New Hampshire’s Pollution Control Tax ExemptionOct 03, 2018
Investing in pollution control equipment can be expensive, but New Hampshire provides an important tax incentive for businesses. State law allows for a local real estate tax exemption that can cover up to the full value of the installation under a multi-agency process that involves both state and local officials. The process often requires both technical and legal assistance but can result in significant savings over time because the exemption lasts as long as the equipment is used. For power plants and large manufacturing facilities that install multi-million dollar pollution control facilities that would otherwise be subject to local valuation and property tax, qualifying for the tax exemption can substantially reduce tax liability or provide a basis for negotiation with taxing authorities.
Qualifying for the exemption requires a determination by the New Hampshire Department of Environmental Services (“NHDES”) that the facility or installation is either wholly or partly for the purpose of air or water pollution control. An application must be filed describing the function or functions of the facility and whether it is wholly or partially for the purpose of controlling air or water pollution. The application must also include details on the amount invested in facility components. For multi-functional equipment, technical support is essential to justify the requested allocation to air or water pollution control. NHDES investigates and determines the percentage of the investment allocated to pollution control, if any. The determination is forwarded to the local taxing authority, which is required by law to exempt the appraised value of the facility, or the exempt percentage, as well as any associated real estate, from local real estate tax.
Because the stakes can be high for both municipal taxing authorities and businesses, agency exemption determinations have generated litigation over the years. For example, a state appeal in the early 1990’s over what types of facilities qualify for the exemption resulted in a judicial determination that only devices treating air or water pollution can qualify. This means that substituting cleaner technology cannot generally qualify, although each case is evaluated on its own merits. At the same time, passive devices like stormwater swales and tall exhaust stacks have been found to qualify for at least partial exemption because they treat emissions.
The statute has also received a great deal of legislative attention. For example, New Hampshire’s legislature responded to broad application of the exemption by amending the law to expressly exclude septic systems and landfills from coverage. Municipal opposition has generated regular legislative hearings on proposed legislation to repeal or significantly curtail the exemption. The New Hampshire Municipal Association and some towns have repeatedly urged lawmakers to repeal the law on grounds that it is unnecessary and counterproductive to provide tax incentives for controlling emissions that are fully regulated under other laws. While it remains to be seen whether municipal taxing authorities succeed in eliminating the exemption, it is still available to those willing to follow the statutory process.
About the Author: Maureen D. Smith