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: March 25, 2022, 4:36 p.m.

HB 1221-FN - AS AMENDED BY THE HOUSE

 

17Mar2022... 0471h

2022 SESSION

22-2291

10/05

 

HOUSE BILL 1221-FN

 

AN ACT relative to the rate of the business profits 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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AMENDED ANALYSIS

 

This bill reduces the rate of the business profits tax 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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

17Mar2022... 0471h 22-2291

10/05

 

STATE OF NEW HAMPSHIRE

 

In the Year of Our Lord Two Thousand Twenty Two

 

AN ACT relative to the rate of the business profits 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  Effective Date.  This act shall take effect upon its passage.

 

LBA

22-2291

Amended  3/23/22

 

HB 1221-FN- FISCAL NOTE

AS AMENDED BY THE HOUSE (AMENDMENT #2022-0471h)

 

AN ACT relative to the rate of the business profits tax.

 

FISCAL IMPACT:      [ X ] State              [    ] County               [    ] Local              [    ] None

 

 

 

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

 

 

 

 

 

METHODOLOGY:

This bill reduces the Business Profits Tax (BPT) rate from 7.6% to 7.5% 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 BPT tax revenue.  Based on the following assumptions/information, the Department is able to estimate a possible fiscal impact:

  • the starting point for calculating the fiscal impact on FY 2023 thru FY 2025 revenues is the FY 2021 cash basis BPT revenue less anomalous receivable revenue (revenue received in FY 2021 that is credited back to FY 2020) 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. Pursuant to Chapter 91:109-111, laws of 2021 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 BPT revenue as well as applying the applicable rates creates a base of $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 split 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 shaded cells below)

Fiscal Year

Tax Year

Percent Applicable to Tax Year

BPT Rates

Fiscal Year 2021

Tax Year 2019

15%

7.7%

 

Tax Year 2020

63%

7.7%

 

Tax Year 2021

22%

7.7%

Fiscal Year 2022

Tax Year 2020

15%

7.7%

 

Tax Year 2021

63%

7.7%

 

Tax Year 2022

22%

7.6%

Fiscal Year 2023

Tax Year 2021

15%

7.7%

 

Tax Year 2022

63%

7.6%

 

Tax Year 2023

22%

7.5%

Fiscal Year 2024

Tax Year 2022

15%

7.6%

 

Tax Year 2023

63%

7.5%

 

Tax Year 2024

22%

7.5%

Fiscal Year 2025 and forward

Tax Year 2023 and forward

100%

7.5%

 

 

Fiscal Impact of Rate Changes by Fiscal Year

Business Profits Tax - Statice Analysis Using 2021 Revenues

Fiscal Year

FY 2021 Revenues with Current Law's Decreased TY22 Rates

FY 2021 Revenues with Proposed Legislation's Decreased TY 23 Rates

Cumulative Fiscal Impact (Proposed Legislation Compared to Current Law)

2023

$645,236,590

$643,372,479

($1,864,111)

2024

$643,965,605

$636,763,358

($7,202,247)

2025

$643,965,605

$635,492,374

($8,473,231)

 

 

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).  

 

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