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2008 -- S 2668 STATE OF RHODE ISLAND

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2008 -- S 2668 STATE OF RHODE ISLAND Powered By Docstoc
					                                            2008 -- S 2668
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     LC01660
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                     STATE              OF        RHODE                ISLAND

                                        IN GENERAL ASSEMBLY

                                     JANUARY SESSION, A.D. 2008
                                           ____________


                                                AN ACT

        RELATING TO TAXATION -- ECONOMIC GROWTH AND FAIRNESS ACT OF 2008



               Introduced By: Senators Moura, Pichardo, Perry, Miller, and C Levesque

               Date Introduced: February 26, 2008

               Referred To: Senate Finance




     It is enacted by the General Assembly as follows:

1             SECTION 1. This act shall be known as the "Economic Growth and Fairness Act of

2    2008."

3             SECTION 2. Preamble --

4             WHEREAS, Rhode Island faces a significant structural deficit;

5             WHEREAS, Public schools and school programs face the threat of shut down, crucial

6    state employees face layoffs and essential services for our residents continue to be cut;

7             WHEREAS, Due to the deficit, the state of Rhode Island is unable to take action on

8    issues Rhode Islanders face daily: paying for health care and college, securing decent

9    employment, and keeping up with fuel prices, rents and mortgage debt;

10            WHEREAS, The poorest Rhode Island pay thirteen percent (13%) of their annual income

11   in income taxes, while the richest pay just six percent (6%)

12            WHEREAS, Middle -income Rhode Islanders pay on average four and four tenths percent

13   (4.4%) of their income in property taxes while the wealthiest Rhode Islanders pay on average just

14   two percent (2%);

15            WHEREAS, The poorest Rhode islanders pay on average eight percent (8%) of their

16   income in sales tax, while top income earners pay on average less than one percent (1%) in sales

17   taxes.

18            SECTION 3. Section 31-34.1-2 of the General Laws in Chapter 31-34.1 entitled "Rental

19   Vehicle Surcharge" is hereby amended to read as follows:
1            31-34.1-2. Rental vehicle surcharge. -- (a) Each rental company shall collect, at the time

2    a motor vehic le is rented in this state, on each rental contract, a surcharge equal to six percent

3    (6.0%) of gross receipts per vehicle on all rentals for each of the first thirty (30) consecutive days.

4    The surcharge shall be computed prior to the assessment of any applicable sales taxes, provided,

5    however, the surcharge shall be subject to the sales tax.

6               (b) The surcharge shall be included on the rental contract and collected in accordance

7    with the terms of the rental contract. Fifty percent (50%) of the surcharge sha ll be retained by the

8    rental company in accordance with this section and subsection (c), and fifty percent (50%) of the

9    surcharge shall be remitted to the state for deposit in the general fund, on a quarterly basis in

10   accordance with a schedule adopted by the tax administration. Each rental company collecting

11   and retaining surcharge amounts may reimburse itself in accordance with this section from the

12   funds retained for the total amount of motor vehicle licensing fees, title fees, registration fees and

13   transfer fees paid to the state of Rhode Island and excise taxes imposed upon the rental

14   companies' motor vehicles during the prior calendar year; provided, that rental companies shall

15   not be authorized to reimburse themselves for title fees, motor vehicles licensing fees, transfer

16   fees, registration fees and excise taxes unless those fees and taxes shall have been assessed and

17   paid in full to the state or appropriate city or town prior to any reimbursement. No reimbursement

18   shall be allowed upon the prepayment of any fees or excise taxes.

19              (c) (b) At a date to be set by the state tax administrator, but not later than February 15th

20   of any calendar year, each rental company shall, in addition to filing a quarterly remittance form,

21   file a report with the state tax administrator on a form prescribed by him or her, stating the total

22   amount of motor vehicles licensing fees, transfer fees, title fees, registration fees and excise taxes

23   paid by the rental company in the previous year. The amount, if any, by which the surcharge

24   collections exceed the amount of licensing fees, title fees, transfer fees, registration fees and

25   excise taxes paid shall be remitted by the rental company to the state of Rhode Island for deposit

26   in the general fund.

27           SECTION 4. Section 31-36-1 of the General Laws in Chapter 31-36 entitled "Motor Fuel

28   Tax" is hereby amended to read as follows:

29           31-36-1. Definitions. -- Terms in this chapter and chapter 37 of this title are construed as

30   follows:

31              (1) "Administrator" means the tax administrator.

32              (2) "Distributor" includes any person, association of persons, firm, or corporation,

33   wherever resident or located, who shall import or cause to be imported into this state, for use or

34   for sale, fuels, and also any person, association of persons, firm or corporation who shall produce,



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1    refine, manufacture, or compound fuels within this state.

2              (3) "Filling station" includes any place, location, or station where fuels are offered for

3    sale at retail.

4              (4) "Fuels" includes gasoline, benzol, naphtha, and other volatile and inflammable

5    liquids (other than lubricating oils, diesel fuel for the propulsion of marine craft, fuels used for the

6    propulsion of airplanes, oils used for heating purposes, manufactured biodiesel fuel that results in

7    employment in Rhode Island at a manufacturing facility for biodiesel fuel), used or suitable for

8    use for operating or propelling motor vehicles with internal combustion engines. This does not

9    include benzol and naphtha sold or used for a purpose other than for the operation or propulsion

10   of motor vehicles. Any article or product represented as gasoline for use in internal combustion

11   type engines, used in motor vehicles, shall be equal to or better in quality and specification than

12   that known as "United States government motor gasoline."

13             (5) (4) "Investigator and examiner" means any person appointed by the tax administrator

14   to act as an investigator and examiner.

15             (6) (5) "Owner" includes any person, association of persons, firm, or corporation

16   offering fuels for sale at retail.

17             (7) (6) "Peddlers" means any person, association of persons, firm or corporation, except

18   a distributor as defined in this chapter, who shall distribute gasoline by tank wagon in this state.

19             (8) (7) "Public highways" includes any state or other highway and any public street,

20   avenue, alley, park, parkway, driveway, or public place in any city or town.

21             (9) (8) "Pump" includes any apparatus or machine for raising, driving, exhausting, or

22   compressing fluids, and used in the sale and distribution of fuels.

23             (10) (9) "Purchaser" includes any person, association of persons, firm, or corporation,

24   wherever resident or located, who purchases fuels from a distributor, for use or resale, and any

25   person, association of persons, firm or corporation who purchases from a distributor, gasoline or

26   other volatile and inflammable liquids (other than lubricating oils and oils used for heating

27   purposes) for use other than for propelling motor vehicles.

28             (11) (10) "Retail dealer" means any person, association of persons, firm, or corporation

29   operating a filling station as herein defined in this chapter for the sale or dispensing of motor fuel

30   by delivery into service tank or tanks of any highway motor vehicle which is propelled by an

31   internal combustion motor, other than the highway motor vehicle belonging to the person owning

32   or operating the place of business; provided, however, that sales by a manufacturer or distributor

33   shall not constitute them retail dealers.

34             (12) (11) "State highways" includes only those public highways or those parts of them



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1    that shall be constructed or maintained by the department of administration.

2              (13) (12) "United States government motor gasoline" means that gasoline which is or

3    may be prescribed by the federal specification board of the United States government for use as a

4    fuel for motor vehicle, motor boat, and similar engines.

5             SECTION 5. Sections 44-11-2 and 44-11-14.2 of the General Laws in Chapter 44-11

6    entitled "Business Corporation Tax" are hereby amended to read as follows:

7             44-11-2. Imposition of tax. -- (a) Each corporation shall annually pay to the state a tax

8    equal to nine percent (9%) of net income, as defined in section 44-11-11, qualified in section 44-

9    11-12, and apportioned to this state as provided in sections 44-11-13 -- 44-11-15, for the taxable

10   year.

11             (b) A corporation shall pay the amount of any tax as computed in accordance with

12   subsection (a) of this section after deducting from "net income," as used in this section, fifty

13   percent (50%) of the excess of capital gains over capital losses realized during the taxable year, if

14   for the taxable year:

15             (1) The corporation is engaged in buying, selling, dealing in, or holding securities on its

16   own behalf and not as a broker, underwriter, or distributor;

17             (2) Its gross receipts derived from these activ ities during the taxable year amounted to at

18   least ninety percent (90%) of its total gross receipts derived from all of its activities during the

19   year. "Gross receipts" means all receipts, whether in the form of money, credits, or other valuable

20   consideration, received during the taxable year in connection with the conduct of the taxpayer's

21   activities.

22             (c) (b) A corporation shall not pay the amount of the tax computed on the basis of its net

23   income under subsection (a) of this section, but shall annually pay to the state a tax equal to ten

24   cents ($.10) for each one hundred dollars ($100) of gross income for the taxable year or a tax of

25   one hundred dollars ($100), whichever tax shall be the greater, if for the taxable year the

26   corporation is either a "personal holding company" registered under the federal Investment

27   Company Act of 1940, 15 U.S.C. section 80a-1 et seq., "regulated investment company", or a

28   "real estate investment trust" as defined in the federal income tax law applicable to the taxable

29   year. "Gross income" means gross income as defined in the federal income tax law applicable to

30   the taxable year, plus:

31             (1) Any interest not included in the federal gross income; minus

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

33   exempt from taxation by this state; and minus

34             (3) Fifty percent (50%) of the excess of capital gains over capital losses realized during



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1    the taxable year.

2             (d) (c) (1) A small business corporation having an election in effect under subchapter S,

3    26 U.S.C. section 1361 et seq., shall not be subject to the Rhode Island income tax on

4    corporations on the proportionate share of their income belonging to Rhode Island residents,

5    except that the corporation shall be subject to the provisions of subsection (a), to the extent of the

6    income that is subjected to federal tax under subchapter S. The proportionate share of corporate

7    income belonging to shareholders who are not Rhode Island residents shall be subject to the

8    provisions of subsection (a).

9             (2) The shareholders of the corporation who are residents of Rhode Island shall include

10   in their income their proportionate share of the corporation's federal taxable income.

11            (3) [Deleted by P.L. 2004, ch. 595. art. 29, section 1.]

12            (4) [Deleted by P.L. 2004, ch. 595, art. 29, section 1.]

13            (e) Minimum tax. The tax imposed upon any corporation under this section shall not be

14   less than five hundred dollars ($500).

15           44-11-14.2. Allocation and apportionment of regulated investment companies and

16   securities brokerage services. -- (a) Notwithstanding any other provisions of the general laws,

17   any taxpayer located within the state which sells management, distribution or administration

18   services (including without limitations, transfer agent, fund accounting, custody and other similar

19   or related services) as described in this section to or on behalf of a regulated investment company

20   (as defined in the Internal Revenue Code of 1986, as amended) may elect the allocation and

21   apportionment method for the taxpayer's net income provided for in this section. The election, if

22   made, shall be irrevocable for successive periods of five (5) years. All net income derived directly

23   or indirectly from the sale of management, distribution, or administration services to or on behalf

24   of regulated investment companies, including net income received directly or indirectly from

25   trustees, and sponsors or participants of employee benefit plans which have accounts in a

26   regulated investment company, shall be apportioned to Rhode Island only to the extent that

27   shareholders of the regulated investment company are domiciled in Rhode Island as follows:

28            (1) Net income shall be multiplied by a fraction, the numerator of which shall be Rhode

29   Island receipts from the services during the taxable year and the denominator of which shall be

30   the total receipts everywhere from the services for the same taxable year.

31            (2) For purposes of this section, Rhode Island receipts shall be determined by

32   multiplying total receipts for the taxable year from each separate regulated investment company

33   for which the services are performed by a fraction. The numerator of the fraction shall be the

34   average of the number of shares owned by the regulated investment company's shareholders



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1    domiciled in this state at the beginning of and at the end of the regulated investment company's

2    taxable year, and the denominator of the fraction shall be the average of the number of the shares

3    owned by the regulated investment company shareholders everywhere at the beginning of and at

4    the end of the regulated investment company's taxable year.

5                (b) Notwithstanding any other provisions of the general laws, any taxpayer which

6    provides securities brokerage services and which operates within the state may elect the

7    allocation and apportionment method for the taxpayer's net income provided for in this section.

8    The election, if made, shall be irrevocable for successive periods of five (5) years. All net income

9    derived directly or indirectly from the sale of securities brokerage services by a taxpayer shall be

10   apportioned to Rhode Island only to the extent that securities brokerage customers of the taxpayer

11   are domiciled in Rhode Island. The portion of net income apportioned to Rhode Island shall be

12   determined by multiplying the total net income from the sale of the services by a fraction

13   determined in the following manner:

14            (1) The numerator of the fraction shall be the brokerage commissions and total margin

15   interest paid in respect of brokerage accounts owned by customers domiciled in Rhode Island for

16   the taxpayer's taxable year; and

17            (2) The denominator of the fraction shall be the brokerage commissions and total margin

18   interest paid in respect of brokerage accounts owned by all of the taxpayer's customers for the

19   same taxable year.

20           SECTION 6. Section 44-13-4 of the General Laws in Chapter 44-13 entitled "Public

21   Service Corporation Tax" is hereby amended to read as follows:

22           44-13-4. Rate of taxation. -- The tax imposed will be at the following rates:

23            (1) In the case of every corporation whose principal business is a steamboat or ferryboat

24   business as a common carrier, every common carrier steam or electric railroad corporation, every

25   street railway corporation, every common carrier dining, sleeping, chair, or parlor car

26   corporation, every corporation whose principal business is selling and distributing water to the

27   public, and every toll bridge corporation, one and one-fourth percent (1.25%) of its gross

28   earnings;

29            (2) In the case of every corporation whose principal business is manufacturing, selling,

30   distributin g and/or transmitting currents of electricity to be used for light, heat, or motive power,

31   four percent (4%) of its gross earnings, but deductions shall be made of gross earnings from the

32   transmission or sale of electricity to other public utility corporations, non-regulated power

33   producers, or municipal utilities for resale, whether within or outside of this state; provided, that

34   the tax measured by the portion of the utility's gross earnings as is derived from the manufacture



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1    and sale of illuminating and heating gas and its by-products and the merchandising of gas

2    appliances shall be computed at the rate of three percent (3%); provided, however, that effective

3    January 1, 2009, the amount of the tax herein established shall be reduced by the fee due and paid

4    to the affordable energy fund established by section 42-141-5;

5                (3) In the case of every express corporation carrying on its business on steamboats,

6    steam or electric railroads, or street railways and of every public service corporation whose

7    principal business is that of a telegraph corporation, four percent (4%) of its gross earnings;

8             (4) In the case of every telecommunications corporation providing telecommunications

9    service, ten percent (10%) of its gross earnings; provided, that the rate shall be nine percent (9%)

10   effective July 1, 1985, eight percent (8%) effective July 1, 1986, seven percent (7%) effective

11   July 1, 1987, six percent (6%) effective July 1, 1988, and five percent (5%) effective July 1,

12   1997. For purposes of this chapter, "telecommunic ations service" means the transmission of any

13   interactive two-way electromagnetic communications including voice, image, data, and other

14   information, by means of wire, cable, including fiber optical cable, microwave, and radio wave,

15   or any combinations of these media. This definition does not include value added non-voice

16   services in which computer processing applications are used to act on the form, content, code, and

17   protocol of the information to be transmitted;

18            (5) In the case of every public service cable corporation, eight percent (8%) of its gross

19   earnings;

20            (6) In the case of every corporation whose principal business is manufacturing, selling

21   and/or distributing to the public illuminating or heating gas, three percent (3%) of its gross

22   earnings.

23           SECTION 7. Sections 44-18-7, 44-18-12, 44-18-18, 44-18-20, 44-18-21, and 44-18-30 of

24   the General Laws in Chapter 44-18 entitled "Sales and Use Taxes - Liability and Computation"

25   are hereby amended to read as follows:

26           44-18-7. Sales defined. -- "Sales" means and includes:

27            (1) Any transfer of title or possession, exchange, barter, lease, or rental, conditional or

28   otherwise, in any manner or by any means of tangible personal property for a consideration.

29   "Transfer of possession", "lease", or "rental" includes transactions found by the tax administrator

30   to be in lieu of a transfer of title, exchange, or barter.

31            (2) The producing, fabricating, processing, printing, or imprinting of tangible personal

32   property for a consideration for consumers who furnish either directly or indirectly the materials

33   used in the producing, fabricating, processing, printing, or imprinting.

34            (3) The furnishing and distributing of tangible personal property for a consideration by



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1    social, athletic, and similar clubs and fraternal organizations to their members or others.

2                (4) The furnishing, preparing, or serving for consideration of food, meals, or drinks,

3    including any cover, minimum, entertainment, or other charge in connection therewith.

4             (5) A transaction whereby the possession of tangible personal property is transferred, but

5    the seller retains the title as security for the payment of the price.

6             (6) Any withdrawal, except a withdrawal pursuant to a transaction in foreign or interstate

7    commerce, of tangible personal property from the place where it is located for delivery to a point

8    in this state for the purpose of the transfer of title or possession, exchange, barter, lease, or rental,

9    conditional or otherwise, in any manner or by any means whatsoever, of the property for a

10   consideration.

11            (7) A transfer for a consideration of the title or possession of tangible personal property,

12   which has been produced, fabricated, or printed to the special order of the customer, or any

13   publication.

14               (8) The furnishing and distributing of electricity, natural gas, artificial gas, steam,

15   refrigeration, and water.

16            (9) (i) The furnishing for consideration of intrastate, interstate and international

17   telecommunications service sourced in this state in accordance with subsections 44-18.1(15) and

18   (16) and all ancillary services, any maintenance services of telecommunication equipment other

19   than as provided for in subdivision 44-18-12(b)(ii). For the purposes of chapters 18 and 19 of this

20   title only, telecommunication service does not include service rendered using a prepaid telephone

21   calling arrangement.

22               (ii) Notwithstanding the provisions of paragraph (i) of this subdivision, in accordance

23   with the Mobile Telecommunications Sourcing Act (4 U.S.C. sections 116 -- 126), subject to the

24   specific exemptions described in 4 U.S.C. section 116(c), and the exemptions provided in

25   sections 44-18-8 and 44-18-12, mobile telecommunications services that are deemed to be

26   provided by the customer's home service provider are subject to tax under this chapter if the

27   customer's place of primary use is in this state regardless of where the mobile

28   telecommunications services originate, terminate or pass through. Mobile telecommunications

29   services provided to a customer, the charges for which are billed by or for the customer's home

30   service provider, shall be deemed to be provided by the customer's home service provider.

31            (10) The furnishing of service for transmission of messages by telegraph, cable, or radio

32   and the furnishing of community antenna television, subscription televis ion, and cable television

33   services.

34            (11) The rental of living quarters in any hotel, rooming house, or tourist camp.



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1             (12) The transfer for consideration of prepaid telephone calling arrangements and the

2    recharge of prepaid telephone calling arrangements sourced to this state in accordance with

3    sections 44-18.1-11 and 44-18.1-15. "Prepaid telephone calling arrangement" means and includes

4    prepaid calling service and prepaid wireless calling service.

5            (13) The furnishing of dry cleaning and/or laundry servic es.

6            (14) The furnishing of linen and uniform supplies.

7            (15) All services provided to domestic animals except those provided by a doctor of

8    veterinary medicine.

9            (16) The furnishing of watch and jewelry repair services.

10           (17) Appliance repairs.

11           (18) Any public golf course green fees and private golf country club fees and

12   membership dues.

13           (19) Marina fees and services.

14           (20) Health club fees and services.

15           (21) Any temporary employment agency fees and services.

16           (22) Telemarketing bureau fees and services.

17           (23) Telephone answering services.

18           (24) Any security system fees and services except those provided by a locksmith.

19           (25) Any janitorial fees and services.

20           (26) Any landscaping fees and services.

21           (27) Any carpet cleaning fees and services.

22           (28) Any swimming pool maintenance fees and services.

23           (29) Any solid waste hauling fees and services.

24           (30) Any porta-pit rental fees and services.

25           (31) Payroll fees and services.

26           (32) Any tax preparation fees and services.

27           (33) Any architectural fees and services, including landscape activities fees and services.

28           (34) Any interior design fees and services.

29           (35) Any management consulting fees and services.

30           (36) Any marketing research and polling fees and services.

31           (37) Any real estate property management fees and services.

32           (38) Any motion picture admission tickets.

33           (39) Any limousine service and usage fees.

34           (40) Any dating service fees.



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1            44-18-12. "Sale price" defined. -- (a) "Sales price" applies to the measure subject to

2    sales tax and means the total amount of consideration, including cash, credit, property, and

3    services, for which personal property or services are sold, leased, or rented, valued in money,

4    whether received in money or otherwise, without any deduction for the following:

5             (i) The seller's cost of the property sold;

6              (ii) The cost of materials used, labor or service cost, interest, losses, all costs of

7    transportation to the seller, all taxes imposed on the seller, and any other expense of the seller;

8              (iii) Charges by the seller for any services necessary to complete the sale, other than

9    delivery and installation charges;

10            (iv) Delivery charges, as defined in section 44-18-7.1(i); or

11            (v) Credit for any trade-in, as determined by state law.

12            (b) "Sales price" shall not include:

13            (i) Discounts, including cash, term, or coupons that are not reimbursed by a third party

14   that are allowed by a seller and taken by a purchaser on a sale;

15            (ii) The amount charged for labor or services rendered in installing or applying the

16   property sold when the charge is separately stated by the retailer to the purchaser; provided that in

17   transactions subject to the provisions of this chapter the retailer shall separately state such charge

18   when requested by the purchaser and, further, the failure to separately state such charge when

19   requested may be restrained in the same manner as other unlawful acts or practices prescribed in

20   chapter 13.1 of title 6.

21            (iii) (ii) Interest, financing, and carrying charges from credit extended on the sale of

22   personal property or services, if the amount is separately stated on the invoice, bill of sale or

23   similar document given to the purchaser; and

24            (iv) (iii) Any taxes legally imposed directly on the consumer that are separately stated on

25   the invoice, bill of sale or similar document given to the purchaser.

26            (v) (iv) Manufacturer rebates allowed on the sale of motor vehicles.

27            (c) "Sales price" shall include consideration received by the seller from third parties if:

28            (i) The seller actually receives consideration from a party other than the purchaser and

29   the consideration is directly related to a price reduction or discount on the sale;

30             (ii) The seller has an obligation to pass the price reduction or discount through to the

31   purchaser;

32            (iii) The amount of the consideration attributable to the sale is fixed and determinable by

33   the seller at the time of the sale of the item to the purchaser; and

34            (iv) One of the following criteria is met:



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1             (A) The purchaser presents a coupon, certificate or other documentation to the seller to

2    claim a price reduction or discount where the coupon, certificate or documentation is authorized,

3    distributed or granted by a third party with the understanding that the third party will reimburse

4    any seller to whom the coupon, certificate or documentation is presented;

5             (B) The purchaser identifies himself or herself to the seller as a member of a group or

6    organization entitled to a price reduction or discount (a "preferred customer" card that is available

7    to any patron does not constitute membership in such a group), or

8             (C) The price reduction or discount is identified as a third party price reduction or

9    discount on the invoice received by the purchaser or on a coupon, certificate or other

10   documentation presented by the purchaser.

