The Utah Legislature’s work doesn’t conclude when its Annual General Session ends. From May through November, the Legislature meets in interim committees to discuss topics that may be examined during the upcoming session.
Many of these topics are guided from the prior year’s session at the request of the legislators. These are compiled in an annual study list.
Not all items on the list will be studied. Some topics may not receive a hearing or discussion and there is no guarantee action will take place to draft legislation for the 2021 Session. This is determined by each committee and the committee chairs.
Here are a few of the study issues with which your Taxpayers Association will be engaged throughout the coming months.
Revenue and Taxation Interim Committee
Overview of Sales Tax Exemptions, Tax Pyramiding, Reporting Requirements
The Revenue and Taxation Interim Committee is likely to look at existing sales tax exemptions. There have been several legislators that have expressed concern over what they view as exemptions that may not have a positive effect on Utah’s economy.
Utah’s past legislatures have made a concerted effort for over two decades to remove sales taxes on business inputs, or what is required by a business to make a final product.
Your Taxpayers Association has strongly supported the use of sales tax exemptions in order to avoid tax pyramiding, which has made Utah the number one place to do business for 12 years running, according to ALEC’s Rich States Poor States annual ranking.
Back in 2019, there was an effort to completely undermine these exemptions and create tax pyramiding by adding sales taxes onto many services, including those required to conduct business. We remained wholly opposed to any efforts to do this, and fortunately that effort was pulled from consideration.
Your Taxpayers Association believes that sales tax exemptions should be examined to ensure they are having a positive impact on Utah’s businesses and overall economy, but it must be done in a responsible way. Requiring in-depth reporting requirements in order to justify tax exemptions only puts additional compliance burdens on business and would be bad policy.
Keep in mind, the Utah State Tax Commission also has authority to audit any of these sales tax exemptions claimed by any business.
Flexibility in Use of Certain Taxes (Local option and Capital Local Levy)
COVID-19 has sent shockwaves across governments, and it is absolutely reflected in this year’s study list.
This committee may look at expanding the usage of local option sales taxes and increased flexibility in the Capital Local Levy (which is levied by school districts to pay for buildings).
Late in the 2020 Session, HB 357 (original version), would have allowed school districts to use the capital levy on any “need for the support of the school district”. Your Taxpayers Association met with the bill sponsor to address concerns over this legislation, who agreed to discuss the issue further.
We remain opposed to expanding the usage of the capital levy to other purposes other than direct capital improvements.
Methods for Taxing Entities to Extend Personal Property Tax Deadlines
The committee may also investigate ways that taxing entities can extend personal property tax deadlines. With many businesses struggling during the height of COVID-19 restrictions, many were concerned about paying property taxes. Your Taxpayers Association issued a press release calling upon counties to voluntarily extend property tax filing deadlines, with many counties agreeing to help. You can read our release here.
Set Property Tax Rate Floor
Utah’s counties are tasked with levying and assessing property taxes. The counties are permitted to levy a Multicounty Assessing and Collecting Levy to help cover the costs of this service. Recently, counties are looking to unify their systems and have been asking for an increase in the levy.
SB 141 in the 2020 session freezes the levy for a period of five years. This discussion during the interim will likely center around creating a floor so as to not have the levy drop below 0.000012.
Purchasing bank loans to increase lending capacity
Included on the study list is an item related to COVID-19, which would allow the state treasurer to purchase Paycheck Protection Program loans from banks and credit unions that have maxed out lending capacity. No one really needs to spell out how bad an idea this is, but we can hope that as businesses begin to recover, this idea will be pulled from the conversation altogether.
Political Subdivisions Interim Committee
Transient Room Tax (TRT)
This study item is in response to counties’ expenditure authority in response to COVID-19. Nothing is specifically outlined in the study list document, but it would allow the committee to examine and perhaps take action on giving counties greater flexibility in the use of the TRT.
TRT has been used to promote tourism and upkeep tourist attractions, such as trails and parks. Your Taxpayers Association has long argued that those who pay for a service be the ones using it. Expanding TRT to other uses moves away from this philosophy and hides the true cost of government from its taxpayers. TRT ought to be used for its current, limited purpose.
There is another item the committee may consider about increasing flexibility from local tax revenue, but no specifics are given. We are watching carefully.
Extend all CRAs, RDAs, and CDAs for One Year
This is again in response to COVID-19’s impact on local tax revenue. CRAs are given a portion of property tax to use to redevelop a defined area. These property taxes come from the city, county, school district, and any special district within the area. CRAs are guaranteed in contract to last a certain period of time, often 20 years.
CRAs can be used for good purposes, such as bringing major, high-paying jobs to an underserved area, but are often used to lure retail to bring in sales taxes to a city.
Extending these CRAs for another year continues to undermine local taxing entities, particularly school districts. Your Taxpayers Association opposes any attempt to automatically break contracts with taxpayers by extending the end dates of these development areas.
Allowing Borrowing for Government Operations
There are very few details in this study item, but a tremendously horrible idea. Borrowing is appropriate when used for a major capital improvement, such as a new building or construction of a major road. But allowing a taxing entity to ask for a loan for ongoing expenses related to maintenance and operation is dangerous and can lead to increased property taxes as the borrowing becomes cyclical.
Public Utilities, Energy, and Technology Committee
Utah’s Telecommunications Industry and COVID-19
As many of us are working remotely through the pandemic, this committee would like to receive a status update from Internet Service Providers (ISP) that operate in the state. The committee may also study the compliance of ISPs that have signed the FCC’s “Keep Americans Connected” pledge, which waives customer service suspension and termination. Many Utah telecommunication companies have voluntarily provided this service to the customers, and your Taxpayers Association worries that this is a ploy to encourage cities, such as Kaysville, to become their own ISP through a service such as UTOPIA.
As UTOPIA continues to face extended financial trouble, expansion of this service in cities will only cause more headache for their taxpayers.
Performance Audit of the Utah Communications Authority and Statewide 911 Operations
The Utah Communications Authority (UCA) has been rocked with scandal dating back a decade, including poor requests for contracts and directly competing with private industry.
In 2020, an audit was released that found UCA to be improving, but work is still to be done.
The PUET Interim Committee is asked to take a motion and to vote to either draft legislation for the 2021 Session to fix concerns made in the audit or to request more time to develop solutions.
Your Taxpayers Association has been watching the UCA closely to ensure no further waste of taxpayer dollars and felt the audit that was completed to be lackluster and weak. We intend to voice our concerns during these discussions to ensure the Committee is aware of the problems continuing to plague the UCA.
Natural Resources, Agriculture, and Environment Interim Committee
Lake Powell Pipeline Project:
The 2019 Interim committee discussed a legislative audit regarding the repayment feasibility of the Lake Powell Pipeline, which would move water from Lake Powell to Washington County. The committee passed motions to recommend that legislation be drafted to clarify the terms for repayment including state bond interest costs for the Lake Powell Pipeline, how repayment costs can be divided among and within repayment contracts, final repayment time frames for outstanding pipeline reimbursable costs, and whether multiple sources of funding for the Lake Powell Pipeline would be in the best interests of the state.
Your Taxpayers Association has long opposed the Lake Powell Pipeline, questioning the feasibility of whether water districts and water users can pay for the construction, operation, and maintenance. Water districts, particularly in Washington County, rely heavily on the property tax to subsidize the cost of water to its users.
To read the entire study list, click here.