2015 Session of NH Enacted State Tax Legislation
Significant 2015 State Tax Legislation
In this issue we discuss the bills that were passed during the 2015 New Hampshire Legislative Session (the “2015 Session”). The 2015 Session served to be a very interesting one as the difficulty in passing the budget caused many of the bills we reported on earlier in the year to either to be tabled or sent to interim study. The difficulty in passing the budget also resulted in several tax provisions being included in House Bill 2, the annual “Budget Trailer Bill” for the State of New Hampshire (the “State”). The Budget Trailer Bill includes all of the statutory changes needed to implement the actual budget that was enacted into law. Perhaps some of the most relevant changes include Business Profits Tax (“BPT”) and Business Enterprise Tax (“BET”) rate reductions that will take effect in the coming years but other changes include the creation of a temporary Amnesty Program, a permanent Voluntary Disclosure (“VDA”) Program and an increase in the BPT Research and Development (“R&D”) Credit. Further information on each bill can be found on the Legislature’s webpage or by clicking on each of the bill’s chapter numbers in this Tax E-News.
The bills enacted into law and included in this Tax E-News are the following:
- Relative to state fees, funds, revenues, and expenditures (HB2)
- Relative to the definition of “price or consideration” under the real estate transfer tax and relative to the exception for transfers by devise under such tax (HB180)
- Relative to information sharing for enforcement of tobacco tax and relative to the biennial adjustment of the filing threshold for the business enterprise tax (HB187)
- Relative to the economic revitalization zone tax credit program (HB599)
- Relative to taxation of employee leasing companies under the business enterprise tax (SB211)
- Exempting certain leases from the real estate transfer tax (SB232)
NH House Bills
HB 2, Chapter 276 and Chapter 274
Relative to state fees, funds, revenues, and expenditures.
Several relevant changes are included in Chapter 276. Section 183 of the bill authorizes the Commissioner of the Department of Revenue Administration to contract with the Multistate Tax Commission (“MTC”) to participate in joint tax audits performed by the MTC audit staff on behalf of various states, effective July 1, 2015. Contracting with the MTC will allow the MTC to perform audits of multi-state and multi-national companies as the agent of the New Hampshire Department of Revenue Administration (the “DRA”) and will allow the DRA to redirect some of its audit activity to other important areas of New Hampshire tax law.
Sections 234 through 239 of the bill were to reduce the rate of BPT and BET taxes over a three-year period; however, when the Governor vetoed the budget the rate reduction did not take effect.
The provisions of Section 234 through 239 in Chapter 276 were subsequently amended by Section 23 and 24 of Chapter 274 as part of a budget compromise between the Legislature and the Governor. The tax rate reductions that do take effect are those contained in Chapter 274 and take effect as follows:
For taxable periods ending on or after December 31, 2016, the BPT rate of 8.5% is reduced to 8.2% and the BET rate of .75% is reduced to .72%.
For taxable periods ending on or after December 31, 2018, the BPT rate is to be conditionally reduced from 8.2% to 7.9% and the BET rate of .72% to .675%.
The legislation states that if the amount of combined unrestricted general and education trust fund revenue collected for the biennium ending June 30, 2017 is less than $4,640,000,000, the additional reductions proposed for taxable periods ending on or after December 31, 2018 shall not take effect and the 2016 rates will continue to be in effect.
Section 241 of the bill increases the amount available for the Research and Development Tax Credit from $2,000,000 to $7,000,000, effective July 1, 2017.
Section 242 of the bill implements a tax amnesty program from December 1, 2015 through February 15, 2016 that allows taxpayers to pay their past due taxes in full without penalty and at a reduced interest rate of 50% of the applicable interest rate for the tax period. The amnesty applies to all taxes administered by the DRA that were due but unpaid on or before February 15, 2016. The unpaid taxes and recalculated interest must be reported to the DRA and paid in full on or before February 15, 2016.
Section 243 of the bill also suspends any discretion available to the DRA, any administrative tribunal or court with jurisdiction to waive, abate or reduce for good cause or any other reason, any penalties for taxes due before December 1, 2015 but paid on or after March 1, 2016. This provision takes effect July 1, 2015.
