SB502: requiring use of the federal tax treatment for deduction of costs of section 179 business property under the business profits tax.

SB 502-FN-A – AS INTRODUCED

2010 SESSION

10-2954

09/04

SENATE BILL 502-FN-A

AN ACT requiring use of the federal tax treatment for deduction of costs of section 179 business property under the business profits tax.

SPONSORS: Sen. Bragdon, Dist 11; Sen. Barnes, Jr., Dist 17; Sen. Bradley, Dist 3; Sen. Carson, Dist 14; Sen. Downing, Dist 22; Sen. Gallus, Dist 1; Sen. Letourneau, Dist 19; Sen. Roberge, Dist 9

COMMITTEE: Ways and Means

ANALYSIS

This bill requires use of the federal tax treatment for deduction of costs of section 179 business property 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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

10-2954

09/04

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Ten

AN ACT requiring use of the federal tax treatment for deduction of costs of section 179 business property under the business profits tax.

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

1 New Paragraph; Business Profits Tax; Reasonable Compensation Deduction. Amend RSA 77-A:4 by inserting after paragraph XVIII the following new paragraph:

XIX. In the case of a business organization which treats the cost of any section 179 property, as that term is defined in 26 U.S.C. section 179, as an expense not chargeable to capital account in accordance with the provisions of 26 U.S.C. section 179 as such section is in effect for the tax period, the gross business profits of the organization shall be adjusted by:

(a) Adding to gross business profits the amount of such cost that would be deducted with respect to such section 179 property under the United States Internal Revenue Code as defined in RSA 77-A:1, XX in arriving at federal taxable income; and

(b) Deducting from gross business profits the amount allowable as a deduction under 26 U.S.C. section 179 as such section is in effect for the tax period.

2 Applicability. Section 1 of this act shall apply to taxable periods beginning on or after January 1, 2010.

3 Effective Date. This act shall take effect upon its passage.

LBAO

10-2954

Revised 03/02/10

SB 502 FISCAL NOTE

AN ACT requiring use of the federal tax treatment for deduction of costs of section 179 business property under the business profits tax.

FISCAL IMPACT:

The Department of Revenue Administration states this bill will decrease state general fund and education trust fund revenue in by an indeterminable amount in FY 2010 and each fiscal year thereafter, and increase state expenditures by an indeterminable amount in FY 2010. This bill will have no fiscal impact on county and local revenue or expenditures.

METHODOLOGY:

The Department of Revenue Administration states this bill requires use of the federal tax treatment for deduction of costs of section 179 business property under the business profits tax (BPT). The Department states current New Hampshire tax code has adopted the Internal Revenue Code that was in effect for December 31, 2000. As such, taxpayers must make adjustment to the New Hampshire taxable BPT based upon non-recognition of certain expenses allowed by the IRS (federally), but not adopted by the state. It is assumed that this bill would allow some of these section 179 expenses to also be recognized on New Hampshire BPT returns. The Department, however, cannot estimate the reduction to New Hampshire BPT revenue because the data on the federal return is not captured in sufficient detail. The Department further states that since the effective date of the bill will apply to taxable periods beginning on or after January 1, 2010, an immediate impact may be realized due to possible reductions in estimated tax payments. The Department also indicates state expenditures will increase in FY 2010 for additional costs to change tax forms and for computer programming expenses. Since this tax provision impacts BPT, a portion of the revenue decrease would impact state general fund and education trust fund revenue.