R.I. Gen. Laws § 44-31-1 — Investment tax credit

(a) A taxpayer shall be allowed a credit, to be computed as provided in this chapter,
against the tax imposed by chapters 11, 14, 17, and 30 of this title. The amount of
the credit shall be two percent (2%) of the cost or other basis for federal income
tax purposes of tangible personal property and other tangible property, including
buildings and structural components of buildings, described in subsection (b) of this
section, acquired, constructed, reconstructed, or erected after December 31, 1973.
Provided, that the amount of the credit shall be four percent (4%) of the: (i) cost
or other basis for federal income tax purposes of tangible personal property and other
tangible property, including buildings and structural components of buildings, described
in subdivision (b)(1) of this section, acquired, constructed, reconstructed or erected
after December 31, 1993; and (ii) qualified amounts for leased assets of tangible
personal property and other tangible property described in subdivision (b)(1) of this
section, acquired, constructed, reconstructed, or erected after January 1, 1998, and
the amount of the credit shall be ten percent (10%) of the cost or other basis for
federal income tax purposes, and the qualified amounts for leased assets, of tangible
personal property and other tangible property described in subdivision (b)(3) of this
section, acquired, constructed, reconstructed, or erected after January 1, 1998, and
with respect to buildings and structural components which are acquired, constructed,
reconstructed or erected after July 1, 2001, as described in subdivision (b)(3) of
this section.
(b)(1) A credit shall be allowed under this section with respect to tangible personal property
and other tangible property, including buildings and structural components of buildings,
which are depreciable pursuant to 26 U.S.C. § 167, have a useful life of four (4) years or more, are acquired by purchase as defined
in 26 U.S.C. § 179(d) or are acquired by lease as prescribed in paragraph (3)(iv) of this subsection, have
a situs in this state and are principally used by the taxpayer in the production of
goods by manufacturing, process, or assembling. The credit shall be allowable in the
year the property is first placed in service by the taxpayer, which is the year in
which, under the taxpayer’s depreciation practice, the period for depreciation with
respect to the property begins, or the year in which the property is placed in a condition
or state of readiness and availability for a specifically assigned function, whichever
is earlier. For purposes of this paragraph, “manufacturing” means the process of working
raw materials into wares suitable for use or which gives new shapes, new quality or
new combinations to matter that already has gone through some artificial process by
the use of machinery, tools, appliances, and other similar equipment. Property used
in the production of goods includes machinery, equipment, or other tangible property
which is principally used in the repair and service of other machinery, equipment,
or other tangible property used principally in the production of goods and includes
all facilities used in the production operation, including storage of material to
be used in production and of the products that are produced.
(2) Within the meaning of subdivision (1) of this subsection, the term “manufacturing”
means the activities of a “manufacturer” as defined in § 44-3-3(20)(iii) and (iv).
(3)(i) A credit shall be allowed under this section with respect to tangible personal property
and other tangible property, (excluding motor vehicles, furniture, buildings and structural
components of buildings, except as provided in this section), which are depreciable
pursuant to 26 U.S.C. § 167, have a useful life of four (4) years or more, are acquired by purchase as defined
in 26 U.S.C. § 179(d) or acquired by lease as prescribed in paragraph (iv) of this subdivision, have a
situs in this state and to the extent the property is used by a qualified taxpayer,
as that term is defined in paragraph (v) of this subdivision, in any of the businesses
described in major groups 20 through 39, 50 and 51, 60 through 67, 73, 76, 80 through
82, 87 and 89 in the standard industrial classification manual prepared by the technical
committee on industrial classification, office of the statistical standards, executive
office of the president, United States Bureau of the Budget, as revised from time
to time (“SIC Code”) and/or any of the businesses described in the three (3) digit
SIC Code 781.
