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HB 8611

AN ACT RELATING TO TAXATION -- TAXATION OF BANKS

2026 Regular Session Introduced by Alex Marszalkowski

Rhode Island may allow banks to use a receipts-factor-only method for apportioning net income starting 2025, with a five-year commitment and alternatives if fairness requires.

06/23/2026 Signed by Governor
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WeVote Research Nonpartisan
Bill Summary · HB 8611

Summary of HB 8611 (Rhode Island, 2026)

Purpose and Intent

  • The bill amends the statutes governing how banking institutions allocate and apportion income for Rhode Island tax purposes.
  • It aims to modify the rules for apportionment of net income between Rhode Island and other jurisdictions, clarifying options and processes for banks with multi-state business activity.
  • Effective for tax years beginning on or after January 1, 2025.

Key Provisions and Changes

  1. Apportionment Framework (Section 44-14-14.1)

    • Reiterates current framework: banks with activity taxable in Rhode Island and elsewhere allocate and apportion net income under §§ 44-14-14.1 to 44-14-14.5.
    • Foreign banks with effectively connected income taxed in Rhode Island and another state follow the same §§.

  2. Apportionment Formula (Section 44-14-14.1(b))

    • Net income apportioned to Rhode Island via an apportionment percentage.
    • Apportionment percentage is the average of three factors: receipts factor, property factor, and payroll factor.
    • If a factor is missing (both numerator and denominator are zero), it is excluded from the average; if two factors are missing, only the remaining factor determines the apportionment percentage.
    • A factor is not considered missing merely because its numerator is zero.

  3. Accounting Method Consistency (Section 44-14-14.1(c))

    • Each factor must be computed using the taxpayer’s accounting method for the year (cash or accrual).

  4. Transition Rules and Alternative Methods (Sections 44-14-14.1(d) and (e))

    • For tax years before 2025: if the current allocation/apportionment provisions do not fairly reflect Rhode Island activity, taxpayers may petition or the administrator may adjust by:
      • Excluding certain factors,
      • Including additional factors to better reflect activity,
      • Employing any other equitable method.
    • For tax years beginning in 2025 and later: if the standard methods do not reasonably approximate Net Income from Rhode Island activity, banks may apply for an alternative method.
      • Application requires a statement of reasons and notes to file additional information under oath if requested.
      • If the administrator determines the standard methods are not reasonably adapted, they will determine Rhode Island net income by reasonable methods, and that determination governs in lieu of §§ 44-14-14.1 to 14.5 or subsection (f).
      • The administrator may require similar information for other banks if warranted.

  5. Election to Use Receipts Factor (Section 44-14-14.1(f))

    • Banks may elect to allocate and apportion net income using only their receipts factor (44-14-14.3) for tax years beginning 2025 and later.
    • Election mechanics:
      • Election filed with the tax return on a prescribed form; effective immediately and applies to all subsequent years (with a potential revocation after at least five years due to a material change in facts or law).
      • If an election is made, the receipts factor is used to determine the portion of net income taxable, subject to provisions below.
    • If the receipts factor is missing (both numerator and denominator zero), the entire net income is taxable under the base framework.
    • Receipts factor must be computed using the taxpayer’s accounting method.
    • Banks electing this method may not claim any benefit under Rhode Island’s Chapter 64.5 of Title 42 (likely related to other tax credits or incentives).

Who Would Be Affected

  • Banking institutions (state-chartered, national or foreign banks with Rhode Island nexus) that are subjected to Rhode Island corporate or banking tax.
  • Banks with multi-state operations that currently use apportionment formulas to allocate income to Rhode Island.
  • Institutions may be affected by potential shifts in how income is apportioned (three-factor, two-factor, or single-factor receipts-based approaches) and by the option to elect the receipts-factor-only method.

Procedural and Timeline Aspects

  • Effective Date: The act takes effect upon passage.
  • Applicable Tax Years: Began applying for tax years starting on or after January 1, 2025.
  • Optional Election: The bill provides a formal election process to adopt the receipts-factor-only method, with a minimum commitment of five years before potential revocation, except for changes due to material changes in facts or law.
  • Alternative Method Process: If standard methods are not reasonably adapted, banks can apply for an alternative method and may need to provide sworn statements and supplemental information as requested by the tax administrator.

Overall Impact

  • The bill offers greater flexibility in how Rhode Island taxes bank income, including a potential simplification path (receipts-factor-only) and an enhanced mechanism for addressing situations where traditional three-factor formulas do not fairly reflect Rhode Island activity.
  • It preserves the option for the tax administrator or banks to adjust or adopt alternative methods if the standard apportionment framework does not fairly allocate Rhode Island-derived income.

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

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