280-RICR-20-20-1
280-RICR-20-20-1. Investment Tax Credit (version Amendment, 01/07/2002 to 01/01/2003)
STATE OF RHODE ISLAND - DIVISION OF TAXATION
TAX CREDITS/DEDUCTION
REGULATION CR02-04
Effective January 1, 1998 the investment tax credit statute
(RIGL 44-31) was extended to provide a ten percent (10%) tax
credit to manufacturers and certain non-manufacturers ("qualified
taxpayers") which meet statutorily defined criteria. The
investment tax credit was further extended on June 30, 1999 to
provide the ten percent (10%) tax credit to property having a
situs in Rhode Island however acquired by "qualified taxpayers"
which are property and casualty insurance companies.
The investment tax credit was increased from four percent (4%)
to ten percent (10%) with respect to buildings and structural
components which are acquired, constructed, reconstructed or
erected after July 1, 2001 for "high performance manufacturers".
This regulation is set out in two (2) parts. The first part
of the regulation deals with manufacturers that meet the criteria
for the four percent (4%) tax credit. The second part of the
regulation deals with manufacturers and non-manufacturers which
meet the statutory criteria for the ten percent (10%) tax credit.
In general, provisions applicable to manufacturers in Part I
are deemed applicable to "qualified taxpayers" in Part II unless
law or regulations in Part II mandate otherwise.
Documentation and Information Required
Taxpayers seeking credit as "manufacturers or qualified
taxpayers" must complete the 3468 form and must attach copies of
calculations and documents evidencing satisfaction of the special
criteria required for "qualified taxpayers" including but not
limited to letters documenting training expenses from the Human
Resource Investment Council, documenting wage information from the
RI Department of Labor and Training, and calculations pertaining
to wages or gross revenues.
INVESTMENT TAX CREDIT - PART I "MANUFACTURERS"
I. A taxpayer shall be allowed an investment tax credit
computed in accordance with 44-31-1 against the business
corporation tax or the personal income tax as imposed by Chapters
44-11 and 44-30, respectively, on tangible personal property and
other tangible property, including buildings and structural
components of buildings acquired, constructed, reconstructed or
erected for use principally by the taxpayer in the production of
goods by manufacturing, processing or assembling. The investment
tax credit shall be allowed against the business corporation tax
computed on the basis of net income or net worth apportioned to
Rhode Island, provided, however, that an investment tax credit
will be allowed against the tax of only that corporation, included
in a consolidated state tax return, that qualifies for the credit
and will not be allowed against the tax of other corporations that
may join in the filing of a consolidated state tax return with
such corporation.
The investment tax credit shall be allowed on qualifying
property acquired, constructed, reconstructed or erected after
December 31, 1973 and first placed in service in this state during
a taxable year beginning on or after July 1, 1974. A taxpayer
placing otherwise qualifying property in service during a taxable
year beginning prior to July 1, 1974 shall not be allowed a credit
in the year placed in service nor shall the taxpayer be allowed a
carryforward to any subsequent year.
In order to qualify for this credit, the property must:
(a) Be depreciable pursuant to Sec. 167 of the
Internal Revenue Code;
(b) Have a useful life of 4 years or more;
(c) Be acquired by purchase as defined in Sec.
179(d) of the Internal Revenue Code;
(d) Have a situs in this state at the date first
placed in service by the taxpayer; and
(e) Be principally used by the taxpayer in the
production of goods by manufacturing,
processing or assembling, as hereinafter
described.
II. For the purpose of this regulation, the business of
manufacturing, processing or assembling, shall be divided into
three parts as follows:
(a) Administration, meaning all administrative
work such as general office operations,
accounting, purchasing, collection, sales
promotion, clerical work in production such as
preparation of work records, production
records and time records, and the transporting
of raw materials to the plant.
(b) Production, meaning all operations performed
in producing or processing room, shop or
plant, including the production line starting
with the handling and storage of raw materials
at the plant and continuing through the last
step of production where the product is
finished, packaged for sale and stored.
