2003 Revenue & Taxation

Sales/property/income taxes

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January 13, 2003
January 14, 2003
January 15, 2003
January 16, 2003
January 16, 2003 – Subcommittee
January 20, 2003
January 20, 2003 – Subcommittee
January 21, 2003 – Subcommittee (Corrected)
January 22, 2003
January 23, 2003
January 28, 2003
January 29, 2003
January 30, 2003

February 3, 2003
February 4, 2003
February 5, 2003
February 6, 2003
February 11, 2003
February 12, 2003
February 13, 2003
February 17, 2003
February 19, 2003
February 20, 2003
February 24, 2003
February 25, 2003
February 25, 2003 – Subcommittee
February 26, 2003
February 27, 2003

March 3, 2003
March 4, 2003
March 5, 2003
March 6, 2003
March 10, 2003
March 11, 2003
March 12, 2003
March 13, 2003
March 17, 2003
March 19, 2003
March 20, 2003
March 21, 2003
March 24, 2003
March 25, 2003
March 26, 2003
March 27, 2003
March 31, 2003
March 31, 2003 – Subcommittee

April 1, 2003
April 1, 2003 – Subcommittee
April 2, 2003
April 3, 2003
April 4, 2003
April 8, 2003
April 9, 2003
April 15, 2003
April 17, 2003
April 21, 2003
April 22, 2003
April 23, 2003
April 24, 2003
April 25, 2003
April 28, 2003 – Morning Meeting
April 28, 2003 – Afternoon Meeting

DATE: January 13, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/EXCUSED: Representatives Denney and Moyle
GUESTS: Ted Spangler, Dan John, Idaho State Tax Commission; Randy Nelson,
Associated Taxpayers of Idaho
Chairman Crow convened the meeting at 10:00 a.m.. She introduced the
office staff and Mr. John and Mr. Spangler who will be representing the
Idaho State Tax Commission and assisting Committee members during
the session. She also introduced Randy Nelson from the Associated
Taxpayers of Idaho who will provide members with pertinent tax
information on legislation to be considered by the Committee.



The Chairman assigned the following Subcommittees: #1 Chairman
Representative Kellogg, members Representatives Field, Smith, Wood
Ringo; #2 Chairman Representative Cuddy, members Representatives
Ridinger, Barrett, Roberts, Denney; #3 Chairman, Representative
Raybould, members Representatives Collins, McKague, Martinez; #4
Chairman, Representative Ridinger, members Representatives Schaefer,
Henbest, McGeachin.



The Chairman informed the members that Representative Raybould will
be serving as the Assistant Vice Chairman. She appointed Vice
Chairman Kellogg and Assistant Vice Chairman Raybould the
responsibility of dividing the Idaho State Tax Commission rules in
categories and assigning subcommittees to review the rules and report
back to the full Committee.

ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:15 a.m.






DATE: January 14, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schumacher, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/EXCUSED: Representative Henbest
GUESTS: Ted Spangler, Idaho State Tax Commission
Chairman Crow called the meeting to order and requested a silent roll
call. She asked Representative Raybould to report on subcommittee
assignments to review the State Tax Commission rules. Representative
Raybould articulated that the following subcommittees will review the
outlined rules. Subcommittee #1; Chairman Field, members, Ridinger,
Schaefer, Wood, Ringo to review 35.01.01 Income Tax Administrative
Rules; 35.02.01 Tax Commission Administration and Enforcement Rules.
Subcommittee #2; Chairman Smith(24), members, Barrett, Denney,
McKague, Henbest; to review 35.01.02 Idaho Sales Tax & Use Tax
Administrative Rules; 35.01.09 , Idaho County Option Kitchen and Table
Wine Tax Administrative Rules; 35.01.10 Idaho Cigarette and Tobacco
Products Tax Administrative Rule; 35.01.12 Idaho Beer Tax
Administrative Rules; Subcommittee #3; Chairman Roberts, members,
Moyle, Collins, Raybould, McGeachin, Cuddy, Martinez, to review
35.01.03 Property Tax Administration Rules.



Chairman Crow requested that the members review the minutes.
Representative Kellogg moved to accept the minutes of the meeting held
on January 13, 2003 as written. Motion carried. The Chairman informed
the members that Representative Schaefer was undergoing surgery and
would temporarily be replaced by Carol Schumacher.

RS12388 The Chairman announced that the first item on the agenda was RS 12388
and recognized Mr. Spangler. Ted Spangler, Idaho State Tax
Commission,
informed the members he is the legal counsel for the Idaho
State Tax Commission explained that this proposed bill amends the
section of the Idaho Sales and Use Tax Act relating to the responsible
person liability for unpaid sales and use taxes to provide that a
responsible person can be liable for taxes of any taxpayer whose tax
compliance is that person’s duty. It deletes “Corporations, Partnerships
and Limited Liability Companies” and substitutes “taxpayer.” He
explained that assessment which is due and payable is not as inclusive
as it should be in the statute.
MOTION: Representative Moyle moved to introduce RS12388. Motion passed on
a voice vote.
RS12390: The Chairman announced the next item on the agenda was RS12390 and
asked Ted Spangler to submit the RS. Mr. Spangler explained that this
proposed bill makes a number of minor updates and corrections to
Idaho’s property tax statutes.



The date by which county auditors must certify the new construction roll to
the State Tax Commission is changed from the first Monday to the fourth
Monday of July. In addition a reference to the Farmers Home
Administration is changed to the Consolidated Farm Service Agency to
reflect a change in federal law.



Obsolete language relating to taxation of merchandise held for sale is
deleted from the code section relating to the property tax exemption for
property of fraternal, benevolent or charitable corporations or societies.
When taxes on inventory was repealed several years ago, this statute
was never corrected.



This proposed bill permits additional time for school districts to certify a
budget for a school emergency fund levy. Last year legislation moved the
date for setting budgets which can be before the first day of school.

MOTION: It was moved by Representative Cuddy to introduce RS12390. Motion
carried on a voice vote.
RS12392: Chairman Crow announced the next item on the agenda was RS12392
and recognized Ted Spangler to address the proposed legislation. Mr.
Spangler
explained that this proposed legislation provides that when the
State Tax Commission petitions a court for a writ of possession as an aid
to collection of delinquent tax assessments, the duties usually performed
by the county sheriff in regard to taking possession and, if necessary, the
sale of property can be performed by the State Tax Commission. In
response to questions from the Committee, he said the purpose of the
proposal is primarily that the Tax Commission can do a better job to
obtain a better purchase price by advertising. It also takes the burden off
the county.
MOTION: Representative Field moved to introduce RS12392.
SUBSTITUTE

MOTION:

A substitute motion was made by Representative Barrett to return
RS12392 to sponsor.
Motion failed on a voice vote.



Motion to introduce RS12392 passed. Representative Barrett requested
to be recorded as voting NO.

RS12396: The Chairman announced the next item on the agenda was RS12396 and
recognized Ted Spangler. Mr. Spangler explained that this proposed bill
makes three corrections and updates to the Idaho Sales Tax Act. First, it
provides administrative review of denial of an application for a seller’s
permit.






Second, the proportion of out of state use by interstate vehicles registered
under the International Registration Plan shall be measured based on the
vehicle’s annual registration period rather than on a calendar year.



Third, the requirement that certain exempt aircraft must be registered
under the law of another state or nation is stricken.

MOTION: It was moved by Representative Roberts to introduce RS12396. Motion
passed on a voice vote.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:30 a.m.






DATE: January 15, 2003
TIME: 10:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schumacher, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/EXCUSED: Representative Martinez
GUESTS: Jerry Nicolescu, Department of Agriculture: Dan John, Idaho State Tax
Commission
Chairman Crow called the meeting to order at 10:30 a.m. and requested a
silent roll call. Representative Ridinger moved to accept the minutes of
the meeting held on January 14, 2003 as written. Motion carried on a
voice vote.
RS12368: The Chairman announced the first item on the agenda was RS12368 and
recognized Mr. Nicolescu to explain the proposed legislation. Jerry
Nicolescu, Department of Agriculture,
said the purpose of this proposal
is to revise Title 22, Chapter 27, Idaho Code and Title 63, Chapter 30,
Idaho Code, to remove the sunset clause and re-authorize the Natural
Resources Income Tax Credit, the sunset date was January 1, 2003.
The-re-authorization defines terms and provides for review and approval
or qualified expenditures. He stated the 1997 legislature passed this tax
incentive and there were one hundred applicants that could not be
funded. This proposed legislation does not impact the general fund.
MOTION: It was moved by Representative Barrett to introduce RS12368. Motion
carried on a voice vote.
RS12397: Chairman Crow announced the next item on the agenda was RS12397
and asked Mr. John to present the proposed bill. Dan John, representing
the Idaho State Tax Commission, explained this proposed legislation
makes technical corrections to the Idaho Income Tax Act. They are as
follows: Updates a cross-reference in the section providing Idaho
adjustments to federal taxable income.



Deletes an extraneous word in the section relating to the Idaho deduction
for health insurance costs.



Conforms the Idaho income tax it relates to electing small business trusts
to the Internal Revenue Code except to provide that the maximum Idaho
rate for individuals shall apply to such trusts.



Makes two changes to the provisions relating to special credit available
for new employees. The first is to provide that a new employee includes
an employee subject to Idaho income tax withholding whether or not any
amounts are required to be withheld. The second is to restore
amendments inadvertently omitted in prior legislation to increase the
limitation on the credit and to coordinate the credit with other credits.

MOTION: It was moved by Representative Wood to introduce RS123797. Motion
carried on a voice vote.
RS12398: The Chairman announced the next item on the agenda was RS12398.
Mr. John stated that this proposed legislation makes procedural
amendments to the Uniform Unclaimed Property Act. It permits a written
agreement between the claimant of property tax and the administrator of
unclaimed property, State Tax Commission, to extend the 90-day, the
time within which the administrator must grant or deny a claim. It provides
a claimant an opportunity for administrative review of a denied claim
before having to file a judicial appeal.
MOTION: Representative Raybould moved to introduce RS12398. Motion passed
on a voice vote.
RS12399: The Chairman announced the next item on the agenda was RS12399 and
recognized Mr. John. He said this proposed bill deals with two tax credits
granted by prior legislation. The purpose of this bill is to clarify that the
tax credits for investment in broadband equipment and the incentive
income tax investment credit are transferably only by the taxpayer who
earned the credit. In the Tax Commission’s opinion it was the intent of the
Legislature that the credit earned by a taxpayer could sell to one person
only. This proposed legislation limits the transfer to one time.
MOTION: Representative Smith moved to introduce RS12398. Motion passed on a
voice vote.
ADJOURN: Chairman Crow announced that concludes the business for today and
adjourned the meeting at 10:47 a.m.

DATE: January 16, 2003
TIME: 10:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schumacher, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/EXCUSED: Representatives Barrett, Schumacher, Cuddy
GUESTS: Judy Comstock, State Treasurer
Chairman Crow convened the meeting at 10:30 a.m. and requested a
silent roll call. Representative Kellogg moved to accept the minutes of the
meeting held on January 15, 2003 as written.
H0068: The Chairman announced the first item on the agenda was H0068 and
recognized Ms. Comstock to present the bill. Judy Comstock,
representing the State Treasurer’s Office testified that this bill is
necessary to bring the Idaho College Savings Program in compliance with
the Federal Economic Growth and Tax Relief Reconciliation Act of 2001.
The bill outlines the definition of family members to collate with Idaho
Code as outlined in Section #529 of the Internal Revenue Code.
MOTION: Representative Wood moved to send H0068 to the floor with a DO PASS
recommendation. Motion passed on a voice vote. Representative Wood
will sponsor the bill on the floor.
H0069: Chairman Crow announced the next item on the agenda was H0069 and
recognized Judy Comstock. Ms. Comstock explained that this bill is
necessary to clarify that a taxpayer will not be taxed twice when a non-qualified withdrawal is made from the Idaho College Savings Program.
The program provides, pursuant to Idaho Code # 63-3022 (o) for a state
tax deduction for contributions made to accounts established in the
program. Idaho Code #63-3022(o) provides that non-qualified
withdrawals from the program must be recaptured in the taxpayer’s
income to offset the tax deduction taken when the contribution was made.
Because of the interaction of the federal and state income tax forms, this
provision causes gains on non-qualified withdrawals to be included twice
in the taxpayer’s state reportable income. This amendment will provide
that a taxpayer may exclude that portion of a non-qualified withdrawal that
has already been included in his federal taxable income, therefore
eliminating double taxation.
MOTION: Representative Moyle moved to send H0069 to the floor with a DO PASS
recommendation. Motion carried on a voice vote. Representative
Denney will sponsor the bill on the floor
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:38.











DATE: January 16, 2003
TIME: 8 a.m.
PLACE: Room 408
MEMBERS: Chairman Roberts Representatives Moyle, Collins, Raybould,
McGeachin, Cuddy, Martinez
ABSENT/EXCUSED: Representatives Moyle and Cuddy
GUESTS: Alan Dornfest, Ted Spangler, State Tax Commission; Harley Hinshaw
Valley County Assessor; Valdi Pace, Blaine County Assessor
MINUTES: Chairman Roberts called the meeting to order. The Chairman recognized
Alan Dornfest, State Tax Commission to present, Property Tax
Administrative Rules – Docket No. 35-0103-0201, 35-0103-0202,

35-0103-0203, 35-0103-0204, 35-0103-0205. See attachment for details.
Discussion and review followed with questions from the committee.

MOTION: Representative Raybould moved to accept the proposed rule
amendments to IDAPA 35.01.03 Dockets No. 35103-0201, 35-0103-0202, 35-0103-0203, 35-0103-0204, 35-0103-0205 in their entirety and to
present them to the full committee. Motion passed unanimously on a
voice vote.
ADJOURN: Meeting was adjourned at 9:17 a.m.






DATE: January 20, 2003
TIME: 10:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schumacher, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/EXCUSED: Representative Roberts
GUESTS: Ted Spangler, Idaho State Tax Commission
Chairman Crow convened the meeting at 10:30 a.m. and requested a silent
roll call. Representative Kellogg moved to accept the minutes of the meeting
held on January 16, 2003 as written. Motion carried on a voice vote. The
Chairman assigned H0073 which increases tax on cigarettes and tobacco
products, to Representative Cuddy’s Subcommittee. All cigarette and
tobacco legislation will be referred to the Cuddy subcommittee.
RS12400: Chairman Crow announced the first item on the agenda was RS12400
and asked Mr. Spangler to explain the proposed legislation. Ted
Spangler, State Tax Commission,
stated that this proposed legislation
changes two provisions of the Idaho Sales Tax Act relating to the credit or
refund allowed retailers for bad debts. It provides that the seller who paid
the tax to the state must claim the credit or refund for sales taxes remitted
on bad debts. It provides that the three-year statute of limitations on
claims for credit or refunds resulting from bad debts will begin on the date
the debt becomes worthless for income tax purposes.
MOTION: Representative Cuddy moved to introduce RS12400. Motion carried on
a voice vote.
H0074: Chairman Crow announced the next item on the agenda was H0074 and
recognized Mr. Spangler. He testified that this bill amends the section of
the Idaho Sales and Use Tax Act relating to the responsible-person
liability for unpaid sales and use taxes to provide that a responsible
person can be liable for taxes of any taxpayer whose tax compliance is
that person’s duty.
MOTION: Representative Raybould moved to send H0074 to the floor with a do
pass
recommendation. Motion passed on a voice vote. Representatives
Barrett and McKague requested to be recorded as voting NO.
Representative Ridinger will sponsor the bill on the floor.
H0075 The Chairman announced the next item on the agenda was H0075 and
asked Mr. Spangler to present the bill. Ted Spangler, State Tax
Commission,
testified that this bill makes a number of minor updates and
corrections to Idaho’s property tax statutes.



The first change is the date by which county auditors must certify the new
construction roll to the State Tax Commission is changed from the first
Monday of June to the fourth Monday of July.



Second, a reference to the Farmers Home Administration is changed to
the Consolidated Farm Service Agency to reflect a change in federal law.



Third, obsolete language relating to taxation of merchandise held for sale
is deleted from the code section relating to the property tax exemption for
property of fraternal, benevolent, or charitable corporations or societies.



Fourth, permits additional time for school districts to certify a budget for a
school emergency fund levy.

MOTION: It was moved by Representative Ridinger to send H0075 to the floor with
a do pass recommendation. Motion carried on a voice vote.
Representative Moyle will be the floor sponsor.
H0077: The Chairman announced the next item on the agenda was H0077 and
recognized Mr. Spangler to present the bill. Mr. Spangler testified that
this bill makes three corrections and updates to the Idaho Sales Tax Act.



This bill provides for administrative review of denial of an application for a
seller’s permit.



The proportion of out-of-state use by interstate vehicles registered under
the International Registration Plan shall be measured based on the
vehicle’s annual registration period rather than on a calendar year.



The requirement that certain exempt aircraft must be registered under the
law of another state or nation is stricken.

MOTION: Representative Wood moved to send H0077 to the floor with a do pass
recommendation. Representative Cuddy will sponsor the bill on the floor.
ADJOURN: There being no further business, Chairman Crow adjourned the meeting
at 11:00 a.m.






DATE: January 20, 2003
TIME: 9 a.m.
PLACE: Room 404
MEMBERS: Chairman Field, Representatives Ridinger, Schumacher, Wood, Ringo
ABSENT/EXCUSED:
GUESTS: Janice Boyd, Ted Spangler
MINUTES: Chairman Field called the meeting to order. The Chairman recognized
Janice Boyd, State Tax Commission to present, Income Tax
Administrative Rules –IDAPA 35.01.01 Docket No. 35-0101-0201; Tax
Commission Administration and Enforcement Rules – 35.02.01 Docket
No. 35-0201-0201.
See attached detailed rule changes.
MOTION: Representative Ringo moved to accept the proposed rule amendments
to IDAPA 35-01.01 Docket No. 35-0101-0201
in the entirety and to
present it to the full committee. Motion passed unanimously on a voice
vote.



Janice Boyd presented the next item on the agenda which was Docket
No.
35-0201-0201. Discussion and questions from the committee
followed.

MOTION: Representative Ridinger moved to accept the proposed rule
amendments to IDAPA 35-02.01 Docket No. 35-0201-0201
in the
entirety and to present it to the full committee. Motion passed
unanimously on a voice vote.
ADJOURN: Meeting was adjourned at 9:29 a.m.









CORRECTED

DATE: January 21, 2003
TIME: 9 a.m.
PLACE: Room 404
MEMBERS: Chairman Smith, Representatives Barrett, Denney, McKague Henbest
ABSENT/EXCUSED:
GUESTS: Jim Husted, Ted Spangler State Tax Commission
Chairman Smith called the meeting to order. The Chairman recognized
Jim Husted State Tax Commission to present Idaho sales tax and use
tax administrative rules 35.01.02, Docket No. 35-0102-0201, Docket No.
35-0102-0202:
Idaho County option kitchen and table wine tax
administrative rules 35.01.09, Docket No. 35-0109-0201: Idaho cigarette
and tobacco products tax administrative rules 35.01.10, Docket No. 35-0110-0201: Idaho beer tax administrative rules 35.01.12, Docket No. 35-0112-0201. See attached detailed rule changes.
MOTION: Idaho sales tax and use tax administrative rules was presented by Mr.
Husted. Representative Denney moved to accept the proposed rule
amendments to IDAPA 35.01.02, Docket No. 35-0102-0201
and to
present it to the full committee for approval. Motion passed unanimously
on a voice vote.



Mr. Husted addressed the additional Docket No 35-0102-0202, sales and
use tax administrative rules.

MOTION: Representative Denney moved to accept the proposed rule
amendments to IDAPA 35.01.02, DOCKET No. 35-0102-0202
and to
send it to the full committee for approval. Motion passed on a voice vote.

Mr. Husted continued the presentation with the Idaho County option
kitchen and table wine tax administrative rules 35.01.09, Docket No. 35-0109-0201. Discussion followed from committee members.

MOTION: Representative Henbest moved to accept the proposed rule
amendments to IDAPA 35.01.09, Docket No. 35-0109-0201
and to
present it to the full committee for approval. Motion passed.



Next on the agenda was Idaho cigarette and tobacco products tax
administrative rules 35.01.10, Docket No. 35-0110-0201. Mr. Husted
presented a brief explanation of the rule.

MOTION: Representative Denney moved to accept the proposed rule

amendments to IDAPA 35.01.10, Docket No. 35-0110-0201 and to
present it to the full committee for approval. Motion passed.



Idaho beer tax administrative rules 35.01.12, Docket No. 35-0112-0201,
was presented by Mr. Husted. Discussion followed.

MOTION: Representative Barrett moved to accept the proposed rule
amendments to IDAPA 35.01.10, Docket No. 35-0112-0201.
ADJOURN: Chairman Smith adjourned the meeting at 9:30 p.m.






DATE: January 22, 2003
TIME: 10:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/EXCUSED: Representative Schaefer
GUESTS: Representative Trail; Representative Anderson; Representative Clark
Chairman Crow called the meeting to order at 10:30 a.m. and requested a
silent roll call. Representative Kellogg moved to accept the minutes of the
meeting held on January 21, 2003 as written. Motion carried on a voice
vote.
RS12436 Chairman Crow announced the first item on the agenda was RS12436.
She asked Representative Trail to acquaint the members with the
proposed legislation. Representative Trail gave a brief overview of the
objective for this proposed legislation is to reduce the sales tax from five
percent to four percent and broadly spread Idaho’s taxes. The proposed
bill enacts the “Idaho Economic Recovery and Tax Reform Act of 2003.”
He yielded to Representative Anderson, co-sponsor, to explain the
specifics.



Representative Anderson stated that the proposed legislation has
primarily three directions. One, the proposed bill provides for quarterly
payment of income tax estimates by wage earners required to make
estimated payments to the Internal Revenue Service in the approximate
sum of $80 million. Two, total sales tax exemptions estimated to be
$955,308,000, recoverable estimate of $799,597,000 resulting in a gain
from removing certain sales tax exemptions in the sum of $45,705,000.

There were seventeen sales tax exemptions in 1965, now there are
seventy sales tax exemptions. Three, total income tax credits in the
amount of $183,293,000, recoverable estimate of $120,891,000 resulting
in a gain of $45,705,000. (See attachment #1 for detail list of
expenditures and exemptions.)



This bill will result in an increase in revenue to the State of Idaho of
approximately $131.2 million commencing September 1, 2003.
Additionally the payment of quarterly estimates will increase the revenues
by the approximate sum of $80 million which will be received on June 15,
2003. This may reduce or eliminate the need for any further hold-backs in
FY2003.

MOTION: After a question and answer period, Representative Denney moved to
return RS12436 to the sponsors.



Explaining his motion, Representative Denney stated that this proposed
legislation is quite lengthy and expensive to print. The proposed
legislation removes economic tax credits from businesses that are
important tools for expansion. If there is a problem with sales tax
exemptions perhaps the Speaker of the House needs to appoint a task
force to study the issue.

ROLL CALL
VOTE:
Voting AYE – Representatives Kellogg, Raybould, Barrett, Ridinger,
Moyle, Field, Smith, Collins, Roberts, Wood, Denney, McKague,
McGeachin, Cuddy, Crow. Voting NAY – Representatives Henbest,
Martinez, Ringo. Motion passed, 15-3-1
RS12626: The Chairman announced the next item on the agenda was RS12626 and
asked Representative Clark to explain the proposed legislation.
Representative Clark said this proposed legislation will amend Idaho
Code 63-3638 (9) deleting thirteen and three quarters percent and
inserting One hundred eight million, five hundred thousand dollars. This
amendment will establish the amount to be distributed from the sales tax
to the revenue sharing account and to fix that amount equal to the FY02
appropriations amount.
MOTION: Representative Smith moved to introduce RS12626.
ROLL CALL
VOTE:
Voting AYE – Representatives Raybould, Barrett, Moyle, Field, Smith,
Collins, Roberts, Wood, Denney, McKague, McGeachin, Crow. Voting
Nay – Representatives Kellogg, Ridinger, Ringo, Martinez, Henbest,
Cuddy. Motion passed, 12-6-1.
ADJOURN: There being no business to come before the Committee, Chairman Crow
adjourned the meeting at 11:00 a.m.






DATE: January 23, 2003
TIME: 10:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representatives Moyle, Schaefer, McKague, Cuddy
GUESTS: None
Chairman Crow convened the meeting at 10:30 a.m. and requested a
silent roll call. Representative Ridinger moved to accept the minutes of
the meeting held on January 22, 2003 as written. Motion carried on a
voice vote. The Chairman turned the gavel to Assistant Vice Chairman
Raybould to conduct the meeting on the Idaho State Tax Commission
Rules.



Chairman Raybould asked for a report from Representative Field,
Chairman of the Subcommittee on the Idaho Tax Commission Income
Tax Rules. Representative Field reported that the subcommittee had
reviewed 35.01.01 and 35.02.01 and recommend the rules be approved.

MOTION: Representative Field moved to accept the Idaho State Tax Commission
Rules: IDAPA 35.01.01 – Income Tax Administrative Rules; Docket No.
35-0101-0201. Motion passed unanimously.
Chairman Raybould asked Representative Roberts, Chairman of the
Subcommittee to review the Idaho State Tax Commission Property Tax
Administrative Rules reported the committee approved all rules in
35.01.03.
MOTION: Representative Roberts moved to accept the Idaho State Tax
Commission Rules: IDAPA 35.01.03 – Property Tax Administrative Rules;
Docket No. 35.-0103-0201; Docket No. 35.0103-0202; Docket No.
35.0103.0203; Docket No. 35.0103-0104; Docket No. 35.0103-0105.



Chairman Raybould asked Representative Smith, Chairman, submit his
subcommittee report. He reported that the subcommittee reviewed the
Idaho State Tax Commission Rules in the following categories: Sales Tax
Administrative Rules, Idaho County Option Kitchen & Table Wine Tax
Administrative Rules, Idaho Cigarette and Tobacco Products Tax
Administrative Rules, Idaho Beer Tax Administrative Rules and Tax
Commission Administration and Enforcement Rules. The subcommittee
recommends approval of the rules.

MOTION: Representative Smith moved to accept the Rules in IDAPA 35.01.02 –
Idaho Sales and Use Tax Administrative Rule; Docket No. 35-0102-0201;
Docket No. 35-0102-0202. Motion carried unanimously.
MOTION: Representative Smith moved to accept the Rules in IDAPA 35.01.09 –
Idaho County Option Kitchen & Table Wine Tax Administrative Rules;
Docket No. 35-0109-0201. Motion carried unanimously.
MOTION: Representative Smith moved to accept the Rules in IDAPA 35.01.12 –
Idaho Beer Tax Administrative Rules; Docket No. 35-0112-0201. Motion
carried unanimously.
MOTION: Representative Smith Moved to accept the Rules in IDAPA 35.02.01 – Tax
Commission Administrative and Enforcement Rules; Docket 35-0201-0201. Motion carried unanimously.



Chairman Raybould returned the gavel to Chairman Crow.

ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:40 a.m.






DATE: January 28, 2003
TIME: 10:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representative Schaefer
GUESTS: Representative Clark; Dan John, Idaho State Commission, Jerry
Nicolescu, Department of Agriculture, Ted Spangler, Idaho State Tax
Commission
Chairman Crow called the meeting to order at 10:30 a.m. and requested a
silent roll call. Representative

Ridinger moved to accept the minutes of the meeting held on January 23,
2003 as written. Motion carried with a voice vote.

RS12637C1: The Chairman announced the sponsor of RS12437 was not present and
the Committee would now consider RS12637C1. She asked Mr. John to
explain the proposed legislation. Dan John, State Tax Commission,
stated that this is the annual bill to update references to the Internal
Revenue Code. It conforms the Idaho Income Tax Act to changes made
to the Internal Revenue Code after January 1, 2002. It includes the
federal Job Creation and Worker Assistance Act of 2002 and excludes the
special “bonus depreciation” allowance.



There are five new major changes in the 2002 IRS Code. First, makes
technical corrections in the pension plans, 401 (k) and a follow up which
has already been adopted. Second, extended some expiring credits
which do not impact Idaho taxation. Third, changes the net operating loss
carry back from two years to five years Idaho has it’s own carry-back
provision and should not impact Idaho. Fourth, provides a deduction to
teachers and counselors for out-of-pocket expenses for purchase of
books and supplies up to $250. Fifth, special allowance for 30% first year
“bonus depreciation” permitted by subsection (k) of section 168 of the
Internal Revenue Code. This bill does not include the “bonus
depreciation” allowance. For computing Idaho taxable income the
adjusted basis of depreciable property and capital gains or losses will be
modified to reflect the disallowance of the federal bonus depreciation.

MOTION: It was moved by Representative Ridinger to introduce RS12637C1.



There were several questions relating to teachers out-of-pocket expenses
and receiving a tax allowance. Mr. John replied by saying the average tax
savings would be $15. If supplies are donated, the teacher or counselor
could claim a charitable deduction if they file itemized deductions.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to return
RS12637C1 to sponsor
and draft another RS without the allowance for
books and supplies.
ROLL CALL
VOTE:
Voting on the Substitute Motion- AYE -Representatives Raybould, Barrett,
Moyle, Collins, Roberts, Wood, Denney, McKague, McGeachin, Crow.
NAY – Representatives Kellogg, Ridinger, Field Smith, Ringo, Martinez,
Henbest, Cuddy. Motion passed, 10-8-1
RS12437: The Chairman announced the Committee item on the agenda was
RS12437 and asked Representative Clark to explain the proposed
legislation. Representative Clark stated that in 1996 legislation was
passed that provided property tax relief to all the citizens of Idaho. A
portion of the school maintenance and operation property tax levy was
replaced with state sales tax receipts. The purpose of this proposed
legislation is to provide a fixed amount of dollars to be distributed as
property tax relief for school support. This proposed legislation will
provide fixed annual amount to be distributed for school support. He
stated that this proposed legislation will not affect the property tax what-so-ever.
MOTION: After a brief question and answer period, Representative Moyle moved to
introduce RS12437. Motion carried on a voice vote. Representatives
Ridinger and Ringo requested to be recorded as voting NO.
H0082: Chairman Crow announced the next item on the agenda was H0082 and
recognized Mr. Nicolescu. Jerry Nicolescu, Department of Agriculture,
stated that this bill revises 63-3024B to remove the sunset clause and re-authorize the Natural Resources Income Tax Credit, the sunset date was
January 1,2003. The re-authorization would define terms and provide for
review and approval of qualified expenditures. He provided a hand-out
depicting the Natural Resources Conservation Credit. (Attachment #1)
This bill provides an extension of the tax credit for voluntary
implementation by private landowners and users of conservation and
resource enhancing efforts on the ground.



The efforts to put on the ground is in four priority areas: Meeting total
maximum daily loads, addressing threatened and endangered species
issues in ESA; enhancement riparian areas through fencing in an
appropriate manner and addressing fish passage barriers. All work
requires a plan of management to carry out and be recognized for
inclusion in the program.



He detailed conservation measures that were approved and unapproved.
He said the maximum return per person cannot exceed $2,000. There is
a cap on how much can be given in credit.

MOTION: Representative Roberts moved to send H0082 to the floor with a do pass
recommendation.
PRO: Chairman Crow recognized Kent Foster, Executive Director, Idaho
Association of Soil Conservation Districts (IASCD),
to testify. Mr.
Foster spoke in favor of H0082 stating that last year HB 555 included
language to remove the sunset clause on this tax credit where it was
contained in conservation district law. HB 555 passed the legislature and
was then unexpectedly vetoed by the Governor on the final day. The bill
was not vetoed because of the tax credit portion of the bill rather a
concern with some language in district law. The tax credit has been an
incentive for landowners to do conservation work. Conservation program
dollars and the landowners labor are not counted toward the credit.
Conservation work is putting dollars into the local economies of the state
by utilizing federal, state and operators funds.



PRO: Larry Ragains testified that he was a farmer that has participated in the
conservation program and has received the tax credit for improving water
for people downstream from him, not just for his benefit.
The motion to send H0082 to the floor with a do pass recommendation
passed on a voice vote. Representatives Crow, Moyle and McKague
requested to be recorded as voting NO. Representative Roberts will
sponsor the bill on the floor.
H0088: The Chairman announced the item on the agenda was H0088 and
recognized Mr. Spangler to present the bill. Ted Spangler, State Tax
Commission,
testified that this bill changes two provisions of the Idaho
Sales Tax Act relating to the credit or refund allowed retailers for bad
debts.



The bill provides that the seller who paid the tax to the state must claim
the credit or refund for sales taxes remitted on bad debts.



It provides that the three-year statute of limitations on claims for credit or
refunds resulting from bad debts will begin on the date the debt becomes
worthless for income tax purposes.

MOTION: Representative Cuddy moved to send H0088 to the floor with a do pass
recommendation. Motion passed on a voice vote. Representative Barrett
will sponsor the bill on the floor.
ADJOURN: There being no further business to come before the meeting, Chairman
Crow adjourned the meeting at 11:35 a.m.






DATE: January 29, 2003
TIME: 11:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representatives Moyle and Denney
GUESTS: Dan John, Idaho State Tax Commission; Noel Hales, Canyon County
Clerk
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Kellogg moved to accept the minutes of the meeting
held on January 28, 2003 as written.
RS12677: The Chairman announced the first item on the agenda was RS12677 and
asked Mr. John to explain the proposed legislation. Dan John, Idaho
State Tax Commission,
stated that this RS repeals the two-dollar credit
allowed for filing tax returns with the State Tax Commission electronically.
Taxpayers are filing electronically anyway and the incentive is mute. This
repeals the automatic credit.
MOTION: Representative Kellogg moved to introduce RS12677. Motion passed on
a voice vote.
RS12722: Chairman Crow announced the next item on the agenda was RS12722
and recognized Mr. Hales to explain the proposed legislation. Noel
Hales, Canyon County Clerk,
stated he was representing the Idaho
Association of Counties. He said that Idaho’s forty-four counties are
required to record documents for public records. The fees that the Clerks
are authorized to charge are set by state statute and have not been
increased, even for changes in inflation, since at least 1987. The lack of
increase has resulted in at least thirty-one counties without a self-supporting recording office. Of the nine counties that reported self-sufficiency, the income was less than $100,000.



