2013 -- S 0831

=======

LC02082

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

____________

A N A C T

RELATING TO TAXATION - PERSONAL INCOME TAX

     Introduced By: Senators McCaffrey, Walaska, Raptakis, Ciccone, and Ruggerio

     Date Introduced: April 04, 2013

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

1-1

     SECTION 1. Section 44-30-12 of the General Laws in Chapter 44-30 entitled "Personal

1-2

Income Tax" is hereby amended to read as follows:

1-3

     44-30-12. Rhode Island income of a resident individual. -- (a) General. - The Rhode

1-4

Island income of a resident individual means his or her adjusted gross income for federal income

1-5

tax purposes, with the modifications specified in this section.

1-6

      (b) Modifications increasing federal adjusted gross income. - There shall be added to

1-7

federal adjusted gross income:

1-8

      (1) Interest income on obligations of any state, or its political subdivisions, other than

1-9

Rhode Island or its political subdivisions;

1-10

      (2) Interest or dividend income on obligations or securities of any authority, commission,

1-11

or instrumentality of the United States, but not of Rhode Island or its political subdivisions, to the

1-12

extent exempted by the laws of the United States from federal income tax but not from state

1-13

income taxes;

1-14

      (3) The modification described in section 44-30-25(g);

1-15

      (4) (i) The amount defined below of a nonqualified withdrawal made from an account in

1-16

the tuition savings program pursuant to section 16-57-6.1. For purposes of this section, a

1-17

nonqualified withdrawal is:

1-18

      (A) A transfer or rollover to a qualified tuition program under Section 529 of the Internal

1-19

Revenue Code, 26 U.S.C. section 529, other than to the tuition savings program referred to in

1-20

section 16-57-6.1; and

2-1

      (B) A withdrawal or distribution which is:

2-2

      (I) Not applied on a timely basis to pay "qualified higher education expenses" as defined

2-3

in section 16-57-3(12) of the beneficiary of the account from which the withdrawal is made;

2-4

      (II) Not made for a reason referred to in section 16-57-6.1(e); or

2-5

      (III) Not made in other circumstances for which an exclusion from tax made applicable

2-6

by Section 529 of the Internal Revenue Code, 26 U.S.C. section 529, pertains if the transfer,

2-7

rollover, withdrawal or distribution is made within two (2) taxable years following the taxable

2-8

year for which a contributions modification pursuant to subdivision (c)(4) of this section is taken

2-9

based on contributions to any tuition savings program account by the person who is the

2-10

participant of the account at the time of the contribution, whether or not the person is the

2-11

participant of the account at the time of the transfer, rollover, withdrawal or distribution;

2-12

      (ii) In the event of a nonqualified withdrawal under subparagraphs (i)(A) or (i)(B) of this

2-13

subdivision, there shall be added to the federal adjusted gross income of that person for the

2-14

taxable year of the withdrawal an amount equal to the lesser of:

2-15

      (A) The amount equal to the nonqualified withdrawal reduced by the sum of any

2-16

administrative fee or penalty imposed under the tuition savings program in connection with the

2-17

nonqualified withdrawal plus the earnings portion thereof, if any, includible in computing the

2-18

person's federal adjusted gross income for the taxable year; and

2-19

      (B) The amount of the person's contribution modification pursuant to subdivision (c)(4)

2-20

of this section for the person's taxable year of the withdrawal and the two (2) prior taxable years

2-21

less the amount of any nonqualified withdrawal for the two (2) prior taxable years included in

2-22

computing the person's Rhode Island income by application of this subsection for those years.

2-23

Any amount added to federal adjusted gross income pursuant to this subdivision shall constitute

2-24

Rhode Island income for residents, nonresidents and part-year residents; and

2-25

      (5) The modification described in section 44-30-25.1(d)(3)(i).

2-26

      (6) The amount equal to any unemployment compensation received but not included in

2-27

federal adjusted gross income.

2-28

      (7) The amount equal to the deduction allowed for sales tax paid for a purchase of a

2-29

qualified motor vehicle as defined by the Internal Revenue Code section 164(a)(6).

2-30

      (c) Modifications reducing federal adjusted gross income. - There shall be subtracted

2-31

from federal adjusted gross income:

2-32

      (1) Any interest income on obligations of the United States and its possessions to the

2-33

extent includible in gross income for federal income tax purposes, and any interest or dividend

2-34

income on obligations, or securities of any authority, commission, or instrumentality of the

3-1

United States to the extent includible in gross income for federal income tax purposes but exempt

3-2

from state income taxes under the laws of the United States; provided, that the amount to be

3-3

subtracted shall in any case be reduced by any interest on indebtedness incurred or continued to

3-4

purchase or carry obligations or securities the income of which is exempt from Rhode Island

3-5

personal income tax, to the extent the interest has been deducted in determining federal adjusted

3-6

gross income or taxable income;

3-7

      (2) A modification described in section 44-30-25(f) or section 44-30-1.1(c)(1);

3-8

      (3) The amount of any withdrawal or distribution from the "tuition savings program"

