2012 -- H 7733

=======

LC01712

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

____________

A N A C T

RELATING TO TAXATION - PERSONAL INCOME TAX

     Introduced By: Representatives DaSilva, Guthrie, Azzinaro, Bennett, and Hull

     Date Introduced: February 16, 2012

     Referred To: House Finance

It is enacted by the General Assembly as follows:

1-1

     SECTION 1. Section 44-30-2.6 of the General Laws in Chapter 44-30 entitled "Personal

1-2

Income Tax" is hereby amended to read as follows:

1-3

     44-30-2.6. Rhode Island taxable income -- Rate of tax. -- (a) "Rhode Island taxable

1-4

income" means federal taxable income as determined under the Internal Revenue Code, 26 U.S.C.

1-5

section 1 et seq., not including the increase in the basic standard deduction amount for married

1-6

couples filing joint returns as provided in the Jobs and Growth Tax Relief Reconciliation Act of

1-7

2003 and the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), and as

1-8

modified by the modifications in section 44-30-12.

1-9

     (b) Notwithstanding the provisions of sections 44-30-1 and 44-30-2, for tax years

1-10

beginning on or after January 1, 2001, a Rhode Island personal income tax is imposed upon the

1-11

Rhode Island taxable income of residents and nonresidents, including estates and trusts, at the rate

1-12

of twenty-five and one-half percent (25.5%) for tax year 2001, and twenty-five percent (25%) for

1-13

tax year 2002 and thereafter of the federal income tax rates, including capital gains rates and any

1-14

other special rates for other types of income, except as provided in section 44-30-2.7, which were

1-15

in effect immediately prior to enactment of the Economic Growth and Tax Relief Reconciliation

1-16

Act of 2001 (EGTRRA); provided, rate schedules shall be adjusted for inflation by the tax

1-17

administrator beginning in taxable year 2002 and thereafter in the manner prescribed for

1-18

adjustment by the commissioner of Internal Revenue in 26 U.S.C. section 1(f). However, for tax

1-19

years beginning on or after January 1, 2006, a taxpayer may elect to use the alternative flat tax

1-20

rate provided in section 44-30-2.10 to calculate his or her personal income tax liability.

2-1

     (c) For tax years beginning on or after January 1, 2001, if a taxpayer has an alternative

2-2

minimum tax for federal tax purposes, the taxpayer shall determine if he or she has a Rhode

2-3

Island alternative minimum tax. The Rhode Island alternative minimum tax shall be computed by

2-4

multiplying the federal tentative minimum tax without allowing for the increased exemptions

2-5

under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (as redetermined on federal

2-6

form 6251 Alternative Minimum Tax-Individuals) by twenty-five and one-half percent (25.5%)

2-7

for tax year 2001, and twenty-five percent (25%) for tax year 2002 and thereafter, and comparing

2-8

the product to the Rhode Island tax as computed otherwise under this section. The excess shall be

2-9

the taxpayer's Rhode Island alternative minimum tax.

2-10

     (1) For tax years beginning on or after January 1, 2005 and thereafter the exemption

2-11

amount for alternative minimum tax, for Rhode Island purposes, shall be adjusted for inflation by

2-12

the tax administrator in the manner prescribed for adjustment by the commissioner of Internal

2-13

Revenue in 26 U.S.C. section 1(f).

2-14

     (2) For the period January 1, 2007 through December 31, 2007, and thereafter, Rhode

2-15

Island taxable income shall be determined by deducting from federal adjusted gross income as

2-16

defined in 26 U.S.C. section 62 as modified by the modifications in section 44-30-12 the Rhode

2-17

Island itemized deduction amount and the Rhode Island exemption amount as determined in this

2-18

section.

2-19

     (A) Tax imposed.

