Legislative Updates
The General Assembly session recessed in the early morning hours of June 21. Over the last couple weeks of the session, legislators passed bills increasing the minimum wage, banning the sale of assault weapons, increasing funding for primary care, hospitals and nursing homes, measures to address housing development and affordability among many other issues. The legislature also had to close an approximately $200 million budget deficit.
It is unclear whether the General Assembly will return later in the year to address any impacts of the budget reconciliation law enacted by Congress last week. Here is a recap of key business issues that were enacted into law and others that were defeated this session.
Some Wins and Losses in Fiscal Year 2026 State Budget
The state budget that became law for the Fiscal Year that began July 1 included some wins and losses for the business community. Among the key issues:
· Exempts the Workers’ Compensation Administrative Fund from the state’s indirect cost recovery charge. Exempting the Administrative Fund from being diverted to the general fund means that approximately $2 million in workers’ compensation insurance premiums or assessments will go directly to the workers’ compensation system.
· A proposal to tax digital advertising was not included in the budget. The Governor’s budget proposed creating ten percent tax on business gross revenue derived in Rhode Island from digital advertising for companies with at least $1.0 billion in global revenues.
· Establishes a Health Services Funding Assessment that would take effect January 1, 2026. As stated in the budget summary, the assessment would support primary care and other critical healthcare programs. The assessment would apply to all covered lives including the self-insured which is estimated to be approximately $4 per month per covered life.
· Includes $2 million in federal funds recently awarded to the Executive Office of Health and Human Services (EOHHS) for the state's participation in the Centers for Medicare & Medicaid Services (CMS) States Advancing All-Payer Health Equity Approaches and Development (AHEAD) program. This initiative aims to curb health care cost growth, improve population health, and reduce disparities in health outcomes.
· A 2-cent increase in the gas tax was also included. The funds raised by the increase will be dedicated to the Rhode Island Public Transit Authority (RIPTA).
· The five percent hotel tax is extended to whole unit short-term rentals with the revenue being split among the Housing Resources and Homelessness Restricted Receipt account, as well as the municipality and tourism district where the rental home is located. In addition, the budget includes an increase in the local hotel tax rate from 1 percent to 2 percent.
· An increase in the Real Estate Conveyance Tax. Currently, the Real Estate Conveyance Tax includes a first-tier rate of 0.46 percent charged on all transfers and a second-tier rate of 0.46 percent charged on the portion of residential transfers above $800,000. The budget passed by the Committee increases both rates to 0.75 percent, for a top-tier effective rate of 1.5 percent. These changes would be effective October 1, 2025. Revenue would be allocated to municipalities, the Housing Production fund, and the Housing Resources and Homelessness restricted account.
· An expansion of the current seven percent sales and use tax to short-term parking of up to one month.
Bills Enacted into Law
Minimum Wage to Increase Over Next Two Years
On June 24, the Governor signed bills to increase the minimum wage into law. House bill 5029, Substitute A and Senate bill 125, Substitute A will increase the minimum wage to $16 per hour effective January 1, 2026 and then to $17 per hour effective January 1, 2027. The original proposals would have increased the minimum wage to $20 by January 1, 2030.
Changes to TCI/TDI Program Signed into Law
Bills were signed into law that amend the Temporary Disability and Temporary Caregiver Insurance Programs. The law takes effect January 1, 2026 and increases the taxable wage base and the weekly benefit rate for recipients receiving benefits and also adds siblings to the definition of caregiver. In response to concerns expressed by the Coalition and other business organizations, the bills that passed the Senate and House removed the expansion to 12 weeks individuals are able to take TCI. Current law is already scheduled to increase to eight weeks as of January 1, 2026.
Governor Signs Captive Audience Bills
Senate bill 126, Substitute A and a matching amended version of its House companion were signed into law on July 2nd. The law prohibits employers from requiring non managerial employees to attend a meeting to learn about legislative proposals or regulatory matters as well as meetings to provide information concerning labor organization efforts. The Coalition expressed concerns that the legislation would severely limit an employer’s ability to educate employees about legislation, including legislation that would materially impact the business’ operations or the employee’s day-to-day job responsibilities.
