Governor Dan McKee recently rolled out his FY2025 budget which includes several changes to the state tax code.
One of the provisions NFIB opposes is a change to the elective pass-through entity tax, also known as the state and local tax (SALT) workaround. In his FY2025 budget, Governor McKee proposed a change to current state tax law to decrease the deduction amount from 100% to 90%.
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Unfortunately for higher tax states like Rhode Island, the 2017 Tax Cuts and Jobs Act placed a limit on the amount of state and local taxes that could be deducted on your federal tax returns. To help small businesses and residents impacted by the tax change, Rhode Island lawmakers included a provision in the FY2020 state budget allowing taxpayers to utilize an optional pass-through entity tax (PTET). This new tax fix provided relief to pass-through S corporations, partnerships, and LLCs facing the newly imposed federal tax deduction cap.
NFIB will advocate for no changes to the current deduction amount at 100% and work to prevent a reduction to 90%.
The budget also includes a favorable section that would decrease the state’s minimum corporate tax from $400 to $350. There is also language to eliminate several other smaller, nuisance fees.
Additionally, the McKee budget calls for unspent American Rescue Plan Act (ARPA) funds to be used to further shore-up the state unemployment fund. This would be beneficial to small businesses as it could trigger a UI tax rate reduction.
NFIB will continue to monitor the FY25 state budget as it moves through the legislative process.
