2009 -- H 6164

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LC02545

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2009

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A N A C T

RELATING TO TAXATION

     Introduced By: Representatives Costantino, Carter, Slater, Melo, and Ehrhardt

     Date Introduced: April 30, 2009

     Referred To: House Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 28-42-38 of the General Laws in Chapter 28-42 entitled

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"Employment Security - General Provisions" is hereby amended to read as follows:

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     28-42-38. Records and reports -- Confidentiality of information. -- (a) Every

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employer and every employing unit employing any person in employment in this state shall keep

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true and accurate employment records of all persons employed by him or her, and of the weekly

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hours worked for him or her by each, and of the weekly wages paid by him or her to each person;

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and every employer and employing unit shall keep records containing any other information that

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the director may prescribe. Those records shall at all times be available within this state and shall

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be open to inspection by the director or his or her authorized representatives at any reasonable

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time and as often as the director shall deem necessary.

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      (b) The director may require from any employer, or employing unit, employing any

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person in this state, any reports covering persons employed by him or her, on employment,

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wages, hours, unemployment, and related matters which the director deems necessary to the

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effective administration of chapters 42 -- 44 of this title.

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      (c) (1) Information obtained, or information contained in other records of the department

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obtained from any individual pursuant to the administration of those chapters, shall be held

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confidential by the director and shall not be published or be open to public inspection in any

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manner revealing the individual's or employing unit's identity, but any claimant at a hearing

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provided for in those chapters shall be supplied with information from those records of the extent

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necessary for the proper presentation of his or her claim. Any department employee guilty of

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violating this provision shall be subject to the penalties provided in chapters 42 -- 44 of this title;

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provided, that nothing contained in this subsection shall be construed to prevent:

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      (i) The director, or any qualified attorney whom the director has designated to represent

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him or her in any court of this state, or the attorney general, from making any record, report, or

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other information referred to in this section, available in any proceeding before any court of this

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state in any action to which the director is a party;

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      (ii) The director from making any record, report, or other information referred to in this

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section, available to any agency of this state or any agency of a political subdivision of this state

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charged with the administration of public assistance within this state, or any of its political

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subdivisions;

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      (iii) The director from making any record, report, or other information referred to in this

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section available to the railroad retirement board or to employees of the Internal Revenue Service

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in the performance of their public duties, and the director shall furnish, at the expense of the

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railroad retirement board or the Internal Revenue Service, copies of those records, reports, or

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other information referred to in this section;

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      (iv) The director from making available upon request and on a reimbursable basis, any

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record, report, or other information referred to in this section to the federal Department of Health

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and Human Services in accordance with the provisions of United States P.L. 100-485, Family

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Support Act of 1988, or to the federal Department of Housing and Urban Development and to

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authorized representatives of public housing agencies in accordance with the Stewart B.

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McKinney Homeless Assistance Act, 42 U.S.C. section 11301 et seq.;

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     (v) The director from making available any record, report, or other information referred

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to in this section to the tax administrator for the enforcement of the provisions outlined in this

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section as well as the enforcement of any tax under title 44.

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      (v)(vi) The director from making, and the director shall make, reports in the form and

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containing any information that the federal Social Security Administration may from time to time

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require, and complying with any provisions that the federal Social Security Administration may

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from time to time find necessary to assure the correctness and verification of those reports. The

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director shall make available, upon request, to any agency of the United States charged with the

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administration of public works or assistance through public employment, the name, address,

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ordinary occupation, and employment status of each recipient of unemployment compensation

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and a statement of that recipient's rights to further compensation under that law;

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      (vi)(vii) The director from conducting any investigations he or she deems relevant in

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connection with these provisions;

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      (vii)(viii) The director from conducting any investigations he or she deems relevant in

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connection with the performance of his or her duties pursuant to the administration of the

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chapters 29, 32, 33, 34, 36, 37 and 41 of this title, or from making any record, report, or other

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information referred to in this section available to the Workers' Compensation Fraud Prevention

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Unit for use in the performance of its duties under section 42-16.1-12; or

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      (viii)(ix) The director from forwarding, and the director shall forward to the jury

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commissioner, the names and addresses of all individuals who are receiving unemployment

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compensation on a yearly basis in accordance with section 9-9-1(e).

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      (2) The director may publish in statistical form the results of any investigations without

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disclosing the identity of the individuals involved.

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     SECTION 2. Section 42-64.5-2 of the General Laws in Chapter 42-64.5 entitled "Jobs

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Development Act" is hereby amended to read as follows:

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     42-64.5-2. Definitions. -- As used in this chapter, unless the context clearly indicates

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otherwise:

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      (1) "Adjusted current employment" means, for any taxable year ending on or after July 1,

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1995, the aggregate of the average daily number of full-time equivalent active employees

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employed within the State by an eligible company and its eligible subsidiaries during each taxable

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year.

