Bill Text: NH HB192 | 2024 | Regular Session | Introduced
Bill Title: Relative to the rate and exemptions of the interest and dividends tax.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2024-01-03 - Inexpedient to Legislate: Motion Adopted Voice Vote 01/03/2024 House Journal 1 P. 69 [HB192 Detail]
Download: New_Hampshire-2024-HB192-Introduced.html
HB 192-FN - AS INTRODUCED
2023 SESSION
23-0403
02/04
HOUSE BILL 192-FN
AN ACT relative to the rate and exemptions of the interest and dividends tax.
SPONSORS: Rep. Almy, Graf. 17
COMMITTEE: Ways and Means
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ANALYSIS
This bill repeals the previously passed phase out of the interest and dividends tax and changes the rates and exemptions.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
23-0403
02/04
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty Three
AN ACT relative to the rate and exemptions of the interest and dividends tax.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Repeal. 2021, 91:99, II, relative to taxation of incomes, is repealed.
2 Taxation of Incomes; Rate. RSA 77:1 is repealed and reenacted to read as follows:
77:1 Rate. The annual tax upon incomes shall be levied at the rate of 5 percent.
3 Taxation of Income; Who Taxable. Amend RSA 77:3, I to read as follows:
I. Taxable income is that income received from interest and dividends during the tax year prior to the assessment date by:
(a) Individuals who are inhabitants or residents of this state for any part of the taxable year whose gross interest and dividend income from all sources, including income from a qualified investment company pursuant to RSA 77:4, V, exceeds [$2,400] $7,500 during that taxable period.
(b) Partnerships, limited liability companies, and associations, the beneficial interest in which is not represented by transferable shares, whose gross interest and dividend income from all sources exceeds [$2,400] $7,500 during the taxable year, but not including a qualified investment company as defined in RSA 77-A:1, XXI, or a trust comprising a part of an employee benefit plan, as defined in the Employee Retirement Income Security Act of 1974, section 3.
(c) Executors deriving their appointment from a court of this state whose gross interest and dividend income from all sources exceeds [$2,400] $7,500 during the taxable year.
4 Taxation of Incomes; Exemptions. Amend RSA 77:5 to read as follows:
Each taxpayer shall have the following exemptions:
I. Income of [$2,400] $7,500.
II. An additional [$1,200] $3,500 if either or both taxpayers are 65 years of age or older on the last day of the tax year.
III. An additional [$1,200] $3,500 if either or both taxpayers are blind.
IV. An additional [$1,200] $3,500 if either or both taxpayers are disabled, unable to work, and have not yet reached their sixty-fifth birthday.
5 Effective Date. This act shall take effect January 1, 2024.
23-0403
12/12/22
HB 192-FN- FISCAL NOTE
AS INTRODUCED
AN ACT relative to the rate and exemptions of the interest and dividends tax.
FISCAL IMPACT: [ X ] State [ ] County [ ] Local [ ] None
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| Estimated Increase / (Decrease) | |||
STATE: | FY 2023 | FY 2024 | FY 2025 | FY 2026 |
Appropriation | $0 | $0 | $0 | $0 |
Revenue | $0 | Indeterminable Increase | Indeterminable Increase | Indeterminable Increase |
Expenditures | $0 | $0 | $0 | $0 |
Funding Source: | [ X ] General [ ] Education [ ] Highway [ ] Other | |||
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METHODOLOGY:
This bill reverses the repeal of the Interest and Dividend Tax (I&D), setting the rate back to 5 percent. The bill also increases the gross income threshold for determining taxable income as well as increases the exemptions for individuals that are 65 years or older, blind, or disabled. These changes are proposed to take effect January 1, 2024.
The Department of Revenue Administration states the impact on General Funds is indeterminable as the Department is not able to predict future I&D tax liability or credit carryforward amounts. Based on the following assumptions/information, the Department is able to estimate a possible fiscal impact:
- as this bill takes effect January 1, 2024, it is assumed the bill begins with taxable periods ending on or after December 31, 2024 (Tax Year 2024)..
