The FY 2020 $9.6 billion-dollar state budget was recently signed by Governor Gina Raimondo. Thanks to the efforts of Speaker Mattiello and our partners at the RI Business Coalition, the final version of the budget included several bills that improve the state’s overall tax and business climate while holding the line on a variety of legislation that would have been detrimental to the business community.
Highlights of the end of the session include:
H. 5576. Pass-Through Entities Bill: was approved in the state budget, after being approved by both chambers, and now becomes law. The bill, which RISCPA member Grafton “Cap” Willey, IV, guided through the process, along with Randy Dittmar, restores an important tax deduction that was lost through the 2017 federal tax reform law and capped the State and Local Taxes (SALT) deduction at $10,000. Now that the Pass-through legislation is approved, it will allow small businesses to pay state income tax at an entity level, the same as what’s allowed for C-Corps. Those businesses can then deduct it from the federal income that is passed to the entity owners. We salute our own Cap Willey and Randy Dittmar for their efforts in helping to shape and steer this important bill through to passage!
H. 5151 Medicaid Assessment on Employers Bill: this bill, which would have forced additional fees, uncertainty and new employee costs on businesses, was pulled from consideration and is not in the state budget. RISCPA leadership worked hard to oppose this anti-employer bill with the hopes leadership will find a more sustainable way to fund this program; several business groups have offered assistance including RISCPA.
Sales taxes: Many legislative proposals for new categories of products and services to be included in the state’s sales tax did not make it to the final budget vote. Proposed sales taxes on things like commercial building services, lobbying, guns and ammunition were all defeated. The only substantial new sales tax item that was approved is a tax on digital downloads.
S. 0021 New Tax Brackets: We opposed this legislation which sought to create 3 new tax brackets for income tax in Rhode Island. We advocated against the bill with our partners in the Business Coalition, the bill was not advanced.
S. 73 & S. 74: Collection of Taxes: 10-year statute of limitations on tax collections.
These bills, which set the allowable timeframe for state tax authorities to commence enforcement and collection of back taxes to ten years, have been approved by the House. RISCPA submitted letters of testimony to support these bills when they were heard in the Senate Judiciary Committee.
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
H. 5189 Taxation-Withholding of Tax:
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. RISCPA supported the bill through a testimony letter when the House Finance Committee took testimony.
Tax Credit Program: The budget included a $210 million cap on the Rebuild RI tax credit program for any one development project. But it also included a tax credit of $25 million to be steered toward the developer of the Fane tower proposed for parcels on the 195 land in downtown Providence.
Car Tax Phase-out: Speaker Mattiello’s multi-year phase-out of the RI car tax stayed on track and was proportionately reduced in the budget. The tax is on a 6-year incremental reduction until it’s totally phased out.
Medical Marijuana legislation: Legislation addressing medical marijuana expanded the Medical Marijuana Compassion center program in the state from three to nine. The Legislation also requires the state Department of Business Regulation (DBR) to seek the approval of the General Assembly before enacting compliance rules on the medical marijuana program.
Recreational Marijuana bill did not advance.
Continuing Contracts -Evergreen Bills: Continuing Contracts Legislation:
(S. 0512) (H. 5437-A)
RISCPA strongly opposed the advancement of the so called “Evergreen” bills that would allow 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, which unfortunately was approved in recent weeks, 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. RISCPA President Melissa Travis commented earlier 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.”
H. 5008/S. 0863: A package of bills calling for comprehensive reforms for the state’s K-12 public school system was approved. The package was brought about through advocacy and collaborative efforts of RI Public Expenditure Council (RIPEC) and the RI Foundation, and includes revisions to assessment standards, curriculum frameworks and teacher licensing requirements as well as stronger school-based management practices.
RI Promise Program: The Governor’s proposal to expand the RI Promise Free Tuition program to cover the last two years of a RI College tuition was rejected; the program continues at CCRI.
URI Trustee Board: The creation of an Independent Board of Trustees for the University of Rhode Island, which would replace oversight currently performed by the State Board of Higher Education, was approved.
Workforce Training: The budget did not include the continued appropriation of $1.5 million for the RealJobsRI workforce training program. RISCPA, which launched the state’s first ever Accounting Collaborative workforce training program for college students held at RISCPA this May-June, advocated to see the grant program keep its funding. We will continue to advocate for a return of the funds.
Looming State Budget deficit: The House Fiscal office ended the session projecting a structural deficit of $75 million looms for the 2020-21 fiscal year.
The session was adjourned with a plan to possibly have the Legislature reconvene sometime this fall to consider legislation to extend the contract between the state and gaming company IGT for another twenty years. A bill to extend the contract was introduced in the final days of the session. A final decision on reconvening and a proposed date has not yet been determined.
Note from RISCPA President Travis:
The legislative session, one of the more challenging in recent memory, is now in the books and noteworthy for some of what was NOT in it, like a Medicaid tax on large employers. RISCPA advocated fiercely on behalf of members and are pleased the $9.97B budget held the line on new taxes. In addition, thanks to the efforts of Society members, several bills were passed including adding a work-around for owners of “pass through” entities whose state and local taxes exceed the new $10,000 cap on the state and local tax deduction on their federal tax returns. We applaud Cap Willey and Randy Ditmar (??) for taking the lead on this legislation. Another win for the Society is the passage of a 10-year statute of limitations on taxes, which had been stymied for years until it passed the Senate Judiciary Committee last week. The Society lobbied for this legislation along with the Rhode Island Business Coalition, Chambers and multiple business groups. We are grateful to the efforts of Speaker Nicholas Mattiello and his leadership on promoting a “pro-business, pro-economy” budget with significant investments in economic development programs (including the creation of a Small Business Development Fund) and changes to public education with increased funding and initiatives that align Rhode Island with the reform efforts that transformed the Massachusetts education system. The Speaker also led the way to reject dozens of proposed new taxes (he met with industry leaders personally to discuss items like Medicaid), continuing the car tax phase-out and increasing assistance to hospitals and nursing homes to help the most vulnerable among Rhode Island’s aging population.