Draft guide - income from pensions, other sources

The Rhode Island Division of Taxation has posted a draft document for public comment. It involves the personal income tax modification for income from private pensions, government pensions, 401(k) plans, annuities, 403(b) plans, military retirement pay, and other such sources.

Public comment is invited. All comments must be submitted on or before 4:00 p.m. Eastern Time on Friday, September 15, 2017. 

• To view the draft guide, click here. 
• To comment on the draft guide, click here.

Wavemaker tax credit

Governor Gina M. Raimondo and the Rhode Island Commerce Corporation have announced the selection of the second round of recipients of the Wavemaker Fellowship awards. 

Following a competitive review process, a total of 224 college graduates who work in science, technology, engineering, mathematics, and design fields at Rhode Island employers will receive the award, which is a Rhode Island tax credit used to defray the cost associated with student loan repayment for a minimum of two years. To learn more, click here.

Criminals impersonate IRS and FBI

The Internal Revenue Service yesterday warned people to avoid a new phishing scheme that impersonates the IRS and the FBI. It is part of a ransomware scam to take computer data hostage. The scam email uses the emblems of both the IRS and the Federal Bureau of Investigation. For more information, click here.

In a separate announcement today, the Security Summit offered tips for how tax professionals can get started protecting their clients and their business from cybersecurity threats. The Security Summit is made up of the Rhode Island Division of Taxation, tax agencies from other states, the IRS, and the tax industry. For details, click here.

Practitioner Alert: Rhode Island tax scam

The Rhode Island Division of Taxation today warned taxpayers and tax professionals about a Rhode Island tax-related scam. It involves a caller who is impersonating a Rhode Island Division of Taxation employee. For more information, click here.

New appointment

Rahul Sarathy has been appointed chief of examinations at the Rhode Island Division of Taxation.

He has worked for tax-related organizations for more than 14 years, during which time he has gained experience involving the implementation of modernized systems and business processes, including the Rhode Island Division of Taxation's new integrated tax system.

He holds two Bachelor of Science degrees from the Massachusetts Institute of Technology, as well as a Master of Science in Taxation degree from Northeastern University.

He was most recently employed with Revenue Solutions Inc. (RSI), where he was chief functional architect for multiple government agencies. RSI is the vendor for the Division of Taxation's integrated tax system as well as its data warehouse.

In his new role as the Division of Taxation's third-in-command, he will oversee the agency's Field Audit section, Office Audit section, and Special Investigation Unit. He will also work on special projects, including a taxpayer portal, business organization assessment, and leveraging the integrated tax system to enhance revenues and improve taxpayer services.

"At this time in the Division’s history, his experience and skills will be a tremendous asset and resource for the Division," said Tax Administrator Neena Savage.

Information for non-collecting retailers, others

The Rhode Island Division of Taxation has established a special section of its website to help foster compliance with the recently enacted "Non-Collecting Retailers, Referrers, and Retail Sale Facilitators Act."

The webpage provides links, forms, legislative language, and other items related to the new law -- all conveniently located in one place.

Under the legislation, which was approved by the General Assembly and signed into law by Governor Gina M. Raimondo on August 3, 2017, you may have certain registration and/or notice and reporting requirements involving Rhode Island sales and use tax.

Which requirements apply to you depends upon whether you qualify as a “non-collecting retailer”, a “retail sale facilitator”, or a “referrer” -- terms that are defined in the new law. To view the webpage, which includes a copy of the new law, please click here. (A screenshot of the webpage appears below.)

Recent developments

Restaurant industry ruling - sales and use tax

The Rhode Island Division of Taxation has posted a Declaratory Ruling regarding whether a restaurant group’s use of mobile point-of-sale devices is subject to the Rhode Island sales and use tax. 

The issue involves a large, full-service, casual-dining company, with restaurant locations in Rhode Island. In the ruling, which is based on the facts and circumstances of this particular case, the Division determines the following: 

• Whether the vendor's lease or rental of the devices to the restaurant company would be subject to Rhode Island sales and use tax.
• Whether the restaurant company's sale of games, news, songs, and other content through the devices to the company's customers would be subject to Rhode Island sales and use tax.
• Whether the device vendor would have to apply for a Rhode Island retail sales permit and collect and remit tax on its sales to the restaurant company. 

To view Ruling 2017-03, click here.

Tax credit and incentive report

The Rhode Island Division of Taxation has posted its latest annual tax credit and incentive report, as required by Rhode Island statute.

The report identifies 17 businesses that received a combined total of approximately $21.6 million in certain state tax credits and incentives for the fiscal year ended June 30, 2017.

Certain of those recipients also received a combined total of approximately $3.9 million in other Rhode Island tax credits and incentives, the report shows. 

• Altogether, approximately 365 businesses have received a total of $290 million in Rhode Island tax credits and incentives since 2008, the report shows.

Historic tax credits

The latest annual tax credit and incentive report also includes certain details regarding the historic preservation tax credit program of 2013.

