Business Taxes

LFDA Editor

In Brief:

  • New Hampshire has two forms of business tax: a flat tax on business profits, and a tax on a business’s “enterprise value”.
  • Business taxes make up the largest portion of New Hampshire’s overall tax revenue.
  • Because New Hampshire’s business tax rates are among the highest in the nation, there have been calls for changes including lowering tax rates and raising the cap on the research and development tax credit.
  • Pro: Lowering tax rates would encourage businesses to stay, expand, or move to New Hampshire, ultimately leading to an increase in revenues and a boost to the economy.
  • Con: Lower business taxes would reduce badly needed revenue, and a more comprehensive view of New Hampshire’s tax climate sees the state rated more favorably overall.

Issue Facts:

Business Taxation in New Hampshire

As many already know, New Hampshire does not have a broad-based sales, earned income, or capital gains tax. As a result, taxes on business activity in the state make up the largest portion of the revenue “pie”: an estimated 24.45% in 2017. In fact, business taxes in New Hampshire count for a bigger portion of revenue than in any other state in the U.S. Even the Granite State’s property taxes count for a smaller percentage of revenue, at 15.85%. This makes business tax policy a particularly contentious area of debate in New Hampshire.

Types of Taxes

Business activity in the state is taxed in two major ways: the business profits tax (BPT) and the business enterprise tax (BET).  

Business Profits Tax

New Hampshire’s business profits tax (BPT) is a flat-rate tax on a business’s taxable income (taxable income being determined essentially by federal income tax rules, with a few adjustments). Currently, the BPT is set at a flat rate of 8.2%, but that will drop to 7.7 percent in 2019 and to 7.5 percent in 2021. 

The BPT applies to all business structures in New Hampshire, from corporations to LLCs or partnerships. Businesses with less than $50,000 in gross income (income before any deductions are taken) are not required to file a BPT return.

Business Enterprise Tax

The business enterprise tax (BET) was instituted in 1993 in response to revenue reports showing that only a small percentage of businesses operating in New Hampshire were paying BPT. BPT revenues also varied greatly from year to year, presenting a challenge to budget writers.  

The BET is a more unusual form of business taxation which is levied not on profits, but on a business’s “taxable enterprise value base”, and is unique in the United States. This enterprise value is the sum of three factors: compensation paid to employees, owners, and directors; interest expenses; and dividends paid out. This means that a business can owe BET even if it doesn’t show any net accounting profits. BET obligations also tend to show less variation from year to year.

Currently, the BET rate in New Hampshire is set at 0.72% of enterprise value. This rate is also set to change over the next couple years. It will drop to 0.60% in 2019 and to 0.50% in 2021.

Like the BPT, all businesses in New Hampshire are obligated to pay the BET unless they received less than $200,000 in gross receipts or have an enterprise tax value base of less than $100,000.

Relationship between BPT and BET

If a business owes both BPT and BET, only the higher of the two taxes must be paid. For example, if you owe $10,000 in BPT and $14,000 in BET, only $14,000 is paid. Additionally, in cases like this where your BET obligation is higher than your BPT, you can credit the difference against future BPT obligations. So in our example, you’d be able to carry forward that $4,000 payment against future BPT liabilities for up to five years.

Comparisons with Other States

The Tax Foundation publishes a yearly “State Business Tax Climate Index” which attempts to make a more comprehensive analysis of respective state business tax environments. In 2017, the group rated New Hampshire 7th overall. Yet a breakdown of the factors used to make the ranking saw the state listed 46th for corporate taxes, this lower statistic being offset by high rankings for the absence of a sales or personal income tax. 

The Small Business Enterprise Council, on the other hand, listed New Hampshire 32th in the nation in its 2017 “Small Business Tax Index”, which used 23 measures to create a broader picture of a state’s overall business tax climate. 

Areas of Contention

Tax Rate Reductions

In recent years, there have been calls to reduce New Hampshire’s BET and BPT rates. This proved a particular area of contention during the 2016–2017 budget debate, when the Republican-dominated Legislature included cuts to both taxes in a budget which was vetoed by Democratic Gov. Maggie Hassan.

A compromise was eventually negotiated which saw the tax cuts included in the budget with a clause specifying that the final rate adjustments would only take effect if state revenues remained above a certain threshold. However, this was overriden by the 2018-2019 budget, which issued further tax rate drops without any revenue requirements.

