2020 -- S 2352

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LC003294

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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 -- DEFINITION OF CORPORATE NET INCOME

     

     Introduced By: Senator Samuel W. Bell

     Date Introduced: February 13, 2020

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Section 44-11-11 of the General Laws in Chapter 44-11 entitled "Business

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Corporation Tax" is hereby amended to read as follows:

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     44-11-11. "Net income" defined.

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     (a)(1) "Net income" means, for any taxable year and for any corporate taxpayer, the

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taxable income of the taxpayer for that taxable year under the laws of the United States, plus:

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     (i) Any interest not included in the taxable income;

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     (ii) Any specific exemptions;

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     (iii) The tax imposed by this chapter; and minus:

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     (iv) Interest on obligations of the United States or its possessions, and other interest

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exempt from taxation by this state; and

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     (v) The federal net operating loss deduction.

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     (2) All binding federal elections made by or on behalf of the taxpayer applicable either

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directly or indirectly to the determination of taxable income shall be binding on the taxpayer

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except where this chapter or its attendant regulations specifically modify or provide otherwise.

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Rhode Island taxable income shall not include the "gross-up of dividends" required by the federal

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Internal Revenue Code to be taken into taxable income in connection with the taxpayer's election

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of the foreign tax credit.

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     (b) A net operating loss deduction shall be allowed, which shall be the same as the net

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operating loss deduction allowed under 26 U.S.C. § 172, except that:

 

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     (1) Any net operating loss included in determining the deduction shall be adjusted to

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reflect the inclusions and exclusions from entire net income required by subsection (a) of this

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section and § 44-11-11.1;

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     (2) The deduction shall not include any net operating loss sustained during any taxable

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year in which the taxpayer was not subject to the tax imposed by this chapter; and

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     (3) The deduction shall not exceed the deduction for the taxable year allowable under 26

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U.S.C. § 172; provided, that the deduction for a taxable year may not be carried back to any other

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taxable year for Rhode Island purposes but shall only be allowable on a carry forward basis for

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the five (5) succeeding taxable years.

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     (c) "Domestic international sales corporations" (referred to as DISCs), for the purposes of

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this chapter, will be treated as they are under federal income tax law and shall not pay the amount

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of the tax computed under § 44-11-2(a). Any income to shareholders of DISCs is to be treated in

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the same manner as it is treated under federal income tax law as it exists on December 31, 1984.

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     (d) A corporation that qualifies as a "foreign sales corporation" (FSC) under the

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provisions of subchapter N, 26 U.S.C. § 861 et seq., and that has in effect for the entire taxable

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year a valid election under federal law to be treated as a FSC, shall not pay the amount of the tax

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computed under § 44-11-2(a). Any income to shareholders of FSCs is to be treated in the same

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manner as it is treated under federal income tax law as it exists on January 1, 1985.

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     (e) For purposes of a corporation's state tax liability, any deduction to income allowable

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under 26 U.S.C. § 1400Z-2(c) may be claimed in the case of any investment held by the taxpayer

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for at least seven years. The division of taxation shall promulgate, in its discretion, rules and

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regulations relative to the accelerated application of deductions under 26 U.S.C. § 1400Z-2(c).

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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 TAXATION -- DEFINITION OF CORPORATE NET INCOME

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     This act would repeal a state corporate income tax deduction to allowable income for

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federal tax purposes for investment property held for at least seven (7) years.

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     This act would take effect upon passage.

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