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Week four - January 29, 2010
This electronic publication, known as The Advocate,
is brought to you each Friday by your Greater Nashua Chamber of
Commerce, in partnership with our friends at Devine Millimet &
Branch, and ActiveEdge. Please use this piece to review what has
happened in Concord this past week, read about our Chamber's lobbying
efforts relating to those activities, and preview what we are
doing on behalf of our Chamber members in the coming week.
This Week’s
Update
Lots to cover this week in the Advocate.
Net Operating Loss (NOL)
This past week started with our own Senator Bette Lasky stepping out in real style, supporting the business community by introducing SB 383, intended to raise the Net Operating Loss (NOL) threshold from $1 Million (the lowest in the country) to $10 Million. Senator Peggy Gilmour and Representative Jane Clemons are standing tall right next to Senator Lasky as co-sponsors of this bill and as advocates for our Nashua business community.
SB 383 is a top strategic priority for the Chamber in 2010.
Senator Lasky is not new to this issue. Back in 2002, she was a co-sponsor of the bill that increased the original NOL threshold from $250,000 to $1M. At that time, Senator Lasky and the other sponsors were successful in articulating the importance of supporting our business community and keeping New Hampshire a business-friendly state. Back then we were dead last, 50th in our NOL threshold.
Fast forward 8 years to 2010. We are in the worst recession in decades. New Hampshire is still dead last nationally on our NOL cap even with the 2002 increase. Most states follow the Federal NOL rules which allow a 2 year carry-back and a 20 year carry-forward for an unlimited cap. A few states limit the carry-back but in New Hampshire we have no carry-back provision.
In this extremely difficult business climate, it is time we let our business community know we understand their difficulty and as a state are investing in future profitability by passing SB 383. We all recognize the need to stimulate the New Hampshire economy, put people back to work and have business invest in the future. Raising the NOL carry-forward from $1M to $10M is the right thing to do for our businesses. Let’s think future again today as we did in 2002.
Thank you Senator Lasky, Senator Gilmour, Senator Bragdon, and Representative Clemons.
NH Supreme Court Stops State’s Grab Of JUA Funds
The big news of the week in Concord was the long-awaited decision by the Supreme Court regarding the State’s appropriation of the JUA medical malpractice funds to balance the State’s FY 2009 and FY 2010 budgets. A 3-2 majority (Chief Justice Broderick, Justice Conboy and Justice Hicks were in the majority) held that the taking of the JUA money by the State was unconstitutional.
The decision issued by the Court on Thursday is likely to have far-reaching implications. In the short-term, the legislature is going to have to figure out how to replace this money. Given the State’s revenue woes, this will be no easy task. In the long-term, however, this Supreme Court decision hopefully will serve as a cautionary tale to the legislature and the Governor against the use of private funds to address the State’s fiscal problems. It is also important to remember that the State designated this money for use in the 2009 and 2010 state budgets even though it was very clear that there was going to be a legal challenge to the use of the funds. Instead of seeking an advisory opinion from the Supreme Court before the budget was enacted, the State simply forged ahead and took the money. In the future, let’s hope that state budgets are based on revenue sources of more certain legality.
Of course, this decision also makes it that much more likely that issues such as the recent LLC tax, and other potential business taxes will still be very front-and-center in Concord. Various efforts to repeal the LLC tax this session, which had low chances of success to begin with despite the loud public outcry, can now be assumed dead-on-arrival. Other efforts to repeal other tax increases last session (the Rooms & Meals tax, the extension of the tax to campgrounds, etc.) were also dealt a blow by the Supreme Court’s decision, which of course resulted in an even larger budget hole for legislators to worry about.
LLC Tax Developments
Speaking of budget decisions, there has been a lot of activity behind the scenes concerning the LLC tax. Senator Lou D’Alessandro of Manchester is almost ready to unveil a new measure designed to redo the LLC tax. As we understand it, Senator D’Alessandro’s bill is going to amend both the Business Profits Tax and the Interest and Dividends Tax. Among the changes will be two well-defined “safe harbors,” which are designed to eliminate audits of small businesses in this area.
The first is a “federal employment tax” safe harbor, whereby a small business owner can treat income as compensation for BPT purposes if that income is also reported to the IRS as “employment income” subject to social security and Medicare taxes.
The second is an “independent investor” safe harbor. Under this theory, if a business reports a minimum 10% profit on its invested capital and pays BPT on that profit, the rest of the income would be treated as “compensation,” assuming that the owner provides personal services to the business.
Look for this bill to be unveiled in the next week or so. It sounds very promising.
