Welcome to another edition of our Society's Statehouse Update, taking you from Smith Hill to Capitol Hill, to keep you informed of the activities of local, state and federal government.
RI Business Coalition Legislative Activity:
RISCPA is signing onto several letters of testimony to chairpersons of various General Assembly Committees this week for issues relating to the state budget, a proposal to expand the sales tax and an ombudsman position for Small Business interests in the state:
Budget Article 5, Section 9: Opposing Budget Article Calling for Expanding the Sales Tax
RISCPA is joining with other members of the Rhode Island Business Coalition to express our opposition to the expansion of the sales tax included in Article 5, Section 9 of the Governor’s Proposed FY 2020 Budget. This legislation would expand the sales tax to include streaming and downloading of videos, music, and books; hunting, trapping and shooting services; lobbying services; interior design services; and commercial building services.
The Governor’s proposal represents an estimated $10.1 million in new and increased fees and $48.5 million for new and expanded taxes. Together this means $58.6 million in an array of new fees, taxes and tax hikes would hit a multitude of businesses operating in various service industries throughout the state. Businesses will struggle to absorb these new fees, tax hikes and associated costs, resulting in difficult choices for many businesses that can include restricting business expansions, reducing employee costs through shrinking staffs or hours, or in some cases, shutting down operations entirely.
The Business Coalition has pointed out that some businesses have suggested that the actual revenue raised, especially the tax on commercial building services, may end up even higher than the original projection and that this proposal seems designed to selectively target certain industries in the state, while not applying a sales tax expansion to others.
Budget Article 1, Sections 12-24: Opposing Budget Article Seeking Budget Transfers from Quasi-State Agencies & Restricted Accounts
We have signed onto a testimony letter to House Finance Committee Chairman Marvin Abney in opposition to Budget Article 1, sections 12-24 proposing budget transfers and “scoops” of funds out of several quasi-public state agency budgets and restricted receipt accounts to help balance the budget. The Governor’s budget blueprint is asking that $16.4 million be transferred out of designated accounts and be directed into the state General Fund to help the state with a budget shortfall. We believe this exercise of making transfers or “scoops” represents bad budgeting practice and is detrimental to the agencies and restricted accounts that could lose portions of their budgets. Agencies and restricted accounts covering the Quonset Development Corp., the RI Education and Building Corp., the RI Student Loan Authority and various programs of the D.E.M. are among those that could be impacted by the proposed transfer of funds.
Budget Article 3: Small Business Ombudsman: We have signed onto a letter of support for the state to maintain a state staff position for a Small Business Ombudsman. The state is proposing to move the position from the Department of Revenue to the Department of Business Regulation (DBR). We have stated regardless of which department will have oversight of the position, we believe it is vital for a Small Business Ombudsman to be preserved as a vital state government link to the state’s vast community of small businesses.
RISCPA Advocacy Letters
The RI Society in recent weeks has sent its own letters of advocacy to several elected officials on a range of issues that are being considered in both state and federal government. We issued a letter of support to RI Senator Jack Reed as the U.S. Senate takes up the issue of the Mobile Workforce Tax Simplification Act; a letter to House Corporations Committee Chair Robert Jacquard to show our support for Lt. Governor Dan McKee’s bill related to public utilities, and a letter to House Majority Leader Joseph Shekarchi related to state tax law and pass-through entities. The details are as follows:
Mobile Workforce State Income Tax Simplification Act of 2019
In the letter to Senator Reed, the RI Society emphasized our support for the Mobile Workforce State Income Tax Simplification Act of 2019 as we seek a uniform standard for the levying of state income tax on the growing number of employees who are periodically working out-of-state during the year. In the letter, our new President Melissa Travis explained that “Currently, workers and businesses face a confusing range of state income tax reporting and often withholding requirements that vary from state to state, based on factors such as amount of income earned and duration of the out-of-state work. They are forced to meet filing requirements in multiple states, and although tax credits are available to avoid double taxation, the burden of complying with dozens of requirements that are unique to such businesses or individuals makes the current system extremely complex and unfair.”
The letter went on to explain we fully support the federal legislation’s goal of establishing a 30-day threshold test for state income tax purposes that is fair and easy to administer and would simplify these burdens. Senator Reed has consistently advocated for the federal legislation and we thank him for his consistent support for the RI business community.
Proposed Amendment to State Tax Code Relating to Pass-Through Entities
The RI Society of CPAs, in a letter to House Majority leader Joseph Shekarchi, is in support of a proposal to amend state law pertaining to the Business Corporations Tax by adding a revised section regarding pass-through entities that have been negatively impacted by the 2017 federal Tax Reform law. The tax overhaul law set the cap on deductions for state and local taxes (SALT) on individual income tax returns used as itemized deductions to $10,000. The new law did allow deductions for state and local taxes incurred in the production of business income, provided that these taxes were paid by the entity and were not reimbursed to the owners. The problem for pass through entities is that the entity income taxes are currently not being paid by the entity, they are being paid by the individuals where they would be limited to the $10,000. The proposed amendment would allow a pass-through entity to elect to pay an entity level state income tax and pass a State tax credit for the taxes paid at the entity level down to the shareholder to be claimed against the taxpayer’s tax liability. Since this tax would be paid at the entity level it would be deductible for Federal income tax purposes providing tax relief for many small businesses. We have respectfully urged Majority Leader Shekarchi to allow this proposed amendment to state tax law to be enacted this session.
Utility Emergency Response Bill H-5327
In our letter to House Corporations Committee Chairman Robert Jacquard, we expressed our support for the Utility Emergency Response Bill, H-5327, legislation from Lt. Governor Dan McKee regarding performance guidelines and potential fines on public utilities related to emergency response situations. We wrote we believe the legislation is both fair and needed as it will improve utility preparedness and response by establishing performance guidelines and enabling the state to issue fines when guidelines are not met. Notably, all fines collected through this legislation are credited back to utility customers.
We know that as an organization with members from the ranks of CPAs, financial advisors, bankers, insurance professionals and others who are often running their own businesses, when utility companies fail to prepare for, or promptly respond to, a power outage emergency, we all feel the impact. Also, as financial professionals, our members are keenly aware of how an extended power outage can create an immense monetary burden for businesses and families.
As Rhode Island has experienced numerous extended power outages in recent years, we believe H 5327 is a reasonable and necessary response to inadequate performance by utility companies during emergencies.
President Trump is meeting in Hanoi, Vietnam this week for his second summit with North Korean leader Kim Jong Un. It’s unclear if the two will make progress toward a goal of persuading North Korea to dismantle its nuclear arsenal to remove the threat of intercontinental missiles being able to reach the West and possibly the U.S. mainland.
Meanwhile Democrats in Congress, who have stated they expect the Mueller report to be released over the coming weeks are pressuring new Attorney General William Barr to guarantee that the House Intelligence Committee will be provided access to the Mueller report when it is released. They have also stated in recent days they will subpoena Robert Mueller himself to testify before Congress on the report if they are excluded access to it.