Bill to Prevent Lost Revenue from Tax Credits
Wednesday, April 27, 2011
While Fidelity’s recent announcement that it will relocate 1,000 employees out of Malborough, Massachusetts and into Rhode Island and New Hampshire comes as good news for the Ocean State, some state legislators see something ominous in the decision: If big companies benefiting from tax credits can suddenly up and leave Massachusetts, whose to say similar companies can’t do the same to Rhode Island?
This is the central concern underlying new legislation proposed by Senator John Tassoni (D-Dist 22).
Like Massachusetts, Rhode Island offers tax credits to large business in order to incentivize further in-state growth and job creation. Ideally, this creates a mutually beneficial relationship between the state and businesses. However, if a tax credit receiving business suddenly decides to relocate to greener economic pastures—as Fidelity recently did—the state stands to lose significant revenue from the years of tax credits.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe legislation introduced by Senator Tassoni would require any company earning tax breaks that relocates out-of-state prior to the end of their term of agreement to repay the entirety of tax liability on the credit the company received during that tax year.
Bill aimed at preventing loss of millions
“If a business doesn’t do what it has agreed to in order to get the credit, or it moves to another state for whatever reason, it is not the Rhode Island taxpayers who should suffer any loss,” Said Senator Tassoni. “This bill will not guarantee that a company will stay in Rhode Island for a long time or permanently, but it will guarantee that Rhode Island isn’t giving away potentially millions in tax revenue.”
At the time of its announced departure, Fidelity was earning roughly $2.5 million a year in tax benefits, and its office buildings were provided by the state free of charge. While Fidelity cites real-estate consolidation and a need for fewer workers as the causes of the move, many suspect it is actually a product of the unfriendly business climate in Massachusetts—the corporate tax rate in Rhode Island is 9 percent, compared to 9.5 in Massachusetts, not to mention a slew of other tax incentives the state offers to businesses. Senator Tassoni, while pleased with recent developments, also sees them as an important warning bell.
“If a company is moving to our state because of our lower tax rates, or our tax incentives, it means it might move again if a neighboring state comes up with a better offer,” he said, “We need to take preventative measures, in order to make sure companies are held accountable if they break any agreements with our state, and to make sure our taxpayers come out whole.”
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