Bill Summary – FastDemocracy

-- S 2067 SUBSTITUTE A
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     LC004065/SUB A
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                       STATE              OF        RHODE                 ISLAND
                                          IN GENERAL ASSEMBLY
                                       JANUARY SESSION, A.D. 2022
                                             ____________
                                                   AN ACT
                       RELATING TO TAXATION -- PERSONAL INCOME TAX
                Introduced By: Senator Melissa A. Murray
                Date Introduced: January 25, 2022
                Referred To: Senate Finance
     It is enacted by the General Assembly as follows:
 1
          SECTION 1. Section 44-30-12 of the General Laws in Chapter 44-30 entitled "Personal
 Income Tax" is hereby amended to read as follows:
          44-30-12. Rhode Island income of a resident individual.
          (a) General. The Rhode Island income of a resident individual means his or her adjusted
 gross income for federal income tax purposes, with the modifications specified in this section.
          (b) Modifications increasing federal adjusted gross income. There shall be added to federal
 adjusted gross income:
          (1) Interest income on obligations of any state, or its political subdivisions, other than
 Rhode Island or its political subdivisions;
          (2) Interest or dividend income on obligations or securities of any authority, commission,
 or instrumentality of the United States, but not of Rhode Island or its political subdivisions, to the
 extent exempted by the laws of the United States from federal income tax but not from state income
 taxes;
          (3) The modification described in § 44-30-25(g);
          (4)(i) The amount defined below of a nonqualified withdrawal made from an account in
 the tuition savings program pursuant to § 16-57-6.1. For purposes of this section, a nonqualified
 withdrawal is:
          (A) A transfer or rollover to a qualified tuition program under Section 529 of the Internal
 Revenue Code, 26 U.S.C. § 529, other than to the tuition savings program referred to in § 16-57-
 6.1; and
            (B) A withdrawal or distribution that is:
            (I) Not applied on a timely basis to pay "qualified higher education expenses" as defined
 in § 16-57-3(12) of the beneficiary of the account from which the withdrawal is made;
            (II) Not made for a reason referred to in § 16-57-6.1(e); or
            (III) Not made in other circumstances for which an exclusion from tax made applicable by
 Section 529 of the Internal Revenue Code, 26 U.S.C. § 529, pertains if the transfer, rollover,
 withdrawal, or distribution is made within two (2) taxable years following the taxable year for
 which a contributions modification pursuant to subsection (c)(4) of this section is taken based on
 contributions to any tuition savings program account by the person who is the participant of the
 account at the time of the contribution, whether or not the person is the participant of the account
 at the time of the transfer, rollover, withdrawal or distribution;
            (ii) In the event of a nonqualified withdrawal under subsection (b)(4)(i)(A) or (b)(4)(i)(B)
 of this section, there shall be added to the federal adjusted gross income of that person for the
 taxable year of the withdrawal an amount equal to the lesser of:
            (A) The amount equal to the nonqualified withdrawal reduced by the sum of any
 administrative fee or penalty imposed under the tuition savings program in connection with the
 nonqualified withdrawal plus the earnings portion thereof, if any, includible in computing the
 person's federal adjusted gross income for the taxable year; and
            (B) The amount of the person's contribution modification pursuant to subsection (c)(4) of
 this section for the person's taxable year of the withdrawal and the two (2) prior taxable years less
 the amount of any nonqualified withdrawal for the two (2) prior taxable years included in
 computing the person's Rhode Island income by application of this subsection for those years. Any
 amount added to federal adjusted gross income pursuant to this subdivision shall constitute Rhode
 Island income for residents, nonresidents and part-year residents;
            (5) The modification described in § 44-30-25.1(d)(3)(i);
            (6) The amount equal to any unemployment compensation received but not included in
 federal adjusted gross income;
            (7) The amount equal to the deduction allowed for sales tax paid for a purchase of a
 qualified motor vehicle as defined by the Internal Revenue Code § 164(a)(6); and
            (8) For any taxable year beginning on or after January 1, 2020, the amount of any Paycheck
 Protection Program loan forgiven for federal income tax purposes as authorized by the Coronavirus
 Aid, Relief, and Economic Security Act and/or the Consolidated Appropriations Act, 2021 and/or
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 any other subsequent federal stimulus relief packages enacted by law, to the extent that the amount
 of the loan forgiven exceeds $250,000, including an individual's distributive share of the amount
 of a pass-through entity's loan forgiveness in excess of $250,000.