(ii) A credit shall be allowed under this section with respect to buildings and structural
components that are acquired, constructed, reconstructed, or erected after July 1,
2001, which are depreciable pursuant to 26 U.S.C. § 167, have a useful life of four (4) years or more, are acquired by purchase as defined
in 26 U.S.C. § 179(d) or acquired by lease for a term of twenty (20) years or more, excluding renewal periods,
have a situs in this state and to the extent the property is used by a high performance
manufacturer. The term “high performance manufacturer” means a taxpayer: (A) engaged
in any of the businesses described in the major groups 28, 30, 34, to 36, and 38 of
the SIC Codes, (B) that pays its full-time equivalent employees a median annual wage
above the average annual wage paid by all taxpayers in the state which share the same
two-digit SIC Code, unless the high performance manufacturer is the only high performance
manufacturer in the state conducting business in that two-digit SIC Code, in which
case this requirement shall not apply, and (C)(I) whose expenses for training or retraining
its employees exceeds two percent (2%) of its total payroll costs, or (II) that pays
its full-time equivalent employees a median annual wage equal to or greater than one
hundred twenty-five percent (125%) of the average annual wage paid in this state by
employers to employees, or (III) that pays its full-time equivalent employees classified
as production workers by the Rhode Island department of labor and training an average
annual wage above the average annual wage paid to the production workers of all taxpayers
in the state which share the same two-digit SIC Code.
(iii) To the extent allowable, the credit allowed under this section is allowed for computers,
software and telecommunications hardware used by a taxpayer even if the property has
a useful life of less than four (4) years;
(iv) The credit for property acquired by lease is based on the fair market value of the
property at the inception of the lease times the portion of the depreciable life of
the property represented by the term of the lease, excluding renewal options. The
credit described in this subdivision for high performance manufacturers that lease
buildings and their structural components for a term of twenty (20) years or more,
excluding renewal periods, shall be calculated in the same manner as for property
acquired by purchase; and
(v) For purposes of this subsection, a “qualified taxpayer” means a taxpayer in any of
the businesses described in major groups 20 through 39, 50 and 51, 60 through 67,
73, 76, 80 through 82, 87 and 89 of the SIC Code, and/or any of the businesses described
in the three (3) digit SIC Code 781, and which meet the following criteria:
(A) The median annual wage paid to a qualified taxpayer’s full-time equivalent employees
must be above the average annual wage paid by all taxpayers in the state which share
the same two-digit SIC Code, unless that qualified taxpayer is the only qualified
taxpayer in the state conducting business in that two-digit SIC Code, in which case
this requirement does not apply; and
(B) With respect to major groups 50 and 51, 60 through 67, 73, 76, 80 through 82, 87 and
89 and/or the three (3) digit SIC Code 781(except for those qualified taxpayers whose
businesses are described in any of the four (4) digit SIC Codes 7371, 7372 and 7373)
only:
(I) More than one-half (½) of its gross revenues are a result of sales to customers outside
of the state; or
(II) More than one-half (½) of its gross revenues are a result of sales to the federal
government; or
(III) More than one-half (½) of its gross revenues are a result of a combination of sales
described in items (I) and (II) of this subparagraph.
(4) For purposes of this section, “sales to customers outside the state” means sales to
individuals, businesses and other entities, as well as divisions and/or branches of
businesses and other entities, residing or located outside of the state. The requirement
of subparagraph (v)(A) of this subdivision does not apply to any qualified taxpayer:
(i) whose expenses for training or retraining its employees exceeds two percent (2%)
of these qualified taxpayer’s total payroll costs; or (ii) whose median annual wage
paid to its full-time equivalent employees is equal to or greater than one hundred
twenty-five percent (125%) of the average annual wage paid in this state by employers
to employees; or (iii), with respect to major groups 20 through 39 only, the average
annual wage paid to these qualified taxpayer’s full-time equivalent employees, classified
as production workers by the Rhode Island department of labor and training, is above
the average annual wage paid to the production workers of all these taxpayers in the
state which share the same two-digit SIC Code. At the election of a taxpayer, which
is made at any time and in any manner that may be determined by the tax administrator,
the taxpayer’s ability in a particular fiscal year to qualify as a qualified taxpayer
may be based on the expenses and gross receipts of the taxpayer for either the prior
fiscal year or the immediately proceeding fiscal year rather than on the expenses
and gross receipts for that fiscal year. For purposes of this chapter, the director
of the Rhode Island human resource investment council shall certify as to legitimate
training and retraining expenses in accordance with the guidelines established in
chapter 64.6 of title 42, and any rules and regulations promulgated under this chapter. For purposes of this
subsection, a “full-time equivalent employee” means an employee who works a minimum
of thirty (30) hours per week within the state or two (2) part-time employees who
together work a minimum of thirty (30) hours per week within the state. For purposes
of this subsection, the director of the Rhode Island department of labor and training,
upon receipt of an application from a qualified taxpayer, shall certify whether this
qualified taxpayer meets the requirement in subparagraph (v)(A) of this subdivision
or is exempt from this requirement because the median annual wage it pays its full-time
equivalent employees is equal to or greater than one hundred twenty-five (125%) percent
of the average annual wage paid in this state by employers to employees or, with respect
to major groups 20 through 39 only, the average annual wage paid to this qualified
taxpayer’s full-time equivalent employees, classified as production workers by the
Rhode Island department of labor and training, is above the average annual wage paid
to the production workers of all these taxpayers in the state which share the same
two-digit SIC Code. The director of the Rhode Island department of labor and training
shall promulgate rules and regulations as required for the implementation of this
requirement.
