Meeting at the tail end of the biennial budget cycle on the eve of a general election, the second-year session of the Legislature is something of an anticlimax to a time when lawmaking and politicking compete for the time and attention of legislators.
This year, lawmakers filed 1,323 bills, ranging from prescribing the correct pronunciation of the capital city to making a $40 million down payment on a new state prison. Most were relegated to some form of parliamentary oblivion. This session will be remembered, if at all, not for the bills that were adopted but for those that were orphaned.
Taxes
Tinkering with taxes without a budget to write is akin to painting without a canvas, but while calls to cut taxes may wither in the Legislature, they thrive on the campaign trail.
In April, Lindsey Stepp, commissioner of the Department of Revenue Administration, and Chris Shea, deputy legislative budget assistant, reported on the flow of state revenues. Lawmakers learned that receipts from major taxes, especially the Business Profits Tax and Business Enterprise Tax, were lagging both projected amounts and last year’s returns. At the same time, they were reminded that the Interest and Dividend Tax, which raised $147.3 million in 2023, will be repealed next year.
“I don’t think you’re going to see the same revenues you’ve seen in the last couple of budget cycles,” Shea said. “There’s going to be harder decisions made, and there’s going to have to be some give and take.”
HB 1422, titled the Consumer Tax Relief Act, sponsored by House Majority Jason Osborne, R-Auburn, would reduce the rates of both the BPT and the BET as well as the Meals and Rooms Tax and Communications Services Tax each year beginning with FY 2025 and ending with FY 2025 and 2029.
The BPT would drop from 7.5% to 7%; the BET, from 0.55% to 0.25%; and the Meals and Rooms Tax from 8.5% to 6.0%. The Communications Services Tax would be halved from 7% to 3.5% for each month from July 2024 to June 2025, and halved again to 1.75% before being repealed on January 1, 2027.
The Department of Revenue Administration estimated that revenues from the four taxes would shrink by increasing amounts each year and cumulatively amount to $2.02 billion of foregone revenue by FY 2031. They sent the bill to interim study by a voice vote.
Meanwhile, the House blessed four bills to lighten the tax liability of business beginning in 2025, three of which the Senate referred to interim study.
HB 1533 would increase the safe harbor provision for compensation for proprietors, partners and members of firms from $75,000 to $100,000 and tailor biennial increases to the Consumer Price Index.
HB 1536 would increase expense deductions against the BPT from $500,000 to $1 million beginning in 2025, an increase matching the limit set by the Internal Revenue Service. The Senate sent both bills to interim study.
HB 450 restored the net operating loss deduction limits on taxable income under the BPT. New Hampshire has traditionally allowed firms generating a loss in one year to carry 100% of the loss forward for 10 years up to an amount of $10 million. However, the federal Tax Cuts and Jobs Act of 2017 limited the carry-forward to 80%, while New Hampshire legislation required taxpayers to follow the federal Internal Revenue Code, effectively importing the 80% limit.
HB 1525, the lone tax bill adopted, originally adjusted the credit carry-forward for the BPT and BET by allowing overpayments taxpayers may claim as a credit to remain at 500% of the total tax liability until Dec. 31, 2029 — when it would drop to 250% and then fall to 100% for the tax period ending Dec. 31, 2031. However, the bill was adopted with a Senate amendment to reduce the credits for both taxes to 250% and 100% for taxable periods ending in 2029 and 2031, respectively.
The Department of Revenue Administration projects revenues to increase by indeterminable amounts from 2025 through 2029 and decrease by indeterminable amounts from 2030 through 2034.
The cloudy revenue forecast appears to have curbed the appetite for taking steps that could trim returns from business taxes.
Public Finance
Where should tax dollars be invested, at home or abroad? The question was raised by SB 553, which required the state treasurer to “ensure all of the funds held by the Public Deposit Investment Pool (PDIP) are invested or deposited within the state of New Hampshire, and that all funds held by the public deposit investment pool are insured or collateralized.”
Sen. Cindy Rosenwald, D-Nashua, the bill’s prime sponsor, explained these funds, primarily cash reserves, “be invested in financial institutions with a physical presence in New Hampshire, and to be secured and collateralized,” which is to say deposited in banks.
PDIP was created by legislation in 1993 following the collapse and closure of the seven largest banks in the state, which together held a quarter of all deposits, in October 1991. The pool provides investment services to 245 public entities, including cities, towns, counties, school districts and other agencies, as well as the state itself.
PDIP is administered by PFM Asset Management, which manages similar funds in 17 states, under a contract with the state and is overseen by the state treasurer and Pool Advisory Committee. Funds invested through PDIP are neither securitized or collateralized, as they are in banks.
