PUBLIC HEARING HB 2191

WORK SESSION, HB 2542, HB 2629

 

TAPES 86-87 A-B

 

HOUSE REVENUE COMMITTEE

MARCH 22, 2005   1:00 PM   STATE CAPITOL BUILDING

 

Members Present:                      Rep. Tom Butler, Chair

                                                Rep. Vicki Berger, Vice-Chair

                                                Rep. Mark Hass, Vice-Chair

                                                Rep. Brian Boquist

                                                Rep. Sal Esquivel

                                                Rep. Larry Galizio

                                                Rep. Betty Komp

                                                Rep. Andy Olson

                                                Rep. Chuck Riley

                       

 

Witnesses Present:                      Veronica Rinard, Portland                                                                                                                       Gus van Sant, Film Director, Portland

                                                Joe Schweinhart, Associated Oregon Industries (AOI)

                                                Rep. Wayne Krieger, District 1         

                                                Debra Buchanan, Dept. of Revenue (DOR)                        

 

 

Staff Present:                          Paul Warner, Legislative Revenue Officer

                                                Lizbeth Martin-Mahar, Economist

                                                Kristi Bowman, Committee Assistant

                                               

 

TAPE 86, SIDE A

002

Chair Butler

Calls meeting to order at 1:04 p.m.

 

 

 

OPENS PUBLIC HEARING FOR HOUSE BILL 2191

 

 

 

008

Lizbeth Martin-Mahar

Gives overview of HB 2191 (Exhibit 1). This bill creates a new rebate for people who invest $1 M or more in actual expenses on film productions in Oregon. Discusses withholding rate and reporting requirements. Discusses the HB 2191–A3 amendment (Exhibit 2) that requires the person claiming the labor rebate to file a report to the OR Film and Video Office. Amendment HB 2191-A3 reduces the fiscal impact on the Dept. of Revenue. Discusses amendment HB 2191-A4 (Exhibit 3) which specifies the special withholding rate at 6.2% of the compensation paid for employees engaged in qualifying film production.  Discusses the Green Light Rebate Fund. The revenue impact is speculative based on how many new film productions will come to OR.

 

 

 

126

Veronica Rinard

Reads from written testimony (Exhibit 5) in support of HB 2191. Discusses the Green Light Investment Fund program.

 

 

 

189

Gus van Sant

Testifies in support of HB 2191. Discusses the impact of higher production costs in OR, for example, high hotel rates in Portland.

 

 

 

221

Rep. Riley

Asks Rinard for more specifics of the Louisiana incentive programs.

 

 

 

223

Rinard

Responds that Louisiana offers a 10-15% labor tax credit, and a 15-20% investment tax credit. Since those are state credits, the film company sells them back to a Louisiana business for 60 to 70 cents on the dollar.

 

 

 

235

Rep. Berger

Asks about financial decisions made regarding production costs. How many jobs would be available for Oregon residents?

 

 

 

263

Rinard

Responds that it depends on the level of production. Large studio feature film companies bring about 150-200 production staff and hire another 150-200 local people. Independent film and television movie companies hire 150-200 local people and bring about 10-15 production staff. Many people in film-related businesses have either left Oregon or are working in non film-related lower paying jobs in the state.

 

 

 

282

Rep. Riley

Asks about the length of time spent on large and small film productions.

 

 

 

291

Rinard

Responds that on a large film the jobs can last 6 to 8 months in addition to any pre-production work. For small films, there is a 2-3 month preproduction time in the state for the production crew, and local employment can last 5-6 weeks during shooting.

 

 

 

307

Chair Butler

General comments to committee members about this bill.

 

 

 

310

Rep. Riley

Comments on the same presentation of HB 2191 recently made to the Trade and Economic Committee, of which Rep. Riley is a member.

 

 

 

CLOSES PUBLIC HEARING FOR HOUSE BILL 2191

 

 

 

OPENS WORK SESSION FOR HOUSE BILL 2629

 

 

 

344

Rep. Boquist

Gives overview of options developed by the committee work group on the estate tax thresholds: (Refer to Exhibits 1, 2, and 3 for 03/07/05)

  • 1.      Compression, which is revenue neutral
  • 2.      Adding to the top income bracket
  • 3.      Taking the bill as is, which is the $1.5 M threshold in 2007 and the $2 M threshold in 2009
  • 4.      Connect to the federal threshold of $2 M in 2007, and $3.5 M threshold in 2009. Neither one is revenue-neutral
  • 5.      Doing nothing

Comments that his caucus prefers options 3 and 4.

