Revision: Jan. 27, 2017, 12:16 p.m.
HB 415-FN-A-LOCAL - AS INTRODUCED
2017 SESSION
17-0229
09/10
HOUSE BILL 415-FN-A-LOCAL
SPONSORS: Rep. Henle, Merr. 12; Rep. Fothergill, Coos 1
COMMITTEE: Ways and Means
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This bill reduces the rates of the business profits tax and repeals the business enterprise tax, the education tax, the utility property tax, and the interest and dividends tax.
This bill establishes an income tax. Portions of revenues from the income tax shall be paid to the education trust fund and the general fund.
This bill requires the state to pay 35 percent of contributions of retirement system employers other than the state for group I teachers and group II members beginning in fiscal year 2021.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
17-0229
09/10
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Seventeen
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Business Profits Tax; Imposition of Tax. RSA 77-A:2 is repealed and reenacted to read as follows:
77-A:2 Imposition of Tax. A tax is imposed at the rate of 4 percent upon the taxable business profits of every business organization.
2 Applicability. Section 1 of this act shall apply to returns and taxes due under RSA 77-A on account of taxable periods ending on or after January 1, 2020.
3 New Chapter; Income Tax. Amend RSA by inserting after chapter 77-G the following new chapters:
CHAPTER 77-H
INCOME TAX
77-H:1 Definitions. In this chapter:
I. “Department” means the department of revenue administration.
II. “Individual” means a natural person.
III. “New Hampshire modified gross income” means New Hampshire modified gross income as determined in RSA 77-H:3.
IV. “New Hampshire taxable income” means New Hampshire taxable income as determined in RSA 77-H:3.
V. “Nonresident individual” means an individual who receives wages, self-employment income, or unearned income for the taxable year from sources in this state, who maintains his or her domicile outside the state.
VI.(a) “Resident fiduciary” means:
(1) The executor or administrator of the estate of a decedent who at death was domiciled in this state;
(2) The trustee of a trust created by will of a decedent who at death was domiciled in this state;
(3) The trustee of a trust created by, or consisting of property of, a person domiciled in this state;
(4) The trustee of a trust the property of which includes a business organization as defined in RSA 77-A:1, with business activity in New Hampshire as defined in RSA 77-A:1; or
(5) The trustee of a trust that has at least one beneficiary who is a resident individual, where, in the case of an individual, the trustee of the trust is a resident of New Hampshire or, in the case of a corporation or other business entity, has a place of business in New Hampshire.
(b) “Resident fiduciary” shall not include the trustee of any trust which is taxable as a corporation under the United States Internal Revenue Code, a trust to the extent it is considered to be a grantor trust pursuant to sections 671-679 of the United States Internal Revenue Code, and the trustee of a tax-qualified retirement plan under section 401(a) of the United States Internal Revenue Code.
VII. “Resident individual” means:
(a) An individual domiciled in the state; or
(b) An individual who maintains a permanent place of abode within the state and spends more than 183 days of the taxable year within the state.
VIII. “Taxable year” means the calendar or fiscal year or portion thereof which the taxpayer uses for federal income tax purposes under the United States Internal Revenue Code.
IX. “Taxpayer” means any individual or fiduciary subject to the provisions of this chapter.
X. “Unearned income” means any income which is not wage or self-employment income, including but not limited to capital gains, allocations of income from S corporations, partnerships, limited liability companies or other similar entities, dividends, interests, rents, and royalties.
XI. “United States Internal Revenue Code” means the United States Internal Revenue Code of 1986 as amended. The forms, procedures, and regulations of the United States Internal Revenue Service may be used by the commissioner of revenue administration in formulating rules for adoption under RSA 541-A. This definition shall be operative unless and until a specific statutory exception to its adoption is provided in this chapter, or until the application of one of its provisions is held to violate the New Hampshire constitution.
77-H:2 Imposition of Tax. A tax is imposed upon every resident and nonresident individual and upon every resident fiduciary at the rate of 3.95 percent of New Hampshire taxable income as determined in RSA 77-H:3.
77-H:3 New Hampshire Modified Gross Income and Taxable Income.
I. “New Hampshire modified gross income” means, for any taxable year, the amount of the taxpayer’s adjusted gross income for federal income tax purposes under the United States Internal Revenue Code:
(a) Decreased by:
(1) Interest on, and dividends on securities attributable to interest on, the direct obligations of the United States government;
(2) Interest and dividend income received from funds invested in the college tuition savings plan under RSA 195-H if used in accordance with RSA 195-H.
(b) Increased by:
(1) Any interest or dividend income on obligations or securities of any authority, commission, or instrumentality of the United States to the extent exempted from the federal income tax; and
(2) Any interest or dividend income on obligations or securities of another state of the United States.
II. “New Hampshire taxable income” means, for any taxable year:
(a) In the case of a resident or nonresident individual, the individual’s New Hampshire modified gross income, as defined in paragraph I, less the following:
(1) The amount of the standard deduction for federal income tax purposes under the United States Internal Revenue Code
(2) $5,000 for every personal exemption allowed for federal income tax purposes under the United States Internal Revenue Code; and
(b)(1) In the case of a resident fiduciary, the amount shown as total taxable income on the fiduciary’s United States fiduciary income tax return:
(A) Increased by:
(i) Any interest or dividend income on obligations or securities of another state of the United States; and
(ii) Any interest or dividend income on obligations or securities of any authority, commission, or instrumentality of the United States to the extent exempted from the federal income tax; and
(B) Decreased by interest on, and dividends on securities attributable to the interest on, the direct obligations of the United States government.
