280-20-25 R.I. Code R. § 2.6

Current through August 19, 2024

Section 280-RICR-20-25-2.6 - General

A. Tax rate reduction

1. The rate of tax payable by an eligible company and each of its eligible subsidiaries for any taxable year ending on or after July 1, 1995, on its net income pursuant to the applicable income tax provisions of the general laws, including the provisions of R.I. Gen. Laws §§ 44-11-2(a), 44-14-3(a), 44-14-4 and 44-17-1, or on its gross earnings pursuant to §44-13-4(4), shall be reduced by the amount specified in § 2.6(B) of this Part; this rate reduction shall be applied annually, once to those eligible companies which are permitted by law to file a consolidated state tax return and in the case of eligible companies not permitted by law to file consolidated state tax returns, then the rate reduction shall be applied annually to each eligible company and its eligible subsidiaries; provided, however, except as provided in R.I. Gen. Laws § 42-64.5-7, should any eligible company fail to maintain in any taxable year after 1997 or, if applicable, the third taxable year following the base employment period election set forth in R.I. Gen. Laws § 42-64.5-5, the number of units of new employment it reported for its 1997 tax year or, if applicable, the third taxable year following the base employment period election set forth in R.I. Gen. Laws § 42-64.5-5, the rate reduction provided for in this chapter shall expire permanently.

B. Reduction rate schedule

1. The amount of the rate reduction specified in R.I. Gen. Laws § 42-64.5-3 for any eligible company that is not a telecommunications company, for each taxable year ending on or after July 1, 1995, shall be based upon the aggregate amount of new employment of the eligible company and its eligible subsidiaries for each taxable year, and shall be determined by multiplying the numerical equivalent of one-quarter of one percent (.25%) by the number of units of new employment for each taxable year through the taxable year ending in 1997 or, if applicable, the third taxable year following the base employment period election set forth in R.I. Gen. Laws § 42-64.5-5; and for each taxable year thereafter, the number of units of new employment reported for the taxable year 1997 or, if applicable, the third taxable year following the base employment period election set forth in R.I. Gen. Laws § 42-64.5-5; provided, however, the amount of each rate reduction shall in no event be greater than six percent (6%).

2. The amount of the rate reduction specified in R.I. Gen. Laws § 42-64.5-3 for any eligible company that is a telecommunications company shall be based upon the aggregate amount of new employment of the eligible company and its eligible subsidiaries for each taxable year and shall be determined in the same manner as set forth in § 2.6(B)(1) of this Part, except that it shall be determined by multiplying the numerical equivalent of one hundredth of one percent (.01%) by the number of units of new employment and the amount of each rate reduction shall in no event be greater than one percent (1%).

3. Notwithstanding any of the provisions of this chapter, where an eligible telecommunications company has one or more affiliated entities that is an eligible company, the eligible company entitled to a rate reduction may assign its rate reduction, to be determined in the manner as provided in § 2.6(B)(2) of this Part, to the eligible telecommunications company. An entity that assigns the rate reduction shall not be eligible for the rate reduction.

4. For eligible companies qualifying on or after July 1, 2009 for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3, the term "full-time equivalent active employee" means any employee of an eligible company who:

a. Works a minimum of thirty (30) hours per week within the state;

b. Earns healthcare insurance benefits and retirement benefits; and

c. Earns no less than two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law at the later of:

(1) The time the employee was first treated as a full-time equivalent active employee during a tax year that the eligible company qualified for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3; or

(2) The time the employee first earned at least two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law as an employee of the eligible company.

5. For existing eligible companies qualifying before July 1, 2009 for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3, any new "full-time equivalent active employee" who replaces an existing "full-time equivalent active employee", shall meet the following standards to remain eligible:

a. Works a minimum of thirty (30) hours per week within the state;

b. Earns healthcare insurance benefits and retirement benefits; and

c. Earns no less than two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law at the later of:

(1) The time the employee was first treated as a full-time equivalent active employee during a tax year that the eligible company qualified for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3; or

(2) The time the employee first earned at least two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law as an employee of the eligible company.

6. Important Note: When determining if an employee meets the new criteria, the requirement to "earn healthcare insurance benefits and retirement benefits" means that an employee is eligible to participate in the company's healthcare and retirement programs. If the employee is eligible for the company's healthcare and retirement program but elects not to participate, he/she is still deemed to have "earned" healthcare insurance benefits and retirement benefits. Also, if an employee is required to complete a reasonable probationary period to be eligible for healthcare insurance benefits and retirement benefits, he/she is deemed to have "earned" these benefits from day one of their employment.

7. On or before September 1, 2009 and every September 1 thereafter, all eligible companies qualifying for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3 shall file an annual report with the tax administrator containing each full time equivalent active employee's name, social security number, date of hire and hourly wage as of the immediately proceeding July 1 and such other information deemed necessary by the tax administrator. The report shall be filed on a form and in a manner prescribed by the tax administrator.

8. Examples

a. Rate reduction for a company with over 100 full time equivalent active employees:

Adjusted Current Employment	1,000
Less Base Employment	560
New Employment	440
Rounded Down to Nearest (50)	400
400/50 = 8
8 x .0025 = .02 The result is a 2% reduction in the rate of tax

b. Rate reduction for a company with less than 100 full time equivalent active employees:

Adjusted Current Employment	90
Less Base Employment	64
New Employment	26
Rounded Down to Nearest (10)	20
20/10 = 2
2 x .0025 = .005 The result is a 0.5% reduction in the rate of tax

C. Maximum rate reduction: No rate reduction shall exceed six (6%) percent, or In the case of a telecommunications company, one percent (1%).

D. Rate reduction applied to net income or gross earnings

1. Credit unions and insurance companies do not qualify for a rate reduction since they do not pay a tax based upon income, however, they will be able to pass the rate reduction on to an "eligible subsidiary."

2. In the case of a Subchapter S Corporation, there is no pass through to the shareholder since there is no provision for a rate reduction under R.I. Gen. Laws Chapter 44-30.

3. The amount of rate reduction for any eligible company that is a telecommunications company shall be determined by multiplying the numerical equivalent of one-hundredth of one percent (.01%) by the number of units of new employment and the amount of each rate reduction shall in no event be greater than one percent (1%).

4. Where an eligible telecommunications company has one or more affiliated entities that are eligible companies, the eligible company entitled to a rate reduction may assign its rate reduction, determined in the manner set forth in the prior paragraph, to the eligible telecommunications company. An entity that assigns the rate reduction shall not be eligible for the rate reduction.

E. Expiration of rate reduction: A rate reduction calculation must be made for each year after a base employment period is elected in accordance with R.I. Gen. Laws § 42-64.5-5. The reduction in place at the end of the third taxable year following the base employment period election shall be permanent unless the level of employment drops below the level in place at the end of the third taxable year. If the level is not maintained the rate reduction provided for shall permanently expire. Only one base employment period can be elected for purposes of rate reduction by an eligible company.

280 R.I. Code R. § 280-RICR-20-25-2.6