Rhode Island 2025 Regular Session

Rhode Island Senate Bill S0776 Compare Versions

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

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5	5	2025 -- S 0776
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7	7	LC002444
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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 Felag, Tikoian, Patalano, Burke, Ciccone, Raptakis, DiPalma,
17	17	Murray, LaMountain, and Sosnowski
18	18	Date Introduced: March 14, 2025
19	19	Referred To: Senate Finance
20	20
21	21
22	22	It is enacted by the General Assembly as follows:
23	23	SECTION 1. Section 44-30-12 of the General Laws in Chapter 44-30 entitled "Personal 1
24	24	Income Tax" is hereby amended to read as follows: 2
25	25	44-30-12. Rhode Island income of a resident individual. [Effective January 1, 2025.] 3
26	26	(a) General. The Rhode Island income of a resident individual means the individual’s 4
27	27	adjusted gross income for federal income tax purposes, with the modifications specified in this 5
28	28	section. 6
29	29	(b) Modifications increasing federal adjusted gross income. There shall be added to 7
30	30	federal adjusted gross income: 8
31	31	(1) Interest income on obligations of any state, or its political subdivisions, other than 9
32	32	Rhode Island or its political subdivisions; 10
33	33	(2) Interest or dividend income on obligations or securities of any authority, commission, 11
34	34	or instrumentality of the United States, but not of Rhode Island or its political subdivisions, to the 12
35	35	extent exempted by the laws of the United States from federal income tax but not from state income 13
36	36	taxes; 14
37	37	(3) The modification described in § 44-30-25(g); 15
38	38	(4)(i) The amount defined below of a nonqualified withdrawal made from an account in 16
39	39	the tuition savings program pursuant to § 16-57-6.1. For purposes of this section, a nonqualified 17
40	40	withdrawal is: 18
41	41	(A) A transfer or rollover to a qualified tuition program under Section 529 of the Internal 19
42	42
43	43
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45	45	Revenue Code, 26 U.S.C. § 529, other than to the tuition savings program referred to in § 16-57-1
46	46	6.1; and 2
47	47	(B) A withdrawal or distribution that is: 3
48	48	(I) Not applied on a timely basis to pay “qualified higher education expenses” as defined 4
49	49	in § 16-57-3(12) of the beneficiary of the account from which the withdrawal is made; 5
50	50	(II) Not made for a reason referred to in § 16-57-6.1(e); or 6
51	51	(III) Not made in other circumstances for which an exclusion from tax made applicable by 7
52	52	Section 529 of the Internal Revenue Code, 26 U.S.C. § 529, pertains if the transfer, rollover, 8
53	53	withdrawal, or distribution is made within two (2) taxable years following the taxable year for 9
54	54	which a contributions modification pursuant to subsection (c)(4) of this section is taken based on 10
55	55	contributions to any tuition savings program account by the person who is the participant of the 11
56	56	account at the time of the contribution, whether or not the person is the participant of the account 12
57	57	at the time of the transfer, rollover, withdrawal, or distribution; 13
58	58	(ii) In the event of a nonqualified withdrawal under subsection (b)(4)(i)(A) or (b)(4)(i)(B) 14
59	59	of this section, there shall be added to the federal adjusted gross income of that person for the 15
60	60	taxable year of the withdrawal an amount equal to the lesser of: 16
61	61	(A) The amount equal to the nonqualified withdrawal reduced by the sum of any 17
62	62	administrative fee or penalty imposed under the tuition savings program in connection with the 18
63	63	nonqualified withdrawal plus the earnings portion thereof, if any, includible in computing the 19
64	64	person’s federal adjusted gross income for the taxable year; and 20
65	65	(B) The amount of the person’s contribution modification pursuant to subsection (c)(4) of 21
66	66	this section for the person’s taxable year of the withdrawal and the two (2) prior taxable years less 22
67	67	the amount of any nonqualified withdrawal for the two (2) prior taxable years included in 23
68	68	computing the person’s Rhode Island income by application of this subsection for those years. Any 24
69	69	amount added to federal adjusted gross income pursuant to this subdivision shall constitute Rhode 25
70	70	Island income for residents, nonresidents, and part-year residents; 26
71	71	(5) The modification described in § 44-30-25.1(d)(3)(i); 27
