2013 -- S 0878

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LC02386

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO TAXATION - PERSONAL INCOME TAX

     Introduced By: Senators Ciccone, and Ruggerio

     Date Introduced: April 25, 2013

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

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

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Income Tax" is hereby amended to read as follows:

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

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

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tax purposes, with the modifications specified in this section.

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

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federal adjusted gross income:

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

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Rhode Island or its political subdivisions;

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

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

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

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income taxes;

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

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

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

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nonqualified withdrawal is:

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

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

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section 16-57-6.1; and

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      (B) A withdrawal or distribution which is:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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federal adjusted gross income.

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

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

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

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from federal adjusted gross income:

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

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

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

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

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

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

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

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

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gross income or taxable income;

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

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

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

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

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withdrawal;

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

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

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following limitations, restrictions and qualifications:

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

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

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return;

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      (ii) The following shall not be considered contributions:

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

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account at the time the contribution is made;

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

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

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U.S.C. section 529; or

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

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

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adjusted gross income to less than zero (0);

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

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

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

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sum of:

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

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such preceding taxable years; and

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

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

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

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

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taxable year;

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

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

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

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

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

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allocated between the prior joint filers; and

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

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

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

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or other coverage plan.

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

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

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

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

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

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

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

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

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

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      (A) Travel expenses.

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      (B) Lodging expenses.

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      (C) Lost wages.

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

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nonresident of this state.

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

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

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

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section 44-30-17.

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     (8) Losses from wagering transactions shall be allowed only to the extent of the gains

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from such transactions.

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

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

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section 44-30-15.

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     SECTION 2. This act shall take effect upon passage.

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LC02386

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION - PERSONAL INCOME TAX

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     This act would provide that any modification reducing federal adjusted gross income for

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losses from wagering transactions be limited to the extent of the gains from such transactions.

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     This act would take effect upon passage.

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LC02386

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