The bill amends Section 44-30-12 of the General Laws in Chapter 44-30, which governs the Rhode Island income tax for resident individuals, with new provisions set to take effect on January 1, 2025. It modifies the definition of Rhode Island income by adjusting the federal adjusted gross income for state tax purposes. Key insertions include the addition of interest income from out-of-state obligations, nonqualified withdrawals from tuition savings programs, and unemployment compensation, while allowing for subtractions related to contributions to tuition savings programs and organ donation expenses. The bill also establishes specific limitations and qualifications for these modifications, such as caps on subtractions for tuition contributions and conditions for claiming organ donation expenses.

Additionally, the bill proposes significant changes to the taxation of Social Security and retirement income. For tax years beginning on or after January 1, 2016, individuals eligible for full Social Security retirement benefits with a federal adjusted gross income below $80,000 (or $100,000 for married couples) can exclude their Social Security benefits from taxable income. It also phases in an increase in the modification for taxable pension and annuity income, ultimately exempting all such income from state income tax for qualifying individuals starting in 2026. The bill includes provisions for inflation adjustments and introduces modifications for investments in Rhode Island opportunity zones and military service pensions. Overall, the bill aims to refine the tax treatment of various income sources while ensuring compliance with federal guidelines.