McKee plans to make to-go drinks permanent for restaurants, reduce corporate minimum tax

Reducing the corporate minimum tax and reforming tangible taxes should “send a signal to small businesses,” said state Commerce Secretary Stefan Pryor

Governor Daniel J. McKeeEdward Fitzpatrick

PROVIDENCE — In his first State of the State address, Rhode Island Governor Dan McKee is expected to unveil significant policy plans related to reducing the red tape around doing business in Rhode Island and getting owners back on their feet amid the coronavirus pandemic.

In his FY2023 budget request to the General Assembly, McKee announced Tuesday that he planned on including a separate, small business article, which will include reducing the corporate minimum tax to $375 from $400, reforming tangible taxes by allowing cities and towns to exempt a portion of business property without seeking individual exemptions from lawmakers, and reducing interest rates on delinquent tax payments from 18 percent to 12 percent (for non-trust fund taxes), which will align Rhode Island’s rates with neighboring Connecticut’s.

Reducing the corporate minimum tax and reforming tangible taxes should “send a signal to small businesses,” said state Commerce Secretary Stefan Pryor in an interview Tuesday. In 2016, Rhode Island’s corporate tax minimum was $500 compared to its current minimum of $400.

Connecticut’s corporate tax minimum is $250, and Massachusetts’s is $456.

“It should show that when the opportunity arises, we will chip away at it,” he said,

Pryor also pointed to the reform on tangible taxes, which he called “redundant for small business owners.”

“The small businesses already pay sales taxes on these items (such as office chairs, desks, lamps, computers, printers, servers, etc.). Why do they have to pay a recurring, tangle tax? It an be especially burdensome for owners,” he said.

McKee also plans on eliminating the sunset provision on liquor to-go, which will permanently allow restaurants and brewpubs to sell alcoholic beverages with take-out food. It was a policy that was introduced in Rhode Island during the pandemic when restaurants, one of the hardest-hit businesses during the pandemic, were struggling to stay open during lockdowns. The sunset provision was set to expire this spring.

His budget will also allow home-based cottage food production for non-farmers. The proposal will permit home-based production of baked goods that do not require refrigeration or temperature control for safety. Rhode Island is the only state in the US that restricts cottage food licenses to farmers, said Pryor.

Despite small businesses being the bulk of Rhode Island’s business landscape, the state has historically had a poor reputation when it comes to infrastructure, the cost of doing business, access to capital, and the cost of living, according to a recent CNBC ranking. In fact, last year, Rhode Island only moved up four rankings — from No. 50 to No. 46 — in CNBC’s 2021 Top States for Business list compared to 2019.

“Small businesses make up not only a crucial part of our economy but also our identity – we are truly a small business state,” said McKee in a statement. “As a former small business owner, I know firsthand the time and resources it takes, and I am pleased that the targeted initiatives announced today will make it easier and simpler to do business in Rhode Island.”

The governor also plans to create a new “taxpayer steward” position within the state’s Division of Taxation, which will guide both small businesses and individuals through the taxation process and assist with resolving to various taxation challenges, according to McKee’s office. Pryor said the position was a recommendation that was part of McKee’s Rhode Island 2030 plan, which laid the groundwork on how to spend federal funds for the state’s future.

In his budget, McKee will also expand the types of financial institutions that are eligible to apply for the Small Business Development Fund, a tax credit program adopted by the General Assembly in 2019. McKee’s office said the governor will also include plans in his budget to provide an exemption from sales tax for the trade-in value of motorcycles. Under current law, an exemption is provided only for private passenger automobiles not used for hire.

In his State of the State address Tuesday night, McKee also plans on unveiling plans for a $10 million investment toward the Minority Business Support Initiative to bolster minority business community.

“Minority-owned businesses were disproportionately impacted by the pandemic,” said Pryor, who added that he hopes the funds, which will be dispersed to minority business support coalitions (such as the Rhode Island Hispanic Chamber of Commerce), will help increase minority business ownership in Rhode Island.

The initiative will help increase access to capital, provide technical assistance, build capacity and support the associations and nonprofits that strengthen minority-owned businesses, and build out a physical space for these activities to occur.

“For far too long, minority entrepreneurs and minority-owned businesses have faced barriers in starting and growing businesses,” said McKee in a statement sent by his office. “They’ve had more hurdles to jump to get over that finish line. That is why my budget proposal includes the Minority Business Support Initiative, to help reduce those hurdles.”