Five Questions With: David A. Fontaine

David A. Fontaine is a partner of tax and business services at the Providence offices of Marcum LLP, an international accounting and advisory firm. / COURTESY MARCUM LLP
David A. Fontaine is a partner of tax and business services at the Providence offices of Marcum LLP, an international accounting and advisory firm. / COURTESY MARCUM LLP

David A. Fontaine is a partner of tax and business services at the Providence offices of Marcum LLP, an international accounting and advisory firm. Fontaine has been closely monitoring the tax changes made in the recently approved fiscal 2017 state budget and talks with Providence Business News about how those changes will affect businesses in Rhode Island.
PBN: What’s your overall reaction to the tax changes made in this year’s budget?
FONTAINE:
The state is continuing to take steps to improve its business environment and improve the relative cost of living for retirees in Rhode Island. It’s been a continuing trend that many Rhode Islanders have fled in their retirement years to more tax-friendly states. This year’s changes in taxation for certain pension benefits, along with prior year changes in connection with the taxation of Social Security benefits, increases in the exemption from the Rhode Island estate tax, and the decrease from 9 percent to 7 percent in the corporate tax rate have also improved Rhode Island’s competiveness. Although many of the business items this year are only incremental, they do show that the Rhode Island government is focused on improving the business climate. I believe that these changes, in addition to the “Lean Initiative” being utilized by the governor’s office to revamp certain processes, have begun to produce a positive attitude change in the business community regarding interactions with the state.
PBN: Was there anything that surprised you about the changes? Why or why not?
FONTAINE:
I was surprised that the state reduced the corporate minimum tax from $450 to $400 this coming year. The reduction comes just one year after the state reduced the minimum tax from $500 to $450. This will mean that in a two-year period the state of Rhode Island has reduced its corporate minimum tax by 20 percent. While this decrease has little or no benefit to large corporations, it is a significant item to small businesses, specifically pass-through entities – S-corps, LLCs and LLPs – which are the majority of Rhode Island businesses. The reduction makes Rhode Island more competitive for small business.
PBN: Which tax change will have the biggest impact on Rhode Island businesses? Why?
FONTAINE:
Since the Rhode Island business landscape is populated predominantly by small businesses, I believe that the previously discussed reduction in the corporate minimum tax will have the greatest impact for current business entities, but I expect it will also spur the formation of new entities in Rhode Island.
PBN: What impact will the transportation network company taxation have on app-hailing companies, such as Uber and Lyft?
FONTAINE:
Rhode Island is not the first state to determine that ride-sharing services should be subject to sales and use tax. I believe that the use of transportation network companies will continue to grow and that the imposition of the sales tax will not deter consumers or providers from doing business in Rhode Island. At least one of the major companies, Uber, has reportedly collected and remitted Rhode Island sales tax for the last 18 months.
PBN: Which tax change will bring in the most new revenue for the state and which one represents the biggest loss?
FONTAINE:
In general, the changes represent improvements for both businesses and individual taxpayers. Intuitively, these changes would result in less revenue to the state of Rhode Island in the short run; however, if these changes result in more retirees remaining in Rhode Island as well as in fostering an improved business environment, the state should see an immediate return on its investment. Overall, these changes should have a very positive effect on the Rhode Island economy.

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