2022 -- S 2600
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LC003635
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S TATE OF RHODE IS L A N D
IN GENERAL ASSEMBLY
JANUARY SESSION, A.D. 2022
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A N A CT
RELATING TO TAXATION -- PROPERTY SUBJECT TO TAXATION
Introduced By: Senators Mack, Bell, Anderson, Calkin, Mendes, Euer, Kallman,
Quezada, and Sosnowski
Date Introduced: March 10, 2022
Referred To: Senate Finance
It is enacted by the General Assembly as follows:
1 SECTION 1. The general assembly finds as follows:
2 WHEREAS, In the 1890s, the general assembly enacted numerous charters incorporating
3 nonprofit hospitals throughout the state; and
4 WHEREAS, In the 1900s, the general assembly enacted numerous charters incorporating
5 nonprofit colleges and universities for specific educational purposes set forth in the charters; and
6 WHEREAS, The corporate charters of colleges and universities exempted from taxation
7 property owned by said educational institutions, provided that the real estate "not used for the
8 corporate purposes shall not be so exempt;" and
9 WHEREAS, The corporate charters of the hospitals, in general, authorizes them to erect,
10 support and maintain facilities for the non-business purposes for which the entities are incorporated,
11 and require that the corporations be managed by their boards of directors, which boards are defined
12 and delineated in the legislative corporate charters; and
13 WHEREAS, Pursuant to the legislatively-granted charters, the nonprofit hospitals in the
14 state have enjoyed exemptions from taxation on all real and personal property owned by the
15 hospitals, pursuant to provisions of the legislation stating that: "the property and estate of said
16 corporation, both real and personal, shall not at any time be liable to be assessed in the
17 apportionment of any state or town tax;" and
18 WHEREAS, In the absence of an express statutory definition to the contrary, the state
19 supreme court has held that the language in the hospital charters affords tax exempt status to all
1 hospital owned property as long as the net income from the property is devoted to the general uses
2 of the hospital, regardless of whether the property is used "wholly" or "exclusively" for the missions
3 and functions of a hospital; and
4 WHEREAS, The state supreme court has further indicated that issues regarding statutory
5 tax exemptions for chartered and nonprofit organizations implicate public policy decisions to be
6 addressed by the general assembly; and
7 WHEREAS, The language of chartered colleges and universities and nonprofit hospitals
8 has never been amended to remove the tax exemptions provided by the legislation; and
9 WHEREAS, The real and personal property held by the chartered entities has increased
10 exponentially, far exceeding what the general assembly would have contemplated when the charters
11 were enacted over a century ago; and
12 WHEREAS, Chartered colleges, universities and hospitals hold property for use by and for
13 commercial, for-profit ventures such as eating establishments, shopping centers, parking garages,
14 and other operations not directly related to the provision of education or for hospital medical care;
15 and
16 WHEREAS, Nonprofit hospitals now expend funds on mass marketing campaigns, large
17 network "holding" and management corporations which are comprised of a board of directors that
18 oversees each hospital and legislatively delineated hospital board, and which conduct business on
19 behalf of not only the hospitals, but also on behalf of physicians’ groups, laboratories, imaging
20 centers and other matters not related to the acquisition and maintenance of a hospital; and
21 WHEREAS, The tax exemptions afforded to all property owned by chartered nonprofit
22 colleges, universities and hospitals, regardless of their uses, imposes a significant burden on the
23 cities and towns in which they are located, and the taxpaying residents of such cities and towns;
24 and
25 THEREFORE, The general assembly deems it appropriate to place limitations on the tax
26 exempt real and personal property a nonprofit college, university or hospital may hold.
27 SECTION 2. Section 44-3-3 of the General Laws in Chapter 44-3 entitled "Property
28 Subject to Taxation" is hereby amended to read as follows:
29 44-3-3. Property exempt. [Effective January 1, 2022.]
