By James Nani

Law360 (April 23, 2020, 8:21 PM EDT) -- New Hampshire's governor called on the state legislature Thursday to repeal economic triggers that could increase business taxes automatically because of steep decreases in state revenue caused by the coronavirus pandemic.

Republican Gov. Chris Sununu, in a letter, said that when lawmakers come back to Concord he will ask them to repeal part of the state budget passed in 2019, which may trigger tax increases for businesses. Sununu issued his letter in response to one sent to state leaders last week by Jim Roche, president of the Business and Industry Association in New Hampshire. Roche said the state's business profits tax, or BPT, and business enterprise tax, or BET, will increase if state revenues are 6% below budgeted projections.

"With regard to business taxes, I wholeheartedly agree that this is not a time to raise taxes by 12.5% on our small businesses," Sununu wrote. "You are right to acknowledge that current revenue projections will likely trigger a tax rate increase but that is through no fault of the business community."

Roche said many businesses have lost customers and revenue and many are closing. Tax increases, he said, would be counterproductive to a quick economic recovery.

"To enact BPT and BET tax increases at this time ... would be extremely insensitive to the struggles of employers of all sizes and will adversely impact their ability to rehire employees at the very time rehiring is desperately needed," Roche said.

Last year's budget bill, H.B. 4, included a tax increase trigger if state revenue fell 6% or below the revenue plan at the conclusion of the fiscal year, June 30, and was certified in the comprehensive annual financial report issued later this year. If the trigger were met, the measure would raise the business enterprise tax by 12.5% and the business profits tax by 2.5% beginning Jan. 1, 2021. The state's current business enterprise tax of 0.6% would rise to 0.675%, and the current business profits tax of 7.7% would increase to 7.9%.

Rep. Susan Almy, D-Grafton, chairwoman of the House Ways and Means Committee, told Law360 via email Thursday Sununu's letter wasn't addressed to lawmakers and said the state General Court had not yet received a letter from the governor. The legislature has been "totally shut down" by the COVID-19 crisis and lawmakers are still trying to figure out how they can meet, she said.

"Until then, we cannot even begin to consider this issue," Almy said.

Sununu's office didn't immediately respond to requests for comment.

Last year, Sununu vetoed the budget in July, citing his distaste for the spending plan's proposed business tax increases. In October, he signed a compromise budget that included the business tax triggers that a spokesman from Sununu's office in September called fair. 

The House of Representatives passed the budget bills by a voice vote, and the Senate passed them by a 23-1 vote. Lawmakers suspended the regular legislative rules to take up the bills in one day after striking a deal with Sununu on Tuesday. The governor had vetoed the first budget that passed in June because it raised business taxes, and lawmakers were unable to reach a bipartisan agreement on a different proposed compromise last week.

Sununu's call for repealing the potential tax increases comes as state and local budgets across the nation have seen significant downturns because of measures to slow the spread of the novel coronavirus.

The call for repealing the tax triggers was backed Thursday by state Republican Chair Stephen Stepanek, who said Democrats in the legislature should realize that now was the time to reduce taxes to help small businesses recover, not increase them.

"Gov. Chris Sununu is absolutely right and the legislature should repeal the automatic business tax hikes set to go into effect," Stepanek said. "Our small businesses are suffering and to impose a tax increase on them would be disastrous to our economy."

House Republican Leader Dick Hinch of Merrimack, in a statement, said House Republicans support the change and will move to fast-track legislation to repeal the tax trigger mechanism. Democrats control the Senate and House of the state General Court. 

"Republicans believed that only in the event of an unlikely economic catastrophe would revenue ever reach that trigger point," Hinch said. "Unfortunately, the impossible has happened, and we now urgently need to delete the Democrats' trigger that could break the backs of many businesses who will be struggling to get back to normal operation, and get people back to work."

Sununu's call for repeal comes as he and four lawmakers have waged a state court battle over the governor's power to spend about $1.25 billion allocated to New Hampshire from the Coronavirus Aid, Relief and Economic Security Act , or CARES Act, without oversight from the legislative branch's Finance Committee. On Wednesday, a superior court judge granted Sununu's motion to dismiss the suit filed by Rep. Mary Jane Wallner, D-Concord, Sen. Lou D'Allesandro, D-Manchester, House Speaker Stephen Shurtleff, D-Penacook, and Senate President Donna Soucy, D-Manchester.

--Editing by Vincent Sherry. 

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