Production shall also include machinery,
equipment or other tangible property which is
principally used in the repair and service of
other machinery, equipment or other tangible
property used principally in the production of
goods.
(c) Distribution, meaning all operations
subsequent to production such as selling,
displaying, loading and transporting the
manufactured products.
The investment tax credit does apply to property used in the
producing or processing room, shop, or plant if such property is
principally used in production as defined above. The investment
tax credit does not apply to property principally used in
administration and distribution as defined above.
III. Section 44-31-1(b) states:
". . . manufacturing shall mean the process
of working raw materials into wares suitable
for use or which gives new shapes, new
quality or new combinations to matter which
already has gone through some artificial
process by the use of machinery, tools,
appliances, and other similar equipment.
Property used in the production of goods
shall include machinery, equipment or other
tangible property which is principally used
in the repair and service of other machinery,
equipment or other tangible property used
principally in the production of goods and
shall include all facilities used in the
production operation, including storage of
materials to be used in production and of the
products that are produced."
Within the meaning of the preceding paragraph a taxpayer is
deemed to be a manufacturer within a city or town within this
state if it uses any premises, room or place therein primarily for
the purpose of transforming raw materials into a finished product
for trade through any or all of the following operations:
adapting, altering, finishing, making and ornamenting; provided,
however, that public utilities, building and construction
contractors, warehousing operations, including distribution bases
or outlets of out-of-state manufacturers, fabricating processes
incidental to warehousing or distribution of raw materials such as
alteration of stock for the convenience of a customer, shall be
excluded from this definition.
A manufacturer is a taxpayer whose principal business in this
state consists of transforming raw materials into a finished
product for trade through any or all of the operations described
in the preceding paragraph. A taxpayer will be deemed to be thus
principally engaged if the gross receipts derived from such
manufacturing operations in this state during the taxable year
amounted to more than fifty percent (50%) of the total gross
receipts derived from all the taxpayer's business activities in
this state during the same taxable year. For the purpose of
computing this percentage, gross receipts derived by a
manufacturer from the sale, lease or rental of finished products
manufactured by the taxpayer in Rhode Island should be deemed to
have been from manufacturing even though the taxpayer's store or
other sales place in Rhode Island may be at a different Rhode
Island location from the Rhode Island manufacturing plant.
The term "manufacturer" shall also include taxpayers who are
principally engaged in any of the general activities respectively
coded and listed as establishments engaged in manufacturing in the
Standard Industrial Classification Manual prepared by the
Technical Committee on Industrial Classification, Office of
Statistical Standards, Executive Office of the President, United
States Bureau of the Budget, as revised from time to time, but
eliminating as manufacturers those taxpayers, who, because of
their limited type of manufacturing activities, are classified in
the manual as falling within a trade rather than an industrial
classification of manufacturers. Among those thus eliminated
(and accordingly also excluded as manufacturers within the meaning
of this subsection), are taxpayers primarily engaged in selling,
to the general public products produced on the same premises from
which they are sold, such as neighborhood bakeries, candy stores,
ice cream parlors, shade shops and custom tailors. However, a
person who manufactures bakery products for sale primarily for
home delivery, or through one or more nonbaking retail outlets
(whether or not the retail outlets are operated by the taxpayer)
shall be a manufacturer.
IV. The credit is 2% of the cost or other basis for federal
tax purposes and is only allowable in the year the property is
first placed in service by the taxpayer for the production of
goods by manufacturing, processing or assembling provided,
however, that only the portion of expenditures that is properly
attributable to acquisition, construction, reconstruction or
erection after December 31, 1973 is taken into account, provided
however the amount of credit shall be 4% of the cost or other
basis for federal tax purposes for expenditures after December 31,
1993. If property is principally used in manufacturing,
processing or assembling and is partially rented or leased, etc.,
the basis of the property must be adjusted for that proportionate
share of nonqualifying use. Property is considered first placed
in service by the taxpayer in the tax year in which under the
taxpayer's depreciation practice, the period for depreciation for
the property begins or the year in which the property is placed in
a condition or state of readiness and availability for a
specifically assigned function, whichever is earlier. If, for the
federal tax purposes of the taxpayer, qualifying property has a
useful life of a range of three to five years, such property will
be considered to have a useful life of four years. The credit may
not reduce the tax for any year to less than the minimum tax. Any
unused investment tax credit may be carried forward for seven
years.
