New Hampshire Governor Signs NH Senate Bill 483

We originally reported back in May of this year that the New Hampshire State Senate had approved Senate Bill 483 on May 21, 2010 and sent the Bill to the Governor's Office for his signature.  Today, we are pleased to report that the Bill has been signed by the Governor and is now law.

1031 Exchange Problem Fixed

This New Hampshire Senate Bill, which is now law, corrects the problem associated with 1031 Tax Deferred Exchange transactions involving the sale of relinquished property located in the State of New Hampshire.

Problem Created by New Hampshire Department of Revenue

The problem was created when the New Hampshire Department of Revenue ruled that the sale or disposition of relinquished property located within New Hampshire and held in a specific single member LLC combined with the subsequent acquisition of replacement property through another (different) single member LLC would not qualify for 1031 Exchange treatment because the sale and purchase were structured in different entities.

This new law prevents the New Hampshire Department of Revenue from applying the Business Profits Tax on the sale of relinquished properties located within the state.  The State of New Hampshire had been one of only two states that were attempting to tax such 1031 Tax Deferred Exchanges involving so-called "disregarded entities."  This new law is retroactive and permits investors to report real estate transactions in the recent past as a 1031 Tax Deferred Exchange without paying the New Hampshire Business Profits Tax.