H.B. 77 Tax Modifications: transcript

Alright. Uh, thank you. Um, HP 77 tax modifications was an interim bill that we spent, uh, a fair amount of time on. I'm joined by, uh, commissioner, uh, John Valentine from the tax commission. We, the interim committee worked very closely with the tax commission on this bill with a lot of, uh, technical, uh, items that, uh, just make a lot of common sense. Um, we're, we're going to, if it's okay, kind of present this together. Um, I've lived up to the commitment to the committee. We didn't make any change changes to the bill. No. Didn't sneak anything in, uh, despite sometimes, you know, wanting to do that with an omnibus bill or at least, uh, uh, some groups would like that. So, um, I think, um, commissioner, would you mind taking the, the first three items on the income income tax?

Sure. Lemme Yeah, you can borrow that. Yep. Okay. You're gonna have to stay with me on these 'cause these are gonna be, uh, hard to do. I'm Commissioner John Valentine. I'm chairman of the Utah State Tax Commission. So, uh, the income tax provisions of the bill included the following unrelated business income in a corporate income tax is one that is related to income that you've earned as a nonprofit, but then you have to pay income tax on it because it's not just from charitable activities, it's not from charitable contributions. So we have to deal with unrelated business income and we actually tax it. The purposes of the taxation, however, has something called a sourcing rule. And the sourcing rule is based upon where was that income earned. So if you have a nonprofit that is in multiple states, you have to source that income to the states where it was earned. An example would be if it had like a charity fair in one state but didn't have it in the other two states, and then they were in three states that one state would be entitled to all of the income of the unrelated business income. I know I told you it was gonna get a little nerdy here, but that's what that issue is all about, is how you source that income to the state that where it was earned. The second one, it repeals the corporate income tax credit for the use of Cleaner Bureau of Fuels that actually has a cleanup because it's been unavailable since 2003. The third one incorporates specific review requirements for low income housing credits into the five year cycle. Prior to this time it was missed. It was just missed in the drafting. And so now that goes into the five year cycle. What's the five year cycle? The five year cycle is one where this legislature every five years has us review individual credits to determine if they're being used and if they're being used properly. Those are the first three items. Mr. Chairman.

Okay. Thank, thank you. Uh, Mr. Chairman. Um, the next component makes provisions, uh, allowing for pass through entities to pay taxes for an individual otherwise known as the state and local tax. The salt cap workaround permanent, the workaround was scheduled to expire 12 31 25. Uh, the last component of the in income tax changes updates the taxpayer credit to align with recent federal changes to the the salt cap. Um, I'll keep going and we can kind of tag team.

This, uh, in the sales and use tax category modifies the definition of a short-term rental in the sales tax statute to include short-term property rentals, um, requires the tax commission to distribute revenue from the 1% local sales tax imposed by a county to any newly incorporated cities within the county during 180 day holdover period. Any comment on those?

No, those are very straightforward Mr. Chairman.

Okay. Updates and aligns the motor vehicle exemptions applicable to the Motor Motor Vehicle Rental tax, the Tourism Recreation Cultural Convention, and the airport facilities tax.

And I may just make a quick comment on that one, Mr. Chairman. That one had two different sets of definitions and qualifications. What the interim committee did was that, let's get those the same so we don't have confusion and that's what the bill does.

And the, the last in item that sales use category requires taxing entities to provide notice to the tax commission for the re reauthorization of local option sales tax and prohibits the tax commission from enforcing a reauthorized sales tax if timely notice is not provided. I believe this ties back to some of the issues that we had, uh, last session with cer certain entities not, uh, providing correct notice. Is that

That is correct. And specifically we had two sets of issues. One was truth and taxation. We had some entities that were not properly complying and so we denied their tax increases. The second one was the reauthorization of certain sales tax, which are given as local option sales taxes to our local communities. Those local option sales taxes need to be reauthorized every 10 years by decision of this legislature. Some of those entities, it was a little questionable as to whether or not they really were reauthorized in the time period that they should have been been reauthorized. So instead of leaving that as a question, the interim committee decided, you know what, let's require those entities to give notice to the tax commission in a timely manner. And if they don't, we're gonna do the same authority revocation that we had on truth and taxation. In other words, we're gonna take away the authority of the tax commission to allow them to continue to impose that tax if they don't give the notice.

