Lawmaker eyes easing BET burden

One New Hampshire lawmaker is betting that his fellow representatives are willing to grant small businesses some tax relief by lessening the burden of the state’s business enterprise tax.

While other Republicans have filed legislation seeking repeal of a number of tax and fee increases that were enacted last year, Rep. Peyton Hinkle, R-Merrimack, told NHBR “I wanted to be practical.”

Hinkle consulted several CPAs and came up with what amounts to an accountant’s wish list for small businesses.

“I’m particularly concern that we find a way for small businesses to survive in this economy,” said Hinkle. “So I asked the accountants what might we be able to do to help. This is not just something I popped off at the top of my head.”

New Hampshire businesses must pay the BET on the wages, interest and dividends they pay out. They can deduct that against the business profits tax, but only if they are earning a large enough profit from which to deduct it. They can carry forward that deduction for five years.

(A proposal to end that deduction “temporarily” caused an uproar in the business community when it was proposed last year to balance the budget. It was replaced by a number of other business-related measures, including a tax on limited liability company distributions.)

Hinkle would like to expand that deduction — gradually — to 10 years. (Last year, lawmakers rejected a bill to double the carry-forward period in a single year.) Hinkle’s proposed bill would extend the carry-forward to six years next year,, adding another year to the period until it reaches 10 years in 2015.

This way, his reasoning goes, all businesses paying those taxes during the difficult years when profits were low or non-existent can use the deductions after their company bounces back.

In a separate bill, Hinkle proposes and increase in the threshold for those who have to pay the tax, from $150,000 to $200,000 in receipts and from $75,000 to $100,000 in wages dividends and interest.

“We are giving people a cushion,” he said.

While there hasn’t been much inflation in the past year, Hinkle thinks the influx of federal stimulus money in the economy could stimulate inflation. His proposal is a precautionary step, ensuring that a lot of smaller businesses won’t have to pay taxes because of inflation.

Finally, Hinkle wants to exempt start-ups and businesses moving into the state from the BET altogether for three years. Such new businesses would be detected at the secretary of state’s office. When asked whether a company could get around that standard by simply renaming the business, Hinkle said that there were some safeguards in his legislation to prevent that, and more measures could be added.

“On the other hand, we don’t want to discourage business from expanding or opening up other branches with a different name,” Hinkle said.

Hinkle’s final tax-related proposal is aimed at interest and dividends distributions from out of state. Those that must pay a higher out-of-state will not get a credit of that extra amount against any the New Hampshire interest and dividends tax.

Hinkle said he doesn’t know at this time how much his proposals would cost the state in revenue. The Department of Revenue Administration usually provides an estimate before a bill goes up for a vote. While he said he expects to find some Republican sponsors for his measures, he doesn’t expect much help from Democrats, who control the Legislature.

“It’s going to take away some revenue that they want to spend,” he said.

The actual text of all proposed legislation for 2010 won’t officially be available for a few months, before or shortly after the start of the legislative session in January. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW