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Without a budget to fashion and an election on the horizon, the second legislative session has been seen as more political posturing rather than landmark legislation. Apart from supporting several promising initiatives to tackle the housing shortage and lighten business taxes, the business lobby found itself fending off proposals that threatened to increase the cost of doing business.
Taxes
Lawmakers gave short shrift to a bill that would reduce a handful of taxes, including both business taxes, over the next five years, following on the heels of a round of lowering business tax rates between 2015 and 2022. The committee unanimously recommended sending the bill to interim study, and the House concurred by voice vote.
HB 1422, sponsored by Rep. Joe Sweeney, R-Salem, and co-sponsored by House Majority Leader Jason Osborne, R-Auburn, titled the Consumer Tax Relief Act, 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 2029.
The BPT, currently levied at a rate of 7.5%, would be reduced by 0.1 percentage point each year beginning in Tax Year 2025 until reaching 7% in Tax Year 2029. The BET, currently levied at a rate of 0.55%, would be reduced by 0.1% each year over the same period and returned to its original rate of 0.25% when it was first introduced in 1993.
The Meals and Rooms Tax, which includes vehicle rentals, would be reduced from 8.5% to 6% between FY 2025 and FY 2027. Currently, 30% of the revenue from the tax is allocated to the Meals and Rooms Municipal Revenue Fund, which is distributed to cities and towns based on their population. The bill would increase the distribution to 42.5% beginning in 2025. However, the Department of Revenue Administration projected that the lower rates will reduce the amount distributed by the fund.
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Tax would be halved from 7% to 3.5% for each month from July 2024 to June 2025 and halved again to 1.75% before being repealed on Jan. 1, 2027.
In its fiscal note to the bill, the Department of Revenue Administration offered a statistic analysis, which does not measure the effect of reduced rates on economic activity. The DRA 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.
When the House Ways and Means Committee heard the bill, Sweeney told the committee the bill would provide tax relief to consumers hard-pressed by the high prices of basic necessities. He was echoed by Rep. Tim McGough, R-Merrimack, who said “lowering taxes has historically increased revenues.” Greg Moore of Americans for Prosperity spoke in its favor, claiming the prior round of business tax cuts both boosted economic growth and increased tax revenues. No one else spoke either for or against the bill.
“Do you understand what this does to state government?” asked Rep. Susan Almy, D-Lebanon, the ranking Democrat and past chair of the committee. “A quarter of our revenues will disappear by 2027,” she reminded the committee of the report by Phil Sletten, research director of the NH Fiscal Policy Institute.
Last year, Sletten undertook an extensive analysis of the fiscal and economic effects of reducing business taxes from FY 2015 to FY 2022. He “found no evidence that concurrent business tax rate reductions led to increased revenue by spurring more economic activity in the state.” Instead, he concluded that by reducing business tax rates the state failed to capture the revenue generated by the growth driven by other factors, foregoing between $496 million and $729 million in revenue between 2016 and 2022.
By a unanimous vote of 20-0, the committee recommended referring the bill to interim study and the House concurred by a voice vote.
Meanwhile, the Ways and Means Committee gave its blessing to three bills, two sponsored by Rep. John Janigan, R-Salem, that would lighten the tax liability of business enterprises beginning in 2025. HB 1533 would increase the safe harbor provision for compensation for proprietors, partners and members of firms from $75,000 to $100,000 and index biennial increases to the Consumer Price Index. The bill carried the House by a voice vote.
HB 1536 would increase expense deductions against the BPT from $500,000 to $1 million beginning in 2025, an increase in keeping with the limit set by the Internal Revenue Service. Both bills carried the House by wide margins.
HB 450, sponsored by Rep. Thomas Schamburg, D-Wilmot, 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 prescribed that taxpayers follow the federal Internal Revenue Code, effectively importing the 80% limit. The bill was introduced in 2023, retained by the House Ways and Means Committee, which endorsed it by a unanimous vote and passed the House by a voice vote in January.
Housing
To address the housing shortage, House lawmakers expanded state authority over municipal land-use regulations to loosen local zoning ordinances to increase the supply of housing. The House passed two bills drafted by the Special House Committee on Housing — HB 1261 and HB 1399 — that proved especially controversial.
HB 1291, sponsored by Rep. Ellen Read, D-Newmarket, would double the number of accessory dwellings units permitted on one lot from one to two — one attached and detached — wherever single-family dwellings are permitted. At the same time, the maximum size of the first unit would be increased from 750 square feet to 1,000 square feet, while the maximum size of the second would be 850 square feet. Read suggested the legislation could generate between 40,000 and 90,000 housing units.