Um, so if it's okay, we will defer to Representative Christofferson 'cause I think it was on the date on this, the most salient issue. The one that was just brought up on the revocation. Right. Okay. So you'll you'll you'll actually mind I'll ask, sorry. Okay, Go ahead. Okay, so the re you, it would give you the ability to revoke the ability to impose that. Would that be for a full cycle, like revoke it permanently or would there be some kind of remediation opportunity if they were found to not be in compliance?

The way that the interim committee wrote it is they wrote it in the same fashion that they did the Truth and taxation hearing in the prior session, which is to take away the authority of the alleged of the tax commission to be able to authorize it. If the notice was not given properly, that means it was not reauthorized and they'd have to go through the whole process again to start it over again.

Okay. It still had the statutory authority, but would not be able to do it without going through the whole process that was in the statute for that, that sales tax to be imposed Like with truth and taxation. Okay, got

It. Just exactly the same model as Truth and Taxation. Thank

You. And since I sit on that interim committee, I should have caught that, but thank you for the refresh. Oh,

No problem. Um,

One more question, if I may for sure. Representative Von can go back to salt. There was a, a, um, on I think your first block there was one that expired December, 2025. But if we're just now addressing it, what's the remediation for that for the current

Fiscal year? I could probably answer that easier for than Mr. Chairman could. So, um, our original salt workaround state and local tax workaround had a Sunset date on it. Mm-hmm. It had a Sunset date of December 31st, 2025. And that was because most of the, of the provisions that were dealing with those, um, salt limitations in federal law were expiring on that same date. So our statute was matching up and expiring on the same date. However, under HR one, the one big beautiful bill that was the extended to a higher cap level of $40,000, we also had a number of entities that were carrying forward unused tax that they had paid. And so the interim committee chose as a policy decision to do away with the Sunset requirement. So the state and local tax work workaround by using pass through entities no longer has a Sunset date on it under the bill. Got it.

Thank you. Thank you Mr. Chair. Yep.

You bet. No, we're not taxing your table salt. That's, that's a different bill. So yes. Yeah.

Yeah. Thank you Mr. Chair. So on the reauthorization, uh, of that, that some people missed, you know, when I, uh, when I have to, uh, renew my registration for vehicles, they send me a notification every 10 years. You know, there's a lot of change in sea government or county government. Do you send out, um, notices that, uh, as reminders to the cities and counties or do they, or that it's gonna expire or

We do not. And the city who imposes the tax has that in their initial authorization that is part of their initial ordinance. When they adopt the attacks, they need to keep track of that. Um, because of the 629 entities that we'd have to follow, all of which have different types of tax and different deadlines, it would be almost impossible for us to keep track of it. That's why the interim committee chose to say, you know what, let's put the burden on the entity that's imposed in the tax to give the notice to the tax commission that they are going to reauthorize it. And probably after last year, they'll all make a real Strong note. I don't think, I don't think there'll be too many mistakes. And you know, we, it was hard because we actually had a hearing on one of them and from my own community, and it was hard to say, I'm sorry, the legislature said the tax commission may not, and that is mandatory language. I don't have discretion in that same bill. The, that was passed the fire prior year Senate bill, I think it was, I can't remember the number, sorry. Um, but in that bill they have had some things that were discretionary and they had provisions that said substantial compliance. So substantial compliance we interpret to mean we have some discretion, but when the legislature chooses words intentionally to say, may not do something, we follow your instructions.

We don't do it. Thank you, Mr. Chair.