72	72	(6) The amount equal to any unemployment compensation received but not included in 28
73	73	federal adjusted gross income; 29
74	74	(7) The amount equal to the deduction allowed for sales tax paid for a purchase of a 30
75	75	qualified motor vehicle as defined by the Internal Revenue Code § 164(a)(6); and 31
76	76	(8) For any taxable year beginning on or after January 1, 2020, the amount of any Paycheck 32
77	77	Protection Program loan forgiven for federal income tax purposes as authorized by the Coronavirus 33
78	78	Aid, Relief, and Economic Security Act and/or the Consolidated Appropriations Act, 2021 and/or 34
79	79
80	80
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82	82	any other subsequent federal stimulus relief packages enacted by law, to the extent that the amount 1
83	83	of the loan forgiven exceeds $250,000, including an individual’s distributive share of the amount 2
84	84	of a pass-through entity’s loan forgiveness in excess of $250,000. 3
85	85	(c) Modifications reducing federal adjusted gross income. There shall be subtracted 4
86	86	from federal adjusted gross income: 5
87	87	(1) Any interest income on obligations of the United States and its possessions to the extent 6
88	88	includible in gross income for federal income tax purposes, and any interest or dividend income on 7
89	89	obligations, or securities of any authority, commission, or instrumentality of the United States to 8
90	90	the extent includible in gross income for federal income tax purposes but exempt from state income 9
91	91	taxes under the laws of the United States; provided, that the amount to be subtracted shall in any 10
92	92	case be reduced by any interest on indebtedness incurred or continued to purchase or carry 11
93	93	obligations or securities the income of which is exempt from Rhode Island personal income tax, to 12
94	94	the extent the interest has been deducted in determining federal adjusted gross income or taxable 13
95	95	income; 14
96	96	(2) A modification described in § 44-30-25(f) or § 44-30-1.1(c)(1); 15
97	97	(3) The amount of any withdrawal or distribution from the “tuition savings program” 16
98	98	referred to in § 16-57-6.1 that is included in federal adjusted gross income, other than a withdrawal 17
99	99	or distribution or portion of a withdrawal or distribution that is a nonqualified withdrawal; 18
100	100	(4) Contributions made to an account under the tuition savings program, including the 19
101	101	“contributions carryover” pursuant to subsection (c)(4)(iv) of this section, if any, subject to the 20
102	102	following limitations, restrictions, and qualifications: 21
103	103	(i) The aggregate subtraction pursuant to this subdivision for any taxable year of the 22
104	104	taxpayer shall not exceed five hundred dollars ($500) or one thousand dollars ($1,000) if a joint 23
105	105	return; 24
106	106	(ii) The following shall not be considered contributions: 25
107	107	(A) Contributions made by any person to an account who is not a participant of the account 26
108	108	at the time the contribution is made; 27
109	109	(B) Transfers or rollovers to an account from any other tuition savings program account or 28
110	110	from any other “qualified tuition program” under section 529 of the Internal Revenue Code, 26 29
111	111	U.S.C. § 529; or 30
112	112	(C) A change of the beneficiary of the account; 31
113	113	(iii) The subtraction pursuant to this subdivision shall not reduce the taxpayer’s federal 32
114	114	adjusted gross income to less than zero (0); 33
115	115	(iv) The contributions carryover to a taxable year for purpose of this subdivision is the 34
116	116
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119	119	excess, if any, of the total amount of contributions actually made by the taxpayer to the tuition 1
120	120	savings program for all preceding taxable years for which this subsection is effective over the sum 2
121	121	of: 3
122	122	(A) The total of the subtractions under this subdivision allowable to the taxpayer for all 4
123	123	such preceding taxable years; and 5
124	124	(B) That part of any remaining contribution carryover at the end of the taxable year which 6
125	125	exceeds the amount of any nonqualified withdrawals during the year and the prior two (2) taxable 7
126	126	years not included in the addition provided for in this subdivision for those years. Any such part 8
127	127	shall be disregarded in computing the contributions carryover for any subsequent taxable year; 9
128	128	(v) For any taxable year for which a contributions carryover is applicable, the taxpayer 10
129	129	shall include a computation of the carryover with the taxpayer’s Rhode Island personal income tax 11
