Chapter 05-054

2005 -- S 1121 SUBSTITUTE B

Enacted 06/20/05

A N A C T

RELATING TO JOBS GROWTH

Introduced By: Senators J Montalbano, Walaska, Paiva-Weed, Tassoni, and Alves

Date Introduced: May 19, 2005

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 64.11

JOBS GROWTH ACT

42-64.11-1. Short title. – This chapter may be cited as the “Jobs Growth Act.”

42-64.11-2. Definitions. – As used in this chapter, unless the context clearly indicates

otherwise:

(a) "Average annual current employment" means, for any test period, the average daily

number of full-time equivalent active employees employed within the state by an eligible

company and it affiliated entities.

(b) "Affiliated entity" of an eligible company means any partnership, limited liability

company, trust or corporation having employees in the state: (i) if the eligible corporation owns at

least fifty percent (50%) of the value of the ownership interests therein; (ii) that owns at least fifty

percent (50%) of the value of the interests in the eligible company; or (iii) that is under common

ownership (at the fifty percent (50%) level) with the eligible company. For this purpose, direct,

indirect, beneficial or constructive ownership shall be considered ownership.

sum of the average quarter wages for total private and government as published by the labor

market information division of the department of labor and training for the four (4) quarters

ending with the second quarter of the calendar year ending one year before the end of the test

period.

(d) "Base employment"" means the average daily number of full-time active employees

employed within the state by an eligible company and its affiliated entities for the calendar year

preceding the calendar year in which the eligible company makes an initial application to be a

certified company as provided in section 42-64.11-3.

(e) "Certified company" means a provisionally-certified company or a fully certified

company.

(f) "Compensation" means any income, capital gain or preference items realized by an

employee in connection with the employee's service for an eligible company or affiliated entity

provided that such compensation would (but for the modification provided by section 42-64.11-4)

be includible in gross income or alternative minimum income for purposes of the Rhode Island

personal income tax.

(g) "Credit year" means any calendar year for which an eligible company has been

certified under section 42-64.11-3.

(h) "De minimus services" means services performed by an employee in the state which

does not aggregate more than two percent (2%) of the total services (based on hours or days of

employment) performed by the employee for an eligible company and all of its affiliated entities

during a calendar year or shorter relevant period.

(i) "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 affiliated entity 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.

(j) "Eligible employee" means any full-time active employee having compensation at

least equal to one hundred twenty-five percent (125%) of the average compensation of all

employees in the state first performing services in the state for an eligible company or an affiliate

entity after the date the eligible company files its initial application for certification; provided,

however, that for any eligible company filing its initial application in 2005, "eligible employee"

means any full-time active employee having compensation at least equal to one hundred-twenty

five percent (125%) of the average compensation of all employees in the state first performing

services in the state after June 1, 2005. An employee shall be considered as first performing

services in the state on a date but only if the employee performs services in the state on such date,

but did not previously during that calendar year or the immediately preceding calendar-year

perform services (other than de minimus services) in the state as an employee of the eligible

company or any affiliated entity. A fully certified company may elect to treat as eligible

employees all employees in the state without regard to the date they first performed services in

the state.

(k) "Full-time active employee" means any employee of an eligible company or an

affiliate entity who works a minimum of thirty (30) hours per week within the state, with benefits

typical to the industry of the employer.

(l) Fully-certified company" means an eligible company that has been certified by the

Rhode Island economic development corporation as meeting the criteria set forth in subsection

42-64.11-3(e) for not less than three (3) consecutive years.

(m) "New employment" for each test period (for an eligible company seeking

qualification as a provisionally-certified company) or credit year (for a fully-certified company)

means the amount of average annual current employment for the test period or credit year (as the

case may be) 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 eligible employees in order to

become a certified company.

(n) "New employment payroll" means the total compensation paid by an employer that is

a certified company and its affiliated entities times a fraction, the numerator of which is its new

employment and the denominator is its total number of full-time active employees.

(o) "Performance-based compensation" means any compensation paid by a certified

company to an eligible employee in consideration of the achievement of individual or company

performance-based goals, including, for example, but without limitation, bonuses, and income

derived from employer-granted stock options. Performance-based compensation does not include

regular fixed periodic compensation, overtime pay, and fringe benefits (including distributions

from qualified retirement plans) or other compensation paid on the basis of time or longevity and

without regard to goal-based performance.

(p) "Provisionally-certified company" means any company that has been certified under

section 42-64.11-3 for fewer than three (3) consecutive years.

(q) "State" means the State of Rhode Island and Providence Plantations.

(r) "Test period" means, at the election of an eligible company as indicated in an updated

application under subsection 42-64.11-3(b), either the calendar-year period last ending before the

filing of that updated application or the two (2) calendar-year period last ending before the filing

of that updated application.

42-64.11-3. Certification. -- (a) An eligible company may submit an initial application

for certification with the Rhode Island economic development corporation. The application shall

specify the name of the eligible company, its affiliated entities, and its base employment.

