Business owners, legislators highlight
benefits of tangible tax relief
STATE HOUSE – Sen. Melissa A. Murray and Rep. Brandon T. Voas gathered with other local leaders and members of the business community today at Kay’s Restaurant in Woonsocket to highlight legislation that would exempt the first $100,000 of tangible property from the tangible personal property tax.
“The tangible tax is both a financial and administrative burden for small businesses. Complying with it is complex, and it’s also an enforcement burden for cities and towns. Eliminating this tax for smaller businesses will give them genuine, much needed relief. It’s a way our state can provide help for the small businesses that support our cities and towns, make our communities unique, and most importantly, employ Rhode Islanders,” said Sen. Murray (D-Dist. 24, Woonsocket, North Smithfield).
“In order to have a healthy and thriving Rhode Island economy, we need to do everything in our power to remove the onerous obstacles that too often choke or stifle our state’s businesses. I am proud to sponsor this legislation, which will eliminate a significant obstacle and frustration for the majority of our state’s small businesses,” said Rep. Voas (D-Dist. 57, Cumberland, Central Falls).
The tangible personal property tax is paid by businesses on property other than real estate that has value by itself, such as computer equipment, furnishings and fixtures. The proposed $100,000 exemption (2023-S 0928, 2023-H 6333) would completely eliminate the tangible tax for an estimated 85% of businesses statewide. Those with more than $100,000 worth of tangible assets would have to pay the tax on the assets above $100,000, but would still receive an equal amount of tax relief.
The tangible personal property tax creates significant logistical and financial burdens for businesses and municipalities, which were highlighted by Kay’s Restaurant president David Lahousse, Graze on Main owner Elyse Paré, Northern Rhode Island Chamber of Commerce President and CEO Elizabeth Catucci, Rhode Island Public Expenditure Council President and CEO Michael DiBiase, and Woonsocket Mayor Lisa Baldelli-Hunt.
“Kay’s has been a staple in the Woonsocket community for 56 years. It’s a special place that brings people together. I worked at the restaurant in my youth before I had the opportunity to become its owner more than 20 years ago,” said David Lahousse, president of Kay’s Restaurant. “The last few years have been especially challenging for businesses like mine, and this tangible tax exemption would provide some much needed relief. I want to thank Senator Murray, Representative Voas, and their fellow legislators for their work on this proposal.”
“Starting a business has been an amazing and incredibly rewarding experience. But there are many challenges, and the tangible tax is an especially onerous burden to deal with,” said Elyse Paré, owner of Graze on Main in East Greenwich. “As someone who also has an extensive background in municipal government and finance, I’ve seen the issues this tax creates for both entrepreneurs and local officials. The legislation proposed by Senator Murray and Representative Voas would make it easier for businesses like mine to start and grow here in our state, and it would be greatly beneficial for city and town officials as well.”
“Tangible taxes discourage businesses from making capital investments needed to expand or to become more productive through modernization. Studies have shown that high commercial real estate and tangible taxes discourage investment and ultimately hinder overall economic development,” said Elizabeth Catucci, President and CEO, Northern Rhode Island Chamber of Commerce.
“Rhode Island’s business tax climate is uncompetitive, hindering the growth of jobs and investment. The most burdensome tax for Rhode Island businesses is the property tax, and in many communities, the tangible property tax in particular has become a very onerous tax, particularly for small business. This legislation will provide much-needed relief from this tax and begin to bring balance to Rhode Island’s property tax system,” said Michael DiBiase, President and CEO, Rhode Island Public Expenditure Council.
“I fully support the proposed state legislation to exempt the first $100,000 of tangible property from the tangible personal property tax, and for the state to reimburse cities and towns for their tangible tax revenues. This tax on business furniture, fixtures and equipment is a flawed tax. It is inconsistently applied to various asset classes, difficult to assess because it is mainly self-reported, and hard for a municipality to enforce and collect the taxes due. The tangible personal property tax particularly burdens small businesses that utilize physical assets to generate revenues, like restaurants, retailers, gyms, and laundromats, especially those just starting out. Buying equipment to run a business is hard enough, paying an additional annual tax on what you have already paid for is often crippling. The time has come to lift this tax onus off our small business owners and give them a better chance of succeeding and being able to invest more in people and capital for their future growth,” said Woonsocket Mayor Lisa Baldelli-Hunt.
Since the tangible tax is a municipal-level tax rather than a state one, the state would reimburse each city, town and fire district annually for their lost revenue, just as it does for revenue they lost from the phased-out vehicle excise tax. According to the Rhode Island Public Expenditure Council (RIPEC), which has recommended the exemption and assisted in the development of the bill, the annual cost to the state would be about $36.6 million.
The legislation would take effect in fiscal year 2025, with reimbursement based on the prior year’s FY 2024 tax roll.
The bill would also require municipalities and fire districts to cap their tangible property tax rate at the level applied in fiscal year 2023. The tax cap would not apply in the case of municipalities and fire districts that utilize a uniform tax rate for all classes of property.
According to an example provided by RIPEC, under current law, $100,000 worth of computer equipment owned by a business located in Providence would result in tangible taxes exceeding $20,000 over the course of 10 years, in addition to the $7,000 the company would have paid in sales tax at its purchase.