WORK SESSION LC 1281, 69, LC, LC 2364

PUBLIC HEARING SB 31, SB 32, SB 33

 

TAPES 24 A-B, 25 A

 

SENATE REVENUE COMMITTEE

FEBRUARY 3, 2005 9:00 AM  STATE CAPITOL BUILDING

 

Members Present:                  Senator Ryan Deckert, Chair

                                                Senator Charles Starr, Vice Chair

                                                Senator Gary George

                                                Senator Rick Metsger

                                                Senator Floyd Prozanski

                                                                       

Witnesses Present:                Debra Buchanan, Oregon Department of Revenue

                                                Dexter Johnson, Legislative Counsel

                                                Patrick Allen, Office of Regulatory Streamlining

 

Staff Present:                          Paul Warner, Legislative Revenue Officer

                                                Lizbeth Martin-Mahar, Economist

                                                Barbara Guardino, Committee Assistant

 

 

TAPE 24, SIDE A

006

Chair Deckert

Calls meeting to order at 9:05 a.m.

 

WORK SESSION, LC DRAFTS

030

Paul Warner

Directs members’ attention to LC’s For Session Filing –LC 1281, LC 69 and LC 2364 (EXHIBIT 1).

Introduces LC 1281 (EXHIBIT 2), LC 69 (EXHIBIT 2) and LC 2364 (EXHIBIT 4), which is the vehicle for a future bill on tax amnesty.

 

057

Vice Chair C. Starr

MOTION: MOVES TO INTRODUCE AS COMMITTEE BILLS, LC 1281, LC 69 AND LC 2364.

 

068

Chair Deckert

ASKS FOR ANY OBJECTIONS TO MOTION. THERE BEING NO OBJECTION THE CHAIR SO ORDERS.

VOTE: 3-0-2

MEMBERS VOTING AYE: GEORGE, VICE CHAIR C. STARR, CHAIR DECKERT

MEMBERS EXCUSED: METSGER, PROZANSKI

 

 

 

072

Warner

Directs members’ attention to Bill Introduction Committee Tax Compliance Bill (EXHIBIT 5).

·         Who is eligible?

 

131

Warner

Continues comments on who is eligible with discussion of abusive tax shelters/specific transactions. Advises combining the issues of voluntary compliance and amnesty in the Oregon bill, unlike the California bill.

 

139

Chair Deckert

Reiterates Warner’s concern that people who come forward could be penalized anyway.

 

156

Warner

In California people who participate in abusive tax shelters are not eligible for amnesty. Tax board would not waive their penalties and interest.

 

 

 

193

Debra Buchanan

Gives Oregon Department of Revenue’s perspective on Who is Eligible issues. The LC draft deals with those who have not filed or those who have under-reported and have not been found.

 

 

 

223

Sen. Prozanski

Asks, how many people are in the system who have been billed. If they’ve been identified, why should they be given amnesty?

 

246

Chair Deckert

Has difficulty with the possibility of people in the system being billed and others who have not been found having penalties waived.

 

245

Buchanan

Good point. That is a concern.

 

263

Dexter Johnson

Suggests considering people who volunteered to pay to be eligible for the amnesty program, but use another option for those discovered by the department.

 

270

Buchanan

This might be possible.

 

286

Sen. Prozanski

Would like to see the law set up as a carrot for people who come in and pay, and a hammer for those who don’t.

 

310

Warner

Two main sticks are penalties and interest, and DOR can vary who pays what.

 

314

Sen. George

Asks how much discretion DOR has.

 

321

Buchanan

DOR has authority to waive penalties and interest, has administrative rules to address people who have not filed on time but come forward voluntarily. Interest waivers are rare.

 

345

Warner

Points out, elimination of DOR discretion is one possible stick.

 

365

All

Continue discussion on who is eligible.

 

412

Sen. George

Relates an example of a past employee who got behind on taxes and couldn’t feed his family. There should be special category for first-time filers who don’t understand the system.

 

441

Buchanan

Responds, this illustrates why DOR is against elimination of discretion.

 

462

Chair Deckert

Requests language to leave in some discretion.

 

TAPE 25, SIDE A

025

Warner

Another way to help is to allow people to pay over a period of time.

 

035

Chair Deckert

Asks if committee would be comfortable using HB 2486 as a starting point for the abusive tax shelter issue.