30 (a) The following property is exempt from taxation:
31 (1) Property belonging to the state, except as provided in § 44-4-4.1;
32 (2) Lands ceded or belonging to the United States;
33 (3) Bonds and other securities issued and exempted from taxation by the government of
34 the United States or of this state;
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1 (4) Real estate, used exclusively for military purposes, owned by chartered or incorporated
2 organizations approved by the adjutant general and composed of members of the national guard,
3 the naval militia, or the independent, chartered-military organizations;
4 (5) Buildings for free public schools, buildings for religious worship, and the land upon
5 which they stand and immediately surrounding them, to an extent not exceeding five (5) acres so
6 far as the buildings and land are occupied and used exclusively for religious or educational
7 purposes;
8 (6) Dwellings houses and the land on which they stand, not exceeding one acre in size, or
9 the minimum lot size for zone in which the dwelling house is located, whichever is the greater,
10 owned by, or held in trust for, any religious organization and actually used by its officiating clergy;
11 provided, further, that in the town of Charlestown, where the property previously described in this
12 paragraph is exempt in total, along with dwelling houses and the land on which they stand in
13 Charlestown, not exceeding one acre in size, or the minimum lot size for zone in which the dwelling
14 house is located, whichever is the greater, owned by, or held in trust for, any religious organization
15 and actually used by its officiating clergy, or used as a convent, nunnery, or retreat center by its
16 religious order;
17 (7) Intangible personal property owned by, or held in trust for, any religious or charitable
18 organization, if the principal or income is used or appropriated for religious or charitable purposes;
19 (8) Buildings and personal estate owned by any corporation used for a school, academy, or
20 seminary of learning, except for a nonprofit institution of higher education and of any incorporated
21 public charitable institution, and the land upon which the buildings stand and immediately
22 surrounding them to an extent not exceeding one acre, so far as they are used exclusively for
23 educational purposes, but no property or estate whatever is hereafter exempt from taxation in any
24 case where any part of its income or profits, or of the business carried on there, is divided among
25 its owners or stockholders; provided, however, that unless any private nonprofit corporation
26 organized as a college or university located in the town of Smithfield reaches a memorandum of
27 agreement with the town of Smithfield, the town of Smithfield shall bill the actual costs for police,
28 fire, and rescue services supplied, unless otherwise reimbursed, to said corporation commencing
29 March 1, 2014;
30 (9) Estates, persons, and families of the president and professors for the time being of
31 Brown University for not more than ten thousand dollars ($10,000) for each officer, the officer's
32 estate, person, and family included, but only to the extent that any person had claimed and utilized
33 the exemption prior to, and for a period ending, either on or after December 31, 1996;
34 (10) Property especially exempt by charter unless the exemption has been waived in whole
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1 or in part, and except as provided in subsection (c) of this section;
2 (11) Lots of land exclusively for burial grounds;
3 (12) Property, real and personal, held for, or by, an incorporated library, society, or any
4 free public library, or any free public library society, so far as the property is held exclusively for
5 library purposes, or for the aid or support of the aged poor, or poor friendless children, or the poor
6 generally, or for a nonprofit hospital for the sick or disabled;
7 (13) Real or personal estate belonging to, or held in trust for, the benefit of incorporated
8 organizations of veterans of any war in which the United States has been engaged, the parent body
9 of which has been incorporated by act of Congress, to the extent of four hundred thousand dollars
10 ($400,000) if actually used and occupied by the association; provided, that the city council of the
11 city of Cranston may by ordinance exempt the real or personal estate as previously described in
12 this subdivision located within the city of Cranston to the extent of five hundred thousand dollars
13 ($500,000);
14 (14) Property, real and personal, held for, or by, the fraternal corporation, association, or
15 body created to build and maintain a building or buildings for its meetings or the meetings of the
16 general assembly of its members, or subordinate bodies of the fraternity, and for the
17 accommodation of other fraternal bodies or associations, the entire net income of which real and
18 personal property is exclusively applied or to be used to build, furnish, and maintain an asylum or
19 asylums, a home or homes, a school or schools, for the free education or relief of the members of
20 the fraternity, or the relief, support, and care of worthy and indigent members of the fraternity, their
21 wives, widows, or orphans, and any fund given or held for the purpose of public education,
22 almshouses, and the land and buildings used in connection therewith;
23 (15) Real estate and personal property of any incorporated volunteer fire engine company
24 or incorporated volunteer ambulance or rescue corps in active service;
25 (16) The estate of any person who, in the judgment of the assessors, is unable from infirmity
26 or poverty to pay the tax; provided, that in the towns of Burrillville and West Greenwich, the tax
27 shall constitute a lien for five (5) years on the property where the owner is entitled to the exemption.
28 At the expiration of five (5) years, the lien shall be abated in full. Provided, if the property is sold
29 or conveyed, or if debt secured by the property is refinanced during the five-year (5) period, the
30 lien immediately becomes due and payable; any person claiming the exemption aggrieved by an
31 adverse decision of an assessor shall appeal the decision to the local board of tax review and
32 thereafter according to the provisions of § 44-5-26;
33 (17) Household furniture and family stores of a housekeeper in the whole, including
34 clothing, bedding, and other white goods, books, and all other tangible personal property items that
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1 are common to the normal household;
2 (18) Improvements made to any real property to provide a shelter and fallout protection
3 from nuclear radiation, to the amount of one thousand five hundred dollars ($1,500); provided, that
4 the improvements meet applicable standards for shelter construction established, from time to time,
5 by the Rhode Island emergency management agency. The improvements are deemed to comply
6 with the provisions of any building code or ordinance with respect to the materials or the methods
7 of construction used and any shelter or its establishment is deemed to comply with the provisions
8 of any zoning code or ordinance;
9 (19) Aircraft for which the fee required by § 1-4-6 has been paid to the tax administrator;
10 (20) Manufacturer's inventory.
