WORK SESSION: SB 720

 

PUBLIC HEARING: HB 2186A

 

TAPES 97-98, A-B

 

SENATE REVENUE COMMITTEE

April 17, 2003†† 1:00 PM†† STATE CAPITOL BUILDING

 

Members Present:††††††††††† ††††††††††† Senator Ryan Deckert, Chair

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Ted Ferrioli, Vice Chair

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Tony Corcoran

††††††††††† ††††††††††† ††††††††††† ††††††††††† Senator Lenn Hannon

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Charlie Ringo

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Bruce Starr

 

Witnesses Present:††††††††††† ††††††††††† Dexter Johnson, Legislative Counsel

††††††††††††††††††††††† ††††††††††† ††††††††††† Debra Buchanan, Department of Revenue

††††††††††††††††††††††† ††††††††††† ††††††††††† Patrick Green, ORAFL-CIO

††††††††††††††††††††††† ††††††††††† ††††††††††† David Williams, Oregon School Employees Association

††††††††††††††††††††††† ††††††††††† ††††††††††† Kappy Eaton, League of Women Voters of Oregon

††††††††††††††††††††††† ††††††††††† ††††††††††† Jim Craven, American Electronics Association

††††††††††††††††††††††† ††††††††††† ††††††††††† J.L. Wilson, National Federation of Independent Businesses

††††††††††††††††††††††† ††††††††††† ††††††††††† Joe Schweinhart, Association Oregon Industries

††††††††††††††††††††††† ††††††††††† ††††††††††† Rob Douglas, Oregon Society of Certified Public Accountants††††† †††††††††††

 

Staff Present:††† ††††††††††† ††††††††††† Paul Warner, Legislative Revenue Office

††††††††††††††††††††††† ††††††††††† ††††††††††† Richard Yates, Legislative Revenue Office

††††††††††††††††††††††† ††††††††††† ††††††††††† Lizbeth Martin-Mahar, Legislative Revenue Office

††††††††††††††††††††††† ††††††††††† ††††††††††† Tara Lantz, Committee Assistant

 

TAPE 97, SIDE A

 

003

Chair Deckert

Calls meeting to order at 1:20pm.

 

OPENS WORK SESSION ON SB 720

 

013

Sen. Ferrioli

MOTION: MOVES SB 720-1 AMENDMENTS DATED 4/3/03 BE ADOPTED.

 

 

 

015

Sen. Deckert

ORDER: HEARING NO OBJECTION, MOTION PASSES: 5-0-1. SENATOR EXCUSED: RINGO.

 

 

 

025

Sen. Ferrioli

MOTION: MOVES SB 720 TO THE SENATE FLOOR WITH A DO PASS AS AMENDED RECOMMENDATION AND A SUBSEQUENT REFFERAL TO THE WAYS AND MEANS COMMITTEE.

 

 

 

030

Sen. Deckert

ORDER: ROLL CALL VOTE: MOTION PASSES: 6-0-0.

SENATORS ANSWERING AYE: CORCORAN, HANNON, RINGO, STARR, FERRIOLI, DECKERT.

 

CLOSES WORK SESSION ON SB 720

 

OPENS PUBLIC HEARING ON HB 2186A

 

044

Lizbeth Martin-Mahar

Discusses the history of the connection to the federal tax code. Exhibit 2.Compares Oregonís policy to other states. Exhibit 3.

 

 

 

160

Martin-Mahar

Discusses the main components of the 2003 proposed Bush economic plan and gives estimated revenue impacts from the plan in its original House form.

 

 

 

205

Sen. Hannon

Asks if there are other limitations that are going to apply to Oregon in a secondary role because of these deductions that were taken at the federal level.

 

 

 

209

Martin-Mahar

Responds that some of them would feed through to the state level.

 

 

 

215

Sen. Hannon

Asks if disconnecting from the federal tax code would hurt Oregon taxpayers in an unintended way.

 

 

 

225

Martin-Mahar

Responds that they tried to maintain the connection for certain elements of taxable income such as depreciation.

 

Discussion follows.

 

 

 

260

Martin-Mahar

Continues to discuss Bushís proposed plan and estimated revenue impacts.

 

 

 

375

Sen. Deckert

Asks if they could cut the estimated revenue impact in half since the U.S. Senate has proposed cutting the credits in half.

 

 

 

380

Martin-Mahar

Responds that they canít just halve the estimates because they donít know what elements have been changed by the Senate and donít have any numbers.

 

TAPE 98, SIDE A

 

002

Martin-Mahar

Discusses the intent of HB 2186 to prevent revenue loss to Oregon due to changes in federal law while maintaining the connection for important elements. Explains HB 2186, which establishes a date certain as the connection date to the Internal Revenue Code for Oregon tax law matters, while continuing the rolling reconnect for certain elements of taxable income.

 

 

 

030

Martin-Mahar

Explains problem with the bill of disconnecting from the rolling reconnect pertaining to depreciation and expensing depreciable assets for federal law changes.

 

 

 

097

Sen. Ringo

Asks about the importance of the effectiveness of the date and if there are time restraints.

