HB 1417

AN ACT eliminating the payment of the business enterprise tax on interest paid by business enterprises.

SPONSORS: Rep. J. Sullivan, Carr 2; Rep. Rogers Johnson, Rock 25; Rep. Belanger, Rock 26; Rep. Giuda, Graf 3; Sen. Roberge, Dist 9; Sen. Francoeur, Dist 14; Sen. Boyce, Dist 4

This bill eliminates the payment of the business enterprise tax on interest paid by business enterprises.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

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

1 Definition; Enterprise Value Tax Base. Amend RSA 77-E:1, IX to read as follows:

IX. "Enterprise value tax base" means the sum of all compensation paid or accrued[~~, interest paid or accrued,~~] and dividends paid by the business enterprise, before special adjustments provided in RSA 77-E:3 or apportionment as provided in RSA 77-E:4.

2 Reference to Interest Apportionment Factor Deleted. Amend RSA 77-E:4, I(c) to read as follows:

(c) The portion of the base from dividends shall be apportioned on the basis of the [3] 2 following factors, giving equal weight to each, and applying the average of the [3] 2 percentages to the dividends:

(1) The compensation apportionment factor in subparagraph (a)(2) of this section; and

(2) [~~The interest apportionment factor in subparagraph (b) of this section; and~~]

[~~(3)~~] The percentage of the total sales, including charges for services, made by the business enterprise everywhere as is made by it within this state. Sales of tangible personal property are made in this state if the property is delivered or shipped to a purchaser, other than the United States government, within this state regardless of free on board point or other conditions of sale, or the property is shipped from an office, store, warehouse, factory or other place of storage in this state and (A) the purchaser is the United States government, or (B) the business enterprise is not taxable in the state of the purchaser. Sales other than sales of tangible personal property are in this state if the revenue-producing activity is performed in this state, or the revenue-producing activity is performed both in and outside this state and a greater proportion of the revenue-producing activity is performed in this state than in any other state, based on costs of performance.

The Department of Revenue Administration states this bill will decrease state general fund revenue by $12,384,900 in FY 2003, $12,632,598 in FY 2004, $13,011,576 in FY 2005, and $13,401,923 in FY 2006. There will be no fiscal impact on state, county, and local expenditures or county and local revenue.

The Department states this bill would remove interest from the enterprise value base of the Business Enterprise Tax (BET). The fiscal impact was calculated using 169,980 tax returns filed over the past three fiscal years, and applying this analysis to the BET as projected in the FY 2002-2003 Operating Budget. The Department assumes 2% growth for FY 2004 and 3% growth for FY 2005 and FY 2006, and states increased Business Profits Tax (BPT) revenue is a result of lower BET credit.

Fiscal Year Business Enterprise Tax Business Profits Tax Net Impact

2003 ($22,518,000) $10,133,100 ($12,384,900)

2004 (22,968,360) 10,335,782 (12,632,598)

2005 (23,657,411) 10,645,835 (13,011,576)

2006 (24,367,133) 10,965,210 (13,401,923)

The Department states this bill will require no additional funding for the Department.