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S 2833Credits & Incentives

Taxation - Rhode Island Local Investment Tax Credit Act

This bill creates a tax credit for individuals who invest money into small, locally-owned Rhode Island businesses.

Held for study
Population
Affected
15
Email Legislator
Introduced Mar 4, 2026Committee Senate Finance

Plain-English Summary

This legislation creates the "Rhode Island Local Investment Tax Credit Act." It establishes a tax credit for Rhode Island residents who make cash investments into qualified local small businesses (those with fewer than 99 employees and primarily based in the state). The credit is equal to 50% of the investment amount, capped at $3,000 per taxpayer per year. Investors cannot claim the credit for investing in a business owned by a family member. The credit becomes available for tax years starting January 1, 2027, and unused credits can be carried forward for up to ten years.

For younger readers

This new law helps small businesses in Rhode Island grow. If a person gives money to a local business to help it run, the state will lower the amount of taxes that person has to pay. This is called a tax credit. It is like getting a reward for helping a neighbor's shop. The business must be small and located in Rhode Island. A person cannot get this reward if they give money to a business owned by their own family. This helps people save money on taxes while helping local shops and companies at the same time.

Who & Where It Applies

Impacted groups
Small Business OwnersPrivate InvestorsTaxpayersRhode Island Commerce CorporationAccountants
Impacted communities
All

Constitutional & Fiscal Check

None Likely

Estimated cost
Amount unknown
Estimated revenue
None

Bill Analysis

Both viewpoints
For Progressives
  • Encourages capital flow directly into small, locally-owned businesses rather than large multi-national corporations, helping to keep wealth circulation within the local community.
  • Provides a mechanism for community members to support local economic development, potentially fostering a more cooperative and resilient local economy that is less dependent on outside corporate interests.
  • Limits the benefits to businesses with fewer than 100 employees, ensuring the support targets smaller entities that often struggle to access traditional financing compared to large conglomerates.
  • Primarily benefits individuals with disposable income who can afford to make investments, potentially exacerbating wealth inequality by giving tax breaks to the already financially stable.
  • Reduces state tax revenue which could otherwise be used to fund essential public services like education, infrastructure, and social safety nets, despite the intent to appropriate funds to cover losses.
  • The legislative intent to appropriate general funds to compensate for revenue loss could divert budget resources away from direct aid programs for the poor and disadvantaged to subsidize private investors.
For Conservatives
  • Promotes private sector growth and entrepreneurship by incentivizing private investment in small businesses without relying on direct government handouts or subsidies.
  • Reduces the overall tax burden for citizens who choose to contribute to the economic vitality of the state, allowing them to keep more of their hard-earned money.
  • Encourages economic independence and local job creation by facilitating capital access for small business owners through voluntary market transactions rather than state-run programs.
  • Expands government bureaucracy by requiring the Rhode Island Commerce Corporation to create new certification processes, oversight programs, and application procedures.
  • Interferes with the free market by using the tax code to manipulate investment decisions and favor specific types of businesses (local, small) over others.
  • Relies on future legislative appropriations to cover revenue losses, which could lead to fiscal instability or necessitate future tax hikes if spending is not cut elsewhere.

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.