11 (i) For the purposes of §§ 44-4-10, 44-5-3, 44-5-20, and 44-5-38, a person is deemed to be
12 a manufacturer within a city or town within this state if that person uses any premises, room, or
13 place in it primarily for the purpose of transforming raw materials into a finished product for trade
14 through any or all of the following operations: adapting, altering, finishing, making, and
15 ornamenting; provided, that public utilities; non-regulated power producers commencing
16 commercial operation by selling electricity at retail or taking title to generating facilities on or after
17 July 1, 1997; building and construction contractors; warehousing operations, including distribution
18 bases or outlets of out-of-state manufacturers; and fabricating processes incidental to warehousing
19 or distribution of raw materials, such as alteration of stock for the convenience of a customer; are
20 excluded from this definition;
21 (ii) For the purposes of this section and §§ 44-4-10 and 44-5-38, the term "manufacturer's
22 inventory," or any similar term, means and includes the manufacturer's raw materials, the
23 manufacturer's work in process, and finished products manufactured by the manufacturer in this
24 state, and not sold, leased, or traded by the manufacturer or its title or right to possession divested;
25 provided, that the term does not include any finished products held by the manufacturer in any retail
26 store or other similar selling place operated by the manufacturer whether or not the retail
27 establishment is located in the same building in which the manufacturer operates the manufacturing
28 plant;
29 (iii) For the purpose of § 44-11-2, a "manufacturer" is a person whose principal business
30 in this state consists of transforming raw materials into a finished product for trade through any or
31 all of the operations described in paragraph (i) of this subdivision. A person will be deemed to be
32 principally engaged if the gross receipts that person derived from the manufacturing operations in
33 this state during the calendar year or fiscal year mentioned in § 44-11-1 amounted to more than
34 fifty percent (50%) of the total gross receipts that person derived from all the business activities in
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1 which that person engaged in this state during the taxable year. For the purpose of computing the
2 percentage, gross receipts derived by a manufacturer from the sale, lease, or rental of finished
3 products manufactured by the manufacturer in this state, even though the manufacturer's store or
4 other selling place may be at a different location from the location of the manufacturer's
5 manufacturing plant in this state, are deemed to have been derived from manufacturing;
6 (iv) Within the meaning of the preceding paragraphs of this subdivision, the term
7 "manufacturer" also includes persons who are principally engaged in any of the general activities
8 coded and listed as establishments engaged in manufacturing in the Standard Industrial
9 Classification Manual prepared by the Technical Committee on Industrial Classification, Office of
10 Statistical Standards, Executive Office of the President, United States Bureau of the Budget, as
11 revised from time to time, but eliminating as manufacturers those persons, who, because of their
12 limited type of manufacturing activities, are classified in the manual as falling within the trade
13 rather than an industrial classification of manufacturers. Among those thus eliminated, and
14 accordingly also excluded as manufacturers within the meaning of this paragraph, are persons
15 primarily engaged in selling, to the general public, products produced on the premises from which
16 they are sold, such as neighborhood bakeries, candy stores, ice cream parlors, shade shops, and
17 custom tailors, except, that a person who manufactures bakery products for sale primarily for home
18 delivery, or through one or more non-baking retail outlets, and whether or not retail outlets are
19 operated by the person, is a manufacturer within the meaning of this paragraph;
20 (v) The term "Person" means and includes, as appropriate, a person, partnership, or
21 corporation; and
22 (vi) The department of revenue shall provide to the local assessors any assistance that is
23 necessary in determining the proper application of the definitions in this subdivision;
24 (21) Real and tangible personal property acquired to provide a treatment facility used
25 primarily to control the pollution or contamination of the waters or the air of the state, as defined
26 in chapter 12 of title 46 and chapter 25 of title 23, respectively, the facility having been constructed,
27 reconstructed, erected, installed, or acquired in furtherance of federal or state requirements or
28 standards for the control of water or air pollution or contamination, and certified as approved in an
29 order entered by the director of environmental management. The property is exempt as long as it is
30 operated properly in compliance with the order of approval of the director of environmental
31 management; provided, that any grant of the exemption by the director of environmental
32 management in excess of ten (10) years is approved by the city or town in which the property is
33 situated. This provision applies only to water and air pollution control properties and facilities
34 installed for the treatment of waste waters and air contaminants resulting from industrial
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1 processing; furthermore, it applies only to water or air pollution control properties and facilities
2 placed in operation f