(b) To qualify as a provisionally-certified company for a calendar-year, an eligible

company shall file with the Rhode Island economic development corporation by the January 31

immediately following such calendar-year an updated application listing, the following for the

test period ending within the calendar-year:

(1) the eligible company and its affiliated entities;

(2) their average annual current employment;

(3) the number of eligible employees and the aggregate compensation paid thereto; and

(4) such other information as the Rhode Island economic development corporation

determines is reasonably necessary.

was a provisionally-certified company for both of the two (2) preceding calendar-years shall file

with the Rhode Island economic development corporation by the January 31 immediately

following such calendar year an updated application listing for the test period ending within the

calendar year:

(1) the eligible company and its affiliated entities;

(2) their average annual current employment;

(3) the number of eligible employees and the aggregate compensation paid thereto; and

(4) such other information as the Rhode Island economic development corporation

determines is reasonably necessary.

Once an eligible company has become a fully-certified company, that qualification shall

continue indefinitely and the certification requirements of subsection (e) shall not apply.

(d) For each affiliated entity not included in the list of affiliated entities for the last prior

updated application (or, if none, the initial application), the updated application shall also indicate

the base employment of such affiliated entity.

(e) Within thirty (30) days after receiving an updated application, the Rhode Island

economic development corporation shall verify the information submitted with the department of

labor and training and/or the division of taxation and shall declare the eligible company to be a

provisionally-certified company or a fully-certified company, as the case may be, if the updated

application demonstrates:

(1) that an eligible company and its affiliated entities have established for the test period

new employment equal to not less than one hundred (100) full-time active employees and not less

than ten million dollars ($10,000,000) in new employment payroll; and

(2) that the annual compensation for eligible employees is not less than one hundred

twenty-five percent (125%) of the average compensation of all employees in the state. A

declaration that an eligible company is a provisionally-certified company or a fully-certified

company shall be valid even if made outside the thirty (30) day period.

(f) A certified company may abandon its certification by filing written notice of its intent

to abandon with the Rhode Island economic development corporation and the division of taxation

at least thirty (30) days before the end of its credit year and such abandonment shall become

effective for taxable years beginning after the end of the credit year for the certified company and

all of its affiliated entities.

(g) An eligible company that has previously filed an initial application may file a new

initial application. In such event, the prior application should be of no further effect and the

calendar year under which the new application is filed shall not be a credit year.

(h) Notwithstanding subsection 42-64.11-6(d), the economic development corporation

shall annually provide an economic impact analysis, consistent with the requirements of

subsection 42-64-10(a)(2), on each provisionally-certified company and fully-certified company.

Such analysis shall also include the name of the eligible company and its affiliated entities, their

average annual current employment, and the number of eligible employees. This analysis shall be

submitted to the chair of the house finance committee, the chair of the senate finance committee,

the house fiscal advisor, and the senate fiscal advisor on or before the January 31st following the

first certification of an eligible company and shall be made available to the public. Such annual

reports shall continue indefinitely and be submitted on or before January 31st, so long as the

certified company has not abandoned it certification. As a condition of continued certification

each provisionally-certified company and fully-certified company shall provide to the economic

development corporation information the corporation deems necessary to complete this analysis.

42-64.11-4. ~~Partial exclusion of performance-based compensation~~ Partial

modification of performance-based compensation. -- (a) Fifty percent (50%) of the

performance-based compensation realized by an eligible employee in any credit year shall be

allowed as a modification decreasing adjusted gross income and alternative minimum income for

purposes of the personal income tax.

(b) The modification provided under subsection (a) shall be taken into account in

determining withholding under section 44-30-71 to be deducted by a fully-certified company with

respect to performance-based compensation paid to eligible employees.

derived from employer granted stock options is subject to the fifty percent (50%) modification

provided for in subsection (a) only to the extent that the same amount is subject to tax under

section 42-64.11-5.

42-64.11-5. Tax on employing unit. -- For any taxable year beginning in a credit year,

each employing unit (within the meaning of subsection 28-42-3(16)) that is a certified company

or one of its affiliated entities shall each pay a tax equal to five percent (5%) of the aggregate

performance-based compensation paid to its eligible employees for the credit year. The tax shall

be reported at the same time as tax on the employing unit may be due to be reported under

chapter 44-11, 44-13, 44-13.1, 44-14, or 44-17, or, if the employing unit is not taxable under

those chapters, at such time as the tax administrator may prescribe. The tax imposed by this

section shall not be offset by credits provided under those sections or any other provision of law.

42-64.11-6. Regulatory authority. -- (a) The Rhode Island economic development

corporation may promulgate such regulations as it deems necessary and appropriate to carry out

its functions under this chapter.

(b) The tax administrator may adopt such regulations as he or she deems necessary and

appropriate in connection with the taxes imposed and modifications granted herein. Appropriate

adjustments shall be made for short taxable years.

penalties of perjury.

(d) By filing an application, the eligible company authorizes the department of labor and

training and the division of taxation to disclose to the Rhode Island economic development

corporation such data relating to the eligible company and its affiliated entities as may be

necessary to verify the information in the initial application or an updated application.

Information submitted by an eligible company under this chapter to the Rhode Island economic

development corporation, the division of taxation, or the department of labor and training shall be

deemed tax return information exempt from disclosure under section 38-2-2(O) (relating to tax

returns).

SECTION 2. This act shall take effect upon passage.

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LC03347/SUB B

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