Detailed Analysis of Single Taxpayer Treatment within the New Hampshire Research and Development Tax Credit Framework

Single Taxpayer Treatment for the New Hampshire Research and Development tax credit means that a unitary business group or multiple related entities are considered one entity for credit purposes. This designation ensures that the $50,000 annual per-taxpayer cap is applied collectively to the entire group rather than to each subsidiary individually.1

The concept of a single taxpayer is fundamental to the equitable administration of the New Hampshire Research and Development (R&D) tax credit, as it prevents the artificial fragmentation of business organizations into multiple entities for the sole purpose of bypassing statutory credit limits. Under the New Hampshire Revised Statutes Annotated (RSA) 77-A:5, XIII(c), a unitary business or an enterprise consisting of one or more taxpayers under the Business Profits Tax (BPT) chapter is explicitly considered a single taxpayer.1 This structural requirement reflects a broader tax policy aimed at treating economically integrated entities as a single unit, ensuring that the tax benefits provided by the state are distributed fairly across the manufacturing sector. By consolidating related entities into a single taxpayer, the Department of Revenue Administration (DRA) maintains the integrity of the state’s annual $7,000,000 funding pool, preventing a single corporate conglomerate from consuming a disproportionate share of the available resources.2

The Conceptual Framework of Unitary Taxation and Single Taxpayer Treatment

The application of Single Taxpayer Treatment is deeply rooted in the theory of unitary taxation. In a modern corporate environment, complex organizational structures often involve a parent company and numerous subsidiaries that function as a single economic unit. Without combined reporting or single taxpayer rules, businesses could potentially engage in “shell games,” shifting profits or research activities to specific entities to maximize tax advantages or minimize liabilities.5 New Hampshire’s adoption of the single taxpayer rule for the R&D credit serves as a regulatory safeguard against such tactics. By treating a parent company and its subsidiaries as one corporation for state tax purposes, the legislation prevents companies from reducing their taxable profits or inflating their credit claims through paper-only shifts of revenue or expenses.5

This approach requires corporations to include all parent and subsidiary companies operating in the United States when calculating their responsibilities, a reform often referred to as combined reporting.5 For the R&D credit, this means the $50,000 cap is not a per-subsidiary limit but a per-group limit. This creates a ceiling for large enterprises, concentrating the benefits of the credit among small and mid-sized manufacturers who are less likely to hit the group-level cap.3 The distinction between a single legal entity and a “single taxpayer” for credit purposes is critical for tax planning, as it dictates the total potential benefit available to a multi-entity organization performing research in the state.

Legislative Evolution of the Research and Development Tax Credit

The New Hampshire R&D tax credit has evolved through several legislative sessions to reflect the changing economic needs of the state’s manufacturing base. Established in 2007 through Senate Bill 134, the credit was initially designed as a targeted incentive for manufacturing research, with a modest $1,000,000 annual aggregate cap.2 The primary motivation was to foster a “pro-growth” environment that specifically rewarded high-wage jobs and technological investment within the state.2

As the program’s popularity grew, the New Hampshire Legislature realized that the initial funding was insufficient to meet the demand of the state’s innovative manufacturing sector. Consequently, several key pieces of legislation expanded the credit’s reach and impact.

Table 1: Historical Evolution of R&D Tax Credit Limits

The transition from a $1 million pilot program to a $7 million permanent credit demonstrates the state’s commitment to manufacturing innovation. Notably, while the aggregate cap has increased sevenfold since inception, the $50,000 per-taxpayer limit remained static for nearly two decades. This has led to the current 2025 legislative efforts (SB 276) to double the individual cap, acknowledging that $50,000 represents a smaller portion of modern R&D salary costs than it did in 2007.11

Technical Guidance from the Department of Revenue Administration

The New Hampshire Department of Revenue Administration (DRA) provides technical guidance through several channels, including Technical Information Releases (TIRs), administrative rules (Rev 2400), and the instructions for Form DP-165.4 These documents represent the official policy positions of the Department and provide the necessary instructions for taxpayers to comply with the “single taxpayer” mandate.

