HB 109-FN-A-LOCAL - AS AMENDED BY THE SENATE
3/25/99 0574s
10/22/99 2166s
1999 SESSION
HOUSE BILL 109-FN-A-LOCAL
AN ACT establishing a flat rate education income tax, repealing the statewide property tax and certain other taxes, and relative to other sources of funding for education.
SPONSORS: Rep. Hager, Merr 18; Rep. McGuirk, Ches 1; Rep. Feuerstein, Merr 13; Rep. Manning, Ches 9; Rep. Robb-Theroux, Sull 9; Sen. Below, Dist 5; Sen. Fernald, Dist 11; Sen. Wheeler, Dist 21
This bill establishes a flat rate education income tax.
This bill reduces the rate of the statewide education property tax through March 31, 2001 and repeals the tax on April 1, 2001. The bill eliminates the excess education property tax payment phase-in provisions upon passage.
The bill establishes a hardship grant program.
The bill repeals the interest and dividends tax and legacies and successions tax and reduces the rates of certain other taxes.
The bill provides that, notwithstanding the provisions of RSA 9:13-e, for the biennium ending June 30, 1999, the state treasurer shall deposit any general fund undesignated surplus into the education trust fund established in RSA 198:39.
This bill extends the final reporting date of the tax equity and efficiency commission.
This bill also provides that the department of revenue administration shall credit all adequate education grant payments to the cooperative school district as a whole for the purpose of determining the amount of taxes to be raised to support the cooperative school district.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
3/25/99 0574s
10/22/99 2166s
99-0091
09/01
STATE OF NEW HAMPSHIRE
In the Year of Our Lord One Thousand Nine Hundred and Ninety-Nine
AN ACT establishing a flat rate education income tax, repealing the statewide property tax and certain other taxes, and relative to other sources of funding for education.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Findings. The general court finds that:
I. New Hampshire's excessive reliance on the property tax as the primary source of funding for public education should be substantially reduced by replacing the statewide education property tax with an education income tax that is a more equitable, stable, efficient, and reliable source of revenue for funding the state's duty to provide an adequate education for the school children of the state.
II. A uniform standard exemption of income from the education income tax for all taxpayers and dependents is a just, reasonable, and proportionate means to assure that each taxpayer has the ability to earn a minimal subsistence level of income before being subject to the burden of income taxation, and that single heads of households are an appropriate class of people for whom an additional modest exemption from the education income tax is just and reasonable.
III. To promote industry, frugality, and a positive work ethic, a modest exemption from the education income tax on income earned by dependents is just and reasonable.
IV.(a) Communities with low per capita income and low property values as compared to those communities with high per capita income and high property values will greatly benefit from certain enhanced hardship grants in addition to the adequate education grants;
(b) There are advantages available to school children due to higher income and property values in certain communities and that a substitute for these advantages should be provided to children in low per capita income and low property value communities;
(c) Hardship grants are appropriate in order to more nearly provide children in low per capita income and low property value communities with the opportunities generally available to school children in more affluent communities.
V. As revenue from the education income tax grows in excess of requirements for funding adequate education grants and hardship grants, the utility property tax, the tax on rental of motor vehicles, and the increase in the rate of the business profits tax and business enterprise tax, all of which were dedicated to the education trust fund should be phased out and eliminated at the earliest reasonable date to be determined by future legislative action.
VI. As New Hampshire enters the 21st century, modern tax policy and revenue forcasting and analysis software should be acquired and made available to the legislature through the legislative budget assistant.
VII. With the removal of the phase-in provisions under this act, the education property tax under RSA 76:3 and the utility property tax under RSA 83-F are constitutional and reaffirmed as law under this act.
2 New Chapter; Education Income Tax. Amend RSA by inserting after chapter 76 the following new chapter:
CHAPTER 76-A
EDUCATION INCOME TAX
76-A:1 Definitions. In this chapter:
I. "Consumer price index" means the consumer price index for all urban consumers published by the United States Department of Labor.
II. "Department" means the department of revenue administration.
III. "Education trust fund" means the education trust fund established in RSA 198:39.
IV. "Individual" means a natural person.
V. "New Hampshire modified gross income" means New Hampshire modified gross income as determined in RSA 76-A:3.
VI. "New Hampshire taxable income" means New Hampshire taxable income as determined in RSA 76-A:3.
VII. "Nonresident individual" means an individual who receives wages, self-employment, or unearned income for the taxable year from sources in this state, who maintains his or her domicile outside the state.
VIII.(a) "Resident fiduciary" means:
(1) The executor or administrator of the estate of a decedent who at death was domiciled in this state;
(2) The trustee of a trust created by will of a decedent who at death was domiciled in this state;
(3) The trustee of a trust created by, or consisting of property of, a person domiciled in this state;
(4) The trustee of a trust the property of which includes a business organization as defined in RSA 77-A:1, with business activity in New Hampshire as defined in RSA 77-A:1; or
(5) The trustee of a trust that has at least one beneficiary who is a resident individual, where, in the case of an individual, the trustee of the trust is a resident of New Hampshire or, in the case of a corporation or other business entity, has a place of business in New Hampshire.
(b) "Resident fiduciary" shall not include the trustee of any trust which is taxable as a corporation under the United States Internal Revenue Code, a trust to the extent it is considered to be a grantor trust pursuant to sections 671-679 of the United States Internal Revenue Code, and the trustee of a tax-qualified retirement plan under section 401(a) of the United States Internal Revenue Code.
IX. "Resident individual" means:
(a) An individual domiciled in the state; or
(b) An individual who maintains a permanent place of abode within the state and spends more than 183 days of the taxable year within the state.
X. "Taxable year" means the calendar or fiscal year or portion thereof which the taxpayer uses for federal income tax purposes under the United States Internal Revenue Code.