Thank you. Uh, so I think I missed it in your, your opening remarks there. Can you go into what's going on with short-term rentals here and, and I'm not following, I don't think to that yet. What's going on with the, We haven't got to that yet. Oh, okay. Stay tuned. You're on the edge of your seat. Got It. Thank you.

I know this is rty discussion, but we're trying to make it as clear. We're halfway there. Stick with me. Got it. Got it. Okay. All right.

All right. Okay. So moving on to the property tax, uh, section of the bill restates the requirements for, uh, county assessment of HOA common areas in the property tax statute. Any comment on that?

No, that's very straightforward.

Yep. Okay. Adjust the qualifying increase report increases the trigger threshold for automatic county review of property with a qualifying increase from 150% to 350% increase. The county, uh, reporting trigger threshold from 50,000 to 250,000 requires counties to report the reasons for the property tax value increase to the tax commission. So, um, chairman, correct me if I'm wrong here, but with previous legislation we did that tried to clamp down on these enormous, uh, unexpected increases to property tax payers with the initial threshold, it generated a long, long list and this was meant to make that list a bit more manageable. Any, any comment on that?

That's pretty cool. That's a pretty accurate statement. Okay.

Uh, modifies the definition of indigent individual and the property tax release statute by removing language that limits the finding of extreme hardship to counties. The last component, extreme hardship remains one of the determining factors of the indigent individual definition allows a taxpayer to appeal a county's denial of the taxpayer's property tax relief application based on late filing. This change extends appeal rights to all grounds for denial of property tax relief.

And, and that one I'd like to make a quick comment on, please, if I may, Mr. Chairman. Um, it was unclear whether a person who was denied relief would have the ability to appear, um, and before the tax commission appeal it for those types of it, we have been very judicious about following what you've authorized us to have appeal rights for some places you don't give us appeal rights. And so we, we follow that other places you give us specific appeal rights, the courts have actually looked at that as well and been very specific with us and said, if appeal rights are not granted, please do not exercise jurisdiction. And so we have not exercised jurisdiction. The reason that one is added is that we feel like we really should have jurisdiction that if someone is denied an abatement or circuit breaker or veteran's exemption, it shouldn't just stop at the county. They should have some place to appeal by appealing to us. They come into the full system and are allowed them to move on to the district court or the Supreme Court if they, so Jews, if they fail in the appeal before us. We just felt that that was a better access to courts and to the administrative process to have those appeal rights very clearly identified that they have appeal rights.

Uh, thank you. Um, remaining revenue related issues, uh, he, he, here's the best part of bill it repeals the inheritance tax. You're like, wait, I didn't know we had an inheritance tax. Well, we really don't, but it's, uh, an obsolete tax provision based on non-existent federal inheritance tax. So if you're losing any sleep over that, you don't have to anymore. Uh,

And I can be real dirty on this one for minute Please too. Okay, please. So what happened was Utah had, as it as its inheritance tax for many, many years, it said we will take the maximum federal credit allowed against federal estate tax. That'll be the Utah inheritance tax. And then the federal government did away with the federal inheritance tax credit. So we had a credit, but we, we had a tax, but no, no place to actually, uh, impose it because, uh, there was no longer a credit. So that's why it was that way.

Tha thank you. Um, consolidates two separate tax commission reports on federal tax law changes into single report. A many paperwork reduction Act incorporates the changes related to reporting and penalties for mineral production tax withholding from HB 61, uh, the revenue taxation interim committee's tax withholding committee bill from last year and consolidates a list of, uh, existing tax, uh, uh, existing privileged tax exemptions in the privileged tax statute within Title 59, chapter four. Um, Kanosh, lemme stop on both of those.

