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Rhode Island Department of Revenue
Division of Taxation
Summary of Legislative Changes
July 11, 2016
Following is a summary of tax law changes in the FY 2017 budget bill enacted June 24, 2016.
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State unemployment insurance tax: reduction
Rhode Island employers in the aggregate will save money through lower Rhode Island
unemployment insurance taxes starting January 1, 2017. It is the result of a fiscal 2017 budget
proposal by Governor Gina M. Raimondo, which was approved by the General Assembly and
signed into law on June 24.
The amount of state unemployment insurance tax that a particular employer pays depends on
several factors, including the number of its employees, the taxable wage base, and the tax rate
that’s assigned to that particular employer.
Rhode Island has a system of nine unemployment insurance tax schedules, each named for a
letter of the alphabet (A through I). Which tax schedule is in effect for any given calendar year
depends, in part, on the level of reserves in Rhode Island’s unemployment insurance trust fund.
The new law reduces the level of reserves that the trust fund must have before Rhode Island
can move to a lower tax schedule. In general, the greater the amount available in the fund to
pay unemployment benefits, the more generous the tax rate schedule can be.
Rhode Island has been on Schedule I – the highest tax rate schedule – since 1992. However,
as a result of the new law, it is expected that the level of reserves in the unemployment
insurance trust fund will be sufficient as of September 30, 3016, to allow Rhode Island to move
to a lower tax schedule starting January 1, 2017 (preliminary plans are to use Schedule H).
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Thispublicationisaninformalsummary ofrecentlyenactedlegislation(HouseBill7454Aaa)andisforgeneral
informationpurposesonly.ItisnotasubstituteforRhodeIslandGeneralLaws,orforRhodeIslandDivisionof
Taxationregulations,rulings,ornotices.
Businesstaxes
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Tax rates, which now range from 1.69% to 9.79%, are to drop to a range of 0.99% to 9.59%,
starting January 1, 2017. As a result, it is estimated that employers, in the aggregate, will save
approximately $30 million in 2017.
Employers are to receive a mailing in December 2016 to let them know about their new
tax rate, which will apply beginning with the first quarter of 2017. First-quarter tax bills,
reflecting the new tax rates, will be due on or before May 1, 2017.
Effective: Employer tax rate reductions to take effect January 1, 2017
Citation: RIGL § 28-43-8
Annual corporate minimum tax: 11% reduction
The annual corporate minimum tax, now $450, will drop by $50, or 11.11 percent, to $400,
effective for tax years beginning on or after January 1, 2017.
The tax, under Rhode Island General Laws (RIGL) § 44-11-2(e), had been set at $500 since
2004. However, under legislation approved by the General Assembly in June 2015, the tax
dropped to $450, for tax years beginning on or after January 1, 2016. Under the new law, for tax
years beginning on or after January 1, 2017, the tax will be $400.
Subchapter S corporations became subject to the annual minimum tax under RIGL § 44-11-2(e)
effective for tax years beginning on or after January 1, 2015. Because the annual minimum tax
under RIGL § 44-11-2(e) will be reduced to $400, subchapter S corporations will also see a
reduction, to $400, for their annual minimum tax, effective for tax years beginning on or after
January 1, 2017.
The annual corporate minimum tax has now been reduced in two consecutive
legislative sessions, by a total of $100, or 20 percent, per entity.
Annualcorporateminimumtax
2015 2016 2017
Taxperentity $500 $450 $400
Reductionasshownfor2016appliesfortaxyearsbeginningonorafterJanuary1,2016,butbeforeJanuary1,2017.Reductionasshownfor2017
appliesfortaxyearsbeginningonorafterJanuary1,2017.
Effective: Latest reduction applies for tax years beginning on or after January 1, 2017
Citation: RIGL § 44-11-2(e)
Annual filing charge: 11% reduction
The annual filing fee, or filing charge, which applies to entities treated as pass-through entities
for federal tax purposes, is now $450. It will drop by $50, or 11.11 percent, to $400, effective for
tax years beginning on or after January 1, 2017.
