CHAPTER
Rev 300 BUSINESS PROFITS TAX
Statutory
Authority: RSA 21-J:13, I; 77-A:1,
III(b); 77-A:4-a; 77-A:6, I & IV; 77-A:15, II
PART Rev 301 DEFINITIONS
Rev 301.01 “Adjusted gross business profits” means a
business organization’s gross business profits, as defined in RSA
77-A:1, III, modified by the additions and deductions provided in RSA 77-A:4.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 301.02 “Apportionment” means the division of a
business organization's adjusted gross business profits among the states where
its activities are conducted by use of a formula provided in RSA 77-A:3.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 301.03 "Association" means a group of
individuals or business organizations which:
(a) Transacts business activity;
(b) Perpetuates its period of existence
notwithstanding that its members or participants change; and
(c) Might have been created by a formal
agreement, declaration of trust or other legal arrangement.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 301.04 “Base of operation” means:
(a) In the case of transportation property, the
place of more or less permanent nature from which property is regularly
directed or controlled; and
(b) In the case of an employee, the place of more
or less permanent nature from which the employee regularly:
(1)
Starts work and to which he or she customarily returns in order to
receive instructions from the employer;
(2) Communicates with customers or other persons;
or
(3) Performs any other functions necessary to the
exercise of his or her trade or profession.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 301.05 “Business trust” means an organization:
(a) Properly organized as a trust under the laws
of its domicile state; and
(b) Conducting business activity.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6129, eff 11-23-95; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 301.06 “Combined apportionment factors,” as used in
RSA 77-A:3, III, means the summation of the separately calculated sales,
payroll and property apportionment factors of each business organization within
a combined group.
Source. #8709, eff 8-25-06
Rev 301.07 “Combined group” means a business
organization whose unitary business is conducted within and without
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06 (formerly Rev
301.06)
Rev 301.08 “Combined reporting” means the use of a
single tax return or document to report the taxable business profits of a
combined group of business organizations subject to the business profits tax.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06 (formerly Rev
301.07)
Rev 301.09 “Compensation”, as used in RSA 77-A:3, I(b),
means remuneration, excluding fringe benefits, paid for services rendered
during the tax period including, but not limited to:
(a) Salaries;
(b) Wages;
(c) Bonuses; and
(d) Commissions.
Source. #4192, eff 12-23-86,
ss by #5490, eff 10-19-92, ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
(formerly Rev 301.08)
Rev
301.10 “Costs of performance” means the
direct costs of providing the service or activity determined in a manner consistent with
generally accepted accounting principles and in accordance with practices
prevalent in the trade or business of the organization.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06 (formerly Rev
301.09)
Rev 301.11 “Earned income”, as used in RSA 77-A:4, III(b),
means the net earnings from self-employment as defined in IRC section 1402.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06 (formerly Rev
301.10)
Rev 301.12 “Eighty/twenty business organization”, as
used in RSA 77-A:1, XV(b), means a separate business organization which
includes all its income in a United States tax return but where 80 % or
more of the average of the payroll and property of such business organization
is outside the 50 states and the District of
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06 (formerly Rev
301.11)
Rev 301.13 “Employee” means any person performing
services for a business organization for which compensation is provided except
that it does not include a director of a corporation acting in such capacity or
an independent contractor.
Source. #2012, eff 5-5-82; ss by #2722, eff 5-23-84;
ss by #4192, eff 12-23-86; ss by #4438, eff 6-22-88; ss by #5490, eff 10-19-92;
ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06 (formerly Rev 301.12)
Rev 301.14 “Enterprises as are expressly made exempt”, as
referenced in RSA 77-A:1, I, means:
(a) Entities exempt from taxation under section
501 of the IRC; and
(b) Does not mean business organizations which, for federal income tax purposes,
serve as conduits either in whole or in part for the real owners such as, but
not limited to:
(1) Partnerships;
(2) Single member limited liability companies;
(3) Subchapter S corporations;
(4) Qualified subchapter S subsidiaries;
(5) Grantor trusts;
(6) Real estate investment trusts;
(7) Real estate trusts; or
(8) Regulated investment companies.
Source. #5910, eff 10-14-94; ss by #6853, eff
9-23-98; ss by #8709, eff 8-25-06 (formerly Rev 301.13)
Rev 301.15 “Fringe benefits”
means the amounts, other than salaries or wages, paid or allowed by the
employer to, or on behalf of, the employee for items including, but not limited
to:
(a) Medical insurance premiums;
(b) Self-insured medical expenses;
(c) Life insurance premiums;
(d) Employer portion of F.I.C.A.;
(e) Unemployment compensation;
(f) Company discounts;
(g) Employer contributions to pension or profit
sharing plans; or
(h) Education assistance payments.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 301.16 “Income-producing activity”, as used in RSA
77-A:3, I(c), means:
(a) Transactions and activities directly engaged
in by the business organization for the ultimate purpose of obtaining gain or
profit and shall include, but not be limited to, the following:
(1) The rendering of personal services by
employees or the utilization of tangible and intangible property by the
business organization in performing a service;
(2) The sale, rental, leasing, or other use of
real property;
(3) The sale, rental, leasing, licensing, or
other use of tangible personal property; or
(4) The sale, licensing or other use of
intangible personal property; and
(b) Does not mean:
(1) Transactions and activities performed for the
business organization by independent contractors or other similar persons or
entities; or
(2) The mere holding of a security interest in
intangible property.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 301.17 “Independent contractor” means a person who:
(a) Exercises an independent employment;
(b) Contracts to do work for multiple business
organizations that are not related parties;
(c) Holds
himself or herself out to the public as an independent contractor in the
regular course of business; and
(d) Meets one of the following criteria:
(1) Has
been granted independent contractor status by the Internal Revenue Service for
federal income tax purposes; or
(2) Works according to his or her own judgment or
methods, without being subject to any employer except as to the results of the
work and, has the right to employ and direct the action of other workers independently of such employer and freed from
any superior authority to say how the specified work will be done.
Source. #4438, eff 6-22-88; ss by #5490, eff 10-19-92;
ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 301.18 “Interdependence in their functions,” as
referenced in RSA 77-A:1, XIV, means that relationship in which the New
Hampshire entity is an integral part of a larger system where the business done
within the state is dependent upon or contributes to the operation of the
business without the state as demonstrated by such factors as:
(a) Centralized management;
(b) Functional integration; and
(c) Economies of scale.
Source. #4192, eff 12-23-86; amd by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 301.19 “Internal Revenue Code (IRC)” means the United States Internal Revenue Code
as defined in RSA 77-A:1, XX.
Source. #5910, eff 10-14-94; ss by #6853, eff
9-23-98; ss by #8709, eff 8-25-06
Rev 301.20 “Manufacturing” means:
(a) The process engaged in as a business of
transforming raw or finished materials by hand or machinery through the
application of human labor and skill into a product which has a new form,
composition or character different from that in which it was acquired;
(b) The printing and binding of books,
newspapers, magazines or other periodicals;
(c) The electroplating, galvanizing, anodizing,
coloring, finishing, impregnating or heat treating of metals or plastics for
use in the process of rolling, drawing or extruding of ferrous and non-ferrous
metals;
(d) Photo finishing and the processing and
development of film, slides and photographs;
(e) The operation of a saw mill or planing mill
working on wood or wood products;
(f) Cooking, baking, freezing of fruits,
vegetables, mushrooms, fish, seafood, meats or grains and flours and placed in
a sealed container for further wholesale or retail distribution; and
(g) The brewing of beverages when such property
is placed in a sealed container for further wholesale or retail distribution.