- the starting point for calculating the fiscal impact is the Tax Year 2021 net taxable income of $2,739,400,000 for I&D.
- based on a tax year revenue analysis of prior fiscal years, it was determined fiscal year tax revenue is comprised of 5 percent from the tax year 2 years prior, 68 percent is from the tax year 1 year prior and 27 percent from the current tax year (See table 1 below)
- the I&D rate based on current law and the proposed bill is applied to the relevant tax year in each fiscal year, keeping all income exemptions and additional exemptions unchanged, to provide an estimated revenue for each fiscal year.
- the results for each fiscal year as determined in bullet above and adjusted Tax Year 2021 net taxable income are used for the income exemption and additional exemption increases as proposed in the bill.
The first table below provides the tax rates and splits. The second table provides an estimated impact repealing the I&D tax will have on revenue.
Table 1. Current Law and Proposed Legislation Rates and Splits
Fiscal Year (FY) | Tax Year (TY) | % Applicable to Tax Year | Current Law I&D Rates | Proposed Law I&D Rates |
FY 2023 | TY 2021 | 5% | 5.0% | 5.0% |
| TY 2022 | 68% | 5.0% | 5.0% |
| TY 2023 | 27% | 4.0% | 4.0% |
FY 2024 | TY 2022 | 5% | 5.0% | 5.0% |
TY 2023 | 68% | 4.0% | 4.0% | |
TY 2024 | 27% | 3.0% | 5.0% | |
FY 2025 | TY 2023 | 5% | 4.0% | 4.0% |
TY 2024 | 68% | 3.0% | 5.0% | |
TY 2025 | 27% | 2.0% | 5.0% | |
FY 2026 | TY 2024 | 5% | 3.0% | 5.0% |
TY 2025 | 68% | 2.0% | 5.0% | |
TY 2026 | 27% | 1.0% | 5.0% | |
FY 2027 | TY 2025 | 5% | 2.0% | 5.0% |
TY 2026 | 68% | 1.0% | 5.0% | |
TY 2027 | 27% | 0.0% | 5.0% | |
FY 2028 | TY 2026 | 5% | 1.0% | 5.0% |
TY 2027 | 68% | 0.0% | 5.0% | |
TY 2028 | 27% | 0.0% | 5.0% | |
FY 2029 and forward | TY 2027 and forward | 100% | 0.0% | 5.0% |
Table 2. I&D Repeal Fiscal Impact - Static Analysis
Fiscal Year | FY 2022 Revenues with Current Law | FY 2022 Revenues with Proposed Legislation | Estimated Fiscal Impact Per Year (Proposed Legislation Compared to Current Law)
| Cumulative Fiscal Impact (Proposed Legislation Compared to Current Law) |
2024 | $103,500,000 | $113,200,000 | $9,700,000 | $9,700,000 |
2025 | $76,200,000 | $117,600,000 | $41,400,000 | $51,100,000 |
2026 | $48,800,000 | $118,000,000 | $69,200,000 | $120,300,000 |
2027 | $21,300,000 | $118,000,000 | $96,700,000 | $217,000,000 |
2028 | $1,400,000 | $118,000,000 | $116,600,000 | $333,600,000 |
2029 | $0 | $118,000,000 | $118,000,000 | $451,600,000 |
The fiscal impact of the proposed rate reduction as depicted in the above table may be overstated or understated for future years depending on whether actual revenue is more or less than the Tax Year 2021 net taxable income. The estimated fiscal impact does not account for any overpayment/ credit carry forwards on file. The use of these overpayments would decrease revenue as taxpayers would apply the overpayments to any I&D tax liability or request a refund.
The Department would need to update all necessary tax return forms and electronic management systems to reflect the changes contained in this bill; however, it is not anticipated this will result in any additional administrative costs that could not be absorbed in the Department's operating budget.
AGENCIES CONTACTED:
Department of Revenue Administration