 

 

 

362

Rep. Riley

Comments that his caucus prefers a revenue-neutral bill that raises the lower limits and adds tax brackets at the top.

 

 

 

378

Martin-Mahar

Discusses revenue impacts of various tax brackets. Will provide additional information to committee members regarding percentages of estate tax relating to the state and federal threshold limits.

 

 

 

TAPE 87, SIDE A

012

Rep. Wayne Krieger

Provides invited testimony in support of HB 2629 and discusses how the bill affects small woodland owners like him. Comments that half of the timber on his property would have to be clear-cut in order to pay the death tax.

 

 

 

CLOSES PUBLIC HEARING FOR HOUSE BILL 2629

 

 

 

OPENS WORK SESSION FOR HOUSE BILL 2542

 

 

 

070

Chair Butler

Discusses written testimony received from Jonah Edelman, Stand for Children in opposition to HB 2542 (Exhibit 6). Discusses written testimony received from the Oregon Metals Industry Council supporting full reconnect to the federal tax code (Exhibit 7). Discusses written testimony received from the Smart Growth Coalition supporting full reconnect (Exhibit 8). Refers to handout from Paul Warner, Legislative Revenue, regarding the employment history of payroll jobs affected by the Qualified Production Activities Deduction (Exhibit 9).

 

 

 

102

Joe Schweinhart

Provides invited testimony in support of HB 2542 as “a rolling or permanent reconnect.” Reads from written testimony (Exhibit 10) regarding various components of the bill affecting the members of AOI.

 

 

 

139

Chair Butler

Asks about the number of new jobs, new plants or capital equipment the AOI businesses project as a result of this bill.

 

 

 

141

Schweinhart

Responds that there are no specific figures available, but the manufacturing business members believe HB 2542 will definitely help in the growth of industry. Adds that as economic growth takes place, employment and capital investment should increase.

 

 

 

152

Chair Butler

Reads from written testimony submitted by Jim Craven, Oregon Council AEA, supporting HB 2542 in order to “help encourage additional jobs and capital investment in the state” (Exhibit 11). 

 

 

 

190

Chair Butler

Discusses e-mail from Karey Schoenfeld representing the Oregon Society of CPAs (Exhibit 12). They support a full reconnect to the federal tax code because of additional costs associated with amended tax returns and possible compliance issues.

 

 

 

210

Chair Butler

Additional discussion of the handout from Warner (Exhibit 9). 

 

 

 

 

227

Chair Butler

Refers to  the HB2542-1 amendment that provides for the re-establishment of the rolling reconnect and the 2542-2 amendment establishing the reconnect date at 01/01/06 (see hearing date 03/09/05)

 

 

 

250

Martin-Mahar

Refers to handout: Amendments to HB 2542 (Exhibit 13). Discusses amendment HB 2542-3, sales tax deduction add-back (Exhibit 14).

 

 

 

290

Rep. Hass

Comments that the sales tax deduction is a new federal tax deduction. Adds that using this deduction against Oregon income is a $1 M “hit” to the state treasury. Comments that he is unsure why Oregon would be willing to allow this deduction at this time.

 

 

 

306

Debra Buchanan

Comments that this is a policy decision for the committee. Without clear direction from the legislature, the DOR would be unable to answer whether a non-resident taxpayer could do something different for their Oregon return than for their federal return. Discusses “border war issues” with Washington regarding Oregon’s tax policies.

 

 

 

370

Chair Butler

Further discussion with Buchanan and Martin-Mahar regarding the HB 2542-3 amendment.

 

 

 

402

Rep. Riley

Comments about the impact of the HB 2542-3 amendment on taxpayers that do not itemize.

 

 

 

413

Buchanan

Responds that the HB 2542-3 amendment would affect people whose sales tax deduction is larger than their income tax deduction. Presumably the non-resident taxpayers would be low-income or have enough credits to offset their income tax.

