HB 664-FN-A – AS INTRODUCED
2009 SESSION
09/01
HOUSE BILL 664-FN-A
AN ACT relative to taxation of capital gains under the interest and dividends tax.
SPONSORS: Rep. Weed, Ches 3; Rep. Shattuck, Hills 1; Rep. Skinder, Sull 1
This bill requires taxation of capital gains under the interest and dividends tax. The bill also increases the standard exemption under the interest and dividends tax.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
09-0750
09/01
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Nine
AN ACT relative to taxation of capital gains under the interest and dividends tax.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Exemption Increased. Amend RSA 77:3, I to read as follows:
I. Taxable income is that income received from interest and dividends during the tax year prior to the assessment date by:
(a) Individuals who are inhabitants or residents of this state for any part of the taxable year whose gross interest and dividend income from all sources, including income from a qualified investment company pursuant to RSA 77:4, V, exceeds [$2,400] $5,000 during that taxable period.
(b) Partnerships, limited liability companies, associations, and trusts, the beneficial interest in which is not represented by transferable shares, whose gross interest and dividend income from all sources exceeds [$2,400] $5,000 during the taxable year, but not including a qualified investment company as defined in RSA 77-A:1, XXI, or a trust comprising a part of an employee benefit plan, as defined in the Employee Retirement Income Security Act of 1974, section 3.
(c) Fiduciaries deriving their appointment from a court of this state whose gross interest and dividend income from all sources exceeds [$2,400] $5,000 during the taxable year.
2 New Paragraph; Taxable Income; Capital Gains. Amend RSA 77:4 by inserting after paragraph V the following new paragraph:
V-a. The realized gain from the sale of all real and financial assets less the realized loss from the sale of financial assets, other than a primary residence, including stocks, bonds, and property.
3 Exemptions. Amend RSA 77:5, I to read as follows:
I. Income of [$2,400] $5,000.
4 Married Taxpayers; Joint Returns. Amend RSA 77:5-a to read as follows:
77:5-a Married Taxpayers; Joint Returns. A married taxpayer may claim the exemptions provided in RSA 77:5 for both self and spouse, regardless of the ownership of the income from interest [or], dividends, on capital gains, provided that both husband and wife file a joint return.
5 Returns and Declaration. Amend RSA 77:18, IV to read as follows:
IV. Notwithstanding the provisions of paragraphs I-III, the following individuals shall not be required to file a return and shall not be considered to have gross or net taxable income for the purposes of this chapter:
(a) Every individual whose total interest and dividend income is less than [$2,400] $5,000 for a taxable period.
(b) For joint filers whose total interest and dividend income is less than [$4,800] $10,000 for a taxable period.
6 Repeal. The following are repealed:
I. RSA 77:4, IV, relative to the exemption of dividends declared by corporations to be a return of capital.
II. RSA 77:4-c, relative to sale or exchange of transferable shares not taxable.
III. RSA 77:7, relative to capital distribution.
7 Effective Date. This act shall take effect July 1, 2009.
LBAO
09-0750
Revised 03/27/09
HB 664 FISCAL NOTE
AN ACT relative to taxation of capital gains under the interest and dividends tax.
FISCAL IMPACT:
The Department of Revenue Administration states this bill may increase state general fund expenditures by $3,000,000 in FY 2010 and increase state general fund revenue by $75,235,983 in FY 2011. The Department states this bill will increase state general fund revenue and expenditures by an indeterminable amount in FY 2012 and FY 2013. This bill has no fiscal impact on county and local revenues or expenditures.
METHODOLOGY:
The Department of Revenue states this bill requires the taxation of capital gains under the interest and dividends tax. This bill also increases the standard exemption under the interest and dividends tax from $2,400 to $5,000.
The Department states there were 148,034 returns filed by NH residents with capital gains totaling $3,634,022,000 in tax year 2006 according to the 2006 statistics of income (SOI) as reported by the IRS. Of these returns, 60,881 paid income and dividends tax. The Department states the proposed $2,600 increase in the standard exemption results in a $130 tax savings for single filers and a $260 tax savings for joint filers. Assuming the returns filed contain the same deductions as claimed in 2006, (either the full standard single filing deduction, full standard joint filing deduction, or the actual tax paid for any amount less than the standard deduction), while applying the new standard deduction, state revenues would have decreased by $9,693,206 in FY 2006.
The Department assumes of the remaining 87,153 returns filed, half or 43,576 are jointly filed and half or 43,577 are single filings. Applying the proposed $5,000 exemption for single filers and $10,000 exemption for joint filers results in gross exemptions totaling $653,645,000 ((43,577 * $5,000) + (43,576 * $10,000)). Gross capital gains of $3,634,022,000 less gross exemptions of $653,645,000 equal $2,980,377,000 of new income taxable under interest and dividends tax. Applying the 5% interest and dividends tax results in tax revenue increase of $149,018,850 ($2,980,377,000 * 5%). This $149,018,850 increase in tax revenue less the $9,693,206 decrease in tax revenue due to the increased standard deduction (described in the previous paragraph) would have resulted in a net increase in tax revenue of $139,325,644 in FY 2006.
Based on revenue study results obtained for the States of New York and Massachusetts, the Department assumes the 2006 tax year revenue estimate of $139,325,644 will grow by 20% for FY08 to $167,190,773 and then be reduced by 70% for FY 2010 to approximately $50,157,322. For FY 2010, the Department assumes a full year of tax revenue of $50,157,322, plus 2 rounds of estimate payments totaling $25,078,661, (50% of one year’s tax), totaling $75,235,983 in FY 2011. The Department has no information to estimate revenue in FY 2012 and FY 2013.
The Department states this bill will result in increased administration costs for additional return processing, auditing, and staffing needs totaling approximately $3,000,000 in FY 2010 only.
This bill does not contain an appropriation or establish positions.