HB 1616-FN-A – AS INTRODUCED
2010 SESSION
09/01
HOUSE BILL 1616-FN-A
AN ACT creating an exemption from the business enterprise tax for new businesses in New Hampshire.
SPONSORS: Rep. Hinkle, Hills 19; Rep. Seidel, Hills 20; Rep. Sapareto, Rock 5; Rep. Renzullo, Hills 27
This bill creates an exemption from the business enterprise tax for new businesses in New Hampshire.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
10-2172
09/01
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Ten
AN ACT creating an exemption from the business enterprise tax for new businesses in New Hampshire.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Definition; Business Organization. Amend RSA 77-E:1, III to read as follows:
III. “Business enterprise” means any profit or nonprofit enterprise or organization, whether corporation, partnership, limited liability company, proprietorship, association, trust, business trust, real estate trust or other form of organization engaged in or carrying on any business activity within this state, except such enterprises as qualify as exempt under RSA 77-E:2-a or as are expressly made exempt from income taxation under section 501(c)(3) of the United States Internal Revenue Code to the extent such enterprise does not engage in any business activity constituting unrelated business activity as defined by section 513 of the United States Internal Revenue Code. Each business enterprise under this definition shall be subject to the tax imposed under RSA 77-E as a separate entity except that trusts treated as grantor trusts under section 671 of the United States Internal Revenue Code shall be included in the return of their owners, and such owners shall be subject to the tax thereon to the extent any such owners would be considered a business enterprise hereunder notwithstanding the existence of the trust. The use of consolidated returns as defined in the United States Internal Revenue Code or of combined reporting is not permitted. Notwithstanding any other provision of this paragraph, an enterprise shall not be characterized as a business enterprise and shall be excluded from taxation at the entity level if it is a qualified investment company as defined in RSA 77-E:1, XIV.
2 New Section; Exemption For New Enterprises. Amend RSA by inserting after section 77-E:2 the following new section:
77-E:2-a Exemption for New Enterprises.
I. There shall be an exemption from the tax due under this chapter for enterprises and organizations which begin conducting new business activity in this state for the first 12 quarterly tax periods after the new business activity commences.
II. To qualify for the exemption, the enterprise or organization shall:
(a) Register with the secretary of state as a corporation, limited liability company, limited liability partnership, or limited partnership.
(b) Be a newly formed or organized business conducting business activity in New Hampshire or, in the case of a business entity formerly domiciled in New Hampshire which relocates to this state, the business shall qualify for the exemption if a period of 3 years has lapsed from the time it was last subject to New Hampshire business taxes. If the business entity has one or more other branches or divisions presently established in this state, the new business shall have a different sector and subsector code or set of codes under the North American Industry Classification System or the North American Production Classification System than the presently established divisions or branches in order to qualify for the exemption.
(c) Be an entity newly conducting business in New Hampshire and not previously required to file a New Hampshire business tax return.
(d) Employ a minimum of 4 persons for which it pays unemployment tax to the state of New Hampshire. For a business that begins operations with fewer than 4 employees for which it pays unemployment tax, the exemption shall begin with the quarter in which the number of employees reaches a minimum of 4 and continue for the remainder of the 12 quarterly tax periods from the date of registration with the secretary of state.
3 Effective Date. This act shall take effect July 1, 2010.
LBAO
10-2172
12/11/09
HB 1616-FN-A - FISCAL NOTE
AN ACT creating an exemption from the business enterprise tax for new businesses in New Hampshire.
FISCAL IMPACT:
The Department of Revenue Administration states this bill would decrease state revenue by an indeterminable amount in FY 2011 and each year thereafter. This bill would have no fiscal impact on state, county, and local expenditures, or county and local revenue.
METHODOLOGY:
The Department of Revenue Administration states this bill would create an exemption from the business enterprise tax (BET) for new businesses in New Hampshire. The Department states the bill does not treat new businesses the same, as trust and proprietorships would not be considered exempt businesses. Furthermore, only those businesses with 4 or more employees would qualify for the exemption. The Department assumes many businesses would reorganize so that they could take advantage of this new loophole. Many current filers may no longer pay the BET, and the state could lose millions of dollars in projected earnings, not just the potential revenues from new businesses. The Department is unable to determine how many new businesses might start conducting business in New Hampshire, or how many current filers would change their entity in order to take advantage of the created loophole. The exact fiscal impact cannot be determined at this time.