 

 

 

435

Chair Butler

Expresses concerns about impacts on Washington residents who work in Oregon.

 

 

 

TAPE 86, SIDE B

028

Martin-Mahar

Discusses the HB 2542-4 amendment (Exhibit 15), US Qualifying Production Activities add-back, and the revenue impact. Comments that adopting this amendment would result in making HB 2542 a revenue- raising bill and require a 3/5 vote.

 

 

 

045

Martin-Mahar

Discusses the HB 2542-5 amendment (Exhibit 16), federal Medicare subsidies for prescription drug plans add-back. Taxpayers would have to recalculate federal tax and add back income. Discusses the revenue impact in the 2005-07 biennium and the 2007-09 biennium.

 

 

 

063

Rep. Berger

Asks for clarification of the term “revenue positive” in the next two bienniums.

 

 

 

065

Martin-Mahar

Discusses the specific dollar figures on page 2 of Exhibit 13 that help explain the term “revenue positive.” Adds that according to

Legislative Counsel, if the revenue committee is not putting in these amendments to raise revenue, a 3/5 vote is not required

 

 

 

081

Martin-Mahar

Discusses the HB 2542-6 amendment (Exhibit 17), Health Savings Accounts add-back and the revenue impact.

 

 

 

098

Martin-Mahar

Discusses the HB 2542-7 amendment (Exhibit 18). It is a technical correction to the language of the bill allowing different effective dates of specific federal tax legislation. No revenue impact.

 

 

 

110

Martin-Mahar

Discusses the HB 2542-8 amendment (Exhibit 19) which is the same as the HB 2542-1 amendment except for the dividends received deduction in Oregon. It provides an 85% dividend deduction received from foreign corporations for all future years.

 

 

 

143

Rep. Hass

Clarifies that this dividend deduction will only be a continuation at the 85% rate. The HB 2542-1 amendment would end the deduction of 85%.

 

 

 

156

Rep. Boquist

Clarifies that the deduction would be brought down to 85% from the 96% deduction currently in effect.

 

 

 

169

Martin-Mahar

Discusses the HB 2542-9 amendment (Exhibit 20) regarding dividends. It is the same as the HB 2542-2 amendment except for the dividends received deduction in Oregon. 

 

 

 

180

Rep. Riley

Clarifies the dividend deductions in the HB 2542-1 and HB 2542-2 amendments.

 

 

 

186

Rep. Galizio

Asks about dividend deductions and repatriations.

 

 

 

194

Martin-Mahar

Discusses the 85% dividend deduction in more detail.

 

 

 

214

Rep. Boquist

Asks about dividends received for the one year reconnect period.

 

 

 

220

Martin-Mahar

Responds that the IRS put the dividends from foreign controlled corporations into a different chapter of the Tax Code. The HB 2542-8 and HB 2542-9 amendments would eliminate the “double-dipping” by some corporations with foreign earnings. Further discussion on dividend deductions with Rep. Boquist.

 

 

 

250

Chair Butler

General comments to committee about the reconnect bill. States that he strongly supports a full reconnect to the federal tax code in order to reduce the cost of amended returns. Reviews all amendments discussed.

 

 

 

303

Rep. Riley

Requests more information about the 85% “dividend received” deduction.

 

 

 

 

319

Martin-Mahar

Responds that the HB 2542-1 and HB 2542-2 amendments are needed to reduce the dividend deduction at 85%.

 

 

 

323

Rep. Boquist

Asks about the HB 2542-1 amendment pertaining to military benefits currently pending in federal legislation.

 

 

 

340

Martin-Mahar

Explains that the HB 2542-1 amendment establishes a rolling reconnect connecting to all federal tax legislation passed in 2005, and that would include the pending death benefit for active military currently under consideration by Congress.

 

 

 

355

Rep. Boquist

Comments that the concept of the dividend deduction proposed in the HB 2542-8 and HB 2542-9 amendments is to encourage corporations to bring back their foreign earnings to Oregon.

 

 

 

370

Martin-Mahar

Adds that there has been a concern about the timing of a company bringing back their foreign earnings, and amendments HB 2542-8 and HB 2542-9 would address that issue.