TIR 2007-007: The Foundational Guidance

Issued on November 13, 2007, TIR 2007-007 was the first formal guidance provided after the credit was enacted. It explicitly stated that “unitary businesses and enterprises consisting of more than one taxpayer shall be considered a single taxpayer for purposes of claiming the credit”.2 This release established the “lesser of” rule for credit calculation, which remains in effect today: the credit is the lesser of 10% of qualified expenditures over the base amount or $50,000.2

TIR 2013-001 and TIR 2015-005: Expansion and Permanence

These releases documented the legislative increases in funding. TIR 2013-001 is particularly significant because it announced the repeal of the “prospective repeal” date, effectively making the R&D credit a permanent feature of the New Hampshire tax code.9 Both releases reiterated the single taxpayer rule, confirming that as the total pool of money grew, the administrative requirement to treat unitary groups as a single entity remained unchanged.9

Administrative Rule Rev 2406.05

Administrative rules provide the regulatory “teeth” to the statutes. Rev 2406.05 clarifies that a business enterprise must file Form DP-165 by June 30 following the taxable period to apply for the credit.13 It also mandates that any wages used in the credit calculation must also be included in the “compensation element” of the enterprise value tax base for the Business Enterprise Tax (BET).13 This creates a direct link between the R&D credit and the BET, ensuring that the state can track the qualified wages across different tax returns.

Statutory Application: Determining Qualified Expenditures

To understand how single taxpayer treatment applies to the law, one must first analyze the definition of “qualified manufacturing research and development expenditures” under RSA 77-A:5, XIII(b). In New Hampshire, the scope of the credit is more restrictive than the federal counterpart under Section 41 of the Internal Revenue Code (IRC).3

The New Hampshire credit is strictly a wage-based credit. While the federal credit allows for expenses related to supplies, contract research, and cloud computing, the New Hampshire credit is limited solely to wages paid or incurred to an employee for services rendered within the state.3

Requirements for Qualified Wages

For a unitary group to include wages in its single taxpayer application, the wages must meet several concurrent criteria:

• The services must be undertaken for the purpose of discovering information that constitutes qualified research and development of a new or improved manufacturing process or business component.1
• The wages must qualify and be reported as a credit by the business organization under Section 41 of the IRC.1
• The wages must be attributable to services rendered within New Hampshire.2
• The wages must be reported in the enterprise value tax base under the Business Enterprise Tax (RSA 77-E).1

The manufacturing focus is a critical distinction. New Hampshire’s credit is designed specifically to boost sectors like electronics, machinery, and precision manufacturing, and it explicitly excludes non-manufacturing R&D activities such as software-only development or service-oriented research.3

Table 2: Comparison of Federal and New Hampshire R&D Expenditures

For a unitary business, this means that even if a subsidiary performs research that qualifies for a federal credit, those costs may only be included in the New Hampshire R&D application if they specifically meet the “manufacturing wage” and “New Hampshire nexus” requirements.3

Calculation Methodology and the “No Floor” Override

The calculation of the credit for a single taxpayer follows a specific formula: 10% of the excess of qualified manufacturing R&D expenses for the taxable year over the “base amount”.3 However, New Hampshire provides a significant departure from federal rules regarding the “base amount” calculation.

The Federal Base Amount and the New Hampshire Exception

Under federal law, the “base amount” is calculated using a fixed-base percentage multiplied by the average gross receipts for the prior four years. Crucially, the federal government imposes a “minimum floor,” stipulating that the base amount cannot be less than 50% of the current year’s qualified research expenses (QREs).3

New Hampshire law, however, removes the 50% floor.3 This allows the state-level base amount to be as low as zero if the historical calculations support it. This “no floor” override is highly advantageous for companies with high current R&D spending relative to their historical gross receipts. For a unitary group, the gross receipts used in this calculation must be the total taxpayer gross receipts, and New Hampshire does not require state-specific adjustments to these figures.3

Step-by-Step Calculation for a Single Taxpayer Group

1. Identify Total NH Manufacturing R&D Wages: Aggregate all qualifying wages across all members of the unitary group.2
2. Determine Group Gross Receipts: Calculate the average annual gross receipts for the entire single taxpayer group for the prior four taxable years.3
3. Calculate the Group Base Amount: Multiply the group’s fixed-base percentage by the average gross receipts. (Note: For startups in their first five years, the fixed-base percentage is typically 3%).3
4. Calculate the Excess: Subtract the Base Amount from the current year’s NH Manufacturing R&D Wages.3
5. Apply the Rate: Multiply the excess by 10%.3
6. Apply the Per-Taxpayer Cap: Limit the requested amount to $50,000 for the entire group.2

Practical Example of Single Taxpayer Treatment

To illustrate the impact of the single taxpayer rule, consider “Tech-Manufacturing Unitary Group,” which consists of a parent company and two wholly-owned manufacturing subsidiaries operating in Concord and Nashua.

