PUBLIC HEARING, WORK SESSION SB 231

WORK SESSION 362A-A

 

TAPES 244 A, AB

 

HOUSE REVENUE COMMITTEE

AUGUST 23, 2003   9:00 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

 

Witnesses Present:                        Debra Buchanan, Department of Revenue, (DOR)

                                                Representative Tom Butler, House District 60

                                                Mike Grainey, Department of Energy

                                                Marge Kafoury, City of Portland

                                                Dave Fiskum, Providence Health System; Pace Program

                                                Brett Salmon, Oregon Healthcare Association (OHA)

                                                Mike Dewey, Fully Capitated Heatlh Insurance Plans (FCHIPS)

                                                Representative Jeff Merkley, District 47

                                                Laurie Wimmer Whelan, Oregon Education Association

                                                Tim Nesbitt, Oregon AFL-CIO

 

Staff Present:                            Paul Warner, Legislative Revenue Officer

                                                Mazen Malik, Legislative Revenue Office

                                                Lizbeth Martin-Mahar, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 244, SIDE A

 

004

Chair Shetterly

Calls meeting to order at  9:00 a.m.

 

 

OPENED PUBLIC HEARING ON SB 231-A

 

010

Mazen Malik

Provided overview of SB 231, (Exhibit 1).  Provided “Revenue Impact SB 231-A9, A16”, (Exhibit 2).

 

024

Debra Buchanan

Spoke in support of SB 231.  The bill allows DOR to waive interest and penalties on a finding of good and sufficient cause. DOR is in the process of adopting an administrative rule to provide for a waiver of first time offense for a taxpayer.  Attorneys have advised that DOR may not be able to allow  a waiver as there is no good and sufficient cause for missing a deadline.  DOR is asking for authority to adopt such rules.

 

034

Chair Shetterly

The intent of this meeting is to begin hearing proposed amendments to SB 231. SB 231 will be the vehicle for items needed to complete the session.

 

054

Rep. Tom Butler

Spoke in support of –A12 amendment (Exhibit 3), as it allows inclusion of existing hydroelectric generating facilities larger than 1 megawatt of installed capacity to be eligible for the renewable resource (tax credit).

 

068

Mike Grainey

This amends the business energy tax credit program and removes the limit of 1 megawatt on hydroelectric facilities where there is an existing impoundment or dam. This restriction is not included in other incentive programs such as the low interest loan program.  The importance of the business energy tax credit is that there are private developers interested in adding generation or replacing and upgrading their facilities and makes sense from an energy point of view.  Facilities are required to meet DEQ (Department of Environmental Quality) and Fish and Wildlife requirements.  It does not change the amount of the business tax credit, this amendment just changes eligibility requirements for the program.

 

089

Chair Shetterly

It doesn’t change the amount of the credit, but in terms of changing eligibility, is there a revenue impact.

 

090

Malik

Had not seen the amendment.

 

092

Grainey

Believes it would have a small impact as typically only see 1 or 2 facilities every couple of years.  The facility would be in the range of $5 million, the tax credit over 5 years would be 5 to 10 percent annually.

 

098

Rep. Verger

This includes wind power?

 

100

Grainey

That’s in existing statute. This program covers all renewable resources as well as energy conservation for businesses. The only size restriction is on hydro.

 

110

Marge Kafoury

Spoke in support of the -9 amendments (Exhibit 4), formerly heard and passed by the Committee as HB 2379. Provided history of the bill’s progression through the House and Senate this session.  Now before the committee as the -9 amendment in its original form.

 

124

Dave Fiskum

Spoke in support of the -13 amendments, (Exhibit 5), as it solves an inadvertent problem in HB 2152 affecting a new tax on managed health care entities.  It taxes the Pace program without benefit; which was dealt with on its own in HB 2182.  The -13 amendment corrects the language in HB 2152.

 

149

Brett Salmon

It was the intent of OHA that Pace remain its own program as it is funded differently than other fully capitated health plan.  The -13 amendments solve that problem.

 

154

Chair Shetterly

That was the intention.

 

155

Mike Dewey

FCHIPS agreed to tax themselves to leverage federal dollars. With bill moving quickly through the Senate and House, did not have an opportunity to review the amendments. The -13 amendments would provide for a date change from 30 days to 75 days which helps administratively to queue payment FCHIPS makes and its reimbursement; eliminates floating additional revenue to the department, evens out the payment. The Department is agreeable.

 

170

Rep. Barnhart

Has this been vetted with the people working on federal issues?

