The bill amends Chapter 44-30 of the General Laws regarding personal income tax by introducing a new section, 44-30-71.5, which allows for the voluntary withholding of state taxes from distributions made from mutual fund individual retirement accounts (IRAs). The tax administrator is authorized to enter into agreements with mutual fund companies to facilitate the deduction and withholding of taxes that may be owed to the state from required minimum distributions. The amount withheld will be based on a reasonable estimate of the tax due from the distribution included in the taxpayer's Rhode Island income, starting from January 1, 2026.

The method for determining the withholding amount will be prescribed by regulations of the tax administrator, taking into account taxpayer exemptions. Participation in this withholding program is voluntary; taxpayers can choose whether or not to have taxes withheld, and this choice will not affect the computation of tax due before credits and payments or any interest or penalties owed to the state. If a mutual fund company has not established an agreement with the tax administrator, the state will still accept payments made by the mutual fund company based on the taxpayer's election for withholding. The act is set to take effect on January 1, 2026.