HB1200 (2020) Detail

(New Title) relative to the tax expenditure report and relative to delaying the enactment of the single sales factor under the business profits and business enterprise taxes.


HB 1200 - AS AMENDED BY THE HOUSE

 

12Mar2020... 0834h

2020 SESSION

20-2289

10/05

 

HOUSE BILL 1200

 

AN ACT relative to the tax expenditure report and relative to delaying the enactment of the single sales factor under the business profits and business enterprise taxes.

 

SPONSORS: Rep. Abrami, Rock. 19; Rep. Ames, Ches. 9

 

COMMITTEE: Ways and Means

 

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AMENDED ANALYSIS

 

This bill removes the consideration of weighted apportionment factors under the business profits tax from inclusion in the tax expenditure report and includes the regional career and technical education center tax credit.  The bill also delays the enactment of the single sales factor for determining apportionment under the business profits tax and the business enterprise tax and extends and amends the legislative committee on apportionment.

 

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

12Mar2020... 0834h 20-2289

10/05

 

STATE OF NEW HAMPSHIRE

 

In the Year of Our Lord Two Thousand Twenty

 

AN ACT relative to the tax expenditure report and relative to delaying the enactment of the single sales factor under the business profits and business enterprise taxes.

 

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

 

1  Tax Expenditure Report; Weighted Apportionment Factors Removed.  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; [the weighted apportionment factors under RSA 77-A:3, II(a);] the regional career and technical education center tax credit pursuant to RSA 188-E:9-a; and the exemption for qualified regenerative manufacturing companies allowed under RSA 77-A:1, I and RSA 77-E:1, III.

2  Business Profits Tax; Single Sales Factor; Amendment to Prospective Amendment.  2019, 346:426, prospectively amending RSA 77-A:3, I-III, are repealed and reenacted to read as follow:

346:426  Business Profits Tax; Apportionment; 2026.  RSA 77-A:3, I-III are repealed and reenacted to read as follows:

I.  A business organization which derives gross business profits from business activity both within and without this state, and which is subject to a net income tax, a franchise tax measured by net income, or a capital stock tax in another state or is subject to the jurisdiction of another state to impose a net income tax or capital stock tax upon it, whether or not such tax is actually imposed, shall apportion its gross business profits so as to allocate to this state a fair and equitable proportion of such business profits.  Except as provided in this section, such apportionment shall be made in the following manner:

(a)  For taxable periods ending before December 31, 2026:

(1)  The business organization’s gross business profits shall be apportioned on the basis of the following 3 factors:

(A)  The percentage of value of the total real and tangible personal property owned, rented and employed by the business organization everywhere as is owned, rented and employed by it in the operation of its business in this state.  Property owned by the business organization shall be valued at its original cost.  Property rented by the business organization shall be valued at 8 times the net annual rental rate.  Net annual rental rate is the annual rental rate paid by the business organization less any annual rental rate received by the business organization from subrentals.

(B)  The percentage of total compensation paid by the business organization to employees everywhere as is paid by the business organization to employees for services rendered within this state.  Such compensation is deemed to be disbursed for services in this state if the service is performed entirely within this state, or if the service is performed both within and without this state and the service performed without this state is incidental to the service within this state, or some of the service is performed in this state and (i) the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in this state, or (ii) the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual performing such service resides within this state.

(C)  The percentage of the total sales, including charges for services, made by the business organization everywhere as is made by it within this state:

(i)  Sales of tangible personal property are made in this state if the property is delivered or shipped to a purchaser, other than the United States government, within this state regardless of f.o.b. point or other conditions of sale, or the property is shipped from an office, store, warehouse, factory or other place of storage in this state and the purchaser is the United States government, or  the business organization is not taxable in the state of the purchaser.

(ii)  Sales other than sales of tangible personal property are in this state if the business organization’s market for the sales is in this state, as follows:

1.  In the case of sale, rental, lease, or license of real property, if and to the extent the property is located in this state;

2.  In the case of rental, lease, or license of tangible personal property, if and to the extent the property is located in this state;

3.  In the case of sale of a service, if and to the extent the service is delivered to a location in this state;

4.  In the case of sale, rental, lease, or license of intangible property, if and to the extent the property is used in this state;

5.  In the case of interest income, if and to the extent the debtor or encumbered property is located in this state;

6.  In the case of dividend income, if and to the extent the business organization’s commercial domicile is in this state; and

7.  In the case of other income, if and to the extent the income is derived from sources in this state.

(iii)  In the case of sales other than sales of tangible personal property, if the state or states of assignment cannot be determined, the state or states of assignment shall be reasonably approximated.

(iv)  In the case of sales other than sales of tangible personal property, if the taxpayer is not taxable in a state to which a sale is assigned, or if the state of assignment cannot be determined or reasonably approximated, such sale shall be excluded from the denominator of the sales factor.  

(2)  A fraction, the numerator of which shall be the property factor in subparagraph  I(a)(1)(A) plus the compensation factor in subparagraph I(a)(1)(B) plus 2 multiplied by the sales factor in subparagraph I(a)(1)(C) and the denominator of which is 4, shall be applied to the total gross business profits (less foreign dividends) of the business organization to ascertain its gross business profits in this state.

(b)  For taxable periods ending on or after December 31, 2026, the business organization’s gross business profits shall be apportioned by multiplying the total gross business profits (less foreign dividends) of the business organization by the sales factor in subparagraph I(a)(1)(C).  

II.(a)  If the applicable method of apportionment in paragraph I does not fairly represent the business organization's business activity in this state, the business organization may petition for, or the commissioner may require, in respect to all or any part of the business organization's business activity, if reasonable, the employment of any other method to effect an equitable apportionment of the business organization's gross business profits.