Changes to Employee Definition and State Labor Relations Board
House Bill 5187, Substitute A as amended and a companion Senate version were signed into law on July 2nd. The law includes a revised definition of "employee" and makes changes to the State Labor Relations Board. In addition, the revised versions remove the definition of "right of control".
Revised Versions of Employment Records Bills Signed into Law
The Governor signed bills into law that require employers to provide certain employment-related information to employees when they begin working. Among the items required are pay rate and type of payment frequency, vacation, holiday and sick time, among other details of their work information. The original version of the bill would have required information to be provided on paychecks every pay period.
Rhode Island First State to Enact Workplace Protections for Women Experiencing Menopause
Bills were signed into law adding menopause to the list of protected conditions in the workplace. Currently, Rhode Island employment law already prohibits workplace and hiring discrimination related to pregnancy, childbirth and all related conditions. This law requires workplaces to reasonably accommodate conditions related to menopause, and protecting employees and prospective employers from being passed over for hiring or promotion or even being fired.
Governor Signs Legislation to Improve Business Climate for Insurance Companies
The House and Senate passed legislation that strikes the cap on certain investments for insurance companies. The law limited the amount insurance companies may invest in assets that are reported in Schedule BA of the annual statement, including long-term invested assets such as LLCs, partnerships, private equity, hedge funds, and joint ventures. The bills signed into law on June 18 remove the investment cap and make Rhode Island more competitive with our neighboring states.
Changes to Spur Development of More Affordable Housing
On June 30, the Governor signed into law Senate bill 1011, Substitute A and its companion House bill 5956, Substitute A. The law intends to spur the development of more moderately priced homes in the state. The Coalition testified that limited affordable housing options add to the challenges Rhode Island businesses face in recruiting and retaining talent. According to a poll released earlier this year, 59% of respondents listed the cost of housing as the most important issue facing Rhode Islanders today. Here is the full Coalition testimony.
Proposed Changes to Historic Tax Credit Program to Boost Development
Senate Bill 940, Substitute A as amended was signed into law. The law makes several revisions to the historic tax credit program to increase the development of housing projects across the state. The Coalition joined several organizations submitting testimony in support of this bill.
Key Bills That Did Not Pass
Noncompetition Agreement Bill Passes Senate But House Takes No Action
The Senate passed a bill to prohibit noncompetition agreements for certain employees. The amended version of the legislation would have prohibited noncompetition agreements for employees with annualized earnings, as defined in the bill, that are more than $125,000. This bill did not pass the House.
Revised Building Decarbonization Bill Passes House But Senate Recommends Further Analysis
The House passed an amended version of the Building Decarbonization Act of 2025. The revised language would establish a benchmarking process for properties in the state. The bill would phase in the requirement to report building energy usage beginning May 15, 2027 for buildings with 50,000 square feet or more. Covered properties would need to input their energy usage through a benchmarking tool which is defined as the ENERGY STAR program developed and maintained by the Environmental Protection Agency. On the last day of session, the Senate passed a Resolution requesting the Office of Energy Resources to analyze benchmarking programs for municipal and private buildings more than 25,000 square feet.
Proposed Income Tax Surcharge on Income above $625,000 Stalls in House and Senate
Proposals to increase the state's top income tax rate by 50% on income above $625,000 stalled in the House and Senate Finance Committees. The Coalition submitted written testimony that the legislation will hurt our competitiveness and impede the state's efforts to grow our economy and add jobs as we head into unstable economic times. The testimony also references the Rhode Island Public Expenditure Council's report that emphasized that the proposal is not only an income tax but a business tax as well. This is because most Rhode Island businesses are pass-through entities, meaning they report business income or losses through their individual return. In 2022, fifty-six percent of tax filers with income exceeding $500,000 reported business income or losses. Read more on the Finance Committee hearing here.
