Planet Fitness tax break moves forward

Planet Fitness tax break moves forward.
change in New Hampshire’s business tax code requested by Planet Fitness was approved in a conference of House and Senate negotiators on Wednesday, without a single Democratic vote in its favor.The change contained in HB 550, if approved by the full House and Senate and signed into law by the governor, will enable the Newington-based company to avoid a huge tax hit from the increase in its value when it goes public and issues stock as planned in the near future.The fitness franchise company with 1,000 locations nationwide had threatened to take its corporate headquarters and the 150 jobs that go with it out of New Hampshire if the change was not made.State Sen. Andy Sanborn, R-Bedford, said the change is designed to allow all businesses in New Hampshire to have the same tax options that major corporations currently enjoy, even if the business is organized as a partnership, sole owner or limited liability company.“This is for all business,” Sanborn said. “I wanted everyone on the bus.”The tax law change would allow a business to make a choice at the point in time when its value increases substantially through a public stock offering, venture capital investment or other reasons.The company could choose to declare the increase in value in its tax returns, and pay the business profits tax of 8.5 percent, or it could choose not to declare the increase and avoid the immediate tax impact.If the company declares the increase, it could use the large tax payment as an expense to depreciate its tax liability in future years. If it does not declare the increase and pays the tax, the business would theoretically see its profits decline in future years because it would not have the big deduction.According to Sanborn, the state will get its tax money in one lump sum if the increase in value is declared, or the state will get taxes on the increased profits of the company in the future. “It’s a net zero sum game,” he said.Opponents of the measure disagree, pointing out that the taxable value of a company when it goes public is a certainty, whereas the potential tax on future earnings is speculation. And nothing in the law guarantees that Planet Fitness or any other company in the same situation won’t eventually move out of New Hampshire.“What began as a special loophole for one former governor and one company has expanded into a significant loophole that will cost the state $8 million over the biennium,” said Sen. Dan Feltes, D-Concord, as he left the committee of conference.Feltes was referring to testimony last month by former Gov. Craig Benson, who appeared before the Senate Finance Committee with the company president to urge the tax law change shortly after Planet Fitness announced its IPO. Benson is a Planet Fitness adviser and board member.Gov. Hassan may veto the bill, which is opposed by some Republican House members as well.“I’ve been very concerned about the process behind that bill. It came in literally at the 11th hour in the legislative process,” she said. “What I am not hearing from supporters of that bill is how they plan to pay for the lost revenues that bill entails.”The Senate initially approved the tax law change in HB 550 on a party-line, 14-10 vote. – See more at: http://www.unionleader.com/article/20150617/NEWS0621/150619077#sthash.r8nKKkSr.dpuf