Rhode Island 2025 Regular Session

Rhode Island Senate Bill S0106 Compare Versions

Only one version of the bill is available at this time.

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5	5	2025 -- S 0106
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7	7	LC000136
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9	9	S T A T E O F R H O D E I S L A N D
10	10	IN GENERAL ASSEMBLY
11	11	JANUARY SESSION, A.D. 2025
12	12	____________
13	13
14	14	A N A C T
15	15	RELATING TO TAXATION -- PERSONAL INCOME TAX
16	16	Introduced By: Senators Sosnowski, and Pearson
17	17	Date Introduced: January 31, 2025
18	18	Referred To: Senate Finance
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20	20
21	21	It is enacted by the General Assembly as follows:
22	22	SECTION 1. Section 44-30-12 of the General Laws in Chapter 44-30 entitled "Personal 1
23	23	Income Tax" is hereby amended to read as follows: 2
24	24	44-30-12. Rhode Island income of a resident individual. [Effective January 1, 2025.] 3
25	25	(a) General. The Rhode Island income of a resident individual means the individual’s 4
26	26	adjusted gross income for federal income tax purposes, with the modifications specified in this 5
27	27	section. 6
28	28	(b) Modifications increasing federal adjusted gross income. There shall be added to 7
29	29	federal adjusted gross income: 8
30	30	(1) Interest income on obligations of any state, or its political subdivisions, other than 9
31	31	Rhode Island or its political subdivisions; 10
32	32	(2) Interest or dividend income on obligations or securities of any authority, commission, 11
33	33	or instrumentality of the United States, but not of Rhode Island or its political subdivisions, to the 12
34	34	extent exempted by the laws of the United States from federal income tax but not from state income 13
35	35	taxes; 14
36	36	(3) The modification described in § 44-30-25(g); 15
37	37	(4)(i) The amount defined below of a nonqualified withdrawal made from an account in 16
38	38	the tuition savings program pursuant to § 16-57-6.1. For purposes of this section, a nonqualified 17
39	39	withdrawal is: 18
40	40	(A) A transfer or rollover to a qualified tuition program under Section 529 of the Internal 19
41	41
42	42
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44	44	Revenue Code, 26 U.S.C. § 529, other than to the tuition savings program referred to in § 16-57-1
45	45	6.1; and 2
46	46	(B) A withdrawal or distribution that is: 3
47	47	(I) Not applied on a timely basis to pay “qualified higher education expenses” as defined 4
48	48	in § 16-57-3(12) of the beneficiary of the account from which the withdrawal is made; 5
49	49	(II) Not made for a reason referred to in § 16-57-6.1(e); or 6
50	50	(III) Not made in other circumstances for which an exclusion from tax made applicable by 7
51	51	Section 529 of the Internal Revenue Code, 26 U.S.C. § 529, pertains if the transfer, rollover, 8
52	52	withdrawal, or distribution is made within two (2) taxable years following the taxable year for 9
53	53	which a contributions modification pursuant to subsection (c)(4) of this section is taken based on 10
54	54	contributions to any tuition savings program account by the person who is the participant of the 11
55	55	account at the time of the contribution, whether or not the person is the participant of the account 12
56	56	at the time of the transfer, rollover, withdrawal, or distribution; 13
57	57	(ii) In the event of a nonqualified withdrawal under subsection (b)(4)(i)(A) or (b)(4)(i)(B) 14
58	58	of this section, there shall be added to the federal adjusted gross income of that person for the 15
59	59	taxable year of the withdrawal an amount equal to the lesser of: 16
60	60	(A) The amount equal to the nonqualified withdrawal reduced by the sum of any 17
61	61	administrative fee or penalty imposed under the tuition savings program in connection with the 18
62	62	nonqualified withdrawal plus the earnings portion thereof, if any, includible in computing the 19
63	63	person’s federal adjusted gross income for the taxable year; and 20
64	64	(B) The amount of the person’s contribution modification pursuant to subsection (c)(4) of 21
65	65	this section for the person’s taxable year of the withdrawal and the two (2) prior taxable years less 22
66	66	the amount of any nonqualified withdrawal for the two (2) prior taxable years included in 23
67	67	computing the person’s Rhode Island income by application of this subsection for those years. Any 24
68	68	amount added to federal adjusted gross income pursuant to this subdivision shall constitute Rhode 25
