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In July of last year, the Rhode Island
legislature enacted a change to the Rhode Island tax code regarding the state's
version of the federal Section 179 deduction.
We'd hoped this change would increase the limit of the deduction, from
$25,000 to the federal limit, at the time of $500,000.[i] However, the federal tax code reverted to its
original Section 179 deduction limit of $25,000 at the beginning of 2014;
essentially making the change to the Rhode Island tax code moot.[ii]
While it's unfortunate that Rhode Island
manufacturers won't have the opportunity to take advantage of the increased
deduction limit, there are still a variety of other incentives we'd like to
point out. These include tax credits,
tax exemptions, or corporate accounting benefits; qualifications for these
incentives include property and equipment investment, waste/pollution control,
and hiring workers. We've included a list below that we thought would be of most
interest to our clients and other Rhode Island manufacturers.
A manufacturer is
allowed a 4% tax credit against the Rhode Island corporate income tax on
buildings and structural components, as well as machinery and equipment, which
are owned or leased and are principally used in the production process
(including storage).
High-performance
manufacturers are allowed a 10% investment tax credit against their corporate
tax on the cost or qualified lease amounts for tangible personal property or
other tangible property, as well as buildings and structural components owned,
leased to own, or leased for at least 20 years.
Both the property value and the wage value portions in the
numerators can be reduced by the portion they each or both increase from
current taxable year compared to past year.
Affiliated multi-state corporations may file separate or
consolidated tax returns, whichever is more favorable, using the average of a
three factor formula.
The business corporation tax amortization provisions may
include tangible personal property for the recycling, reuse, or recovery of
materials from the treatment of hazardous waste.
Pollution control property and supplies are exempt from the
state sales tax.
If you are a manufacturer in Rhode
Island, or are looking to expand operations into Rhode Island, these incentives
may be
worth a closer look. SPEC has worked
with several companies who received government funding or assistance and
understands, first hand, the real value this type of incentive can provide
manufacturers.
[i]
http://www.tax.ri.gov/notice/Summary%20of%20Legislative%20Changes%202013.pdf
[ii] http://www.section179.org/
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Re: Rhode Island Tax Code: What Manufacturers Don’t Know but Should
