S 2021Income

Taxation - Personal Income Tax

This bill exempts up to $20,000 of Bitcoin sales per year from Rhode Island state income taxes for 2027.

Held for study

Population
Affected

Introduced Jan 9, 2026Committee Senate Finance

Plain-English Summary

This legislation establishes a temporary tax exemption for Rhode Island residents and businesses regarding Bitcoin transactions. Specifically, it exempts the sale or exchange of Bitcoin from state income and capital gains taxes, provided the total value does not exceed $5,000 per month or $20,000 per year. Taxpayers can self-certify this exemption on their annual returns without detailing every transaction, though they must maintain records for potential audits. The Department of Business Regulation is tasked with issuing guidance on valuation and recordkeeping. This exemption is effective only for the 2027 calendar year.

For younger readers

This new rule helps people in Rhode Island who use Bitcoin, which is a type of digital money used on computers. Usually, when people make money by selling things, they have to pay a portion to the government as taxes. This rule says that if a person or business sells a small amount of Bitcoin (up to $20,000 in a year), they do not have to pay state taxes on that money. They just have to keep a list of their sales. This rule is only for one year, starting in 2027.

Who & Where It Applies

Impacted groups

Cryptocurrency investorsSmall business ownersTax preparersDepartment of RevenueDepartment of Business Regulation

Impacted communities

All

Constitutional & Fiscal Check

None Likely

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Caps the tax exemption at $20,000 annually, ensuring that the primary benefits go to small-scale users and working-class individuals rather than wealthy institutional investors or "crypto whales."
Encourages financial experimentation and inclusion for unbanked populations who may rely on peer-to-peer digital currencies rather than traditional banking systems.
mandates plain-language guidance from the Department of Business Regulation, ensuring that consumer protections and clear rules are established for the public.
Incentivizes the use of Bitcoin, a technology associated with extremely high energy consumption and environmental damage, which contradicts goals of combating climate change.
Reduces state tax revenue available for funding essential social safety nets, public education, and infrastructure projects.
Relies on self-certification regarding the value of assets, which could facilitate tax evasion and financial opacity among those seeking to hide assets.

For Conservatives

Reduces the tax burden on individuals and businesses, promoting economic freedom and allowing citizens to keep more of their earnings.
Encourages the use of decentralized currency, reducing reliance on government-controlled fiat currency and central banking systems.
Simplifies the reporting process by allowing aggregate reporting rather than requiring government tracking of every individual private transaction.
The exemption limit of $20,000 is relatively low, failing to provide meaningful tax relief for serious investors or successful business owners.
Grants state agencies the authority to audit private financial records, maintaining government intrusion into personal financial affairs.
The legislation is temporary and sunsets after one year, creating economic uncertainty rather than a permanent, stable business environment.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 33 additions

SECTION 1. Chapter 44-30 of the General Laws entitled "Personal Income Tax" is hereby amended by adding thereto the following section: 44-30-12.1. Bitcoin exemption.

(a) For the purposes of this section the following terms shall have the following meanings:

(1) "Bitcoin" means a digital, decentralized currency based on blockchain technology, which is used for peer-to-peer transactions.

(2) "Business" means and refers to any entity, corporation, partnership, sole proprietorship, or other organization that is based and operates primarily in the State of Rhode Island.

(3) "Individual" means and refers to a natural person who resides in the State of Rhode Island.

(4) "Market value" means and refers to the current price of Bitcoin in fiat currency as determined by a reputable, publicly available source or index at the time of the transaction.

(5) "Sale of Bitcoin" means and refers to any transaction in which Bitcoin is sold or exchanged for another form of value, such as fiat currency or other digital or physical assets.

(b) Any sale or exchange of Bitcoin by an individual or business based in Rhode Island shall be exempt from state taxation if the total value of such transactions does not exceed five thousand dollars ($5,000) per month, or twenty thousand dollars ($20,000), per taxable year.

(c) Transactions exempt under this section shall not be included in the individual's or business's income for the purpose of calculating state income or capital gains tax.

(d) Taxpayers may self-certify their eligibility for this exemption on their annual state income tax return.

(e) Individuals and businesses claiming this exemption shall not be required to report such transactions individually but shall maintain reasonable records sufficient to verify that the total value of Bitcoin sales or exchanges within the taxable year does not exceed the annual exemption limit. Such records shall be made available to the department of revenue upon request for audit purposes.

(f) The department of business regulation shall issue plain-language guidance for individuals and businesses regarding this exemption, including examples of acceptable recordkeeping and valuation methods.

(g) This section shall remain in effect until January 1, 2028, unless extended or amended by the general assembly following review of its fiscal and economic impact.

(h) If any provision of this section or its application to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of the section which can be given effect without the invalid provision or application, and to this end, the provisions of this section are severable.

SECTION 2. This act shall take effect on January 1, 2027, and sunset on January 1, 2028.