Idaho’s counties have spent an increasing amount of money updating
their recording offices with changes in technology. For example, counties
are shifting from recording books and microfiche to scanning and this has
caused an increase in costs to the recording office.



This proposed legislation would allow the Clerks to charge $5.00 per page
for recording every instrument paper or notice, $15.00 for recording every
town plat or map for the first 100 lots or less and $15.00 for issuing and
filing of marriage licenses.



Counties are currently experiencing at least a two million dollar negative
difference between what they can charge and what it costs to efficiently
manage the recording office.

MOTION: After a question answer session, Representative Cuddy moved to
introduce RS12722 with a corrected spelling error on the Statement of
Purpose. Motion carried on a voice vote. Representatives Barrett, Wood
and McKague requested to be recorded as voting NO.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 11:18 a.m.






DATE: January 30, 2003
TIME: 11:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representative Collins
GUESTS: Don Pischner
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Kellogg moved to accept the minutes of the meeting
held on January 29, 2003 as written. Motion carried on a voice vote.
RS12725: Chairman Crow announced the first item on the agenda was RS12725
and asked Mr. Pischner to explain the proposed legislation. Don
Pischner
stated he was representing a planned organization of small
retailers. He said this proposed legislation eliminates unfair competitive
advantages now enjoyed by Tribal tobacco retailers in direct competition
with non-Tribal businesses operating in Idaho. This proposal does not
change the existing distribution formula and keeps the tax at twenty-eight
cents per pack.



The proposed legislation will do the following things: Require a cigarette
revenue stamp be affixed to each pack of cigarettes sold in Idaho.
Impose a tax to be pre-collected on all cigarettes sold in Idaho.
Designate responsibility for tax collection. Provide for remittance of
cigarette tax to the State of Idaho. Allow Tribal members their federally
protected rights to not be taxed for cigarettes they purchase on
reservations for their personal consumption.

MOTION: Representative Moyle moved to introduce RS12725. Motion carried on
a voice vote. Representatives Kellogg, Barrett, Ringo and Martinez
requested to be recorded as voting NO.
RS12736: The Chairman announced the next item on the agenda was RS12736 and
called upon Representative Raybould to present the proposed legislation.
Representative Raybould explained the purpose of this proposed
legislation is to make amendments to Section 63-602FF and restore
elements of HB488 that was inadvertently deleted from the original house
bill by HB488a as passed in the second regular session of the fifty sixth
legislature.



When the exemption was taken away it made it difficult for assessors to
administer the law. This proposed legislation specifies the eligibility for
the exemption, the requirement for an application for exemption to be
filed, the effective date of the exemption, the events that will terminate
eligibility, the exemption from the requirement for total land area defined
in Section 63-604 (a) and the amendment to 63-604 providing exceptions
for the implementation of this act. Also defining terms used in the act and
declaring an emergency with retroactive application.

MOTION: Representative Smith moved to introduce RS12736. Motion passed on a
voice vote.
HCR11: Chairman Crow announced the next item on the agenda was HCR11.
She conveyed the request by Representative Trail to withdraw HCR11
and asked for unanimous consent to HOLD HCR 11. Unanimous
consent to HOLD HCR11
was granted.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 11:25 a.m.






DATE: February 3, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representative Schaefer
GUESTS: Mike McDowell, Kootenai County Assessor; John Watts and Jan Wall,
Idaho Library Association
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Ridinger moved to accept the minutes of the meeting
held on January 30, 2003 as written. Motion passed on a voice vote.
RS12744: The Chairman announced the first item on the agenda was RS12744 and
asked Mr. McDowell to explain the RS. Mike McDowell, Kootenai
County Assessor,
stated that currently Assessors are required to revalue
twenty percent of the properties within their county each year and
completing the entire process every five years. This proposed legislation
allows County Assessors five percent flexibility within their five-year
revaluation process of properties.



Varying physical and economic characteristics of the forty four counties in
Idaho such as degree of complexity of appraisals, physical landscape,
high volume of new construction and loss of appraisal staff can make it
difficult for Assessors to complete exactly 20% of the properties each
year. Other years, Assessors may be able to complete more than 20%.
This proposed legislation would allow the Assessor to set a plan based on
the needs and resources of the individual county while still guaranteeing
that the process is complete within five years but allowing flexibility.

MOTION: Representative Wood moved to introduce RS12744. Motion carried on a
voice vote. Representatives Barrett, Moyle and McKague requested to be
recorded as voting NO.
RS12714: Chairman Crow announced the next item on the agenda was RS12714
and recognized Mr. Watts to explain his proposed legislation. John
Watts, representing the Idaho Library Association,
stated he had four
proposals dealing with library districts. He said this proposal would allow
a library district to consolidate if they do not share a common boundary.
Consolidation procedures presently set out in statute for contiguous
consolidation would be required including hearings and actions by county
commissioners. In response to questions from the Committee Mr. Watts
said consolidation would allow for increased economy of scale, such as
purchases of books, equipment and supplies. It provides for efficiencies
in administration and more expertise in technical personnel for better
library services.



In response to an inquiry relating to mill levies , Jan Wall, Idaho State
Library,
said Library Districts are subject to statutory levy limits.

MOTION: After a question and answer period, Representative Henbest moved to
introduce RS12714.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Roberts to return
RS12714 to sponsor.
ROLL CALL
VOTE
Voting Aye – Representatives Barrett, Moyle, Collins, Roberts, Wood,
Denney, McKague. Voting Nay – Representatives Kellogg, Raybould,
Ridinger, Field, Smith, McGeachin, Ringo, Martinez, Henbest, Cuddy,
Crow.. Motion failed, 7-11-1.



Original motion to introduce RS12714 passed.

RS12715: The Chairman announced the next item on the agenda was RS12715 and
told Mr. Watts to continue with his proposals. Mr. Watts stated that if city
residents vote affirmatively to join a library district this proposal clarifies
that the city library budget in effect on the date of the election is the
budget to be used to determine a total district budget. This budget is
used to calculate the first annual assessment rate.
MOTION: Representative Kellogg moved to introduce RS12715. Motion carried
on a voice vote. Representatives Raybould and Barrett requested to be
recorded as voting NO.
RS12716C1: Chairman Crow announced the next item on the agenda was RS12716C1
and asked Mr. Watts to continue. Mr. Watts said this proposal deletes
statutory authority of the Idaho State Library Board to require compliance
with outdated population and budget standards to initiate proceedings to
establish a library district. The proposal requires the State Library Board
to promulgate rules in place of the deleted standards and requires any
proposed district to demonstrate how it would meet the promulgated
standards before going forward with the public petition process for any
establishment.



The criteria would go to the professionals to review and be sure all the
pieces are in place in order to go forward. The people can decide and
then go to the county commissioners to make the decision to be voted on.
There were several questions relating to making rules rather than
legislating by Code.

MOTION: It was moved by Representative Cuddy to return RS12716C1 to
sponsor.
Motion carried on a voice vote.
RS12739: The Chairman announced the next item on the agenda was RS12739 and
recognized Mr. Watts. Mr. Watts explained that this proposed legislation
allows library district to add geographic territory as a result of action taken
by a city adding to its territory if the city is presently part of an established
library district. Under current statute no territory of an incorporated
municipality can be divided simultaneously inside and outside of a library
district.



This proposal also allows established city libraries to consolidate with
established but non-contiguous library district. Under the current statute,
library districts and city libraries cannot consolidate unless they share a
common boundary. Non-contiguous consolidation would follow the
current statutory requirements for inclusion of new territory.

MOTION: Representative Smith moved to introduce RS12739. Motion passed on a
voice vote. Representative Barrett requested to be recorded as voting
NO.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:50 a.m.






DATE: February 4, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

Representative Field
GUESTS: Representative Gagner; Grant Kingsford, Ada County Commissioner; Dan
John, Idaho State Tax Commission
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Raybould moved to accept the minutes of the
meeting held on February 3, 2003 as written. Motion carried on a voice
vote. The Chairman introduced the new member Betty Schaefer who has
been appointed to take her husband, Robert Schaefer’s, place
temporarily.
H0082: Chairman Crow informed the Committee that H0082 had been withdrawn
from the floor and will be held in Committee for more information.
RS12351: Chairman Crow announced the first item on the agenda was RS12351
and asked Representative Gagner to explain the proposed legislation.
Representative Gagner stated that Eastern Idaho Technical College
(EITC) is the only free-standing higher education institution not receiving
specific executive and administrative compensation. In order to correct
this inequity, an amount equal to $150,000 shall be appropriated from the
liquor Fund and shall be distributed to the Eastern Idaho Technical
College Fund. He briefly outlined the liquor distribution formula and the
increased profits due to refinancing the liquor warehouse.



In response to a question whether this proposal was an attempt to
become a Community College and in the future ask for full state funding,
he replied absolutely not. There were questions regarding the language
on page 1, lines 36 through 38, which transfers $150,000 from the
general fund.

MOTION: Representative Wood moved to introduce RS12351.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Roberts to return
RS12351 to the sponsor.
Roll call was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Raybould, Barrett, Ridinger, Moyle,
Schaefer, Collins, Roberts, Denney, McKague, McGeachin, Martinez,
Henbest, Cuddy, Crow. Voting Nay – Representatives Kellogg, Smith,
Wood, Ringo. Motion to return to sponsor passed, 14-4-1
RS12749: Chairman Crow announced the next item on the agenda was RS12749
and asked Mr. Kingsford to explain the proposed legislation. Grant
Kingsford, Ada County Commisser,
representing the Idaho
Association of Counties,
stated that currently taxpayers must file
appeals of property tax assessment by the fourth Monday in June. The
county boards of equalization must meet from the fourth Monday in June
through the second Monday in July for the purposes of equalizing
assessments. With the number of appeals being filed this three-week
period has become an insufficient period of time in which to conduct the
business of the board of equalization, including scheduling meetings
between the county assessor and the taxpayer to solve issues without the
necessity of a formal board of equalization hearing.



To correct this problem, this legislation moves the filing deadline to the
third Monday in June. Although this reduces the time frame for filing
appeals by one week, it allows county boards of equalization more time to
adequately conclude their duties and still allows sufficient time for the
property owner to file an appeal while encouraging the negotiation of
solutions outside of the board of equalization process.

MOTION: Representative Smith moved to introduce RS12749. Motion passed on a
voice vote.
H0130: Chairman Crow announced the next item on the agenda was H0130 and
recognized Mr. John to present the bill. Dan John, Idaho State Tax
Commission,
testified that this bill repeals the two-dollar credit allowed
for filing tax returns with the State Tax Commission electronically. When
this credit was initiated, it was meant to be an incentive to file
electronically. However most individual income tax returns are filed
electronically anyway and the credit has become very expensive.
MOTION: Representative Roberts moved to send H0130 to the floor with a do pass
recommendation.
Motion passed unanimously on a voice vote.
Representative Roberts will sponsor the bill on the floor.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:30 a.m.






DATE: February 5, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Senator Kennedy
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Martinez moved to accept the minutes of the
meeting held on February 4, 2003 as written. Motion carried on a voice
vote.
H0081: Chairman Crow informed the Committee that the State Tax Commission
requested that H0081, transfer of certain tax credits, be held and a new
RS drafted. She asked for unanimous consent to  HOLD H0081.
Unanimous consent was granted.
RS12571: The Chairman announced the first item on the agenda was RS12571 and
asked Senator Kennedy to explain the proposed legislation. Senator
Kennedy,
stated that the purpose of this proposal is to provide for an
annual cost of living adjustment on the $50,000 upper limit of the
homeowner property tax exemption. The percentage used for adjustment
would match that used for the income threshold for the “circuit breaker,”
which is the national Consumer Price Index. If the CPI was two percent in
the first year the upper limit on the exemption would increase by $1,000.
There would be no change in the percentage of the exemption for 50% of
the assessed value of residential improvements. Residential values have
been rising faster than the values of other kinds of property. Once the
homeowner reaches the upper limit at about $120,000 market value there
is no longer mitigation for inflation. So taxes increase at an accelerated
rate. Since 1990 total residential property taxes in Idaho have increased
by 164.5 percent while the total for all non-residential property has
increased by 77.3 percent. The current maximum homeowner’s
exemption was established in 1983 and has never been adjusted for
inflation.



Cities, counties and other local taxing districts could collect the same
amount under the budget cap. Annual increases in property tax
collections going to schools as a result of inflation in the market value of a
home affected by this change increases by five percent. The increase in
taxable value would be $5,500 rather than $6,500 and the increase in
money for schools would be $16.50 rather than $19.50. It increases by
ten percent, the increase for schools would be $33 rather than $39.

MOTION: Representative Cuddy moved to introduce RS12571. Motion carried on
a voice vote.
RS12572: Chairman Crow announced the next item on the agenda was RS12572
and asked Senator Kennedy to continue. Senator Kennedy explained
the purpose of this proposed legislation is to protect homeowners, over
age 65 or disabled veterans, from increased property taxes resulting in
increases in taxable value. Beginning in taxable year 2005 if household
income before taxes is less than $35,000, and the resident qualified for
the homeowner exemption in the previous year, they could apply with the
assessor for a freeze on the taxable value of the home and residential lot.
The freeze would continue so long as they continue to meet the
qualifications and own and live in the home.



Beginning in 2005 the impact on the general fund would be a reduction in
the amount of state funds for the “circuit breaker” program, an estimated
$775,000 in the first year. Most who qualify for the exemption also qualify
for the “circuit breaker.” There would also be a reduction in the state
funds going for property tax replacement for schools, an estimated
$110,000 in the second year. There would be no reduction in the amount
of property tax collected by cities, counties or other local government
entities. The annual increases for schools resulting from inflation in
residential values would be less. Based on recent rates of inflation, the
difference would be $505,000 in the second year.

MOTION: Representative Henbest moved to introduce RS12572 with a corrected
Statement of Purpose and Fiscal Impact. Motion passed on a voice vote.
RS12676: Chairman Crow announced the next item on the agenda was RS12676
and asked Senator Kennedy to continue. Senator Kennedy stated that
much of Idaho’s population resides outside of metropolitan areas and that
many of the residents in these rural areas receive fire protection from
volunteer fire departments. This proposed bill would amend the Idaho
Code to allow fire protection districts to impose and collect a fee from the
residents of the district to defray the cost of equipping and maintaining the
district. Currently fire protection districts are funded through a maximum
2.4 mill levy on all taxable property within the district. Any fee imposed
would be in lieu of and not in addition to any tax levy. This proposal
would give fire protection districts the flexibility in raising revenue currently
enjoyed by recreation districts.
MOTION: Representative Kellogg moved to return RS12676 to sponsor. Motion
passed on a voice vote.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:37 a.m.






DATE: February 6, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Dan John, Idaho State Tax Commission; Sherry Morgan, Ada County
Deputy Prosecuting Attorney; Senator Goedde; Senator Bunderson
Chairman Crow called the meeting to order and requested a silent roll
call. Representative McGeachin moved to accept the minutes of the
meeting held on February 5, 2003 as corrected. Motion carried on a voice
vote.
RS12883: The Chairman announced the next item on the agenda was RS12883 and
explained that this RS replaces the original State Tax Commission annual
Internal Revenue Code conformity bill without the teachers allowance for
supplies. She recognized Mr. John. Dan John, Idaho State Tax
Commission,
said that this bill replaces the original annual update
references to the Internal Revenue Code with the changes talked about at
great length in a prior hearing . It conforms the Idaho income tax to changes
made to the IRC after January 1, 2002, including the federal “Job Creation
and Worker Assistance Act of 2002.” However, no Idaho deduction will be
allowed relating to:



1. The special allowance for 30% first year “bonus depreciation” permitted
by subsection (k) of section 168 of the IRC would not be deductible in
computing Idaho taxable income. For computing Idaho taxable income, the
adjusted basis of depreciable property and capital gains or losses will be
modified to reflect the disallowance of the federal bonus depreciation.



2. Expenses of elementary and secondary teachers for purchase of
classroom supplies otherwise allowable under the IRC would not be
deductible.

MOTION: Representative Wood moved to introduce RS12883. Motion passed on
a voice vote. Representatives Ridinger and Ringo requested to be
recorded as voting NO.
RS12750: Chairman Crow announced the next item on the agenda was RS12750
and asked Ms. Morgan to explain the proposed legislation. Sherry
Morgan, Ada County Deputy Prosecuting Attorney,
representing the
Idaho Association of Counties, stated this proposal removes the 3%
property tax limitation in order to recover the shortfall in revenues to
ambulance and emergency medical services created by the federal
prohibition. This proposed legislation would allow by 66 2/3% voter
approval counties or districts responsible for these services to increase
the levy limit to meet these needs.



Federal government Medicare payments do not adequately cover the
costs of providing ambulance and emergency medical services. New
federal regulations prohibit counties from seeking reimbursement from
Medicare patients for these services. Limitations on property tax
increases do not allow the collection of sufficient funds within the county
or district to cover these costs.

MOTION: After a lengthy question and answer period, Representative Ringo moved
to introduce RS12750.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to return
RS12750 to sponsor.
Roll call vote was called for.
ROLL CALL
VOTE:
Voting Aye- Representatives Raybould, Barrett, Schaefer, Collins,
Roberts, Wood, McKague, McGeachin, Crow. Voting nay –
Representatives Kellogg, Ridinger, Moyle, Field, Smith, Denney, Ringo,
Martinez, Henbest, Cuddy. Motion failed, 9-10-0.



Original motion to introduce RS12750 passed on a voice vote.

RS12657C2: Chairman Crow announced the next item on the agenda was RS12657C2
and asked Senator Goedde to present the RS. Senator Goedde
explained that this proposed legislation authorizes certain resort counties
to adopt local option sales taxes to implement and collect such tax. The
bill requires that the measure be put to the voters and obtain a minimum
of sixty percent approval; sets forth specific purpose; set for a period of
time, ten years or less; sets the rate of taxation and that rate shall not
exceed one percent. The measure allows for county commissioners in
such counties to propose to the voter the opportunity for an additional
sales tax. Not less than fifty percent of the revenue generated would be
applied to reduce existing property taxes and the balance of such
revenues used to provide needed services which would otherwise be paid
for by general fund revenues.
MOTION: Representative Kellogg moved to introduce RS12657C2. Motion passed
on a voice vote. Representatives Barrett, Wood and McGeachin
requested to be recorded as voting NO.
RS12655C1: Chairman Crow announced the next item on the agenda was RS12655C1
and recognized Senator Bunderson. Senator Bunderson explained that
this proposed legislation repeals the special sales and use tax exemption
on tangible and personal property sold by tribally-owned businesses
section 63-3622Z. It moves the definition clause of section 37-2732A.






It is critical that these sales and use tax exemptions are repealed for the
following reasons. Combines with other tax exemptions and special
privileges, this law gives tribal businesses unfair and potentially massive
competitive price advantages and favoritism over Idaho retail businesses
that are required to collect taxes.



The exemption causes unwarranted loss to the general fund and
unnecessarily exposes the general fund to significant additional losses.
For example, Tribal businesses may under the existing law, operate any
retail business, including automobile, truck and heavy equipment
dealerships and not collect and remit state sales and use taxes. Idaho
citizens purchasing vehicles from a Tribal dealership would be required to
register and license their vehicle with the state but under existing law
would be exempt from paying the use tax. This proposed legislation puts
retailers on a level playing field.

MOTION: Representative Wood moved to introduce RS12655C1. Motion carried
on a voice vote. Motion passed on a voice vote. Representatives Kellogg
and Ringo requested to be recorded as voting NO.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 11:00 a.m.






DATE: February 11, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Senator Stennett; Senator Keough; Dan John, State Tax Commission
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Kellogg moved to accept the minutes as written of
the meeting held on February 10, 2003. Motion passed on a voice vote.
RS12615: Chairman Crow announced the first item on the agenda was RS12615
and asked Senator Stennett to explain the proposed legislation. Senator
Stennett
said the issue of land valuation of homesites in Blaine County
has been worked on for several years. The intent of this proposed
legislation is to separate the home site as farm and ranch operation from
speculative sale. He passed out a copy of a resolution approved by the
Idaho Cattle Association. (Attachment #1)



This proposed legislation provides that each homesite on an otherwise
recognized farm or ranch under 63-602HH, Idaho Code would be
considered agricultural property. This proposal provides that the
assessed market value for qualifying homesites which exceeds $30,000
shall be exempt from property taxation.



In response to a question relating to the Fiscal Impact Statement he said
there would be no fiscal increase, it would shift to other property. There
were several questions as to the restriction of one hundred contiguous
acres on page l, line 27 of the RS.

MOTION: Representative Cuddy moved to return RS12615 to sponsor to rework
the RS.
Motion passed on a voice vote.
RS12598: Chairman Crow announced the next item on the agenda was RS12598
and recognized Senator Keough to present the RS. Senator Keough
stated that the purpose of this proposed legislation is to repeal the Estate
and Transfer Tax effective January 1, 2005. This section of Idaho Code is
tied to the federal credit that is being eliminated and will be totally gone in
2005.



In response to inquiries from the Committee Dan John, State Tax
Commission,
said the Idaho State death tax credit is fully phased out for
individuals that die during 2005. When this happens the state will receive
no money from the inheritance tax or state death tax credit.

MOTION: Representative Wood moved to introduce RS12598 with a corrected
Statement of Purpose.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Moyle to return to
sponsor to correct the effective date.
AMENDED
SUBSTITUTE
MOTION:
An amended substitute motion was made by Representative Field to
introduce RS12598C1 with the effective date of January 1, 2006.
Motion passed on a voice vote.
RS12647: Chairman Crow announced that RS12647 would be heard next and asked
Senator Keough to continue. Senator Keough said the purpose of this
proposed legislation is to amend the Estate and Transfer Tax to allow for
an exemption from the tax for families. Currently an estate tax or “death
tax” is levied on the estates of those who die. This proposal would
provide for an exemption for families.
MOTION: Representative Moyle moved to return RS12647 to sponsor. Motion
carried on a voice vote.
RS12641: Chairman Crow announced the next item on the agenda was RS12641
and asked Senator Keough to explain the proposed legislation. Senator
Keough,
stated that the purpose of this proposal is to more accurately
reflect where sales taxes are being collected in Idaho.



Currently companies doing business in more than one county within Idaho
report sales tax figures to the State Tax Commission directly without
regard to the county in which the sales have been generated.



In response to questions relating to data collected by the State Tax
Commission, Dan John said reports are made by some companies on a
multi-county and multi-state basis. He said that when a piece of
equipment is sold it would be reported at the point of sale and not the
destination. He also said that Revenue Sharing is based on a formula
and this bill would not affect the distribution.

MOTION: Representative Smith moved to introduce RS12641.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Cuddy to return
RS12641 to sponsor.
Roll call was called for.
ROLL CALL
VOTE;
Voting Aye – Representatives Kellogg, Raybould, Barrett, Ridinger, Moyle,
Field, Schaefer, Collins, Roberts, Wood, Denney, McKague, McGeachin,
Ring, Martinez, Henbest, Cuddy, Crow. Voting Nay – Representative
Smith. Motion passed, 18-1-0
RS12645: Chairman Crow announced the next item on the agenda was RS12645
and recognized Senator Keough. Senator Keough said the purpose of
this proposed legislation is to ensure that the homeowner’s exemption is
being taken by those who actually live and work in another state and have
second homes in Idaho. This proposal would give the assessors a tool to
address the issue.
It is projected that income from property taxes would increase as people
who are inappropriately claiming the homeowner’s exemption would pay
their full share of those taxes. This, in theory, would require less taxes
from other property taxpayers to pay the bills of our schools and counties
as well as lessen the draw on the state’s general fund for public education
dollars.
MOTION: Representative Moyle moved to introduce RS12645. Motion carried on a
voice vote.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:54 a.m.






DATE: February 12, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representatives Moyle, Field and Denney
GUESTS: Representative Tilman; Dan John, Idaho State Tax Commission
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Cuddy moved to accept the minutes as written of the
meeting held on February 11, 2003. Motion passed on a voice vote.
H0121: The Chairman advised the members that Representative Trail presented
a letter requesting that H0121 filed as a personal bill, be withdrawn. She
asked for unanimous consent to HOLD H0121. Unanimous consent
was granted.
RS12848: Chairman Crow announced the first item on the agenda was RS12848
and asked Representative Tilman to explain the proposed legislation.
Representative Tilman said the purpose of this proposed legislation is to
provide that property used for public charter school purposes is exempt
from taxation. This proposal is a small matter of state policy of exempting
all public schools from property taxes. For a number of years there have
been public charter schools and there are three or four situations where
charter schools lease their facilities. This proposed legislation would
exempt the portion used for educational purposes from property taxes.
MOTION: Representative Barrett moved to introduce RS12848. Motion passed on
a voice vote.
H0194: Chairman Crow announced the next item on the agenda was H0194 and
recognized Mr. John to present the bill. Dan John, State Tax
Commission,
testified that this is the annual bill to update references to
the Internal Revenue Code (IRC.) It conforms the Idaho income tax to
changes made to the IRC after January 1, 2002, including the federal “Job
Creation and Worker Assistance Act of 2002.” However, this bill will carve
out the two major exceptions as listed below:

1. The special allowance for 30% first year “bonus depreciation”
permitted by subsection (k) of section 168 of the IRC would not be
deductible in computing Idaho taxable income. For computing Idaho
taxable income, the adjusted basis of depreciable property and capital
gains or losses will be modified to reflect the disallowance of the federal
bonus depreciation.

2. Expenses of elementary and secondary teachers for purchases of
classroom supplies otherwise allowable under the IRC would not be
deducible.

MOTION: Representative Wood moved to send H0194 to the floor with a do pass
recommendation. Motion passed with a voice vote. Representatives
Ridinger, Ringo and Martinez requested to be recorded as voting NO.
Representative Wood will sponsor the bill on the floor.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:14 a.m.






DATE: February 13, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

Representative Roberts
GUESTS: Representative Eskridge
Chairman Crow called the meeting to order at 10:00 a.m. and requested a
silent roll call. Representative Martinez moved to accept the minutes as
written of the meeting held on February 12, 2003. Motion carried on a
voice vote.
RS12847: Chairman Crow announced the first item on the agenda was RS12847
and asked Representative Eskridge to explain the proposed legislation.
Representative Eskridge stated that there are five wood pellet
manufacturing companies located in Idaho that are prohibited from fully
participating in the State’s sales and use tax exemption afforded to all
other manufacturing companies. This presents a competition problem in
that it penalizes the Idaho manufacturer who is in competition with
manufacturers outside Idaho. They compete with Montana, Washington
and Oregon who qualify fully for their respective state sales and use tax
exemptions. This RS corrects the competitive problem.



In response to a question relating to the deletion of language on page 3,
lines 28 through 30, Dan John, State Tax Commission, stated the RS
was very narrowly drafted and changes needed to be in two sections of
Code.

MOTION: Representative Barrett moved to introduce RS12847 with a corrected
Statement of Purpose
to reflect the purpose of the proposed legislation.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative McGeachin to return
RS12847 to sponsor.
Motion failed on a voice vote.



Original motion to introduce RS12847 passed on a voice vote.
Representatives Crow, Kellogg, Schaefer, McKague, McGeachin and
Henbest requested to be recorded as voting NO.



RS12944: Chairman Crow announced the next item on the agenda was RS12944
and recognized Representative Cuddy to explain the proposed legislation.
Representative Cuddy said the purpose of this legislation is to further
clarify the definition of occupancy of a house after construction. In some
instances the current definition is causing the assessors some difficulty.
MOTION: Representative Kellogg moved to introduce RS12944. Motion passed on
a voice vote.
RS12987: Chairman Crow announced the next item on the agenda was RS12987
and asked Representative Cuddy to explain the proposed resolution.
Representative Cuddy said the purpose of this resolution is to urge all
communities, businesses, schools and residents of the State of Idaho to
help with efforts to provide the 2003 Christmas Tree for the United States
Capitol.
MOTION: Representative Field moved to introduce RS12987C1 changing the
term “Holiday Tree” to “Christmas Tree”
and recommend it be
referred directly to second reading. Motion passed on a voice vote.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:22 a.m.






DATE: February 17, 2003
TIME: 9:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representatives Moyle, Field, Wood, Denney, Cuddy
GUESTS: Dan John, Idaho State Tax Commission
Chairman Crow called the meeting to order at 9:00 a.m. and requested a
silent roll call. Representative Ridinger moved to accept the minutes as
written of the meeting held on February 13, 2003. Motion carried on a
voice vote.
H0131: Chairman Crow announced the first item on the agenda was H0131. She
said a copy of a letter from the Idaho Association of Counties was before
the committee. The letter requested the committee to “Hold” the bill in
committee. The letter contained comments on issues raised during the
committee hearing. (Attachment #1)
UNANIMOUS
CONSENT:
The Chairman asked for unanimous consent to HOLD H0131. Consent
was given.
H0148 and
H0193:
Chairman Crow announced the next two items on the agenda were
H0148 and H0193. H0148 relates to extending the time for county boards
of equalization to meet. H0193 relates to removing the 3% property tax
limitation to recover the shortfall in revenues to ambulance and
emergency medical services created by the federal prohibition. The
Chairman assigned the bills to the Raybould Subcommittee for more
study.
H0225: Chairman Crow announced the next item on the agenda was H0225 and
recognized Mr. John to present the bill. Dan John, State Tax
Commission,
testified that legislation was passed in the 2001 Legislative
Session creating two new credits and did not specify the number of times
they could be transferred. One was an “incentive tax credit” and the
second credit was for “Income Tax Credit for Investment in Broadband
Equipment” and both credits could be transferred. In the case of the
“broadband” credit the taxpayer who earned the credit may make the
transfer through an intermediary. The “incentive credit” was for only one
year and the “broadband ” credit was for five years. This proposed
legislation limits the transfer of the “broadband” credit two times. This RS
replaces H081 which specifically limited the transfer to one time, this was
too restrictive on “broadband.”



MOTION: Representative Roberts moved to send H0225 to the floor with a do pass
recommendation. Motion carried on a voice vote. Representative Moyle
will sponsor the bill on the floor.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 9:13 a.m.






DATE: February 19, 2003
TIME: 9:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Don Pischner; Larry Echohawk, Professor of Law at Brigham Young
University; Bill Roden; Blaine Edmo, Shoshone-Bannock Tribe; Donna
Lynn Simon; Ernie Stensgar, Coeur d’Alene Tribe; Phillip Hernandez,
Shoshone-Bannock Tribe; Samuel Penny, Nez Perce Tribe; Lee Kniffin,
Shoshone-Bannock; Karleane Allen, Idaho Wholesale Marketers; Cheryl
Shepherd, Coeur d’Alene; Terry Gibson, Duck Valley
Chairman Crow called the meeting to order at 9:00 a.m. and requested a
silent roll call. Representative Ringo moved to accept the minutes as
written of the meeting held on February 18, 2003. Motion carried on a
voice vote.
H0135: Chairman Crow outlined the rules for testimony. She recognized Mr.
Pischner to present the bill. Don Pischner said his support of this
legislation was on behalf of an organization of Idaho retailers made up of
small businesses that sell cigarettes. The businesses operate
convenience stores, grocery stores, smoke shops and others.



This legislation simply asked that all, not just slightly more than half, of
the cigarettes sold in Idaho be subject to a product tax. The bill provides
for an exemption for smokers on Indian reservations. He said perhaps a
different but equally fair approach to this issue would be legislation that in
fact exempts all cigarettes sold in Idaho from a product tax.



Cigarettes sold at Idaho Tribal outlets are tax exempt from Idaho
Tobacco Product, Idaho Code 39-5704. The goal of this legislation is to
reduce sales of cigarette to minors, permitting inspection and educational
programs to promote compliance with the law. There are several tax
inequities and the cigarette tax exemption exclusive to Tribal sales of
cigarettes is one of the more blatant. He handed out a graph depicting
the twelve year history of Idaho cigarette sales. (Attachment #1) There
are 1,921 retail cigarette outlets throughout the state that pay Idaho
cigarette tax and eleven Tribal outlets are tax exempt and free of
compliance from the Idaho Tobacco Product law. Tribal sales of
cigarettes are 40% of all Idaho cigarette sales.



Wholesalers reported to the Idaho State Tax Commission 57.5 million
packs of tax exempt cigarettes were sold in 1999 which is up from 14.5
million packs in 1991. Tribal sales on Indian Reservations increased by
43 million packs. Wholesalers report 86.4 million packs of taxed
cigarette packs were sold in 1999 which is up from 81.6 million packs in
1991. non-tribal tobacco retail outlets increase less than 5 million.






Tribes are now beginning to wholesale cigarettes and the state has
limited information about internet activities. Web advertisers now offer
“keep full” service and “discount cigarette buyers club.” All schemes are
for smokers to lower their state cigarette tax to zero.



The cigarette tax statute is not clear as to who bears the legal incidence
of the tax in the context of Indian sellers. Idaho cigarette tax law needs
to be amended to clearly place the legal incidence of the tax on the
consumer with a duty to collect by the wholesaler.

CON: Chairman Crow recognized Mr. Echohawk to testify. Larry Echohawk
stated he is a Professor of Law at the Brigham Young University and
teaches federal Indian law. He spoke in opposition to H0135. Idaho has
never sanctioned tobacco sales on Indian reservations. The Idaho
Supreme Court has addressed this issue in a case entitled Mahoney vs
State Tax Commission and ruled that it is not lawful for the Tax
Commission to collect tax on cigarettes within Indian reservations. In
1980 the U.S. Supreme Court ruled that a state could impose its
cigarette tax on non-Indians purchasing cigarettes within Indian
reservations. Since then the Idaho Legislature as a matter of good tax
policy has rejected several attempts to impose a state tax on tribal
cigarette sales.



In 1978 Fort Hall embarked on economic development to create jobs and
relied on longtime tax immunity. The unemployment rate is 60% at Fort
Hall compared to 5.7% national average and is the real issue. This bill is
bad tax policy and will hurt the economic development in its infancy. The
tribal governments provide primary services on reservations, including
roads, schools, police and more. To change this law would “upset the
apple cart” and change the status quo of providing vital services. The
need for services and the need for jobs would still be there.



Mr. Echohawk said this issue is a very complex matter and the
legislature should not act on impulse. The tribes called for a legislative
study to look at how revenues and service play out on Indian lands. The
issue needs careful study of every reservation.

