2019 -- S 0074 SUBSTITUTE A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2019

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A N   A C T

RELATING TO TAXATION - SALES AND USE TAXES - ENFORCEMENT AND

COLLECTION

     

     Introduced By: Senators Lombardi, McCaffrey, Felag, Ciccone, and Lombardo

     Date Introduced: January 16, 2019

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

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     SECTION 1. Section 44-19-13 of the General Laws in Chapter 44-19 entitled "Sales and

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Use Taxes - Enforcement and Collection" is hereby amended to read as follows:

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     44-19-13. Notice of determination.

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     (a) The tax administrator shall give to the retailer or to the person storing, using, or

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consuming the tangible personal property a written notice of his or her determination. Except in

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the case of fraud, intent to evade the provisions of this article, failure to make a return, or claim

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for additional amount pursuant to §§ 44-19-16 -- 44-19-19, every notice of a deficiency

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determination shall be mailed within three (3) years after the fifteenth (15th) day of the calendar

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month following the month for which the amount is proposed to be determined or within three (3)

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years after the return is filed, whichever period expires later, unless a longer period is agreed

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upon by the tax administrator and the taxpayer.

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     (b) Notwithstanding the provisions of subsection (a) of this section, under no

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circumstances shall the tax administrator issue a notice of a deficiency determination for any sales

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or use tax determined to be due and payable more than ten (10) years after the return is filed or

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was due to be filed, nor shall the tax administrator commence any collection action for any tax

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that is due and payable unless the collection action is commenced within ten (10) years after a

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notice of a deficiency determination becomes a final collectible assessment; provided, however,

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that the tax administrator may renew a statutory lien that was initially filed within the ten (10)

 

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year period for collection actions. Both of the aforementioned ten (10) year periods are tolled for

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any period of time the taxpayer is in federal bankruptcy or state receivership proceedings.

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“Collection action” refers to any activity undertaken by the division of taxation to collect on any

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state tax liabilities that are final, due, and payable under Rhode Island law. “Collection action”

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may include, but is not limited to, any civil action involving a liability owed under chapters 18,

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18.1, 18.2, and 19 of title 44. This section excludes any sales and use tax liabilities that are

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deemed trust funds as defined in § 44-19-35, as well as any meals and beverage tax liabilities that

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are collected pursuant to § 44-18-18.1, and any hotel tax liabilities that are collected pursuant to §

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44-18-36.1.

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     (c) The ten (10) year limitation shall not apply to the renewal or continuation of the

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state's attempt to collect a liability that became final, due, and payable within the ten (10) year

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limitation periods set forth in this section.

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     SECTION 2. Section 44-23-9 of the General Laws in Chapter 44-23 entitled "Estate and

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Transfer Taxes - Enforcement and Collection" is hereby amended to read as follows:

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     44-23-9. Assessment and notice of estate tax -- Collection powers -- Lien.

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     (a) The tax imposed by § 44-22-1.1 shall be assessed upon the full and fair cash value of

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the net estate determined by the tax administrator as provided in this chapter. Notice of the

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amount of the tax shall be mailed to the executor, administrator, or trustee, but failure to receive

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the notice does not excuse the nonpayment of or invalidate the tax. The tax administrator shall

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receive and collect the assessed taxes in the same manner and with the same powers as are

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prescribed for and given to the collectors of taxes by chapters 7 -- 9 of this title. The tax shall be

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due and payable as provided in § 44-23-16, shall be paid to the tax administrator, and shall be and

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remain a lien upon the estate until it is paid. All executors, administrators, and trustees are

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personally liable for the tax until it is paid.

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     (b) Notwithstanding the provisions of subsection (a) of this section, under no

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circumstances shall the tax administrator issue any notice of deficiency determination for the

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amount of the estate tax due more than ten (10) years after the return was filed or should have

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been filed, nor shall the tax administrator commence any collection action for any estate tax due

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and payable unless the collection action is commenced within ten (10) years after the date a

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notice of deficiency determination became a final collectible assessment. “Collection action”

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refers to any activity undertaken by the division of taxation to collect on any state tax liabilities

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that are final, due, and payable under Rhode Island law. “Collection action” may include, but is

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not limited to, any civil action involving a liability owed under chapters 22 and 23 of title 44.

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     (c) The ten (10) year limitation shall not apply to the renewal or continuation of the

 

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state's attempt to collect a liability that became final, due, and payable within the ten (10) year

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limitation periods set forth in this section.

