WORK SESSION SB 226, SB 221, SB 225, HB 2368-A, WORK SESSION HB 3449, HB 2166

 

TAPE 142 AB, 143 A

 

HOUSE REVENUE COMMITTEE

APRIL 24, 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:                        John Phillips, Department of Revenue (DOR)

                                                Debra Buchanan, DOR

                                                Lynn Partin, Housing and Community Services Department

                                                Matt McCauley, Oregon Department of Justice

                                                            Tobacco Compliance Task Force

                                                Don O’Meara, DOR

                                                Jim Gardner, Gardner and Gardner for Phillip Morris

                                                Bill Cross, Council of Independent Tobacco Manufacturers

                                                Bob Russell, Oregon Trucking Association

                                                Patti O’Sullivan, Portland Public School District

                                                Brian Reeder, Department of Education

 

Staff Present:                            Paul Warner, Legislative Revenue Officer

                                                Mazen Malik, Legislative Revenue Office

                                                Lizbeth Martin-Mahar, Legislative Revenue Office

                                                Steve Meyer, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 144, SIDE A

004

Chair Shetterly

Calls meeting to order at 8:40 a.m.

 

016

Mazen Malik

Provided background and description of SB 226 (Exhibit 1).  Discussed -1 amendment (Exhibit 2).  No fiscal impact.

 

049

Chair Shetterly

The revenue impact is indeterminate?

 

051

Malik

Answered affirmatively.

 

044

John Phillips

Worked with the treasurer on amendment, discussed time frame changes, (Exhibit 3).

 

063

Rep. Barnhart

Why can’t this be done by rule, rather than statute?

 

071

Phillips

Could be, it has been there since 1979.

 

076

Chair Shetterly

Would agree.  Department may want to ask for broader rule making authority next biennium for issues that don’t need legislative oversight.

 

080

Chair Shetterly

Closed Public Hearing SB 226.

 

 

OPENED WORK SESSION ON SB 226

086

 

 

090

Rep. Hass

 

 

Rep. Hass

MOTION:  MOVED SB 226 TO THE HOUSE FLOOR WITH A DO PASS RECOMMENDATION

 

AMENDED MOTION:  MOVED ADOPTION OF THE –1 AMENDMENT INTO SB 226

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REP. WILLIAMS, EXCUSED)

 

093

 

 

 

096

Rep. Hass

 

MOTION:  MOVED SB 226, AS AMENDED, TO THE HOUSE FLOOR FOR PLACEMENT ON THE CONSENT CALENDAR WITH A DO PASS RECOMMENDATION.

 

ROLL CALL:  MOTION PASSED 9-0-0

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

 

 

PUBLIC HEARING ON SB 221

118

Lizbeth Martin Mahar

Provided description of SB 221, (Exhibit 4), act is consistent with the Federal Victims of Terrorism Tax Relief Act of 2001 allowing IRS postponement of deadlines.  Does not have revenue or fiscal impact.

 

141

Debra Buchanan

Reiterated Martin-Mahar’s testimony. Summarized SB 221, (Exhibit 5).

 

149

Chair Shetterly

Authority predicated on two events: IRS action, or state declared emergency?

 

152

Buchanan

Answered affirmatively.  Gave examples of other deadlines that might occur.

 

162

Chair Shetterly

Is there some other process for declaring a state emergency, is a Governor’s proclamation?

 

164

Buchanan

I believe it is by the Governor.

 

167

Chair Shetterly

Closed the Public Hearing on SB 221.

 

OPENED WORK SESSION ON SB 221

169

 

 

171

Rep. Scott

MOTION:  MOVED SB 221 TO THE HOUSE FLOOR WITH A DO PASS RECOMMENDATION

 

ROLL CALL:  MOTION PASSED 9-0-0

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

 

Rep. Barnhart  will carry the bill.

 

187

Chair Shetterly

Closed the Work Session on SB 221.

 

 

OPENED PUBLIC HEARING ON SB 225

192

Malik

Provided description of SB 225 as Measure 50 housekeeping, (Exhibit 6).  Discussed -1 amendment, (Exhibit 7). Discussed revenue impact (Exhibit 8).