11           44-18-18. Sales tax imposed. -- A tax is imposed upon sales at retail in this state

12   including charges for rentals of living quarters in hotels, rooming houses, or tourist camps, at the

13   rate of six percent (6%) of the gross receipts of the retailer from the sales or rental charges;

14   provided, that the tax imposed on charges for the rentals applies only to the first period of not

15   exceeding thirty (30) consecutive calendar days of each rental; provided, further, that for the

16   period commencing July 1, 1990, the tax rate is seven percent (7%). Commencing on January 1,

17   2010, the rate shall be six and one half percent (6.5%). Commencing on January 1, 2011, the tax

18   rate shall be six percent (6%). Commencing on January 1, 2012 and thereafter the tax rate shall be

19   five and one half percent (5.5%). The tax is paid to the tax administrator by the retailer at the time

20   and in the manner provided. Excluded from this tax are those living quarters in hotels, rooming

21   houses, or tourist camps for which the occupant has a written lease for the living quarters which

22   lease covers a rental perio d of twelve (12) months or more.

23           44-18-20. Use tax imposed. -- (a) An excise tax is imposed on the storage, use, or other

24   consumption in this state of tangible personal property, including a motor vehicle, a boat, an

25   airplane, or a trailer, purchased from any retailer at the rate of six percent (6%) of the sale price of

26   the property.

27            (b) An excise tax is imposed on the storage, use, or other consumption in this state of a

28   motor vehicle, a boat, an airplane, or a trailer purchased from other than a licensed motor vehicle

29   dealer or other than a retailer of boats, airplanes, or trailers respectively, at the rate of six percent

30   (6%) of the sale price of the motor vehicle, boat, airplane, or trailer.

31            (c) The word "trailer" as used in this section and in section 44-18-21 means and includes

32   those defined in section 31-1-5(a) -- (e) and also includes boat trailers, camping trailers, house

33   trailers, and mobile homes.

34            (d) Notwithstanding the provisions contained in this section and in section 44-18-21



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1    relating to the imposition of a use tax and liability for this tax on certain casual sales, no tax is

2    payable in any casual sale:

3               (1) When the transferee or purchaser is the spouse, mother, father, brother, sister, or

4    child of the transferor or seller;

5               (2) When the transfer or sale is made in connection with the organization, reorganization,

6    dissolution, or partial liquidation of a business entity; provided:

7               (i) The last taxable sale, transfer, or use of the article being transferred or sold was

8    subjected to a tax imposed by this chapter;

9               (ii) The transferee is the business entity referred to or is a stockholder, owner, member,

10   or partner; and

11              (iii) Any gain or loss to the transferor is not recognized for income tax purposes under

12   the provisions of the federal income tax law and treasury regulations and rulings issued

13   thereunder; or

14              (3) When the sale or transfer is of a trailer, other than a camping trailer, of the type

15   ordinarily used for residential purposes and commonly known as a house trailer or as a mobile

16   home; or

17              (4) (3) When the transferee or purchaser is exempt under the provisions of section 44-18-

18   30 or other general law of this state or special act of the general assembly of this state.

19              (e) The term "casual" means a sale made by a person other than a retailer; provided, that

20   in the case of a sale of a motor vehicle, the term means a sale made by a person other than a

21   licensed motor vehicle dealer or an auctioneer at an auction sale. In no case is the tax imposed

22   under the provisions of subsections (a) and (b) of this section on the storage, use, or other

23   consumption in this state of a used motor vehicle less than the product obtained by multiplying

24   the amount of the retail dollar value at the time of purchase of the motor vehicle by the applicable

25   tax rate; provided, that where the amount of the sale price exceeds the amount of the retail dollar

26   value, the tax is based on the sale price. The tax administrator shall use as his or her guide the

27   retail dollar value as shown in the current issue of any nationally recognized used vehicle guide

28   for appraisal purposes in this state. On request within thirty (30) days by the taxpayer after

29   payment of the tax, if the tax administrator determines that the retail dollar value as stated in this

30   subsection is inequitable or unreasonable, he or she shall, after affording the taxpayer reasonable

31   opportunity to be heard, re-determine the tax.

32              (f) Every person making more than five (5) retail sales of tangible personal property

33   during any twelve (12) month period, including sales made in the capacity of assignee for the

34   benefit of creditors or receiver or trustee in bankruptcy, is considered a retailer within the



                                                       12
1    provisions of this chapter.

2             (g) (1) "Casual sale" includes a sale of tangible personal property not held or used by a

3    seller in the course of activities for which the seller is required to hold a seller's permit or permits

4    or would be required to hold a seller's permit or permits if the activities were conducted in this

5    state; provided, that the sale is not one of a series of sales sufficient in number, scope, and

6    character (more than five (5) in any twelve (12) month period) to constitute an activity for which

7    the seller is required to hold a seller's permit or would be required to hold a seller's permit if the

8    activ ity were conducted in this state.

9             (2) Casual sales also include sales made at bazaars, fairs, picnics, or similar events by

10   nonprofit organizations, which are organized for charitable, educational, civic, religious, social,

11   recreational, fraternal, or literary purposes during two (2) events not to exceed a total of six (6)

12   days duration each calendar year. Each event requires the issuance of a permit by the division of

13   taxation. Where sales are made at events by a vendor, which holds a sales tax permit and is not a

14   nonprofit organization, the sales are in the regular course of business and are not exempt as casual

15   sales.

16            (h) The use tax imposed under this section for the period commencing July 1, 1990 is at

17   the rate of seven percent (7%).

18            44-18-21. Liability for use tax. -- (a) Every person storing, using, or consuming in this

19   state tangible personal property, including a motor vehicle, boat, airplane, or trailer, purchased

20   from a retailer, and a motor vehicle, boat, airplane, or trailer, purchased from other than a

21   licensed motor vehicle dealer or other than a retailer of boats, airplanes, or trailers respectively, is

22   liable for the use tax. The person's liability is not extinguished until the tax has been paid to this

23   state, except that a receipt from a retailer engaging in business in this state or from a retailer who

24   is authorized by the tax administrator to collect the tax under rules and regulations that he or she

25   may prescribe, given to the purchaser pursuant to the provisions of section 44-18-22, is sufficient

26   to relieve the purchaser from further liability for the tax to which the receipt refers.

27            (b) Each person before obtaining an original or transferral registration for any article or

28   commodity in this state, which article or commodity is required to be licensed or registered in the

29   state, shall furnish satisfactory evidence to the tax administrator that any tax due under this

30   chapter with reference to the article or commodity has been paid, and for the purpose of effecting

31   compliance, the tax admin istrator, in addition to any other powers granted to him or her, may

32   invoke the provisions of section 31-3-4 in the case of a motor vehicle. The tax administrator,

33   when he or she deems it to be for the convenience of the general public, may authorize any

34   agency of the state concerned with the licensing or registering of these articles or commodities to



                                                       13
1    collect the use tax on any articles or commodities which the purchaser is required by this chapter

2    to pay before receiving an original or transferral registration. The general assembly shall annually

3    appropriate a sum that it deems necessary to carry out the purposes of this section.

4    Notwithstanding the provisions of sections 44-18-19, 44-18-22, and 44-18-24, the sales or use tax

5    on any motor vehicle and/or recreational vehicle requiring registration by the administrator of the

6    division of motor vehicles shall not be added by the retailer to the sale price or charge but shall be

7    paid directly by the purchaser to the tax administrator, or his or her authorized deputy or agent as

8    provided in this section.

9                (c) In cases involving total loss or destruction of a motor vehicle occurring within one

10   hundred twenty (120) days from the date of purchase and upon which the purchaser has paid the

11   use tax, the amount of the tax constitutes an overpayment. The amount of the overpayment may

12   be credited against the amount of use tax on any subsequent vehicle which the owner acquires to

13   replace the lost or destroyed vehicle or may be refunded, in whole or in part.

14               44-18-30. Gross receipts exempt from sales and use taxes. -- There are exempted from

15   the taxes imposed by this chapter the following gross receipts:

16               (1) Sales and uses beyond constitutional power of state. - From the sale and from the

17                                      n
     storage, use, or other consumption i this state of tangible personal property the gross receipts

18   from the sale of which, or the storage, use, or other consumption of which, this state is prohibited

19   from taxing under the Constitution of the United States or under the constitution of this state.

20               (2) Newspapers.

21               (i) From the sale and from the storage, use, or other consumption in this state of any

22   newspaper.

23               (ii) "Newspaper" means an unbound publication printed on newsprint, which contains

24   news, editorial comment, opinions, features, advertising matter, and other matters of public

25   interest.

26               (iii) "Newspaper" does not include a magazine, handbill, circular, flyer, sales catalog, or

27   similar item unless the item is printed for and distributed as a part of a newspaper.

28               (3) (2) School meals. - From the sale and from the storage, use, or other consumption in

29   this state of meals served by public, private, or parochial schools, school districts, colleges,

30   universities, student organizations, and parent teacher associations to the students or teachers of a

31   school, college, or university whether the meals are served by the educational institutions or by a

32   food service or management entity under contract to the educational institutions.

33               (4) (3) Containers.

34               (i) From the sale and from the storage, use, or other consumption in this state of (C)



                                                        14
1    Returnable containers when sold with the contents in connection with a retail sale of the contents

2    or when resold for refilling.

3             (A) Non-returnable containers, including boxes, paper bags, and wrapping materials

4    which are biodegradable and all bags and wrapping materials utilized in the medical and healing

5    arts, when sold without the contents to persons who place the contents in the container and sell

6    the contents with the container.

7             (B) Containers when sold with the contents if the sale price of the contents is not

8    required to be included in the measure of the taxes imposed by this chapter.

9              (ii) As used in this subdivision, the term "returnable containers" means containers of a

10   kind customarily returned by the buyer of the contents for reuse. All other containers are "non-

11   returnable containers."

12            (5) (4) (i) Charitable, educational, and religious organizations. - From the sale to as in

13   defined in this section, and from the storage, use, and other consumption in this state or any other

14   state of the United States of America of tangible personal property by hospitals not operated for a

15   profit, "educational institutions" as defined in subdivision (18) not operated for a profit, churches,

16   orphanages, and other institutions or organizations operated exclusively for religious or charitable

17   purposes, interest free loan associations not operated for profit, nonprofit organized sporting

18   leagues and associations and bands for boys and girls under the age of nineteen (19) years, the

19   following vocational student organizations that are state chapters of national vocational students

20   organizations: Distributive Education Clubs of America, (DECA); Future Business Leaders of

21   America, phi beta lambda (FBLA/PBL); Future Farmers of America (FFA); Future Homemakers

22   of America/Home Economics Related Occupations (FHA/HERD); and Vocational Industrial

23   Clubs of America (VICA), organized nonprofit golden age and senior citizens clubs for men and

24   women, and parent teacher associations.

25            (ii) In the case of contracts entered into with the federal government, its agencies or

26   instrumentalities, this state or any other state of the United States of America, its agencies, any

27   city, town, district, or other political subdivision of the states, hospita ls not operated for profit,

28   educational institutions not operated for profit, churches, orphanages, and other institutions or

29   organizations operated exclusively for religious or charitable purposes, the contractor may

30   purchase such materials and supplies (materials and/or supplies are defined as those which are

31   essential to the project) that are to be utilized in the construction of the projects being performed

32   under the contracts without payment of the tax.

33            (iii) The contractor shall not charge any sales or use tax to any exempt agency,

34   institution, or organization but shall in that instance provide his or her suppliers with certificates



                                                       15
1    in the form as determined by the division of taxation showing the reason for exemption; and the

2    contractor's records must substantiate the claim for exemption by showing the disposition of all

3    property so purchased. If any property is then used for a nonexempt purpose, the contractor must

4    pay the tax on the property used.

5             (6) (5) Gasoline. - From the sale and from the storage, use, or other consumption in this

6    state of: (i) gasoline and other products taxed under chapter 36 of title 31, and (ii) fuels used for

7    the propulsion of airplanes.

8             (7) (6) Purchase for manufacturing purposes.

9             (i) From the sale and from the storage, use, or other consumption in this state of

10   computer software, tangible personal property, electricity, natural gas, artificial gas, steam,

11   refrigeration, and water, when the property or service is purchased for the purpose of being

12   manufactured into a finished product for resale, and becomes an ingredient, component, or

13   integral part of the manufactured, compounded, processed, assembled, or prepared product, or if

14   the property or service is consumed in the process of manufacturing for resale computer software,

15   tangible personal property, electricity, natural gas, artificial gas, steam, refrigeration, or water.

16            (ii) "Consumed" means destroyed, used up, or worn out to the degree or extent that the

17   property cannot be repaired, reconditioned, or rendered fit for further manufacturing use.

18            (iii) "Consumed" includes mere obsolescence.

19            (iv) "Manufacturing" means and includes manufacturing, compounding, processing,

20   assembling, preparing, or producing.

21            (v) "Process of manufacturing" means and includes all production operations performed

22   in the producing or processing room, shop, or plant, insofar as the operations are a part of and

23   connected with the manufacturing for resale of tangible personal property, electricity, natural gas,

24   artificial gas, steam, refrigeration, or water and all production operations performed insofar as the

25   operations are a part of and connected with the manufacturing for resale of computer software.

26            (vi) "Process of manufacturing" does not mean or include administration operations such

27   as general office operations, accounting, collection, sales promotion, nor does it mean or include

28   distribution operations which occur subsequent to production operations, such as handling,

29   storing, selling, and transporting the manufactured products, even though the administration and

30   distribution operations are performed by or in connection with a manufacturing business.

31            (8) (7) State and political subdivisions. - From the sale to, and from the storage, use, or

32   other consumption by, this state, any city, town, district, or other political subdivision of this

33   state. Every redevelopment agency created pursuant to chapter 31 of title 45 is deemed to be a

34   subdivision of the municipality where it is located.



                                                        16
1               (9) (8) Food and food ingredients. - From the sale and storage, use, or other consumption

2    in this state of food and food ingredients as defined in section 44-18-7.1(l).

3               For the purposes of this exemption "food and food ingredients" shall not include candy,

4    soft drinks, dietary supplements, alcoholic beverages, tobacco, food sold through vending

5    machines or prepared food (as those terms are defined in section 44-18-7.1, unless the prepared

6    food is:

7               (i) Sold by a seller whose primary NAICS classification is manufacturing in sector 311,

8    except sub-sector 3118 (bakeries);

9               (ii) Sold in an unheated state by weight or volume as a single item;

10              (iii) Bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries,

11   donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, tortillas; and

12              is not sold with utensils provided by the seller, including plates, knives, forks, spoons,

13   glasses, cups, napkins, or straws.

14              (10) (9) Medicines, drugs and durable medical equipment. - From the sale and from the

15   storage, use, or other consumption in this state, of;

16              (i) "Drugs" as defined in section 44-18-7.1(h)(i), sold on prescriptions, medical oxygen,

17   and insulin whether or not sold on prescription, and over-the-counter drugs as defined in section

18   44-18-7.1(h)(ii). For purposes of this exemption over-the-counter drugs shall not include

19   grooming and hygiene products as defined in section 44-18-7.1(h)(iii).

20              (ii) Durable medical equipment as defined in section 44-18-7.1(k) for home use only,

21   including, but not limited to, syringe infusers, ambulatory drug delivery pumps, hospital beds,

22   convalescent chairs, and chair lifts. Supplies used in connection with syringe infusers and

23   ambulatory drug delivery pumps which are sold on prescription to individuals to be used by them

24   to dispense or administer prescription drugs, and related ancillary dressings and supplies used to

25   dispense or administer prescription drugs shall also be exempt from tax.

26              (11) (10) Prosthetic devices and mobility enhancing equipment. - From the sale and

27   from the storage, use, or other consumption in this state, of prosthetic devices as defined in

28   section 44-18-7.1(t), sold on prescription, including but not limited to, artificial limbs, dentures,

29   spectacles and eyeglasses, and artificial eyes; artificial hearing devices and hearing aids, whether

30   or not sold on prescription and mobility enhancing equipment as defined in section 44-18-7.1(p)

31   including wheelchairs, crutches and canes.

32              (12) (11) Coffins, caskets, and burial garments. - From the sale and from the storage,

33   use, or other consumption in this state of coffins or caskets, and shrouds or other burial garments

34   which are ordinarily sold by a funeral director as part of the business of funeral directing.



                                                        17
1             (13) (12) Motor vehicles sold to nonresidents.

2                                              une 30, 1958, of a motor vehicle to a bona fide
              (i) From the sale, subsequent to J

3    nonresident of this state who does not register the motor vehicle in this state, whether the sale or

4    delivery of the motor vehicle is made in this state or at the place of residence of the nonresident.

5    A motor vehicle sold to a bona fide nonresident whose state of residence does not allow a like

6    exemption to its nonresidents is not exempt from the tax imposed under section 44-18-20. In that

7    event the bona fide nonresident pays a tax to Rhode Island on the sale at a rate equal to the rate

8    that would be imposed in his or her state of residence not to exceed the rate that would have been

9    imposed under section 44-18-20. Notwithstanding any other provisions of law, a licensed motor

10   vehicle dealer shall add and colle ct the tax required under this subdivision and remit the tax to the

11   tax administrator under the provisions of chapters 18 and 19 of this title. When a Rhode Island

12   licensed motor vehicle dealer is required to add and collect the sales and use tax on the sale of a

13   motor vehicle to a bona fide nonresident as provided in this section, the dealer in computing the

14   tax takes into consideration the law of the state of the nonresident as it relates to the trade-in of

15   motor vehicles.

16            (ii) The tax administrator, in addition to the provisions of sections 44-19-27 and 44-19-

17   28, may require any licensed motor vehicle dealer to keep records of sales to bona fide

18   nonresidents as the tax administrator deems reasonably necessary to substantiate the exemption

19   provided in this subdivision, including the affidavit of a licensed motor vehicle dealer that the

20   purchaser of the motor vehicle was the holder of, and had in his or her possession a valid out of

21   state motor vehicle registration or a valid out of state driver's license.

22            (iii) Any nonresident who registers a motor vehicle in this state within ninety (90) days

23   of the date of its sale to him or her is deemed to have purchased the motor vehicle for use,

24   storage, or other consumption in this state, and is subject to, and liable for the use tax imposed

25   under the provisions of section 44-18-20.

26            (14) (13) Sales in public buildings by blind people. - From the sale and from the storage,

27   use, or other consumption in all public buildings in this state of all products or wares by any

28   person licensed under section 40-9-11.1.

29            (15) (14) Air and water pollution control facilities. - From the sale, storage, use, or other

30   consumption in this state of tangible personal property or supplies acquired for incorporation into

31   or used and consumed in the operation of a facility, the primary purpose of which is to aid in the

32   control of the pollution or contamination of the waters or air of the state, as defined in chapter 12

33   of title 46 and chapter 25 of title 23, respectively, and which has been certified as approved for

34   that purpose by the director of environmental management. The director of environmental



                                                        18
1    management may certify to a portion of the tangible personal property or supplies acquired for

2    incorporation into those facilities or used and consumed in the operation of those facilities to the

3    extent that that portion has as its primary purpose the control of the pollution or contamination of

4    the waters or air of this state. As used in this subdivision, "facility" means any land, facility,

5    device, building, machinery, or equipment.

6             (16) (15) Camps. - From the rental charged for living quarters, or sleeping or

7    housekeeping accommodations at camps or retreat houses operated by nonprofit religious,

8    charitable, educational, or other organizations and associations mentioned in subdivision (5), as

9    long as no less than seventy-five percent (75%) of the campers are bonafide residents of the state

10   of Rhode Island. or by privately owned and operated summer camps for children.

11            (17) Certain institutions. - From the rental charged for living or sleeping quarters in an

12   institution licensed by the state for the hospitalization, custodial, or nursing care of human beings.

13            (18) (16) Educational institutions. - From the rental charged by any educational

14   institution for living quarters, or sleeping or housekeeping accommodations or other rooms or

15   accommodations to any student or teacher necessitated by attendance at an educational

16   institution. "Educational institution" as used in this section means an institution of learning not

17   operated for profit which is empowered to confer diplomas, educational, literary, or academic

18   degrees, which has a regular faculty, curriculum, and organized body of pupils or students in

19   attendance throughout the usual school year, which keeps and furnishes to students and others

20   records required and accepted for entrance to schools of secondary, collegiate, or graduate rank,

21   no part of the net earnings of which inures to the benefit of any individual.

22            (19) (17) Motor vehicle and adaptive equipment for persons with disabilities.

23            (i) From the sale of: (A) special adaptations, (B) the component parts of the special

24   adaptations, or (C) a specially adapted motor vehicle; provided, that the owner furnishes to the

25   tax administrator an affidavit of a licensed physician to the effect that the specially adapted motor

26   vehicle is necessary to transport a family member with a disability or where the vehicle has been

27   specially adapted to meet the specific needs of the person with a disability. This exemption

28   applies to not more than one motor vehicle owned and registered for personal, noncommercial

29   use.

30            (ii) For the purpose of this subsection the term "special adaptations" includes, but is not

31   limited to: wheelchair lifts; wheelchair carriers; wheelchair ramps; wheelchair securements; hand

32   controls; steering devices; extensions, relocations, and crossovers of operator controls; power-

33   assisted controls; raised tops or dropped floors; raised entry doors; or alternative signaling

34   devices to auditory signals.



                                                      19
1              (iii) [Effective until January 1, 2008.]For the purpose of this subdivision the exemption

2    for a "specially adapted motor vehicle" means a use tax credit not to exceed the amount of use tax

3    that would otherwise be due on the motor vehicle, exclusive of any adaptations. The use tax credit

4    is equal to the cost of the special adaptations, including installation.

5              (iii) [Effective January 1, 2008.]From the sale of: (a) special adaptations, (b) the

6    component parts of the special adaptations, for a "wheelchair accessible taxicab" as defined in

7    section 39-14-1 and/or a "wheelchair accessible public motor vehicle" as defined in section 39-

8    14.1-1.

9              (iv) [Effective January 1, 2008.]For the purpose of this subdivision the exemption for a

10   "specially adapted motor vehicle" means a use tax credit not to exceed the amount of use tax that

11   would otherwise be due on the motor vehicle, exclusive of any adaptations. The use tax credit is

12   equal to the cost of the special adaptations, including installation.

13             (20) (18) Heating fuels. - From the sale and from the storage, use, or other consumption

14   in this state of every type of fuel used in the heating of homes and residential premises.

15             (21) (19) Electricity and gas. - From the sale and from the storage, use, or other

16   consumptio n in this state of electricity and gas furnished for domestic use by occupants of

17   residential premises.

18             (22) (20) Manufacturing machinery and equipment.

19             (i) From the sale and from the storage, use, or other consumption in this state of tools,

20   dies, and molds, and machinery and equipment (including replacement parts), and related items to

21   the extent used in an industrial plant in connection with the actual manufacture, conversion, or

22   processing of tangible personal property, or to the extent used in connection with the actual

23   manufacture, conversion or processing of computer software as that term is utilized in industry

24   numbers 7371, 7372, and 7373 in the standard industrial classification manual prepared by the

25   technical committee on industrial classification, office of statistical standards, executive office of

26   the president, United States bureau of the budget, as revised from time to time, to be sold, or that

27   machinery and equipment used in the furnishing of power to an industrial manufacturing plant.