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     SECTION 3. Section 44-30-83 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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     44-30-83. Limitations on assessment.

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

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

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

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

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

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shall be considered filed on April 15 of the succeeding calendar year.

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     (b) Exceptions.

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

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     (i) No return is filed;

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

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

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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

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were a deficiency for federal income tax purposes.

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

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

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

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

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

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

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

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

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

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

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

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

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assessment may otherwise be made.

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

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

 

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

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

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

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

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

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

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shall be January 1, 1971.

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

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

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

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

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

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

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

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

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

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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

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thereafter.

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

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to the assessment or collection of Rhode Island personal income tax. Under no circumstances

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shall the tax administrator issue any notice of a deficiency determination for Rhode Island

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personal income tax due or payable more than ten (10) years after the date upon which the return

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was filed or due to be filed, nor shall the tax administrator commence any collection action for

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any personal income tax due and payable unless the collection action is commenced within ten

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(10) years after a notice of deficiency determination became a final collectible assessment;

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provided however, that the tax administrator can renew a statutory lien that was initially filed

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within the ten (10) year period for collection actions. Both of the aforementioned ten (10) year

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periods are tolled for any period of time the taxpayer is in federal bankruptcy or state receivership

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proceedings. “Collection action” refers to any activity undertaken by the division of taxation to

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collect on any state tax liabilities that are final, due, and payable under Rhode Island law.

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“Collection action” may include, but is not limited to, any civil action involving a liability owed

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under chapter 30 of title 44. This section excludes any liabilities that are deemed trust funds as

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defined in § 44-30-76, as amended.

 

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     (f) The ten (10) year limitation shall not apply to the renewal or continuation of the state's

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attempt to collect a liability that became final, due, and payable within the ten (10) year limitation

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periods set forth in this section.

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     SECTION 4. Section 44-11-7.1 of the General Laws in Chapter 44-11 entitled "Business

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Corporation Tax" is hereby amended to read as follows:

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     44-11-7.1. Limitations on assessment.

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

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

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

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date shall be considered as filed on the due date.

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

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     (i) No return is filed.

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

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

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

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

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expiration of the agreed upon period.

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

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

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assessed.

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

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

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

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induced by fraud or misrepresentation of a material fact.

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

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

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

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

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

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

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nature and amount of the item.

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

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

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

 

LC000473/SUB A/2 - Page 5 of 6

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

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

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collection of Rhode Island corporate income tax. Under no circumstances shall the tax

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administrator issue any notice of deficiency determination for Rhode Island business corporation

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tax due and payable more than ten (10) years after the date upon which the return was filed or due

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to be filed, nor shall the tax administrator commence any collection action for any business

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corporation tax due and payable unless the collection action is commenced within ten (10) years

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after a notice of deficiency determination became a final collectible assessment; provided

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however, that the tax administrator may renew a statutory lien that was initially filed within the

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ten (10) year period for collection actions. Both of the aforementioned ten (10) year periods are

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tolled for any period of time the taxpayer is in federal bankruptcy or state receivership

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proceedings. “Collection action” refers to any activity undertaken by the division of taxation to

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collect on any state tax liabilities that are final, due, and payable under Rhode Island law.

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“Collection action” may include, but is not limited to, any civil action involving a liability owed

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under chapter 11 of title 44.

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     (f) The ten (10) year limitation shall not apply to the renewal or continuation of the state's

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attempt to collect a liability that became final, due, and payable within the ten (10) year limitation

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periods set forth in this section.

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     SECTION 5. This act shall take effect on July 1, 2019 and shall apply only to state tax

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liabilities that become final, due and payable after July 1, 2019.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION - SALES AND USE TAXES - ENFORCEMENT AND

COLLECTION

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     This act would enact two ten (10) year statute of limitations on two (2) separate tax

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functions. One requires the tax administrator to issue a notice of deficiency determination no

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more than ten (10) years after a return was filed or should have been filed. The other allows the

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tax administrator to pursue collections activity on that deficiency determination once it becomes a

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final collectible assessment of tax due. Both statute of limitations would apply to the sales and

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use tax, the estate tax, the personal income tax, and business corporation tax.

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     The ten (10) year limitation would not apply to the renewal or continuation of the state's

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attempt to collect a liability that became final, due, and payable within the ten (10) year limitation

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periods in this act.

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     This act would take effect on July 1, 2019 and would apply only to state tax liabilities

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that become final, due and payable after July 1, 2019.

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