Tax change would affect nonprofit New Hampshire hospitals and universities
A bill that would eliminate business tax exemptions for some New Hampshire nonprofits is only targeted at hospitals, colleges and large nonprofit organizations, according to its sponsor.
Rep. David Hess shared details yesterday about his bill, which he acknowledged has caused “a considerable amount of angst” from nonprofit groups.
The proposed change to the state Business Enterprise Tax would tax nonprofits that receive more than $2 million in revenue for their programs and services. That distinction would include colleges, universities and hospitals, but would not affect “the ma and pa” charities, said Hess, a Hooksett Republican.
The bill, which will go before a House committee for a public hearing this afternoon, would not be used to increase state revenue. Instead, Hess said he would broaden the tax base to allow the state to lower the overall tax rate.
Under his bill, Hess said, the Business Enterprise Tax rate could be reduced from 75 cents per $1,000 of taxable enterprise value to 67 cents per $1,000.
Nonprofits’ requirement to pay the tax would be based on the revenue in 990 forms, an annual report to the federal government required of nonprofits.
Organizations with less than $2 million in program and services revenue, or income they receive in exchange for services they provide, would also not be taxed. Hess said religious organizations are exempt from 990 forms and would therefore not be subject to the change to the Business Enterprise Tax.
Hospitals and universities are some of the largest employers in the state, Hess said, and receive millions of dollars in revenue while enjoying a nonprofit tax exemption.
“Certainly some of the entities that would be subject to the BET under this amendment are among the greatest amassers of wealth in New Hampshire today,” Hess said at a press conference yesterday.
Concord Hospital reported more than $404 million in program service revenue in 2012, according to its 990 form. Smaller nonprofits – such as the Concord Boys & Girls Club, with about $1 million in program service revenue – would keep their tax exemption because they earn less than $2 million.
The business tax could also apply to nonprofits that are not hospitals or universities. Easter Seals of New Hampshire, for example, reported $17.4 million in program service revenue in 2012.
Mary Ellen Jackson, executive director of the New Hampshire Center for Nonprofits, said she opposes Hess’s bill, even if it only targets the wealthiest nonprofits. She called tax exemptions for nonprofits a “long-held” agreement between government and the nonprofit sector that acknowledges nonprofits’ important role in society.
“When a mental health center operating on a very, very lean budget that’s been cut multiple times now needs to pay a BET tax, that’s only going to result in the organization that is struggling to serve, (is going) to serve less,” Jackson said.
The number of nonprofits affected by the bill remains unclear.
Hess said the bill would tax fewer than 200 of the 10,000 nonprofits that file 990s in New Hampshire. But Jackson doubted that number. She said more than 1,600 nonprofits receive more than $1 million in program and services revenue, and she estimated the number of groups with more than $2 million in revenue is greater than 200. (The state would need to tally the nonprofits by hand to obtain an accurate count.)
The New Hampshire Hospital Association told the Monitor in December that it would not support Hess’s bill. A spokesman for the association declined to comment yesterday, but the group is expected to appear at today’s public hearing.
Hess acknowledged that the bill will face strong opposition. He said he was open to suggestions about the bill’s language and requirements but wanted to begin a discussion about taxing large nonprofits.
“I have a strong historical perspective that bills of this complexity, and which challenge the existing paradigm as much as this does, are not accomplished in the first introduction,” he said.
His proposal will go before the House Ways and Means Committee for a public hearing at 1:30 this afternoon.