NH LLC Tax Petition

During the final moments of the preparation of the State budget for the current biennium, the legislature voted to expand the reach of the 5% interest and dividends tax. Before the approval of the new legislation distributions from New Hampshire based limited liability companies to owners were not subject to the interest and dividends tax. Late one June evening, the Department of Revenue Administration proposed expanding the tax as a way of generating $30 million in additional revenue. The bill was approved with an effective date of July 1, 2009 and made applicable to distributions in the 2009 calendar year. Thus, at the time of passage, the law was made to apply to the previous six months of distributions.

We reviewed the legislation and its impact on New Hampshire limited liability companies and determined that the legislation could be challenged on a number of constitutional grounds. In our view, the law does not apply equally to similarly situation tax payers. It was adopted under cloak of darkness with no debate or opportunity for public participation. Finally, when it was adopted, it was made to apply to transactions that had already occurred. As a result, we believe that the law is unconstitutional. A number of our clients agreed and we filed a petition seeking to invalidate the law in the Hillsborough County Superior Court.

To see the full text of the Petition, download this document (4.8mb)