Bills seek to update NH’s aging business tax laws

With no changes since 2000, state code seen as ‘a dinosaur’

You may have heard about the Section 179 deduction debate. The federal tax code allows for $500,000 deduction on major expenditures, like a truck or a new server in the year purchased, rather than depreciating it over many years. The state of New Hampshire only allows a $25,000 deduction. But if the state switched to allowing the federal cap on such deductions, Granite State businesses could save – and the state could lose – almost $19 million in the first year it was implemented.

But that’s not the only way New Hampshire tax law differs from the federal tax code. In fact, when it comes to business taxes, the state has been out of sync with Washington since the dawn of the current millennium.

For instance, most states update their business tax code every year, or at least every few years, automatically or though legislation. Not New Hampshire, whose tax law is often so outdated that it drives accountants and tax software firms crazy

“Are we the biggest dinosaur?” asked Patricia Lovejoy, D-Stratham, at a recent NH House hearing.

“By far,” responded Carollynn Ward, a tax policy analyst for the state Department of Revenue Administration.

Ward and DRA Commissioner John Beardmore were testifying in support of Senate Bill 239, the first of three bills that would implement what is known as rolling conformity with the federal government as they tweak the federal tax code.

“We need to get away from the 2000 code. It’s not helpful to reference a code from 16 years ago, for the business profits tax as a starting point,” testified Beardmore dryly.

New Hampshire used to be very “diligent” when it came to tax law, updating its code to conform to every little amendment passed in Washington, said the commissioner. But for some reason that nobody could quite explain, the state just dropped the ball when the new century began. And those little tax changes have started to add up.

Effects on revenue

The Section 179 deduction is the biggest discrepancy, and it perhaps brought this whole matter to the attention of tax professionals. Actually the federal government is partly to blame.

The Congress couldn’t make up its mind about how much to of a deduction to allow, jumping up and down as various economic stimulus packages passed and lapsed. Each increase was temporary, but in December federal lawmakers declared the $500,000 cap permanent, as if such a thing were possible in Washington. 

Indeed, when Rep. Laurie Sanborn, R-Bedford, first introduced House Bill 688 on expanding New Hampshire’s Section 179 deduction, she sought a $100,000 cap, because she had no idea what the federal government would do. By the time the measure got to the NH Senate, and Congress had apparently settled the matter, her husband, Sen. Andy Sanborn, R-Bedford, offered a “friendly amendment” to up the amount to $500,000 and to establish rolling conformity, to match his bill, SB 552. 

But the aforementioned SB 239 doesn’t actually mention the Section 179 deduction, as well as two other parts of the tax code, because the loss of revenue might be so great at this point that DRA wanted lawmakers to deal with the matter separately. 

The Section 179 deduction itself would result in about $19 million in lost revenue if every business took the write-off cap up front. That might cause budget writers to cringe.

“Too much too soon,” warned Sen. Lou D’Alessandro, D-Manchester speaking out against the change on the floor of the Senate.

But Senator Sanborn argued it could be a big boon to businesses.

“The 179 deduction is the most powerful economic incentive we could provide,” he argued. “Currently we are the worst state in America when it accounts for purchases. We want to encourage businesses to expand their business, buy something, make your business grow. That would lead to more employees.”

Besides, he argued, it really won’t cost the state money in the long run. Because businesses that take the deduction up front can’t do it later, so “it’s purely a matter of timing.”

But in a fiscal note to the bill, the DRA said that the measure isn’t revenue-neutral. Putting aside the cost of money, some businesses go out of business, move out of the state, or grow out of state, meaning their proportion of state taxes shrinks. 

Other tax law changes

There are two other provisions of the federal tax code that the DRA would exempt from the rolling conformity: Section 168, which allows businesses to take a “bonus depreciation” equal to 50 percent of the basis of the property in the year of acquisition, and Section 199, which provides a 9 percent deduction of income from production activities, such as mining, farming, construction, manufacturing, engineering and film production.

But the bill would match up the state with federal changes in several other sections:

 • Section 108, which allows for recognition of cancellation of debt as income over five years, rather than all at once

 • Section 195, which enables businesses to deduct up to $10,000 in startup costs up front, rather than over five years

 • Section 179D, which provides a deduction of up to $1.80 per square-foot for energy-efficient commercial buildings (though it has to reduce the basis of the property)

 • Section 48, which allows an energy credit that is deducted from adjusted gross income.

 • Section 181, which allows film or TV production costs of up to $15 million to be fully deducted in the year accrued, rather than stretching them out

 • Section 114, which includes the sale or lease of foreign assets in calculating business income

If New Hampshire conformed with federal law in all but the latter section, the businesses will gain, and the state would lose, at least initially. Like the Section 179 deduction, the state might recapture that revenue over time, if the business is around to pay it.

So how much will be lost? Beardmore said he had no idea.

But certainly, it would make it a lot easier for tax preparers to file, and the state to administer, if state and federal laws matched up. 

“I doubt that there are many tax practitioners who have a copy of the Internal Revenue Code of 2000 that existed in that time period,” testified Maurice Gilbert, director of state taxation for the law firm of Devine Millimet and former director of the DRA’s Audit Division. “It is also doubtful that many, if any, taxpayers or practitioners can elaborate all he changes … enacted into law by Congress over the last 15 years.”

Added Gilbert: “I understand that New Hampshire is unique in its approach to taxation, but I doubt that this is an instance where we should be.” 