Source. #4192, eff 12-23-86; amd by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 301.21 “Net profit from all business activity”, as
used in RSA 77-A:1, III(b) and Rev 302.01(b), means the difference between the
total income and total deductions on federal form 1120-S after making the
modifications required by Rev 302.01(c) (1) and (2).
Source. #2012, eff 5-5-82; ss by #2722, eff 5-23-84; ss
by #4192, eff 12-23-86; amd by #4438, eff 6-22-88; ss by #5490, eff 10-19-92;
ss by #6853, eff 9-23-98;
ss by #8709, eff
8-25-06
Rev 301.22 “Net profit from such business activity”, as
used in RSA 77-A:1, III(e), means the amount of net income from business
activity as is determinable under the provisions of the IRC for corporations
and applied within the provisions of RSA 77-A for such business organizations.
Source. #4192, eff 12-23-86; amd by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 301.23 “Partnership” means an unincorporated entity
comprised of 2 or more persons for the purpose of conducting business activity
as co-owners.
Source. #2012, eff 5-5-82; ss by #2722, eff 5-23-84;
ss by #4192, eff 12-23-86; amd by #4438, eff 6-22-88; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 301.24 “Principal New Hampshire business
organization” means an entity designated as the responsible party for filing
all returns, declarations, extensions, or other documents required under the
business profits tax on behalf of a combined group.
Source. #5910, eff 10-14-94; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06; ss by #8709, eff 8-25-06
Rev 301.25 “Proprietorship”, as used in RSA 77-A:1, III
and Rev 300 means:
(a) The ownership of any unincorporated business
by an individual; and
(b) Does not mean businesses conducted by an
entity such as, but not limited to a:
(1) Partnership; or
(2) Single member limited liability company.
Source. #4192, eff 12-23-86; amd by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06 (formerly Rev 301.26)
Rev 301.26 “Real and tangible personal property” means
land, buildings, improvements, equipment, merchandise or manufacturing
inventories, leasehold improvements, and other similar property that reflects the
organization's business activities.
Source. #4192, eff 12-23-86; amd by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06 (formerly Rev 301.27)
Rev 301.27 “Regular corporation” means an incorporated
business not governed by Subchapter S of the IRC for filing its federal income
tax returns.
Source. #2012, eff 5-5-82; ss by #2722, eff 5-23-84; ss
by #4192, eff 12-23-86; amd by #4438, eff 6-22-88; ss by #5490, eff 10-19-92;
ss by #6853, eff 9-23-98;
ss by #8709, eff 8-25-06 (formerly Rev 301.28)
Rev 301.28 “Representative” means an employee of a
business organization, or any person
acting on behalf of the business organization. The term does not include
independent contractors as defined in Rev 301.17.
Source. #8709, eff 8-25-06
Rev 301.29 “S corporation” means a business organization,
for federal income tax purposes, is defined within section 1361 of the IRC.
Source. #4192, eff 12-23-86; amd by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 301.30 “State”, as used in RSA 77-A:3 and RSA
77-A:4, means:
(a) Any state of the
(b) The
(c) The
(d) A territory or possession of the
(e) Any foreign country or political subdivision
thereof.
Source. #4192, eff 12-23-86; ss by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 301.31 “Taxable in another state” means the
activities of the business organization in another state:
(a) Exceed the parameters enumerated in 15 USC
section 381, P.L. 86-272,; and
(b) Are sufficient to create a taxable presence
within that state.
Source. #4192, eff 12-23-86; amd by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 301.32 “Unity of operation”, means there is a
centralized executive structure generally directing operations commonly
referred to as staff functions.
Source. #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 301.33 “Unity of ownership”, as used in RSA 77-A:1, XIV, means the activities outside the taxing jurisdiction, together with the in-state activities are owned either directly or indirectly by the same economic entity or group of economic entities.
Source. #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 301.34 “Unity of use” means there is an executive
authority with control over major policy matters and activities of the business organization.
Source. #6853, eff 9-23-98; ss by #8709, eff
8-25-06
PART Rev 302 COMPUTATION OF GROSS BUSINESS PROFITS
Rev 302.01 Business Organizations Filing as S
Corporations for Federal Income Tax Purposes.
(a) A corporation which qualifies and files as an
S corporation, for federal income tax purposes pursuant to sections 1361
through 1379 of the IRC, shall be treated the same as a corporation which files
as a regular corporation for federal income tax purposes.
(b) A corporation qualified as a subchapter S
subsidiary for federal income tax purposes pursuant to section 1361(b) of the
IRC shall:
(1) Be treated as a regular S corporation for
purposes of the business profits tax;
(2) Maintain sufficiently detailed records to
determine the business profits tax liability of the corporation at the
corporate level; and
(3) File its own business tax return unless it is
part of a combined return.
(c) The following modifications shall be made to
federal form 1120S to arrive at the net profit from all business activity:
(1) The ordinary income or loss from trade or
business activities on page one of federal form 1120S shall be increased or
decreased by all necessary adjustments including, but not limited to, on
schedule K of federal form 1120S for the amounts of:
a. Gross income or loss from real estate rental activities less expenses for such
activities;
b. Gross income
or loss from other rental activities less
expenses for such activities;
c. Interest, dividend or royalty income;
d. Short-term and long-term capital gains;
e. Net gain or loss under section 1231 of the IRC; and
f. Any S corporation income, loss or expenses
not included in federal form 1120S; and
(2) Expenses allowed to a C corporation may be
deducted.
(d) In a year wherein sections of the IRC
pertaining to formation or termination of an S corporation are applicable, and
the business organization is required to file a federal S corporation
short-year return and a federal regular corporation short-year return for the
same tax year, the corporation shall, for purposes of
business profits tax complete and file Form NH-1120, “Corporate Business
Profits Tax Return” with the department.
(e) Form NH-1120 shall be
accompanied by both federal returns.
(f) The method selected to allocate
income between the short S corporation and regular corporation tax years for federal
purposes shall not alter the amount due under RSA 77-A.
(g) A taxpayer shall determine the basis of stock
held in an S corporation for business profits tax purposes by:
(1) Calculating the basis amount as if the stock
were that of a regular corporation; and
(2) Not using basis adjustments which follow
federal conduit rules for taxation of partnership-type interests.
(h) Liquidations of S corporations shall follow
the same rules of the IRC as liquidations of regular
corporations for business profits tax purposes.
(i) No part of this section shall be construed as
allowing a greater deduction from income or inclusion to income than would be
allowable for regular corporations.
Source. #2651, eff 3-22-84; ss by #2722, eff 5-23-84;
ss by #4192, eff 12-23-86; amd by #4438, eff 6-22-88; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 302.02 Partnerships.
