Lawmakers mull compromise on Section 179 deductions
Senate panel also votes down expansion of Coos property tax break
It looks as if New Hampshire lawmakers agree that businesses should be able to deduct a lot more for their equipment purchases. The only question now appears how much, and whether the state budget can afford it.
And, as the House and Senate sponsors of separate bills addressing the matter happen to be married to each other, chances of some kind of amicable settlement are pretty good.
“Would you consider a friendly amendment?” Sen. Andy Sanborn asked Rep. Laurie Sanborn, both Republicans from Bedford, as she testified Tuesday in front of the Senate Commerce Committee.
“Certainly,” she replied.
Representative Sanborn was testifying for House Bill 668, which would increase the maximum deduction from $25,000 to $100,000 for such items as kitchen equipment, servers and trucks. That’s still way below the federal deduction of $500,000 under Section 179 of the IRS code, which is matched in 34 states.
“This will send a positive message to employers and help small business,” Representative Sanborn said. “Anytime New Hampshire tax code is different from the federal code, it makes us an outlier, and not in a good way.”
Two weeks earlier, the full Senate passed Senate Bill 552, sponsored by Senator Sanborn, which would increase the deduction to the federal level of $500,000.
Representative Sanborn explained that at the time she drew up her bill Congress had not yet raised the limit to 500,000, as it had for the last dozen years on an annual basis. But it did so permanently, so she said she would be inclined to match that.
However, SB 552 still has to go to the Senate Finance Committee to weigh its fiscal impact. The Department of Revenue Administration estimates – based on 2013 data – that raising the deduction to $100,000 would reduce revenues by more than $4.7 million a year and increasing it to $500,000 would cost the state about $13.85 million annually.
But Representative Sanborn said that the revenue would actually be lost, since the taxpayer gets to deduct the full amount either way. Her bill would just allow more of that deduction up-front. But a DRA official noted that some of the revenue might be lost, since an expanding business could receive more revenue from out-of-state sales, and because of apportionment the state would end up with less.
Coos tax break backed
Prior to the public hearing on HB 668, the Senate recommended killing HB 359, a bill that would expand a tax break offered in Coos County to the rest of the state.
The bill would have allowed municipalities to grant businesses making improvements a 10-year abatement on the local property tax portion of the bill. HB 359 originally would have just extended the break to Carroll County, but the House thought that it was only fair that all businesses in the state could potentially benefit.
“We have one of the highest business taxes, and we have to get more businesses in,” said Rep. Frank McCarthy, R-Conway, the bill’s sponsor. McCarthy said that the tax break hasn’t been used much and that the state’s northernmost county wouldn’t lose out on potential development, especially since it still had a more lucrative tax break on any new workers hired against the BET.
But Sen. Jeff Woodburn, D-Dalton, testified against the bill, saying that the program did create some 300 jobs since 2009 in Coos, and spreading it out would dilute the effect on the rural county.
“We need to target financial assistance toward those who have special needs,” Woodburn said.
The Commerce Committee voted to kill the bill, 4-1.