Frustration Boils Over at LLC Tax Hearing

Technically, this hearing gave people an opportunity to comment on the nitty gritty rules the Department of Revenue Administration should use to implement the tax.

And the first speaker did that.

TAPE: it would be a preferential choice that the EP was done at the entity level because the entity has all the information.

CPA Jim Yuselio proved the exception.

In reality, for most of the 200 plus in the room, this was their first chance to talk about the concept, let alone the technical details.

Unlike most laws in the state, the so-called LLC tax never had a public hearing.

This past June, lawmakers adopted the plan as part of the larger state budget.

And Business and Industry President Jim Roche says that’s a real problem.

TAPE: there was no public vetting, no way for the broader business community...to review the legislation and ask questions......and without that kind of public vetting these questions are just arising and obviously the small business community is very concerned about the tax implications of this.

Many at the hearing can’t fathom why- what they consider additional burdens- would come at such a lousy economic time.

Nashua Chamber of Commerce President Chris Williams says what really has owners of Limited Liability Corporations or Partnerships worried is that they will see two new taxes.

TAPE: the biggest concern is the LLC’s are going to pay a tax on their business profits and then an income tax called an interest and dividends tax on their actual income they take out of their business at the end of each year.

There is a sense in some quarters that this tax will be shouldered primarily by small business.

As one person put it, describing the people who showed up, there were a lot of work boots, blue jeans, and flannel jackets in the crowd.

Former Senator Bob Clegg charged that Revenue Administration wasn’t going to bother going after some of the state’s largest LLCs.

TAPE Your person in the hallway said we are not going after the Fidelity’s of the world because they can afford to fight us. you need to leave the little guy alone and go after the big guy because we can’t take it anymore.

DRA Commissioner Kevin Clorety insisted that was not the case.

TAPE: you should know...I am going ot be fair and I am going to go after everybody, and I am going to try to do it as fairly as I can.

For the Commissioner, fairness is what this unpopular tax comes down to.

Clorety says whole idea by the measure is to treat corporations and LLCs alike.

He believes the new levy achieves that goal.

And while some critics predict the tax will lead to business fleeing the state, killing jobs and thwarting economic development, Clorety says the tax’s reach is limited.

TAPE: most of our small businesses leave their earnings in their business. We are not going to see any taxes on those retained earnings. There’s a lot of misunderstanding on what is going to be taxed and how that is going to work. And over the next month we’ll get a lot of clarification on that so people will understand how the tax applies to them.

At the hearing, Clorety announced three additional hearings around the state will be held starting early next year.

It’s not clear if the anger and frustration will be as great as it was in Concord.

But with an eye towards upcoming elections, Democratic leaders, including Governor Lynch will certainly follow the issue closely.

Several bills to either amend or flat out appeal the tax will be introduced this session.

If something isn’t done to change or halt the tax, speaker after speaker issued warnings like this from business owner Tim Carter.

TAPE: what’s going to happen here is we are getting our muskets, we’re going to put our bayonets on them and we are getting ready for hand-to-hand combat.

With an eye on next fall’s elections, Carter and many others like him will see how Democrats handle this unpopular plan.

For NHPR News, I’m DG.