The Marcum 2016 Year-End Tax Guide continues our tradition of providing timely tax guidance for the upcoming year.
Education Assistance and Development Tax Credit:
Credits against corporation tax, bank excise tax, public service corporation tax, and tax on insurance companies are available for qualifying contributions to Rhode Island institutions of higher education. The credit amount is equal to 8% of:
- The amount in excess of $10,000 in any tax year contributed to an institution of higher education for establishment or maintenance of a faculty chair, department, or research program or education.
- The amount in excess of $10,000 in any tax year contributed to an institution of higher education for a work fellowship program.
- The cost or other basis for federal income tax purposes, in excess of $10,000 in any tax year of tangible personal property contributed to an institution of higher education.
The credit cannot reduce the tax due for that year to less than $100.
Adult Education Credit:
Nonrefundable credit equal to 50% of the costs incurred solely and directly for worksite or non-worksite based adult education programs. The maximum credit per employee is $300, with a maximum credit of $5,000 per employer per year. To be eligible, an employee must work for at least 13 consecutive weeks and have a minimum of 455 paid hours of employment. The credit cannot be carried over.
Credit for contributions to a scholarship organization:
A credit for businesses that make cash contributions to qualified scholarship organizations. A 75% credit is allowed for a one-year commitment and a 90% credit is allowed for a two-year commitment. The credit is limited to a maximum of $100,000 per year.
Employment Tax Credit:
An employer that participates in the bonus program can file a tax credit for $250 per participant when a participant has worked 24 consecutive months for the employer.
Jobs Development Rate Reductions Credit:
For companies that create new employment in Rhode Island, pursuant to the Jobs Development Act, an incremental rate reduction is available. For years after January 1, 2015, the rate of reduction is determined by multiplying 0.20% by the number of new employment units.
Stay Invested in R.I. Wavemaker Fellowship Credit:
This credit is designed to motivate college graduates, whether with an associate's degree or bachelor's degree, to stay in Rhode Island. This is a personal, refundable income tax credit. To be eligible you must: (A) have graduated from an accredited two-year, four-year, or graduate post-secondary institute of higher learning; and (B) be a full time employee with a Rhode Island-based employer. The credit amount is for a maximum of $1,000 for an associate's degree holder, $4,000 for a bachelor's degree holder, and $6,000 for a graduate or post-graduate degree holder.
Anchor Institution Tax Credit:
This tax credit rewards an existing Rhode Island business for playing a substantial role in the decision of a qualified business to relocate a minimum number of jobs to the state. For 2015-2018, the minimum numbers of employees to Rhode Island is 10, and for 2019-2020 the minimum number of employees to Rhode Island will be 25. The credit amount is based on certain criteria established by the Commerce Corporation, such as number and types of jobs.
Rhode Island Qualified Jobs Incentive Tax Credit:
Eligible businesses are allowed a tax credit for creating new full-time jobs. The incentive provides a base tax credit for companies relocating to Rhode Island and creating a minimum number of jobs, or for current Rhode Island companies growing their workforce by a certain percentage. To be eligible for the credit, the minimum number of new full-time jobs is as follows:
- In a targeted industry, 10 new full-time jobs in Rhode Island for a business that employs not more than 100 full time employees on the date of application.
- In a targeted industry, at least 10% of the business's existing number of full-time employees, or the creation of at least 100 new full-time jobs if the company already employs more than 100 full-time employees.
- In a non-targeted industry, the creation of at least 20 new full-time jobs if the company employs not more than 200 full-time employees.
- In a non-targeted industry, the creation of not less than 10 % of the business's existing number of full-time employees, or the creation of 100 new full-time jobs in Rhode Island.
The credit amount for each new full-time job is $2,500 per year, with a maximum of $7,500 through 2018. The first 500 jobs approved will receive the maximum credit allowed.
Research and Development Property Credit:
A credit is available for tangible research and development property. The amount of the credit is 10% of the cost of tangible property or other basis for federal income tax purposes. To qualify, the property must: be depreciable, have a useful life of three years or more, be acquired by purchase (defined in IRC 179 d), have situs in Rhode Island, and be used principally for experimental or laboratory research and.
Credit for Qualified Research Expenses:
Allows for a credit against the business corporation tax or the tax on insurance companies for qualified research expenses. The expenses must have been incurred in Rhode Island. The credit is equal to 22.5% of the first $25,000 worth of credit and 16.9% of any excess. The regulation provides that the credit is equal to 22.5% for expenses up to $111,111 and 16.9% for the remaining expenses over $111,111.
