EXCUSED:

#1 Representative Kellogg, Chairman; Members – Representatives Field,
Smith, Wood, Ringo, McGeachin, Henbest

#2 Representative Cuddy, Chairman; members – Representatives Barrett,
Ridinger, Roberts and Denney

#3 Representative Raybould, Chairman; members – Representatives
Moyle, Schaefer, Collins, McKague, Martinez

The Chairman assigned the Tax Commission Rules to the Kellogg
subcommittee. She requested that Representative Raybould assist in the
meetings. She advised all the members they were welcome to attend the
meetings but those not on the subcommittee would vote only when the
rules were before the full committee.

Section 1. Repeals section 63-602DD, Idaho Code, relating to a deferral
of property taxes from 1997 to 1999 for qualified non-profit hospitals and
medical centers. The section is no longer operative.

Section 2 and 3. Provisions relating to exempting manufactured homes
used under a dealer’s plate, or as a sheep or cow camp, are moved from
section 63-303, Idaho Code, ( relating to assessments) to a new section
63-602DD, Idaho Code.

Section 4 amends section 63-602K, Idaho Code, to require the State Tax
Commission to promulgate rules specifying procedures by which the
Commission establishes and publishes average crop prices, capitalization
and discount rates. These amounts are used to determine the exemption
of the speculative portion of the value of agricultural land.

Section 1 clarifies the limitation on the exclusion for certain dividends
payable to a mutual insurance stock holding company or intermediate
holding company. The exclusion is not available if the prior years
insurance premium taxes were less than the amount of income tax the
subsidiary would have paid. The amendment clarifies that the amount of
income tax is determined after allowance for credits.

Section 2 corrects a cross-reference to the Internal Revenue Code.

Section 3 reflects changes to the federal Social Security Act increasing
the full retirement age and adds a definition of “disabled.”

Section 4 clarifies that the deduction for certain expenses for household
and dependent care services must be paid by the individual maintaining
the household, thus conforming to the Internal Revenue Code.

Section 5 corrects a cross-reference.

Section 6 requires that the Lottery Commission withhold Idaho income tax
on prizes in excess of the maximum current tax rate (currently 7.8%)
rather than at 8.2%.

Section 1 permits taxpayers to use private delivery services approved by
the Internal Revenue Service to accomplish timely filing of tax returns and
other tax related documents with the State Tax Commission.

Section 2 changes from October to September the month of the
applicable federal rate used to index the interest rate on taxes and
refunds. This change allows the Tax Commission to spread interest rates
and print in a timely manner.

Section 3 requires that an action to foreclose a tax lien must be brought in
the county in which the property is located rather than where the lien is
filed. All liens are now filed with the Secretary of State. It also clarified
the limitation of time for bringing such an action.

Sections 4, 5 and 6 delete obsolete references to “constables” and
updates references to “deputies” of the State Tax Commission.

Section 1 resolves a conflict between sections 14-517 (2) and 14-502 (e)
which covers reporting of the full name and last known address of an
insured, annuitant or the beneficiary entitled to unclaimed funds under
any life or endowment insurance policy or annuity contract. The “$50 or
more” in 14-517 is conformed to the “more than $50” in section 14-502.
Section 2 also clarifies that the filing date for the report of unclaimed
property is November 1, not “before November 1.”

Section 2 clarifies the ten-year time after which property escheats to the
State of Idaho. It conforms the ten-year escheat date of section14-518 –
“10 years after published” – to that of 14-523 (4) = “10 years after
received.”

Section 3 requires the state tax commission to record the name and last
known address of the person entitled to the property within sixty days of
transferring excess funds from the unclaimed property account.

Section 4 strikes a reference to “tax due” and substitutes a reference to
amounts due under the Unclaimed Property Act.

EXCUSED:

There is another change on page 1, line 36 of the RS correcting an error
in HB 302 which passed in 2003.

Idaho Code 633-3632 no longer refers to appeal time frames, but only
interest on deficiencies and has not since 1993. This section is no longer
applicable to appeals to or from the Board of Tax Appeals.

In response to Committee members questions whether this change would
be beneficial to appellants, Ms. Renfro related an instance where an
appellant was denied a hearing because of the fourteen day allowance
and asked for reconsideration which was granted. This change clarifies
the procedure step by step.

The fiscal impact of this bill will vary depending on future insurance
company insolvencies and assessments. Since 1980 there have been
fourteen years with no assessments and ten years with assessments.
The total net assessment for the twenty-four year period was
$14,887,933. This represents an average of $629,339 per year. Loss to
the general fund for FY 2005 is not anticipated.

EXCUSED:

Representative Field

(1) In 63-702, Definitions, parts 4 and 7, and other sections in the bill,
reference to grantor trusts is eliminated, since that status is no longer
required to receive the benefits of the property tax reductions.

(2) In 63-701, part 4, the definition of income in relation to dual principal
residence applications is clarified.

(3) In 63-701, procedure for filing claims, the application procedure is
simplified, especially as to the affidavit in support of the application, by
limiting the information to only information actually needed. The
difference between and affidavit for trust ownership and an affidavit for
entity ownership is also clarified. The use of the word “grantor” is
changed to “claimant” since, as noted above, grantor status is no longer
relevant. Section d is redundant and is eliminated.

(4) In 63-707, procedure after claim approval, part 1(c) is amended to
properly state what the assessor shall include on the property tax
reduction roll. Part 4 of 63-707 and part 1 of 63-709, reimbursement by
State Tax Commission, are contracted and amended to eliminate dual
reference to the same determination and to provide a single date, the third
Monday in November, for the provision of such data and payment by the
State Tax Commission to the county. This makes the layout of the two
sections more logical and compact and eliminates the conflict in dates in
the two sections.

(5) In 63-602G, property exempt from taxation – residential improvements,
lengthy affidavit procedures are eliminated, since the same informational
requirements are already set forth in section 63-703 (4) and a cross-reference to that section is substituted. This also eliminates differences
and conflicts in the two code sections as to what information and
supporting documents were required to be submitted.

Since making the change in the midst of a tax year would be difficult, the
bill also declares an effective date of January 1, 2004.

All of the language of the bill has been submitted to the state-wide
organization of the Assessors, including to their legislative committee and
to the Sate Tax Commission and has been reviewed by them and
approved by them.

This bill will have no fiscal impact. The bill will greatly clarify and simplify
the administration of the property tax reduction procedures of the State of
Idaho which may lead to administrative savings.

In response to a question whether these changes were approved by the
Tax Commission, Mr. Aldridge responded saying that the Tax
Commission had contacted him for his assistance.

EXCUSED:

Rule No. 45 – Non Resident – Rule 045 is being amended to add
information regarding the federal limitation on the states against taxing the
compensation earned by water carrier employees that are covered by
Title 46, Section 11108, United States Code. Previously, federal law
restricted only the withholding on these employees’ wages, not the
taxation of their income.

Rule No. 120 – Adjustments to Taxable Income – Subtractions
Available to All Taxpayers – Rule 120 is being amended to conform to
2003 legislation that added new Section 63-30220, Idaho Code, in H.B.
390. Subsection 06 is being added to require a subtraction to taxable
income if the taxpayer claimed the special first-year depreciation
allowance for federal income tax purposes and the Idaho depreciation
allowed is more than the amount claimed for federal. Subsection 06 also
requires a subtraction if property was sold or exchanged and the taxpayer
claimed the special first-year depreciation allowance on the property for
federal income tax purposes. Examples are being added. These rule
changes are consistent with H.B. 390, which requires Idaho depreciation,
adjusted basis, and capital gains and losses of depreciable property to be
computed without the federal bonus depreciation.

Representative Ringo moved to accept the proposed amendments to
Docket No. 35-0101-0301 – Idaho Income Tax Administrative Rule 791
and to present the rule to the full committee for approval. Motion passed
unanimously on a voice vote.

Rule No. 872 – Report and Paying State Income Tax Withholding –
Rule 872 is being amended to add a paragraph to address split-monthly
filers for income tax withholding. It includes a table to identify the monthly
and annual threshold amounts for meeting the requirement to remit
income taxes withheld on a split-month basis. .

EXCUSED:

Mr. Whitlock reviewed the history relating to these tax credits stating that
when they were granted the Governor recommended a three year trial
basis. The legislature extended the time to five years. There have been
real benefits to the State as a result of these credits. With enactment of
this bill both tax credit provisions will become permanent.

There will be no fiscal impact to the General Fund in Fiscal Year 2005.
The combined fiscal impact for taxable years beginning on and after
January 1, 2006 could be $2.25 million if utilized.

There will be a cost savings to taxpayers by reduced reporting
requirements and to the State Tax Commission in processing
requirements.

