Bill Text - HB1221 (2022)
(Third New Title) relative to the rate of the business profits tax, and relative to payment by the state to political subdivisions of an amount equal to a portion of retirement system contributions of political subdivision employers.
Revision: Nov. 18, 2021, 1:55 p.m.
HB 1221-FN - AS INTRODUCED
2022 SESSION
22-2291
10/05
HOUSE BILL 1221-FN
AN ACT relative to the rates of the business profits tax and the business enterprise tax.
SPONSORS: Rep. Notter, Hills. 21; Rep. Turcotte, Straf. 4; Rep. Osborne, Rock. 4; Rep. Abramson, Rock. 37; Rep. Mooney, Hills. 21; Rep. Hobson, Rock. 35; Rep. Potucek, Rock. 6; Rep. Healey, Hills. 21
COMMITTEE: Ways and Means
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ANALYSIS
This bill reduces the rates of the business profits and business enterprise taxes for tax years ending on or after December 31, 2023.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
22-2291
10/05
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty Two
AN ACT relative to the rates of the business profits tax and the business enterprise tax.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 New Paragraph; Business Profits Tax; Imposition of Rate; Rate Reduced 2023. Amend RSA 77-A:2 by inserting after paragraph II the following new paragraph:
III. For all taxable periods ending on or after December 31, 2023, a tax is imposed at the rate of 7.5 percent upon the taxable business profits of every business organization.
2 New Paragraph; Business Enterprise Tax; Rate Reduced 2023. Amend RSA 77-E:2 by inserting after paragraph II the following new paragraph:
III. For all taxable periods ending on or after December 31, 2023, a tax is imposed at the rate of 0.50 percent upon the taxable enterprise value tax base of every business enterprise.
3 Effective Date. This act shall take effect upon its passage.
22-2291
10/25/21
HB 1221-FN- FISCAL NOTE
AS INTRODUCED
AN ACT relative to the rates of the business profits tax and the business enterprise tax.
FISCAL IMPACT: [ X ] State [ ] County [ ] Local [ ] None
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| Estimated Increase / (Decrease) | |||
STATE: | FY 2022 | FY 2023 | FY 2024 | FY 2025 |
Appropriation | $0 | $0 | $0 | $0 |
Revenue | $0 | Indeterminable Decrease | Indeterminable Decrease | Indeterminable Decrease |
Expenditures | $0 | $0 | $0 | $0 |
Funding Source: | [ X ] General [ X ] Education [ ] Highway [ ] Other | |||
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METHODOLOGY:
This bill reduces the Business Profits Tax rate from 7.6% to 7.5% and the Business Enterprise Tax rate from 0.55% to 0.50% for taxable periods ending on or after December 31, 2023. The Department of Revenue Administration states the fiscal impact is indeterminable as the Department is not able to predict future business tax revenue. Based on the following assumptions/information, the Department is able to estimate a possible fiscal impact:
- the starting pont for calculating the fiscal impact on FY 2023 thru FY 2025 revenues is the FY 2021 cash basis business tax revenue less anomalous receivable revenue (revenue received in FY 2021 that is credited back to FY 2020) of $982,527,377 (BET revenue of $330,088,540 and BPT revenue of $652,438,837);
- based on a tax year revenue analysis of FY 2021 revenue it was determined 15 percent is attributable to tax year 2019, 63 percent is attributable to tax year 2020, and 22 percent is attributable to tax year 2021; and
- the current law tax rates for Tax Years 2019 – 2021 included in FY 2021 revenue are 7.7% for BPT and 0.60% for BET. Pursuant to Chapter 91:109-111, laws of 2021 the BET rate is reduced from 0.6% to 0.55% and the BPT rate is reduced from 7.7% to 7.6% for taxable periods ending on or after December 31, 2022;
- applying the tax year revenue analysis splits for FY 2021 revenue as well as applying the applicable rates creates a base of $63,487,988,295 (BET:$55,014,756,648 + BPT:$8,473,231,647) to use for the starting point of the calculating the fiscal impact.
The first table below provides the tax rates and any changes under current law and as proposed in this bill. The last table provides an estimated impact the rate changes will have on revenue.
Proposed Legislation Rates and Split
(The proposed legislation would affect Tax Year 2023 and forward as indicated in dark blue below during Fiscal Year 2023 and forward.)
Fiscal Impact of Rate Changes by Fiscal Year
The fiscal impact of the proposed rate reductions as depicted in the above table may be overstated or understated for future years depending on whether actual revenue is more or less than the FY 2021 cash basis revenue less the anomalous receivable revenue (revenue received in FY 2021 that is credited back to FY 2020). Based on the distribution of Business Enterprise Tax revenue pursuant to RSA 77-E:14, at a tax rate of 0.50% all of the Business Enterprise Tax revenue will be deposited into the Education Trust Fund and none being deposited into the General Fund.
The Department would need to update all necessary tax return forms and electronic management systems to reflect the change in rates; however, it is not anticipated this will result in any additional administrative cost that could not be absorbed in the Department's operating budget.
AGENCIES CONTACTED:
Department of Revenue Administration