More New Hampshire businesses received a research and development tax credit this year than ever before, but they each got less than two-thirds of the amount they were entitled to.

While demand for the credit has increased, the amount allocated by the Legislature to pay for the credit has remained the same. In fact, the percentage of R&D credits awarded has fallen ever since the total amount increased from $2 million to $7 million for fiscal 2017, when applicants received 92.4 percent of the full amount they were entitled to.

Gov. Chris Sununu hailed the number of businesses receiving the credit, 276, as “a historic high.” He said the growing demand for the R&D credit “makes clear that the Granite State is the place to be for business innovation, development and growth.”

Last year, 230 businesses received the credit.

For 2021, the applicants asked for a total of nearly $11 million in credits, compared to $9.2 million in 2020, according to the state Department of Revenue Administration.

However, with only $7 million appropriated to pay for the credit, that means each award will amount to 63.9 percent of the amount requested, as opposed to 76 percent in fiscal 2020.

If there were no such cap, each company would be entitled to a full credit of 10 percent of its spending on R&D, up to $50,000. But, at 63.9 percent, businesses entitled to $50,000 — a total of 167 for 2021 — will get $31,948 instead. Four years ago, they would have gotten $38,014.

Despite the increased demand, there was little talk in the Legislature last year about increasing the R&D tax cap beyond the $7 million. Instead, Rep. Timothy Lang, R-Sanbornton, introduced House Bill 210, which would roll back the allocation to $2 million as a way to pay for increasing the exemption for the 5 percent interest and dividends (I&D) tax.

The argument is that the I&D tax is more broad-based, an income tax that particularly affects retirees, as opposed to a tax credit that helps select businesses.

But the bill drew the strong opposition of the Business and Industry Association of New Hampshire. The BIA took no stance on the I&D tax, but argued that the R&D credit attracted and retained businesses and encouraged creation of high-paying jobs. Cutting it back again, the BIA said, would send the wrong message to companies considering moving here.

HB 210 didn’t make it out of the House Ways and Means committee, and the I&D section of the bill may be moot, since the Legislature agreed in the budget to reduce its rate instead, one percent a year starting in 2023, eliminating it completely by 2027.

But the committee retained the bill, which means it must act on it this session.

— BOB SANDERS