 

289

Phillips

Described SB 225 as a reconciliation and catch-up on issues from implementation of Measure 50, (Exhibit 9).  Described -1 amendment regarding surviving spouses, addressed with Sen. Dukes and Dexter Johnson of Legislative Counsel, (Exhibit 10).

 

347

Chair Shetterly

You worked this out with Sen. Dukes?

 

348

Phillips

Answered affirmatively.

 

359

Chair Shetterly

Closed public hearing on SB 225.

 

 

OPENED WORK SESSION ON SB 225

362

 

366

Rep. Verger

MOTION:  MOVED ADOPTION OF THE –1 AMENDMENT INTO SB 225.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT).

 

375

 

 

381

 

 

 

384

Rep. Verger

 

 

Rep. Verger

MOTION:  MOVED SB 225, AS AMENDED, TO THE HOUSE FLOOR WITH A DO PASS RECOMMENDATION.

 

AMENDED MOTION:  MOVED SB 225, AS AMENDED, TO THE HOUSE FLOOR FOR PLACEMENT ON THE CONSENT CALENDAR WITH A DO PASS RECOMMENDATION

 

ROLL CALL:  MOTION PASSED 9-0-0

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

 

 

OPENED WORK SESSION ON 2166

400

Martin-Mahar

Described -4 amendments (Exhibit 11).  Provided background (Exhibit 12), and revenue impact (Exhibit 13).

 

479

Chair Shetterly

This bill did two things, added acquisition costs to the credit; increased the amount that could be assigned from 80% to 100%.  The increase from 80% to 100% had the revenue impact.  The Chair requested -A4s for the purpose of keeping the bill alive; move it to the Senate as possible to accommodate revenue impact in the current biennium and have it available to the Senate to make those amendments.  In the worst case delay the revenue impact of increasing the 80% to 100% until the next biennium.

 

509

Rep. Verger

Is there any revenue impact in 2003-05?

 

 

TAPE 143, SIDE A

040

Lynn Partin

No.  All other changes are taking place in 2004; the only thing moving out is the bill with the revenue impact of 80% to 100% transferability.

 

047

Chair Shetterly

May be able to amend and add back in, in the Senate

 

048

Partin

Approved bill as is.

 

052

Rep. Hass

Requested a real world example of selling or transferring credit to a taxpayer subject to taxation.

 

055

Partin

Described big community based projects are usually built by non-profits who can’t take the credits.  To get equity into the project, credits are sold for community investment credits and additional value received.

 

070

Rep. Farr

MOTION:  MOVED ADOPTION OF THE –A4 AMENDMENTS INTO HB 2166.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT.)

 

075

 

 

080

Rep. Farr

MOTION:  MOVED HB 2166, AS AMENDED, TO THE HOUSE FLOOR WITH A DO PASS RECOMMENDATION

 

ROLL CALL:  MOTION PASSED 9-0-0

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

 

Rep. Farr will carry the bill.

 

082

Chair Shetterly

Closed Work Session on HB 2166

 

 

OPENED PUBLIC HEARING ON HB 2368

100

Richard Yates

Provided background and description of HB 2368, (Exhibit 14).     Provided –A5, (Exhibit 15); and –A6 amendments, (Exhibit 16).

 

120

 

 

126

 

 

 

 

 

 

 

Matt McCauley

 

 

McCauley

 

 

 

 

 

 

Described history of Tobacco Compliance Task Force.  Discussed non-compliance crime issue and effectiveness of current statutes. 

 

Discussed “Cigarette Tax”, (Exhibit 17) Historical Tobacco Distribution, (Page 2, Exhibit 17), and “Current Tobacco Distribution”, (Page 3, Exhibit 17).  Intent to get best enforcement structure. Tobacco world divided into two categories: Cigarettes and other tobacco. Lack of enforcement power for licensing requirement has led to non-compliance with the tax.  Discussed sponsors and input on the bill.  Burden on business from this bill relate to requirements in “other tobacco products sales invoice”. Compliance problems and solutions addressed by HB 2368.