Okay. So on the first one, you don't like reading reports, and I hate even worse rep preparing reports that, that no one ever reads. And so what the legislature did in this interim meeting and said, you know what, we're gonna just get to those that we actually do need. And so consolidated many of the reports that we have to give to not only this committee, but to the legislature. Generally the same information's gonna be be in single reports rather than having to be in multiple reports on that last one. Um, that last one is really kind of near and dear to my heart and let's make sure I get it the way you have presented it. Um, which, where was it? Um, it's The privilege, Privilege tax. The reason it's near and dear to my heart is that when I was a practitioner, it was really hard to find all of the exceptions and the exemptions and the provisions of the privilege tax. What's a privilege tax? It is a tax that's imposed on a entity that is operating in a tax exempt environment, such as a government building. So you have someone that's operating for profit in a government building. Well, the government doesn't pay tax to itself, so we impose a privilege tax as a state. The privilege tax then provides a method of collecting the same tax that would be done by the person who is competitor in the building destroy across the street in a non-government building. So the tax was exactly the same. The problem was it had developed over many, many sessions. And so we had a provision here and we had a provision in here and we had a provision here, all of which you had to be able to find if you were trying to represent a taxpayer instead. Now what this provision does, and this bill is it brings those all together into one chapter, one title, one section. So that's a lot easier to find. So anybody can go into it now. They don't have to look all throughout the code. They can find it all in one place. That's what that one does.

Uh, thank you. That sums up the major provisions, but I think Representative Kyle, I don't know if we covered your question.

Yes, I I I didn't hear it. Can you Just remind us what it was? I I was trying to, um, see what you guys were doing with short term rentals, uh, kind of the language changes there. What, what the purpose of what I I it's hard for me to ascertain without any context what's, what's going on with it. I'm trying to see what we did in short term rentals specifically. Do you know which line? 3, 4, 4 5. Somebody give me a line number that I can help a on that four five again please. 3 4 4 5. Three four. Four five.

Oh, I remembered that one. So we Have, uh, we have a change in the definition on 34 88. Yes, I see it now. Thank you. We had some people trying to play games so they'd have a short term rental and they'd say, we're going to charge you a rental tax for the walls and a separate rental tax for all of the furniture, furnishings, hot tub, everything else that's used in there. And we would not collect the taxes on those other items. So we wanted to make it very clear to say, you know what, when you have a short term rental, you're renting the whole thing. You're renting all the stuff inside, you're renting the hot tub in the back, all of the things that go with the use of that short term rental for the time, it's all gonna be subject to sales tax. Don't play the games of trying to break out the personal, uh, furniture from the building itself. That's all that's doing.

If we wonder why the tax code is so voluminous, both the federal and state, it's because of people like that. I, I have to say I am somewhat guilty, uh, because in my prior life when I wore the other colored hat and I, I would like to say that was the white hat 'cause I was representing taxpayers, uh, I would oftentimes look at things and say, Hey, you know what, it's not clear. So we're going to push the envelope. I did, I pushed the envelope. Now that I'm wearing the other hat, and some would call this the black hat. Um, I actually look at the statute and say, what is the plain meaning of the statute? And the words on the page have to mean something. And that's why I do it both ways. When you tell me to do something with, that's what we do. When you tell me to do it a different way, I do it a different way. And, um, it's actually cut down a number of people making the kinds of arguments that I did when I was representing taxpayers, but they're still there.

Gotcha. Thank you for the question. Thank you.

And while we're on the subject, I'm not sure how germane this is, but I had a, a new, a new city in my district. Ask me why the city has less taxing opportunity than the county for short term rentals. Is that, is that,

That's a conscious decision on your Part that that's something we've done in the past.

Do you, do you know why we made that decision in the past?

I'm not sure why you made that decision. Um, other than the fact that the counties probably were pushing harder on it, um, it would be a policy decision on your part as to whether or not you want to expand some of those same authorities to cities. 'cause remember, cities and counties can impose local option sales taxes that you authorize. Right,

Right, right. I was just wondering if we we had any history on that. 'cause I, I probably wasn't around when we did that, but, uh, and

Let me make Correction. They do all the work and they get less of the tax. So Lemme make one correction. I said sales taxes, let me characterize it a broader category. Transaction taxes. Right. 'cause transit room taxes are, transaction tax is not truly a sales tax.

Got it. Alright. Thank you. You bet.

