Revision: March 8, 2016, midnight
\t \t\tSB 342-FN - AS INTRODUCED
2016 SESSION
\t16-2710
\t09/10
SENATE BILL\t342-FN
AN ACT\tmaking certain changes to business profits tax provisions affecting a business organization when owners sell or exchange ownership interests in the business.
SPONSORS:\tSen. Bradley, Dist 3; Sen. Boutin, Dist 16; Sen. Sanborn, Dist 9; Sen. Morse, Dist 22; Sen. Forrester, Dist 2; Sen. Little, Dist 8; Sen. Cataldo, Dist 6; Sen. Avard, Dist 12; Sen. Carson, Dist 14; Sen. Birdsell, Dist 19; Sen. Stiles, Dist 24; Sen. D'Allesandro, Dist 20; Rep. Major, Rock. 14; Rep. Hinch, Hills. 21; Rep. Packard, Rock. 5
COMMITTEE:\tWays and Means
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ANALYSIS
\tThis bill makes certain changes to business profits tax provisions affecting a business organization when owners sell or exchange ownership interests in the business.
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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\t\tMatter which is either (a) all new or (b) repealed and reenacted appears in regular type.
\t16-2710
\t09/10
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Sixteen
AN ACT\tmaking certain changes to business profits tax provisions affecting a business organization when owners sell or exchange ownership interests in the business.
Be it Enacted by the Senate and House of Representatives in General Court convened:
\t1 Purpose. The general court finds:
\t\tI. The strength of New Hampshire’s economy is based on attracting and growing small businesses that create good jobs and growth, and the state’s tax system should provide clear rules that encourage and enhance the state’s reputation as a leading jurisdiction for the creation and growth of small businesses.
\t\tII. This act clarifies that, under the business profits tax, a business organization must add back federal tax deductions for depreciation and amortization that arise from an increase in basis in one or more of its assets directly as a result of a sale or exchange of an ownership interest in the business, unless the business recognizes federal taxable income as a result of the transfer. This act further clarifies that the business profits tax does not require the addition of taxable income for a business organization directly as a result of a sale or exchange of an ownership interest in the business, unless the business organization is required to recognize taxable income for federal income tax purposes.
\t2 Business Profits Tax; Addition to Gross Business Profits. RSA 77-A:4, XIV is repealed and reenacted to read as follows:
\t\tXIV. In the case of a business organization which realizes under federal income tax law an increase in the basis of one or more of its assets as the direct result of a sale or exchange of an ownership interest in such business organization without a corresponding recognition of taxable income attributable to such increase in basis, such business organization shall determine its gross business profits without taking such increase in basis into account. Accordingly, such business organization shall report an addition to gross business profits of an amount equal to any deduction for depreciation or amortization attributable to any such increase in the basis of its assets for federal income tax purposes. Further, such business organization shall determine gain or loss at the time of any actual disposition of its assets without taking such increase in basis for federal purposes into account.
\t3 Applicability. Section 2 of this act shall take effect for sales or exchanges of interests in business organizations that occur on and after July 1, 2016.
\t4 Effective Date. This act shall take effect upon its passage.
\t\t\t\t\t\t\t\t\t\t\t16-2710
\t\t\t\t\t\t\t\t\t\t\t12/7/15
SB 342-FN- FISCAL NOTE
AN ACT\tmaking certain changes to business profits tax provisions affecting a business organization when owners sell or exchange ownership interests in the business.
FISCAL IMPACT:
The Department of Revenue Administration states this bill, as introduced, will decrease state general fund and education trust fund revenue by an indeterminable amount in FY 2017 and each year thereafter. There is no impact on county and local revenue or state, county and local expenditures.
METHODOLOGY:
The Department of Revenue Administration states this bill repeals and reenacts RSA 77-A:4, XIV to provide that if a business organization realizes under federal income tax law an increase in the basis of one or more of its assets as the direct result of a sale or exchange of an ownership interest in such business organization without a corresponding recognition of taxable income attributable to such increase in basis, the business shall determine its gross business profits without taking the increase in basis into account. A business organization shall report an addition to gross business profits of an amount equal to any deduction for depreciation or amortization attributable to any such increase in the basis of its assets for federal income tax purposes. A business organization will determine the gain or loss at the time of the actual disposition of its assets without taking such increase in basis for federal purposes into account. The Department stats this bill will decrease business profits tax revenue resulting in a decrease in state general fund and education trust fund revenue by an indeterminable amount in FY 2017 and each year thereafter. For informational purposes, if this bill had been in effect over the previous four completed tax years the impact on revenue would have been as follows:
Tax Year | Revenue Increase/(Decrease) |
2010 | ($1.9 million) |
2011 | ($0.9 million) |
2012 | ($13.3 million) |
2013 | ($6.6 million) |