HB 102 - AS AMENDED BY THE SENATE
5Jan2022... 2151h
03/17/2022 1048s
2021 SESSION
21-0078
10/05
HOUSE BILL 102
SPONSORS: Rep. Schamberg, Merr. 4
COMMITTEE: Ways and Means
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AMENDED ANALYSIS
This bill establishes a commission to study worldwide combined reporting method for unitary businesses under the business profits tax. The bill also provides for the tax treatment of water and sewer disposal utilities under the business profits tax.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
5Jan2022... 2151h
03/17/2022 1048s 21-0078
10/05
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty One
AN ACT establishing a commission to study worldwide combined reporting method for unitary businesses under the business profits tax, and relative to the treatment of water or sewerage disposal utilities under the business profits tax.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Findings. The general court finds that New Hampshire has a unique tax structure. With no general sales or income tax and no severance tax on natural resources, New Hampshire relies on its business profits tax more than any other state and most countries. In 1981, the business profits tax law was amended to allow the department of revenue administration or taxpayers to employ the combined reporting method of taxation under the unitary business principle.
2 Commission on Worldwide Combined Reporting for Unitary Businesses under the Business Profits Tax. Amend RSA 77-A by inserting after section 23-a the following new section:
77-A:23-b Commission on Worldwide Combined Reporting for Unitary Businesses under the Business Profits Tax. There is established a commission to study the replacement of the water’s edge method by the worldwide combined reporting method for reporting and apportionment of income under the business profits tax.
I. The members of the commission shall be as follows:
(a) Three members of the house of representatives, who shall be from the ways and means committee, appointed by the speaker of the house of representatives.
(b) One member of the senate, appointed by the president of the senate.
(c) Three members of the state’s business community, one representing in-state domesticated businesses with less than 100 employees, one representing in-state domesticated businesses with more than 100 employees, and one representing out-of-state or foreign domesticated businesses, appointed by the president of the New Hampshire Business and Industry Association.
(d) The president of the New Hampshire Society of Certified Public Accountants, or designee.
(e) The commissioner of the department of revenue administration, or designee.
(f) The commissioner of the department of business and economic affairs, or designee.
(g) The attorney general, or designee.
(h) An attorney expert in transnational and New Hampshire business profit tax accounting issues, appointed by the president of the New Hampshire Bar Association.
II. Legislative members of the commission shall receive mileage at the legislative rate when attending to the duties of the commission.
III. The commission shall study the advantages and disadvantages for the state’s economy and revenues of replacement of the current water’s edge method by the worldwide combined reporting method for reporting and apportionment of income under the business profits tax. It shall consult with national experts in both methods, including economists, business associations, and tax experts.
IV. The members of the commission shall elect a chairperson from among the members. The first meeting shall be called by the first-named house member. The first meeting of the commission shall be held within 45 days of the effective date of this section. Six members of the commission shall constitute a quorum.
V. The commission shall report its preliminary findings on or before November 1, 2022 and issue a final report of its findings and any recommendations for proposed legislation on or before November 1, 2023, to the president of the senate, the speaker of the house of representatives, the senate clerk, the house clerk, the governor, and the state library.
3 Repeal. RSA 77-A:23-b, relative to the commission on worldwide combined reporting for unitary businesses under the business profits tax, is repealed.
4 New Section; Business Profits Tax; Treatment of Water and Sewerage Disposal Utilities. Amend RSA 77-A by inserting after section 3-c the following new section:
77-A:3-d Treatment of Water and Sewerage Disposal Utilities. In determining gross business profits, a business organization shall apply section 118 of the United States Internal Revenue Code consistent with the following adjustments:
I. The term "contribution to the capital of the taxpayer" includes any amount of money or other property received from any person, whether or not a shareholder, by a regulated public utility which provides water or sewerage disposal services if:
(a) Such amount is:
(1) A contribution in aid of construction; or
(2) A contribution to the capital of such utility by a governmental entity providing for the protection, preservation, or enhancement of drinking water or sewerage disposal services;
(b) In the case of a contribution in aid of construction which is property other than water or sewerage disposal facilities, such amount meets the requirements of the expenditure rule of paragraph II; and
(c) Such amount, or any property acquired or constructed with such amount, is not included in the taxpayer’s rate base for ratemaking purposes.
II. An amount meets the requirements of subparagraph I(b) if:
(a) An amount equal to such amount is expended for the acquisition or construction of tangible property described in United States Internal Revenue Code section 1231(b):
(1) Which is the property for which the contribution was made or is of the same type as such property; and
(2) Which is used predominantly in the trade or business of furnishing water or sewerage disposal services;
(b) The expenditure referred to in subparagraph (a) occurs before the end of the second taxable year after the year in which such amount was received; and
(c) Accurate records are kept of the amounts contributed and expenditures made, the expenditures to which contributions are allocated, and the year in which the contributions and expenditures are received and made.
III. For purposes of this section:
(a) “Contribution in aid of construction” shall mean as the term is defined by the United States Department of the Treasury’s Treasury Regulations 1.118-2 (2001), except that such term shall not include amounts paid as service charges for starting or stopping services.
(b) “Predominantly” means 80 percent or more.
(c) “Regulated public utility” has the meaning given such term by Internal Revenue Code section 7701(a)(33), except that such term shall not include any utility which is not required to provide water or sewerage disposal services to members of the general public in its service area.
IV. Notwithstanding any other provisions of law, no deduction or credit shall be allowed for, or by reason of, any expenditure which constitutes a contribution in aid of construction to which this section applies. The adjusted basis of any property acquired with contributions in aid of construction to which this section applies shall be zero.
5 Applicability; Treatment of Water and Sewerage Disposal Utilities. The provisions of section 4 of this act shall apply to contributions made on or after January 1, 2021.
I. Section 3 of this act shall take effect November 1, 2023.
II. The remainder of this act shall take effect upon its passage.