Wealth Tax Proposal Dies in Committee
Legislation that proposed tax on worldwide wealth stalled in the House and Senate Finance Committees. The bills proposed an additional one percent tax on Rhode Island residents with more than $25 million in assets as defined in the legislation. This proposal would make Rhode Island an outlier, not only in the country, but the world. Coalition testimony noted that Rhode Island has often lagged the rest of the country in creating jobs and population growth. As a state, we should be enacting laws to incent people to move here to create jobs and invest.
Warehouse Protection Act Does Not Make it Out of the House
The Senate passed Senate Bill 1058 which would have required employers in the warehousing industry to provide employees with a written description of quotas an employee is required to meet within a defined period. In addition, the bill states, “An employee shall not be required to meet a quota that prevents compliance with meal or rest periods or use of bathroom facilities, including reasonable travel time to and from bathroom facilities.” The Coalition submitted testimony in opposition to this legislation.
The Rhode Island Opportunity for Employee Ownership Act Stalls in Committee
House bill 5940 and its Senate companion would require business owners to offer their employees the opportunity to purchase a business that is up for sale. The Coalition emphasized that should they consider selling their business, owners should have the ability to make this decision without unnecessary government intervention. H5940 would require business owners to notify their employees within seven days of their decision to sell the entire business or a majority ownership position in the business. In addition, the bill states that the employees must be notified that they have an exclusive 30-day window to potentially buy the business as an employee group. Lastly, the mandate to offer the business to employees could undermine one of the most effective and flexible ways for small businesses to transition ownership — through external buyers, family members, or investors.
Bottle Bills Turn Into Beverage Container Redemption, Packaging, and Recycling Plan Implementation Analysis
The amended version of the bottle bill tasked the Department of Environmental Management, Department of Administration, and the Resource Recovery Corporation to conduct a statewide implementation analysis for a beverage container redemption, packaging, and recycling plan. The original versions of the bills, Senate Bill 996 and Senate Bill 997 would have imposed a 10-cent deposit fee on all beverage bottles and cans in the state. Coalition testimony focused on the cost implications on businesses and consumers at a challenging and uncertain time for the economy.
Extreme Heat Bill Passes Senate But Stalls in the House
Legislation passed the Senate that would have required employers to take special precautions when employees are working in temperatures above 90 degrees or below 32 degrees, including employees that are required to stay in vehicles under these conditions or who work in warehouses. The bill stated that employees would be entitled to paid rest breaks, adequate shade, warming or cooling stations, drinking water, protective equipment and clothing. An employer found in noncompliance would be subject to compensatory damages and in some cases punitive damages. Employers are already subject to OSHA regulations when it comes to severe weather situations.
Bill to Prohibit Employers from Asking Questions about Job Applicants Financial Past and Using Credit Reports Held in Committee
The Coalition submitted testimony to the Senate Judiciary Committee in opposition to Senate Bill 285 which would prohibit employers from (1) seeking or using credit reports in making hiring decisions concerning prospective employees, (2) asking questions about the applicant's financial past or (3) including credit history questions in their job applications. The bill also establishes a penalty of up to $10,000 and includes recovery of attorney fees and court costs. The bill was held in Committee.
Proposed Retail Delivery Fee Does Not Make it out of House Committee
House Bill 6365 would have added a fifty-cent tax on retailers with annual gross sales of more than $500,000. As the Coalition noted in its testimony, "This year, several states dealing with budget shortfalls have looked at a delivery tax. All of them so far, including Connecticut, Indiana, Hawaii, Maine, Maryland and Mississippi, have rejected the idea." The Coalition recommended the legislature look at alternative approaches to address infrastructure concerns, which was the stated purpose of the bill.
Jason C. Martiesian
Director of Government Relations
Capitol City Group
39 Pike Street, Suite 2
Providence, RI 02903
401.339.9750