PROVIDENCE, R.I. – In a move to protect taxpayers and ensure greater accountability, the board of the Rhode Island Commerce Corporation has taken action to place stricter controls over a new investment fund tax credit program.
"My top priority is protecting taxpayers and while ensuring accountability and transparency," said Governor Gina Raimondo, who is chair of the board of the Rhode Island Commerce Corporation. "This program, which creates a very generous tax incentive for out-of-state investors, has had mixed resulted in other states. Rhode Islanders deserve to have confidence that taxpayer money is being spent responsibly with transparent processes and professional evaluation. Commerce's regulations will provide the kind of strong safeguards that have been in place for years in our other successful economic development programs."
The Small Business Development Fund was created in statute in June of 2019. The program authorizes state tax credits worth 64.5% for niche investment funds and their investors, meaning that taxpayers will pay investment firms two-thirds of every dollar invested.
Five years ago, the Raimondo Administration set about a new way of doing business in Rhode Island that has shown great results. That approach included developing some of the strongest taxpayer protections in the country for the administration's signature economic development programs, including safeguards that ensure companies deliver what is promised prior to receiving tax credits. The new investment fund tax credit program had no such controls.
"Our priority as a board is to protect taxpayer dollars," said Rhode Island Commerce Corporation board member Michael McNally, "We owe it to the state to be watchful of a select group of outside investors moving from state to state, promising job creation while siphoning off taxpayer dollars without oversight. This statute, as written, appears to offer an unwise, unfair agreement: tax credits irrespective of actual performance."
The Rhode Island Commerce Corporation plans to file emergency regulations regarding the Small Business Development Fund within the coming weeks. Key provisions of the regulations will include:
• Authorizing the Board of the Rhode Island Commerce Corporation to approve applications to this program, just as it approves applications to other tax credit programs. • Demanding strict financial disclosure and performance requirements around the application and reporting process • Ensuring protections for taxpayers in the event an approved applicant fails to deliver promised outcomes.