(2) For a resident fiduciary with at least one beneficiary that is not either a resident individual or another resident fiduciary, the amount of income derived by application of subparagraph (1) shall be multiplied by a fraction, the numerator of which is income properly accumulated for the benefit of resident individuals or resident fiduciaries and the denominator of which is all income property accumulated.
77-H:4 Tax; When Due. Subject to the provisions of this chapter concerning the withholding of tax and estimated tax declarations, the tax imposed by this chapter shall be deemed to be assessed and due and payable on the fifteenth day of the fourth month following the close of the taxpayer’s taxable year.
77-H:5 Credits. The following credits are allowed against the tax due under this chapter:
I. Taxes withheld pursuant to the provisions of this chapter.
II. Estimated tax payments made pursuant to this chapter.
III. In the case of a resident individual, a credit calculated by:
(a) Calculating the wages, self-employment income, and unearned income of the individual earned or derived from sources in another state and subject to income tax or a tax measured by income in that state;
(b) Reducing the amount calculated in subparagraph (a) by the portion of the taxpayer’s claimed exemptions which bears the same relationship to the taxpayer’s total claimed exemptions, as the amount calculated in subparagraph (a) bears to the taxpayer’s New Hampshire modified gross income; and
(c) Multiplying the amount calculated in subparagraph (a), as reduced in subparagraph (b), by the rate of tax provided in RSA 77-H:2.
IV. In the case of a nonresident individual, a credit calculated by:
(a) Reducing the taxpayer’s New Hampshire modified gross income by the amount of wages and self-employment income earned by the taxpayer in New Hampshire and the amount of unearned income from New Hampshire sources;
(b) Reducing the amount calculated in subparagraph (a) by the portion of the taxpayer’s claimed exemptions which bears the same relationship to the taxpayer’s total claimed exemptions, as the amount calculated in subparagraph (a) bears to the taxpayer’s New Hampshire modified gross income; and
(c) Multiplying the amount calculated in subparagraph (a), as reduced in subparagraph (b), by the rate of tax provided in RSA 77-H:2.
V. A credit of 30 percent of the federal earned income credit for the same taxable year.
Returns
77-H:6 Returns.
I. Every resident individual and nonresident individual having New Hampshire modified gross income greater than the exemption amounts provided in RSA 77-H:3, I and every resident fiduciary shall make a return to the department of revenue administration under such rules and in such form or manner as the commissioner may prescribe, on or before the due date of the tax as provided in RSA 77-H:4.
II. A husband and wife who are both residents or who both earn wages or self-employment income from sources within New Hampshire shall file a joint return for any taxable year for which such a joint return is filed for United States income tax purposes.
III. Whenever any return shows that overpayment allowable to the taxpayer exceeds the amount of tax due, the department shall certify the amount of overpayment to the state treasurer for payment of a refund from the general fund or shall allow the taxpayer a credit against taxes due for a subsequent year, to the extent of the overpayment, at the taxpayer’s option.
77-H:7 Information Returns. Each individual, partnership, limited liability partnership corporation, limited liability corporation, proprietorship, joint stock company, association, insurance company, business trust, real estate trust, or other form of organization, organized for gain or profit, being a resident or having a place of business in this state or being a nonresident having income derived from sources subject to tax under this chapter, in whatever capacity acting, including lessors or mortgagors of personal property, fiduciaries, employers, and all officers and employees of the state or of any political subdivision of the state, having the control, receipt, custody, disposal, or payment of salaries, wages, rentals, or other compensation or income subject to the provisions of this chapter paid or payable during any year to any taxpayer subject to a tax under this chapter shall on such date or dates as the department shall from time to time designate, make complete return thereof to the department, in such form as the department may prescribe.
Withholding of Tax
77-H:8 Who Must Withhold. Every employer as defined by section 3401(d) of the United States Internal Revenue Code of 1986, as amended, employing any person within this state shall deduct and withhold upon wages paid to said employee, a tax equal to the percentage rate provided in RSA 77-H:2 multiplied by the amount of such wages less claimed exemptions, subject, however, to the provisions of RSA 77-H:11.
77-H:9 Time for Payment of Withheld Taxes and Filing Withheld Taxes Returns.
I. Every employer required to deduct and withhold any tax under RSA 77-H:8 shall make a quarterly return thereof to the department on or before the fifteenth day of the first calendar month following the calendar quarter for which the return is made. However, a return may be filed on or before the last day of the first calendar month following such quarter if timely deposits have been made in full payment of such taxes due for the quarter.
II. Every employer shall pay over to the department, or to a depository designated by the department, the taxes so required to be deducted and withheld at the same time that such employer is required, under federal income tax law and regulations, to pay over federal taxes that are required to be deducted and withheld from wages to employees.
III. The department may, if such action is necessary in any emergency where collection of the tax may be in jeopardy, require such employer to make such return and pay such tax at any time, or from time to time.
77-H:10 Employer’s Liability.
I. Each employer required to deduct and withhold tax under this chapter shall be liable for such tax. In the event an employer fails to withhold and pay over to the department any amount required to be withheld under RSA 77-H:8, the department shall assess such amount against the employer.
