{"id":1064,"date":"2010-02-25T01:52:53","date_gmt":"2010-02-25T06:52:53","guid":{"rendered":"http:\/\/www.cnht.org\/news\/?p=1064"},"modified":"2017-12-19T12:33:52","modified_gmt":"2017-12-19T17:33:52","slug":"lawmakers-ready-to-ax-business-tax","status":"publish","type":"post","link":"https:\/\/www.cnht.org\/news\/2010\/02\/25\/lawmakers-ready-to-ax-business-tax\/","title":{"rendered":"Lawmakers Ready to Ax Business Tax"},"content":{"rendered":"

Nashua Telegraph<\/a><\/p>\n

Lawmakers ready to ax business tax<\/strong><\/p>\n

CONCORD \u2013 The state\u2019s controversial new tax on owners and investors in limited liability companies could disappear by its one-year anniversary.<\/p>\n

Gov. John Lynch and top leaders in the state Legislature have privately reached a consensus to support repealing the levy, which they had counted on to raise $15 million a year, Democratic sources told The Telegraph on Tuesday.<\/p>\n

Final action could be weeks away and the details of when, where and how to bring about this repeal have yet to be finalized. The move is likely to be linked to Lynch\u2019s request of department heads to propose $140 million in spending cuts to the current, two-year state budget, sources added.<\/p>\n

The Legislature must act on any changes to the ailing state budget before the 2010 session wraps up later this spring.<\/p>\n

Prior to the new levy, the state was taxing unearned income from owners or investors in so-called \u201cS corporations,\u201d but not the owners or investors in LLCs, most of which are small businesses.<\/p>\n

A Manchester real estate LLC and its law firm have sued the state over the tax, charging that it is unconstitutional.<\/p>\n

Repealing the tax would disarm a weapon that state Republican leaders, GOP lawmakers and conservative groups have used to bludgeon Lynch, branding the LLC tax as a \u201cjob killing income tax.\u201d<\/p>\n

GOP opponents claim that controversy over the tax has already exposed the three-term governor as a poor manager who was tone deaf to complaints from business owners from across the state.<\/p>\n

According to sources who did not want to be named, Lynch and top Democratic lawmakers agree that the legislative debate over the LLC tax raised legitimate concerns. The sources said that political opponents skillfully stoked fears among other small business owners that they would somehow be caught in this net.<\/p>\n

State tax officials estimated that 20,000 individuals would pay the tax. That compares to 70,000 who now pay the 5 percent tax on dividends and interest.<\/p>\n

Meanwhile, financial experts warned Lynch and legislative leaders that tax advisers have come up with legal ways to avoid the LLC tax, which include moving a business headquarters outside New Hampshire or creating an out-of-state trust.<\/p>\n

Senate President Sylvia Larsen, D-Concord, confirmed such talks with Lynch and legislative leaders have occurred but would not confirm an agreement was reached on the future of the LLC tax.<\/p>\n

\u201cIt\u2019s under discussion,\u201d Larsen said.<\/p>\n

For her part, Larsen believes any change to the tax should be coupled with an extensive review of how to make taxing business as fair as possible in New Hampshire.<\/p>\n

\u201cWe need to undertake a fundamental review of how business taxes are applied to see if they can be done more fairly than they are now,\u201d Larsen said during a telephone interview. \u201cThat\u2019s a more long-term study but it should get underway.\u201d<\/p>\n

Larsen said legislative testimony in recent weeks has already turned up issues that lawmakers were unaware of last June when they tucked the tax provision into a state budget trailer bill without a public hearing.<\/p>\n

\u201cI think it\u2019s a credit to the Legislature. It\u2019s not easy to go back and review decisions we have made, but we are,\u201d Larsen added.<\/p>\n

Lynch Press Secretary Colin Manning confirmed that talks took place but declined to say if a final agreement was at hand.<\/p>\n

\u201cThe governor has heard concerns from business leaders and there\u2019s a concern that as we close one loophole of the law, another loophole is created,\u201d Manning said.<\/p>\n

Asked whether Lynch endorsed outright repeal of the LLC tax, Manning would only add: \u201cThe governor is going to continue to work with legislators and business leaders to ensure we have fairness across our tax system.\u201d<\/p>\n

