HOUSE SPECIAL SESSION COMMITTEE ON

ECONOMIC GROWTH AND JOB DEVELOPMENT

 

September 10, 2002   Hearing Room 357

9:00  am Tapes  9 -  12

 

MEMBERS PRESENT:             Rep. Jeff  Kropf, Chair

Rep. Alan Brown

Rep. Al King

Rep. Tim Knopp

Rep. Kathy Lowe

                                                Rep. Elaine Hopson

                                                Rep. Greg Smith

 

STAFF PRESENT:                  Ray Kelly, Administrator

Nancy Massee, Administrative Support

 

 

MEASURE/ISSUES HEARD:         LC 16

                                                 LC 24

                                                 HB 4072-5

 

These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.

 

TAPE/#

Speaker

Comments

TAPE 9, A

004

Chair Kropf

Convenes meeting at 9:30 am.   

PUBLIC HEARING LC 16

023

Chair Kropf

Introduces Rep. Butler.

026

Rep. Butler

Explains LC 16.  (EXHIBIT A) Bill offers income tax exemption for certain highly skilled individuals and venture capital firms coming to Oregon to establish business. 

190

Rep. Butler

Continues explaining LC 16.  Suggests some changes and amendments.  This bill is intended to attract outside capital and outside highly skilled individuals, especially in bio-chemistry, bio-technology, molecular biology, genetics, and life sciences. And, the high tech industries.

220

Rep. King

Asks if the bill states only existing venture capital firms, or is it open to create capital venture firms with $100 million. 

226

Rep. Butler

For those firms transferring to the state they would be existing firms.  This would not preclude start up venture capital firms.

235

Rep. King

Page 2, line 5 on upper level management, suggests change in language. 

242

Rep. Butler

Answers that Legislative Counsel suggested not to be too specific.  Explains that section. 

277

Rep. King

Refers to line 21, C, key executive positions of a publicly traded firm. 

334

Rep. King

Suggests structure to qualify companies that are not publicly traded.

347

Chair Kropf

Agrees an organization that is Rep. King described would not want to be precluded. Oregon wants to attract the best and brightest.  .

355

Rep. Butler

Suggests changes that say an “ongoing concern” and deleting “publicly traded.” 

408

Rep. King

Says that is fine if counsel agrees. Suggests changing from five to three other boards. 

422

Rep. King

Refers to Page 4, line 11, Micro-life defining who is an employee and who is not.

TAPE 10,A

036

Fox

OECDD.  Discusses that what is being sought are principal partners. 

041

Rep. King

Page 7. Line 26, item 3.  Discusses the difference in approach that the tax event is correlated to firm income versus all income of the individual.

050

Rep. Butler

Responds explaining that part.

066

Rep. King

Refers to page 8, line 4.  Suggests having 5-year exemption instead of 10 years.

070

Rep. Butler

Discusses how they plan to work that.  Seven to eight years was the original suggestion.

096

Chair Kropf

Asks for any more questions or testimony.

092

Harvey Matthews

Associated Oregon Industries (AOI).  AOI wants adequate business capital in the state.  Considering the possible increasing taxation on corporations, this bill would be a good incentive.  Asks to define resident more clearly.  Clarify that capital gains is included in tax break. Page 7, line 26.

107

Rep. Butler

Responds that capital gains would be a part of the tax free package...

122

Rep. King

Suggests more specificity to provide for sale of parts of the company.  Also, “royalty” may be addressed.

129

Rep. Butler

Agrees with suggestion.

142

Rep. King

Describes possible scenarios.

155

Chair Kropf

Asks Dexter Johnson about language.

176

Mathews

Refers to clarifying the application process. Asks to be informed of administrative rules on this bill by next legislative session. Supports this program. This bill came out of the Oregon Council for Knowledge and Economic Development as charged by the Legislature.

199

Rep. Butler

Explains this concept came out of one of the subcommittees to stimulate jobs.

WORK SESSION LC 16

227

Chair Kropf

Asks to move LC 16 as a committee bill.

228

Rep. Knopp

MOTION:  Moves LC 16 BE INTRODUCED as a committee bill.

229

 

VOTE:  4-0

EXCUSED:  3 - Rep. Hopson, Re. Lowe, Rep. Greg Smith

230

Chair Kropf

Hearing no objection, declares the motion CARRIED.

232

Chair Kropf

Recesses until 1:30 p.m.

234

Chair Kropf

Reconvenes meeting at 1:55 p.m.  Explains HB 4072-5 amendments. (EXHIBIT B)

HB 4072-5 PUBLIC HEARING

244

Ray Kelly

Committee Administrator. Verifies through the Speaker’s office that the HB 4072 has been referred to the House Special Session Committee on Economic Growth and Job Development.