Individual Entity Data

• Subsidiary A (Concord): $400,000 in qualifying NH manufacturing R&D wages.
• Subsidiary B (Nashua): $300,000 in qualifying NH manufacturing R&D wages.
• Group Base Amount: Calculated at $200,000 (Aggregate for the unitary group).

Scenario 1: If Subsidiaries Were Separate Taxpayers (Hypothetical)

If Subsidiary A and B were treated as separate taxpayers, each would apply for its own credit.

• Subsidiary A: 10% of ($400,000 – $100,000 allocable base) = $30,000.
• Subsidiary B: 10% of ($300,000 – $100,000 allocable base) = $20,000.
• Total Credits for the Enterprise: $50,000.

Scenario 2: Actual Single Taxpayer Treatment (RSA 77-A:5, XIII(c))

Under the law, they are considered one taxpayer.

• Total Group NH Wages: $700,000.
• Group Base Amount: $200,000.
• Excess: $500,000.
• Preliminary Credit (10%): $50,000.
• Cap Application: The $50,000 cap is applied to the group. The total credit requested is $50,000.1

In this specific example, the $50,000 cap was not exceeded at the group level, so the single taxpayer treatment did not reduce the credit. However, if Subsidiary A had $1,000,000 in wages, the preliminary credit would be $100,000 (10% of $1M). Under separate treatment, they might have claimed $50,000 for Subsidiary A and additional amounts for Subsidiary B. Under Single Taxpayer Treatment, the entire group is limited to one $50,000 award.3

The Application Process: Navigating Form DP-165

The administrative burden of claiming the credit falls on the “single taxpayer,” who must file Form DP-165, the Research & Development Tax Credit Application, with the DRA by June 30.3

Critical Filing Requirements

• Identification Consistency: The application must use a consistent identification number (FEIN, SSN, or DIN). If a unitary group shares one identifying number for federal tax purposes, that same number must be used for the NH R&D application.16
• Federal Form 6765 Attachment: A complete copy of Federal Form 6765, “Credit for Increasing Research Activities,” must be attached to the application. This form serves as the verification for the underlying research activities and wage amounts.7
• The Pro-Forma Rule: Since many companies do not file their federal returns until October (on extension), the June 30 NH deadline creates a timing conflict. The DRA addresses this by allowing taxpayers to submit a pro-forma or draft copy of Form 6765 with their application. Failure to provide this draft renders the application incomplete.7
• Submission Channel: Applications can be submitted via mail or electronically through the Granite Tax Connect (GTC) portal.3

The Proration Mechanism

Because the credit is funded by a fixed $7,000,000 pool, the “award” is not guaranteed to be the full amount requested. If the aggregate of all timely filed applications from all taxpayers in the state exceeds $7,000,000, the Commissioner must reduce every award proportionately.2 Historically, requested credits have routinely approached or exceeded this cap, making proration a common occurrence.3

Table 3: The Award Cycle and Notification Timeline

This timeline ensures that taxpayers know their final, prorated credit amount before the final federal and state filing deadlines in October, allowing for accurate reporting on the BPT and BET returns.

Application of the Credit to Business Taxes

Once the single taxpayer receives an award letter from the DRA, the credit can be used to offset state tax liabilities. The application of the credit is governed by both RSA 77-A (Business Profits Tax) and RSA 77-E (Business Enterprise Tax).4

Order of Application

The law dictates a specific sequence for utilizing the R&D credit:

1. Business Profits Tax (BPT) First: The credit must first be applied against the BPT liability for the taxable period following the period in which the research was conducted.3
2. Business Enterprise Tax (BET) Second: Any remaining credit not used to offset the BPT can then be applied against the BET.3

This “BPT-first” rule is a standard feature of New Hampshire tax credits, ensuring that the primary income-based tax is offset before the broad-based enterprise tax.2

Carryforward and Non-Refundability

The R&D credit is non-refundable, meaning that if a taxpayer has no tax liability, the state will not issue a cash refund.3 However, the credit has a five-year carryforward provision. Any unused portion of the credit awarded in a specific year can be used to offset BPT and BET liabilities in the five subsequent taxable periods.3

Interaction with the Economic Revitalization Zone Tax Credit (ERZTC)

Taxpayers must be careful not to “double-dip.” Wages used to calculate the R&D tax credit are explicitly ineligible for the Economic Revitalization Zone Tax Credit under RSA 162-N.2 This requirement forces single taxpayers to strategically choose which credit is more advantageous for specific employees or projects.

