Although the 2015 legislative session was dominated by the budget, the NH Legislature was able to pass several pieces of legislation that impact NH businesses. This legislation falls into five areas:
• Change to business tax law
• Update of securities laws
• Modernization of banking laws
• Business name availability, and
• Laws impacting the employer/employee relationship.
The changes to the NH securities law and banking laws were comprehensive updates of these statutes and modernize the laws related to these two industries. These updates continue the efforts of the past several years to modernize certain key NH business statutes, including the limited liability company statute in 2013 and the business corporation statute in 2014.
The Impact of the Budget Debate
The Legislature spent much of 2015 debating the budget. The initial budget was vetoed by the governor and a compromise was finally reached in early September. The result of the compromise was a reduction to the Business Profits Tax (BPT) and the Business Enterprise Tax (BET) that will be phased in over two periods.
During phase I, for taxable periods ending on or after Dec. 31, 2016, the Business Profits Tax will be reduced from 8.5 percent to 8.2 percent and the Business Enterprise Tax will be reduced from 0.75 percent to 0.72 percent. In phase II, for taxable periods ending on or after Dec. 31, 2018, the BPT rate will be reduced to 7.9 percent and the BET rate will be reduced to 0.675 percent, contingent upon combined unrestricted general and education trust fund revenues of $4.64 billion being collected during the biennium ending June 30, 2017.
On or about Dec. 31, 2017, the legislative budget assistant will report on whether revenue collections have met the threshold. The Department of Revenue Administration will issue a Technical Information Release at that time advising taxpayers of the applicable BET rate for taxable periods ending on or after Dec. 31, 2018.
The changes to NH’s securities law reflect a comprehensive update and modernization of the securities law. These changes are intended to make it easier for NH businesses to raise capital, without sacrificing any of the protective measures that are necessary to protect the public.
Among the key changes is an increase in the number of investors that may take part in a private offering during a 12-month period to 25. (Prior law limited the number of investors to 10.) The law eliminates the lifetime cap on the number of investors that may take part in private offerings.
The updated law also makes it easier for companies to coordinate the issuance of securities for their company by eliminating the need for the company to register the employees who are facilitating these efforts as issuer-dealer agents. Each of these changes makes it easier for NH companies to raise capital and aligns NH’s securities law with laws in other states.
One additional change included in the updated securities law is the elimination of the use of the form SRA in entity formations in NH. The form SRA was unique to NH in that it required people who were forming entities in the state to certify that they were complying with NH securities law. The elimination of this form will make the process of forming a business entity in NH easier.
This past year the NH Legislature also passed comprehensive legislation that modernized the state’s banking statutes. The updated banking statutes make the process of forming banks and credit unions in NH more efficient. The updated law clarifies and improves corporate governance for banks and credit unions. The bill modernizing NH’s banking laws also included several amendments governing trusts in the state.
These improvements include clarifications concerning: the limitation periods applicable to claims against trustees, trust advisors and trust protectors; non-judicial settlement agreements and the law of settlor intent. For example, amended RSA 564-B:10-1005(e) clarifies that the three-year limitation period only applies to claims against deceased trustees if the claim has not already been barred by the one year limitation. If either probate or publication has occurred, the one-year limitation period under RSA 556 and RSA 564-B:5-508 will apply. The amended statute provides that a trustee and any other person who has the power to enforce a trust must participate in a nonjudicial settlement agreement.
The changes also include new trust provisions concerning decanting and disclaimers, as well as minor clarifications concerning spendthrift trusts and definitions of commonly-used trust terms. In 2006, NH passed the Trust Modernization and Competitiveness Act that made the state one of the most attractive in the country for trusts. Since the adoption of Trust Modernization Act in 2006, NH has seen a proliferation of trust companies formed in the state. The state has continued to revise and improve its trust statutes to maintain its position as a leader in the trust industry. The most recent changes are a continuation of this effort.
Business Name Selection
In 2015, the corporation and limited liability company name selection statutes, NH RSA 293-A:4.01 and 304-C:32, were amended to make it easier to obtain an entity name in NH. This is an area of great frustration for people trying to form entities in NH.
The changes to the name selection statutes removed the clause in the applicable statute prohibiting any name which would “likely be confused with or mistaken for” another entity’s name. Now the only requirement that a person seeking to register a name in NH must meet is that the proposed name be “distinguishable from, and not the same as,” another name.
This change will allow people to choose a name without the added hurdle of choosing one that is subjectively distinctive from any other entity name in NH and will greatly reduce an issue that created a significant amount of frustration for people trying to do business in the state.
Use of Electronic Devices While Driving
RSA 265-79-c prohibits NH drivers from using “any hand-held mobile electronic device capable of providing voice or data communication” while driving or while temporarily halted in traffic at a stop sign or red light or any other momentary delay.
“Use” is defined broadly, and includes calls, reading or composing text messages or emails, accessing the Internet, and inputting information into a GPS. Drivers are still permitted to use their devices in emergencies or to call 911, and may use a Bluetooth or other hands-free function to send or receive information while driving, provided that the driver does not have to divert attention from the road ahead.
The exception for hands-free devices only applies to adult drivers, as teens under age 18 are not permitted to use electronic devices while driving except to report emergencies. The statute carries fines, which increase for each offense. This legislation is of significance to companies whose employees drive on business. Employers should carefully review and update their cell phone or electronic device policies to confirm the policies are in compliance with this law change.
What Didn’t Pass and What Does That Mean?
A bill introduced in the NH House (HB 450) would have established a uniform definition of employee (as opposed to independent contractor) at least for purposes of NH’s wage and hour, unemployment and worker’s compensation laws. The statute would not have radically changed the criteria for employment status but would have clarified the criteria and brought some consistency among the various agencies that address the issue of “misclassification.”
Employers should note, however, that the U.S. Department of Labor issued a guidance on the issue on July 15, 2015. The document, entitled The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors, summarizes the issue by saying, “The analysis whether the factors are met must focus on whether the worker is economically dependent on the employer or truly in business for him or herself.” It concludes with the more ominous statement that “most workers are employees under the FLSA’s broad definitions.”
Speaking of the FLSA
Perhaps the most significant change employers have to look forward to in 2016 is the new rule proposed by the U.S. Department of Labor regarding the salary basis test that employees must meet in order to be exempt from the minimum wage and overtime requirements of the FLSA.
As usual, businesses need to keep a watchful eye on new legislation and proposed legislation on both the state and federal fronts in order to keep abreast of changes that could significantly impact their companies and the bottom line.
Patrick C. Closson and Charla Bizios Stevens are directors at McLane Middleton, PA with offices in Manchester, Concord and Portsmouth, NH, and Woburn, Mass. They can be reached at firstname.lastname@example.org or email@example.com.