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Sunday, July 27, 2014

‘Hidden’ real estate tax: Fodder for frontal election-year assault in NH

Kevin Landrigan

What do we make of the Senate Republican attack against Gov. Maggie Hassan for pursuing a “new, hidden tax” on ground leases by expanding the state tax on real estate transfer?

At this juncture, it’s still largely a “he said, he said” controversy, and the assault came from a unique, though politically predictable, source. ...

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What do we make of the Senate Republican attack against Gov. Maggie Hassan for pursuing a “new, hidden tax” on ground leases by expanding the state tax on real estate transfer?

At this juncture, it’s still largely a “he said, he said” controversy, and the assault came from a unique, though politically predictable, source.

State Sens. Dave Boutin, R-Manchester, and John Reagan, R-Deerfield, lodged the charges as GOP members of the Joint Legislative Committee on Administrative Rules.

It’s logical for them to mount the counteroffensive, since in February, the Department of Revenue Administration first proposed a rewrite for some of its rules that added taxation of commercial ground leases longer than 30 years.

State and common law have existed for decades that all leases in excess of 99 years are taxable because that represents the lifetime of the lessor.

What’s worth noting is that Boutin and Reagan face spirited GOP primary challenges – Boutin from former Alton Rep. Jane Cormier, who has moved to Hooksett, and Reagan from Howard Pearl, who Reagan defeated in a 2012 primary before eventually taking the seat.

Boutin backed the increase in the gas tax and Medicaid expansion; Reagan voted against both.

Meanwhile, we’ve heard nothing publicly in protest from Senate higher-ups – President Chuck Morse, R-Salem, Senate Finance Committee Chairman Jeannie Forrester, R-Meredith, or Senate Majority Leader Jeb Bradley, R-Wolfeboro.

Hmmm.

It took no time for GOP gubernatorial candidate Walt Havenstein to latch onto it, however, accusing Hassan of pursuing the same expanded powers via executive authority that President Barack Obama has pursued to the ire of the GOP-led U.S. House.

Revenue Commissioner John Beardmore insisted there was nothing to see here – that the department had determined the ground leases were taxable under the current definition of the tax some time ago.

The rules change was merely to clarify and update the language the agency was already enforcing.

“This isn’t some clarification; it’s a new tax treatment, and as such it should come in as a new tax bill in 2015,” said Sen. Andy Sanborn, R-Bedford, a businessman who led the fight to repeal the LLC tax that started years earlier as a rules change to expand what “reasonable compensation” would be subject to the Business Profits Tax.

Beardmore had the rule change withdrawn, reportedly because it actually didn’t go far enough to enforce the taxation of ground leases that already were being taxed.

Time and further public comment served to bring to light the brewing fight over reasonable compensation, and both will likely determine whether this was a cheap election-year stunt by GOP senators or an attack of real substance.

Separating the PAC

The Telegraph first reported last week that while Havenstein was CEO of Scientific Applications International Corp. for nearly four years, the firm’s political action committee gave $512,000 to congressional Democrats, including Sen. Jeanne Shaheen, D-N.H., and Senate Majority Leader Harry Reid.

Havenstein’s campaign insisted there were seven degrees of separation between Havenstein the CEO and Scientific Application’s PAC, which made the calls on which campaigns would get the checks.

“SAIC had a separate PAC committee, of which Walt was not a member,” said Henry Goodwin, press secretary for the Havenstein campaign. “He had no involvement in how SAIC’s PAC spent money, and played no part in the decision-making process as to which candidates it gave.”

But The Sunday Telegraph confirmed the CEO was very much in the PAC loop, based on investor documents at the time.

“SAIC’s political activities are overseen by the SAIC Board of Directors, the SAIC Government Affairs Committee, and senior company leaders,” investor information says regarding “political activities.”

“The board of directors, through the Ethics and Corporate Responsibility Committee, annually reviews the political activities of the corporation and the SAIC Voluntary Political Action Committee.”

Havenstein not only was a “company leader,” but also served on the board of directors.

