Rhode Island Tax Code: What Manufacturers Don’t Know but Should

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.

1.     Manufacturing Investment Tax Credit

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).

2.     High Performance Manufacturing Investment Tax Credit

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.

3.     Apportionment Exclusion

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.

4.     Business Income Apportionment for Manufacturers

Affiliated multi-state corporations may file separate or consolidated tax returns, whichever is more favorable, using the average of a three factor formula.

5.     Hazardous Waste Facilities Amortization

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.

6.     Pollution Control Equipment Incentives

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/