Establishes a compact agreement among at least two (2) states to prohibit the use of subsidies to selectively retain industry or company entice relocation from one state to another state or to open a new facility.
Summary
H5380 would add a new chapter to Rhode Island’s taxation laws creating the “Agreement to Phase Out Corporate Incentives Compact Act.” The bill authorizes Rhode Island to join a multi-state compact, along with any other state or the District of Columbia, to restrict the use of government subsidies aimed at attracting or retaining specific private companies or industries. Under the compact, once at least two states have enacted it, party states and their political subdivisions would be prohibited from offering subsidies to selectively support a particular company or industry, or to induce a business to move an existing facility from one member state to another or to open a new facility.
The bill defines key terms such as “facility,” “party state,” “political subdivision,” and “subsidy,” with subsidy broadly covering direct grants, tax benefits, favorable bonding, special district status, and other economic advantages that reduce government costs for a business venture. It also establishes a compact administrator in each member state, assigns enforcement authority to each state’s attorney general, and gives resident taxpayers standing to seek enforcement in court. The act would take effect immediately upon passage.
Impact
If enacted, H5380 would create a new statutory framework in Rhode Island law governing interstate cooperation on economic development incentives. It would not by itself eliminate all business incentives, but it would bar selective subsidies used to poach businesses or facilities from other compact states once the compact is operational. The bill would affect state and local economic development agencies, governors, attorneys general, and taxpayers, and would potentially limit the use of tax breaks, grants, and other incentive packages for targeted corporate recruitment.
Sentiment
The available record shows no committee transcript or recorded vote, so there is no documented floor debate or formal vote history to gauge broad legislative sentiment. Based on the bill’s sponsorship and framing, the measure appears to reflect a policy preference for reducing interstate subsidy competition and corporate incentive bidding wars. The bill’s structure suggests support for a more restrained approach to economic development incentives, but the absence of recorded discussion makes overall sentiment difficult to assess beyond the proposal itself.
Contention
The main point of contention is likely to be whether Rhode Island should voluntarily limit its ability to offer targeted incentives to businesses, especially if neighboring states do not join the compact. Supporters would likely argue the bill prevents wasteful subsidy competition and protects taxpayers, while critics may argue it could weaken Rhode Island’s competitiveness in attracting or retaining employers and jobs. Another likely issue is the breadth of the subsidy definition, which reaches beyond direct grants to tax and financing advantages and could constrain a wide range of economic development tools.