New Hampshire businesses will be receiving slightly more than 75% of the research and development tax credit that they applied for because, while demand for the credit has increased, the amount allocated has remained the same.
And there is little chance of that allocation going up. Indeed, there is talk of it going down.
The credit against the business profits tax and the business enterprise tax for fiscal year 2020 (which ended on June 30) will be awarded to 230 New Hampshire companies.
That’s seven more than the previous year, but the applicants asked for just over $9.2 million in fiscal 2020 compared to $8.5 million in fiscal 2019, according to the state Department of Revenue Administration. Since state law caps the amount that can be allocated for the credit at $7 million, that means they will each receive 76% of what they asked for, as opposed to 82.7% in fiscal 2019.
The percentage of R&D credit awarded has fallen ever since lawmakers raised the cap from $2 million to $7 million for fiscal 2017, when applicants received 92.4%.
If there was no cap, each company would be entitled to a full credit of 10% of its spending on R&D, up to $50,000. But, at 76% of the request, those businesses entitled to $50,000, for example, will get $38,014. Four years ago, they would have received $45,204.
Despite the increase in demand, there was little talk in the Legislature about increasing the R&D tax cap allocation beyond the $7 million. Indeed, on Sept. 11, lawmakers on the House Ways and Means Committee discussed House Bill 117, which would roll back the allocation to $2 million as a way to pay for increasing the exemption for the interest and dividends tax.
The bill is similar to HB 1554, which failed in 2018. Both drew the opposition of the Business and Industry Association of New Hampshire, who argued that the credit attracted and retained businesses and encouraged creation of high-paying jobs.
The organization also pointed out that most states don’t have a cap, nor does the federal government which also offers a R&D tax credit.
HB 117 never made it out of the House last session. It was sent to interim study. On Sept. 11, the question was whether the committee would recommend it for next year — a non-binding recommendation to legislators who will be elected in November. The committee — faced with a projected huge budget deficit — was split on that question, so it did not make a recommendation.
— BOB SANDERS
