LINCOLN, R.I. (WPRI) — R.I. Senate leadership is backing legislation this year to create a statewide tangible property tax exemption of $100,000, which analysts estimate would eliminate the unpopular tax entirely for 85% of Rhode Island businesses.

The legislation sponsored by state Sen. Melissa Murray was announced Thursday by Senate President Dominick Ruggerio during a legislative breakfast at Kirkbrae Country Club in Lincoln.

The tangible tax is currently levied on businesses by cities and towns for property other than real estate, such as equipment, computers and furniture. The rates vary by municipality; in Providence, the rate is 5.3%.

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The new statewide threshold would prohibit municipalities from collecting the tax on assets totaling less than $100,000. Ruggerio said the state would reimburse local governments for the lost revenue, similar to how the state recently eliminated the municipal car tax.

The Rhode Island Public Expenditure Council, a business-backed think tank, estimated the annual cost to the state would total $36.6 million per year.

Ruggerio argued the cost to the state is worth it to support Rhode Island companies, noting the $100,000 threshold would eliminate the tax for more than eight out of ten businesses. The rest would only have to pay taxes on tangible assets that exceed $100,000.

“This is a step we can and should take to help companies continue to invest and grow here in Rhode Island,” Ruggerio said in prepared remarks. “I think it’s a good one, and will work to see it enacted this year.”

In addition to the new exemption, the legislation would require municipalities to cap their local tangible tax rates — which differ wildly town-to-town — at whatever rate was set during the current fiscal year.

“The tangible tax is both a financial and administrative burden for small businesses,” Murray said in a statement. “Complying with it is complex, and it’s also an enforcement burden for cities and towns. Eliminating this tax for smaller businesses will give them genuine, much needed relief.”

The tangible tax rate has been a topic of discussion at the state level for years. In 2020, former Gov. Gina Raimondo tried to entice cities towns to cut the tangible tax by offering a partial reimbursement for the lost revenue, but few municipal leaders at the time were willing to do it without a full reimbursement from the state.

Last year, Gov. Dan McKee proposed a measure allowing municipalities to exempt portions of business property from the tangible tax without seeking enabling legislation from the General Assembly.

Murray was expected to introduce the legislation later in the day Thursday. If the bill passes the General Assembly, the new law would take effect in fiscal year 2024-25.

Steph Machado contributed to this report.