After months of negotiations, New Hampshire lawmakers and Governor Sununu finally reached an agreement on the state’s budget. The tax provisions in the budget, which are incorporated into enrolled House Bill 4, include Business Profits Tax and Business Enterprise Tax rate changes. The Business Profits Tax (BPT) rate is currently 7.7 percent for tax periods ending on or after December 31, 2019. For tax periods ending on or after December 31, 2021, the bill adopts both a 7.9 percent rate and a 7.5 percent rate. Per the bill, the Commissioner of the Department of Revenue Administration is required to report the total unrestricted general and education trust fund revenue collected for the fiscal year ending June 30, 2020 to the Secretary of State. If revenues are six percent or more below the official estimates for that fiscal year, then the 7.9 percent rate will apply. If revenues, however, are six percent or more above the official revenue estimates for the fiscal year, the 7.5 percent rate will apply. If revenues collected are not six percent or more below or above the official revenue estimates for that fiscal year, the 7.7 percent rate continues to apply. The bill adopts a similar rate mechanism for the Business Enterprise Tax (BET), which is currently imposed at a 0.6 percent rate. The potential higher BET rate for tax periods ending on or after December 31, 2021 is 0.675 percent and the lower rate is 0.5 percent. The bill repeals certain automatic BPT and BET rate changes that were scheduled under current law to occur for tax periods ending on or after December 31, 2021.
House Bill 4 also updates New Hampshire’s definition of the Internal Revenue Code for purposes of the BPT and addresses GILTI. Currently, New Hampshire adopts the Internal Revenue Code as in effect on December 31, 2016. As such, none of the federal Tax Cuts and Jobs Act changes are incorporated into New Hampshire law in computing BPT liability. For tax periods beginning on or after January 1, 2020, the Internal Revenue Code of 1986 as in effect on December 31, 2018 is adopted. A new deduction is allowed for “such amount of gross business profits as is attributable to global intangible low-taxed income under section 951A of the United States Internal Revenue Code as defined in RSA 77-A:1, XX, as determined in accordance with section 250(a) of the United States Internal Revenue Code.” This new deduction for GILTI applies for tax years beginning on or after January 1, 2020. The bill also modifies New Hampshire’s formula for apportioning foreign dividends from a unitary affiliate to exclude amounts subject to tax as GILTI. Please stay tuned to TWIST for additional tax reform updates.