3-9

referred to in section 16-57-6.1 which is included in federal adjusted gross income, other than a

3-10

withdrawal or distribution or portion of a withdrawal or distribution that is a nonqualified

3-11

withdrawal;

3-12

      (4) Contributions made to an account under the tuition savings program, including the

3-13

"contributions carryover" pursuant to paragraph (iv) of this subdivision, if any, subject to the

3-14

following limitations, restrictions and qualifications:

3-15

      (i) The aggregate subtraction pursuant to this subdivision for any taxable year of the

3-16

taxpayer shall not exceed five hundred dollars ($500) or one thousand dollars ($1,000) if a joint

3-17

return;

3-18

      (ii) The following shall not be considered contributions:

3-19

      (A) Contributions made by any person to an account who is not a participant of the

3-20

account at the time the contribution is made;

3-21

      (B) Transfers or rollovers to an account from any other tuition savings program account

3-22

or from any other "qualified tuition program" under section 529 of the Internal Revenue Code, 26

3-23

U.S.C. section 529; or

3-24

      (C) A change of the beneficiary of the account;

3-25

      (iii) The subtraction pursuant to this subdivision shall not reduce the taxpayer's federal

3-26

adjusted gross income to less than zero (0);

3-27

      (iv) The contributions carryover to a taxable year for purpose of this subdivision is the

3-28

excess, if any, of the total amount of contributions actually made by the taxpayer to the tuition

3-29

savings program for all preceding taxable years for which this subsection is effective over the

3-30

sum of:

3-31

      (A) The total of the subtractions under this subdivision allowable to the taxpayer for all

3-32

such preceding taxable years; and

3-33

      (B) That part of any remaining contribution carryover at the end of the taxable year

3-34

which exceeds the amount of any nonqualified withdrawals during the year and the prior two (2)

4-1

taxable years not included in the addition provided for in this subdivision for those years. Any

4-2

such part shall be disregarded in computing the contributions carryover for any subsequent

4-3

taxable year;

4-4

      (v) For any taxable year for which a contributions carryover is applicable, the taxpayer

4-5

shall include a computation of the carryover with the taxpayer's Rhode Island personal income

4-6

tax return for that year, and if for any taxable year on which the carryover is based the taxpayer

4-7

filed a joint Rhode Island personal income tax return but filed a return on a basis other than

4-8

jointly for a subsequent taxable year, the computation shall reflect how the carryover is being

4-9

allocated between the prior joint filers; and

4-10

      (5) The modification described in section 44-30-25.1(d)(1).

4-11

      (6) Amounts deemed taxable income to the taxpayer due to payment or provision of

4-12

insurance benefits to a dependent, including a domestic partner pursuant to chapter 12 of title 36

4-13

or other coverage plan.

4-14

      (7) Modification for organ transplantation. - (i) An individual may subtract up to ten

4-15

thousand dollars ($10,000) from federal adjusted gross income if he or she, while living, donates

4-16

one or more of his or her human organs to another human being for human organ transplantation,

4-17

except that for purposes of this subsection, "human organ" means all or part of a liver, pancreas,

4-18

kidney, intestine, lung, or bone marrow. A subtract modification that is claimed hereunder may be

4-19

claimed in the taxable year in which the human organ transplantation occurs.

4-20

      (ii) An individual may claim that subtract modification hereunder only once, and the

4-21

subtract modification may be claimed for only the following unreimbursed expenses that are

4-22

incurred by the claimant and related to the claimant's organ donation:

4-23

      (A) Travel expenses.

4-24

      (B) Lodging expenses.

4-25

      (C) Lost wages.

4-26

      (iii) The subtract modification hereunder may not be claimed by a part-time resident or a

4-27

nonresident of this state.

4-28

      (8) State income tax refunds. An individual may subtract all state income tax refunds

4-29

included in their federal adjusted gross income where the refund was originally claimed as an

4-30

itemized deduction for federal income tax purposes.

4-31

      (d) Modification for Rhode Island fiduciary adjustment. - There shall be added to or

4-32

subtracted from federal adjusted gross income (as the case may be) the taxpayer's share, as

4-33

beneficiary of an estate or trust, of the Rhode Island fiduciary adjustment determined under

4-34

section 44-30-17.

5-1

      (e) Partners. - The amounts of modifications required to be made under this section by a

5-2

partner, which relate to items of income or deduction of a partnership, shall be determined under

5-3

section 44-30-15.

5-4

     SECTION 2. This act shall take effect upon passage and apply to personal income tax

5-5

returns for the tax year 2013 and thereafter.

=======

LC02082

=======

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION - PERSONAL INCOME TAX

***

6-1

     This act would allow individuals to subtract all state income tax refunds included in their

6-2

federal adjusted gross income where said refund was originally claimed as an itemized deduction

6-3

for federal income tax purposes.

6-4

     This act would take effect upon passage and would apply to personal income tax returns

6-5

for tax year 2013, and thereafter.

=======

LC02082

=======