II. The amount of tax required to be deducted and withheld and paid over to the department under this chapter, when so deducted and withheld, shall be held to be a special fund in trust for the state. No employee or other person shall have any right of action against the employer in respect to any moneys deducted and withheld from wages and paid over to the department in compliance or in intended compliance with this chapter.
77-H:11 Use of Withholding Tables. At the election of the employer, the employer may deduct and withhold a tax determined on the basis of tables to be prepared and furnished by the department, which tax shall be substantially equivalent to the tax provided in RSA 77-H:8 and which shall be in lieu of the tax required in such section.
Estimated Tax Declarations
77-H:12 Filing of Declarations.
I. On the fifteenth day of the fourth month of the current taxable year every resident individual, nonresident individual, and resident fiduciary, except as provided in paragraph II, shall furnish the department with an estimate of such portion of such person’s New Hampshire taxable income for the current taxable year as will not be subject to the withholding provisions of this chapter.
II. The provisions of paragraph I are not applicable to resident individuals and nonresident individuals who reasonably anticipate receiving less than $15,000 of New Hampshire taxable income which will not be subject to withholding during the current taxable year, or to taxpayers receiving their income from farming as defined by the United State Internal Revenue Code of 1986, as amended. The provisions of paragraph I are not applicable to resident fiduciaries who reasonably anticipate having a tax obligation under this chapter of less than $750.
77-H:13 Payment of Estimated Tax. Each taxpayer required to file an estimated tax declaration shall include with the declaration of estimated income, payment of not less than 25 percent of the tax due thereon. Thereafter, on the fifteenth day of the sixth and ninth months of the taxable year, the taxpayer shall pay not less than 25 percent of the tax due upon said estimated income or any revised estimate thereof. The fourth installment of estimated tax shall be paid on the fifteenth day of the first month following the close of the taxable year for which the estimate was made.
Miscellaneous Provisions
77-H:14 Extension of Time for Returns. For good cause, the department may extend the time within which a taxpayer is required to file a return or declaration and if such return or declaration is filed during the period of extension no penalty or late payment charge may be imposed for failure to file the return at the time required by this chapter, but the taxpayer shall be liable for interest and late payment charges as prescribed in RSA 21-J:28 and RSA 21-J:33. Failure to file the return during the period of the extension shall void the extension.
77-H:15 Administration.
I. This chapter shall be administered and enforced by the commissioner of revenue administration. The commissioner shall adopt rules, under RSA 541-A, necessary to insure the proper administration of this chapter which shall be consistent with the provisions of RSA 21-J:13.
II. The commissioner shall appoint such additional technical, clerical, and other personnel as the commissioner shall deem necessary to carry out the provisions of this chapter.
III. The department of revenue administration shall collect the taxes, interest, and penalties imposed under this chapter and RSA 21-J and shall pay them to the state treasurer less the administrative and enforcement costs of this chapter.
IV. The commissioner may institute actions in the name of the state to recover any tax, interest on tax, or the penalties imposed by this chapter and RSA 21-J, as part of the commissioner’s authority to administer this chapter and to administer and enforce the tax laws of this state generally under RSA 21-J.
V. In the collection of taxes imposed by this chapter, the department may use all of the powers granted to tax collectors under RSA 80 for the collection of taxes, and it has all of the duties imposed upon the tax collectors by RSA 80 including the optional tax sale procedure under RSA 80:58-86. The following shall also apply:
(a) The provisions of RSA 80:26 apply to the sale of land for the payment of taxes due under this chapter, and the state treasurer is authorized to purchase the land for the state.
(b) If the state purchases the land, the state treasurer shall certify the purchase to the governor and the governor shall draw a warrant for the purchase price out of any money in the treasury not otherwise appropriated.
VI. The commissioner shall have the authority to subpoena witnesses, records, and documents, as needed, and to administer oaths to those testifying at hearings. The department and the taxpayer may take the depositions of witnesses residing within and without the state pertaining to a matter under this chapter, in the same way as depositions are taken in civil actions in the superior court.
77-H:16 Fees. Fees of witnesses shall be the same as those allowed to witnesses in the superior court. In the case of witnesses summoned by the commissioner, it shall be considered as an expense of administration of this chapter.
77-H:17 Notice. Any notice required by this chapter to be given by the department to a taxpayer shall be made by mail to the last known address of the taxpayer and in the case of hearings shall be given at least 10 days before the date thereof.
77-H:18 Preference. The taxes and interest imposed by this chapter have preference in any distribution of the assets of the taxpayer, whether in insolvency or otherwise.
77-H:19 Dissolutions, Withdrawals, and Statements of Good Standing.
I.(a) No employer organized under any law of this state may transfer property to its shareholders pursuant to RSA 293-A:14.05(a) or to its members and managers pursuant to RSA 304-C:58 until all taxes required to be withheld by the employer under this chapter, and any interest and penalties that related thereto, have been fully paid and a certificate of dissolution shall have been obtained from the commissioner of revenue administration that no returns, tax required to be withheld, tax interest, or penalties for taxes administered by the department are due and unpaid.
(b) In order to transfer property to its shareholders pursuant to RSA 293-A:14.05(a) or its members or managers pursuant to RSA 304-C:58, an employer shall submit a written request containing the complete corporate or limited liability company name and identification number and accompanied by a non-refundable fee of $30 to the commissioner of revenue administration. This fee shall be deposited into the general fund. If, after reviewing the employer’s records, the commissioner determines that no returns, tax required to be withheld, interest, or penalties for taxes administered by the department are due and unpaid, the commissioner shall prepare a certificate in accordance with subparagraph (a).