Goodwin insisted the campaign didn’t mislead about Havenstein’s role.

“On SAIC PAC, the document doesn’t contradict what we already said,” Goodwin said. “All of every company’s activities are overseen by its board of directors. That is not the same as actively providing direction to a PAC, which, as stated before, Walt did not do.

“Also, as stated before, SAIC PAC contributed to candidates that Walt himself did not personally support.”

As we reported, Havenstein was a regular, albeit small, individual donor to the SAIC PAC, as were other executives and board members.

Don’t expect Havenstein’s primary rival, Andrew Hemingway, of Bristol, to appreciate the nuance.

So what about Havenstein’s own donations to political causes?

Well, at SAIE and BAE Systems, where he served as New Hampshire’s CEO, nearly all of Havenstein’s cash went to Republicans such as then-Congressman Charles Bass, $14,300; the GOP National Committee, $25,000 in 2012; and New Hampshire GOP State Committee, $10,000 in 2013.

But there’s that $1,000 check he wrote in 2007 while at BAE to Rhode Island Democratic Congressman Jack Reed.

Appealing act

The decision of a Washington, D.C., appeals court that says federal Affordable Care Act exchanges can’t give tax subsidies to consumers certainly stirred the political pot last week.

A competing ruling from an appeals court in Virginia a short time later obviously means this controversy won’t be settled anytime soon – likely not before the November election.

Republican Senate candidate Scott Brown pounced on the report, warning it means New Hampshire sign-ups face the prospect of having to pay much more out of pocket for insurance or having to drop it because it’s no longer affordable.

Shaheen echoed the national Democratic party line that the courts ultimately will settle the dispute, and in the meantime, New Hampshire residents have nothing to worry about.

What you may not have known is that while in the Senate representing the state of Massachusetts, Brown was looking out for those in Affordable Care Act exchanges.

We confirmed Brown co-sponsored legislation in 2010 with Oregon Democratic Sen. Ron Wyden that would have allowed states to opt out early from provisions of the Affordable Care Act. The current federal law doesn’t permit states to seek wholesale waivers from its mandates until 2017.

“States shouldn’t be forced by the federal government to adopt a one-size-fits-all health care plan,” Brown said at the time. “Each state’s health care needs are different. Our bill provides flexibility, and allows states like Massachusetts to opt out of portions of the health care law.”

Now the legislation reinforces what Brown has stood for in this campaign: repealing the Affordable Care Act and allowing states to serve as laboratories for their own state reforms that best fit their individual markets.

What the bill also does is reinforce the legislative intent of Congress that the D.C. appeals court rejected – namely, that all consumers were to be treated the same under the law whether they’re in state or federal health exchanges.

Not surprisingly, the Brown campaign declined comment on that scenario.

“Scott Brown believes Obamacare should be repealed completely,” said Elizabeth Guyton, Brown’s communications director. “Jeanne Shaheen cast the deciding vote for the law, and despite its catastrophic impact on New Hampshire, she still says today that she’s ‘proud’ of her vote. That’s a big difference in this race.”

Slow process

A performance audit on the approval process for charter schools in New Hampshire contained no smoking gun.

But it did note that it took an average of 206 days from the initial application to final approval from the state Board of Education.

The audit blamed the long process on the quality of the applications, the three layers of review that take place even before it gets to the state and the fact that state law contains no explicit timelines for when a decision should be reached.

The audit concluded the state board and Department of Education “should consider” streamlining the process and the Legislature should spell deadlines out in state law.

The state agency agreed calling the lack of a timeline “unusually flexible.”

A reason for the delay, state officials said, is that unlike other states, New Hampshire’s law says the state has to offer technical assistance to those proposing charter schools that “works in favor of the applicant.”

With that foundation, a 206-day average time to complete the process “appears to be reasonable,” state education officials said.

Translation: Look for legislation in 2015 from both camps – pro-charter schools looking to shorten the time frame and those less supportive looking to get the state out of the business of holding the hand of applicants.

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