(5) To the extent otherwise allowable, the credit provided by paragraphs (3)(i) and (ii)
of this subsection are also allowed for the property having a situs in Rhode Island
and used, however acquired, by a property and casualty insurance company.
(c) Subject to the provisions of subdivision (b)(3) of this section, a taxpayer is not
allowed a credit under subsection (a) of this section with respect to tangible personal
property and other tangible property, including buildings and structural components
of buildings, which it leases to any other person or corporation and is not allowed
a credit under subsection (a) of this section with respect to buildings and structural
components of buildings it leases from any other person or corporation. For the purposes
of the preceding sentence, any contract or agreement to lease or rent or for a license
to use the property is considered a lease, unless a contract or agreement is treated
for federal income tax purposes as an installment purchase rather than a lease.
(d) The credit allowed under this section for any taxable year does not reduce the tax
due for the year by more than fifty percent (50%) of the tax liability that would
be payable, and further in the case of corporations, to less than the minimum tax
as prescribed in § 44-11-2(e); provided, that in the case of the credit allowed to high performance manufacturers
under subdivision (b)(3) of this section, the fifty percent (50%) limitation shall
not apply. If the amount of credit allowable under this section for any taxable year
is less than the amount of credit available to the taxpayer, any amount of credit
not deductible in the taxable year may be carried over to the following year or years
(not to exceed seven (7) years) and may be deducted from the taxpayer’s tax for the
year or years.
(e) At the option of the taxpayer, air or water pollution control facilities which qualify
for elective amortization deduction may be treated as property principally used by
the taxpayer in the production of goods by manufacturing, processing, or assembling;
provided, that if the property qualifies under subsection (b) of this section, in
which event, an amortization deduction is not allowed.
(f) With respect to property which is disposed of or ceases to be in qualified use prior
to the end of the taxable year in which the credit is to be taken, the amount of the
credit shall be that portion of the credit provided for in subsection (a) of this
section, which represents the ratio which the months of qualified use bear to the
months of useful life. If property on which credit has been taken is disposed of or
ceases to be in qualified use prior to the end of its useful life, the difference
between the credit taken and the credit allowed for actual use must be added back
in the year of disposition. If this property is disposed of or ceases to be in qualified
use after it has been in qualified use for more than twelve (12) consecutive years,
it is not necessary to add back the credit as provided in this subsection. A credit
allowed to a qualified taxpayer is not recaptured merely because the taxpayer subsequently
fails to retain the classification as a qualified taxpayer. The amount of credit allowed
for actual use shall be determined by multiplying the original credit by the ratio,
which the months of qualified use bear to the months of useful life. For purposes
of this subsection, “useful life of property” is the same as the taxpayer (or in the
case of property acquired by lease, the owner of the property) uses for depreciation
purposes when computing his or her federal income tax liability. Comparable rules
are used in the case of property acquired by lease to determine the amount of credit,
if any, that will be recaptured if the lease terminates prematurely or if the property
covered by the lease otherwise fails to be in qualified use.
(g) The credit allowed under this section is only allowed against the tax of that corporation
included in a consolidated return that qualifies for the credit and not against the
tax of other corporations that may join in the filing of a consolidated tax return.