Read also sponsored HB 1362 authorizing municipalities to restrict annual rent increases, which the House rejected by a voice vote.
HB 1399, sponsored by Rep. Rebecca McWilliams, D-Concord, would permit the expansion of all single-family homes to duplexes as well as construction of two duplexes on all lots of two acres or less in single-family districts, or on up to half of all lots in a single-family district.
While both bills drew widespread support, including from the NH Housing Authority, NH Association of Realtors, developers and builders and an array of housing advocates, Natch Greyes, legal counsel of the NH Municipal Association, called them “unnecessary intrusions on local control,” and Rep. Thomas Walsh, R-Weare, said HB 1399 “could potentially devastate the single-family neighborhoods that our citizens enjoy.”
The House also passed HB 1361, sponsored by Rep. Joe Alexander, R-Goffstown, which would require municipalities to provide “reasonable and realistic opportunities” for siting manufactured housing units and manufactured housing parks in most, but not all, land areas and lots in residential districts as well as in subdivisions created for manufactured housing parks.
HB 1053, sponsored by Rep. Alissandra Murray, D-Manchester, would require residential uses to be permitted by right in newly constructed or rehabilitated buildings in commercial districts. Ben Frost of the NH Housing Authority told the Municipal and County Government Committee that mixed-use developments, such as Woodmont Commons in Londonderry and Salem’s Tuscan Village, were increasingly common.
The chair of the committee, Rep. Len Turcotte, R-Barrington, said the decision to mingle residential and commercial uses should be preserved to municipal government, not mandated by the state. The House tabled the bill by an overwhelming majority.
SB 538, sponsored by Sen. Rebecca Perkins-Kwoka, D-Portsmouth — the “HOMEnibus” — would offer an incentive for rehabilitating and converting office, commercial and industrial buildings to residential use by freezing the property taxes on qualified buildings at their level prior to conversion. At the same time, municipalities would be authorized to designate “office conversion zones” and specify criteria to determine the eligibility of qualified buildings for tax relief within them.
To expedite the planning and permitting process, the bill would allow non-chartered towns, village districts and counties with unincorporated places to authorize their governing bodies to adopt zoning ordinances after at least one public hearing without a vote of either the legislative body or the voters.
The Senate Election Law and Municipal Affairs Committee stripped two provisions from the original bill. One would have limited lots served by municipal water and sewer for residential use to not more than 10,000 square feet, or about a quarter of an acre, and another would have limited lots not served by municipal water and sewer to the dimensions required by the Department of Environmental Services.
Ben Frost of the NH Housing Authority described 10,000 square feet as “very generous for a single-family home.” He said analysis indicated the limitation would double the capacity to build single-family homes. Ben Cushing of the NH Association of Realtors told lawmakers most towns require lots of two to three acres for a single-family home, while the Super Bowl was played on 1.3 acres.
The committee also scrapped a provision governing inclusionary zoning districts by allowing a municipality to require an “economically viable” share of the units, but at least 10% of projects of more than 10 units should be restricted by deed to workforce housing. Developers who voluntarily commit to provide workforce housing units would be entitled to a density bonus of 25% and an extra story above the height restriction. The bill as amended carried the Senate by a voice vote.
SB 454, sponsored by Sen. Dan Innis, R-Bradford, would double the distribution of revenue from the Real Estate Transfer Tax to the Affordable Housing Fund from $5 million to $10 million. The bill passed the Senate on a voice vote, but the House Ways and Committee split 11 to 8 in favor of referring it to interim study.
SB 384, sponsored by Sen. Donovan Fenton, D-Keene, would establish a median income rental housing program to provide loans and grants to municipalities to acquire land and rental housing where at least 20% of the units would be reserved for households with no more than 80% of the median income. Sen. James Gray, R-Rochester, questioned the propriety of a municipality purchasing property, which then would be sold to and developed by a private party. The bill was referred to interim study.
ESG (environmental, social, governance)
Two bills — HB 1267 and SB 520 — would prohibit consideration of ESG factors when investing public funds primarily, but not exclusively, in retirement systems. The prohibition would apply to the state treasury, executive departments and state agencies as well as state operated institutions, including the university system, and local political subdivisions.
