2001 --

ARTICLE 16 SUBSTITUTE A AS AMENDED

RELATING TO TAXATION

SECTION 1. Section 44-11-42 of the General Laws in Chapter 44-11 entitled "Business Corporation Tax" is hereby repealed.

~~44-11-42.~~ Tax credit for quality certification. [Effective July 1, 2005.] -- (a) Any taxpayer which receives a quality standard certification evidencing compliance with the “ISO 9000” or “ISO 14000” standards as the same are developed, published and amended from time to time by the International Standard Organization shall be entitled to a tax credit equal to the cost incurred to obtain, renew, modify or maintain such certification. The credit under this section may be taken as an offset against the Rhode Island business corporation tax or the Rhode Island personal income tax in the case of subchapter "S" corporations, but in no event shall reduce either tax to below the minimum due or result in a refund.

~~(b) The tax administrator is authorized and empowered to make rules and regulations as the administrator shall deem necessary to carry out the purpose of this section.~~

SECTION 2. Section 42-63.1-12 of the General Laws in Chapter 42-63.1 entitled "Tourism and Development" is hereby amended to read as follows:

42-63.1-12. Distribution of tax to Rhode Island Convention Center Authority. -- (a) The proceeds of the hotel tax generated by any and all hotels ~~in which the Rhode Island convention center authority maintains a majority ownership interest therein~~ physically connected to the Rhode Island Convention Center shall be distributed as follows: twenty-seven percent (27%) shall be deposited as general revenues; thirty-one percent (31%) shall be given to the convention authority of the city of Providence; twelve percent (12%) shall be given to the greater Providence-Warwick convention and visitor's bureau; thirty percent (30%) shall be given to the Rhode Island convention center authority to be used in the furtherance of the purposes set forth in ~~this chapter~~ section 42-99-4.

(b) The Rhode Island Convention Center Authority is authorized and empowered to enter into contracts with the Greater Providence-Warwick Convention and Visitors' Bureau in the furtherance of the purposes set forth in this chapter.

SECTION 3. Section 44-59-10 of the General Laws in Chapter 44-59 entitled "Uniform Sales And Use Tax Administration Act" is hereby amended to read as follows:

44-59-10. Sunset provision. -- This chapter shall be repealed on June 30, ~~2005~~ 2006, without further action by the general assembly, if the statutory amendments to the sales and use tax law necessary to bring this state into compliance with the Streamlined Sales and Use Tax Agreement are not enacted by the general assembly by June 30, ~~2005~~ 2006.

SECTION 4. Section 44-30-2.6 of the General Laws in Chapter 44-30 entitled "Personal Income Tax" is hereby amended to read as follows:

44-30-2.6. Rhode Island taxable income -- Rate of tax. -- (a) "Rhode Island taxable income" means federal taxable income as determined under the Internal Revenue Code, 26 U.S.C. section 1 et seq., not including the increase in the basic standard deduction amount for married couples filing joint returns as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003 and the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), and as modified by the modifications in section 44-30-12.

(b) Notwithstanding the provisions of sections 44-30-1 and 44-30-2, for tax years beginning on or after January 1, 2001, a Rhode Island personal income tax is imposed upon the Rhode Island taxable income of residents and nonresidents, including estates and trusts, at the rate of twenty-five and one-half percent (25.5%) for tax year 2001, and twenty-five percent (25%) for tax year 2002 and thereafter of the federal income tax rates, including capital gains rates and any other special rates for other types of income, except as provided in section 44-30-2.7, which were in effect immediately prior to enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA); provided, rate schedules shall be adjusted for inflation by the tax administrator beginning in taxable year 2002 and thereafter in the manner prescribed for adjustment by the commissioner of Internal Revenue in 26 U.S.C. section 1(f).

(c) For tax years beginning on or after January 1, 2001, if a taxpayer has an alternative minimum tax for federal tax purposes, the taxpayer shall determine if he or she has a Rhode Island alternative minimum tax. The Rhode Island alternative minimum tax shall be computed by multiplying the federal tentative minimum tax without allowing for the increased exemptions under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (as redetermined on federal form 6251 Alternative Minimum Tax-Individuals) by twenty-five and one-half percent (25.5%) for tax year 2001, and twenty-five percent (25%) for tax year 2002 and thereafter, and comparing the product to the Rhode Island tax as computed otherwise under this section. The excess shall be the taxpayer's Rhode Island alternative minimum tax.

(1) For tax years beginning on or after January 1, 2005 and thereafter the exemption amount for alternative minimum tax, for Rhode Island purposes, shall be adjusted for inflation by the tax administrator in the manner prescribed for adjustment by the commissioner of Internal Revenue in 26 U.S.C. Section 1(f).

