The bill seeks to amend the definition of Rhode Island income for resident individuals by adjusting the federal adjusted gross income (AGI) for state income tax purposes. Additions to the federal AGI include interest from non-Rhode Island state obligations, certain dividends, nonqualified withdrawals from tuition savings programs, unemployment compensation not included in federal income, and amounts over $250,000 from forgiven Paycheck Protection Program loans. Conversely, subtractions from the federal AGI are proposed for interest on U.S. obligations, certain tuition savings withdrawals, contributions to tuition savings programs (with limitations and carryover provisions), insurance benefits for dependents, organ donation expenses, and taxable Social Security income. The bill also introduces a one-time subtraction for unreimbursed organ donation expenses and specifies eligibility based on residency status.

The bill further proposes changes to the taxation of Social Security benefits and pension income for qualifying taxpayers. For tax years starting from January 1, 2016, to December 31, 2022, and continuing for years beginning on or after January 1, 2023, individuals who have reached full Social Security retirement age and have a federal AGI below certain thresholds can exclude their Social Security benefits from their federal AGI. These thresholds are subject to annual inflation adjustments. Additionally, the bill increases the modification for taxable retirement income from certain pension plans or annuities to up to $20,000 for individuals meeting the same age and income criteria, with provisions for annual inflation adjustments. The bill is effective upon passage and aims to raise the federal AGI threshold for modifying taxable Social Security income.

Statutes affected:
6010: 44-30-12