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.

Participation in this withholding program is optional for taxpayers; they can choose whether or not to have taxes withheld without affecting their overall tax computation or any penalties. Additionally, if a mutual fund company has not established an agreement with the tax administrator but the taxpayer elects to have taxes withheld, the state will accept payments made by the mutual fund company and credit the taxpayer's account accordingly. This act is set to take effect on January 1, 2026.