AN ACT RELATING TO TAXATION -- STATE TAX OFFICIALS (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.)

S2847

2026 -- S 2847
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LC005901
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STATE OF RHODE ISLAND
IN GENERAL ASSEMBLY
JANUARY SESSION, A.D. 2026
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A N A C T
RELATING TO TAXATION -- STATE TAX OFFICIALS

Introduced By:
Senators Thompson, DiPalma, and Murray

Date Introduced:
March 04, 2026

Referred To:
Senate Finance
It is enacted by the General Assembly as follows:
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SECTION 1. Section 44-1-7 of the General Laws in Chapter 44-1 entitled "State Tax
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Officials" is hereby amended to read as follows:
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44-1-7.
Interest on delinquent payments.
Interest on delinquent payments and audit
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limitations.
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(a) Whenever the full amount of any state tax or any portion or deficiency, as finally
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determined by the tax administrator, has not been paid on the date when it is due and payable,
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whether the time has been extended or not, there shall be added as part of the tax or portion or
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deficiency interest at the rate as determined in accordance with subsection (b) of this section,
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notwithstanding any general or specific statute to the contrary.
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(b) Each January 1 the tax administrator shall compute the rate of interest to be in effect
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for that calendar year by adding two percent (2%) to the prime rate, which was in effect on October
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1 of the preceding year, except:
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(1) Before January 1, 2023, in no event shall the rate of interest exceed twenty-one percent
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(21%) per annum nor be less than eighteen percent (18%) per annum;
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(2) On and after January 1, 2023, in no event shall the rate of interest exceed twenty-one
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percent (21%) per annum nor be less than twelve percent (12%) per annum except:
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(i) For trust fund taxes as established by §§ 44-19-35 and 44-30-76, in no event shall the
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rate of interest exceed twenty-one percent (21%) per annum nor be less than eighteen percent (18%)
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per annum.

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(3) On or after January 1, 2027, the interest rate on all delinquent tax payments, including,
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but not limited to, sales and trust fund taxes, shall be capped at twelve percent (12%) per annum,
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no exclusions. This cap shall serve as both a floor and a ceiling, ensuring consistency in the
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application of interest rates.
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(i) The interest rate assessed on all tax payments, including delinquent taxes, shall be the
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rate in effect on the date of the notification of delinquency, and not the date of the original tax
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obligation.
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(c) “Prime rate” as used in subsection (b) of this section means the predominant prime rate
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quoted by commercial banks to large businesses as determined by the board of governors of the
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Federal Reserve System.
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(d) Notwithstanding any provisions of the general laws to the contrary, the tax
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administrator shall waive interest and penalty on the taxable portion of each Paycheck Protection
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Program loan taxed pursuant to §§ 44-11-11(a)(1)(iv), 44-14-11, and 44-30-12(b)(8) and forgiven
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during tax year 2020 provided that the tax on that portion is paid in full on or before March 31,
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2022. The tax administrator shall make available suitable forms with instructions for making tax
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payments on the taxable portion of such forgiven Paycheck Protection Program loans.
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(e) The tax administrator’s authority to audit taxpayers shall be limited to:
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(1) For ordinary tax returns, the audit period shall not exceed three years (3) years from the
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date of filing.
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(2) In cases involving fraud, the audit period shall not exceed seven (7) years from the date
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of filing.
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(3) Under no circumstances shall the tax administrator initiate or conduct an audit,
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investigation or tax collection for any period in excess of ten (10) years from the date of the original
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filing or required filing deadline, whichever is later.
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(4) The tax administrator shall be prohibited from requesting filings or attempting to collect
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tax liabilities for any period in excess of seven (7) years, regardless of whether a formal audit has
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been initiated.
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(5) These limitations shall apply without exception.
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(f) The interest rate assessed on delinquent tax payments shall be the rate in effect on the
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date of the notification of delinquency, and not the date of the original tax obligation.
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SECTION 2. This act shall take effect on January 1, 2027, and shall apply to all
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assessments, audits and tax payments, including delinquent taxes, initiated on or after this date.
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EXPLANATION
BY THE LEGISLATIVE COUNCIL
OF
A N A C T
RELATING TO TAXATION -- STATE TAX OFFICIALS
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This act would cap the interest rate for all delinquent taxes at twelve percent (12%). This
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act would also limit the tax administrator’s authority to audit taxpayers to three (3) years from the
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date of the tax filing. For fraudulent returns, the audit period shall not exceed seven (7) years, and
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no audit can be performed beyond ten (10) years.
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This act would take effect on January 1, 2027, and would apply to all assessments, audits
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and tax payments, including delinquent taxes, initiated on or after this date.
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