2-20

     (1) There is hereby imposed on the taxable income of married individuals filing joint

2-21

returns and surviving spouses a tax determined in accordance with the following table:

2-22

     If taxable income is: The tax is:

2-23

     Not over $53,150 3.75% of taxable income

2-24

     Over $53,150 but not over $128,500 $1,993.13 plus 7.00% of the excess over $53,150

2-25

     Over $128,500 but not over $195,850 $7,267.63 plus 7.75% of the excess over $128,500

2-26

     Over $195,850 but not over $349,700 $12,487.25 plus 9.00% of the excess over $195,850

2-27

     Over $349,700 $26,333.75 plus 9.90% of the excess over $349,700

2-28

     (2) There is hereby imposed on the taxable income of every head of household a tax

2-29

determined in accordance with the following table:

2-30

     If taxable income is: The tax is:

2-31

     Not over $42,650 3.75% of taxable income

2-32

     Over $42,650 but not over $110,100 $1,599.38 plus 7.00% of the excess over $42,650

2-33

     Over $110,100 but not over $178,350 $6,320.88 plus 7.75% of the excess over $110,100

3-34

     Over $178,350 but not over $349,700 $11,610.25 plus 9.00% of the excess over $178,350

3-35

     Over $349,700 $27,031.75 plus 9.90% of the excess over $349,700

3-36

     (3) There is hereby imposed on the taxable income of unmarried individuals (other than

3-37

surviving spouses and heads of households) a tax determined in accordance with the following

3-38

table:

3-39

     If taxable income is: The tax is:

3-40

     Not over $31,850 3.75% of taxable income

3-41

     Over $31,850 but not over $77,100 $1,194.38 plus 7.00% of the excess over $31,850

3-42

     Over $77,100 but not over $160,850 $4,361.88 plus 7.75% of the excess over $77,100

3-43

     Over $160,850 but not over $349,700 $10,852.50 plus 9.00% of the excess over $160,850

3-44

     Over $349,700 $27,849.00 plus 9.90% of the excess over $349,700

3-45

     (4) There is hereby imposed on the taxable income of married individuals filing separate

3-46

returns and bankruptcy estates a tax determined in accordance with the following table:

3-47

     If taxable income is: The tax is:

3-48

     Not over $26,575 3.75% of taxable income

3-49

     Over $26,575 but not over $64,250 $996.56 plus 7.00% of the excess over $26,575

3-50

     Over $64,250 but not over $97,925 $3,633.81 plus 7.75% of the excess over $64,250

3-51

     Over $97,925 but not over $174,850 $6,243.63 plus 9.00% of the excess over $97,925

3-52

     Over $174,850 13,166.88 plus 9.90% of the excess over $174,850

3-53

     (5) There is hereby imposed a taxable income of an estate or trust a tax determined in

3-54

accordance with the following table:

3-55

     If taxable income is: The tax is:

3-56

     Not over $2,150 3.75% of taxable income

3-57

     Over $2,150 but not over $5,000 $80.63 plus 7.00% of the excess over $2,150

3-58

     Over $5,000 but not over $7,650 $280.13 plus 7.75% of the excess over $5,000

3-59

     Over $7,650 but not over $10,450 $485.50 plus 9.00% of the excess over $7,650

3-60

     Over $10,450 $737.50 plus 9.90% of the excess over $10,450

3-61

     (6) Adjustments for inflation.

3-62

     The dollars amount contained in paragraph (A) shall be increased by an amount equal to:

3-63

     (a) Such dollar amount contained in paragraph (A) in the year 1993, multiplied by;

3-64

     (b) The cost-of-living adjustment determined under section (J) with a base year of 1993;

3-65

     (c) The cost-of-living adjustment referred to in subparagraph (a) and (b) used in making

3-66

adjustments to the nine percent (9%) and nine and nine tenths percent (9.9%) dollar amounts shall

3-67

be determined under section (J) by substituting "1994" for "1993."

4-68

     (B) Maximum capital gains rates

4-69

     (1) In general

4-70

     If a taxpayer has a net capital gain for tax years ending prior to January 1, 2010, the tax

4-71

imposed by this section for such taxable year shall not exceed the sum of:

4-72

     (a) 2.5 % of the net capital gain as reported for federal income tax purposes under section

4-73

26 U.S.C. 1(h)(1)(a) and 26 U.S.C. 1(h)(1)(b).

4-74

     (b) 5% of the net capital gain as reported for federal income tax purposes under 26 U.S.C.

