NH’s battle with feds over cash continues

Kevin Landrigan reports on New Hampshire ongoing battle with the federal government over Medicaid payments.

The feds’ decision against the state’s claim was made on several grounds, among them that the state’s tax on hospital revenues used to generate bonus state Medicaid payments is invalid.

Then, state Health and Human Services Commissioner John Stephen argued that the tax isn’t on income or profit, but on hospital revenues, and therefore, an appropriate expense to claim.

For years, the state’s argument has been that the federal government has changed the rules of the reimbursement game and tried to apply them retroactively to New Hampshire.

Gambling on gambling tax revenues

Under the State House Dome, Tom Fahey looks at the difficulties the Department of Revenue Administration has in collecting the newly passed tax on gambling winnings:

Last Sunday, Revenue Administration Commissioner Kevin Clougherty downplayed worries that a gambling tax will be tough to administer. It's hooked to the federal system, and will be collected and audited as such, he said.

But his office has asked the Attorney General's Office for its opinion on some aspects of the tax law. High on the list is whether the law requires taxes on gambling winnings for the entire year, back to Jan. 1.

Assistant Commissioner Margaret Fulton said the issue is that the tax law states, "Taxable income is income that is received from gambling winnings during the calendar year."

Another question involved those lucky folks who win big lottery prizes and take their winnings as annuities over 20 years. Does the jackpot count as a one-time gain, or is each annual payment a separate gambling win? (more)

This is what happens when lawmakers slap half-crafted taxes into a budget just before deadline. All of these questions could have been answered during a public hearing and public debate on the new tax. But the Conference Committee needed the money to pay for their spending increases.

NH Government paying more for green energy

Kevin Landrigan reports in the Nashua Telegraph that Governor John Lynch has signed an agreement to pay a little bit more for the state's electricity, which will now come from wind farms:

Gov. John Lynch announced the agreement with ConEdison Solutions on Thursday. Under it, New Hampshire state government will pay an extra $21,000 for $1 million worth of power, a quarter of its overall $4 million energy bill.

In return for the extra five-10,000ths of a cent per kilowatt, ConEdison guarantees that it has purchased an equivalent amount of power from wind farms.

DRA answers LLC questions

In a letter the Business and Industry Association President Jim Roche, Department of Revenue Commission Kevin Clougherty addresses concerns about how the new tax on Limited Liability Corporations (LLC's) would be implemented in New Hampshire.

The BIA has posted the entire letter on their website.
Clougherty Assurance Letter

Clougherty addresses technical questions on how the DRA will interpret the new law, which was rushed into the state budget without a public hearing last week. If passed, the DRA will examine the income, profits, and payments made by every LLC and determine how much compensation is appropriate. If state bureaucrats decide that an LLC is paying its officers too much, it will tax them.

Hattip: Drew Cline

Tax Soup

Dan Touhy's piece in the Union Leader has the best headline of the day, "State budget writers cook up tax soup"

Other options under scrutiny include a quarter-percentage point increase in the business enterprise tax to raise an extra $30 million a year, suspension of that tax credit against the business profits tax, and a new tax on distribution of profits to members of limited liability companies.

Clougherty said treating LLCs like corporations is a matter of fairness. He said the state could be subject to a legal challenge without it.

"We're trying to level the playing field so that all corporate entities are treated the same," he said. "I'm very concerned about our liability if we are not treating everybody fairly."

Clougherty outlined ways to broaden the tax base. Some ideas would require legislative approval. None of them appear to be shoo-ins for the House and Senate, which must negotiate a final product of the estimated $11.6 billion plan by July 1, the start of the next two-year budget cycle.

Another idea is to capture real estate transfer taxes avoided by certain major businesses and real estate trusts using 501-c status, the Internal Revenue Service code usually designated for charitable organizations. Clougherty said the change, and modifying the definition of "holding company" under state law, would treat business entities consistently. It could also generate nearly $3 million within three years, according to his report.

Mortgage Tax Gets Cold Reception

In the Concord Monitor, Lauren Dorgan covers yesterday's presentation by the Department of Revenue Administration. Commissioner Kevin Clougherty floated 11 ideas to raise revenues, but the two getting support from Governor John Lynch are extending the Interest and Dividends Tax on LLC's and taxing mortgage refinancings.

Dorgan reports opposition to the Mortgage Tax was strong:

Clougherty's refinance tax presentation, however, quickly attracted lightning bolts, with senators asking whether the tax would hurt those who are already struggling, whether it would increase the cost of home ownership and whether the revenue in the proposal could be relied upon. Gov. John Lynch's office has quietly vetted the refinance idea for a couple of weeks; the state Mortgage Bankers and Brokers Association came out against it Thursday.

"This has been floated for a couple of weeks now in the media, and I don't think I've talked to anyone anywhere" who likes the idea, said Berlin Republican Sen. John Gallus, who said he sees many people refinancing properties to keep their homes, send a child to college or pay for emergency home repairs.

Manchester Democrat Lou D'Allesandro panned the refinance tax idea after the hearing.

"That's the one I don't see. . . . I don't see it as an alternative when we have other alternatives that are better," said D'Allesandro, pointing to the plan he sponsored to allow a total of 13,000 video slot machines spread between the state's three horse and dog tracks and two North Country slot parlors. D'Allesandro estimates the plan would bring in $205 million for the state's two-year budget, which will total about $11.5 billion.