PROVIDENCE – The House Finance Committee on Wednesday will take up a proposal to break away from federal tax provisions outlined in the Coronavirus Aid, Relief, and Economic Security Act, according to a news release.
The scheduled testimony will center on a proposed amendment to a section of the state’s proposed fiscal 2021 budget. The amendment, submitted by State Budget Officer Thomas A. Mullaney to the legislature on Aug. 18, seeks to minimize the fiscal hit expected to state coffers as a result of new tax rules put in place by the CARES Act.
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As part of its attempt to lessen the financial strain of the pandemic on taxpayers, the CARES Act included a provision waiving the limit on the amount of excess business losses for which noncorporate taxpayers could file. The unlimited loss filings would apply retroactively beginning in fiscal 2018, allowing them to get a full or partial refund on up to three years of existing tax statements.
The state amendment, if approved, would separate Rhode Island’s tax policy from that put forth in the CARES Act. Instead, Rhode Island would add the additional loss filings claimed by taxpayers from that time period to the state’s taxable income base. It would also spread out the additional deduction for taxpayers across five fiscal years, with 20% allocated in each year beginning in fiscal 2022.
Either way, the state anticipates a $29 million shortfall from the federal income tax policy changes. But the changes proposed would spread out that hit into $5.8 million increments across five years, rather than forcing the state to fill an $18.8 million hole in the already-ended fiscal 2020 budget plus another $10.3 million in the upcoming budget year.
According to the state, a number of other states have “decoupled” their tax policies from federal code as a result of the CARES Act provisions, including Nebraska, Colorado and North Carolina.
The Finance Committee will hear testimony on the proposed amendment at 4 p.m. on Wednesday, with its meeting televised and livestreamed on Capitol TV.
Nancy Lavin is a staff writer for the PBN. Contact her at Lavin@PBN.com.
