Wednesday, May 22, 2024

BILL SUNSETS JOBS DEVELOPMENT ACT

Sen. Ujifusa, Rep. Stewart bill would sunset Jobs Development Act

Tax credit mainly benefits two large corporations, fails to break even, cost $39.7 million in 2022

STATE HOUSE – Sen. Linda Ujifusa and Rep. Jennifer Stewart have introduced legislation to sunset the Jobs Development Act (JDA) program, a tax incentive whose costs grew to $39.7 million in FY 2022.

According to the state Department of Revenue Office of Revenue Analysis, which issued an analysis of the program in September,  “[T]he JDA program for tax years (TYs) 2019 through 2021 shows the program does not break even on a general revenue basis. This means the JDA program did not stimulate enough new general revenue collections to offset the cost of the program.”

Sen. Linda Ujifusa

First established in 1994 and amended several times, the JDA offers corporations a tax rate reduction for maintaining an employment level established many years ago. The program was closed to any additional companies in 2015, and has primarily benefited only two corporations.

“I was shocked to see that this huge tax break is not in the budget and remains in place, unexamined by the legislature, unless a bill to sunset the program is proposed,” said Senator Ujifusa (D-Dist. 11, Portsmouth, Bristol), “If we are going to give tax breaks to businesses to create jobs, it should go to smaller, local businesses and they have been shut out of this program since 2015.”

Rep. Jennifer Stewart 

Said Representative Stewart (D-Dist. 59, Pawtucket), “Said Representative Stewart (D-Dist. 59, Pawtucket), “In a year when so many worthy services and programs are being told there may not be enough money in the budget, it is especially important that we examine this huge corporate tax break.”

The legislation (2024-S 25482024-H 7933) introduced by Senator Ujifusa and Representative Stewart would sunset the program in 2024, ending the tax reduction for the corporations in the program.

The Office of Revenue Analysis report recommended a sunset be added to the JDA statute to allow for periodic review for the following reasons:

The program fails to break even on a general revenue basis.

The job creation benefits to the state are relatively fixed, even as the cost of the program has increased in recent years.

Because the JDA program has been closed to new applicants since 2015, it may create a barrier to entry for new firms which goes against the taxation principle of horizontal equity.

The corporate tax environment has changed dramatically since the JDA’s adoption in 1994 with state-level reforms and the federal Tax Cuts and Jobs Act.

The full report on the Jobs Development Act covering tax years 2019 through 2021, and prior reports, can be viewed here: https://dor.ri.gov/revenue-analysis/reports.

The House bill has a hearing today before the House Finance Committee following the 4 p.m. House session. The meeting will be televised by Capitol Television on Cox Communications channels 61, i3Broadband (Formerly Full Channel) on channel 15 and Verizon channel 34. Livestreaming is available at https://capitoltvri.cablecast.tv. The Senate Finance Committee will schedule a hearing on the Senate bill in the coming weeks.

Senator Ujifusa and Representative Stewart urge those who wish to submit testimony on behalf of the bill to email it soon as possible with the subject line “In support of 2024-S 2548, 2024-H 7933,” describing their reason for supporting the bills. Testimony can be sent to the House Finance Committee at HouseFinance@rilegislature.gov and the Senate Finance Committee at SenateFinance@rilegislature.gov.