Who is Paying Business Taxes?

Some critics of tax rate reductions contend that only a small portion of businesses operating in New Hampshire actually pay business taxes. Reports from the New Hampshire Department of Revenue Administration (NHDRA) do, to some extent, reinforce this assertion. In 2016, 70% of businesses registered in the state paid no BET or BPT. More strikingly, the top 2.8% of those businesses that did pay tax contributed roughly 71% of total BET and BPT revenue. 

Of course, many registered businesses may be small operations which constitute a less significant portion of the state’s economy. In fact, 49% of registered businesses didn’t even file BPT returns, meaning that their gross receipts totaled less than $50,000. 

The ‘Phantom Gains Tax’ Debate

A particularly contentious area of New Hampshire business tax policy relates to a provision of the BPT that applies in certain situations: for instance, when someone sells their interest in a partnership at a profit.

For federal purposes, the tax on that profit is levied at the personal, not the business, level with the individual who made the sale paying a capital gains tax on their earnings.

New Hampshire doesn’t have a capital gains tax, so if the partner making the profit lives in the Granite State, he or she won’t have to pay any personal state-level tax on the money they made in the transaction.

Things get tricky when the partner who made the purchase opts to have their new interest in the partnership “stepped up” for federal tax purposes, reflecting the price they paid for their share of assets. That’s a common enough move, as taking the “step up” allows the purchaser to take full advantage of potential federal deductions.

But in New Hampshire, this has a fiscal side effect. The “step up” adds value to the company, and the state therefore levies its business profits tax against the increase. This effectively saddles the remaining partners in the company—who did not profit from the transaction—with a sometimes significant tax obligation.  

In 2016, the Legislature addressed criticisms of this policy by amending the state tax code to make the “step up” optional for businesses; that is, a company may opt to maintain its lower asset basis for New Hampshire tax purposes, eliminating the need to pay business profits tax on the “phantom” income. Companies may still opt to report the “step up” and pay tax if they choose.

The Research and Development Tax Credit

As an alternative—or in addition to—lowering rates on business taxes, some lawmakers and industry advocates have called for New Hampshire to raise the cap on its research and development tax credit.

This credit can be applied to up to 10% of a business’s qualifying manufacturing research and development expenses, with a maximum of $50,000. It is applied first against the business’s BPT obligation, and then BET obligation if there is any credit still remaining. Businesses must apply for the credit by submitting an application to the Department of Revenue by June 30th of the year following that in which the expense was incurred. Any unused credit may be carried forward for up to five years.

Currently, funding for the credit is derived from business tax revenue, and is capped at $2 million per year. In recent years, demand has far exceeded this cap, leading the Department of Revenue to divide the available credit between businesses with qualifying applications. In 2015, businesses received, on average, only 29.75% of the credit they might have been approved for had the cap been raised or lifted. 

The cap rose to $7 million in 2017. However, some have argued that this increase is still not enough, and continue to push for eliminating the cap entirely.

Limitation on Net Operating Loss Carryforwards

When a business finishes a year with a net operating loss (NOL), federal tax policy will allow it to “carry forward” the loss against future tax obligations for up to twenty years. New Hampshire law similarly allows businesses to “carry forward” an NOL, but for only ten years, and with a cap of $10 million.

Proponents of raising the cap or extending the period over which it can be applied argue that it would bring New Hampshire more into line with policy in the majority of other states, thirty of which offer a twenty year carry forward period, with only five imposing a cap. They argue this would make us more competitive in attracting businesses. 

Others call for lowering the cap or reducing the carryforward period as a means of increasing revenue.



"For" Position

By LFDA Editor

“New Hampshire should lower business tax rates.”

  • Lower tax rates help existing businesses remain profitable, encouraging them to stay or expand operations in New Hampshire, which will ultimately create more revenue.
  • New Hampshire already has high costs for business expenses such as electricity, health insurance, and unemployment insurance, which makes lower business taxes a crucial factor in attracting and keeping companies here.
  • Tax cuts have stimulated economic growth in other states, reducing unemployment and increasing wages.
  • New Hampshire’s corporate tax burden is ranked 46th in the nation, and must be changed for the Granite State to continue to attract and retain new business.
  • New Hampshire ranks low for business startup activity; lowering the corporate tax burden would help attract more new businesses to the state. 