V. "Principally used" means used more than 50%. A building
or addition is principally used in production where more than 50%
of its useable business floor space is used in storage and
production. Floor space used for bathrooms, cafeterias and
lounges is not useable business floor space. Floor space used for
administration and distribution is not used in production.
Machinery is principally used in production when it is used in
production more than 50% of its normal operating time.
EXAMPLE: ABC Corp., a calendar year corporation, acquires
a five story building, including structural components, (each
story of equal square footage) on 1/1/75, the basis of which is
$100,000.
(a) Taxpayer rents or leases out three floors and
uses the remaining two floors in the production
of goods by manufacturing, processing or
assembling.
Since less than 50% of the building is used in
production, there is no investment tax credit
allowed on any portion of the building.
(b) Taxpayer rents or leases out two floors and
uses the remaining three floors in the
production of goods by manufacturing,
processing or assembling.
Since more than 50% of the building is used in
production, there will be allowed an investment
tax credit on that portion of the building not
leased.
(c) Taxpayer uses three floors for production and
two floors for administration and distribution.
Since more than 50% of the building is used in
production and none of the building is leased
out, there will be allowed an investment credit
on the whole building.
VI. A taxpayer shall not be allowed a credit with respect to
tangible personal property and other tangible property, including
buildings and structural components of buildings, which it leases
to any other person or corporation or leases from any other person
or corporation. For purposes of the preceding sentence, any
contract or agreement to lease or rent or for a license to use
such property shall be considered a lease, unless such contract or
agreement is treated for federal income tax purposes as an
installment purchase rather than a lease. In order to be
considered the owner of the production property, a taxpayer must
be allowed federal depreciation on such property. Since property
rented to others does not qualify for credit, the credit shall not
be allowed where the purchaser is not the user of production
property, even where the purchaser and the user may be included in
a consolidated federal and/or a consolidated state tax return.
VII. At the election of the taxpayer, an investment credit
may be allowed on otherwise qualifying property in lieu of
elective deductions on facilities qualifying as:
(a) Air and water pollution control facilities
(Sec. 44-11-11(a) and 44-30-7);
(b) Research and development facilities (Sec.
44-32-1).
The election may be made even though the qualifying property
is not depreciable under Sec. 167 of the Internal Revenue Code and
is amortized under Sec. 169 or 174 of the Internal Revenue Code.
Where amortization of air and water pollution control
facilities was deducted from apportioned net income or where
expenditures for research and development facilities were deducted
from allocated entire net income, an investment tax credit will
not be allowed on the same facilities.
VIII. A recapture of a portion of the investment tax credit
is required where property on which a credit has been allowed is
disposed or ceases to be in qualified use except:
(a) Where property was in qualified use for its
entire useful life, or
(b) Where property was in qualified use for more
than twelve consecutive years.
IX. Computation of the recapture.
Recapture = Tax credit taken on property ceasing to qualify x
(useful life of property in months - qualified use in months)
(useful life of property in months)
EXAMPLE: XYZ Corp., a calendar year corporation, acquires a
five story building, including structural components, (each story
of equal square footage) on January 1, 1975, and the building's
basis is $100,000. The building has a 20 year life. Taxpayer
rents or leases out one floor and uses the remaining four floors
as three in production and one in administration and distribution.
Investment Tax Credit = 2% x ($100,000 - $20,000) = $1,600.