The annual filing fee is tied to the annual corporate minimum tax under RIGL § 44-11-2(e). As a
result, it had been set at $500, but under legislation approved by the General Assembly in June
2015, the fee dropped to $450, for tax years beginning on or after January 1, 2016. Under the
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new law, for tax years beginning on or after January 1, 2017, the charge will be $400. The
reduction will apply to:
limited partnerships;
limited liability partnerships;
limited liability companies; and
single-member limited liability companies.
The annual filing charge has now been reduced in two consecutive legislative sessions, by
a total of $100, or 20 percent, per entity.
Annualfilingchargeforpartnerships,LLCs
2015 2016 2017
Chargeperentity $500 $450 $400
Filingchargeappliestoentitiestreatedaspass‐throughentitiesforfederaltaxpurposes.Reductioninfilingcharge(filingfee)for2016,asshown
above,appliesfortaxyearsbeginningonorafterJanuary1,2016,butbeforeJanuary1,2017.Reductionshownfor2017appliesfortaxyears
beginningonorafterJanuary1,2017.
Effective: Reduction applies for tax years beginning on or after January 1, 2017
Citation: RIGL § 44-11-2(e)
Business filing deadlines
The Rhode Island filing deadlines for corporations and pass-through entities will be the same as
the federal deadlines for tax years beginning on or after January 1, 2016. Thus, most preparers
will first encounter the new Rhode Island deadlines during the 2017 filing season (which begins
in approximately six months).
Legislation (Public Law 114-41) approved by Congress and signed into law by President Barack
H. Obama on July 31, 2015, changed the original due dates for C corporations and
partnerships.
In general, the original federal due date for a C corporation is now 3 ½ months after the close of
the tax year. Thus, the federal deadline for a calendar-year C corporation is mid-April, which is
one month later than under prior law.
The original federal due date for a partnership is now 2 ½ months after the close of the entity’s
tax year. Thus, the federal deadline for a calendar-year partnership is now mid-March, which is
one month earlier than under prior law.
The new federal filing dates generally apply for federal returns filed for tax years beginning after
December 31, 2015. The Rhode Island General Assembly, in passing the budget bill, has
conformed Rhode Island filing deadlines to the new federal filing deadlines.
Following are some highlights:
The original Rhode Island due date for a calendar-year C corporation, filing on Form RI-
1120C, will be mid-April, instead of mid-March under former law.
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The original Rhode Island due date for a calendar-year entity treated as a partnership for
federal tax purposes, filing on Form RI-1065, will be mid-March, instead of mid-April
under former law.
The original Rhode Island due date for a calendar-year limited liability company (LLC)
treated as a pass-through entity for federal tax purposes, filing on Form RI-1065, will be
mid-March, instead of mid-April under former law.
The original Rhode Island due date for a calendar-year subchapter S corporation, filing
on Form RI-1120S, will continue to be mid-March, the same as under former law.
SelectedRhodeIslandfilingdeadlines(forcalendar‐yearfilers)
Tax/entitytype Olddeadline Newdeadline
Ccorporation
(includingthosesubjecttobusinesscorporationtax,publicservice
corporationtax,taxationofbanks,andtaxationofinsurancecompanies)
March15 April15
Partnership
(includingLP,LLP)
April15 March15
Limitedliabilitycompany(LLC)
(includingsingle‐memberLLCs)
April15 March15
Scorporation
March15 March15
Datesareforcalendar‐yearfilers,fortaxyearsbeginningonorafterJanuary1,2016,anddonottakeintoaccounttheimpactof
weekendsorholidays,includingEmancipationDay.DeadlinesforCcorporationsincludethosetaxedunderRhodeIsland’scorporate
incometax,publicservicetax,banktax,andinsurance
tax,andalsoentitiessubjecttomandatoryunitarycombinedreporting.
Deadlineslistedaboveforpartnerships,LLCs,andScorpsassumethattheyaretreatedaspass‐throughentitiesforfederaltax
purposes.
ESTIMATED PAYMENTS:
The new Rhode Island law does not change the deadlines for, or the formulas for computing,
estimated payments. Those deadlines remain the same as under former law.
EXTENSIONS:
The Division of Taxation is examining its 2017 schedule of extended due dates and will advise
practitioners about any changes as the filing season draws near.