"Against" Position

By LFDA Editor

“New Hampshire should not lower business tax rates.”

  • A more comprehensive view of the overall business tax climate in New Hampshire that includes rates for taxes such as property, unemployment, personal income and sales, sees the state ranked much more favorably:  7th nationally according to the Tax Foundation and 13th by the Council on State Taxation
  • Taxes are not solely a burden on business; they are also the means of funding for public services that enable economic activity or reduce the overall cost of doing business.
  • New Hampshire would do more to attract new business by addressing our relatively high energy and labor costs and improving our infrastructure.
  • Reducing corporate income tax rates without cutting spending accordingly has led to fiscal challenges, including budget shortfalls and lower bond ratings.
  • Because New Hampshire relies more heavily on business tax revenue than other states, cuts have a more significant impact on revenue here than they might elsewhere. 


Killed in the House

Amends the business enterprise tax by stating that any business not required in any year to file a tax return on its gross business profits shall not be required to file a business enterprise tax (BET) return.

In Committee

Reduces the Business Profits Tax (BPT) from 8.2% to 7.7% in 2018 and 7.5% in 2021.

Killed in the House

Establishes a commission to study a carbon reduction investment program for New Hampshire, including how such a program could be used to reduce business taxes.

Signed by Governor

Reauthorizes the commission to study apportionment of gross business profits under RSA 77-A and the committee to study the process by which business names are authorized by the secretary of state.

In Committee

Establishes the technology sector marketing tax credit, to be used against business taxes for businesses recruiting and employing skilled technology sector professionals. The tax credit is equal to 75% of the contribution made to the Community Development Finance Authority by an eligible business as determined by the New Hampshire High Tech Council, with the aggregate of tax credits awarded to not exceed $1 million in any given tax year.

Killed in the Senate

Increases the research and development tax credit against the business profits tax for first-time recipients of the credit.

Passed Senate

Reduces the Business Profits Tax (BPT) from 8.2% to 7.5% and the Business Enterprise Tax (BET) from 0.72% to 0.5% in 2020.

Passed Senate

Establishes the small business jobs fund act and tax credit. The business tax credit is available to taxpayers that make a capital contribution to a small business jobs fund, which is in turn used for small business investments.

Died in Conference Committee

Makes changes to the process for economic revitalization zone tax credits. The bill also increases the aggregate total limit of the credit from $825,000 to $1.5 million per calendar year.

In Committee

Establishes a tax credit for donations to career and technical education centers that can be applied against the business profits tax, with an aggregate allowable amount not to exceed $500,000 per fiscal year.

In Committee

Allows a taxpayer to request a rebate equal to 75% of the research and development tax credit in lieu of a credit being awarded against business profits taxes. The bill appropriates $2 million over the next two fiscal years for rebates.

Killed in the House

Reduces the business profits tax rate from 8.2% to 4%; repeals the business enterprise tax, statewide property tax, utility property tax, and interest and dividends tax; establishes an income tax of 3.95%; and requires the state pay 35% of contributions of retirement system employers to some members beginning in fiscal year 2021.

Tabled in the Senate

Removes the New Hampshire limitation of $100,000 for the Internal Revenue Code Section 179 deduction under the business profits tax. The removal of this limitation will allow taxpayers to use the current Internal Revenue Code Section 179 deduction of $500,000.

Killed in the Senate

Increases the minimum gross business income threshold for filing the Business Profits Tax (BPT) return from $50,000 to $75,000.

Signed by Governor

Requires that business profits tax taxpayer records obtained by the Revenue Administration for an audit or in judicial proceedings shall be confidential and not disclosed.

Passed House

Increases the annual allowable contributions to the Community Development Finance Authority that may be used as a tax credit, from $5 million to $6 million.

Killed in the House

Establishes a credit against business profits taxes for media production expenditures made in New Hampshire.

Tabled in the House

Gradually reduces the business profits tax, from 8.2% to 6%. This bill also gradually reduces the business enterprise tax from 0.72% to 0.4%.

Killed in the House

Provides an exemption from the business profits tax and the business enterprise tax for some manufacturing businesses that start up or relocate to Coos, Grafton, Carroll, Sullivan, or Cheshire county.