(b)  For foreign dividends from unitary sources, the following formula shall be used to modify factors relating to included dividends:

(1)  Determine a percentage for each dividend payor consisting of dividends paid divided by taxable income which has been computed using United States standards.

(2)  Apply this percentage to the dividend payor's foreign property, payroll, and sales for taxable periods ending before December 31, 2026, or to the dividend payor's foreign sales for taxable periods ending on or after December 31, 2026.

(3)  Sum the results in subparagraph (2) for all dividend payors.

(4)  Add the result in subparagraph (3) to the denominators of the combined water's edge group.  The numerator will remain the New Hampshire numerator.  

(5)  Apply the resulting percentage to the foreign dividends.

(6)  Add this amount to the amount of New Hampshire taxable business profits computed pursuant to RSA 77-A:3, I.

III.  When 2 or more related business organizations are engaged in a unitary business, as defined in RSA 77-A:1, XIV, a part of which is conducted in this state by one or more members of the group, the income attributable to this state shall be determined by means of the applicable combined apportionment factors of the unitary business group in accordance with paragraphs I and II.

3  Legislative Committee on Apportionment; Extended; Duties Revised.  Amend RSA 77-A:23-a to read as follows:

77-A:23-a  Legislative Committee on Apportionment.  There is established a committee to study the apportionment of gross business profits under the business profits tax, and to authorize the enactment of the single sales factor for the business profits tax and business enterprise tax.  

I.  The members of the committee shall be as follows:

(a)  Three members of the senate, appointed by the president of the senate.

(b)  Four members of the house of representatives, appointed by the speaker of the house of representatives.

II.  Members of the committee shall receive mileage at the legislative rate when attending to the duties of the committee.

III.(a)  The committee shall study apportionment among states pursuant to RSA 77-A:3 of gross business profits under the business profits tax.  The committee shall also monitor the laws and legislation of other states concerning market-based sourcing and may study any other related issues.  The committee may solicit input or testimony from any person or organization the committee deems relevant to the study.

(b)  The committee shall conduct meetings and on or before November 1, [2020] 2024, shall examine the data provided by the department of revenue administration on the effects of single sales factor under current apportionment rules, and shall hold at least 2 public hearings on the enactment of the single sales tax provisions contained in sections 426-429 of HB 4-FN-A-LOCAL of the 2019 regular legislative session.  In November [2020] 2024, the committee shall, by majority vote of the committee, vote on whether to rescind the enactment of the amendments contained in sections 426-429 of HB 4-FN-A-LOCAL regular legislative session.  If the majority of the committee rescinds the enactment of sections 426-429 of HB 4-FN-A-LOCAL regular legislative session, such sections shall not take effect.  The committee shall report on its actions to the chairpersons of the senate and house finance committees, the chairpersons of the senate and house ways and means committees, the secretary of state, and the director of the office of legislative services.

IV.  The members of the committee shall elect a chairperson from among the members.  The first meeting shall be called by the first-named [senate] house member.  The first meeting of the committee shall be held within 45 days [of the effective date of this section] after May 1, 2024.  Four members of the committee shall constitute a quorum.

V.  The committee shall report its findings and any recommendations for proposed legislation to the president of the senate, the speaker of the house of representatives, the senate clerk, the house clerk, the governor, and the state library on or before December 1, [2020] 2024.

4  Enactment of Single Sales Factor; Date Changed.  Amend 2019, 346:432 to read as follows:

346:432  Enactment of Single Sales Factor.  Sections 426-429 of this act shall take effect January 1, [2022] 2026 unless upon the report of the committee established in RSA 77-A:23-a as inserted in this act, that by majority vote of the committee, sections 426-429 are rescinded.

5 Repeal of Legislative Committee; Change to Effective Date.  Amend 2019, 346:440, XIII to read as follows:

XIII.  Section 433 of this act shall take effect December 1, [2020] 2024.

6  Effective Date.  This act shall take effect upon its passage.

Links

HB1200 at GenCourtMobile
HB1200 Discussion

Action Dates

Date Body Type
Jan. 14, 2020 House Hearing
Feb. 5, 2020 House Hearing
March 3, 2020 House Exec Session
House Floor Vote
March 11, 2020 House Floor Vote

Bill Text Revisions

HB1200 Revision: 8437 Date: March 30, 2020, 11:10 a.m.
HB1200 Revision: 6820 Date: Dec. 2, 2019, 11:28 a.m.

Docket

Date Status
Jan. 8, 2020 Introduced 01/08/2020 and referred to Ways and Means HJ 1 P. 13
Jan. 14, 2020 Public Hearing: 01/14/2020 10:45 am LOB 202
Jan. 23, 2020 ==TIME CHANGE== Full Committee Work Session: 01/23/2020 01:30 pm LOB 202
Feb. 5, 2020 Public Hearing on non-germane Amendment # 2020-0248h: 02/05/2020 01:00 pm LOB 210-211
Feb. 18, 2020 Full Committee Work Session: 02/18/2020 01:00 pm LOB 202
March 3, 2020 Executive Session: 03/03/2020 01:00 pm LOB 202
Committee Report: Ought to Pass with Amendment # 2020-0834h (Vote 20-0; RC)
March 11, 2020 Committee Report: Ought to Pass with Amendment # 2020-0834h (NT) for 03/11/2020 (Vote 20-0; RC) HC 10 P. 77
March 12, 2020 Amendment # 2020-0834h (NT): AA VV 03/12/2020
March 12, 2020 Ought to Pass with Amendment 2020-0834h (NT): MA VV 03/12/2020
June 16, 2020 Introduced 06/16/2020, and Laid on Table, MA, VV; 06/16/2020; SJ 8
June 16, 2020 No Pending Motion; 06/16/2020 SJ 8