Revision: Dec. 14, 2015, midnight
\t \t\tHB 1385-FN-A - AS INTRODUCED
2016 SESSION
\t16-2459
\t09/01
HOUSE BILL\t1385-FN-A
AN ACT\trelative to the sale or exchange of an interest in a business organization under the business profits tax.
SPONSORS:\tRep. Lovejoy, Rock. 36; Rep. Major, Rock. 14; Rep. Abrami, Rock. 19
COMMITTEE:\tWays and Means
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ANALYSIS
\tThis bill limits the inclusion in the business profits tax of the net increase due to certain sales or exchanges of an interest or beneficial interest in a business organization.
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Explanation:\tMatter added to current law appears in bold italics.
\t\tMatter removed from current law appears [in brackets and struckthrough.]
\t\tMatter which is either (a) all new or (b) repealed and reenacted appears in regular type.
\t16-2459
\t09/01
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Sixteen
AN ACT\trelative to the sale or exchange of an interest in a business organization under the business profits tax.
Be it Enacted by the Senate and House of Representatives in General Court convened:
\t1 Sale or Exchange of an Interest in a Business Organization. RSA 77-A:4, XIV is repealed and reenacted to read as follows:
\t\tXIV.(a) In the case of a business organization where an interest or beneficial interest in the business organization has been sold or exchanged, an addition to gross business profits of an amount equal to the net increase in the basis of all underlying assets transferred or sold through the sale or exchange of the interest. The increase in the basis of the assets shall be calculated in accordance with the provisions of the Internal Revenue Code, as defined by RSA 77-A:1, XX but shall apply to the business organization.
\t\t\t(b) A business organization may, for a particular sale or exchange, make an irrevocable election on a timely filed return or extension, to not recognize the basis increase required under subparagraph (a) and thereby not be required to make an addition to gross business profits in the tax period in which the sale or exchange occurs, but shall not be allowed a deduction against gross business profits in any tax period for depreciation or amortization on the unrecognized increased basis in the assets and shall not be allowed the unrecognized increase in the basis of the assets upon disposition when reporting gross business profits.
\t2 Applicability. This act shall take effect for sales or exchanges of interests in business organizations that occur on and after July 1, 2016.
\t3 Effective Date. This act shall take effect July 1, 2016.
\t\t\t\t\t\t\t\t\t\t\t16-2459
\t\t\t\t\t\t\t\t\t\t\t11/13/15
HB 1385-FN-A- FISCAL NOTE
AN ACT\trelative to the sale or exchange of an interest in a business organization under the business profits tax.
FISCAL IMPACT:
The Department of Revenue Administration states this bill, as introduced, may decrease state general fund and education trust fund revenue by an indeterminable amount in FY 2017 and each year thereafter. There is no fiscal impact on county and local revenue or state, county and local expenditures.
METHODOLOGY:
The Department of Revenue Administration states this bill repeals RSA 77-A:4, XIV and reenacts it to limit the inclusion in the business profits tax the net increase in basis of business assets due to certain sales or exchanges of an interest or beneficial interest in a business organization. Section 1 (a) of the bill establishes the taxability of the increase in the basis of the assets of the business organization applicable to business organizations when an interest or beneficial interest in the business organization is sold or exchanged. Section 1 (b) further allows for business organizations to make an irrevocable election to not recognize the basis increase. If a business organization elects not to recognize the basis increase the organization will not be required to make an addition to the gross business profits in the tax period in which the sale or exchange occurs. The business organization shall not be allowed to deduct depreciation or amortization on the increased basis of the assets upon the disposition of the asset. The Department states this bill is effective July 1, 2016 and will be applicable to any sales or exchanges of interest in a business organization that occurs on and after July 1, 2016. The Department has no information to determine how many interest holders will engage in the sale or exchange of their interest at some time in the future or how many will choose to make an irrevocable election to not recognize the basis increase. The Department is able to show that if this legislation was in effect over the previous five tax years and the business organizations made an election the fiscal impact would have resulted in the following decreases in state revenue:
Tax Year 2010 | ($1.9 million) |
Tax Year 2011 | ($0.9 million) |
Tax Year 2012 | ($13.3 million) |
Tax Year 2013 | ($6.6 million) |
Tax Year 2014 (incomplete tax year) | ($3.8 million) |
The Department states it is able to administer this bill with no increased expenditures. This bill does not impact county and local revenue and expenditures.