Rhode Island ~ Corporate, Personal Income Taxes: Budget Bill Containing Combined Reporting, Minimum Tax, Other Changes Enacted

The Rhode Island budget bill requires a pro forma combined report for corporate income tax purposes and requires certain pass-through entities to pay a minimum tax. In addition, setoff requirements are enacted for certain lottery prize winners with unpaid tax liabilities, and taxpayers claiming certain corporate income tax credits are required to file information reports.

Sales and use tax provisions (TAXDAY, 2011/07/06, S.49) and miscellaneous tax provisions (TAXDAY, 2011/07/06, S.50) are reported separately.

Combined Reporting

For taxable years beginning in 2011 or 2012, each corporation that is part of a unitary business is required to file a report for the combined group containing the combined net income of the group. Separate entities of the group members are not disregarded. The pro forma combined report must show the following information, at a minimum:

— the difference in tax owed as a result of filing a combined report compared to the tax owed under the current filing requirements;

— the difference in tax owed as a result of using the combined reporting single sales factor apportionment method as compared to the tax owed using the current three-factor apportionment method;

— volume of sales in the state and worldwide; and

— taxable income in the state and worldwide.

If the taxpayer fails to file a timely report or files a false report, a penalty of up to $10,000 may be assessed. The penalty may be waived for good cause. By March 15, 2014, the tax administrator must submit a report to the Legislature regarding the policy and fiscal ramifications of changing to a combined reporting system. The new combined reporting provisions are effective July 1, 2011.

Minimum Tax for Certain Pass-Through Entities

For tax years beginning after 2011, limited liability partnerships and limited partnerships are required to pay the same minimum tax as corporations. In addition, a limited liability company not treated as a corporation is required to pay the same minimum tax as corporations (previously, a limited liability company treated as a partnership was required to pay the minimum tax). The minimum tax for corporations is currently $500. A penalty of $100 is assessed if the annual tax is not paid.

Other Changes

If a taxpayer wins a lottery prize or ticket over $600 and has unpaid personal income tax liabilities over $600, the lottery director must setoff the prize against the unpaid taxes (up to the balance due), after federal and state withholding.

By September 1, 2011, and every year thereafter, taxpayers claiming credits for film production investment, innovation and growth, and wages paid to qualified employees in enterprise zones are required to file a report with the tax administrator containing certain employee information.

Ch. 151 (H.B. 5894), Laws 2011, effective June 30, 2011, unless otherwise noted


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