XI. "Taxpayer" means any individual or fiduciary subject to the provisions of this chapter.
XII. "Unearned income" means any income which is not wage or self-employment income, including but not limited to capital gains, allocations of income from S corporations, partnerships, limited liability companies or other similar entities, dividends, interests, rents, and royalties.
XIII. "United States Internal Revenue Code" means the United States Internal Revenue Code of 1986 as amended. The forms, procedures, and regulations of the United States Internal Revenue Service may be used by the commissioner of revenue administration in formulating rules for adoption under RSA 541-A. This definition shall be operative unless and until a specific statutory exception to its adoption is provided in this chapter, or until the application of one of its provisions is held to violate the New Hampshire constitution.
76-A:2 Imposition of Tax. A tax is imposed upon every resident and nonresident individual and upon every resident fiduciary at the rate of 4 percent of New Hampshire taxable income as determined in RSA 76-A:3.
76-A:3 New Hampshire Taxable Income.
I. "New Hampshire taxable income" means, for any taxable year:
(a) In the case of a resident or nonresident individual, the individual's New Hampshire modified gross income, as defined in paragraph II of this section, less the following:
(1) An exemption of $11,000 for the taxpayer and an additional exemption of $11,000 for the taxpayer's spouse if a joint return is made, provided that the taxpayer or spouse is not claimed as a dependent on another taxpayer's federal income tax return or New Hampshire income tax return; and
(2) An additional exemption of $3,000 for each dependent to which the taxpayer is entitled for federal tax purposes under the United States Internal Revenue Code, provided that the dependent is not claimed as a dependent on another person's federal income tax return or New Hampshire income tax return. A person who is claimed as a dependent under this subparagraph and who has earned income from wages, self-employment income, or farm income which is taxable under this chapter, shall be entitled to an exemption of $3,000 of such earned income on that person's New Hampshire income tax return; and
(3) An additional exemption of $3,000 for a taxpayer entitled to a head of household status for federal tax purposes under the United States Internal Revenue Code.
(b)(1) In the case of a resident fiduciary, the amount shown as total taxable income on the fiduciary's United States fiduciary income tax return:
(A) Increased by:
(i) Any interest or dividend income on obligations or securities of another state of the United States; and
(ii) Any interest or dividend income on obligations or securities of any authority, commission, or instrumentality of the United States to the extent exempted from the federal income tax; and
(B) Decreased by interest on, and dividends on securities attributable to the interest on, the direct obligations of the United States government.
(2) For a resident fiduciary with at least one beneficiary that is not either a resident individual or another resident fiduciary, the amount of income derived by application of subparagraph (1) shall be multiplied by a fraction, the numerator of which is income properly accumulated for the benefit of resident individuals or resident fiduciaries and the denominator of which is all income property accumulated.
(c) The amount of the exemptions allowed under this paragraph shall be in place for the first year of the tax only. The commissioner of revenue administration shall increase the exemption amounts allowed in each succeeding year by an amount which equals the percentage increase in the consumer price index for a prior annual period established by rule by the commissioner, and rounded to the nearest $10.
II. "New Hampshire modified gross income" means, for any taxable year, the amount of the taxpayer's adjusted gross income for federal income tax purposes under the United States Internal Revenue Code:
(a) Decreased by:
(1) Interest on, and dividends on securities attributable to interest on, the direct obligations of the United States government;
(2) The amount of income taxable under this chapter which is also taxed as business profits under RSA 77-A; and
(3) The amount of capital gains income directly derived from sales of timber subject to taxation under RSA 79.
(b) Increased by:
(1) Any interest or dividend income on obligations or securities of any authority, commission, or instrumentality of the United States to the extent exempted from the federal income tax; and
(2) Any interest or dividend income on obligations or securities of another state of the United States.
76-A:4 Tax; When Due. Subject to the provisions of this chapter concerning the withholding of tax and estimated tax declarations, the tax imposed by this chapter shall be deemed to be assessed and due and payable on the fifteenth day of the fourth month following the close of the taxpayer's taxable year.
76-A:5 Credits. The following credits are allowed against the tax due under this chapter:
I. Taxes withheld pursuant to the provisions of this chapter.
II. Estimated tax payments made pursuant to this chapter.
III. In the case of a resident individual, a credit calculated by:
(a) Calculating the wages, self-employment income, and unearned income of the individual earned or derived from sources in another state and subject to income tax or a tax measured by income in that state;
(b) Reducing the amount calculated in subparagraph (a) by the portion of the taxpayer's claimed exemptions which bears the same relationship to the taxpayer's total claimed exemptions, as the amount calculated in subparagraph (a) bears to the taxpayer's New Hampshire modified gross income; and
(c) Multiplying the amount calculated in subparagraph (a), as reduced in subparagraph (b), by the rate of tax provided in RSA 76-A:2.
IV. In the case of a nonresident individual, a credit calculated by:
(a) Reducing the taxpayer's New Hampshire modified gross income by the amount of wages and self-employment income earned by the taxpayer in New Hampshire and the amount of unearned income from New Hampshire sources;
(b) Reducing the amount calculated in subparagraph (a) by the portion of the taxpayer's claimed exemptions which bears the same relationship to the taxpayer's total claimed exemptions, as the amount calculated in subparagraph (a) bears to the taxpayer's New Hampshire modified gross income; and
(c) Multiplying the amount calculated in subparagraph (a), as reduced in subparagraph (b), by the rate of tax provided in RSA 76-A:2.
Returns
76-A:6 Returns.
I. Every resident individual and nonresident individual having New Hampshire modified gross income greater than the exemption amounts provided in RSA 76-A:3, I and every resident fiduciary shall make a return to the department of revenue administration under such rules and in such form or manner as the commissioner may prescribe, on or before the due date of the tax as provided in RSA 76-A:4.
II. A husband and wife who are both residents or who both earn wages or self-employment income from sources within New Hampshire shall file a joint return for any taxable year for which such a joint return is filed for United States income tax purposes.