(d) Credits against tax. - For tax years beginning on or after January 1, 2001, a taxpayer entitled to any of the following federal credits enacted prior to January 1, 1996 shall be entitled to a credit against the Rhode Island tax imposed under this section:

(1) earned income credit;

(2) child and dependent care credit;

(3) general business credits;

(4) foreign tax credit;

(5) credit for elderly or the disabled;

(6) credit for prior year minimum tax;

(7) mortgage interest credit;

(8) empowerment zone employment credit;

(9) qualified electric vehicle credit;

The credit shall be twenty-five and one-half percent (25.5%) of the listed federal credits for tax year 2001, and shall be twenty-five percent (25%) of the aforementioned federal credits for tax year 2002 and thereafter; provided, there shall be no deduction based on any federal credits enacted after January 1, 1996, including the rate reduction credit provided by the federal Economic Growth and Tax Reconciliation Act of 2001 (EGTRRA). In no event shall the tax imposed under this section be reduced to less than zero. A taxpayer required to recapture any of the above credits for federal tax purposes shall determine the Rhode Island amount to be recaptured in the same manner as prescribed in this subsection.

SECTION 5. Section 31-36-20 of the General Laws in Chapter 31-36 entitled "Motor Fuel Tax" is hereby amended to read as follows:

31-36-20. Disposition of proceeds. -- (a) Notwithstanding any other provision of law to the contrary, all moneys paid into the general treasury under the provisions of this chapter or chapter 37 of this title shall be applied to and held in a separate fund and be deposited in any depositories that may be selected by the general treasurer to the credit of the fund, which fund shall be known as the Intermodal Surface Transportation Fund; provided, that in fiscal year 2004 for the months of July through April six and eighty-five hundredth cents ($0.0685) per gallon of the tax imposed and accruing for the liability under the provisions of section 31-36-7, less refunds and credits, shall be transferred to the Rhode Island public transit authority as provided under section 39-18-21. For the months of May and June in fiscal year 2004, the allocation shall be five and five hundredth cents ($0.0505). Thereafter, until fiscal year 2006, the allocation shall be six and twenty-five hundredth cents ($0.0625). For fiscal year 2006 and thereafter the allocation shall be seven and twenty-five hundredth cents ($0.0725); provided, that expenditures shall include the costs of a market survey of non-transit users and a management study of the agency to include the feasibility of moving the Authority into the Department of Transportation, both to be conducted under the auspices of the state budget officer. The state budget officer shall hire necessary consultants to perform the studies, and shall direct payment by the Authority. Both studies shall be transmitted by the Budget Officer to the 2006 session of the General Assembly, with comments from the Authority. One cent ($0.01) per gallon shall be transferred to the Elderly/Disabled Transportation Program of the department of elderly affairs, and the remaining cents per gallon shall be available for general revenue as determined by the following schedule:

(i) For the fiscal year 2000, three and one fourth cents ($0.0325) shall be available for general revenue.

(ii) For the fiscal year 2001, one and three-fourth cents ($0.0175) shall be available for general revenue.

(iii) For the fiscal year 2002, one-fourth cent ($0.0025) shall be available for general revenue.

(iv) For the fiscal year 2003, two and one-fourth cent ($0.0225) shall be available for general revenue.

(v) For the months of July through April in fiscal year 2004, one and four-tenths cents ($0.014) shall be available for general revenue. For the months of May through June in fiscal year 2004, three and two-tenths cents ($0.032) shall be available for general revenue, and thereafter, until fiscal year 2006, two cents ($0.02) shall be available for general revenue. For fiscal year 2006 and thereafter one cent ($0.01) shall be available for general revenue.

(2) All deposits and transfers of funds made by the tax administrator under this section, including those to the Rhode Island public transit authority, the department of elderly affairs and the general fund, shall be made within twenty-four (24) hours of receipt or previous deposit of the funds in question.

(3) Commencing in fiscal year 2004, the Director of the Rhode Island Department of Transportation is authorized to remit, on a monthly or less frequent basis as shall be determined by the Director of the Rhode Island Department of Transportation, or his or her designee, or at the election of the Director of the Rhode Island Department of Transportation, with the approval of the Director of the Department of Administration, to an indenture trustee, administrator, or other third party fiduciary, in an amount not to exceed two cents ($0.02) per gallon of the gas tax imposed, in order to satisfy debt service payments on aggregate bonds issued pursuant to a Joint Resolution and Enactment Approving the Financing of Various Department of Transportation Projects adopted during the 2003 session of the General Assembly, and approved by the Governor.

