RI 2026 H8195: Taxation - Rhode Island Local Investment Tax Credit Act

Plain-English Summary

This bill creates the "Rhode Island Local Investment Tax Credit Act." Starting in tax year 2027, it allows individuals to claim a state tax credit equal to 50% of an investment made into a qualified small Rhode Island business. The maximum credit is $3,000 per year per taxpayer. To qualify, the business must have fewer than 100 employees, be based in Rhode Island, and do the majority of its business within the state. Investments in businesses owned by family members do not qualify. The Rhode Island Commerce Corporation will oversee the certification of these investments.

For younger readers

This bill is designed to help small businesses in Rhode Island grow. It offers a reward to people who invest their own money into local companies that have fewer than 100 workers. If a person invests money in one of these local businesses, the state will let them pay less in taxes—saving them up to $3,000. This rule starts in the year 2027. To make sure the system is fair, people cannot get this tax break if they just give money to a business owned by their own family members.

Who & Where It Applies

Impacted groups

Small Business OwnersPrivate InvestorsRhode Island Commerce CorporationTaxpayersAccountants and Tax Preparers

Impacted communities

All

Constitutional & Fiscal Check

None Likely

Estimated cost

Amount unknown

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Strengthens the local economy by incentivizing capital flow into small, Rhode Island-based businesses rather than large, multi-national corporations or out-of-state entities.
Includes specific provisions to prevent nepotism and wealth consolidation by disqualifying investments in businesses owned by family members or where a fiduciary relationship exists.
Ensures that the economic benefits remain local by requiring qualified businesses to have their headquarters, the majority of employees, and 80% of assets within Rhode Island.
Reduces state tax revenue available for critical public services and social safety nets, relying on future appropriations to fill the budget gap.
Primarily benefits wealthy individuals who have disposable income to invest, effectively functioning as a tax subsidy for the upper class rather than working families.
Diverts public resources to private enterprises without guaranteeing specific social outcomes, such as living wage requirements or union neutrality for the businesses receiving the investment.

For Conservatives

Reduces the tax burden on private citizens and encourages individuals to take an active role in stimulating the economy through private investment.
Promotes small business growth and entrepreneurship without relying on direct government handouts or welfare-style subsidies.
Strengthens the state's economic independence by fostering businesses that are domiciled in Rhode Island and focused on local commerce.
Expands government bureaucracy by requiring the Rhode Island Commerce Corporation to create and manage a new certification and oversight program.
Allows the government to pick winners and losers in the marketplace by giving state officials the power to certify which businesses qualify for the credit.
Mandates that the General Assembly appropriate funds to cover revenue losses, potentially leading to increased government spending or debt to balance the budget.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 61 additions

SECTION 1. Title 44 of the General Laws entitled "TAXATION" is hereby amended by adding thereto the following chapter: 44-73-1. Short title. This chapter shall be known and may be cited as the "Rhode Island Local Investment Tax Credit Act”. 44-73-2. Legislative intent. It is the intent of the general assembly to annually appropriate sufficient funds from the state general fund to fully compensate for any loss of revenue resulting from the enactment of this chapter. 44-73-3. Definitions. As used in this chapter:

(1) "Family member" means an individual who is the spouse, mother, father, brother, sister, child, stepparent, stepchild, stepbrother, stepsister, grandparent, grandchild, legal ward, or a legally appointed guardian with a certified letter of guardianship, of the investor.

(2) "Qualified business" means a business that employs ninety-nine (99) or fewer employees and that the Rhode Island commerce corporation strategic fund certifies as in compliance with all of the following at the time of the investment:

(i) The business has its headquarters in this state, is domiciled in this state, and has a majority of its employees working in this state, and its transactions are limited to residents of this state.

(ii) The business receives at least eighty percent (80%) of its gross revenues from the operation of its business in this state.

(iii) The business has at least eighty percent (80%) of its assets in this state.

(3) "Qualified investment" means a cash or a cash equivalent investment certified by the Rhode Island commerce corporation strategic fund in a qualified business and that is not in a qualified business in which a family member of the investor is an employee or owner of the business or in which the investor or a family member of the investor has a preexisting fiduciary relationship with the business.

(4) "Rhode Island commerce corporation strategic fund" means the Rhode Island commerce corporation strategic fund to be created pursuant to § 42-64-18. 44-73-4. Credit against tax.

(a) For tax years beginning on and after January 1, 2027, subject to the limitations under this section, a taxpayer that makes a qualified investment in a qualified business may claim a credit against the tax imposed by this title equal to fifty percent (50%) of the qualified investment made during the tax year. A taxpayer shall not claim a credit of more than three thousand dollars ($3,000) based on a qualified investment in any one qualified business and shall not claim a credit of more than three thousand dollars ($3,000) for qualified investments in all qualified businesses in any one tax year. To qualify for the credit under this section, the taxpayer shall request certification from the Rhode Island commerce corporation strategic fund within sixty (60) days of making the investment.

(b) The Rhode Island commerce corporation strategic fund shall develop an application and approval process in order to certify investments under this section and adopt a program describing parameters and criteria to be used for approving investments. As part of that program adoption, the Rhode Island commerce corporation strategic fund shall determine and describe the conditions to be met to be considered a qualified investment. Any investment for which a credit is sought under this section is subject to the provisions of chapter 11 of title 7 ("Rhode Island uniform securities act"), and shall be made in compliance with applicable state and federal securities laws, rules, and regulations.

(c) A taxpayer shall not claim a credit under this section unless the Rhode Island commerce corporation strategic fund has issued a certificate to the taxpayer. The taxpayer shall attach the certificate to the annual return filed under this title on which a credit under this section is claimed. The certificate required under this subsection shall specify all of the following:

(1) The total amount of investment made during the tax year by the taxpayer in each qualified business.

(2) The total amount of qualified investments made in each qualified business if different from the previous amount.

(3) The total amount of the credit under this section that the taxpayer is allowed to claim for the designated tax year.

(4) If the amount of the credit allowed under this section exceeds the tax liability of the taxpayer for the tax year, that portion of the credit that exceeds the tax liability of the taxpayer for the tax year shall not be refunded but may be carried forward to offset tax liability under this title in subsequent tax years for a period not to exceed ten (10) tax years or until used up, whichever occurs first.

SECTION 2. This act shall take effect upon passage.