request assistance from the TRC in conducting this study. The second requirement calls for the
TRC to conduct a study on or before the earlier of: (1) October 1 of the year after the year in
which the Utah State Tax Commission ("tax commission") reports a modification or repeal of a
federal tax credit under
Internal Revenue Code Section 41; or (2) October 1, 2004. The TRC
is required to address: (1) the cost of the credit; (2) the purpose and effectiveness of the credit; (3)
whether the credit will benefit the state; (4) whether the credit should be continued, modified, or
repealed
; and (5) report their findings to the Revenue and Taxation Interim Committee.
Ms. Rockwell reviewed S.B.185, Sales and Use Tax Exemptions Amendments Study, which provides that beginning on or after July 1, 1999, the sales and use tax exemption for sales
or leases of normal operating replacements under the manufacturing exemption will be reduced
from 100 percent to 80 percent. S.B. 185 also directs the Revenue and Taxation Interim
Committee to study these exemptions and provides that they may request assistance from the
TRC in conducting the study.
Ms. Rockwell then discussed H.B. 380, Sales Tax Exemption For Pollution Control. She commented that H.B. 380 did not pass during the 1998 Annual General Session. However,
because the exemption expires on July 1, 1999, the pollution exemption is under consideration
for study this year. She noted that S.B.144, Commercial Waste Facility Issues and S.B. 58, Study on Residential Property Tax Amendments are studies that were assigned to the Revenue and Taxation Interim Committee. S.B. 58 also authorizes the Revenue and Taxation Interim
Committee to request assistance from the TRC in addressing certain issues raised in S.B. 58 and
in preparing legislation. Ms. Rockwell also briefly discussed S.J.R. 13, Resolution on Review of Tax Commission Cases; S.B. 62, District Court Review of Tax Commission Cases; and
S.B. 50, Property Taxes - Uniform Fees and Certified Tax Rate.
b) Study Items - Chair Cornia identified items 175, 179, 183, 184, 186, 177, and 195
from the handout Revenue and Taxation Interim Committee Possible Study Items, 1998 Interim and the studies discussed by Ms. Rockwell as appropriate
items for the TRC to study. He asked staff to communicate with the Revenue and Taxation Interim Committee regarding TRC's desire
to assist in studying these issues. Chair Cornia referred to a letter from the Administrative Rules
Review Committee requesting that the TRC review the tax commission's assessment of transient
room taxes on certain motel accommodations. Commissioner Oveson noted that this matter is
currently on appeal before the tax commission.
c) Revenue and Taxation Interim Committee's Assignments - Chair Cornia reviewed a
letter from the Legislative Management Committee
approving the Revenue and Taxation Interim Committee's request to coordinate meetings with the TRC to avoid duplication of efforts.
3.
Follow-up on Centrally Assessed Tax Issues (Intangible Study)
a) Legislative Response - Rep. Valentine sponsored H.B. 370, Property Tax - Intangibles Exemption which passed during the 1998 Annual General Session. He informed the TRC that the legislation used the existing constitutional framework to statutorily define the
difference between intangible property and tangible property that has intangible attributes. Rep.
Valentine explained that H.B. 370 exempts intangible property, but taxes tangible property with
its intangible attributes that are not separable from the tangible property. He noted that Sen.
Hillyard sponsored S.J.R.
17, Resolution Amending Intangible Property Tax Provisions, a constitutional amendment which did not pass.
b) Tax Commission Response and Proposed Rule Changes - Commissioner Oveson
responded that the tax commission interpreted H.B. 370 as overturning WilTel. He said the commission gave to the Property Tax Division ("division")
the following guidelines for implementing the legislation: (1) the division is to maintain market value as a goal; (2) the
legislation mitigated the shift from centrally assessed property to locally assessed property; and
(3) the division is required to use other states' valuations as an indicator of value. He stressed
that market value is a range rather than an exact value. Commission Oveson distributed a
proposed rule "Valuation of State Assessed Utility and Transportation Properties pursuant to
Utah Code Ann. Section 59-2-201." He said there are two hearings scheduled on this rule. The
tax commission will also have a hearing to research the relevance of other states' values and what
adjustments need to be made for comparison.
Sen. Hillyard stressed the importance for the Supreme Court to make a decision
regarding the definition of intangible property in order to develop a policy. Commissioner
Oveson informed the TRC that WilTel has appealed and the division has cross-appealed the final
WilTel decision.
Mr. Buchi listed the aspects of property that are captured and taxed by Utah
methodology including: (1) land; (2) buildings and equipment; (3) assets working together; (4)
statutorily exempted intangibles; (5) non-exempted intangibles; (6) workforce and management;
and (7) speculation and other influences. He then presented a comparison of county-assessed and
state-assessed property valuations of commercial properties. Mr. Buchi concluded that although
the constitution applies to both county-assessed and state-assessed property, the property is
valued differently depending on the whether it is assessed by the county or the state. Sen.
Hillyard said the problem occurs because the primary method of valuation for the county is
comparable sales and the state assessors primarily use the income approach.
After discussion, the TRC agreed to continue to study intangible issues this year.
4. Report on National Committee Studying Taxation of Internet Sales
Chair Cornia distributed the handout Achieving a Level Playing Field for Electronic Commerce: Policy Considerations, and encouraged members to read it.
5. Other Studies for the Coming Year
Sen. Hillyard recommended that the Chair Cornia and Vice-chair Lee meet with the Revenue and Taxation Interim Committee and staff to select priority issues and make
recommendations to the TRC. Rep. Short said the Revenue and Taxation Interim Committee
would welcome suggestions on hiring a consultant to make recommendations on some of the
issues requiring study.
Ms. Owen referred to the handouts State Income Tax Burdens on Low-Income Families in 1997: Assessing the Burden and Opportunities for Relief and Center On Budget And Policy Priorities. She stated that the Center on Budget and Policy Priorities reported that although Utah has significantly raised its tax threshold, it is one of 21 states that tax those under the poverty
line. She recommended the TRC include developing tax policies relating to low-income people
as a priority study item. Chair Cornia asked that copies of the reports be made available to
members and discussed at a future meeting.
6. Other Business
Chair Cornia commented that those members whose terms are expiring have received a
letter to inquire whether they would be interested in being reappointed. He asked that the
members respond to the letter. Chair Cornia announced that Ray Wood has resigned from the
TRC.
a) Meeting Schedule - The members discussed scheduling the next TRC meeting after
reappointment decisions have been made.
b) Organization for 1998-1999 - This item will be discussed at the next TRC meeting.
7. Adjournment
MOTION: Mr. Buchi moved to adjourn the meeting at 4:30 p.m. The motion passed unanimously.