4-75

1(h)(1)(c).

4-76

     (c) 6.25% of the net capital gain as reported for federal income tax purposes under 26

4-77

U.S.C. 1(h)(1)(d).

4-78

     (d) 7% of the net capital gain as reported for federal income tax purposes under 26 U.S.C.

4-79

1(h)(1)(e).

4-80

     (2) For tax years beginning on or after January 1, 2010 the tax imposed on net capital

4-81

gain shall be determined under subdivision 44-30-2.6(c)(2)(A).

4-82

     (C) Itemized deductions.

4-83

     (1) In general

4-84

     For the purposes of section (2) "itemized deductions" means the amount of federal

4-85

itemized deductions as modified by the modifications in section 44-30-12.

4-86

     (2) Individuals who do not itemize their deductions

4-87

     In the case of an individual who does not elect to itemize his deductions for the taxable

4-88

year, they may elect to take a standard deduction.

4-89

     (3) Basic standard deduction.

4-90

     The Rhode Island standard deduction shall be allowed in accordance with the following

4-91

table:

4-92

     Filing status:
Amount:

4-93

      Single
$5,350

4-94

      Married filing jointly or qualifying widow(er)
$8,900

4-95

      Married filing separately
$4,450

4-96

      Head of Household
$7,850

4-97

     (4) Additional standard deduction for the aged and blind.

4-98

     An additional standard deduction shall be allowed for individuals age sixty-five (65) or

4-99

older or blind in the amount of $1,300 for individuals who are not married and $1,050 for

4-100

individuals who are married.

4-101

     (5) Limitation on basic standard deduction in the case of certain dependents. In the case

4-102

of an individual to whom a deduction under section (E) is allowable to another taxpayer, the basic

5-1

standard deduction applicable to such individual shall not exceed the greater of:

5-2

     (a) $850;

5-3

     (b) The sum of $300 and such individual's earned income;

5-4

     (6) Certain individuals not eligible for standard deduction.

5-5

     In the case of:

5-6

     (a) A married individual filing a separate return where either spouse itemizes deductions;

5-7

     (b) Nonresident alien individual;

5-8

     (c) An estate or trust;

5-9

     The standard deduction shall be zero.

5-10

     (7) Adjustments for inflation.

5-11

     Each dollars amount contained in paragraphs (3), (4) and (5) shall be increased by an

5-12

amount equal to:

5-13

     (a) Such dollar amount contained in paragraphs (3), (4) and (5) in the year 1988,

5-14

multiplied by

5-15

     (b) The cost-of-living adjustment determined under section (J) with a base year of 1988.

5-16

     (D) Overall limitation on itemized deductions

5-17

     (1) General rule.

5-18

     In the case of an individual whose adjusted gross income as modified by section 44-30-12

5-19

exceeds the applicable amount, the amount of the itemized deductions otherwise allowable for the

5-20

taxable year shall be reduced by the lesser of:

5-21

     (a) Three percent (3%) of the excess of adjusted gross income as modified by section 44-

5-22

30-12 over the applicable amount; or

5-23

     (b) Eighty percent (80%) of the amount of the itemized deductions otherwise allowable

5-24

for such taxable year.

5-25

     (2) Applicable amount.

5-26

     (a)In general.

5-27

     For purposes of this section, the term "applicable amount" means $156,400 ($78,200 in

5-28

the case of a separate return by a married individual).

5-29

     (b) Adjustments for inflation. Each dollar amount contained in paragraph (a) shall be

5-30

increased by an amount equal to:

5-31

     (i) Such dollar amount contained in paragraph (a) in the year 1991, multiplied by

5-32

     (ii) The cost-of-living adjustment determined under section (J) with a base year of 1991.

5-33

     (3) Phase-out of Limitation.