PDIP has performed well, returning competitive yields without posting a loss while growing to manage the investment of an increasing share of public funds. The pool is rated AAAm by S&P Global, “the highest principal stability fund rating assigned by S&P Global Ratings.”
In recent years, assets managed by PDIP have more than tripled, from $200 million to more than $650 million.
All of which begs the question: “If it ain’t broke, why fix it?”
One answer hinges on PDIP’s investment portfolio, which consists entirely of investments in commercial enterprises and financial instruments in other states and foreign countries. Another is that, as PDIP has taken a growing share of public funds, the banking industry chaffs at what it considers a tilted playing field that distorts the competitive relationship between the two. While the state requires banks to insure and collateralize their public deposits, PFM is not required to do either.
The NH Bankers Association commissioned a study by Brian Gottlob of Polecon Research. Applying data from 2023, he projected depositing the $530 million held by the PDIP in local banks, which loan some 90% of funds on deposit, would increase their lending capacity by $182 million. This expansion of credit would primarily flow to small businesses with up to 50 employees. Running the data through an economic model, Gottlob estimated the increased economic activity would add $200 million to GDP, generate more than 2,000 jobs and boost state and local revenues by $23 million.
Gottlob acknowledges it is difficult to draw a straightforward comparison between the yield on deposits placed in local banks and those in the PDIP. But he concludes that funds deposited in local banks “produce aggregate fiscal and economic benefits that will exceed the monetary benefits (yield), from investing public funds in out-of-state and international organizations and financial instruments through the PDIP.”
SB 553 carried the Senate by a unanimous 24–0 vote.
While the NH Municipal Association took no position on the bill, a number of local finance officials spoke against it. The bill was amended in the House to require the state treasurer and advisor to “strive to maintain no less than 30% of the funds held by the PDIP in insured or collateralized deposits.”
Although the House rejected the amended bill by 14 votes, the Senate added the amendment to HB 1241 to send the bill to a Committee of Conference.
The House and Senate conferees agreed to the following amendment: “The investment advisor selected by the state treasurer and advisory committee shall strive to place funds ordinarily held by the public deposit investment pool in bank deposits with state or federally chartered banks that are eligible to accept deposits of public funds.”
As amended, HB 1241 passed by voice votes.
Housing
From the outset, when the speaker of the house convened a Special Committee on Housing, addressing the short supply and rising cost of housing was among lawmakers’ highest priorities. However, of the nearly 20 bills filed to tackle that issue, less than a handful succeeded.
Several of these bills sought to increase the housing stock by loosening zoning restrictions, which opponents claimed infringed on local control and threatened the character of communities.
HB 1399 would allow expansion of a single-family home on a lot of two acres in a single-family district to a duplex by right without discretionary review.
HB 1291 would double the number of accessory dwellings units permitted on one lot by right from one to two — one attached and detached — wherever single-family dwellings are permitted. At the same time, the maximum size of both units would be increased.
The House passed both bills, but the Senate referred HB 1399 to interim study and killed HB 1291, drawing a sharp rebuke from Housing Action NH, New Hampshire Realtors and the Business and Industry Association of NH.
Natch Greyes, of the NH Municipal Association, called the bills “unnecessary intrusions on local control,” and Rep. Thomas Walsh, R-Weare, warned HB 1399 “could potentially devastate the single-family neighborhoods that our citizens enjoy.”
Likewise, HB 1053, permitting residential units in newly constructed or rehabilitated buildings in commercial districts, was tabled by the House.
HB 1545 would permit the sale of surplus state property to nonprofit corporations at less than fair market value to develop affordable housing, while SB 454 would have doubled the distribution of proceeds from the Real Estate Transfer Tax to the Affordable Housing Fund from $5 million to $10 million.
HB 1281 sought to make optimal use of rental property by prohibiting municipalities from limiting the number of unrelated occupants in rental property to less than two per bedroom. All three bills were tabled by the House.
SB 384 would establish the Invest NH Fund, seeded with a $10 million appropriation and administered by the Department of Business and Economic Affairs, to award grants and loans to municipalities to acquire land and construct rental housing. Projects financed by the program would be required to reserve a fifth of all units for households with incomes below 80% of the regional median. The bill was referred to interim study.
The House rejected HB 1470, which would have established a study committee to consider the feasibility and impact of providing housing tax credits for low-income households as well as HB 1362 authorizing municipalities to “stabilize” rent increases.
Lawmakers endorsed only three major housing initiatives. SB 538, the so-called “HOMEnibus Bill,” would allow municipalities to freeze property taxes on office buildings converted to residential use within designated districts for a period specified by the local governing body. The bill would also enable municipalities to authorize the governing body — board of selectmen — to adopt and amend zoning ordinances without a vote of the legislative body at town meeting. The bill carried the Senate by a voice vote, but failed by 13 votes in House.