69	69	Island income for residents, nonresidents, and part-year residents; 26
70	70	(5) The modification described in § 44-30-25.1(d)(3)(i); 27
71	71	(6) The amount equal to any unemployment compensation received but not included in 28
72	72	federal adjusted gross income; 29
73	73	(7) The amount equal to the deduction allowed for sales tax paid for a purchase of a 30
74	74	qualified motor vehicle as defined by the Internal Revenue Code § 164(a)(6); and 31
75	75	(8) For any taxable year beginning on or after January 1, 2020, the amount of any Paycheck 32
76	76	Protection Program loan forgiven for federal income tax purposes as authorized by the Coronavirus 33
77	77	Aid, Relief, and Economic Security Act and/or the Consolidated Appropriations Act, 2021 and/or 34
78	78
79	79
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81	81	any other subsequent federal stimulus relief packages enacted by law, to the extent that the amount 1
82	82	of the loan forgiven exceeds $250,000, including an individual’s distributive share of the amount 2
83	83	of a pass-through entity’s loan forgiveness in excess of $250,000. 3
84	84	(c) Modifications reducing federal adjusted gross income. There shall be subtracted 4
85	85	from federal adjusted gross income: 5
86	86	(1) Any interest income on obligations of the United States and its possessions to the extent 6
87	87	includible in gross income for federal income tax purposes, and any interest or dividend income on 7
88	88	obligations, or securities of any authority, commission, or instrumentality of the United States to 8
89	89	the extent includible in gross income for federal income tax purposes but exempt from state income 9
90	90	taxes under the laws of the United States; provided, that the amount to be subtracted shall in any 10
91	91	case be reduced by any interest on indebtedness incurred or continued to purchase or carry 11
92	92	obligations or securities the income of which is exempt from Rhode Island personal income tax, to 12
93	93	the extent the interest has been deducted in determining federal adjusted gross income or taxable 13
94	94	income; 14
95	95	(2) A modification described in § 44-30-25(f) or § 44-30-1.1(c)(1); 15
96	96	(3) The amount of any withdrawal or distribution from the “tuition savings program” 16
97	97	referred to in § 16-57-6.1 that is included in federal adjusted gross income, other than a withdrawal 17
98	98	or distribution or portion of a withdrawal or distribution that is a nonqualified withdrawal; 18
99	99	(4) Contributions made to an account under the tuition savings program, including the 19
100	100	“contributions carryover” pursuant to subsection (c)(4)(iv) of this section, if any, subject to the 20
101	101	following limitations, restrictions, and qualifications: 21
102	102	(i) The aggregate subtraction pursuant to this subdivision for any taxable year of the 22
103	103	taxpayer shall not exceed five hundred dollars ($500) or one thousand dollars ($1,000) if a joint 23
104	104	return; 24
105	105	(ii) The following shall not be considered contributions: 25
106	106	(A) Contributions made by any person to an account who is not a participant of the account 26
107	107	at the time the contribution is made; 27
108	108	(B) Transfers or rollovers to an account from any other tuition savings program account or 28
109	109	from any other “qualified tuition program” under section 529 of the Internal Revenue Code, 26 29
110	110	U.S.C. § 529; or 30
111	111	(C) A change of the beneficiary of the account; 31
112	112	(iii) The subtraction pursuant to this subdivision shall not reduce the taxpayer’s federal 32
113	113	adjusted gross income to less than zero (0); 33
114	114	(iv) The contributions carryover to a taxable year for purpose of this subdivision is the 34
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118	118	excess, if any, of the total amount of contributions actually made by the taxpayer to the tuition 1
119	119	savings program for all preceding taxable years for which this subsection is effective over the sum 2
120	120	of: 3
121	121	(A) The total of the subtractions under this subdivision allowable to the taxpayer for all 4
122	122	such preceding taxable years; and 5
123	123	(B) That part of any remaining contribution carryover at the end of the taxable year which 6
124	124	exceeds the amount of any nonqualified withdrawals during the year and the prior two (2) taxable 7
125	125	years not included in the addition provided for in this subdivision for those years. Any such part 8