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      (2) "Affiliated entity" means any corporation owned or controlled by the same persons or

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shareholders who own or control an eligible company.

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      (3) "Base employment" means, except as otherwise provided in section 42-64.5-7, the

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aggregate number of full-time equivalent active employees employed within the State by an

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eligible company and its eligible subsidiaries on July 1, 1994, or at the election of the eligible

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company, on an alternative date as provided by section 42-64.5-5. In the case of a manufacturing

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company which is ruined by disaster, the aggregate number of full-time equivalent active

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employees employed at the destroyed facility would be zero, under which circumstance the base

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employment date shall be July 1 of the calendar year in which the disaster occurred. Only one

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base employment period can be elected for purposes of a rate reduction by an eligible company.

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      (4) "Disaster" means an occurrence, natural or otherwise, which results in the destruction

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of sixty percent (60%) or more of an operating manufacturing business facility in this state,

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thereby making the production of products by the eligible company impossible and as a result

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active employees of the facility are without employment in that facility. However, disaster does

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not include any damage resulting from the willful act of the owner(s) of the manufacturing

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business facility.

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      (5) "Eligible company" means any corporation, state bank, federal savings bank, trust

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company, national banking association, bank holding company, loan and investment company,

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mutual savings bank, credit union, building and loan association, insurance company, investment

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company, broker-dealer company, manufacturing company, telecommunications company or

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surety company or an eligible subsidiary of any of the foregoing. An eligible company does not

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have to be in existence, be qualified to do business in the state or have any employees in this state

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at the time its base employment is determined.

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      (6) "Eligible subsidiary" means each corporation eighty percent (80%) or more of the

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outstanding common stock of which is owned by an eligible company.

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      (7) "Full-time equivalent active employee" means any employee of an eligible company

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who: (1) works a minimum of thirty (30) hours per week within the State, or two (2) or more part-

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time employees whose combined weekly hours equal or exceed thirty (30) hours per week within

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the State; and (2) earns no less than one hundred fifty percent (150%) of the hourly minimum

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wage prescribed by Rhode Island law; provided, however, for tax years ending after the later of

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July 1, 2003 and the first tax year that an eligible company qualifies for a rate reduction pursuant

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to section 42-64.5-3, for purposes of this section, one hundred fifty percent (150%) of the hourly

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minimum wage prescribed by Rhode Island law shall mean one hundred fifty percent (150%) of

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the hourly minimum wage prescribed by Rhode Island law at: (a) the time the employee was first

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treated as a full-time equivalent active employee during a tax year that the eligible company

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qualified for a rate reduction pursuant to section 42-64.5-3, or, if later, (b) the time the employee

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first earned at least one hundred fifty percent (150%) of the hourly minimum wage prescribed by

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Rhode Island law as an employee of the eligible company. For tax years ending after the later of

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July 1, 2009 and the first tax year that an eligible company qualifies for a rate reduction pursuant

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to section 42-64.5-3, the term "full-time equivalent active employee" means any employee of an

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eligible company who: (1) Works a minimum of thirty (30) hours per week within the state; (2)

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Earn healthcare insurance benefits, and retirement benefits; and (3) Earns no less than two

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hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law at: (i)

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the time the employee was first treated as a full-time equivalent active employee during a tax year

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that the eligible company qualified for a rate reduction pursuant to section 42-64.5-3, or, if later,

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(ii) the time the employee first earned at least two hundred fifty percent (250%) of the hourly

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minimum wage prescribed by Rhode Island law as an employee of the eligible company.

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      (8) "Initial new employment level" means the number of units of new employment

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reported by an eligible company in 1997, or, if applicable, the third taxable year following the

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base employment period election set forth in section 42-64.5-5.

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      (9) (i) "New employment" means for each taxable year the amount of adjusted current

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employment for each taxable year minus the amount of base employment, but in no event less

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than zero; provided, however, no eligible company is permitted to transfer, assign or hire

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employees who are already employed within the State by such eligible company from itself or

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any affiliated entity or utilize any other artifice or device for the purpose of artificially creating

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new employees in order to qualify for the rate reduction provided for in this chapter.

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      (ii) Except as provided in section 42-64.5-7, "new employment" shall not include

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employees already employed in this state who become employees of an eligible company as a

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result of an acquisition of an existing company by purchase, merger, or otherwise, if the existing

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company was eligible for a rate reduction. In the case of a manufacturing company that suffers a

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disaster, it shall mean any employment retained or added as the result of reconstruction of the

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manufacturing facility.