Uh, that, that's, that's it. That's everything in the bill. So that concludes my presentation, Mr. Chair.

Thank you Mr. Chair. Getting the session off to a roaring start. Um, I would like to make a motion, but before I do, I just wanted to thank, um, commissioner Valentine and his team for all of the great work over interim. Um, and I actually really like the reports that you send. Thank you. I do read them. Thank you. Um, Mr. Chair, I'd like to make a motion to pass out favorably HB 77 tax modifications. Excellent. We will go to the bill sponsor.

I support the motion. Okay.

I'll waive. Okay.

Thank you Commissioner Valentine. Appreciate you being here And thank you Mr. Chairman, members of the committee. Um, I recognize that what we did just now was a harmonizing of a lot of things that we've done for all the months of the interim. And so I really appreciate you kind of bearing with us and letting us nail down on that. Um, I wanna say one more thing just to re in response to Representative Kyle, um, that those changes dealing with the transit room tax are no difference in the policy that we're actually doing now. It was attempt to clarify even though I made light of it a little bit, uh, it was attempt to clarify. I appreciate that. Thank you.

Uh, thank you you, Mr. Chair. Um, this was an interim, uh, revenue taxation committee bill that I would deem our annual cleanup bill. Um, lots of exciting topics in here. Um, I will cover the, the, the kind of highlighted, uh, provisions by area of tax, um, under income tax. It modifies the definition. Actually, can I ask Commissioner Valentine to join me? Yeah, Absolutely. Come on down here. The next contestant Senate rev tax. So, okay. Um, and, and I'll just ask him to chime in on anything that I say to add additional context. First component related income tax modifies the definition of unrelated business income in the corporate income tax statute to include allocated income. Do you wanna comment on that?

Uh, yes. The committee this summer, this is Commissioner John Valentine, chairman of the Utah State Tax Commission. Uh, the committee this summer focused on a lot of issues. This was one of them. This was an issue dealing with, um, how unrelated business income is taxed for charities. Specifically unrelated business income is for the business opportunities that the charity may operate. That business income has to be sourced based upon where it's earned or it has to be allocated if it's allocated. Unfortunately, our statute did not clarify that allocated income needed to be added as well. So the interim committee decided to clearly do what other states are doing and added both sourced income and allocated income to the equation of what's included for tax in the state.

Uh, thank you. The next section is super straightforward. It repeals the corporate income tax credit for the use of cleaner burning fuel. This credit has been unavailable since almost last century 2003. So just cleaning up the code there. The next section, uh, incorporates, uh, specific review requirements for low income housing tax credit into the regular five year, five year review cycle and applies to income tax credits, uh, makes provisions, uh, allowing for pass through entities to pay taxes for individuals otherwise known as the salt cap workaround permanent, the workaround of scheduled to expire, uh, December of 25. Do you wanna comment on that?

Yes. Our workaround for pastor entities for the state and local tax deduction had a Sunset date. That Sunset date was December 31st, 2025. What the interim committee did, Mr. Chairman, is it said, we're gonna take the Sunset date off. So that workaround will continue to work as long as we have it in the statute. And updates the taxpayer credit to align with recent federal changes to the salt cap.

Moving into the sales and use tax area, modifies the definition of short-term rental in the sales tax statute to include short-term property rentals. This does not do anything to change the definition of short term rentals from a regulatory perspective, rather just in the sales tax area, um, to make it clear that you're renting the entire property and people can't get crafty of just saying, well, you're just renting the, the beds and stuff like that. You want to add anything there?

Uh, no. The question was whether or not personal property would be, should be included in the tax base when it's be it rented. Some of our more crafty people were starting to say, well, you can rent the property and then the, um, furnish sheets is separate. Rental and the separate rentals of the tangible personal property was not subject to tax. That's all it was.

