Sponsor's Insight

The House gave final approval to two labor-related bills aimed at helping businesses.  Both bills are on their way to the Governor for his consideration.  SB 86 requires the NH Department of Labor to issue one warning for certain violations of law instead of imposing a fine.  The intent of the bill is to direct the Department to focus on educating businesses first, especially when it comes to minor violations.  The Commissioner would not be required to issue a warning, however, and could fine an employer if the violation involves any of the following: failure to pay an employee on time; payment of wages by checks not convenient to the place of employment; failure to pay final wages in full; failure to pay amounts withheld for court ordered child support; failure to pay amounts withheld for insurance benefits; illegal withholding of wages to compensate employer for employee actions resulting in damage or loss; employing illegal aliens; or requiring employees to perform any illegal activity under threat of job loss.  All warnings would require the employer to correct the violation within a 30-day period. 

SB 121 raises the threshold for companies affected by the Worker Adjustment and Retraining Notification (WARN) Act from 75 to 100 employees.  The WARN act provides protection to workers and communities by requiring employers to provide notification 60 calendar days in advance of closings or mass layoffs.  NH is currently the only state in New England with e threshold lower than 100.  The House passed SB 121 on a vote of 259-100. 

The House and Senate acted upon legislation to clarify the "reasonable compensation" deduction under the business profits tax.  Current law allows an owner of a business to claim a "reasonable compensation" deduction when filing the NH business profits tax.  Any compensation above this "reasonable compensation" is subject to the NH business profits tax.  Exactly what is "reasonable compensation" is not perfectly clear, and often times requires a business owner to spend tens of thousands of dollars to prove their compensation is "reasonable."  Current law also provides a "record-keeping safe harbor" of $50,000 in compensation to the partners or members of the business.  This safe harbor is the amount of compensation for personal services claimed by a business, which does not need to be substantiated by any evidence or records.  Any compensation beyond $50,000 may have to be substantiated if the Department of Revenue challenges the taxpayer.  The House voted 340-9 this past week to pass SB 125 with amendment.  This bill says that once a business owner proves that at least one or more of the partners provided actual services to the business, the amount they claim as compensation shall be presumed reasonable, and that the burden of proving otherwise shall be on the Department of Revenue.  The Department would have to prove "by a preponderance of the evidence" that the deduction claimed by the taxpayer is clearly unreasonable.  This would be a huge victory for taxpayers.  Current law requires the taxpayer to prove that the compensation is reasonable.  Meanwhile, the Senate gave initial approval to a similar bill, HB 557, but then laid it on the table.  Senate Finance Chairman, Chuck Morse said that he wants to wait until the Senate finalizes it version of the budget before making a final decision on the bill.  The House and Senate versions of this issue differ as it relates to the record-keeping safe harbor.  The House version includes the safe harbor, while the Senate does not.  Expect this issue to be resolved late in the Session.

Chamber Insight

Not the Legislature's Domain

Undoubtedly the most well attended and tension filled hearing of last week was the Senate Judiciary committee's public hearing on HB 648, which prohibits public utilities to use eminent domain for transmission projects. The Chamber was there and testified in opposition to HB 648.

Before discussing the merits of HB 648, a little background is in order. HB 648 was filed late in the 2011 legislative session (mid February) in direct response to the Northern Pass energy project. As you may know, the Northern Pass project seeks to bring new renewable energy from Canada to the New England electrical grid through New Hampshire. The 180 mile long transmission project utilizes 140 miles of existing right of way owned Public Service of New Hampshire. The other 40 miles (near the Canadian border) will require new rights of way to be established.

Currently, the Chamber has not taken a position on the Northern Pass project. Recognizing that the approval process for this project will span multiple years, the Chamber is interested in learning about all potential benefits and impacts of the project before publicly weighing in. HB 648, however, is a different story. There are several issues with HB 648 that the Chamber finds highly problematic, most notably of which is its impact on the stability and integrity of New Hampshire's regulatory environment. Below is a quick rundown of the Chamber's concerns with HB 648...

First, the language of HB 648 stipulates that a public utility cannot use eminent domain for a transmission project, unless the project is needed for system reliability. While that language may sound straightforward, the public hearing on HB 648 revealed a major issue with the term "system reliability." Officials from the Public Utilities Commission, who ostensibly helped craft this language, admitted that it is difficult and perhaps impossible to define exactly what "system reliability" really means. Needless to say, not being able to define this key term is highly problematic and it seemed several members of the Senate Judiciary committee agreed, as questions regarding "system reliability" were raised throughout the several hours of testimony.

Second, the Chamber is very concerned with the impact of HB 648 on the stability of New Hampshire's regulatory environment. The business community needs consistent policies to effectively evaluate risk and make reasonable business decisions about investing in and operating in a our state. Certainly the legislature is within its bounds to change the state's regulatory environment, but it must take care when doing so it does not send the wrong message to those looking to invest in New Hampshire.

Finally, and most concerning, is the timing of the significant change included in HB 648. This legislation targets a project already in motion sets a terrible precedent for New Hampshire. The legislature's role is to craft policy and create a stable regulatory process that effectively reviews projects such as this. Supporting legislation that targets a specific project for the sole purpose of halting it is a major overstep in legislature's role and again sends a terrible message to those looking to invest in New Hampshire. Supporters of HB 648 claim that the legislation does not target the Northern Pass project and is merely a necessary improvement of our state's eminent domain laws. The reality of course is that HB 648 would not exist if not for the Northern Pass project. HB 648 was filed in direct response to the project and is supported entirely by those who oppose the project.

The Chamber believes good public policy cannot be crafted in this manner and urges the Senate to kill HB 648. The legislature should have confidence in the state's existing review process and preserve the stability of our regulatory environment.

HB 648 is currently pending in the Senate Judiciary committee and likely to be acted upon sometime within the next week or so.

Michael Skelton

Greater Manchester Chamber of Commerce

michaels@manchester-chamber.org