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Revenue and Taxation Interim Committee

MINUTES OF THE

REVENUE AND TAXATION INTERIM COMMITTEE

Wednesday, July 15, 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. Mike Dmitrich         Sen. E. George Mantes
    Sen. L. Steven Poulton
    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. David M. Jones
    Rep. Patricia B. Larson
    Rep. Loraine T. Pace
    Rep. Jack A. Seitz     Rep. John L. Valentine
    Rep. Richard L. Walsh
    

    Staff Present:         Mr. Bryant R. Howe,
         Research Analyst
        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 Nielson called the meeting to order at 9:15 a.m.
        
    a.    Approval of minutes of June 17,1998 meeting

MOTION: Rep. Seitz moved to approve the minutes of the June 17, 1998 meeting . The motion passed unanimously. Sens. Blackham, Poulton, and Stephenson, and Reps. Short, Jones, and Larson were absent for the vote.

        b.    Revenue Update--Doug Macdonald, Utah State Tax Commission ("Tax Commission"), reviewed information from the handout "TC-23 Monthly Revenue Summary Preliminary Year-end, 1997-1998." He told the committee that the net collections for the General Fund and the Uniform School Fund show an increase of $60.67 million. Mr. Macdonald reported that the key economic indicators show an increase in the following areas: (1) non-farm employment; (2) Utah consumer sentiment index; (3) residential construction; (4) nonresidential construction; (5) sales tax; and (6) withholding tax. However, unit car and truck sales are down five percent.

2.    Marriage Penalty
        a.    Review of Marriage Penalty Issues, Letter to Congressional Delegation, and Update on Congressional Action Regarding the Marriage Penalty _ Rebecca L. Rockwell, Associate General Counsel, reviewed the draft letter to Utah's Congressional delegates requested by Rep. Harper urging Congress to eliminate or reduce marriage penalties under the federal system and to adopt an approach minimizing negative impacts to states. She said the letter is drafted in general terms because the proposals before Congress are rapidly changing and Congress has not decided which proposal to adopt.

        b.    Committee Discussion and Action _ Rep. Valentine suggested changes to the letter giving specific recommendations for action to be taken by Congress. Commissioner Oveson, Tax Commission, presented a letter to Utah's Congressional delegates on this issue prepared by the Tax Commission. Rep. Harper agreed to revise his letter to include more specific recommendations. Rep. Harper informed the committee that he will present draft legislation to the committee addressing marriage penalties under the state individual income tax.

3.    Commercial Waste Facility Issues
    a.    Overview of Company Disposal Charges and Waste Stream Information for Low Level Radioactive Waste Facilities _ Bryant R. Howe, Research Analyst, distributed a handout prepared by the Department of Environment Quality ("DEQ") titled "DEQ Environmental Restricted Fund" containing information on the restricted account created by the Legislature. Mr. Howe then presented a comparison of the types of radioactive waste by total volume for Envirocare, US Ecology, and Chem Nuclear. The handout, "Operational vs. Cleanup Waste, U.S. Commercial Radioactive Waste Facilities," shows that 95 percent of Envirocare's radioactive waste is cleanup, while only 5 percent is operational.

    Mr. Howe also responded to the committee's request for disposal fees for these same companies. He provided disposal fee data for US Ecology in the handout "US Ecology, Inc., Schedule A," but commented that the other companies did not disclose their disposal fees because the data is proprietary. Mr. Howe prepared a document for the committee titled "Summary, Low Level Radioactive Waste Fees," reviewing the information that has been presented at previous meetings.

    b.    Comments from Tooele County Commission _ Commissioner Teryl Hunsaker and Commissioner Lois McArthur provided background information to the committee regarding the commercial waste industry in Tooele County. Commissioner Hunsaker reported that in an effort to develop an industrial base for economic growth and development, Tooele County established a hazardous waste zone in the west desert. This zone covers approximately 80,000 acres. He reported that fees from the two major companies that operate facilities in this zone make up about 25 percent of Tooele County's annual general fund budget. Commissioner Hunsaker explained that the county maintains that the west desert industries should pay the oversight costs

incurred by DEQ; however, the fees should be applied equally to every hazardous waste facility in Utah. He said that unfair fees could have a devastating effect on Tooele County. The commissioners provided copies of: (1) a 1997 report by the Tooele County Sheriff's office titled "Hazardous Material Flow Study;" and (2) the Tooele County Commission's presentation titled "Tooele County Government Before the Utah Legislature."

    c.    Discussion of Possible Options and Direction for Future Action _ The committee discussed the possible impacts of withdrawing from the Northwest Compact. Bill Sinclair, Division of Radiation Control, responded to questions from the committee and reported that there is little or no B&C waste generated in the state. Chair Nielson asked Mr. Sinclair to prepare information regarding financial and other advantages to withdrawing from the Northwest Compact. Mr. Sinclair agreed to provide the information to the committee.