III. Whenever any return shows that overpayment allowable to the taxpayer exceed the amount of tax due, the department shall certify the amount of overpayment to the state treasurer for refund from the education trust fund created by RSA 198:39 or shall allow the taxpayer a credit against taxes due for a subsequent year, to the extent of the overpayment, at the taxpayer's option.
76-A:7 Information Returns. Each individual, partnership, limited liability partnership corporation, limited liability corporation, proprietorship, joint stock company, association, insurance company, business trust, real estate trust, or other form of organization, organized for gain or profit, being a resident or having a place of business in this state or being a nonresident having income derived from sources subject to tax under this chapter, in whatever capacity acting, including lessors or mortgagors of personal property, fiduciaries, employers, and all officers and employees of the state or of any political subdivision of the state, having the control, receipt, custody, disposal, or payment of salaries, wages, rentals, or other compensation or income subject to the provisions of this chapter paid or payable during any year to any taxpayer subject to a tax under this chapter shall on such date or dates as the department shall from time to time designate, make complete return thereof to the department, in such form as the department may prescribe.
Withholding of Tax
76-A:8 Who Must Withhold. Every employer as defined by section 3401(d) of the United States Internal Revenue Code of 1986, as amended, employing any person within this state shall deduct and withhold upon wages paid to said employee, a tax equal to 4 percent of such wages less claimed exemptions, subject, however, to the provisions of RSA 76-A:11.
79-A:9 Time for Payment of Withheld Taxes and Filing Withheld Taxes Returns.
I. Every employer required to deduct and withhold any tax under RSA 76-A:8 shall make a quarterly return thereof to the department on or before the fifteenth day of the first calendar month following the calendar quarter for which the return is made. However, a return may be filed on or before the last day of the first calendar month following such quarter if timely deposits have been made in full payment of such taxes due for the quarter.
II. Every employer shall pay over to the department, or to a depository designated by the department, the taxes so required to be deducted and withheld at the same time that such employer is required, under federal income tax law and regulations, to pay over federal taxes that are required to be deducted and withheld from wages to employees.
III. The department may, if such action is necessary in any emergency where collection of the tax may be in jeopardy, require such employer to make such return and pay such tax at any time, or from time to time.
76-A:10 Employer's Liability.
I. Each employer required to deduct and withhold tax under this chapter shall be liable for such tax. In the event an employer fails to withhold and pay over to the department any amount required to be withheld under RSA 76-A:8, the department shall assess such amount against the employer.
II. The amount of tax required to be deducted and withheld and paid over to the department under this chapter, when so deducted and withheld, shall be held to be a special fund in trust for the state. No employee or other person shall have any right of action against the employer in respect to any moneys deducted and withheld from wages and paid over to the department in compliance or in intended compliance with this chapter.
76-A:11 Use of Withholding Tables. At the election of the employer, the employer may deduct and withhold a tax determined on the basis of tables to be prepared and furnished by the department, which tax shall be substantially equivalent to the tax provided in RSA 76-A:8 and which shall be in lieu of the tax required in such section.
Estimated Tax Declarations
76-A:12 Filing of Declarations.
I. On the fifteenth day of the fourth month of the current taxable year every resident individual, nonresident individual, and resident fiduciary, except as provided in paragraph II, shall furnish the department with an estimate of such portion of such person's New Hampshire taxable income for the current taxable year as will not be subject to the withholding provisions of this chapter.
II. The provisions of paragraph I are not applicable to resident individuals and nonresident individuals who reasonably anticipate receiving less than $11,000 of New Hampshire taxable income which will not be subject to withholding during the current taxable year, or to taxpayers receiving their income from farming as defined by the United State Internal Revenue Code of 1986, as amended. The provisions of paragraph I are not applicable to resident fiduciaries who reasonably anticipate having a tax obligation under this chapter of less than $440.
76-A:13 Payment of Estimated Tax. Each taxpayer required to file an estimated tax declaration shall include with the declaration of estimated income, payment of not less than 25 percent of the tax due thereon. Thereafter, on the fifteenth day of the sixth and ninth months of the taxable year, the taxpayer shall pay not less than 25 percent of the tax due upon said estimated income or any revised estimate thereof. The fourth installment of estimated tax shall be paid on the fifteenth day of the first month following the close of the taxable year for which the estimate was made.
Miscellaneous Provisions
76-A:14 Extension of Time for Returns. For good cause, the department may extend the time within which a taxpayer is required to file a return or declaration and if such return or declaration is filed during the period of extension no penalty or late payment charge may be imposed for failure to file the return at the time required by this chapter, but the taxpayer shall be liable for interest and late payment charges as prescribed in RSA 21-J:28 and RSA 21-J:33. Failure to file the return during the period of the extension shall void the extension.
76-A:15 Administration.
I. This chapter shall be administered and enforced by the commissioner of revenue administration. The commissioner shall adopt rules, under RSA 541-A, necessary to insure the proper administration of this chapter which shall be consistent with the provisions of RSA 21-J:13.
II. The commissioner shall appoint such additional technical, clerical, and other personnel as the commissioner shall deem necessary to carry out the provisions of this chapter.
III. The department of revenue administration shall collect the taxes, interest, and penalties imposed under this chapter and RSA 21-J and shall pay them to the state treasurer less the administrative and enforcement costs of this chapter. The state treasurer shall deposit the remaining amount in the education trust fund established in RSA 198:39.
IV. The commissioner may institute actions in the name of the state to recover any tax, interest on tax, or the penalties imposed by this chapter and RSA 21-J, as part of the commissioner's authority to administer this chapter and to administer and enforce the tax laws of this state generally under RSA 21-J.
V. In the collection of taxes imposed by this chapter, the department may use all of the powers granted to tax collectors under RSA 80 for the collection of taxes, and it has all of the duties imposed upon the tax collectors by RSA 80 including the optional tax sale procedure under RSA 80:58-86. The following shall also apply:
(a) The provisions of RSA 80:26 apply to the sale of land for the payment of taxes due under this chapter, and the state treasurer is authorized to purchase the land for the state.
