Under The Dome 5/13/2024

Last Week At the State House

Revenue Estimating Conference – The Numbers Are In

The conferees completed their estimates during a seven-hour meeting Friday. The bottom line – in FY2024, total taxes are up $26.8 million with general revenues up $47.7 million. For FY2025, taxes are estimated to be $10.2 million more than originally thought, with general revenues up only $9.7 million more than anticipated.

The debate over FY2024 personal income taxes was the longest debate as the tax filing deadline was extended to July 15th this year. By declaring a state of disaster during the flooding of many Rhode Island cities and towns, the State was required under federal law to extend the tax filing date. This extension left the conferees asking themselves if final tax collections will track similarly to 2023 because taxpayers have not filed yet, taking advantage of the delayed deadline, or have taxpayers filed as usual and tax payments are lower than anticipated. In the end, the FY2024 personal income tax collection was set at $1,785,200,000 (down $68.7 million). The FY2025 estimate is $1,856,600,000 (down $53.6 million from November’s estimate).

Business Corporate taxes are $67.6 million higher than anticipated in FY2024 ($372.5 million), and $30.7 million higher in FY2025 ($345 million). Sales and use tax collections are also up. FY2024 collections are estimated at $1.64 billion, an increase of $11.4 million; FY2025 collections are estimated at $1.7 billion, an increase of $19.5 million.

Lottery revenues are estimated to be lower. The category “lottery” includes revenue from the casinos, lottery games and igaming. FY2024 saw a slight decrease of $8 million ($428.8 million). The FY2025 estimate is $449.4 million which is $9.4 million less than anticipated during the November, 2023 estimating conference.

With caseload estimates also down slightly, the General Assembly will have small amounts of money to work with as they craft the final budget over the following four to six weeks. The Washington bridge remains in the forefront of all discussions related to spending.

This Week At the State House

Tuesday, May 14th

The House Finance Committee is meeting Tuesday at the Rise (approximately 4:45) in Room 35. H.7486, An Act Relating to Taxation – Personal Income Tax – Capital Gains, changes the holding period requirement from five years to one year and lowers the tax rate - unless the asset is a “non-owner occupied asset.” Non-owner occupied assets valued at $1 million or more would be subject to a capital gains tax rate of $5.00 for each one thousand dollars ($1,000) or fractional part of the assessed value on properties worth at least one million dollars $ 2,000,000; and at the rate of $6.00 for each $1,000 or fractional part of the assessed value on properties worth at least $2,000,000. Businesses involved in investment management services would be

subject to a 19% “carried interest fairness fee” if Massachusetts, Connecticut and New Jersey pass the same fee.

Wednesday, May 15th

The Senate Labor Committee is scheduled to take testimony on S.2470, An Act Relating to Labor and Labor Relations – Minimum Wages. The meeting will be held at 4:30 pm in room 313. This bill would dramatically change the operations of many companies and many sole proprietors in the state. S.2470 changes the definition of “employee” for the purposes of workers’ compensation, unemployment insurance and TDI qualification. It proposes to adopt what is sometimes referred to as the “ABC” test. A person would be deemed an “employee” unless the person can meet all three tests: (1) the person is free from control and direction of the hiring entity (2) the person performs work that is outside the usual course of the hiring entity’s business; AND (3) the person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

Use of the ABC test would make it very difficult for some professions to work as an independent contractor. For example, an independent computer technology person could not work as an independent contractor for any business that has an IT person already on staff (even if that person is out on family leave), since it would not qualify as outside the usual course of business. Any business with a government affairs staff person, would likely not be able to hire an independent lobbyist. It is difficult to imagine all of the possible contractors that may get swept up and reclassified as an employee of multiple businesses, meaning multiple businesses would pay workers compensation, unemployment compensation and TDI for the same person. The third prong of the test allows independent contractors to be hired if that trade is an established trade or occupation customarily known for having independent contractors. The third part of the test gives no assistance to emerging technology and innovation.

S.2237 is also scheduled for hearing in the Senate Labor Committee. The bill proposes to increase the tipped wage (also referred to as cash wage) from the current $3.89 per hour to $6.75 per hour January 1, 2025. It is important to understand that “tipped wage” does not equate to the hourly wage paid to the employee. Both federal and state law require an employee to be paid minimum wage. If the employee does not make minimum wage when the tipped wage and customer tips are added together, the employer must make up the difference. If they fail to do so, the employee can file a complaint with the Department of Labor and back wages will be paid and the employer will be penalized. Another consequence of raising the minimum wage and the tipped wage is an increase in premium pay. Rhode Island remains the only state in the country that requires employers to pay premium pay to employees who work Sunday and holidays as part of their normal forty (40) hour work week.

Testimony on both bills may be emailed to SLegislation@rilegislature.gov

The following new bill was filed last week:

House Bill No. 8262 Corvese, Azzinaro, Cardillo, McNamara, AN ACT RELATING TO LABOR AND LABOR RELATIONS -- WORKERS' COMPENSATION -- BENEFITS (Amends 4 sections relating to the workers' compensation benefits dealing with increasing the amount of dependent benefits payable to a totally disabled employee comprising this year's annual omnibus bill.) http://webserver.rilin.state.ri.us/BillText/BillText24/HouseText24/H8262.pdf

Senate Bill No. 3068 Ciccone, F. Lombardi, Bissaillon, Britto, AN ACT RELATING TO LABOR AND LABOR RELATIONS -- WORKERS' COMPENSATION -- BENEFITS (Amends 4 sections relating to the workers' compensation benefits dealing with increasing the amount of dependent benefits payable to a totally disabled employee comprising this year's annual omnibus bill.) http://webserver.rilin.state.ri.us/BillText/BillText24/SenateText24/S3068.pdf