(a) Co-owners of property shall be considered
partners in a business organization if they conduct business activity with the
intent of dividing the profits.
(b) Co-owners of property which is maintained, kept
in repair, rented or leased shall not, in and of itself, create a partnership.
(c) A business organization that did not, in a
prior tax period, make a required
addition to gross business profits for an increase of the basis of an asset
under RSA 77-A:4, XIV due to the sale or exchange of an interest or a
beneficial interest in a business organization shall not be allowed:
(1) A deduction against gross business profits in
any subsequent period for depreciation or amortization on the increased basis
in the asset to the extent of the under-reported addition to gross business
profits; and
(2) An increase in the basis of the asset upon
disposition in a subsequent period to the extent of the under-reported addition
to gross business profits.
Source. #4192, eff 12-23-86; ss by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 302.03 Proprietorships.
(a) The gross business profits of a
proprietorship, except business activity conducted by a single member
limited liability company, shall include:
(1) The total net profit or loss from all
businesses, professions, or farming activities reported by an individual
on his or her federal income tax return;
(2) The total net income or loss from rental
activities reported by an individual on his or her federal income tax return;
(3) The total gain or loss from the disposition
of all business assets owned by an individual on his or her federal income tax
return; and
(4) The amount of an installment gain from the
disposition of all business assets owned by an individual on his or her federal
income tax return.
(b) A proprietorship engaged in business activity
both within and without
(c) Where spouses jointly own rental property or
provide services for a business activity, and do not file as a partnership for
federal income tax purposes, the gross business profits from such business
activity shall be reported as a single proprietorship.
(d) Gross business profits for a single member limited
liability company shall be determined
based on the entity type of its member.
Source. #4192, eff 12-23-86; ss by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 302.04 Use of Separate Accounting. Business organizations shall not determine
their
Source. #4192, eff 12-23-86; amd by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; amd by #5910, eff 10-14-94; ss by #6853,
eff 9-23-98; ss by #8709, eff 8-25-06
Rev 302.05 Business Organizations Whose Income or
Expenses are Federally Reportable by the Owners.
(a) Any business organization, whose income or
expenses are reportable by the true owners for federal income tax purposes,
shall include all items of income and expense in its business profits tax
return rather than the return of the shareholder, partner, or other owner.
(b) Any element of income, expense, or both,
required to be reported at the entity level for purposes of the business
profits tax shall be removed from the true owner's business profits tax return.
(c) The tax for the business organization shall
be computed before any distributions, adjustments, or both, resulting from the
application of federal tax law provisions which permit the pass-through of
items of income or expenses to the owners.
(d) A real estate investment trust shall be
subject to the business profits tax on the taxable income of the real estate
investment trust prior to adjustments provided in section 857(b)(2) of
the IRC.
(e) A regulated investment company shall be
subject to the business profits tax on the taxable income of the regulated
investment company prior to the adjustments provided in section 852(b)(2)
of the IRC.
(f) A single member limited liability company
shall:
(1) Obtain a New Hampshire taxpayer
identification number, as defined in Rev
2902.04, from the department by
filing Form DP-200, “Request for New Hampshire Taxpayer Identification Number (NHTIN) or a
Department Identification Number”, as described in Rev 2903.01, prior to filing any tax documents with the
department if:
a. The taxpayer does not have a federal employer
identification number;
b. The taxpayer shares a taxpayer identification
number with another taxpayer who is subject to taxation; or
c. The taxpayer is not required to obtain:
i. A federal employer identification number;
ii. Social security number; or
iii. An individual taxpayer identification number
issued by the Internal Revenue Service; and
(2) Determine its gross business profits as
provided in (a) in accordance with:
a. RSA 77-A:1, III(a), if the
member is a corporation;
b. RSA 77-A:1, III(c), if the member
is a partnership;
c. RSA 77-A:1, III(d), if the member is a proprietor; and
d. RSA 77-A:1, III(e), if the
member is a trust;
(g) A qualified subchapter S corporation subsidiary
shall determine its gross business profits, as provided in (a), in accordance
with RSA 77-A:1, III(b).
(h) A single member limited liability company and
a qualified subchapter S corporation subsidiary shall maintain records, as
provided in RSA 77-A:11, sufficiently detailed to calculate:
a. Gross business
profits;
b. Additions and deductions as provided in RSA
77-A:4; and
c. Apportionment factors as provided in RSA 77-A:3.
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 302.06 Gains or
Losses on
(a) The selling price for the sale or other
disposition of a business asset shall be the sum of:
(1) Money received;
(2) Indebtedness assumed by the buyer or
transferee; and
(3) The fair market value of any property, other
than money, received.
(b) The basis of the business asset, such as the original cost of the asset less
the depreciation allowed or allowable, sold or exchanged shall be:
(1) Determined using the requirements of the IRC; and
(2) Applied at the entity level.
(c) One hundred per cent of the
recognized gain or loss on the sale, exchange or other disposition of a business asset
shall be included in a business organization's gross business profits.
(d) The recognition and realization of gains or
losses on the sale, exchange, or other disposition of property shall be
determined based upon the requirements of the IRC except where RSA 77-A and
these rules prescribe a different treatment including, but not limited to, the determination of gain or losses using
the federal provisions relating to consolidated returns.
(e) Property owned by more than one business organization
shall be reported by each business organization in proportion to its ownership
interest on the gain or loss on the sale, exchange or other disposition
of such property.
Source. #3066, eff 7-23-85; ss by #4192, eff
12-23-86; amd by #4438, eff 6-22-88; ss by #5490, eff 10-19-92; ss by #6853,
eff 9-23-98; ss by #8709, eff 8-25-06
Rev 302.07 Installment Method of Reporting Income.
(a) Business organizations reporting their income
under the installment method, for federal income tax purposes, shall report
their income for business profits tax purposes using the same method except as
provided in (f) and (g) below.
(b) Business organizations selling property on an
installment basis shall be considered a business organization until all the
installments have been reported and the total tax paid.
(c) The gross sales price of the property shall
be considered and not the amount received in a particular year for purposes of
the gross business income test.
(d) Neither the gross selling price nor the
installment proceeds shall be included in gross business income except for the
year of sale for purposes of the gross business income test.
(e) A return reporting the installment income shall
be filed every year, regardless of the amount of each installment, if the gross
sales price exceeded $50,000 for tax years ending after June 30, 1993.
(f) The reported installment gain income shall
not be increased or decreased by income from the other business activity if the
filing of a return is due to the reporting of installment income, and the
statutory minimum income level other than for the installment sale has not been
met.
(g) A business organization may elect to report
the entire gain or loss in a single year for business profits tax purposes
although it has not elected, pursuant to section 453(d) of the IRC, by
attaching a completed Form DP-95, “Permission to Report Net Gain in a Year of
Sale”, to the business profits tax return if the filing requirement for
subsequent years is solely the result of reporting the gain or loss from the
installment sale to New Hampshire.