The report shows, in the aggregate, the number of jobs created, the number of Rhode Island businesses retained for work, the total amount of qualified rehabilitation expenditures, and the cost of materials or products purchased from Rhode Island businesses.

Historic preservation tax credit program of 2013
Number of jobs created	1,301.5
Number of Rhode Island businesses retained for work	770
Total amount of qualified rehabilitation expenditures	$84,023,547
Total cost of materials or products purchased from Rhode Island businesses	$29,836,470

To view a copy of the report, which the Division posted by the statutory deadline, click here.

Practitioner Alert: Security webinar; password theft

Securing client information

During a “Cybersecurity for Tax Professionals” webinar on Wednesday, August 23, experts from the Internal Revenue Service, the Federal Trade Commission, and the National Association of Tax Professionals will focus on securing client information against a data breach.

The August 23 webinar will cover access control, secure data storage, protecting data during transmission, remote access, and securing paper, physical media, and devices. It is one of a series of webinars, which are being offered at no charge. CE/CPE credits are available for certain tax practitioners. For registration and other information, click here.

Password theft

The Security Summit on August 22 urged tax professionals to guard against password theft. The Security Summit also reminded tax professionals that they are responsible for protecting access to their IRS e-Services account and safeguarding their Electronic Filing Identification Number (EFIN).

The Security Summit includes the IRS, the Rhode Island Division of Taxation, other states’ tax agencies, and the tax industry. The Security Summit has launched a 10-part campaign, called “Don’t Take the Bait,” which is aimed at tax professionals. To view the August 22 installment of the series, which explains protecting EFINs and safeguarding passwords, click here. To view the August 15 installment, which focuses on email scams targeting employee Forms W-2, click here.

Cigarette tax increase tomorrow

Starting tomorrow, Wednesday, Rhode Island’s cigarette excise tax will be $4.25 per pack of 20 cigarettes, up from $3.75, an increase of 50 cents, or 13.3 percent, per pack.

The increase was contained in the recently enacted fiscal 2018 budget bill, which also requires that cigarette dealers take inventory and apply a floor tax. Many retailers will perform the inventory tonight (Tuesday, August 15). The official measuring point for the floor tax is 12:01 a.m. tomorrow, Wednesday, August 16.

For more details about tax changes contained in the fiscal 2018 budget bill, click here.

Sales tax and boat

The Rhode Island Division of Taxation has posted a Declaratory Ruling involving the application of the sales and use tax to a boat.

In Ruling 2017-04, the Division determined that a nonprofit organization's receipt and ownership of a boat, as well as the organization's lease of the boat to others, the receipt of payments under the lease, and the potential sale of the boat are all exempt from Rhode Island sales and use tax under Rhode Island General Laws sections 44-18-30(48). To view a copy, click here.

Recent developments

Digital networks may be at risk

The Rhode Island Division of Taxation, the Internal Revenue Service, and other members of the Security Summit recently reminded tax professionals that their entire digital network could be at risk for remote takeover by cybercriminals. Such a takeover could lead to fraudulent tax filings and damage to their clients. For more information, click here.

Newsletter for tax professionals

The latest edition of the Rhode Island Division of Taxation’s newsletter includes coverage of the following topics:

• new account IDs;
• assistant tax administrator;
• recent state tax cases; and
• Q&A for tax professionals.

Notices for cigarette dealers, non-collecting retailers

The Rhode Island Division of Taxation recently posted 10 Notices to let stakeholders know about certain tax provisions that were contained in the fiscal year 2018 budget bill, which was enacted August 3, 2017.

One Notice for cigarette dealers and another for cigarette distributors focus on the cigarette tax increase, which takes effect at 12:01 a.m. on August 16, 2017, and the associated floor stock tax and its payment and return due date.

Eight other Notices provide stakeholders with more information about certain registration and/or notice and reporting requirements involving Rhode Island sales and use tax. Which of the requirements apply to a given entity depends upon whether the entity is a “non-collecting retailer,” a “retail sale facilitator,” or a “referrer” -- the terms are defined in the new law. For more information about all of the Notices, click here.

For more information about these and other tax-related provisions in the budget bill, click here.

Summary of legislative changes

The Rhode Island Division of Taxation today posted a “Summary of Legislative Changes.” The document summarizes key tax provisions contained in the fiscal 2018 budget bill enacted last week. To view a copy, click here.

Security Summit warns about ransomware

The Security Summit -- made up of the Internal Revenue Service, state tax agencies, and the tax industry -- today warned tax professionals that ransomware attacks are on the rise worldwide as criminals in the U.S. and abroad infiltrate computer systems and hold sensitive data hostage. For more information, click here.

Annual disclosure forms

Entities that receive specific tax credits and incentives must, by law, annually disclose certain
information to the Rhode Island Division of Taxation.

The Division recently posted a Notice which explains entity reporting obligations. Some information is due on or before August 15, 2017. Other information is due on or before September 1, 2017. To view the Notice, click here.