United States

Rhode Island banks to get tax break after reversal

(The Center Square) – Rhode Island banks could be getting a break on their annual tax bills after lawmakers agreed to Gov. Dan McKee’s plans to change how their taxes are calculated as part of a broader effort to improve the state’s competitiveness.

After initially balking at McKee’s plans, House and Senate leaders said Monday they will be putting up for a vote a bill allowing banks and other financial institutions to pick a single methodology for calculating corporate income tax, which officials say will create a more level playing field with neighboring Massachusetts.

Rhode Island uses a three-factor apportionment for financial institutions, which calculates taxes based on a company’s property, payroll and sales. Under the proposal, set to be taken up this week, banks would be allowed to choose a single tax factor methodology. Massachusetts is set to shift to a single sales tax system for calculating bank taxes beginning in January.

“This change would put Rhode Island on a level playing field with Massachusetts and help ensure we keep good jobs here in our state,” Senate President Dominick Ruggerio, D-North Providence, said in a statement. “I look forward to a thorough review of the proposal through our public Senate Finance Committee hearing process.”

The move is a reversal for Rhode Island’s Democratic leaders who had previously objected to McKee’s proposed changes to the state’s tax structure for banks and other financial institutions. The move was aimed specifically at preventing Citizens Bank from relocating to Massachusetts, which is also easing its tax structure to boost competitiveness with other states.

McKee welcomed the change of course by legislative leaders, saying the goal is to “create a more level playing field with Massachusetts in a way that is both transparent and in the best interest of the people of Rhode Island.”

The move would come at a cost to the state’s tax coffers. Changes are projected to reduce the state’s tax collections by an estimated $15 million a year, according to legislative budget writers.

Not surprisingly, Citizens Bank praised legislative leaders for reconsidering the changes to the tax system, saying it is “encouraged by recent progress” on the proposal.

“We look forward to continuing to work closely with the state toward an outcome that is a win for both the business community and Rhode Island,” Keith Kelly, Citizens’ Rhode Island president, said in a statement.

The legislation was set to be taken up by House and Senate committees on Tuesday before a final version is put up for a vote by both chambers.

House Speaker Joseph Shekarchi vowed the proposal will be “carefully vetted in a public and transparent manner” before it is considered by the full Legislature.

But the measure is expected to face opposition from some Democratic lawmakers who say it would deprive the state of much-needed tax dollars from corporate entities.

“This policy decision would set the precedent that corporations can get tax cuts just by asking for them and open the door to a dramatic decrease in tax revenue,” state Rep. Enrique Sanchez, D-Providence, posted on social media.

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