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      (10) "Rate reduction" means the reduction in tax rate specified in section 42-64.5-4.

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      (11) "Small business concern" means, except as otherwise provided in section 42-64.5-7,

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any eligible company which has a base employment level of less than one hundred (100);

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provided, however, that a telecommunications company may not qualify as a small business

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concern.

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      (12) "State" means the State of Rhode Island and Providence Plantations.

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      (13) "Telecommunications company" means any public service company or corporation

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whose rate of taxation is determined under section 44-13-4(4).

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      (14) "Total employment" for an eligible company as of any date means the total number

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of full-time equivalent active employees employed within the State by the eligible company and

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its eligible subsidiaries on such date.

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      (15) "Units of new employment" means: (i) for eligible companies which are not small

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business concerns, the amount of new employment divided by fifty (50), rounded down to the

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nearest multiple of fifty (50), and (ii) for eligible companies which are small business concerns

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the amount of new employment divided by ten (10), rounded down to the nearest multiple of ten

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(10); provided, however, that an eligible company (other than an eligible company that is a

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telecommunications company) with adjusted current employment of one hundred (100) or more

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employees in its first year of operation or in any other period following the date its base

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employment is determined shall determine its units of new employment by dividing the first one

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hundred (100) employees less its base employment by ten (10), rounded down to the nearest

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multiple of ten (10), and by dividing the number of additional employees in excess of one

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hundred (100) by fifty (50), rounded down to the nearest multiple of fifty (50).

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     SECTION 3. Chapter 44-11 of the General Laws entitled "Business Corporation Tax" is

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hereby amended by adding thereto the following section:

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     44-11-44. Annual Rhode Island corporate income and tax data report. – No later

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than March 15, 2010 and every March 15th thereafter, the division of taxation shall annually

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submit a report for the previous calendar year of Rhode Island corporate income and tax data by

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size of federal taxable income to the chairpersons of the house finance committee and senate

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finance committee, and the house fiscal advisor and the senate fiscal advisor. The report should

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be as similar as practical to the business and income tax data for Rhode Island federal taxpayers

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issued by the Statistics of Income Division of the Internal Revenue Service.

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     SECTION 4. Section 44-18-15 of the General Laws in Chapter 44-18 entitled "Sales and

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Use Taxes - Liability and Computation" is hereby amended to read as follows:

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     44-18-15. "Retailer" defined. -- (a) "Retailer" includes:

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      (1) Every person engaged in the business of making sales at retail, including sales at

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auction of tangible personal property owned by the person or others.

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      (2) Every person making sales of tangible personal property through an independent

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contractor or other representative, if the retailer enters into an agreement with a resident of this

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state, under which the resident, for a commission or other consideration, directly or indirectly

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refers potential customers, whether by a link on an Internet website or otherwise, to the retailer,

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provided the cumulative gross receipts from sales by the retailer to customers in the state who are

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referred to the retailer by all residents with this type of an agreement with the retailer, is in excess

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of five thousand dollars ($5,000) during the preceding four (4) quarterly periods ending on the

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last day of March, June, September and December. Such retailer shall be presumed to be

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soliciting business through such independent contractor or other representative, which

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presumption may be rebutted by proof that the resident with whom the retailer has an agreement

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did not engage in any solicitation in the state on behalf of the retailer that would satisfy the nexus

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requirement of the United States Constitution during such four (4) quarterly periods.

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      (2)(3) Every person engaged in the business of making sales for storage, use, or other

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consumption, or the business of making sales at auction of tangible personal property owned by

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the person or others for storage, use, or other consumption.

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      (3)(4) A person conducting a horse race meeting with respect to horses, which are

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claimed during the meeting.

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      (4)(5) Every person engaged in the business of renting any living quarters in any hotel,

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rooming house, or tourist camp.

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      (5)(6) Every person maintaining a business within or outside of this state who engages in

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the regular or systematic solicitation of sales of tangible personal property in this state by means

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of:

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      (i) Advertising in newspapers, magazines, and other periodicals published in this state,

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sold over the counter in this state or sold by subscription to residents of this state, billboards

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located in this state, airborne advertising messages produced or transported in the airspace above

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this state, display cards and posters on common carriers or any other means of public conveyance

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incorporated or operated primarily in this state, brochures, catalogs, circulars, coupons,

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pamphlets, samples, and similar advertising material mailed to, or distributed within this state to

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residents of this state;

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      (ii) Telephone;

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      (iii) Computer assisted shopping networks; and

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      (iv) Television, radio or any other electronic media, which is intended to be broadcast to

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consumers located in this state.