(b) If the state purchases the land, the state treasurer shall certify the purchase to the governor and the governor shall draw a warrant for the purchase price out of any money in the treasury not otherwise appropriated.
VI. The commissioner shall have the authority to subpoena witnesses, records, and documents, as needed, and to administer oaths to those testifying at hearings. The department and the taxpayer may take the depositions of witnesses residing within and without the state pertaining to a matter under this chapter, in the same way as depositions are taken in civil actions in the superior court.
76-A:16 Fees. Fees of witnesses shall be the same as those allowed to witnesses in the superior court. In the case of witnesses summoned by the commissioner, it shall be considered as an expense of administration of this chapter.
76-A:17 Notice. Any notice required by this chapter to be given by the department to a taxpayer shall be made by mail to the last known address of the taxpayer and in the case of hearings shall be given at least 10 days before the date thereof.
76-A:18 Preference. The taxes and interest imposed by this chapter have preference in any distribution of the assets of the taxpayer, whether in insolvency or otherwise.
76-A:19 Dissolutions, Withdrawals, and Statements of Good Standing.
I.(a) No employer organized under any law of this state may transfer property to its shareholders pursuant to RSA 293-A:14.05(a) or to its members and managers pursuant to RSA 304-C:58 until all taxes required to be withheld by the employer under this chapter, and any interest and penalties that related thereto, have been fully paid and a certificate of dissolution shall have been obtained from the commissioner of revenue administration that no returns, tax required to be withheld, tax interest, or penalties for taxes administered by the department are due and unpaid.
(b) In order to transfer property to its shareholders pursuant to RSA 293-A:14.05(a) or its members or managers pursuant to RSA 304-C:58, an employer shall submit a written request containing the complete corporate or limited liability company name and identification number and accompanied by a non-refundable fee of $30 to the commissioner of revenue administration. This fee shall be deposited into the general fund. If, after reviewing the employer's records, the commissioner determines that no returns, tax required to be withheld, interest, or penalties for taxes administered by the department are due and unpaid, the commissioner shall prepare a certificate in accordance with subparagraph (a).
II. In order to obtain a statement for withdrawal, in accordance with RSA 293-A:15.20(b)(6) or RSA 304-C:68, an employer shall submit a written request containing the complete employer name and identification number and accompanied by a non-refundable fee of $30 to the commissioner of revenue administration. This fee shall be deposited into the general fund. If, after reviewing the employer's records, the commissioner determines that no returns, tax required to be withheld, interest, or penalties for taxes administered by the department are due and unpaid, the commissioner shall prepare a statement for withdrawal for the purposes required under RSA 293-A:15.20(b)(6) or RSA 304-C:68.
III. In order to obtain a statement that it is in good standing with the department of revenue administration, an employer shall submit a written request containing the complete employer name and identification number and accompanied by a non-refundable fee of $30 to the commissioner of revenue administration. This fee shall be deposited into the general fund. If, after reviewing the employer's records, the commissioner determines that no returns, tax required to be withheld, interest, or penalties for taxes administered by the department are due and unpaid, the commissioner shall prepare a statement of good standing.
76-A:20 Liens for Tax.
I. If any employer required to deduct and withhold a tax under this chapter neglects or refuses to pay the same after demand, the unpaid amount, including any late payment charge and interest together with any costs that may accrue in addition thereto, shall be a lien in favor of the state upon all property and rights to property, whether real or personal, belonging to such employer. Such liens shall arise at the time assessment and demand is made by the department and shall continue until the liability for the full amount of the lien is satisfied or becomes unenforceable. Such lien against personal property shall be valid as against any subsequent mortgagee, pledgee, purchaser, or judgment creditor when notice of such lien and the sum due has been placed on record by the department with the secretary of state and in the office of the town clerk where the taxpayer resides. Such lien against real property shall be valid as against any subsequent mortgagee, pledgee, purchaser, or judgement creditor when notice of such lien and the sum due has been placed on record by the department with the register of deeds for the county in which the property subject to the lien is situated. In the case of any prior mortgage on real or personal property so written as to secure a present debt plus future advances by the mortgagee to the mortgagor, the lien herein provided, when notice thereof has been properly recorded, shall be subject to such prior mortgage unless the department also notifies the mortgagee in writing of the recording of such lien, in which case any indebtedness thereafter created from mortgagor to mortgagee shall be junior to the lien herein provided for.
II. The lien created by paragraph I shall be released upon satisfaction of the amount of the lien or upon a finding by the commissioner that the lien has become unenforceable, or if there is furnished to the department a bond with surety approved by the department in a penal sum sufficient to equal the amount of the lien, said bond to be conditioned upon the payment of the amount of the lien upon a final determination or adjudication of the employer's liability therefor.
III. The lien created by paragraph I may be foreclosed in the case of real estate agreeably with the provisions of law relating to foreclosure of mortgages on real estate, and in the case of personal property agreeably with the provisions of law relating to the foreclosure of security interests in personal property.
IV. To secure payment of the taxes, fees, charges, and interest imposed by this chapter and RSA 21-J, the department may avail itself of any other provision of law relating to liens for taxes.
76-A:21 Additional Returns. When the commissioner has reason to believe that a taxpayer has failed to file a return or to include any part of New Hampshire modified gross income in a filed return, the commissioner may require the taxpayer to file a return or a supplementary return showing such additional information as the commissioner prescribes. Upon the receipt of the supplementary return, or if none is received, within the time set by the commissioner, the commissioner may find and assess the amount due upon the information that is available. The making of such additional return does not relieve the taxpayer of any penalty for failure to make a correct original return or relieve the taxpayer from liability for interest imposed under RSA 21-J:28 or any other additional charges imposed by the commissioner. This section shall not be construed to modify or extend the statute of limitations provided in RSA 21-J:29.
