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Taxes & Incentives

Rhode Island offers an increasingly competitive, predictable business environment. Thanks to our governor and legislature's leadership on pension and Medicaid reform, we have reined in structural costs and flattened their trajectories. As a result, we can ensure businesses a stable tax structure.

Rhode Island has not raised its top personal income, corporate income or sales tax rates in a generation. Instead, we recently lowered our top personal income tax rate (from 9.9% to 5.99%), as well as our corporate tax rate (from 9% to 7%). Rhode Island's corporate tax rate is now the lowest in the Northeast.

Potent Incentives for Businesses and Workers

A strong signal of the state's commitment to economic growth, Rhode Island's legislature passed, nearly unanimously and in record time, a powerful suite of new programs aimed at growing businesses and creating jobs as proposed by Governor Raimondo. These incentives, benefiting businesses of every size, are some of the most significant and comprehensive in the Northeast, if not the nation.

Rhode Island has recently lowered our top corporate tax rate from 9% to 7% - the lowest top corporate tax rate in the Northeast. For some taxpayers, the actual rate could be lower, depending on certain factors.

In addition, effective for tax years beginning on or after January 1, 2015, C-Corporations will use a single sales factor to apportion income to Rhode Island (in lieu of the standard three-factor apportionment formula). The annual corporate minimum tax is $450.

Beginning January 2011, Rhode Island's personal income tax structure has been modified to lower the personal income tax rates in the state. Highlights of the legislation include: 
  • Reduces the number of tax brackets from five to three
  • Lowers the top bracket from 9.99% to 5.99%
  • Increases standard deductions for taxpayers to between $7,899 and $15,000 with personal and dependent exemptions equal to $3,650

General Business Incentives
 

Anchor Institution Tax Credit

Compensates existing Rhode Island businesses that attract suppliers, service providers and/or major customers to relocate to Rhode Island.
 

  • Eligible relocations must have 10 jobs 2015-2018; 25 jobs 2019-2020

  • Sector, location, demonstrated role in relocation decision, impact on state, prevailing brokerage fee and ROI all factors in award

Industry Cluster Grants

Competitive grants administered by the commerce corporation to start, grow, or improve industry sector partnerships, encouraging companies to work together to solve problems, exchange technology and share talent.

  • Competitive startup and technical assistance grants ($75-250K)

  • Competitive program grants ($100-500K) to businesses that enhance cluster growth, effectiveness, etc.

Innovation Tax Credit

Rhode Island offers a tax credit to encourage investment in high-growth, high-wage innovation industries. The RI Innovation Tax credit offers up to a 50% credit on qualified capital investments, with a maximum tax credit of $100,000. To be eligible to apply for the credit, a company must produce traded goods or services, have annual gross revenues of less than $1 million in the prior two calendar years, and must be categorized as one of the following industries: biotechnology and life sciences; communication and information technology; financial services; marine and defense manufacturing; professional, technical and educational services; and industrial and consumer product manufacturing and design.  

The credit may be carried forward for a period not to exceed three years. Companies must apply for the credit prior to the investment. Once an application is approved, the company has up to 12 months to invest and provide proof of investment to the Commerce RI Board of Directors. Upon completion of this process, Commerce RI will certify the company's eligibility for the credit with the Rhode Island Division of Taxation.

Jobs Growth Act of 2005: Income Tax Reduction on Performance-Based Income 

The Jobs Growth Act allows eligible businesses in any industry to offer their employees an exclusion of 50% of performance-based compensation from their Rhode Island gross income. In return, the company pays a 5% tax each year on the performance-based income paid that year. An application for certification would be filed with the Rhode Island Commerce Corporation.
 

  • In order to qualify, a company must hire 100 new employees in the state and add at least $10 million to its state payroll. Those new workers must earn at least 125% of the state's average annual compensation.

  • Employees cannot have been previously employed by the company. The tax cut applies only to bonus or incentive income, not base salary.

Investment Tax Credit - Non-Manufacturing Firms

Firms in certain non-manufacturing industries are also able to take the 10% investment tax credit on owned or leased tangible personal property and other intangible property placed in service on or after January 1, 1998.

The 10% credit is not allowed on buildings, structural components, motor vehicles and furniture for non-manufacturing firms. The investment tax credit may not reduce the taxpayer's liability below 50% of the taxpayer's total tax liability before the credits for that year. Unused credits may be carried forward up to seven years.

