You’d think all New Hampshire businesses would celebrate when business taxes are reduced. Yet the Legislature did just that this year, and no one is really rushing out to stock up on fireworks.
Even the Business and Industry Association of New Hampshire — one of the main advocates of said tax cuts — is measured in its assessment of the 2017 legislation session.
“It was a good year but not a great year,” summed up David Juvet, senior vice president of the BIA.
There are just so many more costs a business has to focus on beyond paying taxes. Indeed, compared to labor, energy and healthcare, taxes are relatively minor, and the cut enacted this year is relatively minor.
And it’s almost minuscule when compared to the legislation that can directly affect your sector of the economy.
That could mean such things as the level of infrastructure investment (the construction industry); septic system requirements for accessory dwellings (Realtors and homebuilders); online lottery sales (grocers); or a law expanding the threshold on gift certificates (restaurants and retailers).
Dig even deeper and you’ll discover that lawmakers passed a bill that would invite billions of dollars of foreign trust-like entities into the Granite State.
But before we talk about the latest legislative session’s specific winners and losers let’s look at the broader picture. It is a lot prettier than back in May, when the House’s attempt at passing a budget — with no tax breaks — went down in flames.
The budget that did emerge was passed surprisingly easily with those eye-pleasing tax cuts. The business profits tax, once at 8.5 percent, is now set to shrink to 7.5 percent by 2021, while the business enterprise tax, once at 0.75 percent, will now go down to a 0.50 percent.
The New Hampshire chapter of the National Federation of Independent Business was particularly enthused about the BET cut, since the tax also catches businesses that don’t make a profit and has no real counterpart in others state.
“This can only benefit small businesses who are here and are thinking of locating here,” said Bruce Berke, NFIB state director.
Almost as important was increasing the Section 179 capital expense deduction from $100,000 to $500,000.
“Its biggest impact is on small businesses, like a landscaper who needs to buy new equipment,” Berke said.
Bureaucratic shuffle
Besides the tax cuts, business organization didn’t seem particularly excited about the move to split up the former Department of Resources and Economic Development and create the Department of Business and Economic Affairs. The reorganization involves moving authority for the Division of Parks and Recreation and the Division of Forests and Lands into a new Department of Natural and Cultural Resources.
The bureaucratic shuffling doesn’t seem to change the status quo, though the NH Timberland Owners Association had voiced concerns that the new Natural Resources and Culture agency might neglect economic functions of forests.
But Jasen Stock, executive director of the Timberland Owners Association, said the society was reassured after some language changes in the bill.
Other issues touched on nearly all businesses, and there you found unity. When it comes to labor, for instance, most business organizations favored right-to-work and opposed the minimum wage, both of which went down to defeat. Indeed, the only key labor bill that survived allows businesses to pay workers every other week without asking the Department of Labor’s permission.
Businesses were most divided over Senate Bill 129, which that would increase payments to biomass generators and raise the percentage of solar energy utilities are required to purchase under state Renewable Portfolio Standards. It also sets aside 15 percent of the Renewable Energy Fund for low- to moderate-income energy projects and loosens restrictions on larger solar projects.
It was the only significant energy bill enacted in the past session, becoming law without Governor Sununu’s signature.
The governor did sign one other energy-related piece of legislation — repeal of the energy consumption tax, but that was included in the budget, along with the other business tax cuts.
“Given that we were able to put the repeal of the electricity consumption tax in place to offset any potential costs to ratepayers, allowing this bill to become law makes sense,” said the governor, of SB 129.
But while the BIA said the unasked for tax cut was “helpful,” it comes with “a price,” said Juvet, who made it clear that the organization would have preferred for Sununu to veto SB 129, which he maintained will significantly raise electric rates.
“We have worked very hard to wage legislative awareness about the impact of the high cost of electricity,” said Juvet. “This is a step in the wrong direction. Every analysis said the costs are going to go up.”
But, argued Stock, the state’s wood industry would suffer if the six wood-burning power plants were to be forced to close.
