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Friday, July 25, 2014

Hassan called out on real estate tax

CONCORD – Two leading Senate Republicans, quickly followed by GOP candidate for governor Walt Havenstein, on Thursday accused Gov. Maggie Hassan of seeking – without legal authority – to apply the state tax on real estate to shorter-term leases of property.

Havenstein, a retired businessman from Alton, said Hassan, a one-term Democrat, should level with voters and pursue any tax increase through legislation and not have a state agency maintain the treatment is covered by existing state law. ...

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CONCORD – Two leading Senate Republicans, quickly followed by GOP candidate for governor Walt Havenstein, on Thursday accused Gov. Maggie Hassan of seeking – without legal authority – to apply the state tax on real estate to shorter-term leases of property.

Havenstein, a retired businessman from Alton, said Hassan, a one-term Democrat, should level with voters and pursue any tax increase through legislation and not have a state agency maintain the treatment is covered by existing state law.

“Circumventing the Legislature is no way to govern. If Maggie Hassan wants to raise taxes, she should be honest with voters and try to get a bill passed,’’ Havenstein said in a statement.

“This latest action reveals a disturbing pattern of behavior, which shows that Maggie Hassan thinks she’s above the law. She has taken a page out of Barack Obama’s book and is trying to use a pen and a phone to do whatever she wants without legislative authority.”

Both Sens. John Reagan, R-Deerfield, and David Boutin, R-Hooksett, said they were stunned to learn state tax officials informed a legislative rules panel earlier this month that current law allows them to tax so-called commercial ground leases that are at least 30 years in length.

“The law clearly states that the Real Estate Transfer Tax doesn’t apply to short term leases, and the governor knows it,’’ Boutin said.

“Otherwise, she wouldn’t have pushed to change the rules. Governor Hassan should immediately end her quest to impose a new lease tax on New Hampshire businesses.”

Through a spokesman, Hassan declined comment.

Revenue Commissioner John Beardmore said for years his agency has applied the real estate transfer tax to property leases of 30 years or longer.

“Commercial ground leases are taxable and have been interpreted to be that way by this department for some time,’’ Beardmore said during a telephone interview.

“We were seeking these rules merely to update them and clarify what has been the department’s enforcement of this tax; nothing more, nothing less.’’

Such leases are common in private industry, ranging from the siting of telecommunication towers and wind farms to more traditional, real estate developments.

A case in point: the state last spring signed a 35-year ground lease with restaurant chain owner Alex Ray to convert both rest areas off Interstate 93 in Hooksett into full-scale, commercial establishments with gas pumps, restaurants, a bigger liquor store and small souvenir shops.

Senators Boutin and Reagan said state law only now allows officials to apply this tax to leases longer than 99 years, a legal standard equated with a long-term lease since it’s longer than the life of most human beings.

“If the Governor wants to expand the real estate transfer tax, she’ll need to get a bill passed,’’ said Reagan who chairs the Joint Legislative Committee on Administrative Rules.

“She can’t make such a major policy change on a whim.”

State tax officials countered that the tax – $7.50 per $1,000 of value each paid by the buyer and seller – is already applied to the sale or transfer of property plus “any interest therein.’’ It’s that last phrase that encompasses ground leases.

They’ve applied this tax to leases longer than 30 years since the lease holder can build roads and buildings on it, transfer the ownership and has to pay local property taxes, insurances and other government fees on the property over the life of the lease.

Last February, the Department of Revenue Administration included this reference to ground leases as part of a comprehensive change to agency rules that were set to expire.

After the legislative rules panel asked this matter be postponed, DRA Revenue Counsel Colleen Delaney wrote on July 9 that these sections on ground leases should be taken out, asserting the change was not expanding the state’s real estate tax base.

“As noted above it is DRA’s position the taxation of ground leases exists currently under New Hampshire law,’’ Delaney wrote in her request to withdraw the lease language.

Beardmore said the proposal was “poorly constructed,’’ needed technical improvement and his agency would resubmit this matter at a later date.

All proposed rules require agency heads to estimate the financial cost or benefit any change would have on state government, local government and private taxpayers.

When this rule including the ground lease language was first proposed in February, DRA officials said there was no state revenue to be gained or higher taxes to be paid.

Kevin Landrigan can reached at 321-7040 or klandrigan@nashua
telegraph.com. Also, follow Landrigan on Twitter (@Klandrigan).