Meanwhile, the House Ways & Means Committee continues its work on HB 1607, which would redefine “reasonable compensation.” As reported in earlier issues of The Advocate, the Chamber supports the concepts outlined in the bill but opposed the bill as it was introduced. At the moment, it seems that most, if not all, of the members of the Committee are in favor of substantially amending the bill. A straw poll taken of the Committee members at a work session on the bill last Friday afternoon showed a remarkable unanimity concerning several principles which should be reflected in an amendment:
- the safe harbor should be raised to a minimum of $150,000, and indexed according to
inflation;
- the burden of proof in demonstrating what is “reasonable compensation” should be
placed on the Commissioner of Revenue, and not the taxpayer;
- the discretion given to the Department of Revenue Administration in adopting rules to
effectuate the law should be significantly limited.
All in all, we are very much encouraged by the direction in which this seems to be moving. We will have to be extra vigilant, however, because not surprisingly DRA is keeping the revenue issue before the Committee, and the JUA decision (as mentioned above) is likely to place the tax revenue side of this into sharper focus.
House Judiciary Committee Considers Plaintiff-Oriented Tort Bills
During this past week, the House Judiciary Committee has devoted a substantial time to hearings on a number of bills being advocated by the Association For Justice, the organization representing trial lawyers. The Chamber joined with other business and governmental organizations in opposing these proposals. A look at two of them will give you some flavor of the whole lot.
One bill is HB 1196, which would extend the time period for calculating interest on a judgment. Right now, if a plaintiff wins a lawsuit, the plaintiff can collect interest on the judgment dating back to the day that the writ was filed in the case. Under HB 1196, however, interest would be calculated going back to the date of the event which precipitated the lawsuit. As Chamber President Chris Williams pointed out in his written testimony to the Committee, this not only could add three years to the interest payments (given the three-year statute of limitations), but it could add ten, twenty or thirty years to the calculation because plaintiffs are not required to bring suit until they have discovered the injury. With the business climate as it is, this is hardly the time to make lawsuits more attractive and to increase insurance costs to businesses.
Another one of the bills is HB 1255. This one would change the way that damages are apportioned in lawsuits. Here’s an example of what would happen if this bill were to pass. If one defendant was 99% responsible for an injury, and another defendant was 1% responsible for the injury, a plaintiff could collect the entire amount of damages from the 1% at-fault defendant if that defendant were the only defendant before the court. We believe this gives the plaintiff the ability to direct the case at the deepest pocket, rather than the person most at fault.
The Judiciary Committee is expected to vote on these bills next week.
Looking Ahead to Next Week
Our friend Representative Pete Hinkle of Merrimack was once again found trying to get New Hampshire back to being a business friendly state. He has introduced HB 1604 which creates a credit against the interest and dividends (I&D) tax for taxes paid to other states or distributions paid by out of state LLCs, S-Corporations, partnerships, estates and trust to New Hampshire residents; also HB 1618, exempting some federally tax-exempt transactions from the BPT. The Chamber loves to support Representative Hinkle in his pro-business initiatives. We will work hard this session to help Representative Hinkle with a few victories.
Final Note: Thank You
Finally, we want to thank all of the legislators who attended our 2010 Legislative Symposium last Friday. This was a brand new event that our Chamber had never before tried, and it was intended to provide an opportunity for our region’s legislators to engage directly in dialogue with real businessmen and women about issues in Concord, which is something they rarely get to do thanks to the fact that business people can rarely take the time to get to Concord. It was a great event, which drew Senators Gilmour, Lasky and Sharon Carson; Councilor Pignatelli and close to 40 state representatives also attended. Furthermore, U.S. Senator Jeanne Shaheen attended and spoke at the luncheon portion of the event.
The Symposium wouldn’t have been possible without the strong support and backing of three Chamber members – PSNH, BAE Systems, and Law Warehouses. Their financial support and confidence in this event made it a success. Thank you.
Acknowledgements
This weekly update is made possible by the generous support of
Devine Millimet
& Branch, one of the state’s top law firms and our
Chamber’s contracted representative in Concord. If your
business has a legislative or local issue that needs strategic
consulting and attention, they are a valuable resource that can
help navigate you through both local and state processes.
This weekly update is designed and maintained by our friends
at ActiveEdge,
and we thank them for their help in delivering this piece to your
inbox every Friday!
If you have questions about this update, or comments to share
with us about other issues in Concord, please email Chris Williams
at cwilliams@nashuachamber.com.
We want to be sure we're representing you to the best of our ability,
so do not hesitate to reach out to us!
J.
Christopher Williams
President & CEO
Greater Nashua Chamber of Commerce
151 Main St.
Nashua, NH 03060
Phone: 603.881.8333
Fax: 603.881.7323
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