76-A:22 Corrections. Each taxpayer shall report to the commissioner any change in the amount of the taxpayer's New Hampshire modified gross income as finally determined by the United States Internal Revenue Service with respect to any previous year for which the taxpayer has made a return under this chapter. Such a report shall be made not later than 6 months after the taxpayer has received notice that such change has finally been determined. Notwithstanding any other provision of law, a taxpayer reporting a correction pursuant to this section shall be given notice by the department of any adjustment to the tax due with respect to such correction within 6 months of the filing of the report.
76-A:23 Taxpayer Records.
I. Every taxpayer shall:
(a) Keep such records as may be necessary to determine the amount of the taxpayer's liability under this chapter;
(b) Preserve such records for the period of 3 years or until any litigation or prosecution hereunder is finally determined;
(c) Make such records available for inspection by the commissioner or authorized agents, upon demand, at reasonable times.
II. Whoever violates the provisions of this section shall be subject to the penalties imposed under RSA 21-J:39.
76-A:24 Severability. If any provision or provisions of this chapter, is or are declared unconstitutional or inoperative by a final judgment, order, or decree of the supreme court of the United States or of the supreme court of New Hampshire, the remaining provisions of said chapter shall not be affected thereby.
3 Education Property Tax. RSA 76:3 is repealed and reenacted to read as follows:
76:3 Education Property Tax. An annual education property tax at the uniform rate of $5.50 on each $1000 of the value of taxable property for the April 1, 1999 to March 31, 2000 tax period, and the uniform rate of $5.00 on each $1,000 of the value of taxable property for the April 1, 2000 to March 31, 2001 tax period, is hereby imposed on all persons and property taxable pursuant to RSA 72 and RSA 73, except property subject to tax under RSA 82 and RSA 83-F.
4 What Taxes Assessed. Amend RSA 76:5 to read as follows:
76:5 What Taxes Assessed. The selectmen shall seasonably assess all state and county taxes for which they have the warrants of the [commissioner of revenue administration] state and county treasurers respectively; all taxes duly voted in their towns; and all school and village district taxes authorized by law or by vote of any school or village district duly certified to them; and all sums required to be assessed by RSA 33.
5 Information Required. Amend RSA 76:11-a, I to read as follows:
I. The tax bill which is sent to every person taxed, as provided in RSA 76:11, shall show the rate for municipal, [local education, state education,] school, and county taxes separately, the assessed valuation of all lands and buildings for which said person is being taxed, and the right to apply in writing to the selectmen or assessors for an abatement of the tax assessed as provided under RSA 76:16. The department of revenue administration shall compute for each town and city the rates which are to appear on the tax bills and shall furnish the required information to the appropriate town or city.
6 Reference to Interest and Dividend Tax Deleted; Education Income Tax Added. Amend RSA 72:34, II to read as follows:
II. For those exemptions having income or asset limitations, the assessing officials may request true copies of any of the following, as needed to verify eligibility. Any documents submitted shall be considered confidential, handled so as to protect the privacy of the applicant, and returned to the applicant at the time a decision is made on the application. The documents are:
(a) Federal income tax form; and
(b) [State interest and dividends tax form; and
(c)] Property tax inventory form filed in any other town; and
(c) Education income tax form.
RSA 359-C shall not apply to the documents requested for verification under this section.
7 Adjustment to Business Profits Tax; Reference Changed. Amend RSA 77-A:4, I to read as follows:
I. In the case of a business organization which is subject to taxation under RSA [77] 76-A, a deduction of such amount of gross business profits as is attributable to income which is taxable or is specifically exempted from taxation under RSA [77] 76-A.
8 Education Trust Fund. Amend the introductory paragraph of RSA 198:39, I to read as follows:
I. The state treasurer shall establish an education trust fund in the treasury. Moneys in such fund shall not be used for any purpose other than to distribute adequate education grants to municipalities' school districts pursuant to RSA 198:42 and to provide relief from the local school property tax and to otherwise fund the state's duty to cherish the interest of public schools as defined in statute. The state treasurer shall deposit into this fund immediately upon receipt:
9 Transfer Tax; Rate. RSA 78-B:1, I(b) is repealed and reenacted to read as follows:
(b) The rate of the tax is $.50 per $100, or fractional part thereof, of the price or consideration for such sale, grant, or transfer; except that where the price or consideration is $4,000 or less there shall be a minimum tax of $20. The tax imposed shall be computed to the nearest whole dollar.
10 Education Trust Fund; Tobacco Settlement Funds. Amend RSA 198:39, I(i) to read as follows:
(i) Tobacco settlement funds in the amount of [$40,000,000] $20,000,000 annually.
11 New Subparagraph; Education Income Tax Revenues; Education Trust Fund. Amend RSA 198:39, I by inserting after subparagraph (k) the following:
(1) The net revenue from the education income tax from the department of revenue administration pursuant to RSA 76-A:15, after deducting the necessary costs of collection and administration including taxpayer refunds under RSA 76-A:6, III.
12 Cross-Reference; Phase-in Provisions Eliminated. Amend RSA 198:46, I to read as follows:
I. [Except as provided in paragraph IV and RSA 198:48, VI,] Municipalities for which the education property tax exceeds the amount necessary to fund an adequate education determined by RSA 198:40 shall collect and remit such excess amount to the department of revenue administration on or before March 15 of the tax year in which the excess occurs.
13 Tax Equity and Efficiency Commission. Amend 1999, 17:55, V as amended by 1999, 281:14 to read as follows:
V. The commission shall study issues arising under this act and other tax-related legislation enacted in 1999 or 2000 relating to tax fairness and administrative implementation which may be appropriate for further legislative action, as well as other aspects of fairness and efficiency in the funding of public education. The commission shall also study and recommend changes in policy, procedure, financing, and governance in cooperative school districts, including how the cost of an adequate education should be determined, apportioned, and credited within cooperative school districts. As part of its study, the commission shall consider:
(a) The most appropriate means for evaluating the following types of property for taxation purposes:
(1) Utility property.