28   For the purposes of this subdivision, "industrial plant" means a factory at a fixed location

29   primarily engaged in the manufacture, conversion, or processing of tangible personal property to

30   be sold in the regular course of business;

31             (ii) Machinery and equipment and related items are not deemed to be used in connection

32   with the actual manufacture, conversion, or processing of tangible personal property, or in

33   connection with the actual manufacture, conversion or processing of computer software as that

34   term is utilized in industry numbers 7371, 7372, and 7373 in the standard industrial classification



                                                        20
1    manual prepared by the technical committee on industrial classification, office of statistical

2    standards, executive office of the president, United States bureau of the budget, as revised from

3    time to time, to be sold to the extent the property is used in administration or distribution

4    operations;

5             (iii) Machinery and equipment and related items used in connection with the actual

6    manufacture, conversion, or processin g of any computer software or any tangible personal

7    property which is not to be sold and which would be exempt under subdivision (7) or this

8    subdivision if purchased from a vendor or machinery and equipment and related items used

9    during any manufacturing, converting or processing function is exempt under this subdivision

10   even if that operation, function, or purpose is not an integral or essential part of a continuous

11   production flow or manufacturing process;

12            (iv) Where a portion of a group of portable or mobile machinery is used in connection

13   with the actual manufacture, conversion, or processing of computer software or tangible personal

14   property to be sold, as previously defined, that portion, if otherwise qualifying, is exempt under

15   this subdivision even though the machinery in that group is used interchangeably and not

16   otherwise identifiable as to use.

17            (23) Trade-in value of motor vehicles. - From the sale and from the storage, use, or other

18   consumption in this state of so much of the purchase price paid for a new or used automobile as is

19   allocated for a trade-in allowance on the automobile of the buyer given in trade to the seller or of

20   the proceeds applicable only to the motor vehicle as are received from an insurance claim as a

21   result of a stolen or damaged motor vehicle, or of the proceeds applicable only to the automobile

22   as are received from the manufacturer of automobiles for the repurchase of the automobile

23   whether the repurchase was voluntary or not towards the purchase of a new or used automobile

24   by the buyer; provided, that the proceeds from an insurance claim or repurchase is in lieu of the

25   benefit prescribed in section 44-18-21 for the total loss or destruction of the automobile; and

26   provided, further, that the tax has not been reimbursed as part of the insurance claim or

27   repurchase. For the purpose of this subdivision, the word "automobile" means a private passenger

28   automobile not used for hire and does not refer to any other type of motor vehicle.

29            (24) Precious metal bullion.

30            (i) From the sale and from the storage, use, or other consumption in this state of precious

31   metal bullion, substantially equivalent to a transaction in securities or commodities.

32            (ii) For purposes of this subdivision, "precious metal bullion" means any elementary

33   precious metal which has been put through a process of smelting or refining, including, but not

34   limited to, gold, silver, platinum, rhodium, and chromium, and which is in a state or condition



                                                      21
1    that its value depends upon its content and not upon its form.

2               (iii) The term does not include fabricated precious metal which has been processed or

3    manufactured for some one or more specific and customary industrial, professional, or artistic

4    uses.

5               (25) (21) Commercial vessels. - From sales made to a commercial ship, barge, or other

6    vessel of fifty (50) tons burden or over, primarily engaged in interstate or foreign commerce, and

7    from the repair, alteration, or conversion of the vessels, and from the sale of property purchased

8    for the use of the vessels including provisions, supplies, and material for the maintenance and/or

9    repair of the vessels.

10              (26) (22) Commercial fishing vessels. - From the sale and from the storage, use, or other

11   consumption in this state of vessels and other water craft which are in excess of five (5) net tons

12   and which are used exclusively for "commercial fishing", as defined in this subdivision, and from

13   the repair, alteration, or conversion of those vessels and other watercraft, and from the sale of

14   property purchased for the use of those vessels and other watercraft including provisions,

15   supplies, and material for the maintenance and/or repair of the vessels and other watercraft and

16   the boats nets, cables, tackle, and other fishing equipment appurtenant to or used in connection

17   with the commercial fishing of the vessels and other watercraft. "Commercial fishing" means the

18   taking or the attempting to take any fish, shellfish, crustacea, or bait species with the intent of

19   disposing of them for profit or by sale, barter, trade, or in commercial channels. The term does

20   not include subsistence fishing, i.e., the taking for personal use and not for sale or barter; or sport

21   fishing; but shall include vessels and other watercraft with a Rhode Island party and charter boat

22   license issued by the department of environmental management pursuant to section 20-2-27.1

23   which meet the following criteria: (i) the operator must have a current U.S.C.G. license to carry

24   passengers for hire; (ii) U.S.C.G. vessel documentation in the coast wide fishery trade; (iii)

25   U.S.C.G. vessel documentation as to proof of Rhode Island home port status or a Rhode Island

26   boat registration to prove Rhode Island home port status; (iv) the vessel must be used as a

27   commercial passenger carrying fishing vessel to carry passengers for fishing. The vessel must be

28   able to demonstrate that at least fifty percent (50%) of its annual gross income derives from

29   charters or provides documentation of a minimum of one hundred (100) charter trips annually; (v)

30   the vessel must have a valid Rhode Island party and charter boat license. The tax administrator

31   shall implement the provisions of this subdivision by promulgating rules and regulations relating

32   thereto.

33              (27) (23) Clothing and footwear. - From the sales of single articles worth less than two

34   hundred fifty dollars ($250) each, of clothing, including footwear, intended to be worn or carried



                                                       22
1    on or about the human body. For the purposes of this section, "clothing or footwear" does not

2    include clothing accessories or equipment or special clothing or footwear primarily designed for

3    athletic activity or protective use as these terms are defined in section 44-18-7.1(f).

4             (28) (24) Water for residential use. - From the sale and from the storage, use, or other

5    consumption in this state of water furnished for domestic use by occupants of residential

6    premises.

7             (29) (25) Bibles. - [Unconstitutional; see Ahlburn v. Clark, 728 A.2d 449 (R.I. 1999);

8    see Notes to Decisions.]From the sale and from the storage, use, or other consumption in the state

9    of any canonized scriptures of any tax-exempt nonprofit religious organization including, but not

10   limited to, the Old Testament and the New Testament versions.

11            (30) (26) Boats.

12            (i) From the sale of a boat or vessel to a bona fide nonresident of this state who does not

13   register the boat or vessel in this state, or document the boat or vessel with the United States

14   government at a home port within the state, whether the sale or delivery of the boat or vessel is

15   made in this state or elsewhere; provided, that the nonresident transports the boat within thirty

16   (30) days after delivery by the seller outside the state for use thereafter solely outside the state.

17            (ii) The tax administrator, in addition to the provisions of sections 44-19-17 and 44-19-

18   28, may require the seller of the boat or vessel to keep records of the sales to bona fide

19   nonresidents as the tax administrator deems reasonably necessary to substantiate the exemption

20   provided in this subdivision, including the affidavit of the seller that the buyer represented

21   himself or herself to be a bona fide nonresident of this state and of the buyer that he or she is a

22   nonresident of this state.

23            (31) (27) Youth activities equipment. - From the sale, storage, use, or other consumption

24   in this state of items for not more than twenty dollars ($20.00) each by nonprofit Rhode Island

25   eleemosynary organizations, for the purposes of youth activities which the organization is formed

26   to sponsor and support; and by accredited elementary and secondary schools for the purposes of

27   the schools or of organized activities of the enrolled students.

28            (32) (28) Farm equipment. - From the sale and from the storage or use of machinery and

29   equipment used directly for commercial farming and agricultural production; including, but not

30   limited to, tractors, ploughs, harrows, spreaders, seeders, milking machines, silage conveyors,

31   balers, bulk milk storage tanks, trucks with farm plates, mowers, combines, irrigation equipment,

32   greenhouses and greenhouse coverings, graders and packaging machines, tools and supplies and

33   other farming equipment, including replacement parts, appurtenant to or used in connection with

34   commercial farming and tools and supplies used in the repair and maintenance of farming



                                                        23
1    equipment. "Commercial farming" means the keeping or boarding of five (5) or more horses or

2    the production within this state of agricultural products, including, but not limited to, field or

3    orchard crops, livestock, dairy, and poultry, or their products, where the keeping, boarding, or

4    production provides at least two thousand five hundred dollars ($2,500) in annual gross sales to

5    the operator, whether an individual, a group, a partnership, or a corporation for exemptions issued

6    prior to July 1, 2002; for exemptions issued or renewed after July 1, 2002, there shall be two (2)

7    levels. Level I shall be based on proof of annual gross sales from commercial farming of at least

8    twenty-five hundred dollars ($2,500) and shall be valid for purchases subject to the exemption

9    provided in this subdivision except for motor vehicles with an excise tax value of five thousand

10   dollars ($5,000) or greater; Level II shall be based on proof of annual gross sales from

11   commercial farming of at least ten thousand dollars ($10,000) or greater and shall be valid for

12   purchases subject to the exemption provided in this subdivision including motor vehicles with an

13   excise tax value of five thousand dollars ($5,000) or greater. For the initial issuance of the

14   exemptions, proof of the requisite amount of annual gross sales from commercial farming shall be

15   required for the prior year; for any renewal of an exemption granted in accordance with this

16   subdivision at either Level I or Level II, proof of gross annual sales from commercial farming at

17   the requisite amount shall be required for each of the prior two (2) years. Certificates of

18   exemption issued or renewed after July 1, 2002, shall clearly indicate the level of the exemption

19   and be valid for four (4) years after the date of issue. This exemption applies even if the same

20   equipment is used for ancillary uses, or is temporarily used for a non-farming or a non-

21   agricultural purpose, but shall not apply to motor vehicles acquired after July 1, 2002, unless the

22   vehicle is a farm vehicle as defined pursuant to section 31-1-8 and is eligible for registration

23   displaying farm plates as provided for in section 31-3-31.

24            (33) Compressed air. - From the sale and from the storage, use, or other consumption in

25   the state of compressed air.

26            (34) (29) Flags. - From the sale and from the storage, consumption, or other use in this

27   state of United States, Rhode Island or POW-MIA flags.

28            (35) (30) Motor vehicle and adaptive equipment to certain veterans. - From the sale of a

29   motor vehicle and adaptive equipment to and for the use of a veteran with a service-connected

30   loss of or the loss of use of a leg, foot, hand, or arm, or any veteran who is a double amputee,

31   whether service connected or not. The motor vehicle must be purchased by and especially

32   equipped for use by the qualifying veteran. Certificate of exemption or refunds of taxes paid is

33   granted under rules or regulations that the tax administrator may prescribe.

34            (36) (31) Textbooks. - From the sale and from the storage, use, or other consumption in



                                                     24
1    this state of textbooks by an "educational institution" as defined in subdivision (18) of this section

2    and as well as any educational institution within the purview of section 16-63-9(4) and used

3    textbooks by any purveyor.

4             (37) (32) Tangible personal property and supplies used in on-site hazardous waste

5    recycling, reuse, or treatment. - From the sale, storage, use, or other consumption in this state of

6    tangible personal property or supplies used or consumed in the operation of equipment, the

7    exclusive function of which is the recycling, reuse, or recovery of materials (other than precious

8    metals, as defined in subdivision (24)(ii) of this section) from the treatment of "hazardous

9    wastes", as defined in section 23-19.1-4, where the "hazardous wastes" are generated in Rhode

10   Island solely by the same taxpayer and where the personal property is located at, in, or adjacent to

11   a generating facility of the taxpayer in Rhode Island. The taxpayer shall procure an order from the

12   director of the department of environmental management certifying that the equipment and/or

13   supplies as used, or consumed, qualify for the exemption under this subdivision. If any

14   information relating to secret processes or methods of manufacture, production, or treatment is

15   disclosed to the department of environmental management only to procure an order, and is a

16   "trade secret" as defined in section 28-21-10(b), it is not open to public inspection or publicly

17   disclosed unless disclosure is required under chapter 21 of title 28 or chapter 24.4 of title 23.

18            (38) Promotional and product literature of boat manufacturers. - From the sale and from

19   the storage, use, or other consumption of promotional and product literature of boat

20   manufacturers shipped to points outside of Rhode Island which either: (i) accompany the product

21   which is sold, (ii) are shipped in bulk to out of state dealers for use in the sale of the product, or

22   (iii) are mailed to customers at no charge.

23            (39) (33) Food items paid for by food stamps. - From the sale and from the storage, use,

24   or other consumption in this state of eligible food items payment for which is properly made to

25   the retailer in the form of U.S. government food stamps issued in accordance with the Food

26   Stamp Act of 1977, 7 U.S.C. section 2011 et seq.

27            (40) (34) Transportation charges. - From the sale or hiring of motor carriers as defined in

28   section 39-12-2(l) to haul goods, when the contract or hiring cost is charged by a motor freight

29   tariff filed with the Rhode Island public utilities commission on the number of miles driven or by

30   the number of hours spent on the job.

31            (41) (35) Trade-in value of boats. - From the sale and from the storage, use, or other

32   consumption in this state of so much of the purchase price paid for a new or used boat as is

33   allocated for a trade-in allowance on the boat of the buyer given in trade to the seller or of the

34   proceeds applicable only to the boat as are received from an insurance claim as a result of a stolen



                                                       25
1    or damaged boat, towards the purchase of a new or used boat by the buyer.

2               (42) Equipment used for research and development. - From the sale and from the

3    storage, use, or other consumption of equipment to the extent used for research and development

4    purposes by a qualifying firm. For the purposes of this subdivision, "qualifying firm" means a

5    business for which the use of research and development equipment is an integral part of its

6    operation, and "equipment" means scientific equipment, computers, software, and related items.

7               (43) (36) Coins. - From the sale and from the other consumption in this state of coins

8    having numismatic or investment value.

9               (44) (37) Farm structure construction materials. - Lumber, hardware and other materials

10   used in the new construction of farm structures, including production facilities such as, but not

11   limited to, farrowing sheds, free stall and stanchion barns, milking parlors, silos, poultry barns,

12   laying houses, fruit and vegetable storages, rooting cellars, propagation rooms, greenhouses,

13   packing rooms, machinery storage, seasonal farm worker housing, certified farm markets, bunker

14   and trench silos, feed storage sheds, and any other structures used in connection with commercial

15   farming.

16              (45) (38) Telecommunications carrier access service. - Carrier access service or

17   telecommunications service when purchased by a telecommunications company from another

18   telecommunications company to facilitate the provision of telecommunications service.

19              (46) (39) Boats or vessels brought into the state exclusively for winter storage,

20   maintenance, repair or sale. - Notwithstanding the provisions of sections 44-18-10, 44-18-11, 44-

21   18-20, the tax imposed by section 44-18-20 is not applicable for the period commencing on the

22   first day of October in any year to and including the 30th day of April next succeeding with

23   respect to the use of any boat or vessel within this state exclusively for purposes of: (i) delivery of

24   the vessel to a facility in this state for storage, including dry storage and storage in water by

25   means of apparatus preventing ice damage to the hull, maintenance, or repair; (ii) the actual

26   process of storage, maintenance, or repair of the boat or vessel; or (iii) storage for the purpose of

27   selling the boat or vessel.

28              (47) (40) Jewelry display product. - From the sale and from the storage, use, or other

29   consumption in this state of tangible personal property used to display any jewelry product;

30   provided, that title to the jewelry display product is transferred by the jewelry manufacturer or

31   seller and that the jewelry display product is shipped out of state for use solely outside the state

32   and is not returned to the jewelry manufacturer or seller.

33              (48) (41) Boats or vessels generally. - Notwithstanding the provisions of this chapter, the

34   tax imposed by sections 44-18-20 and 44-18-18 shall not apply with respect to the sale and to the



                                                       26
1    storage, use, or other consumption in this state of any new or used boat. The exemption provided

2    for in this subdivision does not apply after October 1, 1993, unless prior to October 1, 1993, the

3    federal ten percent (10%) surcharge on luxury boats is repealed.

4             (49) Banks and Regulated investment companies interstate toll-free calls. -

5    Notwithstanding the provisions of this chapter, the tax imposed by this chapter does not apply to

6    the furnishing of interstate and international, toll-free terminating telecommunication service that

7    is used directly and exclusively by or for the benefit of an eligible company as defined in this

8    subdivision; provided, that an eligible company employs on average during the calendar year no

9    less than five hundred (500) "full-time equivalent employees", as that term is defined in section

10   42-64.5-2. For purposes of this section, an "eligible company" means a "regulated investment

11   company" as that term is defined in the Internal Revenue Code of 1986, 26 U.S.C. section 1 et

12   seq., or a corporation to the extent the service is provided, directly or indirectly, to or on behalf of

13   a regulated investment company, an employee benefit plan, a retirement plan or a pension plan or

14   a state chartered bank.

15            (50) Mobile and manufactured homes generally. - From the sale and from the storage,

16   use, or other consumption in this state of mobile and/or manufactured homes as defined and

17   subject to taxation pursuant to the provisions of chapter 44 of title 31.

18            (51) (42) Manufacturing business reconstruction materials.

19            (i) From the sale and from the storage, use or other consumption in this state of lumber,

20   hardware, and other building materials used in the reconstruction of a manufacturing business

21   facility which suffers a disaster, as defined in this subdivision, in this state. "Disaster" means any

22   occurrence, natural or otherwise, which results in the destruction of sixty percent (60%) or more

23   of an operating manufacturing business facility within this state. "Disaster" does not include any

24   damage resulting from the willful act of the owner of the manufacturing business facility.

25            (ii) Manufacturing business facility includes, but is not limited to, the structures housing

26   the production and administrative facilities.

27            (iii) In the event a manufacturer has more than one manufacturing site in this state, the

28   sixty percent (60%) provision applies to the damages suffered at that one site.

29             (iv) To the extent that the costs of the reconstruction materials are reimbursed by

30   insurance, this exemption does not apply.

31            (52) (43) Tangible personal property and supplies used in the processing or preparation

32   of floral products and floral arrangements. - From the sale, storage, use, or other consumption in

33   this state of tangible personal property or supplies purchased by florists, garden centers, or other

34   like producers or vendors of flowers, plants, floral products, and natural and artificial floral



                                                       27
1    arrangements which are ultimately sold with flowers, plants, floral products, and natural and

2    artificial floral arrangements or are otherwise used in the decoration, fabrication, creation,

3    processing, or preparation of flowers, plants, floral products, or natural and artificial floral

4    arrangements, including descriptive labels, stickers, and cards affixed to the flower, plant, floral

5    product or arrangement, artif icial flowers, spray materials, floral paint and tint, plant shine, flower

6    food, insecticide and fertilizers.

7             (53) Horse food products. - From the sale and from the storage, use, or other

8    consumption in this state of horse food products purchased by a person engaged in the business of

9    the boarding of horses.

10            (54) Non-motorized recreational vehicles sold to nonresidents.

11            (i) From the sale, subsequent to June 30, 2003, of a non-motorized recreational vehicle to

12   a bona fide nonresident of this state who does not register the non-motorized recreational vehicle

13   in this state, whether the sale or delivery of the non-motorized recreational vehicle is made in this

14   state or at the place of residence of the nonresident; provided, that a non-motorized recreational

15   vehicle sold to a bona fide nonresident whose state of residence does not allow a like exemption

16   to its nonresidents is not exempt from the tax imposed under section 44-18-20; provided, further,

17   that in that event the bona fide nonresident pays a tax to Rhode Island on the sale at a rate equal

18   to the rate that would be imposed in his or her state of residence not to exceed the rate that would

19   have been imposed under section 44-18-20. Notwithstanding any other provisions of law, a

20   licensed non-motorized recreational vehicle dealer shall add and collect the tax required under

21   this subdivision and remit the tax to the tax administrator under the provisions of chapters 18 and

22   19 of this title. Provided, that when a Rhode Island licensed non-motorized recreational vehicle

23   dealer is required to add and collect the sales and use tax on the sale of a non-motorized

24   recreational vehicle to a bona fide nonresident as provided in this section, the dealer in computing

25   the tax takes into consideration the law of the state of the nonresident as it relates to the trade-in

26   of motor vehicles.

27            (ii) The tax administrator, in addition to the provisions of sections 44-19-27 and 44-19-

28   28, may require any licensed non-motorized recreational vehicle dealer to keep records of sales to

29   bona fide nonresidents as the tax administrator deems reasonably necessary to substantiate the

30   exemption provided in this subdivision, including the affidavit of a licensed non-motorized

31   recreational vehicle dealer that the purchaser of the non-motorized recreational vehicle was the

32   holder of, and had in his or her possession a valid out-of-state non-motorized recreational vehicle

33   registration or a valid out-of-state driver's license.

34            (iii) Any nonresident who registers a non-motorized recreational vehicle in this state



                                                        28
1    within ninety (90) days of the date of its sale to him or her is deemed to have purchased the non-

2    motorized recreational vehicle for use, storage, or other consumption in this state, and is subject

3    to, and liable for the use tax imposed under the provisions of section 44-18-20.

4              (iv) "Non-motorized recreational vehicle" means any portable dwelling designed and

5    constructed to be used as a temporary dwelling for travel, camping, recreational, and vacation use

6    which is eligible to be registered for highway use, including, but not limited to, "pick-up coaches"

7    or "pick-up campers," "travel trailers," and "tent trailers" as those terms are defined in chapter 1

8    of title 31.

9              (55) (44) Sprinkler and fire alarm systems in existing buildings. - From the sale in this

10   state of sprinkler and fire alarm systems, emergency lighting and alarm systems, and from the

11   sale of the materials necessary and attendant to the installation of those systems, that are required

12   in buildings and occupancies existing therein in July 2003, in order to comply with any additional

13   requirements for such buildings arising directly from the enactment of the Comprehensive Fire

14   Safety Act of 2003, and that are not required by any other provision of law or ordinance or

15   regulation adopted pursuant to that Act. The exemption provided in this subdivision shall expire

16   on December 31, 2008.

17             (56) Aircraft. - Notwithstanding the provisions of this chapter, the tax imposed by

18   sections 44-18-18 and 44-18-20 shall not apply with respect to the sale and to the storage, use, or

19   other consumption in this state of any new or used aircraft or aircraft parts.

20             (57) (45) Renewable energy products. - Notwithstanding any other provisions of Rhode

21   Island general laws the following products shall also be exempt from sales tax: solar photovoltaic

22   modules or panels, or any module or panel that generates electricity from light; solar thermal

23   collectors, including, but not limited to, those manufactured with flat glass plates, extruded

24   plastic, sheet metal, and/or evacuated tubes; geothermal heat pumps, including both water-to-

25   water and water-to-air type pumps; wind turbines; towers used to mount wind turbines if

26   specified by or sold by a wind turbine manufacturer; DC to AC inverters that interconnect with

27   utility power lines; manufactured mounting racks and ballast pans for solar collector, module or

28   panel installation. Not to include materials that could be fabricated into such racks; monitoring

29   and control equipment, if specified or supplied by a manufacturer of solar thermal, solar

30   photovoltaic, geothermal, or wind energy systems or if required by law or regulation for such

31   systems but not to include pumps, fans or plumbing or electrical fixtures unless shipped from the

32   manufacturer affixed to, or an integral part of, another item specified on this list; and solar storage

33   tanks that are part of a solar domestic hot water system or a solar space heating system. If the tank

34   comes with an external heat exchanger it shall also be tax exempt, but a standard hot water tank is



                                                       29
1    not exempt from state sales tax.

2             (58) (46) Returned property. - The amount charged for property returned by customers

3    upon rescission of the contract of sale when the entire amount exclusive of handling charges paid

4    for the property is refunded in either cash or credit, and where the property is returned within one

5    hundred twenty (120) days from the date of delivery.

6             (59) Dietary Supplements.      - From the sale and from the storage, use or other

7    consumption of dietary supplements as defined in section 44-18-7.1(l)(v), sold on prescriptions.

8             (60) (47) Blood. - From the sale and from the storage, use or other consumption of

9    human blood.

