Revision: March 29, 2010, midnight
SB 383-FN – AS AMENDED BY THE SENATE
03/10/10 0891s
2010 SESSION
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
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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.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 The following are repealed: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 Amended 03/25/10
SB 383 FISCAL NOTE
AN ACT relative to net operating loss carryovers under the business profits tax and relative to economic revitalization zone tax credits.
FISCAL IMPACT:
The Department of Revenue Administration and Department of Resources and Economic Development state this bill, as amended by the Senate (Amendment #2010-0891s), 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.
Year |
BPT Loss |
Year |
BPT Loss | |
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 | |
2000 |
8,108,000 |
2009 |
13,815,000 |
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 an indeterminable loss in BPT revenue. The provisions of this bill can be administered within Department of Revenue Administration’s existing budget.
The Department of Resources and Economic Development states this bill eliminates the repeal of the economic revitalization zone tax credits that was scheduled for July 1, 2011 and makes certain changes regarding the eligibility for and determination of the eligible amounts for the credits. The Department states eligibility criteria changes from a fixed amount, to a variable equation; 80 percent of state median household income will not have a fiscal impact. The repeal change provisions may have a fiscal impact, however. The bill does not change the credit caps that can be taken in any fiscal year: $825,000 in total; $40,000 per taxpayer, but the bill repeals the provision that would have eliminated the credit beginning in FY 2012. Therefore, the decrease in state revenue is indeterminable in FY 2012 and each year thereafter. The chart below shows by calendar year, the amount of economic revitalization zone tax credit actually taken.
Year |
Credit Taken |
2005 |
0 |
2006 |
6,500 |
2007 |
42,000 |
2008 |
65,000 |
2009 |
37,000 |
Since the tax provisions in this bill impact both business profits and business enterprise taxes, the revenue decrease identified would be split between state general fund revenue and education trust fund revenue in accordance with statute.