Chapter 333
2004 -- H 8693
SUBSTITUTE A
Enacted 07/02/04
A N A C T
RELATING
TO JOBS DEVELOPMENT
Introduced
By: Representative Steven M. Costantino
Date
Introduced: June 23, 2004
It
is enacted by the General Assembly as follows:
SECTION
1. Sections 42-64.5-2, 44-64.5-3, 44-64.5-4 and 44-64.5-5 of the General
Laws
in Chapter 42-64.5 entitled "Jobs Development Act" are hereby amended
to read as
follows:
42-64.5-2.
Definitions. -- As used in this chapter, unless the context clearly
indicates
otherwise:
(1) "Adjusted current employment" means, for any taxable year ending
on or after July 1,
1995,
the aggregate of the average daily number of full-time equivalent active
employees
employed
within the State by an eligible company and its eligible subsidiaries during
each taxable
year.
(2) "Affiliated entity" means any corporation owned or controlled by
the same persons or
shareholders
who own or control an eligible company.
(3) "Base employment" means, except as otherwise provided in
section 42-64.5-7, the
aggregate
number of full-time equivalent active employees employed within the State by an
eligible
company and its eligible subsidiaries on July 1, 1994, or at the election of
the eligible
company,
on an alternative date as provided by section 42-64.5-5. In the case of a
manufacturing
company
which is ruined by disaster, the aggregate number of full time equivalent
active
employees
employed at the destroyed facility would be zero, under which circumstance the
base
year employment date
shall be July 1 of the calendar year in which the disaster occurred.
Only
one
base employment period can be elected for purposes of a rate reduction by an
eligible
company.
(4) "Disaster" means an occurrence, natural or otherwise, which
results in the destruction
of
sixty percent (60%) or more of an operating manufacturing business facility in
this state,
thereby
making the production of products by the eligible company impossible and as a
result
active
employees of the facility are without employment in that facility. However,
disaster does
not
include any damage resulting from the willful act of the owner(s) of the
manufacturing
business
facility.
(5) "Eligible subsidiary" means each corporation 80% or more of the
outstanding
common
stock of which is owned by an eligible company.
(6) "Eligible company" means any 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, manufacturing company, telecommunications company or
surety
company or an eligible subsidiary of any of the foregoing. An eligible company
does not
have
to be in existence, be qualified to do business in the state or have any
employees in this state
at
the time its base employment is determined.
(7) "Full time equivalent active employee" means any employee of an
eligible company
who:
(1) works a minimum of 30 hours per week within the State, or two (2) or more
part-time
employees
whose combined weekly hours equal or exceed 30 hours per week within the State;
and
(2) earns no less than 150% of the hourly minimum wage prescribed by Rhode
Island law;
provided,
however, for tax years ending after the later of July 1, 2003 and the first tax
year that an
eligible
company qualifies for a rate reduction pursuant to section 42-64.5-3, for
purposes of this
section,
one hundred fifty percent (150%) of the hourly minimum wage prescribed by Rhode
Island
law shall mean one hundred fifty percent (150%) of the hourly minimum wage
prescribed
by
Rhode Island law at (a) the time the employee was first treated as a full-time
equivalent active
employee
during a tax year that the eligible company qualified for a rate reduction
pursuant to
section
42-64.5-3, or, if later, (b) the time the employee first earned at least one
hundred fifty
percent
(150%) of the hourly minimum wage prescribed by Rhode Island law as an employee
of
the
eligible company.
(8) "New employment" means for each taxable year the amount of
adjusted current
employment
for each taxable year minus the amount of base employment, but in no event less
than
zero; provided, however, no eligible company is permitted to transfer, assign
or hire
employees
who are already employed within the State by such eligible company from itself
or
any
affiliated entity or utilize any other artifice or device for the purpose of
artificially creating
new
employees in order to qualify for the rate reduction provided for in this
chapter. Except as
provided
in section 42-64.5-7,
"new employment" shall not include employees already employed
in
this state who become employees of an eligible company as a result of an
acquisition of an
existing
company by purchase, merger, or otherwise, if the existing company was eligible
for a
rate
reduction. In the case of a manufacturing company that suffers a disaster it
shall mean any
employment
retained or added as the result of reconstruction of the manufacturing
facility.