10            (61) (48) Prewritten computer software delivered electronically. - From the sale and

11   from the storage, use or other consumption of prewritten computer software delivered

12   electronically or by load and leave.

13            (62) (49) Agricultural products for human consumption. - From the sale and from the

14   storage, use or other consumption of livestock and poultry of the kinds of products of which

15   ordinarily constitute food for human consumption and of livestock of the kind the products of

16   which ordinarily constitute fibers for human use.

17           SECTION 8. Sections 44-30-2, 44-30-2.6 and 44-30-2.7 of the General Laws in Chapter

18   44-30 entitle d "Personal Income Tax" are hereby amended to read as follows:

19           44-30-2. Rate of tax. -- (a) General.

20            (1) (i) A Rhode Island personal income tax is imposed upon the Rhode Island income of

21   residents and nonresidents, including estates and trusts, for the period January 1, 1971 through

22   June 30, 1971 equal to twenty percent (20%) of one-half ( 1/2) of the taxpayer's federal income

23   tax liability for the taxable year commencing January 1, 1971; for the period July 1, 1971 through

24   December 31, 1971 equal to fifteen percent (15%) of one-half ( 1/2) of the taxpayer's federal

25   income tax liability for the taxable year commencing January 1, 1971; and for each taxable year

26   on and after January 1, 1972, and ending on or before December 31, 1974 equal to fifteen percent

27   (15%) of the taxpayer's federal income tax liability; for each taxable year on and after January 1,

28   1975 and ending on or before December 31, 1977 equal to seventeen percent (17%) of the

29   taxpayer's federal income tax liability; for each taxable year ending after December 31, 1977

30   equal to nineteen percent (19%) of the taxpayer's federal income tax liability; for each taxable

31   year ending after December 31, 1980 equal to nineteen and twenty-four one-hundredths percent

32   (19.24%) of the taxpayer's federal income tax liability; for each taxable year ending after

33   December 31, 1981 equal to twenty-one and nine-tenths percent (21.9%) of the taxpayer's federal

34   income tax liability; for the period January 1, 1983 through June 30, 1983 equal to twenty-seven



                                                     30
1    and five-tenths percent (27.5%) of the taxpayer's federal income tax liability; for the period July

2    1, 1983 and through June 30, 1984 equal to twenty-six percent (26%) of the taxpayer's federal

3    income tax liability; for the period July 1, 1984 and through December 31, 1984 equal to twenty-

4    four and nine-tenths percent (24.9%) of the taxpayer's federal income tax liability; in accordance

5    with subsection (2) of this section for the period January 1, 1985 through June 30, 1985 equal to

6    twenty-three and sixty-five one-hundredths percent (23.65%) of the taxpayer's federal income tax

7    liability; for the period July 1, 1985 through December 31, 1985, equal to twenty-two and sixty-

8    five one-hundredths percent (22.65%) of the taxpayer's federal income tax liability; in accordance

9    with subsection (3) of this section for January 1, 1986 and thereafter shall be equal to twenty-two

10   and twenty-one one-hundredths percent (22.21%) of the taxpayer's federal income tax liability; in

11   accordance with the Tax Reform Act of 1986, codified primarily at 26 U.S.C. section 1 et seq.,

12   for the period January 1, 1987 through June 30, 1987 shall be equal to twenty-three and ninety-six

13   one-hundredths percent (23.96%) of the taxpayer's federal income tax liability; for the period July

14   1, 1987 through December 31, 1990 shall be equal to twenty-two and ninety-six one-hundredths

15   percent (22.96%) of the taxpayer's federal income tax liability; for the period January 1, 1991

16   through June 30, 1992 and for the period January 1, 1994 and thereafter shall be equal to twenty-

17   seven and five tenths percent (27.5%) of the taxpayer's federal income tax liability; for the period

18   July 1, 1992 through December 31, 1992 if the taxpayer's federal income tax liability is fifteen

19   thousand dollars ($15,000) or less shall be equal to twenty-seven and five tenths percent (27.5%)

20   of the taxpayer's federal income tax liability but if the taxpayer's federal income tax liability is

21   greater than fifteen thousand dollars ($15,000) shall be the sum of twenty-seven and five-tenths

22   percent (27.5%) of the taxpayer's federal income tax liability up to and including fifteen thousand

23   dollars ($15,000) and thirty-two percent (32%) of the taxpayer's federal income tax liability in

24   excess of fifteen thousand dollars ($15,000).

25            (ii) The effective rate for the year 1983 shall be equal to twenty-six and seventy-five

26   hundredths percent (26.75%) of the taxpayer's federal income tax liability. The effective rate for

27   the year 1984 shall be equal to twenty-five and five-tenths percent (25.5%) of the taxpayer's

28   federal income tax liability.

29            (iii) The effective rate for the year 1985 shall be equal to twenty-three and fifteen-

30   hundredths percent (23.15%) of the taxpayer's federal income tax liability. The effective rate for

31   the year 1987 shall be twenty-three and forty-six one-hundredths percent (23.46%) of the

32   taxpayer's federal income tax liability.

33            (iv) For the year 1992, if the taxpayer's federal income tax liability for the year is greater

34   than fifteen thousand dollars ($15,000), the effective rate on such the federal income tax liability



                                                       31
1    in excess of fifteen thousand dollars ($15,000) shall be twenty-nine and seventy-five one-

2    hundredths percent (29.75%).

3            (v) The personal income tax rate for the year 1993 shall be in accordance with the

4    following schedules:

5                                            SCHEDULE X-RI: Single Individuals

6           FEDERAL INCOME TAX RI                                                    INCOME TAX

7           LIABILITY

8                                                                                               Of The

9                                 But not                                   % ON                  Amount

10          Over                  Over                                     Pay + Excess            Over -

11          --------------------------------------------------------------- -------

12          $      0 - $ 15,000                                $     0          27.5%             $    0

13          15,000 -       31,172                                  4,125            32%           15,000

14          31,172 - 79,772                                        9,300        27.55%            31,172

15          79,772                                                 22,689       25.05%            79,772

16           The above rate table may not be used by a taxpayer who files a federal Schedule D and

17   has taxable income in excess of $115,000.00. Those individuals must file a Rhode Island

18   Schedule D.

19                                       SCHEDULE Y-1-RI: Married Filing Jointly or

20                                                    Qualifying Widow(er)

21           FEDERAL INCOME TAX                                                             RI INCOME TAX

22           LIABILITY

23                                                                                                Of The

24                                But not                                    % ON                 Amount

25          Over                  Over                                       Pay + Excess         Over –

26              --------------------------------------------------------------- -------

27          $      0 - $ 15,000                      $     0               27.5%                   $   0

28          15,000 -       35,929                    4,125                  32%                    15,000

29          35,929 -       75,528                    10,822                27.55%                  35,928

30          75,528                                   21,732                25.05%                  75,528

31          The above rate table may not be used by a taxpayer who files a federal Schedule D and

32   has taxable income in excess of $140,000.00. Those individuals must file a Rhode Island

33   Schedule D.

34



                                                               32
1                                 SCHEDULE Y-2-RI: Married Filing Separately

2    FEDERAL INCOME TAX                                                         RI INCOME TAX

3    LIABILITY                                                                  Of The

4                                                     % ON                      Amount

5    Over               But not                      Pay + Excess               Over-

6                       Over

7    --------------------------------------------------------------- -------

8    $          0-$     15,000          $             0        27.5%           $   0

9    15,000 -           17,964                   4,125          32%             15,000

10   17,964 -           37,764                  5,073          27.55%          17,964

11   37,764                                     10,528         25.05%          37,764

12              The above rate table may not be used by a taxpayer who files a federal Schedule D and

13   has taxable income in excess of $70,000.00. Those individuals must file a Rhode Island Schedule

14   D.

15                                SCHEDULE Z-RI: Head of Household

16   FEDERAL INCOME TAX                                                         RI INCOME TAX

17   LIABILITY                                                                             Of The

18                                                                                         Amount

19   Over              But not                             % ON                            Over -

20                     Over                           Pay + Excess

21   --------------------------------------------------------------- -------

22   $ 0-$              15,000              $    0             27.5%                       $    0

23   15,000 -           33,385              4,125             32%                          15,000

24   33,385 -           77,485              10,008             27.55%                      33,385

25   77,485                                 22,158             25.05%                      77,485

26

27              The above rate table may not be used by a taxpayer who files a federal Schedule D and

28   has taxable income in excess of $127,500.00. Those individuals must file a Rhode Island

29   Schedule D.

30                                RI INCOME TAX RATE SCHEDULES FOR USE BY

31                                                    ESTATES AND TRUSTS

32              FEDERAL INCOME TAX                                              RI INCOME TAX

33              LIABILITY

34                                                                                         Of The



                                                              33
1            Over        But not                              % ON                         Amount

2                        Over                                 Pay + Excess                 Over-

3            --------------------------------------------------------------- -------

4            $    0 - $ 1,405                       $     0        27.5%                   $     0

5            1,405 -      2,125                         386        23.68%                1,405

6            2,125 - 15,000                             557        21.53%                  2,125

7            15,000                                 3,329           25.05%                 15,000

8             The above rate table may not be used by a taxpayer who files a federal Schedule D and

9    has taxable income in excess of $5,500.00. Those individuals must file a Rhode Island Schedule

10   D.

11            (vi) The purpose of the 1993 rate schedules and/or the Rhode Island Schedule D shall be

12   such that a taxpayer's 1993 Rhode Island personal income tax liability shall remain the same as it

13   would have been prior to the enactment of the Federal Omnibus Budget Reconciliation Act of

14   1993, (OBRA), P.L. 103-66, 107 Stat. 312.

15            (vii) For the year 1994 through December 31, 1997, the rate shall be twenty-seven and

16   five-tenths percent (27.5%) of the taxpayers entire federal income tax liability.

17            (viii) For the period January 1, 1998, through December 31, 1998, the rate shall be equal

18   to twenty-seven percent (27%) of the taxpayer's federal income tax liability.

19            (ix) For the period January 1, 1999, through December 31, 1999, the rate shall be equal

20   to twenty-six and five-tenths (26.5%) of the taxpayer's federal income tax liability.

21            (x) For the period January 1, 2000, through December 31, 2000, the rate shall be equal to

22   twenty-six percent (26%) of the taxpayer's federal income tax liability.

23            (xi) For the period January 1, 2001, through December 31, 2001, the rate shall be equal

24   to twenty-five and five-tenths percent (25.5%) of the taxpayer's federal income tax liability.

25            (xii) For the period January 1, 2002, and thereafter through July 1, 2008 the rate shall be

26   twenty-five percent (25%) of the taxpayer's federal income tax liability. For the period January 1,

27   2008, and thereafter, the rate shall be twenty-seven and one-half percent (27.5%) of that

28   taxpayer's federal income tax liability, as defined in subsection 44-30-2(b).

29            (2) In the event that the indexing of the federal personal income tax scheduled to take

30   effect on January 1, 1985, as enacted by the Economic Recovery Tax Act of 1981, 26 U.S.C.

31   section 1 et seq., does take effect or is replaced by similar legislation, as the result of an action of

32   the United States Congress, then the Rhode Island personal income tax rate as set forth in

33   subdivision (a)(1) of this section for the period January 1, 1985, and through June 30, 1985, shall

34   be changed and be equal to twenty-three and sixty-five one-hundredths percent (23.65%) of the



                                                              34
1    taxpayer's federal income tax liability.

2             (3) In the event that the indexing of the federal personal income tax scheduled to take

3    effect on January 1, 1986, as enacted by the Economic Recovery Tax Act of 1981, 26 U.S.C.

4    section 1 et seq., does take effect or is replaced by similar legislation as the result of an action of

5    the United States Congress, then the Rhode Island personal income tax rate as set forth in

6    subdivision (a)(1) of this section for the period January 1, 1986, and thereafter shall be changed

7    and be equal to twenty-two and twenty-one one-hundredths percent (22.21%) of the taxpayer's

8    federal income tax liability.

9             (b) Federal income tax liability. - Federal income tax liability shall be the amount of

10   federal income tax without deduction for any new federal credit(s) enacted after January 1, 1996,

11   (excluding self-employment tax, social security tax or any supplemental Medicare premium) or

12   supplemental premium surcharge imposed by the Medicare Catastrophic Coverage Act of 1988

13   (P.L. 100-360), codified primarily at 42 U.S.C. section 1395 et seq., which the taxpayer would

14   have been liable if the taxpayer had paid federal income tax based on federal taxable income as

15   adjusted by the modifications provided in parts II and III of this chapter. The federal taxable

16   income shall not include modifications which would decrease federal taxable income resulting

17   from the applications of section 15 of chapter 489 of the public laws of 1923, as amended by

18   section 8 of chapter 151 of the public laws of 1963; sections 28-17-3, 36-10-32, 45-21-45, or any

19   other sections of Rhode Island law which would provide or would be construed to provide that

20   any pension, annuity, retirement allowance, benefit, or right shall be exempt from any state tax.

21            (c) Cross references. - For credit in respect of:

22            (1) Taxes withheld on wages, see section 44-30-73;

23            (2) Taxes imposed on a resident by other states, see section 44-30-18;

24            (3) Taxes overpaid for a prior taxable year, see section 44-30-86.

25            (d) Tax credit.

26            (1) There shall be allowed as a credit against the Rhode Island personal income tax

27   otherwise due for a taxable year, commencing for the tax year 1988, a contribution of five dollars

28   ($5.00), or ten dollars ($10.00) if married and filing a joint return, to the account for the public

29   financing of the electoral system. The first two dollars ($2.00), or four dollars ($4.00) if married

30   and filing a joint return, shall go to a political party as defined in section 17-12.1-12 to be

31   designated by the taxpayer or to a nonpartisan account if so indicated up to a total of two hundred

32   thousand dollars ($200,000) collectively for all parties and the nonpartisan account. The

33   remainder shall be deposited as general revenue.

34            (2) The credit for the public financing of the electoral system shall appear on the face of



                                                       35
1    the state personal income tax return. The tax administrator shall annually forward by August 1, all

2    contributions to said account to the state general treasurer and the treasurer shall annually remit

3    by September 1, the designated partisan contributions to the chairperson of the appropriate

4    political party and the contributions made to the nonpartisan general account shall be allocated by

5    the state general treasurer to each political party in proportion to the combined number of votes

6    its candidates for governor received in the previous election, after five percent (5%) of the

7    amount in the account is allocated to each party for each general officer elected in the previous

8    statewide election. Each political party may expend moneys received under this provision for all

9    purposes and activities permitted by the laws of Rhode Island and the United States, except that

10   no such moneys shall be utilized for expenditures to be directly made or incurred to support or

11   defeat a candidate in any election within the meaning of chapter 25 of title 17, or in any election

12   for any political party nomination, or for political party office within the meaning of chapter 12 of

13   title 17. The remaining funds shall be allocated for the public financing of campaigns for

14   governor as set forth in sections 17-25-19 -- 17-25-27.

15            (e) Tax adjustment.

16            (1) Notwithstanding the provisions of subsection (a) of this section, for taxable years

17   ending after December 31, 1980, in the event that during a period when the general assembly is

18   not in session a change is made in the provisions of the Internal Revenue Code of the United

19   States and amendments thereto, or other provisions of the law of the United States relating to

20   federal income taxes, or the rules and regulations issued under these laws that alters the taxpayer's

21   federal income tax liability, the tax administrator is directed to so change the Rhode Island

22   personal income tax rate of the taxpayer's federal income tax liability as to retain the tax product

23   upon receipt of which state appropriations were predicated.

24            (2) The rate so set by the tax administrator will be effective until such time as the general

25   assembly shall ratify this rate or set a different rate.

26           44-30-2.6. Rhode Island taxable income -- Rate of tax. -- (a) "Rhode Island taxable

27   income" means federal taxable income as determined under the Internal Revenue Code, 26 U.S.C.

28   section 1 et seq., not including the increase in the basic standard deduction amount for married

29   couples filing joint returns as provided in the Jobs and Growth Tax Relief Reconciliation Act of

30   2003 and the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), and as

31   modified by the modifications in section 44-30-12.

32           (b) Notwithstanding the provisions of sections 44-30-1 and 44-30-2, for tax years

33   beginning on or after January 1, 2001, a Rhode Island personal income tax is imposed upon the

34   Rhode Island taxable income of residents and nonresidents, including estates and trusts, at the rate



                                                        36
1    of twenty-five and one-half percent (25.5%) for tax year 2001, and twenty-five percent (25%) for

2    tax year 2002 and thereafter January 1, 2002 through June 30, 2008 and for July 1, 2008 and

3    thereafter of the federal income tax rates, including capital gains rates and any other special rates

4    for other types of income, except as provided in section 44-30-2.7, which were in effect

5    immediately prior to enactment of the Economic Growth and Tax Relief Reconciliation Act of

6    2001 (EGTRRA); provided, rate schedules shall be adjusted for inflation by the tax administrator

7    beginning in taxable year 2002 and thereafter in the manner prescribed for adjustment by the

8    commissioner of Internal Revenue in 26 U.S.C. section 1(f). However, for tax years beginning on

9    or after January 1, 2006 through June 30, 2008, a taxpayer may elect to use the alternative flat tax

10   rate provided in section 44-30-2.10 to calculate his or her personal income tax liability.

11              (c) For tax years beginning on or after January 1, 2001, if a taxpayer has an alternative

12   minimum tax for federal tax purposes, the taxpayer shall determine if he or she has a Rhode

13   Island alternative minimum tax. The Rhode Island alternative minimum tax shall be computed by

14   multiplying the federal tentative minimum tax without allowing for the increased exemptions

15   under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (as redetermined on federal

16   form 6251 Alternative Minimum Tax-Individuals) by twenty-five and one-half percent (25.5%)

17   for tax year 2001, and twenty-five percent (25%) for tax year 2002 and thereafter, and comparing

18   the product to the Rhode Island tax as computed otherwise under this section. The excess shall be

19   the taxpayer's Rhode Island alternative minimum tax.

20              (1) For tax years beginning on or after January 1, 2005 and thereafter the exemption

21   amount for alternative minimum tax, for Rhode Island purposes, shall be adjusted for inflation by

22   the tax administrator in the manner prescribed for adjustment by the commissioner of Internal

23   Revenue in 26 U.S.C. section 1(f).

24              (2) For the period January 1, 2007 through December 31, 2007, and thereafter, Rhode

25   Island taxable income shall be determined by deducting from federal adjusted gross income as

26   defined in 26 U.S.C. section 62 as modified by the modifications in section 44-30-12 the Rhode

27   Island itemized deduction amount and the Rhode Island exemption amount as determined in this

28   section.

29              (A) Tax imposed.

30              (1) There is hereby imposed on the taxable income of married individuals filing joint

31   returns and surviving spouses a tax determined in accordance with the following table:

32              If taxable income is:                           The tax is:

33              Not over $53,150                                3.75% of taxable income

34              Over $53,150 but not over $128,500              $1,993.13 plus 7.00% of the



                                                       37
1                                                             excess over $53,150

2             Over $128,500 but not over $195,850             $7,267.63 plus 7.75% of the

3                                                             excess over $128,500

4             Over $195,850 but not over $349,700             $12,487.25 plus 9.00% of the

5                                                             excess over $195,850

6             Over $349,700                                   $26,333.75 plus 9.90% of the

7                                                             excess over $349,700

8             (2) There is hereby imposed on the taxable income of every head of household a tax

9    determined in accordance with the following table:

10            If taxable income is:                                   The tax is:

11            Not over $42,650                                        3.75% of taxable income

12            Over $42,650 but not over $110,100                      $1,599.38 plus 7.00% of the

13                                                                    excess over $42,650

14            Over $110,100 but not over $178,350                     $6,320.88 plus 7.75% of the

15                                                                    excess over $110,100

16            Over $178,350 but not over $349,700                     $11,610.25 plus 9.00% of the

17                                                                    excess over $178,350

18            Over $349,700                                           $27,031.75 plus 9.90% of the

19                                                                    excess over $349,700

20            (3) There is hereby imposed on the taxable income of unmarried individuals (other than

21   surviving spouses and heads of households) a tax determined in accordance with the following

22   table:

23            If taxable income is:                                           The tax is:

24            Not over $31,850                                        3.75% of taxable income

25            Over $31,850 but not over $77,100                       $1,194.38 plus 7.00% of the

26                                                                    excess over $31,850

27            Over $77,100 but not over $160,850                      $4,361.88 plus 7.75% of the

28                                                                    excess over $77,100

29            Over $160,850 but not over $349,700                     $10,852.50 plus 9.00% of the

30                                                                    excess over $160,850

31            Over $349,700                                           $27,849.00 plus 9.90% of the

32                                                                    excess over $349,700

33            (4) There is hereby imposed on the taxable income of married individuals filing separate

34   returns and bankruptcy estates a tax determined in accordance with the following table:



                                                    38
1            If taxable income is:                                             The tax is:

2            Not over $26,575                                         3.75% of taxable income

3            Over $26,575 but not over $64,250                        $996.56 plus 7.00% of the

4                                                                     excess over $26,575

5            Over $64,250 but not over $97,925                        $3,633.81 plus 7.75% of the

6                                                                     excess over $64,250

7            Over $97,925 but not over $174,850                       $6,243.63 plus 9.00% of the

8                                                                     excess over $97,925

9            Over $174,850                                            $13,166.88 plus 9.90% of the

10                                                                    excess over $174,850

11           (5) There is hereby imposed a taxable income of an estate or trust a tax determined in

12   accordance with the following table:

13           If taxable income is:                                             The tax is:

14           Not over $2,150                                          3.75% of taxable income

15           Over $2,150 but not over $5,000                          $80.63 plus 7.00% of the excess

16                                                                    over $2,150

17           Over $5,000 but not over $7,650                          $280.13 plus 7.75% of the

18                                                                    excess over $5,000

19           Over $7,650 but not over $10,450                         $485.50 plus 9.00% of the

20                                                                    excess over $7,650

21           Over $10,450                                             $737.50 plus 9.90% of the

22                                                                    excess over $10,450

23           (6) Adjustments for inflation.

24           The dollars amount contained in paragraph (A) shall be increased by an amount equal to:

25           (a) Such dollar amount contained in paragraph (A) in the year 1993, multiplied by;

26           (b) The cost-of-living adjustment determined under section (J) with a base year of 1993;

27           (c) The cost-of-living adjustment referred to in subparagraph (a) and (b) used in making

28   adjustments to the nine percent (9%) and nine and nine tenths percent (9.9%) dollar amounts shall

29   be determined under section (J) by substituting "1994" for "1993."

30           (B) Maximum capital gains rates

31           (1) In general

32           If a taxpayer has a net capital gain for any taxable year, the tax imposed by this section

33   for such taxable year shall not exceed the sum of:

34           (a) 2.5 % of the net capital gain as reported for federal income tax purposes under section



                                                     39
1    26 U.S.C. 1(h)(1)(a) and 26 U.S.C. 1(h)(1)(b).

2            (b) 5% of the net capital gain as reported for federal income tax purposes under 26 U.S.C.

3    1(h)(1)(c).

4            (c) 6.25% of the net capital gain as reported for federal income tax purposes under 26

5    U.S.C. 1(h)(1)(d).

6            (d) 7% of the net capital gain as reported for federal income tax purposes under 26 U.S.C.

7    1(h)(1)(e).

8            (C) (B) Itemized deductions.

9            (1) In general

10           For the purposes of section (2) "itemized deductions" means the amount of federal

11   itemized deductions as modified by the modifications in section 44-30-12.