ESG became a front in the culture wars when the Biden Administration loosened a Department of Labor rule requiring fiduciaries managing retirement plans to consider only pecuniary factors in making investments. The change authorized fund managers to weigh a firm’s environmental policies — chiefly climate change — together with its social responsibility profile and corporate governance policies, all of which pose risks of legal liability and financial performance in the balance of their investment decisions.
Last year, New Hampshire joined 24 other states, all with Republican governors, in a lawsuit to scotch the rule change. Gov. Chris Sununu issued an executive order forbidding executive agencies to invest in funds based solely on ESG criteria and signed legislation (HB 457) requiring the state treasurer and NH Retirement System to report quarterly on “the motivations of funds, especially those that have environmental, social, political or ideological interests.”
HB 1267, sponsored by Rep. Mike Belcher, R-Wakefield, forbids investing any money controlled by the state in funds “with any regard whatsoever with ESG criteria.” Addressing the House Executive Departments and Administration Committee, he described ESG as “a monopolistic cartel manipulating the free market,” serving as “the financial engine of cultural revolution” and engaging in “theft or fraud.” Neither the governor’s executive order nor HB 457, he said, can be enforced. But his bill would make knowingly violating it a felony carrying a prison term of one to 20 years.
SB 520, sponsored by Sen. Bill Gannon, R-Sandown, applies to all public retirement systems. The bill confines the fiduciary duty of fund managers to “the material effect on the financial risk or the financial return of an investment” and specifically excludes “any action taken, or factor considered, by a fiduciary with any purpose whatsoever to further social, political or ideological interests.”
The bill lists five actions a fiduciary might take to further “social, political or ideological interests,” among them divesting or limiting investment in companies that fail to comply with environmental regulations and investing in entities that provide “access to abortion, sex or gender change, or transgender surgery.”
Those speaking against the bill did not address the pros and cons of ESG but instead contended that, by restricting the range of investments, the Board of Trustees of the NH Retirement System can consider what would infringe on its duties as a fiduciary. Martin Karlon of the NHRS spoke in opposition to both bills, telling lawmakers that the Board routinely “opposes all legislation that interferes with its fiduciary obligation to act in the best interest of its members.”
Michelle Veasey of NH Businesses for Social Responsibility described ESG as “a tool when making investment decisions,” explaining that it evaluates risks that may have adverse material impacts on a firm’s financial performance.
Alli Gold Roberts of Ceres, a nonprofit advocacy organization based in Boston, said SB 520 mirrors model legislation distributed to many states by the Heritage Foundation, a conservative think tank. She noted that studies of public investment in Indiana and Arkansas, where the legislation was adopted, indicated that tying the hands of fiduciaries contributed to lower returns.
HB 1546, sponsored by Rep. Travis Corcoran, R-Weare, would forbid state, county and municipal government from purchasing goods and services from companies that discriminate on grounds of “sex, race, sexuality, national origin, ethnicity or ideology, including but not limited to permitting diversity, equity and inclusion statements.” Any aggrieved citizen could bring a civil suit and the attorney general, county attorney or city attorney could enforce the statute.
All three bills failed by voice votes in their respective chambers.
Insurance
SB 462, a bill to remove the caps on loss of consortium claims arising from wrongful death sponsored by Sen. Sharon Carson, R-Londonderry, pitted trial lawyers against insurance carriers, health care providers and trade associations.
In the event of wrongful death, damages are awarded to the estate of the deceased for pain and suffering, reasonable expenses and earnings foregone by the untimely death. At the same time, a surviving spouse may be awarded damages for loss of consortium, or the comfort, society and companionship of the deceased.
Under current law, awards for loss of consortium are capped at $150,000 for a surviving spouse. If the deceased is the parent of a minor child, damages for loss of consortium may be awarded to the child, and likewise, if the deceased is a minor child, the surviving parent may be awarded damages for loss of consortium. In either case, these awards are capped at $50,000.
Holly Haines of the NH Association for Justice, an organization of trial lawyers, told the Senate Judiciary Committee that the caps have not been raised for 30 years and that New Hampshire is the only state in New England that caps awards for loss of consortium at less than $1 million. She dismissed fears that removing the caps would lead to what Chris Appel of the American Tort Reform Association called “nuclear verdicts,” noting “multimillion-dollar verdicts are very rare in New Hampshire.”
D.J. Bettencourt, the deputy commissioner of the NH Insurance Department, expressed concern about the bill, warning it would drive up insurance premiums for consumers. This bill would mean premiums could go up, or carriers could stop writing a certain line of business. George Roussos of the NH Association of Domestic Insurance Companies agreed. He said New York adopted similar legislation, and the costs were significant — an 11% increase in losses and a 15.5% increase in additional losses paid by self-insurers.
