New Hampshire — Corporate Income / Franchise Tax

New Hampshire imposes a Business Profits Tax (BPT) on the taxable business profits of every "business organization" conducting business activity within the state. A business organization is defined as any enterprise—whether corporation, partnership, limited liability company, proprietorship, association, business trust, real estate trust, or other form—organized for gain or profit and carrying on business activity in New Hampshire, except enterprises expressly exempt from income taxation under the Internal Revenue Code. Each entity is taxed separately unless specifically authorized to file using combined reporting. Pass-through entities such as S corporations, partnerships, and LLCs are taxed at the entity level under the BPT; their earnings are not included in the calculation of the owners' business profits.

For taxable periods ending on or after December 31, 2023, the BPT rate is 7.5 percent. Business organizations with gross business income from all activities exceeding $109,000 (for taxable periods beginning on or after January 1, 2025) must file a BPT return. This threshold is adjusted biennially for inflation.

Source: RSA 77-A:1, I; RSA 77-A:2; N.H. DOR Business Taxes

New Hampshire defines "business activity" as "a substantial economic presence evidenced by a purposeful direction of business toward the state examined in light of the frequency, quantity, and systematic nature of a business organization's economic contacts with the state." The term includes "a group of actions performed by a business organization for the purpose of earning income or profit" and "every operation which forms a part of, or a step in, the process of earning income or profit from such group of actions." Actions ordinarily include employing business assets, receiving money or property, and incurring or paying expenses.

Source: RSA 77-A:1, XII

New Hampshire's Business Profits Tax apportionment formula changed significantly effective for taxable periods ending on or after December 31, 2022. For periods ending before that date, multi-state businesses apportioned income using a three-factor formula: property, payroll, and sales, with the sales factor counted twice (double-weighted). For taxable periods ending on or after December 31, 2022, New Hampshire uses a single sales factor apportionment formula exclusively.

Source: RSA 77-A:3, I; N.H. DOR FAQ

Business Profits Tax returns are due on the 15th day of the third month following the close of the taxable period for partnerships (March 15 for calendar-year filers), and on the 15th day of the fourth month following the close of the taxable period for corporations, proprietorships, and fiduciaries (April 15 for calendar-year filers). Nonprofits subject to BPT must file by the 15th day of the fifth month following the close of the taxable period.

Source: N.H. DOR Business Tax Overview (Jan. 2023)

New Hampshire uses market-based sourcing to assign receipts to the sales factor numerator for taxable periods ending on or after December 31, 2021. Under this methodology, receipts are sourced to where the customer receives the benefit of the service or property (the "market"), rather than where the taxpayer incurs costs of performance. Because New Hampshire applies a single-sales-factor apportionment formula for these periods, the proper assignment of receipts to New Hampshire directly determines the apportionment percentage and resulting tax liability.

Tangible personal property sourcing

N.H. Admin. Code Rev 304.04(c) directs that the sales factor numerator "shall include the sum of" the following categories for tangible personal property:

1. Delivery rule: "Sales of tangible personal property, regardless of the conditions of sale delivered in New Hampshire, other than to the United States government";
2. Throwback rule: "Sales of tangible personal property originating in New Hampshire to a purchaser in another state in which the business organization is not taxable or subject to tax";
3. U.S. government sales from NH: "Sales of tangible personal property originating in New Hampshire and delivered to the United States government in any state";
4. Property gains: "Ordinary net gains or losses and capital gains from the sale of real or tangible property, if and to the extent the property is located in this state."

The throwback rule under item (2) applies only to tangible personal property and only when the business is not taxable in the destination state.

Service sourcing – market-based rules

For services delivered to customers, Rev 304.04 establishes distinct market-based sourcing rules depending on delivery method:

• In-person services (Rev 304.04(c)): "In the case of the delivery of a service to a customer by in-person means, the service shall be considered delivered in New Hampshire if and to the extent that the customer receives the service in New Hampshire."
• Electronic transmission to customers (Rev 304.04(d)): "In the case of the delivery of a service to a customer by electronic transmission, the service shall be considered delivered in New Hampshire if and to the extent that the taxpayer's customer receives the service in New Hampshire."
• Electronic delivery to end users through a customer (Rev 304.04(e)): "In the case of the delivery of a service by electronic transmission, where the service is delivered electronically to end users or other third-party recipients through or on behalf of the customer, the service shall be considered delivered in New Hampshire if and to the extent that the end users or other third-party recipients are in New Hampshire."

These service sourcing rules replaced the cost-of-performance method that applied to taxable periods ending before December 31, 2021. Under the prior cost-of-performance method, 100% of service receipts were assigned to the state where the greater proportion of income-producing activity was performed—an all-or-nothing approach.

Other receipts sourcing

Rev 304.04(c) also specifies New Hampshire sourcing for:

• Interest on receivables: "Where the debtor or the encumbered property is located in New Hampshire";
• Gross receipts from leases, rentals, or other use of property: If the property is located in New Hampshire;
• Dividends and other income: "If and to the extent the income is derived from sources in this state."