(h) The
sale, exchange or other disposition of an installment obligation by a business
organization shall require the
inclusion of:
(1) The unreported gain or loss in the business
organization’s business profits tax return covering the year the sale, exchange
or other disposition took place; and
(2) The computation of the gain or loss and the basis
of the obligation in accordance with IRC section 453B.
Source. #4192, eff 12-23-86; amd by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 302.08
(a) Amounts received by a business organization
from the state of New Hampshire for the purchase of agricultural land
development rights shall constitute gross business income within the meaning of
RSA 77-A:1, VI, as gross proceeds from the sale of assets used in the trade or
business.
(b) The gain or loss realized from the sale in
(a) shall be includible in the gross business profits of a business
organization if such asset is compatible with the underlying business activity.
(c) The gain or loss on the sale of agricultural
land development rights to the state of
(d) The gain or loss on the sale of agricultural land
development rights to the state of
Source. #4192, eff 12-23-86; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 302.09 Business Organizations Includible in
Federal Consolidated Return.
(a) Business organizations includible in a
federal consolidated return shall determine their gross business profits
without applying sections 1501 through 1505 of the IRC and the U.S. Department
of the Treasury’s Treasury Regulations 1.1501 et seq.
(b) Business organizations shall compute the
basis of their property, including the stock of subsidiaries, using the basis
provisions contained in the IRC for non-affiliated corporations.
(c) A combined group of business organizations
filing a federal consolidated return shall determine the gross business profits
of each separate legal entity in accordance with (a) and (b) above.
(d) The amount of income, expense and gross
business profits determined under (a) for each entity shall be added together
and all intergroup activity eliminated to arrive at the gross business profits
of the combined group.
Source. #4438, eff 6-22-88; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 302.10 Business Organizations Includible in a Combined
Report.
(a) Business organizations utilizing combined
reporting, as defined in Rev 301.07, shall determine the gross business profits
of each business organization includible in the combined group as if the
organizations were not affiliated companies in accordance with RSA 77-A:1, I
and III and Rev 300.
(b) The amounts of income from each entity shall
be added and all intergroup activity shall be eliminated to arrive at the gross
business profits of the combined group.
(c) The amounts of deductions from each entity
shall be added and all intergroup activity shall be eliminated to arrive at the
gross business profits of the combined group.
Source. #4438, eff 6-22-88; ss by #5490, eff
10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff 8-25-06
Rev 302.11 Factors Suggesting Unity of Operation. To determine if a centralized executive
structure controls the staff functions indicating unity of operation, the
department shall consider the importance to the business organization of, and
the extent to which, the following factors are controlled by a centralized
executive structure:
(a) Accounting;
(b) Advertising;
(c) Industrial or public relations;
(d) Insurance;
(e) Legal;
(f) Purchasing;
(g) Research and development;
(h) Retirement planning; or
(i) Any other factor commonly
referred to as a staff function.
Source. #5355, eff 3-16-92; ss by #6853, eff 9-23-98;
ss by #8709, eff 8-25-06
Rev 302.12 Factors Suggesting
Unity of Use. To determine if a
centralized authority controls major policy decisions and activities of the
business organization indicating unity of use, the department shall consider
the importance to the business organization of, and the extent to which, the
following factors are overseen or performed by an executive authority:
(a)
Defines and controls the
general system for producing profit;
(b)
Establishes professional
standards to enhance or promote public perception of the business;
(c) Imposes and enforces procedures to implement
compliance of business activities with public law and regulations;
(d) Sets standards of ethical performance;
(e)
Controls major policy
issues;
(f) Makes
budgetary allocations;
(g) Approves
major capital expenditures and
expansions;
(h)
Appoints, assigns or transfers
personnel for combined group members;
(i)
Coordinates the
activities of the affiliated entities within the general system of operations;
(j)
Prepares the financial
reports;
(k) Determines and defines required intergroup
transactions including sales, financing, and transfers of goods or services;
(l)
Determines combined group
decisions in matters involving intergroup conflicts or problems; or
(m) Any
other function managed by a
central executive authority.
Source. #8709, eff 8-25-06
Rev 302.13 Master Limited Partnerships.
(a) The taxable presence
(b) Form NH 1065, “Partnership Business Profits
Tax Return”, reporting the combined net income of the master limited
partnership’s unitary business shall be filed in accordance with the provisions
of Rev 307.07.
Source. #6853, eff 9-23-98; ss by #8709, eff 8-25-06
(formerly Rev 302.11)
Rev 302.14 Election to Adopt Consolidated Group's
Averaging Convention.
(a) If a New Hampshire business organization is a
member of a federal consolidated group that has utilized a different averaging
convention under section 168(d) of the IRC than would be allowable for the New
Hampshire business organization under a separate entity filing, the New
Hampshire business organization may elect to follow the averaging conventions
of its consolidated group by indicating that choice to the department by
attaching the following statement to its business profits tax return:
“(name of business
organization) hereby elects to adopt the averaging conventions of Internal
Revenue Code section 168(d) utilized by the (name of parent) federal
consolidated group of which it is a part, and hereby attests that its usage
will have no material effect on the tax liabilities of (name of business
organization).”
(b) The business organization's election shall be
disallowed when an audit is performed on returns filed by a business organization
and the audit determines the election resulted in a material impact upon
the business organization's
(c) The averaging convention otherwise required
shall be required for each return so affected in (b) above.
(d) A material impact upon the business
organization’s
Source. #6853, eff 9-23-98; ss by #8709, eff 8-25-06
(formerly Rev 302.12)
Rev 302.15 Reasonable Compensation for Employees of a
Corporation.
(a) Reasonable
compensation for an employee of a corporation shall follow IRC section 162 and
related federal authority in
determining the gross business profits of a corporation.
(b) The business organization shall be allowed to
deduct reasonable compensation to an owner employee in determining the gross
business profits of a corporation or other organization permitted a federal
compensation deduction for any owner employee in arriving at its gross business
profits.
Source. #8709, eff 8-25-06 (formerly Rev 302.13)
Rev 302.16 Professional Limited Liability Companies. A professional limited liability company
conducting business activity in
Source. #8709, eff 8-25-06 (formerly Rev 302.14)
PART Rev 303 ADDITIONS AND DEDUCTIONS MADE TO GROSS
BUSINESS PROFITS
Rev 303.01 Compensation for Personal Services of
Proprietor, Partner or Member.
(a) For purposes of this chapter, the following
definitions shall apply:
(1) “Amounts which are reasonable and fairly
attributable to the personal services of the proprietor, partner or member”
means the amount that business organizations of similar size, volume and
complexity compensate employees with similar responsibility, devotion of time,
education and experience as the proprietor, partner or member actually
rendering services. The term does not
include amounts that are fairly attributable to a return on business assets and
amounts that are fairly attributable to a return on the labor of non-owner
employees;
(2) “Fairly attributable to a return on business
assets” means the income stream related to the use of business assets defined
in RSA 77-A:1, XI, but not the services of maintaining those assets;
(3) “Fairly attributable to a return on the labor
of non-owner employees” means the value to the business organization of its
employees generally measured by the income to the business brought about by the
efforts of non-owner employees over and above the costs to the organization for
those employees including supervisory, training and overhead costs incurred by
the business organization; and
(4) “Actually renders personal services” means
the services performed by the proprietor, partner or member of the business
organization directly related to the operation of the business organization,
but not in the capacity of an employee, owner, partner or member of another
business organization.