(a) On January 1, 1976 taxpayer rents another floor
that it had previously been using in
administration and distribution. At that point
taxpayer is renting two floors and using the
remaining three floors in production.
Computation of the recapture would be as
follows:
R = $1,600 x 1/4 (240 months - 12 months)
240 months
R = $400 x 95%
R = $380
(b) On January 1, 1976 taxpayer rents two more
floors used in production before. At this
point the taxpayer is renting three floors and
using the remaining two floors as one in
production and one in administration and
distribution. Since the entire building is not
used more than 50% in production, there is a
recapture of the entire remaining investment
credit computed as follows:
R = $1,600 x 4/4 (240 months - 12 months)
240 months
R = $1,600 x 95%
R = $1,510
(c) On February 1, 1987 taxpayer converts the
entire building to leased property. Since the
building was held more than twelve years, there
is no recapture of investment tax credit.
X. Where property is disposed of or ceased to be in qualified
use during the initial taxable year, the tax credit on that
property should be reduced by the recapture on that property.
XI. Where property is disposed of or ceases to be in
qualified use during other than the initial taxable year, the
taxpayer may not reduce the amount of tax liability created by a
recapture of investment tax credits by investment tax credits
allowed for the year in which the asset is disposed of, nor can
that liability be reduced by any carryovers of investment tax
credits to that year. The amount of recapture shall be added to
the taxpayer's tax in that year. The amount of recapture required
to be added to the tax in that year may not be offset or reduced
by application of any other credit otherwise available to the
taxpayer for the same tax year. For example, a taxpayer may not
offset a recapture of investment credit by applying daycare
credits.
XII. The following rules apply to transactions between
taxpayers:
A recapture of investment tax credit is required unless all of
the following elements are present in the transaction:
(a) The property is transferred from one taxpayer
to another by a transaction in which the basis
of the property in the hands of the transferee
is determined in whole or in part by reference
to the basis in the hands of the transferor, or
a mere change in the form of the taxpayer's
business, and
(b) the acquiring taxpayer is taxable under
Chapters 44-11 or 44-30 of the Rhode Island
General Laws, and
(c) the property continues to be in qualified use.
If all of the preceding elements are present in the
transaction, the transfer will not require a recapture of
investment tax credit and any unused investment tax credit on the
transferred property may be passed through to and carried forward
by the acquiring taxpayer.
If the property in the hands of the acquiring taxpayer is not
in qualified use for its entire life or for more than twelve
years, a recapture by the acquiring taxpayer is required. In
measuring the period of qualified use, the period during which the
property was held by the transferor taxpayer and the acquiring
taxpayer shall be taken into account.
The above rules do not strictly conform to federal treatment.
For example, a recapture is required where a transfer is made
other than to an acquiring taxpayer taxable under Chapters 44-11
or 44-30 (on the theory that the property is no longer in
qualified use).
XIII. The following are examples of incidents which require
recapture:
(a) A legal dissolution;
(b) A trade-in;
(c) Foreclosure of a security interest;
(d) Retirement before expiration of its useful
life.
(e) Destruction or damage by fire, storm or other
casualty or by reason of its theft or other
involuntary conversion;
(f) Where property is leased to others;
(g) Removal of property from the state;
(h) Cease to own property;
(i) Cease to otherwise be in qualified use.
XIV. In order to qualify as property used in the production
of goods, inventoriable goods must be produced and the property
must be used principally in the production of such goods. Since
the law includes property and equipment used to store raw
materials and finished goods in the definition of manufacturing,
property and equipment at the raw material warehouse and at the
finished goods warehouse would qualify provided that the property
and equipment are principally used in handling or storing the raw
materials or finished goods. Property used to transport raw
materials to the raw materials warehouse or finished goods to
customers would not qualify. Property used for in-plant handling
of materials during the manufacturing process would qualify.
Property used for transporting materials between plants over
public roads would not qualify.
