Bill Text - HB1418 (2012)

Increasing the threshold amounts for taxation under the business enterprise tax.


Revision: May 18, 2012, midnight

HB 1418-FN-A – AS AMENDED BY THE SENATE

15Mar2012… 0939h

05/02/12 1965s

05/16/12 2261s

2012 SESSION

12-2135

09/03

HOUSE BILL 1418-FN-A

AN ACT increasing the threshold amounts for taxation under the business enterprise tax and extending the commission to study business taxes; excluding charges for Internet access from the communications services tax and requiring the transfer of insurance premium tax revenue to the department of health and human services; and relative to section 179 expense deductions under the business profits tax.

SPONSORS: Rep. Sapareto, Rock 5; Rep. Weyler, Rock 8; Rep. Major, Rock 8; Rep. R. Ober, Hills 27; Rep. Bettencourt, Rock 4

COMMITTEE: Ways and Means

AMENDED ANALYSIS

This bill:

I. Increases the threshold amounts for taxation under the business enterprise tax.

II. Extends the commission to study business taxes.

III. Clarifies that Internet access service is not subject to the communications services tax.

IV. Transfers certain revenue received from the insurance premium tax to the department of health and human services for the purpose of providing services to the developmentally disabled.

V. Allows a business organization to apply the federal section 179 expense deduction amount in the calculation of gross business profits, before net operating loss and special deductions under the business profits tax, as of the date the section 179 property is placed into service.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

15Mar2012… 0939h

05/02/12 1965s

05/16/12 2261s

12-2135

09/03

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Twelve

AN ACT increasing the threshold amounts for taxation under the business enterprise tax and extending the commission to study business taxes; excluding charges for Internet access from the communications services tax and requiring the transfer of insurance premium tax revenue to the department of health and human services; and relative to section 179 expense deductions under the business profits tax.

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

1 Business Enterprise Tax; Returns. Amend RSA 77-E:5 to read as follows:

77-E:5 Returns.

I. Every business enterprise having gross business receipts in excess of [$150,000] $200,000 as adjusted biennially for inflation and rounded to the nearest $1,000 by the commissioner using the Consumer Price Index, Northeast Region as defined by RSA 77-E:1, X, during the taxable period or the enterprise value tax base of which is greater than [$75,000] $100,000 as adjusted biennially for inflation and rounded to the nearest $1,000 by the commissioner using the Consumer Price Index, Northeast Region, shall, on or before the fifteenth day of the third month in the case of enterprises required to file a United States corporation tax return, and the fifteenth day of the fourth month in the case of all other business enterprises, following expiration of its taxable period, make a return to the commissioner. All returns shall be signed by the business enterprise or by its authorized representative, subject to the pains and penalties of perjury and the penalties provided in RSA 21-J:39.

II. Every business enterprise shall in addition file a declaration of its estimated business enterprise tax for its subsequent taxable period; provided, however, if the estimated tax is less than [$200] $260, a declaration need not be filed; and provided further that a declaration shall be filed at the end of any quarter thereafter in which estimated tax exceeds [$200] $260. The declaration shall be filed when payments are due under RSA 77-E:6.

2 Commission to Study Business Taxes Extended. Amend RSA 77-F:1, VII and VIII to read as follows:

VII. The commission shall, following a public hearing on a draft [final] report, submit a [final] report on the items included in subparagraphs III(a), (b), and (e) or before December 1, 2010, containing its findings and any recommendations for proposed legislation, to the governor, the president of the senate, the speaker of the house of representatives, the chairs of the house and senate ways and means committees, the house and senate clerks, and the state librarian.

VIII. The commission shall, following a public hearing on a draft [final] report, submit a [final] report on the items included in subparagraphs III(c) and (d) or before November 1, 2012, containing its findings and any recommendations for proposed legislation, to the governor, the president of the senate, the speaker of the house of representatives, the chairs of the house and senate ways and means committees, the house and senate clerks, and the state librarian.

IX. The commission shall, following a public hearing on a draft report, submit a report on the items included in subparagraphs III(a), (b), and (e) or before December 1, 2012, containing its findings and any recommendations for proposed legislation, to the governor, the president of the senate, the speaker of the house of representatives, the chairs of the house and senate ways and means committees, the house and senate clerks, and the state librarian.