INSURANCE GROSS PREMIUMS, SURPLUS LINES:
For entities subject to the insurance gross premiums tax, the original due date for the annual
return is now mid-April; the old March 1 deadline no longer applies. However, the deadline has
not changed for tax returns from surplus lines brokers/licensees: they will continue to be due to
the Division of Taxation on or before April 1.
MORE INFORMATION:
Expanded tables, showing filing deadlines for a number of different business entities and
different fiscal years, will be included in the Division of Taxation’s quarterly newsletter, Rhode
Island Tax News, to be posted later this month.
Effective: For tax years beginning on or after January 1, 2016
Citation: H 7454Aaa
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Sales tax: ride-sharing companies
Transportation network companies – sometimes called ride-sharing, ridesharing, ride-sourcing,
or ridesourcing companies – are added to the statutory list of services that are subject to Rhode
Island’s 7 percent sales and use tax, effective July 1, 2016.
A “transportation network company” means an entity that uses a digital network to connect
transportation network company riders to transportation network operators who provide
prearranged rides.
The new law makes clear that any transportation network company operating in Rhode Island is
a retailer as provided in RIGL § 44-18-15 and is required to:
file a business application and registration form with the Division of Taxation;
obtain a permit from the Division of Taxation to make sales at retail; and
charge, collect, and remit sales and use tax to the Division of Taxation.
Effective: July 1, 2016
Citation: RIGL § 44-18-7.3
“Rebuild Rhode Island” tax credit
This program, enacted in 2015, generally offers tax credits for certain developments that have a
financing gap. The credit cannot exceed $15 million for any qualified development project. Also,
no building or qualified development project to be completed in phases or in multiple projects
can exceed the $15 million cap for all phases or projects involved.
Under the new law, an exception to certain program limitations will be allowed – no more than
once in a given fiscal year – to the development of land and buildings by developers and
tenants on the former Route I-195 land in Providence. Also, the new law caps, at $150 million,
the aggregate sum of credits that can be issued under the overall program.
The new law gives the Commerce Corporation the right to make a loan – or an equity
investment – as an alternative incentive in lieu of the provision of tax credits.
Effective: Upon passage
Citation: H 7454Aaa
Film tax credit
The motion picture production tax credit program (also known as the film tax credit program),
formerly scheduled to sunset in 2019, is now extended by two years, through June 30, 2021.
Thus, no film tax credits can be issued on or after July 1, 2021, unless the production has
received initial certification under RIGL § 44-31.2-6(a) prior to July 1, 2021.
Effective: July 1, 2016
Citation: RIGL § 44-31.2-11
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Historic tax credits
The 2013 historic preservation tax credit program, formerly scheduled to sunset in 2016, is now
extended by one year, to June 30, 2017.
Thus, no credits can be authorized to be reserved on or after June 30, 2017, or upon the
exhaustion of the maximum aggregate credits, whichever comes first.
Effective: July 1, 2016
Citation: RIGL § 44-33.6-11
Transfer pricing; nexus
The budget authorizes two new revenue-enhancing initiatives for the Division of Taxation:
TRANSFER PRICING:
In general, the term “transfer price” refers to the price which is charged between related parties,
such as a parent company and a subsidiary, for a product or a service. Tax agencies typically
look to see whether transactions involving transfer prices are done at arm’s length and
accurately reflect income (instead of providing for a shifting of income with the goal of avoiding
tax). The Division of Taxation plans to identify, as candidates for audit, certain entities that have
intercompany transactions between related companies.
Prior to Rhode Island’s implementation of mandatory unitary combined reporting for tax years
beginning on or after January 1, 2015, companies generally could shift revenues between
related entities to avoid taxation in certain states. The Division’s audit program will have a three-
year lookback period to capture underpaid or unpaid taxes with regard to transfer pricing.
Also, although combined reporting is now in effect, a corporation still may have intercompany
transactions with an entity which, for a variety of reasons, is not part of the combined group for
purposes of Rhode Island’s combined reporting regime.
