Powers, William J.

English

HELIN Digital Commons

1997 Survey of Rhode Island Law: Legislation: Taxation: An Act Relating to Taxation - The Investment Tax Credit

DOCS@RWU

Roger Williams University Law ReviewVolume 3 | Issue 2 Article 33Spring 19981997 Survey of Rhode Island Law: Legislation:Taxation: An Act Relating to Taxation - TheInvestment Tax CreditWilliam J. PowersRoger Williams University School of LawFollow this and additional works at: http://docs.rwu.edu/rwu_LRThis Survey of Rhode Island Law is brought to you for free and open access by the Journals at DOCS@RWU. It has been accepted for inclusion inRoger Williams University Law Review by an authorized administrator of DOCS@RWU. For more information, please contact mwu@rwu.edu.Recommended CitationPowers, William J. (1998) "1997 Survey of Rhode Island Law: Legislation: Taxation: An Act Relating to Taxation - The InvestmentTax Credit," Roger Williams University Law Review: Vol. 3: Iss. 2, Article 33.Available at: http://docs.rwu.edu/rwu_LR/vol3/iss2/33SURVEY SECTIONTaxation. An Act Relating to Taxation-The Investment TaxCredit. Provides that banks and insurance companies are now in-cluded under the Act. Additionally, the Act allows for leased assetsto be qualified for tax credit under the Act. Effective, July 1, 1997.1997 R.I. Pub. Laws ch. 57.This legislation (the Act) allows for a taxpayer's leased assetsof tangible personal property erected after January 1, 1998 to qual-ify the taxpayer for an investment tax credit (the Credit). The Actstates that the amount of the Credit shall be ten percent of the costor other basis for federal income-tax purposes.1 In addition, theAct makes allowances for "qualified amounts for leased assets, oftangible personal property and other tangible property excludingbuildings and structural components of buildings, motor vehiclesand furniture that have a useful life of four years or more."2The Act provides for the inclusion of computers, software andtelecommunications hardware, provided the useful life of the prop-erty is at least four years. 3 In determining the Credit for leasedproperty, the fair market value of the property at the inception ofthe lease multiplied by the portion of the depreciable life of theproperty outlined in the term of the lease shall be the Credit.4Thirdly, the Act further defines a "qualified taxpayer" as anybusiness described in certain portions of the Technical Committeeon Industrial Classification, Office of the Statistical Standards, Ex-ecutive Office of the President, United States Bureau of the Budget(SIC Code). The portions enumerated under the Act are: groups20 through 39, 50 and 51; 60 through 67, 73, 76; 80 through 82 and87 and 89 as well as group 781. 51. R.I. Gen. Laws § 44-31-1(a) (Supp. 1997).2. The Act also allows a deduction for property purchased under 26 U.S.C.§ 179(d) or acquired by lease as described in subsection (b)(3) of the Act.3. R.I. Gen. Laws § 44-31-1(3)(b) (Supp. 1997).4. See id. § 44-31-1(3)(c).5. The United States Standard Industrial Classifications recognized in theAct include: "(1) 2... Manufacturing with subsections consisting of: 20. .food andkindred products, 21. .tobacco products, 22. .textile mill products, 23. .apparel andother finished products made from fabrics, 24. .lumber, 25. .furniture, 26. .paper,27. .printing and publishing, 28. .chemical, 29. .petroleum and refining, 30. .rub-her, 31. .leather, 32. .stone and clay products, 33..primary metal industries,34. .fabricated metal, 35. .industrial and commercial machinery, 36. electronicproducts, 37. .transportation equipment, 38. .measuring and analyzing equipmentand 39. .miscellaneous manufacturing industries; (2) 5.. .Wholesale Trade whichincludes: 50. durable and 51. .nondurable goods; (3) 6.. .Finance, Insurance and5991998]600 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 3:583The businesses must meet several minimum-wage and gross-revenue criteria in order to be eligible for the Credit under theAct.6 The Act also places minimum requirements on out-of-stategross revenues for certain SIC Code groupings.7 The Act does notallow the Credit to apply to buildings or structural components ofbuildings.8Finally, with respect to favorable results under the new provi-sions, the Act states that tax liability cannot be decreased morethan fifty percent of what otherwise would be allowed before theAct.9 Corporations may not lessen their liability below the mini-mum requirements of section 44-11-2(e) of the Rhode Island Gen-eral Laws.10 The Act still retains a seven-year pour-over provisionwhich allows the taxpayer to carryover any additional tax benefitin excess of the statutory provision for up to seven years. 1' How-ever, if a taxpayer is disqualified because of a change in payer sta-tus, then the taxpayer may not recapture a lost tax credit. 12Finally, the Act provides that similar rules for leased property willbe applied as in other parts of the Act when determining theamount of recapture when a lease terminates prematurely. 13William J. Powers, IVReal Estate consisting of: 60. .depository and 61. .nondepository institutions,62. .security and commodity brokers, 63. .insurance carriers, 64. .real estate andholding and 65. .other investment offices; (4) 7.. .Services including: 73. .businessservices, 76. .miscellaneous repair services, 781.motion picture production andservices, 80. .health services, 81. .legal services, 87. .engineering, accounting, re-search management and related, 89. .services not elsewhere classified." All Can-ada Business Registry, U.S. Standard Industrial Classifications (visited Mar. 11,1998) <http://www.acbr.com/sic.htm>.6. R.I. Gen. Laws § 44-31-1(3)(d) (Supp. 1997).7. Id. § 44-31-1(3)(d)(2)(A). The Act places requirements on groups 50, 51, 60through 67, 73, 76, 80 through 82, 89 and 781. Id.8. Id. § 44-31-1(c).9. Id. § 44-31-1(d).10. See id. Section 44-11-2 of the Rhode Island General Laws generally statesthat each corporation shall annually pay nine percent of its net income to the state.R.I. Gen. Laws § 44-11-2 (1956) (1995 Reenactment).11. Id.12. See id. § 44-31-1(f).13. Id.

https://docs.rwu.edu/cgi/viewcontent.cgi?article=1086&amp;context=rwu_LR

1997 Survey of Rhode Island Law: Legislation: Taxation: An Act Relating to Taxation - The Investment Tax Credit

Abstract

Similar works

Full text

Available Versions

HELIN Digital Commons

HELIN Digital Commons

DOCS@RWU