EXCUSED:

Vice Chairman Hill introduced Janice Boyd, Tax Policy Specialist with the
Idaho State Tax Commission to review Income Tax Administrative Rules.

35.01.01.0301

Rule 045 Non-resident

Rule 075 Tax on individuals, estates and trusts.

Rules 076,077, 079 are deleted. Rates and brackets will be in Rule 075.

Rule 078 Tax on trusts electing small business trusts.

Discussion on whether there were substantive changes.

Ms Boyd clarified that information previously contained in Rules 076, 077,
079 and 078 will all now be reflected in the table in Rule 075.

Rule 105 Adjustments to taxable income – additions required of all
taxpayers. Discussion on projections of fiscal impact. There are no
projections now as it would take an extensive re-computation of past tax
returns. Dan Johns will look into getting an estimate for the committee.
Commission still reviewing impact of investment tax credit.

Rule 108 adjustments to taxable income – additions required only of
individuals

Rule 120 Adjustments to taxable income – subtractions available to all
taxpayers

Rule 193 Health insurance costs and long-term care insurance.
Discussion of federal deduction. Variable federal deduction is allowed.
Idaho statute allows 50% deduction.

Rule 253 Non-resident and part-year resident individuals – additions
required in computing Idaho adjusted income.

Rule 254 Non-resident and part-year resident individuals – subtractions
allowed in computing Idaho adjusted income.

Rules 740 and 741are deleted. The natural resource conservation credit
was enacted during 1997 in SB 1186. It contained a provision that the act
would be null, void and of no force and effect on and after Jan 1, 2003,
which date was not extended by the 2003 legislature. Question about
extent of utilization of this credit. Per Dan Johns it was not widely used.

Rule 746 Credit for qualifying new employees. Question concerning what
employers qualify for this credit. It would be a taxpayer who’s involved in a
revenue producing enterprise to convert natural resources into another
product, such as mining, farming, timber. Discussion of Governor’s tax
credit and how it relates to this rule followed. Ted Spangler said the
proposed bill is not coming from the tax commission. It is the Governor’s
bill. Sen Bunderson let the committee know that as soon as the bill is
printed this committee will schedule hearings even if it cannot immediately
be acted on.

Rule 790 is amended to conform the transfer limitations discussed in the
rule to the legislative changes.

Rule 791 is amended to impose on the intermediary the same notification
requirements of an intended transfer that are imposed on a transferor.

Rule 793 Transfers of credit – in general. Discussion on legislation of
extension of credits and extent of the utilization of these credits. It was
said to be extensive.

Rule 799 Transfer of credit – notification of intended transfer.

Discussion on publishing of Rules and how it conforms with State Statute.
Ted Spangler explained how the proposed rules were published in non-technical language in the Idaho Bulletin. Dept of Administration publishes
the Descriptive Summary in the newspaper. Notice of adoption of
unchanged Pending Rules is not re-printed. If, because of public comment
the Rules are amended, they are printed and published.

Rule 719 Idaho investment tax credit – property tax exemption in lieu of.
Question: Do we have an assessment? No, because this credit is for
property exempted in 2004. No numbers available until next year.

35-0101-0303

Rule 872 Reporting and paying state income tax withholding.

35-0102-0301

Rule 068 Collection of tax.

35-0102-0302

Rules 041, 047, 063,073, 110, 126 are amended because they contain
examples with the 5 % tax rate.

35-0102-0303

Rule 109 imposes a fee increase proportionate to 6% tax rate.

35-0102-0304

Rule 031 Radio and telecommunications equipment (to correct
grammatical error).

Rule 037 Aircraft and Flying Services

Rule 039 Sale and Purchase of bullion, coins, or other currency

Rule 043 Sales price or purchase price defined

Rule 058 Sales through Vending machines

Rule 105 time and imposition of tax, returns, payments and partial
payments

Rule 107 Vehicles and vessels

Rule 112 Direct Pay authority

Idaho Cigarette and Tobacco Products Tax Administrative Rules

Security (bonding) for payment of Taxes. Commission proposes that the
maximum bond amount be deleted from the rule. Discussion included
request for information comparing collections with last year. Commission
indicates sales volume is down, but taxes are at about 93%, very close to
projected numbers. Also, sales on reservations statistics were requested.
They will be provided. Black market sales were also discussed.

