The General Assembly is considering legislation that would prohibit the state from using donations to Rhode Island charities as a basis for residency – and thus tax liability – in the state. All we can say is "Duh!" and "Finally!"
In 2001, the R.I. Supreme Court ruled that where you spend your charitable dollars can have an impact on whether or not you are subject to Rhode Island taxes. In that case, the state was trying to tax a couple who owned a summer home in Rhode Island, but the court said the couple could claim residency and pay taxes in Florida, in part because they donated more to their Florida church than to their Rhode Island church.
That logic has had accountants and attorneys advising clients to avoid contributions to Rhode Island-based nonprofits in order to avoid tax liability in the state.
Since the ruling, there has been a documented drop in charitable giving, so it makes sense for the legislature to step in.
Generous people with more than one residence should not be discouraged from largess in Rhode Island, just because the state Supreme Court believes that home is where the big-hearted giving is.