12           (2) Individuals who do not itemize their deductions

13           In the case of an individual who does not elect to itemize his deductions for the taxable

14   year, they may elect to take a standard deduction.

15           (3) Basic standard deduction. The Rhode Island standard deduction shall be allowed in

16   accordance with the following table:

17           Filing status                                                    Amount

18           Single                                                           $5,350

19           Married filing jointly or qualifying widow(er)                   $8,900

20           Married filing separately                                        $4,450

21           Head of Household                                                $7,850

22           (4) Additional standard deduction for the aged and blind. An additional standard

23   deduction shall be allowed for individuals age sixty-five (65) or older or blind in the amount of

24   $1,300 for individuals who are not married and $1,050 for individuals who are married.

25           (5) Limitation on basic standard deduction in the case of certain dependents.

26           In the case of an individual to whom a deduction under section (E) is allowable to another

27   taxpayer, the basic standard deduction applicable to such individual shall not exceed the greater

28   of:

29           (a) $850;

30           (b) The sum of $300 and such individual's earned income;

31           (6) Certain individuals not eligible for standard deduction.

32           In the case of:

33           (a) A married individual filing a separate return where either spouse itemizes deductions;

34           (b) Nonresident alien individual;



                                                      40
1            (c) An estate or trust;

2            The standard deduction shall be zero.

3            (7) Adjustments for inflation.

4            Each dollars amount contained in paragraphs (3), (4) and (5) shall be increased by an

5    amount equal to:

6            (a) Such dollar amount contained in paragraphs (3), (4) and (5) in the year 1988,

7    multiplied by

8            (b) The cost-of-living adjustment determined under section (J) with a base year of 1988.

9            (D) (C) Overall Limitation on Itemized Deductions

10           (1) General rule.

11           In the case of an individual whose adjusted gross income as modified by section 44-30-12

12   exceeds the applicable amount, the amount of the itemized deductions otherwise allowable for the

13   taxable year shall be reduced by the lesser of:

14           (a) Three percent (3%) of the excess of adjusted gross income as modified by section 44-

15   30-12 over the applicable amount; or

16           (b) Eighty percent (80%) of the amount of the itemized deductions otherwise allowable

17   for such taxable year.

18           (2) Applicable amount.

19           (a) In general.

20           For purposes of this section, the term "applicable amount" means $156,400 ($78,200 in

21   the case of a separate return by a married individual)

22           (b) Adjustments for inflation.

23           Each dollar amount contained in paragraph (a) shall be increased by an amount equal to:

24           (i) Such dollar amount contained in paragraph (a) in the year 1991, multiplied by

25           (ii) The cost-of-living adjustment determined under section (J) with a base year of 1991.

26           (3) Phase-out of Limitation.

27           (a) In general.

28           In the case of taxable year beginning after December 31, 2005, and before January 1,

29   2010, the reduction under section (1) shall be equal to the applicable fraction of the amount which

30   would be the amount of such reduction.

31           (b) Applicable fraction.

32           For purposes of paragraph (a), the applicable fraction shall be determined in accordance

33   with the following table:

34           For taxable years beginning in calendar year                      The applicable



                                                       41
1                                                                               fraction is

2              2006 and 2007                                                    2/3

3              2008 and 2009                                                    1/3

4               (E) (D) Exemption Amount

5              (1) In general.

6              Except as otherwise provided in this subsection, the term "exemption amount" mean

7    $3,400.

8              (2) Exemption amount disallowed in case of certain dependents. In the case of an

9    individual with respect to whom a deduction under this section is allowable to another taxpayer

10   for the same taxable year, the exemption amount applicable to such individual for such

11   individual's taxable year shall be zero.

12             (3) Adjustments for inflation.

13             The dollar amount contained in paragraph (1) shall be increased by an amount equal to:

14             (a) Such dollar amount contained in paragraph (1) in the year 1989, multiplied by

15             (b) The cost-of-living adjustment determined under section (J) with a base year of 1989.

16             (4) Limitation.

17             (a) In general.

18             In the case of any taxpayer whose adjusted gross income as modified for the taxable year

19   exceeds the threshold amount shall be reduced by the applicable percentage.

20             (b) Applicable percentage.

21             In the case of any taxpayer whose adjusted gross income for the taxable year exceeds the

22   threshold amount, the exemption amount shall be reduced by two (2) percentage points for each

23   $2,500 (or fraction thereof) by which the taxpayer's adjusted gross income for the taxable year

24   exceeds the threshold amount. In the case of a married individual filing a separate return, the

25   preceding sentence shall be applied by substituting "$1,250" for "$2,500." In no event shall the

26   applicable percentage exceed one hundred percent (100%).

27             (c) Threshold Amount.

28             For the purposes of this paragraph, the term "threshold amount" shall be determined with

29   the following table:

30             Filing status                                                    Amount

31             Single                                                           $156,400

32             Married filing jointly of qualifying widow(er)                   $234,600

33             Married filing separately                                        $117,300

34             Head of Household                                                $195,500



                                                      42
1             (d) Adjustments for inflation.

2            Each dollars amount contain in paragraph (b) shall be increased by an amount equal to:

3            (i) Such dollar amount contained in paragraph (b) in the year 1991, multiplied by

4            (ii) The cost-of-living adjustment determined under section (J) with a base year of 1991.

5            (5) Phase-out of Limitation.

6            (a) In general.

7            In the case of taxable years beginning after December 31, 2005, and before January 1,

8    2010, the reduction under section 4 shall be equal to the applicable fraction of the amount which

9    would be the amount of such reduction.

10           (b) Applicable fraction.

11           For the purposes of paragraph (a), the applicable fraction shall be determined in

12   accordance with the following table:

13           For taxable years beginning in calendar year                        The applicable

14                                                                               fraction is

15           2006 and 2007                                                       2/3

16           2008 and 2009                                                       1/3

17           (F) (E) Alternative Minimum Tax

18           (1) General rule. –

19           There is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal

20   to the excess (if any) of:

21           (a) The tentative minimum tax for the taxable year, over

22           (b) The regular tax for the taxable year.

23           (2) The tentative minimum tax for the taxable year is the sum of:

24           (a) 6.5 percent of so much of the taxable excess as does not exceed $175,000, plus

25           (b) 7.0 percent of so much of the taxable excess above $175,000.

26           (3) The amount determined under the preceding sentence shall be reduced by the

27   alternative minimum tax foreign tax credit for the taxable year.

28           (4) Taxable excess. - For the purposes of this subsection the term "taxable excess" means

29   so much of the federal alternative minimum taxable income as modified by the modifications in

30   section 44-30-12 as exceeds the exemption amount.

31           (5) In the case of a married individual filing a separate return, subparagraph (2) shall be

32   applied by substituting "$87,500" for $175,000 each place it appears.

33           (6) Exemption amount.

34           For purposes of this section "exemption amount" means:



                                                         43
1            Filing status                                                   Amount

2            Single                                                          $39,150

3            Married filing jointly or qualifying widow(er)                  $53,700

4            Married filing separately                                       $26,850

5            Head of Household                                               $39,150

6            Estate or trust                                                 $24,650

7            (7) Treatment of unearned income of minor children

8            (a) In general.

9            In the case of a minor child, the exemption amount for purposes of section (6) shall not

10   exceed the sum of:

11           (i) Such child's earned income, plus

12           (ii) $6,000.

13           (8) Adjustments for inflation.

14           The dollar amount contained in paragraphs (6) and (7) shall be increased by an amount

15   equal to:

16           (a) Such dollar amount contained in paragraphs (6) and (7) in the year 2004, multiplied

17   by

18           (b) The cost-of-living adjustment determined under section (J) with a base year of 2004.

19           (9) Phase-out.

20           (a) In general.

21           The exemption amount of any taxpayer shall be reduced (but not below zero) by an

22   amount equal to twenty-five percent (25%) of the amount by which alternative minimum taxable

23   income of the taxpayer exceeds the threshold amount.

24           (b) Threshold amount.

25           For purposes of this paragraph, the term "threshold amount" shall be determined with the

26   following table:

27           Filing status                                                   Amount

28           Single                                                          $123,250

29           Married filing jointly or qualifying widow(er)                  $164,350

30           Married filing separately                                       $82,175

31           Head of Household                                               $123,250

32           Estate or Trust                                                 $82,150

33               (c) Adjustments for inflation

34           Each dollar amount contained in paragraph (9) shall be increased by an amount equal to:



                                                    44
1              (i) Such dollar amount contained in paragraph (9) in the year 2004, multiplied by

2              (ii) The cost-of-living adjustment determined under section (J) with a base year of 2004.

3              (G) (F) Other Rhode Island Taxes

4              (1) General rule. - There is hereby imposed (in addition to any other tax imposed by this

5    subtitle) a tax equal to twenty-five percent (25%) of:

6              (a) The Federal income tax on lump-sum distributions.

7              (b) The Federal income tax on parents' election to report child's interest and dividends.

8              (c) The recapture of Federal tax credits that were previously claimed on Rhode Island

9    return.

10             (H) (G) Tax for children under 18 with investment income

11             (1) General rule. - There is hereby imposed a tax equal to twenty-five percent (25%) of:

12             (a) The Federal tax for children under the age of 18 with investment income.

13             (I) Averaging of farm income

14             (1) (H) General rule. - At the election of an individual engaged in a farming business or

15   fishing business, the tax imposed in section 2 shall be equal to twenty-five percent (25%) of:

16             (a) The Federal averaging of farm income as determined in IRC section 1301.

17             (J) (I) Cost-of-Living Adjustment

18             (1) In general. The cost-of-living adjustment for any calendar year is the percentage (if

19   any) by which:

20             (a) The CPI for the preceding calendar year exceeds

21             (b) The CPI for the base year.

22             (2) CPI for any calendar year.

23             For purposes of paragraph (1), the CPI for any calendar year is the average of the

24   Consumer Price Index as of the close of the twelve (12) month period ending on August 31 of

25   such calendar year.

26             (3) Consumer Price Index

27             For purposes of paragraph (2), the term "consumer price index" means the last consumer

28   price index for all urban consumers published by the department of labor. For purposes of the

29   preceding sentence, the revision of the consumer price index which is most consistent with the

30   consumer price index for calendar year 1986 shall be used.

31             (4) Rounding.

32             (a) In general.

33             If any increase determined under paragraph (1) is not a multiple of $50, such increase

34   shall be rounded to the next lowest multiple of $50.



                                                      45
1            (b) In the case of a married individual filing a separate return, subparagraph (a) shall be

2    applied by substituting "$25" for $50 each place it appears.

3            (K) (J) Credits against tax. - For tax years beginning on or after January 1, 2001, a

4    taxpayer entitled to any of the following federal credits enacted prior to January 1, 1996 shall be

5    entitled to a credit against the Rhode Island tax imposed under this section:

6            (1) [Deleted by P.L. 2007, ch. 73, art. 7, section 5].

7            (2) Child and dependent care credit;

8            (3) General business credits;

9            (4) Foreign tax credit;

10           (5) Credit for elderly or the disabled;

11           (6) Credit for prior year minimum tax;

12           (7) Mortgage interest credit;

13           (8) Empowerment zone employment credit;

14           (9) Qualified electric vehicle credit.

15           (L) (K) Credit Against Tax for Adoption. - For tax years beginning on or after January 1,

16   2006, a taxpayer entitled to the federal adoption credit shall be entitled to a credit against the

17   Rhode Island tax imposed under this section if the adopted child was under the care, custody, or

18   supervision of the Rhode Island department of children, youth and families prior to the adoption.

19           (M) (L) The credit shall be twenty-five percent (25%) of the aforementioned federal

20   credits provided there shall be no deduction based on any federal credits enacted after January 1,

21   1996, including the rate reduction credit provided by the federal Economic Growth and Tax

22   Reconciliation Act of 2001 (EGTRRA). In no event shall the tax imposed under this section be

23   reduced to less than zero. A taxpayer required to recapture any of the above credits for federal tax

24   purposes shall determine the Rhode Island amount to be recaptured in the same manner as

25   prescribed in this subsection.

26           (N) (M) Rhode Island Earned Income Credit

27           (1) In general.

28           A taxpayer entitled to a federal earned income credit shall be allowed a Rhode Island

29   earned income credit equal to twenty-five percent (25%) of the federal earned income credit.

30   Such credit shall not exceed the amount of the Rhode Island income tax.

31           (2) Refundable portion.

32           In the event the Rhode Island earned income credit allowed under section (J) exceeds the

33   amount of Rhode Island income tax, a refundable earned income credit shall be allowed.

34           (a) For purposes of paragraph (2) refundable earned income credit means fifteen percent



                                                       46
1    (15%) of the amount by which the Rhode Island earned income credit exceeds the Rhode Island

2    income tax.

3            (O) (N) The tax administrator shall recalculate and submit necessary revisions to

4    paragraphs (A) through (J) to the general assembly no later than February 1, 2010 and every three

5    (3) years thereafter for inclusion in the statute.

6            44-30-2.7. Capital gains rates for assets held more than five (5) years. -- (a) All

7    capital assets purchased prior to January 1, 2002 and sold on or after January 1, 2007, shall be

8    deemed to have a holding period beginning January 1, 2002. For tax years beginning in 2007, the

9    capital gains rate for assets held more than five (5) years shall be as follows:

10            (i) 0.83% 2.5% of the net capital gain as reported for federal income tax purposes under

11   26 U.S.C. section 1(h)(1)(a) and 26 U.S.C. section 1(h)(1)(b).

12            (ii) 1.67% 5.0% of the net capital gain as reported for federal income tax purposes under

13   26 U.S.C. section 1(h)(1)(c).

14            (iii) 2.08% 6.25% of the net capital gain as reported for federal income tax purposes

15   under 26 U.S.C. section 1(h)(1)(d).

16            (iv) 2.33% 7.0% of the net capital gain as reported for federal income tax purposes under

17   26 U.S.C. section 1(h)(1)(e).

18           SECTION 9. Section 44-33-9 of the General Laws in Chapter 44-33 entitled "Property

19   Tax Relief" is hereby amended to read as follows:

20           44-33-9. Computation of credit. -- The amount of any claim made pursuant to this

21   chapter shall be determined as follows: (1) For any taxable year, a claimant is entitled to a credit

22   against his or her tax liability equal to the amount by which the property taxes accrued or rent

23   constituting property taxes accrued upon the claimant's homestead for the taxable year exceeds a

24   certain percentage of the claimant's total household income for that taxable year, which

25   percentage is based upon income level and household size. The credit shall be computed in

26   accordance with the following table:

27           Income Range                       1 Person                          2 or More Persons

28           less than $6000                    3%                                3%

29           $6001-9000                         4%                                4%

30           $9001-12000                        5%                                5%

31           $12001-15000                       6%                                5%

32           $15001-30000                       6%                                6%

33           (2) The maximum amount of the credit granted under this chapter will be as follows:

34           Year                                                        Credit Maximum



                                                          47
1            Commencing July 1977                                                 $ 55.00

2            Commencing July 1978                                                 $150.00

3            Commencing July 1979                                                 $175.00

4            Commencing July 1980                                                 $200.00

5            Commencing on July 1997                                              $250.00

6            and subsequent years

7            Commencing on July 2006                                              $300.00

8            Commencing July 2007 and subsequent years until June 30, 2008, the credit shall be

9    increased, at a minimum, to the maximum amount to the nearest five dollars ($5.00) increment

10   within the allocation of five one-hundredths of one percent (0.05%) of net terminal income

11   derived from video lottery games up to a maximum of five million dollars ($5,000,000) until a

12   maximum credit of five hundred dollars ($500) is obtained pursuant to the provisions of section

13   42-61-15. In no event shall the exemption in any fiscal year be less than the prior fiscal year.

14           Commencing July 1, 2008 and subsequent years, the credit shall be equal to fifteen

15   percent (15%) of the property taxes accrued or rent constituting property taxes accrued upon the

16   claimant's homestead for the taxable year, up to a maximum of six hundred dollars ($600) per

17   claimant.

18           SECTION 10. Section 44-33.2-3 of the General Laws in Chapter 44-33.2 entitled

19   "Historic Structures - Tax Credit" is hereby amended to read as follows:

20           44-33.2-3. Tax credit. -- (a) Any person, firm, partnership, trust, estate, limited liability

21   company, corporation (whether for profit or non-profit) or other business entity that incurs

22   qualified rehabilitation expenditures for the substantial rehabilitation of a certified historic

23   structure, provided the rehabilitation meets standards consistent with the standards of the

24   Secretary of the United States Department of the Interior for rehabilitation as certified by the

25   commission, shall be entitled to a credit against the taxes imposed on such person or entity

26   pursuant to chapter 11, 12, 13, 14, 17 or 30 of this title in an amount equal to thirty percent (30%)

27   of the qualified rehabilitation expenditures. Provided, however that the total amount of credits

28   shall be capped at forty million dollars ($40,000,000) each tax year. Certification for credits shall

29   also be limited to those projects that will result in an increase in the number of permanent jobs,

30   and/or an increase in the number of affordable housing units and to those that incorporate

31   renewable energy systems in the rehabilitation of the structure.

32            (b) Tax credits allowed pursuant to this chapter shall be allowed for the taxable year in

33   which such certified historic structure or an identifiable portion of the structure is placed in

34   service provided that the substantial rehabilitation test is met for such year.



                                                       48
1             (c) If the amount of the tax credit exceeds the taxpayer's total tax liability for the year in

2    which the substantially rehabilitated property is placed in service, the amount that exceeds the

3    taxpayer's tax liability may be carried forward for credit against the taxes imposed for the

4    succeeding ten (10) years, or until the full credit is used, whichever occurs first for the tax credits.

5    Credits allowed to a partnership, a limited liability company taxed as a partnership or multiple

6    owners of property shall be passed through to the persons designated as partners, members or

7    owners respectively pro rata or pursuant to an executed agreement among such persons

8    designated as partners, members or owners documenting an alternate distribution method without

9    regard to their sharing of other tax or economic attributes of such entity.

10            (d) (1) If the taxpayer has not claimed the tax credits in whole or part, taxpayers eligible

11   for the tax credits may assign, transfer or convey the credits, in whole or in part, by sale or

12   otherwise to any individual or entity, including, but not limited to, condominium owners in the

13   event the certified historic structure is converted into condominiums. The assignee of the tax

14   credits may use acquired credits to offset up to one hundred percent (100%) of the tax liabilities

15   otherwise imposed pursuant to chapter 11, 12, 13, (other than the tax imposed under section 44-

16   13-13), 14, 17 or 30 of this title. The assignee may apply the tax credit against taxes imposed on

17   the assignee until the end of the tenth (10th) calendar year after the year in which the substantially

18   rehabilitated property is placed in service or until the full credit assigned is used, whichever

19   occurs first. Fiscal year assignees may claim the credit until the expiration of the fiscal year that

20   ends within the tenth (10th) year after the year in which the substantially rehabilitated property is

21   placed in service. The assignor shall perfect the transfer by notifying the state of Rhode Island

22   division of taxation, in writing, within thirty (30) calendar days following the effective date of the

23   transfer and shall provide any information as may be required by the division of taxation to

24   administer and carry out the provisions of this section.

25            (2) For purposes of this chapter, any assignment or sales proceeds received by the

26   taxpayer for its assignment or sale of the tax credits allowed pursuant to this section shall be

27   exempt from this title. If a tax credit is subsequently recaptured under subsection (e) of this

28   section, revoked or adjusted, the seller's tax calculation for the year of revocation, recapture, or

29   adjustment shall be increased by the total amount of the sales proceeds, without proration, as a

30   modification under chapter 30 of this title. In the event that the seller is not a natural person, the

31   seller's tax calculation under chapters 11, 12, 13 (other than with respect to the tax imposed under

32   section 44-13-13), 14, 17, or 30 of this title, as applicable, for the year of revocation, recapture, or

33   adjustment, shall be increased by including the total amount of the sales proceeds without

34   proration.



                                                       49
1             (e) Substantial rehabilitation of property that is exempt from real property tax shall be

2    ineligible for the tax credits authorized under this chapter. In the event a certified historic

3    structure undergoes a substantial rehabilitation pursuant to this chapter and within twenty-four

4    (24) months after issuance of a certificate of completed work the property becomes exempt from

5    real property tax, the taxpayer's tax for the year shall be increased by the total amount of credit

6    actually used against the tax.

7             (f) In the case of a corporation, this credit is only allowed against the tax of a corporation

8    included in a consolidated return that qualifies for the credit and not against the tax of other

9    corporations that may join in the filing of a consolidated tax return.

10           SECTION 11. Chapter 44-18 of the General Laws entitled "Sales and Use Taxes -

11   Liability and Computation" is hereby amended by adding thereto the following section:

12           44-18-41. Tax on accounting and legal services. -- Notwithstanding any other

13   provisions in this chapter, all recipients of accounting services provided by accountants and legal

14   services provided by a Rhode Island licensed attorney, except those actually provided in matters

15   subject to the jurisdiction of the family court, shall pay a two percent (2%) gross receipt tax to the

16   provider which shall then be forwarded to the state department of revenue.

17           SECTION 12. Chapter 44-30 of the General Laws entitled "Personal Income Tax" is

18   hereby amended by adding thereto the following section:

19           44-30-98.1. Refundable earned income credit. -- A taxpayer shall be allowed a credit as

20   provided in subsection 44-30-2.6(d); provided, however, fifteen percent (15%) of the excess

21   Rhode Island earned income credit will be refunded for the 2006 and 2007 taxable year and

22   twenty-five (25%) for each taxable year thereafter.

23           SECTION 13. Section 42-64.9-8 of the General Laws in Chapter 42-64.9 entitled "Mill

24   Building and Economic Revitalization Act" is hereby repealed.

25           42-64.9-8. Business tax credits. -- A taxpayer who owns and operates an eligible

26   business within a certified building that has been substantially rehabilitated is allowed a credit

27   against the tax imposed pursuant to chapter 11 or 30 of title 44 as follows:

28            (1) A credit equal to one hundred percent (100%) of the total amount of Rhode Island

29   salaries and wages as are paid to qualified employees in excess of Rhode Island salaries and

30   wages paid to the same employees in the prior calendar year. The maximum credit allowable per

31   taxable year under the provisions of this subsection is three thousand dollars ($3,000) per

32   qualified employee.

33            (2) Any tax credits provided in subdivision (1) shall not offset any tax liability in years

34   other than the year in which the taxpayer qualifies for the credit. Fiscal year taxpayers must claim



                                                       50
1    the tax credit in the year in which the December 31st of the certification year falls. The credit

2    shall not reduce the tax below the minimum tax. The credit shall be used to offset tax liability

3    under either chapter 11 or 30 of title 44, but not both.

4              (3) In the case of a corporation, the credit allowed under this section is only allowed

5    against the tax of that corporation included in a consolidated return that qualifies for the credit

6    and not against the tax of other corporations that may join in the filin g of a consolidated tax

7    return.

8              (4) In the case of multiple business owners, the credit provided in subdivision (1) is

9    apportioned according to the ownership interests of the eligible business.

10             (5) In the event that the eligible business is located within an enterprise zone and is a

11   certified business under the provisions of section 42-64.3-6, the taxpayer must elect to use the

12   credit provided under subdivision (1) or the credit provided in section 42-64.3-6 to offset tax

13   liability, but the taxpayer may not elect to claim both.

