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 Tax Interest and Audit Limits Bill

This bill makes two significant changes to Rhode Island's tax rules. First, it caps the interest rate charged on overdue 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, no matter how long the taxes go unpaid. Second, it sets clear time limits on how far back the state can go when auditing a taxpayer's returns — generally no more than three years from when the tax return was filed.

There are some exceptions to the three-year audit limit. If the state believes a taxpayer committed fraud, it has up to seven years to conduct an audit. Additionally, under no circumstances can the state audit records more than ten years old, regardless of the situation. This ten-year cap serves as an absolute backstop, even in cases involving fraud or other serious violations.

This bill primarily affects individual taxpayers and businesses in Rhode Island who interact with the state tax system. For people who owe back taxes, the 12% interest cap could limit how much their debt grows over time. For all taxpayers, the audit time limits provide a clear window of certainty — after a set number of years, they can be confident their old tax filings are no longer subject to state review. The bill has been referred to the Senate Finance Committee, where it will be reviewed before any further action is taken.