New Tax Code Kills Tax Breaks for Businesses That Add Jobs

An amendment to Rhode Island’s tax code that passed last August and went into effect on Jan. 1 has eliminated Enterprise Zone tax credits for businesses not organized as C-Corporations.

Enterprise Zones were created in 1992 to “take distressed areas in the state and provide incentives to put people back to work, while giving tax credits to companies that create the jobs,” according to J. Alan Crisman, former executive director of Mt. Hope Enterprise Zone and current executive director of the Center for Economic Development, a position paid for by the Town of Bristol to provide business support to incoming and established area businesses.

The Enterprise Zone Tax Credit program allowed businesses with fewer than 1,000 employees to receive a $2,500 credit for every employee hired outside of a zone and a $5,000 credit for every employee living within a zone in the same tax year. The Mt. Hope Enterprise Zone covers all business areas in Warren and Bristol.

Crisman believes the elimination of the tax credits may have been an “inadvertent” consequence that legislators did not fully comprehend when voting on the amendment.

“The bill came to the floor for a vote in the last night of the session at about 1 or 2 in the morning, I believe,” Crisman said. “So without thinking about it, what they did when they passed the personal tax code amendment is they took tax credit away from 80 to 95 percent of businesses.”

Crisman has a credible argument that the tax credit program actually saves the state money in the long run.

“We’ve got 70,000 people out of work in this state,” he said. “We’re trying to get them back to work. A large number are on unemployment. Guess what happens when they’re hired? They go off unemployment and pay taxes on their new job.”

Crisman said he has received numerous phone calls from area business leaders concerned about the change. He feels too that he has lost some leverage in attracting new businesses to the area, citing local businesses Avtech in Warren and Hall Spars and Rigging and George Patton Associates in Bristol as examples of the successful use of tax credits to boost local employment.

Two pieces of legislation that would reinsert tax credits into the personal tax code are coming up for vote in the House, including H-5494, a bill introduced on March 2 by Pawtucket Rep. Elaine Coderre. Crisman emailed a letter in support of that bill to local legislators several weeks ago, but he has not heard whether they will support it. He hopes local businesses affected by the elimination of tax credits will vocalize their support of the bill.

“I can’t speak for all businesses,” said Crisman, “but my sense is that they very much would like the credits back.”