 

 

 

103

Martin-Mahar

Responds that this is a no revenue impact now but as soon as the federal law changes it will be a revenue raising bill.

 

 

 

114

Sen. Ringo

Asks if it is known when the federal law will pass.

 

 

 

115

Sen. Deckert

Responds that Congress is on recess right now but that it could happen very quickly after they get back.

 

 

 

120

Paul Warner

Responds that they are on two week recess and that the House and Senate still have to reach an agreement, but that it could change within a week after they get back.

 

 

 

135

Sen. Hannon

Asks if this requires a 3/5 vote.

 

 

 

137

Warner

Responds that until the federal plan is signed into law they donít need the 3/5 majority vote

Discussion follows.

 

 

 

150

Sen. Hannon

Asks if there could be a constitutional challenge at a later date that there was not a 3/5 vote.

 

 

 

165

Dexter Johnson

Responds that there has not been a court case on the 3/5 majority, but he believes no because they look at the actual state of the law at the time the legislature acts.

 

 

 

198

Sen. Hannon

Asks if future legislation could apply retroactively causing taxpayers to be penalized for using the wrong deduction scale.

 

 

 

244

Johnson

Responds that it depends on the choices that the 2005 legislation makes.

 

 

 

255

Debra Buchanan

Responds that they have had that situation in the past during the 1980ís disconnect and that if federal legislation is passed while the state is disconnected and then the state picks up the changes retroactively, the taxpayers could be charged more taxes without penalties or receive a refund without penalty.

 

Discussion follows.

 

 

 

304

Warner

States that in the 1980ís they disconnected from the depreciation system and that complicated things because a taxpayer has to keep track of the depreciation for the entire life of the asset.

 

 

 

310

Johnson

States that there is a section of the bill that states that interest is not paid on retroactive changes in the future.

 

 

 

316

Sen. Ringo

Asks about the determination for a 3/5 vote.††

 

 

 

324

Johnson

Responds that there is a chance that the vote could be challenged because there has never been a court ruling on it.

 

 

 

335

Sen. Ringo

Points out that the House passed the bill with a 3/5 majority and suggests that the Senate ensure 3/5 majority as well.

 

Discussion follows.

 

 

 

351

Sen. Starr

Asks why there is not an emergency clause on the bill.

 

 

 

355

Johnson

Responds that there is a statute that prohibits emergency clauses on bills that effect taxation.

 

 

 

365

Buchanan

Refers members to summary of the bill. Exhibit 6. Discusses a few of the major elements of the bill.

 

 

 

392

Sen. Deckert

Asks if they have ensured that there are no unintended consequences.

 

 

 

400

Buchanan

Responds that there will be something that is not included, but that they have tried to think of everything.

 

TAPE 97, SIDE B

 

030

Patrick Green

Testifies in support of HB 2186 because it allows the legislature to take control of Oregonís tax system in a time when the federal government is deficit spending.

 

 

 

045

David Williams

Testifies in support of HB 2186 because it will create some certainty that the federal tax code wonít be detrimental to the state.

 

 

 

076

Kappy Eaton

Testifies in support of HB 2186 because it closes one of the loopholes to restructure the Oregon tax system. Refer to written testimony. Exhibit 7.

 

 

 

099

Jim Craven

Testifies that this bill does create more work and costs for tax filers. States that he appreciated the accommodations made in the House.

 

 

 

157

Sen. Deckert

Asks if he would prefer to amend HB 2186 or pass it and amend another bill to fix it.

 

 

 

165

Craven

Responds that they should change HB 2186 to accurately reflect what the chair of the house revenue committee said the intent of the bill was on the house floor.

 

Discussion follows.

 

 

 

202

J.L. Wilson

Testifies that he is opposed to the bill if it is not fixed.

 

 

 

227

Joe Schweinhart

Testifies that they opposed the bill in the house but understand the situation the state is in. States that if they disconnect from the federal tax code, they should work on economic development in the state to help businesses.

 

Discussion follows.

 

 

 

306

Rob Douglas

States that there are still some problems with the bill and makes a commitment that the CPAís will continue to be a resource.

 

CLOSES PUBLIC HEARING ON HB 2186

 

330

Sen. Deckert

Adjourns meeting at 2:34pm.

 

 

Tape Log Submitted by,

 

 

 

Tara Lantz, Committee Assistant

 

Exhibit Summary:

1.      HB 2186A, Lizbeth Martin-Mahar, Staff Measure Summary, 1p.

2.      HB 2186A, Lizbeth Martin-Mahar, Oregon Income Tax Reconnect History, 1p.

3.      HB 2186A, Lizbeth Martin-Mahar, State Relationships to the Federal Tax Code, 1p.

4.      HB 2186A, Lizbeth Martin-Mahar, Revenue Impact from Connecting to the 2003 Proposed Plan, 2pp.

5.      HB 2186A, Lizbeth Martin-Mahar, An Analysis of Changes Resulting from the, 45pp.

6.      HB 2186A, Debra Buchanan, Written testimony, 6pp.

7.      HB 2186A, Kappy Eaton, Written Testimony, 1p.