 

172

Fiskum

Believes the answer is affirmative; these issues as well as others may be in another consensus vehicle.  Presently both sides of the aisle and administration are on board.

 

179

Rep. Barnhart

Just want to make sure Oregon does not get afoul of federal regulators and lose the program as a result.  You have said that is not a problem?

 

180

Fiskum

Believe the answer is affirmative. This has been vetted with the federal attorneys from the Department of Justice as well as Legislative Counsel.  This piece does not run afoul of federal rule or law.

 

189

Malik

The -14 amendments, (Exhibit 6), requested as a technical fix for HB 2152 by the Department of Human Services (DHS), allows for the audit of records for a period of 5 years.

 

196

Chair Shetterly

This relates to what part of HB 2152? Is this the provider tax?

 

197

Malik

Answered affirmatively.

 

199

Malik

Discussed the -15 amendments (Exhibit 7), requested as a technical fix by DOR adds ORS references into HB 2152 and specifies the date for S corporations to file as the same as a federal return.

 

212

Malik

The -16 amendments, (Exhibit 8) deals with an issue resulting from the activation of the National Guard and Reserves for mobilization to the war.  Explained federal and state laws regarding taxation on earnings when deployed by the federal government when outside the state. However, the 1249th Engineering Battalion is deployed in state in the Umatilla rather than to the Middle East, therefore the batallion gains federal income in Oregon and is subject to Oregon tax.  The -16 amendments would exempt that income for a period of two years.

 

247

Chair Shetterly

Requested a sunset of two years be placed on this as affects a specific group of National Guard Reserves.

 

266

Chair Shetterly

Closed the public hearing SB 231 and recessed the meeting.

 

267

Rep. Verger

Would like to know the fiscal impact on any other amendments.

 

269

Chair Shetterly

So far we don’t have a revenue impact? 

 

270

Chair Shetterly

The energy amendment potentially.

 

271

Malik

The -16 amendments are $60,000 for three years.

 

272

Rep. Verger

What is the $5 million?

 

273

Chair Shetterly

That’s the local option property tax impact, that’s not a state general fund.

 

277

Malik

It’s the City of Portland.

 

279

Chair Shetterly

Recessed meeting at 9:20

 

 

TAPE 245, SIDE A

 

001

Chair Shetterly

Reconvened meeting at 2:35 p.m.

 

OPENED WORK SESSION ON SB 231-A

 

004

Chair Shetterly

The –A9 amendment restores language from HB 2379.

 

005

Chair Shetterly

MOTION:  MOVED ADOPTION OF THE –A9 AMENDMENTS INTO SB 231-A.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REPS. BARNHART AND VERGER, EXCUSED).

 

034

Chair Shetterly

There is no revenue impact to the Providence and Pace technical fix -13 amendments.

 

035

Chair Shetterly

MOTION:  MOVED ADOPTION OF THE –13 AMENDMENTS INTO SB 231-A.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REPS. BARNHART AND REPS. VERGER, EXCUSED).

 

040

Chair Shetterly

There is no revenue impact to the -14 amendments; it provides technical amendments to the medical provider tax.

 

041

Chair Shetterly

MOTION:  MOVED ADOPTION OF THE –14 AMENDMENTS INTO SB 231-A.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REPS. BARNHART AND VERGER, EXCUSED).

 

045

Chair Shetterly

There is no revenue impact to the -15 amendments; it provides a technical fix to HB 2152 relating to filing date for S Corporation returns.

 

049

Chair Shetterly

MOTION:  MOVED ADOPTION OF THE –X15 AMENDMENTS INTO SB 231-A.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REPS. BARNHART AND VERGER, EXCUSED).

 

051

Malik

The –A16 amendments were included with the –A9 amendments heard in an earlier meeting.

 

052

Chair Shetterly

The $60,000?

 

055

Malik

Answered affirmatively.

 

056

Rep. Scott

Asked if –A9 amendments had a revenue impact?

 

057

Chair Shetterly

The –A9 amendments do not have a general fund revenue impact, it is a local property tax option.

 

058

Rep. Scott

This revenue impact study doesn’t really refer to –A9 amendments?

 

061

Malik

The $4.5 million in the revenue impact statement is the local City of Portland, Multnomah County impact.

 

064

Malik

The.-A16 is the smaller figure at the bottom, it shows a general fund loss of $60,000 for the 2003-05 biennium.

 

065

Rep. Scott

So it does have an impact of $60,000?

