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NH non-profits would pay taxes under proposed legislation

New Hampshire Union Leader

January 13. 2014 9:48PM

Big non-profit organizations such as hospitals, private universities and preparatory schools would start paying New Hampshire business taxes under legislation that will be the subject of a hearing today before a New Hampshire House committee.

State Rep. David Hess, R-Hooksett, said the non-profits pay high salaries, employ hundreds and generate money through tuition or medical charges. Yet they don’t pay the business enterprise tax, which businesses and even some non-profits already pay based on wages, debt payments and profits.

“These institutions are some of the major accumulators of wealth in our society,” Hess said. “I think it’s time to have a conversation about what these institutions do for society and why they’re exempt from this minimal tax.”

On Monday, Hess stressed that he narrowed the scope of his original legislation, which would have expanded the tax to all non-profit organizations with IRS 501(c)3 status. The revision applies to non-profits with more than $2 million in program revenues — which means money generated from services such as education or health care.

Even large organizations, such as the New Hampshire Charitable Foundation, would remain exempt if they did not generate significant revenue through the sale of services, he said.

Over the years, lawmakers have dabbled with the idea of eliminating property-tax exemptions for non-profits.

But Hess said this is the first time he knows that anyone has tried to extend the business enterprise tax to non-profits.

Based on hospital salaries alone, the expansion could generate $14 million in state revenues, said Hess, who relied on 4-year-old data compiled by the New Hampshire Hospital Association.

Hess’ legislation is revenue-neutral, meaning he wants to see the business enterprise tax reduced for others based upon how much the expansion generates.

“Obviously, it’s nothing we’re in favor of,” said John Clayton, a spokesman for the New Hampshire Hospital Association. He said the organization has prepared remarks for a hearing — scheduled for 1:30 p.m. today before the House Ways and Means Committee — and would comment further then.

“Why would you want to do damage to one of the few industries getting us through this economic downturn?” said Paul LeBlanc, president of Southern New Hampshire University.

He said the Hooksett college added a residence hall last year and is building a library this year. It does business with hundreds of Hooksett-based vendors, he said.

The BET was implemented in the early 1990s under former Gov. Steve Merrill. An employer pays a tax of 0.75 percent — or 75 cents of every $100 — on wages, dividends or interest payments to creditors.

The law applies to all for-profit business, and non-profits such as credit unions, retirement funds, labor organizations, social clubs and chambers of commerce.

But it exempts organizations with the 501(c)3 status.

In an email, the spokesman for Democratic Gov. Maggie Hassan said she will review the measure as it moves through the legislative process.

Hess, a deputy Republican leader in the House, and Kenneth Wyler, R-Kingston, are the only sponsors of the original bill.

Hess is the only sponsor of the amended version. Hess said he didn’t have the time to find other sponsors.

Democrats have told him privately they like the idea of the bill, but they didn’t want to sign onto it, he said. As for his fellow Republicans?

“I haven’t had anyone come up and say, ‘You’re nuts,’” Hess said. “I’ve had a number say, ‘You’re pretty courageous.”

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