X. The commission shall, following a public hearing on a draft report, submit a report on the items included in subparagraphs III(c) and (d) or before November 1, 2014, containing its findings and any recommendations for proposed legislation, to the governor, the president of the senate, the speaker of the house of representatives, the chairs of the house and senate ways and means committees, the house and senate clerks, and the state librarian.

3 Commission to Study Business Taxes Extended. Amend SS2010, 1:123, III to read as follows:

III. Section 56 of this act shall take effect November 1, [2012] 2014.

4 Communications Services Tax; Purpose. Amend 82-A:1 to read as follows:

82-A:1 Statement of Purpose. It is the intent of the general court to impose a tax on those who use 2-way communications services and to source mobile telecommunications services to the place of primary use. It is also the intent of the general court that Internet access service and basic communications services essential to public health, safety, and welfare shall not be subject to the tax imposed by this chapter.

5 Communications Services Tax; Definition of “Communications Services;” Internet Access Excluded. Amend RSA 82-A:2, III(b) and (c) to read as follows:

(b) Purchases of communications services by a communications services provider for use as a component part of the service provided by him to the ultimate retail consumer who originates or terminates the taxable end-to-end communications, including carrier access charges, right of access charges, charges for use of inter-company facilities, and all communications services resold in the subsequent provision of, used as a component of, or integrated into end-to-end communications services; [or]

(c) The one-way transmission of radio or television programming, by cable, broadcast, satellite, microwave or similar facility, which is made available generally to any person able to receive such transmission, together with the interaction, if any, of such person required for the selection of such programming other than by use of the same facility by which such transmission was received[.]; or

(d) Internet access.

6 New Paragraphs; Communications Services Tax; Definitions of “Internet” and “Internet Access.” Amend RSA 82-A:2 by inserting after paragraph XXIV the following new paragraphs:

XXV. “Internet” means collectively the myriad of computer and telecommunications facilities, including equipment and operating software, which comprises the interconnected world-wide network of networks that employ the Transmission Control Protocol/Internet Protocol, or any predecessor or successor protocols to such protocol, to communicate information of all kinds by wire or radio.

XXVI. “Internet access”:

(a) Means a service that enables users to connect to the Internet to access content, information, or other services offered over the Internet;

(b) Includes the purchase, use, or sale of communications services by a provider of a service described in subparagraph (a) to the extent such communications services are purchased, used or sold:

(1) To provide such service; or

(2) To otherwise enable users to access content, information, or other services offered over the Internet;

(c) Includes services that are incidental to the provision of the service described in subparagraph (a) when furnished to users as part of such service, such as a home page, electronic mail, and instant messaging (including voice- and video-capable electronic mail and instant messaging), video clips, and personal electronic storage capacity;

(d) Does not include voice, audio, or video programming, or other products and services (except services described in subparagraph (a), (b), (c), or (e)) that utilize Internet protocol or any successor protocol and for which there is a charge, regardless of whether such charge is separately stated or aggregated with the charge for services described in subparagraph (a), (b), (c), or (e); and

(e) Includes a homepage, electronic mail, and instant messaging (including voice- and video-capable electronic mail and instant messaging), video clips, and personal electronic storage capacity that are provided independently or not packaged with Internet access.

7 Communications Services Tax; Definition of “Gross Charge;” Charges of Internet Access Excluded. Amend RSA 82-A:2, V(f)-(h) to read as follows:

(f) Charges for communications services and all services and equipment provided in connection therewith between a parent corporation and its wholly owned subsidiaries or between wholly owned subsidiaries, when the tax imposed under this chapter has already been paid to a retailer and only to the extent that the charges between the parent corporation and wholly owned subsidiaries or between wholly owned subsidiaries represent expense allocation between the corporations and not the generation of profit for the corporation rendering such service; [and]

(g) [Repealed.]

(h) Bad debt. For the purposes of this paragraph, bad debt means any portion of a debt that is related to a purchase at retail for which gross charges are not otherwise deductible or excludable that has become worthless or uncollectible, as determined under applicable federal income tax standards. If the portion of the debt deemed to be bad is subsequently paid, the retailer shall report and pay the tax on that portion during the reporting period in which the payment is made[.]; and

(i) Charges for Internet access.