Research and Development

Innovation Vouchers

Provides financial/technical assistance to small businesses (fewer than 500 employees) in innovation sectors. Competitive awards ($5,000-$50,000) to purchase R&D technical assistance from state and regional higher-ed institutions.

Innovate Rhode Island Small Business Fund

Provides grants of up to $3,000 to companies developing innovative products - offsetting the costs associated with preparing competitive Phase I federal SBIR/STTR applications - and matching grants of up to $45,000 to pursue Phase II awards.
 
Research & Development Expense Credit 

Rhode Island offers a 22.5% tax credit for increases in qualified research expenses.

Research & Development Property Credit

A corporation is allowed a 10% tax credit for expenditures paid or incurred for the construction, reconstruction or acquisition of any property which is principally used or to be used for research and development in the experimental or laboratory sense.

Elective Deduction for Research & Development Facilities 

In lieu of depreciation or the investment tax credit, a corporation is allowed a one year write-off for expenditures paid or incurred during the taxable year for the construction, reconstruction or acquisition of all qualifying depreciable tangible property used or to be used for the purpose of research and development in the experimental or laboratory sense.

Research & Development Sales Tax Exemptions 

Sales or use of scientific equipment, computers, software and related items to a qualifying firm to be used predominantly for research and development purposes are exempt from Rhode Island Sales and Use Tax.

Financial Service Industry Incentives

Alien Insurance Companies 

Rhode Island allows a non-U.S. insurance company to become licensed in Rhode Island and, as long as it maintains its base of U.S. operations in Rhode Island, and to be treated as a Rhode Island domiciled insurance company for the purposes of obtaining licenses in other states. 
 

Deregulation of Commercial Lines 

This law exempts qualified commercial insurance lines from specific state review requirements, including filing policy forms, casualty insurance rating requirements, and certificate of compliance requirements. 
 

Income Apportionment - Depository Institutions

Income of banks having a regular place of business outside Rhode Island are entitled to apportion net income using a three-factor formula similar to that used for the corporate income tax. 


Income Apportionment - Credit Card Banks

Banking institutions engaged only in credit card business may elect to apportion net income derived directly or indirectly from the banking institution to Rhode Island to the extent that customers of the taxpayer are domiciled in Rhode Island. 
 

Income Apportionment - Regulated Investment Companies & Securities Brokerage

Income of Regulated Investment Companies and Securities Brokerage Services may be apportioned to Rhode Island using a one-factor formula based on the ratio of gross sales to Rhode Island residents to gross sales everywhere. 
 

Income Apportionment - Retirement and Pension Plans

Pension fund service firms may use a one-factor formula based on the ratio of total Rhode Island receipts to total receipts everywhere. Taxpayers who provide traditional administrative services to pension or retirement plans may elect to have its net income apportioned on the basis of the domicile of its employee beneficiaries. 
 

Insurance Company Retaliatory Tax Exemption 

Foreign insurance companies are exempt from gross premiums retaliatory taxes in Rhode Island when their home jurisdiction does not impose a like tax. 
 

Intangible Personal Property Sales Tax Exemption 

Sales or transfers of intangible personal property such as stocks, bonds, accounts receivable, money, or insurance policies are exempt from the sales tax. 
 

Interest 

Rhode Island has no cap on credit card transactions and authorizes any interest rate agreed upon between lender and debtor. 
 

International Investment Management Fee Income Tax Exemption 

Companies with at least 500 employees in Rhode Island will not be taxed on fee income derived from international investment management services rendered to investors not domiciled in the United States.
 

Interstate Banking 

Rhode Island allows out of state banks to operate branch offices in Rhode Island as long as the same opportunities are offered to Rhode Island banks as in their home state. 
 

Mutual Insurance Holding Companies 

Rhode Island effectively permits mutual insurance companies to access capital through stock issues without threatening policy holder rights or sacrificing the benefits of the mutual form of ownership. 
 

Protected Cell Companies 

The protected cell act facilitates insurance securitization transactions and rent-a-captive formation through its protected cell structure.
 

Telecommunication Sales Tax Exemption

Regulated investment companies with at least 500 full-time equivalent employees are exempt from the sales and use tax imposed on toll-free terminating telecommunication service.
 