NEXUS PROGRAM:
The Division of Taxation expects to identify and register out-of-state entities that legally do
business in Rhode Island, but have not paid appropriate corporate, withholding, and/or sales
and use taxes. Establishing nexus generally means that a business has sufficient connection or
presence in Rhode Island for the State to have taxing authority. To help implement its nexus
program, the Division intends to rely, in part, on its new regulation on nexus for corporate
income tax purposes. The effective date of Regulation CT 15-02, “Business Corporation Tax:
Corporate Nexus,” was January 12, 2016.
Effective: H 7454Aaa
Citation: July 1, 2016
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Distillery annual fee (“Manufacturer’s license”)
Under RIGL Chapter 3-6, “Manufacturing and Wholesale Licenses,” a manufacturer’s license
authorizes the holder to establish and operate a brewery, distillery, or winery at the place
described in the license for the manufacture of beverages within Rhode Island.
For a distillery, the annual fee for the license was $3,000. Under the new law, the annual license
fee remains at $3,000 for a distillery producing more than 50,000 gallons a year, but is $500 for
a distillery producing less than or equal to 50,000 gallons per year.
Effective: July 1, 2016
Citation: RIGL § 3-6-1
Alcoholic beverages excise tax
RIGL § 3-10-1 sets forth tax rates on alcoholic beverages. The taxes apply to manufacturers;
wholesalers/distributors pay a fee equal to the applicable tax rate
Under the statute, a brewer that brews beer in Rhode Island and that is actively and directly
owned, managed, and operated by an authorized legal entity that has owned, managed, and
operated a brewery in Rhode Island for at least 12 consecutive months receives a tax
exemption on the first 100,000 barrels of beer that it produces and distributes in Rhode Island in
any calendar year.
The new law provides a similar tax break for distillers. Under the new provision, a distiller that
distills spirits in Rhode Island and that is actively and directly owned, managed, and operated by
an authorized legal entity that has owned, managed, and operated a distillery in Rhode Island
for at least 12 consecutive months will receive a tax exemption on the first 50,000 gallons of
distilled spirits that it produces and distributes in Rhode Island in any calendar year.
Effective: July 1, 2016
Citation: RIGL § 3-10-1
Tax break for pension/annuity income
The calculation of Rhode Island’s personal income tax begins with your federal adjusted gross
income (AGI). Under the new law, for tax years beginning on or after January 1, 2017, you will
be allowed a modification for up to $15,000 of taxable pension and/or annuity income that is
included in your federal AGI for the taxable year.
Personalincometax
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In other words, if your federal AGI includes taxable pension and/or annuity income, up to
$15,000 of that income will escape Rhode Island’s personal income tax, assuming that you
meet the requirements of the new provision.
Thus, assuming that you are in the 3.75 percent Rhode Island personal income tax bracket, the
provision could result in annual Rhode Island tax savings of up to approximately $563. (The
example does not take into account other factors that could affect your Rhode Island tax, such
as other modifications that could decrease or increase income; the Rhode Island standard
deduction; personal exemptions; tax credits; and use tax.)
To qualify for Rhode Island’s new modification regarding taxable pension and/or annuity
income, you must clear three main hurdles:
At least some of your pension and/or annuity income must be taxed at the federal level;
You must have reached “full retirement age” based on Social Security Administration
rules; and
Your federal adjusted gross income must be below a certain amount (see table below).
Incomethreshold
Youmayqualifyforthemodificationifyourincomefallsbelowacertainamount...
Youfileyourreturnas: YourfederalAGIis:
▪single,headofhousehold,ormarriedfilingseparately Lessthan$80,000
▪marriedfilingjointly,orqualifyingwidow,orqualifyingwidower Lessthan$100,000
Note:FirstcolumnreferstofilingstatusonyourRhodeIslandpersonalincometaxreturn.ForamarriedcouplefilingajointRhodeIslandreturn,incomethreshold
appliestocouple’scombinedfederaladjustedgrossincome(AGI).IncomethresholdswillbeadjustedannuallyforinflationfortaxyearsbeginningonorafterJanuary1,
2018.FilingstatusonyourRhodeIslandreturnmustbethesameasfilingstatusonyourfederalreturn.
