§ 44-43-8. Exclusion for qualifying securities.
(a) For purposes of determining the federal income tax liability of a qualifying taxpayer
subject to Rhode Island income tax, the Rhode Island income of the taxpayer under
§§ 44-30-12 and 44-30-16 shall be determined by excluding any income, gain, or preference items resulting
from the transfer of employer securities from a qualified retirement plan, the sale,
transfer, or exercise of stock, warrants, options, bonds, notes, or other interests
of any corporation; provided, that at the time of the sale, transfer, or exercise
the corporation is a qualifying corporation with respect to the qualifying taxpayer.
(b) A qualifying taxpayer is a current or former employee of a qualifying corporation
employed for three (3) consecutive months as a full-time employee in accordance with
corporate policy, and the estate, heirs and successors of that individual.
(c) A qualifying corporation is any corporation for which:
(1) Any of the securities issued by the corporation are traded publicly on a recognized
exchange;
(2) Its headquarters or principal office in North America is located in the state of Rhode
Island;
(3) It has at least one hundred (100) full-time employees in the state of Rhode Island
or, if greater, at least fifty percent (50%) of its full-time employees in North America
are based in Rhode Island, at the time it elects (in a manner that may be determined
by the tax administrator) to be a qualifying corporation;
(4) Either:
(i) The average annual rate of growth in the number of full-time employees of the corporation
in Rhode Island over the five (5) fiscal years preceding the year of the election
by the corporation has been at least ten percent (10%) per annum or if the period
is shorter, the period of time prior to the election by the corporation that its headquarters
or principal office has been located in Rhode Island, has been at least ten percent
(10%) per annum; or
(ii) The amount of the capital stock of the corporation covered by qualified and non-qualified
stock options issued by the corporation and the amount of capital stock of the corporation
owned by any qualified retirement plan organized for the employees of the corporation
equals in the aggregate at least five percent (5%) of the authorized capital stock
of the corporation and at least fifty percent (50%) of the non-executive employees
of the corporation are the holders of options or are eligible to participate in a
qualified retirement plan;
(5) Prior to the end of the fiscal year in which it elects to be a qualifying corporation,
it shall own any facility it is occupying in the state;
(6) It shall state at the time it files its election to be a qualifying corporation that
it intends to maintain its headquarters or principal office in the state of Rhode
Island and that at least fifty percent (50%) of its full-time employees in North America
will be based in the state of Rhode Island for at least ten (10) years; and
(7) During the year in which the corporation files its election to be treated as a qualifying
corporation and in the four (4) fiscal years following that year, the number of Rhode
Island based full-time employees of the corporation has either increased on the average
by at least fifteen percent (15%) per annum over or in the aggregate has increased
by at least seventy-five percent (75%) the level of Rhode Island based full-time employees
on the first day of the fiscal year in which the election is filed. The election by
a corporation to be treated as a qualifying corporation shall become effective for
purposes of this section as of the first day of the fiscal year during which the election
is filed; provided, that in no event shall an election be effective prior to January
1, 1993.
(d) For purposes of this section, if a corporation is a member of an "affiliated group�
of corporations (as defined in 26 U.S.C. § 1504(a)), it shall be considered to be the employer of the employees of the other members
of that group. In the event a corporation fails to maintain the required average annual
rate of growth in Rhode Island based full-time employees during the year in which
it files its election or in any of its four (4) succeeding fiscal years, or if it
fails to thereafter retain the highest level of Rhode Island based full-time employees
required under this section or otherwise fails to satisfy the requirements of this
section, the corporation ceases being a qualifying corporation, and no exclusion under
this section applies. As a condition to the acceptance of its election to be treated
as a qualifying corporation, the corporation must agree that if it should fail to
meet the requirements in this section in the future that it will recapture and include
in its Rhode Island tax liability an amount equal to one hundred percent (100%) of
the investment tax credits it claimed against its Rhode Island business corporation
tax liability during the prior ten (10) year period.
(e) The director of the Rhode Island economic development corporation is authorized to
promulgate regulations establishing standards for employee recruitment and job training.