CON: Chairman Crow recognized Mr. Roden to testify on the bill. Bill Roden
said that Idaho has never taxed cigarettes on Indian reservations. He
delineated technical issues in the bill.



Section 1 on legislative intent. on Page 1, lines 9-11­”It is the intent of
this act to eliminate unfair competitive business advantages now enjoyed
by Indian tobacco retailers in direct competition with non-Indian
business.” This language may be problematic when facing a
constitutional challenge in state or federal court. The question is the
power to tax, not non-Indian businesses concern over competition.
Idaho businesses on the Washington/Oregon border do not object to
their tax advantage over Washington retailers. He questioned whether a
tax advantage is an unfair advantage.



Page 1, line 15-18 “Legislature intends to require that cigarettes sold to
non-Indian purchasers on an Indian reservation must have an Idaho
cigarette stamp affixed even if sold by an Indian or an Indian enterprise.”
Contrary to only requiring the stamping of cigarettes for sale to non-Indians, the other provisions of the Act require the stamping of cigarettes
for sale to Indians as well.



Section 2, Page 1, lines 12-23 ­ Purpose. To levy a tax on cigarettes
used, consumed or purchased for any purpose other than resale in the
regular course of business. A sale to any business for the purpose of
resale would be tax exempt. A sale to Costco or Albertson’s would not
be taxable, because the sale to Costco or Albertson’s was for “resale.”
Arguably the wholesaler is also exempt from the tax because he
purchased the cigarettes for resale. However, the wholesaler has a duty
to pre-collect the tax from somebody other than a person who purchased
cigarettes for resale.



Section 3, paragraph (1)-Page 1, lines 28031. Imposition of a Tax. ” A
tax upon the purchase, storage, use for any purpose other than the
resale in the regular course of business, consumption or use is hereby
imposed at the rate ———-.” The language mirrors the language of the
purpose section, which states that a purchase for the purpose of resale is
not subject to tax. A retailer purchases only for resale. The term
“precollected” is not defined. Section 1, lines 23-25, provides for
“precollection” from the person who first sells, receives, handles or
distributes the cigarettes. That person would be the wholesaler, not the
retailer.



Paragraph 2, page 2, line 5. The tax imposed does not apply to
cigarettes sold to an Indian retailer for resale to members of a tribe. But,
non-taxable cigarettes must have a tax stamp on them, paid for by the
wholesaler. Query: If the sale to the Indian retailer for resale to Indians is
exempt, how does the Indian retailer get a return of tax paid if the
wholesaler has pre-collected the tax from the retailer who was tax
exempt? The wholesaler obviously did not pre-collect the tax from the
consumer because the wholesaler had no relationship with the
consumer.



Paragraph 3, Lines 10-16 Wholesalers making sales to the Indian
retailers may apply to the commission for authorization to deduct taxes
paid on cigarettes sold by the retailers to members of an Indian tribe.



Why would the wholesaler make such an application? The wholesaler
has been paid for the tax by the retailer and is included in the price. As
written the tribe or Indian retailer was not liable for it in the first place.
This is a clear violation of the prohibition of taxation on Indian tribal sales
to tribal members.



In addition, to claim the deduction on the tax return that is not filed by the
wholesaler until the 15th of the month following the transaction the
wholesaler has to have had permission for the sale from the Tax
Commission prior to the sale or the right to the deduction by the
wholesaler is lost.



Paragraph 4, lines 17-31 Allocation process. The first sentence seems
to make an allocation statewide and limits the amount of deduction
allowed to all wholesalers based on the “average annual allocated
consumption of cigarettes for all Indian tribes located in Idaho.” In other
words, if there are six thousand tribal members on reservations in the
state and the total allocation of all of the tribes is one pack a day per
member, (2,190,000), if one tribe used the entire allocation the remaining
tribes would not have an exemption for their tribal members.



The second sentence, line 21, seems to say something different but
changes the area in which the tribal population is determined, from
“reservation” to “tribal service.” A tribal service area, under federal law,
may be larger than the reservation boundaries. In the case of the Coeur
d’Alene tribe the tribal service area for health care purposes is
approximately a 100-mile radius from its reservation boundaries. It
extends into Montana and Washington. As written, the tribal allocation
would include Indian members within that radius, although they may not
be members of the Coeur d’Alene tribe.



The allocation shall also be based on the national cigarette consumption
per capita average for the most recently completed “calendar year” or
“fiscal year” ­which one? And whose data? Or the allocation may be
based on the cigarette consumption per capita average for a federally
recognized Indian tribe based on a calendar year. Which year as used in
the prior standard?



Paragraph 5, lines 32-34. How does the wholesaler show to the
commission that the economic benefit of the proposed deduction has
been passed by the retailers to whom the sales were made. Is it a
refund of the entire tax? The tax is not separately stated on the invoices
to retailers.



Mr. Roden summarized his testimony by saying there is no way that
distributors could comply with this bill.

CON: Chairman Crow recognized Blaine Edmo who spoke in opposition to
H0135 saying that he was the Chairman of the Fort Hall business
Council, the governing body of the Shoshone-Bannock Tribes, which is
located on the Fort Hall Indian reservation in southeast Idaho. He said
the Indian Affairs Council had met yesterday and voted eight to one to
recommend that the committee hold H0135 and create a committee to
analyze the economic effect that H0135 would have on the tribes.



He strongly opposed House Bill 135 which is being proposed for
enactment by the Idaho Legislature in an attempt to authorize the State
Tax Commission to collect taxes on cigarettes sold to non-Indians on the
Indian reservations in Idaho.






Historically, federal law has prohibited taxation in Indian country. The
current state statute, in effect since 1974, conforms to the federally
recognized law in this area. In addition the Idaho Supreme Court has
found in Mahoney v. State Tax Commission, in a strongly worded
opinion, “In the absence of “Congressional consent, the Idaho State Tax
Commission has no jurisdiction to tax the on-reservation sale of
cigarettes by an Indian seller, whether the purchasers were Indians or
non-Indians.” The decision makes a strong statement for Indian
sovereignty in Idaho and the Idaho Supreme Court has not changed their
ruling in recent years.



Responsible law making requires careful analysis before taking action.
Therefore, the leaders of the Shoshone-Bannock Tribes urge the
members of the Idaho Legislature to oppose the enactment of House Bill
135. Full written testimony is attached. (Attachment #2)

PRO: Donna Lynn Simon, Owner, Robs Seafood & Burgers, appeared
before the committee to testify in support of H0135. She said H0135 is
about equality and fairness, nothing else. All over Idaho and Washington
cigarettes are sitting on the shelves of grocery and convenience stores
collecting dust. Why, because cigarette buyers have found alternative
ways and places to purchase cigarettes tax-free, such as tribal web sites
and tribal smoke shops. A tax paying cigarette retailer cannot compete.
Non-tribal smoke shops are at a $6.00 a carton disadvantage, including
sales tax, on fourth tier cigarettes. These are the cigarettes that don’t
pay into the Master Settlement Agreement and are illegal for non-tribal
retailers to sell. This is a huge market. The State of Idaho does not
receive any Master Settlement Agreement money from the sale of these
cigarettes.



The disadvantage on all other cigarettes is $4.00 a carton including sales
tax. It is not uncommon for a customer to order 10-20 or more cartons of
cigarettes at a time. They come from all over Washington and buy
cigarettes for everyone in the neighborhood. It is a regular occurrence
for a customer to come to our store and ask for a price quote on our
cigarettes and then ask “how do I get to the Indian reservation,” without
buying a cup of soup, sandwich or even a drink. We lose the sale and so
does the State of Idaho. We don’t want to put anyone out of business
and we don’t want to be forced out of business. There are enough
cigarette buyers out there for everyone.



She concluded saying that all things equal let us share in the profit. We
are a member of the Idaho Tobacco Retailers Association. Please vote
yes on house Bill 135.

CON: Ernie Stensgar, Tribal Chairman of the Coeur d’Alene Tribe, spoke in
opposition to H0135. He testified that HB135 would result in the loss of
hundreds of thousands of dollars annually to the Coeur d’Alene Tribe.
The legislation would harm small businesses and result in the loss of
precious jobs on the Coeur d’Alene Reservation. It would result in an
enormous administrative burden on already-struggling small business.
The bill is illegal and will ultimately be struck down in the courts.






Mr. Stensgar concluded his remarks by saying that this is bad legislation,
bad for working people, bad for small businesses, bad for tribal
governments, schools, health care programs and other services funded
by our cigarette tax revenues. He urged that the State and the Tribes
work together on this and other taxation issues to reach agreement that
all governments can live with. Let’s not turn this issue into another
divisive, expensive Tribe/State battle. Let’s take the opportunity to
cooperate as sovereign governments acting in the best interest of all the
people of Idaho and the Indian Nations here.



He repeated Mr. Edmo’s report of the Indian Tribal Council’s decision to
analyze the economic effect of House Bill 135 on the Tribes. Full written
testimony attached. (Attachment #3)

CON: Phillip Hernandez identified himself as the manager of the Trading Post
Grocery Store, one of the enterprises that is owned and operated by the
Shoshone-Bannock Tribes. He provided written testimony in opposition
to House Bill 135. (Attachment #4) He said that any attempt to impose
tobacco taxation on Indian Reservations by the State can only cause a
burden to the Tribe and the State. This tax will also cause animosity
between the Tribal and State governments be construed as racial
hostility and burden the courts with needless litigation.



He encouraged the House Revenue and Taxation Committee to not
support House Bill 135 and to maintain a respectable relationship
between the State of Idaho and Idaho Tribes as well as helping Idaho
Tribes to continue to become more self-sufficient.

CON: Samuel Penny, Nez Perce Tribal Executive Committee, appeared
before the committee to testify in opposition to H0135. He stated that in
1989, as in previous years, a similar effort was made to impose the state
cigarette tax on tribal sales, but in the face of great public outcry reason
prevailed and the exemption continues with no major negative impact to
the overall economy of Idaho. Claims that the exemption was driving
competitors into bankruptcy proved to be completely unfounded.



The Nez Perce Tribe as a sovereign nation imposes its own tax on
tobacco sales on its reservation. He cited several programs that are
funded from this tax. Without these social programs the Nez Perce tribal
members who rely upon these services would be applying for State
assistance. While the idea to increase state revenue may sound
tempting at first glance the committee needs to consider all of the
economic impacts of this bill.



The bill would cost more to administer than it would ever generate in
revenue. The bill would violate a 1974 Idaho Supreme Court ruling that
says that imposition of a state tax on tribal cigarette sales is an
impermissible tax on commerce with Indian tribes. Tax on tribal cigarette
sales is an unlawful interference with Indian commerce. Copy of the full
text is attached. The issue needs to be studied further. (Attachment #5)

CON: Lee Kniffin appeared before the committee to speak in opposition to
H0135. He submitted printed testimony see attachment. (Attachment
#6)



He stated that there are problems with the formula as to the allowable
exemption of enrolled membership and how the State would pay back to
the Indians. Cross border sales have not been addressed and the whole
bill does not hold water. He said most of his points had been addressed
by previous presenters.

CON: Karleane Allen representing the Idaho Wholesale Marketers
Association, appeared before the committee in opposition to H0135. She
said wholesalers are confused as to how to implement this legislation.
She cited several problems relating to affixing the stamps and how to
implement the bill. Concluding her remarks she urged the committee to
hold H0135 and work out something with wholesalers.
PRO: Cheryl Shepherd, Coeur d’Alene, Idaho, appeared before the
committee testifying in support of H0135. She exhibited two cartons of
cigarettes with no stamps affixed to the packages. The cigarettes were
purchased last week, one at the Coeur d’Alene Tribal Casino near
Worley and the other at Adeline’s Smoke Shop also near Worley on
Highway #95. No questions asked by the sales person, these Marlboro
cigarettes were purchased by Weston O’Brien. Weston was born March
11, 1986. He is 16 years old. She stated that she is a mother against
underage teen smoking.



Although she might not understand all the laws, she believed that if the
tribes had to pay cigarette tax that might afford an opportunity for
controlling their abuse of cigarette sales to minors.

CON: Terry Gibson representing the Shoshone-Pauite Tribe located in Duck
Valley appeared before the committee in opposition to H0135. He
testified that the reservation is located on 290 acres and their
government works like the State government. The Shoshone-Pauite

Tribe is the only self-governing Tribe in Idaho. This bill offends the
sovereignty of Tribes. The status of this sovereignty cannot be changed
until the U. S. Government says otherwise.



For years the Federal and State government has held that the Tribes will
be self sufficient and be determined to develop revenue. This bill is
unfair and is a broken promise for the development of Tribal business to
be self sufficient. This proposed remedy should not apply to all Tribes.
Any remedy should be crafted to particular problems.



He concluded his remarks by urging the committee to hold H0135 to fully
analyze the economic impact.

MOTION: Representative Kellogg moved to hold H0135.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Roberts to introduce
H0135
with a do pass recommendation.
AMENDED
SUBSTITUTE
MOTION:
An amended substitute motion was made by Representative Raybould to
hold H0135 time certain for one week. Roll call was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Raybould, Ridinger, Moyle, Field,
Schaefer, Roberts, Wood, McKague, McGeachin, Cuddy, Crow. Voting
Nay – Representatives Kellogg, Barrett, Smith, Collins, Ringo, Martinez,
Henbest. Amended substitute motion to Hold H0135 time certain for
one week passed, 11-7-1
ADJOURN: There being no further business to come before the committee,
Chairman Crow adjourned the meeting at 11:05 a.m.






DATE: February 20, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Ted Spangler, Idaho State Tax Commission
Chairman Crow called the meeting to order at 10:00 a.m and requested a
silent roll call. She assigned H0280, relating to tax expenditure limitation
and HJR02, relating to the “Taxpayer’s Bill of Rights” constitutional
amendment, to the Kellogg Subcommittee for further study.
H0076: Chairman Crow announced the only item on the agenda was H0076 and
asked Mr. Spangler to present the bill. Ted Spangler, Idaho State Tax
Commission,
testified that this legislation provides that when the State
Tax Commission petitions a court for a writ of possession as an aid to
collection of delinquent tax assessments the sale can be performed by
the State Tax Commission. The duty to take possession of property and
the sale of property is usually performed by the county sheriff. This
legislation will transfer the responsibility of the sale to the State Tax
Commission.



He said the Tax Commission believes they could get more money for the
property which would be a benefit to the taxpayers to satisfy the lien. This
takes the burden from the sheriff and will reduce the Tax Commission’s
fee cost paid to the sheriff

MOTION: Representative Moyle moved to send H0076 to the floor with a do pass
recommendation. Motion passed on a voice vote. Representative
McGeachin will sponsor the bill on the floor. Representatives Barrett,
Wood, McKague and Ringo requested to be recorded as voting no.
ADJOURN: There being no further business to come before the committee, Chairman
Crow adjourned the meeting at 10:20 a.m.






DATE: February 24, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representatives Raybould and Wood
GUESTS: Senator Goedde; Ron Rankin, Idaho State Property Owners Association;
Dick Panabaker, Kootenai County Commissioner; John Robideaux,
Businessman; Rocky Watson, Kootenai County Sheriff; Suzan Scott,
Coeur d’Alene Chamber of Commerce; Pete Skamser, National
Federation of Independent Business; Randy Nelson, Associated
Taxpayers of Idaho; Denise Brennan, Automobile Dealers Association;
Senator Compton; Steve Ahrens, Idaho Association of Commerce and
Industry; Pam Eaton, Idaho Retailers Association; Jane Gorsuch,
Intermountain Forest Association
Chairman Crow called the meeting to order and requested a silent roll
call. She announced the only item on the agenda was HB192 and
recognized Senator Goedde to present the bill.
HB192: Senator Geodde stated that he was here to asked support of this
legislation which alleviates a huge problem now faced by Kootenai County
property taxpayers, citizens who placed their faith on the actions of our
legislature in 1996 but are now caught between a Supreme Court ruling
and the legislatures prior actions.



In 1996 our contemporaries passed a bill that allowed local option sales
tax for specific counties. Based on the actions of the 1996 legislature,
Kootenai County Commissioners acting in good faith and with legislative
approval brought to the voters a proposal to build a jail employing a half
cent sales tax. That measure passed with 62% approval and the county
obligated itself to construct the jail and pay it off over ten years using the
proceeds of one half of the local option sales tax collected. The other
half, $3.4 million, as required in the legislation went to a reduction in
property taxes. In 2002 the Idaho Supreme Court found that the statute
passed in 1996 was unconstitutional because it was written in a manner
that only one county could avail itself of local option.



The citizens of Kootenai County are now in a dilemma. The annual
payment on our jail is $1.4 million. Last year’s property tax reduction was
$3.4 million increase. The following year the increase will total $4.8
million or a 22% increase in property taxes. We must have some relief
from this burden.



What is before you today is not a tax increase measure. Its passage
would offer the citizens of Kootenai County the opportunity to again vote
for alternative financing of the jail project.



Remember that to qualify a local option measure it must gain 60% voter
support. The measure has to be written for a specific duration not to
exceed ten years in length; must be written for a specific purpose; state
the exact rate of taxation and fifty percent of the proceeds from local
option tax must apply to property tax relief.



Changes from the legislation passed in 1996: The language defining a
resort county has been altered to reflect a population base of 17,000 and
employment base of 10% tourism related jobs. According to the data
provided by the Department of Commerce this will allow six counties in
the state to use local option as an income source and property tax
reduction mechanism The new legislation is more restrictive in that, in
addition to the sideboards in the first bill this one contains a maximum
taxation rate of 1%.



Senator Goedde stated that when he last appeared before this committee
questions were asked about the 60% voter approval: Why not 66 2/3rd%
as found in other code sections. The answer is fairly straightforward.
Local option does not create a general obligation bond situation which
would require the higher approval rate thus could be passed with a simple
majority. It is familiar in nature to school plant and facilities levies that
carry a sliding scale of approval as low as a simple majority. Reflect on
the number of school bonds that have failed in Idaho; 60% is a high bar to
jump. Put another way, if committee members had to gain 60% for
successful election seven members of this committee would not have
survived their primary and be sitting here today. Senator Goedde said he
also did not gain 60% of the vote and would be here presenting this
measure.



Senator Goedde passed out a copy of letter from the Idaho Tax
Commission on the issue of simplified Sales Tax. The key to compliance
with Simplified Sales Tax is the collection device. Should the legislature
pass the Simplified Sales Tax measure the only thing needing to be
changed in local option is the collection point. It would need to move from
the county to the state level. (Attachment #1)



Resort County local option would have no bearing on local option city
taxes as that is dealt with in another section of code. Cities gain no
additional taxation rights if they are located in a resort county.



In the original passage of the first local option sales tax a good deal of
concern was raised on the burden on business, not only to collect the tax
and remit it, but also because an additional one half-cent would make
them non-competitive in the area marketplace. He provided several
letters from businesses in the area refuting those concerns. (Attachments
#3)



In summation he said that HB192 offers the narrowest window they could
construct to solve the huge problem now faced by Kootenai County
property taxpayers who placed their full faith on the actions of the
legislature. He asked the committee to send this to the floor with a do
pass recommendation.

PRO: Ron Rankin representing the Idaho State Property Owners
Association and Ron McIntire
appeared before the committee testifying
in support of HB192. He stated that the jail in Kootenai County was
understaffed and overcrowded and their was a demand to increase the
size. A committee was set up to study how much the jail would cost and
how to finance the project. The legislature passed in good faith a statute
authorizing a local option county sales tax which Kootenai county used to
build a jail.
PRO: Dick Panabaker, Kootenai County Commissioner, stated he was
representing the Idaho Association of Counties. He testified in support of
HB192 saying he had lobbied to pass a resort county option bill to fund
the counties infrastructure costs. Their was no reason that Kootenai
County should not have a voter approved jail project under the resort
county local option sales tax. The jail project seemed perfect to save
property taxes for Kootenai County property owners. He reiterated
Senator Goedde’s testimony that the proposal to build the jail passed by
62% and sunsets in ten years.



This bill is very important to Kootenai County to pay the $1.4 million
annual payment. They do not know what they will do if it does not pass.
Voters feel the sales tax is a painless way to pay for the jail which has
been a tremendous success. Detractors of the sales tax are now
supportive.



In response to questions, Mr. Panabaker stated that the jail project started
in 1999 and the jail is now over half full. The one-half cent sales tax is
used for property tax reduction.

PRO: John Robideaux appeared before the committee in support of HB192
stating he has 30 different businesses and his experience was favorable
with the resort sales tax. The tax assessment did not create a challenge
or loss of business with its implementation.



The business community supports the resort sales tax and the collection
of the tax is not a burden but there is significant benefit by reducing the
property tax.

PRO: Rocky Watson, Kootenai County Sheriff, speaking in support of the bill
stated that Kootenai County is unique in the fact that the population goes
from 30,000 to 50,000 during the summer. There are fourteen lakes in
the area and fifty percent is public land. This creates many problems for
the Sheriff department. It is important to collect sales tax from non-county
residents.

PRO: Suzan Scott representing the Coeur d’Alene Area Chamber of
Commerce and the Postfalls and Hayden Chambers
appeared before
the committee in support of HB192. This important legislation allow local
voters the right to raise local taxes for additional funds for programs and
services. The Chambers firmly believe local voters should have the
opportunity and not be restricted by state government. States are
capable of creating their tax system and so are counties but you need
know the level of limitation that is felt at the county level.



Under the definitions of the Department of Commerce Kootenai County is
a resort county. Kootenai County has approximately 2 million visitors
annually. Local property taxpayers are already overburdened by extra
services required by tourism. For instance, 30% of the County jail
population are non-residents. Similar statistics also apply to resort county
roads, parking, police and emergency services, parks, and utilities. This
legislation not only allows counties with strong travel and tourism base to
shift some of the tax burden to non-residents but also allow for property
tax relief.

CON: Pete Skamser, National Federation of Independent Business,
appeared before the committee in opposition to HB192. He testified that
the NFIB membership oppose local option tax. There are six counties
that could qualify with 10% workforce. This bill creates various taxing
districts. He urged the committee to hold H0 192.
CON: Randy Nelson, Associated Taxpayers of Idaho, provided a hand-out
depicting the resort county sales tax (Attachment #2); taxpayer impact
example of property tax savings of $52.07 and sales tax increase of
$65.60. (Attachment #2) Beginning on page 1 line 33 the bill describes
a resort county as a county that “derives a major portion of its economic
well-being from businesses catering to recreational needs and meeting
needs of people traveling to that destination county for an extended
period of time.” The bill goes on to include other criteria such as over
17,000 population and 10% of workforce employed in recreation
employment meeting certain North American Industry Classification
System code.



He forecasted and analyzed what the impact of the property tax relief fund
could have been in Kootenai County continued for a 5-year period. Even
with the county property tax relief the growing budgets of the other taxing
districts and the taxpayers increasing property value will still cause the
property tax bill to increase.



In closing, Mr. Nelson stated that HB192 does attempt to identify and
narrow the local option sales taxes to a few resort counties, but does miss
resort counties such as Valley, Teton, Shoshone, Fremont, Custer,
Camas, Boise, Bear Lake and Adams which have their residents bringing
commerce dollars into population centers. He provided a hand-out listing
option tax pros and cons. (Attachment #3)

CON: Denise Brennan appeared before the committee representing the Idaho
Automobile Dealers Association
in opposition to HB192. She testified
that local option taxes create an unfair competitive advantage to
bordering, as well as other counties which do not impose such taxes. It is
especially unfair in the case of large ticket purchases such as
automobiles. As an example sales tax at 5% on a $20,000 vehicle
purchase is $1,000; If certain counties were allowed the option to collect
an additional 1%, the consumer would be paying an additional $200 on
this amount.



In these difficult times while we are trying to stimulate the economy
statewide, granting authorization of local option sales tax to select
counties offers the possibility of impeding growth in others.

PRO: Senator Compton, co-sponsor of the bill, said that the last two
speakers described problems that could be caused for dealerships. The
disadvantage was debated when the original bill was passed. This has
turned out not to be true and dealerships have seen that the resort tax
has worked. The resort tax has worked well to fund roads and the jail and
reduced property taxes.
CON: Steve Ahrens, Idaho Association of Commerce and Industry,
appeared before the committee in opposition to HB192. He stated that
the secretary has a copy of his testimony for the record and he would be
brief. See attachment for full testimony. (Attachment # 5) The business
community has been consistent over the years in support of fair, stable
and competitive system. A system that taxpayers, both individual and
corporate, can understand and comply with. The House Revenue and
Taxation Committee is the traditional guardian of the authority to tax in the
State of Idaho. Members of this Committee have adhered to certain key
principles in constructing and maintaining Idaho’s tax system. The power
to tax is an awesome power.



IACI sees three primary objections to giving up tax authority to local
government: First, the multiplication of local-option taxes will create a
patchwork of taxation that will artificially distort business development and
operations. That is precisely what happened in other jurisdictions across
the country



Second, allowing local-option sales tax authority flies directly in the face
of efforts across the nation to simplify sales system, an area in which
Idaho already has an advantage, unless we dilute it with bills like HB192.



Third, it’s proposed that sales tax revenues be sued for property tax relief.
We do not believe property taxes will stay down. Taxpayers ultimately will
find themselves paying both property tax and sales tax and it will be
difficult to demonstrate that the property taxes are in fact lower.

CON: Pam Eaton, Idaho Retailers Association, appeared before the
committee in opposition to HB192 stating that the Association has long
had opposition to local option taxes. There are five or six counties that
could qualify to impose a local option tax, not just Kootenai County. Look
at the complexity of the tax system in neighboring states, especially
Washington.

PRO: Jane Gorsuch, Intermountain Forest Association, appeared before the
committee in support of HB192 saying that this bill represents an option
for IFA lumber mills and lands. There are five lumber mills and six
individual forest landowners who will potentially be affected by the
passage of this bill and the opportunity to vote again on a local option
sales tax to pay for their jail.
Chairman Crow recognized Senator Goedde to wrap up the testimony.
Senator Goedde said this bill is a tax shift targeting people who use
county services to pay sales tax to support them. This bill is for a property
tax relief of $3.4 million.
MOTION: It was moved by Representative Ridinger to send HB192 to the floor with
a do pass recommendation.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Roberts to HOLD
HB192.
Roll call was called for.
ROLL CALL
VOTE:
Voting AYE – Representatives Barrett, Moyle, Field, Schaefer, Collins,
Roberts, Denney, McKague, McGeachin, Crow. Voting NAY –
Representatives Kellogg, Ridinger, Smith, Ringo, Martinez, Henbest,
Cuddy. Motion to HOLD HB192 passed, 10-7-2.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 11:05 a.m.






DATE: February 25, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

Representative Field

Representative Kellogg

GUESTS: Representative Langford
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Ridinger moved to accept the minutes as written of
the meetings held on February 19, 2003 and February 20, 2003. Motion
carried on a voice vote.
RS12964: Chairman Crow announced the first item on the agenda was RS12964
and asked Representative Raybould to explain the proposed legislation.
Representative Raybould stated that this proposal changes the
requirements for tax appeals. The legislation identifies the standard to be
applied and the burden of proof in appeals of property tax assessments to
the County Board of Equalization, the Board of Tax Appeals or the district
court.



This proposed legislation changes the legal standard from one that
requires proof that an assessment is manifestly excessive, arbitrary and
capricious or fraudulent and oppressive, to one that requires simply that
the assessment is erroneous. It changes the burden of proof to satisfy
that standard from a “clear and convincing” burden to the normal
“preponderance of the evidence” standard applicable to most civil cases.

MOTION: Representative Moyle moved to introduce RS12964. Motion passed on
a voice vote.
RS12975: Chairman Crow announced the next item on the agenda was RS12975
and recognized Representative Langford to explain the proposed
legislation. Representative Langford stated that this proposed
legislation is being done on the behalf of Teton County, the fastest
growing small county in the State. When the 3% cap was imposed, being
a conservative county, Teton County had a very low mill levy. This
legislation amends Chapter 3, Title 63, Idaho Code by the addition of a
new Section. It gives flexibility to counties of under 20,000 population and
over 10% annual growth regarding the 3% cap for increases in county
budgets.
MOTION: Representative Ringo moved to introduce RS12975.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Moyle to return
RS12975
to sponsor. Motion passed on a voice vote.
RS12998: Chairman Crow announced the next item on the agenda was RS12998
and asked Representative Langford to continue. Representative
Langford
explained that this proposed legislation modifies the provisions
of Idaho Code relating to land actively devoted to agricultural use as
applied to counties with under 20,000 in population and an annual growth
rate of more than 10%.



This proposal adds a chapter which creates and defines the agricultural
land preservation tax. It give the county commissioners certain powers in
dealing with the new tax. It makes some technical corrections as well as
provisions for collection of said taxes and administrative functions.

MOTION: After a brief question and answer session, Representative McGeachin
moved to return RS12998 to sponsor. Motion carried on a voice vote.
ADJOURN: There being no further business to come before the committee, Chairman
Crow adjourned the meeting at 10:30 a.m.






DATE: February 25, 2003
TIME: 9:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Raybould, Collins, McKague, Martinez
ABSENT/

EXCUSED:

None
GUESTS: Ada Commissioner Grant Kingford; Tony Poinelli, Idaho Association of
Counties; Randy Nelson, Associated Taxpayers of Idaho; Russ
Hendricks, Idaho Farm Bureau; Troy Hagen, Assistant Director Ada
County EMS
H0148 Chairman Raybould recognized Ada County Commissioner, Grant
Kingsford to present H0148. Commissioner Kingsford explained the
purpose of the legislation is to move the filing deadline for appeals of
property tax assessment by the fourth Monday in June to the third
Monday in June. This does reduce the time frame for filing appeals by
one week. It allows the County Boards of Equalization more time to
adequately conclude their duties and still allow sufficient time for the
property owner to file an appeal while negotiating solutions outside of the
Board of Equalization process. Members of the committee inquired as to
how this would benefit the taxpayer and counties. Commissioner
Kingsford explained that the taxpayers, assessors and the Board of
Equalization would all benefit.
PRO: Chairman Raybould called upon Anthony Poinelli, Idaho Association
of Counties
to testify. Mr. Poinelli stated that Commissioner Kingsford
had covered most of the questions asked by the committee members.
He stated the purpose of the bill was to give additional time for the
assessor and the taxpayers who file an appeal on the value of their
property. This would reduce the number of individuals who would
appear before the Board of Equalization. There may be some latitude for
adjustment both ways on this time schedule. Of 31 counties reporting,
there were 2,015 Board of Equalization filings and the number that went
to hearing was 900. The assessors were able to reduce the numbers
over 50%. This bill would give them some additional time to reduce the
numbers.
CON: Randy Nelson, Associated Taxpayers of Idaho, was recognized by
Chairman Raybould. He echoed what Mr. Poinelli had said. Mr. Nelson
stated that it is important to keep a one- month time frame and adjust the
deadline dates for appeal. He agrees that negotiations would be helpful
in adjusting the dates.



Mr. Russ Hendricks, Idaho Farm Bureau, was called upon to present
his testimony. He rose in opposition to H0148.

MOTION: Representative Collins moved to return H0148 to the full committee to be
HELD. Motion passed.
H0193 Chairman Raybould called upon Troy Hagen, Assistant Director Ada
County EMS, to present H0193. Mr. Hagen explained neither the
federal government Medicare payments nor state government grants
provide adequate funding to cover the costs of providing ambulance and
emergency medical services. In fact, the recent federal law prohibits
counties from seeking reimbursement from Medicare patients for these
services. Also limitations on property tax increases do not allow the
collection of sufficient funds within the county or district to cover these
costs. H0193 removes the 3% property tax limitation in order to recover
the shortfall in revenues to ambulance and emergency medical services
created by the federal prohibition. By 66 2/3% voter approval, counties
or districts responsible for these services may increase the levy limit to
meet these needs. Levy increases may result in counties or districts
providing such services, where voter approval has been given.

Questions from the committee followed. (Attachment #1 – Report and
graph.)

PRO: Ada Commissioner Grant Kingsford spoke in support of H0193.
Commissioner Kingsford testified that after the April 2002 rule went into
effect, the Commission has been closely monitoring their revenues. The
rule changes have reduced Ada County EMS’s gross revenue by 22%.
Additionally, Medicaid and other insurance carriers responding to the
same rule change have cut their reimbursements. Those additional cuts
have served to reduce their revenues even further, with an overall loss of
23.91%. For Ada County EMS that translates to a loss of $1,588,972.00.

In order to correct the problem H0 193 would give the voters an
opportunity for a choice of tax and services.



Toni Poinelli, Idaho Association of Counties, rose to speak stating
that the bill doesn’t cover just ambulance districts, it covers ambulance
and emergency medical services. The bill does effect all services. This
problem was caused by the Federal Government prohibiting entities that
provide ambulance service from billing the remaining balance from
Medicare recipients or insurance companies. The bill would require a
2/3’s vote of the citizen’s to exceed the 3% cap and would make it
permanent. There was a concern expressed about making it permanent
and we would be willing to work on this to develop some Legislative
intent if the Federal Government would reinstitute the ability to bill
Medicare recipients. We would be willing to sit down with the Tax
Commission to develop that language.



Randy Nelson, Association of Idaho Taxpayers, explained the 2002
levy year of the ambulance districts and counties with ambulance
service. He presented a spread sheet and discussed the graphs with the
committee showing expenses of the ambulance districts and counties.
(Attachment #2)

MOTION: Representative Martinez moved to return the bill to the full committee
with a Do Pass. Motion failed 3-1.
MOTION: Representative Collins moved to return the bill to the full committee
without recommendation
. Motion passed. Representative Raybould
announced the bill will be returned to the full committee.
ADJOURN: Meeting was adjourned at 9:55 a.m.






DATE: February 26, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representative Kellogg
GUESTS: Don Pischner
Chairman Crow called the meeting to order and requested a silent roll
call. She recognized Mr. Pischner, sponsor of HB135, to make closing
comments of testimony heard on February 19, 2003.
HB135: Don Pischner stated that there is a strong feeling in the Legislature that
the problems raised with Indian cigarette tax exemptions could be solved
in the same manner as it is handled with farmers and the gasoline tax;
that is they pay the tax and then apply for a refund. In 1988 the Indian
Affairs Committee members solved the problem in the State of
Washington as follows: “Sales of cigarettes to non-members by Indian
Tribes are subject to the cigarette tax. The wholesaler is obligated to
make pre-collection of the tax. Stamped exempt cigarettes to Tribal
members may be made only in such quantity as is approved in advance
by the dependent related to evidenced demand.”



