PUBLIC HEARING HB 2424, HB 2197

INTRODUCTION OF LC 2337, LC 2339, LC 2040

 

TAPE 35, 36, A-B, 37 A

 

HOUSE REVENUE COMMITTEE

FEBRUARY 10, 2003   8:30 AM   STATE CAPITOL BUILDING

 

Members Present:                        Representative Lane Shetterly, Chair

                                                Representative Wayne Scott, Vice Chair

                                                Representative Joanne Verger, Vice Chair

                                                Representative Phil Barnhart

                                                Representative Vicki Berger

                                                Representative Pat Farr

                                                Representative Mark Hass

                                                Representative Elaine Hopson

                                                Representative Max Williams

 

 

Witness Present:                        Dexter Johnson, Legislative Counsel

                                                Kristina McNitt, Oregon Small Woodlands Association,

                                                  Oregon Department of Forestry Technical Working Group

                                                Rep. Wayne Krieger

                                                Clint Bentz, Oregon Small Woodlands Association,

                                                  Oregon Department of Forestry Technical Working Group

                                                Norm Miller, Department of Revenue

                                                Wallace Rutledge, Department of Forestry

 

Staff Present:                            Paul Warner, Legislative Revenue Office

                                                Dick Yates, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 35, SIDE A

 

004

Chair Shetterly

Calls meeting to order at 8:31 a.m.

 

OPENED HEARING ON HB 2424

 

013

Paul Warner

This is a biennial event, Legislative Counsel goes through the tax statutes and reviews them for syntax and consistent language.

 

016

Dexter Johnson

Explained that the intent of the bill before the Committee was to make technical corrections to the Oregon Tax Statutes.  There are no substantive changes.

 

028

Rep. Williams

There are a number of definitions sections in this bill, is this rewriting existing definitions, or is this new language for the definitions?.

 

035

Johnson

It is neither, it is simply alphabetizing the definitions to make it consistent with legislative form and style and is something legislative counsel has been changing over years.

 

052

Chair Shetterly

Let the record reflect that the witness is telling us the truth.

 

055

Rep. Williams

For example, when it defines “specific request”, it would be deleted later? (HB 2424, Page 19, line 6), and then re-added, not changing any definitions. It would help for the record to understand that we didn’t redefine language.

 

045

Johnson

That’s correct.

 

065

Rep. Hass

Last biennium there was a law that changed from “shall” to “may”, I’m seeing legislation coming through that reflects that, what does that really mean in terms of old laws that had “may” in there?.

 

072

Johnson

The provision that was passed said that the phrase “shall not” or “may not” means the same, it is a mandatory prohibition.  Position of Legislative Counsel has been to change “shall not” to “may not” when a statute is being amended.

 

095

Chair Shetterly

Closes Public Hearing

 

 

OPENED WORK SESSION HB 2424

 

097

Rep. Williams

MOTION: MOVES HB 2424 TO THE FLOOR WITH A DO PASS RECOMMENDATION.

 

101

 

 

 

 

 

ROLL CALL VOTE:  MOTION PASSED 8-0-1

REPRESENTATIVES VOTING AYE:  Berger, Farr, Hass, Hopson, Scott, Verger, Williams, Chair Shetterly.  Rep. Barnhart Excused.

 

Rep. Farr will carry the bill.

 

 

 

 

OPENED PUBLIC HEARING ON HB 2197

 

160

Kristina McNitt

Testified in support of HB 2197, -1 amendments, -2 amendments.  Charge of the Oregon Department of Forestry Technical Working Group (ODFTWG) was to create a property tax system that would be:

·         Acceptable to all parties;

·         Reduce the Department of Revenue’s administrative cost of the previous deferral system, and

·         Provide an incentive to encourage small tract forestland owners to continue to maintain a forestland base.

 

178

Rep. Wayne Krieger

Testified in support of HB 2197.

 

218

Clint Bentz

Testified in favor of HB 2197.

 

253

Chair Shetterly

Advised the Committee, if this bill is not passed this session, the small woodland owners will revert to the industrial tax model, with full property tax imposed and paid on an annual basis.

 

261

Norm Miller

Gave a technical overview of HB 2197, who it impacts, and its alignment with Measure 50.

 

340

Rep. Farr

What’s the line of demarcation between Eastern and Western Oregon?

 

343

Miller

The line of demarcation would be the west edge of Wasco, Deschutes, Klamath Counties, the top of the Cascade Range.  

 

Continued testimony regarding “Land Tax Examples, (Page 4, Exhibit 3).

 

436

Chair Shetterly

What is showing is unpaid, tax which they currently would not be paying.  This would be the tax that would be due if they were to go on to 100% taxation.  This is not current taxes that are being foregone?

