Governor McKee Unveils Budget
The Governor released his budget January 16th. Over the next few editions of Advocacy in Action, we will share summaries of the various Articles of interest to the business community. The $14.2 billion budget includes program cuts, as well as targeted taxes and fees in an effort to deal with annual anticipated increased revenues of 2.5% coupled with increasing expenditures of 3.7%.
Article 5 – Relating to Taxes and Fees
This 64-page article (https://webserver.rilegislature.gov/BillText25/HouseText25/Article-006.pdf) contains a wide variety of program sunsets, tax and fee increases and new collection tools. The following is a list of items in the article:
• Nonprofit organizations (not including governmental entities) with 500 or more employees would be required to pay the job development assessment fee that is assessed on all for-profit businesses. Today the assessment equals .21% of an employer’s taxable payroll. The taxable wage base is currently $29,200 (or $30,700 for employers with a high experience rate). The funds collected are used to support the Governor’s Workforce Board, employment services and unemployment insurance activities.
• The technology surcharge fee increases from $2.50 per division of motor vehicles’ transaction to $3.50 per transaction. The money goes into a restricted receipt account to pay for maintenance and improvements to the Department of Transportation’s computer system.
• Battery electric vehicles would be assessed an additional registration fee of $150 per year to go toward maintaining the state’s roads. Electric vehicles are considered 100% electric via battery operation. Since these vehicles use roads but pay no gasoline tax, the Governor included the assessment. Plug-in hybrid cars, capable of using charging stations, would be assessed $75 per year. The budget article calls for the bi-annual adjustment of the assessment to reflect the change in CPI-U. The gasoline tax is adjusted in the same manner.
• The Governor included a proposal to tax “whole home rentals” to visitors the same as a hotel (5%). Proceeds collected after December 31, 2025 would go to the Housing Resources and Homelessness restricted receipt account.
• Gun safety devices and gun storage devices would be exempt from sales tax.
• The cigarette tax increases from $4.50 a pack to $5.00 per pack.
• The real estate conveyance tax on homes selling at $800,000 or more increases from an additional $2.30 for every $500 increment over $800,000, to $3.95 per $500 increment over $800,000. Under current law, every residential real estate transaction must pay a conveyance tax of $2.30 for each $500 of consideration. Once the selling price reaches $800,000, the tax goes to $4.60 per $500 increment over the $800,000 price (the original $2.30 plus an additional $2.30 per $500 increment). This additional tax was passed into law in 2021 and became effective January 1, 2022. As an example, today a house selling at $850,000 would include a conveyance tax of $4140. The Governor’s budget proposal takes the tax levy to $4,305. The new revenues are earmarked for the Housing Resources and Homelessness restricted receipt account.
• The Investment Tax Credit program, the Elective Deduction for Research and Development Facilities, the Employment Tax Credit program, the Small Business Capital Investment Credit, the Wage Credit and the program called the Credit for Research and Development Property Acquired, Constructed or Reconstructed after July 1, 1994, all sunset at the end of 2025. Those with carry forward credits are permitted to use those credits, however.
• The carryover provision for the Credit for Qualified Research Expenses is expanded from 7 years to 15 years to match Massachusetts and Connecticut. The Governor stated that for every $1 investment in research and development, the state sees a return of $6.76.
• Financial Institutions would be required to assist the Division of Taxation in identifying and seizing non-exempt assts of delinquent taxpayers by operating a data match system. Each financial institution must provide identifying information at least each calendar quarter to the Division for each delinquent taxpayer identified by the Division that maintains an account at the institution. The institution cannot tell the delinquent taxpayer that it is giving the information to the Division; however, it can provide a general notice acknowledging the Division’s authority to request certain information. The article includes language stating the institution is not liable under state law for the disclosure of the information to the tax administrator.
• A new tax is proposed on digital advertising gross revenue. A digital advertising service is defined as including “advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services.” The 10% tax is applicable to persons or entities with annual gross revenues exceeding $1 million; and it cannot be passed on directly to a customer who purchases digital advertising services via a separate fee, surcharge, or line-item.
