2018 -- H 8258

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LC005771

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2018

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A N   A C T

RELATING TO TAXATION - BUSINESS CORPORATION AND PERSONAL INCOME TAX

     Introduced By: Representative Robert B. Lancia

     Date Introduced: May 30, 2018

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 44-11-7.1 of the General Laws in Chapter 44-11 entitled "Business

Corporation Tax" is hereby amended to read as follows:

     44-11-7.1. Limitations on assessment.

     (a) General. Except as provided in this section, the amount of the Rhode Island corporate

income tax shall be assessed within three (3) years after the return was filed, whether or not the

return was filed on or after the prescribed date. For this purpose, a tax return filed before the due

date shall be considered as filed on the due date. In the event that no return is filed, the amount of

the Rhode Island corporate income tax shall be subject to assessment within seven (7) years after

the date the return was due to be filed.

     (b) Exceptions. (1) The tax may be assessed at any time if:

     (i) No return is filed. The state taxation division estimates a return;

     (ii) A false or fraudulent return is filed with intent to avoid tax.

     (2) Where, before the expiration of the time prescribed in this section for the assessment

of tax, or before the time as extended, both the tax administrator and the taxpayer have consented,

in writing, to its assessment after that time, the tax may be assessed at any time prior to the

expiration of the agreed upon period.

     (3) If a taxpayer's deficiency is attributable to an excessive net operating loss carryback

allowance, it may be assessed at any time that a deficiency for the taxable year of the loss may be

assessed.

     (4) An erroneous refund shall be considered to create an underpayment of tax on the date

made. An assessment of a deficiency arising out of an erroneous refund may be made at any time

within three (3) years thereafter, or at any time if it appears that any part of the refund was

induced by fraud or misrepresentation of a material fact.

     (c) Notwithstanding the provisions of this section, the tax may be assessed at any time

within six (6) years after the return was filed if a taxpayer omits from its Rhode Island income an

amount properly includable therein which is in excess of twenty-five percent (25%) of the amount

of Rhode Island income stated in the return. For this purpose there shall not be taken into account

any amount which is omitted in the return if the amount is disclosed in the return, or in a

statement attached to the return, in a manner adequate to apprise the tax administrator of the

nature and amount of the item.

     (d) The running of the period of limitations on assessment or collection of the tax or other

amount, or of a transferee's liability, shall, after the mailing of a notice of deficiency, be

suspended for any period during which the tax administrator is prohibited from making the

assessment or from collecting by levy, and for sixty (60) days thereafter.

     (e) No period of limitations specified in any other law shall apply to the assessment or

collection of Rhode Island corporate income tax.

     SECTION 2. Section 44-30-83 of the General Laws in Chapter 44-30 entitled "Personal

Income Tax" is hereby amended to read as follows:

     44-30-83. Limitations on assessment.

     (a) General. Except as otherwise provided in this section the amount of the Rhode Island

personal income tax shall be assessed within three (3) years after the return was filed, whether or

not the return was filed on or after the prescribed date. For this purpose a tax return filed before

the due date shall be considered as filed on the due date; and a return of withholding tax for any

period ending with or within a calendar year filed before April 15 of the succeeding calendar year

shall be considered filed on April 15 of the succeeding calendar year. In the event that no return is

filed, the amount of the Rhode Island personal income tax subject to assessment shall be within

seven (7) years after the date the return was due to be filed.

     (b) Exceptions.

     (1) Assessment at any time. The tax may be assessed at any time if:

     (i) No return is filed The state division estimates a return;

     (ii) A false or fraudulent return is filed with intent to evade tax; or

     (iii) The taxpayer fails to file a report, pursuant to § 44-30-59, of a change, correction, or

amended return, increasing his or her federal taxable income as reported on his or her federal

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income tax return or to report a change or correction which is treated in the same manner as if it

were a deficiency for federal income tax purposes.

     (2) Extension by agreement. Where, before the expiration of the time prescribed in this

section for the assessment of tax, or before the time as extended pursuant to this section, both the

tax administrator and the taxpayer have consented in writing to its assessment after that time, the

tax may be assessed at any time prior to the expiration of the period agreed upon.

     (3) Report of changed or corrected federal income. If the taxpayer shall, pursuant to § 44-

30-59, file an amended return, or report a change or correction increasing his or her federal

taxable income or report a change or correction which is treated in the same manner as if it were a

deficiency for federal income tax purposes, an assessment may be made at any time prior to two

(2) years after the report or amended return was filed. This assessment of Rhode Island personal

income tax shall not exceed the amount of the increase attributable to the federal change,

correction, or items amended on the taxpayer's amended federal income tax return. The

provisions of this paragraph shall not affect the time within which or the amount for which an

assessment may otherwise be made.

     (4) Deficiency attributable to net operating loss carryback. If a taxpayer's deficiency is

attributable to an excessive net operating loss carryback allowance, it may be assessed at any time

that a deficiency for the taxable year of the loss may be assessed.

     (5) Recovery of erroneous refund. An erroneous refund shall be considered to create an

underpayment of tax on the date made. An assessment of a deficiency arising out of an erroneous

refund may be made at any time within three (3) years thereafter, or at any time if it appears that

any part of the refund was induced by fraud or misrepresentation of a material fact.

     (6) Armed forces relief. For purposes of this tax, the date appearing in 26 U.S.C. § 692(a)

shall be January 1, 1971.

     (c) Omission of income on return. Notwithstanding the foregoing provisions of this

section, the tax may be assessed at any time within six (6) years after the return was filed if an

individual omits from his or her Rhode Island income an amount properly includible therein

which is in excess of twenty-five percent (25%) of the amount of Rhode Island income stated in

the return. For this purpose there shall not be taken into account any amount which is omitted in

the return if the amount is disclosed in the return, or in a statement attached to the return, in a

manner adequate to apprise the tax administrator of the nature and amount of the item.

     (d) Suspension of limitation. The running of the period of limitations on assessment or

collection of tax or other amount (or of a transferee's liability) shall, after the mailing of a notice

of deficiency, be suspended for the period during which the tax administrator is prohibited under

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§ 44-30-81(c) from making the assessment or from collecting by levy, and for sixty (60) days

thereafter.

     (e) Limitations exclusive. No period of limitations specified in any other law shall apply

to the assessment or collection of Rhode Island personal income tax.

     SECTION 3. Chapter 44-1 of the General Laws entitled "State Tax Officials" is hereby

amended by adding thereto the following section:

     44-1-40. Statute of limitations.

     The state taxation division and the tax administrator shall not commence any collection

actions to recover unpaid tax liability from ten (10) years from the date upon which the balance

was assessed, subject to the following exceptions by which the statute of limitations is tolled:

     (1) The filing of an offer in compromise;

     (2) The filing of an appeal;

     (3) The filing of bankruptcy under any chapter of the federal laws; and

     (4) The filing of a tax related lawsuit against the state of Rhode Island concerning any

state tax matter.

     SECTION 4. This act shall take effect upon passage.

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LC005771

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION - BUSINESS CORPORATION AND PERSONAL INCOME TAX

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     This act would limit to seven (7) years the period within which the business corporation

tax and the personal income tax may be assessed for taxpayers who fail to file returns on the date

the return was due to be filed, and limit to ten (10) years the period within which the state may

commence tax collection activities from the date upon which the balance was assessed except

when there is:

     (1) The filing of an offer in compromise;

     (2) The filing of an appeal;

     (3) The filing of bankruptcy under any chapter of the federal laws; and

     (4) The filing of a tax related lawsuit against the state of Rhode Island concerning any

state tax matter.

     This act would take effect upon passage.

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LC005771

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