35-0111-0301

Idaho Unclaimed Property Tax Administrative Rules

Rule 015 Description of fee corrected to conform to Idaho Code. Question
concerning identification of persons rightfully entitled to unclaimed
property. Information is available on the inter-net and the Tax Commission
maintains a book which is available to the public. The unclaimed property
remains available to the rightful owner for a period of 7 to 10 years
depending on category.

Meeting adjourned at 4:25 p.m.

EXCUSED:

Chairman Bunderson introduced Janice Boyd, Tax Policy Specialist with
the Idaho State Tax Commission to review Tax Commission
Administration and Enforcement Rules.

35-0201-0301

Rule 310 Interest Rates

Rule 400 Penalties – General Rules

Rule 704 Disclosure of information – government agencies and officials

35-0201-0302

Rule 450 Property tax exemption penalty

Chairman Bunderson introduced Alan Dornfest, Tax Policy Supervisor
with the Idaho State Tax Commission to review Property Tax
Administrative Rules. At this time Senator Bunderson announced that Mr
Dornfest will be returning January 28, to speak to the committee on
Property taxes.

35-0103-0301

Rule 313 Assessment of transient personal property.

Rule 316 Compliance of continuing valuation program. Explanation of
valuation and the schedule of appraisals. Value is not being changed, just
the requirement for percentage of appraisals completed each year within
a five year period.

Rule 509 Identification of urban renewal increment and partial exemption.
values on county and school district abstracts of value.

Rule 609 Property exempt from taxation – residential improvements.

Rule 802 Budget certification relating to new construction and annexation.

35-0103-0302

Rule 803 Budget Certification – dollar certification form. Amended to
implement HB 140 changing the rule to provide directions and clarification
relating to the property tax funded budgets for library districts when library
districts consolidate with city library services. Discussion concerning
library district boundaries and non-contiguous districts especially with
regard to bonds. The issue of non-contiguous districts does create
problems in apportioning values.

35-0103-0303

Rule 988 Election of qualified property for exemption. Discussion centered
on issue of confidentiality of information. Response indicated that these
are items that if they had been reported on the investment tax credit
would have been confidential. This assures that the county will maintain
that confidentiality. Further discussion on recapture penalty procedure:
Taxpayers would be required to notify county assessors of property
movement between counties to assure penalties would not be improperly
assessed. It was noted that in the quest to do good things for economic
progress in Idaho, a monster had been created. This is a very complex
procedure that requires a lot from the taxpayer and needs to be
monitored. It was noted that the motivation for the bill was to alleviate the
economic problems some businesses were having. The bill went into
effect January 1, so there will not be information on its effectiveness for
some time. The committee would like to be informed when such
information becomes available.

This concludes the Rules review.

Meeting adjourned at 4:00pm.

EXCUSED:

The IACA and IAC have agreed to make optional by county the inclusion
of “current estimated taxes” on the Assessment Notice. They are not
asking that the format be revised, however they do not want the policy to
be relaxed in those cases where reasonable estimates cannot be made. It
was agreed that every effort would be made to obtain an accurate
estimate, but when unavailable because of new bonds, levies, loss of
valuation, etc. it would be acceptable to exclude the estimate from the
Assessment Notice with some disclosure as to why the estimate is
excluded.

Senator Werk indicated he would be replaced Wednesday by Debbie
Spindler.

Meeting adjourned at 4:35 p.m.

EXCUSED:

Motion

What is property tax?

How does the property tax budget and levy system work?

What happens when property values increase/decrease?

Who pays property tax?

How much is paid?

How does Idaho compare?

Who uses property tax?

How do incentives and tax relief measures work?

Discussion pertaining to all of the planned topics of conversation was
vigorous. There was clarification of ambiguous practices and some insight
into the division of tax burden and tax distribution.

Chairman Bunderson thanked Mr.Dornfest for sharing his expertise and
said there would be other Tax related reports for the “Training and
Development” of the committee members.

There will be no Friday meeting

The meeting adjourned at 4:35 p.m.

EXCUSED:

Chairman Bunderson thanked Mr. Hancock for his presentation and
said we would take up this subject again.

Meeting adjourned at 4:30 p.m.

