- In Hologic, Inc. v. Commissioner1 the Supreme Court of New Hampshire reversed the ruling of the trial court and held that a water’s-edge combined group could not carry back a capital loss generated by one member to offset a capital gain generated by another member for New Hampshire Business Profits Tax purposes.
- The decision narrows the availability of capital loss carryback benefits for New Hampshire water’s-edge combined filers and underscores the importance of tracking capital gains and losses at the member level.
Background
Hologic, Inc. (“Hologic”) was the parent of a group of affiliated companies filing a New Hampshire water’s-edge combined return for Business Profits Tax purposes. The dispute arose from an amended return filed in 2021 for Hologic’s fiscal year ending September 30, 2017. The amended return related to a capital loss generated in fiscal year 2020 when one member of the combined group sold a subsidiary. Hologic sought to carry back that loss to offset a 2017 capital gain generated by a different member of the group from the sale of one of its divisions.
The New Hampshire Department of Revenue Administration rejected the capital loss carryback and issued an assessment. The dispute reached the New Hampshire Supreme Court after the trial court ruled in Hologic’s favor. In its August 26, 2026 opinion, the Supreme Court reversed the trial court’s decision.
The Issue
The issue centered on whether a New Hampshire water’s-edge combined group may compute its Business Profits Tax liability by using a capital loss from one member to offset a capital gain recognized by another member.
The dispute required the court to interpret New Hampshire’s combined reporting provisions, including the statutory definitions of “combined net income” and “water’s-edge method,” as well as the operative combined reporting rule. That rule requires a business organization that is part of a water’s-edge combined group to file a return containing the group’s combined net income and authorizes the commissioner to impose tax as though the entire combined net income of the group was that of one business organization.
Taxpayer’s Position
Hologic argued that New Hampshire’s water’s-edge combined reporting regime should treat the combined group as one business organization for purposes of applying the capital loss carryback. Under that approach, the capital loss carryback of one group member could be applied against the capital gain of another member because both amounts were part of the combined group’s tax base.
The company maintained that this result was supported by RSA 77-A:6, IV, which allows the commissioner to impose tax as though the entire combined net income of the water’s-edge combined group was that of one business organization. Hologic also raised state and federal constitutional arguments, asserting that the Department’s interpretation resulted in non-uniform treatment and tax that was not proportionate to the combined group’s New Hampshire activities.
The Decision
The Supreme Court of New Hampshire held that a water’s-edge combined group cannot offset capital gains with capital losses if those gains and losses were generated by different members of the group. Instead, the capital loss may offset only the gains of the same member that generated the loss.
In reaching that conclusion, the court focused on the statutory structure for determining income within a water’s-edge combined group. The court noted that each member first determines its own individual net income, including capital gains and losses, before those member-level amounts are aggregated to determine the combined group’s net income.
The court distinguished between aggregating member-level net income and allowing one member’s capital loss to offset another member’s capital gain. Although RSA 77-A:6, IV speaks in terms of imposing tax on the combined net income of the water’s-edge group as though it were that of one business organization, the court read the relevant statutory provisions to require member-level computation before aggregation. The court rejected Hologic’s state constitutional argument finding that the treatment was reasonable and did not provide preferential treatment to one type of taxpayer over another. The court also rejected the taxpayer’s federal constitutional argument that the treatment at issue resulted in unproportionate taxation because Hologic’s argument only focused on the tax base and did not address the impact of the application of the statutory apportionment formula.
The New Hampshire Supreme Court therefore reversed the trial court’s ruling and concluded that members of the water’s-edge combined group must separately calculate their net income, including the application of capital loss carrybacks, prior to combination.
Implications
This decision illustrates that New Hampshire water’s-edge combined reporting does not necessarily permit all member-level tax attributes to be shared across the combined group. While combined reporting requires aggregation of members’ income, the Supreme Court’s ruling indicates that capital gain and capital loss positions should be evaluated by reference to the member that generated the gain or loss.
Businesses filing New Hampshire Business Profits Tax water’s-edge combined returns should review capital gain and loss positions, assess amended returns and refund claims involving capital loss attributes, evaluate ASC 740 and state tax reserve implications, and maintain detailed member-level documentation for tax attributes.
The case also reinforces that statutory language treating a combined group as one business organization may not, by itself, answer whether a specific tax attribute can be shared within the combined group. Taxpayers should analyze the attribute, the sequence of the statutory computation, and any member-level limitations that may apply.
How Forvis Mazars Can Help
Forvis Mazars can help businesses evaluate the impact of the Supreme Court of New Hampshire’s decision on Business Profits Tax compliance, planning, and controversy matters. Our state and local tax professionals can assist with reviewing capital gains, capital loss attributes, modeling potential tax exposure, evaluating refund claim viability, and documenting member-level tax positions for water’s-edge combined groups. For more information, please reach out to a professional at Forvis Mazars.
- 1“Hologic, Inc. v. Comm’r, N.H. Dept. of Revenue Admin.,” No. 2025-0240, 2026 N.H. 32 (N.H. Aug. 26, 2026).