PROVIDENCE – If an allegiance to a sense of civic duty isn’t enough, Rhode Island businesses and residents who owe more than $50,000 in past due taxes may want to settle up with the R.I. Department of Taxation, if only to prevent any negative search engine results.
That’s because of legislation that took effect July 1 that was included in Gov. Daniel J. McKee’s fiscal year 2025 budget and approved by the General Assembly expanded the division’s two long-running Top 100 Tax Delinquents lists to all individuals and businesses who have owed more than $50,000 in excess of 90 days.
Data from the division of taxation shows the current top 10 lists combine for close to $60 million, however none of those listed owe less than $100,000.
R.I. Department of Taxation spokesperson Paul Grimaldi said the office is sending formal notices to each taxpayer in danger of finding their names on the lists of their intent to include them, in line with state law requiring a 30 days' advance warning.
Grimaldi said the updated lists are scheduled to go live sometime in October.
"The Division of Taxation is updating its statutorily required notices in accordance with the change and expects to send the notices to taxpayers by the end of September,” he said. “And the lists will be updated accordingly.”
Providence Business News previously reported the amount owed by the state’s top 100 tax delinquents had grown 50% in the previous five years.
In a April interview with PBN, R.I. Tax Administrator Neena Savage called the lists "one tool we have to ensure that all taxpayers pay their fair share of taxes, and hopefully move those taxpayers toward voluntary compliance in the future.”
The expansion “is on par with our neighboring states” and helps “encourage taxpayers to reach out to resolve their tax issues before publication of the list,” she added, “ thereby increasing the efficiency of collections and reducing the tax burden on compliant Rhode Island taxpayers.”
The R.I. Department of Revenue in May said $256 million-or 5%- of cumulative tax liabilities went unpaid in fiscal 2023.
The new policy follows previous initiatives meant to recover past due taxes. The fiscal 2023 budget reduced the penalty interest rate from 18% to 12%.
McKee requested an additional $700,000 in his fiscal 2024 proposal to fund a multi-pronged approach to increasing compliance and collections, which the administration said could raise an additional $10.4 million this fiscal year, $3.4 million resulting from the list expansion.
Some have questioned the approach.
Attorney Christopher G. Kehoe, who has spent more than two decades helping his clients settle accounts on both the state and federal level, thinks the state would do better to formulate its rules and processes to assist tax delinquents to get back in good standing, suggesting for example that Rhode Island adopt the Internal Revenue Service’s Audit Reconsideration Process for any taxpayer who disagrees with their federal tax bill.
As it stands, said Kehoe, state tax authorities “have absolute discretion,” which can be especially challenging to smaller entities and less resourced taxpayer’s who can't afford to hire a tax attorney or personal accountant.
“They need to promulgate some reasonable standards to determine if a mistake was made before they’re required to pay these [past due] taxes,” he said.
Cumberland-based attorney Bruce Sawyer was skeptical that expanding the list would have the desired result, suggesting state officials rethink what he called a “drastic” step.
“It’s important to have people comply, that’s always the goal," he said. “But I’m not sure this is the proper approach.”
Sawyer also worried the expansion may even have the opposite effect, particularly for the private sector, where one’s reputation and public opinion are key factors for bringing in the revenue that could in theory be used to pay what is due.
“There could be many reasons they fall behind. But now you are publicly shaming them,” he said. “I think this sends the wrong message to the business community and shows the state in a bad light.”
Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com.