Each fiscal year the state distributes to counties, cities, school districts
and other local taxing districts an amount of state funds intended to
replace revenues lost when agricultural equipment was exempted from
property tax in 2001. Under current law these funds are paid from the
state refund account which is used to pay income tax refunds. This
overstates refunds paid each year and depletes the refund account. This
bill will change the distribution to provide that it be paid from revenue
received from the Sales Tax Act.

Local governments will receive the same amount of state General Fund
revenue.

There was a question relating to the value of agricultural equipment going
up or down, Mr. John responded saying reimbursement cost for the
agricultural exemption is a fixed amount of $13.4 million per year.

EXCUSED:

The Chairman recognized James Husted, State Tax Commissions
Specialist to present the rule changes. Mr Husted explained the
proposed amendments as follows: (See attached – complete document of
Idaho Income Tax Administrative Rules).

Idaho Tax Commission Administrative and Enforcement Rules
Docket 35-0102-0303 Fee Rule No. 109 – Amusement Devices. .

Section 63-3623B(c), Idaho Code states: Upon payment of the permit
fees, the state tax commission shall issue the permit(s) to the owner or
lessee or person having the right to impose a charge for use of the
amusement device. Such permit fee may be increased in a proportionate
amount by the commission if the state sales tax rate increases.

With the enactment of H.B. 400 in 2003, the legislature increased the
sales tax rate from 5% to 6%. The Tax Commission is therefore
proposing to increase the amusement device permit fee by a
proportionate amount, as permitted by statute. The rule promulgated by
the Commission accomplishes this by adding a formula to calculate the
permit fee. The formula multiplies the current tax rate by $700. Thus, at
the current rate the permit fee would be 6% of $700 or $42.

When the sales tax rate returns to 5% the permit fee will therefore
automatically return to $35 by applying this formula.

MOTION:

Representative McGeachin moved to accept the proposed rule
amendments to Docket 35-0102-0304 – Idaho Sales and Use Tax
Administrative Rule No. 37 – and to present the rule change to the full
committee for approval. Motion passed unanimously on a voice vote.

MOTION:

Representative Field moved to accept the proposed rule amendments
to Docket No. 35-0110-0301 – Idaho Cigarette and Tobacco Products
Tax Administrative Rule 017 – Security for Tax Required and to
present the changed rule to the full committee for approval. Motion
passed unanimously with a voice vote

EXCUSED:

Additional language puts into statute that any sale or lease of hunting or
fishing rights on the property does not change the tax status of the land if
it meets the definitions of 63-604, “land actively devoted to agriculture.”

The purpose of this legislation is to provide an incentive to locate thermal
power plants owned by electric utilities close to electric load. It also gives
an incentive to cities to permit a power plant to locate within or near a city
by providing that the property taxes from such a plant are “apportioned
based on the physical location of the plant.”

Currently utility owned generating assets are centrally assessed and the
property values are then apportioned throughout the utility service area
based on the situs of the utility’s transmission wire miles.

The proposed legislation will change the apportionment or allocation of
property taxes from an electric generating plant as among a multitude of
taxing districts. This would result in a generalized net effect of taxing
districts with nexus to the plant receiving more property tax revenues.
Taxing districts without plant nexus but with utility transmission nexus
would receive less.

This proposed legislation clarifies the definition of those transactions
which qualify for an exemption from last year’s one cent sales tax
increase.

Representative Cuddy said this affects public works and highway
contracts right in the middle of a project.

EXCUSED:

Docket No. 35-0103-0301 – Rule No. 313 – Assessment of Transient
Personal Property – Rule 313 is being amended to clarify the statutory
references for different types of transient personal property (by definition,
construction, logging, and mining equipment that is moved between
counties during the year). When such property is “in transit” it is not
subject to property tax, based on the provisions of Section 63-313(4),
Idaho Code. Transient personal property that has been sold is not
subject to additional property tax, provided the full year’s tax was paid,
based on Section 63-313(4), Idaho Code. An existing cross-reference to
Section 63-602U, Idaho Code, is being deleted as confusing.

to Rule 316 – Compliance of Continuing Valuation Program and to
present the rule change to the full committee for approval. Motion passed
unanimously on a voice vote.

Section 63-3029B, Idaho Code, in lieu of the investment tax credit.

In response to questions relating to confidentiality Robert McQuade, Ada
County Assessor, stated the legal staff had checked out violations that
had occurred, therefore this rule was developed:

Paragraph 15 – Public Records and Exemption Of Certain QIE
Information From Disclosure. Public records are presumed to be open
to the public. Records containing certain information pertaining to private
businesses (such as trade secrets and other proprietary information) may
be exempt from public disclosure (See Section 9-340D, Idaho Code) and
may be protected from disclosure by the Idaho Trade Secrets Act,
Chapter 8 Title 48, Idaho Code, and other laws. A taxpayer who submits
information to the State Tax Commission or to a county assessor or board
of equalization in accordance with this rule may designate all or part of
the information as confidential. The designation must be made in writing
and clearly identify the particular information deemed confidential. In
addition, the front page of the submission must prominently state that the
document contains information as designated as confidential. The State
Tax Commission, the county assessor and board of equalization shall
treat the designated information as confidential, exempt from disclosure
under Section 9-34D, Idaho Code and as subject to the Idaho Trade
Secrets Act (See Chapter 8 Title 48, IdahoCode). Nothing in this
paragraph limits exchanges of information between or among the State
Tax Commission and county officials otherwise authorized by law.

Voting Nay. Representatives Smith, McGeachin, Henbest and Ringo.

Substitute Motion failed – 2-4-1

Voting Aye Representatives Smith, McGeachin, Henbest and Ringo
Original Motion passed. 4-2-1

EXCUSED:

Mr. Lehman stated that in 2001 the legislature allowed fifty percent of long
term care insurance premiums to be exempted as a tax incentive. This
legislation further enhances the incentive by increasing the deduction for
the full amount of the premiums.

The reason for this incentive is to encourage people to purchase long
term care insurance and not rely on medicaid. Private long term care
insurance is accepted by all care centers to provide the right care and the
right setting. This incentive will be a long term benefit for individuals and
the state.

EXCUSED:

If this legislation receives the needed two-thirds approval in both the
House of Representatives and the Senate it will then be placed on the
November 2004 ballot to be ratified by the voters of the State of Idaho.

The fiscal impact from this legislation will be realized by the taxpayers of
the State of Idaho. This proposal is designed to control the growth of
government.

Representative Roberts informed the members that there are thirteen
states that have constitutional amendments in place requiring more than a
simple majority.

Voting Nay – Representatives Kellogg, Ridinger, Ringo, Martinez,
Henbest. Motion passed. 12-5-2

EXCUSED:

Subsection 15, “Public Records and Exemption of Certain QIE Information
From Disclosure, Public records are presumed to be open to the public,
Records containing certain information pertaining to private businesses
(such as trade secrets and other proprietary information) may be exempt
from public disclosure (See Section 9-340D, Idaho Code) and may be
protected from disclosure by the Idaho Trade Secrets Act, Chapter & Title
48, Idaho Code, and other laws. A taxpayer who submits information to
the State Tax Commission or to a county assessor or board of
equalization in accordance with this rule may designate all or part of the
information as confidential. The designation must be made in writing and
clearly identify the particular information deemed confidential. In addition,
the front page of the submission must prominently state that the
document contains information designated as confidential. The State Tax
Commission, the county assessor and board of equalization shall treat the
designated information as confidential, exempt from disclosure under
Section 9-340D, Idaho Code and as subject to the Idaho Trade Secrets
Act (see Chapter 8 Title 48, Idaho Code). Nothing in this paragraph limits
exchanges of information between or among the State Tax Commission
and county officials otherwise authorized by law.

Representative Smith explained his substitute motion saying this rule sets
forth standards for information exempt from exposure. The majority of the
subcommittee viewed this as setting tax policy. This rule goes beyond the
rule making process, beyond public policy and goes beyond the statute.

Rule 15 confidentiality is deemed to be a “Trade Secret” by the taxpayer
and the assessor. There is no information for people to protest. This rule
goes beyond the statute and if there is a need for confidentiality there
needs to be as statute to take advantage of the tax credit.

Voting Nay: Representatives Kellogg, Raybould, Barrett, Moyle, Field,
Collins, Roberts, Wood, Denney, McKague, McGeachin, Crow.

Motion failed, 4-12-3

EXCUSED:

In response relating to repealing Chapter 13, title 7, Idaho Code,
Representative Eberle said it does repeal judicial confirmations. It also
repeals the power of the judicial to impose a tax. That power should be
by the vote of the people if they want to be taxed.

Voting Nay: Representatives Barrett, Collins, McKague, Ringo, Cuddy.
Substitute motion to return to sponsor passed, 12-6-1.

The purpose of this bill is to partially exempt parcels of land in a rural
homesite development plat. This bill 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 requirement for total land area defined in
Section 63-0604 (a) and the amendment to 63-604 providing exceptions
for implementation of this act. It also defines terms used in the act.