HB135 has an Attorney General’s opinion that it meets the provisions of
Idaho’s Constitution. Idaho Statute 67-4007 limits the powers and duties
of the Idaho Council on Indian affairs to “monitor, review and advise.”
Because this legislation is being proposed it requires no negotiation as
the Tribes claim. In fact there is presently nothing to negotiate.



HB135 is not a new tax, not a tax increase but is about tax avoidance. If
cigarettes are taxed it might well set the stage for regulation and control of
matters impacting risk to health and substance abuse, provide protection
from racketeering and crime and promote goals of the Idaho Tobacco
Products law.



The primary goals of this bill are to reduce sale to teens and about
fairness.

MOTION: Representative McGeachin moved to HOLD HB135 time certain for one
week.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Smith to send HB135 to
the floor with a do pass recommendation.
AMENDED
SUBSTITUTE
MOTION:
An amended substitute motion was made by Representative Barrett to
HOLD HB135 for the parties involved in disagreement to study the
problems and the bill held subject to the call of the Chairman. Roll call
was called for.
ROLL CALL
VOTE;
Voting Aye – Representatives Crow, Raybould, Barrett, Ridinger, Field,
Collins, McKague, Ringo, Martinez. Henbest, Cuddy. Voting Nay –
Representatives Moyle, Schaefer, Smith, Roberts, Wood, Denney,
McGeachin. Amended substitute motion passed, 11-7-1.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:23 a.m.






DATE: February 27, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representative Kellogg
GUESTS: John Watts, Patricia Younger, Heather Clark, Jan Wall representing the
Idaho Library Association
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Ridinger moved to accept the minutes as written of
the meetings held on February 24, 25 and 26, 2003. Motion carried on a
voice vote.
HB139: Chairman Crow announced the first item on the agenda was HB139 and
recognized Mr. Watts to present the bill. John Watts, Idaho Library
Association,
testified that there are forty-nine district libraries; fifty public
community libraries and nine university and college library districts in
Idaho. He distributed a handout depicting Idaho public libraries and
pointed out small districts that would benefit from this legislation. This
proposal would allow library districts to consolidate if they do not share a
common boundary. Consolidation procedures presently set out in statute
for contiguous consolidation would be required including hearings and
actions by all affected county commissions.



The consolidation would allow non-contiguous boundaries to consolidate
their budgets and merge to create a new budget. The consolidation
would reduce administration cost and there would be less overhead.



In response to an inquiry as to how many library districts straddled county
boundaries, Jan Wall said that there are two; Kootenai and Shoshone
and Nez Perce, Lewis and Idaho.

MOTION: After a short discussion relating to non-contiguous boundaries,
Representative Henbest moved to send HB1139 to the floor with a do
pass
recommendation.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to HOLD HB
139.
Roll call vote was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Raybould, Barrett, Ridinger, Moyle,
Field, Collins, Roberts, Wood, McKague, McGeachin. Voting Nay –
Representatives Schaefer, Smith, Denney, Ringo, Martinez., Henbest,
Cuddy. Substitute motion to HOLD HB139 passed, 11-7-1.
HB140: Chairman Crow announced the next item on the agenda was HB140 and
asked Mr. Watts to continue his testimony. Mr. Watts said that if city
residents vote affirmatively to join a library district this proposal clarifies
that the city library budget in effect on the date of the election is the
budget to be used to determine a total district budget and then calculate
the first annual assessment rate. Mr. Watts distributed a copy of a letter
from the Association of Idaho Cities supporting HB 140 and HB141.
(Attachment #1)
MOTION: Representative Martinez moved to send HB140 to the floor with a do
pass
recommendation. Motion passed on a voice vote. Representatives
Crow, Raybould, Barrett and Wood requested as voting NO.
Representative Martinez will sponsor the bill on the floor.
HB141 The Chairman announced the next item on the agenda was HB141 and
recognized Mr. Watts. Mr. Watts stated that this proposal allows a
library district to add geographic territory as a result of action taken by a
city adding to its territory if the city is presently part of an established
library district. Under current statute no territory of an incorporated
municipality can be divided simultaneously inside and outside of a library
district. In response to a question relating to annexation, Mr. Watts stated
this legislation does not deal with the annexation laws. When the city
grows the library district will expand.



This proposal also allows established city libraries to consolidate with
established but non-contiguous library districts. Under the current statute,
library districts and city libraries cannot consolidate unless they share a
common boundary. Non-contiguous consolidation would follow the
current statutory requirements for inclusion of new territory.

PRO: Patricia Younger, Idaho Library Association, appeared before the
committee in support of HB141. She said that Idaho Code 33-2703
Subsection (2) “The territory of the district shall be continuous, and no
territory of an incorporated municipality shall be divided” is a potential
problem for residents of some cities and in some cases, those who reside
outside city limits as well.



The City of Meridian lies within the boundaries of the Meridian Library
District. Both the east and west city limits lines match the east and west
boundaries of the library district. She distributed a copy of ” Meridian
Areas of City Impact.” (Attachment #2) There are no current plans to
expand the city at either of these boundaries. However due to the recent
development of the North Meridian area expansion to the west between
Ustick and McMillian could occur.



The most eminent potential problem at this time lies south of the city in an
area called “Meridian Area of City Impact Referral Area.” When this area
becomes a part of the City of Meridian, two things could happen if 33-2703 (2) remains as written.



First is because a city cannot be divided, all of the City of Meridian would
lose library service because the area within the city limits could no
longer be a part of the library district.



Second the added territory which presently lies with Kuna Library District
and Ada Community Library District would also lose library service.



Residents of all the areas under discussion presently have library
services provided by library districts and are taxed by the districts.

PRO: Heather Clark, Idaho Library Association, appeared before the
committee in support HB141. She testified that Garden City is unique in
that is almost surrounded by the City of Boise. Garden City has no school
district of its own so students go to Boise, Eagle, and Meridian even
though borders do not necessarily touch. While students may attend
Meridian schools, because of the wording of HB141 our library would not
be allowed to join the Meridian Library District.



Why should our district want to join the Meridian District? Combining
libraries will save money by consolidating acquisitions, cataloging and
administrative staff costs. Fewer offices will be needed for this staff so
the space may be used as additional public space without the cost of
building additions.



Combining libraries would improve public service while providing it with
more efficiency. Rather than each library requiring a director there would
be only one. The rest would be branch managers who because they are
relieved of administrative duties could spend more time enhancing patron
services where they are needed. Duplications in the collections of each
library would be reduced. Each library could instead focus on the specific
needs and wants of their area.



The public would be informed and a vote would be required before the
combining could take place. Consolidating library districts would better
serve the public and the levy would be lower. The city levy rate is higher
than the district levy rate.

PRO: Jan Wall, Idaho Library Association, appeared before committee in
support of HB141 stating that the mission of the Library Association is to
assist librarians. Consolidation would give customers of communities
more choices with a wide variety of videos and books being made
available to small libraries.



This bill tells libraries how to go about consolidating and what process to
go through. Consolidation of small libraries would be a benefit to the
citizens in smaller disticts.

MOTION: Representative Ringo moved to send HB141 to the floor with a do pass
recommendation.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Roberts to HOLD
HB141.
Roll call vote was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Raybould, Barrett, Moyle, Collins,
Roberts, Wood, Denney, McKague, McGeachin. Voting Nay –
Representatives Ridinger, Field, Schaefer, Smith, Ringo, Martinez,
Henbest, Cuddy. Motion to HOLD HB141 passed, 10-8-1.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:50 a.m.






DATE: March 3, 2003
TIME: 9:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representatives Kellogg and Barrett
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Ridinger moved to accept the minutes as written of
the meeting held on February 27, 2003. Motion carried on a voice vote.
Chairman Crow asked Representative Raybould to submit his
subcommittee report.
SUBCOMMITTEE
REPORT:
Representative Raybould stated that the Subcommittee had met on
February 25, 2003 and heard testimony on HB 148 relating to changing
the time frame for appeals of property tax assessments. The members of
the Subcommittee felt that changing the time period from four to three
weeks created a hardship.



Testimony for HB193 relating to allowing a budget increase above the
three percent cap for ambulance districts. It was moved to return the bill
back to the full committee “without recommendation.”

MOTION: Representative Raybould moved to HOLD HB148. Motion carried on a
voice vote.
HB264: Chairman Crow announced the sponsor was not present for the first item
on the agenda, the Committee would now consider HB264. She
recognized Representative Cuddy to present the bill. Representative
Cuddy
stated that the purpose of this legislation is to further clarify the
definition of occupancy of a house after construction.



Sometimes a home may have some things not completed longer than
necessary. There may be boats, recreational vehicles placed on the
property. The owner is using all the services of the county and they are
not paying their fair share.

MOTION: Representative Martinez moved to send HB264 to the floor with a do
pass
recommendation. Motion passed on a voice vote. Representative
Cuddy will sponsor the bill on the floor.



RS13084: Chairman Crow announced the next item to be considered was RS13084
and recognized Representative Moyle to address the proposed
legislation. Representative Moyle explained that this proposed bill
allows taxpayers who make new personal property investments in Idaho,
on and after January 1, 2003, the opportunity to forego the income tax
investment tax credit (ITC) by electing instead an exemption from
personal tax on the property for two years.



Taxpayers who are in a loss situation are not able to claim the ITC
because they have no tax liability to offset. This proposal will allow
taxpayers who have suffered losses to elect to be exempt from property
tax on personal property on new personal property acquisitions or
investments for two years in lieu of the ITC.

MOTION: Representative Field moved to introduce RS13084. Motion passed on a
voice vote.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 9:37 a.m.






DATE: March 4, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representatives Kellogg, Moyle and Denney
GUESTS: John Mackey, United Heritage Financial Group; Troy Hagen, Ada County
Emergency Medical Services;
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Ridinger moved to accept the minutes as written for
the meeting held on March 3, 2003. Motion carried on a voice vote.
RS13104: Chairman Crow announced the first item on the agenda was RS13104
and recognized Mr. Mackey to present the proposed legislation. John
Mackey, United Heritage Financial Group,
explained that the mutual
insurance holding company system in Idaho was created by the Idaho
Legislature in 1997. This system provides mutual insurance companies
with access to capital markets and opportunities for greater growth, which
in turn, benefits the job market and economy of Idaho.



Unfortunately the legislation that created the mutual insurance holding
company system overlooked a state tax issue which makes it difficult if
not impossible for a company operating within the system to transfer
capital between said companies. Non-Insurance Holding Companies in
Idaho pay no federal or state tax on Inter-Company Capital transfers.



Mutual Insurance Holding companies with subsidiaries who pay premium
tax, as well as subsidiaries who pay income tax, are not able to transfer
capital between companies without paying a tax.



This legislation, if enacted would correct this oversight and allow mutual
insurance holding companies the opportunity to grow as was intended by
passage of original legislation in 1997.

MOTION: Representative Ridinger moved to introduce RS13104. Motion carried
on a voice vote.
HB193: Chairman Crow announced the next item on the agenda was HB193 and
recognized Mr. Hagen to present the bill. Troy Hagen, Assistant
Director for the Ada County Emergency Medical Services,
testified
that the purpose of our proposed legislation is to allow ambulance districts
to go to the voter for approval to increase the ambulance district property
tax levy. The reason for this legislation is that the Federal Government
via its Medicare rule making authority has significantly reduced
reimbursement for Medicare eligible patients.



In 1998 at the direction of Congress Medicare began creating a new
ambulance reimbursement fee schedule. The intent of this new fee
schedule was to reduce costs for Medicare patients. However, the new
fee schedule has also had a dramatic negative affect on ambulance
service providers.



Under the new Medicare fee schedule all ambulance providers in Idaho
must accept assignment on Medicare claims. That is providers in Idaho
must accept what Medicare pays as payment in full. The district is no
longer allowed to “balance bill”” the patient for the difference between the
billing charges and what Medicare pays for ambulance services.



Since April 2002 when the rules went into effect they have been closely
monitoring their revenues. The rule changes have reduced Ada County
EMS’s gross revenue by 22%. Additionally Medicaid and other insurance
carriers responding to the same rule change have cut their
reimbursements. Those additional cuts have served to reduce our
revenues even further with an overall loss of 23.91%. For Ada County
EMS that translates to a loss of $1,588,972.



Idaho Code Title 32-Chapter 39 delegates responsibility for providing an
ambulance service to the respective counties of the State. The Code
goes on to declare that operating revenues can come from property tax
and fees for service. It also authorizes creation of an ambulance district
which allows for a property tax levy of not to exceed four hundredths
percent of market value for assessment purposes. Most ambulance
districts around the state, there are 18, have their rates set well below the
maximum allowed by law. In Ada County the rate for 2003 is .000117687
or less than one-fourth of the maximum levy rate.

Ada County EMS receives funds from property tax, sales tax, sale of
license plates and fee for service Tax revenues from all taxes amount to
about 35% for funding, 65% come from fee for service. Unlike most
businesses they cannot arbitrarily cut services that they provide. When
someone calls 9-1-1 and asks for medical help they must go. If they are
forced to cut their budget 23% they will have to reduce the number of field
medics and operate fewer ambulances resulting in significantly longer
response times.



This legislation gives ambulance districts the ability to go to the voter and
ask them to approve adjusting the property tax levy up to the maximum
allow by law of .04%. The vote to do so must pass by a majority of 66
2/3% of the voters within the ambulance district.



Mr. Hagen past out copies






DATE: March 5, 2003
TIME: 9:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representative Wood
GUESTS: Russell Westerberg, New Horizons Development Corporation; Mitch
Jacobs, Rancher; Greg Nelson; Idaho Farm Bureau Federation;

Alex La Beau, Idaho Association of Realtors; Mike Ferguson, Developer;
Dave Gunderson, Ball Ventures; Max Vaughn, Minidoka County
Assessor; Representative Clark; Randy Nelson, Associated Taxpayers of
Idaho

Chairman Crow called the meeting to order at 9:30 a.m. and requested a
silent roll call. She announced the first item on the agenda was HB136
and recognized Representative Raybould to present the bill.
HB136: Representative Raybould stated that HB136 is an amendment to
HB488a passed in the 2002 legislature. The original HB488 as passed in
the House of Representatives was amended in the Senate in the last days
of the session. The amended version excluded many of the requirements
of the original HB488 that was negotiated with county assessors and
many members of the House. HB136 restores the elements of HB488
that were promised to get the original bill passed in the House and
clarifies the intent of the original legislation that granted a tax break for
“agricultural” land platted in a rural sub-division until each individual parcel
or lot is sold.



The Senate objections to the House Bill were that it did not include a
provision that the parcel would lose the agricultural land designation if (1)
the parcel was built upon by the owner of the sub-division for his own use
and title of the parcel did not change or (2) the developer would lease the
parcel for building of any kind and the title did not change. Also the Tax
Commission voiced their concern that HB488 may be unconstitutional in
creating a special assessment rate for an otherwise defined class of
property. To correct these objections the Tax Commission offered to write
an amendment that would address these concerns.



The amendment created by the Tax Commission, although addressing
the Senate problems, left out of the new Senate bill several of the
essential elements of the original legislation passed by the House. These
elements of the original bill were agreed to by several members of the
House, assessors, county commissioners and developers. It is now
necessary to correct the Senate amendments to satisfy the commitment
made to the above people.



HB488a did not provide a definition of “Improvement.” It may have been
construed to have applied to the whole sub-division thus making each
parcel ineligible for the agricultural tax rate. This needed to be clarified.



HB488a did not provide a definition for “Improvement” although this is the
event that triggers the loss of the exemption. HB488a also left out the
definition of “Intended Owner Occupant” and “Rural Home Site.”






The amendment in HB136, in addition to the definition of “Plat” and “Rural
home site development plat,” clearly defines “Improvement” this makes it
applicable to only the individual parcels and not the sub-division as a
whole, thus preserving the exemption to undeveloped or unsold lots. Also
defined is “owner”, “Parcel” and “Sale.” All of these definitions are
essential to clarify the intentions of the original HB488 legislation.



HB488 amended 63-604 relieves the five acre of income- producing
requirement from the parcels in the sub-division. Without this amendment
to 63-604 no parcel or lot would be eligible for the agricultural tax rate.
HB488a omitted this amendment to 63-604. Without restoring this
qualification for the qualifying sub-divisions no parcel or lot would be
eligible for the exemption.



HB136 amends 63-604 to allow for parcels of less than five contiguous
acres, producing less than $1,000 gross income, or producing 15% of the
owners annual gross income to be eligible for the agricultural exemption.
This is a major reason to amend HB488a.



HB136 provides that the loss of exemption does not take place until
January 1 of the year following the event that causes the agricultural
exemption to be lost. Both HB488 and HB488a left the loss of exemption
to be determined by the assessor after a sale of the parcel or after
improvements are made.



Under the present law it is probable that, because of the gray areas of
eligibility, every claim for exemption could wind up in court. Some court
cases are now pending because of the ambiguity of the present law.

CON: Russell Westerberg stated he was appearing before the Committee on
behalf of his client New Horizons Development Corporation, a family
owned corporation, in opposition to HB 136. He distributed handouts to
be referred to in his testimony. (Attachment 1)



HB136 as currently drafted is unfair, unnecessary and is a significant
public policy departure from HB488 as approved by this committee and
from HB488aas and approved overwhelmingly by the House last year.
HB488aas was also signed into law by the Governor and was included in
the list of 58 tax relief bills he has said he was proud of approving during
the first four years of his administration. The list referred to is contained
in Item #1 in the handout.



Mr. Westerberg stated he was honored to participate in the crafting of
HB488 with Representative Raybould last year and appeared in tandem
with him before this committee in support of HB488. The purpose of
HB488 was to encourage economic development in some of Idaho’s
forgotten rural areas by allowing the owner of agricultural property outside
the limits of an incorporated municipality to attempt to develop that
property for residential or recreation use without risking financial ruin
before the lots created by the subdivision could be developed and sold.
Higher taxes that usually followed reclassification as a result of the
owner’s efforts to develop that property.



Item 2 of the handout is a copy of HB488 as originally approved by this
committee and the full House and sent to the Senate. Beginning on line
26 in subsection (3) it is clear that the intent of this committee and a
majority of the members of the House last year was to require the County
Assessor to continue to assess property in rural areas for which a plat
had been filed as agricultural property until that property had been
subdivided, developed and transferred to an owner whose intended use of
that property is as a residential or recreational home site.



In the new section 63-318 created by HB488 the House’s intent that land
treated for tax purposes as agricultural land continue to be treated as
such until such time as each individual parcel created by the rural home
site plat was sold to an intended owner occupant is very clear.



The intent of HB488 was obvious that members recognized that land in a
rural subdivision could not continue to be farmed at the same time the
initial improvements including access roads and utilities necessary to
attract potential owner occupants to the property were taking place.

Further evidence that the House version never intended to require a rural
home site development to continue to meet the definition of agricultural
property as HB136 would require, found on page 2 line 44, is where it
says “except as provided in section 35-318.”



Item #3 in the hand out is a copy of HB488 as amended in the Senate. It
is clear in HB488aas that the Senate agreed with the House’s intention
that parcels within a rural home site development were to continue being
assessed for tax purposes as agricultural land until that property had
been subdivided, developed and transferred to an owner who intended to
make it his or her recreational or residential home site.



HB488aas is current law in Idaho. Idaho property owners who are
attempting to use the law believe that it was the stated intent of the
legislature in enacting HB488aas to require each parcel or lot within a
rural home site development platted on land previously eligible for tax
assessment as agricultural property to continue to be appraised or be
reappraised and assessed as agricultural property until improvements
defined as the “construction of structures”, not including utilities, roads,
septic systems or similar site developments, are built upon the parcel
regardless of whether or not the parcel continues to meet the definition of
agricultural property.



Mr. Westerberg stated it was their interpretation of HB488aas has been
affirmed in part by temporary rules developed by the Tax Commission
after HB488aas became law. Note the underlined language 01 section c.
in item #4.



HB136 makes two fundamental policy reversals to this premise. It strikes
the word previously and allows the exemption only on land actively
devoted to agriculture on or after January 1, 2002. It was always his
understanding and the understanding of his client that one of the
fundamental purposes of HB488 was to provide some relief to those
existing rural developments whose parcels were being taxed as
residential property even though the parcels had not been sold nor any
improvements had been constructed on them.



Eliminating the word “Previously” in HB136 is an attempt to make the law
consistent with the Tax Commission’s temporary rule which seeks to draw
a line in the sand of time and allow the exemption to only those
subdivisions platted on land actively devoted to agriculture in 2001.



They believe the Tax Commission’s temporary rule and the like
requirement in HB136 is inconsistent with Idaho’s constitution which in
Article 7 section 5 requires uniformity of taxation. For this reason, his
client and other land owners attempting to seek relief under HB488aas
are challenging this rule in court.



He suggested that HB136 be held or send it to a subcommittee and craft
a new amendment to 630602FF as proposed in item #8. This direct
approach to remedying the slow selling rural residential developments
from being made unprofitable by taxes before the lots can be sold
eliminates the need of anyone to worry about whether or not a parcel
should or should not continue to meet the requirements of agricultural
classification. The suggested language in item #8 also recognizes the
declining state of Idaho’s economy in all counties and would apply
consistent tax treatment of rural home site developments in all 44
counties.



Mr. Westerberg concluded his testimony saying that if the committee
believed refinements to the current law are necessary, they would
welcome the opportunity to sit at the table with members of this committee
and County Assessors and see if we can work out our differences.

CON: Mitch Jacobs appeared before the committee in opposition to HB136.
He said he was in the livestock business and the economic climate is not
good for agriculture. His operation is in Fremont county and has
developed final plans for an Island Park subdivision. The Assessor
assessed the value of the lots so high it is causing him to sell lots at fire
sale prices to pay the property tax.



HB488 was an incentive to help the economics and growth in eastern
Idaho. He had put millions of dollars to develop the subdivision and the
county assessor is putting him out of business.

PRO: Greg Nelson, Idaho Farm Bureau Federation, appeared before the
committee in support of HB136. He stated that after HB488 went into
effect there were lots of ambiguities in the bill. This bill tightens the law
for the agricultural exemption created by HB488 which was broader than

intended.

PRO: Alex LaBeau representing the Idaho Association of Realtors,
appeared before the committee in support of HB136 stating that when
HB488 was originally proposed we supported the measure because we
were under the impression that agricultural land was being taxed unfairly.



It was their impression that if property is being used as agriculture
property even if it is subdivided and small lots are being sold, that the rest
of the property should qualify for the agriculture exemption if it is still
being used as agriculture property. The trigger is “use.,” If not being used
as agriculture it is something else.



We understand the concerns of the opponents of this bill and we share
their concerns. However we believe the concerns they express can be
best served by an old law that was originally passed by this body several
years ago. It was called the “developer discount.” Unfortunately the law
was held unconstitutional. It is their belief that all of the interested parties
could get together to review the ruling to see if there is a way to fix it. We
have already had offers from county representatives to do just that. This
would address the issues raised by the opponents and be the cleanest
way to deal with the problems.



In the mean time we believe that HB136 should be passed as written. It is
an appropriate clarification to the law and taxation of subdivided
agriculture land. We ask you to support it with a do pass recommendation
to the House floor.

CON: Mike Ferguson appeared before the committee in opposition to HB136
saying the intent of the legislation in HB488 was to create economic
development in rural Idaho. In 1996 his agricultural property in Fremont
County was used for range and was assessed at $1 per acre. The
assessors reassessed the property before it was platted for recreational
projects. In 1998 a plat was filed and was assessed at $3,000 per acre.
The property tax was $300,000 and he cannot sell a lot a year to pay the
property tax.



It cost a lot of money for infrastructure to get this property developed.
HB488 allowed us to pick up the exemption. HB 136 eliminates the
possibility of economic development. Many million dollar homes are being
built that will have higher property taxes to bring more money into the
county.



HB488 was good for developers and urged the committee not to pass
HB136 because the timing is not right. He said HB488 has not had
enough time to work.

CON: Dave Gunderson, Ball Ventures, appeared before the committee in
opposition to HB136 saying that the reins are too tight in HB136. He
urged the committee to work out problems before changing the law.
HB488 is now in litigation which should be decided before the issue is
settled.
PRO: Max Vaughn, Minidoka County Assessor and President of the Idaho
Association of County Assessors,
appeared before the committee in
support of HB136. He stated this bill restores the intent and purpose of
HB488 which was changed when it was amended in the Senate. The
original HB488 stated there was no fiscal impact to the State General
Fund and counties would have only the increase in the assessed value of
unsold lots deferred. The final fiscal impact to the State General Fund
and to counties would have only the increase in the assessed value of
unsold lots deferred. The final fiscal impact as a result of the amendment
to HB488 was a $30 million loss in assessed value, shifting property taxes
to other property owners. This year the schools will lose $120,000. This
impact would have been substantially higher if not for the narrow
interpretation of Rule 645 promulgated by the State Tax Commission.
Rule 645 is now being challenged in Court. HB136 may reduce any fiscal
impact to school districts imposed by HB488 as amended.



From the House Revenue and Taxation Committee minutes of last year
testimony in support of HB 488 indicated quote, “The act before you will
remove one very significant barrier to rural economic development by
eliminating the requirement of the county assessor to reclassify
agricultural property simply because the owner of that property has
notified the county of his or her intentions to develop that property by the
filing of a subdivision plat in accordance with and as required by law.”



There is no such requirement for assessors in Idaho Code. There may
have been a few assessors that disallowed the agricultural exemption in a
platted subdivision for some reason. However the vast majority of the
assessors continued to grant the exemption if the subdivision met the
requirements of 63-604 I.C. which defines Land Actively Devoted to
Agriculture.



To prevent such a misinterpretation Section (2) (1) (a) of House Bill 136
states: “provided however, that the recording of a plat of a subdivision
shall not by itself cause such failure,” referring to the agricultural
exemption. This provision therefore clarifies that the Assessor may not
revoke the agricultural exemption on property solely because the
subdivision was platted.



The agricultural exemption was passed by the legislature so Idaho
farmers and ranchers could be economically competitive with surrounding
states with similar exemptions. Agriculture is one of Idaho’s major
economic resources and needs to be preserved. Section 63-602FF, I. C.,
as added by Section 2, Chapter 341, Session Laws of 2002, eroded the
agricultural exemption. HB 136 is good legislation and policy and will
restore integrity to the agricultural exemption.

Representative Raybould reiterated his statement that under present
law it is probable that because of the gray areas of eligibility, every claim
for exemption could wind up in court. Some court cases are now pending
because of the ambiguity of the present law.
MOTION: Representative McGeachin moved to send HB136 to the floor with a do
pass
recommendation. Motion passed on a voice vote. Representative
McKague requested to be recorded as voting No. Representative
Raybould will sponsor the bill on the floor.
HB96: Chairman Crow announced the next item on the agenda was HB96 and
recognized Representative Clark to present the bill. Representative
Clark
testified that this legislation will amend Idaho Code 63-3638 relating
to sales tax distribution. This amendment freezes the amount of revenue
sharing to counties and cities at a fixed amount equal to the FY 02
appropriations level.



Representative Clark provided hand outs of spreadsheets containing five
sheets. Each sheet contained a different aspect of the sales tax
distribution formula as follows: (1) Schedule (1) reflects county by county
the county portion of the revenue sharing distribution, Actual FY2002
distribution of $30,597,111.92, Adjusted FY2002 distribution of
$29,890,824.12 with a decrease of $796,287.80. Schedule (2) reflects
the city portion, city by city, of the revenue sharing distribution; Actual
distribution for FY2002 of $30,597,111.92 , Adjusted distribution
$29,890,824 a decrease of $706,287.78. (3) Schedule of the counties
base and excess portion,FY2002 distribution, Actual distribution
$21,361,426.93, Adjusted FY2002 distribution $21,16,043.73 decrease of
$196,383.20. (4) Schedule of the city’s base and excess portion of the
distribution, actual FY2002 distribution, adjusted distribution
$16,889,461.39 a decrease of $427,863.20. (5) Schedule of special
purpose taxing districts base and excess portion of the distribution, actual
FY2002 distribution $8,354,734.19, adjusted distribution $8,346,455.89 a
decrease of $7,094.22.



Representative Clark expounded the fact that the foregone balances for
all local government entities increased from 2001 to 2002 by 17.63%.
Attached charts reflect the foregone balances and a chart listing the
balances individually. Charts reflecting the property tax budgets and the
formula used for the distribution of revenue sharing monies effective for
the September 2001 distribution. Also a list of authorized additional
property tax budget authority above the 3% cap.



He concluded his presentation by saying the committee has the ability to
freeze revenue with a savings of approximately $ 5 million a year. He
suggested that the bill be amended to sunset in four years.

Randy Nelson, Associated Taxpayers of Idaho, appeared before the
committee to provide statistical data relative to revenue sharing. He
distributed a handout and explained the comparison of 1996-2000 State
and Federal revenue sharing. (Attachment #2)



Mr. Nelson stated he could see longer-term property tax increases without
the future increasing growth of the sales tax revenue source. There might
be more of Idaho’s many taxing districts seeking more options to raise
taxes and fees without this revenue source growing.



Many parts of Idaho do not enjoy the normally stronger economy that
Idaho’s state sales tax comes from and preserving revenue sharing in its
current formula is a way to share some of that growing revenue source.
Revenue sharing helps keep stability in our tax system. In times like
these he could see why the state might need the growth of this revenue
for state appropriations such as school funding which also makes its way
back to local communities.

MOTION: It was moved by Representative Roberts to report HB 96 back with
amendments attached to be placed on General Orders. The amendment
would be to include a sunset clause in four years.
SUBSTITUTE
MOTION:
A Substitute motion was made by Representative Ridinger to HOLD HB
96
. Roll call was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Kellogg, Raybould, Barrett, Ridinger, Field,
Smith, McGeachin; Ringo, Martinez, Henbest, Cuddy. Voting NY –
Representatives Crow, Moyle, Schaefer, Collins, Roberts, Denney,
McKague. Substitute Motion to HOLD HB 96 passed, 11-7-1
ADJOURN: Chairman Crow announced that time had run out and would continue the
agenda tomorrow. She adjourned the meeting at 10:50 a.m.






DATE: March 6, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representative Kellogg
GUESTS: Senator Burkett; Representative Clark, Phil Homer, Idaho School
Administrators; Archie N. Banbury, Valley County Assessor
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Ridinger moved to accept the minutes as corrected
of the meeting held on March 4, 2003.
RS13097: Chairman Crow announced the first item on the agenda was RS13097
and asked Senator Burkett to explain the proposed legislation. Senator
Burkett
stated that the purpose of this proposed legislation is to require
individuals who are required under federal law to pay income tax quarterly
be also required to pay state income tax quarterly. Currently self-employed and professional taxpayers are required to pay state income tax
once annually though they pay federal income tax quarterly. This
proposed bill would bring Idaho into conformance with other states and
the federal government in collection of income tax quarterly.



Senator Burkett listed the following facts about quarterly payments. Only
two states do not currently follow the national standard of collecting
income tax quarterly. The United States government instituted quarterly
payments in 1943 to provide a funding boost to help fund a wartime
economy. Quarterly payments reduce the number of filings from five to
four for most filers. Quarterly payments will even the flow of revenue to
the state and is a more business-like approach to revenue collection.
Quarterly payments alleviate the one-time “hit” experienced by taxpayers
who must now pay an entire year’s taxes at one time.



This plan would provide the revenue needed in FY03 to balance the
budget without sacrificing education and essential services.

MOTION: After a brief question and answer period regarding the fiscal impact on
individuals, Representative Smith moved to introduce RS13097.
SUBSTITUTE
MOTION:
A Substitute Motion was made by Representative Barrett to return
RS13097 to the sponsor.
Roll call was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow Raybould, Barrett, Ridinger, Moyle,
Collins, Roberts, Wood, Denney, McKague, McGeachin. Voting Nay –
Representatives Schaefer, Smith, Ringo, Martinez, Henbest, Cuddy.
Substitute Motion to return to sponsor passed, 12.6.1.
HB126: Chairman Crow announced the next item to be considered was HB126
and recognized Representative Clark to present the bill. Representative
Clark
testified that in 1996 the Legislature passed the property tax relief
bill for all the citizens of Idaho. A portion of the school maintenance and
operation property tax levy was replaced with State sales tax receipts.



He provided a handout reflecting the state public school property tax
replacement yearly since 1996. In FY2003 the amount was $68.9 million
and property assessment values increased 6.7% since 1996.



The purpose of this legislation is to cap forever the dollar amount to $68.9
to be distributed as property tax relief for school support.

CON: Phil Homer, representing the Idaho School Administrators, appeared
before the committee in opposition. He said that one of his colleagues,
Dr. Mike Friend, was asked to consolidate into one page the Education
Change Initiatives that are becoming a part of the systemic change
process in all public schools. Standards, Assessments and Accountability
are all a part of this process to make sure that each child in our public
schools reaches his or her potential. We have appreciated the
willingness of the legislature to provide financial support in this effort and
the hard work of teachers, administrators and State Department
personnel in moving this process along.



As a part of this change process, the federal government has entered the
picture in an unprecedented way with their initiative, “No Child Left
Behind.” Yes, they have provided some funding, but will it be enough?
Will it be targeted to a special group? Will there be flexibility in how the
federal money is spent? No one can answer these questions at this time.
However, if funding for this program follows the same financial pattern as
that which was developed for federal mandates for special services, it will
be minimal, it will be targeted and it will allow little flexibility. In fact the
federal government agreed to provide 40% of the cost of our current
special services programs but now provides approximately only 17% of
this cost. That places a heavy burden on the state and the local school
district.



In many states where they have embarked on a similar reform movement,
they have found it takes a 25-30 percent increase in state funding as
reported by Bill Roberts who has done considerable research into this
issue. An increase of this magnitude is certainly not an expectation in
Idaho. However school districts need to continue to receive an increase
in property tax replacement money into the future to offset costs that will
result as these initiatives are implemented, as well as to maintain current
operations.



