NH Senate OKs upping Section 179 deduction to $500,000

But three tax credit proposals sent back to committee

The NH Senate is backing a fivefold increase on the amount that businesses can deduct up front for equipment purchases. As for business tax credits? The jury’s still out.

Senate Bill 77 would increase the maximum deduction allowed on a company’s business profits tax bill – known as the Section 179 deduction because of its place in the federal tax code – from $100,000 to $500,000 – which would bring it in line with the current federal code.

Lawmakers just increased the deduction from $25,000 last session, and critics contended at the time that proponents of an even bigger deduction should wait to see the effects of the change to $100,000.

But supporters of the bill suggested that the effect on state revenues would be negligible, since what’s deducted on the front end would be lost on depreciation on the back end. In addition, they said that equipment purchases would create more economic activity, which would theoretically result in more profits to tax.

But in its fiscal note, the state Department of Revenue Administration said it couldn’t be sure of the effect on revenues, since some businesses move, go out of businesses or their apportionment changes, so it may be more than just a timing issue. However, if the deduction were increased to $500,000 in 2014, the state would have lost $9.7 million in revenue, the DRA said.

“Let’s find out what the $100,000 deduction costs,” said Sen. Lou D'Allesandro, D-Manchester. “We want to increase it again when we have no results, because nobody has had a chance to take advantage of it yet? Is that good sense? I don’t think so.”

Sen. Dan Feltes, D-Concord, also criticized the bill, which he called the “SUV loophole” for “cutting the taxes of people at the top rather than working families. Are equipment deductions more important than child care? What kind of message are we sending here?”

The Senate passed SB 77 on a 14-10 vote and then tabled it until it gets a better idea of what the budget will look like.

Tax credits

But three other tax-related bills didn’t make it that far. They were all recommended for re-referral to the Senate Ways and Means Committee.

Sen. Andy Sanborn, R-Bedford, the prime sponsor of SB 77, said that the state already offers $176 million in various tax credits against the BPT and the various proposals would add another $100 million if they are all adopted.

Instead of giving out the credits, he said, “we could cut our tax rate by 30 percent.” So with that in mind, he argued it’s better to look at all the tax credit bills in context in committee.

The three bills are:

 • SB 75, which would establish a tax credit against the BPT for donations to career and technical centers. Those donations could be in terms of equipment and time. The total credits in the original bill would be limited to $500,000 a year, but Sen. David Watters, D-Dover, offered an amendment to lower that cap to $250,000 in a four-year pilot, but to no avail.

 • SB 76, which would allow those using the Research and Development tax credit to take it as a rebate instead of a credit so that startups that have yet to make a profit could take advantage of it right away.

 • SB 183, establishing a New Hampshire technology sector marketing tax credit, was recommended for re-referral, but the Senate adjourned before it got to it.