           (c) Modifications reducing federal adjusted gross income. There shall be subtracted from
 federal adjusted gross income:
           (1) Any interest income on obligations of the United States and its possessions to the extent
 includible in gross income for federal income tax purposes, and any interest or dividend income on
 obligations, or securities of any authority, commission, or instrumentality of the United States to
 the extent includible in gross income for federal income tax purposes but exempt from state income
 taxes under the laws of the United States; provided, that the amount to be subtracted shall in any
 case be reduced by any interest on indebtedness incurred or continued to purchase or carry
 obligations or securities the income of which is exempt from Rhode Island personal income tax, to
 the extent the interest has been deducted in determining federal adjusted gross income or taxable
 income;
           (2) A modification described in § 44-30-25(f) or § 44-30-1.1(c)(1);
           (3) The amount of any withdrawal or distribution from the "tuition savings program"
 referred to in § 16-57-6.1 that is included in federal adjusted gross income, other than a withdrawal
 or distribution or portion of a withdrawal or distribution that is a nonqualified withdrawal;
           (4) Contributions made to an account under the tuition savings program, including the
 "contributions carryover" pursuant to subsection (c)(4)(iv) of this section, if any, subject to the
 following limitations, restrictions and qualifications:
           (i) The aggregate subtraction pursuant to this subdivision for any taxable year of the
 taxpayer shall not exceed five hundred dollars ($500) or one thousand dollars ($1,000) if a joint
 return;
           (ii) The following shall not be considered contributions:
           (A) Contributions made by any person to an account who is not a participant of the account
 at the time the contribution is made;
           (B) Transfers or rollovers to an account from any other tuition savings program account or
 from any other "qualified tuition program" under section 529 of the Internal Revenue Code, 26
 U.S.C. § 529; or
           (C) A change of the beneficiary of the account;
           (iii) The subtraction pursuant to this subdivision shall not reduce the taxpayer's federal
 adjusted gross income to less than zero (0);
           (iv) The contributions carryover to a taxable year for purpose of this subdivision is the
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 excess, if any, of the total amount of contributions actually made by the taxpayer to the tuition
 savings program for all preceding taxable years for which this subsection is effective over the sum
 of:
          (A) The total of the subtractions under this subdivision allowable to the taxpayer for all
 such preceding taxable years; and
          (B) That part of any remaining contribution carryover at the end of the taxable year which
 exceeds the amount of any nonqualified withdrawals during the year and the prior two (2) taxable
 years not included in the addition provided for in this subdivision for those years. Any such part
 shall be disregarded in computing the contributions carryover for any subsequent taxable year;
          (v) For any taxable year for which a contributions carryover is applicable, the taxpayer
 shall include a computation of the carryover with the taxpayer's Rhode Island personal income tax
 return for that year, and if for any taxable year on which the carryover is based the taxpayer filed a
 joint Rhode Island personal income tax return but filed a return on a basis other than jointly for a
 subsequent taxable year, the computation shall reflect how the carryover is being allocated between
 the prior joint filers;
          (5) The modification described in § 44-30-25.1(d)(1);
          (6) Amounts deemed taxable income to the taxpayer due to payment or provision of
 insurance benefits to a dependent, including a domestic partner pursuant to chapter 12 of title 36 or
 other coverage plan;
          (7) Modification for organ transplantation.
          (i) An individual may subtract up to ten thousand dollars ($10,000) from federal adjusted
 gross income if he or she, while living, donates one or more of his or her human organs to another
 human being for human organ transplantation, except that for purposes of this subsection, "human
 organ" means all or part of a liver, pancreas, kidney, intestine, lung, or bone marrow. A subtract
 modification that is claimed hereunder may be claimed in the taxable year in which the human
 organ transplantation occurs.
          (ii) An individual may claim that subtract modification hereunder only once, and the
 subtract modification may be claimed for only the following unreimbursed expenses that are
 incurred by the claimant and related to the claimant's organ donation:
          (A) Travel expenses.
          (B) Lodging expenses.
          (C) Lost wages.
          (iii) The subtract modification hereunder may not be claimed by a part-time resident or a
 nonresident of this state;
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           (8) Modification for taxable Social Security income.
           (i) For tax years beginning on or after January 1, 2016:
           (A) For a person who has attained the age used for calculating full or unreduced social
 security retirement benefits who files a return as an unmarried individual, head of household, or
 married filing separate whose federal adjusted gross income for the taxable year is less than eighty
 thousand dollars ($80,000); or
           (B) A married individual filing jointly or individual filing qualifying widow(er) who has
 attained the age used for calculating full or unreduced social security retirement benefits whose
 joint federal adjusted gross income for the taxable year is less than one hundred thousand dollars
 ($100,000), an amount equal to the social security benefits includible in federal adjusted gross
 income.
           (ii) Adjustment for inflation. The dollar amount contained in subsections (c)(8)(i)(A) and
 (c)(8)(i)(B) of this section shall be increased annually by an amount equal to:
           (A) Such dollar amount contained in subsections (c)(8)(i)(A) and (c)(8)(i)(B) of this section
 adjusted for inflation using a base tax year of 2000, multiplied by;
           (B) The cost-of-living adjustment with a base year of 2000.