HB126 does the following: 1. Reduces the state’s responsibility to follow
through with property tax replacement in an on-going basis to local school
districts. 2. Reduces the Districts’ ability to capture the increased market
value each year that was in place prior to Gov. Batt’s property tax
replacement bill. A district will lose twenty-five cents on each dollar of
increased market value. 3. Another concern, besides the loss of money,
is that HB126 could very well initiate a tax shift. Currently, 50 districts use
the supplemental levy to provide financing for programs. Would the
amount of those overrides increase to replace lost funds? Would more
districts have to resort to supplemental levies in order to replace those
lost funds?

MOTION: Representative Ringo moved to HOLD HB126.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Roberts to HOLD HB
126 subject to call of the Chair.
AMENDED
SUBSTITUTE
MOTION:
An amended substitute motion was made by Representative McKague to
send HB 126 to the floor with a do pass recommendation. Roll call was
called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Moyle, Smith, Wood, McKague. Voting No –
Representatives Crow, Raybould, Barrett, Ridinger, Field, Collins,
Roberts, Denney, McGeachin, Ringo, Martinez, Henbest, Cuddy.
Amended substitute motion failed, 4.15.1.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Raybould, Barrett, Moyle, Field,
Schaefer, Smith, Collins, Roberts, Wood, Denney, McKague, McGeachin.
Voting Nay – Representatives Ridinger, Ringo, Martinez, Henbest, Cuddy.
Amended Substitute Motion to HOLD HB 126 subject to call of the
Chair passed, 13-5-1.
HB302: Chairman Crow announced the last item on the agenda was HB 302 and
recognized Representative Raybould to present the bill. Representative
Raybould
stated that this legislation identifies the standard to be applied
and the burden of proof in appeals of property tax assessments to the
County Board of Equalization, the Board of Tax Appeals or the District
Court.



This legislation changes the legal standard from one that requires proof
that an assessment is manifestly excessive, arbitrary and capricious or
fraudulent and oppressive, to one that requires simply that the
assessment is erroneous. It changes the burden of proof to satisfy that
standard from a “clear and convincing” burden to the normal
“preponderance of the evidence” standard applicable to most civil cases.

CON: Archie N. Banbury, Valley County Assessor, appeared before the
committee in opposition to HB302. He stated that he was representing
the Idaho Association of Counties and the Idaho Association of County
Assessors.



We have consulted legal counsel concerning the effects of this legislation
and have been advised that it will have a major impact on county
government. Lowering the burden of proof from clear and convincing
evidence to the proposed standard of “a preponderance of the evidence”
as proposed in this legislation will increase the volume of appeals to the
Board of Equalization, to the Board of Tax Appeals and to the District
Court. Further, he had been advised that this will cause the burden of
proof to shift to the county government as soon as the above standard is
met.



The rule of law that has prevailed for the past 50 years is generally stated
as follows: “The County Assessor’s valuation of property for purposes of
taxation is presumed correct and the burden of proof is on the taxpayer to
show by clear and convincing evidence that the taxpayer is entitled to the
relief claimed.” Dilution of this standard will undoubtedly increase appeals
and have a dramatic impact on the County Commissioners in their service
as the Board of Equalization, the County Clerk in his or her ministerial role
of recording the Board of Equalization’s proceedings, the Prosecuting
Attorney as the county’s legal counsel in these matters and of course the
Assessor and staff.



The present law has served us well. The Board of Equalization and
Board of Tax Appeals share an informal approach to resolving valuation
and other assessment disputes. A lawyer is not required and in most
cases is unnecessary. Valley County rarely relies on counsel in these
matters and he thinks we get along pretty well. Generally the Assessor
attempts to reach a settlement with appellant prior to appearing before the
BOE. The taxpayer is provided with copies of the Assessor’s entire file as
well as other evidence that may have been requested to demonstrate
comparable sales and other data.



He urged the committee to seek their opinion on this matter. County and
State government can ill afford the costs of increased litigation. At a time
when funding is short we need to find processes that will reduce rather
than increase litigation. Finally Mr. Banbury said it can be argued that it is
unwise under any circumstances to lower the burden of proof as provided
in this bill. There is no mandatory disclosure bill in Idaho making the
Assessor’s task difficult at best.

MOTION: Representative Barrett moved to send HB302 to the floor with a do pass
recommendation. Motion carried on a voice vote. Representative
Ridinger requested to be recorded as voting No. Representative
Raybould will sponsor the bill on the floor.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 11:00 a.m.






DATE: March 10, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Randy Nelson, Associated Taxpayers of Idaho
Chairman Crow called the meeting to order and requested a silent roll
call. She advised the members that Representative Ringo, co-sponsor
of HB101 relating to extending the “Circuit Breaker” to the disabled,
requested that it be held in Committee. Senator Keough, sponsor of HB
249 relating to homeowner exemption for residents after two years, be
held in Committee. Senator Keough also requested that HB250 be held
in Committee relating to estate/transfer tax to be repealed.
UNANIMOUS
CONSENT:
Chairman Crow asked unanimous consent to HOLD HB101, HB249 and
HB250.
Consent was granted.
RS13061C1: Chairman Crow announced the first item on the agenda was
RS13061C1 and asked Representative Field to explain the proposed
legislation. Representative Field stated that she is a member of the
American Heart Association and was presenting this bill on their behalf.
The purpose of this proposal is to increase the tax on a pack of
cigarettes by $1.00 per pack. She provided a hand-out depicting the
current expenditure of the tobacco tax at $.28 per pack and the fiscal
impact of increasing the tobacco tax by $1.28 per pact. (Attachment #1)

The statement of purpose reflects that the increase would give smokers
economic incentive to quit smoking. Other tobacco products receive a
comparable tax increase. This proposal provides that approximately five
percent of the tobacco tax revenues are targeted to fund six of the nine
elements of a comprehensive tobacco prevention and control program
recommend by the Center for Disease Control and endorsed by both the
American Heart Association and the Coalition for a Healthy Idaho.



The fiscal impact will increase tax receipts from tobacco sales from the
current amount of $26,900,000 to $90,000,000. General fund revenues
from the tobacco tax will increase from $9.2 million to more than $67
million. Four million dollars of the tobacco tax is also dedicated to six
elements of a comprehensive tobacco prevention and control programs.

MOTION: Representative Henbest moved to introduce RS13061C1. Roll call vote
was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Raybould, Ridinger, Field, Wood, Ringo,
Martinez, Henbest, Cuddy. Voting Nay – Representatives Crow, Kellogg,
Barrett, Moyle, Schaefer, Smith, Collins, Denney, McKague, McGeachin.
Motion to introduce RS113061C1 failed, 8-10-1
RS13066C1 Chairman Crow announced the next item on the agenda was
RS13066C1 and recognized Representative Henbest to explain the
proposed legislation. Representative Henbest provided the members
with a copy of the U. S. Department of Health and Human Services
“National Strategy for Suicide Prevention: Goals and Objective for
Action.” She said Idaho is the only state without a comprehensive
suicide prevention plan.



The purpose of this proposed legislation is to appropriate a portion of the
tax levied on tobacco for one year to develop a state suicide prevention
plan. There will be a one time decrease in revenue of $5,500 from the
Public School Income Fund and a decrease of $5,500 from the

department of Juvenile Corrections.

MOTION: Representative Smith moved to introduce RS13066C1 with a corrected
Statement of Fiscal Impact.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to return
RS13066C1.
Roll call vote was called for.

ROLL CALL
VOTE:
Voting Aye – Representatives Barrett, Moyle, Schaefer, McKague, Crow.
Voting Nay – Representatives Kellogg, Raybould, Ridinger, Field, Smith,
Collins, Wood, Denney, McGeachin, Ringo, Martinez. Henbest, Cuddy.
Motion to return to sponsor failed, 5­13­1.
Original motion to introduce RS13066C1 passed on a voice vote.
Representative Barrett requested to be recorded as voting no.
HB193: Chairman Crow announced the next item on the agenda was HB 193
and explained she had requested this bill be returned to the Committee
for further information. The bill increases the budget cap for ambulance
and emergency medical services. She recognized Mr. Nelson to present
his testimony as previously given to the Raybould Subcommittee.
Randy Nelson, Associated Taxpayers of Idaho, provided a hand-out
with statistical data on ambulance districts and counties with ambulance
services. The property tax for ambulance districts and county
ambulance service for 2002 was $11,179,030. The potential for the
2002 budget, had HB193 been effect would have been $21,541,2723.
He stated that this data reflects the potential impact if all ambulance
districts and county ambulance services passed with 2/3rd vote to
increase their budgets to the maximum. The last sheet of the handout
depicted the taxing entities with levies with local option to go outside the
3% plus growth.
MOTION: Representative Barrett moved to HOLD HB193.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Ridinger to send
HB193 to the floor with a do pass recommendation. Roll call vote was
called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Kellogg, Ridinger, Field , Smith, Ringo,
Martinez, Henbest, Cuddy. Voting Nay – Representatives Crow,
Raybould, Barrett, Schaefer, Collins, Roberts, Denney, McKague,
McGeachin. Motion for a do pass failed, 8-9-2.



Original motion to HOLD HB193 passed on a voice vote.

ADJOURN: There being no further business to come before the Committee,
Chairman Crow adjourned the meeting at 10:40 a.m.






DATE: March 11, 2003
TIME: 9:15 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Senator Kennedy; Alex LaBeau, Idaho Association of Realtors; Max
Vaughn, Minidoka County Assessor; Randy Nelson, Associated
Taxpayers of Idaho.
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Kellogg moved to accept the minutes as written of
the meetings held on March 5, 2003 and March 6, 2003. Motion passed
on a voice vote.
HB135: Chairman Crow announced the first item on the agenda was HB135
requiring that the cigarette tax be collected on cigarettes from non-tribal
members sold on Indian reservations. She submitted that the bill has
been before this Committee twice and once on the second floor. She
declared that the bill was before the Committee.
MOTION: Representative Barrett moved to HOLD HB135.
SUBSTITUTE
MOTION:
After a lengthy discussion relating to the Indians sovereignty and the
fairness issue. Chairman Crow brought out the issue of State
infrastructure across certain Tribal reservations and the possibility of
fairness issues as seen by the Tribes.. Representative Denney moved to
send HB135 to the floor with a do pass recommendation. Roll call vote
was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Raybould, Moyle, Field, Schaefer, Smith,
Collins, Roberts, Wood, Denney, McKague, McGeachin, Cuddy. Voting
Nay – Representatives Crow, Kellogg, Barrett, Ridinger, Ringo, Martinez,
Henbest. Substitute motion with a do pass recommendation passed, 12-7-0. Representative Denney will sponsor the bill on the floor.
HB172: Chairman Crow announced the next item on the agenda was HB172 and
recognized Senator Kennedy to present the bill. Senator Kennedy
testified that the purpose of this legislation is to provide for an annual cost
of living adjustment of the $50,000 upper limit of the homeowner property
tax exemption. The percentage used for adjustment would match that
used for the income threshold for the “circuit breaker” the National
Consumer Price Index. If the CPI was two percent in the first year, the
upper limit on the exemption would increase $1,000.



Residential values have been rising faster than the value of other kinds of
property. Once the homeowner reaches the upper limit, at about
$120,000 market value, there is no longer mitigation for inflation. So
taxes increase at an accelerated rate. Since 1990, total residential
property taxes in Idaho have increased by 164.5 percent while the total for
all non-residential property has increased by 77.3 percent. The current
maximum homeowner’s exemption was established in 1983 and has
never been adjusted for inflation.



Cities, counties and other local taxing districts could collect the same
amount under the budget cap. Annual increases in property tax
collections going to schools as a result of inflation in residential values
would be less than without this change. If five percent, the increase in
taxable value would be $5,500 rather than $6,500 and the increase in
money for schools would be $16.50 rather than $19.50. If it increases by
ten percent, the increase for schools would be $33 rather than $39.

CON: Alex LaBeau, representing the Idaho Association of Realtors,
appeared before the committee in to opposition of HB172. He testified
that this bill is a tax shift and it also exacerbates existing problems. The
time frame of when the homeowner receives the 50-50 exemption is the
following year and pays the full brunt while his neighbor has the
exemption.



Mr. LaBeau agreed with Senator Kennedy that residents are pushed
around because of the different classification. However this is not the
right way to go at this time.

CON: Max Vaughn, Minidoka County Assessor, stated he was appearing
before the committee in behalf of the Association of County Assessors in
opposition to HB172. The definition of this exemption is a definite tax shift
to other classifications of property.
Randy Nelson, Associated Taxpayers of Idaho, distributed an analysis
of HB172 which he reviewed in detail. (Attachment #1) He testified that
owner-occupied Idaho housing units grew 34% between 1990-2000
based on U.S. Bureau of Census data. Assume five-year growth was half
this amount or 17%. For this analysis assume the 5-year, 2000-2005
growth in owner-occupied housing units is only 12%. That would result in
380,703 owner-occupied homes and if an estimated 39.5% of those have
value over $120,000 the estimated 2005 owner-occupied units valued
$120,000+, would be 150,378.



Reduced school property taxes reduce the total property tax budget by
$451,110 but the overall tax rate goes from 1.454% to 1.456% a .138%
increase. The owner-occupied residential and all other property tax rates
also will increase by .138%. Although there are less overall property
taxes collected, this does not offset the $150,378,000 Homeowner
exemption shift to other taxpayers.

Senator Kennedy concluded his testimony by stating that the property
from 1976 to 2002 for residential actual with homeowner exemption
increased 797%; total non-residential property tax increased by 288.5%.
If there had been no homeowner exception the residential property would
have increased 904% and the total non-residential property would have
increased 133.5%.
MOTION: Representative McGeachin moved to HOLD HB172.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Ringo to send HB172 to
the floor with a do pass recommendation. Roll call was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Ringo, Martinez, Henbest, Cuddy. Voting
Nay – Representatives Crow, Kellogg, Raybould, Barrett, Ridinger, Moyle,
Field, Schaefer, Smith, Collins, Wood, McKague, McGeachin. Motion for
a do pass failed, 4-14-1.
Original motion to HOLD HB172 passed on a voice vote.
ADJOURN: Chairman Crow announced the committee was due on the floor and
would hear HB207 on Monday, March 17, 2003. She adjourned the
meeting at 9:50 a.m.






DATE: March 12, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

Representatives Moyle and Denney
GUESTS: John Mackey, Dennis Johnson and Jack Winderl, United Heritage Mutual
Holding Company; Dan John, Idaho State Tax Commission
Chairman Crow called the meeting to order at 10:00 a.m. and requested a
silent roll call. Representative Kellogg moved to accept the minutes as
written of the meetings held on March 10, 2003 and March 11, 2003.
Motion passed on a voice vote.
HB 327: Chairman Crow announced the only item on the agenda was HB 327 and
recognized Mr. Mackey to present the bill. John Mackey, United
Heritage Holding Company and its subsidiaries
testified that currently
mutual insurance holding companies and their subsidiaries are taxed by
the State of Idaho on inter-company capital transfers. Non-insurance
holding company systems are not taxed on these transfers.



This bill, when enacted, will treat mutual insurance holding company
systems the same as non-insurance holding companies with respect to
inter-company capital transfers.



The Federal tax system does not treat insurance holding and non-holding
companies differently with respect to inter-company transfers. This is a
state matter. The bill will amend Section 41-3821 as stated on page one,
lines 8-22 of the bill.



This language reaffirms that insurance companies will continue to be
subject to Idaho premium tax. It also states that a subsidiary insurance or
other company may issue a dividend or distribution, which he had referred
to as capital transfer, to the mutual holding company or an intermediate
holding company within the mutual holding company system. Such
dividend or distribution shall be excluded from Idaho taxable income of
the recipient company just as it would be if the transfer were made in a
non-insurance holding company structure.



Such exclusion from taxation shall not apply if in the preceding year the
subsidiary insurance company’s liability for Idaho premium tax was less
than the Idaho income tax would have been if the insurance subsidiary
had been subject to Idaho income tax rather than premium taxation. This
language results in zero fiscal impact to the State.



Mr. Mackey concluded his testimony by saying to the best of his
knowledge there is no opposition to this bill It was their understanding
that the Sate Tax Commission and the Department of Insurance does not
oppose this bill.

In response to a question relating to the effective date, Jack Winderl,
CPA, Executive Vice President of United Heritage Mutual Holding
Company,
stated the bill had been drafted for the enacting date of 2004
instead of 2003 because their fiscal year is on a calendar year. It was not
their intention for it to be retroactive. He also stated that when the original
bill was passed many years ago this problem was over looked. They
were not aware of it until about a year ago.
In response to a question, Dan John, State Tax Commission, stated
that he was aware of only once that the problem had arisen. If this bill
does not happen the companies will not make capital transfers.
Dennis Johnson, CEO of the United Heritage Mutual Holding
Company,
appeared before the committee stating that the holding system
has been in existence since 1934. He gave a briefing on how the holding
company systems worked and of its expansion. They need the capability
to transfer capital to allow for growth. This restriction only applies to
insurance holding companies.
MOTION: Representative Field moved to send HB 327 to the floor with a do pass
recommendation. Motion passed on a voice vote. Representative Collins
will sponsor the bill on the floor
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:15 a.m.






DATE: March 13, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representative Cuddy
GUESTS: Speaker Bruce Newcomb, Randy Nelson, Associated Taxpayers of Idaho;
Phil Homer, Idaho Association of School Administrators; Dan Chadwick,
Idaho Association of Counties; Dan John, Idaho State Tax Commission
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Raybould moved to accept the minutes as written of
the meeting held on March 12, 2003. Motion carried on a voice vote.
HB 317: Speaker Newcomb advised the members that these are tough times and
good opportunity to relieve taxes for two years. This bill is unique giving
businesses and prospective businesses an option to use the Investment
Tax Credit (ITC) when they incur a loss. He stated that the ITC is
meaningless when income tax has not been paid. This bill would allow
companies who make new personal property investments in Idaho to
forego the income ITC by electing an exemption from personal property
tax for two years.



Mr. Speaker noted that Idaho’s market place is a long way from
population centers and this would allow the ITC to be a useful purpose
providing incentive for business to stay in Idaho. California, Oregon,
Canada and other surrounding states are competing with Idaho for
companies to come to here. This changes the statewide philosophy of
the ITC to keep existing businesses and attract new growth.



The Statement of Purpose reflects that taxpayers who are in a loss
situation are not able to claim the ITC because they have no tax liability to
offset. This bill will allow taxpayers who have suffered losses to elect to
be exempt from personal property tax on new eligible property
acquisitions/investments for two years in lieu of the ITC.



In response to a question relating to the $665,000 cost to schools Dan
John, State Tax Commission,
stated the Tax Commission prepared the
fiscal note but now find it is understated and should be about $1.8 million
loss to schools for the second year.

Randy Nelson, Associated Taxpayers of Idaho, appeared before the
committee to provide statistical data on the fiscal impact of HB317. He
distributed a copy of the information and explained in detail. (Attachment
#1) He stated that the Idaho statewide estimate of 2003 personal property
tax is an estimated tax shift of $7.2 Million. The statewide estimate of the
2003 levy year rates overall average is 1.46%. The first year statewide
school district and tax shift impact would be $1,268,100 and the state
property tax replacement impact would be $422,700 for a total of
$1,790,800. The statewide property tax rate increase would be .9%.
Phil Homer, Idaho Association of School Administrators, appeared
before the Committee and voiced concerns about the tax shift that HB
317creates and the hit to public schools.
Dan Chadwick, Idaho Association of Counties, appeared before the
Committee saying that the Association is not taking a position on HB 317.
He stated one of the most significant questions raised and clearly
answered by HB 317 is whether the credit allowed is limited to only two
years and once the taxpayer makes the election is forever barred from
making the election again. If this legislation can be construed to be
available beyond the two-year limitation there is then a real possibility that
increases in value are “permanently” lost and a perpetual exemption is
granted for personal property.



What is the effect of a qualified investment in property that is not personal
property under Idaho property tax law? Can a taxpayer somehow benefit
from such an investment under the provisions of this bill? Will qualifying
investment property truly be limited to personal property?



Certain property such as construction and mining equipment may be
moved from county to county and used in a variety of settings and
locations. In such circumstance the “home” county will bear the burden of
exempting the property but the investment in the property will operate to
the economic benefit of other counties. How can this inequity be
resolved?



The income tax law includes provisions for the State Tax Commission to
recapture the investment credit claimed if the property is sold, suffers
early disposition or otherwise ceases to qualify for the credit. Is there a
process in place to share the credit recaptured by the State Tax
Commission with the counties and other taxing districts who have been
deprived of the property tax revenue?



Once the credit has been used what is the value of the personal property
placed on the assessment rolls? House Bill 317 is silent as to what that
value might be such as the original value or value at the time the credit
ends or some other form of depreciated value.



Finally this legislation provides that this relief is only available to a
taxpayer whose Idaho taxable income in the second preceding year is
negative. It is quite possible that although an individual taxpayer
sustained a significant business loss, his non-business income, from
investments for example, may cause his taxable income to be a positive
figure. Is this legislation intended for corporations only? If intended for
individuals or partners, shareholders in S-Corporations and beneficiaries
of certain trusts, would it be more appropriate to specify a negative Idaho
adjusted gross income? Is this legislation intended to deny relief to such
a person?

Speaker Newcomb reiterated that these are tough times and this bill
gives us the opportunity to do something for business. When the
economy turns around we need to think in the long term not the short term
for future growth to build the economic base. Since we are a long way
from population centers we need to provide tax incentives.
Dan John, State Tax Commission, responded to inquires from the
Committee saying this bill exempts property tax for two years on
businesses that have new acquisitions and have chosen the option not to
accrue the Idaho Tax Credit on any losses for income tax purposes.
MOTION: Representative Denney moved to send HB 317 to the floor with a do
pass
recommendation. Roll call vote was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Kellogg, Raybould, Barrett, Moyle,
Field, Schaefer, Collins, Wood, Denney, McKague. Voting Nay –
Representatives Ridinger, Smith, Roberts, McGeachin, Ringo, Martinez,
Henbest. Motion passed, 11-7-1.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:50 a.m.






DATE: March 17, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Senator Kennedy; Randy Nelson, Associated Taxpayers of Idaho; Gene
Kuehn, Canyon County Assessor; Michael Lindstrom, Balukoff Lindstrom
& Co., P.A.; Debby McAllister, Idaho Laboratories Corp.
Chairman Crow called the meeting to order at 10:00 a.m. and requested a
silent roll call. Representative Martinez moved to accept the minutes as
written of the meeting held on March 13, 2003. Motion carried on a voice
vote.
RS13136: Chairman Crow announced the first item on the agenda was RS13136
and asked Senator Kennedy to explain the proposed legislation. Senator
Kennedy
stated that this proposal is seeking alternate financing for fire
protection districts.



This proposed legislation would amend the Idaho Code to allow fire
protection districts to impose and collect a uniform fee from property
owners in the district to defray the cost of equipping and maintaining the
district. Currently fire protection districts are funded through a levy on all
taxable property within the district. The total amount of the uniform fees
collected during any one fiscal year under this proposal could not exceed
the total revenue that could have been collected as a result of the
maximum levy authorized in Section 31-1420 Idaho Code. Any such fee
imposed would be in lieu of, not in addition to, any tax levy. Except for the
limitation imposed on the amount of the uniform fee that could be
imposed, this proposed bill would give fire protection districts the same
flexibility in raising revenue as is currently enjoyed by recreation districts.

MOTION: After a brief question and answer period, Representative Barrett moved to
return RS13136 to sponsor.
SUBSTITUTE
MOTION:
A substitute motion was moved to introduce RS13136. Roll call was
requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Smith, Roberts, Ringo, Martinez, Henbest,
Cuddy. Nay – Representatives Crow, Kellogg, Raybould, Barrett, Moyle,
Field, Schaefer, Collins, Wood, Denney, McKague, McGeachin.
Substitute Motion failed, 6-12-1
Original motion to return RS13136 to sponsor passed on a voice vote.
HB 207: Chairman Crow announced the next item on the agenda was HB 207 and
recognized Senator Kennedy to present the bill. Senator Kennedy
testified that the purpose of this legislation is to protect homeowners over
age 65 or disabled veterans from increased property taxes resulting from
increases in taxable value. If household income before taxes is less than
$35,000 and the resident qualified for the homeowner exemption in the
previous year they could apply with the assessor for a freeze on the
taxable value of the home and residential lot. The freeze would continue
so long as they continued to meet the qualifications and own and live in
the home.



Senator Kennedy stated there would be no fiscal impact on the general
fund in FY2004. It would reduce payments for “circuit breaker” relief of
$775,000 in FY2005 and indexed thereafter. It would reduce payment of
school replacement fund in FY2006 of $110,000. The property tax
reduction to eligible households in 2005 would be $1.8 million. The
reduced property tax and replacement funds to school districts beginning
in 2006 would be $505,000. There would be no effect on other taxing
districts’ property tax revenues and $1.4 million would shift to remaining
tax base in 2005.



In response to a question relating to a tax shift, Senator Kennedy
responded and agreed that it will cause a tax shift.

Randy Nelson, Associated Taxpayers of Idaho, distributed a hand out
documenting the effect of HB 207 on taxing districts. (Attachment #1) He
said the reduced school property taxes reduce the total property tax
budget by $382,467 but the overall tax rate goes from 1.454% to1.456% a
.138% increase. The owner-occupied residential and all other property
tax rates also will increase by .138%. Although there are less overall
property taxes collected this does not offset the $127,489,000 homeowner
exemption tax shift to other taxpayers.



Assuming that the estimated disability population would be 127,938 the
criteria for those to qualify under HB 207 the additional homeowners
property tax exemption in 1005 would be $1,853,690. The reduced
payments for “circuit breaker” relief are also assumed to be in the
$775,000 range with the annual growth factor thereafter.

CON: Gene Kuehn, Canyon County Assessor, testified in opposition to HB
207 saying this bill is a tax shift. Taxpayers have a couple of ways to
seek property tax relief. There is the “circuit breaker” and if the property
owner cannot pay his tax they can go to the county commissioners and
may not have to pay for one year.
Senator Kennedy said that older people need help or will end up in
nursing homes.
MOTION: Representative Henbest moved to send HB 207 to the floor with a do
pass
recommendation.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to Hold HB 207.
A roll call was requested.
ROLL CALL
VOTE:`
Voting Aye – Representatives Crow, Kellogg, Raybould, Barrett, Ridinger,
Moyle, Field, Smith, Collins, Roberts, Denney, McKague, McGeachin.
Nay – Representatives Schaefer, Wood, Ringo, Martinez, Henbest,
Cuddy. Motion to Hold 207 passed, 13-6-0.
HB 279: Chairman Crow announced the next item on the agenda was HB 279 and
recognized Representative Gagner to present the bill. Representative
Gagner
stated that this legislation simplifies Idaho income tax withholding
for small and medium sized employers. It will repeal the “split month
withholding” for 75% of businesses affected by “split month withholding”
adopted as a revenue acceleration measure in 1983 and still required of
approximately 1,050 businesses as of 2003.



Increasing the threshold in current statute will exempt approximately 750
employers from this requirement and return them to calendar month filers.
Three hundred employers retain the “split month withholding”
requirement, about the same number of employers affected when the
legislation was enacted in 1983.

PRO: Michael Lindstrom, CPA, Balukoff- Lindstrom & Co., appeared before
the Committee in support of HB 279. He stated his clients call “split
month withholding” is “busy work” for small businesses. This bill would
simplify tax administration for the State Tax Commission and the small
businessman.
PRO: Debby McAllister, Idaho Laboratories Corp., appeared before the
Committee in support of HB 279 saying she has worked as the payroll
clerk, bookkeeper and office manager for the firm for more than 16 years.

The “split monthly” status for payroll reporting is complicated and does not
match with federal requirements.



There used to be one ledger that contained all payroll related information
for each year. Now the over-lapping quarters and different sets of
standards to balance twelve and half months of withholding tax against
twelve months of W2’s. Hard copies in old files have to be accessed and
thirteen months of reports that include information from three different
calendar years has to be manually calculated to arrive at the correct totals
for any inquiries.



The “split monthly” system has been burdensome for all businesses and
especially for the Tax Commission. She stated that she was certain there
have been numerous reporting errors made. Their cross-check against
the Federal quarterly and year-end reports no longer applies and now it’s
too easy to unintentionally submit the wrong information.

MOTION: It was moved by Representative Field to send HB 279 to the floor with a
do pass recommendation. Motion passed on a voice vote.
Representatives Gagner and Kellogg will co-sponsor the bill on the floor.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:50 a.m.






DATE: March 19, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Brian Whitlock, Office of the Governor
Chairman Crow called the meeting to order and requested a silent roll
call. Without objection the Chairman assigned HB 362 relating to
cigarette tax to fund a suicide prevention plan.
RS 13175: Chairman Crow announced the first item on the agenda was RS 13175
and recognized Mr. Whitlock to explain the proposed legislation. Brian
Whitlock, Office of the Governor,
stated that the two RS’s before the
Committee were outlined in the Governor’s State of the State message.
This proposed legislation increases the cigarette tax rate from $0.28 per
20 cigarette pack to $0.62 per 20 cigarette pack effective June 1, 2003. It
makes adjustments to the distribution formula to cause all additional net
revenue generated by this rate increase to go to the General Fund while
holding all other recipients of cigarette tax distribution harmless. The
compensation for affixing stamps is reduced from 5% to 2.4%.



At the time of the Governor’s address the national average of cigarette tax
was an average $.062 per pack. Other states have since increased the
cigarette tax and this is no longer the national average. The tax would go
into effect on June 1, 2003 generating $28.7 million in revenue.

MOTION: Representative Kellogg moved to introduce RS 13175. Motion passed
on a voice vote.
RS 13183: Chairman Crow announced the next item on the agenda was RS 13183
and asked Mr. Whitlock to continue. Mr. Whitlock stated this proposed
legislation embodies an important element to make adjustments to the
Governor’s budget and not drastically reduce programs.



This legislation increases the sales tax from 5% to 6.5% for the period
May 1, 2003 through June 30, 2006. The last time the sales tax was
increased was in 1986 and this proposal is different in that it is only a
temporary increase for only 3 years. It modifies the sales tax distribution
formula for the period June 1, 2003 through July 31, 2006 so that the
percentage of sales tax distributed to revenue sharing is decreased from
13.75% to 10.6%, thereby distributing all of the additional revenue
expected from the rate increase to the General Fund. It increases the
annual permit fee for amusement devices from $35.00 to $45.00 for the
period May 1, 2003 through June 30, 2006. This fee is in lieu of sales tax.

MOTION: Representative Kellogg moved to introduce RS 13183. Motion carried
on a voice vote.
HB 369: Chairman Crow announced the next item on the agenda was HB 369 and
recognized Representative Field to present the bill. Representative
Field
remarked that there are very few things in state government that
produce great results and returns. There is an eighty percent success
rate from the Drug Court and the Family Court Services. This legislation
provides for a two percent surcharge on the sale of all liquor through the
Liquor Dispensary in order to provide an ongoing dedicated source of
funding for Drug Courts and Family Court Services in the Judicial Branch.
These programs have been put at risk due to reducing general fund
appropriations in the Judicial Branch budget.



Representative Field distributed a copy of an Attorney General’s opinion.
(Attachment #1) She said the current statute for a fifteen percent
surcharge is not being used and is deleted in this bill and adds a two
percent surcharge to be designated as a dedicated fund. She also
distributed a chart depicting the distribution of the liquor profits.
(Attachment #2)

MOTION: Representative Wood moved to send HB 369 to the floor with a do pass
recommendation. Motion carried on a voice vote. Representatives
Barrett, Schaefer, McKague and McGeachin requested to be recorded as
voting NO.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting At 10:11 a.m.






DATE: March 20, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representatives Moyle and Denney
GUESTS: Representative Eskridge; Representative Campbell
Chairman Crow called the meeting to order and requested a silent roll
call. Representative McGeachin moved to accept the minutes of the
meeting held on March 17, 2003 as written. Motion carried on a voice
vote.
HB 265: Chairman Crow announced that the sponsor of the first item was not
present and without objection the Committee would hear testimony on HB
265. She asked Representative Eskridge to present the bill.
Representative Eskridge stated that this bill corrects an inequity in the
Idaho manufacturing sales and use tax exemption. Lignetics Incorporated
is a wood pellet and fire log manufacturing company in his district. They
are at a competitive disadvantage with like companies located in
neighboring states who sell the same product including sales in Idaho.
There are five of these small companies in our state.



Currently these companies receive only half of the exemption benefit.
They are exempt from paying sales tax on raw materials used in the
production process. They are not exempt from paying sales tax on any
capital, repair or supply items used in the production process as are other
manufacturing businesses in Idaho.



The competition in the neighboring states receive the full advantage of
their states’ production exemptions, hence the competitive disadvantage.
HB 265 provides wood pellet and firelog companies in Idaho full
exemption under the Idaho manufacturing sales and use tax exemption.
It provides the full exemption by striking out the reference to 63-3266G,
heating materials, from existing legislation.



Representative Eskridge said Idaho has already lost much of our forest
related employment in his district. Passage of this bill would help to keep
Lignetics and the four similar companies like it competitive and able to
stay in business. Lignetics employs 51 people and in 2002 had a total
payroll of $1,077,249. Not a large company by any means, but an
important part of his district’s economic base.



With permission from The Chairman Representative Eskridge read the
following remarks from Senator Keough, co-sponsor of the bill. “Although
this appears to be giving a “new exemption”, it really is not as other wood
products companies receive the same exemption. Because Lignetics
makes fuel pellets they somehow got carved out from the exemption”.

“The costs of losing the jobs and the subsequent tax dollars generated
from those employees paying income tax, sales tax, property tax, etc is a
far greater hit to Idaho’s economy. In fact this is an investment that will
more than pay for itself as a result of keeping the company here.”

MOTION: Representative McGeachin moved to HOLD HB 265. Motion carried on a
voice vote. Representative Cuddy requested to be recorded as voting
NO.
RS 13154: Chairman Crow announced the next item on the agenda was RS 13154
and asked Representative Campbell to explain the proposed legislation.
Representative Campbell stated that this legislation permanently
exempts sales tax on food and raises the sales tax to 7%. The additional
two percent of the increase would go into the general fund and not be
distributed to revenue sharing to counties and cities.



There was a discussion period relating to competition with bordering
states and the fiscal impact was questioned.