EXCUSED:

The concept being worked on is to leverage a small percentage of federal
and/or state fuel taxes to pay principal and interest on bonds. For
example, with current interest rates on a 18 year payoff, $10 million in fuel
tax revenue to provide $120 – $130 million in bond proceeds. The ability to
issue such bonds would provide ITD with another tool in its tool box to
provide cash when needed to fixing critical needs.

Senator Bunderson said that in two weeks the Task Force will produce a
white paper and proposed legislation addressing the entire matter. Albeit,
only federal fuel tax money under the Federal GARVEE law will be
considered at this time.

The meeting adjourned at 3:55p.m.

EXCUSED:

Chairman Bunderson thanked the commissioners for their report.

EXCUSED:

The meeting adjourned at 4:30 p.m.

EXCUSED:

Chairman Bunderson indicated those items not addressed at this
meeting would be taken up Wed, Feb 18.

The meeting adjourned at 4:00p.m.

EXCUSED:

Chairman Bunderson asked if there was anyone present in opposition to
the bill who wished to testify. No opposition being present, Steve
Sedlacek of ISSA summarized his associations support of the bill.
Discussion centered on customer service and problem resolution, capital
investment costs, and contract management.

Chairman Bunderson thanked Dr. Weatherby for his report.

The meeting adjourned at 4:35 p.m.

EXCUSED:

The meeting adjourned at 4:20p.m.

EXCUSED:

EXCUSED:

EXCUSED:

Chairman Bunderson stated that S1334, The Lien Provision Bill that was
to be heard today, will be moved to Wednesday, March 3, at the request
of Senator Ingram and IAC.

The meeting adjourned at 3:55p.m.

PRESENT:

EXCUSED:

The meeting adjourned at 3:45p.m.

EXCUSED:

John Watts of Watco reviewed the RS emphasizing counties may enter
into intermodal commerce authorities and may acquire assets and
revenue from loans or it may issue and secure bonds, 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. This bill empowers counties
only, and only within county boundaries can that power be exercised.
Discussion clarified salary (none – reimbursement only), latitude of power
(intent is to be very broad and to give the district discretion in order to
stimulate the economy) and to assure that the districts have no taxing
authority. Also discussed was constitutionality of this bill. No conflict was
seen.

Next Marina Schwarzbach testified that the lien placed against her and
her husband for her cancer treatments will be with them for the rest of
both of their lives. She was denied aid by all existing programs because
their earnings are over the poverty line. The lien attaches to Social
Security numbers, to the real and personal property of both parties and
into the future so that any future earnings or wind falls are covered by the
lien which does not go away until the entire obligation is paid.

Senator Ingram explained the history of the catastrophic health care
program and the lien procedure in current practice. He then introduced
Tony Poinelli with IAC, who went over a hand-out showing what that
process is and why it should continue. It has been the policy of Idaho that
each person is responsible for his or her own medical care. The counties
and the State Catastrophic Health Care Cost Program (CHCCP) will step
in with assistance when no other resources are available, but nothing
prevents the board of county commissioners from requiring the applicant
to reimburse the county and the CHCCP, where appropriate, for all, or a
portion of their medical expenses, when investigation determines their
ability to do so. A question was asked about the process followed in filing
the application and alternatives available to those choosing not to accept
help from the county. The answer was that the hospital has the ability to
file a third party lien on behalf of the patient with the lien remaining in
place until the bill is paid.

Senator Duncan offered an explanation of general liens and suggested
that the current process may not be the best, but that removing the lien
provision in its entirety was also not the best solution. He feels the
language needs to be corrected to protect the position of priority of the
lien holder and the taxpayer’s interest, and still prevent the patient from
financial harm. With no payment protection for the service provider and
the county, and maintaining a non-entitlement system, services might not
be as widely available.

Teresa Wolf, Nez Perce Social Services, testified that counties take
responsibility for the health of indigent citizens, but that they also have a
responsibility to the tax payer. She stated that only the amounts that are
spent by the county for the patients care are subject to collection (there is
no interest), and often at reduced rates. They also set up payment plans
based on ability to pay. Each lien must be taken to the end of the process,
even if the applicant changes their mind. Again it was noted that a better
way of assuring payment could be found through a re-working of the
language of the existing law.

John Waddell testified that the liens that have been filed against him will
prevent him from ever owning anything.

