Bill Text - SB383 (2010)

(New Title) relative to net operating loss carryovers under the business profits tax and relative to economic revitalization zone tax credits


Revision: March 11, 2010, midnight

SB 383-FN – AS AMENDED BY THE SENATE

03/10/10 0891s

2010 SESSION

10-2711

09/01

SENATE BILL 383-FN

AN ACT relative to net operating loss carryovers under the business profits tax and relative to economic revitalization zone tax credits.

SPONSORS: Sen. Lasky, Dist 13; Sen. Bradley, Dist 3; Sen. Gilmour, Dist 12; Sen. Merrill, Dist 21; Sen. Bragdon, Dist 11; Sen. Gallus, Dist 1; Rep. Clemons, Hills 24; Rep. Sad, Ches 2; Rep. Hatch, Coos 3

COMMITTEE: Ways and Means

AMENDED ANALYSIS

This bill limits the amount of net operating loss generated in a tax year that may be carried forward under the business profits tax to $10,000,000.

The bill also repeals the 2011 repeal of the economic revitalization zone tax credits and makes certain changes regarding the eligibility for and determination of the eligible amounts for the credits.

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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

03/10/10 0891s

10-2711

09/01

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Ten

AN ACT relative to net operating loss carryovers under the business profits tax and relative to economic revitalization zone tax credits.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 New Subparagraph; Business Profits Tax; Net Operating Loss Carryovers. Amend RSA 77-A:4, XIII by inserting after subparagraph (d) the following new subparagraph:

(e) On or after July 1, 2010, the amount of net operating loss generated in a tax year that may be carried forward may not exceed $10,000,000.

2 Repeal of Prospective Repeal. The following are repealed:

I. 2007, 263:123, relative to the repeal of economic revitalization zone tax credits.

II. 2007, 263:176, X, relative to the effective date of 2007, 263:123.

3 Designation of Economic Revitalization Zone. Amend RSA 162-N:2, I(b) to read as follows:

(b) The median household income in the census tract or tracts in which the zone is located is less than [$40,500] 80 percent of the state median household income according to the most recent federal decennial census.

4 Determination of Economic Revitalization Zone Tax Credits Eligible Amount. Amend the introductory paragraph of RSA 162-N:6, II(d) to read as follows:

(d) 4 percent of the [lesser] greater of the following:

5 Effective Date. This act shall take effect July 1, 2010.

LBAO

10-2711

12/31/09

SB 383-FN - FISCAL NOTE

AN ACT relative to net operating loss carryovers under the business profits tax.

FISCAL IMPACT:

      The Department of Revenue Administration states this bill will decrease state general fund and education trust fund revenue by an indeterminable amount in FY 2011 and each fiscal year thereafter. This bill will have no fiscal impact on state, county and local expenditures or county and local revenue.

METHODOLOGY:

    The Department of Revenue Administration states this bill increases the limitation amount of net operating loss (NOL) generated in a tax year that may be carried forward under the business profits tax (BPT) from $1 million to $10 million. The Department states they cannot project the loss of revenue due to this expansion of the NOL deduction because the future BPT profits and losses are not known. The Department did, however, provide the following background of the NOL deduction: The NOL deduction is a provision of the BPT law added in 1988. The NOL provision was effective for losses incurred after January 1, 1989. On July 1, 2002, the law was revised to permit carry forward of NOLs for 10 years following the loss year instead of 5 years. The amount of NOL generated each year per entity was limited to $250,000. For taxable periods ending between July 1, 2003 and June 30, 2004, the NOL generated was limited to $500,000, between July 1, 2004 and June 30, 2005, limited to $750,000, and for taxable periods ending on or after July 1, 2005, limited to $1 million and the requirement to carry back losses prohibited. The chart below shows by calendar year, the BPT revenue reduction attributable to the NOL deduction.

FY

BPT Loss

 

FY

BPT Loss

1991

4,607,000

 

2000

8,108,000

1992

4,428,000

 

2001

9,029,000

1993

7,297,000

 

2002

10,162,000

1994

7,974,000

 

2003

12,518,000

1995

7,751,000

 

2004

10,911,000

1996

4,762,000

 

2005

12,681,000

1997

7,514,000

 

2006

13,281,000

1998

8,451,000

 

2007

16,695,000

1999

8,715,000

 

2008

17,743,000

                      LBAO

                      10-2711

                      12/31/09

    The Department further states that since the expansion of the deduction to $1 million in 2005, there has been an increased loss in BPT revenue of more that $5 million. While unknown, the Department indicates an increase in the NOL deduction to $10 million would result in a substantial loss in BPT revenue. The provisions of this bill can be administered within Department of Revenue Administration’s existing budget.