“These power plants are a real asset and they produce electricity with a local fuel that we create,” Stock said.
Education
Lawmakers did little to address the state’s troublesome workplace development shortage, Juvet noted, but it did increase funding for the community college system, though “we were disappointed that the university system was held flat.”
Lawmakers did fund the governor’s $10 million scholarship program, which provide $1,000-a-year merit scholarships to New Hampshire students who attend a post-secondary institution in the state, and they expanded a dual-enrollment program, allowing high school students to gain college credits at local colleges before they graduate.
Another workforce-related issue was addressed the capital budget, House Bill 25, which includes $2.5 million in funding for developers building affordable housing.
Another affordable housing-related measure involves accessory dwellings units.
In 2016, lawmakers required municipalities to include them in their zoning. HB 258 counters current state requirements to increase septic capacity during conversion.
That would make sense if you were adding an addition to the house, said Bob Quinn, of the NH Realtors Association, which supported the measure.
And there was full funding for kindergarten, which the BIA and other business groups supported, not only because it seen as enhancing the education of the future workforce but will help attract and retain young workers to the state right now.
The funding mechanism of expanded kindergarten is keno, and that could have an effect on businesses, specifically restaurants and bars, where keno will be set up in the municipalities that allow it.
The NH Lodging and Restaurant Association has been and still is torn over the issue, since a majority of its membership has opposed expanded casino gambling.
That opposition was partly due to the concern that gambling would counter the image of the Granite State as a family-friendly destination, but also because many members were worried that casinos would suck patrons and their dollars out of existing establishments. Keno could draw people into their establishments.
The association didn’t take a position on the bill, but now that it has been signed into law, CEO Mike Somers said, “We will be watching it. There will be a discussion about it in the future.”
Convenience store issues
While the NH Grocers Association stayed out of the fray when it came to keno, there was no neutrality about online lottery sales, which were tucked into the budget legislation.
Currently, lottery players have to go to a store every time they buy a scratch ticket.
“You remember something you forget, or see something you’d like to buy,” said John Dumais, CEO of the association. That’s an impulse buy. It’s a major part of the trade of what we do at a convenience store.”
It’s true that lottery ticket sellers will still get a percentage of all the ticket buys, even those made without entering the store — albeit that percentage would go down a half a point to 4.5 percent — but that commission hardly makes up for loss of traffic, Dumais said
The grocers had two other setbacks.
One was passage of SB 140, which allows wine manufacturers to set up a satellite retail outlet without the requirement of selling food. While the original bill would have allowed six such outlets per manufacturer, “still this concerned us more than anything else,” Dumais said, not because it allows a “package” store that will compete with convenience stores that sell food, but it also “break down the walls” that have existed between alcohol manufacturing, distribution and retailing that were erected in the 1930s.
The capital budget also includes about $18 million for a plaza complex along Interstate 95, similar to the Hooksett plazas on Interstate 93.
“That’s going to hurt every convenience business for 30 miles around,” Dumais said. “The Legislature is looking to make more money at our expense.”
Development
Contractors were “disappointed” that the capital budget didn’t include the $10 million for school construction aid that had been proposed, said Gary Abbott, executive vice president of Associated General Contractors of NH. So the moratorium continues.
But that is more than offset by an extra $38 million for local roads and bridges in a separate bill, SB 38, essentially doubling the amount the state sends to localities now.
Lawmakers passed two other bills that could help commercial development.
One would enable municipalities to give an exemption of up to 10 years on 50 percent of construction costs on commercial or industrial property taxes for up to a decade — an expansion of a tax break formerly restricted to Coos County. The second would extend the Community Revitalization Tax Relief program to coastal properties subjected to storm surge, sea level rise and extreme precipitation.
Finally, the AGC backed a bill that would increase the bond threshold from $35,000 to $75,000 on state projects and $120,000 on municipal projects, meaning that contractors won’t have to post a bond on smaller projects, but still provides protection for subcontractors.