Closing a loophole, uh, requires the tax commission to distribute revenue from the 1% sales tax imposed by a county to any newly incorporated cities within the county during the 180 day holdover period. Um, updates and lines of motor vehicle exemptions applicable to motor vehicle rental tax, the tourism recreation, cultural convention airport facilities taxes. And lastly in the section requires tax entities to provide notice to the tax commission for the reauthorization of local options sales tax taxes, and prohibits the tax commission from enforcing a reauthorized sales tax if timely notice is not provided. This kind of goes back to some of the issues we've recently had. Um, feel free to chime in if you want.

Uh, thank you Mr. Chairman. Th this particular issue was a continuation of the provisions of Senate bill 2 0 2 in the last legislative session session 2025, which actually said to the tax commission, you may not certify a tax rate unless certain things are done similar to that for the reauthorization of sales tax, local option sales tax, this bill would have that same con consequence that the tax commission could not reauthorize unless that notice was given by the local entity that opposed the sales tax.

Thank you. Um, moving into the property tax section, restates the requirements for county assessment of HOA common areas and the property tax statute. Um, one, uh, would you wanna comment on that?

Uh, say that one, uh, the Re the restate the requirements for county assessment of HOA common areas in the property tax statute. Um, uh, that one was a technical one dealing with how we assess common areas and it didn't really have much, um, of a policy decision on it.

Thank you. Um, th there was a, an amendment made in the house, um, from the bill that passed committee regarding the, uh, adjusting the qualifying increase report. Uh, the interim committee had set it, uh, changing the trigger for the automatic review of, of all property from 150% to 350%. There was an amendment in the house that, uh, took it back to the 150% just for residential property. Um, so that's one the only difference between this bill and what was in the interim bill that might consider taxpayer friendly. Um, it does increase the county reporting trigger threshold from 50,000 to 250,000 and requires counties to report the reasons for the property value increase to the tax commission. Um, that also modifies the definition of indigent individual and the property tax relief statute. By removing language that limits the fund, the finding of extreme hardship to counties and extreme hardships remain one of the determining factors of the individ indigent individual definition. Lastly, allows a taxpayer to appeal a county's denial, uh, the taxpayer's property tax relief application based on late filing. This change extends appeals rights to all grounds for denial of property tax relief. So that's a taxpayer friendly change that if you, um, didn't appeal it on time or didn't file on time, that you could still appeal it. Is that correct, commissioner?

That is correct. I'm gonna correct one of the statements you made, though. There was one additional item that was added to this bill that was not in the interim bill, and that was dealing with the add back of the state and local tax. When the federal change from the taxpayer, um, um, tax cut and jobs act in 2017 increased the threshold from $10,000 to the, um, one big beautiful bill, HR one, um, increased it to 40,000. That caused a tax increase of about $4 million on those people who were in that category who were not using the state and local tax workaround. And so that particular item was added after the interim committee bill, and it's what's giving rise to the $4 million fiscal note.

I need to clarify that. Okay. Appreciate that. Thank you. And then, um, just the last few issues, kind of miscellaneous re repeals the inheritance tax, uh, title 59, chapter 11, that is an obsolete tax provision based on a non-existent federal inheritance tax. Uh, consolidates two, uh, tax commission reports on federal tax law changes and single reports. So kind of mini paperwork reduction Act there incorporates the changes related to the reporting penalties from mineral production tax withholding from HB 61, um, the revenue taxations Interim Committees tax Withholding committee bill from last year. And then the last thing it really does is consolidates a list of all existing privilege, privileged tax exemptions and the privileged tax statute within Title 59 to chapter four. This is more or less from a convenience perspective because these privileged tax exemptions were scattered kind of throughout the code, and this puts them into one section that is much easier for, uh, kind of practitioners and the, the commission to, to use. So if I Missed, I came into that one. Oh, okay. All right. Okay, great. Great. Really very much so. Uh, okay. Um, anything else, commissioner?

Uh, no, that's pretty much the summary, Mr. Chairman of what the bill does. That will conclude my presentation.

