On Feb. 6, New Hampshire House of Representatives Rep. David Hess, R-Merrimack, proposed new legislation that would expand the state’s Business Enterprise Tax to include large charity organizations, such as hospitals and institutions of higher education including Dartmouth, and lower the tax rate.
College spokesperson Diana Lawrence wrote in an email that a business enterprise tax would have an impact on both College services and charitable giving, and wrote that such a proposal “deserves careful study.”
Currently, the BET is a 0.75 percent tax on businesses’ interest, dividends and wages, according to the New Hampshire Department of Revenue Administration. Groups classified as 501(c)3 charitable organizations, including the College, are exempt from paying the tax but would no longer be excused if the proposed legislation passes. The BET is one of the highest-grossing taxes in New Hampshire, having brought in $219.5 million in 2014, according to multiple news outlets.
The legislation aims to yield a “revenue neutral” result, offsetting a decreased tax rate with revenue from large charitable organizations, according to the bill. By expanding the tax base to include these organizations, New Hampshire will be able to lower the BET rate from .75 percent to .65 percent, according to the bill.
Lowering the rate will have the beneficial result of reduced taxes on businesses, according to Rep. Neal Kurk, R-Hillsborough, who is co-sponsoring the bill. Kurk said that he would like to see the tax rate reduced to bring more businesses to the New Hampshire area. While the state’s overall tax burden is low, Kurk said, the burden on businesses is currently excessive. The state needs to take action to resolve this issue and make New Hampshire more attractive to businesses, he said, “Or else Dartmouth graduates won’t have any job options in New Hampshire.”
Rep. Robert Backus, D-Hillsborough, who is also co-sponsoring the bill, said he believes Dartmouth will likely be one of the institutions no longer exempt from paying the Business Enterprise Tax.
Kurk also said that if the bill passes, Dartmouth will be responsible for paying the Business Enterprise Tax. In the past, Dartmouth has failed to contribute to the state because it has been excused from paying a number of taxes, he said.
“Dartmouth has been getting a free ride for generations,” Kurk said.
Lawrence responded that the College pays millions of dollars in property taxes to Hanover each year and acts as the town’s largest taxpayer. She added that the College paid $5,481,661 in taxes to the town in 2012, as well as taxes to other municipalities in New Hampshire and several other states.
Kurk said he thinks that Dartmouth will either raise student tuition or lower College expenditures to raise money to offset the cost of the tax, but said he was not an expert on all of the details of the bill.
Backus said he believes Dartmouth should pay the tax because it falls under the type of non-profit that can be seen as “acting like a business in every type of way,” such as by raising revenue and paying salaries.
“It seemed appropriate to take a look at whether certain charities are entitled to be totally exempt from all contributions to revenues for the state of New Hampshire,” Backus said.
Backus said the bill will also target large hospitals, which have recently been absorbing a large number of private medical practices. As a result, tax revenue has decreased because hospitals, unlike private practices, are currently exempt from paying the BET.
Rep. Robert Walsh, D-Hillsborough, another co-sponsor, said that the legislation is a way to increase tax revenues for the state.
“A great many individuals that used to pay the BET are now being employed by corporations that are 501(c)3s, and New Hampshire is trying to recover some of the lost revenues from that,” Walsh said.
Hess proposed a similar bill last year, which narrowly failed a House vote, The Valley News reported.
Hess was unable to be reached by press time.
