Repeal the interest and dividends tax extension

New Hampshire prides itself on having an open and transparent legislative process, where all who are interested and affected by public policy decisions benefit from the public-vetting process, including public hearings.In fact, New Hampshire requires that all bills introduced in the Legislature receive at least one public hearing. This ensures lawmakers respond to public input and implement policy consistent with the will of the people. It also ensures legislators implement policy that is sound and based on knowledge of outcomes.Last legislative session, in the final hours of the budget process, lawmakers inserted language representing a significant change in tax policy into House Bill 2, the biennial budget bill. Before the Business and Industry Association of New Hampshire and broader business community, particularly small-business owners, had a chance to review and comment on the details of the complex tax proposal, legislators voted to extend the state’s interest and dividends tax to distributions from LLCs and partnerships as part of the budget.At the time, BIA was one of only a few groups to raise a red flag over this tax extension. The BIA was the most vocal and assertive business group to seek clarity from New Hampshire Department of Revenue Administration Commissioner Kevin Clougherty about the fairness and efficacy of the tax extension.Those who would characterize the BIA’s support for the budget last session as support for the I&D tax extension are simply wrong. The BIA never supported this tax law change. Support for the budget did not equate to support for or defense of each and every line item and expenditure.Despite its flaws, BIA felt the 2010-2011 state budget approved by the Legislature was the best the business community was going to get. If it had failed, a revised budget would have likely still included the I&D tax extension and other anti-business measures that we worked so hard to have removed from the version that prevailed. In other words, a revised budget would have been far worse for businesses of all sizes – large, mid-size and small.Despite our reservations about the extension of the I&D tax to LLC distributions, BIA, in good faith, worked with the DRA during the summer and fall to clarify how the department would implement the I&D tax extension and the impact it would have on the small-business community, the bulk of our own membership.However, by December it became clear to us that the lack of input from the business community when the law was first passed, especially small-business owners most impacted by it, created so much confusion, angst, misinformation and misunderstanding that the atmosphere for a reasoned public policy debate was irreparably damaged. It also became clear that BIA’s own position on this issue was being mischaracterized by others with their own agendas.Consequently, on Jan. 6, BIA called for a fast-track repeal of the extension of the I&D tax to LLC and partnership distributions. We believe a fast-track repeal of this tax is the best way to restore trust in the legislative process and calm small business fears surrounding this matter.If the Legislature or DRA wants to pursue the same or similar tax going forward, they should do so with proper vetting through the public hearing process. This will give the public, particularly small-business owners and practitioners well-versed in tax law, the opportunity to voice their opinions and provide valuable information to help legislators make an informed decision.Jim Roche is president and chief executive of the Business and Industry Association of New Hampshire.