 

 

 

376

Rep. Berger

MOTION: MOVES THE ADOPTION OF THE HB 2542-1 AMENDMENT.

 

 

 

390

Rep. Riley

Clarifies that if the committee adopts amendment HB 2542-1, then HB 2542-2 will not be adopted, and vice-versa.

 

 

 

400

Chair Butler

Concurs that either amendment will be adopted, but not both.

 

 

 

413

Rep. Berger

Comments that she sees the HB 2542-1 amendment as the most expedient way to fully reconnect as of 01/01/05 and make it as simple as possible for most taxpayers. Adds that the HB 2542-2 amendment postpones the reconnect date and forces amended tax returns.

 

 

 

438

Chair Butler

Asks for roll call vote.

 

 

 

459

Chair Butler

MOTION PASSES 8-1-0. ANSWERING AYE: BOQUIST, ESQUIVEL, GALIZIO, OLSON, RILEY, BERGER, HASS, BUTLER. ANSWERING NAY: KOMP.

 

 

 

TAPE 87, SIDE B

021

Rep. Berger

MOTION: MOVES THE ADOPTION OF THE HB 2542-3 AMENDMENT.

 

 

 

028

Chair Butler

ORDER: THERE BEING NO OBJECTION, THE CHAIR SO ORDERS. MOTION PASSES 9-0-0. ANSWERING AYE: BERGER, BOQUIST, ESQUIVEL, GALIZIO, HASS, KOMP, OLSON, RILEY, BUTLER.

 

 

 

030

Rep. Berger

MOTION: MOVES THE ADOPTION OF THE HB 2542-7 AMENDMENT.

034

Chair Butler

ORDER: THERE BEING NO OBJECTION, THE CHAIR SO ORDERS. MOTION PASSES 9-0-0. ANSWERING AYE: BERGER, BOQUIST, ESQUIVEL, GALIZIO, HASS, KOMP, OLSON, RILEY, BUTLER.

 

 

 

036

Rep. Hass

MOTION: MOVES THE ADOPTION OF THE 2542-4 AMENDMENT.

 

 

 

040

Rep. Hass

Expresses concern about amendment HB 2542-4. Discusses decoupling from the provisions concerning corporate deductions that won’t work well for OR.

 

 

 

084

Rep. Berger

Agrees with Rep. Hass about policy decisions made at the federal level that the state “did not have a hand in.” Disagrees that this is the place to “make a line in the sand.” Comments that the rolling reconnect helps every Oregonian who files a tax return, including businesses. Advocates for the rolling reconnect.

 

 

 

110

Chair Butler

Asks for discussion on the motion. Discusses previous testimony from various businesses and individuals regarding the reconnect issue.

 

 

 

137

Chair Butler

Asks for roll-call vote.

 

 

 

140

Chair Butler

MOTION FAILS 4-5-0. VOTING AYE: GALIZIO, KOMP, RILEY, HASS. VOTING NAY: BOQUIST, ESQUIVEL, OLSON, BERGER, BUTLER.

 

 

 

143

Rep. Hass

MOTION: MOVES THE ADOPTION OF THE HB 2542-5 AMENDMENT.

 

 

 

145

Chair Butler

Asks for discussion on the motion.

 

 

 

146

Rep. Hass

Expresses concerns about subsidies to insurance industry. Comments that no testimony from the insurance industry was given in support of this amendment.

 

 

 

161

Chair Butler

Comments that it is his understanding that this subsidy would be for businesses to continue to offer drug coverage to their employees. Comments that there seems to be a disagreement regarding who is the beneficiary of this amendment.

 

 

 

179

Chair Butler

Asks for roll-call vote.

 

 

 

186

Chair Butler

MOTION FAILS 4-5-0. VOTING AYE: GALIZIO, KOMP, RILEY, HASS. VOTING NAY: BOQUIST, ESQUIVEL, OLSON, BERGER, BUTLER.

 

 

 

193

Rep. Hass

MOTION: MOVES THE ADOPTION OF THE HB 2542-6 AMENDMENT.

 

 

 

195

Chair Butler

Asks for discussion on the motion.

 

 

 

200

Rep. Hass

Expresses concern that “this is another health care expenditure that could be better spent.”