MOTION: Representative Kellogg moved to introduce RS 13154.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative McGeachin to return
RS 13154
to sponsor. Roll call was requested.
ROLL CALL: Voting Aye – Representatives Crow, Raybould, Barrett, Ridinger, Field,
Schaefer, Collins, Roberts, Wood, McKague, McGeachin. Voting Nay –
Representatives Kellogg, Smith, Ringo, Martinez, Henbest, Cuddy.
Motion carried, 11-6-2.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:29 a.m.






DATE: March 21, 2003
TIME: 9:00 a.m.
PLACE: Gold Room
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Brian Whitlock, Office of the Governor; Vern Newby, Coeur d’Alene School
District; Richard Hachtel, Associated Students of Boise State University;
Duane Youngberg, Payette County Business Council; Julie VanOrden,
Idaho PTA; Anne Newton; Kerry Holbret, Nampa, Idaho; John Franden,
Boise State University; Dale Williamson, Mayor of Payette; Debbie
Johnson; Kent Tingey, Idaho State University; Elaine Clegg, Idaho Smart
Growth; Greg Jensen, Payette Business Council; Phil Homer, Idaho
Association of School Administrators; Bea Black; Jon Barrett, Idaho Smart
Growth; Wendy Cary and Judy Last, National Association of Social
Workers; Bob Jackson; Elinor K. Chehey, League of Women Voters of
Idaho; Jim Baugh, Comprehensive Adversity Disabilities; Mary Knodell,
Church Women United; Ray Stark, Boise Metro Chamber of Commerce;
Marty Peterson, University of Idaho; Patricia Scott, Developmental
Disability Council; Marilyn Sword, Developmental Disability; Roger
Sherman, United Vision for Idaho; Sue Stadler; Katherine Hansen
Community Partnership; Kelly Buckland, State Independent Living Council;
Denise Brennan, Idaho Automobile Dealers Association; Randy Nelson,
Associated Taxpayers of Idaho; Jean Boyles; Deanna Smith; Pete
Skamser, NFIB; Nancy Merrill, Mayor of Eagle; Alex Feldman, Boise State
University; Steve Rodeltz, Idaho Benefits Planning Assistance Out Reach;
Bobby Ball; Dr. Greg Nelson, Idaho Farm Bureau Federation; Katherine
Gray; Janet Orndorf, Idaho School Board Association
Chairman Crow called the meeting to order and requested a silent roll call.
Representative Kellogg moved to accept the minutes of the meeting held
on March 19, 2003 as written. Motion passed on a voice vote. Chairman
Crow addressed the guests setting guidelines for those testifying speak
only to the subject matter of the bills and bring only new points from
previous testimony. In order for everyone to be heard the testimony will be
timed to one minute.
HB 379: Chairman Crow announced the first item on the agenda was HB 379 and
recognized Mr. Whitlock to present the bill. Brian Whitlock, Office of the
Governor,
said they have a young man in their office who is a history buff
and he often teased him of being the font of all useless knowledge, but he
did have some thoughts as he was preparing his testimony for the
committee that he felt might be helpful. He reminded him of some of the
teachings of Atilla the Hun. First, Atilla taught: “A wise chieftain never kills
the Hun bearing bad news.” Second, he said: ” A wise chieftain kills the
Hun who fails to deliver bad news.”



He said he did not relish the fact that he was there to deliver what he
thought we all feel is bad news. Our economy in Idaho and the nation has
been bouncing along the bottom now for almost two years. We have had a
number of holdbacks, budget cuts, base reduction whatever you prefer to
call them which have totaled nearly $200 million. We have borrowed from
one-time sources of money to help get us through some of the difficult
times, but now those sources are dry. The bad news is that whatever
scenario plays out this legislative session, it appears with growing certainty
that it will involve some type of revenue increase.



Mr. Whitlock said HB 379 proposed a temporary increase in the sales tax
of 1.5 cents. The increase is effective May 1, 2003 which sunsets on June
30, 2006 and generates an estimated $240,3 million in FY2004. The bill
will help the state regain solid financial footing for both FY2003 and
FY2004. Just as important , it also gives us stability and time prior to
FY2007 to begin to make whatever structural and programmatic changes
in state government necessary to ensure that the state budget is balanced
when the temporary increase sunsets in June 2006.



Some have suggested in this time of fiscal crisis that a preferred option
would be to eliminate certain exemptions and broaden our tax base.
House Bill 379 buys you the time to thoughtfully and responsibly do that.
Still others have suggested that we need further structural changes on the
expenditure side. House Bill 379 buys you time to thoughtfully and

responsibly adjust budgets rather than order massive reductions that
eliminate or hamstring services and programs that are needed and
expected by the citizens of Idaho.



As he mentioned to the committee on Wednesday, the last time the sales
tax was increased was in April 1986, seventeen years ago. The conditions
then were similar to what we are experiencing today.



The legislative history for that time period shows the sales tax rate had
remained at 3% since its inception in 1965 until the mid 1980’s: it went
from 3% to 4% in March of ’83; then to 4.5% in June of ’83; then back to
4% in July of ’84; and ultimately to 5% in April of ’86. In 1987 the
Legislature affirmed the 5% sales tax.



There were four changes in three years. Tax policy and the state budget
were in a constant state of flux throughout that time. Those disruptions
were not conducive to economic stability, much less growth.

In assessing the daunting task of balancing a budget for FY2004 the
Governor is not interested in half measures or precarious one-time fixes.
The temporary increase called for in House Bill 379 from 5% to 6.5% is
intended to accrue fully to the general fund instead of the sharing
allocation that is experienced under the current 5% structure. As a result
the Permanent Building Fund, revenue sharing to local government, Water
Pollution Control and the Circuit Breaker Program will not be affected by
the temporary increase addressed in this bill.



One way to minimize the impact of this increase, particularly for those
individuals in lower income brackets, is to increase the grocery tax credit
which the Governor proposed in his Executive Budget recommendation for
FY 2004. Our budget has incorporated the $5.5 million reduction in
revenues based on expanding this tax credit.



Mr. Whitlock said he knew there are a number of revenue generating
proposals that are beginning to be discussed. Please keep in mind that
this revenue proposal is based on a consumptive aspect of our economic
model. It does not adversely affect the performance of investment
strategies or incentive conditions.



This proposal represents an opportunity to capture substantial nonresident
economic impacts such as those experienced in the tourism industry. This
sales tax proposal recognized that changing the base of current
exemptions of the sales tax code would be problematic for many vendors
as well as purchasers. This proposal does not change the relationship.
Nor does it apply to services that have been previously excluded from
sales tax coverage.



HB 379 does not alter the sales tax paradigm on which the state has been
based since 1986. It applies only to the rate being charged and to the
point in time when the increase returns to its former 5% level. It does not
require extensive record keeping to implement nor does it require
documentation or record keeping after the sunset provision has been met.



Outside of changing the rate and designating a total allocation of the
increase to the general fund it does not require anything different of
vendors. The exemptions, the reporting and the mechanics of collection
remain exactly as they are today.



Mr. Whitlock concluded his remarks saying that the intent of this measure
is to allow the state to provide stability in our programs and services at a
time they are needed most by our citizens. It is important and he would
characterize it as imperative that we balance the budget with as much
stability in tax structure and budget expenditures as possible. It is
important to retain our standing in the bond markets so that state and local
government can enjoy substantial cost savings for many years to come. It
is important to retain Idaho’s reputation as a state that provides an
environment favorable to business and citizens through a strong system of
education, public safety and infrastructure programs. House Bill 379
accomplishes these things.

PRO: Vern Newby, Board member for the Coeur d’Alene School District,
appeared before the Committee in support of HB 379 saying it is not
possible to for school districts to meet the demand of state and federal
mandates with out increased revenues.
PRO: Richard Hachtel stated he was representing the Associated Students of
Boise State University,
appeared before the Committee in support of HB
379. He testified that our great state stands at a cross-road. We can either
move forward with a budget that will continue to allow our state’s
government to be a positive and progressive force in its citizens lives by
providing them with the services upon which they depend or the
Legislature can do irrevocable harm in the ability of our state to educate its’
citizens and keep them healthy and safe. ( See full text in Attachment #1.)
CON: Duane Youngberg said he was representing the Payette County
Business Council
and was appearing before the Committee in opposition
to HB 379. He stated when sales taxes are raised they never decrease.
Businesses have had to make cuts so the state should make cuts. Raising
taxes will not relieve the problem.
PRO: Julie VanOrden, Idaho PTA, appeared before the Committee in support
of HB 379 testified that education funding is the priority. A strong
education system is important.
PRO: Anne Newton appeared before the Committee in support of HB 379. She
stated that occupational therapy for disabled children needed additional
funding.
CON: Kerry Holbret, Nampa, Idaho, appeared before the Committee in support
of HB 379 saying he is disabled and lives on his social security disabled
pension. Sales tax increases would hurt people like him on fixed incomes.
He stated this bill is bogus.
PRO: John Franden, Boise State University, testified in support of higher
education and HB 379. BSU had a ten percent cut last year and had to
raise student fees. They have to turn away students and reduced twenty-two facility and twenty-three staff members. He said higher education is an
investment not an expenditure.
CON: Dale Williamson, Mayor of Payette, appeared before the Committee in
opposition to HB 379. He testified that he was representing the small
businesses in the Southwest counties. Raising sales taxes shuts border
counties off and businesses will dry up. When taxes are raised they will
not normally go away.
PRO: Debbie Johnson appeared before the Committee in support of HB 379
saying she is a parent of a daughter who is disabled. There have been
budget cuts and there needs to be an alternate source for revenue. Every
state has lost federal medicaid money and there is now a crisis.
PRO: Kent Tingey, Idaho State University, appeared before the Committee in
support of HB 379 stating that cuts have been made at ISU. There have
been eighty positions cut and half of those positions were in administration.
Classes are full and students are transferring to Utah State University.
Young people desperately want to obtain a college education.
PRO: Elaine Clegg, Idaho Smart Growth, testified in support of HB 379 and HB
378 saying she was afraid a thorough education would become a basic
education without solid programs such as art and music.



CON: Greg Jensen, Vice President Payette Business Council, appeared
before the Committee in opposition to HB 379 saying sales tax kills
business for the City of Payette.
PRO: Phil Homer, Idaho Association of School Administrators, appeared
before the Committee in support of HB 379 and HB 378. He stated their
membership recognizes that revenue enhancements are going to be
necessary to ensure that all state agency services are, at a minimum,
maintained at the current level of operation. The measures before you
today are important steps in providing that assurance.



They further recognize that no tax increase is popular, however they also
recognize that no one wants services reduced that are vital to the health,
safety, education and welfare of Idaho citizens.

PRO: Bea Black appeared before the Committee in support of HB 379. She
supported a sales tax increase rather than cut education with unfunded
mandates such as “no child left behind.”
PRO: Jon Barrett, Executive Director, Idaho Smart Growth, appeared before
the Committee in support of HB 379 saying the sales tax increase will fund
responsible programs. With rapid growing cities there is a need for funding
infrastructure.
PRO: Wendy Cary and Judy Last, National Association of Social Workers
appeared before the Committee in support of HB 379 said they were social
workers working with poor young families. Cuts in revenue have hit low
income people.
PRO: Bob Jackson appeared before the Committee in support of HB 379
stating medicaid optional programs cost less for people who cannot be left
alone. Under funding these people will put them in danger.
PRO: Elinor K. Chehey, League of Women Voters of Idaho, appeared before
the Committee in support of HB 379 stating that the League believes that
Idaho should maintain a balanced, equitable tax structure using a variety of
sources which is adequate to provide for citizens needs. (Full text is
attached­Attachment #2)
PRO: Jim Baugh, Comprehensive Adversity Disabilities, testified in support
of HB 379 stated there has been a seven and one-half cut in home care
programs. It is not an exaggeration to say that removing 3,000 people
from life-sustaining services would result in some deaths.
PRO: Mary Knodell, Church Women United, appeared before the Committee
in support of HB 379 saying this six and one-half sales tax is a good
interim solution and agrees with the sunset.
PRO: Ray Stark, Boise Metro Chamber of Commerce, testified that the
Chamber supports, at a minimum, higher education funding of $213.6
million the original appropriation for the current fiscal year for next year’s
budget. The Chamber supports maintaining economic development tools
to benefit the economy, including the sales tax production exemption and
the investment tax credit. The Chamber supports minimum revenue
increases for fiscal year 2003. State budget recommendations are
attached. (Attachment #3)
PRO: Marty Peterson, University of Idaho President’s Office, testified that
colleges have cut expenses during this recession period. They agree with
the Governor’s deliberations and approach to preserve the higher
education system and goals.
PRO: Patricia Scott appeared before the Committee in support of HB 379
stating she has a child with disabilities. Medicaid allows her child to stay at
home and without waivers would be forced to live in an institution. Thirty
percent of the budget was cut last fall. Revenue is needed to allow
vulnerable children to receive services not to cut services.
PRO: Marilyn Sword, Executive Director of the Developmental Disability
Council,
appeared before the Committee in support of HB 379 stated
medicaid has been a target of discussion about growth and cut to the
bone.
PRO: Roger Sherman, United Vision for Idaho, testified in support of HB 379
stating that in surveys conducted at a fair booth people support education
funding. The people said education has been cut enough and support
raising the sales tax.
PRO: Sue Stadler appeared before the Committee in support of HB 379 with
reservations. She said revenues are needed for education but the sales
tax should not be raised to 6.5%. Exemptions need to be looked into.
PRO: Katherine Hansen, Director of Community Partnership, testified in
support of HB 379 said there have been several cuts in services to balance
the budget. Impact of these cuts have been significant and cannot be cut
anymore.
PRO: Kelly Buckland, State Independent Living Council, appeared before the
Committee in support of HB 379 stated one of the issues is to make it
possible for the disabled to live at home. Cuts have taken place and
revenues need to be raised for these programs.
CON: Denise Brennan, Idaho Automobile Dealers Association, testified in
opposition to HB 379 saying the increased sales tax will add one or two
extra payments on cars. However they will live with whatever the
Committee decides.
Randy Nelson, Associated Taxpayers of Idaho, provided a hand-out
depicting “State Tax Rate and Burden Comparisons.” He also provided a
state revenue/budget forecast chart that included the HB 379 governor’s
recommendation and other scenarios carried out to FY2008. (Attachment
# 4) Mr. Nelson said he used combinations of 5.2% to 6.9% average
annual budget/revenue growth beyond FY 2004 after explaining that for the
fourteen years prior to FY 2002 the average annual budget/revenue growth
was 8.2% to 8.3%. He pointed out that the ending balance for most of the
scenarios remained positive going out to FY 2008, but if the ending
balance got built into future budgets it would become negative.



To prevent budgets from exceeding long-term revenue growth and to
monitor economic impacts, Mr. Nelson recommended that any sales tax
increase be revisited annually rather than having a three-year sunset.

PRO: Jean Boyles appeared before the Committee in support of HB 379 with
exception to certain economic groups.
PRO: Deanna Smith testified in support of HB 379 saying she did not generally
support tax increases but the state is at a point that it cannot cut services
any further.
CON: Pete Skamser, National Federation of Independent Business,
appeared before the Committee in opposition to HB 379 saying his
membership voted against raising taxes to balance budgets.
PRO: Nancy Merrill, Mayor of Eagle, testified that she had served on Governor
Kempthorne’s Blue Ribbon task force and the sales tax may be better than
other revenue increasing options.
PRO: Alex Feldman, University Professor at Boise State University,
appeared before the Committee in support of HB 379. He said higher
education has tried many ways to do more with less revenue to provide
programs.
PRO: Steve Rodoletz, Idaho Benefits Planning Assistance Out Reach,
testified in support of HB 379 said federal grants need Idaho matching
funds for new programs for the disabled.
PRO: Bobby Ball testified in support of HB 379 said health insurance does not
cover personal care and without help she would not be able to get out of
bed. Cutting medicaid she would have to stay in bed.
CON: Dr. Greg Nelson, Idaho Farm Bureau Federation, provided the members
with a copy of a letter from Frank Priestley, President of the Farm Bureau
Federation. (Attachment # 5). Dr. Nelson said they do not support an
increase of sales tax of one and one-half cents. The Idaho Farm Bureau
policy #70 states: “We oppose balancing budget shortfall by any tax
increase.” Dr. Nelson said school budgets should be cut before taxes are
increased on farmers.
PRO: Katherine Gray appeared before the Committee in support of HB 379 said
she had a disabling mental illness for ten years. Without help from the
state programs she would not have gotten better. She stated that she was
attending Boise State University and is able to hold a job.
MOTION: Representative Smith moved to send HB 379 to general orders with
Committee amendment to change the sales tax from six and one-half
cents to five and one-half cents.
Mr. Whitlock concluded his testimony by saying he appreciated both sides
of this issue. There is a serious problem and this is not a perfect tax.
Sales tax provides an easier way to provide services and maintain
integrity.
PRO Janet Orndorf, Trustee, Idaho School Board Association, appeared
before the Committee in support of HB 379 stated to cut education would
do more long term damage to the economy.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Roberts to Hold HB 379.
AMENDED
SUBSTITUTE
MOTION:
An amended substitute motion was made by Representative Kellogg to
send HB 379 to the floor with a do pass recommendation.
ROLL CALL
VOTE:
Voting Aye -Representatives Kellogg, Ridinger, Ringo, Martinez, Henbest,
Cuddy. Voting Nay – Representatives Crow, Raybould, Barrett, Moyle,
Field, Schaefer, Smith, Collins, Roberts, Wood, Denney, McKague,
McGeachin. Amended substitute motion failed, 6-13-0.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Raybould, Barrett, Moyle, Field,
Schaefer, Collins, Roberts, Wood, Denney, McKague, McGeachin.
Substitute motion to HOLD HB 379 passed, 12-7-0.
ADJOURN: Chairman Crow announced that the Committee was past due on the floor
and would hear HB 378 on Monday. She adjourned the meeting at 11:15
a.m.






DATE: March 24, 2003
TIME: 9:00 a.m.
PLACE: Gold Room
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, (Henbest) Bray,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Brian Whitlock, Office of the Governor; Amber Halverson, Cab Inc.
Enterprises; Paul Noorda, President of Tem State Distributors; John
Wager, Idaho Candy Company; Bill Roden, Williamson Tobacco
Company; Janet Orndorff, Idaho School Board Association; Phil Homer,
Idaho Association of School Administrators; Randy Nelson, Associated
Taxpayers of Idaho; Charley Jones, Stinker Stations; Skip Smyser, Phillip
Morris; Cory Jackson, Capitol Distributors
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Kellogg moved to accept the minutes of the meeting
held on March 20, 2003 as written. Motion carried on a voice vote.
HB 378: Chairman Crow announced the first item on the agenda was HB 378 and
recognized Mr. Whitlock to present the bill. Brian Whitlock, Office of the
Governor,
said he appreciated the opportunity to address the second
element of the Governor’s revenue package.



As a number of states look at revenue options to help with their fiscal
crisis, the cigarette tax is one to which many states have turned. HB 378
represents a 34 cent per pack increase in the cigarette tax here in Idaho
which is a viable option to help balance the budget.



The proposed increase in the cigarette tax differs from the sales tax
proposal in one important aspect: we are suggesting this be a permanent
increase. It increases the tax on cigarettes from its current rate of $.28
per pack to $.62 per pack. At the time the Governor was considering this
increase the national average was $.62. Since then many states have
increased their cigarette tax, including our neighboring states of
Washington, Oregon, Utah and Wyoming.



Just for your information an updated listing of cigarette taxes from the
State Tax Commission shows that Washington’s current rate is 1.52.5
cents per pack, Oregon is 1.28 cents, Utah is now at 69.5 cents and
Wyoming is 60 cents. Again, under this proposal Idaho would be at 62
cents. In fairness he would also point out Montana is still at 18 cents a
pack and Nevada is at 35 cents a pack. It has been almost nine years
since Idaho adjusted its rate. The last time we increased the tax on
cigarettes was in July of 1994.



HB 378 calls for an implementation date of June 1 of this year in order to
ensure that a full twelve month fiscal impact of $28.7 million for FY 2004
is achieved. The distribution of revenues to the Public School Income
Fund, Permanent Building Fund, Cancer Control Fund, Central Tumor
Registry Fund and the Juvenile Probation Fund are retained and thus
share in the increased revenue.



The projection of $28.7 million in revenues has taken into account the
“elasticity” or effects a higher cost will have on decisions to purchase
cigarettes. This proposal is as straightforward and effective as we can
possibly make it and at 34 cents is probably the most conservative
increase in the cigarette tax that this committee will hear this session.

CON: Amber Halverson, Cab Inc. Enterprises, appeared before the
Committee in opposition to HB 378 stated she is a small family business
owner. The state will not benefit by raising the cigarette tax but will lose
money to other states. She distributed a packet containing information on
the Cab Inc. tobacco sales from January 1999 through December 2002.
(Attachment #1)



The State of Washington increased their cigarette tax to $6.00 per carton
in January, 2002. There is concern that a tax increase would force
people to go to Indian Reservations to purchase cigarettes.



Recently internet sales advertised by “Google” for cheap cigarettes result
in more loss of cigarette sales. (Copy of Google” #2 attachment.) There
is no age requirement and teenagers can go on line and purchase
cigarettes.



There is also a problem of increasing in the Master Settlement Agreement
of $2.72 per carton. Cross-border sales create interstate smuggling.
(Copy of reports from the Tax Foundation #3 attachment.)



Cab Inc. showed a 20% increase in the year of 2002 with no change in
their operations. Cross-border and internet sales will make a difference in
Idaho sales if the cigarette tax is raised.

CON: Paul Noorda, President of Gem State Distributors, an Idaho
Corporation located in Pocatello. We are one of Idaho’s licensed
wholesale distributors and tax collectors.



He briefly touched on the following three points. First is the issue of
fairness to a minority group of Idaho citizens. Second is the issue of
fairness to Idaho’s retail community. Third is the reduction of
compensation to Idaho wholesalers who affix the tax stamps.



On the first point is of fairness to a minority group of Idaho citizens who
choose to use a legal product and who already contribute over $62.7
million dollars to state and federal coffers. In 2002 Idaho smokers
comprise only 19.6% of the adult population in the state and already pay
more than their fair share only because they choose to buy a legal
product.



Here is what Idaho smokers paid in FY 2002:

State and Federal Excise Tax $23,410,260
State Sales Tax 13,377,291
Tobacco Settlement Payments 25,965,969
Total dollars FY 2002 $62,753,520



HB 378 asks this minority, 19.5% of Idaho citizens, to belly up and pay an
additional $28.7 million dollars; now this becomes a real issue of fairness.



The second point of fairness to Idaho’s retail community. This point of
fairness most certainly broadens the retail price disparity between taxed
and untaxed retail outlets. HB 378 also creates a new financial burden on
Idaho retailers by increasing their cost of goods by ten to fifteen percent.
That may not sound as bad as it is, but here are some quick calculations
he came up with yesterday.

Average store carton inventory 1,000ctns
HB 378 proposed increase per ctn. x$3.40
Additional capital requirements $3,400.00



This example is very conservative. Keep in mind that most stores carry 2
to 3 times that amount of inventory and tobacco outlet stores can easily
reach 10 times that amount. One of my very good accounts that have five
stores told me that he estimated that HB 378 would require him to have
an additional capital requirement of $22,250 just to maintain existing
inventories.



The point is the reduction of compensation to the Idaho Wholesaler who
affixes the tax stamp to packages of cigarettes. When the author of HB
378 came up with this idea he or she sure did not ask the wholesalers of
Idaho for any input, so today he would like to offer you his input.



He could only share an example of what it costs our company to affix
Idaho Tax Stamps to each package of cigarettes shipping from our
warehouse. He was sure all his fellow wholesale distributors can give you
similar examples of cost. He was only sharing costs of labor, equipment
and accounts receivable financing for simplicity.



He gave an example of man hours used to affix stamps costing
$5,540.00. Total cost per carton was $0.31. One last quick point. Rising
prices due to unfair excise tax increases force smokers to find alternative
methods of purchasing cigarettes and tobacco such as through the
Internet. This results in greater evasion of state excise taxes and lessens
control of underage access. Studies also show when a state raises its
excise tax their cigarette smoker’s travel to nearby states with lower
excise taxes. They also find brands that are not approved by the attorney
general’s authorized list of non-participating manufacturers. They can also
seek out an approved NPM brand and our state loses Master Settlement
Agreement monies.

CON: John W. Wagers, Idaho Candy Company, appeared before the
Committee in opposition to HB 378 saying that this is a regressive tax.
Idaho smokers comprise about 20% of the population. It is easy to pass a
tax onto the minority. He reiterated Mr. Noorda’s testimony on the cost for
wholesaler to affix the stamps on cigarettes.
CON: Bill Roden, representing Williamson Tobacco Company, testified in
opposition to HB 378. He provided the members with fiscal information
relating to the history of cigarette taxation for the last ten years, together
with a fiscal analysis of HB 378. The primary purpose of the information
is to show you the following important information.



Because of increased taxes in bordering states, Idaho’s cigarette tax
collections for FY 21003 and FY 2004, as projected by the Division of
Financial Management, are projected to rise dramatically due to cross-border cigarette sales. These increases follow a decline in sales for the
past nearly six years. These projected increases are due to substantial
tax increases in Washington, Oregon and Utah.



History shows that a major cigarette tax increase in Idaho will result in a
substantial loss in sales in the short and long term and will not provide
stability in the cigarette tax revenue. Reliance on product taxes does not
provide necessary predictability upon which to base long-term budget
decisions.



HB 378 will cause a substantial loss of package sales of cigarettes and
will erode support now being given through the cigarette tax for substance
abuse programs of five cents in our public schools and five cents for
county juvenile probation services.



Because of time constraints placed on this hearing, he would be pleased
to answer questions concerning the printed information following his
prepared remarks. (Attachment # )



In considering HB 378 it is important to also consider some of the policy
issues which apply to the broader issue of taxes popularly known as “sin”
or “product” taxes. Items which many of our citizens do not use or which
many of our citizens do not want to publicly defend.



When government, either state or federal, is torn with the demands
between budget reduction or the need to maintain a certain level of
governmental programs, it is easy to demonize consumers concerning
products which a majority of the public does not use or the use of which a
non-vocal minority of the public is not willing to openly defend.



The consumer’s use of products which some regard as “sinful” or harmful
to the public health justifies in some minds a tax which will help to reform
the users’ indulgent or harmful behavior.



For others if there is a pressing need for additional revenues a tax on
products that the majority either does not use, or which some can afford
to use, regardless of the tax burden. Product taxes may be justifiedp on
the seldom expressed basis that it will avoid an increased tax burden on
either income, property or sales taxes that will affect the majority of the
public.



The major dilemma with “product” or “sin” taxes is three-fold: First, is the
provision of social benefits depend on revenue from the “product” tax.
Some level of consumption of the product must be maintained. This
creates a bipolar political and economic mindset and weakens the
benevolent justification for the tax. In the cigarette and tobacco tax arena
this is clearly a problem for the funds receiving major support from this
source.



Second, if the “product” or “sin” tax is intended to raise revenue the
concept runs counter to the established principles of “fair taxation.”
Fairness in taxation is usually understood to involve non-discriminatory
treatment of persons in similar situations, horizontal equity, and
differentiation in the burdens imposed on persons varying abilities to pay,
vertical equity.



An example of horizontal equity is the taxation of all persons with equal
net taxable income being taxed at the same rate. In property taxation, the
homeowner’s exemption would be another example. An example of
vertical equity would be our tax structure that exempts persons below
certain subsistence income levels from the impact of income taxation.



“Product” or “sin” taxes, however, work to impose the greatest economic
burden on the poorest members of society or to compel them to desist
from use of the product. Economically sufficient members of our society
can escape the compulsion to desist from use of the demonized product
for a fee, ie., the tax.



Third, “product” or “sin” taxes are politically discriminatory since they
constitute a “tax shift” enabling the majority to shift a substantial portion of
the burden of providing benefits for the public sector onto a select
minority.



It is no secret that political support for an excise tax rises as the percent
of the population consuming the product falls. Cigarette taxes are the
best example of this truism because the majority does not consume the
product at all or consumes such a small share that the aggregate tax
price is small in relation to the majority. Reluctance to increase a broad
based excise tax, such as the sales tax, demonstrates the reverse of this
statement, ie., political support for an excise tax falls as the percent of the
population affected rises.



The term, “tax exploitation,” aptly describes this discriminatory justification
for a selective excise tax on a minority of the citizens.



In conclusion, HB 378 will have unintended consequences on existing
funds and as a solution to the state’s budget problems it is speculative as
to providing a stable future revenue on which to build a fiscally sound
budget base.



More importantly, selective excise taxes, both existing and future and on
whatever products, are politically schizophrenic, unfair and discriminatory
in their application. He urged the Committee not to compound the
existing inequities through the approval of HB 378 or any of its progeny.

PRO: Janet Orndorff, Idaho School Board Association, appeared before the
Committee in support of HB 378 saying without revenue increases there
will be un-precedented cut in school programs. It will affect kids in
various ways and cuts in programs will hurt children at risk. By slashing
education through K12 to balance the state budget will do long term harm.
Idaho must continue to provide quality education.
PRO: Phil Homer, Idaho Association of School Administrators, reiterated
his testimony made on March 21, 2003. He stated his membership
recognizes that revenue enhancements are going to be necessary to
ensure that all state agency services are, at a minimum, maintained at the
current level of operation. The measure before you today is an important
step in providing that assurance.
CON: Randy Nelson, Associated Taxpayers of Idaho, testified that the
cigarette tax, like the income tax, can be pretty volatile but as HB 378
proposes he thought that any new revenue from this source should go to
the general fund for appropriation rather than being directly earmarked to
specific programs.



The economy is weak and uncertain. If Idaho state government needs
more revenue it is fairer and simpler to adjust the rate on a broader based
tax like the sales tax.



He understood why higher cigarette taxes might be attractive. Other
states have tapped this source and like Idaho many are also receiving
millions from the tobacco settlement agreement. That from a sound, long-term tax policy perspective, Idaho should be careful about relying heavily
on excise taxes.



He said he left a tax rate comparison “handout” with you at your hearing
last Friday morning. The information included cigarette tax rates. He said
he hoped they find that helpful. (The tax rate comparison is attachment
#4 in the March 21, 2003 minutes.)

CON: Charley Jones, Stinker Stations, appeared before the Committee in
opposition to HB 378 stated he opposed this “sin” tax. Tax on the minority
to increase the revenue source makes the cigarette smoker pay a
disproportionate share. He said do not depend on this “sin” tax measure
to stop smokers behavior. There should be a broader base tax to get
everyone.
CON: Skip Smyser, representing Phillip Morris, testified in opposition to HB
378 stating revenues should be raised in an equitable manner.
Increasing the excise tax on cigarettes would require additional
enforcement and Idaho is not ready to do this. There will be illegal
transactions and organized crime is already moving into this country.
CON: Cory Jackson, Capitol Distributors, appeared before the Committee
stating a price increase for smokers will cause them to down grade to
cheaper products. The revenue increase is less than what has been
projected in elasticity. This increase will make it easy to buy from the
Indian reservations. It will also make business expenses for wholesalers
to go higher because the more expensive the cigarettes there will be more
stolen.
Mr. Whitlock wrapped up saying he appreciated the previous testimony
presenting good arguments. There has been a lot of thought given to
close the gap of the deficit and this bill is one element proposed by the
Governor.
MOTION: Representative Denney moved to hold HB 378 time certain March 26,
2003.
SUBSTITUTE
MOTION:
Representative Barrett moved to Hold HB 378. Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Kellogg, Barrett, Ridinger, Schaefer,
Roberts, Wood, McKague, Cuddy. Voting Nay – Representatives
Raybould, Moyle, Field, Smith, Collins, Denney, McGeachin, Ringo,
Martinez, Bray. Substitute motion to Hold HB 378 failed, 9-10-0



Motion to Hold HB 378 time certain to March 26, 2003 passed on a
voice vote. Representatives Crow, Kellogg, Barrett, Cuddy requested to
be recorded as voting No.

ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:30 a.m.






DATE: March 25, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, (Henbest) Bray,
Martinez, Ringo
ABSENT/

EXCUSED:

Representative Wood
GUESTS: Dan John, Idaho State Tax Commission; Senator Davis
Chairman Crow called the meeting to order at 10:00 a.m. and requested a
silent roll call. She announced that the first item on the agenda was RS
13231C1 and asked Representative Denney to explain the proposed
legislation.
RS 13231C1: Representative Denney said this is one out of two recommendations
made by the School Facilities Task Force. This legislation establishes a
safe school facilities levy. It sets up criteria under which the levy may be
imposed and allows for judicial confirmation when the safety levy fails.
School districts identify safety issues after they have spent all monies
available.
MOTION: Representative Raybould moved to introduce RS 13231C1. Motion
passed on a voice vote. Representative Barrett requested to be recorded
as voting no.
RS 13219: Chairman Crow announced the next item on the agenda was RS 13219
and recognized Mr. John to explain the proposed legislation. Dan John,
Idaho State Tax Commission,
said that this is the annual bill to update
references to the Internal Revenue Code (IRC). It conforms the Idaho
income tax to changes made to the IRC after January 1, 2002, including
the federal “Job Creation and Worker Assistance Act of 2002.” However,
no Idaho deduction will be allowed relating to:



1. The special allowance for 30% first year “bonus depreciation”
permitted by subsection (k) of section 168 of the IRC would not be
deductible in computing Idaho taxable income. For computing Idaho
taxable income, the adjusted basis of depreciable property and capital
gains or losses will be modified to reflect the disallowance of the federal
bonus depreciation.



2. Expenses of elementary and secondary teachers for purchases of
classroom supplies otherwise allowable under the IRC would not be
deductible.

MOTION: Representative Cuddy moved to introduce RS 13219. Motion carried on
a voice vote. Representatives Ridinger, Ringo and Martinez requested to
be recorded as voting no.
SJM 102: Chairman Crow announced the next item on the agenda was SJM 102
and she said the Committee would go at ease until the sponsor of the bill
was available
MOTION: Representative Moyle moved to send SJM 102 to the floor with a do pass
recommendation.
Senator Davis asserted that the purpose of this memorial would be to
encourage Congress to immediately and permanently repeal the death
tax.