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      (b) When the tax administrator determines that it is necessary for the proper

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administration of chapters 18 and 19 of this title to regard any salespersons, representatives,

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truckers, peddlers, or canvassers as the agents of the dealers, distributors, supervisors, employers,

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or persons under whom they operate or from whom they obtain the tangible personal property

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sold by them, irrespective of whether they are making sales on their own behalf or on behalf of

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the dealers, distributors, supervisors, or employers, the tax administrator may so regard them and

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may regard the dealers, distributors, supervisors, or employers as retailers for purposes of

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chapters 18 and 19 of this title.

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     SECTION 5. Chapter 44-19 of the General Laws entitled "Sales and Use Taxes -

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Enforcement and Collection" is hereby amended by adding thereto the following section:

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     44-19-10.3. Electronic filing of sales tax returns. -- (a) Beginning on January 1, 2010,

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any person required to collect and remit sales and use tax to the state of Rhode Island who had an

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average monthly sales and use tax liability of two hundred dollars ($200) or more per month for

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the previous calendar year, shall remit said payments by electronic funds transfer or other

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electronic means defined by the tax administrator. The tax administrator shall adopt rules

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necessary to administer a program of electronic funds transfer or other electronic filing system.

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     (b) If any person fails to remit said taxes by electronic funds transfer or other electronic

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means defined by the tax administrator as required hereunder, the amount of tax required to have

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been electronically transferred shall be increased by the lesser of five percent (5%) of the amount

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that was not so transferred or five hundred dollars ($500), whichever is less, unless there was

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reasonable cause for the failure and such failure was not due to negligence or willful neglect.

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     (c) The tax administrator is authorized to waive the electronic filing requirement in a

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given year a person who can show that filing electronically will cause undue hardship.

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     SECTION 6. Section 44-30-71 of the General Laws in Chapter 44-30 entitled "Personal

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Income Tax" is hereby amended to read as follows:

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     44-30-71. Requirement of withholding tax from wages. -- (a) General. - Every

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employer maintaining an office or transacting business within this state and making payment of

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any wages subject to Rhode Island personal income tax to a resident or nonresident individual

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shall deduct and withhold from the wages for each payroll period a tax computed in such manner

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as to result, so far as practicable, in withholding from the employee's wages during each calendar

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year an amount substantially equivalent to the tax reasonably estimated to be due resulting from

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the inclusion in the employee's Rhode Island income of his or her wages received during the

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calendar year. The method of determining the amount to be withheld shall be prescribed by

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regulations of the tax administrator, with due regard to the withholding exemptions of the

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employee.

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      (b) Withholding exemptions. - For purposes of this section:

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      (1) An employee shall be entitled to the equivalent of the same number of Rhode Island

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withholding exemptions as the number of withholding exemptions to which he or she is entitled

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for federal income tax withholding purposes. An employer may rely upon the number of federal

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withholding exemptions claimed by the employee.

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      (2) The amount of the equivalent of each Rhode Island withholding exemption shall be

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equal to and correspond to those set forth in 26 U.S.C. section 3402(b).

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     (c) Electronic filing. Any person required to withhold and remit tax under this section

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with five (5) or more employees must make the payments by electronic funds transfer or other

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electronic means defined by the tax administrator. The tax administrator shall adopt rules

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necessary to administer a program of electronic funds transfer or other electronic filing system.

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     (1) In the case of failure of a person required to deposit taxes by electronic funds transfer

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or other electronic means defined by the tax administrator under the provisions of this section,

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unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there

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shall be added to the amount shown as tax required to have electronically transferred five percent

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(5%) of the amount or five hundred dollars ($500) per required payment, whichever is less.

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     (2) The tax administrator is authorized to waive the electronic filing requirement in a

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given year for persons who can show that filing electronically will cause undue hardship.

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     SECTION 7. Section 6 of this act shall take effect on January 1, 2010 and the remainder

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of the act shall take effect upon passage.

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LC02545

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION

***

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     This act would allow the director of the department of labor and training to share

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information with the tax administrator; would modify the definition of a full-time employee for

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purposes of the Jobs Development Tax Credit; would require the division of taxation to annually

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submit a report on corporate tax data based on the size of federal taxable income; would expand

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the definition of retailer for sales tax purposes to include companies that sell over the Internet and

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contract with Rhode Island companies; and would require employers with more than five (5)

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employees and all taxpayers who collect sales tax to file electronically.

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     Section 6 of this act would take effect on January 1, 2010 and the remainder of the act

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would take effect upon passage.

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LC02545

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