Chairman Crow called the meeting to order and requested a silent
roll call. Representative Ridinger moved to accept the minutes of
the meetings held on January 29, 2004 and February 2, 2004 as
written.

In section 2 and 3 language is moved from section 63-303, Idaho
Code, relating to assessments, to a new section 63-602DD, Idaho
Code, relating to exemptions. The provisions relate to exempting
manufactured homes used as dealers plate or as a sheep and
cow camp.

Section 4 amends section 63-602K, Idaho Code, to require the
State Tax Commission to promulgate rules specifying procedures
by which the Commission establishes and publishes average crop
prices, capitalization and discount rates. These amounts are used
to determine the exemption of the speculative portion of the value
of agricultural land.

Section 2 changes from October to September the month of the
applicable federal rate used to index the interest rate on taxes and
refunds.

Section 3 requires that an action to foreclose a tax lien must be
brought in the county which the property is located rather than
where the lien is filed and clarifies the limitation of time for bringing
such an action.

Section 4, 5 and 6 deletes reference to ‘constables” which is
antiquated language. There is only one “constable” in the State
who is in Bellevue which is a charter city. It also updates
references to “deputies” of the State Tax Commission to ‘agent of
the state tax commission.”

Section 1 resolves a conflict between sections 14-717 (2) and 14-502 (e) about reporting of the full name and last known address of
an insured, annuitant or the beneficiary entitled to unclaimed funds
under any life or endowment insurance policy or annuity contract.
The “$50 or more” in 14-517 is conformed to the “more then $50”
in section 14-502. Section 1 also clarifies that the filing date for the
report of unclaimed property is November I, not “before November
I.”

Section 3 requires the State Tax Commission to record the name
and last known address of the person entitled to the property within
sixty days of transferring excess funds from the unclaimed property
account.

Section 4 strikes a reference to “tax due” and substitutes a
reference to amounts due under the Unclaimed Property Act.

Section 2 corrects a cross-reference of college tuition to the
Internal Revenue Code.

Section 3 , page 7, line 3 reflects changes “man” to “person” making
it gender neutral. Starting on line 3 adds “full retirement” from “age
sixty-five years” to reflect changes to the federal Social Security
Act increasing the full retirement age. Line 45 adds a definition of
“disabled.”

Section 4 clarifies that the deduction for certain expenses for
household and dependent care services must be paid by the
individual maintaining the household thus conforming to the
Internal Revenue Code.

Section 5 corrects a cross reference from “J” to “j”.

Section 6 requires that the Lottery Commission withhold Idaho
income tax on prizes in excess of the maximum current income tax
rate of 7.8% rather than at 8.2%.

Representative Barrett was assigned to sponsor the bill on the
floor.

EXCUSED:

Tax Commission; Neil Colwell, Avista; Leon Duce, Association of Idaho
Cities

“The purpose of this legislation is to provide an incentive to locate thermal
power plants owned by electric utilities close to electric load.”
Representative Eskridge said that in today’s atmosphere there is a need
for thermal power as we have reached capacity of water use for power.
Citizens of communities accept the burden of waste water and other
nuisances created by the operation of the plant. In current law the cities
bear the brunt of the impact and very little revenue from property taxes.

This bill changes the apportionment of property taxes on thermal power
plant facilities located within five miles outside city borders to be
apportioned to that taxing district.

Representative Eskridge stated that this is not a property tax bill, it is a
power plant siting bill. This bill enhances the benefit of location of a
power plant to cities by allowing the property taxes to remain at the local
level.

EXCUSED:

Section 63-3632 no longer refers to appeal time frames, only interest on
deficiencies and has not since 1993. This section is no longer applicable
to appeals to or from the Board of Tax Appeals.

The second change is to correct an error in HB 302 passed in 2003. On
line 36 of the bill it deletes the word “party” and inserts the word “burden.”

By way of review Mr. Mackay reminded the committee that there are two
Guaranty Associations in the state. One covers the life and health
insurance companies while the other covers property casualty and
workers compensation insurance companies. Both were created by
legislative action in the early 70’s and have identical purposes. The
legislation provided the mechanism for the prompt payment of covered
claims of an insolvent insurance company doing business in the State of
Idaho. This avoids financial loss to those Idaho citizens who relied on the
protection provided by the insurance. The claims are paid with funds the
Guaranty Association receives by assessing the other member insurance
companies doing business in Idaho.

Idaho Code section 41-3616 allows life and health companies to recover
assessments paid to the guaranty association by offsetting the
assessment against premium tax to the extent of twenty percent of the
amount assessed for each of the five years following the year in which the
assessment was paid.

Idaho Code section 41-3616 provides property casualty and workers
compensation companies the opportunity to increase rates and premium
charged to its policyholders as the only way to recover assessments paid
to its guaranty association

It was their position that 41-3616 in its present form could impose an
unfair penalty on Idaho policyholders as well as jeopardize any
competitive portion that an Idaho company might enjoy. Furthermore the
United Heritage Financial Group felt that 41-4313 gives the life and health
insurers a business advantage because 41-3616 does not provide for
property casualty and workers compensation companies.

HB 512 would amend 41-3616 by removing the language relating to
increased rates and premiums and in its place insert the language from
41-4313 which allows tax offsets for assessments paid to the guaranty
association.

To the best of his knowledge there is no opposition to this bill and the
Department of Insurance is aware of the bill.

The Fiscal Impact to FY05 will vary depending on insurance company
insolvencies and assessments occurring between now and the end of the
year. Insurance companies are required to file their 2004 premium tax
returns with the state before March 1, 2005. If an assessment should
occur between now and the end of the year, twenty percent would be
reflected on that return. To the best of his knowledge at this moment in
time there are no property casualty or workers compensation companies
doing business in Idaho that would trigger an assessment this year.

In response to Representative Cuddy’s request he had attempted to
identify the insolvencies and assessments over the past five years. He
provided the members with a report reflecting the assessment/refund
history all assessments and refunds since 1971. He said that last year’s
assessment of $9,200,000 is by far the largest amount ever assessed and
the only year in which an assessment was made since 1994. Hopefully
2003 was an anomaly and will not be repeated anytime soon. However if
HB 512 had been in effect last year the fiscal impact each of the following
five years would have been $1,800,00 less any amounts refunded upon
liquidation.

Since the introduction of HB 512 there had been requests to amend the
bill. Amendment 1 is to clarify premium tax paid to the Department of
Insurance. Amendment 2 allows the Idaho Association of Loggers the
offset of premiums paid to the Industrial Commission.

Mr. Richards said that he had received a communication from the
Industrial Commission which led to the first requested amendment and he
had a subsequent discussion with the Industrial Commission which led to
the second amendment .

As some of you may know, there are two premium taxes paid by
insurance companies in Idaho. One is paid to the Idaho Department of
Insurance and goes to the General Fund. The second us paid to the
Industrial Commission administration fund. As he understood from the
sponsor, the intent of HB 512 is to allow an offset to the premium taxes
paid to the Department of Insurance. In order to make sure that there is
no confusion the Industrial Commission had asked that the first
amendment be added. The second amendment arises because there is
one insurance company, Associated Loggers Exchange, that pays its
2.5% premium tax only to the Industrial Commission. Associated Loggers
is a member of the Guaranty Association and pays assessment to the
Guaranty Association. In order to keep the Associated Loggers on a level
playing field in terms of being able to take an offset. The second
amendment was authorized by the Industrial Commission to allow
Associated Loggers to take its offset against the Industrial Commission
premium tax.

Mr. Richards suggested that the Statement of Purpose/Fiscal Impact be
amended to reflect that no loss to the Industrial Commission
administration fund is anticipated at this time in FY 2005.

EXCUSED:

The Statement of Purpose is as follows: This resolution proposes to
amend the Constitution to provide that on and after January 1, 2005 any
changes in state taxes that create or increase a tax rate or remove or
reduce a state tax exclusion, exemption, credit or deduction, shall require
the approval of two-thirds of the entire membership of the house of
representatives, approval of two-thirds of the entire membership of the
Senate and the signature of the Governor.

If this legislation receives the needed 2/3 approval in both the House of
Representatives and the Senate it will then be placed on the November
2004 ballot to be ratified by the voters of the State of Idaho.

There was an active debate as to the extent of restricting taxes or fees.

Voting Nay – Representatives Raybould, Barrett, Moyle, Schaefer, Collins,
Roberts, Wood, Denney, McKague, Crow. Motion failed, 7-10-2

Original motion to recommend RS13978 be introduced passed on a
voice vote. Representative Kellogg requested to be recorded as voting
no.

In 63-701, Definitions, parts 4 and 7 and other sections in the bill,
reference to grantor trusts is eliminated. That status is no longer required
to receive the benefits of the property tax reductions.

In 63-701, part 4, the definition of income in relation to dual principal
residence applications is clarified.

