R.I. Gen. Laws § 44-11-2.3 — Pass-through entities — Election to pay state income tax at the entity level

(a) Definitions. As used in this section:
(1) “Election” means the annual election to be made by the pass-through entity by filing
the prescribed tax form and remitting the appropriate tax.
(2) “Net income” means the net ordinary income, net rental real estate income, other net
rental income, guaranteed payments, and other business income less specially allocated
depreciation and deductions allowed pursuant to § 179 of the United States Revenue
Code (26 U.S.C. § 179), all of which would be reported on federal tax form schedules C and E. Net income
for purposes of this section does not include specially allocated investment income
or any other types of deductions.
(3) “Owner” means an individual who is a shareholder of an S Corporation; a partner in
a general partnership, a limited partnership, or a limited liability partnership;
a member of a limited liability company, a beneficiary of a trust; or a sole proprietor.
(4) “Pass-through entity” means a corporation that for the applicable tax year is treated
as an S Corporation under I.R.C. 1362(a) (26 U.S.C. § 1362(a)), or a general partnership, limited partnership, limited liability partnership, trust,
limited liability company or unincorporated sole proprietorship that for the applicable
tax year is not taxed as a corporation for federal tax purposes under the state’s
regulations.
(5) “State tax credit” means the amount of tax paid by the pass-through entity at the
entity level that is passed through to an owner on a pro rata basis. For tax years
beginning on or after January 1, 2025, “state tax credit” means ninety percent (90%)
of the amount of tax paid by the pass-through entity at the entity level that is passed
through to an owner on a pro rata basis.
(b) Elections.
(1) For tax years beginning on or after January 1, 2019, a pass-through entity may elect
to pay the state tax at the entity level at the rate of five and ninety-nine hundredths
percent (5.99%).
(2) If a pass-through entity elects to pay an entity tax under this subsection, the entity
shall not have to comply with the provisions of § 44-11-2.2 regarding withholding on non-resident owners. In that instance, the entity shall
not have to comply with the provisions of § 44-11-2.2 regarding withholding on non-resident owners.
(c) Reporting.
(1) The pass-through entity shall report the pro rata share of the state income taxes
paid by the entity which sums will be allowed as a state tax credit for an owner on
his or her personal income tax return.
(2) The pass-through entity shall also report the pro rata share of the state income taxes
paid by the entity as an income (addition) modification to be reported by an owner
on his or her personal income tax returns
(d) State tax credit shall be the amount of tax paid by the pass-through entity, at the
entity level, which is passed through to the owners, on a pro rata basis. For tax
years beginning on or after January 1, 2025, the state tax credit shall be ninety
percent (90%) of the amount of tax paid by the pass-through entity, at the entity
level, which is passed through to the owners, on a pro rata basis.
(e) A similar type of tax imposed by another state on the owners’ income paid at the state
entity level shall be deemed to be allowed as a credit for taxes paid to another jurisdiction
in accordance with the provisions of § 44-30-18.
(f) “Combined reporting” as set forth in § 44-11-4.1 shall not apply to reporting under this section.