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April 22, 2016
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UPDATE:
New Hampshire Proposed Tax Legislation- 2016 Legislative Session

Author
Maurice P. Gilbert, CPA, MST
Director of State Taxation
603-695-8612
EMAIL
This article briefly discusses the status of some of the proposed legislative tax changes that were introduced in the Senate and House of Representatives and provides their status as of April 15th. We will provide a detailed analysis of the legislation that was enacted sometime in July 2016. If you wish to review the legislative history for any of the bills that we include in this edition, you can locate the information on the Legislative Website by entering the House or Senate bill number under the State Legislation Dash Board section. The bill docket document will provide a listing of all the actions taken related to the bill.

As activity in the Legislature increases, we also wanted to note that Devine Millimet & Branch’s Legislative and Governmental Affairs Team, chaired by Bob Dunn, is available to assist our clients, accountants, and tax practitioners in working with the state legislature and executive branch agencies. Teresa Rosenberger, President of Devine Strategies, also interacts with the state, federal, and local governments. Attorney Dunn can be reached at (603) 410-1704 or by e-mail and Ms. Rosenberger can be reached at (603) 410-1702 or by e-mail.

For your future planning, please note that the Devine Millimet Tax Team will be offering a number of New Hampshire tax seminars during the months of May through November and our 8th Annual Developments in New Hampshire Taxation Seminar tentatively set for January 6, 2017, at a Massachusetts location and January 13, 2017, at a New Hampshire location. In addition, we can provide the seminars on an in-house basis to your firm’s professional staff. If you are interested in discussing an in-house presentation, please contact me. For more information on these seminars, please visit our website periodically to review a full list of seminars that our firm’s various practice teams will be presenting this year. New seminars may be added throughout the year.

Learn more about Devine Millimet & Branch, Professional Association. Our e-mail alerts are sent to clients and friends and may be considered advertising.

Maurice
Maurice P, Gilbert, CPA, MST
 

The bills have been grouped below based on the tax or the general subject area that they relate to. The initial list only references the topic so that you can determine which bills you want to review. A brief summary of the bill is included in later sections and you can go directly to the ones of interest by clicking on the link in the initial list. The language contained in the Tax E-News is merely a summary of the proposal and the actual language of the legislation must be reviewed to determine all of the implications associated with the proposed bill under review by the Senate or House of Representatives.

Click link to jump to the summary.
Click the link in the summary to view the full bill.


BUSINESS PROFITS TAX (“BPT”)

  • UPDATING THE INTERNAL REVENUE CODE (“IRC”) REFERENCE IN THE BPT LIMITING IRC § 168, 179 AND 199 TO THE 2000 IRC LEVELS (SB 239)
  • SALE OR EXCHANGE OF OWNERSHIP INTERESTS WITH BASIS INCREASE (SB 342)
  • COMMISSION TO STUDY APPORTIONMENT OF GROSS BUSINESS PROFITS (SB 343)
  • TAX CREDITS APPLICABLE TO CLIENT LEASING COMPANIES (SB 344)
  • UPDATING THE INTERNAL REVENUE CODE (“IRC”) AND ALLOWING FULL FEDERAL IRC § 179 DEDUCTION (SB 552)
  • INCREASING THE IRC § 179 DEDUCTION TO $100,000 (HB 668)
  • REPEALING THE EDUCATION TAX CREDIT (HB 1192)
  • EXEMPTING CERTAIN MANUFACTURING BUSINESS FROM THE BPT & BET (HB 1254)
  • EXEMPTING NEW BUSINESSES FROM THE BPT & BET (HB 1258)
  • CHANGING THE FILING DUE DATES FOR BPT AND BET RETURNS FOR PARTNERSHIPS &  CORPORATIONS (HB 1290)
  • ESTABLISHING A CREDIT AGAINST THE BPT FOR MOTION PICTURE PRODUCTION EXPENDITURE EXPENSES IN NEW HAMPSHIRE (HB 1360)
  • SALE OR EXCHANGE OF OWNERSHIP INTERESTS WITH BASIS INCREASE (HB 1385)
  • EXEMPTING NEW BUSINESSES FROM THE BPT IN NEW HAMPSHIRE (HB 1422)
  • CHANGES TO THE REASONABLE COMPENSATION DEDUCTION FOR UNINCORPORATED BUSINESS UNDER THE BPT (HB 1443)
  • ESTABLISHING A BROADBAND DEPLOYMENT TAX CREDIT AGAINST THE BPT & BET (HB 1572)