6-34

     (a) In general.

6-35

     In the case of taxable year beginning after December 31, 2005, and before January 1,

6-36

2010, the reduction under section (1) shall be equal to the applicable fraction of the amount which

6-37

would be the amount of such reduction.

6-38

     (b) Applicable fraction.

6-39

     For purposes of paragraph (a), the applicable fraction shall be determined in accordance

6-40

with the following table:

6-41

     For taxable years beginning in calendar year: The applicable fraction is:

6-42

      2006 and 2007 2/3

6-43

      2008 and 2009 1/3

6-44

     (E) Exemption amount

6-45

     (1) In general.

6-46

     Except as otherwise provided in this subsection, the term "exemption amount" mean

6-47

$3,400.

6-48

     (2) Exemption amount disallowed in case of certain dependents.

6-49

     In the case of an individual with respect to whom a deduction under this section is

6-50

allowable to another taxpayer for the same taxable year, the exemption amount applicable to such

6-51

individual for such individual's taxable year shall be zero.

6-52

     (3) Adjustments for inflation.

6-53

     The dollar amount contained in paragraph (1) shall be increased by an amount equal to:

6-54

     (a) Such dollar amount contained in paragraph (1) in the year 1989, multiplied by

6-55

     (b) The cost-of-living adjustment determined under section (J) with a base year of 1989.

6-56

     (4) Limitation.

6-57

     (a) In general.

6-58

     In the case of any taxpayer whose adjusted gross income as modified for the taxable year

6-59

exceeds the threshold amount shall be reduced by the applicable percentage.

6-60

     (b) Applicable percentage. In the case of any taxpayer whose adjusted gross income for

6-61

the taxable year exceeds the threshold amount, the exemption amount shall be reduced by two (2)

6-62

percentage points for each $2,500 (or fraction thereof) by which the taxpayer's adjusted gross

6-63

income for the taxable year exceeds the threshold amount. In the case of a married individual

6-64

filing a separate return, the preceding sentence shall be applied by substituting "$1,250" for

6-65

"$2,500." In no event shall the applicable percentage exceed one hundred percent (100%).

6-66

     (c) Threshold Amount.

6-67

     For the purposes of this paragraph, the term "threshold amount" shall be determined with

6-68

the following table:

7-1

     Filing status:
Amount:

7-2

     Single $156,400

7-3

     Married filing jointly of qualifying widow(er)
$234,600

7-4

     Married filing separately
$117,300

7-5

     Head of Household
$195,500

7-6

     (d) Adjustments for inflation.

7-7

     Each dollars amount contain in paragraph (b) shall be increased by an amount equal to:

7-8

     Such dollar amount contained in paragraph (b) in the year 1991, multiplied by

7-9

     (ii) The cost-of-living adjustment determined under section (J) with a base year of 1991.

7-10

     (5) Phase-out of Limitation.

7-11

     (a) In general.

7-12

     In the case of taxable years beginning after December 31, 2005, and before January 1,

7-13

2010, the reduction under section 4 shall be equal to the applicable fraction of the amount which

7-14

would be the amount of such reduction.

7-15

     (b) Applicable fraction. For the purposes of paragraph (a), the applicable fraction shall

7-16

be determined in accordance with the following table:

7-17

     For taxable years beginning in calendar year: The applicable fraction is:

7-18

      2006 and 2007 2/3

7-19

      2008 and 2009 1/3

7-20

     (F) Alternative minimum tax

7-21

     (1) General rule. - There is hereby imposed (in addition to any other tax imposed by this

7-22

subtitle) a tax equal to the excess (if any) of:

7-23

     (a) The tentative minimum tax for the taxable year, over

7-24

     (b) The regular tax for the taxable year.

7-25

     (2) The tentative minimum tax for the taxable year is the sum of:

7-26

     (a) 6.5 percent of so much of the taxable excess as does not exceed $175,000, plus

7-27

     (b) 7.0 percent of so much of the taxable excess above $175,000.

