Download Zipped File WP 6.1 0411TAXM.ZIP 8,101 Bytes

Tax Review Commission

MINUTES OF THE

TAX REVIEW COMMISSION

April 11, 1997 - 2:00 p.m. -- Room 1030 State Tax Commission Building



Members Present:    
    Mr. Gary Cornia, Chair
    Mr. James B. Lee, Vice-chair
    Mr. Mark Buchi
    Mr. Robert M. Graham
    Sen. Lyle W. Hillyard
    Sen. E. George Mantes
    Ms. Carol McCormick
    Ms. Bonnie Miller
    Ms. Dorothy Owen
    Mr. W. Val Oveson    
    
Members Absent:
    Judge Jon Memmott


    
Members Excused:
    Mr. Ray Wood
    Rep. John Valentine

Staff Present:
    Mr. Bill Asplund
     Executive Director
    Ms. Rebecca L. Rockwell
     Associate General Counsel
    Mr. Bryant R. Howe
     Research Analyst
    Ms. Karen E. Mecham
     Secretary

Note:    A list of others present and a copy of materials distributed in the meeting are on file in the Office of Legislative Research and General Counsel.
    

1.    Call to Order and Approval of Minutes -- Chair Cornia called the meeting to order at 2:10 p.m. and welcomed members of the Tax Review Commission (TRC).

     MOTION: Mr. Lee moved to approve the minutes of the December 3, 1996 meeting. The motion passed unanimously.

2.    Tour of the Tax Commission Facility -- Mr. Oveson, Chair of the Utah State Tax Commission (tax commission), took the members on a tour of the facility. He noted that the building has been in operation for about three years. He added that the security processes are to ensure confidentiality for taxpayers. The tour included the adjudicative hearing rooms, tax return processing area, and the motor vehicle identification unit.

3.    Review of Changes to Tax Laws During the 1997 Annual Session -- Mr. Asplund distributed a handout outlining the bill passage process. He also distributed a handout titled "History of Legislation." He noted that the 1997 Annual General Session had the lowest number of bills introduced in a decade while the number of bills that passed was a much higher percentage than in the past.

    Mr. Asplund, referring to the interim schedule, explained that there are 12 committees this interim period rather than nine.

    Ms. Rockwell distributed a summary of selected legislation passed during the 1997 Annual General Session. She discussed H.B. 98, Local Taxing Authority, which modifies the business license fee and taxing authority of municipalities. She explained that prior to H.B. 98, municipalities had the authority to raise revenue by levying and collecting a license fee or tax on any business within the municipal limits. The language granting business license tax authority to municipalities has been interpreted by the courts to allow cities to raise revenue through the license fees. Counties, on the other hand, may license for the purpose of regulation and revenue any business within the unincorporated areas of the county. She said that the courts have interpreted the county authority to only permit counties to license for the cost of business regulation, not for revenue. H.B. 98 amends the municipal license fee taxing authority provisions to mirror the county authority, allowing municipalities to license only for the cost of business regulation, not for revenue. She noted there are several exceptions that allow municipalities to license for revenue raising purposes, including: 1) the Municipal Energy Sales and Use Tax; 2) a tax not to exceed 6 percent on public utilities engaged in the business of supplying telephone service; and 3) limited taxes on parking service businesses, on public assembly facilities, and on businesses that cause disproportionate costs of municipal services or for which a municipality provides an enhanced level of municipal services.

    Ms. Rockwell said that H.B. 98 also relaxes the former conditions for imposing the resort community tax that required the transient room capacity of the city or town to equal or exceed the municipality's population. Under H.B. 98 the transient room capacity is now only required to equal 66 percent of the population. She said H.B. 98 also allows municipalities to impose an additional ½ percent resort community tax under certain circumstances, subject to the limitation that the municipality has to offset the first 12 months of revenues from that new tax by decreasing its certified tax rate. She added that a municipality transient room tax of up to 1 percent is also authorized under certain circumstances, and an additional municipal transient room tax up to ½ percent is authorized for the payment of debt service on certain bonded indebtedness. Finally, she said that H.B. 98 allows municipalities that do not impose a public transit tax to impose a ¼ percent tax for the construction and maintenance of highways.

    Ms. Rockwell also discussed H.B. 129, Centrally Assessed Taxpayers Amendments, which provides for objections to tax commission assessments by property owners or counties. She highlighted the basic structure of H.B. 129 stating that if a tax payer objects to a tax commission assessment the taxpayer must pay the full amount of taxes due indicating with the payment the amount of valuation in dispute and the amount of taxes levied on the disputed value. The county treasurer then holds the disputed amounts in escrow and invests them with the county's other investment funds, or, by agreement between the treasurer and the taxpayer, invests the funds in another manner consistent with the state money management act.
    She said H.B. 129 also provides new procedures for adjudicating property tax disputes. She explained that on or before August 1, the tax commission is required to hold a scheduling conference with all parties to the hearing on the disputed taxes. She said that at the

scheduling conference the tax commission is required to establish dates for completing discovery, filing posthearing motions, and conducting the hearing. The tax commission is given 120 days after the hearing is completed and all posthearing briefs are submitted to render a written decision on the appeal. She said any applications that are not resolved within a two-year period from the date of filing are considered to be denied, unless the parties stipulate to a different time period for resolution. Within 30 days from the day an application is considered to be denied, a party may appeal to the district court for de novo proceedings.