BUSINESS ENTERPRISE TAX (“BET”)

  • CHANGING THE BET  TO A BUSINESS FLAT TAX, REDUCING THE RATE OF THE I&D AND REPEALING OTHER TAXES (HB 1538)

REAL TRANSFER TAX (“RETT”)

  • ELIMINATING THE NEED FOR A WITNESS ON THE DECLARATION OF CONSIDERATION FOR PURPOSES OF THE RETT (HB 1289)
  • EXCEPTIONS TO THE RETT (HB 1656)

TOBACCO TAX (“TABACCO”)

  • RELATING TO THE ADMINISTRATION OF THE TOBACCO TAX (HB 1208)
 


SUMMARY OF PROPOSED LEGISLATION

Click the link in the summary to view the full bill.

UPDATING THE INTERNAL REVENUE CODE (“IRC”) REFERENCE IN THE BPT (SB 239)
The proposed legislation would change the definition of the IRC contained in the BPT so that it would no longer be the IRC in effect on December 31, 2000. The new IRC would be the IRC of 1986 as amended and would apply to taxable periods beginning on or after January 1, 2016. The provision carves out the IRC § 168(k), 179 in excess of $25,000 & 199. The carve-out section of the bill would apply to property placed in service on or after January 1, 2016. The Senate also added a requirement that the Commissioner must provide a biennial report to the House and Senate Finance Committees on the changes in the IRC that could impact New Hampshire. The proposed legislation passed the Senate on February 4th and the House assigned the bill to the House Ways & Means Committee. The House Ways & Means Committee held a public hearing on March 22nd and conducted a couple of work sessions on this bill. The Committee is concerned with the “as amended” nature of the IRC update and appears to favor an update to the IRC in effect on December 31, 2015. Members of the Committee appear to favor an increase in the IRC Section 179 amount from the current $25,000 to $100,000 and finally the Commissioner’s report on changes would be an annual requirement. The Committee scheduled a vote on this bill for April 21st and that will be followed by a House vote sometime in early May.

If enacted, the legislation would apply to taxable periods beginning on or after January 1, 2016.

Back to List 
 
SALE OR EXCHANGE OF OWNERSHIP INTERESTS WITH BASIS INCREASE (SB 342)
The proposed language in the bill as it was introduced repeals the current language in RSA 77-A:4, XIV requiring a business organization to add to its gross business profits the amount of the basis increase on the sale of an ownership interest in a partnership, limited liability company or subchapter S corporation and replaces the provision with one that would not require the payment of the tax on the gain but would add to gross business profits the amount of the annual additional depreciation or amortization associated with the basis step up (the “Default Position”). The Senate amended the bill that was originally introduced to simplify the language but it retains the same result and the Senate passed the bill on March 24th. The House Ways & Means Committee had its public hearing on this bill on March 29th and the Committee has been reviewing the bill with a possible Committee vote scheduled for April 21st. There is a similar House Bill (HB 1385) dealing with this issue. The Default Position in HB 1385 is identical to SB 342 but HB 1385 contains an election by the taxpayer to pay the BPT tax on the amount of the basis step-up and then be able to depreciate/amortize the increase in basis as well as calculate the gain/loss on the sale of such asset using the increase in the adjusted basis. HB 1385, as passed by the House, had a public hearing in the Senate on April 5th and is under consideration in the Senate Ways & Means Committee. 

Both of the bills would apply to transactions that occur on or after January 1, 2016. 

Back to List 

COMMISSION TO STUDY APPORTIONMENT OF GROSS BUSINESS PROFITS (SB 343)
This bill as introduced would establish a Legislative Commission comprised of two Senators, two members of the House, the Commissioners of the Departments of Revenue Administration and Resources and Economic Development and the Attorney General to review apportionment provisions under the Business Profits Tax to determine what changes may need to be made in light of the changes occurring in neighboring states such as market-based sourcing of receipts. The Commission is to report their findings to the legislative leadership on or before November 1, 2016. At the Senate Ways & Means Committee hearing on January 12th, the bill was amended to add representatives of the business community, the New Hampshire Society of CPAs and the New Hampshire Bar Association. The bill has passed the Senate as amended and was referred to the House Ways & Means Committee. The House Ways & Means Committee held a public hearing on April 6th and voted on April 12th to recommended the bill for passage by the full House of Representatives. 