Reasonable approximation when assignment cannot be determined

Rev 304.04(g) provides: "In the case of sales other than sales of tangible personal property, if the state or states of assignment cannot be determined, the state or states of assignment shall be reasonably approximated." Acceptable methods include "multiplying such sales by a percentage that equals the ratio that the population of New Hampshire bears to the combined total population of every state within the United States where such business organization is taxable or subject to tax." The regulation requires that "the need, and methodology used, for reasonable approximation shall be determined on a separate entity basis consistent with the separate entity treatment provided in RSA 77-A:1, I, notwithstanding that a combined report is filed."

Throwout rule

Rev 304.04(h) establishes a throwout rule (distinct from the throwback rule for tangible personal property): "In the case of sales other than sales of tangible personal property, if the taxpayer is not taxable in a state to which a sale is assigned, or if the state of assignment cannot be determined or reasonably approximated, such sale shall be excluded" from the sales factor. This exclusion applies to both the numerator and the denominator.

The throwback rule assigns receipts to New Hampshire when the taxpayer is not taxable in the destination state (tangible personal property only), while the throwout rule excludes receipts from the sales factor entirely when the taxpayer is not taxable in the state of assignment or assignment cannot be determined (applies to receipts other than tangible personal property).

Source: RSA 77-A:3; N.H. Admin. Code Rev 304.04

New Hampshire requires combined reporting for business organizations that constitute a unitary business, and prohibits it for non-unitary businesses. This is not an election; the unitary determination drives the filing method.

Unitary business definition

RSA 77-A:1, XIV defines "unitary business" as "one or more related business organizations engaged in business activity both within and without this state among which there exists a unity of ownership, operation, and use; or an interdependence in their functions." The Department of Revenue Administration applies this standard by evaluating whether related entities share integrated management, centralized functions, economies of scale, or functional integration such that the business income of the group cannot be accurately measured on a separate-entity basis.

Combined reporting mandate

RSA 77-A:3, III provides: "When 2 or more related business organizations are engaged in a unitary business, as defined in RSA 77-A:1, XIV, a part of which is conducted in this state by one or more members of the group, the income attributable to this state shall be determined by means of the applicable combined apportionment factors of the unitary business group." This language is mandatory—organizations meeting the unitary standard must file using combined reporting.

The New Hampshire Supreme Court confirmed this requirement in General Electric Co. v. Commissioner, 151 N.H. 689 (2005), holding that "[a]s a unitary business, GE is required to file under the combined reporting method."

Water's edge limitation

New Hampshire applies combined reporting on a water's edge basis under RSA 77-A:1, XV-XVI. The "water's edge combined group" includes all members of a unitary business except "overseas business organizations," defined in RSA 77-A:1, XIX as:

• Foreign incorporated business organizations, and
• Business organizations with 80% or more of the average of their payroll and property assignable to locations outside the 50 states and the District of Columbia ("80/20 companies").

Even under water's edge, certain foreign income is taxed. RSA 77-A:3, II(b) requires the addition of foreign dividends (subject to apportionment adjustments) and, for taxable periods beginning on or after January 1, 2020, global intangible low-taxed income (GILTI) as determined under IRC § 951A (adjusted by the deduction at RSA 77-A:4, XIX).

Historical context

New Hampshire adopted combined reporting for unitary businesses in 1981 to prevent large multi-form corporations from distorting income by filing on a separate-entity basis. In 1986, the legislature limited the regime to water's edge—curtailing worldwide unitary treatment. Periodic legislative proposals to replace water's edge with worldwide combined reporting have been introduced (e.g., HB 102 in 2021, HB 1567 in 2020) but have not been enacted.

Contrast with separate-entity filing

The default under RSA 77-A:1, I is separate-entity treatment: "Each business organization . . . shall be taxed on its taxable business profits as a separate entity." Combined reporting under RSA 77-A:3, III displaces that default only when the unitary standard is met. The Department of Revenue Administration FAQ confirms: "Organizations operating a unitary business must use combined reporting in filing their New Hampshire Business Tax return."

Planning considerations

• The unitary determination is fact-intensive and entity-specific; practitioners should analyze ownership structure, operational integration, and shared functions under N.H. Admin. Code Rev 300 (addressing unity of ownership, operation, use, and interdependence of functions).
• New Hampshire does not permit elective combined reporting for non-unitary groups (unlike some states that allow voluntary consolidation).
• The 80/20 exclusion applies only if the taxpayer certifies comparable-basis transfer pricing and agrees to report IRS adjustments (RSA 77-A:1, XV).
• Combined reporting interacts with the single-sales-factor apportionment method for taxable periods ending on or after December 31, 2022; careful sourcing of intercompany receipts is critical.

Source: RSA 77-A:1; RSA 77-A:3; N.H. DOR BPT FAQ