XV. The investment tax credit shall apply only in the taxable
year in which the property is first placed in service by the
taxpayer. Acquisitions in a taxable year do not affect similar
property previously qualifying. For example, a manufacturer
builds an addition to a previously qualifying building for use as
office space. The investment in the addition will not qualify for
the credit since it is not used in production, but it will not
trigger a recapture of the credit taken on the previously existing
plant. If the addition was built for use principally in
production, the credit would apply.
XVI. The term "taxpayer" as used in the regulation shall mean
and include, as appropriate, an individual, a partnership, a
corporation, or other taxable entity.
XVII. "Structural components" means such separately attached
parts of a building, as walls and built-in partitions, permanent
paneling and tiling, doors, stairways, the entire central heating,
plumbing, electrical, and air conditioning systems. Sink and
toilet facilities, sprinkler systems, fire escapes, elevators and
escalators do not qualify. For the purpose of this regulation,
the building and all of its structural components are treated as a
whole when the building is acquired, constructed, reconstructed or
erected and first placed in service. The repairs, alterations,
improvements or replacement of a structural component subsequent
to the acquisition, construction, reconstruction or erection of
the building will not be allowed the credit.
XVIII. For the purpose of determining the basis of qualifying
property, the carryover of investment tax credit and of the
recapture of the investment tax credit, pertinent portions of the
Internal Revenue Code and regulations thereunder, including
provisions applicable to corporations, Subchapter S corporations,
estates and trusts, and partnerships are deemed adopted to the
extent not inconsistent with this regulation and Rhode Island law.
INVESTMENT TAX CREDIT - PART II - "QUALIFIED TAXPAYER(S)"
I. Generally
A "qualified taxpayer" shall be allowed a credit computed in
accordance with section 44-31-1 against the tax imposed by
chapters 11, 14, 17 and 30 of this title. The amount of the
credit shall be ten percent (10%) of the cost or other basis for
Federal income tax purposes, and the qualified amounts for leased
assets of tangible personal property and other tangible property
acquired, constructed, reconstructed or erected on or after
January 1, 1998, and provided, further, however, beginning on or
after July 13, 2000 that there shall be allowed a credit in the
amount of twenty-five percent (25%) for investments otherwise
qualifying under chapter 44-31 for a film production business
meeting the following criteria: (1) located within the State of
Rhode Island; ; (2) whose primary location for the film production
are within the State of Rhode Island; and (3) whose total
production budget is a minimum of three hundred thousand dollars
($300,000) but does not exceed five million dollars ($5,000,000).
Film production shall be defined as the creation of a film
documentary, direct-to-video or independent television production
sold to commercial distribution. Total production budget shall be
defined as a pre-production cost including, but not limited to,
the purchase of the screen play, salaries, equipment, film
processing, sound, editing, and other services related to
production. The budget shall not include costs associated with
the promotion or marketing of the film, video or television
product. Any cost overruns on the project shall also not be
included in the total production budget. The Providence Film
Commission, in conjunction with the Rhode Island Film Office and
the Rhode Island State Council on the Arts, will establish
specific guidelines together with a certification process that
will guide the selection and evaluation of film projects that are
eligible for investment tax credits.
A "qualified taxpayer" means a taxpayer in any of the
businesses described in the major groups 20 through 39, 50 and 51,
60 through 67, 73, 76, 80 through 82, 87 and 89 of the SIC Code
(or the corresponding industry sectors of the North American
Industry Classification System ["NAICS"]) and/or any of the
businesses described in the three (3) digit SIC Code 781 (or the
corresponding industry sector of the NAICS) which meet certain
wage criteria and with respect to the major groups set forth in
section 44-31-1(b)(3)(d)(2) the additional requirement relating to
gross revenues.
