The New Hampshire Legislature Enacts “Taxpayer Friendly” Provisions

By Merrill Barter July 2, 2012

New Hampshire’s recently-concluded 2012 Legislative Session produced some favorable tax changes for New Hampshire business and Interest and Dividend taxpayers.  Following is a brief overview of the results.

Business tax

With regard to business taxes, the new legislation created an Education Tax Credit that can be utilized against the Business Profits Tax (BPT) and/or the Business Enterprise Tax (BET).  The credit is available for tax years beginning on or after January 1, 2013, and enables businesses that contribute to scholarship organizations to claim a tax credit against the BPT and/or BET equal to 85% of the contribution amount.  (A scholarship organization is one which awards scholarships to students to help pay educational expenses.)  Also, the Department of Revenue Administration will require the donor to obtain a Scholarship Receipt from the recipient organization.  The total tax credits granted to all taxpayers cannot exceed a specified maximum amount (similar to the Research and Development Credit).  The aggregate amounts of Education Tax Credits that can be issued in the first two years are capped at $3.4MM and $5.1MM, respectively.  In future years, the total amount of credits available will be tied to the level of scholarships granted to students in the previous year.

Other positive changes made during the session include

• The Net Operating Loss (NOL) carry-over that may be generated in a tax year will increase to $10MM effective for tax years beginning on or after January 1, 2013.  Currently only $1MM of NOL can be generated in a tax year.
• The Research and Development Tax Credit was effectively extended further by changing the prospective repeal date to July 1, 2015.  It had been set to expire on July 1, 2013.
• The BET filing thresholds were increased.  For tax years ending on or after December 31, 2013, every business enterprise having gross business receipts in excess of $200,000 during the taxable period or an enterprise value tax base greater than $100,000 shall be required to file a return.  Prior to this change, the gross business receipts and enterprise value base thresholds were $150,000 and $75,000, respectively.
• The BET estimated tax threshold was increased to $260, effective for tax years ending on or after December 31, 2013.  If the estimated tax due for a year is expected to be less than $260, an estimated tax declaration (voucher) is not required.  However, a voucher must be filed at the end of any quarter thereafter in which the estimated tax for that year exceeds $260.
• The Section 179 deduction limit was increased to $25,000 (from $20,000) for eligible property placed in service on or after January 1, 2012.

Interest and dividends tax

A significant change was made to the Interest and Dividends tax (IDT) regarding the taxability of trusts.  For tax years ending on or after December 31, 2013, trusts will not be taxed under the IDT.  Instead, interest and dividend income received by grantor trusts shall be included in the return of their grantor, to the extent that the grantor is an inhabitant or resident of New Hampshire.  Also, trust beneficiaries who are individual inhabitants or residents of New Hampshire and report interest and dividend income for federal tax purposes will also report this income on their New Hampshire IDT returns.

The information above represents a short overview of the state’s recent changes in tax law, all of which should be welcomed by taxpayers.  For more information on these changes and how they may impact your or your business, please contact Merrill Barter, BNN’s state and local tax practice leader.