Ben Bradley of the NH Hospital Association feared hospitals could find themselves “in a cloud of limitless liability.” Without caps on damages, he said the hospitals are afraid they would see frivolous lawsuits and unpredictable verdicts. David Juvet of the NH Business and Industry Association (BIA) said a reasonable increase indexed to inflation would place the value of the spousal cap at $290,000, while hastening to add that he was not suggesting the BIA would support such an approach.
The committee shrank from removing the caps altogether in favor of raising them to $500,000 for a surviving spouse and $300,000 for a parent losing a minor child or a minor child losing a parent. The Senate passed the bill by a voice vote.
Employment, unemployment
HB 1322, sponsored by Rep. Kathy Staub, D-Manchester, would increase the minimum wage, which currently mimics the federal minimum wage of $7.25 per hour, to $9.50 beginning in September and by $1.50 each year beginning in 2025 through 2029, when it would reach $17 per hour. Starting in 2030, the hourly minimum wage would be adjusted to the cost of living measured by the Northeast Consumer Price Index. Tipped employees customarily receiving more than $30 per month would receive a base rate from employers of not less than 50% of minimum hourly rate.
Staub acknowledged that the tight labor market has afforded employees leverage to bid up their wages, but added that some 124,000 workers earn less than $17 per hour, which the Massachusetts Institute of Technology calculates as the cost of living for a single person. The House voted 193 to 187 to kill the bill.
Two bills, both sponsored by Rep. Mark McKenzie, D-Manchester, would increase unemployment compensation benefits. HB 1315 would adjust the calculation of wages for employees earning less than the minimum wage for the purposes of unemployment compensation on the basis of what they would have earned if paid the minimum wage. HB 1522 would increase the maximum weekly benefit corresponding to an employee’s annual earnings, which have not been adjusted since 2008, while the wage replacement value has fallen from 50% to less than 35% in some cases.
HB 1315 was killed and HB 1522 was tabled in the House as both their supporters and opponents acknowledged that a Senate bill offered a “slightly better solution.” That bill, SB 436, sponsored by Sen. Rebecca Perkins-Kwoka, D-Portsmouth, set the minimum weekly benefit at not less than 33% of the average weekly wage, which would be updated every five years based on the cost of living. The maximum benefit would not exceed 150% of the average weekly wage and would also be adjusted every five years.
Juvet conceded the need for some adjustment, but noted the “extraordinary price wage” of the bill would impact the employer’s contribution to the Unemployment Trust Fund. He doubted the increase contemplated by the bill would be sustainable, while offering to work with the sponsor to reach a formula that did not adversely affect employers. The Senate killed the bill on a straight party-line vote, 13-10.
HB 1178, sponsored by Rep. Michael Cahill, D-Newmarket, would require employers with 15 or more employees to pay those who lose their jobs due to circumstances beyond their control — such as a layoff, business closure or change of ownership — for their unused vacation time. Although it is common for employers to include earned but unused vacation time in wages, there is no protection for employees who are laid off or lose their jobs when the firm has a layoff, ceases operations or changes ownership.
Those opposed to the bill explained that different businesses not only may employ a mix of full-time, part-time and seasonal employees but also have different policies with respect to vacation, holiday, personal and sick time, so a “one size fits all” approach is inappropriate.
The House Labor, Industrial and Rehabilitative Services Committee recommended the bill ought to pass by a voice vote, but the Finance Committee recommended referring it to interim study. Ultimately, the bill passed the House on a roll call vote, 196-18.
Landfills
HB 1145, sponsored by Rep. Peter Bixby, D-Dover, would prohibit the private ownership of landfills. Half the trash in New Hampshire landfills originates in other states, and the Interstate Commerce of the U.S. Constitution requires all trash be treated the same regardless of its origin. The bill would require future landfills be owned by the state, municipalities or counties. State-owned landfills would be operated by private contractors, while local landfills could be operated by either private contractors or public entities. Restricting the volume of out-of-state trash would reduce the need for more landfills.
Opponents of the bill described it as “not business-friendly,” claiming that private contractors would have little incentive to invest in the infrastructure to operate a landfill on publicly owned land with the risk that their contracts might not be renewed. The bill also raised questions about whether the owner or the contractor would bear the liability from environmental contamination arising from landfills. Despite these reservations, the House passed the bill on a roll-call vote of 208-162.
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