Revenue agency outlines FY25–FY27 ranges, warns of estimate-resetting in business taxes

The New Hampshire Department of Revenue Administration told the House Ways and Means Committee on Wednesday that it is presenting a set of reasonable high and low revenue scenarios for fiscal year 2025 that will serve as the base for growth assumptions in 2026 and 2027.

Commissioner Lindsey Stepp, commissioner of the New Hampshire Department of Revenue Administration, told the committee "what we're going to talk about today is kind of 3 things" and summarized the office's approach: run five scenarios using year-to-date actuals, comparisons to plan and to the prior year, and then select what the agency regards as a reasonable high and low for each tax type.

That methodology frames the department's projections across tax types from business taxes to meals-and-rentals to tobacco. For business taxes, DRA reported fiscal-year-to-date receipts roughly $110.3 million, or about 18.2 percent, below plan and about $102.9 million, or 17.2 percent, below the prior year. Stepp explained part of the shortfall reflects a “resetting of estimated payments” by corporations after pandemic-era volatility in profits and estimated payments.

The agency ran a low scenario that projects the first seven months' shortfall extending through the year and a high scenario that applies prior-year actuals to the remaining months. On business-tax growth, DRA presented a range of about 3 to 8 percent for both 2026 and 2027, saying that range represents the underlying, "noise‑removed" growth the department considers classic for business tax revenue.

DRA gave specific ranges for other major taxes: meals-and-rentals (gross FY25 range about $475.1 million to $479.1 million, net to the state after municipal and school transfers roughly $331.9 million to $335.9 million, with 2–5 percent annual growth assumed for 2026–27), tobacco tax (FY25 roughly $182.6 million to $185.3 million with continued gradual declines projected in later years), the communication services tax (near $29.1 million to $30.0 million for FY25 with modest decline or stabilization thereafter) and the real-estate transfer tax (showing recovery, low net after the $5.0 million annual affordable-housing transfer at about $197.7 million and a high of about $200.1 million for FY25).

Stepp also summarized a policy change that materially affects short-term revenues: the interest-and-dividends tax was repealed effective Jan. 1, 2025, meaning the state will receive collections for tax year 2024 in fiscal 2025 but, on DRA's timing assumptions, only a small residual (about $8.7 million) in fiscal 2026 and effectively no recurring revenue in fiscal 2027 from that tax. "The tax was repealed as of 01/01/2025," Stepp said. "We will receive revenue in 2025 for tax year 2024, but we're not going to receive April and June estimated payments in '25, and we're not gonna really receive any money in '26 or '27."

DRA highlighted two technical items committee members pressed the agency on: refunds tied to the CCO cap and the role of estimated payments. Stepp said "approximately just under $72,000,000 in fiscal year 24 was refunded due to the CCO cap. Year to date for fiscal year 25, we're at $41.7 million" in such refunds. She said the department cannot precisely separate how much of the decline in estimated payments results from required refunds under the cap versus firms voluntarily reducing estimated payments as they "right‑size" them after the pandemic; that detail will become clearer once tax returns are filed in March and later in returns filed on extension.

Committee members also asked DRA about the sensitivity of tourism-linked taxes to consumer behavior and neighboring states' tax moves. On meals-and-rentals, DRA noted the tax is fairly predictable because it is driven mainly by meals (about 80 percent of the base) and rooms (about 18 percent); the department uses a municipal-revenue transfer and a schedule of school-building aid in calculations and provides a net amount to the state budget worksheet.

On the tobacco side, DRA noted declining stamped-cigarette sales but rising receipts from other tobacco products, including e-cigarettes and noncombustible products taxed at higher rates. Stepp said the department can investigate historical cross-border impacts (for example, when neighboring states change cigarette or vape taxes) but cautioned that policy changes in other states often produce an initial bump in cross‑border sales that may not be sustained.

DRA staff told the committee the agency updates its scenarios monthly as new receipts come in and applies judgment when selecting which scenario to present as the reasonable high and low for each tax. The department provided a worksheet the committee can edit and said it will supply monthly reports and additional historical comparisons on request.

Committee members asked for and received commitments to supply the committee with the estimate-versus-liability breakdowns (to compare taxpayer liabilities to their estimated payments) once returns are available, and asked the department to review earlier years' estimate performance so members can assess forecast accuracy. DRA said it will provide the years since the current commissioner took office and will help retrieve older records where available.

The department's presentation set the ranges the committee used during a subsequent work session to accept several agency revenue estimates and to flag items that need further review before the committee issues its consolidated Ways and Means revenue resolution.

Ending: DRA asked committee members to treat the ranges as working options the legislature can adjust; it cautioned the full picture will become clearer after March return filings and as monthly receipts are updated.