Welcome to another edition of our Society's Statehouse Update, keeping you informed of the activities of local, state and federal government "on the hills" from Smith Hill to Capitol Hill!
State Government & RI Legislature Activity:
The RI Society of CPAs has taken advocacy positions on several legislative proposals and statewide issues in recent weeks. We have been monitoring major bills including:
H-5576: Pass-Through Entities Bill
RISCPA member and tax issues advocate Grafton "Cap" Willey, IV presented testimony on 5.1.19 before the House Finance committee on H-5576, legislation which would restore an important tax deduction that was changed through the 2017 Federal Tax Reform bill. The change put a cap on an entity's utilization of the State and Local Taxes (SALT) deduction at $10,000, a cap that has hurt many small businesses in a high tax state such as RI. The bill would allow a pass-through entity to elect to pay the state income tax at the entity level the same as a C-Corp. and then deduct it from the federal income that is passed to the entity owners. It basically restores fairness in the treatment of income between smaller and larger entities. The legislation would also be revenue neutral to the state. RISCPA President Melissa Travis also submitted a testimony letter urging passage of the bill along with members of the RI Business Coalition. House Majority Leader Joseph Shekarchi, who supports the bill, led off the hearing and introduced Cap Willey to give a detailed explanation of the bill. RISCPA member Randy Dittmar testified, as did the Greater Providence Chamber of Commerce and a representative of the State Treasurer's office. A supportive letter from state Commerce Secretary Stephan Pryor was also presented. The bill's chances of passage look extremely positive and RISCPA salutes our own Cap Willey and Randy Dittmar for the comprehensive efforts they have made to advance the bill to this stage.
S. 234 Consumer Privacy Protection Act: RISCPA, along with our partners in the RI Business Coalition, opposes this legislation that would create a consumer data protection policy in Rhode Island with unworkable compliance issues, potential for misuse of data, and overly costly burdens on businesses across the state. It would require businesses that collect and sell personal information from consumers to notify those consumers, to disclose what information they are collecting, and to tell consumers what they use it for. The legislation would also require such businesses to provide consumers with an option to opt out of the data collection process, and to have their information deleted. Any business with a web presence in RI, whether headquartered here or not, would be required to overhaul their data management practices and sort all potentially identifiable data in their possession to individual Rhode Island residents.
This legislation would make Rhode Island a national outlier, as few states have implemented such a restrictive data-protection policy and would create another significant deterrent for companies looking to do business in Rhode Island, thus undermining the state's economic development goals. An alternative proposal, calling for the establishment of a legislative Study Commission to examine more reasonable consumer data protection policies is also currently under review by legislators. The Committee recommended the bill be held for further study. There is no House companion bill. RISCPA President Melissa Travis commented on the legislation. "The Society has been working with our national partners opposed to this legislation and the implications it poses for issues of privacy, cost, and data storage security among other concerns," she says. "The potential for misuse of data access is a very real concern. It should be noted that a Russian owned software firm has been the leading advocate promoting these types of bills across the country. We share the concerns of those opposed to this legislation including auditors, attorneys general, other financial sector professionals and law enforcement."
Continuing Contracts -Evergreen Bills: Continuing Contracts Legislation:
In recent weeks, both the Senate (S 0512) and House (H5437A) approved Continuing Contracts legislation, or "Evergreen" bills that would allow an expired municipal employee contract to remain in place and extend indefinitely while negotiations for a new contract continue. The package of bills, that would apply to police, fire, municipal employees and teachers, are considered a significant threat to the individual and business taxpayer and are opposed by the Business Coalition, RISCPA, chambers of commerce and the RI League of Cities and Towns. The legislation would prevent a city or town from having any meaningful leverage in contract negotiations and would essentially cut off their ability to implement a pay freeze or reduction or increase health benefit co-pays to balance their municipal budgets. RI League of Cities and Towns Executive Director Brain Daniels stated that these bills could result in 75% of a municipal budget becoming untouchable, resulting in maximum property tax increases and reductions of services in other areas. The bills had earlier cleared both the Senate and House Committees on Labor. It will now be up to the Governor to decide to either approve or veto the bills. RISCPA President Melissa Travis commented on the legislation. "The Governor vetoed an earlier version of this legislation in 2017. Municipal leaders and employees have been able to succeed in reaching compromises on contracts through the collective bargaining process, and municipal leaders have stated these bills would be devastating to local budgets and governing and will certainly produce new taxes."
S. 73 & S. 74: Collection of Taxes: Ten -Year Commencement of Action Requirement
RISCPA submitted letters of testimony to support two bills that were heard in the Senate Judiciary Committee on April 30 addressing the allowable timeframe for enforcement and collection of back taxes. S. 73 addresses personal income tax collection and calls for a ten-year period limit by which the state Tax Administrator may commence any action for collection of personal income tax, tied to the filing date by which the tax was originally owed. S 74 addresses the same issue as it applies to Sales and Use tax for businesses and calls for an allowable period of no more than ten years for state tax authorities to commence a collection action of taxes tied to the filing date when the tax was originally owed.
"While we believe the pursuit of back taxes is appropriate, we also feel that fairness to the personal or business taxpayer requires a proper notification from state tax authorities be undertaken within a ten-year timeframe from the April 15 date at which a tax return would have been filed," stated RISCPA President Melissa Travis in testimony letters submitted to Senate Judiciary Committee Chair Erin Lynch Prata.
H. 5189 Taxation-Withholding of Tax: RISCPA submitted a letter of testimony to House Finance Committee Chairman Marvin Abney supporting H5189, concerning corporations that sell real estate and non-resident withholding requirements. The bill calls for a 7% tax rate to be applied to the non-resident withholding provisions for a corporation that sells real estate, aligning with the 7% that is already applied to non-resident withholding for a corporate income tax rate. The Committee took testimony on April 30.
Washington, DC: On Capitol Hill the battle continues between Congressional committees and the Trump White House following Democrats' criticism of Attorney General William Barr and his handling of the release of the Mueller report. In recent days the House Judiciary Committee has indicated Special Counsel Robert Mueller himself will be called to testify before Congress this month. The announcement has angered President Trump who says the ongoing congressional hearings are unnecessary and he now opposes seeing Mueller testify about his inquiry.