STATE HOUSE – The state Senate has approved legislation sponsored by Sen. Melissa Murray, a Democrat representing District 24 in Woonsocket and North Smithfield, to exempt the first $50,000 of tangible property from the tangible personal property tax aimed at helping businesses statewide.
The tangible personal property tax is paid by businesses on property, other than real estate, that has value by itself, such as computer equipment, furnishings and fixtures.
“The tangible tax is both a financial and administrative burden for small businesses. Complying with it is complex, and it’s also an enforcement burden for cities and towns. Eliminating this tax for smaller businesses will give them genuine, much-needed relief,” Murray said. “It’s a way our state can provide help for the small businesses that support our cities and towns, make our communities unique, and most importantly, employ Rhode Islanders.”
The bill – 2023-S 0928A – now goes to the House of Representatives, where Rep. Brandon Voas, a Democrat representing District 57 in Cumberland and Central Falls. is sponsoring companion legislation, 2023-H 6333.
The legislation would provide a $50,000 exemption to all tangible tax accounts beginning in the 2024 tax year. Those with more than $50,000 worth of tangible assets would have to pay the tax on the assets above $50,000, but would still receive an equal amount of tax relief. The legislation would completely wipe out the tangible tax for 75 percent of Rhode Island businesses.
Under current laws, $50,000 worth of computer equipment owned by a business located in Providence would result in more than $10,000 in tangible taxes over the course of 10 years, in addition to the $3,500 the company would have paid in sales tax at its purchase, according to a release on the legislation.
Since the tangible tax is a municipal-level tax rather than a state one, the state would reimburse each city, town and fire district annually for their lost revenue, just as it does for revenue they lost from the phased-out vehicle excise tax. According to the Rhode Island Public Expenditure Council, which has recommended the exemption, the annual cost to the state would be about $25 million.
The bill would also require municipalities and fire districts to cap their tangible property tax rate at the level applied in fiscal year 2024. The tax cap would not apply in the case of municipalities and fire districts that utilize a uniform tax rate for all classes of property.
At an event held at Kay’s Restaurant in Woonsocket last month in support of the bill, Kay’s president David Lahousse and Graze on Main owner Elyse Paré spoke about how the tangible tax is a burden on their small businesses, in terms of both the expense and the administrative hassle.
“The last few years have been especially challenging for businesses like mine, and this tangible tax exemption would provide some much-needed relief,” said Lahousse. “I want to thank Senator Murray, Representative Voas, and their fellow legislators for their work on this proposal.”