248

Chair Kropf

Requests committee take a short recess.  Present are Lowe, King, Hopson, Alan Brown, Knopp and Chair Kropf.  Excused is Rep. Greg Smith.

257

Kelly

Gives update on the meeting from the morning session.

264

Chair Kropf

Explains the HB 4072 (LC 6) –5 amendments.  Explains the changes in qualifications for employees and number of employees. Intent is to encourage employers to hire new employees, not to recycle people, see page 2, and paragraph 7.  

334

Rep. Hopson

Asks about eliminating new businesses language.  Asks for definition of employer.

376

Tamara Brickman

Oregon Employment Department. States that for tax purposes does not know if a person with no employees is an employer.  Under the Employment Department statutes there are specific definitions of employment.

395

Rep. Hopson

Comments that the important part is the “intent,” which is meant to include new start-up companies starting January 1, 2003.

TAPE 9,B

042

Chair Kropf

States that is his intent.

050

Brickman

Comments that the bill draft does not affect the unemployment trust fund.

057

Johnson

Responds that the bill does not affect unemployment.  It is a tax credit for the employer.

064

Rep. Lowe

Refers to page 3, line 2.  Asks about nonresident employers who locate a business in the state but import out of state workers.

076

Johnson

Responds, that the U.S. constitution requires non-residents be treated same as residents as far as taxes.   That is standard language in the bill.

104

Chair Kropf

Asks about page 2, paragraph 7, line 22.  Would the words “new entity” preclude a new business from starting up.

111

Johnson

This paragraph applies if the new entity employed 50 percent of its employees that were previously employed with an earlier employer. That was designed to address the concern of creating this new corporation and moving all the employees over to it.

120

Chair Kropf

Refers to page 1, line 12 and 13, does that preclude a new business startup.

135

Johnson

Says no, because it says “fewer than 50 fulltime employees.”

147

Rep. Hopson

Asks about line 21, page 2, is “a new entity or acquired the business of a person”.  Should the “and” be instead of the “or”?
 

155

Johnson

It could be an existing entity that acquires a business and its employees.

155

Rep. Hopson

Questions the language.

164

Johnson

Says that can be corrected.

182

Hopson

Refers to page 3, line 9, asks if it is pro-rated for less than six months.

190

Johnson

Explains pro-rate for less than 12 months.

195

Rep. Hopson

Asks if that is only applicable January 1, 2003 through June 30, 2003.

215

Chair Kropf

Answers in terms of qualifying. 

225

Johnson

Will clarify language in terms of new entity.

216

Rep. Lowe

Asks if the structure of HB 4072-5 will attract a certain line of business.

230

Johnson

Answers it is open to small businesses but no particular sector of the economy is targeted.

250

Chair Kropf

The intention  of the bill is to stimulate small businesses.

265

Brickman

Offers to check with the department regarding these kinds of businesses.

277

Chair Kropf

Asks for any further questions on clarifying language.

281

Rep. Lowe

Asks if this bill has any negative impact on the budget.

308

Chair Kropf

Refers to EXHIBIT  D?.  Discusses chart. 

337

Dick Yates

Legislative Revenue Office (LRO).   Explains chart.  Basically, the bill offers a tax credit to employers to hire additional people.  (EXHIBIT C)

TAPE 10,B

005

Yates

Explains chart.

014

Chair Kropf

Discusses kinds of industries with under 50 employees.

023

Yates

Discusses the credit is 4 percent of what.

027

 Chair Kropf

Of wages paid to new employees. 

064

Yates

Explains chart under “credit.” Continues discussing the chart. 

083

Rep. Lowe

Questions how the figures were arrived at.  Is there an assumption of long-term unemployment??

110

Yates

It would be in a sense that those who do not meet 10 percent growth.  Employees move back and forth between firms. This is a model.

128

Rep. Lowe

Asks how to target employers who hire people who have been unemployed for six months.

169

Chair Kropf

Discusses unemployment targeting.

171

Rep. Lowe

It brings more people into income tax paying status and helps the General Fund. 

181

Brickman

Comments that she does not know the legal aspect of targeting unemployed individuals for employment. Verification of unemployment might be needed.

199

Johnson

Legally there would not be a problem to put the requirement in.

209

Rep. Lowe

All the employer would have to do is certify that it is true.

230

Brickman

Comments on certification by employer that would have to come from the employer’s information.

235

Rep. Lowe

The individual would have to sign a statement.

224

Rep. King

Discusses problems that could evolve from this aspect.

239

Brickman

Asks if one would actively be receiving unemployment or have exhausted benefits.

268

Rep. Lowe

One would have to be a new hire. 

255

Chair Kropf

Rep. Lowe thinks it should be a new hire. Someone who is not working for someone else.

280

Rep. Lowe

Discusses how employees get shifted around.

