PUBLIC HEARING

SB 283

PUBLIC HEARING AND WORK SESSION

SB 29

WORK SESSION

HM 7, HB 2234

 

TAPES 163-164 A-B

 

HOUSE REVENUE COMMITTEE

MAY 18, 2005   1:30 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:                      Ian Richardson, Oregon State Bar Tax Section           

                                                Jim Carlson, Oregon Health Care Assn.

                                                Senator Ben Westlund, District 27

                                                Doris Penwell, Assn. of Oregon Counties (AOC)

                                                Arthur Fish, Economic and Community Development Dept.

 

 

Staff Present:                          Paul Warner, Legislative Revenue Officer                                    

                                                Mary Ayala, Economist                                         

                                                Lizbeth Martin-Mahar, Economist                                         

                                                Kristi Bowman, Committee Assistant

                                               

 

TAPE 163, SIDE A

002

Chair Butler

Calls meeting to order at 1:38 p.m.

 

 

 

OPENS PUBLIC HEARING FOR SENATE BILL 283

 

 

 

016

Mary Ayala

Gives background of SB 283 (Exhibits 1,2,3). The bill enables a Limited Liability Corporation (LLC) to qualify for a property tax exemption or special assessment if the LLC is owned by a non-profit organization. Discusses amendment SB 283-1 (Exhibit 4) which pertains to residency requirements for long-term care facilities that are eligible for the property tax exemption.

 

 

 

056

Chair Butler

Discusses the relating clause of SB 283, and comments that there are other amendments pending.

 

 

 

064

Ian Richardson

Testifies in support of SB 283 because it would give a significant benefit to charitable organizations who own real property in Oregon. Comments on benefits of LLCs. There is no downside because there is no revenue impact. Submits written testimony (Exhibit 5).

098

Chair Butler

Discusses non-profits and LLCs with Richardson.

 

 

 

118

Rep. Boquist

Asks if the LLC would have to report to the Dept. of Justice (DOJ) annually.  How does the public know if the LLC is wholly owned?

 

 

 

126

Richardson

Responds that there is a need for a reporting mechanism for the DOJ. Discussion with Rep. Boquist regarding the formation of an LLC to handle the property tax and title details. An LLC reduces the financial risk to non-profit organizations.

 

 

 

215

Jim Carlson

Testifies in support of SB 283 and submits written testimony (Exhibit 6). The Oregon Health Care Assn. sponsored the amendment SB 283-1. The program has been used by small rural counties to ensure that long term care facilities can qualify for the property tax exemption.

 

 

 

253

Rep. Riley

Asks why 70% was used for the percentage of Medicaid residents to determine eligibility requirements for the tax credit.

 

 

 

254

Carlson

Responds that at the time there was no particular reason to use 70% because it was unknown how widespread the potential utilization would be. Since then it was decided by local districts to provide more leeway. More discussion with Rep. Riley on the percentage issue.

 

 

 

CLOSES PUBLIC HEARING FOR SENATE BILL 283

 

 

 

OPENS PUBLIC HEARING FOR SENATE BILL 29

 

 

 

325

Ayala

Gives background of SB 29 (Exhibit 7). The bill clarifies that a property’s real market value will be multiplied by the changed percent ratio (CPR), or assessed value, to determine the property’s maximum assessed value.

 

 

 

337

Sen. Ben Westlund

Testifies in support of SB 29. The bill clarifies current statute language regarding a property’s value.

 

 

 

CLOSES PUBLIC HEARING FOR SENATE BILL 29

 

 

 

OPENS WORK SESSION FOR SENATE BILL 29

 

 

 

383

Rep. Berger

MOTION: MOVES SB 29 TO THE HOUSE FLOOR WITH A DO PASS RECOMMENDATION.

 

 

 

385

Chair Butler

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

 

 

 

399

Rep. Berger

MOTION: MOVES SB 29 TO THE CONSENT CALENDAR.

 

 

 

406

Chair Butler

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

 

 

 

CLOSES WORK SESSION FOR SENATE BILL 29

 

 

 

OPENS WORK SESSION FOR HOUSE MEMORIAL 7

 

 

 

TAPE 164, SIDE A

003

Lizbeth Martin-Mahar

Gives background of HM 7 which was previously heard by the Revenue Committee on 05/12/05. It expresses support by the State House of Representatives to Oregon Congressional Representatives to abolish the federal estate tax.

 

 

 

034

Chair Butler

Comments that there would need to be a change to state law to make any necessary changes to the 2010 federal tax law change. Discussion of the tax implications with Martin-Mahar.