II. In order to obtain a statement for withdrawal, in accordance with RSA 293-A:15.20(b)(6) or RSA 304-C:68, an employer shall submit a written request containing the complete employer name and identification number and accompanied by a non-refundable fee of $30 to the commissioner of revenue administration. This fee shall be deposited into the general fund. If, after reviewing the employer’s records, the commissioner determines that no returns, tax required to be withheld, interest, or penalties for taxes administered by the department are due and unpaid, the commissioner shall prepare a statement for withdrawal for the purposes required under RSA 293-A:15.20(b)(6) or RSA 304-C:68.
III. In order to obtain a statement that it is in good standing with the department of revenue administration, an employer shall submit a written request containing the complete employer name and identification number and accompanied by a non-refundable fee of $30 to the commissioner of revenue administration. This fee shall be deposited into the general fund. If, after reviewing the employer’s records, the commissioner determines that no returns, tax required to be withheld, interest, or penalties for taxes administered by the department are due and unpaid, the commissioner shall prepare a statement of good standing.
77-H:20 Liens for Tax.
I. If any employer required to deduct and withhold a tax under this chapter neglects or refuses to pay the same after demand, the unpaid amount, including any late payment charge and interest together with any costs that may accrue in addition thereto, shall be a lien in favor of the state upon all property and rights to property, whether real or personal, belonging to such employer. Such liens shall arise at the time assessment and demand is made by the department and shall continue until the liability for the full amount of the lien is satisfied or becomes unenforceable. Such lien against personal property shall be valid as against any subsequent mortgagee, pledgee, purchaser, or judgment creditor when notice of such lien and the sum due has been placed on record by the department with the secretary of state and in the office of the town clerk where the taxpayer resides. Such lien against real property shall be valid as against any subsequent mortgagee, pledgee, purchaser, or judgment creditor when notice of such lien and the sum due has been placed on record by the department with the register of deeds for the county in which the property subject to the lien is situated. In the case of any prior mortgage on real or personal property so written as to secure a present debt plus future advances by the mortgagee to the mortgagor, the lien herein provided, when notice thereof has been properly recorded, shall be subject to such prior mortgage unless the department also notifies the mortgagee in writing of the recording of such lien, in which case any indebtedness thereafter created from mortgagor to mortgagee shall be junior to the lien herein provided for.
II. The lien created by paragraph I shall be released upon satisfaction of the amount of the lien or upon a finding by the commissioner that the lien has become unenforceable, or if there is furnished to the department a bond with surety approved by the department in a penal sum sufficient to equal the amount of the lien, said bond to be conditioned upon the payment of the amount of the lien upon a final determination or adjudication of the employer’s liability therefor.
III. The lien created by paragraph I may be foreclosed in the case of real estate agreeably with the provisions of law relating to foreclosure of mortgages on real estate, and in the case of personal property agreeably with the provisions of law relating to the foreclosure of security interests in personal property.
IV. To secure payment of the taxes, fees, charges, and interest imposed by this chapter and RSA 21-J, the department may avail itself of any other provision of law relating to liens for taxes.
77-H:21 Additional Returns. When the commissioner has reason to believe that a taxpayer has failed to file a return or to include any part of New Hampshire modified gross income in a filed return, the commissioner may require the taxpayer to file a return or a supplementary return showing such additional information as the commissioner prescribes. Upon the receipt of the supplementary return, or if none is received, within the time set by the commissioner, the commissioner may find and assess the amount due upon the information that is available. The making of such additional return does not relieve the taxpayer of any penalty for failure to make a correct original return or relieve the taxpayer from liability for interest imposed under RSA 21-J:28 or any other additional charges imposed by the commissioner. This section shall not be construed to modify or extend the statute of limitations provided in RSA 21-J:29.
77-H:22 Corrections. Each taxpayer shall report to the commissioner any change or correction in the amount of the taxpayer’s New Hampshire modified gross income or exemptions, such as may result from determinations by the United States Internal Revenue Service, with respect to any previous year for which the taxpayer has made a return under this chapter. Such a report shall be made not later than 6 months after the taxpayer becomes aware of such change or correction, including receipt of notice from the United Stated Internal Revenue Service that a change in the taxpayer’s federal adjusted gross income has finally been determined. Notwithstanding any other provision of law, a taxpayer reporting a correction pursuant to this section shall be given notice by the department of any adjustment to the tax due with respect to such correction within 6 months of the filing of the report.
77-H:23 Taxpayer Records.
I. Every taxpayer shall:
(a) Keep such records as may be necessary to determine the amount of the taxpayer’s liability under this chapter;
(b) Preserve such records for the period of 3 years or until any litigation or prosecution hereunder is finally determined;
(c) Make such records available for inspection by the commissioner or authorized agents, upon demand, at reasonable times.
II. Whoever violates the provisions of this section shall be subject to the penalties imposed under RSA 21-J:39.
77-H:24 Distribution of Revenues. The commissioner shall pay 59 percent of the revenues collected to the state treasurer for deposit in the education trust fund established by RSA 198:39.
77-H:25 Severability. If any provision or provisions of this chapter, is or are declared unconstitutional or inoperative by a final judgment, order, or decree of the Supreme Court of the United States or of the supreme court of New Hampshire, the remaining provisions of said chapter shall not be affected thereby.
