Kimball on LLC Tax

Jack Kimball, potential candidate for Governor, issued the following statement regarding the hearing tomorrow on proposed rules for the LLC tax.

NEW LLC TAX IS AN INCOME TAX
ON SMALL BUSINESSES

PORTSMOUTH, N.H.—The Department of Revenue Administration (DRA) will hold a hearing on Wednesday to discuss the proposal of a new LLC tax. Business owners across the state are rightfully concerned about what this will cost them.

The 13.5 percent LLC tax would be composed of a five percent “Dividends” Tax and an eight and a half percent “Business Profit’s” Tax on all individuals who own LLC’s and Partnerships in New Hampshire.

“If passed, this will be stifling to any sort of economic recovery in New Hampshire,” said Jack Kimball, exploratory candidate for governor. “Small businesses are the largest part of the state’s economy responsible for over 90 percent of the job creation in New Hampshire. At a time when jobs are at an increasing low in the state, we should be finding ways to create incentives that encourage entrepreneurs to begin new businesses, bring new small business to New Hampshire, and ensure that current small businesses do not leave,” Kimball said.

Limited Liability Corporations, or LLC’s, make small businesses like local stores, restaurants and labor based operations possible by being taxed as individual operators. The net profit of an LLC is what the LLC owner takes home as an income. Subsequently, this proposed new LLC tax will equate to an income tax for small business owners. LLC’s already are taxed through the K1 portion of the Federal Tax Return and the Business Enterprise State Tax. In addition, the State is trying to impose a five percent Personal Income tax on the owners of LLCs and Partnerships that borrow money to grow or expand their business.

“Small businesses are overburdened by state taxes as it is. This tax is especially sinister in that it taxes the owners of LLC’s and Partnerships twice. They are already taxed once on the income that nets down to them on the K1. Not only that, but the state’s Department of Revenue Administration intends to audit New Hampshire businesses and arbitrarily determine if a business owner is making more than ‘reasonable compensation,’ which is completely subjective. If this isn’t bad enough, the DRA also plans to tax bank borrowing or refinancing at a rate of five percent. Therefore, if a small business owner chooses to borrow money to expand his/her business or to supplement capital due to losses, the state intends to tax the business owner five percent of that borrowed money as they feel it is the same as personal income,” said Kimball.

He continued, “John Lynch sees nothing wrong with this—he has no problem with killing jobs in New Hampshire when we need them the most. This will clearly be the final nail in the coffin for many small businesses that are barely getting by. I understand this because I am a small business man myself.”