14             SECTION 14. Sections 44-11-12, 44-11-14.5 and 44-11-43 of the General Laws in

15   Chapter 44-11 entitled "Business Corporation Tax" are hereby repealed.

16             44-11-12. Dividends and interest excluded from net income. -- There shall not be

17   included in a taxpayer's net income:

18             (1) Dividends received from the shares of stock of:

19             (i) Any banking institution liable to a tax under chapter 14 of this title; or

20             (ii) Any corporation liable to a tax imposed by this chapter; or

21             (2) Dividends received from the shares of stock of, or interest received on, the bonds,

22   debentures, or other evidences of indebtedness or the distributive share of the taxable income of

23   any public service corporation or company liable to a tax imposed by chapter 13 of this tit le.

24             44-11-14.5.   International     investment       management      service    income. --   (a)

25   Notwithstanding any other provisions of the general laws, any qualified taxpayer located within

26   the state which sells international investment management services to non-U.S. persons or non-

27   U.S. investment funds shall exclude from its net income any income derived directly or indirectly

28   from the sale of international investment management services.

29             (b) For purposes of this section, "non-U.S. persons" means any person who is not a

30   citizen of the United States and who is domiciled outside of the United States during the entire

31   taxable year; "non-U.S. investment funds" means any collective investment fund the sole

32   beneficiaries of which are non-U.S. persons.

33             (c) For purposes of this section, "international investment management services" shall

34   include, without limitation, investment advice, investment research, investment consulting,



                                                        51
1    portfolio management, administration or distribution services (including, without limitation,

2    transfer agent, fund accounting, customary and other similar or related services) rendered to or on

3    behalf of non-U.S. persons and non-U.S. investment funds.

4             (d) For purposes of this section, a "qualified taxpayer" is one which during the taxable

5    year employs, or together with affiliated taxpayers with which it is eligible to file a consolidated

6    tax return for federal income tax purposes, an average of not less than five hundred (500) full-

7    time equivalent employees in the state.

8            44-11-43. Passive investment treatment. -- (a) Notwithstanding any amendments or

9    revisions to, or the repeal of, section 44-11-1(1)(vii), or any other law, or new legislative action

10   that shall serve to repeal or limit the benefits conferred therein, the provisions of that statute as in

11   effect on the date of passage of this section shall continue to be applicable until December 31,

12   2014, for a "qualifying business" that meets the requirements set forth herein.

13            (b) A "qualifying business" for the purposes of this chapter shall mean a business which

14   meets the terms and conditions imposed by the board of directors of the Rhode Island economic

15   development corporation and is designated as such upon a finding of fact that:

16            (1) The business has committed to relocate from outside the state to a Rhode Island

17   location no less than an annual tax year average of two hundred and fifty (250) full-time

18   employees with a combined payroll of no less than twelve million dollars ($12,000,000) annually

19   within twenty-eight (28) months following such designation; for the purposes of this section "full-

20   time employee" means any employee of the qualified business who works a minimum of thirty

21   (30) hours per week within the state;

22            (2) The business would not relocate such jobs to the state but for such a designation of a

23   qualifying business; and

24            (3) The annual salary of each employee counted in subdivision (b)(1) shall be no less

25   than twenty-five thousand dollars ($25,000) per year, plus benefits typical to the industry.

26            (c) The division of taxation shall require annual reports from a qualified business, which

27   shall include, but not be limited to, the number of individuals employed by the company within

28   the state, the job descriptions, and the annual salaries. The division of taxation shall verify these

29   annual reports and certify that they are correct. The certification shall be sent to the board of

30   directors of the economic development corporation, president of the senate, speaker of the house,

31   the chairperson of the senate finance committee, the chairperson of the house finance committee,

32   the senate fiscal advisor, and the house fiscal advisor. If the division of taxation finds that the

33   qualified business no longer meets the criteria set forth in subdivision (b)(1) or (3), and if, sixty

34   (60) days after receipt of written notice from the division of taxation describing such finding in



                                                       52
1    detail, the business has reasonably cured the noticed violations, then such business will continue

2    to receive the benefits offered under the provisions of subsection (f) as if such violation had not

3    occurred, otherwise that business shall no longer be considered a qualified business and shall no

4    longer be entitled to any further benefits under any agreement made under the provisions of

5    subsection (f) and such provisions shall become null and void.

6               Notwithstanding the foregoing, upon a finding the violation was caused by natural

7    disaster, acts of terrorism, acts of war, or other similar events reasonably beyond the control of

8    the business, the division of taxation may extend the cure period hereunder for up to twelve

9    months.

10             (d) The economic development corporation shall certify only one company pursuant to

11   this section, and such certification shall be issued prior to August 31, 2004.

12              (e) The economic development corporation shall be authorized to enter into such

13   agreements as it may deem necessary or prudent in order to memorialize and effect the intent of

14   the provisions of this section. The terms of such agreements shall not extend beyond December

15   31, 2014. Any such agreement shall include provisions for recapture of some portion of lost tax

16   revenue, if any, resulting from the conveyance of the benefits contemplated hereunder, if the

17   division of taxation finds that the qualified business has failed to maintain its qualified status

18   pursuant to subsection (c) above. Such recapture provisions shall be in place for the first five (5)

19   years of the agreement, and shall require the recapture of the value of any tax revenue lost in the

20   last tax year that the company was a qualified company. Such recapture shall only apply to tax

21   revenue lost through the amendment or revision to, or the repeal of, section 44-11-1(1)(vii), or

22   any other law, or new legislative action that shall serve to repeal or limit the benefits conferred

23   therein, and the subsequent avoidance of such newly imposed tax by the company through the

24   function of this section. Calculation of any amount recaptured shall take into account other

25   preferential tax treatments, credits, or other benefits in order to assure that the company is treated

26   no less favorably under the recapture calculation than they would have been if they had not

27   become a qualifying company under the provisions of this section. The corporation may, within

28   the terms of the contract, include as a condition of default the failure to maintain employment

29   criteria more rigorous than the criteria set forth in subdivision (b)(1) or (3); however, a default for

30   violation of such higher contractual standards shall not necessitate a recapture of lost revenues as

31   contemplated herein.

32             SECTION 15. Sections 44-17-1 and 44-17-2 of the General Laws in Chapter 44-17

33   entitled "Taxation of Insurance Companies" are hereby repealed.

34             44-17-1. Companies required to file -- Payment of tax -- Retaliatory rates. [Effective



                                                       53
1    January 1, 2008.] -- (a) Every domestic, foreign, or alien insurance company, mutual

2    association, organization, or other insurer, including any health maintenance organization, as

3    defined in section 27-41-1 and any nonprofit hospital or medical service corporation, as defined

4    in chapters 27-19 and 27-20, except companies mentioned in section 44-17-6, and organizations

5    defined in section 27-25-1, transacting business in this state, shall, on or before March 1 in each

6    year, file with the tax administrator, in the form that he or she may prescribe, a return under oath

7    or affirmation signed by a duly authorized officer or agent of the company, containing

8    information that may be deemed necessary for the determination of the tax imposed by this

9    chapter, and shall at the same time pay an annual tax to the tax administrator of two percent (2%)

10   of the gross premiums on contracts of insurance, except:

11             (1) Entities subject to chapters 27-19 and 27-20, shall pay the following: one and one-

12   tenth percent (1.1%) of the gross premiums on contracts of insurance, excluding any business

13   related to the administration of programs under Title XIX of the Social Security Act, 42 U.S.C.;

14   provided, further, notwithstanding any provision of the law to the contrary, installment payments

15   shall equal at least ninety percent (90%) of estimated liability in the first year; or

16             (2) Health maintenance organizations as defined in section 27-41-1, shall pay the

17   following: one and one-tenth percent (1.1%) of the gross premiums on contracts of insurance,

18   excluding any business related to the administration of programs under Title XIX of the Social

19   Security Act, 42 U.S.C.; provided, further, notwithstanding any provision of the law to the

20   contrary, installment payments shall equal at least ninety percent (90%) of estimated liability in

21   the first year; or

22             (3) Ocean marine insurance, as referred to in section 44-17-6, covering property and

23   risks within the state, written during the calendar year ending December 31st next preceding, but

24   in the case of foreign or alien companies, except as provided in section 27-2-17(d) the tax is not

25   less in amount than is imposed by the laws of the state or country under which the companies are

26   organized upon like companies incorporated in this state or upon its agents, if doing business to

27   the same extent in the state or country.

28            44-17-2. Amounts included as gross premiums. [Effective January 1, 2008.] -- Except

29   where such a charge would be inconsistent with federal law, gross premiums include all

30   premiums and premium deposits and assessments on all policies, certificates, and renewals,

31   written during the year, covering property and risks within the state, policies subsequently

32   cancelled, and reinsurance assumed, whether the premiums and premium deposits and

33   assessments are in the form of money, notes, credits, or other substitute for money, after

34   deducting from the gross premiums the amount of return premiums on the contracts covering



                                                        54
1    property and risks within this state and the amount of premiums for reinsurance assumed, of the

2    property and risks. Mutual companies and companies which transact business on the mutual plan

3    are also allowed to deduct from their premiums and premium deposits and assessments, the so-

4    called dividends or unused or unabsorbed portion of the premiums and premium deposits and

5    assessments applied in part payment of the premiums and premium deposits and assessments or

6    returned to policyholders in cash or credited to policy holders during the year for which the tax is

7    computed. Every domestic company, mutual association, organization, or other insurer, shall

8    include for taxation in like manner and with like deductions premiums and premium deposits and

9    assessments written, procured, or received in this state on business covering property or risks in

10   any other state on which the company has not paid and is not liable to pay a tax to the other state.

11           SECTION 16. Sections 44-18-30.B, 44-18-33 and 44-18-40 of the General Laws in

12   Chapter 44-18 entitled "Sales and Use Taxes - Liability and Computation" are hereby repealed.

13           44-18-30.B. Exemption from sales tax for sales by writers, composers, artists --

14   Findings. -- (a) The general assembly makes the following findings of facts:

15            (1) The downtown area of the city of Providence has been characterized by blighted

16   areas, and dilapidated and abandoned structures;

17            (2) As a result, the downtown area has been designated an economic development zone

18   in order to stop the deterioration and stimulate economic activity;

19            (3) The capitol center area of the city of Providence has become an attractive location,

20   especially with the construction of the Providence Place Mall;

21            (4) In order to promote, revitalize and redevelop the "Old Downtown" area of the city of

22   Providence it is necessary to provide tax exemptions to this area as it has been designated as an

23   economic development zone;

24            (5) In order to promote, revitalize, and redevelop the "Downtown or other industrial or

25   manufacturing buildings" located in the City of Pawtucket, it is necessary to provide tax

26   exemptions to this area as it has been designated as an economic development zone;

27            (6) The development of an active artistic community, including "artists in residence", in

28   this area would promote economic development, revitalization, tourism, employment

29   opportunities, and encourage business development by providing alternative commercial

30   enterprises while in Providence creating a link between the Old Downtown and the Capital Center

31   Area;

32            (7) There is a separate artistic community in the town of Westerly which is important to

33   preserve, promote, and revita lize, and which is distinct from that in the city of Providence;

34            (8) There is a separate artistic community in the city of Woonsocket which is important



                                                      55
1    to promote and revitalize and which is distinct from that in the cities of Providence and Pawtucket

2    and the town of Westerly;

3             (9) There is a separate artistic community in the city of Warwick which is important to

4    preserve, promote, and revitalize and which is distinct from that in the cities of Providence,

5    Pawtucket, Woonsocket and the town of Westerly;

6             (10) There are separate artistic communities in the city of Newport and in the town of

7    Tiverton which are important to promote and revitalize and which are distinct from those in the

8    cities of Providence, Pawtucket, Warwick and Woonsocket and the towns of Westerly and Little

9    Compton;

10            (11) There is a separate artistic community in the town of Warren which is important to

11   promote and revitalize and which is distinct from that in the cities of Providence, Pawtucket,

12   Newport, Warwick and Woonsocket and the towns of Westerly and Tiverton.

13            (b) (1) This section only applies to sales by writers, composers and artists residing in and

14   conducting a business within a section of the defined economic development zone in the cities of

15   Providence or Pawtucket, or the defined economic development zone in the town of Westerly or

16   the defined economic zone in the city of Woonsocket, or the defined economic zone in the city of

17   Warwick, or in those areas within the city of Newport, and the town of Little Compton, which are

18   zoned "general business," "waterfront business," or "limited business" or have been designated

19   by the city of Newport as part of the arts district, or in those areas of the town of Warren which

20   are zoned "waterfront district," "special district," "village bus iness district," "manufacturing

21   district," "business district" or "Warren historic district," or in those areas of the town of Tiverton

22   which are zoned "business commercial," "business waterfront" or "village commercial." For the

23   purposes of this section, a "work" means an original and creative work, whether written,

24   composed or executed for "one-of-a-kind limited" production and which falls into one of the

25   following categories:

26            (i) A book or other writing;

27            (ii) A play or the performance of said play;

28            (iii) A musical composition or the performance of said composition;

29            (iv) A painting or other like picture;

30            (v) A sculpture;

31            (vi) Traditional and fine crafts;

32            (vii) The creation of a film or the acting within the film;

33            (viii) The creation of a dance or the performance of the dance.

34            (2) For the purposes of this section, a "work" includes any product generated as a result



                                                       56
1    of any of the above categories.

2             (3) For the purposes of this section, a "work" does not apply to any piece or performance

3    created or executed for industry oriented or related production.

4             (c) (1) This section applies to sales by any individual:

5             (i) Who is a resident of and has a principal place of business situated in the section of the

6    economic development zone designated as the arts and entertainment district in the downtown

7    area of the city of Providence or in the city of Pawtucket, or the defined economic development

8    zone in the town of Westerly or the defined economic zone in the city of Woonsocket, or the

9    defined economic zone in the city of Warwick, or who is a resident of and has a principal place of

10   business situated in those areas within the city of Newport or the town of Little Compton, which

11   are zoned "general business," "waterfront business," or "limited business," or have been

12   designated by the city of Newport as part of the arts district, or who is a resident of and has a

13   principal place of business situated in those areas within the town of Warren which are zoned

14   "waterfront district," "special district," "village business district," "manufacturing district,"

15   "business district" or "Warren historic district," or who is a resident or has a principal place of

16   business situated in those areas within the town of Tiverton which are zoned "business

17   commercial," "business waterfront" or "village commercial." For the purposes of this section, the

18   Providence arts and entertainment district in Providence is defined as the area bounded by Pine

19   Street to the southeast, Dorrance Street to the northeast, Sabin Street to the northwest and Empire

20   Street to the southwest. Said Providence arts and entertainment district also includes the area

21   beginning at the point of intersection of Acorn Street and Harris Avenue, then turning east onto

22   Atwells Avenue to Service Road 7, then turning southerly onto Service Road 7 to Westminster

23   Street, then turning westerly onto Westminster Street, continuing until Bridgham, then turning

24   south onto Bridgham to Cranston Street, then turning southwesterly onto Cranston Street, then

25   continuing to Messer Street, then turning north onto Messer Street to Westminster Street, turning

26   west onto Westminster Street to US Hwy 6 off ramp, then heading west on US Hwy 6 to Sheridan

27   Street, then heading northeast on Sheridan Street to Aleppo Street, then turning southeast along

28   Aleppo Street to Pelham Street, then heading northeast on Pelham Street to Manton Avenue, then

29   continuing southeast on Manton Avenue until Delaine Street, then heading northeast on Delaine

30   Street until Appleton Street, then continuing northwesterly on Apple ton Street until Bowdoin

31   Street, then heading north on Bowdoin Street until Barstow Street, then heading east on Barstow

32   until Valley Street, then heading northeast on Valley Street to Hemlock Street, then turning

33   southeast on Hemlock Street until Promenade Street, then heading east on Promenade Street to

34   Acorn Street, then heading south on Acorn Street to the intersection of Acorn Street and Harris



                                                      57
1    Avenue. The named streets are included in the Providence district; and in Pawtucket is defined as

2    the area beginning at the point of intersection of Dexter Street and the Central Falls line, then east

3    along the Central Falls line to the Blackstone River, then north along the city boundary on the

4    Blackstone River to the Cumberland line, then west along the Pawtucket city boundary line to I-

5    95, then south along I-95 to Pine Street, then north on Pine Street to AMTRAK Right of Way,

6    then northwest along the AMTRAK Right of Way to Dexter Street, then north on Dexter Street to

7    the Central Falls line. The named streets are included in the district. The Westerly arts and

8    entertainment district is defined as assessor's plat 56, lots 1 through 24, lot 48, lots 50 through 62,

9    and lots 71 through 82, and assessors plat 66, lots 22 through 26, and lots 29 through 36 the

10   Woonsocket arts and entertainment district is defined as the area beginning at a point of land on

11   the southwest bank of the Blackstone River abutting the bridge for the Providence & Worcester

12   Railroad and proceeding northerly to a point at the intersection of Worrall Street, Clinton Street

13   and Harry S. Truman Drive, then proceeding northwesterly along Worrall Street to its intersection

14   with Social Street, then turning westerly on Social Street proceeding to its intersection with Main

15   Street, Blackstone Street and North Main Street, then turning northwesterly and proceeding along

16   Blackstone Street to its intersection with River Street, then turning northerly and proceeding

17   along River Street to its intersection with the north/east bank of Blackstone River, then following

18   the riverbank southerly to the bridge at Bernon Street and turning easterly crossing the Blackstone

19   River via Bernon Street and proceeding to its intersection with Front Street, then turning

20   northeasterly on Front Street and proceeding to its intersection with Hamlet Avenue, and to

21   include the former courthouse on the southerly side of Front Street at its intersection with Hamlet

22   Avenue, then turning easterly on Hamlet Avenue and proceeding to its intersection with Manville

23   Road, then turning southeasterly on Manville Road and proceeding to its intersection with

24   Davison Avenue, then turning northeasterly on Davison Avenue and proceeding to a point on the

25   south/west bank of the Blackstone River, then turning northerly, following the southerly

26   riverbank to the point of beginning. The abovementioned streets are included in the district. The

27   Warwick arts district is defined as that area known as Pontiac Village, beginning on Route 5 at

28   the Warwick/Cranston municipal boundary, then south to the intersection of Route 5 and the

29   Pawtuxet River, then following the Pawtuxet River in an easterly and northerly direction to the

30   municipal boundary in the vicinity of Knight Street, then from the intersection of Knight Street

31   and the municipal boundary westerly along the Warwick/Cranston municipal boundary to the

32   intersection of Route 5 and Greenwich Avenue. The above named streets are included in the

33   district.

34               (ii) Who is determined by the tax administrator, after consideration of any evidence he or



                                                        58
1    she deems necessary or which is submitted to him or her by the individual, to have written,

2    composed, or executed, either solely or jointly, a work or works which would fall into one of the

3    categories listed in subsection (b)(1).

4              (2) This section also applies to sales by any other gallery located in the arts and

5    entertainment district described in subsection (c)(1)(i) as well as any other arts and entertainment

6    district designated by the general assembly, as well as to sales by any other gallery located in

7    those areas within the city of Newport, or the town of Little Compton, which are zoned "general

8    business," "waterfront business," or "limited business" or have been designated by the city of

9    Newport as part of the arts district, as well as to sales by any other gallery located in those areas

10   within the town of Warren which are zoned "waterfront district," "special district," "village

11   business district," "manufacturing district," "business district" or "Warren historic district," as

12   well as to sales by any other gallery located in those areas within the town of Tiverton which are

13   zoned "business commercial," "business waterfront" or "village commercial."

14            (3) The tax administrator shall not make a determination unless:

15            (i) The individual(s) concerned duly make(s) an application to the tax administrator for

16   the sales tax exemption which applies to the works defined in this section; and

17            (ii) The individual has complied and continues to comply with any and all requests made

18   by the tax administrator.

19            (d) Any individual to whom this section applies and who makes an application to the tax

20   administrator is entitled to a sales tax exemption for the sale of a work or works sold from the

21   individual's business located in the economic development zone which would, apart from this

22   section, be subject to the tax rate imposed by the state of Rhode Island.

23            (e) When an individual makes a request for the exemption, the tax administrator is

24   entitled to all books, documents, or other evidence relating to the publication, production or

25   creation of the works that may be deemed necessary by the tax administrator for the purposes of

26   the exemption. The time period in which to provide this information is in the sole discretion of

27   the tax administrator and specified in the notice.

28            (f) In addition to the information required in subsection (e), the tax administrator may

29   require the individual(s) to submit an annual certified accounting of the numbers of works sold,

30   the type of work sold, and the date of the sale. Failure to file this report may, in the sole discretion

31   of the tax administrator, terminate the individual's eligibility for the exemption.

32            (g) Any person storing, using, or otherwise consuming in this state any work or works

33   which is deemed to be exempt from the sales tax pursuant to this section is not liable for the use

34   tax on the work or works.



                                                       59
1             (h) Notwithstanding the provisions of this section, any individual to whom this section

2    may apply shall comply with all the administration, collection, and other provisions of chapters

3    18 and 19 of this title.

4            44-18-33. Sales to common carrier for use outside state. -- There is exempted from the

5    computation of the amount of the sales tax the gross receipts from sales of tangible personal

6    property to a common carrier, shipped by the seller via the purchasing carrier under a bill of

7    lading whether the freight is paid in advance, or the shipment is made freight charges collect, to a

8    point outside of this state and the property is actually transported to the out-of-state destination

9    for use by the carrier in the conduct of its business as a common carrier.

10           44-18-40. Exemption for buses, trucks and trailers in interstate commerce. --

11   Notwithstanding any provision of the general laws to the contrary, the purchase, rental or lease of

12   a bus, truck, or trailer by a bus or trucking company is not subject to the provisions of the sales

13   and use taxes imposed by this chapter on the condition that the bus, truck and/or trailer is utilized

14   exclusively in interstate commerce.

15           SECTION 17. Section 44-31-1.1 of the General Laws in Chapter 44-31 entitled

16   "Investment Tax Credit" is hereby repealed.

17           44-31-1.1. Biotechnology investment tax credit. -- (a) Any company primarily engaged

18   in commercial biological research and development or manufacturing and sale of biotechnology

19   products or active pharmaceutical ingredients which pays its employees that work a minimum of

20   thirty (30) hours per week within the state a median annual wage equal or greater than one

21   hundred and twenty-five percent (125%) of the average annual wage paid by all employers in the

22   state to employees that work a minimum of thirty (30) hours per week within the state, and

23   provides benefits typical to the biotechnology industry, shall be allowed a credit of ten percent

24   (10%) of the cost or other basis for federal tax purposes of tangible personal property and other

25   tangible property, including buildings and structural components of buildings acquired,

26   constructed, reconstructed, or leased with situs in Rhode Island and principally used in the

27   production of biotechnology products after December 31, 2001.

28            (1) "Biotechnology products" means those products that are applicable to the prevention,

29   treatment, or cure of a disease or condition of human beings, and that are produced using living

30   organisms, or materials derived from living organisms, or cellular, sub cellular, or molecular

31   component of living organisms.

32            (2) "Principally" means the company's sales of biotechnology products or costs related to

33   the development of biotechnology products constitute at least fifty percent of its overall receipts

34   or its overall costs respectively.