130	130	return for that year, and if for any taxable year on which the carryover is based the taxpayer filed a 12
131	131	joint Rhode Island personal income tax return but filed a return on a basis other than jointly for a 13
132	132	subsequent taxable year, the computation shall reflect how the carryover is being allocated between 14
133	133	the prior joint filers; 15
134	134	(5) The modification described in § 44-30-25.1(d)(1); 16
135	135	(6) Amounts deemed taxable income to the taxpayer due to payment or provision of 17
136	136	insurance benefits to a dependent, including a domestic partner pursuant to chapter 12 of title 36 or 18
137	137	other coverage plan; 19
138	138	(7) Modification for organ transplantation. 20
139	139	(i) An individual may subtract up to ten thousand dollars ($10,000) from federal adjusted 21
140	140	gross income if the individual, while living, donates one or more of their human organs to another 22
141	141	human being for human organ transplantation, except that for purposes of this subsection, “human 23
142	142	organ” means all or part of a liver, pancreas, kidney, intestine, lung, or bone marrow. A subtract 24
143	143	modification that is claimed hereunder may be claimed in the taxable year in which the human 25
144	144	organ transplantation occurs. 26
145	145	(ii) An individual may claim that subtract modification hereunder only once, and the 27
146	146	subtract modification may be claimed for only the following unreimbursed expenses that are 28
147	147	incurred by the claimant and related to the claimant’s organ donation: 29
148	148	(A) Travel expenses. 30
149	149	(B) Lodging expenses. 31
150	150	(C) Lost wages. 32
151	151	(iii) The subtract modification hereunder may not be claimed by a part-time resident or a 33
152	152	nonresident of this state; 34
153	153
154	154
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156	156	(8) Modification for taxable Social Security income. 1
157	157	(i) For tax years beginning on or after January 1, 2016 through December 31, 2024: 2
158	158	(A) For a person who has attained the age used for calculating full or unreduced Social 3
159	159	Security retirement benefits who files a return as an unmarried individual, head of household, or 4
160	160	married filing separate whose federal adjusted gross income for the taxable year is less than eighty 5
161	161	thousand dollars ($80,000); or 6
162	162	(B) A married individual filing jointly or individual filing qualifying widow(er) who has 7
163	163	attained the age used for calculating full or unreduced Social Security retirement benefits whose 8
164	164	joint federal adjusted gross income for the taxable year is less than one hundred thousand dollars 9
165	165	($100,000), an amount equal to the Social Security benefits includible in federal adjusted gross 10
166	166	income. 11
167	167	(ii) For tax years beginning on or after January 1, 2025: 12
168	168	(A) For a person who has attained the age used for calculating full or unreduced Social 13
169	169	Security retirement benefits who files a return as an unmarried individual, head of household, or 14
170	170	married filing separate whose federal adjusted gross income for the taxable year is less than one 15
171	171	hundred twenty-five thousand dollars ($125,000); or 16
172	172	(B) A married individual filing jointly or individual filing qualifying widow(er) who has 17
173	173	attained the age used for calculating full or unreduced Social Security retirement benefits whose 18
174	174	joint federal adjusted gross income for the taxable year is less than one hundred seventy thousand 19
175	175	dollars ($170,000), an amount equal to the Social Security benefits includible in federal adjusted 20
176	176	gross income. 21
177	177	(ii)(iii) Adjustment for inflation. The dollar amount contained in subsections 22
178	178	(c)(8)(i)(ii)(A) and (c)(8)(i)(ii)(B) of this section shall be increased annually by an amount equal 23
179	179	to: 24
180	180	(A) Such dollar amount contained in subsections (c)(8)(i)(ii)(A) and (c)(8)(i)(ii)(B) of this 25
181	181	section adjusted for inflation using a base tax year of 2000, multiplied by; 26
182	182	(B) The cost-of-living adjustment with a base year of 2000. 27
183	183	(iii)(iv) For the purposes of this section the cost-of-living adjustment for any calendar year 28
184	184	is the percentage (if any) by which the consumer price index for the preceding calendar year 29
185	185	exceeds the consumer price index for the base year. The consumer price index for any calendar 30
