S-Corporation Election Package (Form 2553 + State S-Election) — New Hampshire

S-CORPORATION ELECTION PACKAGE (FORM 2553 + STATE S-ELECTION) — NEW HAMPSHIRE

OVERVIEW

This package guides a New Hampshire corporation or LLC through the federal S-corporation election and explains why the New Hampshire overlay is unusual and unfavorable for S-corporations:

1. Federal layer — electing S-corporation status with the IRS by filing Form 2553 under 26 U.S.C. § 1362(a). A valid election causes income, loss, deductions, and credits to pass through to shareholders, avoiding entity-level federal income tax.
2. State layer (New Hampshire overlay) — New Hampshire does NOT give S-corporations pass-through treatment. NH has no general income tax, but it taxes the S-corporation at the entity level under the Business Profits Tax (BPT, RSA 77-A) and Business Enterprise Tax (BET, RSA 77-E). The federal S-election delivers no New Hampshire tax benefit. This is flagged throughout Part 5.

Use this package as a working checklist. Confirm every citation and current-year form against the IRS and the New Hampshire Department of Revenue Administration before filing.

PART 1 — FEDERAL ELIGIBILITY CHECKLIST (IRC § 1361)

An entity must satisfy every requirement below to be eligible to elect S-corporation status.

Entity Eligibility — § 1361(b)(1)

☐ Entity is a domestic corporation or an LLC eligible to elect corporate treatment
☐ Entity has no more than 100 shareholders (§ 1361(b)(1)(A); family members may be treated as one under § 1361(c)(1))
☐ Entity has only one class of stock (§ 1361(b)(1)(D); differences in voting rights alone are permitted)
☐ Entity is not an ineligible corporation under § 1361(b)(2) (e.g., certain banks using the reserve method, insurance companies subject to subchapter L, possessions corporations, or former DISCs)

Shareholder Eligibility — § 1361(b)(1)(B)–(C)

☐ All shareholders are individuals, estates, certain trusts, or qualifying tax-exempt organizations
☐ No shareholder is a partnership, corporation, or nonresident alien (§ 1361(b)(1)(B)–(C))
☐ Any trust shareholder qualifies (grantor trust, testamentary trust within the 2-year window, QSST under § 1361(d), ESBT under § 1361(e), or voting trust)
☐ Each shareholder will consent to the election (Part 3 below)

Pre-Filing Confirmations

☐ Entity is properly formed and in good standing with the New Hampshire Secretary of State
☐ EIN obtained from the IRS
☐ A reasonable-compensation plan for shareholder-employees has been considered
☐ A CPA or tax attorney has confirmed S-status still makes sense given that New Hampshire taxes the S-corporation at the entity level (see Part 5)

PART 2 — FORM 2553 LINE-BY-LINE

Part I — Election Information

Timing of the Election — § 1362(b)

The election is timely if filed:

☐ At any time during the tax year preceding the tax year it is to take effect; OR
☐ On or before the 15th day of the 3rd month of the tax year it is to take effect (for a calendar-year entity electing for the current year, that is March 15; March 16 in 2026 because March 15, 2026 falls on a Sunday)

For a newly formed entity, the first tax year begins on the earliest of: first having shareholders, first acquiring assets, or first beginning to do business. The 2-month-and-15-day clock runs from that date.

Late Election Relief — Rev. Proc. 2013-30

If the deadline has passed, relief may be available under Rev. Proc. 2013-30 when:

☐ The entity intended to be an S-corporation as of the intended effective date
☐ The failure to qualify was solely because Form 2553 was not filed timely
☐ The entity has reasonable cause and acted diligently to correct
☐ The request is filed within 3 years and 75 days of the intended effective date
☐ All returns filed are consistent with S-status (or none were due yet)

To request relief: write "FILED PURSUANT TO REV. PROC. 2013-30" across the top of Form 2553, attach a reasonable-cause statement, and have all shareholders sign the consent.

Filing Method

☐ Fax or mail Form 2553 to the IRS service center listed in the current instructions (no e-file for Form 2553)
☐ Retain the IRS CP261 acceptance notice permanently

PART 3 — SHAREHOLDER CONSENT STATEMENT

All shareholders on the election effective date (and, for a retroactive election, anyone who held stock during the year) must consent. Consent is made in column K of Form 2553 or by attached statement under Treas. Reg. § 1.1362-6.

