Revenue and Taxation Interim Committee (Tangible Personal Property Tax and Tax Relief for Seniors)
During the Revenue and Taxation Interim Committee meeting on November 18th, your Utah Taxpayers Association provided testimony on two bills.
First, Senator Lincoln Fillmore (R – South Jordan) proposed a bill to provide property tax relief to senior citizens by allowing for a statewide deferral of property taxes for those over age 66 with a home valued at $500,000 or less.
The bill would allow taxpayers to apply for that deferral with their county each year. When the home is sold or transferred to heirs, the balance of deferred taxes would then be collected and paid.
Your Taxpayers Association spoke in support of the bill as it will provide meaningful relief for those that need it and it is done as a deferral, not a forgiveness, of property taxes, so other taxpayers would not be subsidizing the benefit. The bill was voted through as a committee bill along with a bill sponsored by Senator Gene Davis (D – Salt Lake City) updating the property tax circuit breaker statutes.
The second bill that the Association spoke in support of was sponsored by Senator Wayne Harper (R – Taylorsville) that raises the exemption amount on tangible personal property tax from the current $15,000 in personal property value to the first $50,000. It would also make this a tax cut and not a tax shift to other taxpayers. This would mean very meaningful relief for many Utah small businesses.
According to data from the Office of Legislative Fiscal Analyst, this would exempt almost 40,000 additional small business taxpayers from the tax, leaving around 18,000 filers still subject to the tax. Around two-thirds of Utah businesses personal property taxpayers would now be exempt, if the law were to pass during the 2021 General Session.
However, the important note is that the amount of revenue lost to taxing entities is only $13.2 million statewide out of the roughly $3.4 billion that is collected annually from property tax. That goes to show that the vast majority of the personal property tax is paid by large businesses and exempting those small businesses from having to deal with this tax does not come at a meaningful cost to taxing entities.
Your Taxpayers Association made the comment that the $50,000 should be the cap of what the exemption should be and there should be no further efforts to raise it higher. The Taxpayers Association believes the bill is constitutional on all fronts and the bill passed through the committee with a 16-1 vote.
Political Subdivisions Interim Committee (Tax Increment Financing)
The Political Subdivisions Interim Committee considered legislation proposed by Representative Merrill Nelson (R – Tooele) entitled Tax Increment Financing Amendments. Rep. Nelson explained to the committee that the legislation is necessary to protect the poorest school district’s participation in Tax Increment Financing (TIF) incentives for developers. He said that the school districts which are property poor tend to have the highest tax rates and therefore have more money taken from them through TIF than the wealthier districts. The bill would set a maximum participation of a school district as the average statewide school tax rate. He said he wanted to set a limit on the amount that can be taken from school kids in the lowest funded schools in the state.
Speaking in support of the bill, your Taxpayers Association explained to committee members that under the current law, Tooele School District, which has the second highest school tax rate in the state and yet is one of the lowest per student funding, would potentially contribute twice the amount to the developers of a new project than the exact project would receive from Salt Lake School District and three times more than Park City.
The Association told the committee that the spending disparities illustrate why this limit on taking from the poorest districts is called for: Tooele total spending per student in the 2018-19 school year was $8,347 compared to $12,293 in Salt Lake City School District and $17,494 in Park City School District. We argued that the bill would not inhibit economic development in districts protected by the cap because even with the TIF limited to the statewide school tax rate, a project in Tooele School District would still generate to the developer 92% more than Park City School District and 43% higher than Salt Lake City School District.
A motion to recommend the bill to the legislature was overwhelmingly supported by committee members in the House of Representatives but opposed by Senate members and therefore the motion failed to pass. The bill will likely be brought to the Legislature’s 2021 General Session.
Public Utilities, Energy, and Technology Interim Committee (Hydrogen Production Tax Credits)
In the Public Utilities, Energy, and Technology Interim Committee, legislators were presented with draft legislation that would expand tax credits for hydrogen fuel production, including removing the excise tax for hydrogen fuel.
Your Taxpayers Association had spoken with the sponsor and vested parties on the issue weeks prior, and after review, found no specific reasons to oppose the bill.
This proposal would add credits for hydrogen fuel cells, production, and infrastructure, among others. The idea of this legislation, as mentioned by the sponsor, is to incentivize the industry to create and expand in Utah. Your Taxpayers Association has not opposed these types of measures in the past for burgeoning industries. However, we believe that when an industry is “grown up” to a point where it no longer needs these credits, that the credits be revoked.
In regards to this proposal, one suggestion that we made during these conversations was to add a sunset to the credits. In the legislation presented to the committee, your Taxpayers Association testified urging the committee to add provisions to ensure these credits are reviewed periodically. In addition, the removal of the excise tax for hydrogen fuel removes these types of vehicles from appropriately and fairly contributing to their usage of the roads, since the traditional gas tax would not apply.
Until a road usage charge is in place in the state of Utah, the excise tax is more appropriate to ensure everyone, regardless of vehicle purchase, is paying for their usage of the roads.
The Committee chose not to make the legislation a committee bill, but the sponsor is likely to bring the proposal forward during the 2021 General Session, which begins in January.