However, the Senate tacked the provision dealing with the conversion of office space to residential use onto HB 1400. This bill redefines tenancies in rental properties and prohibits local authorities from requiring more than 1.5 parking spaces per unit for units of less 1,000 square feet and in multifamily developments of 10 or more units. Branded “the good, the bad and the ugly bill” by Rep. Len Turcotte, R-Barrington, HB 1400 was adopted as amended.
Lawmakers also voted to expand opportunities for manufactured housing.
HB 1361 requires municipalities to provide “reasonable and realistic opportunities for siting manufactured housing units in most, but not all, residential districts, subject only to regulations on lot size, setbacks and road frontage. The same bill allows manufactured housing parks as subdivisions within residential districts.
Lawmakers smoothed the process of appealing decisions of planning boards and zoning boards of adjustment. Current law allows “any person aggrieved” to appeal decisions of land-use boards, effectively enabling those whose interests are not at stake to hamstring the permitting process and increase the costs of projects. HB 1359 limits standing for such appeals solely to abutters and municipal officials. The bill carried the House and Senate by wide margins.
Of all the housing bills, HB 1115 was especially controversial and consequential, particularly in light of the dearth of rental housing. Sponsored by Rep. Bob Lynn, R-Windham, the bill would entitle a landlord to evict a tenant with 30 days’ notice upon the mere expiration of the lease, contrary to a ruling by the NH Supreme Court in 2005.
The bill, endorsed by the Apartment Association of NH and the NH Rental Property Owners Association, drew a raft of opposition from housing advocacy groups as well as NH Legal Assistance and the NH Local Welfare Administrators Association, who warned it would increase the ranks of the homeless. The law entitles landlords to evict for good cause, including nonpayment of rent, violating the lease, damaging the property and endangering the welfare of others. The bill passed the House by 14 votes, but was referred to interim study by a voice vote in the Senate.
The House killed two bills addressing short-term rentals: HB 1635, defining short-term rentals as units rented for not more than 30 days, and HB 1498, establishing a registry of short-term rental properties. Both bills were found redundant, since the Department of Revenue Administration includes short-term rentals in the licensing and registration requirements in the course of administering the Meals and Rentals Tax.
Employment
Lawmakers once again rejected legislation — HB 1377 and SB 516— prohibiting collective bargaining agreements that require employees to join or contribute to a labor union, while bills to increase the minimum wage and unemployment benefits were given short shrift.
New Hampshire is one of 16 states where the federal minimum wage of $7.25 per hour applies. In 2023, the minimum wage increased in the five other New England states to range between $13.18 in Vermont and $15 in Massachusetts and Connecticut.
HB 1322 would raise the minimum wage to $9.50 in 2024, $11 in 2025, $12.50 in 2026, $14 in 2027, $15.50 in 2028 and $17.00 in 2028 while indexing future increases to the Consumer Price Index. The bill also required tipped employees be paid no less than half of the minimum wage. The bill was killed by the House.
The House also rejected HB 1246, allowing employers to pay wages — minimum or otherwise — in gold or silver by roll call vote of 182 to 155.
Several bills addressed unemployment compensation, including HB 1522, which would increase the weekly benefits as well as the maximum benefit during any benefit year.
HB 1315 would require the wages of those paid less than the minimum wage be tallied as what they would earn if paid the minimum wage when calculating unemployment compensation benefits.
HB 190 would set the duration of unemployment benefits at 14 if the unemployment rate is at or below 3% and add an additional week for each 0.5% increase in the rate up to a maximum of 24 weeks if unemployment tops 8%. All three bills failed in the House.
HB 1178, requiring employers with 15 or more employees to pay for unused earned time in the event of a layoff or transfer of ownership, proved the thorniest of bills considered by both the House Labor, Industrial and Rehabilitative and Finance Committees. Those representing employers stressed that policies governing vacation, sick and personal time vary from firm to firm and “use it or lose it” policies are common.
After much debate and several amendments, the House passed a bill providing, in the event of a layoff without a reasonable assurance of returning to work as well as a business closing or changing ownership, employees would be due up to 30 days of unused earned time. However, the Senate referred the bill to interim study.
Two bills addressed working remotely. HB 1007 would require employers specify the terms and conditions of an arrangement for employees to work remotely. The House referred the bill to interim study.
SB 330, passed by both chambers, would permit work-from-home to count toward eligibility for unemployment benefits by repealing the disqualification for those not available for work outside their home.