(b) Compensation shall be available to a
proprietor, partner, or member of a limited liability company taxed as a
proprietorship or partnership for federal income tax purposes who:
(1) Is a natural person; and
(2) Actually renders personal services to the
business organization.
(c) Compensation shall be allowed for amounts
which are:
(1) Reasonable and fairly attributable to the
personal services of the proprietor, partner or member pursuant to RSA 77-A:4,
III(a); and
(2) Not in excess of the maximum deduction
allowable pursuant to RSA 77-A:4, III(b).
(d) In order to support the
reasonableness of the compensation deduction for a proprietor, partner,
or member, a business organization shall maintain records to indicate
the:
(1) Personal services provided by the individual
for the business organization;
(2) Amount of time required to perform the
personal services for the business organization taking the deduction; and
(3) The methods used to determine the amount of
the compensation deduction.
(e) A business organization may utilize
comparative compensation data from:
(1) Business organizations of similar size,
volume and complexity from industry statistics; or
(2) Publications such as the most current
editions of:
a. The Occupational
Outlook Handbook published by the U.S. Department of Labor, Bureau of Labor
Statistics, available at www.bls.gov; and
b. The New Hampshire Wages and Benefits published by the New Hampshire
Department of Employment Security, available at www.nhes.state.nh.us, as a reference
point.
(f) Each proprietor, partner, or member described
in (b) above shall be allowed a minimum deduction of $6000.
(g) In determining the maximum deduction
allowable under RSA 77-A:4, III (b) for the proprietor’s, partner’s, or
member’s compensation, the proprietor, partner, or member shall utilize the sum
of the following amounts included on their federal income tax schedules:
(1) The sum of the following amounts from the
federal income tax returns of the business organization:
a. Net profit or loss from federal form 1040,
schedule C;
b. Net farm profit or loss from federal form
1040, schedule F;
c. Ordinary income or loss from trade or
business activities from federal form 1065, schedule K-1;
d. Guaranteed payments to a partner or member
from federal form 1065, schedule K-1; and
e. Income, expenses or losses from business
activities in the regular trade or business or the partnership or limited
liability company taxed as partnership for federal tax purposes that are
specifically allocated to the individual partner or member;
(2) Net income or loss, but not less than zero,
from rental properties from federal form 1040, schedule E, federal form 8825
and federal form 4835; and
(3) If the proprietor, partner or member acted as
the broker or agent the following shall apply:
a. If no other broker or agent representing the
seller was involved in the sale of the property, a commission not to exceed 15% of the total gross sales price as
shown on federal form 4797, federal form 6252, federal form 1065 schedule D,
and federal form 1040 for the sale of business assets; or
b. If the partner, proprietor or member acts as
a co-broker, the maximum deduction shall be the difference between the amount determined in a. above and the amounts
paid to other brokers or agents.
(h) A partnership business organization electing
to be taxed as a corporation for federal income tax purposes shall:
(1) Not take a compensation deduction under RSA
77-A:4, III; and
(2) Take a reasonable compensation deduction as
allowed under the IRC when such deduction is:
a. Taken on the entity's federal corporate
return filed with the Internal Revenue
Service; and
b. In accordance with Rev 302.15.
(i) Where a proprietor, partner, or member provides
personal services for multiple business organizations, the records of each
organization shall comply with the requirements of (c) above.
(j) Where a proprietor, partner, or member
provides personal services for multiple business organizations, the deduction
claimed by each business organization shall be for the personal services
rendered to it by the individual in the capacity of the proprietor, partner, or
member of the specific business organization for which the deduction is taken.
(k) Remuneration for the personal services
performed by a spouse shall be deductible:
(1) As compensation in determining the gross
business profits of the business organization when the spouse is an employee;
or
(2) Under the provisions of RSA 77-A:4, III if the
spouse is not an employee of the business organization and performs the
personal services as a surrogate for the proprietor, partner or member.
Source. #4192, eff 12-23-86; ss by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06
Rev 303.02 Qualified Research Contributions.
(a) For purposes of RSA 77-A:4, XII(a), the
business organization shall add back to its gross business profits the
federally deducted amount attributable to the specifically contributed items
which meet all requirements of qualified research contributions defined in RSA
77-A:1, X.
(b) Each business organization taking a qualified
research contribution under RSA 77-A:4, XII shall attach a document to its business profits tax
return containing the following information:
(1) Name of each donee;
(2) Date of each donation;
(3) Description of each item donated;
(4) Amount deducted under section 170 of the IRC
for the contributed item;
(5) Business organization's basis in the
contributed item;
(6) Total amount of unrealized appreciation for
the contributed item; and
(7) The portion of the
federal contribution carryover attributable to a
(c) The amount listed under (b)(7), above, shall
be utilized to increase the business organization's gross business profits in
subsequent years as the contribution carryover is used to reduce federal
taxable income.
(d) When a contribution becomes a
(1) Be considered fully taken in the year it is
given;
(2) Not be endowed with special federal tax
attributes beyond the scope of the language of RSA 77-A:1, X, such as, but not
limited to, the federal carryover capabilities of unused charitable
contributions; and
(3) Not be carried over to a subsequent business
profits tax return.
Source. #2567, eff 12-28-83; ss by #2722, eff
5-23-84; ss by #4192, eff 12-23-86; ss by #5490, eff 10-19-92; amd by #6675,
eff 1-27-98; ss and moved by #6853, eff 9-23-98 (from Rev 303.03); ss by #8709,
eff 8-25-06
Rev
303.03 Net Operating Loss Deduction.
(a) No loss amounts incurred before July 1, 1997,
as determined by the business organization’s method of accounting, shall
contribute either directly or indirectly to a net operating loss deduction.
(b) Section 172 of the IRC in
effect December 31, 1996, for purposes of calculating the amount of any net
operating loss deduction allowed under RSA 77-A:4, XIII, shall be followed,
except:
(1) The carryback of loss required by IRC
section 172 (b)(1) is not required for
(2) The amount
is limited as provided in Rev 303.03 (d), (e), and (f), below.
(c) Net operating losses may be
carried forward for 10 years following the loss year.
(d) Business organizations,
subject to RSA 77-A:3, regarding the apportionment of income shall apportion
any net operating loss carried forward using the formula provided in RSA 77-A:3
and Rev 304.
(e) Combined groups with more than
one member subject to RSA 77-A shall:
(1)
Calculate separate apportionment percentages for each business organization
as follows:
a. The denominators used to calculate these
percentages shall be the sales, payroll and property denominators of the
combined group; and
b. The numerators shall be the
(2) Treat
each business organization’s apportioned share of the combined loss amount as a
tax attribute which remains with that business organization;
(3) Total
the apportioned loss carry forward amounts of each business organization in the
combined group possessing such tax attributes; and
(4) Apply
the result in (3) as a deduction from the gross business profits of the
combined group before apportionment under RSA 77-A:3 in the taxable period in which the deduction
is to be used.
