SB411: (New Title) relative to the research and development tax credit.

SB 411-FN-A - AS AMENDED BY THE HOUSE

03/08/2018 1006s

12Apr2018... 1330h

2018 SESSION

18-2914

10/05

SENATE BILL 411-FN-A

AN ACT relative to the research and development tax credit.

SPONSORS: Sen. Innis, Dist 24; Sen. Bradley, Dist 3; Sen. Gannon, Dist 23; Sen. Carson, Dist 14; Sen. Birdsell, Dist 19; Rep. Nigrello, Rock. 16; Rep. Emerick, Rock. 21; Rep. Bean, Rock. 21

COMMITTEE: Ways and Means

AMENDED ANALYSIS

This bill decreases the annual total aggregate amount of the research and development tax credit against business taxes and requires applicants for the research and development tax credit to complete a survey.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

03/08/2018 1006s

12Apr2018... 1330h 18-2914

10/05

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Eighteen

AN ACT relative to the research and development tax credit.

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

1 Business Profits Tax; Credit for Research and Development; Survey. Amend RSA 77-A:5, XIII to read as follows:

XIII.(a) There shall be allowed a research and development tax credit for qualified manufacturing research and development expenditures made or incurred during the fiscal year, as follows:

(1) The aggregate of tax credits issued by the commissioner to all taxpayers claiming the credit shall not exceed [$7,000,000] $2,000,000 for any fiscal year.

(2) Each credit shall be used to offset the taxpayer's tax liability within the subsequent 5 tax years. The amount of the credit shall be the lesser of:

(A) Ten percent of the excess of the qualified manufacturing research and development expenses for the taxable year over the base amount;

(B) The proportional share of the maximum aggregate credit amount allowed in subparagraph (1);

(C) $50,000.

(3) Taxpayers shall apply for the tax credit on forms provided by the commissioner and shall be accompanied by information or records required by the commissioner, including but not limited to the survey described in subparagraph (d). Such application shall be postmarked no later than June 30 following the tax year during which research and development occurred.

(4) A determination on the final amount of the credit awarded by the commissioner to each taxpayer claiming the credit shall be made no later than September 30 of each year.

(5) Wages for which a credit is taken under this paragraph shall not also be eligible for a credit under RSA 162-N.

(b) For purposes of this paragraph:

(1) The term "qualified manufacturing research and development expenditures" shall mean solely any wages paid or incurred to an employee of the business organization for services rendered by such employee within this state within the meaning of RSA 77-A:3; I(b), provided that:

(A) Such wages shall be treated as wages for qualified research expenses under section 41(b) of the United States Internal Revenue Code.

(B) Such services are undertaken for the purpose of discovering information which constitutes qualified research and development of a new or improved manufacturing process or business component of the business organization.

(C) The wages qualify and are reported as a credit by the business organization under section 41 of the United States Internal Revenue Code as defined in RSA 77-A:1, XX.

(D) The wages are reported by the business organization in the enterprise value tax base under RSA 77-E.

(2) "Base amount" shall mean the base amount of expenditure as defined under section 41 of the United States Internal Revenue Code as defined by RSA 77-A:1, XX, except that the minimum base amount may be 0.

(c) A unitary business or an enterprise consisting of one or more taxpayers under this chapter shall be considered a single taxpayer for purposes of claiming the credit under this paragraph.

(d) Applications for the research and development tax credit shall be accompanied by a completed survey, upon such form as the commissioner may direct, providing information describing the impact of the expenditures upon which the tax credit is based as follows:

(1) The types of research and development projects supported by the expenditures;

(2) Whether the projects supported by the expenditures resulted in products being brought to market;

(3) An estimate of the number of jobs created or supported as a result of the expenditures;

(4) The total prior year business profits tax liability of the taxpayer, before consideration of any credits provided for in this section;

(5) The number of times the taxpayer has received the research and development tax credit in the past;

(6) The total amount of research and development tax credits that the taxpayer had outstanding at the end of the prior tax year, and

(7) Any other question helpful to evaluating the costs and benefits of the research and development tax credit.

(e) On or before December 31 2019, and each December 31 thereafter, the commissioner shall provide the president of the senate, the speaker of the house of representatives, and members of the senate ways and means committee and house ways and means committee a report detailing, consistent with RSA 21-J:14, the aggregated results of the survey described in subparagraph (d).

2 Effective Date. This act shall take effect July 1, 2018.

LBAO

18-2914

Amended 4/20/18

SB 411-FN-A- FISCAL NOTE

AS AMENDED BY THE HOUSE (AMENDMENT 2018-1330h)

AN ACT relative to the research and development tax credit.

FISCAL IMPACT: [ X ] State [ ] County [ ] Local [ ] None

Estimated Increase / (Decrease)

STATE:

FY 2019

FY 2020

FY 2021

FY 2022

Appropriation

$0

$0

$0

$0

Revenue

Indeterminable Increase

Indeterminable Increase

Indeterminable Increase

Indeterminable Increase

Expenditures

$0

$0

$0

$0

Funding Source:

[ X ] General [ X ] Education [ ] Highway [ ] Other

METHODOLOGY:

This bill reduces the cap on the research and development tax credit from $7,000,000 to $2,000,000. The Department has no definitive method to determine how many taxpayers will request the research and development tax credit or the future value of those requests to determine the specific increase in State General Fund and Education Trust Fund revenue.

The Department is able to provide the amount of research and development tax credit requested for the period of FY 2016 through FY 2018.

Fiscal Year

Statutory Cap

Amount of R&D Credit Requested

2018

$7,000,000 cap

$7,575,079

2017

$2,000,000 cap

$7,368,097

2016

$2,000,000 cap

$6,725,106

The bill also requires taxpayers requesting a research and development tax credit complete a survey as part of the request.

The Department states this bill could be administered by the Department without any additional costs that could not be absorbed within their operating budget.

AGENCIES CONTACTED:

Department of Revenue Administration