HB1388: reducing the rate of the business profits tax.

HB 1388-FN-A - AS INTRODUCED

2003 SESSION

03-2089

09/10

HOUSE BILL 1388-FN-A

AN ACT reducing the rate of the business profits tax.

SPONSORS: Rep. Brady, Coos 2; Rep. Holden, Hills 48; Rep. Gibson, Hills 58; Rep. Itse, Rock 80; Sen. Gallus, Dist 1

COMMITTEE: Ways and Means

ANALYSIS

This bill reduces the rate of the business profits tax to 4 percent over a 5-year period.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

03-2089

09/10

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Three

AN ACT reducing the rate of the business profits tax.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Business Profits Tax; Rate Reduced; 2004. Amend RSA 77-A:2 to read as follows:

77-A:2 Imposition of Tax. A tax is imposed at the rate of [8.5] 7.5 percent upon the taxable business profits of every business organization.

2 Business Profits Tax; Rate Reduced; 2005. 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] 6.5 percent upon the taxable business profits of every business organization.

3 Business Profits Tax; Rate Reduced; 2006. Amend RSA 77-A:2 to read as follows:

77-A:2 Imposition of Tax. A tax is imposed at the rate of [6.5] 5.5 percent upon the taxable business profits of every business organization.

4 Business Profits Tax; Rate Reduced; 2007. Amend RSA 77-A:2 to read as follows:

77-A:2 Imposition of Tax. A tax is imposed at the rate of [5.5] 4.5 percent upon the taxable business profits of every business organization.

5 Business Profits Tax; Rate Reduced; 2008. Amend RSA 77-A:2 to read as follows:

77-A:2 Imposition of Tax. A tax is imposed at the rate of [4.5] 4 percent upon the taxable business profits of every business organization.

6 Business Profits Tax; Distribution of Funds. Amend RSA 77-A:20-a to read as follows:

77-A:20-a Distribution of Funds.

I. The commissioner shall determine the [additional] amounts of revenue produced by [an increase of 1.5 percent in] 17.65 percent of the rate of tax imposed by RSA 77-A:2 for each fiscal year and shall certify such amounts to the state treasurer by October 1 of that year for deposit in the education trust fund established by RSA 198:39.

II. The commissioner shall make quarterly estimates of the amount of [additional] revenues that will be produced by [the increase in] 17.65 percent of the tax rate for the next fiscal year and shall certify such amounts to the state treasurer for deposit in the education trust fund established by RSA 198:39. Such estimates shall be certified on June 1, September 1, December 1, and March 1 of each year.

7 Applicability.

I. Section 1 of this act shall apply to returns and taxes due on account of taxable periods ending on or after July 1, 2004. In the case of any business organization or enterprise which has elected a 52-53 week taxable period under section 441(f) of the United States Internal Revenue Code and the fiscal year of which ends on the last day of the week nearest to June 30, 2004, the taxable period shall be deemed to have ended on June 30, 2004, for the purposes of this act.

II. Section 2 of this act shall apply to returns and taxes due on account of taxable periods ending on or after July 1, 2005. In the case of any business organization or enterprise which has elected a 52-53 week taxable period under section 441(f) of the United States Internal Revenue Code and the fiscal year of which ends on the last day of the week nearest to June 30, 2005, the taxable period shall be deemed to have ended on June 30, 2005, for the purposes of this act.

III. Section 3 of this act shall apply to returns and taxes due on account of taxable periods ending on or after July 1, 2006. In the case of any business organization or enterprise which has elected a 52-53 week taxable period under section 441(f) of the United States Internal Revenue Code and the fiscal year of which ends on the last day of the week nearest to June 30, 2006, the taxable period shall be deemed to have ended on June 30, 2006, for the purposes of this act.

IV. Section 4 of this act shall apply to returns and taxes due on account of taxable periods ending on or after July 1, 2007. In the case of any business organization or enterprise which has elected a 52-53 week taxable period under section 441(f) of the United States Internal Revenue Code and the fiscal year of which ends on the last day of the week nearest to June 30, 2007, the taxable period shall be deemed to have ended on June 30, 2007, for the purposes of this act.

V. Section 5 of this act shall apply to returns and taxes due on account of taxable periods ending on or after July 1, 2008. In the case of any business organization or enterprise which has elected a 52-53 week taxable period under section 441(f) of the United States Internal Revenue Code and the fiscal year of which ends on the last day of the week nearest to June 30, 2008, the taxable period shall be deemed to have ended on June 30, 2008, for the purposes of this act.

8 Effective Date.

I. Section 2 of this act shall take effect July 1, 2005.

II. Section 3 of this act shall take effect July 1, 2006.

III. Section 4 of this act shall take effect July 1, 2007.

IV. Section 5 of this act shall take effect July 1, 2008.

V. The remainder of this act shall take effect July 1, 2004.

LBAO

03-2089

Revised 11/24/03

HB 1388 FISCAL NOTE

AN ACT reducing the rate of the business profits tax.

FISCAL IMPACT:

The Department of Revenue Administration indicates this bill will decrease state unrestricted general fund revenue by $22.7 million in FY 2005, $46.8 million in FY 2006, and $72.1 million in FY 2007 and decrease restricted education trust fund revenue by $4.9 million in FY 2005, $10.0 million in FY 2006, and $15.5 million in FY 2007. There is no fiscal impact on state, county and local expenditures or county and local revenue.

METHODOLOGY:

The Department states this bill reduces the Business Profits Tax (BPT) rate from 8.5% to 4.0% over a five-year period. Since a portion of the BPT goes to the Education Trust Fund and the General Fund, this rate reduction will impact revenue collections to both of these funds. The Department assumed a constant growth rate of the BPT using the same rate of increase that the official FY 2005 BPT estimate increased over the FY 2004 official estimate.