7-28

     (3) The amount determined under the preceding sentence shall be reduced by the

7-29

alternative minimum tax foreign tax credit for the taxable year.

7-30

     (4) Taxable excess. - For the purposes of this subsection the term "taxable excess" means

7-31

so much of the federal alternative minimum taxable income as modified by the modifications in

7-32

section 44-30-12 as exceeds the exemption amount.

7-33

     (5) In the case of a married individual filing a separate return, subparagraph (2) shall be

7-34

applied by substituting "$87,500" for $175,000 each place it appears.

8-1

     (6) Exemption amount.

8-2

     For purposes of this section "exemption amount" means:

8-3

     Filing status:
Amount:

8-4

     Single $39,150

8-5

     Married filing jointly of qualifying widow(er)
$53,700

8-6

     Married filing separately
$26,850

8-7

     Head of Household
$39,150

8-8

     Estate or trust $24,650

8-9

     (7) Treatment of unearned income of minor children

8-10

     (a) In general.

8-11

     In the case of a minor child, the exemption amount for purposes of section (6) shall not

8-12

exceed the sum of:

8-13

     (i) Such child's earned income, plus

8-14

     (ii) $6,000.

8-15

     (8) Adjustments for inflation.

8-16

     The dollar amount contained in paragraphs (6) and (7) shall be increased by an amount

8-17

equal to:

8-18

     (a) Such dollar amount contained in paragraphs (6) and (7) in the year 2004, multiplied

8-19

by

8-20

     (b) The cost-of-living adjustment determined under section (J) with a base year of 2004.

8-21

     (9) Phase-out.

8-22

     (a) In general.

8-23

     The exemption amount of any taxpayer shall be reduced (but not below zero) by an

8-24

amount equal to twenty-five percent (25%) of the amount by which alternative minimum taxable

8-25

income of the taxpayer exceeds the threshold amount.

8-26

     (b) Threshold amount. For purposes of this paragraph, the term "threshold amount" shall

8-27

be determined with the following table:

8-28

     Filing status
Amount

8-29

     Single
$123,250

8-30

     Married filing jointly or qualifying widow(er)
$164,350

8-31

     Married filing separately
$82,175

8-32

     Head of Household
$123,250

8-33

     Estate or Trust
$82,150

9-34

     (c) Adjustments for inflation

9-35

     Each dollar amount contained in paragraph (9) shall be increased by an amount equal to:

9-36

     (i) Such dollar amount contained in paragraph (9) in the year 2004, multiplied by

9-37

     (ii) The cost-of-living adjustment determined under section (J) with a base year of 2004.

9-38

     (G) Other Rhode Island taxes

9-39

     (1) General rule. - There is hereby imposed (in addition to any other tax imposed by this

9-40

subtitle) a tax equal to twenty-five percent (25%) of:

9-41

     (a) The Federal income tax on lump-sum distributions.

9-42

     (b) The Federal income tax on parents' election to report child's interest and dividends.

9-43

     (c) The recapture of Federal tax credits that were previously claimed on Rhode Island

9-44

return.

9-45

     (H) Tax for children under 18 with investment income

9-46

     (1) General rule. - There is hereby imposed a tax equal to twenty-five percent (25%) of:

9-47

     (a) The Federal tax for children under the age of 18 with investment income.

9-48

     (I) Averaging of farm income

9-49

     (1) General rule. - At the election of an individual engaged in a farming business or

9-50

fishing business, the tax imposed in section 2 shall be equal to twenty-five percent (25%) of:

9-51

     (a) The Federal averaging of farm income as determined in IRC section 1301.

9-52

     (J) Cost-of-living adjustment

9-53

     (1) In general.

9-54

     The cost-of-living adjustment for any calendar year is the percentage (if any) by which:

9-55

     (a) The CPI for the preceding calendar year exceeds (b) The CPI for the base year.

9-56

     (2) CPI for any calendar year. For purposes of paragraph (1), the CPI for any calendar

9-57

year is the average of the Consumer Price Index as of the close of the twelve (12) month period

9-58

ending on August 31 of such calendar year.

