recommend a provision, either by an administrative rule or through legislation
, that would provide companies with an option to elect to be considered to be a new company for the purposes
of calculating their Utah research tax credit. In addition, the coalition recommends that the TRC
consider a statutory provision that would require that equipment must be used in a qualifying
research activity for a period of one year or the claimed credit is subject to recapture. He stated
that these proposals are consistent with the intent of the research and development tax credit
legislation passed during the 1998 General Session.
The TRC discussed the Task Force/Coalition
recommendations. Mr. Val Finlayson, Utah Partnership, spoke in favor of the recommendations and added that areas with strong
business cycles have two things in common: (1) strong research universities; and (2) strong
research companies. Mr. Paul Cherecwich, Cordant Technologies, Inc., argued that the research
tax credits enable Utah to be competitive in the national market.
MOTION: Mr. Buchi moved that staff draft legislation: (1) providing companies an option to elect to be considered as a new company for the purposes of calculating their Utah
research and development tax credit
; and (2) requiring that equipment must be used in a qualifying research activity for a period of one year or the claimed credit is subject to recapture
The motion passed unanimously.
3. Property Tax Issues - Relief and Limitations
a) Assessment Limitations in Other States
Mr. Asplund referred to the handouts "State Property Tax Relief in 1997" and "Property
Tax Relief: Limitations on Property Assessments." He explained that because of economic
prosperity, many states have adopted property tax relief measures including: (1) expanding
homestead exemption programs; (2) reducing statewide property tax rates that fund K-12
education; (3) capping growth in property values for tax purposes; and (4) providing one-time
rebates; or (5) other specialized forms of relief. Mr. Asplund reported that New York's tax relief
legislation is "back loaded" so that most of the tax reductions will occur in future years.
b) Study on Assessment Limitations and Constitutional Proposal
Sen. Howard Stephenson informed the TRC that he sponsored S.B. 58, "Study On
Residential Property Tax Amendments," which passed during the 1998 General Session. The
legislation required the Revenue and Taxation Interim Committee to address the issue of whether
to amend the Utah Constitution to authorize a property tax exemption for residential property of
not to exceed a statewide average of 45 percent of fair market value as provided by statute. He
reported that the Revenue and Taxation Interim Committee heard his presentation in August and
requested that he make a presentation to the TRC. Sen. Stephenson reported that while Utah's
truth in taxation law has been effective in controlling tax rates, taxable values increase year after
year as county assessors fulfill a constitutional mandate to keep assessed values current with
market values. He maintained that homeowners are much more upset by unpredictable tax hikes
than by rate increases. Sen. Stephenson explained that under his proposal homeowners would
not experience the tax reappraisal of their homes for as long as they own it, and current
homeowners would only see their taxable values increase by a maximum of 2 percent per year.
He then reviewed the draft legislation
proposing to amend the Utah Constitution to end the regular reappraisal of homes for property tax purposes
titled "Resolution on Homeowner Acquisition-date-based Property Taxes," which he will sponsor during the 1999 General Session.
Sen. Stephenson explained that the legislation provides an exception to the constitutional
uniform and equal rate of assessment and the uniform and equal rate of taxation requirements.
This exception, however, applies only to residential property. He compared his proposal to
California's Proposition 13, and said the proposal is a component of
Proposition 13 but it is not identical. Sen. Stephenson requested that the TRC continue to study his proposal next year with
the goal of having it finalized by the 2000 General Session.
The TRC discussed some possible effects of the legislation on: (1) younger
homeowners; (2) tax capitalization; (3) first-time buyers; (4) home improvements; (5) the
elderly; (6) the real estate market; (7) fraud; and (8) second homes. Mr. Bob Rees, Associate
General Counsel, explained that the legislation focuses on the valuation assessment and does not
change the uniform and equal rate for residential property, and added that the language may need
further clarification. Chair Cornia urged the members to give careful consideration to this
proposal. Sen. Stephenson said that he would like to return at a future meeting with more data to
resolve these issues. Vice-chair Lee told the TRC that a document highlighting policy
considerations will be included in the next mailing.
MOTION: Sen. Hillyard moved that Sen. Stephenson return next year to discuss his proposal. The motion passed unanimously.
4. Income Tax
Review of Income Tax Policy Statement
Mr. Asplund recommended that the TRC review H.J.R. 31 "Tax Recodification
Commission Income Tax Policy"
before
the Revenue and Taxation Interim Committee studies the policy at their next meeting. Rep. Buffmire requested copies of the tax policy for property
tax, sales tax, and income tax be mailed to the TRC.
MOTION: Mr. Buchi moved that the TRC: (1) affirm the existing income tax policy; and (2) recommend to the Revenue and Taxation Interim Committee that the policy be
implemented. In response to Mr. Buchi's motion, Rep. Valentine commented that one of the
policy positions provides that the state income tax system should be linked to the federal income
tax system. He raised a concern that because Congress may dramatically change the federal
income tax system, language should be added to TRC's policy statement clarifying that the state
income tax system should be linked to the current federal income tax system. Mr. Buchi
amended the motion to insert the word "current" before "federal income tax system." The
motion passed unanimously.
Mr. Asplund then reviewed information found in "Utah State Tax Commission
Individual Income Tax FY 96-97" and "State of Utah Financial Highlights."
5. Sales Tax Base and Review Process
Mr. Asplund distributed "Summary of 1993-1996 Sales and Use Tax Exemption Review" in response to TRC's motion to limit the number of exemptions to be reviewed and also
focus on the sales tax base. He recommended that the TRC use this handout as reference
material in developing a sales and use tax exemption review process.
MOTION: Sen. Hillyard moved that the Chair and Vice-chair of the TRC, staff, Sen. Mantes, and Commissioner McKeown meet with representatives of the governor's office and
recommend specific sales and use tax exemptions to be studied by the TRC. The motion passed
unanimously.
6. Other Business
Vice-chair Lee commented that the vacancies in the TRC will be discussed at the next
meeting. He noted that Ms. Owen has requested that she be reappointed and Mr. Keith Prescott
has been recommended to fill the vacancy created by Mr. Ray Wood's resignation.
Ms. Owen distributed a flyer for Utah Issues Poverty Issues 1999 Conference, and
recommended the TRC attend. She reported that according to the "Utah Data Guide,
Spring/Summer 1998," Utah's average annual pay is 85 percent of the national average pay.
Vice-chair Lee said that due to a UEA weekend, the TRC may need to reschedule
October's meeting. The committee decided to meet on October 2, 1998, at 12:00 p.m. Lunch
will be provided for members of the TRC.
7. Adjournment
MOTION: Rep. Valentine moved to adjourn the meeting at 3:45 p.m.