The amount of money owed by the state’s top income tax delinquents has grown 50% in the last five years to $65.2 million, which is raising questions for some about the effectiveness of Rhode Island’s effort to collect those back taxes.
The R.I. Division of Taxation publishes running lists of the top 100 businesses and top 100 individuals who owe the most income taxes in a bid to publicly shame scofflaws to pay up.
Owing more than $102,000 can get taxpayers put on the list.
But an overview of the top-tier tax delinquents shows that many people owe much more. That includes former Alex and Ani LLC CEO Giovanni Feroce, who the state says owes $1.23 million. No. 12 on the list is former boxing champion Vinny Paz, whose tax balance has risen from $332,000 in 2018 to $416,000 in 2023.
The amount owed by the top 100 individuals alone has nearly doubled since 2018, from $23.6 million to $42.5 million.
Consequences for owing can range from not being allowed to renew sales permits, refund offsets, and driver’s license blocks, among other restrictions, according to R.I. Tax Administrator Neena Savage.
But with amounts of back taxes growing and the same names of the biggest scofflaws clogging up the list for years, should Rhode Island be looking at alternatives to bring in money owed?
Yes, says Thomas Quinn, a Providence tax attorney and managing partner at McLaughlinQuinn LLC.
Quinn, who worked at the IRS for more than a decade before going into private practice, says he has represented clients who found themselves on the infamous delinquency list. While certain clients “are very concerned from a publicity standpoint and want to resolve the matter,” said Quinn, “for others, it’s less impactful.”
One of the steps he suggests the state should take is to consider allowing debtors to enter into installment agreements more easily. Often, the state’s opening offer is a 50% down payment, he says.
“One of the difficult things dealing with the division is they look at how much they want to collect versus client’s financial wherewithal,” Quinn said. “If that’s impossible to pay, what can they do? It becomes difficult to negotiate when the dollar amounts are that high.”
He also says amnesties can be effective.
“You can’t just forgive them, or nobody would pay,” Quinn said. “But leaving them on the books [for years] doesn’t make a lot of sense either.”
Indeed, the state has offered tax amnesty programs in the past to push delinquent taxpayers into settling up. Typically, amnesty would reduce the accrued interest rate by 25% and waive all criminal and civil penalties.
The last one was held in 2017. But Savage says there are no plans for amnesty programs in the near future.
State officials have tried other changes.
The statute was amended in 2011 to allow for the publication of the top 100 delinquent businesses. That list includes seven now-defunct companies that owe more than $1 million, with the Attleboro-based S & P Temporary Help Services Inc. leading the way at $5.29 million.
In 2021, the R.I. Department of Revenue sought to expand the public list of delinquents to individuals who owed more than $25,000 to make the list “less stagnant” and have more recent debtors posted. The proposal wasn’t included in Gov. Daniel J. McKee’s fiscal 2023 budget request.
Instead, McKee proposed to cut the interest rate on delinquent taxes, touted as a business-friendly move. It was approved by the General Assembly. The change from an 18% rate to 12% went into effect in January this year and brings the rate in line with Connecticut.
Meanwhile, the tax division is in the process of reviewing both delinquency lists, and updates will be published in the next few weeks.