(9) "Rate reduction" means the reduction in tax rate specified in
section 42-64.5-4.
(10) "Small business concern" means, except as otherwise provided
in section 42-64.5-7,
any
eligible company which has a base employment level of less than one hundred
(100);
provided,
however, that a telecommunications company may not qualify as a small business
concern.
(11) "State" means the State of Rhode Island and Providence
Plantations.
(12) "Units of new employment" means: (i) for eligible companies
which are not small
business
concerns, the amount of new employment divided by fifty (50), rounded down to
the
nearest
multiple of fifty (50), and (ii) for eligible companies which are small
business concerns
the
amount of new employment divided by ten (10), rounded down to the nearest
multiple of ten
(10);
provided, however, that an eligible company (other than an eligible company
that is a
telecommunications
company) with adjusted current employment of one hundred (100) or more
employees
in its first year of operation or in any other period following the date its
base
employment
is determined shall determine its units of new employment by dividing the first
one
hundred
(100) employees less its base employment by ten (10), rounded down to the
nearest
multiple
of ten (10), and by dividing the number of additional employees in excess of
one
hundred
(100) by fifty (50), rounded down to the nearest multiple of fifty (50).
(13) "Telecommunications company" means any public service company or
corporation
whose
rate of taxation is determined under section 44-13-4(4).
(14)
“Total employment” for an eligible company as of any date means the total
number
of
full-time equivalent active employees employed within the State by the eligible
company and
its
eligible subsidiaries on such date.
(15)
“Initial new employment level” means the number of units of new employment
reported
by an eligible company in 1997, or, if applicable, the third taxable year
following the
base
employment period election set forth in section 42-64.5-5.
42-64.5-3. Tax rate reduction. -- The rate of tax payable by an
eligible company and
each
of its eligible subsidiaries for any taxable year ending on or after July 1,
1995, on its net
income
pursuant to the applicable income tax provisions of the general laws, including
the
provisions
of sections 44-11-2(a), 44-14-3(a), 44-14-4 and 44-17-1, or on its gross
earnings
pursuant
to section 44-13-4(4), shall be reduced by the amount specified in section
42-64.5-4; this
rate
reduction shall be applied annually once to those eligible companies which are
permitted by
law
to file a consolidated state tax return and in the case of eligible companies
not permitted by
law
to file consolidated state tax returns, then the rate reduction shall be
applied annually to each
eligible
company and its eligible subsidiaries; provided, however, except as provided
in section
42-64.5-7, should any eligible
company fail to maintain in any taxable year after 1997 or, if
applicable,
the third taxable year following the base employment period election set forth
in
section
42-64.5-5, the number of units of new employment it reported for its 1997 tax
year or, if
applicable,
the third taxable year following the base employment period election set forth
in
section
42-64.5-5; the rate reduction provided for in this chapter shall expire
permanently.
42-64.5-4.
Reduction rate schedule. -- (a) The amount of the rate reduction
specified in
section
42-64.5-3 for any eligible company that is not a telecommunications company for
each
taxable
year ending on or after July 1, 1995, shall be based upon the aggregate amount
of new
employment
of the eligible company and its eligible subsidiaries for each taxable year,
and shall
be
determined by multiplying the numerical equivalent of one-quarter of one
percent (.25%) by
the
number of units of new employment for each taxable year through the taxable
year ending in
1997
or, if applicable, the third taxable year following the base employment period
election set
forth
in section 42-64.5-5; and for each taxable year thereafter, the number of units
of new
employment
reported for the taxable year 1997 or, if applicable, the third taxable year
following
the
base employment period election set forth in section 42-64.5-5; provided,
however, the
amount
of each rate reduction shall in no event be greater than six percent (6%).