(f) The net operating loss carry
forward calculated in either (b), (d) or (e) above, shall be limited as
provided in RSA 77-A:4 XIII (a), (b), (c) and (d) for each business
organization.
(g) The resulting net operating
loss shall be applied to the gross business profits before apportionment under
RSA 77-A:3.
(h) Business organizations
availing themselves of the net operating loss deduction shall:
(1) Maintain detailed records that confirm each
step in the calculation of the:
a. Net operating loss;
b. Net operating loss carry forward; and
c. Net operating loss deduction amounts; and
(2) Retain the federal and state tax returns and the
detailed records relating to a net operating loss for all taxable periods to
which the net operating loss relates.
(i) During a department audit of a taxable period
where a
(1) Provide the department with all state and
federal tax returns and detailed records with an impact on the proper
calculation of the deduction taken by the business organization;
(2) Not receive a refund for a prior year
overpayment nor be assessed additional tax liability for prior year
deficiencies resulting from an inquiry that reveals adjustments to prior
taxable period net operating loss calculations would be appropriate in the
liability of the business organization in any of the prior taxable periods
outside the statute of limitations;
(3) Deduct the appropriate New Hampshire net
operating loss deduction in the audit years as if the extra-statutory year
adjustments had been made; and
(4) Adjust the carry forward amount in the years
subsequent to the audit year.
Source. #2012, eff 5-5-82; amd by #2403, eff 6-27-83;
ss by #2722, eff 5-23-84; ss by #4192, eff 12-23-86; ss by 5355, eff 3-16-92; ss
by #5490, eff 10-19-92; ss and moved by #6853, eff 9-23-98 (from Rev 303.04);
rpld and ss by #8709, eff
8-25-06
Rev 303.04 Interest Income Derived from Notes, Bonds
and Other Securities of the
(a) For
purposes of this section, “other securities” means a long-term indebtedness
similar to a bond that can be sold or exchanged by the owner.
(b)
Deposits, such as demand deposits, timed deposits or certificates of
deposits, placed in financial institutions of the
(c)
Business organizations shall deduct only interest which is received
directly or indirectly from direct obligations of the
(d)
Business organizations, upon a request from the department, shall
provide documentation showing that the interest was from a direct obligation of the
(e) The
documentation provided in (d) shall indicate that the obligation:
(1) Was in writing;
(2) Was interest bearing;
(3) Contained a binding promise by the
(4) Contained specific congressional
authorization pledging the full faith and credit of the
(f) Business
organizations shall deduct that portion of interest from US obligations
represented by gross business profits, net of
business expenses relating to the obligation as provided in RSA 77-A:4, II.
(g)
Interest received on obligations from organizations where the United
States guarantees, but is not the principal obligor of the debt, shall not
qualify for the deduction provided in RSA 77-A:4, II.
Source. #4192, eff 12-23-86; ss by #5490, eff 10-19-92;
amd by #5910, eff 10-14-94; amd by #6026, eff 4-27-95; amd by #6129, eff
11-23-95; ss and moved by #6853, eff 9-23-98 (from Rev 303.05); ss by #8709,
eff 8-25-06
PART Rev 304 APPORTIONMENT OF ADJUSTED GROSS BUSINESS
PROFITS
Rev 304.01 Availability or Requirement of
Apportionment for Business Organization.
(a) A
(1) Its business activities are conducted both
within and without
(2) The business organization's activities were
sufficient in another state for that state to impose a:
a. Net income tax;
b. Franchise tax based upon net income; or
c. Capital stock tax.
(b) A business organization not domiciled in
(1) Its activities within New Hampshire are
sufficient to meet the due process requirements of the New Hampshire
constitution in part 1, article 12 and part 2, articles 5 and 6; and
(2) Its in-state activities exceed the protection
of 15 USC Section 381, P.L. 86-272.
(c) A business organization shall not apportion a
portion of its income to another state when:
(1) Its activities within the other state were
not sufficient for that state to impose the taxes referred in (a)(2) above;
(2) It pays a minimal fee for qualifying to do
business within that state; or
(3) It voluntarily files and pays a tax referred to
in (a)(2), above, which it was not legally required to do.
(d) A business organization shall determine its
immunity under 15 USC Section 381, P.L. 86-272, by comparing its activities
within
(1) Activities which exceed the protection of
P.L. 86-272 when conducted in
a. Making repairs or providing maintenance;
b. Owning, maintaining, leasing, or otherwise
using any of the following facilities or property:
1. Repair shop;
2. Parts department;
3. Purchasing office;
4. Employment or recruiting office;
5. Warehousing facilities including the use of
public warehouses;
6. Meeting place for directors, officers or
employees;
7. Stock of goods other than samples used entirely
ancillary to the solicitation of orders;
8. Mobile stores such as a truck with a driver
salesman making sales from the vehicle; or
9. Real property, fixtures or equipment of any
kind;
c. Collecting current or delinquent accounts;
d. Installing merchandise or equipment or
supervising such work;
e. Conducting training programs, seminars or
lectures for personnel other than personnel
involved only in the
solicitation of sales;
f. Investigating, handling, or otherwise
assisting in resolving customer complaints, other than mediating direct
customer complaints when the sole purpose of such mediation is to ingratiate
the sales personnel with the customer;
g. Approving or accepting customer orders;
h. Providing any kind of technical assistance or
services, such as engineering assistance or services, when one of the purposes
thereof is other than the facilitation of the solicitation of orders ;
i. Accepting deposits on customer orders;
j. Picking up or replacing damaged or returned
property.
k. Hiring, training, or supervising personnel,
other than personnel involved only in solicitation;
l. Repossessing property;
m. Providing shipping information and
coordinating deliveries;
n. Maintaining a sample or display room in
excess of 14 days at any one location during the taxable period;
o. Carrying samples for sale, exchange or
distribution in any manner for consideration;
p. Consigning tangible personal property to any person,
including an independent contractor;
q. Using agency stock checks or any other
instruments or process by which sales are made within
r. Maintaining, by any representative, an office
or place of business in the home or otherwise that is publicly attributed to
the business organization or to the agent of the business organization in their
agency status, even if such office is for the exclusive use of soliciting
orders; or
s. Conducting any activity in addition to those
described in Rev 304.01(d)(2) which is not entirely ancillary to the
solicitation of orders, even if such activity helps to increase purchases;
(2) Business activities which fall within the
protection of P.L. 86-272 when conducted in
a. Soliciting orders for sales by any type of
advertising;
b. Carrying samples only for display or for
distribution without charge or other consideration;
c. Owning or furnishing motor vehicles to sales
personnel;
d. Submitting inquiries and complaints received
to the home office;
e. Checking of customers' inventories without a
charge for the purpose of a replacement order but not for other purposes such
as quality control;
f. Soliciting orders using an in-state resident representative
of the business organization provided the representative maintains no
in-state sales office or place of business whether in-home or otherwise that is
attributable to the business organization or to the business organization's
agent in his agency capacity;
g. Conducting missionary sales activities;
h. Maintaining a sample or display room for 14
days, or less, at any one location during the taxable period;
i. Recruiting, training, or evaluating sales
personnel, including occasionally using homes, hotels or similar places for
meetings with sales personnel;
j. A representative maintaining an
in-home office that is not:
1. Paid for directly or indirectly by the
business organization;
2. Attributable to the business organization; or
3. Attributable to the business organization's
agents in their agency capacity; or
k. Mediating direct customer complaints when the
purpose thereof is solely for ingratiating the sales personnel with the
customer and facilitating requests for orders.
