HB 466-FN-A – AS INTRODUCED
2005 SESSION
09/10
HOUSE BILL 466-FN-A
AN ACT establishing a research and development tax credit against the business profits tax and the business enterprise tax.
SPONSORS: Rep. Hinkle, Hills 19; Rep. Hansen, Hills 6; Rep. Michon, Hills 25; Rep. Slocum, Hills 6; Sen. Roberge, Dist 9; Sen. Boyce, Dist 4
This bill establishes a research and development tax credit against the business profits tax and the business enterprise 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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
05-0523
09/10
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Five
AN ACT establishing a research and development tax credit against the business profits tax and the business enterprise tax.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 New Paragraph; Business Profits Tax; Research and Development Tax Credit. Amend RSA 77-A:5 by inserting after paragraph XII the following new paragraph:
XIII.(a) There shall be allowed a research and development tax credit equal to 15 percent of qualified manufacturing research and development expenditures made or incurred during the taxable period.
(b) In this paragraph:
(1) “Employee” means any United States citizen employed by a business organization who, as of the last day of the applicable tax year:
(A) Has been employed by such business organization for at least 6 consecutive months; and
(B) Performs all but an incidental portion of services at a location or locations within the state.
(2) “Qualified manufacturing research and development” means research which is undertaken for the purpose of discovering information which is technical in nature, and the application of which is intended to be useful in the development of a new or improved product, process, computer software, technique, formula, or invention which is to be offered for sale, lease, or license.
(3) “Research and development” shall not include:
(A) Any research related to the adaptation of an existing business component to a particular customer’s requirements or need.
(B) Any efficiency survey; activity relating to management function or technique; market research, testing or development; routine data collection; or routine or ordinary testing or inspection for quality control.
(C) Any research conducted outside of New Hampshire.
(D) Any research in the social sciences, arts, or humanities.
(E) Any research funded by any grant, contract, or otherwise by another person or government entity.
(4) “Research and development expenditures” means any wages paid to or incurred by an employee for qualified service performed by such employee.
(5) “Qualified service” means services engaged in qualified research as defined above, or services engaged in the direct supervision or direct support of research activities which constitute research and development. If an employee is engaged in qualified research and development part time and performs other services for the employer for the balance of the time employed, only that time spent in qualified research and development is counted toward the research and development tax credit.
(c) In no event shall the credit allowed under this paragraph exceed 5 percent of the tax due under this chapter before any credits under RSA 77-A:5 are taken into account.
(d) The research and development tax credit shall apply to eligible research and development costs that occur on or after July 1, 2005.
(e) The research and development tax credit may be applied against either the tax imposed under this chapter or the business enterprise tax imposed under RSA 77-E.
2 New Section; Business Enterprise Tax; Research and Development Tax Credit. Amend RSA 77-E by inserting after section 3-a the following new section:
77-E:3-b Research and Development Tax Credit. The research and development tax credit allowed under RSA 77-A:5, XIII may be applied to either the tax imposed under RSA 77-A or the tax imposed under this chapter.
3 Effective Date. This act shall take effect July 1, 2005.
LBAO
05-0523
1/25/05
HB 466-FN-A - FISCAL NOTE
AN ACT establishing a research and development tax credit against the business profits tax and the business enterprise tax.
FISCAL IMPACT:
The Department of Revenue Administration indicates this bill will decrease state unrestricted general fund revenue by $650,000 in FY 2006 and FY 2007, and by $700,000 in FY 2008 and FY 2009. There is no fiscal impact on state, county and local expenditures or county and local revenue.
METHODOLOGY:
The Department states that this bill reinstates the research and development credit that was repealed on July 1, 1995. To determine an equivalent research and development credit for FY 2006, the Department used the credit that was taken in 1994 and 1995 as a percentage of total Business Profits Taxes (BPT) paid (.38%), and applied that percentage to an estimate of FY 2006 BPT (FY 2003 BPT times a growth factor of 1% per year).
The Department states that this tax change can be administered within their existing budget.