HB1533 (2024) Detail

Relative to the safe harbor compensation amount under the business profits tax.


HB 1533-FN - AS INTRODUCED

 

 

2024 SESSION

24-2541

05/10

 

HOUSE BILL 1533-FN

 

AN ACT relative to the safe harbor compensation amount under the business profits tax.

 

SPONSORS: Rep. Janigian, Rock. 25; Rep. Schamberg, Merr. 6; Rep. Plett, Hills. 29; Rep. Ulery, Hills. 13; Rep. Ammon, Hills. 42; Rep. Spilsbury, Sull. 3

 

COMMITTEE: Ways and Means

 

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ANALYSIS

 

This bill increases the amount of the safe harbor provision for compensation under the business profits tax and provides for a biennial increase in future years based on the percentage change in the Consumer Price Index.

 

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

24-2541

05/10

 

STATE OF NEW HAMPSHIRE

 

In the Year of Our Lord Two Thousand Twenty Four

 

AN ACT relative to the safe harbor compensation amount under the business profits tax.

 

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

 

1  Business Profits Tax; Safe Harbor Amount.  Amend RSA 77-A:4, III(c) to read as follows:

(c)  In lieu of substantiating the value of the personal services of proprietors, partners, or members, a business organization or group of related business organizations may elect, as a record-keeping safe harbor, to deduct up to [$75,000] $100,000 as total compensation for the tax year.  For tax years beginning on and after January 1, 2025, the commissioner shall biennially adjust this threshold amount rounding to the nearest $1,000 based on the 2-year (24-month) percentage change in the Consumer Price Index for All Urban Consumers, Northeast Region as published by the Bureau of Labor Statistics, United States Department of Labor, using the amount published for the month of June in the year prior to the start of the tax year;

2  Applicability.  This act shall apply to taxable periods ending on or after December 31, 2024.

3  Effective Date.  This act shall take effect 60 days after its passage.

 

LBA

24-2541

11/27/23

 

HB 1533-FN- FISCAL NOTE

AS INTRODUCED

 

AN ACT relative to the safe harbor compensation amount under the business profits tax.

 

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

 

 

Estimated State Impact - Increase / (Decrease)

 

FY 2024

FY 2025

FY 2026

FY 2027

Revenue

$0

Indeterminable Decrease

Indeterminable Decrease

Indeterminable Decrease

Revenue Fund(s)

General Fund and Education Trust Fund

 

Expenditures

$0

$0

$0

$0

Funding Source(s)

None

 

Appropriations

$0

$0

$0

$0

Funding Source(s)

None

 

Does this bill provide sufficient funding to cover estimated expenditures? [X] See Below

Does this bill authorize new positions to implement this bill? [X] No

 

METHODOLOGY:

This bill increases the amount of the safe harbor deduction amount under the business profits tax from $75,000 to $100,000 and provides for a biennial increase in future years based on the percentage change of the Consumer Price Index.  The Department of Revenue Administration states this bill will decrease General Fund and Education Trust Fund revenue, however the fiscal impact is indeterminable as the Department is not able to determine if taxpayers will have additional compensation expenses to claim above the current limitation of $75,000.

 

Based on the following assumptions/information, the Department is able to estimate a possible fiscal impact:

  • using Tax Year (TY) 2021 safe harbor deduction and recalculating it to current BPT tax rate of 7.5% results in an amount of  $8.8 million.
  • assuming the $8.8 million is based on the limitation of $75,000, it is adjusted for the new $100,000 limitation, which results in an estimated tax liability of $7.7 million for tax years ending on December 31,2024.
  • based on a tax year revenue analysis of prior fiscal years, it was determined fiscal year tax revenue is comprised of 15 percent from the tax year 2 years ago, 63 percent is from the tax year 1 year ago and 22 percent from the current tax year  (See table 1 below)
  • any estimated decrease does not include the apportionment methodology that transitioned to single sales factor (SSF) apportionment after TY 2021 for taxable periods ending on or after December 31, 2022 and the net operating loss deduction moving to single apportionment (apportioned only in the year the loss was generated).  
  • estimates apply to revenue attributable to TY 2025 and forward; assumes no change in taxpayer behavior; and does not include any adjustments based on the 2-year (24-month) percentage change in the Consumer Price Index for All Urban Consumers, Northeast Region as published by the Bureau of Labor Statistics.
  • due to timing of when this proposed legislation may be passed, it is assumed the first two TY 2024 estimated tax payments would not reflect the increased deduction. Therefore, it is assumed there is no fiscal impact in FY 2024.

 

 

The first table below provides the tax year splits impact on fiscal year.  The second table provides an estimated fiscal impact this changes will have on revenue.

 

Table 1. Tax Year Splits Impact on Fiscal Year

Fiscal Year

Tax Year

% Applicable to Tax Year

Current Law Safe Harbor Comp. Deduct.

Proposed Safe Harbor Comp. Deduct.

Fiscal Year 2025

Tax Year 2023

15%

$75,000

$75,000

Tax Year 2024

63%

$75,000

$100,000

Tax Year 2025

22%

$75,000

$100,000

Fiscal Year 2026 and forward

Tax Year 2024 and forward

100%

$75,000

$100,000

 

 

Table 2. Estimated Fiscal Impact - Static Analysis

Fiscal Year

Current Law Revenue Using TY 2021 Net Taxable Income

Est Revenue Under Proposed Legislation

Estimated (Decrease)/Increase Fiscal Impact Per Year

Cumulative Fiscal Impact

2025

$7,500,000

$6,500,000

($1,000,000)

($1,000,000)

2026 and forward

$8,800,000

$7,700,000

($1,100,000)

($2,100,000)

 

The fiscal impact 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 TY 2021 net taxable income used for the analysis of this bill.

 

The Department would need to update all necessary tax return forms and electronic management systems to reflect the changes contained in this bill; however, it is not anticipated this will result in any additional administrative costs that could not be absorbed in the Department's operating budget.

 

AGENCIES CONTACTED:

Department of Revenue Administration

 

Links


Date Body Type
Jan. 16, 2024 House Hearing
Feb. 6, 2024 House Exec Session
Feb. 6, 2024 House Floor Vote
April 3, 2024 Senate Hearing
April 10, 2024 Senate Hearing

Bill Text Revisions

HB1533 Revision: 40084 Date: Dec. 11, 2023, 9:28 a.m.

Docket


March 27, 2024: Hearing: 04/10/2024, Room 100, SH, 10:00 am; SC 13


March 27, 2024: ==CANCELLED== Hearing: 04/03/2024, Room 100, SH, 10:00 am;


March 27, 2024: Hearing: 04/03/2024, Room 100, SH, 10:00 am; SC 13


Feb. 22, 2024: Introduced 02/21/2024 and Referred to Ways and Means; SJ 6


Feb. 15, 2024: Ought to Pass: MA VV 02/15/2024 HJ 5


Feb. 8, 2024: Committee Report: Ought to Pass 02/06/2024 (Vote 20-0; CC) HC 6 P. 10


Jan. 31, 2024: Executive Session: 02/06/2024 01:00 pm LOB 202-204


Jan. 31, 2024: Full committee Work Session: 02/05/2024 10:00 am LOB 202-204


Jan. 5, 2024: Public Hearing: 01/16/2024 11:30 am LOB 202-204


Dec. 11, 2023: Introduced 01/03/2024 and referred to Ways and Means HJ 1