Effective: For tax years beginning on or after January 1, 2017
Citation: RIGL § 44-30-12
Earned income credit
The earned income credit, or EIC, is a special tax break for the working poor. It is available
under federal and Rhode Island law. It is sometimes referred to as the earned income tax credit,
or EITC. Eligible taxpayers may claim a federal earned income credit and a Rhode Island
earned income credit.
For tax year 2015, the Rhode Island credit was 10 percent of the federal credit, and was fully
refundable. For tax year 2016, the Rhode Island credit is 12.5 percent of the federal credit, and
is fully refundable.
For tax years beginning on or after January 1, 2017, the Rhode Island credit will increase to 15
percent of the federal credit. (The refundable portion will continue to be 100 percent of the
amount by which the Rhode Island earned income credit exceeds the Rhode Island income tax.)
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RhodeIslandearnedincomecredit:%offederalcredit
Taxyear: 2015 2016 2017
PercentageoffederalEIC: 10% 12.5% 15%
RhodeIslandcreditisfullyrefundableforeachyearshown.
Effective: For tax years beginning on or after January 1, 2017
Citation: RIGL § 44-30-2.6
Hospital licensing fee
For all hospitals except those located in Washington County, Rhode Island, the hospital
licensing fee rate is 5.862 percent of the net patient services revenue based on the hospital’s
first fiscal year ending on or after January 1, 2014. (There’s a 37 percent discount for hospitals
located in Washington County.) Every hospital must pay the licensing fee to the Division of
Taxation on or before July 11, 2016.
Under the new law, for all hospitals except those located in Washington County, Rhode Island,
the hospital licensing fee rate is 5.652 percent of the net patient services revenue based on the
hospital’s first fiscal year ending on or after January 1, 2015. (There’s a 37 percent discount for
hospitals located in Washington County.) Every hospital must pay the licensing fee to the
Division of Taxation on or before July 10, 2017.
Effective: July 1, 2016
Citation: RIGL § 23-17-38.1.
Offsets for cities and towns
Under existing statute -- RIGL § 45-13-12, “Distressed communities relief fund” -- a fund is
available to provide state assistance to those cities and towns which have the highest property
tax burdens relative to the wealth of taxpayers.
Under the new law, in a section titled, “Mandatory Participation for Collection of Debts,” once a
community is determined to be a distressed community, it will have three months to notify the
Tax Administrator to allow the Tax Administrator to collect outstanding liabilities owed to that
community (including refund offsets, as provided under RIGL § 42-142-7, “Collections of
debts”). The Rhode Island Division of Municipal Finance will determine which liabilities will be
subject to collection by the Tax Administrator.
Effective: Upon passage
Citation: RIGL § 45-13-12
Miscellaneoustaxmatters
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Proceeds from fuel use tax
All money collected from the fuel use tax on motor carriers under RIGL Chapter 31-36.1, which
formerly went to the general fund, must – under the new law – go instead to the State’s
Intermodal Surface Transportation Fund under RIGL § 31-36-20.
Effective: July 1, 2016
Citation: RIGL § 31-36.1-18
Proceeds from hotel tax
For fiscal year 2017 only, proceeds of the hotel tax – but not the portion of the hotel tax
collected from residential units offered for tourist or transient use through a hosting platform –
must be distributed in accordance with the distribution percentages established in RIGL § 42-
63.1-3(a)(1) through § 42-63.1-3(a)(3) by the Division of Taxation and the City of Newport.
The provision applies for returns and tax payments received on or after July 1, 2016, and on or
before June 30, 2017, except as provided in RIGL § 42-63.1-12, “Distribution of tax to Rhode
Island Convention Center Authority.”
Effective: Upon passage
Citation: RIGL § 42-63.1-3
This publication is an informal summary of recently enacted
legislation(H7454
Aaa)andisforgeneralinformationpurposesonly.
It is not a substitute for Rhode Island General Laws, or for Rhode
Island Division ofTaxation regulations, rulings, or notices. Citations
listedinthisdocumentarefromtheoriginallegislativetextandare
subjecttorevision.
‐‐NeenaS.Savage,Esq.
Acting
RhodeIslandTaxAdministrator