(e) Independent contractors conducting activities
in
(1) Lose its immunity when the activities
include:
a. Maintaining a consignment inventory of the
organization's products other than for purposes of display; or
b. Entering into any other type of arrangement
extending beyond the solicitation of orders; or
(2) Not lose its immunity when the activities
include:
a. Soliciting and making sales for the business
organization; or
b. Maintaining their own office.
(f) A business organization, whose activities do
not exceed the protection of P.L. 86-272, claiming exemption under the federal
law and desiring to commence the 3 year statute of limitation shall:
(1) Indicate on the front page of their
applicable
a. Placing a check mark in the appropriate box;
or
b. Typing or clearly printing “exempt under P.L.
86-272”; and
(2) Not attach
(g) The purpose of this section is to reconcile the combined reporting method with the limitations imposed by P.L. 86-272 on states’ taxing jurisdictions. This section shall be interpreted in furtherance of that purpose.
(h) If
any member of a combined group has nexus with
(1) An individual business organization shall be
subject to the tax jurisdiction of New Hampshire or another state for purposes
of Rev 304.01 (b) and (c) respectively only on the basis of the separate
activities of that individual business organization and its representatives;
and
(2) A business organization shall not be subject
to the tax jurisdiction of New Hampshire or another state for purposes of Rev
304.01 (b) and (c) respectively, merely because an affiliate of the business
organization conducts business activities in New Hampshire or another state
that are unitary with the individual business organization’s business
activities.
Source. #4192, eff 12-23-86; ss by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; amd by #5910, eff 10-14-94; ss by #6853,
eff 9-23-98; ss by #8709, eff 8-25-06
Rev 304.02 Property Factor.
(a) The property factor shall include:
(1) All the real and tangible personal property,
as defined in Rev 301.26;
(2) Property that is used, is available for, or
capable of being used, during the taxable period in the regular course of the
trade or business of the business organization;
(3) Property used in the regular course of
business until its permanent withdrawal from use;
(4) Property in transit with the property being
included in the numerator of destination state; and
(5) The value of moveable or mobile property,
such as construction equipment and common carrier vehicles, with the value
being determined for purposes of the property factor on the total time or miles
within a state during the period.
(b) Property or equipment under construction
during the tax period, except inventoriable goods in process, shall be excluded
from the factor until such property is used or available for use by the
business organization in its regular trade or business.
(c) Property, other than inventory, owned by the
business organization shall be valued at its original cost and be the
basis of the property for federal income tax purposes at the time of
acquisition, prior to any federal adjustments, and adjusted by subsequent sale,
exchange, abandonment, or other such disposition.
(d) Inventory, owned by
the business organization, shall be included in the property factor
in accordance with the valuation method used for federal income tax purposes.
(e) Property rented by a business organization
shall be valued at 8 times the net annual rental rate.
(f) The net annual rental rate shall be the
annual rent paid or accrued by the business organization less the aggregate
annual sub-rental rates accrued or received from sub-tenants.
(g) Rent shall be the amount payable for the use
of real or tangible property whether designated as a fixed sum or as a
percentage of sales or profits, and includes any additional amounts due in lieu
of rent such as interest and taxes which are required by the terms of the
lease.
(h) Business organizations renting property in
the regular course of a trade or business shall not deduct such rental income
as sub-rents.
(i) Business organizations utilizing combined
reporting shall:
(1) Determine the property includible in the
property factor after having eliminated all of the inter group activity;
and
(2) Eliminate any intergroup profits from
the valuation of property included in the property apportionment factor.
(j) The beginning and ending average value of
owned property shall be used for the property factor unless material
distortions of the factor are caused by:
(1) Fluctuations in values existing during the
period; or
(2) The acquisition or disposition of significant
property during the period.
(k) Material distortions shall exist in instances
where the property factor computed using monthly averages is 25% greater or lesser
than the property factor computed using the beginning and ending
average.
(l) Business organizations having material
distortions caused by the use of a beginning and ending average value shall
calculate the value of their property for apportionment purposes using a
monthly average.
Source. #2012, eff 5-5-82; ss by #2722, eff 5-23-84;
ss by #4192, eff 12-23-86; amd by #4438, eff 6-22-88; ss by #5490, eff
10-19-92; amd by #5910, eff 10-14-94; ss by #6853, eff 9-23-98; ss by #8709,
eff 8-25-06 (formerly Rev 304.03)
Rev 304.03 Payroll Factor.
(a) The
total amount of compensation paid to employees shall be determined based on:
(1) The
basis of the business organization's method of accounting; or
(2) The wages
reported on the various states’ unemployment tax returns.
(b) The
method selected under paragraph (a) shall be used in a consistent manner.
(c)
Business organizations making a change under (a) above from one method to
another, shall make all adjustments required in order to prevent the inclusion
of the identical wages in the payroll factor for more than one taxable period.
(d) An
employer and employee relationship shall exist before compensation is included
in the payroll apportionment factor.
(e) The
employer and employee relationship shall exist when the individual for whom the
services are to be performed has the right to:
(1)
Control and direct the individual performing the activities in areas
greater than the overall results of the work; or
(2)
Determine the methods and individuals used in performing the activity.
(f)
Payment made to, or on behalf of, independent contractors shall not be
includible in a business organization's payroll apportionment factor.
(g) A
designation of employee or independent contractor adopted by the individuals
not factually supported shall not change the relationship that actually exists
for purposes of RSA 77-A:3, I(b).
(h)
Business organizations includible in a combined group shall eliminate
all intergroup payments for the use of another group member's employees
with only the compensation actually paid to the employee being included.
(i) An
employee's compensation shall be included in a state's numerator when:
(1) The employee's
base of operations is located in that state;
(2) The
employee's activities are controlled from within that state in instances where
there is no base of operations; or
(3) That
state is the employee's state of residency in instances where:
a. There is no base of operations; and
b. The location from which the employee's
activities are controlled cannot be determined.
Source. #2012, eff 5-5-82; ss by #2722, eff 5-23-84;
ss by #4192, eff 12-23-86; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98;
ss by #8709, eff 8-25-06 (formerly Rev 304.04)
Rev 304.04 Sales Factor.
(a) Income producing activity shall include any:
(1) Transaction, procedure, or operation directly
engaged in by a business organization resulting in a separately identifiable
item of income; or
(2) Activity which creates an obligation of a
particular customer to pay specific consideration to the business organization.
(b) The sales factor shall include:
(1) Sales less returns and allowances;
(2) Dividends not eligible for the dividend
deduction under RSA 77-A:4, or the factor relief provided in RSA 77-A:3, II(b);
(3) Interest;
(4) Rents;
(5) Royalties;
(6) Capital gain income;
(7) Net gains or losses; and
(8) Other income unless the other income is
properly includible as a reduction of an expense or allowance.