Thank you. I think you, uh, hit the line numbers. I was going to address 1877 where you change the language in there, regardless this of whether the claimant is allowed and item itemized. Then you change the 10,000 to the state. So what you're really doing there is saying if you itemize and you have 20,000 in state and local taxes, you don't get to claim that 'cause you claimed it on the federal. Is that Correct? You'd

have to add it back in without the statutory change. That's what we already do in the present situation as we make the calculation. That's one of the reasons why high income earners use the passer entity, uh, workaround. So they wouldn't have to do that ad back in. They could then take that on the passer entity would reduce the income on the passer entity, and then the passer entity tax would then be based on the individual's portion of the income from that passer entity. Without that, for those individuals who did not do that, they had a $10,000 add back. Now because they can go up to $40,000 as a deduction on their federal return, now they could have up to a $40,000 add back. So in other words, it helps on the federal, but it does not help on the state at all Without the amendment that was placed into the bill. That is correct. Without the addition to what was placed in the interim bill. That is correct. With the addition, then it has a 40, a 4,000, $4 million reduction in revenue to the state, but then it brings those people back to even again.

Okay. Is that, is that showing that it's a positive 4 million, not a negative on

The fiscal? Yeah, that's a policy call on the part of the legislature if you want to do that or not. Yeah.

Okay. Thank you. I'm trying to unpack what he just said. Commissioner Valentine, are we saying that it's a positive fiscal note to do it this way? In other words, the state makes money.

I mean, this is, this is, uh, like for those that aren't paying attention, this is one of the difficulties of quote un uncoupling, but doing it in a very weird way, which is what we ended up doing with the salt, uh, you know, deduction back when the, um, you know, the Trump Tax Getting Jobs Act, uh, was done. We, we did it through this creative measure in dealing with, you know, reducing income to the pass through entity. But now that we're somewhat separated from the federal process, now it's not automatic like it was with the, with the other $300 million Right. Sort of. Okay. Okay. Um, without the bill, the way it's written, there would be a small group of taxpayers would have a $4 million tax increase with the bill. The way it's written, there's a $4 million reduction in revenues to the state of Utah.

Okay. I I see that. I Juab I had pulled the fiscal note up, so if that makes more sense to me now.

Okay. So do you see that Senator Harper, the fiscal note? In other words, we're gonna have to appropriate $4 million to cover this, to cover this change, uh, just through pass through for pass through entities and it's all the differences.

I as if I mis summarize, it's all the difference in having the $10,000 ceiling versus the $40,000 ceiling. That's

A good summary.

Okay. Yeah. Okay. Uh, can you talk to me, uh, this is an issue I'd forgotten about during the, uh, during the, um, uh, the interim, but the short term rental tangible personal property issue. Um, trying to find it again. I found it once and Then you gimme a line number that'll help me. Yeah, so I was trying to find the line again. Hang on just a second. I think we're in 38. See, I'm in, we're in the 38 21. I'm just looking through, uh, short term rentals. That's the short term rental section here. I think it's 34 88.

Transfer of possession or control of real property, tangible personal property or product transferred electronically for. So really what you are, really what this does, if I, I'm just reminding myself from interim, really what this does is it says that the tangible personal property is coupled with the asset for the purposes of taxation, such that their effort to try and exclude it from that saying it wasn't subject to taxation because of other tangible personal property limitations. They're saying you can't tax those components of it. Is that correct? That

Is correct. It's, it's sort of a bundled transaction. If you wanna make a a a kind of a, a conceptual, it's not a bundled transaction in the streamlined sales tax sense, but it's a bundled transaction in the sense of you're, you're, you're taking the whole thing when you go rental, a short term rental, you don't just rent the, um, outside walls and then a separate charge for the hot tub and the beds and the furniture and furnishings. Some of 'em, were trying to do that to reduce the size of the tax burden on it. We're saying no, that's not what was intended.

When did short term rental, you're running the whole thing. But on the short term rental side, how does that, how does that tangible personal property, I'm just trying to figure out how it figures into the valuation for, for per, for property. 'cause it's the value of the entire asset that is valued, not necessarily, not necessarily the individual pieces.