270

Chair Kropf

Explains a new job has to be created.  Not just a trading of jobs.  Jobs Plus program is a great program.

303

Brickman

Is not sure what mechanism it is.  How that would be used as an incentive.

330

Chair Kropf

I mean in identifying people off work and making this program available.

340

Brickman

Explains how the Employment Department would identify people who might qualify.

321

Johnson

Responds that thirty days of unemployment could be used and affirmed by individual certification.

337

Rep. King

Discusses concerns with this bill. Does not support bill.  Says there is a lot of social policy in the bill.  Windfall benefits could outweigh targeted economic benefits.   

TAPE 11,A

035

Chair Kropf

Reiterates to clarify that there has to be an average of fewer than 50.

044

Chair Kropf

Asks Mr. Yates about credit tax and impact.

051

Yates

Once you have a credit base, you are talking about number of employees that are eligible. Explains example from chart. 

111

Rep. Lowe

Asks if there is a credit number that is a wash.

120

Yates

Answers no.  It will cost something. There has not yet been away to increase income by giving tax credits.

134

Chair Kropf

Discusses societal effects gained by the tax credit program.

157

Chair Kropf

Asks if there are any further questions on HB 4072.  Explains there will be further amendments adjusting.

174

Rep. Hopson

Feels uncomfortable with some of the issues in this measure.  Feels the potential is there for stimulating some jobs.  Does not support the bill at this time.

206

Rep. King

Comments that the bill may be an economic policy experiment but not as a budget assist in a negative budget.

237

Rep. Brown

Comments on HB 4072 as compared to a baseball single and not a home run.  Wants continued efforts on the bill. 

200

Rep. Lowe

Says she supports a little risk but not a lot.  Asks to keep working on the numbers in this measure. 

283

Chair Kropf

Refers to employment forecast for 2003.  Will the tax credit have a more positive impact if there is less than the forecasted employment?

323

Chair Kropf

Comments that in the 5th special session there has been no effort to stimulate the economy.  Discusses Enterprise Zones.  Talks about making an investment and long term benefits for society as a whole.

400

Chair Kropf

Mentions the $1.7 million investment for six months (chart).  Has a positive societal impact to employ those unemployed, on unemployment.  Discusses frustration from economically disadvantaged.

420

Chair

Explains the employer will reinvest the tax credit he gets and create more jobs.

TAPE 12,A

020

Chair Kropf

Explains how the credit will cause an employer to hire more people.

030

Rep. King

Refers to the chart from Revenue (chart) and questions what different figures would do to the picture. Says there could be significantly larger risks than shown in the model. 

140

Chair Kropf

Comments on a joint memorial to Congress regarding Oregon’s burned forests this summer.

149

Chair Kropf

Recesses at 3:45.  Reconvenes at 4:15 p.m. to introduce LC 24 Memorial. (EXHIBIT D)

PUBLIC HEARING ON LC 24

172

Mark Kelly

Works for 14 family owned forest products companies and a helicopter company in Oregon on federal forest policy issues.

180

Ti m Wigley

Oregon Forest Industries Council. Describes wild fires in Oregon that destroyed acres of forest this summer, both private and government land.  One million acres in Oregon have burned this summer. Supports the memorial. 

193

Chair Kropf

Asks what the memorial urges Congress.

195

Kelly

Responds the proposal is to reduce hazards that fired the wild fires. Describes what is needed in the forests after the fires.  Comments that this legislation will come before Congress on Thursday.

201

Chair Kropf

Responds that our adoption would be timely.  Asks for questions.

214

Rep. King

Comments that by Thursday it would have to be adopted tonight.

215

Rep. Hopson

Asks for a work session.

230

Rep. G. Smith

Says 70 percent of land is federal in eastern Oregon.  Supports.

235

Chair Kropf

Describes Ukiah fire that he saw two weeks ago. Biscuit Fire 500,000 acres. Memorial urges Congress to take steps to reduce fires. Describes Bridge Creek fire. 

WORK SESSION ON LC 24

340

Rep. Hopson

Discusses the memorial.  Will give courtesy vote.

341

Rep. Greg Smith

MOTION:  Moves LC 24 BE INTRODUCED as a committee bill.

342

 

VOTE:  7-0

343

Chair Kropf

Hearing no objection, declares the motion CARRIED.

344

Chair Kropf

Adjourns meeting at 4:30 p.m.

 

Transcribed by,                        Reviewed by,

 

 

Nancy Massee                        Ray Kelly

Committee Assistant                        Committee Administrator

 

 

EXHIBITS:

 

A – LC 16, staff, 8 pp

B – HB 4072-5, staff, 3 pp

C -  Model Tax Credit Chart, staff, 1 p

D – LC 24, staff, 2 pp