           (iii) For the purposes of this section the cost-of-living adjustment for any calendar year is
 the percentage (if any) by which the consumer price index for the preceding calendar year exceeds
 the consumer price index for the base year. The consumer price index for any calendar year is the
 average of the consumer price index as of the close of the twelve-month (12) period ending on
 August 31, of such calendar year.
           (iv) For the purpose of this section the term "consumer price index" means the last
 consumer price index for all urban consumers published by the department of labor. For the purpose
 of this section the revision of the consumer price index which is most consistent with the consumer
 price index for calendar year 1986 shall be used.
           (v) If any increase determined under this section is not a multiple of fifty dollars ($50.00),
 such increase shall be rounded to the next lower multiple of fifty dollars ($50.00). In the case of a
 married individual filing separate return, if any increase determined under this section is not a
 multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower multiple
 of twenty-five dollars ($25.00);
           (9) Modification for up to fifteen thousand dollars ($15,000) of taxable retirement income
 from certain pension plans or annuities.
           (i) For tax years beginning on or after January 1, 2017, until the tax year beginning January
 1, 2022, a modification shall be allowed for up to fifteen thousand dollars ($15,000), and for tax
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 years beginning on or after January 1, 2023, a modification shall be allowed for up to twenty
 thousand dollars ($20,000), of taxable pension and/or annuity income that is included in federal
 adjusted gross income for the taxable year:
           (A) For a person who has attained the age used for calculating full or unreduced social
 security retirement benefits who files a return as an unmarried individual, head of household, or
 married filing separate whose federal adjusted gross income for such taxable year is less than the
 amount used for the modification contained in subsection (c)(8)(i)(A) of this section an amount not
 to exceed $15,000 for tax years beginning on or after January 1, 2017, until the tax year beginning
 January 1, 2022, and an amount not to exceed twenty thousand dollars ($20,000) for tax years
 beginning on or after January 1, 2023, of taxable pension and/or annuity income includible in
 federal adjusted gross income; or
           (B) For a married individual filing jointly or individual filing qualifying widow(er) who
 has attained the age used for calculating full or unreduced social security retirement benefits whose
 joint federal adjusted gross income for such taxable year is less than the amount used for the
 modification contained in subsection (c)(8)(i)(B) of this section an amount not to exceed $15,000
 for tax years beginning on or after January 1, 2017, until the tax year beginning January 1, 2022,
 and an amount not to exceed twenty thousand dollars ($20,000) for tax years beginning on or after
 January 1, 2023, of taxable pension and/or annuity income includible in federal adjusted gross
 income.
           (ii) Adjustment for inflation. The dollar amount contained by reference in subsections
 (c)(9)(i)(A) and (c)(9)(i)(B) of this section shall be increased annually for tax years beginning on
 or after January 1, 2018, by an amount equal to:
           (A) Such dollar amount contained by reference in subsections (c)(9)(i)(A) and (c)(9)(i)(B)
 of this section adjusted for inflation using a base tax year of 2000, multiplied by;
           (B) The cost-of-living adjustment with a base year of 2000.
           (iii) For the purposes of this section, the cost-of-living adjustment for any calendar year is
 the percentage (if any) by which the consumer price index for the preceding calendar year exceeds
 the consumer price index for the base year. The consumer price index for any calendar year is the
 average of the consumer price index as of the close of the twelve-month (12) period ending on
 August 31, of such calendar year.
           (iv) For the purpose of this section, the term "consumer price index" means the last
 consumer price index for all urban consumers published by the department of labor. For the purpose
 of this section, the revision of the consumer price index which is most consistent with the consumer
 price index for calendar year 1986 shall be used.
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          (v) If any increase determined under this section is not a multiple of fifty dollars ($50.00),
 such increase shall be rounded to the next lower multiple of fifty dollars ($50.00). In the case of a
 married individual filing a separate return, if any increase determined under this section is not a
 multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower multiple
 of twenty-five dollars ($25.00); and.
          (vi) For tax years beginning on or after January 1, 2022, the dollar amount contained by
 reference in subsection (c)(9)(i)(A) of this section shall be adjusted to equal the dollar amount
 contained in subsection (c)(8)(i)(A) of this section as adjusted for inflation, and the dollar amount
 contained by reference in subsection (c)(9)(i)(B) of this section shall be adjusted to equal the dollar
 amount contained in subsection (c)(8)(i)(B) of this section as adjusted for inflation; and
          (10) Modification for Rhode Island investment in opportunity zones. For purposes of a
 taxpayer's state tax liability, in the case of any investment in a Rhode Island opportunity zone by
 the taxpayer for at least seven (7) years, a modification to income shall be allowed for the
 incremental difference between the benefit allowed unde