Consent language: Each shareholder, by signing above, consents to the corporation's election to be treated as an S-corporation under 26 U.S.C. § 1362(a) and represents that the information provided is true and correct. For shares held by spouses or by a trust, each person with a community-property or beneficial interest must also consent.

PART 4 — ENTITY INTERPLAY (LLC ELECTING S-STATUS)

An LLC may elect S-status. The interaction with the entity-classification rules is critical:

☐ LLC filing Form 2553 alone — Under Treas. Reg. § 301.7701-3(c)(1)(v)(C), an eligible entity that timely files Form 2553 is deemed to have elected to be classified as an association (corporation) under § 301.7701-3, so a separate Form 8832 is not required. The Form 2553 does double duty.
☐ LLC already taxed as a C-corporation (previously filed Form 8832) — file only Form 2553 to layer the S-election on top.
☐ Confirm New Hampshire formation documents and operating agreement do not create a second class of equity (e.g., preferred distribution/liquidation rights) that would break the single-class-of-stock rule.
☐ Reasonable compensation — once taxed as an S-corp, member-managers who work in the business become shareholder-employees who must be paid a reasonable W-2 salary before distributions.
☐ New Hampshire note — because NH taxes both LLCs and S-corps at the entity level under the BPT/BET regardless of federal classification, the entity-choice analysis in NH turns on factors other than state pass-through treatment (see Part 5).

PART 5 — NEW HAMPSHIRE STATE S-CORP OVERLAY

CRITICAL FLAG: New Hampshire does NOT recognize S-corporation pass-through treatment. There is NO separate New Hampshire S-election, and the federal S-election produces NO New Hampshire tax benefit. New Hampshire has no general income tax, but it imposes the Business Profits Tax (BPT) and Business Enterprise Tax (BET) on the S-corporation at the entity level — effectively taxing the S-corporation much as it taxes a C-corporation. NH does not conform to Subchapter S pass-through for these taxes.

5.1 — No State S-Election / No Pass-Through

☐ There is nothing to "elect" in New Hampshire; the S-corporation is taxed as a business organization under the BPT and as a business enterprise under the BET.
☐ Profits do not pass through to shareholders free of NH tax the way they do federally; the tax is paid by the entity.

5.2 — FLAG: Business Profits Tax (BPT) — RSA 77-A

The BPT applies to the S-corporation's taxable business profits at the entity level.

☐ The BPT is assessed on the taxable business profits of business organizations conducting business activity in New Hampshire.
☐ Rate: 7.5% for taxable periods ending on or after December 31, 2023 (was 7.6% for periods ending on or after December 31, 2022). [verify current BPT rate]
☐ Filing threshold (TY 2025): a BPT return is required for every business organization with gross business income over $109,000 (threshold adjusted biennially). [verify current threshold]
☐ Multi-state businesses apportion using a single sales factor for taxable periods ending on or after December 31, 2022; unitary businesses use combined reporting.
☐ The federal S-election does not exempt the entity from the BPT.

5.3 — FLAG: Business Enterprise Tax (BET) — RSA 77-E

The BET is a separate entity-level tax on the S-corporation's compensation, interest, and dividends — not on profit.

☐ The BET is assessed on the enterprise value tax base = the sum of all compensation paid or accrued, interest paid or accrued, and dividends paid by the business enterprise.
☐ Rate: 0.55% for taxable periods ending on or after December 31, 2022. [verify current BET rate]
☐ Filing threshold (TY 2025): a BET return is required for every business enterprise with gross receipts over $298,000 OR an enterprise value tax base over $298,000 (threshold adjusted biennially). [verify current threshold]
☐ BET credit: BET paid may be credited against the BPT, with unused BET carried forward up to 10 taxable periods (for credits attributable to periods ending on or after December 31, 2014).
☐ Because an S-corporation pays shareholder-employees reasonable W-2 compensation, that compensation is part of the BET base — coordinate the reasonable-comp analysis with BET exposure.

5.4 — Interest & Dividends Tax — REPEALED Effective January 1, 2025

☐ Historic note: New Hampshire formerly imposed an Interest & Dividends (I&D) Tax under RSA ch. 77 (5% → 4% → 3% phase-down). Dividends paid by a corporation — including an S-corporation — were generally subject to the I&D Tax, which historically discouraged the S-corp form in NH.
☐ The I&D Tax was repealed effective January 1, 2025 (H.B. 2, 2023 session; repeal accelerated). For tax periods beginning on or after January 1, 2025, no I&D Tax applies to interest or dividend income, and no 2025 I&D return is required. Taxable periods on or before December 31, 2024 remain subject to filing/audit.
☐ Net effect: the I&D Tax disincentive to S-corp distributions is gone, but the BPT and BET entity-level taxes remain — so NH still provides no S-corp pass-through benefit.