House Speaker Terie Norelli, D-Portsmouth, was unavailable for comment on this story.<\/p>\n

Publicly, Lynch maintains that the so-called LLC tax closed a loophole because unearned income going to investors in corporations was taxed as a stock dividend, but similar cash as non-salary bonuses going to those with holdings in the other business entities was not.<\/p>\n

Some of Lynch\u2019s political advisers had been urging him to endorse repeal because the governor may need bipartisan legislative and business leader support to close the budget deficit.<\/p>\n

The same advisers privately suggested that the $15 million in revenues from this tax were not worth the political fallout to Lynch and the Democrats who have controlled this Legislature since 2006.<\/p>\n

Chris Williams, president of the Greater Nashua Chamber of Commerce, said repealing the LLC tax is the best way the state can encourage small businesses to grow coming out of this recession.<\/p>\n

\u201cWe continue to believe that outright repeal is the best outcome for small business in New Hampshire,\u201d Williams said. \u201cThe Legislature\u2019s support of repeal can go a long way to getting the business community to find common ground as lawmakers try to deal with a looming budget deficit.\u201d<\/p>\n

Former state senator and lobbyist Robert Clegg is a co-founder of the Small Business and Small Industry Association of New Hampshire, created last fall in the wake of opposition to the LLC tax.<\/p>\n

\u201cThis restores my faith in the legislative process because this does put them in an even deeper budget hole,\u201d Clegg said. \u201cIf it comes to pass, I for one will do all I can to help them find a real solution to the budget and I will urge everyone in the small business community to do the same.\u201d<\/p>\n

But Republican State Chairman John E. Sununu said repealing the tax would be an admission of incompetence on Lynch\u2019s part. It will not diffuse the issue as Lynch is expected to seek a historic fourth term, Sununu maintained.<\/p>\n

\u201cIf this rumor is true, it underscores this governor and the tax-and-spend, Democratic leaders in the House and Senate have realized how irresponsible and job-killing the LLC tax they passed last year truly was,\u201d Sununu said. \u201cIn the meantime, as we waited for them to come to their senses, the business community in New Hampshire was frozen in hiring or adding investment that would have created jobs.\u201d<\/p>\n

Sununu insisted it will only get done because Lynch and Democratic leaders fear the voters will throw them out of office in November, Sununu said.<\/p>\n

\u201cThis is equivalent to having the governor put a sign on his back as he campaigns for re-election that says, \u2018I am incompetent,\u2019\u201d Sununu said.<\/p>\n

On Feb. 7, The Sunday Telegraph reported Lynch was open to making changes to the LLC as a result of talks he had been having for weeks with key legislators, tax experts and some business leaders.<\/p>\n

Under one scenario, repeal would apply to unearned income from LLCs, proprietorships and partnerships paid out to their owners or investors after Jan. 1, 2010. It will not change the reality that LLC owners have to pay the tax on such unearned income for all of 2009.<\/p>\n

Dividend and interest tax returns for 2009 are due April 15, although Revenue Commissioner Kevin Clougherty said he expects all reasonable requests for an extension will be approved.<\/p>\n

Only last Friday, a legislative oversight committee approved the final rules that Clougherty\u2019s agency would use to implement the LLC tax for the 2009 tax year.<\/p>\n","protected":false},"excerpt":{"rendered":"

Nashua Telegraph Lawmakers ready to ax business tax CONCORD \u2013 The state\u2019s controversial new tax on owners and investors in limited liability companies could disappear by its one-year anniversary. Gov. John Lynch and top leaders in the state Legislature have privately reached a consensus to support repealing the levy, which they had counted on to […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3,71,11,50],"tags":[],"class_list":["post-1064","post","type-post","status-publish","format-standard","hentry","category-articles-nh","category-governor-watch","category-legislation","category-taxes"],"_links":{"self":[{"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/posts\/1064","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/comments?post=1064"}],"version-history":[{"count":4,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/posts\/1064\/revisions"}],"predecessor-version":[{"id":6796,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/posts\/1064\/revisions\/6796"}],"wp:attachment":[{"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/media?parent=1064"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/categories?post=1064"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cnht.org\/news\/wp-json\/wp\/v2\/tags?post=1064"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}