4 Retirement System; Employer Contributions; State Share of Contributions. Amend RSA 100-A:16, II(b) and (c) to read as follows:
(b) The contributions of each employer for benefits under the retirement system on account of group II members shall consist of a percentage of the earnable compensation of its members to be known as the "normal contribution,'' and an additional amount to be known as the "accrued liability contribution;'' provided that beginning with state fiscal year [2013] 2021 and for each state fiscal year thereafter, any employer [shall pay the full amount of such total contributions] other than the state, shall pay 65 percent of such total contributions, and 35 percent thereof shall be paid by the state; and provided further that, in case of group II members employed by the state, the state shall pay both normal and accrued liability contributions. The rate percent of such normal contribution, including contributions on behalf of group II members whose group II creditable service is in excess of 40 years, in each instance shall be fixed on the basis of the liabilities of the system with respect to the particular members of the various member classifications as shown by actuarial valuations, except as provided in subparagraph (i).
(c) The contributions of each employer for benefits under the retirement system on account of group I members shall consist of a percentage of the earnable compensation of its members to be known as the "normal contribution,'' and an additional amount to be known as the "accrued liability contribution;'' provided that, in the case of teachers, and beginning with state fiscal year [2013] 2021 and for each state fiscal year thereafter, any employer [shall pay the full amount of such total contributions] other than the state, shall pay 65 percent of such total contributions, and 35 percent thereof shall be paid by the state; and provided further that, in case of group I teacher members employed by the state, the state shall pay both normal and accrued liability contributions. The rate percent of such normal contribution in each instance shall be fixed on the basis of the liabilities of the system with respect to the particular members of the various member classifications as shown by actuarial valuation, except as provided in subparagraph (i).
5 Reference to Business Enterprise Tax Deleted. Amend RSA 6:12, I(b)(65) to read as follows:
(65) Money received under RSA 77-A, [RSA 77-E,] RSA 78, RSA 78-A, RSA 78-B, RSA 83-F, and from the sweepstakes fund, which shall be credited to the education trust fund under RSA 198:39.
6 Reference to Interest and Dividends Tax Deleted. Amend RSA 14-B:8, III(q) to read as follows:
(q) New Hampshire taxes, specifying if business profits tax[,] or business enterprise tax[, or interest and dividends tax].
7 Reference to Interest and Dividends Tax Deleted. Amend RSA 15-A:5, I(d)(17) to read as follows:
(17) New Hampshire taxes, specifying if business profits tax[,] or business enterprise tax[, or interest and dividends tax].
8 References to Interest and Dividends Tax and Business Enterprise Tax Deleted. Amend RSA 21-J:31 to read as follows:
21-J:31 Penalty for Failure to File. Any taxpayer who fails to file a return when due, unless an extension has been granted by the department, shall pay a penalty equal to 5 percent of the amount of the tax due or $10, whichever is greater, for each month or part of a month during which the return remains unfiled. The total amount of any penalty shall not, however, exceed 25 percent of the amount of the tax due or $50, whichever is greater. This penalty shall not be applied in any case in which a return is filed within the extended filing period as provided in [RSA 77:18-b,] RSA 77-A:9, [RSA 77-E:8,] RSA 83-C:6, RSA 83-E:5, RSA 84-A:7, or RSA 84-C:7, or the failure to file was due to reasonable cause and not willful neglect of the taxpayer. The amount of the penalty is determined by applying the percentages specified to the net amount of any tax due after crediting any timely payments made through estimating or other means.
9 References to Interest and Dividends Tax and Business Enterprise Tax Deleted. Amend the introductory paragraph of RSA 21-J:33-a, I to read as follows:
I. If there is a substantial understatement of tax imposed under [RSA 77,] RSA 77-A, [RSA 77-E,] RSA 78-A, RSA 78-C, RSA 82-A, RSA 83-C, RSA 83-E, or RSA 84-A for any taxable period, there shall be added to the tax an amount equal to 25 percent of the amount of any underpayment attributable to such understatement.
10 References to Interest and Dividends Tax and Business Enterprise Tax Deleted. Amend RSA 21-J:46, III to read as follows:
III. This section shall apply only to tax returns and associated payments under [RSA 77,] RSA 77-A[, and RSA 77-E].
11 Reference to Business Enterprise Tax Credit Deleted. Amend RSA 71-C:2 to read as follows:
71-C:2 Tax Expenditures Specified. Tax expenditures include, but may not be limited to, the community development finance authority investment tax credit as computed in RSA 162-L:10; the economic revitalization zone tax credit as computed in RSA 162-N:6; the research and development tax credit under RSA 77-A:5, XIII; [the Coos county job creation tax credit under RSA 77-E:3-c;] the education tax credit as computed in RSA 77-G:4; and the weighted apportionment factors under RSA 77-A:3, II(a).
12 References to Interest and Dividends Tax and Business Enterprise Tax Credit Deleted. Amend RSA 71-C:4, I and II to read as follows:
I. On or before December 15 of every fiscal year the commissioner of the department of revenue administration shall certify in a report to the general court and the governor an analysis of each of the past fiscal year’s tax expenditures as identified in RSA 71-C:2, and other credits allowed under [RSA 77,] RSA 77-A, [RSA 77-E,] RSA 77-G, RSA 78, RSA 78-A, 78-B, RSA 82-A, RSA 83-E, RSA 84-A, RSA 84-C, and RSA 400-A.
