centrally assessed valuation in dispute were included as revenues by a taxing entity and
incorporated into the taxing entity's budget. He said that when the base shrinks as a result of
H.B. 129, the property tax rate will have to rise to make up for lost revenue.
Rep. Short, sponsor of H.B. 129, explained that the bill was drafted to reduce the high
number of appeals coming before the tax commission annually. He added that "intangibles"
were considered a part of the reason for the high number of appeals. He said that those studying
the issue felt that the high number of appeals resulted in revenue refunds that hurt local taxing
entities because they could not count on collected revenues to remain in the coffers.
Rep. Short said that about $2 billion in centrally assessed property valuation is in dispute
this year. He explained that those counties with large amounts in escrow would have to raise
their tax rate on all properties, such as homeowners, to make up for revenues placed in escrow.
He said that the committee was meeting to decide whether to alleviate the tax shift caused as a
result of this escrow requirement. Sen. Blackham noted that the business community in Utah has
very low taxes compared to adjoining states. He felt that the short-term issue is to determine
whether to modify or defer the escrow provisions for a time or to eliminate them.
Chair Nielson said there were four suggested solutions presented in last month's special
session: 1) change the constitutional definition of "intangibles"; 2) delay implementation of H.B.
129 for one to two years; 3) change the escrow provisions; or 4) do nothing. Rep. Tyler said that
for most counties centrally assessed properties are less than 1 percent of the tax base. He
recommended addressing solutions to only the counties with a tax shift problem.
Rep. Buffmire said she felt that there needs to be a better definition for "intangibles." Ms.
Rockwell said that the Legislature has leeway in defining "intangibles" but that if "intangibles"
are taxed under the property tax, the constitution provides that the Legislature cannot tax income
derived from "intangibles" and there is a 5-mill property tax limitation in the constitution.
Sen. Dmitrich noted the property tax shift will occur even if "intangibles" are not redefined.
Commissioner W. Val Oveson, tax commission, said that H.B. 129 caused the shift because the
escrowed revenue has to be made up in the taxing entities' budgets.
Sen. Blackham said that H.B. 129 exempts from the judgment levy from truth in taxation.
Sen. Stephenson said there is a difference between the escrow requirement and the judgment
levy. He expressed concern that provisions in the law allowing taxing entities to capture "new
growth" has permitted taxing entities to use increased property tax revenues without complying
with the truth in taxation process.
Rep. Valentine said that maybe requiring taxing entities to escrow 100 percent of disputed
property taxes is excessive. He referred to Tab 2 in the tax commission booklet to say that many
taxpayers are stating that more than 75 percent of their excessive valuations are in dispute. He
felt that abuses are causing other taxpayers to cover the taxes of those under appeal. He
suggested that perhaps the historical 25 percent appeal settlement should be the amount
escrowed. Sen. Blackham suggested postponing implementation of the escrow provisions for
two years retrospectively to January 1, 1997 to permit time to find a solution.
Mr. David Bird, Parsons, Behle & Latimer, said that under the current law, all taxpayers
pay their full assessed value while they appeal. He also commented that all tax payers appealing
their valuations will pay to replace the revenues required to be escrowed. Sen. Mantes noted that
small business taxpayers could pay a 15-percent increase due to the tax shift if nothing is done.
Sen. Stephenson said that taxpayers are having to protest values they have appealed and
won before and that should not be repeated. Commissioner Oveson said that he expected that in
the future "intangibles" will be accounted for and removed from valuations. He noted that the
tax commission has come to the Legislature for clarification on the definition of "intangibles."
Sen. Dmitrich suggested putting back the 20-percent exemption for intangibles. Rep.
Valentine said that this solution has been proposed by the counties but that this should be further
debated at a later date. Rep. Short reminded the committee that he would like to make a change
to H.B. 129 in a special session before tackling the larger constitutional issues in the next general
session.
Chair Nielson opened the discussion to public comment.
