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SB 2847

AN ACT RELATING TO TAXATION -- STATE TAX OFFICIALS

2026 Regular Session Introduced by Lou DiPalma and 2 co-sponsors

Rhode Island caps delinquent tax interest at 12% starting 2027, tightens audits to 3/7/10 year limits, and offers limited PPP forgiveness relief.

06/05/2026 Referred to House Finance
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Bill Summary · SB 2847

Bill Summary – SB 2847 (Rhode Island, 2026)

Purpose and Intent

  • Introduces caps and limits to the tax administration process in Rhode Island.
  • Aims to standardize and restrict interest on delinquent taxes, tighten audit timeframes, and provide transitional rules beginning January 1, 2027.
  • Addresses treatment of certain forgiven Paycheck Protection Program (PPP) loan portions in tax filings and requires related payment forms.

Key Provisions

  • Interest on Delinquent Payments (Section 44-1-7)

    • Delinquent state tax amounts (full, partial, or deficiency) will incur interest at a rate set annually by the tax administrator.
    • The interest rate is computed each January 1 by adding 2 percentage points to the prior year’s prime rate (as of Oct 1 preceding year).
    • Prior year limits and adjustments:
    • Before 2023: rate capped between 18% and 21% per year.
    • On/after 2023: rate capped between 12% and 21% per year, with special treatment for trust fund taxes (44-19-35 and 44-30-76) capped between 18% and 21%.
    • Crucially, starting on or after January 1, 2027: the interest rate on all delinquent tax payments shall be capped at 12% per year (a floor and ceiling cap).
    • The interest rate applied to a delinquency will be the rate in effect on the date the delinquency notification is issued (not the original tax obligation date).
    • The “prime rate” is defined as the predominant rate quoted by banks to large businesses per the Federal Reserve.

  • PPP Loan Forgiven Portion Taxation (Section 44-1-7(d))

    • Waives interest and penalties on the taxable portion of PPP loans that were forgiven and taxed (as specified by certain Code sections) if the tax on that portion is paid in full by March 31, 2022.
    • The Department must provide forms/instructions for paying the tax on the taxable portion of forgiven PPP loans.

  • Audit Limitations (Section 44-1-7(e))

    • Sets explicit audit periods:
    • Ordinary tax returns: audits may cover up to 3 years from filing.
    • Fraud cases: audits may cover up to 7 years from filing.
    • No audits or tax collection actions may be initiated for periods beyond 10 years from the original filing date or required filing deadline (whichever is later), with no exceptions.
    • Auditors cannot request filings or attempt collection for periods beyond 7 years, regardless of audit status.
    • These limitations are mandatory and apply without exception.

  • Miscellaneous (Section 44-1-7(a)-(c))

    • Clarifies that interest accrues on unpaid amounts as determined, regardless of contrary statutes.
    • Defines “prime rate” as used for calculating the annual interest.

Effective Date and Scope

  • Effective Date: January 1, 2027.
  • Application: Applies to all assessments, audits, and tax payments (including delinquent taxes) initiated on or after January 1, 2027.

Who/What is Affected

  • Rhode Island taxpayers facing delinquent state taxes.
  • State tax administration and audit processes.
  • Taxpayers with PPP loan forgiveness-related tax matters (and the forms/instructions they would use).
  • Agencies and individuals involved in audits, collections, and delinquency notification.

Procedural/Timeline Aspects

  • The annual interest-rate formula becomes fixed at 12% cap for delinquent taxes starting 2027.
  • Audit periods are rigidly limited (3 years ordinary, 7 years fraud, 10 years overall limit for any period), with a seven-year cap on tax filings the administrator can request.
  • PPP-related tax relief (waiver of interest/penalties) is tied to specific payment deadlines (full payment by March 31, 2022) and requires the administration to provide forms.

Practical Impact

  • Delinquent tax interest will become more predictable for periods after 2027 due to the 12% cap.
  • Taxpayers with long-closed or older periods may benefit from the 10-year overall limit on audits, reducing risk of prolonged investigations.
  • PPP forgiveness provisions offer targeted relief for taxpayers who paid taxes on forgiven PPP amounts, provided they meet the deadline.
  • The changes could modestly reduce the long-term revenue impact of delinquent taxes while enhancing taxpayer protections and audit clarity.

Notes

  • The act is introduced by Senators Thompson, DiPalma, and Murray and is scheduled for Senate Finance consideration.

Compiled from official sources — confirm details with the bill’s official record.

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