044

Johnson

Understands it is similar in language to the California bill

 

060

Warner

Continues discussion:

·         What tax years?

 

076

Chair Deckert

Asks committee for reaction to going back 10 years as a starting point.

 

079

Sen. George

Responds, if a person has a pattern of tax evasion, DOR should go back as far as possible.

 

 

 

087

Johnson

There may be a reason for keeping the Voluntary Compliance Initiative (VCI) program and the amnesty program separate. VCI is geared toward those who are manipulating things to look like they have no income and should be treated differently.

 

 

 

105

Warner

Continues discussion:

·         What are the carrots?

 

133

Chair Deckert

Expresses concern that California program is weighted toward sticks and not the carrots. Considers two-tiered penalty levels.

 

150

Sen. George

Prefers a positive carrot approach with a big stick for continued noncompliance. Enforcement may require additional staff.

 

175

Chair Deckert

Agrees, would prefer customer-friendly approach.

 

187

All

Continue discussion on carrot approach.

 

218

Johnson

Questions concerning positive approach incentive in the bill. How do you want that framed? Follow-up questions.

 

232

Chair Deckert

There needs to be description of legislative intent. Would like wiggle room for discretion.

 

 

 

285

Warner

Continues discussion on carrots: disclosure agreements, appeal rights.

 

310

Chair Deckert

Asks committee’s opinion on no criminal prosecution if they comply.

Follow-up discussion on who this applies to.

 

345

Buchanan

Asks whether this amnesty applies to those whom DOR does not know about, or to those who have filed but under-reported their income.

 

 

 

395

Chair Deckert

Asks what latitude the state has on disclosure in terms of the federal government.

 

410

Buchanan

Will look into this.

 

431

Chair Deckert

Invites discussion on carrot issue of appeal rights.

 

442

Warner

Appeal rights become less of an issue if more broadly defined.

 

 

 

TAPE 24, SIDE B

019

Sen. George

Expresses concern that some who make a deal will then appeal.

 

030

Chair Deckert

Concurs with that concern. Turns attention to issue of sticks. Likes option of anonymity for those who come into compliance.

 

040

Warner

·         What are the sticks?

Enhanced future enforcement

 

054

Sen. George

·         When is the Amnesty period?

See exhibit 5. Contends that current amnesty is too short.

 

062

Warner

Responds, most of the time periods tend to be about 60 days. VCI has a longer time period, and the Oregon bill could be 6 months. At the end of the period, increased interest and penalties go into effect. California has 50% additional interest as an amnesty penalty.

 

074

Sen. George

Why couldn’t it be longer than that?

 

076

Buchanan

Committee could consider setting a one-year period and then authorizing the DOR to determine an appropriate amnesty time. Expresses doubt whether a one-year amnesty period would gain much more than a 4-month period. People still wait until the last minute.

 

093

Chair Deckert

Would like to know how other states have rolled out their programs and how Oregon might learn from them, and could set a date around that.

 

098

Warner

·         How will taxpayers know about the program?

Maximize public awareness

 

108

Chair Deckert

Asks if whistle blowing language is necessary.

 

110

Sen. George

State should give whistle blowers incentive and maximum protection.

 

158

Chair Deckert

Closes work session on LC 2364. Acknowledges the promotion of Marine Corps Officer Matthew Hicks to Captain. He is the son of Senate Revenue Committee Assistant Barbara Guardino.

 

179

Chair Deckert

Opens public hearing on SB 31.

 

PUBLIC HEARING, SB 31

182

Lizbeth Martin-Mahar

Gives review of Senate Bill 31. Grants cases before the Oregon Tax Court the authority to determine if additional individuals are liable for withholding taxes. See Revenue Impact of Proposed Legislation (EXHIBIT 6), and Staff Measure Summary (EXHIBIT 7).

 

216

Chair Deckert

Asks Buchanan whether all parties are named in proceedings until the responsible party is identified. Is that how it occurs in tax court?

 

225

Buchanan

That is generally correct, if DOR knows about people. See written testimony (EXHIBIT 9).

 

254

Chair Deckert

Closes public hearing on SB 31.

 

WORK SESSION, SB 31

256

Vice Chair Starr

MOTION: MOVES SB 31 TO THE SENATE FLOOR WITH A DO PASS RECOMMENDATION.