(2) Railroad property.
(3) Nuclear station property.
(b) The income tax treatment of pension payments received in lieu of social security payments, pension payments from pensions to which the taxpayer's contributions to the pension were previously taxed, and military pensions.
(c) The proper income tax treatment of military personnel on active duty residing out-of-state.
(d) Whether items of personal income under the Internal Revenue Code, such as certain capital gains, which are currently taxed under RSA 77-A, the business profits tax, can and should instead be taxed under RSA 76-A, the education income tax.
(e) Whether there can and should be a targeted exemption of capital gains from investments in New Hampshire businesses from the education income tax under RSA 76-A.
(f) Whether there can and should be a targeted exemption of capital gains, the proceeds of which are used for necessary medical services.
14 Tax Equity and Efficiency Commission; Final Reporting Date Extended. Amend RSA 1999, 17:55, VII to read as follows:
VII. The commission shall report its findings and any recommendations for proposed legislation to the speaker of the house of representatives, the senate president, the house clerk, the senate clerk, the governor, and the state library on or before December 31, 1999, [and] on or before March 31, 2000, and on or before December 1, 2000.
15 Cooperative School Districts; Adequate Education Grants. Amend RSA 195:7, I to read as follows:
I. If a cooperative school district was organized prior to July 1, 1963, during the first 5 years after the formation of a cooperative school district each preexisting district shall pay its share of all capital outlay costs and all operational costs in excess of the amount determined necessary to provide an adequate education under RSA 198:40, I(a) in accordance with either one of the following formulas as determined by a majority vote of the cooperative district meeting:
16 Cooperative School Districts; Certification of District Taxes; Adequate Education Grants. Amend RSA 195:14, I (b) to read as follows:
(b) The commissioner of revenue administration shall examine such certificates and delete any appropriations which appear not made in accordance with the law, and adjust any sum, in accordance with RSA 21-J:35, which may be used as a setoff against the amount appropriated when it appears to the commissioner of revenue administration such adjustment is in the best public interest. The commissioner of the department of revenue administration shall apply the total amount of all adequate education grants received pursuant to RSA 198:42.
17 Cooperative School Districts; Certification of District Taxes Amended. Amend RSA 195:14, I (c) to read as follows:
(c) The commissioner of revenue administration shall certify to the state department of education the total amount [to be apportioned among the pre-existing school districts. Such total shall include the adequate education cost for the district under RSA 198:38, XII, and the amount above the cost of an adequate education to be assessed and collected as local educational taxes] of taxes to be raised for the support of the cooperative school district.
18 Cooperative School Districts; Certification of District Taxes; Determination of Proportional Share Amended. RSA 195:14, I (d) is repealed and reenacted to read as follows:
(d) The state department of education shall determine the proportional share of said taxes to be borne by each preexisting school district and notify the commissioner of revenue administration of its determination.
19 Cooperative School Districts; Educational Adequacy Grant Computation Amended. Amend RSA 195:15 to read as follows:
195:15 State Aid. The state aid to which a cooperative elementary and/or secondary district shall be entitled shall be the total of those shares of the aid to which the pupils attending the cooperative district would have entitled the pre-existing districts, had they remained in the pre-existing districts. [For the purposes of crediting the cooperative district's adequate education cost to the pre-existing districts, each such pre-existing district shall have its adequate education cost under RSA 198:38, XII credited against its share of the cooperative school district budget. However, cooperative school districts formed by 2 or more pre-existing districts whose boundaries approximate those of a single township in which they are located shall be treated as a single school district for the purposes of this section].
20 Cooperative School Districts; Formation procedures; Computation of Adequate Education Grants. Amend RSA 195:18, III (e) to read as follows:
(e) The method of apportioning [the] all operating expenses in excess of the amount determined necessary to provide an adequate education under RSA 198:40, I(a) of the cooperative school district among the several preexisting districts and the time and manner of payment of such shares. Home education pupils who do not receive services from the cooperative school district, except an evaluation pursuant to RSA 193-A:6, II shall not be included in the average daily membership relative to apportionment formulas.
21 Cooperative School Districts; Formation Procedures; Adequate Education Grant Apportionment Amended. Amend RSA 195:18, IX to read as follows:
IX. The organization meeting of a cooperative school district shall be called to order by the chairperson of the cooperative school district planning board, or by the clerk-treasurer thereof, who shall serve as temporary chairperson for the first order of business which shall be the election of a moderator and of a temporary clerk, by ballot, who shall be qualified voters of the district. From and after the issuance of the certificate of formation by the board to the date of operating responsibility of the cooperative school district, such district shall have all the authority and powers of a regular school district for the purposes of incurring indebtedness, for the construction of school facilities and for such other functions as are necessary to obtain proper facilities for a complete program of education. When necessary in such interim, the school board of the cooperative school district is authorized to prepare a budget and call a special meeting of the voters of the district, which meeting shall have the same authority as an annual meeting, for the purpose of adopting the budget, making necessary appropriations, and borrowing money. Whenever the organization meeting is held on or before April 20 in any calendar year, no annual meeting need be held in such calendar year. Sums of money raised and appropriated at the organization meeting or any interim meeting prior to the first annual meeting shall be forthwith certified to the commissioner of revenue administration and the state department of education upon blanks prescribed and provided by the commissioner of revenue administration for the purpose, together with a certificate of estimated revenues, so far as known, and such other information as the commissioner of revenue administration may require. The commissioner of revenue administration shall examine such certificates and delete any appropriations which appear not made in accordance with the law, and adjust any sum which may be used as a setoff against the amount appropriated when it appears to the commissioner such adjustment is in the best public interest. The commissioner of the department of revenue administration shall apply the total amount of all adequate education grants received pursuant to RSA 198:42 as a setoff against the amount appropriated. The commissioner of revenue administration shall certify to the state department of education the total amount of taxes to be raised for said cooperative school district and the state department of education shall determine the proportional share of said taxes to be borne by each preexisting school district and notify the commissioner of revenue administration of its determination. Upon certification by the commissioner of revenue administration the selectmen of each town shall seasonably assess the taxes as provided by law. The selectmen shall pay over to the treasurer of the cooperative district such portion of the sums so raised as may reasonably be required according to a schedule of payments needed for the year as prepared by the treasurer and approved by the cooperative school board, but no such payment shall be greater in percentage to the total sum to be raised by one local district than that of any other local district comprising such cooperative school district.