126	126	shall be disregarded in computing the contributions carryover for any subsequent taxable year; 9
127	127	(v) For any taxable year for which a contributions carryover is applicable, the taxpayer 10
128	128	shall include a computation of the carryover with the taxpayer’s Rhode Island personal income tax 11
129	129	return for that year, and if for any taxable year on which the carryover is based the taxpayer filed a 12
130	130	joint Rhode Island personal income tax return but filed a return on a basis other than jointly for a 13
131	131	subsequent taxable year, the computation shall reflect how the carryover is being allocated between 14
132	132	the prior joint filers; 15
133	133	(5) The modification described in § 44-30-25.1(d)(1); 16
134	134	(6) Amounts deemed taxable income to the taxpayer due to payment or provision of 17
135	135	insurance benefits to a dependent, including a domestic partner pursuant to chapter 12 of title 36 or 18
136	136	other coverage plan; 19
137	137	(7) Modification for organ transplantation. 20
138	138	(i) An individual may subtract up to ten thousand dollars ($10,000) from federal adjusted 21
139	139	gross income if the individual, while living, donates one or more of their human organs to another 22
140	140	human being for human organ transplantation, except that for purposes of this subsection, “human 23
141	141	organ” means all or part of a liver, pancreas, kidney, intestine, lung, or bone marrow. A subtract 24
142	142	modification that is claimed hereunder may be claimed in the taxable year in which the human 25
143	143	organ transplantation occurs. 26
144	144	(ii) An individual may claim that subtract modification hereunder only once, and the 27
145	145	subtract modification may be claimed for only the following unreimbursed expenses that are 28
146	146	incurred by the claimant and related to the claimant’s organ donation: 29
147	147	(A) Travel expenses. 30
148	148	(B) Lodging expenses. 31
149	149	(C) Lost wages. 32
150	150	(iii) The subtract modification hereunder may not be claimed by a part-time resident or a 33
151	151	nonresident of this state; 34
152	152
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155	155	(8) Modification for taxable Social Security income. 1
156	156	(i) For tax years beginning on or after January 1, 2016: 2
157	157	(A) For a person who has attained the age used for calculating full or unreduced Social 3
158	158	Security retirement benefits who files a return as an unmarried individual, head of household, or 4
159	159	married filing separate whose federal adjusted gross income for the taxable year is less than eighty 5
160	160	thousand dollars ($80,000); or 6
161	161	(B) A married individual filing jointly or individual filing qualifying widow(er) who has 7
162	162	attained the age used for calculating full or unreduced Social Security retirement benefits whose 8
163	163	joint federal adjusted gross income for the taxable year is less than one hundred thousand dollars 9
164	164	($100,000), an amount equal to the Social Security benefits includible in federal adjusted gross 10
165	165	income. 11
166	166	(ii) Adjustment for inflation. The dollar amount contained in subsections (c)(8)(i)(A) and 12
167	167	(c)(8)(i)(B) of this section shall be increased annually by an amount equal to: 13
168	168	(A) Such dollar amount contained in subsections (c)(8)(i)(A) and (c)(8)(i)(B) of this section 14
169	169	adjusted for inflation using a base tax year of 2000, multiplied by; 15
170	170	(B) The cost-of-living adjustment with a base year of 2000. 16
171	171	(iii) For the purposes of this section the cost-of-living adjustment for any calendar year is 17
172	172	the percentage (if any) by which the consumer price index for the preceding calendar year exceeds 18
173	173	the consumer price index for the base year. The consumer price index for any calendar year is the 19
174	174	average of the consumer price index as of the close of the twelve-month (12) period ending on 20
175	175	August 31, of such calendar year. 21
176	176	(iv) For the purpose of this section the term “consumer price index” means the last 22
177	177	consumer price index for all urban consumers published by the department of labor. For the purpose 23
178	178	of this section the revision of the consumer price index which is most consistent with the consumer 24
179	179	price index for calendar year 1986 shall be used. 25
180	180	(v) If any increase determined under this section is not a multiple of fifty dollars ($50.00), 26
181	181	such increase shall be rounded to the next lower multiple of fifty dollars ($50.00). In the case of a 27