Compliance, Audit, and Documentation

Given that the R&D credit is essentially a grant of state funds, the DRA maintains rigorous audit standards. For unitary groups, the complexity of compliance is magnified by the need to prove the New Hampshire nexus for multiple entities.1

Recordkeeping Requirements

The statute of limitations for the DRA is generally three to four years, but taxpayers are encouraged to retain records for as long as a carryforward is active. Key documentation includes:

• Detailed wage allocations by employee and project.17
• Project records, lab notes, and prototypes that prove the “manufacturing” nature of the research.17
• Testing protocols and results of analysis from trial runs.17
• A copy of the original award letter and the Federal Form 6765 used for the application.7

The DRA audits often focus on the “manufacturing nexus,” ensuring that the activities performed meet the state’s specific definition and that the wages reported are not inflated by non-qualifying administrative or sales personnel.3

Fiscal and Policy Implications of the Single Taxpayer Rule

The single taxpayer rule is not merely an administrative convenience; it is a vital tool for managing the state’s fiscal health. By capping the credit at $50,000 per unitary group, the state limits its “tax expenditure”—the amount of revenue foregone through tax breaks.20

Concentration of Benefits

According to the DRA and legislative analysts, the $50,000 per-taxpayer cap tends to concentrate the benefits of the R&D credit among small and mid-sized manufacturers.3 For a small company with $500,000 in R&D wages, a $50,000 credit represents a significant 10% reduction in labor costs. For a massive multinational with $50,000,000 in R&D wages, the $50,000 credit is negligible, often barely covering the administrative costs of filing.3 This intentional design ensures that the $7 million pool supports the “long tail” of New Hampshire’s diverse manufacturing base rather than being dominated by a few large players.

Economic Impact and State Revenue

The BPT is one of the largest sources of New Hampshire’s general fund revenue.21 The R&D credit represents a direct reduction in this revenue. In FY 2026, the current $7 million credit is projected to be fully utilized, and the proposed increase to $10 million under SB 276 would result in an additional $3,000,000 decrease in state business tax revenue.12 The Single Taxpayer rule helps the state predict these impacts by ensuring that the number of “maximum claims” ($50,000) is limited to the number of unique unitary business organizations rather than the number of legal subsidiaries.

Emerging Trends: Senate Bill 276 and the Future of the Credit

The R&D tax credit framework is currently at a potential inflection point. As of early 2025, SB 276 seeks to significantly raise both the aggregate and individual caps.11

Proposed Enhancements

If passed, the new law would take effect January 1, 2026, with several major changes:

• Aggregate Cap Increase: From $7,000,000 to $10,000,000 per fiscal year.11
• Individual Taxpayer Cap Increase: From $50,000 to $100,000 per taxpayer.11

For a single taxpayer group, this would represent the first increase in the individual cap since the program’s inception. A unitary group that was previously frustrated by the $50,000 limit would find a much more meaningful incentive at $100,000, potentially encouraging more robust documentation and filing efforts from larger enterprises.11

Administrative Continuity

Importantly, SB 276 does not propose any changes to the “single taxpayer” definition.11 This suggests that the DRA and the Legislature remain committed to the unitary business model as the most effective way to govern the credit’s distribution. Even with a $100,000 cap, the requirement to consolidate related entities will continue to be the primary regulatory mechanism for preventing the fragmentation of claims.

Summary of Key Provisions for Businesses

For tax directors and business owners in the New Hampshire manufacturing sector, the R&D tax credit remains a high-value, albeit administratively strict, opportunity. Success in claiming the credit requires a clear understanding of the “single taxpayer” status and the specific requirements for New Hampshire manufacturing research.

Table 4: Key Facts for Single Taxpayers

Conclusion

The Single Taxpayer Treatment is the cornerstone of New Hampshire’s R&D tax credit administration, ensuring that the state’s investment in manufacturing innovation is distributed equitably and effectively. By defining a “taxpayer” through the lens of a unitary business rather than a legal entity, the state prevents corporate restructuring from diluting the impact of the program. While the $50,000 cap and the manufacturing-only restriction make the New Hampshire credit more conservative than the federal equivalent, the “no floor” override on the base amount provides a powerful, high-leverage incentive for companies scaling their research operations within the state. As the legislative landscape shifts toward higher caps and greater funding, businesses must remain vigilant in their compliance with the single taxpayer rule, maintaining the rigorous documentation and clear nexus required to secure and defend these valuable tax offsets. For the New Hampshire manufacturer, the R&D credit is not just a tax break—it is a strategic asset, provided one navigates the “single taxpayer” framework with precision and foresight.

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