HB 615-FN-A - AS INTRODUCED

2017 SESSION

17-0207

09/10

HOUSE BILL 615-FN-A

AN ACT reducing the rates of the business profits tax and the business enterprise tax.

SPONSORS: Rep. Schleien, Hills. 37; Rep. Fisher, Belk. 9; Rep. Zaricki, Hills. 6; Rep. Fromuth, Hills. 7; Rep. Phinney, Straf. 24

COMMITTEE: Ways and Means

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ANALYSIS

This bill reduces the rates of the business profits tax and the business enterprise tax over a 3-year period.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

17-0207

09/10

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Seventeen

AN ACT reducing 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  Business Profits Tax; Imposition of Tax; 2018.  RSA 77-A:2 is repealed and reenacted to read as follows:

77-A:2  Imposition of Tax.  A tax is imposed at the rate of 7.5 percent upon the taxable business profits of every business organization.

2  Business Profits Tax; Imposition of Tax; 2019.  Amend RSA 77-A:2 to read as follows:

77-A:2  Imposition of Tax.  A tax is imposed at the rate of [7.5] 7 percent upon the taxable business profits of every business organization.

3  Business Profits Tax; Imposition of Tax; 2020.  Amend RSA 77-A:2 to read as follows:

77-A:2  Imposition of Tax.  A tax is imposed at the rate of [7] 6 percent upon the taxable business profits of every business organization.

4  Business Enterprise Tax; Imposition of Tax; 2018.  RSA 77-E:2 is repealed and reenacted to read as follows:

77-E:2  Imposition of Tax.  A tax is imposed at the rate of .5 percent upon the taxable enterprise value tax base of every business enterprise.

5  Business Enterprise Tax; Imposition of Tax; 2019.  Amend RSA 77-E:2 to read as follows:

77-E:2  Imposition of Tax.  A tax is imposed at the rate of [.5] .45 percent upon the taxable enterprise value tax base of every business enterprise.

6  Business Enterprise Tax; Imposition of Tax; 2020.  Amend RSA 77-E:2 to read as follows:

77-E:2  Imposition of Tax.  A tax is imposed at the rate of [.45] .4 percent upon the taxable enterprise value tax base of every business enterprise.

7  Applicability.

I.  Sections 1 and 4 of this act shall apply to taxable periods ending on or after December 31, 2018.

II.  Sections 2 and 5 of this act shall apply to taxable periods ending on or after December 31, 2019.

III.  Sections 3 and 6 of this act shall apply to taxable periods ending on or after December 31, 2020.

8  Effective Date.  This act shall take effect July 1, 2018.

LBAO

17-0207

1/23/17

HB 615-FN-A- FISCAL NOTE

AS INTRODUCED

AN ACT reducing the rates of the business profits tax and business enterprise tax.

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

METHODOLOGY:

This bill reduces the Business Profits Tax (BPT) rate from 8.2 percent to 7.5 percent for taxable periods ending on or after December 31, 2018; from 7.5 percent to 7.0 percent for taxable periods  ending on or after December 31, 2019; and from 7.0 percent to 6.0 percent for taxable periods ending on or after December 31, 2020.  The bill also reduces the Business Enterprise Tax (BET) rate from 0.72 percent to 0.50 percent for taxable periods ending on or after December 31, 2018; from 0.50 percent to 0.45 percent for taxable periods  ending on or after December 31, 2019; and from 0.45 percent to 0.40 percent for taxable periods ending on or after December 31, 2020.  

The Department of Revenue Administration (DRA) considered the estimated revenue impact associated with the BPT and BET rate reductions contained in Chapter 274, Laws of 2015 (SB 9) when deriving the estimated revenue loss associated with this bill.  The DRA estimated the rate reduction of 8.5 percent to 8.2 percent for BPT and 0.75 percent to 0.72 percent for BET would result in a revenue loss of $5,112,407 in FY 2016 and $16,013,240 in FY 2017.  The DRA estimated the revenue impact for the rate reduction of 8.2 percent to 7.9 percent for BPT and 0.72 percent to 0.675 percent for BET would result in a revenue loss of $6,214,475 in FY 2018 and $19,465,172 in FY 2019.  The DRA notes the analysis for the rate reductions contained in Chapter 274, Laws of 2015 used the 2015 revenue plan amount of $568,000,000 as the starting point.  For this analysis, the DRA used the FY 2016 cash basis revenue as the starting point for analyzing the proposed rate reductions in this bill resulting in the use of $610,901,677 in FY 2019 and each year thereafter as the revenue base based on the following assumptions:

• FY 2017 revenue would be equal to FY 2016 cash basis revenue of $641,000,000 from the June, 2016 Department of Administrative Services Revenue Focus.

• The impact of the rate reduction from 8.2% to 7.9% for BPT and .72% to .675% for BET has already been fully realized in the FY 2017 estimate payments and has eliminated any additional revenue growth.  Thus, the Department has not adjusted FY 2016 cash basis revenue for FY 2017 and thus has used $641,000,000 as the tax base for FY 2017.

• For FY 2018, the revenue estimate was reduced from $641,000,000 to $631,820,011 to account for the 1^st and 2^nd quarter estimate payments for Tax Year 2018, where the tax rate is expected to be reduced from 8.2% to 7.9% for BPT and 0.72% to 0.675% for BET.

• For FY 2019 and each year thereafter, the revenue estimate was reduced from $641,000,000 to $610,901,677 to realize the full implementation of the tax rate reduction from 8.2% to 7.9% for BPT and 0.72% to 0.675% for BET as taxpayers file their returns.

• No revenue growth from FY 2019 and has thus retained the FY 2019 tax base for purposes of analyzing the revenue impact of the proposed rate reductions.

The DRA notes there is a potential fiscal impact of $29,025,911 in FY 2018, if taxpayers reduce their first and second estimated payments to reflect the reduced Tax Year 2018 BPT and BET rates.  As part of the analysis, the DRA allocated each fiscal year’s revenue based on the proportionate amount of revenue anticipated to be received.  For example: the 1^st and 2^nd quarter estimate payments average about 30.5% of the total BPT/BET revenue received in each tax year.  Therefore, when calculating the fiscal impact of a tax year rate change on a state FY basis, this percentage was applied to allocate the fiscal impact proportionally based on the fiscal year when the revenue will actually be received.  After revenue was allocated proportionally based on when it is received, this new reduced revenue was subtracted from the assumed revenue to determine the incremental revenue impact of the proposed rate reductions for each fiscal year.  

It should be noted the fiscal impact of the proposed rate reductions may vary for future fiscal years depending on whether actual revenue under or over performs compared to the DRA’s assumed revenue figures.  The tables below summarize DRA's analysis:

Fiscal Impact of Rate Reductions by Fiscal Year

Original Rates and Assumed Revenue without Implementation of Proposed Legislation

New Rates and Revenue with Implementation of Proposed Legislation

Difference from New Rates and Revenue to Original Rates and Assumed

The DRA states this bill will result in additional costs for programming, scanning and form and instruction changes; however these additional costs can be absorbed into the Department’s budget.

AGENCIES CONTACTED:

Department of Revenue Administration