Foreign Trade Zones 

Foreign Trade Zone #105 

Foreign Trade Zone # 105 consists of three different geographic locations in the State of Rhode Island (32 acres at the Port of Providence, the Airport Business Park adjacent to T.F. Green Airport in Warwick, Rhode Island and the Quonset - Davisville Port) which provide a variety of tax benefits, including: duty exemption on re-exports, duty elimination on manufacture, re-packaging, waste and scrap; relief from inverted tariffs; no duty on rejected or defective parts; no duty charged on merchandise while it is in a foreign trade zone; no duty on domestic content or value added and relief from local property taxes for foreign merchandise stored or held in a FTZ for export.
 

Film and Television Industry Incentives 

Motion Picture Production Tax Credit Rhode Island provides a transferable 25% tax credit against the corporate or personal income tax for all certified costs (including salaries) associated with Rhode Island primary locations of feature-length films, videos, video games, television series, or commercials.
 

Real Estate Incentives

Rebuild Rhode Island Tax Credit

Provides capital to qualified real estate projects that demonstrate a "financing gap".
 

  • Up to 20% of eligible project costs; 30% if certain criteria are met; minimum project cost of $5 million

  • Sales tax exemption on building materials, furnishings and equipment

  • Credits payable in 5 years following completion (certificate of occupancy) 

Tax Increment Financing

Provides capital to eligible projects by rebating new state tax revenue generated.
 

  • Projects must demonstrate need through a "financing gap"

  • Reimbursements may not exceed 30% of total project costs (exemption for public infrastructure/utilities) or 75% of incremental revenue generated

I- 195 Redevelopment Fund

Adjacent to Providence's vibrant downtown, world-renowned universities and cutting-edge medical centers, the I-195 Redevelopment District offers an unparalleled development opportunity. The $25 million I-195 Redevelopment Fund has been created to finance projects that have the potential to catalyze development in the district.
 

 

Job Training and Education

Incentives

Qualified Jobs Incentive 

Rhode Island provides businesses with a base tax credit for creating a minimum number of new jobs. The base tax credit is up to $2,500/new full-time job; bonus up to $7,500/job if certain criteria are met; must create a minimum of 20 jobs or grow in-state workforce by 10%; lowered to 10 jobs if certain criteria are met. Benefit may not exceed 10 years in term or income tax withholdings generated by the jobs created. The first 500 jobs approved under the program will receive the maximum credit available. Applications must be received by 12/31/18. Credits are usable, tradable and redeemable (90% to the state).
 

Job Training Tax Credit

 

A credit against the corporate income tax (or the insurance premium tax) equal to 50% of eligible training expenditures for new or existing employees, in accordance with an approved training plan.
 

Wavemaker Fellowship

Used to attract and retain talent through funding student loan repayment costs to graduates pursuing careers in technology, engineering, design and other key sectors in Rhode Island.
 

Adult Education Tax Credit

Rhode Island allows for a tax credit of 50% of the direct costs for worksite and non worksite-based vocational training or basic education, up to a maximum of $300 per employee.
 

Employer's Apprenticeship Tax Credit

Employers of registered full-time apprentices in the metal and plastic industries are eligible for an annual corporate tax credit of 50% of the actual wages paid to the qualifying apprentice, or $4,800, whichever is less.
 

Educational Assistance and Development Credit

A contribution to a Rhode Island institution of higher education is allowed a tax credit of 8% for the amount above $10,000. The contribution must be for the establishment or maintenance of a faculty chair, department, work fellowship, or program of scientific research or education.
 

Job Training Grants

The Governor’s Workforce Board Rhode Island offers customized training programs for business and industry funded through a job development assessment of 0.21% on the firm's taxable payroll. Each employer's unemployment tax rate is reduced annually by 0.21% to ensure that this program does not result in a tax increase. 

Bonus Program Private Participation 

An employer who participates in the Bonus Program, which provides job training for former public assistance recipients, can qualify for a $250 tax credit per participant.
 