 

 

 

041

Rep. Hass

Expresses concern about certain statements in the bill “that are so far from reality…and filled with non-factual propaganda.”

 

 

 

055

Chair Butler

Responds that if there is a way to keep federal estate tax money in Oregon, then it would benefit the state economy.

 

 

 

059

Rep. Galizio

Expresses concern about using the phrase “death tax” stated in the bill. Discusses lines 12-13 concerning old vs. new wealth. Comments that this bill is “problematic.”

 

 

 

082

Chair Butler

Comments that most “old” wealth has been “estate-planned” away into family foundations. More discussion of estate tax issues with Rep. Galizio.

 

 

 

113

Rep. Hass

Asks if this is a bill on which the Revenue Committee wants to have a floor discussion.

 

 

 

118

Rep. Boquist

States for the record that the state of Washington calls the estate tax a “death tax.”

 

 

 

123

Chair Butler

MOTION: MOVES HM 7 TO THE HOUSE FLOOR WITH A DO PASS RECOMMENDATION.

 

 

 

127

Chair Butler

Asks for roll-call vote.

 

 

 

135

Chair Butler

ORDER: MOTION PASSES 5-4-0. VOTING AYE: BOQUIST, ESQUIVEL, OLSON, BERGER, BUTLER. VOTING NO: GALIZIO, KOMP, RILEY, HASS.

 

 

 

CLOSES WORK SESSION FOR HOUSE MEMORIAL 7

 

 

 

OPENS WORK SESSION FOR HOUSE BILL 2234

 

 

 

145

Ayala

Gives background of HB 2234 (Exhibit 8). The bill concerns the number of electronic enterprise zones (E-commerce zones) that can be placed within existing enterprise zones. Asks members to replace the HB 2234-5 amendment (Exhibit 9) with the HB 2234-7 amendment (Exhibit 10), according to instructions from Legislative Counsel. Discusses the HB 2234-7 amendment provisions. There is a potential revenue impact (Exhibits 11 and 12).  

 

 

 

200

Chair Butler

Discusses the revenue impact of corporate income tax exemptions on E-commerce zones.

 

 

 

240

Chair Butler

Discusses the revenue impact of the property tax exemption.  

 

 

 

255

Rep. Riley

Clarifies that the property tax exemption is for the enterprise zone and there is no additional exemption for the E-commerce zone designation.

 

 

 

260

Ayala

Responds that under the E-commerce zone designation the property tax exemption is at a lower threshold than that of the enterprise zone. There is a minimal revenue impact. The significant revenue impact for this bill is the corporate income tax exemption which only exists for an E-commerce zone.

 

 

 

270

Chair Butler

Discusses the property tax exemption revenue impact on E-commerce zones.

 

 

 

296

Chair Butler

Comments on a concern expressed on the House Floor about workers overseas employed by companies in an enterprise zone.

 

 

 

312

Rep. Riley

Responds that the property tax credit is only on that portion that is in the enterprise zone. There is no tax credit given for property outside of an enterprise zone.

 

 

 

327

Rep. Esquivel

Gives an update to the number of E-commerce zones in the state and in Medford. Comments that it has been a very good tool and is very successful. Discussion with Chair Butler about the companies using the tax credit in the Medford area.

 

 

 

370

Rep. Hass

Expresses concern that whenever new enterprise zones are added, they are taking away from existing zones.

 

 

 

378

Rep. Esquivel

Responds that he does not agree. E-commerce zones are good for a region and the state.

 

 

 

409

Rep. Hass

Agrees that it would be good for the state to have greater employment in other areas, but we are taking away the appeal of locating in Burns if more enterprise zones are created in other areas.

 

TAPE 163, SIDE B

015

Chair Butler

Expresses concern about locating enterprise zones in rural areas like Burns.

 

 

 

026

Rep. Riley

Comments that the bill still has requirements for establishing E-commerce zones. It still has to be inside an enterprise zone, and enterprise zones have restrictions.

 

 

 

033

Rep. Boquist

Comments that the state is trying to attract new business to rural locations by creating E-commerce zones as an incentive.

 

 

 

050

Chair Butler

Comments that E-commerce zones are a way to ensure businesses locate in economically distressed areas.

 

 

 

075

Rep. Riley

Comments that there are not enough jobs to go around. These zones are being created to create new jobs.

 

 

 

076

Rep. Boquist

Comments that there are many factors that determine why a business locates in a certain area. The state must have alternatives to attract businesses and gain jobs. Medford has done a better job of selling enterprise and E-commerce zones to attract businesses.