Biotechnology Investment Tax Credit:
This tax credit extends the existing investment tax credits for biotechnology companies from seven to 15 years. A credit is allowed in the amount of 10% of the cost of tangible personal property or other basis for federal tax purposes. The credit applies to any company primarily engaged in commercial biological research and development, or manufacturing and sale of biotechnology products, that pays employees who work at least 30 hours per week in Rhode Island a median annual wage equal to or greater than 125% of the average annual wage paid by all employers in Rhode Island to employees who work a minimum of 30 hours per week within the same industry. There is an extended carryover period beyond seven years but not to exceed 15 years.
Day-Care Assistance and Development Credit:
A credit is allowed for a taxpayer that pays for or provides adult or child day-care services, or provides real property or dedicates rental space for day-care service to its employees. To be eligible for the credit, the day-care must be licensed and agree to accept children whose services are paid for in part or in full by the Rhode Island Department of Human Services. The credit amount is equal to:
- 30% of the total amount expended in the state by a taxpayer for day-care services purchased to provide care for the taxpayer's employees.
- 30% of the total amount expended in the establishment and/or operation of a day-care facility used primarily by the dependent children of the taxpayer's employees.
- 30% of the total amount expended during the year by a taxpayer in conjunction with one or more other taxpayers for the establishment and/or operation of a day-care facility used primarily by the dependent children of the taxpayer's employees.
- 30% of the total amount foregone in rent or lease payments. The amount forgone will be the difference between fair market rental and actual rental.
Investment Tax Credit:
This credit is broken down into two categories: manufacturers and qualified taxpayers.
Manufacturers: An investment credit is taken equal to: (A) 4% of the cost for certain property used by the taxpayer in producing goods by manufacturing, processing, or assembling, and acquired, constructed, or reconstructed after 1993, and (B) 4% of the qualified amounts for leased assets of tangible personal property and other tangible property used in manufacturing after 1998.
Qualified taxpayers: A credit equal to 10% of the cost, and the qualified amounts for leases of assets, tangible personal property and other tangible property after 1998.
Rebuild Rhode Island Tax Credit:
A credit may be taken for qualified development projects, specifically a construction project or improvement, including lands, buildings, real and personal property or any interest, including lands underwater, riparian rights, space rights, and air rights, undertaken by a developer, owner, or tenant within a specific region. To be eligible: (A) The applicant must have committed capital investments of at least 20% of the total project cost; (B) There is a project financing gap in which the project is not likely to be accomplished without tax credits; and (C) The project fulfills the state's specified policy and planning objectives and priorities. The credit maximum is the lesser of 30% of the total project cost or the amount needed to close a project financing gap.
Job Training Tax Credit:
Qualifying employees can take a credit of 50% of the expenses incurred to provide training and/or retraining for a qualifying employee. Of this amount, 50% will be allowed in the taxable year in which the expense is paid, and the remaining credit will be taken in the following year. The maximum amount of the credit is $5,000 per employee for any three-year period.
Motion Picture Production Company Tax Credit:
This tax credit is allowed for motion picture production companies certified by the Rhode Island Film Office. The credit will be 25% of the state-certified production costs incurred within Rhode Island, as long as the budget minimum for the film is $100,000. The maximum credit is $5 million, and no credits will be issued after July 1, 2019. The credit can be carried forward but not for more than three successive years.
Residential Renewable Energy System Tax Credit:
Taxpayers are entitled to a nonrefundable credit for the cost of purchase of any qualifying renewable energy system installed in a residence. A qualifying renewable energy system is any of the following: a photovoltaic system, a solar domestic hot water system, a solar space heating system, a geothermal system, or a wind-energy system. The credit will equal 25% of the cost of the system. The maximum cost of the photovoltaic system, solar space heating systems, or wind energy systems may not exceed $15,000. The maximum cost of the solar domestic hot water system or the geothermal system may not exceed $7,000.
- Photovoltaic systems must have a minimum module size of 25 sq. ft.
- Solar domestic hot water systems must have a minimum collector area of 34 sq. ft. and a storage tank that holds 80 gallons.
- Wind energy systems must have a rotor diameter of at least 44 inches and minimum output of 250 watts at 28 MPH.
- Solar space heating systems must have a minimum collector area of 125 sq. ft.
- Geothermal systems must have either a coefficient of performance of 3.4 or greater, or an efficiency ratio of 16 or greater.
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