II. The report shall be divided into the following parts:
(a) Tax expenditures as determined by the joint committee on tax expenditure review under RSA 71-C:3;
(b) Potential liabilities against the state’s revenues, specifically:
(1) Other credits allowed under [RSA 77,] RSA 77-A, [RSA 77-E,] RSA 77-G, RSA 78, RSA 78-A, RSA 78-B, RSA 82, RSA 82-A, RSA 83-E, RSA 84-A, RSA 84-C, and RSA 400-A against the business profits tax imposed by RSA 77-A; and
(2) Credit carryovers from overpaid taxes.
13 Reference to Education Tax Deleted. Amend RSA 72:76 to read as follows:
72:76 Property Tax Exemption. An eligible municipality may, by vote of the local legislative body pursuant to RSA 72:77, adopt a new construction property tax exemption for commercial or industrial uses, or both. The exemption shall apply only for municipal and local school property taxes assessed by the municipality which shall exclude [state education property taxes under RSA 76:3 and] county taxes assessed against the municipality under RSA 29:11, and shall be a specified percentage on an annual basis of the increase in assessed value attributable to construction of new structures, and additions, renovations, or improvements to existing structures. The exemption may run for a maximum period of 10 years following the new construction; provided, however, that the exemption for all years shall cumulatively not exceed 500 percent of the increased assessed value. Once adopted by the local legislative body, the percentage rate and duration of the exemption shall be granted uniformly within that municipality to all projects for which a proper application is filed.
14 Reference to Business Enterprise Tax Deleted. Amend RSA 77-A:5-b, IV to read as follows:
IV. The qualified investment company shall be subject to the provisions of RSA 77-A:11 [and RSA 77-E:10]. The commissioner is authorized to audit and enforce such provisions with any of the powers granted under this chapter [and RSA 77-E].
15 Reference to Business Enterprise Tax Deleted. Amend RSA 77-G:3 to read as follows:
77-G:3 Contributions to Scholarship Organizations. For each contribution made to a scholarship organization, a business organization or business enterprise may claim a credit equal to 85 percent of the contribution against the business profits tax due pursuant to RSA 77-A[, or against the business enterprise tax due pursuant to RSA 77-E, or apportioned against both provided the total credit granted against both shall not exceed the maximum education tax credit allowed. Credits provided under this chapter shall not be deemed taxes paid for the purposes of RSA 77-A:5, X]. The department of revenue administration shall not grant the credit without a scholarship receipt. No business organization or business enterprise shall direct, assign, or restrict any contribution to a scholarship organization for the use of a particular student or nonpublic school. No business organization or business enterprise shall receive more than 10 percent of the aggregate amount of tax credits permitted in RSA 77-G:4.
16 Reference to Business Enterprise Tax Deleted. Amend RSA 162-L:10, I and II to read as follows:
I. An investment tax credit equal to 75 percent of the contribution made to the authority during the contributor’s tax year shall be allowed against any of the following individually or in combination:
(a) Taxes imposed by RSA 77-A.
(b) Taxes imposed by RSA 400-A.
[(c) Taxes imposed by RSA 77-E. ]
II. Credits provided by this section applied against the liabilities imposed by RSA 400-A [and RSA 77-E] shall be deemed to be taxes paid for the purpose of RSA 77-A:5, III [and X, respectively].
17 Reference to Business Enterprise Tax Deleted. Amend RSA 162-N:7 to read as follows:
162-N:7 Application of Economic Revitalization Zone Tax Credit. The economic revitalization zone tax credit shall be applied against the business profits tax under RSA 77-A[, and any unused portion thereof may be applied against the business enterprise tax under RSA 77-E]. Any unused portion of the credit allowed under this chapter or any eligible credit in excess of $40,000 allowed under this chapter, may be carried forward and allowed against taxes due under RSA 77-A [or RSA 77-E] for 5 taxable periods from the taxable period in which the tax was paid. [For the purpose of the credit allowed under RSA 77-A:5, X, the economic revitalization zone credit shall be considered taxes paid under RSA 77-E.]
18 Education Trust Fund; Reference to Low and Moderate Income Homeowners Property Tax Relief Deleted. Amend the introductory paragraph of RSA 198:39, I to read as follows:
I. The state treasurer shall establish an education trust fund in the treasury. Moneys in such fund shall not be used for any purpose other than to distribute adequate education grants to municipalities’ school districts and to approved charter schools pursuant to RSA 198:42[, to provide low and moderate income homeowners property tax relief under RSA 198:56-198:61,] and to fund kindergarten programs as may be determined by the general court. The state treasurer shall deposit into this fund immediately upon receipt:
19 Education Trust Fund. Amend RSA 198:39, I(k) to read as follows:
(k) The amount allocated to the education trust fund from the income tax collected by the department of revenue administration pursuant to RSA 77-H:24.
(l) Any other moneys appropriated from the general fund.
20 Reference to Business Enterprise Tax Deleted. Amend RSA 277-B:17-a to read as follows:
277-B:17-a Tax Credits. For purposes of determination of business profits tax credits under RSA 77-A, Coos county job creation credits under RSA 162-Q, economic revitalization zone credits under RSA 162-N, or any other available statutory tax credits provided by this state that are based on employment, leased employees shall be deemed employees solely of the client company if an election is made [pursuant to RSA 77-E:13-a] to the department of revenue administration. A client company shall be entitled to the benefit of any such tax credit arising as the result of the employment of leased employees of such client company. Notwithstanding that the employee leasing company is the W-2 reporting employer, the client company shall continue to qualify for business profits tax credits under RSA 77-A, Coos county job creation credits under RSA 162-Q, economic revitalization zone credits under RSA 162-N, or any other available statutory tax credits. Leased employees working for other client companies of the employee leasing company shall not be counted together. Each employing leasing company shall provide, upon request by a client company, state agency, or department responsible for administration of any such tax credit, employment information reasonably required by such agency or department and necessary to support any request, claim, application, or other action by a client company seeking any such tax credit. This section shall not apply to the administration of RSA 282-A.