                                                      60
1             (3) "Tangible personal property" and "other tangible property" includes buildings and

2    structural components of buildings acquired, constructed, reconstructed, or leased with situs in

3    Rhode Island and principally used in the production of biotechnology products after December

4    31, 2001 that:

5             (A) is depreciable pursuant to 26 USC. Section 167,

6             (B) has a useful life of four (4) years or more, and

7             (C) is acquired by purchase as defined in 26 U.S.C. section 179(d), or

8             (D) is acquired by lease based on the fair market value of the property at the inception of

9    the lease times the portion of the depreciable life of the property represented by the term of the

10   lease, excluding renewal options, for a term of twenty (20) years; and

11            (E) does not include vehicles or furniture.

12            (4) "Wages" means all remuneration paid for personal services, including commissions

13   and bonuses and the cash value of all remuneration paid in any medium other than cash and all

14   other remuneration which is defined as taxable wages by the Internal Revenue Service, as

15   certified by the department of labor and training.

16            (b) If the amount of credit allowable for any taxable year is less than the amount of credit

17   available to the taxpayer, any amount of credit not used in the taxable year will be available the

18   following year or years not to exceed fifteen (15) years and may be deducted from the taxpayer's

19   tax for the year or years.

20            (1) The credit may be extended beyond seven (7) years only in a year in which:

21            (A) The company maintains an average quarterly number of employees for each calendar

22   year that is nine and one half percent (9.5%) greater than average quarter number of employees in

23   the fourth year of the initial credit. Employees are defined as those that work a minimum of thirty

24   (30) hours per week within the state with benefits typical to the biotechnology industry;

25             (B) The company's average quarterly median wage is not less than the company's

26   average of its quarterly median wage for the three (3) previous calendar years;

27            (C) The company pays its employees a median annual wage equal or greater than one

28   hundred and twenty-five percent (125%) of the average annual wage paid by all employers in the

29   state. Employees are defined as those that work a minimum of thirty (30) hours per week within

30   the state with benefits typical to the biotechnology industry; and

31            (D) The department of labor and training certifies to the tax administrator that the criteria

32   in (A) -- (C) have been met.

33            (2) Unused credits after the seventh year are forfeited permanently if any of these wage

34   and employment criteria are unmet after the seventh year.



                                                      61
1              (3) The company may determine the order in which the credits generated in different tax

2    years are utilized, provided that credits available for more than seven (7) years may not reduce

3    current year liability by more than seventy-five percent (75%); and provided further that in no

4    event, can liability be reduced below the minimum tax prescribed in section 44-11-2.

5             SECTION 18. Sections 44-32-1, 44-32-2 and 44-32-3 of the General Laws in Chapter 44-

6    32 entitled "Elective Deduction for Research and Development Facilities" is hereby repealed in

7    its entirety.

8             44-32-1. Elective deduction against allocated entire net income. -- (a) General. -

9    Except as provided in subsection (c) of this section, at the election of a taxpayer who is subject to

10   the income tax imposed by chapters 11 or 30 of this title, there shall be deducted from the portion

11   of its entire net income allocated within the state the items prescribed in subsection (b) of this

12   section, in lieu of depreciation or investment tax credit.

13             (b) One-year write-off of new research and development facilities.

14             (1) Expenditures paid or incurred during the taxable year for the construction,

15   reconstruction, erection or acquisition of any new, not used, property as described in subsection

16   (c) of this section, which is used or to be used for purposes of research and development in the

17   experimental or laboratory sense. The purposes are not deemed to include the ordinary testing or

18   inspection of materials or products for quality control, efficiency surveys, management studies,

19   consumer surveys, advertising, promotion, or research in connection with literary, historical, or

20   similar projects. The deduction shall be allowed only on condition that the entire net income for

21   the taxable year and all succeeding taxable years is computed without the deduction of any

22   expenditures and without any deduction for depreciation of the property, except to the extent that

23   its basis may be attributable to factors other than the expenditures, (expenditures and depreciation

24   deducted for federal income tax purposes shall be added to the entire net income allocated to

25   Rhode Island), or in case a deduction is allowable pursuant to this subdivision for only a part of

26   the expenditures, on condition that any deduction allowed for federal income tax purposes on

27   account of the expenditures or on account of depreciation of the property is proportionately

28   reduced in computing the entire net income for the taxable year and all succeeding taxable years.

29   Concerning property that is used or to be used for research and development only in part, or

30   during only part of its useful life, a proportionate part of the expenditures shall be deductible. If

31   all or part of the expenditures concerning any property has been deducted as provided in this

32   section, and the property is used for purposes other than research and development to a greater

33   extent than originally reported, the taxpayer shall report the use in its report for the first taxable

34   year during which it occurs, and the tax administrator may recompute the tax for the year or years



                                                       62
1    for which the deduction was allowed, and may assess any additional tax resulting from the

2    recomputation as a current tax, within three (3) years of the reporting of the change to the tax

3    administrator. Any change in use of the property in whole or in part from that, which originally

4    qualified the property for the deduction, requires a recomputation. The tax administrator has the

5    authority to promulgate regulations to prevent the avoidance of tax liability.

6              (2) The deduction shall be allowed only where an election for amortization of air or

7    water pollution control facilities has not been exercised in respect to the same property.

8             (3) The tax as a result of recomputation of a prior year's deduction is due as an additional

9    tax for the year the property ceases to qualify.

10            (c) Property covered by deductions. - The deductions shall be allowed only with respect

11   to tangible property which is new, not used, is depreciable pursuant to 26 U.S.C. section 167, was

12   acquired by purchase as defined in 26 U.S.C. section 179(d), has a situs in this state, and is used

13   in the taxpayer's trade or business. For the taxable years beginning on or after July 1, 1974, a

14   taxpayer is not allowed a deduction under this section with respect to tangible property leased by

15   it to any other person or corporation or leased from any other person or corporation. For purposes

16   of the preceding sentence, any contract or agreement to lease or rent or for a license to use the

17   property is considered a lease, unless the contract or agreement is treated for federal income tax

18   purposes as an installment purchase rather than a lease. With respect to property that the taxpayer

19   uses itself for purposes other than leasing for part of a taxable year and leases for a part of a

20   taxable year, the taxpayer shall be allowed a deduction under this section in proportion to the part

21   of the year it uses the property.

22            (d) Entire net income. - "Entire net income", as used in this section, means net income

23   allocated to this state.

24             (e) Carry-over of excess deductions. - If the deductions allowable for any taxable

25   yearpursuant to this section exceed the portion of the taxpayer's entire net income allocated to this

26   state for that year, the excess may be carried over to the following taxable year or years, not to

27   exceed three (3) years, and may be deducted from the portion of the taxpayer's entire net income

28   allocated to this state for that year or years.

29            (f) Gain or loss on sale or disposition of property. - In any taxable year when property is

30   sold or disposed of before the end of its useful life, with respect to which a deduction has been

31   allowed pursuant to subsection (b) of this section, the gain or loss on this entering into the

32   computation of federal taxable income is disregarded in computing the entire net income, and

33   there is added to or subtracted from the portion of the entire net income allocated within the state

34   the gain or loss upon the sale or other disposition. In computing the gain or loss, the basis of the



                                                        63
1    property sold or disposed of is adjusted to reflect the deduction allowed with respect to the

2    property pursuant to subsection (b) of this section; provided, that no loss is recognized for the

3    purpose of this subsection with respect to a sale or other disposition of property to a person whose

4    acquisition of this property is not a purchase as defined in 26 U.S.C. section 179(d).

5                (g) Investment credit not allowed on research and development property. - No

6    investment credit under chapter 31 of this title shall be allowed on the research and development

7    property for which accelerated write-off is adopted under this section.

8                (h) Consolidated returns. - The research and development deduction shall only be

9    allowed against the entire net income of the corporation included in a consolidated return and

10   shall not be allowed against the entire net income of other corporations that may join in the filing

11   of a consolidated state tax return.

12           44-32-2. Credit for research and development property acquired, constructed, or

13   reconstructed or erected after July 1, 1994. -- (a) A taxpayer shall be allowed a credit against

14   the tax imposed by chapters 11, 17, or 30 of this title. The amount of the credit shall be ten

15   percent (10%) of the cost or other basis for federal income tax purposes of tangible personal

16   property, and other tangible property, including buildings and structural components of buildings,

17   described in subsection (b) of this section; acquired, constructed or reconstructed, or erected after

18   July 1, 1994.

19               (b) A credit shall be allowed under this section with respect to tangible personal property

20   and other tangible property, including buildings and structural components of buildings which

21   are: depreciable pursuant to 26 U.S.C. section 167 or recovery property with respect to which a

22   deduction is allowable under 26 U.S.C. section 168, have a useful life of three (3) years or more,

23   are acquired by purchase as defined in 26 U.S.C. section 179(d), have a situs in this state and are

24   used principally for purposes of research and development in the experimental or laboratory sense

25   which shall also include property used by property and casualty insurance companies for research

26   and development into methods and ways of preventing or reducing losses from fire and other

27   perils. The credit shall be allowable in the year the property is first placed in service by the

28   taxpayer, which is the year in which, under the taxpayer's depreciation practice, the period for

29   depreciation with respect to the property begins, or the year in which the property is placed in a

30   condition or state of readiness and availability for a specifically assigned function, whichever is

31   earlier. These purposes shall not be deemed to include the ordinary testing or inspection of

32   materials or products for quality control, efficiency surveys, management studies, consumer

33   surveys, advertising, promotions, or research in connection with literary, historical or similar

34   projects.



                                                        64
1             (c) A taxpayer shall not be allowed a credit under this section with respect to any

2    property described in subsections (a) and (b) of this section, if a deduction is taken for the

3    property under section 44-32-1.

4             (d) A taxpayer shall not be allowed a credit under this section with respect to tangible

5    personal property and other tangible property, including buildings and structural components of

6    buildings, which it leases to any other person or corporation. For purposes of the preceding

7    sentence, any contract or agreement to lease or rent or for a license to use the property is

8    considered a lease.

9             (e) The credit allowed under this section for any taxable year does not reduce the tax due

10   for that year, in the case of corporations, to less than the minimum fixed by section 44-11-2(e). If

11   the amount of credit allowable under this section for any taxable year is less than the amount of

12   credit available to the taxpayer, any amount of credit not credited in that taxable year may be

13   carried over to the following year or years, up to a maximum of seven (7) years, and may be

14   credited against the taxpayer's tax for the following year or years. For purposes of chapter 30 of

15   this title, if the credit allowed under this section for any taxable year exceeds the taxpayer's tax

16   for that year, the amount of credit not credited in that taxable year may be carried over to the

17   following year or years, up to a maximum of seven (7) years, and may be credited against the

18   taxpayer's tax for the following year or years.

19            (f) (1) With respect to property which is depreciable pursuant to 26 U.S.C. section 167

20   and which is disposed of or ceases to be in qualified use prior to the end of the taxable year in

21   which the credit is to be taken, the amount of the credit is that portion of the credit provided for in

22   this section which represents the ratio which the months of qualified use bear to the months of

23   useful life. If property on which credit has been taken is disposed of or ceases to be in qualified

24                        f
     use prior to the end o its useful life, the difference between the credit taken and the credit

25   allowed for actual use must be added back in the year of disposition. If the property is disposed of

26   or ceases to be in qualified use after it has been in qualified use for more than twelve (12)

27   consecutive years, it is not necessary to add back the credit as provided in this subdivision. The

28   amount of credit allowed for actual use is determined by multiplying the original credit by the

29   ratio which the months of qualified use bear to the months of useful life. For purposes of this

30   subdivision, "useful life of property" is the same as the taxpayer uses for depreciation purposes

31   when computing his federal income tax liability.

32            (2) Except with respect to that property to which subdivisio n (3) of this subsection

33   applies, with respect to three (3) year property, as defined in 26 U.S.C. section 168(c), which is

34   disposed of or ceases to be in qualified use prior to the end of the taxable year in which the credit



                                                       65
1    is to be taken, the amount of the credit shall be that portion of the credit provided for in this

2    section which represents the ratio which the months of qualified use bear to thirty-six (36). If

3    property on which credit has been taken is disposed of or ceases to be in qualified use prior to the

4    end of thirty-six (36) months, the difference between the credit taken and the credit allowed for

5    actual use must be added back in the year of disposition. The amount of credit allowed for actual

6    use is determined by multiplying the original credit by the ratio that the months of qualified use

7    bear to thirty-six (36).

8             (3) With respect to any recovery property to which 26 U.S.C. section 168 applies, which

9    is a building or a structural component of a building and which is disposed of or ceases to be in

10   qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of

11   the credit is that portion of the credit provided for in this section which represents the ratio which

12   the months of qualified use bear to the total number of months over which the taxpayer chooses

13   to deduct the property under 26 U.S.C. section 168. If property on which credit has been taken is

14   disposed of or ceases to be in qualified use prior to the end of the period over which the taxpayer

15   chooses to deduct the property under 26 U.S.C. section 168, the difference between the credit

16   taken and the credit allowed for actual use must be added back in the year of disposition. If the

17   property is disposed of or ceases to be in qualified use after it has been in qualified use for more

18   than twelve (12) consecutive years, it is not necessary to add back the credit as provided in this

19   subdivision. The amount of credit allowed for actual use is determined by multiplying the original

20   credit by the ratio that the months of qualified use bear to the total number of months over which

21   the taxpayer chooses to deduct the property under 26 U.S.C. section 168.

22            (g) No deduction for research and development facilities under section 44-32-1 shall be

23   allowed for research and development property for which the credit is allowed under this section.

24            (h) No investment tax credit under section 44-31-1 shall be allowed for research and

25   development property for which the credit is allowed under this section.

26            (i) The investment tax credit allowed by section 44-31-1 shall be taken into account

27   before the credit allowed under this section.

28            (j) The credit allowed under this section only allowed against the tax of that corporation

29   included in a consolidated return that qualifies for the credit and not against the tax of other

30   corporations that may join in the filing of a consolidated return.

31             (k) In the event that the taxpayer is a partnership, joint venture or small business

32   corporation, the credit shall be divided in the same manner as income.

33           44-32-3. Credit for qualified research expenses. -- (a) A taxpayer shall be allowed a

34   credit against the tax imposed by chapters 11, 17 or 30 of this title. The amount of the credit shall



                                                      66
1    be five percent (5%)(and in the case of amounts paid or accrued after January 1, 1998, twenty-

2    two and one-half percent (22.5%) for the first twenty-five thousand dollars ($25,000) worth of

3    credit and sixteen and nine-tenths percent (16.9%) for the amount of credit above twenty-five

4    thousand dollars ($25,000)) of the excess, if any, of:

5               (1) The qualified research expenses for the taxable year, over

6               (2) The base period research expenses.

7               (b) (1) "Qualified research expenses" and "base period research expenses" have the same

8    meaning as defined in 26 U.S.C. section 41; provided, that the expenses have been incurred in

9    this state after July 1, 1994.

10               (2) Notwithstanding the provisions of subdivision (1) of this subsection, "qualified

11   research expenses" also includes amounts expended for research by property and casualty

12   insurance companies into methods and ways of preventing or reducing losses from fire and other

13   perils.

14              (c) The credit allowed under this section for any taxable year shall not reduce the tax due

15   for that year by more than fifty percent (50%) of the tax liability that would be payable, and in the

16   case of corporations, to less than the minimum fixed by section 44-11-2(e). If the amount of

17   credit allowable under this section for any taxable year is less than the amount of credit available

18   to the taxpayer any amount of credit not credited in that taxable year may be carried over to the

19   following year or years, up to a maximum of seven (7) years, and may be credited against the

20   taxpayer's tax for that year or years. For purposes of chapter 30 of this title, if the credit allowed

21   under this section for any taxable year exceeds the taxpayer's tax for that year, the amount of

22   credit not credited in that taxable year may be carried over to the following year or years, up to a

23   maximum of seven (7) years, and may be credited against the taxpayer's tax for that year or years.

24   For purposes of determining the order in which carry-overs are taken into consideration, the

25   credit allowed by section 44-32-2 is taken into account before the credit allowed under this

26   section.

27              (d) The investment tax credit allowed by section 44-31-1 shall be taken into account

28   before the credit allowed under this section.

29              (e) The credit allowed under this section shall only be allowed against the tax of that

30   corporation included in a consolidated return that qualifies for the credit and not against the tax of

31   other corporations that may join in the filing of a consolidated return.

32              (f) In the event the taxpayer is a partnership, joint venture or small business corporation,

33   the credit is divided in the same manner as income.

34              SECTION 19. Sections 44-43-2 and 44-43-5 of the General Laws in Chapter 44-43



                                                         67
1    entitled "Tax Incentives for Capital Investment in Small Businesses" are hereby repealed.

2              44-43-2. Deduction or modification. -- (a) In the year in which a taxpayer first makes a

3    qualifying investment in a certified venture capital partnership or the year in which an

4    entrepreneur first makes an investment in a qualifying entity, the taxpayer or the entrepreneur

5    shall be allowed:

6               (1) A deduction for purposes of computing net income or net worth in accordance with

7    chapter 11 of this title; or

8               (2) A deduction from gross earnings for purposes of computing the public service

9    corporation tax in accordance with chapter 13 of this title; or

10             (3) A deduction for the purposes of computing net income in accordance with chapter 14

11   of this title; or

12              (4) A deduction for the purposes of computing gross premiums in accordance with

13   chapter 17 of this title; or

14             (5) A modification reducing federal adjusted gross income in accordance with chapter 30

15   of this title.

16              (b) The deduction or modification shall be in an amount equal to the taxpayer's

17   qualifying investment in a certified venture capital partnership or an entrepreneur's investment in

18   a qualifying business entity and shall be measured at the year end of the certified venture capital

19   partnership, the year end of the qualifying business entity, or the year end of the investing

20   taxpayer, whichever comes first.

21             44-43-5. Exemption. -- To the extent that a long-term capital gain was included in the

22   calculations of taxes imposed by chapters 11, 13, 14 or 30 of this title, that long-term capital gain

23   shall be excluded. The long-term capital gain is the long-term capital gain as defined in 26 U.S.C.

24   section 1222(3) which is :

25              (1) Recognized by a partner in a certified venture capital partnership from the sale or

26   exchange of an interest in the partnership; or

27              (2) A partner's distributive share (in a certified venture capital partnership) of any long-

28   term capital gain recognized by the partnership from the sale or exchange of an interest in any

29   entity which at the time the interest was acquired was a qualifying business entity; or

30             (3) The long-term capital gain recognized by an entrepreneur from the sale or exchange

31   of an interest in an entity, which at the time the interest was acquired was a qualifying business

32   entity.

33             SECTION 20. Section 44-54-1 of the General Laws in Chapter 44-54 entitled "Disabled

34   Access Credit For Small Businesses" is hereby repealed.



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1             44-54-1. Tax credit. -- (a) A small business taxpayer that pays for or incurs expenses to

2    provide access to persons with disabilities shall be allowed a credit, to be computed against the

3    tax imposed by chapters 11 and 13 of this title. The expenses must be paid or incurred to enable

4    the small business to comply with federal or state laws protecting the rights of persons with

5    disabilities. The credit is equal to ten percent (10%) of the total amount expended in the state of

6    Rhode Island during the taxable year but in no event shall exceed the sum of one thousand dollars

7    ($1,000) for:

8              (1) Removing architectural, communication, physical, or transportation barriers;

9              (2) Providing qualified interpreters or other effective methods of delivering aurally

10   delivered materials to persons with hearing impairments;

11             (3) Providing readers, tapes or other effective means of making visually delivered

12   materials available to persons with visual impairments;

13             (4) Providing job coaches or other effective methods of supporting workers with severe

14   impairments in competitive employment;

15             (5) Providing specialized transportation services to employees or customers with

16   mobility impairments;

17             (6) Buying or modifying equipment for persons with disabilities; and

18             (7) Providing similar services, modific ations, material or equipment for persons with

19   disabilities;

20             (b) As used in this chapter, the following words have the following meanings:

21             (1) "Small business" is one that for the preceding year had thirty (30) or fewer full-time

22   employees, or had one million dollars ($1,000,000) or less in gross receipts.

23             (2) "Full-time employee" is one employed at least thirty (30) hours a week for twenty

24   (20) or more calendar weeks in the proceeding year.

25             (3) "Federal or state laws protecting the rights of persons with disabilities" includes but

26   is not limited to the: Americans with Disabilities Act of 1990, 42 U.S.C. section 12101 et. seq.;

27   Title V of the Rehabilitation Act of 1973, 29 U.S.C. section 794; Declaration of Certain

28   Constitutional Rights and Principles -- Discrimination, R.I. Const. art. 1, section 2; Civil Rights

29   of People with Disabilities, chapter 87 of title 42; Open Meeting Handicapped Accessibility for

30   persons with disabilities, section 42-46-13; Access for persons with disabilities, section 37-8-15;

31   and AIDS Discrimination Prohibited, section 23-6-22.

32             (4) "Amount expended" means the actual sum of money spent.

33            SECTION 21. Sections 44-62-1, 44-62-2, 44-62-3, 44-62-4, 44-62-5, 44-62-6 and 44-62-

34   7 of the General Laws in Chapter 44-62 entitled "Tax Credits for Contributions to Scholarship



                                                      69
1    Organizations" is hereby repealed in its entirety.

2            44-62-1. Tax credit for contributions to a scholarship organization -- General. -- In

3    order to enhance the educational opportunities available to all students in this state, a business

4    entity will be allowed a tax credit to be computed as provided in this chapter for voluntary cash

5    contribution made by the business entity to a qualified scholarship.

6            44-62-2. Qualification of scholarship organization. -- A scholarship organization must

7    certify annually by December 31st to the division of taxation that the organization is eligible to

8    participate in the program in accordance with criteria as defined below:

9             (a) "Scholarship organization" means a charitable organization in this state that is exempt

10   from federal taxation under section 501(c)(3) of the internal revenue code, and that allocates at

11   least ninety percent (90%) of its annual revenue through a scholarship program for tuition

12   assistance grants to eligible students to allow them to attend any qualified school of their parents'

13   choice represented by the scholarship organization.

14            (b) "Scholarship program" means a program to provide tuition assistance grants to

15   eligible students to attend a nonpublic school located in this state. A scholarship program must

16   include an application and review process for the purpose of making these grants only to eligible

17   students. The award of scholarships to eligible students shall be made without limiting

18   availability to only students of one school.

19            (c) "Eligible student" means a school-age student who is registered in a qualified school

20   and is a member of a household with an annual household income of not more than two hundred

21   fifty percent (250%) of the federal poverty guidelines as published in the federal register by the

22   United States department of health and human services.

23            (d) "Household" means one or more persons occupying a dwelling unit and living as a

24                                                                                  e
     single nonprofit housekeeping unit. Household does not mean bona fide lessees, t nants, or

25   roomers and borders on contract.

26            (e) "Household income" means all income received by all persons of a household in a

27   calendar year while members of the household.

28            (f) "Income" means the sum of federal adjusted gross income as defined in the internal

29   revenue code of the United States, 26 U.S.C. section 1 et seq., and all nontaxable income

30   including, but not limited to, the amount of capital gains excluded from adjusted gross income,

31   alimony, support money, nontaxable strike benefits, cash public assistance and relief (not

32   including relief granted under this chapter), the gross amount of any pension or annuity

33   (including Railroad Retirement Act (see 45 U.S.C. section 231 et seq.) benefits, all payments

34   received under the federal Social Security Act, 42 U.S.C. section 301 et seq., state unemployment



                                                      70
1    insurance laws, and veterans' disability pensions (see 38 U.S.C. section 301 et seq.), nontaxable

2    interest received from the federal government or any of its instrumentalities, workers'

3    compensation, and the gross amount of "loss of time" insurance. It does not include gifts from

4    nongovernmental sources, or surplus foods or other relief in kind supplied by a public or private

5    agency.