In 63-703, procedure for filing claims, the application procedure is
simplified, especially as to the affidavit in support of the application
limiting the information to only information actually needed. The
difference between an affidavit for trust ownership and an affidavit for
entity ownership is also clarified. The use of the word “grantor” is
changed to “claimant” since, as he previously stated, grantor status is no
longer relevant. Section d is redundant and is eliminated.

In 63-707, procedure after claim approval, part l (c) is amended to
properly state what the assessor shall include on the property tax
reduction roll. Part 4 of 63-707 and part l of 63-709 reimbursement by
State Tax Commission are contracted and amended to eliminate dual
reference to the same determination and to provide a single date, the third
Monday in November, for the provision of such data and payment by the
State Tax Commission to the county. This makes the layout of the two
sections more logical and compact and eliminates the conflict in dates in
the two sections.

In 63-602G, property exempt from taxation – residential improvements,
lengthy affidavit procedures are eliminated. The same informational
requirements are already set forth in section 63-703(4) and a simple
cross-reference to that section is substituted. This also eliminates
differences and conflicts in the two code sections as to what information
and supporting documents were required to be submitted.

Since making the change in the midst of a tax year would be difficult the
bill also declares an effective date of January 1, 2004.

In response to a question whether these changes had gone through the
resolution process and approved by the Bar Association, Mr. Aldridge
said that they had not but the changes had been furnished to the Bar. .
He said the resolution process is prior to December 1 st and would not be
reviewed until next year. The changes had been reviewed by his
Committee and the Tax Commission.

This bill changes where the money comes from to replace these funds.
Under current law these funds are paid from the state refund account.
When the refund account is depleted the State Tax Commission has to go
to the Board of Examiners to increase the fund, this is an unnecessary
step as the money comes from the same source. This bill will change the
distribution to come from revenue received from the Sales Tax Act.

The Governor is the Chairman of the National Governors Association and
his initiative is long term care solutions to reduce costs to medicare and
medicaid by private long term care.

Mr. Lehman addressed the costs of long-term care and the availability of
information provided for taxpayers to obtain long-term insurance.

EXCUSED:

Representatives Moyle and Denney

Some values on the high end eschew the system and are not carrying
their share of the property tax burden.

The statement of purpose of this bill is to require mandatory disclosure of
sales price for all real estate transactions. Transfer of ownership and the
amount of consideration paid for such transfer would be certified and
submitted to the county assessor by the purchaser within 30 days of the
transfer. Disclosure of sales price information would be limited to licensed
appraisers, real estate brokers, the Idaho State Tax Commission and
persons with 5% ownership interest in the property. Idaho public records
law is amended to exempt further disclosure and penalties for
unauthorized disclosures are provided.

The bill provides county assessors, who are required by state law to value
property at market-value with an additional tool to perform accurate and
equitable appraisals.

There was a short discussion relating to confidentiality.

Voting Nay: Representatives Barrett, McKague, McGeachin

Substitute motion to introduce RS 13781 passed, 13-3-3

These two measures were part of the 2001 historic tax relief package that
passed this Legislature and was approved by the Governor. As you may
recall when the Governor proposed these two elements of the package he
suggested that we test them out for three years. The Legislature wisely
expanded that to a 5-year trial period- January 1, 2001 to December 31,
2005 ­and we have seen tremendous benefit as a result of that decision .

With regard to the broadband tax credit, he shared with the Committee a
packet of letters from various companies that have invested millions of
dollars throughout the state, especially in the rural parts of Idaho, in part
because of that incentive.

It is important to note that this is one investment that opens the door for
technology and new business opportunities to exist where they have
never been possible before.

Charlie Creason with Project Mutual Telephone in Rupert says, “Since
passage of the broadband tax credit by the Idaho legislature, Project
Mutual Telephone has invested over $10 million modernizing our local
telecommunication network, bringing the availability of broadband to over
95% of our subscribers.” He goes on to say, “To make the true potential
of these networks a reality will require continued and additional
investment.”

Teton Telecom’s vice president, Ron McCue wrote, “The development
and deployment of broadband technology for rural Idaho is essential to
retaining to our citizens as bringing roads and interstate highway systems
to our state was in the last century. Our residents and the companies
they work for truly face global competition. The use of broadband
technology places us on an even footing to compete for jobs and for
increased business to help us grow.”

ATC Communications in Albion said this. “ATC has over 5,000 customers
in four counties spanning more than 4,000 square miles. We are very
rural in nature and this tax incentive has not only helped stimulate rural
economic growth in our areas, it has also helped our company to make
the necessary investments to bring Broadband to our rural customers.”

Farmers Mutual Telephone Company in Fruitland invested $121,000 last
year so that they could bring DSL to their customers. They”ve budgeted
$215,000 for upgrades in 2004. “Without the Broadband Investment Tax
Credit we would have to decrease our 2004 investment as well as that
invested in future years.”

The last letter is from Syringa Networks. ” As a result of the Broadband
Investment Tax Credit, DSL Service is available in Clyde, Idaho. Most
folks in Idaho probably don’t even know that Clyde is a small community
northwest of Howe, Idaho.” Mr. Whitlock said he saw a great headline
after Clyde was connected. It read: “Clyde is on the right side of the
digital divide.”

These companies and others like them have made significant investments
since the passage of the Broadband Tax Credit and there will be more.
Our tax policy needs to encourage that kind of investment.

With regard to the Research and Development Tax Credit, at last count
Idaho was one of 34 states that has an R&D income tax credit. In the
State of the State address the Governor mentioned the imaging
technology owned by Micron and how they have developed the camera
and a chip that can fit into a pill. What a great medical breakthrough that
is less invasive and less costly than other procedures.

Companies will only continue to thrive if they can continue research and
development of new technologies and new products. As part of our Idaho
tax policy we should seek to encourage that kind of research and
development.

If there is one constant among Tax Practitioners, the CPA community and
corporate tax managers in Idaho it is that lead-time is important for good
tax planning. This bill does just that.

While current tax credits are not set to expire until December 31, 2005,
eliminating that sunset will send a strong positive message to companies
making investment in Research and Development and in Broadband
deployment.

The fiscal impact of this bill does not take effect until FY2007. At that
point they anticipate that the continuation of the Broadband credit will be
$1.0 million if used. The continuation of the R&D credit is estimated to be
$1.25 million if they are used.

The Governor believes those costs are a good investment. Especially
when you consider the incentives that are provided by other states. When
the R&D and Broadband incentives were put in place, Idaho was able to
compete with any other state in the Northwest. We don”t want to lose
these tools and our competitive advantage.

EXCUSED:

On occasions timberland is sold and the taxes were paid or delayed, the
county treasurer has no way to distribute the funds. This legislation is
drafted to fix that problem.

This RS provides a technical correction and amends section 39-1325a to
provide for an order of dissolution of a hospital district. When the
completion of winding up and liquidating the district’s business and affairs,
the commissioners shall notify the social security administrator at the
Idaho State Controller’s office of the dissolution of a hospital district
assets within ninety days.

The purpose for any consolidation is to foster economies of scale,
maximize resources, ensure up to date materials and information. Non-contiguous consolidation would require submission of a citizen’s petition
requesting the question be placed on the ballot, a public election ordered
by city council and agreed to by the district board of trustees, an election
held on one of the consolidated election dates and approval by a majority
of voters.

Voting Nay: Representatives Kellogg, Ridinger, Field, Schaefer, Smith,
Collins, McGeachin, Ringo, Martinez, Henbest, Cuddy. Motion failed, 8-11-0

Original motion to introduce passed on a voice vote. Representatives
Moyle and McKague requested to be recorded as voting no.

This proposal would amend Section 33-2724 Idaho Code, allowing library
districts to align their levy rates with Idaho’s city library levy rate authority.
City libraries now are allowed to levy up to .10 percent or one dollar per
on thousand dollars of appraised value. Library districts are allowed to
levy no more than six one hundredths percent or sixty cents per one
thousand dollars. This increase in levy authorization will facilitate library
districts in meeting the same maintenance and operating expenses,
demands and costs comparable to city libraries.

This amendment would allow library districts to take the allowable annual
increase in budget as needed up to the new maximum but still within the
3% growth cap limit. A permanent over-ride would still require a 2/3rd
vote as required in Section 63-802 Idaho Code.

Voting Nay: Representatives Kellogg, Raybould, Ridinger, Smith, Collins,
McGeachin, Ringo, Martinez, Henbest, Cuddy. Motion failed, 9-10-0

Original motion to introduce passed. Representatives Moyle and
McKague requested to be recorded as voting no.

EXCUSED:

Copy of the report is filed in the Legislative Library.

