PROVIDENCE – Just when you thought it was out for this year, lawmakers showed Citizens Bank leaders they were indeed listening on their request for tax relief.
State leaders have reached a late-session agreement to provide tax relief for Rhode Island financial institutions – including Citizens Bank – keeping alive a proposal previously spiked by House Speaker K. Joseph Shekarchi, who declined to include a fiscal 2025 budget amendment offered by Gov. Daniel J. McKee to reform the state's tax code to allow banks to calculate income tax liability using so-called "single sales factor" apportionment.
Companion legislation was resubmitted Monday in both the House and Senate sponsored by Rep. Joseph Solomon Jr., D-Warwick, and Sen. Lou DiPalma, D-Middletown, which would let banks elect to use the single-factor method apportionment for calculating corporate income tax, beginning on or after Jan. 1, 2025.
Rhode Island currently uses a three-factor apportionment for financial institutions, a method that determines tax based on a company’s property, payroll and sales. Beginning in January 2025, Massachusetts will shift to the single sales factor methodology. Rhode Island has used the single sales factor method for other corporate taxpayers since 2015.
"There is a desire to do it the right way," said Solomon. "The parties just needed time to work through the details. We want to maintain parity with Massachusetts.”
A bill posted earlier on the legislature's website and subsequently removed was just a temporary "placeholder" until the final version is unveiled sometime before the House and Senate finance committee hearings now scheduled for Tuesday, said Solomon.
In a joint press release Monday, McKee said the legislation was meant to implement the change "in a way that is both transparent and in the best interest of the people of Rhode Island," while Shekarchi vowed the proposal will be "carefully vetted in a public and transparent manner" before the respective committees.
Citizens has 4,200 employees and $400 million in annual payroll in Rhode Island.
Keith Kelly, Citizens Rhode Island president, said the institution was "encouraged by recent progress" by state leaders "towards an outcome that is a win for both the business community and Rhode Island."
McKee administration officials previously said if enacted, the reform would result in $7.7 million in lost revenue this fiscal year, growing to $15.6 million over the full fiscal 2025, however Solomon said those projections were on the "high-end."
Shekarchi spokesperson Larry Berman on Monday said if the House finance committee approves, the bill will go to the House floor on June 13.
"This agreement would keep Citizens here," he said.
Berman added that because the legislation is a revenue reduction, it would not require amendment to the $13.9 billion state budget passed by the House on June 7.
"There would be a cost, but we could find the money in this year's budget," he said. "It's not money we have to pay out. It is money we wouldn't be getting in taxes.”
Shekarchi has stated repeatedly he was open to revisiting the legislation at any time after the current General Assembly session and before the end of the calendar year.
Indeed, regardless if the legislation is enacted before the session ends on June 13, Solomon said that single-sales-factor could still be implemented. The General Assembly has the power to reconvene at any time.
"We can go back into session," he said. "There is nothing that stops us from doing it later."
(SUBS 11th paragraph to update with date of full House vote.)
Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com.