Tax cuts and family leave top the list of measures
Business groups didn’t get every single thing they wanted from New Hampshire lawmakers this year, but on the whole, they’re pretty happy with the outcome of the 2021 legislative session.
“This was a great year for the state’s smallest businesses,” said David Juvet, senior vice president of public policy for the Business & Industry Association of New Hampshire. “There were lower taxes and new programs to help them keep running.”
Added Bruce Berke, state director of the National Federation of Independent Business: “There were not any broad sweeping measures that impacted the business community, and that’s a good thing.”
Still, not everyone is happy with the session. Anyone trying to run a family planning clinic is probably tearing their hair out, thanks to funding threats and increased restrictions. And any business in a property-poor town is bracing for property taxes to go up, thanks to a new adequate education funding formula.
Much of the new legislation was contained in House Bill 2, the trailer bill to the state’s new budget. But not all. Here’s a rundown of the key measures that were enacted in the legislative session.
Taxes
Under Senate Bill 3, New Hampshire businesses — after a lot of back and forth over the issue — won’t have to pay the business profit tax on some $3.2 billion of forgivable Paycheck Protection Program loans they received. No one is sure how much that will cost the state or when, since the U.S. Small Business Administration still hasn’t forgiven a good chunk of the loans yet. But the state Department of Revenue Administration took a stab back in May, and came up with $100 million, taking into account that much of the taxes to be exempted would be paid by companies based in the state. If the estimate is accurate, SB 3 could cost the state — and save businesses — more than any tax cuts will.
Interestingly, $100 million is also the amount that HB 2 cut from the statewide property tax. But budget opponents warned that the change will force property taxes up, because the budget suspends aid to towns and cities and the cut will mean less aid to property-poor towns and benefit wealthier towns.
But the budget does provide a large chunk of rooms and meals tax revenue to cities and towns, plus more money for school construction and for roads and bridges, which could cut the property tax, as well as help out the construction industry.
As for direct taxes on business, they are going down but not as much as expected.
When the year began, bills in both the House and Senate called for cutting the rate of the BPT, currently 7.7%, to 7.5%, and the business enterprise tax rate, now at 0.6%, to 0.5% in 2022. But the final BPT rate in HB 2 is 7.6% and 0.55% for the BET.
So for a company that reports $100,000 in profits, the BPT cut will save $100. And for the business with a million-dollar payroll and no profits, the new BET rate will mean a savings of $500 annually.
HB 2 also increases the BET filing threshold from $200,000 in gross business receipts to $250,000, which is also the threshold for the enterprise value tax base — a big jump from the current $100,000. Another bill, Senate Bill 101, increases the BPT filing threshold from $50,000 to $92,000 of gross business income, and adjusts for inflation.
That means fewer businesses will have to file and pay taxes. But why did lawmakers not cut the rate as far as they originally planned?
“They were trying to spread the wealth,” said Berke.
Berke added that the change was made to pay for the cost of cutting the 5% interest and dividends tax rate by 1% a year until it is totally eliminated in 2027. That cut — also in HB 2 — won’t start until the tail end of 2023.
Workplace
The primary piece of workplace-related legislation involves creation of the voluntary Granite State Paid Family Leave Plan, which Sununu had originally offered as a counter proposal to a mandatory proposal based on a payroll tax, which the governor earlier vetoed. It will build on a new benefit program offered to state employees that businesses and individuals can join.
Employees who participate will get 60% of their pay for six weeks (half of the time of the vetoed version’s) after birth or adoption of a child in their first year or to take care of a family member with a serious health condition.
The commissioner of the Department of Administrative Services will run the program. A request for proposals will be issued in March 2022, making benefits available by January 2023.
Businesses with more than 50 employees will contract with the winning bidder directly. Smaller businesses and individuals can purchase insurance through Administrative Services, paying a premium of no more than $5 a month per individual, a rate subsidized by taxes on premiums for third-party insurers providing Medicaid and others offering family leave plans.
Although talked about for years, the family leave proposal was a last-minute addition to the budget. In fact, it nearly derailed the budget process by angering hard-right conservatives who were mollified by the program’s delayed start.
Longtime family leave advocates were doubtful that the state will be able to attract a company to offer such a benefit at such a low price, since, they say, a voluntary pool would not be large enough and would tend to attract those that need it the most, thus driving up the cost for all.
At least two large business groups were neutral. “It certainly does no harm,” said Juvet. “I could give some business access to a benefit. We will just have to see how it works.”
“It’s another tool in the toolbox to attract labor,” said Berke. “We just want to make sure it doesn’t become mandatory.”
When it comes to labor, Juvet’s biggest disappointment was the narrow defeat of socalled right-to-work legislation, which would have forbidden contracts that required workers to pay union dues. Although very few New Hampshire workers are in unions, Juvet thought it would have been a selling point for businesses that want to avoid them. “We thought that was a great opportunity,” he said.
His other disappointment of the session was the failure of passing a Covid liability shield, which never gained much traction, even from Republican senators, since there was no such litigation in the state.
