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Revenue and Taxation Interim Committee

MINUTES OF THE

REVENUE AND TAXATION INTERIM COMMITTEE

Wednesday, April 22, 1998 -- 9:00 a.m. -- Room 223 State Capitol


Members Present:    
    Sen. Howard C. Nielson, Senate Chair
    Rep. Raymond W. Short, House Chair     Sen. Leonard M. Blackham
    Sen. E. George Mantes
    Sen. Howard A. Stephenson
    Rep. Judy A. Buffmire
    Rep. Greg J. Curtis
    Rep. Kevin S. Garn
    Rep. James R. Gowans
    Rep. Wayne A. Harper
    Rep. Loraine T. Pace
    Rep. Jack A. Seitz     Rep. John L. Valentine
    Rep. Richard L. Walsh
    

    Members Excused:
        Sen. Mike Dmitrich
    
     Members Absent:
        Sen. L. Steven Poulton
        Rep. David M. Jones
        Rep. Patricia B. Larson

    Staff Present:         Mr. Bryant R. Howe,
         Research Analyst
        Mr. O. William Asplund,
         Assistant Director
        Ms. Rebecca L. Rockwell,
         Associate General Counsel
        Ms. L. Kaye Clark,
         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.     Committee Business _ Chair Short called the meeting to order at 9:00 a.m.
     a.    Approval of minutes of November 19, 1997 meeting

     MOTION: Rep. Pace moved to approve the minutes of the November 19 , 1997 meeting. The motion passed unanimously. Sen. Blackham was absent for the vote.
                    
    b.    Meeting Schedule for 1998 - Chair Short reviewed the interim schedule and noted that the committee will meet at 9:00 a.m. for meetings held on interim day.

    c.    Results of Management Committee Meeting - Chair Short explained that the Legislative Management Committee approved the request to hold four additional meetings during the 1998 interim on days other than interim days.

    MOTION: Chair Nielson moved that the additional meetings of the Revenue and Taxation Interim Committee be held on August 5, September 9, October 7, and November 4, at 2:00 p.m. in Room 403 or 405. The motion passed unanimously. Sen. Blackham, Sen. Mantes, Rep. Curtis, Rep. Garn, Rep. Gowans, and Rep. Valentine were absent for the vote.

    Chair Short reported that the Legislative Management Committee also approved a request that committee members receive per diem for attending Tax Review Commission meetings.

    d.    Utah Tomorrow Report - Chair Short requested that committee members review the report. Rep. Buffmire added that the Legislative Management Committee recommended committees use the information as a resource when prioritizing their study items.
    
    Chair Short suggested committee members read the NCSL publication Tax Policy Handbook For State Legislators.

2.    Update on Congressional Action Regarding Possible Federal Highway Funding - Robert H. Parry, Utah Department of Transportation ("UDOT"), compared the House and Senate versions of the six-year federal highway funding bill. He noted that an interim bill passed which gave UDOT one-third of its allotment to allow work to continue. He listed the congressional priority roads for Utah and added that the Senate has continued funding for light rail. Mr. Parry said the goal is to have a bill before the President in May. He expects Utah will receive sufficient funding to complete Governor Leavitt's ten-year highway program.
    
3.    State Revenue Update -- Doug Macdonald, Utah State Tax Commission ("Commission"), reviewed the handouts "America's bubble economy" and "TC-23 Monthly Review, First Three Quarters, 1997-1998." He reported on the key economic indicators in the following areas: (1) nonfarm employment; (2) Utah consumer sentiment index; (3) unit car and truck sales; (4) residential construction; (5) nonresidential construction; (6) sales tax; and (7) payroll tax. Mr. Macdonald forecast a four percent growth in sales tax is for the next fiscal year and noted that Utah consumer credit is approximately one percent higher than the national average.

    Rep. Garn suggested that an explanation of Utah's unique demographics accompany the commission's tax burden reports.
        
4.     Overview of Possible Study Items for the 1998 Interim -- Bryant R. Howe reviewed selected study items from the Master Study Resolution, additional studies required by legislation enacted during the 1998 Annual General Session, and other studies mandated by statute. He also informed the committee that the Airport Funding Task Force is required to report its findings and recommendations to the Revenue and Taxation Interim committee before November 30, 1998. Chair Nielson said there may be some action on the federal level regarding taxing internet sales that will require state legislation.
    
5.    Taxation of Boats and Off-Highway Recreational Vehicles
    a.    Background and Possible Options for Committee Action - Mr. Howe distributed the handout "Fees on Boats and Off-Highway Vehicles, Background and Possible Options for Change." He discussed the feasibility of implementing a flat fee on all boats and off-highway vehicles (including snowmobiles). Mr. Howe commented that although the change would generate about the same amount of revenue statewide , each county would be affected differently. He referred to a letter from Richard G. Swapp, Kane County Assessor, stating that a flat fee that

is lower than the current average tax per boat would severely impact Kane County with a loss of property tax revenue.