9-59

     (3) Consumer Price Index

9-60

     For purposes of paragraph (2), the term "consumer price index" means the last consumer

9-61

price index for all urban consumers published by the department of labor. For purposes of the

9-62

preceding sentence, the revision of the consumer price index which is most consistent with the

9-63

consumer price index for calendar year 1986 shall be used.

9-64

     (4) Rounding.

9-65

     (a) In general.

9-66

     If any increase determined under paragraph (1) is not a multiple of $50, such increase

9-67

shall be rounded to the next lowest multiple of $50.

10-68

     (b) In the case of a married individual filing a separate return, subparagraph (a) shall be

10-69

applied by substituting "$25" for $50 each place it appears.

10-70

     (K) Credits against tax. - For tax years beginning on or after January 1, 2001, a taxpayer

10-71

entitled to any of the following federal credits enacted prior to January 1, 1996 shall be entitled to

10-72

a credit against the Rhode Island tax imposed under this section:

10-73

     (1) [Deleted by P.L. 2007, ch. 73, art. 7, section 5]

10-74

     (2) Child and dependent care credit;

10-75

     (3) General business credits;

10-76

     (4) Credit for elderly or the disabled;

10-77

     (5) Credit for prior year minimum tax;

10-78

     (6) Mortgage interest credit;

10-79

     (7) Empowerment zone employment credit;

10-80

     (8) Qualified electric vehicle credit.

10-81

     (L) Credit against tax for adoption. - For tax years beginning on or after January 1, 2006,

10-82

a taxpayer entitled to the federal adoption credit shall be entitled to a credit against the Rhode

10-83

Island tax imposed under this section if the adopted child was under the care, custody, or

10-84

supervision of the Rhode Island department of children, youth and families prior to the adoption.

10-85

     (M) The credit shall be twenty-five percent (25%) of the aforementioned federal credits

10-86

provided there shall be no deduction based on any federal credits enacted after January 1, 1996,

10-87

including the rate reduction credit provided by the federal Economic Growth and Tax

10-88

Reconciliation Act of 2001 (EGTRRA). In no event shall the tax imposed under this section be

10-89

reduced to less than zero. A taxpayer required to recapture any of the above credits for federal tax

10-90

purposes shall determine the Rhode Island amount to be recaptured in the same manner as

10-91

prescribed in this subsection.

10-92

     (N) Rhode Island earned income credit

10-93

     (1) In general.

10-94

     A taxpayer entitled to a federal earned income credit shall be allowed a Rhode Island

10-95

earned income credit equal to twenty-five percent (25%) of the federal earned income credit.

10-96

Such credit shall not exceed the amount of the Rhode Island income tax.

10-97

     (2) Refundable portion.

10-98

     In the event the Rhode Island earned income credit allowed under section (J) exceeds the

10-99

amount of Rhode Island income tax, a refundable earned income credit shall be allowed.

10-100

     (a) For purposes of paragraph (2) refundable earned income credit means fifteen percent

10-101

(15%) of the amount by which the Rhode Island earned income credit exceeds the Rhode Island

10-102

income tax.

11-1

     (O) The tax administrator shall recalculate and submit necessary revisions to paragraphs

11-2

(A) through (J) to the general assembly no later than February 1, 2010 and every three (3) years

11-3

thereafter for inclusion in the statute.

11-4

     (3) For the period January 1, 2011 through December 31, 2011, and thereafter, "Rhode

11-5

Island taxable income" means federal adjusted gross income as determined under the Internal

11-6

Revenue Code, 26 U.S.C. 1 et seq., and as modified for Rhode Island purposes pursuant to

11-7

section 44-30-12 less the amount of Rhode Island Basic Standard Deduction allowed pursuant to

11-8

subparagraph 44-30-2.6(c)(3)(B), and less the amount of personal exemption allowed pursuant of

11-9

subparagraph 44-30-2.6(c)(3)(C).