21 Reference to Business Enterprise Tax Deleted. Amend RSA 293-A:14.05(b) to read as follows:
(b) Prior to making any distributions of its remaining property among its shareholders according to their interests, the corporation shall first obtain a certificate of dissolution from the department of revenue administration in accordance with RSA 77-A:18 [and RSA 77-E:12].
22 Reference to Business Enterprise Tax Deleted. Amend RSA 293-A:14.22(a)(4) to read as follows:
(4) contain a certificate from the department of revenue administration in accordance with RSA 77-A:18, III, [and RSA 77-E:12, III,] if such application is received by the secretary of state more than 120 days after the notice of administrative dissolution is mailed.
23 Reference to Business Enterprise Tax Deleted. Amend RSA 293-A:15.20(b)(6) to read as follows:
(6) A statement of withdrawal from the New Hampshire department of revenue administration in accordance with RSA 77-A:18, II [and RSA 77-E:12, II].
24 Reference to Business Enterprise Tax Deleted. Amend RSA 304-C:145, I(d) to read as follows:
(d) Contain a certificate from the New Hampshire department of revenue administration in accordance with RSA 77-A:18, III[, and RSA 77-E:12, III];
25 Initial Funding; Bonds Authorized. To provide initial funding for start-up costs including consultants, facilities, equipment and computer purchases, and other administrative and enforcement costs under RSA 77-H, in excess of funds appropriated, the state treasurer is hereby authorized to borrow upon the credit of the state not exceeding an amount certified by the commissioner of revenue administration and for said purposes may issue bonds and notes in the name of and on behalf of the state of New Hampshire in accordance with RSA 6-A. Payments of principal and interest of the bonds and notes shall be made from the education trust fund established in RSA 198:39. The bonds shall be 5-year bonds.
26 Appropriation. The sum of $30,000,000 for the fiscal year ending June 30, 2018 is hereby appropriated to the department of revenue administration to fund the costs necessary to implement RSA 77-H. This appropriation shall be nonlapsing. The governor is authorized to draw a warrant for said sum out of any money in the treasury, including the education trust fund, not otherwise appropriated.
27 First Taxable Year of Income Tax. The first taxable period under RSA 77-H, as inserted by section 3 of this act, begins January 1, 2020, and ends December 31, 2020. Persons liable for a tax during the first taxable period and who do not report the payment of federal income taxes on a calendar year basis are entitled to such proportion of the exemptions allowed in RSA 77-H as the period bears to their taxable year. The determination of the tax shall be made under rules adopted by the commissioner of revenue administration under RSA 541-A, consistent with the general purposes and provisions of RSA 77-H. Persons required to make information returns for the first taxable period shall make them on a proportional basis in such form as the commissioner requires. For such first taxable period under RSA 77-H, all penalties, but not interest, shall be waived for underpayment of estimated taxes and insufficient withholding for calendar year 2020.
28 Returns for Certain Taxes. All persons who are liable for a tax under RSA 77 as of December 31, 2019, who thereafter are no longer liable for a tax under RSA 77 because of the passage of this act shall make a return of such taxes due the commissioner of revenue administration in such manner and on such forms as the commissioner shall prescribe in rules adopted under RSA 541-A. The administrative provisions of RSA 77 shall remain in effect to permit the collection of taxes upon income taxable under RSA 77 which is received by persons subject to taxation under that chapter through December 31, 2019, and to permit the distribution of that revenue. Persons who are liable for a tax under RSA 77 who do not report the payment of federal income taxes on a calendar year basis are entitled to such proportion of the exemptions allowed in RSA 77 as the reporting period bears to their taxable year.
29 Severability. If any provision of this act or the application thereof to any person or circumstance is deemed invalid, the invalidity does not affect the other provisions or applications of this act which can be given effect without the invalid provisions or applications and to this end the provisions of this act are severable.
30 Repeals. The following are repealed:
I. RSA 21-I:18, I(l), relative to an exemption for purchase of supplies by the department of revenue administrations with respect to the administration of low and moderate income homeowners property tax relief claims.
II. RSA 21-J:45, I(e), relative to reports on status of requested interest and dividends tax refunds.
III. RSA 76:3, relative to the education tax.
IV. RSA 77, relative to taxation of incomes.
V. RSA 77-A:4, I, relative to an adjustment to the business profits tax.
VI. RSA 77-A:4, XIV, relative to sales or exchanges under the business profits tax.
VII.. RSA 77-A:4-c, II(c), relative to the duty of a committee to study the taxation of distributions received by investment organizations under the interest and dividends tax.