 

073

Chair Shetterly

The –A16 amendments have a $60,000 revenue impact.

 

077

Rep. Hass

Who is seeking this amendment?

 

080

Rep. Williams

Col. Caldwell from the National Guard. There is a group currently on active duty that was going to be deployed to Fort Lewis or overseas. Instead it was assigned to Umatilla. They are not with their families and not in a position to perform regular activities because they are on active duty. They are deployed in Oregon and don’t receive benefit of the tax break other people in the unit receive. The intent was to lessen the burden for this group in active service.

 

093

Rep. Williams

MOTION:  MOVED ADOPTION OF THE –16 AMENDMENT INTO SB 231-A.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REPS. BARNHART AND VERGER, EXCUSED).

 

097

Malik

Provided revenue impact on -A12 amendments (Exhibit 9), with a net negative impact of $3.3 million.

 

121

Chair Shetterly

$3.3-$3.5 million is a little steep at the end (of session) without some accommodation in other budget or revenue.

 

130

Chair Shetterly

The -9, -13, -14, -15, and -16 amendments are already in the bill?

 

131

Malik

Answered affirmatively.

 

136

Chair Shetterly

MOTION:  MOVED SB 231-A, AS AMENDED, TO THE HOUSE FLOOR WITH A DO PASS RECOMMENDATION

 

ROLL CALL:  MOTION PASSED  6-1-2

REPRESENTATIVES VOTING AYE:  Barnhart, Berger, Farr, Hass, Hopson, Verger, Williams, Chair Shetterly.  VOTING NO:  Scott.  EXCUSED:  Barnhart and Verger.

 

144

Chair Shetterly

Recessed at 2:50 p.m.

 

001

Chair Shetterly

Reconvened the meeting at 4:05.

 

 

 

TAPE 247, SIDE A

 

OPENED WORK SESSION ON SB 362

 

007

Lizbeth Martin-Mahar

Described SB 362 as the venture capitalist exemption bill.  The –A5 amendment, (Exhibit 10) deals with the estate tax; it clarifies past and future dates on which Oregon state taxes are connected to the Internal Revenue Code for decedents.  The -5 amendments would put into law the current tax table for decedents after January 1, 2010.  Discussed “Estate Taxes” and “Oregon Estate Taxes”, (Exhibit 11).  Discussed Revenue Impact. “362-5”, (Exhibit 12).

 

095

Martin-Mahar

Discussed multiplier effect in tax table through 2010. Beginning in 2010 the estate tax in Oregon is not imposed.

 

105

Chair Shetterly

The conundrum is to do this on a revenue neutral basis for the 2003-05 biennium. Discussed application of multiplier on larger estates and exempting the estates previously believed to be exempt.

 

120

Rep. Jeff Merkley

Spoke in support of HB 2704 -10 amendments, (Exhibit 13).  Described the estate tax issue as an issue of gravity as baby boomers begin to die and will continue to escalate.  Important to understand in the context of long-term tax policy perspective.

 

160

Rep. Merkley

Discussed historical context of estate tax as a substitute for capital gains.

 

178

Rep. Merkley

Warren Buffett said society benefits from infrastructure paid for by others, and it should not be possible for those that benefit the most to not participate when it comes time to pay capital gains.  Asked the committee to consider the alternative of sunsetting this legislation effective with the end of this biennium and the next legislature can discuss the appropriate path to go forward so as not to get caught in 3/5 majority rule.

 

202

Rep. Merkley

Another option is to use the HB 2704 –A10 amendments, written as a gut and stuff, which would replace estate tax components in SB 362.  Allows raising the exemption limit to $1 million from $600,000.  Two parent family exemption would be $2 million. This clause mimics the federal clause.

 

233

Rep. Merkley

Discussed clause which allows a disconnection from federal legislation.  On page 4 of HB 2704 -10 amendments, in case of decedents, discussed credit calculation mimicking federal clause.  Discussed weights and multipliers  included in the model.

 

283

Rep. Merkley

Asked what the weight was in the Chair’s model.

 

281

Martin-Mahar

1.34 in 2003, 1.38 for 2004.

 

287

Rep. Merkley

Said either option was fine, but believed in the $1 million dollar option, felt it would be appropriate to give back to a community that provided the infrastructure to prosper.

 

312

Chair Shetterly

Asked if it were possible to get a comparable schedule of impacts on Rep. Merkley’s amendment

 

314

Martin-Mahar

In 2003-05 there is no revenue impact and the plan includes multipliers.  It begins in 2005 because there is no multiplier.  The impact is $5 million going from $600,000 to the $1 million.