182	182	married individual filing separate return, if any increase determined under this section is not a 28
183	183	multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower multiple 29
184	184	of twenty-five dollars ($25.00); 30
185	185	(9) Modification of taxable retirement income from certain pension plans or 31
186	186	annuities. 32
187	187	(i) For tax years beginning on or after January 1, 2017, until the tax year beginning January 33
188	188	1, 2022, a modification shall be allowed for up to fifteen thousand dollars ($15,000), and for tax 34
189	189
190	190
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192	192	years beginning on or after January 1, 2023, until the tax year beginning January 1, 2024, a 1
193	193	modification shall be allowed for up to twenty thousand dollars ($20,000), and for tax years 2
194	194	beginning on or after January 1, 2025, a modification shall be allowed for up to fifty thousand 3
195	195	dollars ($50,000), of taxable pension and/or annuity income that is included in federal adjusted 4
196	196	gross income for the taxable year: 5
197	197	(A) For a person who has attained the age used for calculating full or unreduced Social 6
198	198	Security retirement benefits who files a return as an unmarried individual, head of household, or 7
199	199	married filing separate whose federal adjusted gross income for such taxable year is less than the 8
200	200	amount used for the modification contained in subsection (c)(8)(i)(A) of this section an amount not 9
201	201	to exceed $15,000 for tax years beginning on or after January 1, 2017, until the tax year beginning 10
202	202	January 1, 2022, and an amount not to exceed twenty thousand dollars ($20,000) for tax years 11
203	203	beginning on or after January 1, 2023, until the tax year beginning January 1, 2024, and an amount 12
204	204	not to exceed fifty thousand dollars ($50,000) for tax years beginning on or after January 1, 2025, 13
205	205	of taxable pension and/or annuity income includible in federal adjusted gross income; or 14
206	206	(B) For a married individual filing jointly or individual filing qualifying widow(er) who 15
207	207	has attained the age used for calculating full or unreduced Social Security retirement benefits whose 16
208	208	joint federal adjusted gross income for such taxable year is less than the amount used for the 17
209	209	modification contained in subsection (c)(8)(i)(B) of this section an amount not to exceed $15,000 18
210	210	for tax years beginning on or after January 1, 2017, until the tax year beginning January 1, 2022, 19
211	211	and an amount not to exceed twenty thousand dollars ($20,000) for tax years beginning on or after 20
212	212	January 1, 2023, until the tax year beginning January 1, 2024, and an amount not to exceed fifty 21
213	213	thousand dollars ($50,000) for tax years beginning on or after January 1, 2025, of taxable pension 22
214	214	and/or annuity income includible in federal adjusted gross income. 23
215	215	(ii) Adjustment for inflation. The dollar amount contained by reference in subsections 24
216	216	(c)(9)(i)(A) and (c)(9)(i)(B) of this section shall be increased annually for tax years beginning on 25
217	217	or after January 1, 2018, by an amount equal to: 26
218	218	(A) Such dollar amount contained by reference in subsections (c)(9)(i)(A) and (c)(9)(i)(B) 27
219	219	of this section adjusted for inflation using a base tax year of 2000, multiplied by; 28
220	220	(B) The cost-of-living adjustment with a base year of 2000. 29
221	221	(iii) For the purposes of this section, the cost-of-living adjustment for any calendar year is 30
222	222	the percentage (if any) by which the consumer price index for the preceding calendar year exceeds 31
223	223	the consumer price index for the base year. The consumer price index for any calendar year is the 32
224	224	average of the consumer price index as of the close of the twelve-month (12) period ending on 33
225	225	August 31, of such calendar year. 34
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229	229	(iv) For the purpose of this section, the term “consumer price index” means the last 1
230	230	consumer price index for all urban consumers published by the department of labor. For the purpose 2
231	231	of this section, the revision of the consumer price index which is most consistent with the consumer 3
232	232	price index for calendar year 1986 shall be used. 4
233	233	(v) If any increase determined under this section is not a multiple of fifty dollars ($50.00), 5