• Lastly, the Article clarifies that “home occupations” under zoning rules does not include remote work activities. This change is meant to ensure that municipalities cannot bar employees from working at home by considering the use of the home a non-conforming use. The use of the home is not considered remote work if it generates substantial increase in traffic to the area, or if the activities occur outside the residential dwelling.
Department of Labor Issues New Rule for Employees Ages 14 and 15
In 2022, the General Assembly passed a law affecting children ages 14 or 15 who wish to be employed. In addition to obtaining a permit from the local school district to work during non-school hours, beginning February 4, 2025, the employee must also now complete a three-hour mandatory training program to learn about workers’ rights, workplace safety and workers’ compensation. The Department of Labor and Training, charged in the law with implementing the program, released its regulations last week announcing that the program will be handled by the Institute for Labor Studies & Research. https://www.riilsr.org/ This program may be available virtually. Failure to comply could result in a fine of $500 for each offense.
CHAMBER MEMBER ACTION REQUEST - Preparations for 2025 Session
If you attended the January “Eggs and Issues” breakfast with the Speaker of the House, you heard him say loudly and clearly that business people must be engaged with their state Representatives and Senators or face the passage of harmful legislation. Legislators are not experts in your business. They need to hear from you directly in order to understand the challenges you confront on a daily basis.
Throughout the legislative session, the Chamber may be calling on you, asking for your assistance conveying our message on legislation to legislators. Please go to https://vote.sos.ri.gov and click on “Find Your Elected Officials.” Enter your zip code and address. Find your “Representative District” legislator and your “Senate District” legislator (if you live in Rhode Island). Email your name and the legislators name to general@nrichamber.com. The Chamber will be compiling a database for future grassroots efforts. If you also know a legislator who lives in another district, please send that information to the Chamber as well and we will include it in the database.
Thank you for your help!
The following new bills have been filed:
House Bill No. 5043 Azzinaro, Fellela, Serpa, Casimiro, Kennedy, Corvese
ENTITLED, AN ACT RELATING TO COMMERCIAL LAW -- GENERAL REGULATORY PROVISIONS -- DECEPTIVE TRADE PRACTICES (Provides protection from and prevent the unethical, improper conduct and the collection of fees by, anyone advising or assisting a veteran filing a claim for disability benefits with the Department of Veterans Affairs except as authorized by federal law.) https://webserver.rilegislature.gov/BillText/BillText25/HouseText25/H5043.pdf
House Bill No. 5047 Shanley, Craven, O'Brien, Dawson, Solomon, McEntee, Corvese, Fellela, Kennedy, Edwards, AN ACT RELATING TO LABOR AND LABOR RELATIONS -- WAREHOUSE WORKER PROTECTION ACT (Requires employers to provide each employee of a warehouse distribution center, upon hire, with written description of quotas applicable to the employee within defined time periods and adverse employment action for failure to meet the quota.) https://webserver.rilegislature.gov/BillText/BillText25/HouseText25/H5047.pdf
House Bill No. 5075 (Governor) BY AbneyENTITLED, AN ACT RELATING TO MAKING REVISED APPROPRIATIONS IN SUPPORT OF FY 2025 https://webserver.rilegislature.gov/BillText/BillText25/HouseText25/H5075.pdf
House Bill No. 5076 (Governor) BY AbneyENTITLED, AN ACT MAKING APPROPRIATIONS FOR THE SUPPORT OF THE STATE FOR THE FISCAL YEAR ENDING JUNE 30, 2026 https://webserver.rilegislature.gov/BillText/BillText25/HouseText25/H5076.pdf
House Bill No. 5083 BY Fellela, Serpa, Messier, Corvese, Ackerman, Caldwell
ENTITLED, AN ACT RELATING TO HEALTH AND SAFETY -- AUTOMATED EXTERNAL DEFIBRILLATORS REQUIRED AT PUBLIC PLACES AND HEALTHCARE FACILITIES (Requires public or private golf courses to have an automated external defibrillator on the premises.) https://webserver.rilegislature.gov/BillText/BillText25/HouseText25/H5083.pdf
