only to the extent utilized directly and exclusively in the |
10 | project: (1) Furniture, fixtures, and equipment, except automobiles, trucks, or other motor |
11 | vehicles; or (2) Other materials, including construction materials and supplies, that are |
12 | depreciable and have a useful life of one year or more and are essential to the project. |
13 | (r) The commerce corporation shall promulgate rules and regulations for the |
14 | administration and certification of additional tax credit under subsection (e), including criteria for |
15 | the eligibility, evaluation, prioritization, and approval of projects that qualify for such additional |
16 | tax credit. |
17 | (s) The commerce corporation shall not have any obligation to make any award or grant |
18 | any benefits under this chapter. |
19 | 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 | |
*** | |
1 | This act would amend certain provisions of the "Rebuild Rhode Island Tax Credit Act", |
2 | and would create the Pawtucket-Central Falls station redevelopment district with a metes and |
3 | bounds description. The act would also provide that tax credits may be available for certain |
4 | projects located in the transit-oriented development area located in the Pawtucket-Central Falls |
5 | station redevelopment district for an amount not to exceed fifty percent (50%) of the project cost. |
6 | This act would take effect upon passage. |
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