4.    Sales Tax Exemption for Pollution Control Facilities
    a.    Background Information - Ms. Rockwell reviewed the existing law on the exemption and provided a summary titled "Sales and Use Tax Exemption for Pollution Control Facilities: Summary of Current Law." Her review included a discussion of certifying pollution control facilities and the procedures for revoking the certification of pollution control facilities for purposes of the exemption. Ms. Rockwell also reviewed the consequences of a revocation.

    O. William Asplund, Assistant Director, told the committee that in 1993 the Legislature ordered a study of all the sales tax exemptions including the pollution control facilities exemption. He reviewed the findings and recommendations from that study provided in the packet "Utah State Tax Commission, State Sales & Use Tax FY 96-97, Utah Sales Tax Exemption Expenditures." He noted that last year the Tax Commission estimated the exempted sales tax revenue to be approximately $4.2 million. Mr. Asplund summarized the findings and recommendations of a consultant hired by the Legislature in 1993 to study the sales and use tax exemption. He also reviewed the Tax Review Commission's recommendations on the exemption. Mr. Asplund explained to the committee that the study resulted in amendments to: (1) the definition of "pollution control facility" and the certification process to require a "primary" rather than "substantial" use in reducing air or water pollution; and (2) the implementation of the exemption to include the State Tax Commission in the process of certifying and revoking the certification of pollution control facilities. He added that the consultant recommended that if the exemption was retained that perhaps it should be extended to include pollution control equipment on automobiles.
            
    b.    Department of Environmental Quality--Dianne Nielson, Executive Director, distributed
"Utah Department of Environmental Quality Summary Of Pollution Control Sales Tax Exemptions, July 15, 1998," regarding the number of exemptions that have been approved since 1995 for air quality and water quality. Rep. Jones requested data on the value of the exemption for each class of taxpayers listed on the handout. He commented that this data is necessary in

evaluating the exemption. Ms. Nielson agreed to provide the information that does not violate confidentiality issues. She commented that solid and hazardous waste facilities are not prohibited from applying for the exemption. Ms. Nielson also addressed options for dealing with pollution control for automobiles.                 
    c.    Utah State Tax Commission--W. Val Oveson, Chair, explained that the Tax Commission's involvement in the administration of the exemption includes providing a sales tax audit and a refund of the sales tax after certification.

    d.    Public Comment _ Lee Peacock, Utah Petroleum Association; Stan Parrish, Salt Lake Chamber of Commerce; Tom Bingham, Utah Mining Association; and Ron Casper, National Federation of Independent Business distributed a position statement "Business Coalition in Support of Reauthorizing the Sales & Use Tax Equipment for Pollution Control Equipment and Facilities Utah Code 59-12-104(12)." They spoke in support of the sales and use tax exemption for pollution control equipment and facilities and urged the committee to reauthorize the tax exemption during the 1999 Annual General Session.

    e.    Committee Discussion and Direction for Future Action _ Ms. Rockwell provided an overview of the history of the exemption in the handout "Historical Highlights." She explained that the exemption was enacted in 1973 and was extended in 1980,1985, 1990, and 1994. She noted that the exemption lapsed for approximately 1-½ years between 1985 and 1986.

    MOTION: Rep. Valentine moved that the Revenue and Taxation Interim Committee adopt the provisions of 1998 H.B. 380 as a committee position and that staff draft legislation extending the exemption to 2004.

    SUBSTITUTE MOTION: Rep. Jones moved that the committee delay action on the bill until the next meeting to allow the committee to become more informed regarding the effectiveness and value of the exemption. Rep. Jones revised his motion to also instruct staff to: (1) draft legislation similar to 1998 H.B. 380 for consideration by the committee at the next meeting; and (2) provide the committee with additional information at the next meeting. Sen. Dmitrich declared a possible conflict of interest. Rep. Short moved previous question. The motion failed in the Senate. Sen. Mantes and Reps. Buffmire, Jones, Larson, Seitz, and Valentine voted in favor of the motion.

    The original motion passed with Sen. Mantes and Reps. Buffmire, Jones, and Larson voting in opposition to the motion.

    Rep. Valentine requested that the additional information regarding the pollution control exemption be presented at the next meeting.

5.    Other Business _ Rep. Valentine announced that Rep. Harper had prepared a revised version of the letter to the congressional delegates including specific recommendations and committee support of S1999.

     MOTION: Rep. Valentine moved the committee chairs send the revised letter to the Utah congressional delegates. The motion passed unanimously. Reps. Garn, Harper, and Walsh were absent for the vote.

6.    Adjournment --

     MOTION: Rep. Jones moved to adjourn the meeting at 11:45 a.m. The motion passed unanimously.

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