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PUBLIC
HEARING HB 2184, HB 2503, HB 2704 |
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TAPE 75 A-B,
76 A |
MARCH 11,
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: Rep. Randy Miller, District 37
Rep.
Tom Butler, District 60
Jeff
Cheyne, Attorney, Myatt, Bell & Cheyne, P.C.
Don
Schellenberg, Oregon Farm Bureau
Tom
Brawley, Oregon Farm Bureau
Don
Cersovski, Oregon Farm Bureau
J.L.
Wilson, NFIB
Patrick
Green, AFL-CIO, Oregon Revenue Coalition
Clif
Kenagy, retired Albany farmer
Debra
Buchanan, Oregon Revenue Department
Staff Present: Paul
Warner, Legislative Revenue Officer
Lizbeth
Martin-Mahar, Legislative Revenue Office
Kathy
Tooley, Committee Assistant
TAPE 75, SIDE A
|
004 |
Chair Shetterly |
Calls meeting to order at 8:34 a.m. |
PUBLIC HEARING HB 2184, 2503, 2704
|
022 |
Lizbeth Martin-Mahar |
Provided background of current law and recent changes in estate tax
law, (Exhibit 1), described connection to federal estate tax law changes,
(Exhibit 2). |
|
100 120 |
Martin-Mahar Martin-Mahar |
Two components need to be a part of any change in estate tax area: ·
A
statement for the DOR on tax treatment of Oregon estates with deaths between
1997 and 2001. ·
Tax
treatment for Oregon estates for 2002 and future years. Encompassed in change need to consider: ·
What
is Oregon’s estate value, filing threshold, and should it be connected to
federal law? ·
What
is method of imposing estate tax in the future beyond phase out in 2005? |
|
132 |
Martin-Mahar |
Summarized intent of HB 2184, need for additional clarifying language;
and potential fiscal impact, (Exhibit 3). |
|
170 |
Martin-Mahar |
Summarized intent and provided background of HB 2704; discussed revenue
impact, (Exhibit 4). |
|
203 |
Martin-Mahar |
Summarized intent of HB 2503, need for additional clarifying
language; discussed possible revenue impact under different connection
assumptions (Exhibit 5). |
|
237 |
Chair Shetterly |
Issues that need to be discussed: ·
Federal
changes in capital gains step up in basis. ·
What
happens January 1, 2011 when the estate tax is re-imposed, does Oregon go back
to a pick-up tax? |
|
237 |
Rep. Randy Miller |
Spoke to philosophy behind HB 2503.
Endorsed elimination of objectionable estate tax. Stated that throughout a person’s life,
property and income in an estate has been taxed, making this a double tax. Estate
taxes could force a family to close its business. |
|
297 |
Rep. Tom Butler |
Spoke in favor of HB 2503, described family experience filing a 706
U.S. death tax return, and issues relative to filing multi-state tax returns,
particularly with Oregon. Oregon’s
estate tax required family to choose to divide the family business in order
to avoid payment of $40,000 in Oregon taxes in limited cash situation. Further issues involved DOR with equality
on estate tax exemptions going back to 1996 where modifications in the law
had not actually been made. Concern is Oregon is unique in inability to make
up its mind where it needs to be relative to other states, created a complex
situation in settling multi-state estate taxes. |
|
402 |
Chair Shetterly |
Assume it would be easier for you and your clients receiving
inherited capital assets to connect with federal law changes relative to step
up in basis? |
|
404 |
Rep. Butler |
Correct, not just when selling the assets, also includes multiple
depreciation schedules. |
TAPE 76, SIDE A
|
002 |
Jeff Cheyne |
Discussed
benefits and problems associated with the three bills, (Exhibit 6). Until 2002, could advise clients of
certain principles: ·
If
no federal tax due, then no state inheritance tax due. ·
When
first spouse passes away, no federal or state tax due (not addressed in
today’s bills). |
|
073 |
Cheyne |
Issue how to ensure compliance when federal return is not required,
there is possible problem with ensuring compliance. |
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083 |
Cheyne |
HB 2184 addresses procedural issues and lack of statute concerning
Oregon inheritance tax. HB 2184 also
addresses ORS 118.160 where Oregon tax is not owed unless federal return is
required. |
|
110 |
Cheyne |
Suggested remedial provisions be placed in one bill, cleaning up
items that are revenue neutral. Address
future revenue concerns in a separate bill. |
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122 |
Hass |
Do you approve of HB 2184? |
|
126 |
Cheyne |
Not completely. Concern is
with section applying to 2002 and 2003.
