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New Hampshire: Proposed Rules Reflect IRC §163(j) Decoupling and Market-Sourcing Apportionment for Financial Institutions
Final Proposal to Adopt Rev 303.06 and 304.10, N.H. Dept. of Rev. Admin. (3/27/24). The New Hampshire Department of Revenue Administration (Department) released final proposed text of an administrative rule reflecting state legislation enacted in 2023 [see S.B. 189 (2023) / Chapter 163 and StateTaxMatters, Issue 2023-31, for more details on this legislation] that permits a New Hampshire business profits tax (BPT) taxpayer to fully deduct its business interest expense in the year it is incurred, thereby decoupling from the limitations on the deduction of business interest expense under Internal Revenue Code (IRC) section 163(j), for tax years beginning on or after January 1, 2024. Specifically, the proposed text provides the following:
“A business organization with a fiscal tax period that begins before, and ends on or after, January 1, 2024 and has a carry forward of disallowed business interest under section 163(j) of the IRC at the end of such fiscal tax period, shall be allowed as a deduction of such disallowed business interest expense, under RSA 77-A:4, XX, in 3 equal parts over 3 consecutive years, beginning with the first taxable period commencing on or after the end of said fiscal period.”
The Department also released final proposed text revising its rule on computing special industry apportionment of financial institutions to reflect the market-based sourcing apportionment methodology adopted by 2019 state legislation. According to the Department, it is expected that these final rule proposals collectively will be considered by New Hampshire’s Joint Legislative Committee on Administrative Rules (JLCAR) during their April 19, 2024 meeting. Please contact us with any questions.
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