The bill amends Section 44-30-2.6 of the General Laws in Chapter 44-30, which governs Rhode Island's personal income tax. It introduces new language that establishes a Rhode Island earned-income credit for taxpayers entitled to a federal earned-income credit. For tax years beginning on or after January 1, 2027, the Rhode Island earned-income credit will be equal to thirty percent (30%) of the federal earned-income credit. This credit shall not exceed the amount of the Rhode Island income tax.

The bill does not include changes to definitions for "Rhode Island taxable income," tiered tax rates for various filing statuses, or provisions for adjusting tax rates and exemption amounts based on inflation, as these aspects are not part of the new language introduced by this bill. Additionally, it does not address itemized deductions, standard deductions, or the calculation of alternative minimum tax for residents, as these are not relevant to the new provisions being added.

The primary focus of the bill is the increase in the Rhode Island earned-income credit, which is set to rise from previous rates of fifteen percent (15%) and sixteen percent (16%) for earlier tax years to thirty percent (30%) starting in 2027. The bill also includes a provision for the credit to be refundable, allowing taxpayers to receive refunds if their earned-income credit exceeds their Rhode Island income tax. The act will take effect upon passage.

Statutes affected:
7594: 44-30-2.6