Rockwell outlined the meeting schedule for the Tax Review Commission as follows: May 16,
June 13, July 11, August 15, September 12, October 17, and November 21.
2. Tax Review Commission -- James B. Lee, Vice-chair of the Tax Review Commission (TRC), reviewed the TRC's structure and responsibilities. He said that one of
the TRC's original goals was to look at all of the tax laws because of overlapping and
duplication to attempt to streamline the system. Later, substantive issues were addressed.
Some study issues were assigned by the Legislature while others were initiated by the TRC.
He added that today the TRC receives assignments from the Legislature and from the
governor. In the past four years, the TRC has reviewed the sales and use tax exemptions.
In 1996, the TRC focused on the taxation of the telecommunications industry. Mr.
Lee said that S.B.184, Sales Tax -- Telephone Exemption, was recommended by the TRC. He
explained that the legislation makes permanent the exemption for resale of telephone services
for purposes of providing telephone services. He noted the other recommendations made by
the TRC as a result of the telecommunications study were not acted upon, and he invited the
committee to consider them in the future.
Mr. Lee said that Mr. Gary Cornia, Chair of the TRC, is also chairing a national
effort to write model legislation to assist states in making decisions about taxing the
telecommunications. He noted the TRC study was one of the factors that fostered the national
effort. He added that when the model legislation is completed, the TRC will review it and
make recommendations to the Legislature and the governor.
Mr. Lee outlined policies the TRC will address in 1997, including: 1) the valuation
process of taxing centrally assessed property, including the taxation of intangible assets;
2) broadening and consolidating individual income tax brackets; 3) the various taxes collected
by the Utah State Tax Commission (tax commission) for removal or consolidation; 4) income
tax credits and how they relate to the adjusted gross income (AGI); and 5) piggybacking the
federal tax collection system.
Mr. Lee invited the committee members to attend the TRC meetings and said that the
TRC's recommendations would be brought to the committee in the fall.
3. Review of Tax Related Legislation from the 1997 General Session -- Ms. Rockwell distributed two handouts titled "History of Legislation" and "Revenue and Taxation Summary of Selected Legislation" passed during the 1997 Annual General Session. She noted that there were 668 bills introduced and of those 400 passed.
4. Review of 1997 General Session and Update on Revenue Collections and Forecasts -- W. Val Oveson, Chair, and Mr. Doug Macdonald, Chief Economist, Utah State Tax Commission distributed three handouts.
Mr. Macdonald reviewed handouts titled "TC-23 Monthly Revenue Summary" and "Key Economic Indicators." He noted that: 1) nonfarm employment is up 4.3 percent for the latest month and up 4.3 percent for the year; 2) the consumer sentiment index is down 4
percent from a record level in January but still high; 3) unit car and truck sales are up 9
percent for the last month and up 6 percent for the year; 4) residential construction is up 5
percent for the last month but down 8 percent for the year; 5) nonresidential construction is up
3 percent for the last month but down 5 percent for the year; 6) taxable sales are up 7 percent
for the last month and up 5 percent for the year; and 7) payroll tax is up 6 percent for the last
month and 5 percent for the year.
Mr. Macdonald explained that sales and use tax collections are below estimates by
$5.64 million with the General Fund and Uniform School Fund in excess of estimates by
$47.28 million. He added that motor fuel tax collections are in a deficit of $.83 million while
the transportation fund is in excess by $.07 million. He noted that prepayments representing
income from capital gains, sole proprietorships and partnerships, and from individuals not
required to withhold, were up substantially in December and January. Total final and
prepayments, through April 7, 1997 at $130 million, were $20 million higher than forecasts.
Commissioner Oveson discussed criticism of the Internal Revenue Service due to
public perception that the system is too complex. He said that six new sales tax exemptions
were passed during the 1997 General Session which also makes Utah's tax system more
complicated. He said that he has asked the TRC to review the more than 43 types of Utah
taxes in conjunction with the tax commission's study.
