With Nudge From Benson, Senate Moves Fast On Planet Fitness Bill
Planet Fitness is famous for taking a non-judgmental, no-grunting approach to working out. But as it readies to go public, it’s been straining -- loudly -- to get lawmakers to tweak the state business profits tax or BPT.
Specifically, to exempt companies that trade or sell stock or any beneficial interest from paying that tax’s 8.5 percent levy on any increase in value.
CEO Chris Rondeau told the Senate Finance Committee last week that if Planet Fitness’s expected gain in value from its looming IPO is subject to the BPT, the company will relocate, taking with it the 200 jobs at its Newington headquarters.
"This tax is just to the point where it’s hard for the CEO of the company, with my partners as the shareholders, to stay. The tax would just be too great."
Planet Fitness grew from a single gym in Dover to serve 7 million members.
According to Rondeau, that makes it the largest health club company in the world.
It all started with a single gym in Dover. In 2012 its three founders sold a 75 percent stake in the company to the private equity firm SKG. The deal valued Planet Fitness at $480 million dollars.
Reuters has pegged the value of its coming IPO at $2 billion. If that number is accurate, Planet Fitness could on the hook to the state for a quick $50 million dollars in BPT payments. Steven Burke, who directs the tax department at the McLane law firm, said, “Ultimately it is a timing issue. You’ve got to pay New Hampshire up front, and then as you amortize the cost down you do get tax deductions, which over time, not considering the time value of money, do make it up.”
Burke says he's had clients who’ve faced similar situations and didn’t like it. They tend to take one of two paths.
“In almost every case, they either pay the tax or restructure the transaction," Burke said.
Planet Fitness chose a third approach: Change the law. That effort only got started last week, but Senate leaders fast tracked it. It may not have hurt, to have some high profile help.
“Thank you Madame Chairman, members of the committee. It’s nice to be back in Concord on a beautiful day.”
That’s former Governor Craig Benson.
He’s a Planet Fitness advisory board member, and holds holds a “small, fractional profits interest.”
Benson also paid $350,000 to purchase the exclusive rights to operate 35 Planet Fitness franchises in the state of New Jersey.
That’s all according to documents from a federal lawsuit. An investment banker sued Planet Fitness, and won $2.5 million dollars in damages, over a disputed commission in its sale to the SKG, a deal Benson also advised on.
The extent of the former governor’s involvement with Planet Fitness never came up when he testified at the bill's public hearing last week. Benson offered few details, and lawmakers never asked. Benson instead stressed that all of New Hampshire stood to lose if Planet Fitness didn’t get relief.
“About a week ago, I became aware of a situation in which Planet Fitness would be caught up in a law that I don’t think is intended to do what doing to the company,” Benson told lawmakers. “And so I asked to be able to reach out to you to see if we couldn’t rectify the situation before harm comes to the state.”
Benson also reached out to the state’s revenue commissioner, who told lawmakers he opposes the change that Planet Fitness seeks. And Benson has met with the House Speaker Shawn Jasper, and Governor Maggie Hassan, who in a statement said she wants to keep Planet Fitness jobs in the state, but called the proposal “last second” and “a tax loophole.”
And the fact that the bill could reduce tax collections, though how much is hard to say, makes it a very tough sell with Democrats. That it’s being pushed by a controversial former Republican governor doesn’t help either.
GOP leaders, meanwhile, say they will continue to work on the bill. When it hit the Senate floor yesterday, Senate President Chuck Morse took the rare step of putting down his gavel to join the debate.
“This is so important to New Hampshire that I really do think it’s important that I speak,” Morse told his colleagues.
Morse helped quash an effort by Democrats to send bill back to a committee for more work. But as he did so, Morse also seemed to acknowledge that, given the complexity of the issue and the thorniness of the politics, further study might be this bills fate.
“Everyone is well aware that doesn’t save those jobs if we send it into next year,” he said. “That’s why we are willing to work on to the point of if we can’t get it done, then we will set up a study committee.”
The Senate’s information session on the tax change is set for the Ways and Means Committee later this morning.