Juvet also said that the BIA opposed language in HB 2 that restricts discussion of socalled “divisive concepts” in the classroom.
He said it might send the wrong message to potential employees of color from out of state, though he was glad that the restrictions didn’t extend to businesses with contracts with the state to provide diversity training.
No one expected New Hampshire’s minimum wage to go up this year, considering the makeup of the Legislature, and that keeps the state in the New England cellar at $7.25 an hour. However, a change was made in the minimum wage for tipped workers. Since it is currently at 45% of the federal minimum, or $3.27 an hour, it would have gone up if Congress raised the federal minimum wage. But SB 137 (not yet signed by the governor) would freeze the tipped minimum at $3.27. But if the federal government does specifically raise the tipped wage above that level, the state’s will have to go up as well.
Hospitality and tourism
“We are pretty happy about the way things went,” said NH Lodging and Restaurant Association President Mike Somers about the session, citing the tax exemption for PPP loans, since so many restaurants and hotels were hit hard by the pandemic and benefited from the forgivable loans.
But lawmakers passed some other bills that related to the pandemic and the hospitality industry.
HB 155 will allow restaurants to continue to serve diners on streets, sidewalks and parking lots, with local permission. HB 66 will allow them to continue offering beer and wine with takeout meals. And HB 593 will force food delivery services — like DoorDash and Uber Eats — to contract with a restaurant before delivering its food.
Lawmakers also passed HB 15, a bill that predates the pandemic. It requires shortterm rental facilitators to pay the rooms and meals tax. Airbnb already pays the tax, and the bill will make sure “everyone is on a level playing field,” said Somers. The bill also covers third-party car rental providers.
But the reduction in the rate of the rooms and meals tax from 9% to 8.5% was “the cherry on top for us,” said Somers.
The change amounts to about a dime savings on a $20 meal, but it makes the state a little more competitive when it comes to weddings and large events.
Almost as important to Somers was the allocation of 30% of the rooms and meals tax revenue to cities and towns. It’s not quite up to the 40% originally promised, but perhaps enough to take the pressure off tourist communities like Portsmouth that have been pushing lawmakers to allow it to impose a local tax.
Real estate and construction
“I think we did really well,” said Gary Abbott, executive vice president of Associated General Contractors of New Hampshire, ticking off the appropriation of $35 million in school building aid, $20 million to tackle redlisted bridges, $41 million to plug the hole in the highway fund and another $88.3 million to fully fund highway grants.
There are also several key projects funded in HB 25, the capital budget, like the $7 million Conway bypass, which will bring in some $29 million from the federal government.
But it isn’t all about money. Abbott cited SB 129, a bill designed to streamline the process by giving the Fish and Game Department more authority over alteration-of-terrain permits. A court decision required the agency to do extensive research on whether such projects threaten endanger species, creating a backlog. The bill, said Abbott, creates more of a “balanced” approach that allow projects to go forward.
Ari Pollack, a lobbyist for the NH Home Builders Association, was another SB 129 advocate, along with SB 85, which clarifies the law when it comes to third-party inspectors. Contractors don’t mind doing extra work to pass inspection, but “we want to know what we have to do so we know how much it is going to cost,” Pollack said.
Then there’s the $25 million allocated to the state’s Affordable Housing Fund — more than twice the amount given last year, said Bob Quinn, who specializes in government affairs for the NH Association of Realtors.
Quinn’s biggest disappointment of the session was the failure of HB 586, a more comprehensive affordable housing bill, but there were several others addressing the issue, including HB 154, which allows municipalities to offer community revitalization tax incentives for the construction of additional housing in a housing Opportunity Zone, and SB 102, which allows municipalities to offer incentives for renovation of houses that are more than 40 years old, and to adopt a property tax exemption for renewable generation and energy storage systems.
Energy
Of all the many energy bills proposed during the session, only a few significant bills made their way through.
Perhaps the most significant was HB 315, which increased the net metering cap for political subdivisions from one to five megawatts. Already, a Community Power Coalition — for now including Exeter, Hanover, Nashua, Lebanon and Cheshire County — has formed to respond to the new law.
“There is an immense amount of interest,” said Kelly Buchanan, director of regulatory affairs for Clean Energy NH. “It will greatly expand opportunities for solar development.”
SB 91 — an omnibus energy bill — could have held this up by requiring the Public Utilities Commission to revisit the rate that such projects get for selling their power to the grid, but some compromise language grandfathered in the old rate and allows the PUC to set a new rate using roughly the same standard it already uses. There is another key provision in that bill that would allow utilities to own large energy storage units without violating the state’s utility restructuring law, which gives a boost to energy storage and renewable energy in the state.
Other legislation, tucked into HB 2, allows leftover renewable energy funds to spill over to the next fiscal year, allowing for larger multiyear projects. And HB 2 also creates the Department of Energy, a new agency that would run programs formerly handled by the PUC, with the goal of speeding up implementation.
Bob Sanders can be reached at bsanders@nhbr.com.
