The Economic Revitalization Zone Tax Credit in the Landscape of New Hampshire Business Incentives: A Strategic Analysis of RSA 162-N and the Research and Development Tax Credit

The New Hampshire Economic Revitalization Zone Tax Credit is a specialized tax incentive designed to stimulate capital investment and job creation in designated areas characterized by underutilization or physical blight. By providing credits against the Business Profits Tax and Business Enterprise Tax, the program encourages companies to rehabilitate brownfields and obsolete structures while expanding the state’s industrial and commercial base.1

The broader context of New Hampshire’s economic policy reveals a deliberate strategy of using surgical, performance-based tax expenditures to address specific market failures. While the Economic Revitalization Zone Tax Credit (ERZTC) addresses geographical and structural stagnation, its counterpart, the Research and Development (R&D) Tax Credit under RSA 77-A:5, XIII, targets sectoral innovation in the manufacturing industry.3 Together, these incentives form a dual-pronged approach to economic development: one focused on the physical environment and the other on intellectual and process-driven advancement. Understanding the meaning of the ERZTC requires an appreciation of its role as a bridge between municipal planning and private enterprise. The program does not simply reward growth; it rewards growth that occurs in the right places—specifically, in zones where the cost of redevelopment or the legacy of industrial decline would otherwise deter private capital.1 This report analyzes the legal mechanisms of RSA 162-N, the administrative guidance provided by the Department of Revenue Administration (DRA) and the Department of Business and Economic Affairs (BEA), and the critical interaction rules that prevent the duplication of benefits when wages also qualify for R&D incentives.6

Statutory Framework and the Evolution of RSA 162-N

The legal foundation for the ERZTC is established in RSA 162-N, a chapter dedicated to fostering economic redevelopment and reducing suburban sprawl by incentivizing the reuse of existing developed land.1 The legislative intent is clear: the state seeks to expand its tax base not through the consumption of greenfield sites, but through the revitalization of “Economic Revitalization Zones”.1 These zones are defined by rigorous criteria involving the presence of unused or underutilized industrial parks, vacant land, or structures previously used for industrial, commercial, or retail purposes that have fallen into disuse due to age, obsolescence, deterioration, or unfavorable economic conditions.1

The program, formerly known as the Community Reinvestment and Opportunity Zones Credit, represents a refined tool for the Commissioner of the BEA to certify projects that are in the “public interest”.1 To maintain the program’s relevance, each zone designation is subject to evaluation every five years to determine if the economic conditions that justified its creation still persist.1 This periodic review ensures that tax expenditures are not continued indefinitely in areas that have already achieved self-sustaining economic health.

Source: 1

The Role of Municipalities in Zone Designation

The ERZTC is unique among New Hampshire tax incentives because it requires a bottom-up initiation process. A business cannot independently apply for the credit unless its municipality has already secured a zone designation from the BEA.13 The local governing body must take the lead by identifying an area with a single continuous boundary that meets the statutory definitions of underutilization.1 This process, facilitated through Form ERZ-1, requires the municipality to provide evidence of eligibility, such as listings of vacant properties, photographs of site deterioration, or documentation of brownfields status.11

The requirement for municipal involvement serves as a filter, ensuring that the tax credits align with local zoning and economic development goals. For instance, towns like Epsom and Hopkinton have strategically used ERZs to focus development along major transit corridors like Route 28 and Route 4, or near interstate exits.14 In larger cities like Nashua, the use of seven distinct zones allows the municipality to direct investment toward specific industrial parks, such as Westwood, or downtown sectors where the commercial base needs reinforcement.16 Once a zone is designated, any business within its boundaries may apply for project certification, provided they meet the job and investment thresholds.5

Business Eligibility and the Definition of Qualified Investment

For a business organization to qualify for the ERZTC, it must demonstrate a direct investment in plant or equipment and the creation of at least one net new full-time job within the state.1 The law emphasizes that the investment and the job creation must occur within the same calendar year to be eligible for that year’s certification.1

The definition of “full-time job” is strictly interpreted by the BEA as a permanent, year-round position requiring at least 35 hours of work per week.1 This excludes temporary, seasonal, or contracted positions, reflecting a policy preference for stable employment that contributes to the long-term economic security of New Hampshire residents.1 Furthermore, the investment in “plant or equipment” must be made directly by the business applying for the credit, and it typically includes new construction, renovations to existing facilities, or the purchase of machinery and materials other than inventory.1

State Revenue Office Guidance on Credit Calculation

The Department of Revenue Administration and the BEA provide complex guidance for calculating the credit, which is essentially the sum of two components: a wage-based credit and an investment-based credit.1 The calculation is designed to scale with the quality of the jobs created and the magnitude of the capital deployed.