8 Existing Assessments Not Enforceable. The department of revenue administration shall not enforce any existing assessment of communications services tax on charges for Internet access, shall promptly withdraw all such pending assessments, and shall issue no additional assessments with respect to such charges.

9 Transfer of Insurance Premium Tax Revenue to Department of Health and Human Services. Notwithstanding any provision of law to the contrary, and in recognition of an unanticipated surplus for the fiscal year ending June 30, 2011 as determined by the official audit performed pursuant to RSA 21-I:8, II(a), the state treasurer shall transfer $1,500,000 in revenue received from the insurance premium tax pursuant to RSA 400-A:32 to the department of health and human services for the purpose of providing services to the developmentally disabled. Said amounts are hereby appropriated to the department for the biennium ending June 30, 2013.

10 New Section; Business Profits Tax; Gross Business Profits; Expense Deductions. Amend RSA 77-A by inserting after section 3 the following new section:

77-A:3-a Expense Deductions. Notwithstanding the definition of Internal Revenue Code in RSA 77-A:1, XX(l), in determining gross business profits before net operating loss and special deductions, a business organization shall calculate expense deductions as permitted under Internal Revenue Code section 179 using the version of the United States Internal Revenue Code in effect as of the date section 179 property is placed into service.

11 Application. Section 10 of this act shall apply to any qualifying section 179 property as that term is defined in the United State Internal Revenue Code with respect to property placed into service on or after January 1, 2014.

12 Effective Date.

I. Section 1 of this act shall be in effect for taxable periods ending on or after December 31, 2013.

II. The remainder of this act shall take effect upon its passage.

LBAO

12-2135

Amended 05/14/12

HB 1418 FISCAL NOTE

AN ACT increasing the threshold amounts for taxation under the business enterprise tax and extending the commission to study business taxes; excluding charges for Internet access from the communications services tax and requiring the transfer of insurance premium tax revenue to the department of health and human services; and relative to section 179 expense deductions under the business profits tax.

FISCAL IMPACT:

    The Department of Revenue Administration states this bill, as amended by the Senate (Amendment #2012-1965s), will decrease state revenue by an indeterminable amount in FY 2013 and each 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 would amend the Business Enterprise Tax (BET) filing thresholds to $200,000 gross business receipts or an Enterprise Tax Value Base (BETVB) of greater than $100,000. The Department analyzed Tax Year 2009 data, which consisted of the 16,649 returns filed by entities that had a BETVB of less than or equal to $100,000. Tax Year 2009 was used as it is the most complete file tax year for New Hampshire business taxes with available matching federal tax records. The Department states the minimum revenue loss would be $1,977,988 and the maximum revenue loss estimated for these changes would be $4,528,156, based upon the returns used in the study. The Department rounds the possible revenue loss to between $2,000,000 and $4,500,000 for a single tax year. The bill would take effect for taxable periods ending on or after December 31, 2013. The impact of this revenue loss could be felt in FY 2013 due to a possible reduction of required BET estimate payments. The Department is unable to determine the decrease in revenue for FY 2014 and beyond. The Department states with all of the presumed available BET credit carryforward outstanding, it is unlikely that BET offsets against BPT would be reduced to a degree that it could minimize the loss of BET revenue. The Department states this bill would require the commissioner of the Department to biennially adjust the two filing thresholds, which is mechanically simple, but tedious in that the tax forms would constantly be changing. The Department cannot estimate the tax loss every biennium since it cannot predict future consumer price index numbers, and the current fiscal impact is based upon Tax Year 2009 data. The Department states the last section of the bill would change the requirement for an estimated payment from a total BET liability of $200 or more to $260. The Department states this should not have much of a fiscal impact as no one with less than $200,000 gross business receipts or a $100,000 of BETVB would be subject to the tax. Someone having a BETVB of $100,000 would have a $750 tax liability. While the loss of estimate payments may be minimal, the deferral of tax payments due to this increased threshold cannot be quantified.

    The Department of Revenue Administration states this bill also extends the Commission to Study Business Taxes which will have no fiscal impact.

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