Legislators learn about state tax agencies, business incentives

When legislators go into session in January, they may be presented with requests for data center equipment sales tax exemptions, changes in how property tax is assessed, far fewer rules and a new structure for the State Tax Commission.

This was during the ATI Taxpayers Conference, held on Dec. 4 at the Boise Centre. The annual event, serving as the unofficial beginning of the Idaho legislative session, is sponsored by the Associated Taxpayers of Idaho, a Boise-based, independent, nonpartisan, not-for-profit organization that says it works on behalf of Idaho’s taxpayers.

‘Least-regulated state in the Union’

Calling Idaho the “least-regulated state in the Union,” Gov. Brad Little noted that 75% of rules had been eliminated or simplified during the interim. He was able to do this because the House and Senate failed to pass the traditional “drop dead” bill, which automatically continues all rules forward until the next year The Legislature will need to approve these rules for them to continue.

Little didn’t reveal details of his planned budget, which he provides during his State of the State message on Jan. 6 at noon in the Idaho Statehouse, but telegraphed that he might not be able to eliminate grocery tax, on which he campaigned. Funding education – which he said was his top priority — and balancing the budget take precedence, he said.

Incentives

Steve DelBianco, president of NetChoice, a Washington, D.C. trade association representing eCommerce businesses and online consumers, who testified at an informational hearing near the end of last year’s legislation session on the benefits of a data center equipment sales tax exemption, made a similar presentation. Exemption proponents have said they plan to bring forth legislation to support it again this year, after several failures.

In addition, Grant Cooper, manager of credits and incentives for Ernst & Young, presented information about federal, state and local incentives more generally. He noted several examples of companies, which he didn’t name, choosing to site in Idaho due to the combination of such incentives.

Businesses want to relocate where they feel most welcome, Cooper said. At the same time, “Incentives are never the singular focus of a client’s business decision,” he said.

Tax Commission structure

The Idaho State Tax Commission is considering a change in structure to be more of a state agency, with a director, rather than with several equal commissioners, said chair Tom Harris. He didn’t provide any specifics on how or when this might happen.

Most states have a director who provides rulemaking authority and helps control incoming revenue, said Nikki Dobay, senior tax counsel of the Council on State Taxation (COST), which promotes equitable and nondiscriminatory state taxation.

Such a model would also make tax appeals more independent by having judicial separate from auditing – something that the current system doesn’t have and for which COST has criticized Idaho, Dobay said. Taxpayers also have to post a bond to be able to appeal, she added.

Property tax study

Dr. Allan Walburger, a professor in the Department of Economics at Brigham Young University-Idaho, presented preliminary results of a property tax study he’s doing to update a similar study performed in 1997. A legislative working group is looking at policy with the goal of reducing property taxes in the next legislative session.

Generally, residential properties pay less than what they receive in services, while commercial and industrial lands receive less, though agricultural lands typically do as well, Walburger said. And the gap is widening, he said.

“I’m not setting policy, I’m just telling you how it is,” Walburger said.

The good news is that there isn’t much chance of a recession in the coming year, and if there is, it’s likely to be short and mild, said Dr. Lawrence Yun, chief economist and senior vice president of research for the National Association of Realtors. While this is the longest economic expansion in the U.S., a recession requires an underlying trigger, he said.