6              (g) "Qualified school" means a nonpublic elementary or secondary school that is located

7    in this state and that satisfies the requirements prescribed by law for nonpublic schools in this

8    state.

9              (h) "School-age student" means a child at the earliest admission age to a qualified

10   school's kindergarten program or, when no kindergarten program is provided, the school's earliest

11   admission age for beginners, until the end of the school year, the student attains twenty-one (21)

12   years of age or graduation from high school whichever occurs first.

13             (i) Designation. - A donation to a scholarship organization, for which the donor receives

14   a tax credit under this provision, may not be designated to any specific school or student by the

15   donor.

16             (j) Nontaxable income. - A scholarship received by an eligible student shall not be

17   considered to be taxable income.

18             44-62-3. Application for the tax credit program. -- (a) Prior to the contribution, a

19   business entity shall apply in writing to the division of taxation. The application shall contain

20   such information and certification as the tax administrator deems necessary for the proper

21   administration of this chapter. A business entity shall be approved if it meets the criteria of this

22   chapter; the dollar amount of the applied for tax credit is no greater than one hundred thousand

23   dollars ($100,000) in any tax year, and the scholarship organization which is to receive the

24   contribution has qualified under section 44-62-2.

25             (b) Approvals for contributions under this section shall be made available by the division

26   of taxation on a first-come-first-serve basis. The total aggregate amount of all tax credits

27   approved shall not exceed one million dollars ($1,000,000) in a fiscal year.

28             (c) The division of taxation shall notify the business entity in writing within thirty (30)

29   days of the receipt of application of the division's approval or rejection of the application.

30             (d) Unless the contribution is part of a two-year plan, the actual cash contribution by the

31   business entity to a qualified scholarship organization must be made no later than one hundred

32   twenty (120) days following the approval of its application. If the contribution is part of a two-

33   year plan, the first year's contribution follows the general rule and the second year's contribution

34   must be made in the subsequent calendar year by the same date.



                                                       71
1               (e) The contributions must be those charitable contributions made in cash as set forth in

2    the Internal Revenue Code.

3               44-62-4. Calculation of tax credit and issuance of tax credit certificate. -- (a) When

4    the contribution has been made as set forth in section 3 above, the business entity shall apply to

5    the division of taxation for a tax credit certificate. The application will include such information,

6    documentation, and certification as the tax administrator deems proper for the administration of

7    this chapter including, but not limited to a certification by an independent Rhode Island certified

8    public accountant that the cash contribution has actually been made to the qualified scholarship

9    organization. For purposes of the proper administration of this section, an independent Rhode

10   Island certified public accountant shall be licensed in accordance with RIGL 5-3.1 and means a

11   person, partnership, corporation, limited liability corporation that is not affiliated with or an

12   employee of said business entity or its affiliates and is not affiliated in any manner whatsoever

13   with a qualified scholarship organization or scholarship program as defined in section 42-62-2 (a)

14   -- (j).

15              (b) The division of taxation will review the documentation submitted; calculate the tax

16   credit pertaining to the contribution, and prepare and mail a certificate for amount of credit to be

17   granted.

18              (c) Unless a two year contribution plan is in place, the credit, is computed at seventy-five

19   percent (75%) of the total voluntary cash contribution made by the business entity.

20              (d) This credit is available against taxes otherwise due under provisions of chapters 11,

21   13, 14, 15, 17 or 30 of title 44.

22              (e) (1) A two year contribution plan is based on the written commitment of the business

23   entity to provide the scholarship organization with the same amount of contribution for two (2)

24   consecutive tax years. The business entity must provide in writing a commitment to this extended

25   contribution to the scholarship organization and the division of taxation at the time of application.

26              (2) In the event that a two year contribution plan is in place, the calculation of credit for

27   each year shall be ninety percent (90%) of the total voluntary contribution made by a business

28   entity.

29              (3) In the event that, in the second year of the plan, a business entity's contribution falls

30   below the contribution amount made in the first year but the second year's contribution is eighty

31   percent (80%) or greater than the first year's contribution, the business entity shall receive a credit

32   for both the first and second year contributions equal to ninety percent (90%) of each year's

33   contribution.

34              (4) If the amount of the second year contribution is less than eighty percent (80%) of the



                                                        72
1                                                  oth
     first year contribution, then the credit for b the first and second year contributions shall be

2    equal to seventy-five percent (75%) of each year's contribution. In such case, the tax

3    administrator shall prepare the tax credit certificate for the second year at seventy-five percent

4    (75%). The difference in credit allowable for the first year [90% -- 75% = 15% x first year

5    contribution]shall be recaptured by adding it to the taxpayer's tax in that year.

6            44-62-5. Limitations. -- (a) The credit shall not exceed one hundred thousand dollars

7    ($100,000) annually per business entity.

8             (b) The tax credit must be used in the tax year the contribution was made. Any amounts

9    of unused tax credit may not be carried forward. The tax credit is not refundable, assignable or

10   transferable. The tax credit may not reduce the tax below the state minimum tax.

11            (c) The credit allowed under this chapter is only allowed against the tax of that

12   corporation included in a consolidated return that qualifies for the credit and not against the tax of

13   other corporations that may join in the filing of a consolidated tax return.

14           44-62-6. Definitions. -- The following words and phrases used in this chapter shall have

15   the meanings given to them in this section unless the context clearly indicates otherwise:

16            (1) "Business entity" means an entity authorized to do business in this state and subject

17   to taxes imposed under chapters 44-11, 44-13, 44-14, 44-15 and 44-17 of the general laws.

18   Business entities also include Subchapter S Corporations, Limited Liability Partnerships, and

19   Limited Liability Corporations.

20            (2) "Division of taxation" means the Rhode Island division of taxation.

21           44-62-7. Miscellaneous -- Lists. -- By June 30 of each year, the division of taxation shall

22   annually publish in print and on the division of taxation's website a list of all qualified scholarship

23   organizations under section 44-62-4. The list will indicate which scholarship organizations

24   received contributions from business entities for which tax credits were authorized under this

25   chapter. In addition, each scholarship organization shall submit to the division of taxation by

26   December 31st of each year the following information, which shall be a public record: the

27   number of scholarships distributed by the organization, per school, and the dollar range of those

28   scholarships; a breakdown by zip code of the place of residence for each student receiving a

29   scholarship under this program; and a description of all criteria used by the organization in

30   determining to whom scholarships under this program shall be awarded.

31           SECTION 22. Section 44-63-2 of the General Laws in Chapter 44-63 entitled "Incentives

32   for Innovation and Growth" is hereby repealed.

33           44-63-2. Innovation credit. [Repealed pursuant to section 44-62-5.] -- (a) An eligible

34   qualified innovative company may apply to the division of taxation for a tax credit certificate in



                                                       73
1    an amount equal to fifty percent (50%) of any investment made in the company, but in no case

2    shall the amount of the tax credit certificate exceed one hundred thousand dollars ($100,000). The

3    tax credit certificate may be issued in the name of the eligible company, or an executive

4    employee or employees of the company, an investor in the company, or any combination thereof

5    as requested by the company, and may be applied against state tax liability arising under chapters

6    44-11, 44-12, or 44-30 by the holders of the certificates. If not applied in full at the time of the

7    next following tax filing period, the certificate(s) or the remaining value thereof may be carried

8    forward for a period not to exceed three (3) years.

9            SECTION 23. Sections 42-64.5-1, 42-64.5-2, 42-64.5-3, 42-64.5-4, 42-64.5-5, 42-64.5-6

10   and 42-64.5-7 of the General Laws in Chapter 42-64.5 entitled "Jobs Development Act" are

11   hereby repealed.

12           42-64.5-1. Short title. -- This chapter shall be known as the "Jobs Development Act".

13           42-64.5-2. Definitions. -- As used in this chapter, unless the context clearly indicates

14   otherwise:

15            (1) "Adjusted current employment" means, for any taxable year ending on or after July 1,

16   1995, the aggregate of the average daily number of full-time equivalent active employees

17   employed within the State by an eligible company and its eligible subsidiaries during each taxable

18   year.

19            (2) "Affiliated entity" means any corporation owned or controlled by the same persons or

20   shareholders who own or control an eligible company.

21            (3) "Base employment" means, except as otherwise provided in section 42-64.5-7, the

22   aggregate number of full-time equivalent active employees employed within the State by an

23   eligible company and its eligible subsidiaries on July 1, 1994, or at the election of the eligible

24   company, on an alternative date as provided by section 42-64.5-5. In the case of a manufacturing

25   company which is ruined by disaster, the aggregate number of full-time equivalent active

26   employees employed at the destroyed facility would be zero, under which circumstance the base

27   employment date shall be July 1 of the calendar year in which the disaster occurred. Only one

28   base employment period can be elected for purposes of a rate reduction by an eligible company.

29            (4) "Disaster" means an occurrence, natural or otherwise, which results in the destruction

30   of sixty percent (60%) or more of an operating manufacturing business facility in this state,

31   thereby making the production of products by the eligible company impossible and as a result

32   active employees of the facility are without employment in that facility. However, disaster does

33   not include any damage resulting from the willful act of the owner(s) of the manufacturing

34   business facility.



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1             (5) "Eligible company" means any corporation, state bank, federal savings bank, trust

2    company, national banking association, bank holding company, loan and investment company,

3    mutual savings bank, credit union, building and loan association, insurance company, investment

4    company, broker-dealer company, manufacturing company, telecommunications company or

5    surety company or an eligible subsidiary of any of the foregoing. An eligible company does not

6    have to be in existence, be qualified to do business in the state or have any employees in this state

7    at the time its base employment is determined.

8             (6) "Eligible subsidiary" means each corporation eighty percent (80%) or more of the

9    outstanding common stock of which is owned by an eligible company.

10            (7) "Full-time equivalent active employee" means any employee of an eligible company

11   who: (1) works a minimum of thirty (30) hours per week within the State, or two (2) or more part-

12   time employees whose combined weekly hours equal or exceed thirty (30) hours per week within

13   the State; and (2) earns no less than one hundred fifty percent (150%) of the hourly minimum

14   wage prescribed by Rhode Island law; provided, however, for tax years ending after the later of

15   July 1, 2003 and the first tax year that an eligible company qualifies for a rate reduction pursuant

16   to section 42-64.5-3, for purposes of this section, one hundred fifty percent (150%) of the hourly

17   minimum wage prescribed by Rhode Island law shall mean one hundred fifty percent (150%) of

18   the hourly minimum wage prescribed by Rhode Island law at: (a) the time the employee was first

19   treated as a full-time equivalent active employee during a tax year that the eligible company

20   qualified for a rate reduction pursuant to section 42-64.5-3, or, if later, (b) the time the employee

21   first earned at least one hundred fifty percent (150%) of the hourly minimum wage prescribed by

22   Rhode Island law as an employee of the eligible company.

23            (8) "Initial new employment level" means the number of units of new employment

24   reported by an eligible company in 1997, or, if applicable, the third taxable year following the

25   base employment period election set forth in section 42-64.5-5.

26            (9) (i) "New employment" means for each taxable year the amount of adjusted current

27   employment for each taxable year minus the amount of base employment, but in no event less

28   than zero; provided, however, no eligible company is permitted to transfer, assign or hire

29   employees who are already employed within the State by such eligible company from itself or

30   any affiliated entity or utilize any other artifice or device for the purpose of artificially creating

31   new employees in order to qualify for the rate reduction provided for in this chapter.

32            (ii) Except as provided in section 42-64.5-7, "new employment" shall not include

33   employees already employed in this state who become employees of an eligible company as a

34   result of an acquisition of an existing company by purchase, merger, or otherwise, if the existing



                                                      75
1    company was eligible for a rate reduction. In the case of a manufacturing company that suffers a

2    disaster, it shall mean any employment retained or added as the result of reconstruction of the

3    manufacturing facility.

4               (10) "Rate reduction" means the reduction in tax rate specified in section 42-64.5-4.

5               (11) "Small business concern" means, except as otherwise provided in section 42-64.5-7,

6    any eligible company which has a base employment level of less than one hundred (100);

7    provided, however, that a telecommunications company may not qualify as a small business

8    concern.

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

10              (13) "Telecommunications company" means any public service company or corporation

11   whose rate of taxation is determined under section 44-13-4(4).

12              (14) "Total employment" for an eligible company as of any date means the total number

13   of full-time equivalent active employees employed within the State by the eligible company and

14   its eligible subsidiaries on such date.

15              (15) "Units of new employment" means: (i) for eligible companies which are not small

16   business concerns, the amount of new employment divided by fifty (50), rounded down to the

17   nearest multiple of fifty (50), and (ii) for eligible companies which are small business concerns

18   the amount of new employment divided by ten (10), rounded down to the nearest multiple of ten

19   (10); provided, however, that an eligible company (other than an eligible company that is a

20   telecommunications company) with adjusted current employment of one hundred (100) or more

21   employees in its first year of operation or in any other period following the date its base

22   employment is determined shall determine its units of new employment by dividing the first one

23   hundred (100) employees less its base employment by ten (10), rounded down to the nearest

24   multiple of ten (10), and by dividing the number of additional employees in excess of one

25   hundred (100) by fifty (50), rounded down to the nearest multiple of fifty (50).

26           42-64.5-3. Tax rate reduction. -- The rate of tax payable by an eligible company and

27   each of its eligible subsidiaries for any taxable year ending on or after July 1, 1995, on its net

28   income pursuant to the applicable income tax provisions of the general laws, including the

29   provisions of sections 44-11-2(a), 44-14-3(a), 44-14-4 and 44-17-1, or on its gross earnings

30   pursuant to section 44-13-4(4), shall be reduced by the amount specified in section 42-64.5-4; this

31   rate reduction shall be applied annually once to those eligible companies which are permitted by

32   law to file a consolidated state tax return and in the case of eligible companies not permitted by

33   law to file consolidated state tax returns, then the rate reduction shall be applied annually to each

34   eligible company and its eligible subsidiaries; provided, however, except as provided in section



                                                       76
1    42-64.5-7, should any eligible company fail to maintain in any taxable year after 1997 or, if

2    applicable, the third taxable year following the base employment period election set forth in

3    section 42-64.5-5, the number of units of new employment it reported for its 1997 tax year or, if

4    applicable, the third taxable year following the base employment period election set forth in

5    section 42-64.5-5; the rate reduction provided for in this chapter shall expire permanently.

6            42-64.5-4. Reduction rate schedule. -- (a) The amount of the rate reduction specified in

7    section 42-64.5-3 for any eligible company that is not a telecommunications company for each

8    taxable year ending on or after July 1, 1995, shall be based upon the aggregate amount of new

9    employment of the eligible company and its eligible subsidiaries for each taxable year, and shall

10   be determined by multiplying the numerical equivalent of one-quarter of one percent (.25%) by

11   the number of units of new employment for each taxable year through the taxable year ending in

12   1997 or, if applicable, the third taxable year following the base employment period election set

13   forth in section 42-64.5-5; and for each taxable year thereafter, the number of units of new

14   employment reported for the taxable year 1997 or, if applicable, the third taxable year following

15   the base employment period election set forth in section 42-64.5-5; provided, however, the

16   amount of each rate reduction shall in no event be greater than six percent (6%).

17                                       e
              (b) The amount of the rate r duction specified in section 42-64.5-3 for any eligible

18   company that is a telecommunications company shall be based upon the aggregate amount of new

19   employment of the eligible company and its eligible subsidiaries for each taxable year and shall

20   be determined in the same manner as set forth in subsection (a) of this section, except that it shall

21   be determined by multiplying the numerical equivalent of one-hundredth of one percent (.01%)

22   by the number of units of new employment and the amount of each rate reduction shall in no

23   event be greater than one percent (1%).

24            (c) Notwithstanding any of the provisions of this chapter, where an eligible

25   telecommunications company has one or more affiliated entities that is an eligible company, the

26   eligible company entitled to a rate reduction may assign its rate reduction, to be determined in the

27   manner as provided in subsection (b) of this section, to the eligible telecommunications company.

28   An entity that assigns the rate reduction shall not be eligible for the rate reduction.

29           42-64.5-5. Election. -- An eligible company may elect to determine its "base

30   employment" for the purposes of this chapter on July 1 of any year subsequent to 1994, rather

31   than on July 1, 1994; provided, however, that an eligible company that is a telecommunication

32   company shall determine its base employment on either July 1, 2001 or July 1, 2002; and

33   provided, further, that except as otherwise provided in this chapter, an eligible company may not

34   use July 1, 2003 or any subsequent date to determine its base employment unless a determination



                                                       77
1    has been made by the board of directors of the Rhode Island economic development corporation

2    that: (a) but for the incentives available under this chapter the company is not likely to retain,

3    expand, or add employment in this state; and (b) that the company has provided reasonable

4    evidence supporting a finding that the jobs retained, expanded, or added will generate new tax

5    revenue for the state that is at least equivalent to the value of this incentive.

6             As a result of the election, rules comparable to those set forth elsewhere in this chapter

7    shall be applied to determine the rate reduction available for each of the three (3) taxable years

8    following the first anniversary of the date the eligible company elected to use to determine its

9    "base employment" and for the taxable years following that three (3) year period. This election:

10   (a) shall be made in a manner that may be determined by the tax administrator, and (b) shall not

11   be available to an eligible company that previously claimed a rate reduction under this chapter.

12           42-64.5-6. Severability. -- If any provision of this chapter or the application of any

13   section or part of this chapter to any person or circumstance is held invalid, the invalidity shall

14   not affect other provisions or applications of this chapter which can be given effect without the

15   invalid provision or application.

16           42-64.5-7. Business reorganizations. -- (a) If:

17            (i) An eligible company (hereinafter referred to as the "resulting company") continues,

18   succeeds to or acquires all or substantially all of the business of one or more eligible companies

19   including all of its eligible subsidiaries (each such eligible company, together with its eligible

20   subsidiaries being hereinafter referred to as a "combin ing company"), whether by consolidation,

21   merger, stock acquisition, asset acquisition, or other method of business combination;

22            (ii) At least one of the combining companies has previously established a base

23   employment date; and

24            (iii) The resulting company elects to have this section apply,

25            then the following rules shall apply for purposes of determining the rate reduction

26   applicable to the resulting company. The resulting company, if in existence prior to the

27   combination, is also a combining company.

28            (1) The "reference company" shall be the combining company which has a previously

29   established base employment date and which, for its last taxable year ending before the

30   combination, had the highest number of units of new employment; provided, that for purposes of

31   making this determination only, no combining company shall be treated as a small business

32   concern. If more than one of the combining companies having previously established base

33   employment dates had the highest number of units of new employment, the reference company

34   shall be the one of those companies that has the largest total employment before the combination.



                                                        78
1             (2) The resulting company may claim a rate reduction, and the base employment of the

2    resulting company shall be the base employment of the reference company plus, for each other

3    combining company, the greatest of: (i) if the combining company had a previously established

4    base employment date, its base employment; (ii) the base employment determined as of the base

5    employment date of the reference company; and (iii) its adjusted current employment for its most

6    recently completed taxable year. The initial new employment level of the resulting company shall

7    be the initial new employment level of the reference company plus, for each other combining

8    company, the greater of: (i) the combining company's previously established initial new

9    employment level, if any; and (ii) its adjusted current employment for its most recently completed

10   taxable year.

11            (3) The resulting company shall be a small business concern only if: (A) the sum of: (i)

12   for each combining company that has a previously established base employment date, the greater

13   of its base employment level or its base employment level determined as of the base employment

14   date of the reference company, plus (ii) for each other combining company, the greater of its base

15   employment level determined as of the base year of the reference company or its total

16   employment immediately prior to the combination is less than one hundred (100); and (B) the

17   resulting company is not a telecommunications company.

18            (4) If, for the year in which the combination occurs or for either of the next two (2)

19   taxable years thereafter, the resulting company's units of new employment is less than its initial

20   new employment level, the resulting company shall compute and pay applicable taxes as though

21   this chapter did not apply for such year. If the restoration condition described in paragraph (6) is

22   satisfied, the resulting company shall be entitled to a credit or refund equal to the sum of the

23   amount actually paid by the resulting company over:

24            (i) For the taxable year in which the combination occurred, the tax that would have been

25   paid at the rate last previously determined for the reference company, plus, for each other

26   combining company that had a previously established initial employment level, an amount equal

27   to the product of the combining company's taxable income for its last prior taxable year before

28   the combination (but not less than zero) times the difference in the tax rate established for that

29   combining company over the tax rate established for the reference company; provided, however,

30   that the tax on the resulting company shall not be higher than the tax that would result if this

31   chapter did not apply; and

32            (ii) For the first or second taxable year beginning after the combination, the tax that

33   would have been paid if using a rate reduction equal to one-quarter of one percent (0.25%) times

34   the number of units of new employment for that taxable year (but not in excess of the resulting



                                                     79
1    company's initial new employment level).

2              (5) For each taxable year thereafter, the resulting company's rate reduction shall be the

3    same as the reference company's rate reduction before the combination; provided, that if for any

4    such succeeding taxable year the resulting company's number of units of new employment is less

5    than its initial new employment level, the rate reduction provided for in this chapter shall expire

6    permanently.

7              (6) The restoration condition shall be satisfied if: (i) by the last month of the second

8    taxable year beginning after the combination, the resulting company's units of new employment

9    equals or exceeds its initial new employment level; and (ii) for a twelve (12) month period (which

10   may be selected after the end of such period by the resulting company) that includes the last

11   month of the second taxable year beginning after the combination, the resulting company's

12   adjusted current employment (measured over such twelve (12) month period) equals or exceeds

13   its initial new employment level.

14             (7) A resulting company may elect to have this subsection apply only if the reference

15   company's number of units of new employment for its last taxable year ending before the date of

16   the combination is not less than the reference company's initial new employment level.

17             (b) If an eligible company (hereinafter referred to as the "acquiring company") acquires

18   an eligible subsidiary, division, or other unit of another eligible company (hereinafter referred to

19   as the "divesting company") that does not represent all or substantially all of the business of the

20   divesting company and its eligible subsidiaries, the acquiring company and the divesting

21   company may elect to determine any rate reduction applicable to the acquiring company and the

22   divesting company after the date of the acquisition in accordance with the following:

23             (1) If the acquiring company has previously established a base employment level:

24             (A) The base employment, if any, of the divesting company shall be the lesser of its base

25   employment before the divestment and its total employment immediately after the divestment;

26   and

27             (B) If the base employment of the divesting company is reduced by reason of the rule

28   stated in (A), the base employment of the acquiring company shall be increased by an equal

29   amount.

30             (2) If the acquiring company has not previously established a base employment level, the

31   base employment of the divesting company, if any, shall be unaffected.

32             (3) The acquiring company and the divesting company shall jointly make the election in

33   such form as the tax administrator may require, and, once filed by either company, the election

34   shall be irrevocable.



                                                     80
1        SECTION 24. This act shall take effect upon passage.


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                                               81
                                            EXPLANATION

                                  BY THE LEGISLATIVE COUNCIL

                                                    OF


                                              AN ACT

       RELATING TO TAXATION -- ECONOMIC GROWTH AND FAIRNESS ACT OF 2008



                                                    ***

1           This act comprehensively changes the personal and business income taxes as well as the

2   sales tax laws. It would increase the income tax rates for some taxpayers, significantly expand

3   those fees and services subject to sales tax, increase the capital gains tax and decrease the number

4   of available tax credits.

5           This act would take effect upon passage.


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