A credit is allowed with respect to buildings and structural
components that are acquired, constructed, reconstructed, or
erected after July 1, 2001, which are depreciable pursuant to 26
U.S.C. section 167, have a useful life of four (4) years or more,
are acquired by purchase as defined in 26 U.S.C. 179(d) or
acquired by lease after July 1, 2001 for a term of twenty (20)
years or more, excluding renewal periods, have a situs in this
state and to the extent the property is used by a high performance
manufacturer. The term "high performance manufacturer" means a
taxpayer engaged in any of the businesses described in the major
groups 28, 30, 34 to 36, and 38 of the SIC codes, that pays its
full-time equivalent employees a median annual wage above the
average annual wage paid by all taxpayers in the state which share
the same two-digit SIC Code, unless the high performance
manufacturer is the only high performance manufacturer in the
state conducting business in that two-digit SIC Code, in which
case this requirement does not apply and whose expenses for
training or retraining its employees exceeds two percent (2%) of
its total payroll costs, or that pays its full-time equivalent
employees a median annual wage equal to or greater than one
hundred twenty-five percent (125%) of the average annual wage paid
in this state by employers to employees, or that pays its
full-time equivalent employees classified as production workers by
the Rhode Island Department of Labor and Training an average
annual wage above the average annual wage paid to the production
workers of all taxpayers in the state which share the same
two-digit SIC Code.
II. Leased Property
A. Property leased to the "qualified taxpayer"
To the extent otherwise allowable, the credit shall be allowed
for computers, software and telecommunications hardware used by a
"qualified taxpayer" even if the property has a useful life of
less than four (4) years.
The credit for property acquired by lease shall be based on
the fair market value of the property at the inception of the
lease times the portion of the depreciable life of the property
represented by the term of the lease excluding renewal options.
Example:
Taxpayer X leased a computer from a lessor for a two (2) year
period with a useful life of four (4) years. The resulting
qualified cost would be a fraction which represents the two (2)
year lease divided by the four (4) year life resulting in a fifty
percent (50%) qualified cost.
Lease Period 2 years
------------ = ------- = 50% x $20,000 = $10,000
Life of Asset 4 years (Cost) (Basis)
B. Property leased from the "qualified taxpayer" by others
Property leased (subleased or rented) from the "qualified
taxpayer" to others does not qualify for the credit.
C. Property leased to a "high performance manufacturer"
The credit for high performance manufacturers that are lessees
of buildings and their structural components for a term of twenty
(20) years or more, excluding renewal periods, shall be calculated
in the same manner as for property acquired by purchase.
III. Limitation of Credit
The credit allowed under this subdivision of any taxable year
shall not reduce the tax for the year by more than fifty percent
(50%) of the tax liability that would otherwise be payable, and
further cannot reduce the tax to less than the minimum tax as
applicable; provided, however, that in the case of the credit
allowed to high performance manufacturers, the fifty percent (50%)
limitation shall not apply. However, if the amount of credit
allowable under this subdivision of any taxable year is less than
the amount of credit available to the taxpayer any amount of
credit not deductible in the taxable year may be carried over to
the following year or years (not to exceed seven (7) years) and
may be deducted from the taxpayer's tax for the year or years.
The "tax liability that would otherwise be payable" is defined
as tax after any other credits are applied unless such credits'
laws or regulations mandate otherwise.
An example depicting the limitation of fifty percent (50%) of
the tax liability is shown below:
A "qualified taxpayer", XYZ Corporation purchases equipment
with qualifying costs of $100,000 on February 1, 1998; has
investment tax credit of $10,000 (10% of $100,000); and a normal
tax year of December 31, 1998. The tax as reported on Line 13 of
the RI 1120 is $30,000. The taxpayer has other credits for
enterprise zone wages of $25,000 and a credit for daycare
assistance of $3,000. What is the maximum amount of credit that
can be taken for ITC?
Tax $ 30,000
Enterprise Zone Wage Credit (25,000)
Daycare Assistance Credit (3,000)
---------
Tax "Otherwise Payable" $ 2,000
Maximum Investment Credit
50% tax "Otherwise Payable"
50% x $2,000 = 1,000
---------
TAX DUE $ 1,000
The amount of ITC carryforward is $100,000 x 10% = $10,000
less the amount used of $1,000, leaving a balance of $9,000 to
be carried forward to 1999.