Bill Title

Prime Sponsor





Relative to application of the Internal Revenue Code to provisions of the business profits tax.

Andy Sanborn

Rolling conformity most of IRS code. Changes 179 deduction from $25,000 to $500,000.


Relative to application of the Internal Revenue Code to provisions of the business profits tax.

Jeb Bradley

Rolling conformity with most of IRS code but leaves 179 deductions as is. 


Relative to expense deductions under the business profits tax.

Laurie Sanborn

Increased 179 deduction to $100,000, but Senate amended to be the same as SB552. In Senate Finance.


Making certain changes to business profits tax provisions affecting a business organization when owners sell or exchange ownership interests in the business.

Jeb Bradley

Planet Fitness bill. Exempts growth in basis though a sale of business interest from the BPT. 


Relative to the sale or exchange of an interest in a business organization under the business profits tax.

Patricia Lovejoy

Another version of the Planet fitness bill that passed the House. 




Relative to expenditures from the energy efficiency fund.

Dan Feltes

Gives full RGGI rebate to commercial customers, but takes away rebate from residential to fund municipal and low income efficiency projects.


Relative to net metering.

Frank Edelblut

Doubles the net metering cop, but 80 percent goes to residential.  Leaves the reimbursement rates in the future to PUC.


Relative to net energy metering.

Jeb Bradley

Increases the net metering cap by  half with 60 percent going to residential. Passed in the Senate


Relative to the availability of net metering tariffs.

Donna Soucy

Prevents any developer to take up more than a fifth of the cap.


Relative to funding electric vehicle charging stations with municipal registration permits.

David Watters

Allows municipal registration funds to fund electrical charging stations


Relative to eminent domain for gas pipelines and relative to assessment of the land use change tax for eminent domain takings for energy infrastructure.

James Belanger

Requires that gas pipelines offer to take the whole parcel, not just the right of way.


Relative to pipeline capacity contracts.

James McConnell

Said that capacity contracts must be in the public interest




Requesting a modification of the New Hampshire health protection program.

Joseph Lachance

Continues Medicaid expansion. Relies on voluntary contributions from hospitals and insurance companies for the state match.     Pass the House and is now in Senate finance.


Relative to a special health care service license.

Jeb Bradley

Licenses complicated medical procedures like open heart surgery.


Relative to employment contract restrictions upon physicians.

Kevin Avard

Voids non-compete clauses which prevents doctors from continuing their practice in the same area with their old patients.


Relative to prior authorization for substance abuse treatment.

Nancy Stiles

Would require insurers to pay for the first 72 hours of drug treatment without prior authorization.




Relative to breastfeeding.

Martha Fuller Clark

Requires employers find a sanitary place for breast feeding.  Exempts business with 50 or less workers.  


Relative to flexible working arrangements in employment.

Dan Feltes

Employers can’t retaliate for workers asking for flexible arrangements


Relative to the use of the Family and Medical Leave Act time as it applies to workers' compensation.  

James Webb

Employers can’t count workers comp time as FMLA time.  Senate amended it to exempt summer camp workers from youth employment laws.


Relative to the issuance of youth employment certificates.

Gregory Hill

Allows parents to do it.


Permitting employers to pay wages to employees weekly or biweekly.

Laurie Sanborn

It currently is illegal with state DOL permission.  This would make it legal, but DOL could withdraw it for cause.




Repealing the repeal of certain fees in the shoreland protection act

Jeb Bradley

This continues to fund permits by notification.


Relative to exceptions to the real estate transfer tax.

Dan McGuire

Exempts transfers from organizations with the same ownership.


Relative to regulation of the practice of out-of-state brokers by the real estate commission.

Benjamin Baroody

Increases such regulation.


Relative to payment of rent pending the stay of an eviction proceeding

Patrick Abrami

Makes it easier to evict if tenant violates payment agreement.


Relative to mortgage bankers, brokers, and servicers.

Edward Butler

Regulates mortgage servicers.


Relative to damage to private property.

Gene Chandler

Allows landowners to sue for pollution, OHRV and snowmobile damage. 




Relative to the sale of gift certificates with expiration dates.

Jeanie Forrester

Forbids them if the face value is $250 or less.  Threshold is currently $100.


Establishing keno.

L. Ober



Relative to lottery retailer incentive awards.


Increases maximum incentive for stores that sell winning lottery tickets.


Relative to highway signs.

Regina Birdsell

Allow signs indicating what restaurants and gas stations at stops (only below Concord).


Relative to the definition of agritourism.

David Boutin

Makes it easier for farmers to hold weddings etc.


Defining "agritourism."

Robert Haefner

Makes it easier for farmers to hold weddings etc.


Relative to operator requirements under the meals and rooms tax.  

Franklin Sterling

Real estate agencies must reveal individual rental properties with their rooms and meals payment.


Relative to the regulation and taxation of short-term rental businesses.

Edward Butler

Owners of AirBnB and similar companies must put tax id on listings.


Enabling municipalities to license and regulate short-term rental businesses.

Martha Fuller Clark

Amended to a study committee.


Prohibiting the use of latex gloves and utensils in the food service industry.

Suzanne Smith

Restaurants didn’t objects because affordable substitutes are available.


Relative to the operation and insurance of transportation network companies.

John Hunt

Require insurance and otherwise regulates Uber and similar companies.

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