EXCUSED:

On the first page of the bill, lines 40 through 43 modifies the present
structure by adjusting the premium tax, over a six year time frame, to a
single premium tax rate of 1.5%. A single premium tax rate of 1.5% will
make Idaho more competitive in its efforts to attract insurance carriers to
locate in Idaho as its “home” or “domiciliary” state. Page 3, lines 28 and
29 reflects the required percentage of assets invested. Page 4, lines 27
through 40, appropriates $1,000,000 to the Idaho health insurance access
card fund. The future appropriations will be applicable percentages set
out in section (e). Changing the premiums tax remaining exceeds fifty
million dollars, instead of forty five million dollars, will be appropriated to
the Idaho high risk pool. Twenty-five percent of the remaining excess
above fifty million, instead of fifty- five million will be appropriated to the
Idaho health insurance access card fund.

The change to a single premium tax rate for all insurance carriers will also
satisfy current litigation to waive their process and will withdraw the
lawsuit.

Representative Moyle explained his motion saying premiums are a
different issue. Roll call vote was requested.

Voting Nay – Representatives Smith, Collins, Ringo, Martinez, Henbest,
Cuddy

Motion to introduce the corrected RS 14114 passed, 13-6-0

The General Fund impact for FY 2004 is a reduction of $1.5 million in the
revenue stream. There is a General Fund reduction in the revenue
stream of $1.8 million for FY 2005 and FY 2006. The General Fund fiscal
impact diminishes starting in FY 2007 and this reversal will continue in
future years to the point that the net fiscal impact to the state over the life
of the asset is zero.

In response to a question relating to the disallowance of the federal
“bonus” depreciation, Mr. John said it would be difficult to go back to
section 168 of the Internal Revenue Code to pick up the 30% and the
50% depreciation.

Currently Idaho Code allows that counties pay a portion of a resident
student’s community college tuition not to exceed $500 each semester for
a two semester year for a full time student up to six semesters which
would be a total of $3,000.

The purpose of this legislation is to recognize that community college
students today do not necessarily complete their education within six
semesters because they often have to work for a living while striving
towards a college degree.

This legislation leaves the county exposure cap at $3,000 but would allow
a longer period of time for students to complete their community college
courses.

The legislation leaves in place the current cap of $3,000. However it is
possible that this change could attract more students into community
college courses thus expanding the counties overall budget. This cost
could be offset because students completing college courses and
increase their income earning potential which would increase their ability
to pay taxes and contributions to the counties overall economy.

Mr. Whitlock briefed the members with the history of the jobs credit which
originally was for natural resource based revenue-producing enterprises.
This was expanded in 2001 for one year only and applied only to net new
jobs, not filling of a vacant position. Idaho businesses are anxious to
expand and hire new employees and should encourage those employers
to create attractive new jobs.

He enumerated the average pay for all various occupations reported by
the Department of Labor. Last year the statewide average for all
occupation was $15.50 per hour or $32,200 annually. With benefits this
amount approximates $42,800 per year. If an employer will create
desirable jobs with benefits the proposed tax credit incentive for that
employer will be $1,000 per qualifying job.

This bill requires that the employee must work at the job for nine months
in a year which means the job has to be created during the first quarter of
the taxpayer’s year. As a side note, he said the $500 credit still remains
for net new jobs created in solely natural resource based revenue
producing enterprises that do not meet the pay criteria of this bill.

Motion with a do pass carried on a voice vote. Representative Cuddy
was assigned to carry the bill on the floor

John Cantamessa, Shoshone County Commissioner, stated that the
Shoshone Hospital District went bankrupt in 2001. Their assets were
bonded. This bill gives the county the ability to tax until the bond is paid
off.

EXCUSED:

Chairman Crow introduced Dr. James Weatherby, Chairman of the
Property Tax Task Force Committee. Dr. Weatherby introduced members
of the task force who were present. He provided the members with a copy
of the PROPERTY TASK FORCE STUDY. He proceeded to review each
page of the study asking for questions from the committee. (See attached
complete study). A question and answer period followed.

Chairman Crow thanked Dr. Weatherby and the task force committee and
commended them for their good work and the value of the report.

A copy of the report is filed in the Legislative Library.

EXCUSED:

The Chairman informed the members that copies of the corrected
Statement of Purpose for the insurance premium bill passed yesterday
was before them for their review only.

Chairman Crow announced that without objection she was assigning the
Constitutional Amendment bills HJR006, HJR007 and HJR010 to the
Kellogg Subcommittee for further study. There was no objection.

Loss of revenue to the general fund would be about $90,000 each fiscal
year. An equal savings to the cities and schools that purchase the
playground equipment should offset this expense.

In response to question relating to other contractors status relating to
sales tax on material, Dan John, State Tax Commission, stated the
statute which has been in place since 1965 is very specific that
contractors will pay sales tax on material used for contracts with all
government entities.

After a general discussion regarding setting a precedent Representative
Wood amended her motion to introduce with a corrected RS to insert the
word “public” before playground equipment with the changes in the title.
Motion passed on voice vote.

This legislation deals with section 63-1703 of the Idaho Code that allows
for taxing forestland on a bare land and yield basis. When this method of
taxation is used the property owner pays tax only on the land until the
timber on the land is harvested or at the end of the ten year period. If
during this period the property title is transferred the existing code does
not address how taxes collected and disbursed between regular taxing
and disbursement of these collections are to be handled. This legislation
is intended to clarify the code in regard to collection and distribution.

He said the treasurers are confused how to handle the deferred tax when
the land is sold and title companies sometimes do not know if there is an
automatic lien on the property.

Chairman Crow called the meeting to order and requested a silent
roll call. She announced that Representative Trail had requested
that HB 530, Income tax deduction, teachers expenses, filed as a
personal filed bill be held. Without objection HB 530 was HELD.

This proposed bill amends cemetery maintenance district code
whereby a sixty-six and two-thirds percent vote of the voters voting
on the question may increase the district up to four hundredths of
one percent.

The Tax Commission informed him correctly that the
transactions prior to the effective date of the sales tax
increase the five percent only applied to contracts on real
property made prior to the effective date of the sales tax
increase.

This legislation clarifies the definition of those transactions
which qualify for an exemption from last years one cent
increase in the state sales tax.

In response to questions from the Committee, Dan John,
State Tax Commission, said this bill is far reaching and could
go to anyone with existing contracts, such as Health Club
members, leased cars, etc.

Terminology in HB 452 was patterned by a bill passed in the 80s
and applies to persons listed in the statute for persons engage in
real estate. For example contracts on building and road. The
original bill had a fiscal impact of $6 to $9 million and to date the
impact is around $500.

In closing remarks Representative Langhorst stated this bill is not
far reaching because not many would make a claim for the one-cent additional tax. This bill reflects what the intentions were on the
floor.

EXCUSED:

The purpose of this proposal – Section 1 amends the legislative
expenditure limit language in Idaho Code 67-6803. It provides that
beginning with fiscal year 2006 budget and each year thereafter general
fund expenditures shall not exceed a rolling three year average of
population and consumer price index growth. Exceptions to this limitation
may be approved for programs transferred to the state from political
subdivisions of the state or for deficiency warrants issued for emergency
expenditures.

Section 2 sets up the Taxpayer Reserve Fund which will collect
unexpended and unencumbered moneys at the end of each fiscal year. If
the balance in the Taxpayer Reserve Fund equals or exceed three
percent of the revenues to the general fund then it shall automatically be
refunded to the taxpayers.

The purpose of this legislation is to exempt certain military personnel from
licensure if they have been licensed by the military to operate an official
motor vehicle in the military service. This will help to alleviate any
problems that military personnel may experience when attempting to
update an Idaho drivers’ license during times of war and any other time.

The purpose of this proposal is to add a tax credit for contributions to the
Women’s and Children’s Alliance. The organization is a nonprofit
organization that provides secure shelter, transitional homes, counseling,
case management and comprehensive supportive services to women and
children escaping domestic and /or sexual violence.

In response to Representative Smith concerns over substantial changes
being made and not approved by the State Bar, Mr. Aldridge said this is
not a State Bar bill. The Tax Commission and the State Assessors
requested he refine the existing law and current practices. There are no
substantive changes. This bill eliminates redundancy and confusion.

EXCUSED:

This proposed legislation will provide an investment tax credit against
state income taxes for investments in wind turbines, solar energy, low
impact hydro, industrial waste, animal waste, municipal waste, geothermal
resources and other renewable resources. This credit is patterned after
the broadband tax credit that was enacted in 2001. The credit escalates if
a qualifying facility is located in certain economically depressed counties.
The credit is for new investment for tax years 2004 through 2009.

The strategic plan of the Energy Division of the Department of Water
Resources is to have 300 MW of wind power installed in Idaho by the year
2010. If we were to break this out into 50 MW per year new energy
coming on line this would be an annual total investment of $4,250,000
based on the cost of $850 KW. The maximum credit that could be taken
per year would be $340,000 if the facility were to be in the qualifying
counties in the legislation. If the remainder of alternative energy is added
at about fifty percent capacity of wind power the maximum credit that
would be taken would be $200,000 annually. Estimated credit for the first
year would be $540,000, second year $1,080,000, third year $1,620,000,
fourth year $2,160,000, fifth year $2,700,000 and the sixth year
$3,240,000. This credit would not take into account any increased sales
or income taxes paid as a result of the construction of a facility.