452

Miller

Continued testimony regarding “Severance Tax”, and difference between Eastern and Western Oregon rates, (Page 7, Exhibit 3).

 

Questions and discussion interspersed regarding timber and taxation.

 

 

TAPE 36, SIDE A

 

097

Chair Shetterly

The Severance Tax is designed across all landowners to collect the deferred tax, but it is not applied on a property by property basis?

 

100

Miller

That is correct.

 

147

Miller

Explained the -1 and -2 amendments.

 

Questions and discussion regarding tax rate indexing of timber harvesting.

 

253

Rep. Verger

Are you trying to set up a system to allow the small forest land owner, who doesn’t harvest every year, to pay the taxes during the year the trees are cut?

 

270

Miller

Yes.

 

Questions and discussion regarding opting in and out of program.

 

322

Rep. Scott

If you go into the 10-year period of time does the factor accumulate deferral interest?

 

350

Miller

At this point in time, we are not building a mechanism to pay interest on unpaid tax.

 

356

Rep. Scott

If a person does not harvest for 10 years and sells their land, but never opts out of the program, what happens?

 

359

Miller

The taxation option follows with the land, until someone opts of the program.

 

366

Rep. Scott

It is for life until harvest then?

 

369

Miller

That’s correct.

 

370

Rep. Hass

Is this like the seniors’ deferral system.

 

352

Miller

There are some similarities to the senior deferral, with the interest rate at 6%.  In this case, the committee did not factor interest into the calculations; tax is being accumulated over time without interest.

 

383

Chair Shetterly

At an escalating rate adjusted by this index?

 

385

Miller

That’s correct

 

369

Chair Shetterly

Since you are not collecting on a per property basis, there is not an amount to which that interest could be attached?

 

394

Miller

That is correct.  Suggests staff in work session may have info about how rate was computed.

 

404

Yates

Explains the indexing of the harvest tax rate system vs. property tax system.

 

Questions and discussion interspersed regarding property tax not paid and severance tax.

 

 

TAPE 35, SIDE B

 

015

Miller

Explains that over a 50-year period that unpaid taxes would be paid based on the tax rate.

 

025

Rep. Barnhart

If I pay severance tax, does that start the severance tax rate over again back at the $3.89?

 

018

Miller

The rate continues to grow over time for all landowners.  This bill is trying to recover property tax not paid over time, it does not start over for each individual landowner, it increases as the property tax value increases.

 

043

Rep. Barnhart

Hard to understand unpaid taxes are made up for on a single tax rate on severance based on a valuation increase only over time.

 

054

Wallace Rutledge

Testified in favor of HB 2197 and the -1 and -2 amendments.  Provided background and the intention of the bill. HB 2197 attempts to create a streamline version combining two tax programs, encouraging landowners to invest their money into managing small tract forest lands.

 

170

Clint Bentz

Clarified issue on tax rate.  Tax rate indexed every year, increasing and at harvest accrues at the highest tax rate, mimicking interest collection.

 

200

Chair Shetterly

Told the committee, this is an attempt to mimic severance tax that was on the books for all landowners prior to 1999.  A problem with the severance tax was that while it was intended to collect the deferred tax, it actually collected more than the deferred tax.

 

160

Bentz

As of today, there is no deferred tax. People that harvest early and clear cut will pay a penalty.  This bill gives flexibility to the small woodland owner to pay the tax when they harvest and have the money.

 

Questions and discussion interspersed over opt in rates.

 

313

 

 

 

330

Yates

 

 

 

Yates

Provided Committee with “Fiscal Analysis”, (Exhibit 7), “Staff Measure Summary”, (Exhibit 8), “Revenue Impact Statement”, (Exhibit 9), and Slide Presentation”, (Exhibit 10). 

 

Began presentation with overview of the bill

 

334

Yates

Continued testimony, beginning “Extension of 80-20 program”, (Page 1, Slide Bottom, Exhibit 10)

 

350

Yates

Continued testimony, beginning “Extension of 80-20 Program”

 

Continued testimony, beginning “Small Tract Forestland”, (Page 2, Slide Top, Exhibit 10).

 

380

Yates

Continued testimony, beginning “Property Tax”, (Page 2, Slide bottom, Exhibit 10).

 

Questions, discussion interspersed.

 

393

Yates

Continued testimony, beginning “Severance Tax”, (Page 3, Slide Top, Exhibit 10).

 

TAPE 36, SIDE B

 

038

Yates

Discussed Amendment -1, -2, (Exhibits 4 and 5).

 

052

Yates

Continued presentation, beginning “Application Process”, (Page 3, Slide Bottom, Exhibit 10).

 

067

Yates

Continued presentation, beginning “Requirements to Qualify”, (Page 4, Slide Top, Exhibit 10).

