2023 -- H 6010

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LC002199

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

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A N   A C T

RELATING TO TAXATION -- PERSONAL INCOME TAX

     

     Introduced By: Representatives Cardillo, Phillips, J. Brien, Noret, Rea, Serpa, Solomon,
Place, Sanchez, and DeSimone

     Date Introduced: March 01, 2023

     Referred To: House 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.

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     (a) General. The Rhode Island income of a resident individual means his or her adjusted

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gross income for federal income 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 income

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taxes;

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     (3) The modification described in § 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 § 16-57-6.1. For purposes of this section, a nonqualified

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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. § 529, other than to the tuition savings program referred to in § 16-57-

 

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6.1; and

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     (B) A withdrawal or distribution that 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 § 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 § 16-57-6.1(e); or

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

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

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

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which a contributions modification pursuant to subsection (c)(4) of this section is taken based on

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contributions to any tuition savings program account by the person who is the participant of the

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

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

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     (ii) In the event of a nonqualified withdrawal under subsection (b)(4)(i)(A) or (b)(4)(i)(B)

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of this section, 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 subsection (c)(4) of

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

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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. Any

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

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

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     (5) The modification described in § 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 § 164(a)(6); and

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     (8) For any taxable year beginning on or after January 1, 2020, the amount of any Paycheck

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Protection Program loan forgiven for federal income tax purposes as authorized by the Coronavirus

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Aid, Relief, and Economic Security Act and/or the Consolidated Appropriations Act, 2021 and/or

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any other subsequent federal stimulus relief packages enacted by law, to the extent that the amount

 

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of the loan forgiven exceeds $250,000, including an individual’s distributive share of the amount

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of a pass-through entity’s loan forgiveness in excess of $250,000.

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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 extent

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

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obligations, or securities of any authority, commission, or instrumentality of the United States to

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the extent includible in gross income for federal income tax purposes but exempt from state income

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taxes under the laws of the United States; provided, that the amount to be subtracted shall in any

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case be reduced by any interest on indebtedness incurred or continued to purchase or carry

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obligations or securities the income of which is exempt from Rhode Island personal income tax, to

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the extent the interest has been deducted in determining federal adjusted gross income or taxable

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income;

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     (2) A modification described in § 44-30-25(f) or § 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 § 16-57-6.1 that is included in federal adjusted gross income, other than a withdrawal

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or distribution or portion of a withdrawal or distribution that is a nonqualified 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 subsection (c)(4)(iv) of this section, 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 account

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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 or

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

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U.S.C. § 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 sum

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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 which

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

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

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shall be disregarded in computing the contributions carryover for any subsequent 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 tax

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

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

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subsequent taxable year, the computation shall reflect how the carryover is being allocated between

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the prior joint filers;

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     (5) The modification described in § 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 or

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other coverage plan;

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     (7) Modification for organ transplantation.

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     (i) An individual may subtract up to ten thousand dollars ($10,000) from federal adjusted

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gross income if he or she, while living, donates one or more of his or her human organs to another

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human being for human organ transplantation, except that for purposes of this subsection, “human

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organ” means all or part of a liver, pancreas, kidney, intestine, lung, or bone marrow. A subtract

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modification that is claimed hereunder may be claimed in the taxable year in which the human

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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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     (8) Modification for taxable Social Security income.

 

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     (i) For tax years beginning on or after January 1, 2016 through December 31, 2022:

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     (A) For a person who has attained the age used for calculating full or unreduced Social

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Security retirement benefits who files a return as an unmarried individual, head of household, or

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married filing separate whose federal adjusted gross income for the taxable year is less than eighty

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thousand dollars ($80,000); or

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     (B) A married individual filing jointly or individual filing qualifying widow(er) who has

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attained the age used for calculating full or unreduced Social Security retirement benefits whose

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joint federal adjusted gross income for the taxable year is less than one hundred thousand dollars

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($100,000), an amount equal to the Social Security benefits includible in federal adjusted gross

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income.

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     (ii) For tax years beginning on or after January 1, 2023:

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     (A) For a person who has attained the age used for calculating full or unreduced Social

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Security retirement benefits who files a return as an unmarried individual, head of household, or

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married filing separate whose federal adjusted gross income for the taxable year is less than eighty

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thousand dollars ($80,000); or

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     (B) A married individual filing jointly or individual filing qualifying widow(er) who has

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attained the age used for calculating full or unreduced Social Security retirement benefits whose

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joint federal adjusted gross income for the taxable year is less than one hundred thousand dollars

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($100,000), an amount equal to the Social Security benefits includible in federal adjusted gross

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income.

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     (ii)(iii) Adjustment for inflation. The dollar amount contained in subsections (c)(8)(i)(A)

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and (c)(8)(i)(B) (c)(8)(ii)(A) and (c)(8)(ii)(B) of this section shall be increased annually by an

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amount equal to:

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     (A) Such dollar amount contained in subsections (c)(8)(i)(A) and (c)(8)(i)(B) (c)(8)(ii)(A)

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and (c)(8)(ii)(B) of this section adjusted for inflation using a base tax year of 2000, multiplied by;

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

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

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

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

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average of the consumer price index as of the close of the twelve-month (12) period ending on

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August 31, of such calendar year.