186	186	year is the average of the consumer price index as of the close of the twelve-month (12) period 31
187	187	ending on August 31, of such calendar year. 32
188	188	(iv)(v) For the purpose of this section the term “consumer price index” means the last 33
189	189	consumer price index for all urban consumers published by the department of labor. For the purpose 34
190	190
191	191
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193	193	of this section the revision of the consumer price index which is most consistent with the consumer 1
194	194	price index for calendar year 1986 shall be used. 2
195	195	(v)(vi) If any increase determined under this section is not a multiple of fifty dollars 3
196	196	($50.00), such increase shall be rounded to the next lower multiple of fifty dollars ($50.00). In the 4
197	197	case of a married individual filing separate return, if any increase determined under this section is 5
198	198	not a multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower 6
199	199	multiple of twenty-five dollars ($25.00); 7
200	200	(9) Modification of taxable retirement income from certain pension plans or 8
201	201	annuities. 9
202	202	(i) For tax years beginning on or after January 1, 2017, until the tax year beginning January 10
203	203	1, 2022, a modification shall be allowed for up to fifteen thousand dollars ($15,000), and for tax 11
204	204	years beginning on or after January 1, 2023, until the tax year beginning January 1, 2024, a 12
205	205	modification shall be allowed for up to twenty thousand dollars ($20,000), and for tax years 13
206	206	beginning on or after January 1, 2025, a modification shall be allowed for up to fifty thousand 14
207	207	dollars ($50,000), of taxable pension and/or annuity income that is included in federal adjusted 15
208	208	gross income for the taxable year: 16
209	209	(A) For a person who has attained the age used for calculating full or unreduced Social 17
210	210	Security retirement benefits who files a return as an unmarried individual, head of household, or 18
211	211	married filing separate whose federal adjusted gross income for such taxable year is less than the 19
212	212	amount used for the modification contained in subsection (c)(8)(i)(ii)(A) of this section an amount 20
213	213	not to exceed $15,000 for tax years beginning on or after January 1, 2017, until the tax year 21
214	214	beginning January 1, 2022, and an amount not to exceed twenty thousand dollars ($20,000) for tax 22
215	215	years beginning on or after January 1, 2023, until the tax year beginning January 1, 2024, and an 23
216	216	amount not to exceed fifty thousand dollars ($50,000) for tax years beginning on or after January 24
217	217	1, 2025, of taxable pension and/or annuity income includible in federal adjusted gross income; or 25
218	218	(B) For a married individual filing jointly or individual filing qualifying widow(er) who 26
219	219	has attained the age used for calculating full or unreduced Social Security retirement benefits whose 27
220	220	joint federal adjusted gross income for such taxable year is less than the amount used for the 28
221	221	modification contained in subsection (c)(8)(i)(ii)(B) of this section an amount not to exceed 29
222	222	$15,000 for tax years beginning on or after January 1, 2017, until the tax year beginning January 30
223	223	1, 2022, and an amount not to exceed twenty thousand dollars ($20,000) for tax years beginning on 31
224	224	or after January 1, 2023, until the tax year beginning January 1, 2024, and an amount not to exceed 32
225	225	fifty thousand dollars ($50,000) for tax years beginning on or after January 1, 2025, of taxable 33
226	226	pension and/or annuity income includible in federal adjusted gross income. 34
227	227
228	228
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230	230	(ii) Adjustment for inflation. The dollar amount contained by reference in subsections 1
231	231	(c)(9)(i)(ii)(A) and (c)(9)(i)(ii)(B) of this section shall be increased annually for tax years beginning 2
232	232	on or after January 1, 2018, by an amount equal to: 3
233	233	(A) Such dollar amount contained by reference in subsections (c)(9)(i)(ii)(A) and 4
234	234	(c)(9)(i)(ii)(B) of this section adjusted for inflation using a base tax year of 2000, multiplied by; 5
235	235	(B) The cost-of-living adjustment with a base year of 2000. 6
236	236	(iii) For the purposes of this section, the cost-of-living adjustment for any calendar year is 7
237	237	the percentage (if any) by which the consumer price index for the preceding calendar year exceeds 8
238	238	the consumer price index for the base year. The consumer price index for any calendar year is the 9
