Lawmakers pass change to business profits tax advocated by Planet Fitness
CONCORD — Lawmakers approved a change to the business tax code that will make it easier for closely held companies to sell stocks without tax liability.
The owners of Newington-based Planet Fitness approached legislators with former Gov. Craig Benson earlier this month asking them to change the business profits tax provisions for closely held companies.
The company is about to issue an initial public offering but would have to pay millions in business profits tax because the stock sale increases the company’s values. The company threatened to move its headquarters with about 150 jobs out of the state unless the tax code is changed.
The compromise plan for House Bill 550 would exempt stock sales or other events that increase a company’s value, such as angle investors, but forbid the company from depreciating the increased value in the future.
However, Democrats argued the plan would provide a new loophole that could allow not only closely held companies but large corporations to avoid business profits taxes.
They said the bill is a significant change in the state’s business tax law and should not be done at the last minute.
“New Hampshire should not be enacting tax policy with a gun to our head,” said Rep. Patricia Lovejoy, D-Stratham, who was removed from the conference committee on HB 550 because she refused to approve the proposal.
Sen Dan Feltes, D-Concord, said the bill addresses a section in law that was approved in 1988 to close a loophole that allowed partnerships to escape taxation. But the change will create an even bigger loophole that could cost the state $8 million, but probably more.
“What began as a special, 11th hour tax loophole for one company, and one former governor with a profit-sharing interest in that company, has evolved into a major tax loophole that could allow all stock transactions by businesses and corporations in New Hampshire to be entirely tax-free,” Feltes said. “This far-reaching tax change goes way beyond what the Business Tax Study Commission recommended to be reviewed to help start-up companies.”
But supporters like Sen Andy Sanborn, R-Bedford, said the change will make New Hampshire much more business friendly to start-ups and small entrepreneurial companies.
“New Hampshire is the only state in America that imposes this punitive tax on success,” Sanborn argued. “Few companies will come here.”
He noted it is called a phantom tax because it taxes companies whether they have the ability to pay it or not. It tells a company to pay the tax even though it has received no financial benefit, he said.
Sanborn said over the last four years, 76 companies have paid about $20 million because of the provision.
“We could cure every problem we have by making sure everybody has a good job,” Sanborn said. “You cannot be pro-job if you are not pro-business. We need to be competitive, but how can we be competitive if we’re the only state in the country with this punitive tax?”
The Senate approved HB 550 on a party line 14-10 vote, while the House passed the plan on a 202-145 vote.
In other action, the House and Senate approved:
• House Bill 572 sets parameters for the taking of property for a high pressure gas pipeline and determining its location.
• House Bill 25, the state’s two-year $125.9 million capital budget, includes a new Merrimack County court house, additional money for constructing a new women’s prison and money to upgrade career technical centers in Dover and Somersworth.
• House Bill 681 establishes a $50 fine for a domestic violence conviction and a $5 fee increase for a marriage license to help fund domestic violence programs.
• House Bill 323 allows school districts to use the SAT or ACT college readiness tests to satisfy statewide testing requirements.
• House Bill 468 requires a warrant for law enforcement to seek electronic device location information.
• Senate Bill 169 and House Bill 219 both place greater restrictions on the use of electronic benefit transfer cards. The House version bans the use of the cards in such places as liquor stores and tattoo parlors, while the Senate version bans the purchase of specific items like beer or cigarettes.