This is a memorial to congress and the mere passage creates no fiscal
impact to the State of Idaho. In the event that Congress does repeal the
death tax and should not de-couple, the fiscal impact would be projected
at $4.5.

After a brief question and answer period. A motion was made to send
SJM 102 to the floor with a do pass recommendation. Motion carried on
a voice vote. Representatives Ringo and Martinez requested to be
recorded as voting no. Representative Denney will sponsor the bill on the
floor.
SJM 103: Senator Davis explained that the alternative minimum tax for individuals
and corporations is an evil tax. When a taxpayer reaches a certain level
of income they have to pay the minimum tax and are unable to take the
same deduction allowed to other taxpayers. The purpose of this Joint
Memorial is to encourage the Congress of the United States to abolish the
alternative minimum tax for individuals and corporations.
MOTION: Representative Moyle moved to send SJM 103 to the floor with a do pass
recommendation. Motion carried on a voice vote. Representatives
Ringo, Martinez and Bray requested to be recorded as voting no.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 9:28 a.m.






DATE: March 26, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Speaker Newcomb; Senator Stennett
Chairman crow called the meeting to order and requested a silent roll call.
She recognized Speaker Newcomb to address the Committee.
Speaker Newcomb said he would like to explain the meeting held
yesterday. The meeting was with some of the majority members of the
Revenue and Taxation Committee to discuss procedural motions that may
be made when a bill to raise revenues is made in committee, one of which
is to come to the floor without recommendation. He also discussed what
obligations the members have when supporting that legislation. During
this meeting he gave an historical perspective of what has occurred in the
past.



He said that all members of this Committee know that it is up to them to
make decisions on all revenue measures. The constitution charges the
House to originate all revenue measures. It was his view that the
germane committee on revenues and taxation should originate the bills,
not the Ways and Means Committee.



Mr. Speaker said that in the meeting held yesterday there was no subject
matters discussed, it was strictly procedural matters. He apologized to
the press and others who were offended.

HB 378: Chairman Crow announced the next item on the agenda was HB 378:
MOTION: Representative Denney moved to put HB 378 in the tobacco
subcommittee. Motion passed on a voice vote. Representative Kellogg
requested to be recorded as voting no.
RS 13171: Chairman Crow announced the next it on the agenda was RS 13171 and
asked Senator Stennett to explain the proposed legislation. Senator
Stennett
said this proposal has been before the Committee earlier and
was returned to make changes to address problems voiced by committee
members. He distributed copies of letters from the State Tax
Commission, Idaho Cattle Association, Ken Haught, Picabo Livestock Co.
and a petition from farmers in Blaine County. (Attachment #1)



The purpose of this proposed legislation is to provide each homesite on
an otherwise recognized farm or ranch under 63-602EE, Idaho Code to
be considered agricultural property and provides that the assessed
market value for qualifying home sites which exceeds $30,000 shall be
exempt from property taxation. The farm or ranch must exceed 100
contiguous acres, the applicant must file for a homeowners exemption
and the applicant must file documentation from a certified public
accountant with the county assessor that certifies the filing of a schedule
under the IRS code. If the property can be split off under separate survey
it will not qualify for the exemption.



It would be revenue neutral to counties and other taxing districts.
However, it would be a tax shift if the county currently is assessing home
sites for more than $30,000. The qualifications are drawn tightly to
protect viable agriculture, open space and wildlife habitat which have
public benefits.

MOTION: Representative Cuddy moved to introduce RS 13171.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Moyle to return RS
13171
to sponsor.



There was a lengthy discussion about the good merits of the bill and how
it could penalize farms close to expanding urban areas. Chairman Crow
suggested that Senator Stennett work out the problems with those
Committee members who voiced their concerns.



The Substitute motion to return RS 13171 to sponsor passed on a voice
vote.

Chairman Crow said the JFAC has the budgets set at seven and one-half
percent reduction. The Revenue and Taxation Committee has our work
cut out for us to raise revenue up to the $120 million range. There will
then be a committee bill created in a package or one bill form.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:45 a.m.






DATE: March 27, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

Representatives Moyle Denney, Brail
GUESTS: Commissioner Dewey Hammond, Chairman of the State Tax Commission
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Ringo moved to accept the minutes of the meeting
held on March 21, 2003. Motion carried on a voice vote. Representative
Martinez moved to accept the minutes of the meeting held on March 24,
2003 as written. Motion carried on a voice vote.
Chairman Crow explained that Representative Ringo, co-sponsor of HB
99, had requested that the bill be held. The Chairman announced that if
there was no objection HB 99 would be held in Committee. There were
no objections.
The Chairman introduced Commissioner Dewey Hammond to
demonstrate the computer program which was developed by
Commissioner Hammond and Dan John, Idaho State Tax Commission.
He provided the members with a copy of instructions on how to retrieve
revenue data for various taxes and possible adjustments to selected
product tax rates. (Attachment # 1)
ADJOURN: There being no further business to come before the committee, Chairman
Crow adjourned the meeting at 10:35 a.m.






DATE: March 31, 2003
TIME: 9:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Wood moved to accept the minutes of the meeting
held on March 25, 2003 as written. Motion carried on a voice vote.
Representative Kellogg moved to accept the minutes of the meetings held
on March 26 and 27, 2003 as written. Motion carried on a voice vote.



Chairman Crow advised the Committee members that there are a number
of issues and ways to work a bill or bills. It will be a Committee action, not
personal bills. The objective is to raise approximately $120 million. She
said the Committee would discuss the various options and ideas.

ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:28 a.m.






DATE: March 31, 2003
TIME: 8:15 a.m.
PLACE: Room 412
MEMBERS: Chairman Cuddy, Representatives Ridinger, Barrett, Roberts and Denney
ABSENT/

EXCUSED:

None
GUESTS: Karleane Allen, IWMA; John Wagers, Idaho Candy; Bill Roden,
attorney/Brown & Willamson; Charley Jones, Stinker Stations; Russell
Westerberg, Lobbyist/S.T.C.; Ron Williams, American Heart Assoc.; Skip
Smyser, Lobbyist/Philip Morris
BILL #: H73 Rep. Ring, presented H73. This legislation is to increase taxes on
cigarettes and increase the appropriation to the public schools for
substance abuse programs by amending section 62-2506 of the Idaho
Code, and increase taxes on other tobacco products by amending section
63-2552 of the Idaho Code. This bill would increase the cost of a pack of
cigarettes to $1.20. Fifteen cents of the tax collected per pack would be
an appropriation to the public school income fund to be utilized to facilitate
and provide substance abuse programs in the public school system. Five
cents of the tax collected per pack shall be subject to appropriation to the
department of juvenile corrections for distribution to the counties to be
utilized for county juvenile probation services. Rep. Ring gave other data
on a handout which is attached.
CON: Karleane Allen, stated that as a licensed Idaho Tobacco Wholesaler they
collect the fifth largest amount of revenue through tobacco excise tax and
remit these funds to the state of Idaho. She showed a video of
employees affixing Idaho’s tax stamp to each package of cigarettes to
show the committee how time consuming and expensive this is. The
remainder of her testimony is attached.
PRO: Ron Williams, stated that the average pack of cigarettes in Idaho cost
$3.33 per pack. Smoking caused medical costs per pack in Idaho is
$6.03 per pack. The current Idaho cigarette tax of 28 cents per pack
raises approximately $28 million in state revenues. Medicaid costs in
Idaho for smoking related illness are approximately $65 million per year.
More data is attached.
CON: Bill Roden, suggested that with a raise in taxes to this level would cause
bootlegging and smuggling. He also stated that this bill would not put
money in the general fund, but it would go to health problems and that it is
dictating what social behavior will be. Mr. Roden passed out a fact sheet
on “Idaho Cigarette Tax Facts” which is attached.



CON:


Charley Jones, stated that this bill is not sound tax or public policy. Mr.
Jones’ testimony is attached.
MOTION: Rep. Barrett made a motion to recommend to the full committee that H73
be held in committee.



Motion approved unanimously.

ADJOURN: The meeting was adjourned at 9 a.m.






DATE: April 1, 2003
TIME: 9:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Representative Jones; Dan John, Idaho State Tax Commission
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Martinez moved to accept the minutes of the
meeting held on March 31, 2003 as written. Motion passed on a voice
vote.
RS 13249: Chairman Crow announced the first item on the agenda was RS 13249
and asked Representative Jones to explain the proposed legislation.
Representative Jones testified that this proposed legislation creates a
tax credit for growers of turf grass in Kootenai and Benewah counties who
will stop burning their grass stubble. The credit would be $100.00 per
acre not burned for up to ten years depending on the year the grower
chooses to enter the program The grower must have burned his fields
for the previous three years to be eligible.



If the grower is unable to use part or all of the credit they may carry it
forward or sell it to someone else who could use it. This credit is created
in order to encourage growers to find alternatives to field burning or
alternative crops to produce.

MOTION: Representative Kellogg moved to introduce RS 13249.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Roberts to return RS
13249 to sponsor.
A roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Raybould, Barrett, Moyle, Field,
Schaefer, Smith, Collins, Roberts, Wood, Denney, McKague, McGeachin.
Voting Nay – Representatives Kellogg, Ridinger, Ringo, Martinez,
Henbest, Cuddy. Motion to return RS 13249 to sponsor passed, 13-6-0.
HB 389: Chairman Crow announced the next item on the agenda was HB 389 and
recognized Representative Denney to present the bill. Representative
Denney
stated this bill is one of four recommendations from the School
Task Force. This legislation establishes a safe school facilities levy. It
sets up criteria under which the levy may be imposed and allows for
judicial confirmation when the safety levy fails. He explained the process
schools who have identifiable safety issues must use. This bill is
important because the problem has not been solved to address fail safe
method for schools with immanent safety problems.
MOTION: Representative Kellogg moved to send HB 389 to the floor with a do pass
recommendation. Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Kellogg, Ridinger, Moyle, Smith,
Denney, Ringo, Martinez. Voting Nay – Representatives Raybould,
Barrett, Field, Schaefer, Collins, Roberts, Wood, McKague, McGeachin,
Henbest, Cuddy. Motion failed, 8-11-0.
HB 390: Chairman Crow announced the next item on the agenda was HB 390 and
recognized Mr. John to present the bill. Dan John, Idaho State Tax
Commission,
testified that this is the annual conformance bill to update
references to the Internal Revenue Code (IRC). It conforms the Idaho
income tax to changes made to the ITC after January 1, 2002, including
the federal “Job Creation and Worker Assistance Act 2002.” The
conformance with IRC carves out the “bonus depreciation” and special
education deduction.
MOTION: Representative Kellogg moved to send HB 390 to the floor with a do pass
recommendation. Motion carried on a voice vote. Representatives
Ridinger, Ringo and Martinez requested to be recorded as voting NO.
Representative Moyle will sponsor the bill on the floor.
SUBCOMMITTEE
REPORT:
Representative Cuddy, Chairman, reported that his subcommittee has
heard testimony on HB 73, HB 362 and HB 378 and makes the following
recommendations:



HB 73, Relating to increased tax on Cigarettes and tobacco products, to
be held by the full Committee

HB 362 Relating to cigarette tax surcharge used for suicide prevention,
be held at the request of the sponsor.

HB 378 Increased cigarette tax ­ Governor’s proposal -be held by the
full Committee

UNANIMOUS
CONSENT:
Unanimous consent was granted to accept the Cuddy Subcommittee
report to HOLD HB 73, HB 362 and HB 378.
There was a short discussion relating to the budget shortfall.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 9:45 a.m.






DATE: April 1, 2003
TIME: 8:15 a.m.
PLACE: Room 404
MEMBERS: Chairman Charles Cuddy; Representatives Denney, Roberts, Ridinger
and Barrett
ABSENT/

EXCUSED:

Representative Denney
GUESTS: Brian Whitlock, Governor’s Office; John Wagers, Idaho Candy Co.;
Representative Henbest; Russell Westerberg
HB 362: Chairman Cuddy recognized Representative Henbest to testify.
Representative Henbest said this bill deals with an appropriation of a
portion of the tax levied on tobacco for one year to develop a state suicide
prevention plan. Representative Henbest asked that HB 362 be held in
Committee.
Chairman Cuddy said if there was no objection, the
subcommittee would recommend to the full committee that HB 362 be
held at the request of the sponsor.
There being no objection, that
recommendation will be made.
HB 378: Brian Whitlock with the Office of the Governor was recognized. Mr.
Whitlock said this legislation increases the cigarette tax rate from $0.28
per cigarette package of twenty cigarettes to $0.62 per pack, effective
June 1, 2003. The bill makes adjustments to the distribution formula to
cause all additional net revenue generated by this increase to go to the
General Fund, while holding all other recipients of cigarette tax
distributions harmless. It also reduces the compensation for affixing
stamps from 5% to 2.4%. This would increase the General Fund revenue
by $28.7 million beginning in FY 2004. This tax increase would actually
be below the national average.
CON: John Wagers with the Idaho Candy Company was recognized. Mr.
Wagers said Idaho Candy Company has been in business since 1901.
Mr. Wagers said HB 378 is a flawed bill. It is not consistent with good
business practices and it is not reasonable. Wholesalers need to be
taken care of and this legislation does not do that. His business would be
penalized for affixing stamps to packages of cigarettes. The bill is not
equitable. It would cause a loss of sales in northern Idaho. These
stamps provide no benefit to those who stamp the cigarettes. A better bill
needs to be drafted.
CON: Chairman Cuddy recognized Russell Westerberg, representing the
Smokeless Tobacco Council. Mr. Westerberg gave the committee a
handout providing information on “Other Tobacco Products” (OTP)
(Attachment). Mr. Westerberg said the OTP tax has been automatically
increasing each year. There has been a 45% increase in OTP tax
revenue since 1994. The person who will bear the cost of this tax
increase will be the average middle aged underground miner, mill worker,
truck driver and farm hand, who will pay the tax from their average annual
income of less than $30,000. Consider the fairness issue. OTP product
taxes have been rising steadily as the price of the product is increased by
the manufacturer. Taxes on other “sin” products like cigarettes, beer and
wine have not been increased for several years.
MOTION: Representative Barrett moved to recommend to the full Committee that
HB 378 be held in Committee.
In support of the motion, Representative
Barrett said this bill is deja vu to the ninth degree. Business is the
workhorse of the economy. When you hurt business, you hurt the
economy. Everybody needs to pull their share of the load. Motion
carried.
ADJOURN: There being no further business to come before the committee, the
meeting was adjourned at 8:45 a.m.






DATE: April 2, 2003
TIME: 9:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
Senator Compton; Speaker Newcomb
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Kellogg moved to accept the minutes of the meeting
held on April 1, 2003 as written. Motion carried on a voice vote.
SUBCOMMITTEE
REPORT:
Representative Kellogg reported that the Kellogg Revenue and Taxation
Subcommittee met on March 25, 2003 and heard testimony for HB 380. It
was recommended by the subcommittee to return HB 380 to the full
committee with the recommendation that it be held. The subcommittee
also recommended that HJR 002 be returned to the full committee with
the recommendation that it be held.
UNANIMOUS
CONSENT:
Unanimous consent was requested to accept the Kellogg Subcommittee
report to HOLD HB 280 and HJR002. Consent was granted.
RS 13259: Chairman Crow announced the first item on the agenda was RS 13259
and recognized Senator Compton to explain the proposed legislation.
Senator Compton asked for the Committee’s approval to let the people
elect to put in an economic plan with the tool contained in this proposed
legislation. The purpose of this proposed legislation is to expand the
opportunity of creating port districts to areas that are not adjacent to
continuous waterways and to allow for the creation of port districts in
county and regional situations.



Senator Compton said if the ten percent of electors approve a port district
it would include the whole county not just part of the county. He said this
proposed legislation is a positive tool to allow counties to support their
economic plan.

MOTION: Representative Raybould moved to introduce RS 13259. Motion passed
on a voice vote.
UNANIMOUS
CONSENT:
Chairman Crow stated that SB 1090aa was started unconstitutionally in
the Senate and was replaced by RS 13259. Unanimous consent was
requested to HOLD SB 1090aa, consent was granted.
Chairman Crow said the Speaker had been asked to draft revenue bills to
raise revenues to fund approximately $150 million budget shortfall. The
bills will be Committee bills and referred to the full house without
recommendation. Committee bills sent to the floor without
recommendation do not bind Committee members to a floor vote.
RS13261: Chairman Crow announced the next item on the agenda was RS 13261.
The purpose of this legislation is to require individuals, who by federal law
pay income tax quarterly, to make their state income tax payment
quarterly.
MOTION: Representative Field moved to introduce RS 13261 with the
recommendation that it be placed on second reading without
recommendation.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to return RS
13261 to sponsor.
Roll call vote was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Barrett, Ridinger, Smith, Wood, Ringo,
Martinez, Henbest, Cuddy. Voting Nay – Representatives Crow, Kellogg,
Raybould, Moyle, Field, Schaefer, Collins, Roberts, Denney, McKague,
McGeachin. Motion failed, 8-11-0
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Kellogg, Field, Schaefer, Collins,
Roberts, Denney, McKague, McGeachin. Voting Nay – Representatives
Barrett, Ridinger, Moyle, Smith, Wood, Ringo, Martinez, Henbest, Cuddy.
Motion to introduce RS 13261 with recommendation that it be placed
on second reading without recommendation passed, 10-9-0.

Representative McGeachin will sponsor the bill on the floor.
RS 13262: Chairman Crow announced the next item on the agenda was RS 13262
and recognized Speaker Bruce Newcomb to explain the bill. Speaker
Newcomb
testified that this proposed legislation is one of the
components to balance the budget which is required by law. This
proposal increases the sales tax from 5% to 5.5% for the period May 1,
2003 through June 30, 2004. This proposal is sufficient to balance the
FY2003 budget.
MOTION: Representative Smith moved to introduce RS 13262 with the
recommendation that it be placed on second reading without
recommendation.
Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Kellogg, Ridinger, Smith, Ringo, Martinez,
Henbest, Cuddy. Voting Nay – Representatives Crow, Raybould, Barrett,
Moyle, Field, Schaefer, Collins, Roberts, Wood, Denney, McKague,
McGeachin. Motion failed, 7-12-0.
RS 13263: The Chairman announced the next item on the agenda was RS 13263
and asked Mr. Speaker to continue. The purpose of this proposed
legislation is to increase the tax on cigarettes to five cents per cigarette
and one dollar per package of twenty cigarettes. This proposal would
also increase the tax on tobacco products to sixty percent of the
wholesale sales price. Speaker Newcomb said this proposal is expected
to generate $53,500,000.



MOTION: Representative McGeachin moved to return RS 13263 to sponsor.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Field to introduce RS
13263 with the recommendation that it be placed on second reading
without recommendation.
AMENDED
SUBSTITUTE
MOTION:
An amended substitute motion was made by Representative Cuddy to
introduce RS 13263. Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Raybould, Wood, McKague, Ringo,
Martinez, Henbest, Cuddy. Voting Nay – Representatives Crow, Kellogg,
Barrett, Ridinger, Moyle, Field, Schaefer, Smith, Collins, Roberts, Denney,
McGeachin. Amended substitute to introduce RS 13263 motion failed,
7-12-0.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Raybould, Moyle, Field, Smith,
Collins, Denney, McKague, Ringo, Martinez, Henbest. Voting Nay –
Representatives Kellogg, Barrett, Ridinger, Schaefer, Roberts, Wood,
McGeachin, Cuddy. Substitute Motion to introduce RS 13263 that it be
placed on second reading without recommendation passed, 11-8-0.
Representative Field will sponsor the bill on the floor.
RS 13264: Chairman Crow announced the next item on the agenda was RS 13264
and asked Speaker Newcomb to continue. Speaker Newcomb stated
that this proposed legislation is different than RS 13262. This proposal
increases the sales tax from 5% to 5.5% for the period July 1,2003
through June 30, 2004.
MOTION: Representative Smith moved to introduce RS13264 with the
recommendation that it be placed on second reading without
recommendation.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to return RS
13264 to sponsor.
Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Barrett, Schaefer, Roberts, Wood,
McGeachin. Voting Nay – Representatives Kellogg, Raybould, Ridinger,
Moyle, Field, Denney, McKague, Ringo, Martinez, Henbest, Cuddy.
Substitute motion to return to sponsor failed, 6-13-0.



Original motion to introduce RS 13264 with the recommendation that it
be placed on second reading without recommendation passed
on a
voice vote. Representatives Barrett, Wood and McGeachin requested to
be recorded no. Representative Smith will sponsor the bill on the floor.

RS 13271: Chairman Crow announced that the next item on the agenda was RS
13265 but has been replaced by RS 13271. She recognized Speaker
Newcomb and asked him to continue. Speaker Newcomb stated that
testimony on beer and wine tax has not had a hearing. He pointed out
that beer tax had not been raised since 1961 and wine since 1971.



MOTION: Representative Wood moved to introduce RS 13271. Motion carried on
a voice vote. Representatives Barrett, McKague and McGeachin
requested to be recorded as voting no.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:05 a.m.






DATE: April 3, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Senator Goedde; Representative Shepherd
Chairman Crow called the meeting to order and requested a silent roll
call. She announced the first item on the agenda was RS 13257 and
asked Senator Goedde to explain the proposed legislation.
RS 13257: Senator Goedde stated that what is before you today is based on the bill
passed in 1995 and HB 192 which you agreed to hear earlier in this
session.



This proposal changes from past legislation to be open to all counties,
maximum tax reduced to one-half percent, one-half of the proceeds can
be used only for retirement of debt for detention facilities. The other one-half percent to be used as property tax reduction. The measure sunsets
in 2009.



Kootenai County is relying on a statute passed by this body and in good
faith proposed to their voters a local option sales tax to fund expansion of
the jail. The jail was built and funded at a cost of $1.4 million per year
until 2009. Following the Supreme Court decision the property taxpayers
will need to come up with the additional revenue to fund the debt load as
well as some $3.4 million per year in property tax reduction, somewhere
between 18% and 22% increase.



This proposed legislation authorizes counties to adopt local option sales
taxes and to implement and collect such tax. It is possible that other
counties could take advantage of this legislation. To use this local option
tax the measure must be approved by 60% of the voters and would need
enough cash flow to pay off the measure prior to 2009.

MOTION: Representative Raybould moved to introduce RS 13257.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to return to
sponsor.
Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Barrett, Wood, McKague, McGeachin.
Voting Nay – Representatives Crow, Kellogg, Raybould, Ridinger, Moyle,
Field, Schaefer, Smith, Collins, Roberts, Denney, Ringo, Martinez,
Henbest, Cuddy. Motion failed, 4-15-0
Original motion to introduce RS 13257passed on a voice vote.
RS 13236: Chairman Crow announced the next item on the agenda was RS 13236
and asked Representative Shepherd to explain the proposed legislation.
Representative Shepherd stated that this proposed legislation was
originally drafted early in the session but it had problems. After checking
with the Attorney Generals office, the Tax Commission and the Idaho
Association of Counties, it was determined it had been addressed in the
wrong Idaho code. With a great deal of help from these same entities a
new RS was drafted that is constitutional. It is now in the correct code
and addresses the needs of what the problem is for Shoshone County.



Representative Shepherd gave a brief history of the East Shoshone
Hospital District which has declared bankruptcy. This district is still intact
and is repaying 100% of old debt with bonds and has a levy to repay the
bonds. It is expected that the district will stay intact until the bonds are
paid. However this may take as long as 20 years.



The concern is that if for some reason before the bond debt is satisfied
the district would dissolve, the county would become liable for any
remaining debt and that debt would fall within the 3% cap and come under
the county levy thereby placing more financial pressure on the struggling
county budget. Current law would then leave the county with the hospital
debt, the hospital levy would cease and the county would have no ability
to levy to pay that debt.



This proposed legislation would create additional requirements in the
process of dissolving a hospital district. District residents should be
responsible for the eventual payment of any district debts. Residents of
the entire county should not be responsible for a district in which they do
not reside. The county commissioners must be able to levy for the
hospital district until all debt is paid.

MOTION: Representative Cuddy moved to introduce RS 13236. Motion passed
unanimously.
RS 13275: Chairman Crow announced the next item on the agenda was RS 13275
and asked Representative Field to explain the proposed legislation.
Representative Field stated that the purpose of this legislation is to
impose an excise tax on bottled soft drinks, syrups and dry mix and
provide for affixing of tax stamps or crowns. The revenue will be one cent
for twelve fluid ounces, one dollar per gallon of soft drink syrup and one
cent each ounce by weight of dry mixture for making soft drinks.
MOTION: Representative Kellogg moved to introduce RS 13275.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to return RS
13275 to sponsor.
Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Barrett, Moyle, Field, Collins,
Roberts, Wood, McKague, McGeachin. Voting Nay – Kellogg, Raybould,
Ridinger, Schaefer, Smith, Denney, Ringo, Martinez, Henbest, Cuddy.
Motion to return to sponsor failed, 9-10-0.
Original motion to introduce RS 13275 passed. Representatives Barrett,
Moyle, McKague, McGeachin requested to be recorded as voting no.
RS 13263C2: Chairman Crow announced that RS 13263 which passed yesterday had a
drafting error and the Committee would now hear from Representative
Denney to explain the purpose of this change. Representative Denney
explained that RS 13263 was not intended to include tobacco products.
RS 13263C2 takes out tobacco products and changes the reimbursement
for affixing the stamps on cigarettes.



The purpose of this proposed legislation is to increase the tax on
cigarettes to five cents per cigarette and one dollar per package of twenty
cigarettes.



Representative Denney asked for unanimous consent to change RS
13263. There was an objection and unanimous consent was denied.

MOTION: Representative Denney moved to introduce RS 13263C2 with the
recommendation that it be placed on second reading without
recommendation.
Roll call was called for.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Raybould, Moyle, Field, Collins,
Denney, McKague, Ringo, Martinez, Henbest. Voting Nay –
Representatives Kellogg, Barrett, Ridinger, Schaefer, Smith, Roberts,
Wood, McGeachin, Cuddy. Motion to introduce RS 13263C2 with the
recommendation that it be placed on second reading without
recommendation passed, 10-0-0.
Representative Field will sponsor the
bill on the floor.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:35 a.m.






DATE: April 4, 2003
TIME: 8:35 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Speaker Bruce Newcomb; Ron Bitner, Idaho Grape Growers, Idaho Beer
& Wine Distributors Association; Pete Skamser, National Federation of
Independent Business; Ken McClure, Anheuser Busch Companies, Inc.;
Bob Corbell, Idaho Wine Commission; Randy Nelson, Associated
Taxpayers of Idaho; Skip Smyser, Miller Brewing Company; Mike
Fitzgerald, Table Rock Café; Charlie Jones, Stinker Stations, Scott
Defulhorst, Snake River Winery; Chuck Devlin, Ste. Chapell Winery; Brad
Pintler, Skyline Vineyards and Sawtooth Winery
Chairman Crow called the meeting to order and requested a silent roll
call. She announced the first item on the agenda was HB 402 and asked
Speaker Newcomb to present the bill.
HB 402: The purpose of this legislation is to increase the tax on beer from $4.65
per barrel to $7.44 per barrel and to increase the excise tax on wine from
$.45 per gallon to $.75 per gallon. The revenues generated by such
increases will be distributed to the General Fund. Speaker Newcomb
stated that it had been called to his attention that vineyard owners have
concerns with this bill. He said that if the bill goes out of this Committee
that it be referred to General Orders with Committee amendments without
recommendation.
Ron Bitner, Idaho Grape Growers, appeared before the Committee and
advised the Committee that Idaho has eighteen wineries producing world
class wines. Idaho does not have the same support as Washington and
Oregon. Idaho wineries need support to market Idaho wine.
Bill Roden stated he was representing the Idaho Beer & Wine
Distributors Association.
He sympathized with comments made by
members of this committee concerning the difficult and uncomfortable
position you are in. The clients he represented recognize that none of
you want to raise taxes in these difficult times. To paraphrase a comment
by Will Rogers, “when the state has money, government cuts taxes.
When the state is broke, government raises taxes”. Rogers may have
been being facetious but he added “that’s statesmanship of the highest
order.” The times are difficult and you have painful decisions to be made.



Mr. Roden passed out a brochure containing data relating to Idaho beer
and wine distributors and the important economic contributions that the
beer and wine industry makes to the economy of the state. (Attachment
#1) They provide jobs, make major capital investments in the state
resulting in enhancements to the property tax base and pay substantial
taxes to the state and federal coffers.



He passed out a two-page paper showing the effect of HB 402 on the
taxpayer. (Attachment #2) The wholesaler actually pays the tax to the
Idaho Tax Commission but in the final analysis the wholesaler is the tax
collector and it is the consumer that pays the tax through increased prices
for the products if you decide to selectively tax.



For those of you who refer to the taxes in HB 402 as “sin” taxes, he
reminded the Committee that the state has even been selective in picking
the “sins” to be taxed. Only “sins” resulting from private business
operations are taxed under laws now being considered by this
Legislature.



Private alcohol beverage taxes will increase under HB 402. Yet, there is
no tax on the state sales of distilled spirits, profit, yes, but no tax. The
wholesalers and their employees also share their profits with the state in
the form of income, sales and property taxes. The state retail operations
do not charge a sales tax on the shelf price of products at the state liquor
store, as the state imposes on products being taxed under HB 402.



Mr. Roden conveyed that it has been said that, “The art of taxation
consists in so plucking the goose as to obtain the largest possible amount
of feathers with the smallest possible amount of hissing.” HB 402 and
other unfair selective tax bills that you have had before you are excellent
examples of attempting to avoid the hissing goose. Selective excise tax
bills impose taxes on products that many of our citizens either do not use
or which many of our citizens are reluctant to publicly defend. Selective
excise taxes are a good example of robbing Peter to pay Paul. Many
believe that as George Bernard Shaw said, “A government which robs
Peter to pay Paul can always count on Paul’s support.”



Mr. Roden said that he was not sure it was a true statement for the
reason that the public recognizes that the tax on beer or wine or
cigarettes or soda pop, today may tomorrow mirror federal selective taxes
or, worse, and follow the federal example of imposing selective taxes on
pistols, ammunition, bows and arrows or fishing equipment.



There is nothing fair about selective taxes. Governments should not have
gone down this road in the past. Selective excise taxes are and always
have been bad tax policy. It probably is too late to turn back but someday
it should be considered. A state that relies on selective excise taxes
rather than broad based taxes may well be digging the hole deeper. But
there is no question that you don’t make a “bad tax” better by increasing
the tax.



The term “tax exploitation” applies as it describes this discriminatory
justification for a selective excise tax on a minority of the citizens. Lyndon
Johnson jokingly said: “in 1790 the nation which had fought a revolution
against taxation without representation discovered that some of its
citizens weren’t much happier about taxation with representation.”



This is actually a true statement and particularly applicable to the ability of
those in power to selectively impose a tax burden on the minority or even
the silent majority. To repeat, a bad tax policy is not made better by
increasing the tax. Increases in such taxes merely compound the existing
inequities and should not be approved.



Mr. Roden concluded his remarks saying if HB 402 is to proceed, careful
attention needs to be paid to the effect of the tax rates on the industry,
particularly with reference to Idaho’s wine industry. In addition, if HB 402
is to proceed they respectfully request that the amendment to treat all
beer equally be recommended for adoption by this committee. It would be
a small but important move to remove an existing discriminatory treatment
under current law. (Amendment attachment #3)

Pete Skamser, National Federation of Independent Business,
appeared before the Committee in opposition to HB 402 saying 87% of
his membership voted for no increased taxes.
Ken McClure stated he was representing Anheuser Busch Companies,
Inc..
He said this bill is regressive with the combination of sales tax and
excise tax. If the body increases sales tax it will compound the
regressivity. Adding an additional excise tax is more regressive. The tax
structure is not out of kilter and doesn’t appear to have enough revenue to
balance the budget.
Bob Corbell, Executive Director, Idaho Wine Commission, testified
that the State of Washington has an eighty seven cent excise tax and
uses state employees. They have a $600,000 general fund appropriation
for advertising and promotion.



Reducing the small percentage to the wine commission would decrease
promotion and advertising of Idaho’s wine and alcohol treatment account.

Idaho’s small wine producers would have to adjust their price on premium
wine and would be in competition with other states where wine producers
are being subsidized by government. Wineries in Idaho will lose the shift
in market creating another problem for them. This bill could affect a lot of
jobs.

Randy Nelson, Associated Taxpayers of Idaho, provided the members
with a report on “State Tax Rate and Burden Comparisons.” (Attachment
#4) Mr. Nelson stated that the tax rate chart #1, which you have seen
before, includes beer and wine tax rates. It specifically identifies rates for
other western states. The flip side of this chart includes the state and
local sales tax rates which also apply to beer and wine sales.



The beer and wine tax, although a small share of the general fund
revenues, can also be fairly volatile like the cigarette tax and even the
income tax. He did not think that any new revenue from these sources
should go to the General Fund as HB 402 proposes.



However if Idaho state government needs more revenue it would be
simpler and more reliable to adjust the rate on a broader based tax rather
than targeting large rate increases on a mix of product taxes.



Mr. Nelson concluded his remarks saying from a long-term tax policy
perspective, Idaho should be careful about depending too heavily on
product taxes.

Skip Smyser, Miller Brewing Company, passed out copies of two letters
from distributors. The attached are letters form Gate City Intermountain
and Bear River Sales Company in opposition to HB 402. (Attachments #
5 and #6)



Mr. Smyser stated that Idaho has a three legged stool tax structure and
this bill will make a fourth stool which is unreliable. The State Treasurer is
concerned about Idaho’s credit rating relying on an unstable tax base.

