BPT R&D credit pushed at Senate hearing
Several business groups are joining together to urge support for a Senate bill that would restore a research and development tax credit against the business profits tax.
Senate Bill 380, sponsored by Sen. Bob O’Dell, R-Lempster, would let a firm take a research and development tax credit equal to 15 percent of the federal R&D tax credit for R&D work conducted in New Hampshire. Under the federal formula, that’s a small percentage of the actual expense.
O’Dell testified at a public hearing in January that the change would cost the general fund $900,000 a year in lost taxes on profits, but the bill would pay for itself several times over in good jobs saved or created.
“We need a level playing field,” he told the Senate Finance Committee. “This sends a signal we respect quality research.”
A co-sponsor, Rep. Steve Stepanek, R-Amherst, said part of the “New Hampshire advantage” is its vibrant business sector.
“We want companies at the forefront of development to settle here,” he said.
Revenue Commissioner Phil Blatsos said lawmakers repealed a similar tax break in 1995 to keep several changes made to the business profits tax that year — including establishment of the business enterprise tax — revenue-neutral. The R&D credit reduced the profits tax by $650,000 per year a decade ago, he said.
State Economic Development Director Stuart Arnett said the R&D credit would reward a company when it’s gearing up for a new product.
“We are not a low-cost manufacturing state,” he said, “but we do well in the early stage of an innovation.”
But Senate President Ted Gatsas, R-Manchester, said a tax credit for creating jobs might grow the economy faster than O’Dell’s bill.
Jim Roche, head of the Business & Industry Association of New Hampshire, however, warned that the New Hampshire business sector is morphing into a service economy and “we need more companies that make things. The bill will take advantage of our highly educated workforce.”
Brian Monbouquette of the Gallagher, Flynn and Company accounting firm helps clients across New England claim R&D credits.
“The feds liberalized their rules in 2002 to let more companies qualify for the credit,” he noted. “In the past you had to show you were creating knowledge that was new to your industry. The standard is lower now. It’s easier to claim.”
Fred Kocher, president of the High Tech Council, said New Hampshire companies face a major decision when they grow to about $25 million in sales — whether to do their research here or elsewhere.
“The R&D credit would give one more reason to keep jobs like that here,” he said.
Sen. Joe Foster, D-Nashua, is sponsoring a bill that he says will boost R&D by letting firms apply their BET tax payments against the BPT up to 10 years later. The current time window is five years, and the tax break costs the state more than $90 million a year. SB 381 would siphon off an additional $35 million per year in revenue. Startup firms in particular incur high costs with low profits, and many never take their full reduction from the BPT.
Foster later said the bill looks impractical if the fiscal analysis holds up.
“I suspect the impact would be substantially less,” he said, “if we limit the credit to new businesses.”