 

100

Yates

Continued presentation, beginning “Owner to Notify Assessor”, Page 4, Slide Bottom, Exhibit 10).

 

120

Yates

Continued presentation, beginning “Disqualification”, (Page 5, Slide Top, Exhibit 10).

 

Questions and discussion interspersed.

 

145

Yates

Continued presentation, beginning “Additional Tax”, (Page 5, Slide Bottom, Exhibit 10).

 

Questions and discussion interspersed.

 

165

Yates

Continued presentation, beginning “Severance Tax Administration”, (Page 6, Slide Top, Exhibit 10).

 

202

Yates

Continued presentation, beginning “Severance Tax Distribution” (Page 6, Slide Bottom, Exhibit 10).

 

217

Yates

Continued presentation, beginning “Disqualifications” (Page 7, Slide Top, Exhibit 10).

 

234

Yates

Continued presentation, beginning “Severance Tax Administration”, (Page 7, Slide Bottom, Exhibit 10).

 

243

Yates

Continued presentation, beginning “Conforming Amendments”, (Page 8, Slide Top, Exhibit 10).

 

287

Yates

Continued presentation, beginning “WOSTOT Repeal” (Page 8, Slide Bottom, Exhibit 10).

 

297

Yates

Continued presentation, beginning “Miscellaneous”, (Page 9, Slide Top, Exhibit 10).

 

300

Yates

Continued presentation, beginning “Technical Issues”, (Page 9, Slide Bottom, Exhibit 10).

 

335

 

 

 

Yates

Continued presentation, “Example: Will Penalties Prevent Exit Prior to Harvest (Exhibit 11).

 

Questions and discussion regarding opting in and out of the program.

 

 

TAPE 37, SIDE A

 

067

Bentz

If there are people that take advantage of the systems, this can addressed in future legislatures. 

 

095

Yates

Model recognizes that there will be gainers and losers among those in the program, and anticipated losses in first couple of cycles, but evens out and may raise additional revenue.

 

120

Rep. Verger

Asked what program is an owner in if opt out of the program.

 

126

 

 

132

Yates

 

 

Verger

An owner would move into large owner program and pay property tax at 100% and no harvest tax. 

 

A disincentive would be “if I opt out, then I don’t get to opt back in”.

 

143

Chair Shetterly

MOVES INTRODUCTION OF LC 2337, LC 2339, AS COMMITTEE BILLS.  LC 2337 transfers money from the state school fund to local equalization grant; LC 2339 relates to local option distribution to school fund; and LC 2040 is

 

155

Chair Shetterly

Clarifies the bills entered as Committee Bills, do not indicate support opposition by the members of the Committee.

 

ORDER:  THERE BEING NO OBJECTION, THE CHAIR SO ORDERS.  Members present:  Barnhart, Berger, Farr, Hass, Hopson, Scott, Verger, Williams, Chair Shetterly.

 

162

Chair Shetterly

MOVES INTRODUCTION OF LC 2040 FOR INTRODUCTION AT THE REQUEST OF LEAGUE OF OREGON CITIES AND ASSOCIATED OREGON INDUSTRIES. 

 

ORDER:  THERE BEING NO OBJECTION, THE CHAIR SO ORDERS. Members present:  Barnhart, Berger, Farr, Hass, Hopson, Scott, Verger, Williams, Chair Shetterly.

 

 

 

166

Chair Shetterly

Meeting adjourned at 10:35 a.m.

 

 

Tape Log Submitted by,

 

 

 

Kathy Tooley, Committee Assistant Reviewed by Kim Taylor James

 

Exhibit Summary:

1.       Warner, Staff Measure Summary, HB 2424, 1 page

2.       McNitt, “Testimony HB 2424”, 2 pages

3.       Miller, “Testimony for HB 2197”, 8 pages

4.       Miller, “HB 2197-1”, 3 pages

5.       Miller, “HB 2197-2”, 1 page

6.       Rutledge, “Testimony for HB 2197”, 4 pages

7.       Yates, “Fiscal Analysis of Proposed Legislation”, 2 pages

8.       Yates, “Staff Measure Summary”, 1 page

9.       Yates, “Revenue Impact HB 2197”, 2 pages

10.   Yates, “Slide Presentation HB 2197”, 9 pages

11.   Yates, “Example:  Will Penalties Prevent Exit Prior to Harvest”, 1 page

12.   Chair Shetterly, “LC 2337”, a committee bill, 6 pages

13.   Chair Shetterly, “LC 2339”, a committee bill, 11 pages

14.   Chair Shetterly, “LC 2440”, at the request of League of Oregon Cities, and Associated Oregon Industries”, 22 pages