Caps delinquent tax interest rate at 12%. Prohibits audits beyond 3 years from date of tax filing, 7 years for fraudulent filings, and in no event beyond 10 years from date of filing or required filing date, whichever is later.

Rhode Island Bill Summary: Tax Interest Rate Cap and Audit Time Limits

This bill would make two significant changes to how Rhode Island handles state taxes. First, it would cap the interest rate charged on overdue (delinquent) taxes at 12% per year. This means that if someone owes back taxes to the state, the interest that builds up on that debt cannot exceed 12% annually, regardless of how long it goes unpaid. Second, the bill sets clear deadlines for how long the state tax authorities can go back and audit a person's or business's tax filings.

Under the bill's new audit rules, the state would generally have 3 years from the date a tax return is filed to conduct an audit. If fraud is suspected, that window extends to 7 years. No matter the circumstances, the state could never audit a filing more than 10 years after it was filed — or after it was *required* to be filed, whichever date comes later. Currently, Rhode Island law may allow audits to extend beyond these proposed limits in certain situations.

This bill would affect anyone who pays Rhode Island state taxes — individuals, small business owners, and corporations alike. For taxpayers, the changes offer greater financial certainty and protection: they would know that after a set number of years, old tax filings are effectively "closed," and that any unpaid tax debt won't accumulate interest beyond the 12% cap. For the state government, these changes would limit its ability to investigate and collect on older tax obligations.

The bill has been referred to the House Finance Committee and is scheduled for a hearing, meaning it is still in the early stages of the legislative process and has not yet become law.