22 New Subdivisions; Hardship Grants; Taxpayer Disclosure and Protection; Per Pupil Adequate Education Cost Containment. Amend RSA 198 by inserting after section 49 the following new subdivision:
Hardship Grants
198:50 Hardship Grant Calculation and Distribution.
I. Starting in fiscal year 2002 the department of revenue administration shall compute 3 percent of the statewide cost of an adequate education for the prior fiscal year, which product shall be the total amount available for distribution as hardship grants, and shall be known as the hardship grant pool.
II. The hardship grant for each eligible municipality shall be calculated by the department of revenue administration and distributed as follows:
(a) An income factor shall be computed for each municipality by dividing the municipality's per capita income average by the statewide per capita income average.
(b) A property wealth factor shall be computed for each municipality by dividing the municipality's equalized assessed value by the municipality's average daily membership in residence, and then dividing by the statewide equalized assessed value per average daily membership in residence.
(c) A hardship factor shall be computed for each municipality by summing the income factor and property wealth factor and dividing the resulting product by 2.
(d) The hardship grant pool shall be divided by the total number of average daily membership in residence in all municipalities with a hardship factor < .80, which yields the gross hardship grant per pupil amount.
(e) The gross hardship grant per pupil amount shall be adjusted for each municipality to produce a net hardship grant per pupil amount which decreases as the hardship factor approaches .80.
(f) Each municipality with a hardship factor of < .80 shall receive a hardship grant equal to the net hardship grant per pupil amount times the municipality's average daily membership in residence.
III. The hardship grant shall be used to reduce the local school property tax rate of each municipality receiving the same.
IV. The commissioner of the department of revenue administration shall adopt rules, pursuant to RSA 541-A, relative to the implementation of this subdivision.
Taxpayer Disclosure and Protection
198:51 Taxpayer Disclosure and Protection.
I. The department of revenue administration shall annually calculate for each municipality the percentage decrease in local school property taxes resulting from the provision of the adequate education grant, hardship grant, if any, and the amount of other state aid for education. The department of revenue administration shall also annually calculate the local school property tax rate for each municipality as if no such grants or other aid had been provided.
II. The department of revenue administration shall provide to every municipality by October 30 in each year:
(a) A statement of the total amount of the adequate education grant, hardship grant, if any, and the amount of other state aid for education provided to the municipality;
(b) The percentage decrease in school local property taxes resulting from provision of such grants and other state aid to the municipality; and
(c) The local school property tax rate that would have applied in the municipality but for the provision of such grants and other state aid.
III. In addition to the other information required by law, every property tax bill issued in every community shall contain the information specified in paragraph II(a)-(c) in substantially the following format:
"Your local school property tax bill has been reduced by ____ percent
because of education funding in the sum of $__________ provided by the
State of New Hampshire. Your local school tax rate would have been
$ ______ per $1,000 if your municipality had not received the state aid."
Per Pupil Adequate Education Cost Containment
198:52 Per Pupil Adequate Education Cost Containment.
I. Notwithstanding any other provision of law to the contrary, the per pupil expense of an adequate education as computed in paragraph II, shall not increase in any given fiscal year by an amount in excess of the percentage increase in the consumer price index as defined in RSA 76-A:1, I
for the most immediate prior calendar year ended, provided that, for the fiscal year 2002 only, the increase shall be equal to the total of the percentage increase in the consumer price index for the 2 immediate prior calendar years ended.
II. The per pupil expense of an adequate education for purposes of paragraph I shall be computed by dividing the sum of the statewide cost of an adequate education under RSA 198:40, III for the prior fiscal year by the average daily membership in residence for that fiscal year.
23 General Fund; Deposit of Undesignated Surplus into the Education Trust Fund for the Biennium Ending June 30, 1999.
I. Notwithstanding the provisions of RSA 9:13-e, the state treasurer shall deposit up to $31,000,000 of general fund undesignated surplus as of June 30, 1999 into the education trust fund as established in RSA 198:39.
II. If there is a surplus in the education trust fund on June 30, 2001, the first $31,000,000 of such surplus shall be transferred to general fund surplus on June 30, 2001.
24 Education; School Money; Excess Education Property Tax Payment; Maintenance of Local Control. Amend RSA 198:46 to read as follows:
198:48 Maintenance of Local Control. Distributions under RSA 198:42 depend only on weighted average daily membership in residence and the per pupil adequacy cost amounts as determined in this subdivision and are independent of how the [municipalities] school districts decide to spend the distributions or other funds they may raise for education. Notwithstanding any other provision of law, nothing in this subdivision is intended in any way to limit or control how school districts operate or spend their budgets, except that adequate education grants must be expended for educational purposes. Adequate education grants and hardship grants shall not be considered unanticipated funds under RSA 198:20-b. In determining the local school property tax rate, the commissioner of revenue administration shall apply the total amount of adequate education grants received by school districts as a setoff against the amount appropriated in the officially approved budget.