Killed in the House

Provides for a three year tax exemption from the business profits tax and business enterprise tax to any business organization which begins conducting new business activity in New Hampshire.

Signed by Governor

Modifies the business profits tax provisions affecting a business organization when owners sell or exchange ownership interests in the business.

Died in Conference Committee

Limits the inclusion in the business profits tax of the net increase due to certain sales or exchanges of an interest or beneficial interest in a business organization.

Killed in the House

Creates a ten year exemption from the business profits tax for new businesses in New Hampshire.

Killed in the House

Repeals certain provisions relative to burden of proof in determining the reasonable compensation deduction and advises the Department of Revenue Administration to use certain averages of compensation when determining reasonableness.

Signed by Governor

Establishes a commission to study apportionment of gross business profits under the business profits tax.

Interim Study

Updates the effective version of the United States Internal Revenue Code of 1986 applicable to the business profits tax, subject to certain adjustments. The bill also requires the Commissioner of Revenue Administration to report biennially on changes to the Internal Revenue Code.

Signed by Governor

Allows an employee leasing company and a client company to elect to make the client company solely responsible for paying business enterprise taxes concerning its leased employees and be eligible for credits against such taxes.

Interim Study

Applies the business enterprise tax to 501(c)(3) nonprofits with annual revenues - less contributions and grants - exceeding $10,000,000. This bill also lowers the rate of the business enterprise tax.

Veto Overridden

2016-2017 state budget bill (part 1).  The budget cuts business taxes, restores the Rainy Day Fund, and increases funding for some social services.  The budget does not reauthorize Medicaid expansion or include a pay raise negotiated with state employees.

Veto Overridden

2016-2017 state budget bill (part 2).

Killed in the House

Reduces the rate of the business profits tax.

Signed by Governor

Updates the effective version of the United States Internal Revenue Code of 1986 applicable to the business profits tax, requires the Commissioner of Revenue Administration to report annually on changes to the Internal Revenue Code.

Died in Conference Committee

Increases the maximum expense deductions for the business profits tax from $25,000 to $100,000.  The Senate amended the bill to instead update the effective version of the United States Internal Revenue Code of 1986 applicable to the business profits tax.

Vetoed by Governor

As introduced, this bill makes a variety of changes to the tobacco tax laws. The bill was amended to modify business taxes so that a company going public does not have to pay the 8.5% business profits tax on any increase in the company's value from the sale of shares.

Tabled in the Senate

Increases the research and development tax credit against the business profits tax

Tabled in the Senate

Allows taxpayers to elect to receive a rebate of the Research and Development tax credit instead of applying the credit as an offset of tax liability. The rebate is 65 percent of the amount of the credit awarded.

Killed in the House

Exempts proprietorships from the Business Profits Tax (BPT).

Tabled in the Senate

Reduces the business profits tax by 0.2%.

Tabled in the Senate

Allows taxpayers to elect to receive a rebate of the Research and Development tax credit instead of applying the credit as an offset of tax liability. The rebate is 65 percent of the amount of the credit awarded.

Signed by Governor

Permits the sharing of information between the Department of Revenue Administration and the Liquor Commission’s Division of Enforcement for purposes of enforcement of the tobacco tax. The bill also specifies the formula for the biennial adjustment of the filing threshold for the business enterprise tax. This bill was requested by the Department of Revenue Administration.

Killed in the House

Exempts proprietorships from the Business Enterprise Tax (BET). 

Tabled in the Senate

Establishes a statewide tax credit against business enterprise taxes for new net jobs created.

Should NH lower business taxes?

Add a comment

Log in or register to post comments

Issue Status

A new tax break for commercial and industrial development, allowing municipalities to offer up to a 50% discount on property taxes for 10 years, took effect in August. Individual cities and towns still have to vote to authorize the breaks, and can set terms on what businesses qualify and how much of a discount they can receive. 


Here in NH, your opinion counts. We make it easy to find and reach out to your elected officials about the issues that matter most to you. Click to search and contact your elected officials!


Join our constantly growing community. Membership is free and supports our efforts to help NH citizens become informed and engaged. 


©2017 Live Free or Die Alliance | The Live Free or Die Alliance is a 501(c)3 nonprofit organization.