(c) The sales factor numerator for separate business
organizations and all members of a combined group shall include the sum of:
(1) Sales of tangible personal property,
regardless of the conditions of sale delivered in
(2) Sales of tangible personal property
originating in New Hampshire to a purchaser in another state in which the
business organization is not taxable or subject to tax;
(3) Sales of tangible personal property
originating in
(4) Interest on installment receivables where the
debtor or the encumbered property is located in
(5) Gross receipts from the lease, rental or
other use of real or personal property located in
(6) Gross receipts from the licensing or other
use of intangible property when such property is used within
(7) Gains
or losses from the sale of property located in
(8) Capital gains from the sale of business
assets located within
(9) Dividend income received by business
organizations domiciled in
(10) Gross receipts for the rendering of personal
services when the services are performed in
(11) Other income which is earned in
(d) The rental, lease, licensing or other use of
tangible or intangible personal property in
(e) Business organizations utilizing combined
reporting shall determine the costs of performance as used in RSA 77-A:3, I (c)
and Rev 301.09 for each business organization on a separate entity basis.
(f) When an income producing activity results
from the use of personal property within and without
(1) Where the amount of time is the most
appropriate measure under the specific facts and circumstances of the business
organization’s activities, the time the property was used in New Hampshire as
compared to the total time of use of the property everywhere during that
taxable period; or
(2) Where distance is the most appropriate
measure under the specific facts and circumstances of the business
organization’s activities, the distance traveled or covered in New Hampshire
as compared to the total distance traveled or covered everywhere during the
taxable period.
(g) Personal services performed in
(h) The rendering of personal services shall be
attributed to
(1) Is completely performed in
(2) Performed in
(i) Costs of performance
shall be determined on a separate entity basis consistent with the separate
entity treatment provided in RSA 77-A:1, I not withstanding that a combined
report is filed.
(j) In determining the costs directly associated
with the performance of the service in (h), the business organization shall
allocate all compensation costs, including benefits, of personnel rendering the
service based on the amount of time spent rendering the service in
(k) Expenses incurred in obtaining or retaining
customers or clients, including contract negotiations, shall not be costs
directly associated with the performance of the service.
(l) The sales price shall include all interest,
carrying charge or time-price differential charges and excise taxes passed on
to the buyer or included as part of the selling price of the product.
(m) Business organizations includible in a
combined group shall eliminate all intergroup transactions with other members
of the combined group for both the numerator and denominator of the sales
factor.
Source. #2012, eff 5-5-82; ss by #2722, eff 5-23-84;
ss by #4192, eff 12-23-86; ss by #5490, eff 10-19-92; ss by #6853, eff 9-23-98; ss by #8709, eff
8-25-06 (formerly Rev 304.05)
Rev 304.05 Business Organizations Seeking a
Modification of Apportionment Provisions.
(a) A business organization shall petition the
commissioner in writing by separate cover for approval prior to using the
modified apportionment formula provided in RSA 77-A:3.
(b) The petition for use of the modification of
the apportionment formula shall:
(1) Be mailed to:
Commissioner
New Hampshire Department
of Revenue Administration
(2) Set forth a complete statement of the facts
relating to the request including:
a. For all interested parties:
i. Full names, and addresses;
ii. Federal identification numbers; and
iii. Department license numbers, if any;
b. A full and precise statement of the necessity
for the modification;
c. A detailed description of the business
activity which necessitates the modification; and
d. Evidence supporting the business organization's
petition including:
i. Court decisions on the matter; and
ii. True copies of all contracts, deeds,
agreements, instruments or other documents demonstrating the necessity of the
modification;
(3) Reference to the statutory provisions
relating to the subject of the petition;
(4) A description of the modified formula
proposed by the business organization; and
(5) A statement whether or not, to the best of
the petitioner's knowledge, the modification is the subject of prior petition
requests of a similar or identical factual nature.
(c) The information in the
petition shall be reviewed by the commissioner’s designee, to determine whether
the requested modification measures the activity being conducted in
(d) A petitioner may appeal the department’s written determination and
request a hearing on the petition in the same manner as an adjudicative
proceeding involving the administration, assessment, or refund of taxes
governed by Rev 200.
(e) An
appeal shall be filed, pursuant
to Rev 200, within 60 days of the notice of the recommendation of the
commissioner’s designee.
(f) The use of a separate accounting result which
differs from the standard apportionment result shall not prove the need for, or
the acceptability of, a modified apportionment formula.
(g) If the commissioner disapproves a petition,
no return shall be considered filed by the business organization until a proper
apportionment schedule is submitted to the department.
(h) The use of a modified apportionment formula
by a business organization without prior written approval or final hearing
order of the commissioner shall:
(1) Constitute a willful violation of RSA 77-A:3;
and
(2) Not be considered filed for purposes of RSA
77-A:6, RSA 77-A:1, VII; and Rev 307 until such approval has been obtained from
or ordered by the commissioner.
(i) A copy of the commissioner's approval letter
shall be attached to all subsequent returns filed.
Source. #4192, eff 12-23-86; ss by #4438, eff
6-22-88; ss by #5490, eff 10-19-92; amd by #5910, eff 10-14-94; ss by #6853,
eff 9-23-98; ss by #8709, eff 8-25-06 (formerly Rev 304.06)
Rev 304.06 Use of Special Industry Apportionment
Provisions.
(a) A business organization, which is not a
member of a water’s edge combined group, may
elect to use one of the industry specific apportionment provisions in
Rev 304.07 through Rev 304.11, provided
more than 50 % of the business organization’s:
(1) Gross receipts for the taxable period are
from sources relating to the industry identified by the rule; and
(2) Total assets on the last day of the taxable
period are commonly related to the industry identified by the rule.
(b) A business organization, which is a
member of a water’s edge combined group, may elect to use one of the industry
specific apportionment provisions in Rev 304.07 through Rev 304.11 provided
more than 50 % of the water’s edge combined group’s:
(1) Gross receipts for the taxable period are
from sources relating to the industry identified by the rule; and
(2) Total assets on the last day of the taxable
period are commonly related to the industry identified by the rule.
(c) The business organization or group of
business organizations electing to use the industry specific apportionment
provisions contained in Rev 304.07 through Rev 304.11 shall continue to use the
apportionment provisions until:
(1) The department grants, in writing, a request
made to the department to change the method used;
(2) The principal business organization may
request approval by the department to change the apportionment method used by
submitting a written request to the department; and
(3) The department approves of a change in the
apportionment method upon a showing that the business organizations:
a. No longer meets the requirements to use
Special Industry Apportionment Provisions; or
b. Circumstances have changed so that the use of
Special Industry Apportionment Provisions no longer accurately reflects the
business organization’s business activity in
(d) Unless otherwise indicated, the industry
specific apportionment provision elected by the business organization shall
apply in its’ entirety.
(e) If
further adjustments to the formula are necessary to accurately reflect the business organization’s business activity
in New Hampshire, the business organization may petition for, or the
commissioner may require, modification under RSA 77-A:3, II.