Only the investment credit allowed and claimed at the ten
percent (10%) rate (effective on or after January 1, 1998) is
limited to fifty percent (50%) of the tax liability.
Taxpayers are allowed to use one hundred percent (100%) of the
credit carried forward from years prior to January 1, 1998 and one
hundred percent (100%) of the credit claimed at the four percent
(4%) rate on or after January 1, 1998 to the extent of the tax or
minimum filing fee.
Example 1:
ABC Jewelry is a "C Corporation"; files and pays business
corporation tax (RIGL 44-11); and, for calendar year 1998, has a
tax of $2,750. ABC Jewelry also has an investment credit carry
forward of $4,000 from 1996. Because ABC's investment credit is
carried forward from a year prior to January 1, 1998, it can use
$2,500 of the credit to reduce its tax to the minimum filing fee.
This is calculated as:
Tax $2,750
Minimum Fee 250
------
Credit used $2,500
ABC Jewelry then has a carry forward available for 1999 of
$1,500 and may use one hundred percent (100%) of that credit
because it was carried forward from a year prior to January 1,
1998.
Example 2:
Sam and Joanne Taxpayer have a Rhode Island personal income
tax of $1,000 for 1998 and an investment credit carryforward from
1997 of $700. Because the credit has been carried forward from a
year before January 1, 1998, the taxpayers can reduce their tax by
all of the $700 leaving a balance due of $300 as follows:
Tax $1,000
Investment Credit 700
------
Balance Due $ 300
Example 3:
Gina's Pearl Company added qualifying assets during the
calendar year 1998 which generated an investment credit of $13,000
at the four percent (4%) rate and for 1998 the corporation (a "C"
corporation) has a tax of $11,000. Because the investment credit
is at the four percent (4%) rate on or after January 1, 1998 the
company will use $10,750 of the credit to reduce its tax to the
minimum filing fee calculated as follows:
Tax $11,000
Minimum Fee 250
-------
Credit Used $10,750
The company will have investment credit carried forward to
1999 of $2,250 and, depending upon its 1999 tax, the company can
use one hundred percent (100%) of the credit in 1999 because,
although it came from 1998, it was calculated at the four percent
(4%) rate.
Example 4:
Steven and Jennifer Smith are shareholders in a subchapter "S"
corporation which claimed investment credit for the calendar year
1998 using the four percent (4%) rate and Steven and Jennifer
received $500 of investment credit. Since the investment credit
passed through to them was calculated at the four percent (4%)
rate they can use their $500 investment credit to reduce their
1998 personal income tax to zero (0) but not below.
IV. Property and Casualty Insurance Company
Effective June 30, 1999 and to the extent otherwise allowable,
the credit shall also apply to property having a situs in Rhode
Island and used by a property and casualty insurance company,
however acquired. The term "however acquired" shall include
acquisition by merger so long as the property had a situs in this
state at the time of merger.
V. Recapture of Investment Tax Credit by a Qualified Taxpayer
The rules for recapture on qualified taxpayer acquisitions are
the same as those cited in the law as it pertains to manufacturing
companies based upon acquisitions prior to the enactment of this
legislation and also set out in Part I of this regulation. In
addition to those requirements, comparable rules shall be used in
the case of property acquired by lease to determine the amount of
credit, if any, that will be recaptured if the lease terminates
prematurely or if the property covered by the lease otherwise
fails to be in qualified use.
Recapture does not occur when the taxpayer subsequently fails
to meet the classification as a "qualified taxpayer".
R. GARY CLARK
TAX ADMINISTRATOR
EFFECTIVE: FEBRUARY 1, 2002
THIS REGULATION AMENDS AND SUPERCEDES REGULATION CR01-04
PROMULGATED JANUARY 1, 2001.