Section 280-RICR-20-20-11.4 - Deductions or ModificationsA. General: As applicable, deductions or modifications for investments in certified venture capital partnerships or in qualifying business entities are allowed in the computation of business corporation tax (R.I. Gen. Laws Chapter 44-11), public service corporation tax (R.I. Gen. Laws Chapter 44-13), bank excise tax (R.I. Gen. Laws Chapter 44-14), gross premiums tax (R.I. Gen. Laws Chapter 44-17) and personal income tax (R.I. Gen. Laws Chapter 44-30).B. Calculation and Documentation: The deduction or modification allowed is equal to the taxpayer's qualifying investment in a certified venture capital partnership or equal to the entrepreneur's investment in a qualifying business entity. The amount is measured at the year end of the certified venture capital partnership, the year end of the qualifying business entity or the year end of the investing taxpayer, whichever comes first. The deduction or modification is allowed only in the year in which the taxpayer first makes an investment. 1. EXAMPLE: C Corporation makes a first time investment of $40,000 in a certified venture capital partnership which invests 90% of its capital in qualifying activities. All year ends coincide. C Corporation may deduct 90% of the $40,000 or $36,000 from net income in computing its business corporation tax under R.I. Gen. Laws Chapter 44-11.2. EXAMPLE: John Taxpayer is an entrepreneur in Small Company, a qualifying business entity, and makes two investments of $10,000 each. One investment is made on March 10 and the other is made on July 10. John is a calendar year taxpayer and Small Company is a June 30 year end. John is entitled to a modification of $10,000 reducing his federal adjusted gross income because Small Company's year end (June 30) occurs first and, at that time, John had made only the March 10th investment of $10,000. Taxpayers seeking the deduction or modification must provide proof of the investment in a certified venture capital partnership or qualifying business entity; of that partnership's or entity's status AT THE DATE OF INVESTMENT; of the amount of investment and of the year ends of the taxpayer and partnership or entity. The taxpayer must show the certification number of the certified venture capital partnership or qualifying business entity where indicated on appropriate tax forms.C. Restrictions and Carryovers: 1. The deduction or modification cannot reduce the business corporation tax, public service corporation tax or bank excise tax to less than $100.2. The deduction or modification cannot reduce the personal income tax or gross premiums tax to less than $0.3. If the investor entitled to a deduction is a partnership, joint venture or small business corporation, the deduction shall be divided in the same manner as income.4. The deduction allowed in the computation of net income (business corporation tax) shall only be allowed to that corporation (included in a consolidated return) that qualifies for the deduction and may not be used in the computation of net income of other corporations that may join in the filing of a consolidated return.5. Amounts of unused deduction or modification may not be carried over to the following year.D. Recapture: 1. The taxpayer or entrepreneur which has been allowed a deduction or modification must recapture ALL the deduction or modification in the year:a. the taxpayer or entrepreneur sells, exchanges or otherwise has a reduction in his/her interest in a qualifying business entity, orb. in which there is a reduction in the taxpayer's interest in a qualifying investment in a certified venture capital partnership.2. The recapture is limited to the proceeds resulting from any such reduction.3. There will be no recapture as a result of the death of an entrepreneur or taxpayer, nor will there be recapture of any investment held by the entrepreneur or taxpayer for at least 5 years. 280 R.I. Code R. § 280-RICR-20-20-11.4