(b) Notwithstanding any other provision of law to the contrary, all other funds in the fund shall be dedicated to the department of transportation, subject to annual appropriation by the general assembly. The director of transportation shall submit to the general assembly, budget office and office of the governor annually an accounting of all amounts deposited in and credited to the fund together with a budget for proposed expenditures for the succeeding fiscal year in compliance with sections 35-3-1 and 35-3-4. On order of the director of transportation, the state controller is authorized and directed to draw his or her orders upon the general treasurer for the payments of any sum or portion of the sum that may be required from time to time upon receipt of properly authenticated vouchers.

(c) At any time the amount of the fund is insufficient to fund the expenditures of the department of transportation, not to exceed the amount authorized by the general assembly, the general treasurer is authorized, with the approval of the governor and the director of administration, in anticipation of the receipts of monies enumerated in section 31-36-20 to advance sums to the fund, for the purposes specified in section 31-36-20, any funds of the state not specifically held for any particular purpose. However, all the advances made to the fund shall be returned to the general fund immediately upon the receipt by the fund of proceeds resulting from the receipt of monies to the extent of the advances.

SECTION 6. Section 44-20-13.2 of the General Laws in Chapter 44-20 entitled "Cigarette Tax" is hereby amended to read as follows:

44-20-13.2. Tax imposed on smokeless tobacco, cigars, and pipe tobacco products. -- A tax is imposed on all smokeless tobacco, cigars, and pipe tobacco products sold or held for sale in the state by any person, the payment of the tax to be accomplished according to a mechanism established by the administrator, division of taxation, department of administration. Any tobacco product on which the proper amount of tax provided for in this chapter has been paid, payment being evidenced by a stamp, is not subject to a further tax under this chapter. The tax imposed by this section is at the rate of ~~thirty~~ forty percent ~~(30%)~~(40%) of the wholesale cost of smokeless tobacco, cigars, and pipe tobacco products. The proceeds collected are paid into the general fund.

SECTION 7. Chapter 44-19 of the General Laws entitled "Sales and Use Tax-Enforcement and Collection" is hereby amended by adding thereto the following sections:

44-19-10.1. Prepayment of Sales Tax on Cigarettes.-- (a) Every distributor and dealer licensed pursuant to chapter 44-20 shall pay, as a prepayment for the taxes imposed by chapter 44-18, a tax on cigarettes possessed for sale or use in this state and upon which the distributor or dealer is required to affix cigarette stamps pursuant to chapter 44-20. The tax shall be computed annually by multiplying the minimum price of standard brands of cigarettes in effect as of April 1, 2005 and each April 1 thereafter, by the tax rate imposed by sections 44-18-18 and 44‑18‑20. The minimum price of standard brands of cigarettes shall be determined in accordance with Chapter 13-6 of the General Laws and the regulations promulgated by the tax administrator. The tax shall be prepaid at the time the distributor or dealer purchases such stamps from the tax administrator. However, the tax administrator may, in his or her discretion, permit a licensed distributor or licensed dealer to pay for the prepayment within thirty (30) days after the date of purchase, provided that a bond satisfactory to the tax administrator in an amount not less than the prepayment due shall have been filed with the tax administrator conditioned upon payment for the prepayment of sales tax. The tax administrator shall keep accurate records of all stamps sold to each distributor and dealer.

(b) The provisions of section 44-20-12 relating to the use of stamps to evidence payment of the tax imposed by chapter 44-20 shall be applicable to the prepayment requirement of the sales/use tax imposed by this section. Provided, however, no sales/use tax is required to be prepaid on sales of cigarettes sold to the United States, its agencies and instrumentalities or the armed forces of the United States, this state (including any city, town, district or other political subdivision) and any other organization qualifying as exempt under section 44-18-30(5).

(c) Except as otherwise provided in this section, all other provisions of chapters 18 and 19 of title 44 applicable to administration and collection of sales/use tax shall apply to the prepayment requirement pursuant to this section.

(d) All taxes paid pursuant to this section are conclusively presumed to be a direct tax on the retail consumer, precollected for the purpose of convenience and facility only.

44-19-10.2. Floor Stock Tax on Inventory.-- (a) A floor tax is imposed on the inventory of stamped packages of cigarettes held for sale in this state at 12:01 AM on July 1, 2005, other than the inventory of cigarettes offered for sale to a consumer at retail. The floor tax will apply to the stamped cigarette inventory of distributors and dealers, but not to the inventory of retail sellers to the extent the inventory is held for retail sale. If a distributor or dealer also sells at the retail level, the stamped inventory held for sale at a retail location shall not be included in the inventory subject to the floor tax. In addition, the floor tax will apply to any unaffixed tax stamps in the possession of a distributor or dealer at 12:01 AM on July 1, 2005 that had been issued prior to that date. The inventory necessary to account for the floor tax must be taken as of the close of business on June 30, 2005.