The DRA will be issuing a Technical Information Release later this year explaining the process to be followed for the amnesty program as well as providing additional guidance on the application of the mandatory penalty provision. We will also provide additional information on the amnesty program in subsequent Tax E-News.
Section 245 in the bill enacts into law the DRA’s administrative voluntary disclosure program that allows persons or entities to voluntarily self-disclose a tax liability to the tax department in exchange for a waiver of penalties and a compromise on the amount of tax and interest due. The provision does not apply to:
Taxpayers who have been already contacted by the DRA or in instances where any related party to the taxpayers has been contacted about being subject to New Hampshire tax laws.
Taxpayers or any related party to the taxpayer who have previously filed a tax return for the specific tax being considered for the voluntary disclosure program.
Persons who have collected taxes such as the Meals & Rental from consumers but failed to remit the taxes collected to the DRA.
Chapters 274 and 276 take effect July 1, 2015 but some of the tax provisions apply to different taxable periods.
HB 180, Chapter 133
Relative to the definition of “price or consideration” under the real estate transfer tax and relative to the exception for transfers by devise under such tax.
The bill clarifies that the term “price or consideration” applies to contractual transfers. It also provides that properties transferred through testamentary disposition are non-taxable transfers and the fact that a transferee may receive consideration or assume or pay off a mortgage does not therein make the transfer a bargained-for exchange and subject to the Real Estate Transfer Tax (“RETT”). The bill took effect on July 1, 2015.
READ STATUTORY LANGUAGE: HB 180, Chapter 133
HB 187, Chapter 183
Relative to information sharing for enforcement of tobacco tax and relative to the biennial adjustment of the filing threshold for the business enterprise tax.
For taxable periods beginning on or after January 1, 2015, the Business Enterprise Tax filing threshold will be based on the 2-year percentage change in the Consumer Price Index for all Urban Consumers in the Northeast Region as calculated for the month of June in the prior year. The bill also permits the sharing of information between the DRA and the Division of Enforcement of the Liquor Commission for enforcement of tobacco and liquor taxes and places restrictions on any information shared between the bodies to prevent unauthorized disclosure of the information. The bill takes effect August 28, 2015.
READ STATUTORY LANGUAGE: HB 187, Chapter 183
HB 599, Chapter 265
Relative to the economic revitalization zone tax credit program.
The bill has three components. First, the bill specifies that only those employers creating full time jobs (at least 35 hours per week in a permanent year-round position) are eligible for business tax credits received. Second, the bill imposes a requirement that each zone be reevaluated every 5 years to determine if the zone has maintained its eligibility. Lastly, the bill requires the Department of Resources and Economic Development (the “DRED”) to formulate criteria for determining the effectiveness of revitalization zones and authorizes the Commissioner of the DRED to collect information from businesses to analyze the effectiveness of the revitalization zones. The legislation is effective July 1, 2015.
READ STATUTORY LANGUAGE: HB 599, Chapter 265
NH Senate Bills
SB 211, Chapter 216
Relative to taxation of employee leasing companies under the business enterprise tax.
The bill permits client companies of employee leasing companies to elect to become responsible for paying the BET due on wages paid to leased employees and to claim the BET credit against its BPT liability. The election will be made on a form to be prescribed by the DRA and will remain in effect until both parties notify the DRA of its termination. This is a marked change from the current practice of employee leasing companies paying the BET due on the wages paid by the client companies and claiming the BET as a credit against the leasing companies BPT. The bill applies to taxable periods beginning on or after January 1, 2016.
READ STATUTORY LANGUAGE: SB 211, Chapter 216
SB 232, Chapter 255
Exempting certain leases from the real estate transfer tax.
The bill defines the term lease for purposes of the Real Estate Transfer Tax and indicates that it includes a ground lease. It clarifies that a ground lease will be treated the same as other leases; namely that all leases, including all renewals, for terms less than 99 years will not be subject to the RETT. The bill is effective July 1, 2015.
READ STATUTORY LANGUAGE: SB 232, Chapter 255
Our Tax Team stands ready to assist you and your clients in complying with these statutory changes and to determine how they may be leveraged for businesses operating in New Hampshire, to the business owners, and to New Hampshire residents. Members of our team can also assist practitioners and their clients with tax planning or tax representation before the Internal Revenue Service or the various states’ Departments of Revenue.