Gave example of woman required to pay $25,000 tax, suggested a marital
deduction paid on death of surviving spouse. Another unworkable aspect of HB
2184 affects 2003 and beyond which will be addressed by Debra Buchanan. Favors HB 2704 overall, although there is
a reduction in revenue, simplifies administration and compliance by federal
tax exemption alignment. |
|
160 |
Don Schellenberg |
Spoke in support of the principle of eliminating of inheritance tax
provided in HB 2503 and HB 2704, (Exhibit 7). Discussed elimination of death
tax as critical issue for Oregon family farms. Farm Bureau supports connection
to federal statutes, for ease in bookkeeping, and less expense. |
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231 |
Tom Brawley |
Spoke in support of HB 2503 and HB 2704. Discussed family business, incurred debt and burden death tax
will be on heirs, estimated at 22% of estate. Revenue removed from the state would be approximately 1%. |
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315 |
Don Cersovski |
Spoke in favor of elimination of the death tax. Described tax as double
taxation, (Exhibit 8). Gave example
of 90 year farm that was dissolved short of receiving century farm
designation to pay taxes. Questions and discussion regarding 90 year-old farm. |
|
389 |
Rep. Barnhart |
Has Farm Bureau examined any alternatives to eliminating inheritance
tax such as raising exempted amount, or exempting farm land totally? |
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446 |
Chellenberg |
No, because the Farm Bureau believes the inheritance tax issue is flawed. |
TAPE 75, SIDE B
|
031 |
Rep. Farr |
Agrees with Rep. Miller, that this is not the right kind of taxation. |
|
036 |
Cersovski |
What is the difference between deductions taken for interest taken on
a loan to pay taxes vs. getting the money up front? |
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049 |
Rep. Hass |
You want to cap mortgage interest deductions? |
|
050 |
Cersovski |
No. How close to revenue neutral would a mortgage deduction be over
30 years? |
|
056 |
Rep. Hass |
The Committee has sympathy for the plight of farmers, but don’t get a
lot of suggestions as to how to improve system that will ensure quality of
education and life so people want to be here in the first place. |
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072 |
Brawley |
Farm Bureau has tax committee here next week and would like to bring
back their answer. |
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075 |
Rep. Barnhart |
Important to hear suggestions.
Worth looking into interest deduction on farmland mortages as a
business expense. |
|
091 |
Rep Scott |
Sympathize with farmers, noted the revenue impact is less than half a
percent on the General Fund. |
|
138 |
J.L. Wilson |
Supported the three bills in concept with suggestions for additional
language. |
|
190 |
Patrick Green |
Spoke in opposition to the three bills, in particular HB 2503, 2504, because
Oregon cannot afford now, possibly would support in the future; said these
industries already get tax breaks. |
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236 |
Clif Kenagy |
Testified in opposition to statements made prior. Discussed “Three Hypothetical Tax
Scenarios for the Next Generation Farmer”, (Exhibit 11). Said the problem is the value of the land,
not the inheritance tax. |
|
354 |
Debra Buchanan |
Provided history and discussed issues including the lack a specific
date referenced in ORS Chapter 118. After
2001 session, DOR realized there was a problem. Discussed tax that does not work together, resulting in a tax
on a benefit not received. In this
session, seek to clarify what the Legislature intended prior to reconciling
back taxes. |
|
407 |
Buchanan |
Summarized HB 2184 conforming the law to what was practice in
1998-2001, (Exhibit 12). For 2002,
DOR interpreting and applying current law, using an exclusion of $600,000,
which does not tie to TRA 1997 for 2002 returns. HB 2184 ties Oregon to changes for 2002, taxpayer could amend
and use $700,000 exclusion. For
deaths in 2003 and later, Oregon reflects pre-TRA 1997 law; DOR does not make
presumption about legislative intent, goes back to current law; discusses
issue and statute of limitations. Advised
there needs to be other legislation to conform the three statutes and make
them work together. |
|
016 |
Verger |
Additional language in HB 2184?
Is that what you are referring to? |
TAPE 76, SIDE B
|
015 |
Buchanan |
Answered affirmatively, could be additional language to HB 2184 or
another bill to address 2003 and later; at 2003 estate taxation goes back to
current law which needs to be fixed. Questions and discussion about what HB 2184 does |
|
049 |
Buchanan |
HB 2184 does what DOR felt 1999 Legislature intended. It applies those changes through 2002,
beyond that leave Oregon inheritance tax to Legislature’s judgment. |
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054 |
Barnhart |
How many estates are we talking about? |
|
058 |
Buchanan |
Fewer than 1000 returns filed each year. A couple of hundred are impacted over those 4 years that might
have a potential increase in Oregon tax. |
|
073 |
Vice Chair Verger |
Meeting adjourned at 10:01 a.m. |
Tape Log Submitted by,
Kathy Tooley, Committee
Assistant Reviewed by Kim Taylor James
Exhibit Summary:
1.
Martin-Mahar,
“Current Law and Recent Changes in Federal Estate Tax Law”, 1 page
2.
Martin-Mahar,
“June 2002 NCSL Survey, States Connection and Decoupling from Federal Estate
Tax Law Changes”, 1 page
3.
Martin-Mahar,
“Staff Measure Summary HB 2184”, 1 page
4.
Martin-Mahar,
“Staff Measure Summary HB 2503”, 1 page
5.
Martin-Mahar,
“Staff Measure Summary HB 2704”, 1 page
6.
Cheyne,
“Testimony HB 2184”, 5 pages
7.
Schellenberg,
“Testimony HB 2503, HB 2704”, 2 pages
8.
Cersovski,
“Testimony HB 2503 and HB 2704”, 1 page
9.
Green,
“Testimony HB 2503”, 3 pages
10.
Green,
“Testimony HB 2704”, 3 pages
11.
Kenagy,
“Three Hypothetical Tax Scenarios for the Next Generation Farmer”, 1 page
12.
Buchanan,
“Testimony HB 2184”, 1 page