 

200

Don O’Meara

Impact of tax non-compliance is in “other tobacco products” area. Auditor discovered $2 million in unpaid taxes in 15 month period. Executed search warrants on illegal operator, legitimate distributors reported business increased 30%.

 

247

Rep. Barnhart

Concern regarding interstate issues, and extraterritorial jurisdiction.

 

250

McCaulley

Discussed federal cooperation. Amendments address threshold out of state business can establish nexus to allow criminal and/or civil enforcement.

 

262

Rep. Barnhart

What is the criminal penalty for violating delivery sales permit requirements?

 

270

McCauley

Provided background, Phillip Morris drafted delivery sales provisions.  Attorney General’s office supports the general concept of delivery sales provisions, but needs adjustment.

 

280

McCauley

Penalty is an A Misdemeanor for violation with criminal penalties; and civil penalties would include a fine.

 

286

Rep. Barnhart

Questions and discussion regarding cigarette giveaway and taxation.

 

302

Rep. Verger

Are Russian companies required to get a permit for delivery sale in Oregon?

 

307

McCauley

Depends on how cigarettes come into the country, if for mass distribution, would need customs and Alcohol, Tobacco and Firearms licensing for distribution with duty paid on import. Russian cigarettes sent via mail/UPS, directly to the consumer would not be known; Manufacturer would not have to be licensed to do that.  Described transnational tax avoidance problem. Described federal law requirements.  Sent letters to 600 internet distributors, none have responded as to who they are mailing cigarettes to.

 

349

Rep. Verger

Of global businesses, are they going to add a tax, where is the liability?

 

360

McCauley

Current law on cigarettes puts the ultimate tax liability is on consumer.

 

381

Rep. Verger

Part of bill is aimed at underage smoking, observed now enticing movie stars to smoke; don’t know how you plug that up, but it bears watching.

 

391

McCauley

Tobacco industry sells a very addictive substance, every time state plugs holes, ingenious people find way around. Bill tries to provide a legal structure that allows flexibility to change with the times and make penalties enough to deter non-compliance.

 

438

Rep. Verger

Where law suit against Phillip Morris is successful, are you worried the money could dwindle if they go out of business?

 

427

McCauley

Discussed concerns. Discussed HB 2094 non-participating manufacturer’s aspect of MSA, discussed task force active role in enforcements of that law and hundreds of tobacco companies located offshore. 

 

496

Chair Shetterly

Amendments? Do you need time?

 

 

TAPE 142, SIDE B

040

McCauley

Difficulty with delivery sales aspect of the amendment, scheduled a task force work group and Pete Shepherd will communicate to the Committee.

 

048

O’Meara

There is another issue that needs time, regarding Ways and Means funding for task force and another amendment which is not ready as yet.

 

060

Jim Gardner

Discussed delivery sales amendments. -A6 adds tools for the state for police enforcement. To Rep. Barnhart’s question a recent 2nd Circuit decision upheld the constitutionality regarding internet sales of cigarettes.

 

074

Gardner

Discussed enforceability issue in -A6 amendment, asks manufacturers to enforce, in addition to Attorney General, against contraband sales.

 

087

Gardner

Estimates untaxed sales of Gray/Black market at +30%. Discussed companion bills.

 

097

Gardner

Work group will look at UPS/Fedex concerns about shipping documents and NPMs.

 

104

Bill Cross

Discussed concerns about additional regulations on compliant NPMs that no other state requires. Recently retained by the coalition.

 

131

Rep. Verger

Do you have reasons to oppose licensing requirements in the bill?

 

135

Cross

Know it is an issue, not comfortable discussing other than no other state has the requirement.

 

145

Bob Russell

Concerns with HB 2368-A, and one set of amendments relating to transport.  Provided history meetings with DOR to work through concerns.  DOR asked cigarette transporters inside and outside the United States to provide notification when transporting cigarettes destined for Oregon.  Doesn’t comport with current practices.  Trucking companies pick up package, but don’t know its contents; -5 amendments fixed that problem.