 

 

 

209

Chair Butler

General comments about the HB 2542-6 amendment. Asks for additional discussion.

 

 

 

212

Chair Butler

Asks for roll-call vote.

 

 

 

218

Chair Butler

MOTION FAILS 4-5-0. VOTING AYE: GALIZIO, KOMP, RILEY, HASS. VOTING NAY: BOQUIST, ESQUIVEL, OLSON, BERGER, BUTLER.

 

 

 

223

Rep. Berger

MOTION: MOVES HB 2542-1, HB 2542-3, AND HB 2542-7 AS AMENDED TO THE HOUSE WITH A DO-PASS RECOMMENDATION.

 

 

 

229

Chair Butler

Asks for discussion on the motion.

 

 

 

230

Rep. Berger

Commends the committee’s analysis of the reconnect issues involved with HB 2542. Advocates the rolling reconnect.

 

 

 

258

Rep. Hass

Expresses concern that the committee pass provisions that are “reasonable” and advocates decoupling from two provisions [pertaining to business dividend credits] that would better serve all Oregonians.

 

 

 

274

Rep. Galizio

General comments about the difficult policy choices involved with this legislation.

 

 

 

292

Rep. Riley

Expresses concern that the committee could have done better on the reconnect issues.

 

 

 

302

Chair Butler

General comments about reconnect issues affected by HB 2542.

 

 

 

363

Chair Butler

Asks for roll-call vote.

 

 

 

367

Chair Butler

MOTION PASSES 6-3-0. VOTING AYE: BOQUIST, ESQUIVEL, OLSON, RILEY, BERGER, BUTLER. VOTING NAY: GALIZIO, KOMP, HASS.

 

 

 

369

Rep. Hass

SERVES NOTICE OF POTENTIAL MINORITY REPORT FOR HB 2542.

 

 

 

CLOSES WORK SESSION FOR HOUSE BILL 2542

 

 

 

375

Chair Butler

Adjourns meeting at 2:50 p.m.

 

 

 

 

 

 

Tape Log Submitted by:

Reviewed by:

 

 

 

Kristi Bowman, Committee Assistant

Kim Taylor James, Committee Coordinator

 

Exhibit Summary:

  1. HB 2191, Staff Measure Summary, Martin-Mahar, 1 pg., 03/22/05
  2. HB 2191, Amendment 2191-A3, Legislative Counsel, 2 pp., 03/18/05
  3. HB 2191, Amendment 2191-A4, Legislative Counsel, 1 pg., 03/22/05
  4. HB 2191, Handout: Lights, Camera…Oregon!, Oregon Labor Market Information System, 3 pp., 03/15/05
  5. HB 2191, Testimony and Handouts, Rinard, 8 pp., 03/22/05
  6. HB 2542, Testimony, Edelman, 2 pp., 03/22/05
  7. HB 2542, Testimony, Nelson, 1 pg., 03/22/05
  8. HB 2542, Testimony, Smart Growth Coalition, 1 pg., 03/22/05
  9. HB 2542, Handout: Oregon Industries Impacted by the Qualified US Production Activities Deduction, Warner, 1 pg., 03/22/05
  10. HB 2542, Testimony, Schweinhart, 2 pp., 03/22/05
  11. HB 2542, Testimony, Craven, 1 pg., 03/22/05
  12. HB 2542, Testimony, Schoenfeld, 1 pg., 03/21/05
  13. HB 2542, Handout: Summary of Amendments, Martin-Mahar, 3 pp., 03/22/05
  14. HB 2542, Amendment 2542-3, Legislative Counsel, 2 pp., 03/21/05
  15. HB 2542, Amendment 2542-4, Legislative Counsel, 2 pp., 03/21/05
  16. HB 2542, Amendment 2542-5, Legislative Counsel, 1 pg., 03/21/05
  17. HB 2542, Amendment 2542-6, Legislative Counsel, 1 pg., 03/21/05
  18. HB 2542, Amendment 2542-7, Legislative Counsel, 1 pg., 03/21/05
  19. HB 2542, Amendment 2542-8, Legislative Counsel, 2 pp., 03/21/05
  20. HB 2542, Amendment 2542-9, Legislative Counsel, 3 pp., 03/21/05