239	239	average of the consumer price index as of the close of the twelve-month (12) period ending on 10
240	240	August 31, of such calendar year. 11
241	241	(iv) For the purpose of this section, the term “consumer price index” means the last 12
242	242	consumer price index for all urban consumers published by the department of labor. For the purpose 13
243	243	of this section, the revision of the consumer price index which is most consistent with the consumer 14
244	244	price index for calendar year 1986 shall be used. 15
245	245	(v) If any increase determined under this section is not a multiple of fifty dollars ($50.00), 16
246	246	such increase shall be rounded to the next lower multiple of fifty dollars ($50.00). In the case of a 17
247	247	married individual filing a separate return, if any increase determined under this section is not a 18
248	248	multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower multiple 19
249	249	of twenty-five dollars ($25.00). 20
250	250	(vi) For tax years beginning on or after January 1, 2022, the dollar amount contained by 21
251	251	reference in subsection (c)(9)(i)(ii)(A) shall be adjusted to equal the dollar amount contained in 22
252	252	subsection (c)(8)(i)(ii)(A), as adjusted for inflation, and the dollar amount contained by reference 23
253	253	in subsection(c)(9)(i)(ii)(B) shall be adjusted to equal the dollar amount contained in subsection 24
254	254	(c)(8)(i)(ii)(B), as adjusted for inflation; 25
255	255	(10) Modification for Rhode Island investment in opportunity zones. For purposes of 26
256	256	a taxpayer’s state tax liability, in the case of any investment in a Rhode Island opportunity zone by 27
257	257	the taxpayer for at least seven (7) years, a modification to income shall be allowed for the 28
258	258	incremental difference between the benefit allowed under 26 U.S.C. § 1400Z-2(b)(2)(B)(iv) and 29
259	259	the federal benefit allowed under 26 U.S.C. § 1400Z-2(c); 30
260	260	(11) Modification for military service pensions. 31
261	261	(i) For purposes of a taxpayer’s state tax liability, a modification to income shall be allowed 32
262	262	as follows: 33
263	263	(A) For the tax years beginning on January 1, 2023, a taxpayer may subtract from federal 34
264	264
265	265
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267	267	adjusted gross income the taxpayer’s military service pension benefits included in federal adjusted 1
268	268	gross income; 2
269	269	(ii) As used in this subsection, the term “military service” shall have the same meaning as 3
270	270	set forth in 20 C.F.R. § 212.2; 4
271	271	(iii) At no time shall the modification allowed under this subsection alone or in conjunction 5
272	272	with subsection (c)(9) exceed the amount of the military service pension received in the tax year 6
273	273	for which the modification is claimed; 7
274	274	(12) Any rebate issued to the taxpayer pursuant to § 44-30-103 to the extent included in 8
275	275	gross income for federal tax purposes; and 9
276	276	(13) For tax years beginning on or after January 1, 2025, in the case of a taxpayer that is 10
277	277	licensed in accordance with chapters 28.6 and/or 28.11 of title 21, the amount equal to any 11
278	278	expenditure that is eligible to be claimed as a federal income tax deduction but is disallowed under 12
279	279	26 U.S.C. § 280E. 13
280	280	(d) Modification for Rhode Island fiduciary adjustment. There shall be added to, or 14
281	281	subtracted from, federal adjusted gross income (as the case may be) the taxpayer’s share, as 15
282	282	beneficiary of an estate or trust, of the Rhode Island fiduciary adjustment determined under § 44-16
283	283	30-17. 17
284	284	(e) Partners. The amounts of modifications required to be made under this section by a 18
285	285	partner, which relate to items of income or deduction of a partnership, shall be determined under § 19
286	286	44-30-15. 20
287	287	SECTION 2. This act shall take effect upon passage. 21
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294	294	EXPLANATION
295	295	BY THE LEGISLATIVE COUNCIL
296	296	OF
297	297	A N A C T
298	298	RELATING TO TAXATION -- PERSONAL INCOME TAX
299	299	***
300	300	This act would increase the federal adjusted gross income threshold for modification for 1
301	301	taxable social security income. This act would also amend references to the federal adjusted gross 2
302	302	income as it pertains to modification of taxable retirement income from certain pension plans or 3
303	303	annuities. 4
304	304	This act would take effect upon passage. 5
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