H 7385Credits & Incentives

Taxation - Agreement to Phase Out Corporate Incentives Compact Act

This bill enters Rhode Island into an agreement with other states to stop using tax breaks to lure businesses away.

Introduced

Population
Affected

Introduced Jan 28, 2026Committee House State Government & Elections

Plain-English Summary

This legislation would enter Rhode Island into an agreement with other states called the "Agreement to Phase Out Corporate Incentives Compact." The purpose of this agreement is to stop member states from offering special financial benefits, known as subsidies, to specific companies or industries. These subsidies often include tax breaks, grants, or favorable loans used to lure businesses from one state to another. Under this bill, Rhode Island would agree not to offer these incentives to poach businesses from other states that have also signed the agreement. It allows taxpayers to sue the government to ensure these rules are followed.

For younger readers

Imagine two towns are trying to get a cool new toy store to open. One town offers the store free candy to move there, and the other town offers free ice cream. This creates a contest where the towns give away too much. This bill is like a promise between the towns to stop offering free treats. Rhode Island is agreeing not to give special money or gifts to companies to get them to move here from other places, as long as those other places promise to do the same thing. This helps the state save its money.

Who & Where It Applies

Impacted groups

CorporationsState GovernmentTaxpayersBusiness OwnersEconomic Development Agencies

Impacted communities

All

Constitutional & Fiscal Check

None Likely

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Prevents the "race to the bottom" where states deplete their tax bases and cut public services to fund corporate handouts, thereby preserving funds for social safety nets and community needs.
Increases government accountability and corporate oversight by allowing individual taxpayers to sue the Attorney General to enforce the ban on corporate subsidies.
Promotes economic fairness by stopping large corporations from receiving special treatment and financial advantages that are not available to small, local businesses or working-class individuals.
Could potentially hinder the state's ability to offer targeted incentives for green energy companies or sustainable industries if such incentives are interpreted as "selectively supporting a specific industry."
Risk of economic stagnation if neighboring states do not join the compact, as those states could continue to lure jobs away from Rhode Island using subsidies while Rhode Island cannot respond in kind.
The definition of "subsidy" is broad and might inadvertently restrict government programs designed to assist specific disadvantaged communities if those programs involve private enterprise ventures.

For Conservatives

Eliminates "crony capitalism" by preventing the government from picking winners and losers in the marketplace through special tax breaks and financial favors.
Empowers taxpayers with the legal standing to sue the government, ensuring strict adherence to the law and providing a check on government overreach.
Reduces government spending and interference in the free market by halting the use of public funds to subsidize private business ventures.
Surrenders a portion of state sovereignty and decision-making power to an interstate compact, restricting Rhode Island's ability to set its own independent economic policy.
Handicaps the state's ability to compete aggressively for business relocations and job creation against states that do not sign the compact.
Increases the potential for litigation against the state by giving citizens broad standing to sue regarding interpretation of economic policies.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 46 additions

SECTION 1. Title 44 of the General Laws entitled "TAXATION" is hereby amended by adding thereto the following chapter: 44-73-1. Membership. Any state of the United States and the District of Columbia may become a member of this agreement/compact by enacting this agreement in substantially the following form. 44-73-2. Definitions. As used in this chapter:

(1) "Facility" means, but is not limited to, a headquarters, warehouse, outlet, affiliate, office, or production facility of a company.

(2) "Party state" means a state that has enacted a statute agreeing to this compact.

(3) "Political subdivision" means governmental branches, departments, agencies, counties, municipalities, special districts, as well as other governmental entities and quasi-governmental entities created by the authorization of law.

(4) "Subsidy" means an economic benefit, direct or indirect, granted by a state government or any political subdivision including, but not limited to, direct grants, tax consideration, favorable bonding status, special district status, or any other benefit that has the effect of reducing governmental costs for a venture or class of ventures compared to others similarly situated, with the primary purpose or substantial effect of encouraging or maintaining within a state's or political subdivision's borders particular or specific classes of ventures in which private persons have a substantial financial or ownership interest. 44-73-3. Anti-poaching prohibition. When two (2) or more states have passed and signed the compact, the party state governments, or any political subdivision, shall not give a subsidy to a private enterprise for the purpose of selectively supporting a specific industry or company, or to entice a specific industry or company to relocate an existing facility from one party state to another party state or open a new facility. 44-73-4. Compact administrator and exchange of information.

(a) The governor of each party state or the governor's designee is the compact administrator.

(b) The compact administrator of each party state shall maintain an accurate list of all party states.

(c) The compact administrator of each party state shall furnish to the compact administrator of each other party state any information or documents that are reasonably necessary to facilitate the administration of this compact. 44-73-5. Enforcement. The attorney general of each member party state shall enforce this compact. A taxpaying resident of any member party state has standing in the courts of any member party state to require the attorney general of that member party state to enforce this compact. 44-73-6. Construction and severability. This compact shall be liberally construed in order to effectuate its purposes. If any phrase, clause, sentence or provision of this compact, or the applicability of any phrase, clause, sentence or provision of this compact to any government, agency, person or circumstance is declared in a final judgment by a court of competent jurisdiction to be contrary to the Constitution of the United States or is otherwise held invalid, the validity of the remainder of this compact and the applicability of the remainder of this compact to any government, agency, person or circumstance shall not be affected. If this compact is held to be contrary to the constitution of any member party state, the compact shall remain in full force and effect as to the remaining member party states and in full force and effect as to the affected member party state as to all severable matters.

SECTION 2. This act shall take effect upon passage.