The RI Budget included an elective provision for a pass through entity to pay the RI income tax at the entity level. The Budget Bill is expected to be signed by the Governor.
For taxable years beginning on or after 1/1/19, the pass through entity may elect to pay the state tax at the entity level at a rate of 5.99%. This election would replace the payments required for nonresident withholding.
The amount of the entity level tax paid will be allowed as a credit on the owners tax return.
The entity level tax will be a RI modification increase.
The IRS is expected to provide guidance on whether the state tax deduction will be reduced by the state tax credit allowed on the owners’ return. Stay tuned. You can also contact us at 401-831-0200 with questions.Read more about Passthrough entity taxes (here).