Rhode Island Boat Tax Proposal: What Owners Need to Know About the Potential End of a 30-Year Exemption

A proposed bill in Rhode Island could end a three-decade-long tax exemption for boats, potentially imposing new annual property taxes on vessels and significantly impacting the state's marine industry and middle-class boat owners. Based on our experience assessment, this legislative change aims to generate new state revenue but faces strong opposition over concerns it could harm a key economic sector and make boat ownership unaffordable for many.

Understanding the Proposed Rhode Island Boat Tax Change

For 30 years, since 1993, boat owners in Rhode Island have not paid state sales tax or local property taxes on their vessels. This exemption was originally established to bolster the marine industry. However, a bill proposed by Representative John Lombardi (D-Providence) seeks to repeal this exemption, applying taxes to boats, their slips, moorings, repairs, and storage. The primary argument for the bill is revenue generation for state needs, such as funding schools. It's important to note that under the proposed changes, boats valued under $50,000 would be exempt from property tax, following a recent law that exempts the first $50,000 of tangible property (physical assets other than real estate) from taxation.

How Much Would the New Boat Property Tax Cost?

If passed, the tax burden would vary significantly across the state. Property tax rates are set by individual cities and towns in Rhode Island, not at the state level. The tax would be applied to a boat's assessed value minus the $50,000 exemption. For example, the Providence Journal estimated the annual tax on a boat valued at $150,000 (taxed on $100,000 of value after the exemption) would be:

To provide context, South Carolina currently has the highest boat property taxes in the nation, generating approximately $4 million annually. However, even South Carolina is considering legislation to cut its boat taxes by half.

Who Would Be Impacted by the Rhode Island Boat Tax?

The impact would extend beyond the wealthy. While there are nearly 38,000 registered boats in Rhode Island, data from the Association of Marina Industries indicates that 61% of boat owners have a household income of $75,000 or less. This suggests the tax would significantly affect middle-class residents. Opposition has been substantial, with the House Finance Committee receiving over 1,500 letters, texts, and phone calls against the bill. Critics argue it would:

• Price out middle-class owners: The cumulative cost of ownership, including existing expenses like slip fees (which can exceed $6,500 annually), fuel, and maintenance, could become prohibitive with an added property tax.
• Harm the marine industry: Industry representatives, like Hinckley Yachts' Scott Bryant, warn that a potential 7% sales tax would make Rhode Island less competitive, jeopardizing thousands of jobs.
• Affect live-aboard residents: For individuals like Stacy Rae Seminick, who live on their boats year-round as an affordable housing option, the tax could make this lifestyle uneconomical.
• Deter real estate buyers: Some opponents, like boat owner Jules Friedman, argue that the state's boating culture is an attraction for real estate buyers, and taxing it could indirectly harm the housing market.

What’s the Current Status of the Boat Tax Bill?

As of the latest developments, the bill has been held for further study, granting boat owners a temporary reprieve. This indicates that lawmakers are weighing the potential revenue against the significant economic and public concerns raised. House Speaker K. Joseph Shekarchi acknowledged the high volume of opposition.

Key Takeaways for Rhode Island Voters and Boat Owners

The debate over taxing boats highlights a common tension between generating public revenue and supporting a specific industry. For Rhode Islanders, the core considerations are:

• The proposal is not yet law. It is undergoing legislative review, and its passage is uncertain.
• Boat owners should assess potential costs. Using local municipal tax rates and a boat's estimated value (minus $50,000), owners can model the financial impact.
• The argument centers on economic trade-offs. The state must balance funding for public services against the risk of stifling a historic industry and burdening middle-class taxpayers.

The final decision will depend on continued legislative review and public input. For now, the three-decade-old tax exemption remains in place, but its future is now a central topic of conversation at the State House.