 

318

Rep. Hopson

Are you saying the sunset would go through if the -5 amendments were introduced rather than HB 2074 -10.

 

327

Rep. Merkley

Suggest a sunset in the context of the Chair’s amendment to continue the conversation tied to Economic Growth and Tax Relief Act (EGTRA) and not be trapped into an ascending schedule.  Also supported $1 million under the HB 2074-10 amendment and inclusion of a sunset. Would support melding the two.  Discussed advantages.

 

362

Rep. Hass

What are exemption levels in Washington and California?

 

365

Chair Shetterly

$700,000 in Washington.

 

367

Martin-Mahar

Washington is connected to the 1997 law and will go to $1 million. Uncertain regarding California’s exemption level.

 

363

Laurie Wimmer

Whelan

OEA is concerned about the impacts of the -5 amendments with respect to estate tax and venture capital changes being contemplated.  It is the position of OEA that technical fixes are rational and necessary as well as the $1 million threshold, but opposes $3.5 million and connection to federal tax law; also opposes the venture capital piece.

 

384

Tim Nesbitt

In Oregon even an unemployed family pays some income tax.   Support estate tax, estimates working families will pay $700 million additional taxes in the next 3 years and will be done in a progressive way which AFLCIO supports.  All projections indicate that money will be required to fund services until a stable and fair tax reform is developed.

 

441

Wimmer Whelan

Problem with venture capital; is not a lack of venture capital, but a lack of projects. If that is the case, this is not the right solution for the problem.

 

456

Chair Shetterly

Discussed conundrum in maintaining revenue neutrality, in a shift from estate’s under $1 million to estates over $1 million.

 

479

Chair Shetterly

Already have $1 million problem because Oregon is not connected to the current tax law.

 

 

TAPE 247, SIDE A

 

030

Warner

Provided background and description of the -A6 amendments, formerly SB 313.  The amendment establishes a credit program to fund the Oregon Production Investment Fund, where tax credits would be sold to corporations and defraying up to 10% of the costs of film production in Oregon.  The –A6 amendments have two changes dealing with dates, the act would apply to tax years beginning 2005.  Tax credits cannot be taken until after July 1 2005.  The bill retains the $1 million limit.  Discussed revenue impact as $0 for 2003-05, $2 million in 2005-07.  Film production would be eligible for expenses for production after January 1, 2005 for up to 10% of costs.

 

065

Rep. Verger

What is the motivation to buy tax credits? Is there some kind of plus to buying these tax credits?

 

072

Warner

The credit is similar a child care credit set up in 2001 and modified in 2003, key to it being attractive is the deductibility on the federal return, plus receiving a state credit.

 

083

Rep. Verger

Where is the fiscal impact statement on this?

 

084

Warner

An impact statement has not been prepared, but the fiscal impact of this piece of the bill would be $0 for 2003-05, $2 million for 2005-07 biennium.

 

092

Rep. Barnhart

Expressed concern regarding the need for discussion of the original bill.

 

093

Chair Shetterly

Answered affirmatively.

 

099

Chair Shetterly

Closed Work Session on SB 362.  Meeting adjourned at 4:50 p.m.

 

 

 

 

 

Tape Log Submitted by,

 

 

 

Kathy Tooley, Committee Assistant

 

Exhibit Summary:

1.       Malik, “Staff Measure Summary SB 321-A”, 1 page

2.       Malik, “Revenue Impact SB 231-A9, A16”, 2 pages

3.       Rep. Butler, “SB 231-A12 Amendments”, 3 pages

4.       Kafoury, “SB 231-A9 Amendments”, 11 pages

5.       Fiskum, “SB 231-A13 Amenments”, 2 pages

6.       Malik, “SB 231-A14 Amendments”, 1 page

7.       Malik, “SB 231-A15 Amendments”, 5 pages

8.       Malik, “SB 231-A16 Amendments”, 1 page

9.       Malik, “Revenue Impact SB231-A9, 16, 12”, 1 page

10.   Martin-Mahar, “SB 362-A5 Amendments”, 8 pages

11.   Martin-Mahar, “Estate Taxes”, 2 pages

12.   Martin-Mahar, “Revenue Impact SB 362-5”, 2 pages

13.   Rep. Merkley, “HB 2704-10 Amendments”, 7 pages

14.   Warner, “SB 362-A6 Amendments”, 6 pages