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     (iv) For the purpose of this section the term “consumer price index” means the last

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

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

 

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price index for calendar year 1986 shall be used.

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     (v) If any increase determined under this section is not a multiple of fifty dollars ($50.00),

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

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married individual filing separate return, if any increase determined under this section is not a

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multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower multiple

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of twenty-five dollars ($25.00);

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     (9) Modification of taxable retirement income from certain pension plans or

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annuities.

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     (i) For tax years beginning on or after January 1, 2017, until the tax year beginning January

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1, 2022, a modification shall be allowed for up to fifteen thousand dollars ($15,000), and for tax

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years beginning on or after January 1, 2023, a modification shall be allowed for up to twenty

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thousand dollars ($20,000), of taxable pension and/or annuity income that is included in federal

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adjusted gross income for the taxable year:

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     (A) For a person who has attained the age used for calculating full or unreduced Social

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Security retirement benefits who files a return as an unmarried individual, head of household, or

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married filing separate whose federal adjusted gross income for such taxable year is less than the

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amount used for the modification contained in subsection (c)(8)(i)(A) of this section an amount not

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to exceed $15,000 for tax years beginning on or after January 1, 2017, until the tax year beginning

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January 1, 2022, and an amount not to exceed twenty thousand dollars ($20,000) for tax years

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beginning on or after January 1, 2023, of taxable pension and/or annuity income includible in

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federal adjusted gross income; or

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     (B) For a married individual filing jointly or individual filing qualifying widow(er) who

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has attained the age used for calculating full or unreduced Social Security retirement benefits whose

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joint federal adjusted gross income for such taxable year is less than the amount used for the

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modification contained in subsection (c)(8)(i)(B) of this section an amount not to exceed $15,000

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for tax years beginning on or after January 1, 2017, until the tax year beginning January 1, 2022,

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and an amount not to exceed twenty thousand dollars ($20,000) for tax years beginning on or after

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January 1, 2023, of taxable pension and/or annuity income includible in federal adjusted gross

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income.

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     (ii) Adjustment for inflation. The dollar amount contained by reference in subsections

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(c)(9)(i)(A) and (c)(9)(i)(B) of this section shall be increased annually for tax years beginning on

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or after January 1, 2018, by an amount equal to:

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     (A) Such dollar amount contained by reference in subsections (c)(9)(i)(A) and (c)(9)(i)(B)

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of this section adjusted for inflation using a base tax year of 2000, multiplied by;

 

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

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

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

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

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average of the consumer price index as of the close of the twelve-month (12) period ending on

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August 31, of such calendar year.

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     (iv) For the purpose of this section, the term “consumer price index” means the last

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

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

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price index for calendar year 1986 shall be used.

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     (v) If any increase determined under this section is not a multiple of fifty dollars ($50.00),

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

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married individual filing a separate return, if any increase determined under this section is not a

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multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower multiple

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of twenty-five dollars ($25.00).

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     (vi) For tax years beginning on or after January 1, 2022, the dollar amount contained by

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reference in subsection (c)(9)(i)(A) shall be adjusted to equal the dollar amount contained in

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subsection (c)(8)(i)(A), as adjusted for inflation, and the dollar amount contained by reference in

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subsection(c)(9)(i)(B) shall be adjusted to equal the dollar amount contained in subsection

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(c)(8)(i)(B), as adjusted for inflation;

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     (10) Modification for Rhode Island investment in opportunity zones. For purposes of

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a taxpayer’s state tax liability, in the case of any investment in a Rhode Island opportunity zone by

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the taxpayer for at least seven (7) years, a modification to income shall be allowed for the

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incremental difference between the benefit allowed under 26 U.S.C. § 1400Z-2(b)(2)(B)(iv) and

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the federal benefit allowed under 26 U.S.C. § 1400Z-2(c);

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     (11) Modification for military service pensions.

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     (i) For purposes of a taxpayer’s state tax liability, a modification to income shall be allowed

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as follows:

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     (A) For the tax years beginning on January 1, 2023, a taxpayer may subtract from federal

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adjusted gross income the taxpayer’s military service pension benefits included in federal adjusted

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gross income;

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     (ii) As used in this subsection, the term “military service” shall have the same meaning as

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set forth in 20 C.F.R. § 212.2;

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     (iii) At no time shall the modification allowed under this subsection alone or in conjunction

 

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with subsection (c)(9) exceed the amount of the military service pension received in the tax year

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for which the modification is claimed; and

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     (12) Any rebate issued to the taxpayer pursuant to § 44-30-103 to the extent included in

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gross income for federal tax purposes.

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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 § 44-

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30-17.

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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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44-30-15.

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     SECTION 2. This act shall take effect upon passage.

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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 increase the federal adjusted gross income threshold for modification for

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taxable social security income.

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     This act would take effect upon passage.

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