Nicole LeFavour ended by noting that this process adds financial
hardship to physical injury, and should be repealed.

Chairman Bunderson then closed the hearing by indicating that there
does need to be changes made but that repeal seems to be premature.
He emphasized that changes in law would only have a prospective effect.
A new law would not impact what had happened in the past. He asked the
parties involved to continue to work with Senator Ingram to improve the
law. Senator Duncan also agreed to assist. .

Senator Ingram agreed to review the bill this summer with any members
that would care to participate. They will bring changes back to the
committee next session.

The meeting adjourned at 4:50 p.m.

EXCUSED:

Senator Stegner explained the current two tier system and its negative
impact on the insurance business and Idaho’s ability to attract that
business.

Robert Baldwin of Metropolitan Life added that the lower tier of taxes is
good for economic development. Senator Werk indicated he would like a
progress report next session.

EXCUSED:

Roger Sherman of United Vision for Idaho, testified that he supported the
concept, but would like to see the bill amended to the original amount of
$15.50. Information from The Bureau of Labor Statics shows that below
$15.00 the uptake rate for purchasing health insurance is about 35%,
above $15.00 that rate goes to over 60%. The higher wage provides an
income sufficient to purchase the insurance that’s offered.

Mia Crosthwaite representing Catholic Charities, said that any new jobs
were preferable to none, and that at $12.50 more jobs would be available.
Further discussion indicated the bill would be most useful if those
employees benefitting from it were no longer eligible for any other state
aid.

Substitute
Motion

Senator McKenzie made a substitute motion to move the bill to the 14^th
order to amend the bill back to the original $15.50. Senator Werk
seconded the motion.

Dwight Perkins, IAPMO, testified that HVAC wants to use their uniform
code as opposed to the 2003 international code required by H756.

Ken Baker, AIC, spoke in favor of the bill, but suggests education for
inspectors would be helpful.

Dennis Tanikuni, Farm Bureau, was concerned about private property
infringement.

John Eaton, Idaho Building Contractors Association, supports the bill and
feels that it provides uniformity and is a significant improvement over what
we now have. He believes the stronger issue addressed by the bill is more
life safety as opposed to building safety.

Bruce Allcott, Idaho Fire Chiefs, strongly disagrees with the exemption
for three and four unit buildings. It is true that the bill as written provides
more protection than was previously required, but sprinklers save lives
and the exemption should be removed from the bill.

Ken Harward indicated that AIC supports the bill as written.

Ron Anderson joined in the opposition to the exemption noting that from
a fire fighter’s perspective three and four unit fires are major incidents,
especially for small districts, which are sometimes manned by volunteers.
Sprinklers would not only help save the lives of occupants, but would
make the job of fighting fires more successful.

Jack Rayne spoke in support of the bill saying that when sprinklers are
installed egress windows in sleeping rooms are not required below the
fourth floor, thereby creating a trap. Also surrounding states already are,
or soon will be, using the 2003 codes.

Jenifer Gilliland of the City of Boise also spoke in favor of the bill.

Final discussion summarized the issue as a matter of not whether the bill
is good, but whether it is as good as it could be. The bill is a positive step
forward, and nothing would preclude the fire fighters from forwarding more
inclusive legislation in the future.

The meeting adjourned at 4:20 p.m.

EXCUSED:

EXCUSED:

Representative Eskridge spoke about the kinds of renewable energy
equipment that would be included in the bill and that it would be power
that was available to go back into the grid. He reminded the committee
that Idaho’s power supply has been volatile, and that renewable energy
sources offer price and supply stability.

Ron Williams, who represents Idaho Consumer Owned Utilities
Association testified that the amendment allowing transferability is
important and asked that it not be removed from the bill.

Bill Eddie, who represents Advocates for the West, supports the bill but
suggests a minor change. He would like to include the word “existing” in
the low-impact hydro definition.

Russell Hendricks, representing Idaho Farm Bureau, concerned about
removal of transferability. Believes that it would be advantageous to the
small farmers to have the credit

Senator Stegner encouraged removal of the amendment. He indicated
that it was decided income tax exemptions were the best way to help in
encouraging creation of alternative energy investments, and that it makes
sense that for an exemption to be claimed, taxes must be paid. Non-profits don’t pay income taxes so they should not be allowed a credit to
sell.