Rhode Island Economic Development Directory

Rhode Island State Incentives

The JOBS GROWTH ACT allows eligible businesses in any industry to offer their employees an exclusion of 50 percent of performance-based compensation from their Rhode Island gross income. In return, the company pays a 5 percent tax each year on the performance-based income paid that year. 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 percent o the state’s annual average compensation. Employees must be hired or relocated after June 1, 2005 and cannot have been previously employed by the company. The tax cut applies only to bonus or incentive income, not base salary.

A 22.5 percent RESEARCH & DEVELOPMENT TAX CREDIT is allowed for increases in qualified research expenses—the highest rate in America. If the increase above base period expenditures exceeds $111,111, the credit equals 16.9 percent of the excess. The credit is available against a corporations business tax. Unused credit may be carried forward for up to seven years. A taxpayer is allowed 10 percent tax credit for expenditures paid or incurred during the taxable year for the construction, reconstruction, erection, or acquisition of any property that is used or to be used for the purpose of research and development in the experimental or laboratory sense. The property must be depreciable and have a useful life of three years or more. The credit is available against a corporations business tax. Unused credit may be carried forward for up to seven years.

The JOB TRAINING TAX CREDIT grants a credit against the corporate income tax (or the insurance premium tax in the case of insurance companies) equal to 50 percent of the actual training spending, whether for new or existing employees, by companies in accordance with an approved training plan. Plans must be filed with the Rhode Island Human Resources Investment Council for approval prior to the training. The credit allowed is capped at $5,000 for each employee in any three-year period.

JOB TRAINING GRANTS: Rhode Island offers a unique Human Resources Investment Council training program for business and industry funded through a job development assessment of 0.15 percent on the firm’s taxable payroll to $18,200 per employee. This pool of money is available for industry to create customized training programs tailored specifically for a company and free from restrictions imposed by federally funded programs.

Created in 2010, the JOB CREATION GUARANTY PROGRAM authorizes the RIEDC to support critical economic development projects by helping innovative small businesses gain access to private growth capital and credit. The program helps companies with primarily “soft” assets like patents, intellectual properties and licenses expand and create jobs in Rhode Island. Under the program, the RIEDC may provide credit enhancement on bonds or loans privately placed with capital providers and banks. The net proceeds of the bonds would provide the necessary financing to capitalize a company’s growth and expansion in Rhode Island. The state would use its “moral obligation” authority to guarantee debt service payments to the bondholders or lenders.

INDUSTRIAL REVENUE BONDS may be used to finance qualified commercial and industrial projects. The bonds offer a competitive interest rate and state sales tax exemption on building materials, which may be significant for projects involving new construction. Financing is available through the Rhode Island Industrial Facilities Corporation and covers the entire project cost. The project and the credit of the user provide the security for the bonds, which may be issued on the financial strength of the user when the user is appropriately rated. The bonds may also be issued with an enhancement letter of credit from a financial institution.

TAX-EXEMPT “SMALL ISSUE BONDS”: interest on certain bonds with face amounts of less than $10 million is excluded from income if at least 95 percent of the bonds proceeds is used to finance manufacturing facilities. Industrial revenue bonds are tax-exempt obligations of the issuer, the interest on which is exempt from federal and state income tax. The interest rate on such obligations is normally below that available for conventional mortgages.

The SMALL BUSINESS LOAN FUND (SBLF) provides partial funding for expansion projects that will benefit Rhode Island’s economy by encouraging business development. The program makes loans available with attractive terms for nonspeculative ventures involving the following types of capital investment: acquiring land; purchasing machinery or equipment; constructing new buildings and facilities; providing working capital.