Sen. Melissa A. Murray is introducing legislation today to exempt the first $100,000 of tangible property from the tangible personal property tax to help businesses — especially small 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 proposed exemption would completely eliminate the tangible tax for an estimated 85% of businesses statewide.
“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. 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,” said Senator Murray (D-Dist. 24, Woonsocket, North Smithfield).
The legislation, which Senator Murray plans to submit during this afternoon’s Senate session, would provide a $100,000 exemption to all tangible tax accounts. Those with more than $100,000 worth of tangible assets would have to pay the tax on the assets above $100,000, but would still receive an equal amount of tax relief.
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 (RIPEC), which has recommended the exemption, the annual cost to the state would be about $36.6 million.
The legislation would take effect in fiscal year 2025, with reimbursement based on the prior year’s FY 2024 tax roll.
The bill would also require municipalities and fire districts to cap their tangible property tax rate at the level applied in fiscal year 2023. 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.
According to an example provided by RIPEC, under current laws, $100,000 worth of computer equipment owned by a business located in Providence would result in $21,483 in tangible taxes over the course of 10 years, in addition to the $7,000 the company would have paid in sales tax at its purchase.
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