HB 707-FN-A – AS INTRODUCED
2005 SESSION
09/10
HOUSE BILL 707-FN-A
AN ACT establishing a credit against the business enterprise tax for certain borrowed and invested money.
SPONSORS: Rep. Itse, Rock 9; Rep. Buhlman, Hills 27; Sen. Clegg, Dist 14
This bill establishes a credit against the business enterprise tax for the total amount of borrowed and invested money for taxpayers which have conducted business activities in this state for 5 years or less.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
05-0091
09/10
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Five
AN ACT establishing a credit against the business enterprise tax for certain borrowed and invested money.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 New Section; Business Enterprise Tax; Credit. Amend RSA 77-E by inserting after section 3-a the following new section:
77-E:3-b Credit. A taxpayer under this chapter shall be allowed a credit against the tax due under this chapter for an amount up to the total amount of money borrowed for, including interest paid, and money invested in, the taxpayer’s business activities within this state for the first 5 years of engaging in or carrying on any business activities within this state.
2 Effective Date. This act shall take effect July 1, 2005.
LBAO
05-0091
2/1/05
HB 707-FN-A - FISCAL NOTE
AN ACT establishing a credit against the business enterprise tax for certain borrowed and invested money.
FISCAL IMPACT:
The Department of Revenue Administration indicates this bill will decrease state unrestricted general fund revenue, decrease restricted education trust fund revenue and increase state expenditures by an indeterminable amount in FY 2006 and each year thereafter. There is no fiscal impact on county and local revenue or expenditures.
METHODOLOGY:
The Department states this bill establishes a credit against the business enterprise tax (BET) for the total amount of borrowed and invested money for taxpayers which have conducted business activities in the this state for the first five years that a business is in existence. The Department states this bill will decrease both unrestricted general fund revenue and restricted education trust fund revenue by an indeterminable, but substantial amount, in FY 2006 and each year thereafter. The Department states that total BET receipts adjusted based on returns filed in FY 2004 was $189 million. The Department does not know the total principal and interest that was invested into taxpayer businesses in New Hampshire in their first 5 years of existence, but the Department states for example using the interest paid component of BET paid for all businesses and adjusting this number to the total loan outstanding, it would take less than 1% of this total to eliminate the entire $189 million of BET revenues. The Department states that this would also reduce to zero the BET credit used to offset business profits tax (BPT). The result would be a $50 million BPT increase, and a net BET/BPT loss of $139 million ($189 million – $50 million). This loss would be allocated between the general and education trust funds as shown in the table below.
Allocation between General and Education Trust Funds
Education Trust Fund General Fund Total
Business Enterprise Tax
Split % 66.70% 33.30% 100.00%
Decrease ($126.063) ($62.937) ($189.000)
Business Profits Tax
Split % 17.65% 82.35% 100.00%
Increase $8.825 $41.175 $50.000
Net Decrease ($117.238) ($21.762) ($139.000)
The Department also indicates that state expenditures will increase for additional administrative costs, including increased audit costs to ensure compliance with the 5 year limitation.