Legislation introduced by Sen. William A. Walaska, and currently before the Senate Committee on Finance, calls for the reinstatement of a successful jobs development program that, under the law that created it, expired three years ago.
The program, known as “Project Status,” gave the RI Economic Development Corporation (now the RI Commerce Corporation) the authority to permit companies a sales and use tax exemption on materials used in the construction, reconstruction or rehabilitation of a business expansion or relocation project in return for the creation of new, full-time jobs in the state. The program required the newly created full-time jobs to be jobs of at least 30 hours per week with wages that exceeded the median annual wage by at least 5 percent (or approximately $36,000 per year) with benefits.
Under the program, exemptions on sales and use taxes were generally capped by the total state income tax generated by qualifying new jobs over a three-year period.
When established, the program restricted the sales tax exemption to only those projects approved by the then-RIEDC board prior to July 1, 2011, prohibiting any companies from qualifying for the benefit after that date.
The legislation introduced by Walaska, 2014-S 2579, would remove that date restriction so the program, to be renamed the “Sales Tax Development Initiative,” may continue.
“This program was an effective economic development tool and encouraged many companies to expand or relocate in Rhode Island,” said Walaska. “I believe reinstating the program would help Rhode Island be competitive and attract new investment and create new quality jobs in our state.”
According to information provided by the Commerce Corporation, a veritable “who’s who” of Rhode Island businesses utilized Project Status at various times during their respective growth cycles to accelerate 27 relocation or expansion projects in the state, including Electric Boat, Fidelity, FM Global, G-Tech and Citizens.
Project Status companies reported the creation of more than 8,500 jobs from 1996 to 2010, according to the Commerce Corporation. The net new income tax revenue generated by those jobs during those years was estimated at $71.9 million, with a cap on the value of the sales tax exemptions of approximately $35.3 million. That reflects nearly $2 in personal income taxes received by the state for every $1 in sales tax exemptions.
“This would, once again, provide us with a much-needed arrow in our quiver to compete with other states to attract new companies or to retain current Rhode Island businesses so they can continue to thrive and create jobs here,” said Commerce Corporation executive director Marcel A. Valois.
Walaska said a jobs development program that would result from enactment of his legislation would make it easier for companies to say “yes” when considering Rhode Island as their place to do business. In exchange for the creation of quality, good salary, full-time jobs, this program, he said, can help companies reduce the cost of expansion or relocation and add income tax revenue to the state.
A similar House bill, 2014-H 7415, has been introduced by Rep. K. Joseph Shekarchi (D-Dist. 23, Warwick). In addition to eliminating the sunset provision of the law, that bill would also allow the sales tax exemption to be applied to other business equipment, such as machinery and computers.