RI Would Save $29M By Decoupling From CARES Act, Adviser Says

Decoupling from federal coronavirus aid provisions that temporarily suspend the limitation on pass-through businesses' ability to use net operating losses to offset nonbusiness income would save Rhode Island $29 million over two years, a legislative fiscal adviser said Wednesday.

Sharon Reynolds Ferland, the state House fiscal adviser, said decoupling from the provision in the federal Coronavirus Aid, Relief and Economic Security Act  that suspends from 2018 to 2020 annual caps on business losses would save the state from refunding $19 million for previous fiscal years out of this year's revenue. Ferland told the Rhode Island House Finance Committee that if the provision stays in place, the state estimates it will lose another $10 million in revenue for the current fiscal year. 

Under an amendment requested by Rhode Island Democratic Gov. Gina Raimondo, the state would decouple from the federal suspension of the $250,000 cap for individuals and $500,000 cap for couples. However, it would allow taxpayers to take 20% of the disallowed deduction for 2021 through 2025.

Ferland also said decoupling would potentially affect only 692 taxpayers in the state, 70% of whom have a federal adjusted income of more than $1 million. The average tax change would be about $15,000, she estimated.

--Editing by Neil Cohen.

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