At deadline, Sununu had yet to sign HB 654, a bill that started out studying the issues raised by short-term rental companies like Airbnb. But the Realtors backed an amendment that would prevent state housing standard requirements from being used to force unwanted inspections into what is often somebody’s home.
“This is to protect the private person’s ability to do what he wants with his property,” said Quinn.
The Lodging and Restaurant Association had first opposed the bill, worried that increasing the number of short-term rentals would stiffen competition for B&Bs, inns and other lodging providers without requiring them to comply with the same regulations. But it backed off once it was clear that municipalities towns could still regulate under other parts of state law.
The association’s biggest win was HB 473 bill, expanding the threshold on gift certificates that don’t expire from $100 to $250. That means only gift certificates over $250 will be subject to state abandoned property laws.
The association also backed a bill that expands tip pooling to those non-tipped employees who aren’t included in the service.
The Lodging and Restaurant Association’s biggest disappointment was that the Legislature again flat-funded the Division of Travel and Tourism budget that was supposed to be paid for by 3.1 percent of the rooms and meals tax, a law passed by lawmakers but never implemented.
Healthcare
The BIA had some other things to be pleased about besides tax cuts.
The final budget, for instance, did not slash Medicaid via changing the Medicaid enhancement tax agreement with the state’s hospitals. This wasn’t only a priority of the NH Hampshire Hospital Association — which threatened litigation over the change — but the BIA as well, because providers would have passed on the extra costs to private insurers and employer-based insurance plans.
The final budget would end Medicaid expansion if the federal government doesn’t grant a waiver allowing the state to add work requirements. The Obama administration refused to grant these, but Juvet said that a Trump administration likely would, allowing the program to continue at least though the end of 2018.
NH Medical Society Executive Vice President James G. Potter said he was unsure whether the work requirement would push people into the workforce or cause them to drop coverage. But the effect would be “incremental” compared to losing Medicaid expansion altogether, he said.
The lack of resources and personnel were top concern of the NH Medical Society and the NH Nurses Association, and lawmakers passed a number of bills that addressed this.
For the society, the biggie was HB 400, which, when combined with the budget, provides more funding to relieve emergency rooms of the increasing demand to treat people needing mental health services that they’re not equipped to provide. HB 400 would revive the Anna Philbrook Center and set up some mobile units. The society took the governor and key lawmakers to observe the situation at Concord Hospital “and they were aghast,” said Potter.
There are numerous other bills aimed at alleviating healthcare shortages:
• HB 468, for instance, allows mental health practitioners in other states to practice in New Hampshire for 60 days.
• SB 137 provides temporary licenses for nurses from nearby states that don’t take part in a licensing compact who wish to work here while awaiting state credentials.
• SB 212 enables creation of such a compact for physical therapists
• SB 152 allows LNAs to start work while awaiting a criminal background check.
• HB 322 would survey healthcare providers when renewing their licenses to better ascertain where the shortages are.
• SB 150 allows pharmacy interns to administer vaccines, and SB 65 expands the vaccines pharmacists are allowed to administer.
Trust liberalization
In recent years, each session lawmakers pass legislation that makes setting up a trust here more attractive, and this year was no different.
New Hampshire is already a haven for trusts used to shield about a half-trillion dollars of assets from taxation and scrutiny.
SB 225 expands the liberal trust laws two ways.
It adds the Granite State to the list of five states that have deregulated family trusts, joining Florida, Ohio, Nevada, Wyoming and Tennessee. And it makes the state the first in the nation to allow civil law foundations, trust-like entities set up in foreign countries with civil law (as opposed to the United States, that operates under common law) to set up shop and operate here. A related bill, SB 230, makes it easy to set up a power of attorney online.
“It continues to enhance the trust codes and our competitive position in New Hampshire,” said Glenn Perlow, a lobbyist for Hampton-based Perspecta Trust and executive director of the NH Trust Council, not to mention the state’s former banking commissioner.
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