Mr. Kent Peterson, Emery County Commissioner, said that the shift to locally assessed
taxpayers needs to be resolved. Mr. James Fauver, Emery County Assessor, distributed a handout
titled "Solution to the Intangible Shift" and recommended narrowing the definition of
intangibles. Mr. Brent Gardner, Utah Association of Counties, distributed a handout outlining
several issues. He noted that there is a continual problem with refunds that must be repaid by the
counties as a result of the appeals. He said that H.B. 129 should remain in place because it is a
good solution to the appeal refund process. He added that the shift would occur regardless of
whether the bill's implementation is delayed.
Mr. Doug Foxley, Union Pacific Railroad, said he was involved in the compromise that
resulted in H.B. 129. He said he felt the legislation is sound and should be allowed to go forth.
Mr. Mark Buchi, Holme, Roberts & Owen and representing US West, said that the escrow
process of H.B. 129 is not connected to "intangibles." He also noted that the shift is caused by
overvaluation because of "intangibles" and that the shift is not necessarily wrong. He suggested
that the total tax rate process should be reviewed.
Ms. Alis Ritz, Washington County Treasurer, distributed a handout showing the amounts of
refunds counties have had to pay in the past five years. Ms. LeAnn Joseph, Beaver County,
explained that her county owes a major taxpayer $71,000 with only $44,000 in revenues. Ms.
Eileen Jensen, Duchesne County, said her budget covers only debt repayment and cannot afford
to pay back appeal settlements without the escrow process.
Mr. David Dentton, representing Sprint, noted there are two parts to H.B. 129. He felt that
the procedural part of the bill should be retained. He also asked that the focus be kept on the
counties that need to be worried about. Mr. Steve Young, Holme, Roberts, and Owen
representing US West, noted that the trial de novo provisions of H.B. 129 should not be repealed.
He added H.B. 129 also contains fail safe provisions to protect small counties.
Mr. Greg Fredde, Utah Taxpayers Association, distributed a handout titled "Estimated
Impact of 1997 Centrally Assessed Appeals." He felt the escrow process should be effective but
the rates need to be lowered when the escrow moneys are released.
Mr. Fauver recommended implementing H.B. 129. He noted that the judgment levy that
was used to pay appeal settlements prior to H.B. 129 is not acceptable to the homeowner
taxpayer. He added that large centrally assessed businesses are not paying their share of taxes.
Chair Nielson closed the public comment and returned to committee discussion.
Sen. Blackham explained that the Legislature did not desire to cause a tax shift when it
passed H.B. 129. He felt time was needed to resolve the problems before implementing the
escrowing provisions.
MOTION: Rep. Valentine moved to recommend to the Legislature to delay the effective date of the escrow provisions of H.B. 129 for one year.
Speaking to the motion, Rep. Valentine said that the Wiltel decision's impact on the taxation of intangible property should encourage caution in making any changes without careful
study. Sen. Dmitrich said he did not feel delaying will assist the shift. He felt that the issues
should be raised in the next general session.
SUBSTITUTE MOTION: Sen. Stephenson moved that the escrow provision in H.B. 129 be amended to provide that only 25 percent of property tax revenues from disputed centrally
assessed values be placed in escrow.
Sen. Mantes said that neither proposal is a long-term solution. He recommended reviewing
the tax system. He supported Rep. Valentine's motion.
Returning to the substitute motion, Chair Nielson called for the vote. The motion failed
with Sens. Poulton and Stephenson and Reps. Curtis and Harper voting in favor and Sens.
Nielson, Blackham, Dmitrich, and Mantes and Reps. Buffmire, Short, Tyler, and Valentine
voting against. Rep. Jones was absent for the vote.
Returning to the original motion, Chair Nielson called for the vote. The motion passed
with Sens. Nielson, Blackham, Mantes, and Poulton and Reps. Curtis, Short, and Valentine
voting for and Sens. Dmitrich and Stephenson and Reps. Buffmire, Harper, and Tyler voting
against. Rep. Jones was absent for the vote.
Rep. Valentine requested that a bill be prepared to mail out to the Legislature for review
before the special session.
3. Other Business -- No other business was discussed.
4. Adjournment --
MOTION: Rep. Buffmire moved to adjourn the meeting at 4:55 p.m. The motion passed unanimously. Rep. Jones was absent for the vote.
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