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SB 2549

AN ACT RELATING TO TAXATION -- TAX ON GAINS FROM THE SALE OR EXCHANGE OF REAL PROPERTY

2026 Regular Session Introduced by Sam Bell and 5 co-sponsors

Rhode Island would impose a new tax on gains from short-term real estate sales (generally six years or less), with rates based on holding period and penalties for evasion.

05/12/2026 Committee heard
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WeVote Research Nonpartisan
Bill Summary · SB 2549

Overview

SB 2549 proposes a new Rhode Island tax on gains from the sale or exchange of real property, targeted at short-term property transactions. The tax is in addition to existing taxes and includes detailed exclusions, holding-period rules, withholding provisions, and penalties. The act would take effect upon passage.

Main purpose and intent

  • Create a dedicated tax on gains from the sale or exchange of real property held for short periods (generally six years or less), to capture tax revenue from faster-flip real estate activity.
  • Establish a comprehensive framework for calculation, withholding, administration, and enforcement of the tax, including specific exemptions and anti-evasion provisions.

Key provisions and changes

  • Tax Imposed

    • Imposes a new tax on gains from Rhode Island real property transactions, in addition to existing taxes.

  • Exclusions (categories not subject to the tax)

    • Sales by nonprofit development corporations (501(c)(3)).
    • Property purchased by the State from 501(c)(3) organizations.
    • Property conveyed by court decree in divorce settlements.
    • Farmland and open-space properties transferred to qualifying 501(c)(3) organizations for conservation, with holding periods of at least six years; additional conditions apply if the six-year period is not met.
    • Property sold to 501(c)(3) organizations for affordable housing or for other charitable purposes, with six-year holding requirements; partial tax liability if holding requirement is not met.
    • Sales by federal, state, or certain nonprofit instrumentalities, if federally tax-exempt.
    • Agricultural land transferred within families, with time-based holding requirements.
    • Conservation and preservation rights transferred to qualified holders.
    • Other specific conservation/open-space or affordable-housing-related transfers.

  • Rate and calculation of gain

    • Tax rate is tied to holding period as a percentage of gain (basis).
    • Graduated rates vary from 5% to 60% depending on the hold period and the ratio of gain to basis, with adjustments for very short holds.
    • The gain percentage is rounded up to the next whole percent; a single flat tax rate applies to the entire gain based on that percentage.
    • Federal capital gains tax paid on the same property can be credited against the Rhode Island tax.

  • Definitions and mechanics

    • Defines “sale or exchange” broadly to include transfers, options, contracts, and certain rights to use or occupy property.
    • Sets rules for basis, amount realized, and holding periods, aligning with federal Internal Revenue Code concepts.
    • Addresses transfers from estates and certain related holding-period rules.

  • Withholding and payment

    • Buyers must withhold 10% of consideration for sales held less than six years.
    • Withholding must be remitted to the tax administrator; sellers file a return and may owe additional tax or seek a refund.
    • Purchasers may be exempt from withholding if the seller provides a certification that tax has been satisfied or is not due.

  • Installment sales

    • Provides special provisions for installment sales, including payment timing, proportional taxation by installment, and filing options.

  • Administration and penalties

    • Tax administrator can issue and amend rules; taxation follows general RI tax collection provisions.
    • Criminal penalties potential for evasion (up to 2 years’ imprisonment, fines, or both).

  • Special exception

    • For sales to qualifying 501(c)(3) affordable-housing organizations held for six years, half of the tax may be due; if not held, liability shifts to the organization.

Who would be affected

  • Transferors/sellers of real property in Rhode Island, particularly those with short-term holdings (six years or less).
  • Buyers/transferees who must withhold 10% of consideration for qualifying sales.
  • Organizations meeting 501(c)(3) status involved in conservation or affordable housing, subject to holding-period requirements.
  • Tax administrators and property gains tax filers; potential impact on real estate investment activity and flipping.

Procedural and timeline aspects

  • Introduced February 13, 2026; referred to Senate Finance.
  • Schedule indicates a hearing/consideration set for May 12, 2026.
  • Effective date: upon passage.

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

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