Bill Sponsors
de la Cruz, Rogers, Ciccone, Tikoian, Burke, E Morgan, and Paolino
Committee
Senate Finance
Summary
Select
This legislation amends Rhode Island's tax laws regarding the Business Corporation Tax. Specifically, it eliminates the requirement for corporations to pay a minimum annual tax. Currently, corporations—including small businesses designated as S-corporations—must pay at least $400 per year to the state, even if they do not generate a profit. This bill removes that mandatory minimum fee, meaning businesses with no net income would no longer owe this specific tax amount to the state.
Sponsor
Analysis
Pros for Progressives
- Reduces the financial burden on micro-enterprises and low-income entrepreneurs, removing a regressive barrier to entry for disadvantaged individuals starting a business.
- Eliminates a flat tax structure that disproportionately affects small businesses and non-profits that may have legitimate reasons for zero net income in a given year.
- May encourage community economic development by lowering the overhead costs for small, locally-owned start-ups that often struggle with cash flow in their early stages.
Cons for Progressives
- Reduces state revenue available for funding essential public services, social safety nets, and infrastructure projects by eliminating a guaranteed income stream.
- Allows corporations to utilize state resources, court systems, and legal protections like limited liability without contributing any minimum tax revenue in return.
- Could facilitate the maintenance of shell companies or tax-avoidance vehicles that no longer face a financial disincentive to remain active on the state registry.
Pros for Conservatives
- Reduces the overall tax burden on the private sector, promoting a more business-friendly environment and encouraging investment and entrepreneurship.
- Eliminates an arbitrary government fee on companies that did not generate a profit, adhering to the principle that taxes should be based on actual income rather than existence.
- Reduces government interference in business operations by removing a mandatory compliance cost, allowing owners to reinvest that capital into their companies.
Cons for Conservatives
- Could contribute to a state budget shortfall, potentially leading to calls for tax increases in other areas to offset the lost revenue.
- Might allow inactive or "zombie" companies to clutter the state's business registry indefinitely without contributing to the administrative costs of maintaining those records.
- Removes a financial filter that helps ensure only serious, active business entities remain registered with the state.
Constitutional Concerns
None Likely
Impact Overview
Groups Affected
- Small Business Owners
- Corporations
- S-Corporations
- Entrepreneurs
- State Tax Administration
Towns Affected
All
Cost to Taxpayers
None
Revenue Generated
None
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Bill Status
Current Status
Held
Comm Passed
Floor Passed
Law
History
• 01/09/2026 Introduced, referred to Senate Finance
Bill Text
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 ($400).
SECTION 2. This act shall take effect upon passage.
44-11-2. Imposition of tax.
(a) Each corporation shall annually pay to the state a tax equal to nine percent (9%) of net income, as defined in § 44-11-11, qualified in § 44-11-12, and apportioned to this state as provided in §§ 44-11-13 — 44-11-15, for the taxable year. For tax years beginning on or after January 1, 2015, each corporation shall annually pay to the state a tax equal to seven percent (7.0%) of net income, as defined in § 44-11-13 — 44-11-15, for the taxable year.
(b) A corporation shall pay the amount of any tax as computed in accordance with subsection (a) after deducting from “net income,” as used in this section, fifty percent (50%) of the excess of capital gains over capital losses realized during the taxable year, if for the taxable year:
(1) The corporation is engaged in buying, selling, dealing in, or holding securities on its own behalf and not as a broker, underwriter, or distributor;
(2) Its gross receipts derived from these activities during the taxable year amounted to at least ninety percent (90%) of its total gross receipts derived from all of its activities during the year. “Gross receipts” means all receipts, whether in the form of money, credits, or other valuable consideration, received during the taxable year in connection with the conduct of the taxpayer’s activities.
(c) A corporation shall not pay the amount of the tax computed on the basis of its net income under subsection (a), but shall annually pay to the state a tax equal to ten cents ($.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.]
SECTION 2. This act shall take effect upon passage.