Recommendations from the Commission would likely be reviewed and possibly acted on in the 2017 Session of the Legislature. Tax professionals may want to follow the activities of the Commission and provide testimony or other assistance to it with the hope of providing better incentives for businesses to locate and grow in New Hampshire. 

Back to List 

TAX CREDITS APPLICABLE TO CLIENT LEASING COMPANIES (SB 344)
The bill relates to business tax credits that are applicable to employee leasing companies. The bill amends RSA 277-B:17-a to indicate tax credits relative to the business profits tax under RSA 77-A; the Coos County job creation credits under RSA 162-Q, the economic revitalization zone credit under RSA 162-N or any other available statutory tax credit that is based on employment, leased employees shall be deemed employees solely of the client company if an election is made under RSA 77-E:13-a. The client company shall be entitled to any such credits arising out of the employment of leased employees by such client company. The Senate passed the proposed bill on March 10th and sent the bill to the House for their consideration. The House Ways & Means Committee held its public hearing on March 29th and on April 12th recommended the bill for passage by the full House of Representatives.

The provision would apply to wages paid to the leased employee beginning on or after January 1, 2016.

Back to List 

UPDATING THE INTERNAL REVENUE CODE (“IRC”) AND ALLOWING FULL FEDERAL IRC § 179 DEDUCTION (SB 552)
The bill as originally introduced would have amended RSA 77-A:3-a which is the BPT provision that limits the IRC § 179 to $25,000 so that the provision would have eliminated the monetary limitation and would use the current version of the IRC rather than the IRC of 2012. After the public hearing on February 9th, the Senate amended the bill so that it also incorporated provisions similar to those in SB 239 previously discussed with the exception that it removed the IRC § 179 limitation in its entirety the result of which would have allowed the federal deduction amount of $500,000. The amended version of the bill was passed by the Senate on March 24th. The House Ways & Means Committee held its public hearing on this bill on April 5th. After a Committee work session on April 12th, the Committee is recommending that the House of Representative send the bill to interim study which would essentially kill the bill for the session.

Back to List 

INCREASING THE IRC § 179 DEDUCTION TO $100,000 (HB 668)
The bill that passed the House of Representatives would have increased the IRC § 179 deduction to $100,000 for tax periods beginning on or after January 1, 2017. The Senate Ways & Means Committee held its public hearing on March 1st. The Committee amended the bill so that the language was the same as SB 552, previously discussed. The Senate has submitted the bill to its Finance Committee for its review. The bill remains in the Finance Committee as of April 15th.

Back to List 

RELATING TO THE ADMINISTRATION OF THE TOBACCO TAX (HB 1208)
This bill makes a variety of changes to the tobacco tax laws, including changing and adding certain definitions and removing references to metering machines. This bill clarifies activities which constitute unauthorized sales of tobacco products. The bill also adds records of tobacco stamps sold and tobacco products distributed to required taxpayer records. The House of Representatives passed the bill on March 9th and the Senate also passed the bill on April 7th.

The legislation would be effective July 1, 2016.

Back to List 

ELIMINATING THE NEED FOR A WITNESS ON THE DECLARATION OF CONSIDERATION FOR PURPOSES OF THE RETT (HB 1289)
This bill makes technical corrections regarding rulemaking authority and reporting and payment dates to certain tax laws. The bill removes a requirement for witnessed signatures on declaration of consideration reports under the real estate transfer tax. The House passed the bill on March 9th and after the Senate Ways & Means Committee hearing on April 5th, the Committee voted to recommend that the Senate also pass the bill.
 
The legislation would be effective 60 days after its passage.

Back to List 
 
CHANGING THE FILING DUE DATES FOR BPT AND BET RETURNS FOR PARTNERSHIPS &  CORPORATIONS (HB 1290)
This bill changes the due dates for filing business profits tax and business enterprise tax returns to conform with federal due dates for partnership and corporate tax returns for taxable periods beginning after December 31, 2015. The House passed the bill on March 9th. The Senate Ways & Means Committee held its hearing on April 5th and the Committee voted to recommend that the Senate should also pass the bill. The full Senate has not yet acted on the bill.

