Corporate Close-Up: Rhode Island’s New Combined Reporting Regime

Taxpayers and tax practitioners planning for 2015 should be aware that Rhode Island has overhauled its corporate tax regime for tax years beginning on or after Jan. 1, 2015. The Rhode Island legislature adopted water’s-edge unitary combined reporting for corporate taxpayers as part of the 2015 budget bill that was signed by the governor on June 19, 2014. Rhode Island has generally required corporate taxpayers to file on a separate basis for tax years prior to 2015.

Importantly, Rhode Island will also continue to allow groups of corporations that file on a consolidated basis for federal income tax purposes to file on a consolidated basis for Rhode Island corporate income tax purposes, as well. The election, made with the consent of all members of the consolidated return, is binding on the taxpayer for 5 years.

For 2015, taxpayers will have to calculate their estimated tax payments on the basis of the unitary group’s estimated tax liability. Rhode Island will provide a safe harbor for estimated tax payments equal to the lessor of 100% of the current year’s tax liability or 100% of the prior year’s tax liability. Notably, taxpayers will have to make necessary adjustments to their prior year’s corporate tax liability to account for differences due to combined reporting in order to meet the safe harbor.

Further information on the changes made to Rhode Island’s corporate tax system can be found in the Summary of Legislative Changes issued by the Rhode Island Department of Revenue on June 27, 2014.

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