02.01.16 |
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Rhode Island Budget Bill Enacts New Credits

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The Rhode Island budget bill1 for fiscal year ending June 30, 2016 includes the enactment of several new tax credits and incentives designed to encourage business development in the state, as well as the repeal of a couple of pre-existing credit and incentive programs.   Some of the new credits are discussed in more detail below.

Rebuild Rhode Island Tax Credit3

The Rebuild Rhode Island Tax Credit is available to eligible real estate project development applicants who have demonstrated a financing gap after taking into account all other private and public funding sources available for the project.  According to the text in the bill, “the amount of a tax credit allowed under this chapter shall be…no more than thirty percent (30%) and no less than fifteen percent (15%) of the total credits allowed…”The credit is available in five annual increments.

To be eligible as a qualified project, the applicant must demonstrate the following6:

  • The applicant must commit capital investment or owner equity of at least 20 percent of the total project cost.
  • The project must have a financing gap such that the project is not likely to be accomplished without the tax credits.
  • The applicant may be required to obtain a tax stabilization agreement from the municipality in which the project is located.
  • The project is:
    • A commercial development of at least 25,000 square feet and containing at least 25 full-time jobs.
    • A multi-family residential development of at least 20,000 square feet and having at least 20 units in a Hope Community.
    • An occupied mixed use development of at least 25,000 square feet.
  • The project must have a total project cost of at least $5,000,000 (with certain exceptions).

A Hope Community is defined as a community where family poverty levels exceed the state median (based on the average of the last 5 years).  Upon passage of the budget bill, the list of eligible communities include Providence, Central Falls, West Warwick, Pawtucket, and Woonsocket.

Anchor Institution Credit8

The Anchor Institution Credit program provides an incentive to existing Rhode Island businesses that attract suppliers, service providers, or major customers to relocate to Rhode Island.  The amount of the available credit, which will be determined by the Rhode Island Commerce Corporation, will be based on the following criteria9:

  • The applicant must have played a substantial role in the decision of the qualified business to relocate to Rhode Island.
  • The qualified business must relocate a minimum number of jobs to Rhode Island, as follows:
    • For the years 2015-2018, no less than 10 jobs.
    • For the years 2019-2020, no less than 25 jobs.

 New Qualified Jobs Incentive10

The New Qualified Jobs Incentive Program was established to provide tax credits to qualifying businesses who create new jobs in the state over an eligibility period of up to 10 years.11 The base credit amount is $2,500 per year for each new full-time job12; however, the credit amount can be increased by the Rhode Island Commerce Corporation to up to $7,500 if any of the following criteria are met13:

  • The business is located in a Hope Community.
  • The business is in a targeted industry.
  • The business is located in a transit-oriented development area.
  • The business is an out-of-state business that relocates a business unit or creates a significant number of new full-time jobs in Rhode Island during a defined commitment period.

The minimum number of new full-time jobs that a business is required to create in Rhode Island to be eligible for the New Qualified Jobs Incentive is as follows14:

  • For a business in a targeted industry that employs 100 or fewer employees on the date of application, the requirement is 10 new full-time jobs.
  • For a business in a targeted industry that employs more than 100 employees on the date of application, the requirement is either 100 new full-time jobs, or new full-time jobs in an amount equal to 10 percent or more of the business’s existing number of full-time jobs.
  • For a business in a non-targeted industry that employs 200 or fewer employees on the date of application, the requirement is 20 new full-time jobs.
  • For a business in a non-targeted industry that employs more than 200 employees on the date of application, the requirement is either 100 new full-time jobs, or new full-time jobs in an amount equal to 10 percent or more of the business’s existing number of full-time jobs, or 100 new full-time jobs.

“Targeted industry” will be defined by the Rhode Island Commerce Corporation at a later date. 15

Tax Increment Financing16

Tax Increment Financing (“TIF”) is an incentive program whereby a municipality can dedicate future property tax revenue increases for a defined district to the economic development project that generates the underlying increase in property values.  The budget bill includes a new TIF program to be implemented and administered by the Rhode Island Commerce Corporation (the pre-existing Rhode Island TIF statute is implemented and administered locally17).  Under the new TIF statute, the Commerce Corporation may enter into a TIF agreement with a developer for an amount of up to 30 percent of the total cost of the TIF project.18

First Wave Closing Fund19

The First Wave Closing Fund provides the Rhode Island Commerce Corporation with lynchpin financing, unavailable from other sources, to help close transactions that are critical for Rhode Island’s economy and communities.20 In order to make an award, the Commerce Corporation will consider the following21:

  • Economic impact of the project, including cost and benefit to the state.
  • The amount of the project financing gap.
  • Strategic importance of the project to the state, region, or locality.
  • Quality and number of jobs produced.
  • Quality of industry and project.
  • Competitive offers regarding the project from another state or country.