The Wage-Based Component

The credit amount for each new job is determined by the salary level relative to the state minimum wage. Higher-paying positions earn a higher percentage credit, incentivizing businesses to create “quality” jobs rather than low-wage labor.1

• For jobs paying less than or equal to 1.75 times the minimum wage, the credit is 4% of the annualized base salary.10
• For jobs paying between 1.75 and 2.5 times the minimum wage, the credit increases to 5%.10
• For jobs paying more than 2.5 times the minimum wage, the credit reaches its maximum of 6%.10

The Investment-Based Component

The infrastructure portion of the credit is calculated as 4% of the lesser of two amounts: the actual cost incurred for the project (facility creation, renovation, or equipment) or a fixed cap of $20,000 for each new job created during the fiscal year.1 This “lesser of” rule prevents businesses from claiming massive infrastructure credits for projects that do not result in significant local employment.10

Source: 1

The Research and Development Tax Credit: Context and Contrast

While the ERZTC is geographical, the New Hampshire Research and Development Tax Credit is functional, aimed specifically at the manufacturing sector.3 Established in 2007 via SB 134, the R&D credit has grown significantly in its scope, with the annual statewide pool increasing from $1 million to $7 million in 2017.7

Eligibility for the R&D credit requires a business to conduct “qualified manufacturing research and development” in New Hampshire.3 This is defined strictly as wages paid to employees for services rendered in-state that qualify for the federal R&D credit under IRC Section 41.3 Unlike the federal credit, New Hampshire does not allow for the inclusion of supplies, contract research, or overhead costs—the focus is entirely on the state’s workforce.3 The credit amount is generally 10% of the excess qualified manufacturing R&D expenditures over a base amount, capped at $50,000 per taxpayer per year.3

The Interaction Rule: Preventing Duplicate Wage Claims

The most critical intersection between the ERZTC and the R&D credit is the statutory prohibition on duplicate claims for the same wage dollars. Under RSA 162-N:7 and RSA 77-A:5, XIII(a)(5), wages for which a credit is taken under the R&D program shall not also be eligible for the ERZTC.3 This rule necessitates a strategic decision for manufacturing firms operating within an Economic Revitalization Zone.

A firm must evaluate which credit provides the higher return for a specific employee’s wages. For an engineer involved in manufacturing innovation, the R&D credit’s 10% rate is typically more attractive than the 4% to 6% rates offered by the ERZTC.3 However, the ERZTC also offers a credit for the infrastructure costs of the project, which the R&D credit does not.1 Therefore, a business may choose to claim its research-focused employees under the R&D credit while utilizing the ERZTC for its production staff and capital investments. This bifurcated approach allows for the maximization of state incentives but requires meticulous accounting to ensure that no single dollar of payroll is cross-claimed between the two programs.8

Administrative Procedures and the Hierarchy of Application

The New Hampshire Department of Revenue Administration provides specific guidance on the order in which these credits must be applied against a business’s tax liability. Both the ERZTC and the R&D credit follow a “BPT-first” hierarchy.2

Business Profits Tax (BPT) Application

The credits must first be applied against the Business Profits Tax (RSA 77-A). Any amount applied against the BPT reduces the liability for that taxable period, but the credit cannot exceed the total tax due.17 For the ERZTC, any portion used against the BPT becomes unavailable for use against the Business Enterprise Tax (BET).17

Business Enterprise Tax (BET) Application and the Cascading Effect

If a taxpayer has a remaining credit balance after offsetting their BPT, they may apply the unused portion against the Business Enterprise Tax (RSA 77-E).2 For the R&D credit, this is a straightforward offset. However, the ERZTC carries a “cascading” benefit: any credit applied against the BET is considered “BET paid”.17

Under New Hampshire’s tax structure, BET paid is itself a credit against the BPT. By treating the ERZTC as “BET paid,” the state allows that credit to effectively reappear as a BPT credit in the same or subsequent years, to the extent it was used to satisfy the BET liability.12 This cascading mechanism is a significant feature for businesses with high payrolls (which drive BET liability) but fluctuating profits.12

Filing Requirements and Form DP-160

Taxpayers report these activities on Form DP-160, the Schedule of Credits.17

• ERZTC Reporting: The amount applied to the BET is reported in Section A, Line 2, while the amount applied to the BPT is reported in Section B, Line 2.17 A copy of the award letter from the BEA must be attached to the return.17
• R&D Reporting: The credit amount awarded by the DRA is reported in Section C, Line 1. The amounts used against BPT and BET are then summarized in the respective summaries.17 A copy of the DRA award letter must be attached.20

Administrative Deadlines and Critical Timelines

The two programs operate on distinct administrative timelines, which businesses must synchronize to ensure compliance.

• ERZTC Deadline: Businesses must submit Form ERZ-2 to the BEA by February 10 following the tax year in which the investment and hiring occurred.1
• R&D Deadline: Businesses must submit Form DP-165 to the DRA by June 30 following the tax year in which the R&D expenditures were incurred.3
• Reporting Deadline: The credits are claimed on the actual tax return (BPT/BET), which is generally due on the 15th day of the 4th month following the end of the taxable period, though this varies based on entity type and extensions.28

Failure to meet the June 30th R&D deadline renders a business ineligible for that year’s pool, as the DRA must have all applications in hand to calculate the proportional distribution of the $7 million cap by September 30th.3

Comprehensive Example: The Manufacturing Expansion in an ERZ

To illustrate the interplay between these laws and the revenue office guidance, consider “Aero-Tech Manufacturing,” a company located in a designated ERZ in Berlin, New Hampshire.

