2022 -- S 2265

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LC004494

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2022

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A N   A C T

RELATING TO TAXATION -- BUSINESS CORPORATION TAX AND FRANCHISE TAX

     Introduced By: Senators Raptakis, de la Cruz, Murray, E Morgan, DiPalma, Rogers,
Sosnowski, Ciccone, and Lombardo

     Date Introduced: February 11, 2022

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 44-11-2 of the General Laws in Chapter 44-11 entitled "Business

Corporation Tax" is hereby amended to read as follows:

     44-11-2. Imposition of tax.

     (a) Each corporation shall annually pay to the state a tax equal to nine percent (9%) of net

income, as defined in § 44-11-11, qualified in § 44-11-12, and apportioned to this state as provided

in §§ 44-11-13 -- 44-11-15, for the taxable year. For tax years beginning on or after January 1,

2015, each corporation shall annually pay to the state a tax equal to seven percent (7.0%) of net

income, as defined in § 44-11-13 -- 44-11-15, for the taxable year.

     (b) A corporation shall pay the amount of any tax as computed in accordance with

subsection (a) after deducting from "net income," as used in this section, fifty percent (50%) of the

excess of capital gains over capital losses realized during the taxable year, if for the taxable year:

     (1) The corporation is engaged in buying, selling, dealing in, or holding securities on its

own behalf and not as a broker, underwriter, or distributor;

     (2) Its gross receipts derived from these activities during the taxable year amounted to at

least ninety percent (90%) of its total gross receipts derived from all of its activities during the year.

"Gross receipts" means all receipts, whether in the form of money, credits, or other valuable

consideration, received during the taxable year in connection with the conduct of the taxpayer's

activities.

     (c) A corporation shall not pay the amount of the tax computed on the basis of its net

income under subsection (a), but shall annually pay to the state a tax equal to ten cents ($.10) for

each one hundred dollars ($100) of gross income for the taxable year or a tax of one hundred dollars

($100), whichever tax shall be the greater, if for the taxable year the corporation is either a "personal

holding company" registered under the federal Investment Company Act of 1940, 15 U.S.C. § 80a-

1 et seq., "regulated investment company," or a "real estate investment trust" as defined in the

federal income tax law applicable to the taxable year. "Gross income" means gross income as

defined in the federal income tax law applicable to the taxable year, plus:

     (1) Any interest not included in the federal gross income; minus

     (2) Interest on obligations of the United States or its possessions, and other interest exempt

from taxation by this state; and minus

     (3) Fifty percent (50%) of the excess of capital gains over capital losses realized during the

taxable year.

     (d)(1) A small business corporation having an election in effect under subchapter S, 26

U.S.C. § 1361 et seq., shall not be subject to the Rhode Island income tax on corporations, except

that the corporation shall be subject to the provisions of subsection (a), to the extent of the income

that is subjected to federal tax under subchapter S. Effective for tax years beginning on or after

January 1, 2015, a small business corporation having an election in effect under subchapter S, 26

U.S.C. § 1361 et seq., shall be subject to the minimum tax under § 44-11-2(e).

     (2) The shareholders of the corporation who are residents of Rhode Island shall include in

their income their proportionate share of the corporation's federal taxable income.

     (3) [Deleted by P.L. 2004, ch. 595, art. 29, § 1.]

     (4) [Deleted by P.L. 2004, ch. 595, art. 29, § 1.]

     (e) Minimum tax. The tax imposed upon any corporation under this section, including a

small business corporation having an election in effect under subchapter S, 26 U.S.C. § 1361 et

seq., shall not be less than four hundred fifty dollars ($450). For tax years beginning on or after

January 1, 2017, the tax imposed shall not be less than four hundred dollars ($400).

     (f) If a corporation's annual gross income, as defined in § 44-11-2(c), amounts to less than

the four hundred dollar ($400) minimum tax imposed by subsection (e) of this section, the

difference shall be refunded to the corporation; provided, the amount refunded shall never be

greater than the four hundred dollar ($400) minimum tax paid.

     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 -- BUSINESS CORPORATION TAX AND FRANCHISE TAX

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     This act would refund the minimum tax paid by corporations with annual gross income of

less than four hundred dollars ($400); but caps the amount refunded at four hundred dollars ($400).

     This act would take effect upon passage.

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