As part of the budget recently signed by the governor on June 17, 2024, Rhode Island announced legislative changes to several tax laws. The majority of these legislative updates will go into effect on January 1, 2025, and cover a variety of areas.
For pass-through businesses in the State, such as S Corporations and Partnerships, there will be a significant change to the pass-through entity (PTE) credit. The percentage that an owner receives for the tax paid by the entity has been lowered from 100% to 90%. This change aligns with neighboring states’ treatment of similar pass-through credits. Since the pass-through entity tax is elective in Rhode Island, the federal tax savings from the resultant deduction will need to be reevaluated in 2024 to ensure the benefit continues to outweigh the cost.
The Net Operating Loss (NOL) Carryforward period will be increased to 20 years from 5 years. Rhode Island will continue to limit the NOL deduction amount to the federal NOL allowed in that tax year.
For individual tax filers, the Pensions and Annuity Income Modification will increase from $20,000 to $50,000 (or $100,000 for Married Filing Jointly filers). However, the qualifying income thresholds already established will not be impacted.
The $50 fee associated with filing RI Estate Tax returns will be eliminated starting January 2025, along with the $25 application fee for the certificate of exemption for Sales and Use tax for certain Tax-exempt organizations.
Many Rhode Island tax credits have also been extended, clarified, or expanded under the current legislative updates effective July 1, 2024. This includes the popular Motion Picture Production Tax Credit and the Historic Preservation Tax Credit.
If you have any questions about how this new legislation may apply to you, please call us at (401) 921-2000 or contact us here.