 

 

 

095

Doris Penwell

Discusses the HB 2234-7 amendment which moves up the implementation date to 2006 and drops further expansion of zones. Discusses the selection of enterprise zones by the Oregon Economic and Community Development Dept. (ECDD) that ensures all companies meet qualifications.

 

 

 

136

Chair Butler

Discussion with Ayala on the revenue impact of the HB 2234-7 amendment.

 

 

 

187

Arthur Fish

Testifies that there are 14 completed E-commerce projects who have filed for tax breaks. Rep. Esquivel referred to proposed projects  The enterprise zones sunset in 2009. The E-commerce zones last as long as the enterprise zones do. This is a one time credit with a five year carry-forward.

 

 

 

225

Fish

Discusses the tax credit process.

 

 

 

228

Rep. Hass

Clarifies that it is a one year credit.

 

 

 

230

Fish

Responds that the credit is used for only one year, but it can be used on more than one asset. The unused portions can be carried forward.

 

 

 

244

Chair Butler

Discussion with Fish about job creation and capital equipment investment.

 

 

 

253

Rep. Hass

Suggests updating the definitions of E-commerce.

 

259

Fish

Responds that it is a self-regulating definition and is redefined in rules. The Law is clear about what the ECDD regulates. Assets used for the tax credit must be related to E-commerce. The key is to understand what assets are part of the business.

 

 

 

280

Rep. Hass

Asks for more definition of various capital assets that “are part of the business.”

 

 

 

390

Fish

Responds that specifics are in ORS 307.517. All assets that are claimed for the tax credit have to be part of the business. If warehouses and shipping operations are serving the business, then it is included by statute. Uses Blue Cross and Dell as examples.

 

 

 

325

Chair Butler

Comments that there are two tax credits involved in this discussion. Expresses the need for clarification of enterprise zone qualifications and revenue impacts before taking the bill back to the House Floor. General comments about E-commerce and enterprise zones.

 

 

 

372

Rep. Riley

Comments that for existing E-commerce zones, the business must increase employees in the enterprise by 10%. Adds that this provision is not applicable to new businesses coming into the state.

 

 

 

378

Fish

Discusses the property tax exemption. Comments that very little property tax credits can be claimed initially.

 

 

 

405

Chair Butler

Discussion with Penwell on HB 2234-7 amendment.

 

 

 

407

Fish

Comments that ECDD supports the HB 2234-7 amendment.

 

 

 

411

Chair Butler

Expresses concern about businesses not locating in eastern Oregon because of the lack of transportation alternatives to trucking. Asks what causes success in this program.

 

 

 

430

Fish

Agrees with Chair Butler about his concerns, and states that people make a difference. Cites Medford as an example. He is  working with people in Harney County to get the program started in their area. 

TAPE 164, SIDE B 

039

Ayala

Discusses HB 2234-B6 amendment.

 

 

 

CLOSES WORK SESSION FOR HOUSE BILL 2234

 

 

 

052

Chair Butler

Adjourns meeting at 3:03 p.m.

 

 

Tape Log Submitted by:

Reviewed by:

 

 

 

Kristi Bowman, Committee Assistant

Kim Taylor James, Committee Coordinator

 

Exhibit Summary:

  1. 1.      SB 283, Staff Measure Summary, Ayala, 1 pg., 05/16/05
  2. 2.      SB 283, Staff Measure Summary, Ayala, 1 pg., 05/17/05
  3. 3.      SB 283, Staff Measure Summary, Ayala, 1 pg., 02/22/05
  4. 4.      SB 283, Amendment SB 283-1, Leg. Counsel, 2 pp., 05/02/05
  5. 5.      SB 283, Testimony, Richardson, 1 pg., 05/18/05
  6. 6.      SB 283, Testimony, Carlson, 4 pp., 05/18/05
  7. 7.      SB 29, Staff Measure Summary, Ayala, 1 pg., 05/17/05
  8. 8.      HB 2234, Staff Measure Summary (Revised), Ayala, 1 pg., 05/17/05
  9. 9.      HB 2234, Amendment HB 2234-B5, Leg. Counsel, 2 pp., 05/18/05
  10. 10.  HB 2234, Amendment HB 2234-B7, Leg. Counsel, 2 pp., 05/18/05
  11. 11.  HB 2234, Revenue Impact Statement (Revised), Ayala, 2 pp., 05/17/05
  12. 12.  HB 2234, Revenue Impact Statement (Revised HB 2234 B-5), Ayala, 2 pp., 05/17/05
  13. 13.  HB 2234, Amendment HB 2234-B6, Leg. Counsel, 3 pp., 05/18/05