(b) The floor tax shall be computed in the same manner as the prepayment of sales tax on cigarettes as set forth in subsection 44-19-10.1(a).

SECTION 8. Section 45-37.1-9 of the General Laws in Chapter 45-37.1 entitled "Industrial Facilities Corporation" is hereby amended to read as follows:

45-37.1-9. Exemption from taxation. -- (a) The exercise of the powers granted by this chapter will be in all respects for the benefit of the people of this state, for the increase of their commerce, welfare and prosperity, and for the improvement of their health and living conditions, and will constitute the performance of an essential government function, and the corporation is not required to pay any taxes or assessments upon or in respect of a project, or any property or moneys of the corporation, levied by any municipality or political subdivision of the state, nor is the corporation required to pay state taxes of any kind, and the corporation, its projects, property, and moneys, and any bonds and notes issued under the provisions of this chapter, their transfer and the income from them, including any profit made on their sale, are at all times free from taxation of every kind by the state and by the municipalities and all other political subdivisions of the state, and the corporation is not required to pay any transfer tax of any kind on account of instruments recorded by or on its behalf or in connection with the financing of any of its projects; provided, that any person, partnership, corporation, or concern leasing a project from the corporation shall pay to the city, town, school district, or other political subdivision or special district having taxing powers, in which the project is located, a payment in lieu of taxes which equals the taxes on real and personal property which the lessee would have been required to pay, had it been the owner of the property during the period for which the payment is made, and under no circumstances are the corporation or its projects, properties, money, bonds, or notes obligated, liable, or subject to a lien of any kind for their enforcement, collection, or payment; and provided, further, that in the case of any person, partnership, corporation, or concern leasing a project from the corporation any such person, partnership, corporation or concern so leased shall be exempt from payment of state sales tax applicable to materials used in construction of such a facility only to the extent that the costs of such materials do not exceed the amount financed through the corporation .

(b) If and to the extent the proceedings under which the bonds or notes authorized to be issued under the provisions of this chapter so provide, the corporation may agree to cooperate with the lessee of a project in connection with any administrative or judicial proceedings for determining the validity or amount of payments, and may agree to appoint or designate and reserve the right in and for the lessee to take all action which the corporation may lawfully take in respect of those payments and all matters relating to them, provided, that the lessee bears and pay all costs and expenses of the corporation thereby incurred at the request of the lessee or by reason of any action taken by the lessee in behalf of the corporation. Any lessee of a project, which has paid the amounts in lieu of taxes required by the first sentence of this section, is not required to pay any taxes for which a payment in lieu thereof has been made to the state or to any city, town, school district, or other political subdivision or special district having taxing powers, notwithstanding any other statute to the contrary.

SECTION 9. Section 44-30-98 of the General Laws in Chapter 44-30 entitled "Personal Income Tax" is hereby amended to read as follows:

44-30-98. Refundable earned income credit. -- A taxpayer shall be allowed a credit as provided in section 44-30-2.6(d); provided, however, ~~five percent (5%)~~ ten percent (10%) of the excess Rhode Island earned income credit will be refunded for the ~~2003~~ 2005 taxable year and each taxable year thereafter.

Section 10. Section 21 of Chapter 410 of Public Laws is hereby amended to read as follows:

SECTION 21. Payment assessments and fees. – (a) Except as provided in this act, the fund shall pay assessments in the same manner as an insurance carrier authorized to issue workers’ compensation insurance in Rhode Island.

~~(b) In light of the express purpose of the fund to serve as the insurance carrier of last resort, the fund shall be exempt from any taxes due pursuant to chapter 17 of title 44.~~ In no event shall any amounts received by the fund relating to the workers’ compensation capital assessment be subject to any form of state taxation or assessment.

(b) The corporation shall be subject to the provisions of chapter 17 of title 44 of the Rhode Island general laws and shall file returns and pay taxes in accordance therewith; provided, however, that the corporation shall be taxed on gross premiums on contracts of insurance written by the corporation after July 1, 2005.

(c) The corporation shall be subject to the provisions of chapter 26 of title 44 of the Rhode Island general laws except that the "safe harbor" provisions contained in subsection 44-26-2.1(j) shall not apply to tax year 2006 and estimated tax payments for tax year 2006 shall be due on March 15, 2006 and June 15, 2006 in accordance with the other provisions of chapter 26 of title 44 and such estimated payments shall together be equal to at least two percent (2%) of the gross premiums on contracts of insurance written by the corporation in calendar year 2005.

SECTION 11. Sections 1, 5, 6, 7 and 10 of this article shall take effect as of July 1, 2005. Sections 2, 3, 4, 8 and 9 of this article shall take effect upon passage.