VIII. RSA 77-A:5, X, relative to the business enterprise credits under the business profits tax.
IX. RSA 77-A:5, XIII(b)(1)(D), relative to a business enterprise tax credit.
X. RSA 77-A:5, XIV, relative to the Coos county job creation tax credit.
XI. RSA 77-B, relative to the commuter income tax.
XII. RSA 77-E, relative to the business enterprise tax.
XIII. RSA 77-G:1, IV, relative to the definition of business enterprise under the education tax credit.
XIV. RSA 83-F, relative to the utility property tax.
XV. RSA 100-A:16, II(c-1), relative to employer contributions for fiscal year 2012.
XVI. RSA 162-Q, relative to the Coos county job creation tax credit.
XVII. RSA 195-H:10, relative to exemption from RSA 77 for income and distributions from qualified tuition programs.
XVIII. RSA 198:39, I(a) and (b), relative to funds certified to the education trust fund from the business profits tax and the business enterprise tax.
XIX. RSA 198:39, I(f), relative to funds paid to the education trust fund from the utility property tax.
XX. RSA 198:56 through RSA 198:61, relative to low and moderate income homeowners property tax relief claims.
XXI. RSA 261:52-a, relative to notice that the interest and dividends tax may be due.
XXII. RSA 277-B:9, I(h), relative to business enterprise taxes paid by employee leasing companies.
XXIII. RSA 391:3, relative to the taxation of common trust funds under RSA 77.
XXIV. RSA 400-A:34-a, relative to the business enterprise tax credit against the insurance premium tax.
I. Sections 25 and 26 of this act shall take effect July 1, 2017.
II. Paragraph XVII of section 30 of this act shall take effect January 1, 2019.
III. The remainder of this act shall take effect January 1, 2020.
17-0229
1/6/17
HB 415-FN-A-LOCAL- FISCAL NOTE
AS INTRODUCED
FISCAL IMPACT: [ X ] State [ X ] County [ X ] Local [ ] None
|
| |||
| Estimated Increase / (Decrease) | |||
STATE: | FY 2018 | FY 2019 | FY 2020 | FY 2021 |
Appropriation | $30,000,000 | $0 | $0 | $0 |
Revenue | $0 | $0 | Indeterminable Increase | Indeterminable Increase |
Expenditures | $30,000,000 | Indeterminable Increase | Indeterminable Increase | Indeterminable Increase |
Funding Source: | [ X ] General [ X ] Education [ ] Highway [ ] Other | |||
|
|
|
|
|
POLITICAL SUBDIVISIONS*: |
|
|
|
|
Revenue | $0 | $0 | $0 | $104,300,000 |
Expenditures | $0 | $0 | $0 | $0 |
*The New Hampshire Retirement System states it is not able to separate the fiscal impact of this legislation between county and local government, therefore the fiscal impact is shown together as political subdivisions.
METHODOLOGY:
This bill reduces the business profits tax rate from 8.2 percent to 4 percent; repeals the business enterprise tax, statewide education property tax, utility property tax, and interest and dividends tax; establishes an income tax of 3.95 percent; and requires the state pay 35 percent of contributions of retirement system employers other than the state for group I teachers and group II members beginning in FY 2021. The Department of Revenue Administration estimates reducing the business profits tax (BPT) rate from 8.2 percent to 4 percent will decrease revenue by an estimated $217.4 million, however repealing the business enterprise tax (BET) will have an indeterminable impact on the BPT. Repealing the BET will decrease revenue by an estimated $283.1 million in FY 2020. The repeal of BET may increase BPT as there will be no BET to offset the BPT, however a larger amount of other tax credits that would have been used against the BET will now be applied to the BPT. Lastly with the repeal of the BET, the insurance premium tax will increase by an indeterminable amount because current law allows it to be offset by BET paid, however BPT may decrease because the insurance premium tax paid can be used as a credit against the BPT. Repealing the interest and dividends tax will decrease revenue by approximately $95.1 million in FY 2020, repealing the utility property tax will decrease revenue by approximately $43.3 million in FY 2020, and repealing the statewide education property tax will decrease revenue by $363.1 million. Finally the repeal of the low and moderate homeowners property tax relief program will decrease education trust fund expenditures by $1.9 million.
The Department states the implementation of an income tax would increase revenue to the general fund and education trust fund by an indeterminable amount. The Department estimates the income tax at a rate of 3.95 percent will generate revenue of $1,315.2 million based on NH federal 1040 data reported by the IRA and trended out to tax year 2020 with adjustments made as required in the bill. Once the Department deducts the earned income tax credit (estimated at $50.2 million), revenue loss from the repeal of taxes and the BPT rate change, the Department estimates revenue will increase by approximately $263 million in FY 2021 and each year thereafter. This bill directs 59 percent of revenue collected from the income tax be transferred to the education trust fund. The Department notes this bill does not provide a mechanism to transfer money from the education trust fund back to the municipalities if the intent is to replace the state's portion of education funding raised through the statewide education property tax.
In addition to the initial appropriation of $30 million to the Department to cover administrative costs associated with the initial implementation of the new state income tax, the Department states it will have ongoing expenditures associated with administering the income tax program. The Department is not able to reasonably estimate the increase in expenditures without more extensive study of the proposed income tax program. The bill also provides authority to bond any startup costs in excess of the $30 million appropriation however the Department is not able to determine the full amount needed for starting this new income tax program to know if any amounts will need to be bonded.
The New Hampshire Retirement System states having the state pay 35 percent of political subdivisions retirement contributions for certain members will increase state general fund expenditures and increase political subdivision revenue by $104.3 million in FY 2021.
AGENCIES CONTACTED:
Department of Revenue Administration and New Hampshire Retirement System