This proposed legislation would provide an income tax credit of one-half
cent per kilowatt for electric energy generated by wind turbines, solar
energy, low impact hydro industrial waste, animal waste, municipal waste,
geothermal resources and other renewable resources. The facility would
have to be constructed after January 1, 2004 to qualify.

This proposed legislation authorizes cities and counties to approve the
creation of taxing districts to fund public infrastructure within the district.
A district can be formed if 100% of the property owners within the
proposed district sign a petition requesting the formation of the district.
The land to be included in the district must be more than 160 acres in
size. A board made up of the city or county officials in which the district is
located will operate the district when it is formed. The district can issue
general obligation and revenue bonds to finance the construction of
infrastructure within the district. Bonds issued by a district are not an
obligation of the city or county in which the district is located. The
creation of a district does not supercede or result in the elimination of any
existing taxing system or system of fees.

In a normal case, a developer is responsible for financing and providing
infrastructure such as roads within a new development at the developer’s
cost. The buyers of land or building or buildings within the development
pay the developer’s costs through the cost of the land or buildings. Under
this proposed legislation the buyers would pay the cost through property
taxes or fees for services. The benefit to the developer is that there is a
reduction in the cost of the development.

The risk that people who already live in a community will pay for new
growth is reduced under this proposal. This proposal draws a line around
large new growth. It does not solve all of the problems related to new
growth but it does assure that the infrastructure cost for that growth is not
paid by existing residents of the city or county.

The benefit to the purchasers is the receipt of expensive infrastructure
such as parks, bridges and railroad under or overpasses that would
normally add high costs to the purchase price, but are paid over time
under the taxing district concept.

Voting Nay: Representatives Barrett, Ridinger, Moyle, McKague,
McGeachin

Motion to introduce passed, 11-5-3.

This bill simplifies the method used to compute payment of premium taxes
by insurance carriers doing business in the State of Idaho. It modifies the
present structure by adjusting the premium tax over a six year time frame
to a single premium tax rate of 1.5%. Representative Deal delineated the
changes in the bill and stated that this is a clean bill dealing only with the
rate change. He provided the members of letters from Jim Jones &
Associates, representing the General Fire & Casualty Company; Robert
R. Baldwin, Associate Tax Counsel for Metlife and James Williams,
Second Vice President and Associate General Counsel for
Massachusetts Mutual Life Insurance Company. Mr. Baldwin and Mr.
Williams submitted joint written testimony in support of House Bill 724.
Attachment of full text filed in the Legislative Library.

Excerpt from a letter submitted by Jim Jones & Associates, representing
the General Fire & Casualty Company ­”will dismiss the lawsuit and
waive any claim for recovery of alleged premium tax overpayments in
exchange for the State reducing the premium tax to the uniform 1.5% rate
over the six-year period 2005-2010).”

Excerpt from the written joint testimony submitted by Mr. Baldwin,
Metropolitan Life Insurance Company and Mr. Williams, Massachusetts
Mutual Life Insurance Company – “For many years, MetLife, Mass Mutual
and a number of other foreign insurance companies have paid their Idaho
premium taxes under protest and these protests have been viewed as
perfect tax claims. At last count, we have been able to catalog
approximately $36 million in such claims. If HB 724 is enacted and
becomes law, MetlLife, Mass Mutual and others in the list of companies
comprising the $36 million in foreign company claims and protests will
dismiss and withdraw all their claims and protests”.

The statement of purpose for this bill is to amend Section 63-602

G, Idaho Code, to provide authority and procedures for determination and
collection of homeowner’s exemptions from property tax in situations
where the exemption is improperly claimed and allowed as a result of
error, misstatement or misunderstanding.

EXCUSED:

RS 13609 and asked Representative Roberts to explain the proposed
legislation. Representative Roberts stated that this is a clean-up
proposal to HB 317 passed last year dealing with investment tax credit on
capital improvements.

The statement of purpose is to amend Section 63-3029B, Idaho Code, to
provide that all moneys collected by the State Tax Commission as a result
of certain property ceasing to qualify for the investment tax credit and
where the owner has elected a personal property tax credit in lieu of
investment tax credit be remitted to the county within which the property
was located when the property tax exemption was claimed.

The land owner applies to the Soil Conservation Commission for approval
of natural resource programs to qualify for the tax credit and shall not
exceed two thousand dollars. The Commission then submits their
approval of the program to the State Tax Commission for the eligible tax
credit.

This legislation amends Section 33-906, Idaho Code, Bond Levy
Equalization Support Program so that provisions of this section may not
be used to subsidize projects previously subsidized by state grants.

The statement of purpose proposes to cap the percent of increase that
can be experienced in any one year by residential property owner for
his/her primary residence. Residential property owners in various areas
have been levied high property valuations as a result of homes in their
locale selling at prices considerably higher than the price originally paid
by existing home owners, even though they may have only owned their
homes for a short period. This has resulted in property tax increases up
to as much as 100-200 percent or higher, resulting in a hardship on
residential owners, especially those on fixed incomes. This proposed
legislation avoids this hardship by capping assessed valuation increases
to no more than three percent per year.

When the property is sold the market value will be put in place. The cap
will apply to owners of the primary residence who qualify for the
exemption provided for in 63-602G, the 50-50 homeowners exemption.
He said this may be a band-aid approach but something needs to be done
to slow the ever-growing property taxes.

There was a general discussion as to the tax shift and the causes of
escalating property taxes.

Clients have the opportunity to receive professional skill training to assist
them in finding and retaining jobs. This training will be driven by the funds
dedicated to the WCA through the Susan P. Sherlock Training
Scholarship Fund.

This tax credit will attract donations and the WCA needs any kind of
revenue to continue their services that are a benefit to the State.

EXCUSED:

1. The bill clarifies the election is available for qualified property
placed in service in calendar year 2003.

2. It clarifies the determination of a loss year.

3. It limits disclosure of tax information exchanged between the State
Tax Commission and County Assessors.

4. It excludes taxpayers whose rates or returns are regulated
according to federal or state law.

5. It provides for the recapture of the property tax benefit of property
ceasing to qualify for the investment tax credit or for the election.

The purpose of the legislation last year was to retain business in Idaho
and provide an incentive for businesses to come to this state. The
problem with the original bill was that it could possibly go back twenty
years to carry forward a loss. This amendment closes that loophole. The
recapture of property taxes would be returned to the counties instead of
the State. The bill will be effective on and after January 1, 2003 – the
effective date of the original legislation.

In response to a question Speaker Newcomb said this bill is similar to
Representative Roberts’ bill which was introduced last week in that the
counties would get money back from the recaptured exemption.

The statement of purpose is to clarify the taxation of agricultural property
when the land is leased for the grazing of livestock. The new language
defines a bona fide lessee as a for-profit business that grazes livestock
that will be sold or used in their business.

Additional language puts into statute that any sale or lease of hunting or
fishing rights on the property does not change the tax status of the land if
it meets the definitions of 63-604, land actively devoted to agriculture.

There was a brief question and answer period as to for-profit enterprises.

This legislation allows for property tax exemption for $150,000 assessed
valuation. It provides owner-occupied homestead used as the primary
dwelling place of an individual who is at least seventy years of age and is
the recorded owner holding title or who has retained or been granted a life
estate. They may apply for an exemption for the tax on that property each
year. If the owner dies after the exemption has been approved it shall be
in force for the rest of the year. After the property is sold it will be
assessed at market value and the counties would recoup the losses.

She reviewed the bill section by section. In response to a question as
why there was no income limit, Representative McKague responded
saying lower income people can qualify under the “circuit breaker” based
on income and medical bills. This bill frees up money for middle income
people to put towards health problems, this is a fairness issue.

He also estimated the impact of HB 716 will have on the state funded
“circuit breaker” program. The first diamond of the hand-out reflects the
reduced “circuit breaker” claims of $9,139,063. That assumes everyone
will elect to take the HB 716 exemption because most of these claimants
would likely have 100% of their taxable property values well within what
HB 716 exempts. But, if 20% of the “circuit breaker” qualified claimants
are already having their entire property taxes paid under that program this
impact is likely closer to 80% of the $9,139,063 estimate or $7,311,250.

The second diamond in the hand-out reflects the impact to public school
funding on the property tax by multiplying the HB 716 additional property
value by the school general M&O levy. The result is an estimated tax
reduction of $14,090,000 but if you also account for the higher multipliers
for the Boise School District this will be closer to $14,439,000.

The last thing he looked at was the tax shift component. He estimated
what the 2005 property tax values would be for owner-occupied
residential homesteads, all other property and the statewide total.