Back to List 

ESTABLISHING A CREDIT AGAINST THE BPT FOR MOTION PICTURE PRODUCTION EXPENDITURE EXPENSES IN NEW HAMPSHIRE (HB 1360)
This bill establishes a credit against business profits taxes for media production expenditures made in New Hampshire. After its hearing and work session on the bill, the House Ways & Means Committee recommended that the bill be deemed inexpedient to legislate however Rep. Azarian recommended that the House table the bill and it remains tabled at this point in time.

If enacted into law, the legislation would be effective from July 1, 2016 through June 30, 2020.

Back to List 

ESTABLISHING A BROADBAND DEPLOYMENT TAX CREDIT AGAINST THE BPT & BET (HB 1572)
This bill establishes a broadband deployment tax credit incentive program to be administered by the department of resources and economic development. The credit shall be available against the business profits tax or the business enterprise tax to broadband providers for investment in providing access to broadband service to residences and businesses in under-served areas. After a hearing in the House Ways & Means Committee and a work session on the bill, the House on March 9th referred the bill to interim study which would essentially kill the bill for the session. 

Back to List 

EXCEPTIONS TO THE RETT (HB 1656)
This bill as introduced in and passed by the House would have exempted real estate transfers that occurred as a result of a conversion in entity type for entities with transferable ownership interests. The report of the House Ways & Means Committee indicated that the bill was going to accomplish more than what the language authorized. The Senate Ways & Means Committee held a hearing on the bill on March 22nd where testimony by the NH Association of Realtors and the prime sponsor of the bill, Rep. Daniel McGuire discussed the problems that needed to be resolved. Since the hearing and at the suggestion of the Senate Ways & Means Committee, there have been joint efforts among the NH Association of Realtors, Rep. McGuire and the Department of Revenue to resolve all of the issues that were presented so that all intended transfers such as those between the owners of an entity and the entity be exempted as long as there was no consideration involved and no change in the direct or indirect owners of the real estate. An amendment acceptable to the parties was  drafted and presented to the Senate Ways & Means Committee on April 19th for their consideration.
 
If the amended bill is enacted into law it will affect transactions that occur after its passage. 

Back to List 
 

SUMMARY OF BILLS DEEMED
INAPPROPRIATE TO LEGISLATE

This effectively kills the bill for the legislative session. 
Click the link in the summary to view the full bill. Back to List 

Our TAX TEAM can assist you and your clients in reviewing these proposed statutory changes to determine how they may be applicable to businesses operating in New Hampshire, to the business owners, and to New Hampshire residents. Members of our team can assist practitioners and their clients with tax planning or tax representation before the Internal Revenue Service or the various states’ Departments of Revenue.
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Tax Team


Jon B. Sparkman, Esq. CPA

Chair
603-695-8507
jsparkman@devinemillimet.com



Steve Cohen, Esq., CPA, LLM

603-695-8504
scohen@devinemillimet.com



Anu R. Mullikin, Esq., LLM

603-695-8536
amullikin@devinemillimet.com



Daniel E. Will, Esq.

603-695-8554
dwill@devinemillimet.com


Harper R. Marshall, Esq., LLM

603-695-8645
hmarshall@devinemillimet.com


Theofilos Vougias, Esq.
603-695-8534
tvougias@devinemillimet.com

Maurice P. Gilbert, CPA, MST

Director of State Taxation
603-695-8612
mgilbert@devinemillimet.com


Patricia M. McGrath, Esq., LLM

603-695-8537
pmcgrath@devinemillimet.com


Jason E. Cole, Esq., CPA

603-695-8566
jcole@devinemillimet.com



Michelle M. Arruda, Esq.

603-410-1705
marruda@devinemillimet.com



Patrick C. Brady, Esq.

603-695-8565
pbrady@devinemillimet.com
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The Devine Millimet Tax Group offers this free E-Mail Alert service to provide information on recent developments in tax law. If you have any questions about this e-mail please send us an email at mgilbert@devinemillimet.com.


This E-Alert is provided for informational purposes only. It is not intended to serve as legal advice or legal opinion. Devine, Millimet & Branch, Profesional Association makes no representations that this is a complete or final description or procedure that would ensure legal compliance and does not intend that the reader should rely on it as such. Our attorneys are available to assist tax payers in their compliance efforts and to represent tax payers in matters before state and federal courts and administrative agencies. For more information, please contact the attorney(s) listed or the Devine Millimet attorney or tax professional with whom you regularly work.

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