(b) The amount of the rate reduction specified in section 42-64.5-3 for any
eligible
company
that is a telecommunications company shall be based upon the aggregate amount
of new
employment
of the eligible company and its eligible subsidiaries for each taxable year and
shall
be
determined in the same manner as set forth in subsection (a) of this section,
except that it shall
be
determined by multiplying the numerical equivalent of one-hundredth of one
percent (.01%)
by
the number of units of new employment and the amount of each rate reduction
shall in no
event
be greater than one percent (1%).
(c) Notwithstanding any of the provisions of this chapter, where an eligible
telecommunications
company has one or more affiliated entities that is an eligible company, the
eligible
company entitled to a rate reduction may assign its rate reduction, to be
determined in the
manner
as provided in subsection (b) of this section, to the eligible
telecommunications company.
An
entity that assigns the rate reduction shall not be eligible for the rate
reduction.
42-64.5-5.
Election. -- An eligible company may elect to determine its "base
employment"
for the purposes of this chapter on July 1 of any year subsequent to 1994,
rather
than
on July 1, 1994; provided, however, that an eligible company that is a
telecommunication
company
shall determine its base employment on either July 1, 2001 or July 1, 2002; and
provided,
further, that except as otherwise provided in this chapter, an eligible
company may not
use
July 1, 2003 or any subsequent date to determine its base employment unless a
determination
has
been made by the board of directors of the Rhode Island economic development
corporation
that:
(a) but for the incentives available under this chapter the company is not
likely to retain,
expand,
or add employment in this state; and (b) that the company has provided
reasonable
evidence
supporting a finding that the jobs retained, expanded, or added will generate
new tax
revenue
for the state that is at least equivalent to the value of this incentive.
As a result of the election, rules comparable to those set forth elsewhere in
this chapter
shall
be applied to determine the rate reduction available for each of the three (3)
taxable years
following
the first anniversary of the date the eligible company elected to use to
determine its
"base
employment" and for the taxable years following that three (3) year
period. This election
(a)
shall be made in a manner that may be determined by the tax administrator, and
(b) shall not
be
available to an eligible company that previously claimed a rate reduction under
this chapter.
SECTION
2. Chapter 42-64.5 of the General Laws entitled "Jobs Development
Act" is
hereby
amended by adding thereto the following section:
42-64.5-7.
Business reorganizations. – (a) If: (i) an eligible company
(hereinafter
referred
to as the “resulting company”) continues, succeeds to or acquires all or
substantially all
of
the business of one or more eligible companies including all of its eligible
subsidiaries (each
such
eligible company, together with its eligible subsidiaries being hereinafter
referred to as a
“combining
company”), whether by consolidation, merger, stock acquisition, asset
acquisition, or
other
method of business combination; (ii) at least one of the combining companies
has
previously
established a base employment date; and (iii)_ the resulting company elects to
have
this
section apply, then the following rules shall apply for purposes of determining
the rate
reduction
applicable to the resulting company. The resulting company, if in existence
prior to the
combination,
is also a combining company.
(1)
The “reference company” shall be the combining company which has a previously
established
base employment date and which, for its last taxable year ending before the
combination,
had the highest number of units of new employment; provided, that for purposes
of
making
this determination only, no combining company shall be treated as a small
business
concern.
If more than one of the combining companies having previously established base
employment
dates had the highest number of units of new employment, the reference company
shall
be the one of those companies that has the largest total employment before the
combination.
(2)
The resulting company may claim a rate reduction, and the base employment of
the
resulting
company shall be the base employment of the reference company plus, for each
other
combining
company, the greatest of: (i) if the combining company had a previously
established
base
employment date, its base employment; (ii) the base employment determined as of
the base
employment
date of the reference company; and (iii) its adjusted current employment for
its most
recently
completed taxable year. The initial new employment level of the resulting
company shall
be
the initial new employment level of the reference company plus, for each other
combining
company,
the greater of: (i) the combining company’s previously established initial new
employment
level, if any; and (ii) its adjusted current employment for its most recently
completed
taxable
year.