Commissioner Oveson distributed the tax commission's ruling in the case of Wiltel.
He explained that the case involves the legality of taxing for property tax purposes intangible
assets and gave a brief history of this issue. Additionally, he said that the 1997 Legislature
passed a joint resolution urging the tax commission to study eliminating the current valuation
methods applied to centrally assessed telecommunications property that result in excessive
property tax valuation. He said the Tax Commission will study the issue and make a
recommendation for the next general session. He added that this ruling does not apply to
locally assessed properties.
Sen. Stephenson said that locally assessed telecommunications industries are not
affected by this ruling, only centrally assessed ones. Commissioner Oveson said that many
resellers of telecommunications are not centrally assessed. He noted that refunds will be paid
to the companies that prevail in their property tax appeals.
5. Review of Proposed Study Items for the 1997 Interim -- Sponsors of the study items gave brief presentations urging the committee to study their issue. Sen. Hillyard asked
the committee to study the cost and benefits of offering a research tax credit. He also
discussed studying standards for repealing tax credits. Mr. Asplund substituted for Sen.
Beattie in requesting a study of the need to rebracket the state income tax. Rep. Valentine
added the issue of the retirement income tax exemption and suggested that the committee study
going to a flat rather than a bracketed tax system. Rep. Nora Stephens requested a study of the
levels of taxation on alcoholic beverages, recommendations for tax increases, and the
distribution of new revenues for the prevention and treatment of alcohol problems and the
enforcement of alcohol-related laws. Ms. Mary Lou Bozich, Utah Substance Abuse and
Antiviolence Coordinating Council, made a presentation encouraging an increase in the
alcoholic beverage tax to discourage abuse of alcohol.
Rep. Olsen requested a study providing a tax credit for education choice. He
distributed two documents supporting the credit. He also asked that the committee study the
local option sales tax to preserve agricultural land. Rep. Styler requested a study of the tax
equity of a gross receipts tax for electricity generating entities. Sen. Mantes proposed to study
methods of replacing or eliminating the current ad valorem uniform fee on vehicles. He felt
that the current tax is administratively expensive. Rep. Bigelow asked the committee to study
the issue of amending the requirement of the Utah Constitution that property taxes be imposed
based on the fair market value of the property in favor of a valuation system based on the
square footage of livable space. Sen. Taylor requested a study of issues related to tax
increment financing and RDAs.
Rep. Arent proposed creation of an annual state tax expenditure budget showing what
the state is losing on tax exemptions and exclusions. Rep. Iverson asked the committee to
study imposing a tax on water users to fund the mitigation of environmental. Rep. Valentine
requested a study of the taxation of utilities limitation. Rep. Saunders suggested indexing the
motor fuel tax to the cost of living.
Rep. Harper requested a study of the impact, benefits, costs, value, and limitations of
taxing nontangible services that are currently exempt from the sales and use tax. Rep.
Valentine declared a conflict of interest as this issue will affect his business. Rep. Allen
proposed studying the sales tax incentives for transportation congestion relief. Rep. Short
explained that Sen. Buhler is requesting a study to extend the property tax residential
exemption to certain secondary homes. Rep. Short declared a conflict of interest on this issue.
Sen. Nielson raised several issues including: 1) taxing credit unions; 2) requiring a super-
majority vote on any tax increase; 3) the taxation of intangible assets; and 4) fees on a variety
of types of waste.
MOTION: Sen. Nielson moved to add the taxation of intangible assets to the study list. The motion passed unanimously. Sens. Blackham, Mantes, and Poulton and Reps.
Hunsaker, Garn, and Larson were absent for the vote.
6. Adjournment --
MOTION: Rep. Seitz moved to adjourn the meeting at 4:20 p.m. Sens. Blackham, Mantes, and Poulton and Reps. Hunsaker, Garn, and Larson were absent for the vote.
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