Bill Text - HB1563 (2024)

Relative to the education property tax and the authority of political subdivisions.

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Revision: Dec. 22, 2023, 9:22 a.m.

HB 1563-FN - AS INTRODUCED

 

 

2024 SESSION

24-2025

05/10

 

HOUSE BILL 1563-FN

 

AN ACT relative to the education property tax and the authority of political subdivisions.

 

SPONSORS: Rep. Fellows, Graf. 8; Rep. Schamberg, Merr. 6; Rep. Grassie, Straf. 8; Sen. Fenton, Dist 10

 

COMMITTEE: Ways and Means

 

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ANALYSIS

 

This bill replaces the statewide education property tax with a property tax contribution from political subdivisions based on the state education property tax warrant issued for the tax year beginning April 1, 2024.  The bill also restores statutory authority for the determination of education grants for municipalities that tuition students to other institutions.

 

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

24-2025

05/10

 

STATE OF NEW HAMPSHIRE

 

In the Year of Our Lord Two Thousand Twenty Four

 

AN ACT relative to the education property tax and the authority of political subdivisions.

 

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

 

1  Taxation; Real Estate.  Amend RSA 72:6 to read as follows:

72:6  Real Estate.  Political subdivisions of the state may impose a real estate tax.  The state may impose real estate taxes only upon railroads pursuant to RSA 82 and utilities pursuant to RSA 83-F.  All real estate, whether improved or unimproved, shall be taxed except as otherwise provided.

2  New Paragraph; Adequate Education; Education Trust Fund; Definition of Local Property Tax Contribution.  Amend RSA 198:38 by inserting after paragraph VIII the following new paragraph:

IX.  "Local property tax contribution" means the state education property tax warrant issued by the department of revenue pursuant to RSA 76:8 for the property tax year beginning April 1, 2024.  

3  Determination of Education Grants.  Amend RSA 198:41, I to read as follows:

I.  Except for municipalities where all school districts therein provide education to all of their pupils by paying tuition to other institutions, the department of education shall determine the total education grant for the municipality as follows:

(a)  Add the per pupil cost of providing the opportunity for an adequate education for which each pupil is eligible pursuant to RSA 198:40-a, I-III, and from such amount;

(b)  Subtract the [amount of the education tax warrant to be issued by the commissioner of revenue administration for such municipality reported pursuant to RSA 76:8 for the next tax year] local property tax contribution; and

(c)  Add the municipality's extraordinary need grant pursuant to RSA 198:40-f.

I-a.  For municipalities where all school districts therein provide education to all of their pupils by paying tuition to other institutions, the department of education shall determine the total education grant for each municipality as the lesser of the 2 following calculations:

(a) The amount calculated in accordance with paragraph I of this section; or

(b) The total amount paid for items of current education expense as determined by the department of education minus the local property tax contribution for such municipality.

4  Repeal.  The following are repealed:

I.  RSA 76:3, relative to the education tax.

II.  RSA 76:8, relative to the commissioner's warrant.

III.  RSA 198:56-198:61, relative to low and moderate income homeowners property tax relief.

IV.  RSA 198:39, I(d), relative to distribution of funds from the education trust fund for the low and moderate income homeowners property tax relief program.

5  Effective Date.

I.  Paragraphs I and II of section 4 of this act shall take effect December 1, 2024.

II.  Paragraphs III and IV of section 4 of this act shall take effect January 1, 2026.

III.  The remainder of this act shall take effect July 1, 2025.

 

LBA

24-2025

Revised 12/21/23

 

HB 1563-FN- FISCAL NOTE

AS INTRODUCED

 

AN ACT relative to the education property tax and the authority of political subdivisions.

 

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

Estimated State Impact - Increase / (Decrease)
	FY 2024		FY 2025	FY 2026	FY 2027
Revenue	$0		$0	($363,000,000)	($363,000,000)
Revenue Fund(s)	Education Trust Fund
Expenditures	$0		$0	Education Funding - $363M Decrease per Year   Low and Moderate Income Homeowner Property Tax Relief - Indeterminable
Funding Source(s)	Education Trust Fund
Appropriations	$0		$0	$0	$0
Funding Source(s)	None
• Does this bill provide sufficient funding to cover estimated expenditures? [X] N/A • Does this bill authorize new positions to implement this bill? [X] N/A
Estimated Political Subdivision Impact - Increase / (Decrease)
	FY 2024		FY 2025	FY 2026	FY 2027
Local Revenue	$0		$0	Indeterminable
Local Expenditures	$0		$0	$0	$0

 

METHODOLOGY:

This bill repeals the Statewide Education Property Tax (SWEPT) and effectively replaces it with authority for political subdivisions to impose a real estate tax.  For purposes of determining education grants, this bill replaces references to SWEPT with "local property tax contribution", which is defined as the SWEPT warrant amount issued on April 1, 2024.  Therefore, it is assumed this bill will have no impact on the non-SWEPT portion of state education grants under RSA 198:41.  Since this bill does repeal SWEPT, effective in FY 2026, it is assumed associated state education trust fund revenue and expenditures to local school districts would be decreased by $363,000,000 per year.  It is assumed political subdivisions will respond to this change by utilizing the new real estate tax authority to replace the lost revenue from the State, however, those potential offset amounts are indeterminable and would vary from community to community, as it would be determined through local decision making.