(3)
The resulting company shall be a small business concern only if: (A) the sum
of: (i)
for
each combining company that has a previously established base employment date,
the greater
of
its base employment level or its base employment level determined as of the
base employment
date
of the reference company plus; (ii) for each other combining company, the
greater of its base
employment
level determined as of the base year of the reference company or its total
employment
immediately prior to the combination is less than one hundred (100); and (B)
the
resulting
company is not a telecommunications company.
(4)
If, for the year in which the combination occurs or for either of the next two
taxable
years
thereafter, the resulting company’s units of new employment is less than its
initial new
employment
level, the resulting company shall compute and pay applicable taxes as though
this
chapter
did not apply for such year. If the restoration condition described in
paragraph (6) is
satisfied,
the resulting company shall be entitled to a credit or refund equal to the sum
of the
amount
actually paid by the resulting company over:
(i)
For the taxable year in which the combination occurred, the tax that would have
been
paid
at the rate last previously determined for the reference company, plus, for
each other
combining
company that had a previously established initial employment level, an amount
equal
to
the product of the combining company’s taxable income for its last prior
taxable year before
the
combination (but not less than zero) times the difference in the tax rate
established for that
combining
company over the tax rate established for the reference company; provided,
however,
that
the tax on the resulting company shall not be higher than the tax that would
result if this
chapter
did not apply; and
(ii)
For the first or second taxable year beginning after the combination, the tax
that
would
have been paid if using a rate reduction equal to one-quarter of one percent
(0.25%) times
the
number of units of new employment for that taxable year (but not in excess of
the resulting
company’s
initial new employment level).
(5)
For each taxable year thereafter, the resulting company’s rate reduction shall
be the
same
as the reference company’s rate reduction before the combination; provided,
that if for any
such
succeeding taxable year the resulting company’s number of units of new
employment is less
than
its initial new employment level, the rate reduction provided for in this
chapter shall expire
permanently.
(6)
The restoration condition shall be satisfied if: (i) by the last month of the
second
taxable
year beginning after the combination, the resulting company’s units of new
employment
equals
or exceeds its initial new employment level; and (ii) for a twelve-month period
(which
may
be selected after the end of such period by the resulting company) that
includes the last
month
of the second taxable year beginning after the combination, the resulting
company’s
adjusted
current employment (measured over such twelve-month period) equals or exceeds
its
initial
new employment level.
(7)
A resulting company may elect to have this subsection apply only if the
reference
company’s
number of units of new employment for its last taxable year ending before the
date of
the
combination is not less than the reference company’s initial new employment
level.
(b)
If an eligible company (hereinafter referred to as the “acquiring company”)
acquires
an
eligible subsidiary, division, or other unit of another eligible company
(hereinafter referred to
as
the “divesting company”) that does not represent all or substantially all of
the business of the
divesting
company and its eligible subsidiaries, the acquiring company and the divesting
company
may elect to determine any rate reduction applicable to the acquiring company
and the
divesting
company after the date of the acquisition in accordance with the following:
(1)
If the acquiring company has previously established a base employment level:
(A)
The base employment, if any, of the divesting company shall be the lesser of
its base
employment
before the divestment and its total employment immediately after the
divestment;
and
(B)
If the base employment of the divesting company is reduced by reason of the
rule
stated
in (A), the base employment of the acquiring company shall be increased by an
equal
amount.
(2)
If the acquiring company has not previously established a base employment
level, the
base
employment of the divesting company, if any, shall be unaffected.
(3)
The acquiring company and the divesting company shall jointly make the election
in
such
form as the tax administrator may require, and, once filed by either company,
the election
shall
be irrevocable.
SECTION
3. This act shall take effect upon passage.
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LC03745/SUB
A
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