25 Repeal.
I. RSA 77, relative to taxation of incomes.
II. RSA 77-B, relative to the commuter income tax.
III. RSA 78:32, relative to distribution of tobacco tax revenues.
IV. RSA 261:52-a, relative to notice that the interest and dividends tax may be due.
V. RSA 391:3, relative to the taxation of common trust funds under RSA 77.
VI. RSA 198:39, I(d), relative to tobacco tax revenues deposited in the education trust fund.
26 Repeal.
I. RSA 86, relative to the taxation of legacies and successions.
II. RSA 78-B:13, relative to distribution of funds.
III. RSA 198:39, I(e), relative to real estate transfer tax funds deposited in the education trust fund.
IV. RSA 198:39, I(i), relative to tobacco settlement funds deposited in the education trust fund.
V. RSA 198:39, I(k), relative to general funds appropriated to the education trust fund.
VI. 1999, 281:4, relative to apportioning the costs of an adequate education within a cooperative school district.
VII. RSA 281:12, relative to the definition of state aid for educational adequacy.
27 Repeal. The following are repealed:
I. RSA 198:46, IV, relative to the phase-in provisions for excess education property tax payments.
II. 1999, 17:1, VI, relative to the purpose of the phase-in provisions.
28 Repeal. The following are repealed:
I. RSA 76:3, relative to the state education property tax.
II. RSA 76:8, relative to the commissioner's warrant.
III. RSA 76:9, relative to the commissioner's report.
IV. RSA 198:46, I-III, relative to excess education property tax payments.
V. RSA 198:47, relative to forms for reporting and remitting excess education property tax.
29 Tax Policy Simulation and Forecasting Models. The legislative budget assistant shall acquire, through a consulting firm, a complete system of tax policy simulation and forecasting models for the state of New Hampshire, including all necessary database development and training. The system shall include (1) an individual income tax model; (2) a sales and excise tax model; (3) a property tax model; (4) a business tax model; (5) a dynamic revenue estimating model; and (6) a multi-tax incidence model. The legislative budget assistant shall draw on existing sources of funds within its budget to pay for this system. The department of revenue administration and the department of administrative services shall cooperate with the legislative budget assistant and its consultant in the development of databases for the model and copies of the delivered software system, and training in its use, shall be made available to the department of revenue administration and the department of administrative services.
30 Effective Date.
I. Sections 2, 6-8, and 11 and 25 of this act shall take effect January 1, 2001.
II. Sections 4-5 and 28 of this act shall take effect April 1, 2001.
III. Sections 9, 15-21, and 26 of this act shall take effect July 1, 2001.
IV. The remainder of this act shall take effect upon its passage.
LBAO
99-0091
Revised 1/25/99
HB 109 FISCAL NOTE
AN ACT establishing a flat rate education income tax and a statewide education property tax to fund public education and making an appropriation therefor.
FISCAL IMPACT:
The Departments of Revenue Administration (DRA) and Education (DOE) indicate this bill will have an indeterminable fiscal impact on state and local revenue and expenditures in FY 2000 and each year thereafter. There will be no fiscal impact on county revenue and expenditures.
This bill authorizes the Treasurer to issue 5 year bonds and notes in an amount certified by the Commissioner of the Department of Revenue Administration as necessary for start-up costs including equipment and computer purchases, and other administrative and enforcement costs, with the payment of principal and interest on these bonds and notes to be paid from the education trust fund.
METHODOLOGY:
The DRA determined an increase of $821.736 million in state revenue from this bill composed of two pieces; $568.613 million from income tax and $253.123 million from statewide property tax.
Income Tax Revenue: The Department projected income tax revenue using adjusted gross income (AGI) from 566,955 federal tax returns filed with the IRS by New Hampshire residents for tax year 1996. The provisions of this bill were then applied to determine the actual tax for each individual. This model calculates the actual tax that would have been received had this new law been in place in FY 1996. The DRA calculation of income taxes due is as follows:
(Dollars in Millions)
Computed Income Tax Before Adjustment $576.024
Adjustments:
Additions:
Taxes Paid by Non-Residents 57.675
Tax on Other States' Bonds 2.074
Reductions:
Business Profits Tax Adjustment ( 10.286)
Taxes Paid to Other States ( 152.753)
Non-taxable US Interest ( 4.608)
Renter Credit ( 42.338)
Repeal of Interest and Dividends Tax ( 52.699)
Net Tax Revenue After Adjustments $373.089
The DRA then used growth rates based on the State of Massachusetts' experience and average AGI increase to adjust the calculated $373.089 net tax revenue after adjustments in FY 1996 to $568.613 net tax revenue increase in FY 2000.
Statewide Property Tax Revenue: The Department projected property tax revenue using FY 1997 modified assessed value of $65,793,020,051 and 1990 census data to determine whether a property was owner-occupied or not. The provisions of this bill were then applied to this data to determine the following fiscal impact:
(Dollars in Millions)
Modified Assessed Value $65,793.020
All property at $8 per $1,000 tax rate 526.344
Less Value of Census Determined
Owner-Occupied Property (228.675)
Difference - Remaining Tax $ 297.669
Tax on Other Qualified Property (68.704)
Net Statewide Property Tax $ 228.965
The DRA then used growth rates based on average changes between the 1990, 1995, and 1997 equalized assessed value totals to adjust the calculated $228.965 statewide property tax in FY 1997 to $253.123 statewide tax revenue for FY 2000.
The DRA further estimated $5.0 million would be needed in the initial year and $4.5 million in each subsequent year for administration of the new tax.
Although the DOE is unable to determine the fiscal impact, they did calculate a base annual education block grant for FY 2000 by using an estimate for the average daily membership in residence times the per pupil grant of $5,000 less categorical aid programs. This calculation results in estimated increased state expenditures and local revenues of approximately $948.374 million in FY 2000, $1.008 billion in FY 2001, and $1.071 billion in FY 2002. For years after FY 2000, DOE assumed that average daily membership (ADM) in residence increased 2.5% per year and the per pupil grant amount by 3.5%.
This bill repeals foundation aid and kindergarten per pupil aid programs in FY 2000. Sweepstakes net income that previously funded foundation aid will now be deposited into the education trust fund to offset a portion of these expenditures.