The analysis reflects the 2005 estimated values before the HB 716
exemption and 2005 after $4,696,730,000 in taxable value for owner-occupied homesteads. The property tax side after HB 716 there are
$14,909,000 less property taxes to be collected. That is due to the
reduced school M&O amount.

The tax rates for all taxpayers are increased by about 5% in order to
collect the $1,193,504,000 estimated property taxes after HB 716. Under
this scenario owner-occupied homesteads will have their property taxes
reduced by $49,255,000 while all other taxpayers will be paying an
additional $35,165,000.

Although there are $14,909,000 less total property taxes, the other
property taxpayers are paying more to make up for the additional exempt
property values. Over time this impact will escalate as the 70 plus age
population becomes a larger share of our society and as homeowner
property values increase.

People would take advantage of this exemption rather than the “circuit
breaker.” HB 716 does not include fees or income that apply to the
“circuit breaker.” Increasing the tax exemption represents a tax shift.

EXCUSED:

This legislation authorizes cities and counties to approve the creation of
taxing district to fund public infrastructure within the district. This
legislation provides for the formation of a public infrastructure improve-ment district through a petition filed by 100% of the owners of all the area
in which the proposed district would be located. A district would be
formed for the purpose of building new public infrastructure improvements
to serve new growth and development and to provide for the payment of
those costs by district.

The formation petition would be filed with the county commissioners or the
city council of the county or city in which the proposed district board would
be located. The board would be comprised of county commissioners or
the city council of the county or city in which the district would be located.
After formation a district would be able to issue general obligation and
revenue bonds following notice, hearing and election. General obligation
bonds would require a 2/3rd super majority vote of the qualified electors of
the district. Revenue bonds would require either a 2/3rd majority or a
simple majority as controlled by Article VIII section 3 of the Idaho
Constitution.

This legislation provides a mechanism for paying for infrastructure for the
property within the district. Only the property within the district that is
specially benefitted by improvements will pay the cost of those
improvements.

A district can be formed if all of the property owners (this could be only
one owner) within the proposed district sign a petition requesting the
formation of the district. The land to be included in the district must be
more than 160 acres in size. There is no maximum size limit. This
legislation does not deal with police protection or fire protection which are
paid by property taxes.

The benefit to the purchaser is the receipt of expensive infrastructure
such as parks, bridges and railroad under or overpasses, this would
normally add high cost to the purchase price but is paid over time under
the taxing district concept.

In addition, the development of renewable energy resources also provides
an economic development tool. By encouraging development of wind,
geothermal biomass and other renewable resources within our borders,
we provide additional employment opportunities, property tax benefits and
other economic benefits.

At the same time renewables need a jump start to encourage
development of these resources. HB 760 provides that jump start through
a tax incentive method. Very simply it is patterned after the broadband
tax credit. The legislation would provide an additional 3.0% investment
tax credit for a renewable energy project and another 2% investment tax
credit if the project is developed in an economically stressed county.

Voting Nay: Representatives Field, Smith, Wood, Ringo, Martinez,
Henbest

Motion passed, 12-6-1

This legislation would provide an income tax credit of one-half cent per
kilowatt for electric energy generated by wind turbines, solar energy, low
impact hydro industrial waste, animal waste, municipal waste, geothermal
resources and other renewable resources.

EXCUSED:

Mr. Speaker said all of the rebates should go to the counties which is not
included in this bill. Part of Representative Roberts’ HB 782 would return
the erroneously taken investment credit and would be returned to the
counties where the property was located. Mr. Speaker felt this would be
fair.

Representative Roberts said he would withdraw HB 781 if HB 799 is
amended to reflect part of bill to return the money to the counties affected.

The Statement of Purpose reflects the following amendments to the bill:

1. The bill clarifies that the election is available for qualified property
placed in service in calendar year 2003. 2. It clarifies the determination of
a loss year. 3. It limits disclosure of tax information exchanged between
the State Tax Commission and county assessors. 4. It excludes
taxpayers whose rates or returns are regulated according to federal or
state law. 5. It provides for the recapture of the property tax benefit of
property ceasing to qualify for the investment tax credit or for the election.
The bill will be effective on and after January 1, 2003, the effective date of
the original legislation.

Suggested amendment: Page 6, line 26 – delete “2004” insert “2003.”
Add “(f) All moneys collected by the state tax commission pursuant to this
subsection, which amounts are continuously appropriated for this
purpose, shall be deposited with the state treasurer and placed in the
state refund account, as provided by section 63-3067, Idaho Code, to be
remitted to the county within which the property was located that was not
a qualified investment or ceased to qualify during the recapture period.
The county shall distribute this remittance to all appropriate taxing districts
based on the proportion each appropriate taxing district’s levy is to the
total of all the levies of the taxing districts for the tax code area where the
property was located for each year the exemption was granted. If any
taxing district is dissolved or disincorporated, the proportionate share of
the remittance to be distributed to that taxing district shall be deposited in
the county current expense fund.

(g) For purposes of the limitation provided by section 63-802, Idaho Code,
moneys received pursuant to this subsection shall be treated as property
tax revenue by taxing districts.”

If two-thirds of the voters and minimum of thirty percent of the qualified
electors, the new budget amount shall be the base budget for the
purposes of the three percent property tax cap.

He illustrated the expenditure limitations and appropriations comparison
with a graph. (Attachment #1) The second part of the hand-out depicted
the process by which the Taxpayers Reserve Fund would receive surplus
moneys to by refunded to taxpayers.

Representative Roberts stated that this bill is all about protecting the
taxpayers when revenues come in high. In response to questions relating
to restricting the legislature, he responded by saying if the this bill restricts
a future Legislature he thought that’s a good thing.

We have heard from those who would characterize spending limits as
putting the Legislature on “autopilot.” We disagree with this assertion. In
fact, just the opposite is true. The current system seems to promote
spending money on just about any good cause that comes along. As long
as there is money coming in it is hard to say no. It is always easy to
spend money.

Under the proposed spending limitation it would cause the Legislature to
return to the serious business of taking a hard look at each proposal and
prioritizing when items truly fall within the role of government to provide.

We believe this bill would take out the volatile boom and bust cycles that
we have experienced in the past and would remove the need for
emergency tax increases.

Voting Nay: Representatives Kellogg, Ridinger, Smith, Ringo, Martinez.

Substitute Motion passed, 11-5-3

EXCUSED:

There would be no fiscal impact on the general fund in FY 2005.
Thereafter, the impact on the general fund would be a reduction in the
amount of state funds required for the “circuit breaker” program, an
estimated $800,000 in the first year FY 2006. Most who qualify for this
exemption now qualify for the “circuit breaker.” There would be a property
tax reduction to eligible households of $1.8 million in 2006, about $45 per
eligible taxpayer. There would be no reduction in the amount of property
taxes collected by cities, counties or other local government entities.
Annual increases for schools resulting from inflation in residential values
would be less than without this change. Based on recent rates of
inflation the difference would be $410,000 starting in FY 2006.

There was a brief question and answer period relating to the tax shift.

Residential values have been rising faster than the values of other kinds
of property. Once the homeowner reaches the upper limit of $100,000
market value for residential improvements. There is no longer any
mitigation for inflation so taxes increase by accelerated rate. Since 1990
the total residential property taxes in Idaho have increased by 194 percent
while the total for all non-residential property has increased by 82 percent.
The current maximum homeowner’s exemption was established in 1983
and has never been adjusted for inflation.

There would be no fiscal impact on the general fund. Cities, counties and
other local taxing districts could collect the same amount under the
budget cap. Eligible homeowners would see a property tax reduction of
about $1.7 million in the first year which would be paid by non-eligible
property taxpayers.

Presently rural counties in Idaho have the potential to add 5 to 10 large
windfarm projects. Each project would result in investment of $120
million, $30 million of which would be spent on local construction using
Idaho workers. Once operational each windfarm would provide hundreds
of thousands of dollars per year in royalty payments to landowners, local
jobs and over $1 million in property taxes. The property tax revenue
comes with virtually no increase in the demand on county services.

The direct benefit to local economies is calculated to be $1.7 million per
year from each project. This figure is subject to a multiplier effect which in
the Bonneville/Bingham area is calculated to range between 2.6 and 2.8
which increases this amount close to $5 million. Even without the
multiplier, over the 40 year expected life this brings in $68 million dollars
per project.

If projects are exempted from the sales tax Idaho can win contracts and
counties will receive millions of dollars. Diversification of energy
production will reduce power rates. New energy sources will produce jobs
and growth of renewable energy will yield a tremendous, positive fiscal
impact throughout the state.

EXCUSED:

The Statement of Purpose is as follows: This resolution proposes to
amend the Constitution to provide that on and after January 1, 2005 any
changes in state taxes that create or increase a tax rate or remove or
reduce a state tax exclusion, exemption, credit or deduction, shall require
the approval of two-thirds of the entire membership of the house of
representatives, approval of two-thirds of the entire membership of the
Senate and the signature of the Governor.