11-10

     (A) Tax imposed.

11-11

     (I) There is hereby imposed on the taxable income of married individuals filing joint

11-12

returns, qualifying widow(er), every head of household, unmarried individuals, married

11-13

individuals filing separate returns and bankruptcy estates, a tax determined in accordance with the

11-14

following table:

11-15

      RI Taxable Income RI Income Tax

11-16

     Over But not over Pay + % on Excess On the amount over

11-17

     $ 0 - $ 55,000 $ 0 + 3.75% $ 0

11-18

     55,000 - 125,000 2,063 + 4.75% 55,000

11-19

     125,000 - 250,000 5,388 + 5.99% 125,000

11-20

     250,000 - 12,876 + 9.99% 250,000

11-21

     (II) There is hereby imposed on the taxable income of an estate or trust a tax determined

11-22

in accordance with the following table:

11-23

      RI Taxable Income RI Income Tax

11-24

     Over But not over Pay + % on Excess On the amount over

11-25

     $ 0 - $ 2,230 $ 0 + 3.75% $ 0

11-26

     2,230 - 7,022 84 + 4.75% 2,230

11-27

     7,022 - 312 + 5.99% 7,022

11-28

     (B) Deductions:

11-29

     (I) Rhode Island Basic Standard Deduction. Only the Rhode Island standard deduction

11-30

shall be allowed in accordance with the following table:

11-31

     Filing status
Amount

11-32

     Single
$7,500

11-33

     Married filing jointly or qualifying widow(er)
$15,000

12-34

     Married filing separately
$7,500

12-35

     Head of Household
$11,250

12-36

     or in an amount equal to seventy-five percent (75%) of the federal itemized deduction

12-37

allowance as determined by the applicable provisions of the Internal Revenue Code of 1986, as

12-38

amended from time to time, whichever is greater.

12-39

     (II) Nonresident alien individuals, estates and trusts are not eligible for standard

12-40

deductions.

12-41

     (III) In the case of any taxpayer whose adjusted gross income, as modified for Rhode

12-42

Island purposes pursuant to section 44-30-12, for the taxable year exceeds one hundred seventy-

12-43

five thousand dollars ($175,000), the standard deduction amount shall be reduced by the

12-44

applicable percentage. The term "applicable percentage" means twenty (20) percentage points for

12-45

each five thousand dollars ($5,000) (or fraction thereof) by which the taxpayer's adjusted gross

12-46

income for the taxable year exceeds one hundred seventy-five thousand dollars ($175,000).

12-47

     (C) Exemption Amount:

12-48

     (I) The term "exemption amount" means three thousand five hundred dollars ($3,500)

12-49

multiplied by the number of exemptions allowed for the taxable year for federal income tax

12-50

purposes.

12-51

     (II) Exemption amount disallowed in case of certain dependents. In the case of an

12-52

individual with respect to whom a deduction under this section is allowable to another taxpayer

12-53

for the same taxable year, the exemption amount applicable to such individual for such

12-54

individual's taxable year shall be zero.

12-55

     (D) In the case of any taxpayer whose adjusted gross income, as modified for Rhode

12-56

Island purposes pursuant to section 33-30-12, for the taxable year exceeds one hundred seventy-

12-57

five thousand dollars ($175,000), the exemption amount shall be reduced by the applicable

12-58

percentage. The term "applicable percentage" means twenty (20) percentage points for each five

12-59

thousand dollars ($5,000) (or fraction thereof) by which the taxpayer's adjusted gross income for

12-60

the taxable year exceeds one hundred seventy-five thousand dollars ($175,000).

12-61

     (E) Adjustment for inflation. - The dollar amount contained in subparagraphs 44-30-

12-62

2.6(c)(3)(A), 44-30-2.6(c)(3)(B) and 44-30-2.6(c)(3)(C) shall be increased annually by an amount

12-63

equal to:

12-64

     (I) Such dollar amount contained in subparagraphs 44-30-2.6(c)(3)(A), 44-30-

12-65

2.6(c)(3)(B) and 44-30-2.6(c)(3)(C) adjusted for inflation using a base tax year of 2000,

12-66

multiplied by;

12-67

     (II) The cost-of-living adjustment with a base year of 2000.

