The Internal Revenue Service affirms state policy that lets certain types of small businesses deduct state and local taxes from their income. The 2019 Rhode Island legislation, sponsored by R.I. House of Representatives Majority Leader K. Joseph Shekarchi, D-Warwick, was intended as a workaround to help small-business owners who would otherwise be hurt by the $10,000 cap on state and local tax deductions enacted under the Tax Cuts and Jobs Act passed in 2017. The legislation applies specifically to pass-through entities including LLCs, S corporations, sole proprietors and partnerships that would otherwise face higher federal tax liabilities under the SALT cap deduction on federal taxes.