If this legislation receives the needed 2/3 approval in both the House of
Representatives and the Senate it will then be placed on the November
2004 ballot to be ratified by the voters of the State of Idaho.

There was an active debate as to the extent of restricting taxes or fees.

Voting Nay – Representatives Raybould, Barrett, Moyle, Schaefer, Collins,
Roberts, Wood, Denney, McKague, Crow. Motion failed, 7-10-2

Original motion to recommend RS13978 be introduced passed on a
voice vote. Representative Kellogg requested to be recorded as voting
no.

In 63-701, Definitions, parts 4 and 7 and other sections in the bill,
reference to grantor trusts is eliminated. That status is no longer required
to receive the benefits of the property tax reductions.

In 63-701, part 4, the definition of income in relation to dual principal
residence applications is clarified.

In 63-703, procedure for filing claims, the application procedure is
simplified, especially as to the affidavit in support of the application
limiting the information to only information actually needed. The
difference between an affidavit for trust ownership and an affidavit for
entity ownership is also clarified. The use of the word “grantor” is
changed to “claimant” since, as he previously stated, grantor status is no
longer relevant. Section d is redundant and is eliminated.

In 63-707, procedure after claim approval, part l (c) is amended to
properly state what the assessor shall include on the property tax
reduction roll. Part 4 of 63-707 and part l of 63-709 reimbursement by
State Tax Commission are contracted and amended to eliminate dual
reference to the same determination and to provide a single date, the third
Monday in November, for the provision of such data and payment by the
State Tax Commission to the county. This makes the layout of the two
sections more logical and compact and eliminates the conflict in dates in
the two sections.

In 63-602G, property exempt from taxation – residential improvements,
lengthy affidavit procedures are eliminated. The same informational
requirements are already set forth in section 63-703(4) and a simple
cross-reference to that section is substituted. This also eliminates
differences and conflicts in the two code sections as to what information
and supporting documents were required to be submitted.

Since making the change in the midst of a tax year would be difficult the
bill also declares an effective date of January 1, 2004.

In response to a question whether these changes had gone through the
resolution process and approved by the Bar Association, Mr. Aldridge
said that they had not but the changes had been furnished to the Bar. .
He said the resolution process is prior to December 1 st and would not be
reviewed until next year. The changes had been reviewed by his
Committee and the Tax Commission.

This bill changes where the money comes from to replace these funds.
Under current law these funds are paid from the state refund account.
When the refund account is depleted the State Tax Commission has to go
to the Board of Examiners to increase the fund, this is an unnecessary
step as the money comes from the same source. This bill will change the
distribution to come from revenue received from the Sales Tax Act.

The Governor is the Chairman of the National Governors Association and
his initiative is long term care solutions to reduce costs to medicare and
medicaid by private long term care.

Mr. Lehman addressed the costs of long-term care and the availability of
information provided for taxpayers to obtain long-term insurance.

EXCUSED:

This proposal creates a new section 70-2201 authorizing the creation of a
county-based intemodal commerce authority. The local commerce
authority shall not have taxing authority and is designed to create,
stimulate and advance commerce and economic development in the local
jurisdiction and for all Idaho. Any board of county commissioners may
create or abolish the intermodal commerce authority. A board of local
intermodal commissioners shall serve as the management team. A
county-based intermodal commerce authority may acquire assets and
revenue from loans or it may issue and secure bonds according to article
VIII, section 3B of the Idaho Constitution, but only to the limit of assets
held by the intermodal authority and other revenue generated by
economic operations of the authority. The authority is empowered to
receive federal, state or local money including gifts, grants, direct
appropriations and to enter into contracts, acquire, hold and lease
property only for purposes of promoting local and statewide economic
growth and commerce, maintaining facilities for commerce, commodity
shipping, transportation transfer and storage.

In response to questions posed by the Committee, Speaker Newcomb
stated no way would the State or county be responsible for or underwrite
a loan to the intermodal commerce authority.

Intermountain Forest Association; Food Producers of Idaho, Inc; Idaho
Grain Producers Association; Avista Corp; Idaho Association of
Counties

Page 5, line 10 after the word “authority” delete “may” and insert “shall”

Page 6 delete “Section 70-2214”, this deletes the tax exemption.

Representative Barrett voiced concerns with Section 70- 2205
“Cooperation of County” and recommended it be amended to limit
responsibilities to the intermodal commerce authority.

There was a brief question and answer period relating to bond security
and liability.

This legislation clarifies the taxation of agricultural property when that land
is leased for the grazing of livestock. The new language defines a bona
fide lessee as a for-profit business that grazes livestock that will be sold
or used in their business.

Additional language puts into statute that any sale or lease of hunting or
fishing rights on the property does not change the tax status of the land if
it meets the definitions of 63-604, land devoted to agriculture.

Representative Wood stated that this legislation needs to be amended to
clarify the taxation of agricultural property when that land is leased for the
grazing of livestock. New language defines a bona fide lessee as a for-profit business that grazes livestock A definition of for-profit is included.

This legislation has been reviewed extensively by Tax Commission staff,
Highway district staff, county and city associations. There have been
changes made to the original bill which were reviewed on March 9, 2004.
There were several questions as to maintaining the infrastructure. Mr.
Brassey responded stating before the formation of the district the
developer must file the development plat with the county planning and
zoning and highway districts. In essence the purpose of this is to create
an infrastructure financing vehicle.

Voting Nay: Representatives Kellogg, Field, Schaefer, Smith, Collins,
Roberts, Ringo, Henbest, Cuddy, Crow. Motion failed, 7-10-2

Motion to recommend a do pass carried. Representative Moyle
requested to be recorded as voting no. Representative Smith will sponsor
the bill on the floor.

She gave a dissertation on the American Legion, a valid Idaho non-profit
Veterans Service Organization, activities, including their creed. She also
read excerpts of the Internal Revenue Code defining veterans
associations who qualify for the non-profit organization.

EXCUSED:

Chairman Raybould called the meeting to order at 8:30 a.m. and
requested the secretary take a silent roll call. He asked the committee to
hear and discuss all four of the bills before a motion is made. He also
explained that testimony will be heard after all of the bills have been
presented to the committee.

HB 781:

Next on the agenda was HB 781 with Representative Deal presenting
the bill. He explained the escalating of property values has become a
serious financial burden on the elderly. This has been a concern for
legislators for several years and legislators have been working to solve
this problem.

The statement of purpose reflects that the proposal to cap the percent of
increase that can be experienced in any one year by residential property
owners for his/her primary residence. Higher property values in certain
areas result in homes being assessed at prices considerably higher than
the prices originally paid which has resulted in a hardship for the elderly.
This proposed legislation avoids this hardship by capping assessed
valuation increases to no more than three percent per year. When the
property is sold the market value would be reviewed. The cap would
apply to owners of the primary residence who qualify for the exemption
provided in 63-602G, 50/50 homeowners exemption.

Representative Deal asked to yield to Representative Eskridge.

Representative Eskridge spoke in support of an emotional issue
regarding people in his district who are forced to sell their homes because
of the increasing property taxes. This is due to increase in the market
value of homes which are purchased at a higher price in their area. He
further stated that this is a real problem for homeowners and there is a
possibility that there will be an Initiative brought before the voters if there
is no help from legislation.

General discussion followed as to the tax shift and the need to help the
property owner.

The Chairman called upon Senator Kennedy to explain the proposed
legislation. Senator Kennedy stated that the purpose of this legislation is
to protect homeowners age sixty-five or older or disabled, from increased
property taxes resulting from increases in taxable value. This applies to
household income before taxes, if it 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. This exemption would apply only to owner occupied
primary residential properties. The freeze would continue so long as the
owners continued to meet the qualifications and own and live in the home.

Fiscal impact was discussed with a brief question and answer period
relating to the tax shift.

MOTION:

There would be no fiscal impact on the general fund. Cities, counties and
other local taxing districts could collect the same amount under the
budget cap.

Chairman Raybould then called upon Archie Banbury, Valley County
Assessor. Mr. Banbury expressed hope for a bill which would be a
combination of the four bills which will satisfy the problems of property
owners.

Marilyn Knighton, Treasurer IAC spoke in favor of a ‘true fix’ of the
property tax problem.

Todd Lakey, Canyon County Commissioner, asked for a good solution
from a possible combination of parts of all of the bills.

Chairman Raybould asked Dan John to offer information regarding the
bills. He stated in studying all of the concepts together and taking the
best parts of each one, there is still on thing that is consistent…someone
else pays the tab.

Representative Moyle moved to return all four bills to the full committee
with a recommendation to HOLD in committee with the suggestion of
possible further review by an interim committee.

There being no further business to come before the subcommittee
Chairman Raybould adjourned the meeting at 9:03 a.m.