    Ms. Rockwell said a party may also appeal to the district court for de novo proceedings pursuant to Section 59-1-601 a final tax commission decision resulting from a formal adjudicative proceeding. Prior to H.B. 129, Section 59-1-601 authorized a district court to review by trial de novo all decisions by the tax commission resulting from formal adjudicative proceedings, subject to: 2) a requirement that the district court review a record of the commission's proceedings and, unless the parties agree in writing, a limitation that the district court may not hear witnesses that were not called to testify or consider exhibits that were not presented to the tax commission at the formal hearing. She said H.B. 129 the requirement that the district court review the tax commission's proceedings and the limitations on hearing additional witnesses or considering additional exhibits for all tax commission decisions resulting from formal adjudicative procedures, not just centrally assessed property taxpayers.

    She also noted there are two cases before the Utah Supreme Court involving Section 59-1-601 as it existed before H.B. 129. One case deals with the valuation of locally assessed property and the other case concerns delinquent sales and use taxes. The Utah Supreme Court's decisions in these cases may define the scope of the district court's trial de novo jurisdiction, and also may clarify the district court's statutory authority and the tax commission's constitutional authority to raise, lower, adjust, or equalize taxes.

    Ms. Rockwell said that once an appeal is adjudicated, H.B. 129 requires the disputed amount to be released from escrow and be distributed in accordance with the Tax commission's or court's decision to the taxpayer, taxing entity, or the state. Taxing entities and the state are required to treat amounts released from escrow as property tax revenues for purposes of establishing their certified rates or certified revenue levy.

    Commissioner Oveson said he felt the bill would increase the district court case load. He added that the bill encourages the tax commission to hold informal hearings, and appeals under this process would be taken up in district court. He noted there is a process to convert hearings from informal to formal that allows the case to go directly to the Utah Supreme Court.

    Mr. Asplund said that S.B. 26, Sales Tax Option for Counties, authorizes a county option sales and use tax. He noted this is a major shift in policy. He explained that if many counties use this method, there will be a reduction in property tax collections. This may encourage other taxing entities to raise their portion of the property taxes.

4.     Study Assignments from the Legislature and Governor -- Chair Cornia asked for recommendations from the members for study items. He noted there were no direct assignments from the Legislature or the governor .

    Commissioner Oveson suggested studying the policy of taxing intangible property on centrally assessed properties because the Legislature passed a resolution requesting a study by the tax commission on this issue as it relates to the telecommunications industry. He suggeted that the TRC and the tax commission work jointly on the study. Sen. Hillyard talked about a second prong of ramifications in taxing intangible properties. He asked if there was money to study this issue. Mr. Asplund said he wasn't sure. Chair Cornia said that he believed members of the industry interested in this issue would be willing to provide research voluntarily.

     MOTION: Mr. Lee moved to study the valuation process of taxing centrally assessed intangible property.

    Ms. Owen said she felt that this issue was too narrow for the TRC to study. She felt that the TRC should be studying more broad tax policy issues. Chair Cornia said he felt this issue focuses on the collection of revenue for the uniform school fund and how the funding process is being undermined. Mr. Buchi agreed with Ms. Owen that the larger issues need to be kept in focus, but he also felt that a broad study would require looking at microsimulation models of the economy and would be beyond the scope of the TRC's ability.

    Mr. Asplund suggested that the TRC look at all the taxes imposed under Utah law and see if it is possible to remove or consolidate some of them. Mr. Oveson said there are at least 43 types of taxes collected by the tax commission.

    Chair Cornia said that a microsimulation model of Utah's economy should be developed. He thought that one of the universities or the tax commission could be asked to develop that model. Sen. Mantes agreed that a broader picture is needed. Chair Cornia suggested that the world economy is changing rapidly and becoming much more global in its focus rather than geographic. Mr. Asplund said that a model designed by Price/Waterhouse is available for eight or 10 industries in three locations within the state. He suggested that the model can be manipulated to make predictions on the effects of changes to the tax system. Sen. Hillyard suggested having a presentation made with this model.

    Returning to the motion, Chair Cornia called for the vote. The motion passed with Ms. Owen voting against.

     MOTION: Sen. Hillyard moved that the TRC study reviewing and consolidating individual income tax brackets. The motion passed unanimously.

     MOTION: Mr. Lee moved to study the 43 tax types for removal or consolidation. The motion passed unanimously.

     MOTION: Sen. Hillyard moved to review income tax credits and how they relate to AGI, and piggybacking the tax collection system on the federal system. The motion passed unanimously.

    Chair Cornia said that the governor's office would like the TRC to continue studying the taxation of telecommunications. He explained that the national committee he is working with will provide model legislation for taxation of telecommunications by next year. He said he would keep the TRC posted on the progress made by the national committee.

    Chair Cornia said that another issue could be the administration of the tax commission and the crossover of duties. Sen. Hillyard felt that the tax court changes should be allowed time to work before raising this topic. Commissioner Oveson agreed.

    Mr. Headlee raised the issue of municipal license fees on utilities, natural gas, and telecommunications. He said that issues relating to telecommunications license fees still need to be resolved. He said there is confusion about municipal authority to set these fees. Chair Cornia suggested that this issue be brought up when Rep. Valentine is present.

5.    Study Agenda for 1997 -- Chair Cornia outlined the meeting schedule as May 16, June 13, July 11 at 9:00 a.m., August 15, September 12, and October 17. He suggested that the May 16 agenda should include income tax brackets and the June 13 meeting could focus on the centrally assessed issues.

    Mr. Oveson distributed copies of the tax commission's law library on disk to the members of the TRC.

6.    Adjournment--

     MOTION: Mr. Oveson moved to adjourn the meeting at 4:45 p.m. The motion passed unanimously.
MINUTE04.WPD

    

[Back to the Interim Directory][Back to the Monthly Schedule][Back to the Committee Listing] Utah State Legislature