Sponsor Insight
 
LLC tax update
 
I was hoping not to mention the so-called "LLC tax" this week since it has figured prominently in every issue of Capitol Insight this session. But, it is a top priority for the business community and, indeed, there was significant activity in a number of venues on the issue this week.
 
On Wednesday, the House voted 190-150 to refer HB 1661 to study. HB 1661, sponsored by Republican Representatives Hess (Hooksett), Ober (Hudson ) and Kurk (Weare), would limit extension of the Interest and Dividends tax to dividends of those LLCs that have transferrable shares. The roll call vote was essentially along party lines, with Democrats voting to send the bill to study and Republicans supporting the minority recommendation that the bill pass (only two members from each party switched sides). Roll call results are available here (click on "Yeas" or "nays" to see how each Representative voted).
 
Prior to Wednesday's vote, the House Finance Committee considered an amendment to HB 1672 that would do exactly the same thing as HB 1661. The Finance Committee vote was 14-10 with fourteen voting to kill the bill and 10 voting to adopt the bill with the LLC amendment, again along party lines. HB 1672 is on the House Calendar for March 24th. Given the vote on HB 1661, it is likely that this bill, too, will fail. Note, however, that there seems to be some confusion as to the Governor's position on the issue (see excerpts from committee reports, below). A strong statement from him could shift the tide in one direction or another.
 
Rep. Marjorie K Smith for the Majority of Finance (excerpt): The governor shares some concerns about issues relating to the LLCs and has asked that any repeal of this tax be part of an effort to study all of the state's business taxes. 
 
Rep. Neal M Kurk for the Minority of Finance (excerpt):  The governor has publicly called for the repeal of the LLC tax.  The minority agrees with him and believes that it should be done now.      
 
The full committee reports are available here (scroll down to HB 1672 under Finance).
 
Finally, an identical proposal regarding the LLC tax was introduced in the Senate Finance Committee, as an amendment to SB 450 which seeks to address costs and expenditures in the Department of Health and Human Services. This proposal would repeal both the LLC tax and the equally controversial "campsite tax" (extension of the existing Meals and Rooms tax to campsites) and replace them with a new tax on the Seabrook nuclear power plant and a return of the existing insurance premium tax to the previous rate of 2%. This proposal was not well received for a number of reasons including timing and presentation to the Senate Finance Committee rather than Ways and Means, the committee that typically deals with revenue proposals. SB 450 is on the Senate Calendar for March 24th with a proposed amendment, but not with the amendment containing the LLC proposal.
 
News accounts and other informal sources indicate that legislative leaders do intend to repeal the LLC tax, but prefer to do so as part of a comprehensive package to deal with the financial challenges facing the state. My guess is that this issue will continue to appear in future issues of Capitol Insight.
 
Two other items of interest
 
HB 478, dealing with remotely readable devices (RFID) - HB 478 is a carryover bill from last session which passed the House in January, and has finally crossed over to the Senate and been scheduled for a hearing on March 23rd. The business community opposes HB 478 primarily because it will be an impediment to interstate commerce. Industry specific objections have also been raised along the way, such as the impact of the bill on the use GPS systems to track rental cars or the impact of the bill on security efforts at airports and other public transportation venues. Business advocates prefer that this issue be dealt with at the federal level. However, most are willing to accept an amendment proposed, but ultimately rejected, in the House that would prohibit human implantation of RFID devices and make illegal the theft of information on RFID devices. Senators appear to be receptive to amending the bill, with some favoring killing the bill altogether. More information will be available after the Senate Commerce Committee hearing.
 
HB 1356, extending the Right-to-Know law to certain non-profit organizations - HB 1356, a controversial bill that sought to extend the state's right-to-know law to non-profit organizations that receive significant funding from public sources, was killed in the House this week by a roll call vote of 214-80. The bill would have applied to a fairly limited number of non-profits and, as amended, would have subjected those entities to the open records requirements of the right-to-know law but not to the open meetings requirements. Nonetheless, legislators responded to concerns raised by the non-profit community such as diversion of limited resources from core mission to government reporting, duplication of reporting effort with information already required by the Office of Charitable Trusts and others and already publicly available, and the impact of the reporting requirements on those programs and services that are privately funded. Since HB 1356 could have begun a "slippery slope" toward extension of the right-to-know law to all non-profits, its demise this week is good news for that sector as a whole.


Valerie Acres
Sheehan Phinney Capitol Group