Mike Fitzgerald stated he owned the Table Rock Café and was
appearing before the Committee in opposition to HB 402. He briefed the
Committee members on the negative effect this bill would have on micro
beer. When prices go up consumers buy cheaper beer and wine. Now is
not the time to take money from small business.
Charlie Jones stated that he was the President of the Stinker Stations
and was appearing in opposition to HB 402. Excise tax on targeted
products will affect business and jobs will be destroyed. A broad based
tax such as sales tax would do less harm. He said that he reduces
expenses when income is down.
Scott Defulhorst, Snake River Winery, appeared before the Committee
in opposition to HB 402 saying the wine business is currently at a critical
juncture. The fledgling wine business needs help and increasing the
excise tax would be devastating not only for small wineries but larger
ones as well. This bill affects not just the growers and distillers but
industry in the entire state.
Chuck Devlin, Ste. Chapell Winery, appeared before the Committee in
opposition. He said he was afraid that if his parent company were to
perceive that the business climate here in Idaho is unstable or perhaps
hostile to wine production and wine sales, they will probably take that
capital and invest it elsewhere. The political climate in Oregon,
Washington and California is extremely favorable to the wine industry.
State general funds are allocated in both Oregon and Washington to
promote the grape and wine industry. He concluded his remarks urging
the Committee to send the message that Idaho is a good place for them
to invest their money and reject this alarming increase.
Brad Pintler representing Skyline Vineyards and Sawtooth Winery
appeared before the Committee in opposition to HB 402 reiterating
previous testimony on Idaho’s fledgling wine industry. He stated that the
increased excise tax would put the wine industry in a non competitive and
unprofitable position.
MOTION: Representative Barrett moved to HOLD HB 402.
SUBSTITUTE
MOTION;
A substitute motion was made by Representative Henbest to send HB
402 to General Orders with Committee Amendments attached
without recommendation.
AMENDED
SUBSTITUTE
MOTION:
An amended substitute motion was made by Representative Smith to
send HB 402 to the floor without recommendation. Roll call was
requested.
ROLL CALL
VOTE:
Voting Aye – Representative Smith. Voting Nay – Representatives Crow,
Kellogg, Raybould, Barrett, Ridinger, Moyle, Field, Schaefer, Collins,
Roberts, Wood, Denney, McKague, McGeachin, Ringo, Martinez,
Henbest, Cuddy. Motion to sent HB 402 to the floor without
recommendation failed, 1-18-0.
ROLL CALL
VOTE:
Voting Aye – Representatives Moyle, Denney, Ringo, Martinez, Henbest.
Voting Nay – Representatives Crow, Kellogg, Raybould, Barrett, Ridinger,
Field, Schaefer, Smith, Collins, Roberts, Wood, McKague, McGeachin,
Cuddy. Motion to send HB 402 to General Orders failed, 5-14-0.
Original motion to HOLD HB 402 passed on a voice vote.
HB 405: Chairman Crow announced the next item on the agenda was HB 405 and
asked Representative Field to present the bill. Representative Field said
this bill imposing an excise tax on soft drinks was an attempt to level the
playing field with the wine and beer tax.
UNANIMOUS
CONSENT:
Representative Field asked for unanimous consent to hold HB 405.
Consent was granted.
Representative Barrett asked for point of order to lodge a complaint
against the Revenue and Taxation Committee as the contact on the
Statement of Purpose. The House Rules book says that the Statement
of Purpose must have “a person” named as contact. A Committee is not
a person, not even in the collective sense.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 9:55 a.m.






DATE: April 8, 2003
TIME: 9:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT: None
GUESTS: Senator Compton; Representative Bedke, Charlie Clark, Union Pacific
Railroad; Steve Ahrens, Idaho Association of Commerce & Industry;
George Millward, United Transportation Union, Senator Goedde, Ben
Wolfinger, Deputy Sheriff of Kootenai County; Randy Nelson, Associated
Taxpayers of Idaho; Russ Westerberg, Hagadone Corporation; Rocky
Watson, Kootenai County Sheriff; Jane Gorsuch, Intermountain Forest
Association
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Ridinger moved to accept the minutes of the meeting
held on April 2, 2003 as written.
UNANIMOUS
CONSENT:
Chairman Crow informed the members that Representative Shepherd
requested HB 407 relating to dissolution of hospital districts be held in
Committee. She asked for unanimous consent to Hold HB 407. Consent
was granted.
HB 401: Chairman Crow announced the first item on the agenda was HB 401 and
recognized Senator Compton to present the bill. Senator Compton
passed out copies of letters from the Post Falls Chamber of Commerce,
the Association of Idaho Cities, the Idaho Association of Counties
(neutral), Jobs Plus and the City of Post Falls in support of HB 401.
Senator Compton said this is an important bill to be used as an economic
tool.



The states of Washington and Montana have land-based ports and have
been very successful. This legislation is the catalyst for economic
development to provide infrastructure for a land-based port. It takes fifty
percent of the voters to form a district and this legislation takes two-thirds
to pass a bond.



The purpose of this legislation is to expand the opportunity of creating
port districts to areas that are not adjacent to contiguous waterways and
to allow for the creation of port districts in county and regional situations.

This legislation provides for great opportunity for counties to have this
economic tool with long lasting positive impact.

Representative Bedke testified that there are a number of organizations
and people developing economic plans to germinate in counties. This bill
will provide the tax structure to allow for infrastructure to attract business.
The Port of Lewiston and the Moses Lake Port districts have been very
successful in attracting business.



Representative Bedke stated that no one likes Ad Valorem taxes. This
legislation allows counties to have the opportunity to enter into a taxing
district to help with economic development. Voters pass school bonds
with a two-thirds vote which is the consensus of the community and the
building of schools is widely accepted. This bill is the same with a two-thirds vote of the people to obligate themselves to allow counties to enter
into a port district to compete for business.

Charlie Clark, Union Pacific Railroad, appeared before the Committee
in support of HB 401 saying he has had ten years experience with
Montana and Washington Port districts. These districts have utilized the
Union Pacific in distributing commodities in the area. Bringing a port
district into Pocatello where there are two interstate highways and Union
Pacific would be an opportunity for economic development.
CON: Steve Ahrens, Idaho Association of Commerce & Industry, testified in
opposition to HB 401 saying with Idaho’s economy mired in a recession,
with the state searching desperately for current revenue and for ways to
create new revenue, it is entirely appropriate that this committee and this
Legislature have spent a great deal of time this session considering a
variety of proposals that promise to create economic development.



However, we should not forego the exercise of some careful inspection,
even of proposals that promise this much sought-after “economic
development.” Such a proposal is HB 401. The bill is quite
straightforward. It is basically an “election bill.” It describes in
excruciating detail how citizens can go about creating a so-called “port
district.” It does not, however, spend much time telling you what kind of a
creature a port district is, what its powers are, how it operates or the
impact it will have on local taxpayers.



You may want to look on Page 5, at the bottom, Title 70-2220 “Application
of Port District provisions.” You have to go and check the chapters listed
here to find out all about what a Port District really is. If you do go to read
those chapters, you will find that in creating a Port District, you are
creating a whole new level of government at the local level. Among other
things a Port District has: The power of eminent domain, the right of
condemnation; The power to levy and collect assessments on property;
The power to acquire or dispose of property; The power to make grants or
take out loans; The power to issue general obligation and/or revenue
bonds; The power to accept federal aid; The power to levy property taxes
up to one-tenth of one percent of the market value for assessment
purposes on all taxable property in the port district.



Mr. Ahrens said that HB 401 and debate over the bill has nothing to do
with the Lewiston Port District or “whether the Lewiston Port has been
successful ” or “whether the Lewiston Port has contributed to economic
development.” The Lewiston Port has been a great asset to the local and
Idaho economy.



HB 401 is simply about the question of whether it is a good idea to
transfer the “port concept” to creation of a whole new governmental entity,
a land-based entity, in any county and to authorize that new government
to levy yet one more tax on local property taxpayers.



Mr Ahrens concluded his remarks saying Idaho statistically has had low
property taxes although many property taxpayers don’t’ feel that to be true
when they pay their property taxes. In the last few years, property taxes
have once again begun to rise around the state. We must watch carefully
to see that property tax rates do no get out of hand and one way to do
that is to look very carefully at creation of additional levels of government
with property taxing authority. He opposed the creation of additional
taxing districts.

George Millward, United Transportation Union, appeared before the
Committee in support of HB 401 stated he represented 930 members of
which most worked in Pocatello. He said this legislation will bring in more
tools for counties to use to bring in investment by the creation of a port
district.
Senator Compton wrapped up the testimony saying this legislation
allows communities to put on the ballot an economic tool for development.
MOTION: Representative Martinez moved to send HB 401 to the floor with a do
pass
recommendation.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to hold HB 401.
Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Crow, Barrett, Moyle, Field, Schaefer, Collins, Roberts,
Wood, Denney, McKague, McGeachin. Voting Nay – Kellogg, Raybould,
Ridinger, Smith, Ringo, Martinez, Henbest, Cuddy. Motion to hold HB
401 passed, 11­8-0.
HB 406: Chairman Crow announced the next item on the agenda was HB 406 and
recognized Senator Goedde to present the bill. Senator Goedde stated
that this legislation is to reinstate a local option tax passed previously by
the Legislature. Kootenai County approved an ordinance for local option
sales tax to fund the expansion of their jail. This was challenged by the
Supreme court while the jail was being built.



This legislation authorizes counties to adopt local option sales taxes and
to implement and collect such tax. Not less than fifty percent of the
revenue generated would be applied to reduce existing property taxes
and the balance to pay off the debt load of $1.4 million a year until 2009.



Senator Goedde provided a copy of a proposed amendment to change
the voter approval to sixty- six and two thirds.

Ben Wolfinger, Deputy Sheriff of Kootenai County, testified in favor of
HB 406 said that in 1996 a levy was imposed to fund major infrastructure
spread among visitors for a much needed jail facility. One-half of the
revenue decreased property taxes. The Coeur d’ Alene Area Chamber of
Commerce supports the bill. See attached letter. (Attachment #1) The
legislature gave the people of Kootenai a tool to build a jail and the
Supreme Court took it away.
Randy Nelson, Associated Taxpayers of Idaho, passed out a report
depicting State Sales and Use Tax identified by county from the State Tax
Commission. The .5% sales tax generates $6,383,425 and is close to
what has been collected.
Russ Westerberg, Hagadone Corporation, appeared before the
Committee in support of HB 406. He stated that the Hagadone
Corporation is the largest property owner and collector of sales tax in the
county and they are in total support of the local option tax.
Rocky Watson, Kootenai County Sheriff, testified in support of HB 406.
He said in 1999 there were no available rooms in the jail facilities and
prisoners were transported to Montana. The local option sales tax was
fifty percent for the jail expansion and fifty percent for property tax relief.
In 2001 the Supreme Court took away this option and this bill will give
back to the county revenues to finish paying for the jail expansion.
Jane Gorsuch, Intermountain Forest Association, testified in favor of
HB 406 saying her membership urges full support.
Senator Goedde wrapped up the testimony stating that as soon as the
bond is paid off the tax gets shut off.
MOTION: Representative Ridinger moved to send HB 406 to general orders with
Committee amendments attached.
SUBSTITUTE
MOTION :
Representative Barrett moved to Hold HB 406. Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Crow, Barrett, Moyle, Field, Schaefer, Wood, McKague,
McGeachin. Voting Nay – Representatives Kellogg, Raybould, Ridinger,
Smith, Collins, Roberts, Denney, Ringo, Martinez, Henbest, Cuddy.
Motion to hold HB 406 failed, 8-11-0



Motion to send HB 406 to general orders with committee amend-ments attached passed on a voice vote. Representatives Crow, Barrett,
Wood, McKague, McGeachin requested to be recorded as voting no.
Representatives Ridinger and Kellogg will co-sponsor the bill on the floor.

ADJOURN: Chairman Crow stated that the Committee members were past due on the
floor and would continue the agenda tomorrow. She adjourned the
meeting at 10:03 a.m.






DATE: April 9, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

None
GUESTS: Mike Gilmore, Deputy Attorney General; Representative Doug Jones
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Kellogg moved to accept the minutes of the
meetings held on April 3, 2003 and April 4, 2003 as written. Motion
carried on a voice vote.
HB 403: Chairman Crow announced the first item on the agenda was HB 403 and
recognized Representative Denney to present the bill. Representative
Denney
testified that the purpose of this legislation is to break the current
law suit into segments to be heard in their own district. The State has
been in litigation for twelve years over the universal problem of safe
school facilities.



This legislation establishes a safe school facilities levy. It sets up criteria
under which the levy may be imposed and allows for judicial confirmation
when the safety levy fails. This legislation also brings all pending lawsuits
under the constitutional based Education Claims Act.



Representative Denney proposed the bill be amended to delete “or safe
school levy” to “”school facility levy.”

Mike Gilmore, Deputy Attorney General, briefed the Committee
members on the history of ISEEO and related lawsuits. (Attachment # 1)

There are seven school districts that which have continued to put on
evidence that have not proposed plant facilities levies or bonds since the
interest subsidy program began. It is time to bring them under the
procedures of the Constitutional Based Education Claims Act, Idaho Code
6-2201 et seq., and make them defendants in a suit brought by the State
in their own counties to encourage these districts to devote their available
resources to abate any unsafe or unhealthy conditions.

MOTION: Representative Wood moved to send HB 403 to general orders with
Committee amendments attached.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Ringo to hold HB 403.
Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Ridinger, Ringo, Martinez, Henbest, Cuddy.
Voting No – Representatives Crow, Kellogg, Raybould, Barrett, Moyle,
Field, Schaefer, Smith, Collins, Roberts, Wood, Denney, McKague,
McGeachin. Motion to Hold HB 403 failed, 5-14-0
Original motion to send HB 403 to general orders with committee
amendments attached passed
on a voice vote.
RS 13283: Chairman Crow announced the next item on the agenda was RS 13283
and asked Representative Doug Jones to explain the proposed
legislation. Representative Jones stated that this legislation would
require a ten percent per year reduction in the number of acres of grass
stubble burned in Kootenai and Benewah counties for four years resulting
in a forty percent reduction by the year 2006.



Growers who voluntarily sign up acres not to be burned would receive a
$100.00 per acre tax credit for ten years until the number of acres
required to meet the ten percent reduction level has been reached
voluntarily. Additional acres would be required to not be burned without
receiving the tax credit.

MOTION: Representative Field moved to introduce RS 13283. Roll call was
requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Crow, Kellogg, Raybould, Ridinger, Moyle,
Field, Schaefer, Denney, Ringo, Cuddy. Voting Nay – Representatives
Barrett, Smith, Collins, Roberts, Wood, McKague, McGeachin, Martinez,
Henbest. Motion to introduce RS 13283 passed, 10-9-0.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 11:00 a.m.






DATE: April 15, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:



Representatives Schaefer and Cuddy
GUESTS: Representative Ellsworth, Ted Spangler, Idaho State Tax Commission
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Martinez moved to accept the minutes of the
meetings held on April 8, 2003 and April 9, 2003 as written. Motion
carried on a voice vote.
RS 13270C1: Chairman Crow announced the first item on the agenda was RS 13270C1
and asked Representative Ellsworth to explain the proposed legislation.
Representative Ellsworth stated that this proposed bill intends to
improve compliance with existing laws relating to taxation of cigarettes
and to age restrictions on sale of cigarettes.



The proposal imposes a use tax on individuals who purchase or possess
unstamped contraband cigarettes. The tax equals the amount of the
required tax stamp. The penalty for possession of contraband cigarettes
is changed from a misdemeanor to a civil penalty of $20 per unstamped
pack of cigarettes to a maximum of $2,500.



This RS prohibits shipment of cigarettes to consumers by a cigarette
seller or common or contract carrier. It requires containers of cigarettes
to be externally marked as cigarettes. The intent is number one, to make
tax avoidance more difficult and number two, facilitate age verification of
retail purchasers. Representative Ellsworth yielded to Mr. Spangler to
explain the details of the proposed bill.

Ted Spangler, Idaho State Tax Commission, conveyed that this
proposal makes the sale of cigarettes in compliance with the law and
gives the State Tax Commission a tool to enforce the law. It is not an
overall dragnet for revenue leaking out but when the Tax Commission
finds a situation the use tax can be collected. Section 3 provides for a
civil penalty of twenty dollars per package of unstamped cigarettes or two
thousand five hundred dollars.



The intent of this proposed legislation is to limit retail sales of cigarettes
face to face. This is no cure all to enforce the sale of unstamped
cigarettes but it will help to deter persons in possession of large volumes
of unstamped cigarettes.

MOTION: Representative Raybould moved to introduce RS 13270C1. Motion
passed on a voice vote. Representatives Kellogg, Barrett, McKague and
McGeachin requested to be recorded as voting no.
Chairman Crow submitted that the following bills have been in Committee
for some time and action was needed on the following bills:



HB 82– Relating to income tax credits, land management which was
brought back from the floor for additional information.

Sponsored by the Department of Agriculture.

HB 126­Relating to schools, support, sales tax moneys.

Motion to hold subject to the call of the Chair if money was
needed. Sponsored by Representative Clark.

HB 191 ­ Relating to Sales tax, repeals special exemption on tangible
and personal property sold on Indian reservations.

Sponsored by Senator Bunderson.

HB 408 ­ Relating to income tax credit. No field burning.

Sponsored by Representative Jones who requested that it
be held in Committee.

MOTION: Representative Barrett moved to HOLD HB 82, HB 126, HB 191 and HB
408.
Motion carried on a voice vote. Representative Smith requested to
be recorded as voting no on holding HB 191.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:20 a.m.






DATE: April 17, 2003
TIME: 9:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Frost, Collins, Raybould, Roberts,
Wood, Denney, McKague, McGeachin, Cuddy, Henbest, Martinez, Ringo
ABSENT/

EXCUSED:

Representatives Schaefer and McGeachin
GUESTS: Representative Ellsworth; Bill Roden; Ted Spangler, Idaho State Tax
Commission
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Kellogg moved to accept the minutes of the meeting
held on April 15, 2003 as written. Motion carried on a voice vote.
RS 13297: Chairman Crow announced the first item on the agenda was RS 13297
and asked Representative Field to explain the proposed legislation.
Representative Field said the purpose of the proposed legislation is to
require that sales tax on retail sales of liquor by the state liquor
dispensary shall be collected on the retail shelf price after all surcharges
and mark-up by the dispensary and to direct the sales tax collected be
placed in the general account. This proposal does not affect the
distribution formula for the liquor account as provided in section 23-404,
Idaho Code. Representative Field said that Mr. Roden had assisted her
in drafting this RS to generate money to the general fund and yielded to
Mr. Roden to explain the proposal further.
Bill Roden stated that the state liquor dispensary does not distribute
sales tax on sales to the general fund. It is included in the surcharge and
distributed by a formula to various funds. This proposal places the 5%
sales tax on the shelf price and is distributed directly to the general fund.
MOTION: Representative Moyle moved to introduce RS 13297. Motion carried on
a voice vote. Representatives Kellogg and Barrett requested to be
recorded as voting no.
HB 421: Chairman Crow announced the next item on the agenda was HB 421 and
recognized Representative Ellsworth to present the bill. Representative
Ellsworth
testified that this bill intends to improve compliance with
existing laws relating to the taxation of cigarettes and to age restrictions
on sale of cigarette.
Ted Spangler stated that this bill imposes a use tax on individuals who
purchase or possess unstamped contraband cigarettes. It provides for a
penalty for possession of contraband cigarettes is changed from a
misdemeanor to a civil penalty of the greater of $20.00 per unstamped
pack of cigarettes or $2,500.00.



The bill prohibits shipment of cigarettes to consumers by a cigarette seller
or common or contract carrier. It requires containers of cigarettes to be
externally marked as cigarettes. The intent is to limit retail sales of
cigarettes to face-to-face transactions in order to make tax avoidance
more difficult and facilitate age verification of retail purchases.



Mr. Spangler said it had been brought to his attention that the Statement
of Purpose is misstated and should be reprinted.

Bill Roden stated he was not representing his clients but wanted to make
some comments relating to HB 421. In Section 3 it provides increased
civil penalties for possession of unstamped cigarette packages or
cigarette packages upon which the use tax imposed by section 2 has not
been paid. The penalty together with interest is the greater of $20 per
pack of cigarettes or $1,200. This language of the bill permits an
interpretation that the penalty is $2,500 per pack because $2,500 is
greater than $20. That would be $25,000 for each carton, ten time $2,500
per pack per carton, over the first carton. This penalty would certainly
make it worth while as a deterrent but it would add on a lot of law
enforcement officers.



Mr. Roden voiced concern with the language in section 3 which covers
military personnel purchasing at military facilities as well as tourists. If
they had two cartons of cigarettes in their possession the possessor may
be liable for a civil penalty of $25,000, plus interest plus confiscation of
the carton of cigarettes. That is an unconscionable penalty for one who
innocently possesses unstamped cigarettes.



If it is the intent of the sponsor for a purchaser of cigarettes at a military
PX not be subject to the penalty he suggested that the language on page
2, line 20 be changed from “or” to “and.”

MOTION: Representative Wood moved to send HB 421 to general orders
amending page 2, line 20 to delete “or” and add “and” with a
corrected Statement of Purpose.
Motion carried on a voice vote.
Representatives Kellogg, Barrett and McKague requested to be recorded
as voting no.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 9:50 a.m.






DATE: April 21, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, (Ringo) Cooke
ABSENT/

EXCUSED:

Representative Schaefer
GUESTS: Dan John, Idaho State Tax Commission
Chairman Crow called the meeting to order and requested a silent roll
call. She stated that questions had been raised concerning HB 406aa
after this Committee sent it to General Orders for amendment and the bill
was returned from the floor for further discussion.
HB406aa: Chairman Crow announced the first item on the agenda was HB 406aa.
This legislation authorizes counties to adopt local option sales taxes and
how to implement and collect such tax. The bill requires that the measure
be put to the voters and obtain a minimum of sixty-six and two-thirds
percent approval. The bill sets a period of time to ten years or less, set
forth a rate of taxation and that rate shall not exceed one-half of one
percent.



Not less than fifty percent of the revenue generated would be applied to
reduce existing property taxes and the balance of such revenues to
provide needed services which otherwise be paid for by county general
fund revenues.



Chairman Crow questioned conflict in the bill on page 2, line 3 which
states “for the purpose of the tax which shall be debt retirement for
expansion of detention facilities” and lines 42 and 43 “revenue of the
county available for any lawful purpose approved by county voters.” She
also said Section 4 “void and of no force and effect on and after
December 31, 2009 and on page 2, line 2 limits the term to ten years.



Representative Barrett said this bill opens up the option for a tax increase
for a local option tax.



Representative Kellogg disagreed that this is an additional tax rather it is
a replacement tax.



In response to the question of conflict on lines 3 and 42-43, Dan John,
Idaho State Tax Commission,
the two sections conflict. The section
dealing with jails is specific and the other section is a general section.
Specific control over general provisions.



Representative Ridinger pointed out the bill is for fifty percent for property
tax relief and fifty percent for debt reduction of the jail



Representative Henbest asked Mr. John if the expiration date of 2009, the
period of the debt, differ from the Act. Mr. John responded saying no the
county sales tax goes away at 2009.



Representative Kellogg said the approval of the tax takes sixty-six and
two-thirds approval to pay for infrastructure.



Representative Ridinger stated that this bill is narrowly drafted to allow a
local option tax which has worked well for Kootenai County to build a jail
and is supported by local business. Federal and state codes require
people to go to jail and local governments have to provide a jail. This bill
is a genuine property tax relief for something that property tax would have
to pay for and requires sixty-six and two-thirds voter approval.

MOTION: Representative Ridinger moved to send HB 406aa to the floor with a do
pass
recommendation. Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Kellogg, Ridinger, Smith, Denney, Cooke
(Ringo) Martinez, Henbest, Cuddy. Voting Nay – Representative Crow,
Barrett, Raybould, Moyle, Field, Collins, Roberts, Wood, McKague,
McGeachin. Motion failed, 8-10-1.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:24 a.m.






DATE: April 22, 2003
TIME: 10:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, (Ringo) Cooke
ABSENT/

EXCUSED:

None
GUESTS: Bill Roden
Chairman Crow called the meeting to order at 10:08 and requested a
silent roll call. Representative Cuddy moved to approve the minutes of
the meeting held on April 17, 2003 as written.
HB 423: Chairman Crow announced the first item on the agenda was HB 423 and
recognized Representative Field to present the bill. Representative
Field
testified that this legislation requires that sales tax on retail sales of
liquor by the state liquor dispensary shall be collected on the retail shelf
price. She stated it was not her intention to hurt anyone with introducing
this bill but it was the intention to find money for the general fund. The
charges built into the price of liquor has been changed seven times. This
bill is similar to the surcharge to fund the family and drug courts that has
passed both houses. She yielded to Mr. Roden to explain the bill.
Bill Roden stated he was not representing any of his clients. He
provided the members with a hand-out depicting the retail price
components, the Liquor Dispensary income statement, statement of
changes in fund equity and historical data on the liquor surcharge.
(Attachment # 1)



Mr. Roden explained that the purpose of this legislation is for the Liquor
Dispensary to collect sales tax on the shelf price this will treat them the
same as all other retailers in Idaho. The liquor dispensary has never
used the fifteen percent surcharge provided for in statute. As shown on
the chart provided by the Idaho State Liquor Dispensary on a retail price
of $10.95 there is a charge of .52 cents for sales tax, $2.16 for federal
alcohol tax, $4.72 markup and handling and $3.55 product cost. This bill
also puts sales tax on non-alcohol items sold in the liquor dispensary.
Liquor by the drink charges five percent sales tax and licensees get a five
percent discount.



The liquor dispensary can apply the taxes on the product and go forth to
make as much money as they can. The last page of the hand-out reflects
the liquor surcharge distribution of fixed amounts to the Alcohol Treatment
Fund, Community College Fund, Cooperative Welfare Fund , Public
School Fund. The balance goes to cities and counties and retained funds
for current obligations.



The second page of the hand-out reflects the income statement with
$22,300,831.5973 in net income for FY 2002 and $21,865,754.08 for FY
2001. Page 3 reflects the changes in the fund equity. After the
distributions the fund equity at the end of the FY 2002 was $9,963,491.06
and FY 2001 was $9,203,093.70. The total income increased by 6.8%
from FY 2001. There has been steady growth in terms of sales. Per
capita sales essentially stayed the same.



Mr. Roden said this is a policy issue to treat the liquor dispensary the
same as all other retail stores.

Maggie Mahoney, Idaho Association of Counties, appeared before the
Committee in opposition to HB 423. She testified that counties strongly
oppose losing $3.7 million in revenue. Counties take the end of what is
left over after fixed distributions are made with natural growth. One-half of
the liquor distribution goes to fund Junior College tuition which does not
cover the cost. The only way to make up any shortfall will have to be
made up for by property taxes.
MOTION: After a lengthy discussion, Representative McGeachin moved to HOLD
HB 423.
Representative Moyle voiced concern that no one was here from the
liquor dispensary to explain the approximately $10 million fund balance.
Chairman Crow thanked Representative Field and Mr. Roden for bringing
this issue forward.
Motion to HOLD HB 423 passed on a voice vote.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 10:53 a.m.






DATE: April 23, 2003
TIME: 8:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, (Ringo) Cooke
ABSENT: None
GUESTS: Senator Goedde
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Field moved to accept the minutes of the meetings
held on April 21, 2003 and April 22, 2003 as written. Motion passed on a
voice vote.
RS 13305C1: Chairman Crow announced that the first item on the agenda was RS
13305C1 and recognized Representative Ridinger to explain the
proposed legislation. Representative Ridinger yielded to Senator
Goedde. Senator Goedde said this is the fourth time this local option
sales tax has been before the Committee. This RS addresses the
concerns expressed by Committee members in the meeting held on April
21, 2003. There are changes on page 2, lines 43 and 44 removing “any
lawful purpose” to “expansion of detention facilities”. This language
clears up any misinterpretation of the use of this local option sales tax.
Language was changed on lines 48, 49 and 50 to clarify the debt
retirement.
MOTION: Representative Ridinger moved to introduce RS13305C1 and
recommend that it be placed directly on second reading without
recommendation.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to return RS
13305C1 to sponsor.
Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Raybould, Barrett, Moyle, Field, Schaefer,
Collins, Roberts, Wood, McKague, McGeachin, Crow. Voting Nay –
Representatives Kellogg, Ridinger, Smith, Denney, (Ringo) Cooke,
Martinez, Henbest, Cuddy. Motion to return RS 13305C1 to sponsor
passed, 11-8-0.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 8:40 a.m.






DATE: April 24, 2003
TIME: 9:00 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Martinez, Ringo
ABSENT/

EXCUSED:

Representatives Kellogg and Smith

Representative Schaefer and Collins

GUESTS:
Chairman Crow called the meeting to order and requested a silent roll
call. Representative Ridinger moved to accept the minutes of the meeting
held on April 23, 2003 as written. Motion passed on a voice vote.



Chairman Crow thanked the Committee and Secretaries for their diligent
work. She informed the Committee to be on standby.

ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting at 9:01 a.m.






DATE: April 25, 2003
TIME: 11:16 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Toryansky (Field(18)), Schaefer, Smith(24), Collins,
Raybould, Roberts, Wood, Denney, McKague, McGeachin, Cuddy,
Henbest, Martinez, Ringo
ABSENT/

EXCUSED:

Representative Smith

Representative Collins

GUESTS: Representative Bolz
Chairman Crow called the meeting to order and requested a silent roll
call. She recognized Representative Bolz to explain the proposed
legislation.
RS 13320: Representative Bolz testified that the purpose of this RS was to exempt
the additional one cent sales tax on contracts entered into agreement
prior to May 1, 2003. Since the sales tax of 5% was in effect when
contracts were agreed upon and signed to build at that price it is a matter
of fairness.



Representative Bolz said that on lines 26 through line 37 explains
procedures of applying to the state tax commission for the one cent
refund.

MOTION: Representative Raybould moved to send RS 13320 directly to second
reading with a do pass recommendation.
Motion passed unanimously.
Representative Bolz will sponsor the bill on the floor.
ADJOURN: There being no further business to come before the Committee Chairman
Crow adjourned the meeting subject to call of the Chair, at 11:25 a.m.






DATE: April 28, 2003
TIME: 11:30 a.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Echohawk (Martinez), Ringo
ABSENT/

EXCUSED:

None
Chairman Crow called the meeting to order at 12:10 p.m. and requested a
silent roll call. Representative Raybould moved to accept the minutes of
the meetings held on April 23, 2003 and April 24, 2003 as written. Motion
carried on a voice vote.



Chairman Crow said the testimony had previously been heard on all
three RS’s on the agenda. The House did not concur with Senate
amendments on HB 317 and HB 294.

RS13322: Chairman Crow announced the first item on the agenda was RS13322
and recognized Representative Denney to present the RS.
Representative Denney explained that this legislation replaces HB 135
requiring cigarette revenue stamps affixed to each pack of cigarettes sold
to non-Indians on Indian reservations. The language has been modified
to clarify where cigarettes are sold and where not sold. It also clarifies
definitions to conform with Internal Revenue currently in United States
Code. This language has been changed per letter from the Attorney
General’s Office. (Attachment #1)
MOTION: Representative Field moved to introduce RS13322.
SUBSTITUTE
MOTION:
A substitute motion was made by Representative Barrett to return
RS13322 to sponsor.
Roll call was requested.
ROLL CALL
VOTE:
Voting Aye – Representatives Kellogg, Raybould, Barrett, Ridinger,
Schaefer, Collins, McKague, Ringo, Eckohawk (Martinez), Henbest.
Voting Nay – Representatives Crow, Moyle, Field, Smith, Roberts, Wood,
Denney, McGeachin, Cuddy. Motion to return RS 13322 to sponsor
passed. 10-9-0.
RS13321: Chairman Crow announced the next item on the agenda was RS13321
and asked Representative Moyle to present the RS. Representative
Moyle
stated that this RS replaces HB 317 which the Senate amended to
add other taxes and the House did not concur with the amendments.



This is a leadership bill which allows taxpayers who make new personal
property investments in Idaho the opportunity to forego the income tax
investment tax credit by electing an exemption from personal property tax
on the property for a period of two years.

MOTION: Representative Wood moved to introduce RS13321 and recommend
that it be placed on second reading with a do pass recommendation.
Representatives Ridinger and Ringo requested to be recorded as voting
No. Motion passed on a voice vote. Representative Moyle will sponsor
the bill on the floor.
RS13324: Chairman Crow announced the next item on the agenda was RS13324
and recognized Representative Cuddy to explain the proposed legislation.
Representative Cuddy stated that this is a replacement of HB 264 which
the Senate amended with other tax measures and the House did not
concur with the amendments.



This legislation is to further clarify the definition of occupancy of a house
after construction.

MOTION: Representative Ridinger moved to introduce RS13324 and recommend
that it be place on second reading with a do pass recommendation.
Motion carried unanimously. Representative Cuddy will sponsor the bill
on the floor.
ADJOURN: There being no further business to come before the Committee, Chairman
Crow adjourned the meeting subject to the call of the Chair at 12:35 p.m..






DATE: April 28, 2003
TIME: 4:00 p.m.
PLACE: Room 404
MEMBERS: Chairman Crow, Vice Chairman Kellogg, Representatives Barrett,
Ridinger, Moyle, Field(18), Schaefer, Smith(24), Collins, Raybould,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Henbest,
Echohawk (Martinez), Ringo
ABSENT/

EXCUSED:

None
Chairman Crow called the meeting to order at 4:00 p.m. and requested a
silent roll call. She recognized Representative Denney to explain the
proposed legislation.
RS13331: Representative Denney said this proposed legislation replaces RS13322
requiring that a cigarette tax stamp be affixed on each package of
cigarettes sold on Indian reservations. RS13322 was returned to sponsor
by actions taken in the noon meeting.



Representative Denney said this proposal changes the implementation
date to July 1, 2004. This will allow the Tribes a year to talk about
economic issues with representatives of the State of Idaho and negotiate
an equitable agreement.

MOTION: Representative Henbest moved to return RS13331 to sponsor.
SUBSTITUTE
MOTION:
After a brief discussion a substitute motion was made by Representative
Field to introduce RS13331 and recommend that it be placed on
second reading without recommendation.
Roll call was requested.
ROLL CALL: Voting Aye – Representatives Raybould, Moyle, Field, Smith, Collins,
Roberts, Wood, Denney, McKague, McGeachin, Cuddy, Crow. Voting
Nay – Representatives Kellogg, Barrett, Ridinger, Ringo, Echohawk
(Martinez), Henbest. Motion passed to introduce RS13331 and
recommend that it be placed on second reading without
recommendation, 13-6-0.
ADJOURN: There being no further business to come before the Committee, Chairman
crow adjourned the meeting subject to call of the Chair at 4:20 p.m.