 

176

Russell

Delivery service requirement to verify cigarettes have stamps has been partially addressed in -6 amendments. Issue with -6 says in complying with notice seller puts on shipping document, modern shipping done electronically, with no bill of lading. Current industry practices make it difficult to comply with requests and difficult to customize for delivery to Oregon only.  Discussed public and private delivery issues.

 

220

Rep. Barnhart

Trucking company may haul packages without knowing the contents?

 

222

Russell

True for package delivery services.  Transporter defined in delivery sales.

 

238

Chair Shetterly

Hoping for consensus amendments.  If the work group cannot agree, would request alternative amendments and the Committee will make choices.

 

248

Chair Shetterly

Closed Public Hearing HB 2368.

 

OPENED WORK SESSION ON HB 3449

255

Meyer

Discussed -4 amendments, (Exhibit 18), clarifies language applies only to Portland School Districts.

 

275

Chair Shetterly

Ozzie Rose and his interests are happy with these amendments?

 

275

Patti O’Sullivan

Answered affirmatively.

 

279

Meyer

Second change is new language in the event Portland pays off their gap bond.  Change is either “A” or “B” not both at the same time.  Balance of language deals with amending temporary and permanent statute changes.

 

304

O’Sullivan

Concur with changes, makes major technical changes; attempt to ensure it doesn’t inadvertently make changes at the same time. Adding this bill to a Senate bill allowing look at entire school funding package at the same time.

 

332

Chair Shetterly

Discussing the amendments. This doesn’t disadvantage any school district.

 

335

O’Sullivan

Answered affirmatively.  This is not a formula bill.

 

340

 

Questions and discussion regarding desegregation dollars and combining this bill with SB 550 and SB 819.

 

354

Rep. Verger

One of the reasons I have been supportive of this bill is because it was Portland’s decision made about Portland Schools.  Will that complicate that position if folded into another bill?

 

364

O’Sullivan

Does not believe so, the bill has had a hearing if SB 819 is not supported, it can go on its own.

 

373

Chair Shetterly

These bills will still be discrete in their impact.

 

362

Brian Reeder

Discussed gap bond rate and permanent rate.  It applies only to Portland, question is why does that make sense other than Portland needs more money, but so does every other school district in this state?

 

407

Chair Shetterly

Is this a discussion for the Committee?

 

408

O’Sullivan

Responded no.

 

413

Chair Shetterly

Closed Work Session HB 3449.

 

 

415

Chair Shetterly

Meeting adjourned at 10:00 a.m.

 

 

Tape Log Submitted by,

 

 

 

Kathy Tooley, Committee Assistant

 

Exhibit Summary:

1.       Malik, “Staff Measure Summaries, Revenue Impact SB 226”, 3 pages

2.       Malik, “SB 226-1 Amendment”, 2 pages

3.       Phillips, “Testimony SB 226 and the -1 Amendment”, 1 page

4.       Martin-Mahar, “Staff Measure Summaries SB 221”, 2 pages

5.       Buchanan, “Testimony SB 221”, 1 page

6.       Malik, “Staff Measure Summaries, Revenue Impact SB 225”, 3 pages

7.       Malik, “SB 225-1 amendment”, 3 pages

8.       Malik, “Revenue Impact SB 225”, 1 page

9.       Phillips, “Testimony SB 225 Reconciliation of 2001 Legislation”, 2 pages

10.   Phillips, “Testimony SB 225-1 Amendment”, 2 pages

11.   Martin-Mahar, “HB 2166-A4 amendment”, 23 pages

12.   Martin-Mahar, “Staff Measure Summary HB 2166A-A4, 1 page

13.   Martin-Mahar, “Revenue Impact HB 2166A-A4”, 1 page

14.   Yates, “Staff Measure Summary HB 2368”, 1 page

15.   Yates, “HB 2368-A5 Amendment”, 1 page

16.   Yates, “HB 2368-A6 Amendment”, 6 pages

17.   McCauley, “Cigarette Tax”, 3 pages

18.   Meyer, “HB 3449-4 Amendment”, 16 pages