Project Facts:

• Facility Renovation: The company spends $300,000 renovating an abandoned textile mill.10
• New Equipment: The company invests $200,000 in specialized CNC machines.10
• New Hiring: The company hires 5 new full-time employees.

• 3 Production Technicians earning $45,000 each (approx. $21.60/hr).
• 2 Research Scientists earning $90,000 each, focused 100% on manufacturing process R&D.

Step 1: Maximizing the R&D Credit

The company chooses to claim the 2 Research Scientists under the R&D Tax Credit.

• Calculation: 10% of $180,000 (wages) = $18,000.
• Filing: The company files Form DP-165 by June 30. Assuming the state pool is not over-subscribed, they receive an award letter for $18,000 in September.3 These 2 scientists are now excluded from the ERZTC job count.6

Step 2: Calculating the ERZTC for the Remaining 3 Jobs

The company applies for the ERZTC for the 3 technicians and the infrastructure costs.

• Job Component: 3 technicians $\times$ $45,000 $\times$ 6% (assuming high-wage tier) = $8,100.10
• Infrastructure Component: The company has 3 qualifying jobs for the ERZTC. The infrastructure credit is 4% of the lesser of:

• Total project cost ($300k + $200k) = $500,000.
• Job-based cap (3 jobs $\times$ $20,000) = $60,000.
• The infrastructure credit is 4% of $60,000 = $2,400.1

• Total ERZTC Calculated: $8,100 + $2,400 = $10,500.
• Filing: The company files Form ERZ-2 by February 10 and receives a certification letter for $10,500.1

Step 3: Application to Tax Liability (DP-160)

On its tax return, Aero-Tech applies the credits as follows:

• BPT Liability: $25,000.
• Credit Application: It applies the $18,000 R&D credit and the $10,500 ERZTC to the BPT.
• Result: The $25,000 BPT is reduced to $0. The remaining $3,500 in total credits ($28,500 – $25,000) can be carried forward for 5 years.2

Statistical Insights into Program Efficacy

The 2024 Tax Expenditure Report provides a clear view of the relative scale and utilization of these incentives. While the R&D credit is a major driver of state investment, the ERZTC remains a more niche but critical tool for localized redevelopment.12

Source: 12

The data suggests that the R&D credit is highly efficient, with 271 taxpayers successfully claiming nearly $6.2 million of the $7 million pool.12 Conversely, the ERZTC utilization of $627,000 against an $825,000 pool indicates that there is still capacity for more businesses to engage with the program, provided they are located in designated zones.2

The Future of New Hampshire’s Incentive Landscape

The state’s approach to these credits is currently in a period of evaluation. During the 2025 legislative session, SB 276 was introduced to significantly expand the R&D credit by increasing the aggregate cap to $10 million and doubling the individual taxpayer cap to $100,000.29 Advocates for the bill, including the life sciences and medical device manufacturing industries, argued that New Hampshire’s $50,000 cap had become uncompetitive compared to neighboring states.31 However, as of late 2025, the bill was tabled, meaning the current $50,000 limit remains the ceiling for manufacturing innovation incentives.32

The ERZTC faces its own critical juncture, with a statutory repeal date of January 1, 2028.2 This “sunset” creates a sense of urgency for municipalities and businesses. For a zone to be effective, redevelopment must be completed, and jobs must be created before the repeal takes effect. While the legislature has a history of extending such programs—as it did for the R&D credit in 2013—the 2028 deadline currently represents a definitive end-point for new project certifications under RSA 162-N.2

Conclusion

The Economic Revitalization Zone Tax Credit is more than a simple financial incentive; it is a mechanism for regional parity, ensuring that New Hampshire’s economic growth is not confined to wealthy suburbs but is shared with communities struggling with the legacy of industrial decline. Its meaning is defined by the physical structures it helps rebuild and the full-time, permanent jobs it helps create in the state’s most vulnerable areas.

By situating the ERZTC within the context of the R&D Tax Credit, the state creates a sophisticated environment for manufacturers. The interaction between these two laws prevents the inefficient “double-counting” of payroll while providing a comprehensive suite of tools for companies that are both innovating and expanding their physical footprint. For the modern New Hampshire business, navigating these credits requires a dual focus: a geographic awareness of zone boundaries and a technical assessment of qualifying manufacturing activities. As the 2028 sunset for the ERZTC approaches, the synergy between localized redevelopment and statewide manufacturing innovation will remain a cornerstone of New Hampshire’s business-friendly policy framework. Companies that successfully integrate state revenue office guidance into their long-term capital planning will find that these credits not only reduce their immediate tax burden but also fundamentally de-risk the process of investing in the Granite State’s industrial future.

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