13-68

     (III) For the purposes of this section the cost-of-living adjustment for any calendar year is

13-69

the percentage (if any) by which the consumer price index for the preceding calendar year

13-70

exceeds the consumer price index for the base year. The consumer price index for any calendar

13-71

year is the average of the consumer price index as of the close of the twelve (12) month period

13-72

ending on August 31, of such calendar year.

13-73

     (IV) For the purpose of this section the term "consumer price index" means the last

13-74

consumer price index for all urban consumers published by the department of labor. For the

13-75

purpose of this section the revision of the consumer price index which is most consistent with the

13-76

consumer price index for calendar year 1986 shall be used.

13-77

     (V) If any increase determined under this section is not a multiple of fifty dollars

13-78

($50.00), such increase shall be rounded to the next lower multiple of fifty dollars ($50.00). In the

13-79

case of a married individual filing separate return, if any increase determined under this section is

13-80

not a multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower

13-81

multiple of twenty-five dollars ($25.00).

13-82

     (E) Credits against tax.

13-83

     (I) Notwithstanding any other provisions of Rhode Island Law, for tax years beginning on

13-84

or after January 1, 2011, the only credits allowed against a tax imposed under this chapter shall be

13-85

as follows:

13-86

     (a) Rhode Island Earned Income Credit: Credit shall be allowed for earned income credit

13-87

pursuant to subparagraph 44-30-2.6(c)(2)(N).

13-88

     (b) Property Tax Relief Credit: Credit shall be allowed for property tax relief as provided

13-89

in section 44-33-1 et seq.

13-90

     (c) Lead Paint Credit: Credit shall be allowed for residential lead abatement income tax

13-91

credit as provided in section 44-30.3-1 et seq.

13-92

     (d) Credit for income taxes of other states. - Credit shall be allowed for income tax paid

13-93

to other states pursuant to section 44-30-74.

13-94

     (e) Historic Structures Tax Credit: Credit shall be allowed for historic structures tax

13-95

credit as provided in section 44-33.2-1 et seq.

13-96

     (f) Motion Picture Productions Tax Credit: Credit shall be allowed for motion picture

13-97

production tax credit as provided in section 44-31.2-1 et seq.

13-98

     (g) Child and Dependent Care: Credit shall be allowed for twenty-five percent (25%) of

13-99

the federal child and dependent care credit allowable for the taxable year for federal purposes;

13-100

provided, however, such credit shall not exceed the Rhode Island tax liability.

13-101

     (h) Tax credits for contributions to Scholarship Organizations: Credit shall be allowed for

13-102

contributions to scholarship organizations as provided in section 44-62 et seq.

14-1

     (i) Credit for tax withheld. - Wages upon which tax is required to be withheld shall be

14-2

taxable as if no withholding were required, but any amount of Rhode Island personal income tax

14-3

actually deducted and withheld in any calendar year shall be deemed to have been paid to the tax

14-4

administrator on behalf of the person from whom withheld, and the person shall be credited with

14-5

having paid that amount of tax for the taxable year beginning in that calendar year. For a taxable

14-6

year of less than twelve (12) months, the credit shall be made under regulations of the tax

14-7

administrator.

14-8

     (2) Except as provided in section 1 above, no other state and federal tax credit shall be

14-9

available to the taxpayers in computing tax liability under this chapter.

14-10

     SECTION 2. This act shall take effect upon passage.

=======

LC01712

=======

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION - PERSONAL INCOME TAX

***

15-1

     This act would provide that the Rhode Island standard tax deduction be the greater of the

15-2

amount(s) currently allowed or seventy-five percent (75%) of the federal itemized deduction

15-3

allowance.

15-4

     This act would take effect upon passage.

=======

LC01712

=======