Other New Incentives

The following incentives have also been enacted:

  • Tax Stabilization Incentive22
  • I-195 Redevelopment Project Fund 23
  • Small Business Assistance Program 24
  • Stay Invested in RI Wavemaker Fellowship25
  • Main Street Rhode Island Streetscape Improvement Fund 26
  • Innovative Initiative Fund 27
  • Industry Cluster Grants 28

Repeal of the Distressed Areas Economic Revitalization Act

In addition to enacting these tax credits, H.B. 5900 also repeals the tax credits available under the Rhode Island Distressed Areas Economic Revitalization Act (commonly referred to as the enterprise zone program).29 No new credits will be issued under this Act until on or after July 1, 2015, unless the business had received its certification prior to July 1, 2015.30

Repeal of Jobs Development Act Tax Rate Reduction Program

The Jobs Development Act Tax Rate Reduction Program was also repealed.  No new rate reduction agreements can be entered into under this program as of July 1, 2015.31 Any rate reductions already in effect as of June 30, 2015 will remain in effect until the expiration of the agreement.32

Learn more about how the ADP SmartCompliance® Tax Credits module can help businesses maximize the capture of tax credits and incentives for which they are eligible.

 

Learn More About ADP SmartCompliance® Tax Credits


The information provided in this blog post is for informational purposes only and not for the purpose of providing accounting, legal, or tax advice.  The information and services ADP provides should not be deemed a substitute for the advice of any such professional.  Such information is by nature subject to revision and may not be the most current information available.

1 2015 Rhode Island H. 5900.  Text of bill is located at http://webserver.rilin.state.ri.us/BillText/BillText15/HouseText15/H5900Aaa.pdf  RI Department of Commerce summary of the credits can be found at http://commerceri.com/finance-business/taxes-incentives/.  See also RI Department of Revenue Advisory ADV 2015-12.

2 2015 RI H. 5900, Article 23, Section 1

3 2015 RI H. 5900, Article 19, Section 3 adds RI Gen. Laws Section 42-64.20

4 RI Gen. Laws Section 42-64.20-5(d)(i)

5 RI Gen. Laws Section 42-64.20-5(g)

6 RI Gen. Laws Section 42-64.20-5(b)

7 RI Gen. Laws Section 42-64.3-3(7)8 2015 RI H. 5900, Article 19, Section 13 adds RI Gen. Laws Section 42-64.30

9 RI Gen. Laws Section 42-64.30-5

10 2015 RI H. 5900, Article 19, Section 15 adds RI Gen. Laws Section 44-48.3

11 RI Gen. Laws Section 44-48.3-4

12 RI Gen. Laws Section 44-48.3-6(a)

13 RI Gen. Laws Sections 44-48.3-6(c) through 44-48.3-6(d)

14 RI Gen. Laws Section 44-48.3-4(c)

15 RI Gen. Laws Section 44-48.3-3(14)

16 2015 RI H. 5900, Article 19, Section 4 adds RI Gen. Laws Section 42-64.21

17 RI Gen. Laws Section 45-33.2-1 et seq

18 RI Gen. Laws Section 42-64.21-6(f)

19 2015 RI H. 5900, Article 19, Section 6 adds RI Gen. Laws Section 42-64.23

20 RI Gen. Laws Section 42-64.23-4(b)

21 RI Gen. Laws Section 42-64.23-5

22 2015 RI H. 5900, Article 19, Section 5 adds RI Gen. Laws Section 42-64.22

23 2015 RI H. 5900, Article 19, Section 7 adds RI Gen. Laws Section 42-64.24

24 2015 RI H. 5900, Article 19, Section 8 adds RI Gen. Laws Section 42-64.25

25 2015 RI H. 5900, Article 19, Section 9 adds RI Gen. Laws Section 42-64.26

26 2015 RI H. 5900, Article 19, Section 10 adds RI Gen. Laws Section 42-64.27

27 2015 RI H. 5900, Article 19, Section 11 adds RI Gen. Laws Section 42-64.28

28 2015 RI H. 5900, Article 19, Section 12 adds RI Gen. Laws Section 42-64.29

29 2015 RI H. 5900, Article 11, Section 1

30 RI Gen. Laws Section 42-64.3-6(7)

31 RI Gen. Laws Section 44-48.3-12(a)

32 RI Gen. Laws Section 44-48.3-12(b)

 


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