    Rebecca Rockwell raised a possible constitutional issue with Utah Constitution Article XIII, Section 14. She said it is unclear how Utah courts will rule in allowing the classification of property. Chair Short asked Ms. Rockwell to provide the committee more information on the issue.

    b.    Comment from County Assessors - Barbara Kresser, Summitt County Assessor, recommended grouping vehicle classifications as follows: (1) snowmobiles; (2) motorcycles; (3) travel trailers; (4) motor homes; and (5) boats. She said the classification of houseboats needs special consideration because of the impact on the revenue of Kane, San Juan, and Daggett counties.

    c.    Comment from Utah State Tax Commission - Rodney Marrelli, Executive Director , supported moving to a fee-based system. He recommended fees for boats be based on the length rather than the age of a boat. He said additional work is needed on recreational vehicle definitions.

    Sen. Mantes commented that S.B. 50, Property Taxes - Uniform Fees and Certified Tax Rate, created a change that has been difficult for the public to accept. He advised the committee to carefully consider the timing of additional changes.

6.    Taxation of Campers _ David Haun, Weber County Assessor, distributed a handout listing the following problems with taxing campers: (1) no statewide database exists to track the existence of campers for registration purposes; (2) the only way counties can assess a tax on campers is by looking at who paid the tax for the previous year; (3) ownership documents are not issued when a camper is purchased; (4) law enforcement issues are inconsistent; (5) no method of inventory or tracking camper decals; and (6) fairness to taxpayers. He stated that the revenue generated is minimal compared to the problems and inequities. The Utah Assessors Association supports eliminating registration and property taxes on campers. Chair Short asked Mr. Haun to provide the committee with the total amount of revenue involved.

    MOTION: Rep. Garn moved that staff prepare legislation to repeal taxes and registration on campers. Ms. Rockwell reviewed the potential constitutional issues with repealing taxes and registration on campers. The motion passed with Rep. Buffmire and Rep. Pace voting in opposition. Sen. Blackham and Rep. Valentine were absent for the vote.

    MOTION: Sen. Stephenson moved to have staff prepare a constitutional amendment regarding the classification of property under Utah Constitution Article XIII, Section 14. The motion passed with Rep. Curtis voting in opposition. Rep. Valentine was absent for the vote.

7.    Commercial Waste Facility Issues
    a.    Introduction - Senator Leonard Blackham said that S.B.144, Commercial Waste Facility Issues, assigned to the Revenue and Taxation Interim Committee a study of issues regarding commercial waste facilities. He asked Mark Bleazard, Office of the Legislative Fiscal Analyst, to report on a NCSL meeting he attended that addressed waste disposal. Mr. Bleazard distributed and reviewed for the committee a copy of a presentation from that meeting titled "A Long-Term Low-Level Radwaste Disposal Option, April 3, 1998."

    b.    Background Information - Bryant R. Howe made a presentation to the committee titled "Commercial Waste Facility Issues." His presentation included: (1) a review of the requirements of S.B. 144; (2) a legislative history covering 1986-1997; (3) definitions of the different categories of commercial waste; (4) information about the major commercial waste facilities in Utah; (5) fees charged by type of waste; and (6) tons of waste disposed by type of waste and facility. Mr. Howe identified the declining value of the hazardous waste market, declining landfill volumes due to increased waste prevention and recycling , unused capacity, and stiff competition as challenges facing the hazardous waste industry. Bill Asplund highlighted national hazardous waste fees and said that hazardous waste is a declining industry. He reviewed some of the reasons for placing fees on commercial waste. Sen. Blackham suggested committee members study the handouts and plan to visit local commercial wastes sites.

8.    Internet Taxation Issues and Proposed Federal Legislation--Governor Michael O. Leavitt addressed issues concerning taxing the internet including: (1) taxing access to the internet; (2) taxing purchases made over the internet; and (3) inequities in the current system. He is opposed to taxing access to the internet, but believes that sales tax should be collected on purchases made over the internet. He explained that proposed federal legislation contains provisions imposing a three year moratorium on taxing the internet. The proposed federal legislation also creates a commission to: (1) develop a system that is compatible with technology; (2) standardize definitions for sales tax; and (3) define nexus. Governor Leavitt said that state and local governments support this version of the federal legislation . Val Oveson, Commission Chair, commented that access to the internet is not currently taxed in Utah and discussed how the proposed federal legislation would be implemented by the states.

9.    Other Business - No other business was discussed.
    
10.    Adjournment --

     MOTION: Sen. Blackham moved to adjourn the meeting at 12:00 p.m. The motion passed unanimously.

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