House bill seeks local tax break for new business construction

Coos County exemption would be allowed statewide

Don’t expect the NH House to make any further cuts in business tax rates when it convenes Wednesday – given the nearly $60 million shortfall in revenue that its Ways and Means Committee is projecting – but it will likely pass a bill that will enable a big municipal tax break for developers.

House Bill 316 would give towns and cities in New Hampshire the authority to offer an exemption of up to 10 years on 50 percent of construction costs on commercial or industrial property taxes for up to a decade.

“This is a business and tax base growth bill,” said Rep. Frank McCarthy, R-Conway, the bill‘s sponsor.

The tax break may sound familiar, not only because it has existed since 2008 in Coos County, but because McCarthy also sponsored proposed a similar bill last session. That measure passed the House but died in the Senate, opposed by those who thought it would dilute one of the few advantages  to attract businesses to the North Country.

“The question is, should the tax be targeted to those who need it the most, or should everyone benefit?” said Sen. Jeff Woodburn, D-Dalton, who led the fight against it last year.

McCarthy said that Coos already has a much more lucrative tax credit against the Business Enterprise Tax as a reward for creating jobs. And even with both breaks, “they hardly use it. They don’t have the roads, the internet system.”

But that’s exactly why the county needs all the help it can get, Woodburn said. “You don’t give out free and reduced lunch to rich kids,” he said.

Besides, he added, the existing law did help attract a steel plant to Berlin.

The towns could decide how much of a break to offer its duration, as well as for the type of development that qualifies. However, once such an ordinance is adopted, it has to be left in place for all development for a period of five years.

The NH Municipal Association didn’t oppose the bill because it’s enabling legislation, but it did have other concerns.

“Competition that it could create among municipalities may not always be for the better. It also allows for a lot of differing interpretations from one municipality to another, and that makes us a little nervous,” said Cordell Johnston, a staff lobbyist for the Municipal Association.

The House Municipal and County Government Affairs Committee unanimously recommended the bill and placed it on the consent calendar, which means that the House will automatically pass it on to the Senate, unless it is pulled at the last minute.

Business tax cuts

However also on the consent calendar is a recommendation to kill HB 615, which would have decreased the business profits tax and the BET even more than under existing law. The BPT’s rate, currently at 8.2 percent, is slated to go down to 7.9 percent, and the BET, now at 0.72 percent of payroll, interest and dividend income, is slated to drop to 0.675 in 2018.

But HB 615 would cut the BPT’s rate to 7.5 percent in 2018 and bring it all the way down to 6 percent by 2020. It also would cut the BET rate to 0.50 percent next year and gradually down to 0.4 percent.

The House Ways and Means committee unanimously said it favored a “breathing period” so that “the complete impact of last year’s tax reduction can be reviewed.”

The House, however, has always been a bit more conservative when it comes to budget projections, since it must act months earlier than the Senate, so the Business and Industry Association of New Hampshire has not lost hope.

The Senate has two bills to cut the tax rates, though not as steeply as the House proposal. “The expectation is they’ll pass them and table them and take them up when considering the budget,” said David Juvet, the BIA’s senior vice president for government affairs.

The BIA, however, is also concerned that the state budget isn’t slashed, and it’s particularly worried about cuts in Medicaid that it says would result in cost-shifting to businesses that offer insurance plans for their employees, and that the University System of New Hampshire and the Community College System be funded enough to avoid tuition increases, which would not be helpful, given the state’s workforce needs.

Still, Juvet noted that the economy is strong and hoped that taxes could be cut and the budget adequately funded.

“We’d like to see both, and at this point, we feel we don’t have to choose,” he said.