Hiring of Unemployed or Low-Income Residents 

A tax credit of 40% of a newly-hired employee's first year wages (up to a maximum of $2,400) is allowed for businesses that employ and retain Rhode Island residents who were previously unemployed or receiving public assistance

Manufacturing

Incentives

Manufacturing Investment Tax Credit (4%)

A manufacturer is allowed a 4% tax credit against the Rhode Island corporate income tax on buildings and structural components, as well as machinery and equipment, which are owned or leased and are principally used in the production process (including storage).


High Performance Manufacturing Investment Tax Credit (10%)

High-performance manufacturers are allowed a 10% investment tax credit against their corporate tax on the cost or qualified lease amounts for tangible personal property or other tangible property, as well as buildings and structural components owned, leased to own, or leased for at least 20 years.
 

Business Income Apportionment for Manufacturers 

Affiliated multi-state corporations may file single, separate Rhode Island corporate tax returns or file a consolidated return using a three-factor formula.


Apportionment Exclusion for Medical & Pharmaceutical Manufacturers

 
A Rhode Island manufacturer of Medical Instruments, Supplies or Pharmaceuticals whose facility is registered and certified by the United States Food & Drug Administration may modify the Rhode Island business income apportionment formula for the current tax year. 

Miscellaneous Tax Credits and Incentives

Tax Stabilization Incentive

Provides an incentive for Rhode Island municipalities to enter into tax stabilization agreements (TSA).
 

  • Up to 10% of foregone tax revenue reimbursed to a local municipality for 12-year TSA 

  • Projects must be more than or equal to $10 million and create 50 jobs (50% for Hope Communities)


Child and Adult Daycare Tax Credit 

A Rhode Island taxpayer that purchases or provides for adult or child day care services for adult family members or dependent children of the taxpayer's employees or to employees of its commercial tenants is allowed a tax credit in the amount of:

 

  • 25% of the total amount expended during the taxable year for services purchased and 25% of the total amount expended during the taxable year for the establishment and/or operation of a daycare facility by the taxpayer alone or in conjunction with others. Credits may not exceed the Rhode Island tax liability.

  • 30% of the total amount foregone in rent or lease payments related to the dedication of rental or lease space to day care services. The amount foregone shall be the difference between the fair market rental and actual rental. The maximum credit allowed is $30,000 and the amount of unused credit may be carried forward five years.

  • Credits for child daycare require confirmation that the facility agrees to accept children for whom the services are paid by Rhode Island Department of human Services. 

Hazardous Waste Facilities Amortization 

Rhode Island extends a business corporation tax amortization to include tangible personal property for the recycling, reuse or recovery of materials from the treatment of hazardous waste.


Natural Disaster Rebuilding

Manufacturers who have lost 60% or more of their facilities due to a natural disaster, resulting in the inability of active employees to continue production, may qualify for corporate income tax rate reductions under the Jobs Development Act for jobs retained or added.
 

Sales Tax Exemptions

Statewide Arts District

The sale of original and creative works created by -and sold by- writers, composers and artists residing in and conducting a business within the state of Rhode Island will be exempt from the state's 7 percent sales and use tax. This exemption will also apply to sales by any other gallery located in the state of Rhode Island. 
 

Wine and Spirits


Rhode Island's sales and use tax will not apply to wine and spirits sold at package stores and liquor stores ("Class A" licenses under RIGL Title 3)
 

Scientific Equipment

Scientific equipment used for research and development by eligible firms is exempt from the state sales tax.
 

Pollution Control Equipment

Pollution control property and supplies are exempt from the state sales tax. 

Aircraft, Boats & Aircraft Fuel

Rhode Island exempts the sale, storage, use or other consumption of new or used aircraft and aircraft parts from taxation. Labor charges continue to be exempt where labor charges are separately stated by the seller. Fuel used for propulsion of aircraft is also exempt. Boats are also exempt from the sales tax.
 

Professional & Occupational Services

Professional services such as those provided by physicians, attorneys, accountants, engineers and others are exempt. However, the tax applies to any tangible personal property that may be sold at retail by such professionals. Occupational services such as provided by barbers, beauty parlors, bootblacks, cleaning and pressing shops, laundries, and similar service establishments are exempt. However, if delivery to the purchaser or his agent is consummated within the state, the tax applies to any tangible personal property which may be sold at retail by such establishments.
 

Intangible Personal Property

Sales or transfers of intangible personal property such as stocks, bonds, accounts receivable, money or insurance policies are exempt.