234	234	such increase shall be rounded to the next lower multiple of fifty dollars ($50.00). In the case of a 6
235	235	married individual filing a separate return, if any increase determined under this section is not a 7
236	236	multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower multiple 8
237	237	of twenty-five dollars ($25.00). 9
238	238	(vi) For tax years beginning on or after January 1, 2022, the dollar amount contained by 10
239	239	reference in subsection (c)(9)(i)(A) shall be adjusted to equal the dollar amount contained in 11
240	240	subsection (c)(8)(i)(A), as adjusted for inflation, and the dollar amount contained by reference in 12
241	241	subsection(c)(9)(i)(B) shall be adjusted to equal the dollar amount contained in subsection 13
242	242	(c)(8)(i)(B), as adjusted for inflation; 14
243	243	(10) Modification for Rhode Island investment in opportunity zones. For purposes of 15
244	244	a taxpayer’s state tax liability, in the case of any investment in a Rhode Island opportunity zone by 16
245	245	the taxpayer for at least seven (7) years, a modification to income shall be allowed for the 17
246	246	incremental difference between the benefit allowed under 26 U.S.C. § 1400Z-2(b)(2)(B)(iv) and 18
247	247	the federal benefit allowed under 26 U.S.C. § 1400Z-2(c); 19
248	248	(11) Modification for military service pensions. 20
249	249	(i) For purposes of a taxpayer’s state tax liability, a modification to income shall be allowed 21
250	250	as follows: 22
251	251	(A) For the tax years beginning on January 1, 2023, a taxpayer may subtract from federal 23
252	252	adjusted gross income the taxpayer’s military service pension benefits included in federal adjusted 24
253	253	gross income; 25
254	254	(ii) As used in this subsection, the term “military service” shall have the same meaning as 26
255	255	set forth in 20 C.F.R. § 212.2; 27
256	256	(iii) At no time shall the modification allowed under this subsection alone or in conjunction 28
257	257	with subsection (c)(9) exceed the amount of the military service pension received in the tax year 29
258	258	for which the modification is claimed; 30
259	259	(12) Any rebate issued to the taxpayer pursuant to § 44-30-103 to the extent included in 31
260	260	gross income for federal tax purposes; and 32
261	261	(13) For tax years beginning on or after January 1, 2025, in the case of a taxpayer that is 33
262	262	licensed in accordance with chapters 28.6 and/or 28.11 of title 21, the amount equal to any 34
263	263
264	264
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266	266	expenditure that is eligible to be claimed as a federal income tax deduction but is disallowed under 1
267	267	26 U.S.C. § 280E. 2
268	268	(14) Modification for foreign service officers. 3
269	269	(i) For purposes of a taxpayer's state tax liability, a modification to income shall be allowed 4
270	270	as follows: 5
271	271	(A) For the tax years beginning on January 1, 2026, a taxpayer may subtract from federal 6
272	272	adjusted gross income the taxpayer's foreign service officer's pension benefits included in federal 7
273	273	adjusted gross income; 8
274	274	(ii) As used in this section, the term "foreign service officer" shall have the same meaning 9
275	275	as defined in § 103 of the Foreign Service Act of 1980, and 22 U.S.C. § 3903, and appointed 10
276	276	pursuant to the provisions of 22 C.F.R. § 11. 11
277	277	(d) Modification for Rhode Island fiduciary adjustment. There shall be added to, or 12
278	278	subtracted from, federal adjusted gross income (as the case may be) the taxpayer’s share, as 13
279	279	beneficiary of an estate or trust, of the Rhode Island fiduciary adjustment determined under § 44-14
280	280	30-17. 15
281	281	(e) Partners. The amounts of modifications required to be made under this section by a 16
282	282	partner, which relate to items of income or deduction of a partnership, shall be determined under § 17
283	283	44-30-15. 18
284	284	SECTION 2. This act shall take effect upon passage. 19
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291	291	EXPLANATION
292	292	BY THE LEGISLATIVE COUNCIL
293	293	OF
294	294	A N A C T
295	295	RELATING TO TAXATION -- PERSONAL INCOME TAX
296	296	***
297	297	This act would amend modifications to income tax for residents to now include an 1
298	298	exemption for a foreign service officer's pension. 2
299	299	This act would take effect upon passage. 3
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301	301	LC000136
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