5.5 — Filing & Other

☐ File NH business tax returns (BPT/BET) with the NH Department of Revenue Administration via Granite Tax Connect (GTC). [verify current forms — BT-Summary, NH-1120/NH-1120-WE for combined, etc.]
☐ Confirm current BPT/BET rates and the current biennial filing thresholds before filing. [verify all NH rates and thresholds for filing year]

PART 6 — POST-ELECTION COMPLIANCE

Federal

☐ File Form 1120-S annually; issue Schedule K-1 to each shareholder
☐ Pay shareholder-employees reasonable compensation via W-2 before taking distributions (IRS scrutinizes under § 3121 / employment-tax rules; recharacterization of distributions as wages is a common audit adjustment) — note these wages also feed the New Hampshire BET base
☐ Built-in gains tax (§ 1374) — if the entity converted from C-corp status, gain on pre-conversion appreciated assets sold within the 5-year recognition period is taxed at the corporate level
☐ Excess net passive income tax (§ 1375) — if the entity has accumulated C-corp earnings and profits and passive investment income exceeds 25% of gross receipts, an entity-level tax applies; three consecutive years also terminates the election under § 1362(d)(3)
☐ Maintain single class of stock and shareholder eligibility continuously

New Hampshire

☐ File the Business Profits Tax return (RSA 77-A) at the entity level if over the gross-business-income threshold
☐ File the Business Enterprise Tax return (RSA 77-E) at the entity level if over the gross-receipts or enterprise-value threshold
☐ Apply the BET credit against the BPT and carry forward any unused credit
☐ Make NH business-tax estimated payments as required
☐ Keep the NH Secretary of State annual report current and the entity in good standing
☐ No I&D Tax return for periods beginning on or after January 1, 2025

PART 7 — REVOCATION (§ 1362(d))

Voluntary Revocation — § 1362(d)(1)

☐ Shareholders holding more than 50% of the outstanding shares (voting and nonvoting) must consent
☐ File a revocation statement with the IRS (no official form; a signed letter citing § 1362(a) and § 1362(d)(1) with shareholder consents)
☐ Effective date: if filed on or before the 15th day of the 3rd month of the tax year, revocation is effective the first day of that year; otherwise the first day of the following year. A prospective effective date may be specified.
☐ A 5-year waiting period generally applies before a new S-election may be made (§ 1362(g)), absent IRS consent

Automatic Termination — § 1362(d)(2)–(3)

☐ Ceasing to meet any § 1361(b) requirement (e.g., exceeding 100 shareholders, a second class of stock, an ineligible shareholder) terminates the election as of the disqualifying event
☐ Passive investment income exceeding 25% of gross receipts for 3 consecutive years while holding C-corp E&P terminates the election (§ 1362(d)(3))

New Hampshire Effect of Revocation/Termination

☐ Because New Hampshire already taxes the entity under the BPT and BET regardless of federal S-status, federal revocation/termination has little or no New Hampshire tax effect — the BPT/BET obligations continue at the entity level either way. Confirm the transition-year federal filing (typically reverting to a C-corporation Form 1120) with a tax advisor.

FILLABLE FIELDS SUMMARY

SOURCES AND REFERENCES

• 26 U.S.C. §§ 1361–1379 (Subchapter S); §§ 1374, 1375 (entity-level taxes)
• IRS Form 2553 and Instructions; Form 1120-S and Instructions
• Rev. Proc. 2013-30 (late S-election relief)
• Treas. Reg. § 1.1362-6 (election/consent); § 301.7701-3 (entity classification; Form 2553 = deemed Form 8832)
• N.H. Rev. Stat. Ann. ch. 77-A (Business Profits Tax) and N.H. Code Admin. Rules Rev 300
• N.H. Rev. Stat. Ann. ch. 77-E (Business Enterprise Tax) and N.H. Code Admin. Rules Rev 2400
• N.H. Rev. Stat. Ann. ch. 77 (Interest & Dividends Tax — repealed eff. Jan. 1, 2025; H.B. 2, 2023)
• New Hampshire Department of Revenue Administration — Business Taxes overview; Granite Tax Connect (revenue.nh.gov)