Rhode Island Code of Regulations › Title 280 - Department of Revenue › Chapter 20 - Division of Taxation › Subchapter 25 - Business Corporation Tax › Part 15 - Treatment of Repatriated Income 2017 (280-RICR-20-25-15) › Section 280-RICR-20-25-15.5 - Findings of Fact

Current through June 14, 2024
A. The Tax
				 Administrator makes the following findings of fact that support the
				 promulgation of this regulation:
1. The
				 United States Congress passed legislation commonly known as the Tax Cuts and
				 Jobs Act ("TCJA") (Pub. Laws 115-97) on December 20, 2017. The President of
				 the United States signed the TCJA into law on December 22, 2017.
2. The TCJA includes a number of significant
				 tax updates, including changes that affect individuals, businesses, and
				 international entities.
3. The
				 TCJA, under
				  26 U.S.C. §
												965(a),
				 imposes a one-time transition tax on the accumulated post-1986 deferred foreign
				 income (deemed dividend) of certain deferred foreign income corporations earned
				 before the end of calendar year 2017. This transition tax is established for
				 tax year 2017.
4. R.I. Gen. Laws
				 §
											44-11-11(a) 
				 defines "net income" as federal taxable income subject to certain adjustments.
				 R.I. Gen. Laws §
											44-11-12 states what type of income is not included in Rhode Island net
				 income.
5.
											26 U.S.C. §
												965(c) provides for a deduction that reduces the tax liability on 965 Income.
				  26 U.S.C. §
												965(h)  allows
				 taxpayers the option to pay the 965 Income tax liability over eight (8) years.
				 However, Rhode Island has no authority to defer payment on recognized income
				 without adding interest and penalty.
6.
											26 U.S.C. §
												965  provides S corporation
				 shareholders the option to make an election for deferred recognition of Section
				 965 net tax liability at the federal level until certain "triggering events".
				 Rhode Island recognizes income for Rhode Island purposes at the time it is
				 recognized for federal income tax purposes.
7. Rhode Island law currently contains no
				 statutory requirement to provide a dividend received deduction ("DRD") for
				 Subpart F income. Nor does Rhode Island law allow for any increased Rhode
				 Island income tax liability arising from 965 Income to be paid in installments
				 over the course of several years.
8. In response to federal and Rhode Island
				 case law, since Rhode Island does not have statutory authority to provide a DRD
				 for dividend income provided by corporations not subject to the Business
				 Corporation Tax, Rhode Island has historically administratively allowed
				 corporate taxpayers to take a DRD for certain types of foreign-source income
				 such as non-U.S. source dividends and Subpart F income received by a C
				 corporation. The amount of the Rhode Island DRDs in the context of foreign
				 source income has been equivalent to the level of DRD provided to corporations
				 under prior federal income tax law for dividends paid by domestic corporate
				 subsidiaries to parent C corporations as disclosed on their Federal Corporate
				 Income Tax Return.
9. The TCJA is
				 imposing a one-time repatriation tax on 965 Income subject to a special and
				 additional Section
				 965(c) 
				 deduction amount, and Rhode Island now employs combined reporting for C
				 corporations. These facts distinguish the prior case law and urge against Rhode
				 Island providing a DRD for 965 Income amounts included as net income at the
				 Rhode Island level.