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House approves substitute personal property tax bill

House approves substitute personal property tax bill

Idaho Freedom Foundation staff
March 19, 2013
[post_thumbnail]Rep. JoAn Wood listens to testimony on personal property tax.

In a sure sign that the members of the Legislature are eager to conclude this year’s session, and in a rare display of expediency, the Idaho House of Representatives Tuesday afternoon first voted 66-2 to suspend its normal rules for considering legislation then subsequently voted 67-2 for House Bill 315, which alters the personal property tax law in Idaho. The entire process took little more than one hour.

Legislative leaders have said they want the session to be completed prior to the Easter weekend, which is March 30-31.

In a committee hearing on the bill Tuesday morning, House Revenue and Taxation Committee members unanimously approved the bill and forwarded it to the full House for consideration. Then came the whirlwind approval of the bill, which now heads to the Senate for debate.

The bill the House committee approved is a more modest reduction in the state’s personal business property tax than a previous bill heard in the committee but subsequently withdrawn. The legislation is in an effort to reduce the burden levied against businesses on their business equipment and supplies.

“This bill streamlines the reporting process and encourages a uniform tax reporting process across all counties,” said Seth Grigg, policy analyst for the Idaho Association of Counties, as he presented House Bill 315 to the committee.

The bill would allow an exemption for businesses in the state on the first $100,000 worth of purchases of personal business property, and businesses would also be exempt from paying the tax on new purchases of items costing less than $3,000.

“The exemption on new purchases is intended to apply to items that have low values,” Grigg stated.

During questioning, Rep. Neil Anderson, R-Blackfoot, asked Grigg “how does this get enforced, how does it get audited? Whose responsibility is it to follow up on these taxes and make sure they are reported properly?”

Grigg replied: “We’ve always been on the honor system,” noting that collection of the tax relies heavily on self-reporting. “Good or bad, that’s always how it has worked. Businesses are also subjected to random audits. There are complaints about the unfairness of this, and the way the current system can create some inequities, but this is how it works.”

Brent Adamson, Boise County assessor, added, “Rep. Anderson, you asked how do we take care of these taxes. I’m the guy who does. I have an appraiser on my staff that is dedicated to personal property, and I support this bill.”

“How are all the CPAs going to handle this?” asked Rep. JoAn Wood, R-Rigby, of Grigg. “You have this applying retroactively back to the beginning of this year. How will this work?”

“These are issues that the tax commission will need to work out,” Grigg replied.

The bill appears to have supplanted another, more aggressive piece of legislation that was presented to the committee seven days ago. “This is not just a starting point, this finishes this tax off once and for all,” testified Alex La Beau, president of the Idaho Association of Commerce and Industry, as he spoke before the committee on March 12 arguing in favor of what was then known as House Bill 276. LaBeau’s bill would have saved business owners an estimated $120 million a year.

Yet county and local government officials protested La Beau’s plan, noting that the services provided by county and local government agencies are heavily funded with the personal business property tax. Thus, Grigg proposed a modified bill that would reduce the tax burden to business owners by only $20 million a year in an effort to keep tax revenues flowing into county and municipal coffers.

Taxing “personal property” in Idaho is not new; the practice has been in place in the state for more than a century. According to the Idaho State Tax Commission’s website, personal property that is taxable under the current personal business property tax includes “items used commercially, such as furniture, libraries, art, coin collections, machinery, tools, equipment, signs, unregistered vehicles, and watercraft.”

The website further states that “taxable personal property also includes items used commercially for convenience, decoration, service, or storage. Examples are store counters, display racks, desks, chairs, file cabinets, computers, typewriters, office machines, and medical/scientific instruments.”

La Beau’s plan was to gradually eliminate the tax over a seven-year period. He has contended for several years that the tax is a huge disincentive for existing Idaho businesses to expand, and for out-of-state business to relocate to Idaho. Others have expressed concerns about disparities in the ways in which the tax is assessed.

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