 

The Department of Revenue Administration (DRA) has provided the following understanding and assumptions relative to this bill :

 

• Section 1 amends RSA 72:6 to enable political subdivisions of the State to impose tax on real estate and limits the State’s ability to tax real estate to railroads pursuant to the Taxation of Railroads under RSA 82 and utility properties pursuant to the Utility Property Tax under RSA 83-F.  The DRA believes that this added sentence to RSA 72:6 is not necessary to accomplish the intent of the bill with the repeal of RSA 76:3.

 

• Section 2 defines “local property tax contribution” to be the RSA 76:8 education property tax warrant issued by the DRA for the property tax year beginning April 1, 2024.  These warrants were issued around September 2023, the revenue of which shall be for FY 2025.

 

• Section 3 modifies the calculation of total education grant for municipalities under RSA 198:41, I to subtract the local property tax contribution as opposed to the amount of the education tax warrant from the DRA.  Section 3 adds new paragraph I-a to RSA 198:41 stating the method for the Department of Education (DOE) to determine the total education grant for the municipalities where all school districts therein provide education to all their pupils by paying tuition to other institutions.

 

• Section 4 repeals RSA 76:3 that requires the DRA to set the education tax rate at a level sufficient to generate revenue of $363 million and RSA 76:8, relative to the Commissioner’s warrant.  RSA 76:8, II currently requires the Commissioner to issue the SWEPT warrants by December 15th each year.  The effective date of the repeal of RSAs 76:3 and 76:8 is effective December 1, 2024. While the DRA generally issues the warrant around September, RSA 76:8 requires the SWEPT warrant to be issued by December 15th each year.  Therefore, the DRA suggests that the effective date of this repeal be July 1, 2024, for property tax year beginning April 1, 2025. The DRA assumes that no SWEPT warrants shall be issued for the property tax year beginning April 1, 2025, the revenue of which would be for FY 2026.

 

• Section 4 also repeals the Low and Moderate Income Homeowners Property Tax Relief (L&M Relief), RSAs 198:56 through 198-61 and repeals RSA 198:39, I(d) that provided for the usage of moneys in the Education Trust Fund (ETF) to provide for the L&M Relief. This repeal of Sections 4 and 5 shall be effective January 1, 2026. The DRA interprets this to mean that this repeal would apply to property taxes assessed on April 1, 2026, and thereafter. The L&M Relief filing period runs between May 1 and June 30. The application dates for Tax Year 2026 claims are May 1, 2027, through June 30, 2027. Since the relief payments for Tax Year 2026 claims are paid out in FY 2027 and FY 2028, the fiscal impact of this proposed repeal will begin in FY 2027 and onwards.  

 

The DRA has provided the following fiscal impact considerations/assumptions:

• Assumes that each municipality would assess the local property tax contribution, generating the cumulative total of $363 million, to fund school district appropriations that were previously funded by the SWEPT. The DRA assumes that each municipality’s local property tax contribution rate for future years will remain static to the 2024 warrant.
• Under current law, each municipality collects the SWEPT on behalf of the State and retains the SWEPT locally to fund the State’s portion of education funding. Although the SWEPT is locally retained, the total amount of SWEPT collected by the municipalities is still recognized by the State as revenue to the ETF. The proposed legislation repeals the SWEPT. With the repeal of SWEPT, there would be a decrease in revenue of $363 million in the ETF starting in Fiscal Year 2026.
• The municipalities, in total, would see an increase in revenues by $363 million. However, the DRA is unable to determine the impact of this change to individual municipalities because the DRA would no longer be responsible for calculating the SWEPT rate in future years and instead the local property tax contribution for each municipality would be set to the 2024 warrant, therefore there would be no change in the amount for each municipality based on future changes in values.
• The DRA is unable to determine the fiscal impact of the repeal of the L&M Relief because the DRA is unable to predict the applications for the relief in the future. However, the repeal of the L&M Relief would result in the reduction of state expenditure from the ETF. As a guide, the amount of relief that was paid out during FY 2023 was approximately $1.5m. The L&M Relief filing period runs between May 1 and June 30. The application dates for Tax Year 2026 claims are May 1, 2027, through June 30, 2027. Since the relief payments for Tax Year 2026 claims are paid out in FY 2027 and FY 2028, the fiscal impact of this proposed repeal will begin in FY 2027 and onwards.

 

The New Hampshire Municipal Association states in light of the Contoocook Valley School District et al v. State of New Hampshire and Steven Rand et al v. State of New Hampshire decisions issued on November 20, 2023, further analysis would have to be performed to understand if these Superior Court decisions would impact this legislation.

 

AGENCIES CONTACTED:

Department of Education, Department of Revenue Administration, and New Hampshire Municipal Association