 

258

Chair Deckert

ASKS FOR ANY OBJECTIONS TO MOTION. THERE BEING NO OBJECTIONS THE CHAIR SO ORDERS.

VOTE: 4-0-1

MEMBERS VOTING AYE: GEORGE, METSGER, VICE CHAIR STARR, CHAIR DECKERT

MEMBERS EXCUSED: PROZANSKI

 

PUBLIC HEARING, SB 32

274

Martin-Mahar

Explains SB 32. Adds language how DOR can establish rules to waive penalties. See Revenue Impact of Proposed Legislation (EXHIBIT 10) and Staff Measure Summary (EXHIBIT 11).

 

287

Buchanan

Bill would allow for waiver of first-time offenses even without sufficient cause. See written testimony (EXHIBIT 13). This addresses Sen. George’s earlier example.

 

324

Chair Deckert

Wonders if language is needed at all. Doesn’t want to pass two similar bills.

 

 

 

365

Patrick Allen

Regulatory Streamlining office is following this bill as part of a package of 3 dozen bills. Encourages support of SB 32.

 

374

Chair Deckert

Closes public hearing on SB 32.

 

PUBLIC HEARING, SB 33

380

Martin-Mahar

Gives description of SB 33, regarding 5% delinquency penalties (EXHIBIT 14) and (EXHIBIT 15). Bill would take effect 90 days after 2005 legislative session.

 

425

Buchanan

See written testimony (EXHIBIT 17). Poses policy question: Should the 5% penalty be applied to both groups evenly? A second change corrects an inadvertent change made in 1995.

 

459

Chair Deckert

Asks if there are any conflicts with other bills.

 

474

Buchanan

Does not see any conflicts.

480

Chair Deckert

Closes public hearing.

 

WORK SESSION, SB 33

485

Vice Chair Starr

MOTION: MOVES SB 33 TO THE SENATE FLOOR WITH A DO PASS RECOMMENDATION.

 

490

Chair Deckert

ASKS FOR ANY OBJECTIONS TO MOTION. THERE BEING NO OBJECTIONS THE CHAIR SO ORDERS.

VOTE: 4-0-1

MEMBERS VOTING AYE: GEORGE, METSGER, VICE CHAIR STARR, CHAIR DECKERT

MEMBERS EXCUSED: PROZANSKI

 

490

Chair Deckert

Adjourns meeting at 10:29 a.m. Committee will reconvene at 8:30 Monday, Feb. 7.

 

 

 

Tape Log Submitted by,

 

 

 

Barbara Guardino, Committee Assistant                              

 

Exhibit Summary:

1.      LC 2364, LC’s for Session Filing, Warner, 1 pp.

2.      LC 1281, Draft, Warner, 4 pp.

3.      LC 69, Draft, Warner, 7 pp.

4.      LC 2364, Draft, Warner, 5 pp.

5.      LC 2364, Bill Introduction Committee Tax Compliance Bill, Warner, 1 pp.

6.      SB 31, Revenue Impact of Proposed Legislation, Martin-Mahar, 1 pp.

7.      SB 31, Senate Committee on Revenue, Martin-Mahar, 1 pp.

8.      SB 31, Legislative Fiscal Office, No Expenditure Impact Statement, Martin-Mahar, 1 pp.

9.      SB 31, Senate Revenue Committee SB 31 testimony, Buchanan, 1 pp.

10.  SB 32, Revenue Impact of Proposed Legislation, Martin-Mahar, 1 pp.

11.  SB 32, Staff Measure Summary, Martin-Mahar, 1 pp.

12.  SB 32, Legislative Fiscal Office No Expenditure Impact Statement, Martin-Mahar, 1 pp.

13.  SB 32, Senate Revenue Committee SB 32 testimony, Buchanan, 1 pp.

14.  SB 33, Revenue Impact of Proposed Legislation, Martin-Mahar, 1 pp.

15.  SB 33, Staff Measure Summary, Martin-Mahar, 1 pp.

16.  SB 33, Legislative Fiscal Office, No Expenditure Impact Statement, Martin-Mahar, 1 pp.

17.  SB 33, Senate Revenue Committee SB 33 testimony, Buchanan, 7 pp.