Okay. This particular provision is dealing with the sales tax or the transaction taxes.

Okay. Okay. And the transfer room tax,

it does not affect the real property Valuation. Okay.

I see what you're, I now I understand the loophole Okay. Based on what sections in Yep. Nope, makes a ton of sense. Okay. That makes more sense than it did before. I was trying to figure out how it fit into the property tax realm and that didn't make sense how it would cut their value at all. So yeah, That'll be conflating the issue. Yep, exactly. Thank you. Okay. Uh, thank you very much.

Thank you. I believe that we pass out house bill 77 with a favorable recommendation. If I could speak to that.

after going through things half a dozen times up here again, what that change on the state and local tax is actually doing and, and how you're addressing it. We could undo that and, and go through and potentially reduce that amount, but in reality it's, it's a tax increase unless we go through and offset It. Yeah. Yep. So, um, I, uh, it, it, I have a question for the sponsor related to that and, um, uh, do you wanna make a motion to pass it out?

Yeah, I do. And I have a discussion to it. So, go ahead.

We, uh, representative, we, because of all the other issues that are in the bill, are kind of in the must pass cleanup area. If we don't get this funded or if there's a funding issue, are we in a situation where we would prefer to take this bill, take this issue, the salt issue and put it in, uh, another bill that also requires funding in case we run into problems related to the funding? 'cause I, this bill represents really 10, maybe, maybe 11 or 12 different bills. Um, you know, that, uh, policy concepts and to hold it up for the fiscal note process over this one issue might not be our, our, this might not be our best vehicle for it. Thoughts?

Uh, yes. Have you read the book by Aaron Ralston entitled Between a Rock and a Hard Place? No, Aaron's the one who had to cut off his arm when he got stuck between a Boulder in southern Utah. Yeah. And decided to cut part of it off to save his life. Fair. Uh, Complete same philosophy here that, uh, that we'll, we'll pull that, we'll cut that out of the bill. Don't want to, but We'll, if we need to, to keep everything else moving, it's not worth it.

Yeah. So that's my, I guess that's my, my concern or, or that kind of thing, is just making sure we don't get caught up on the fiscal note on this issue. If for some reason, just knowing it's tight budget year, et cetera, that we don't get caught up over that to kill the other policies that are in it.

Um, I, I think that we've had a good discussion about that. A lot of work's gone into this. A lot of just kind of common sense housekeeping, uh, provisions. Okay.

It's always fun to deal with a lot of bills. You know, it's a big, big issue, so appreciate that. Okay.

Uh, thank you Mr. Speaker. This is, uh, an interim bill that's our annual cleanup bill, where we work very closely with the Utah State Tax Commission on statutory provisions that, uh, need to be updated or modified. Uh, I'm just gonna high level talk about some of the highlights of the bill. The first category touches is the income tax that modifies the definition of unrelated business income in the corporate statute to include allocated income. It, uh, the next component is actually really encouraging that if somebody's looking to do a repeal, there's all sorts of areas of the code that you can do a repeal. So this repeals the corporate income tax, uh, use of cleaner burning fuel. Uh, that credit has been unavailable since 2003, but it was still in the code. So we're pulling that out. Uh, incorporates, uh, certain, uh, requirements for review of the low income housing tax credit into moves that into the five year cycle like we do other income tax credits, uh, makes provisions, uh, allowing for pass through entities to pay taxes for an individual otherwise known as the, the salt cap workaround permanent, uh, that was scheduled to expire, uh, 12 31 25, and then it updates the taxpayer credit to align with, uh, changes to the salt cap in the sales and use tax area. It, uh, modifies the definition of short-term rental. It is not change, it only changes that in the sales tax section of the code. It does not modify the definition of short-term rental in terms of what can be used as a short term rental. This makes sure that it includes real property as well as personal property. Um, it, the next section requires the tax commission to distribute revenue from the 1% local sales tax imposed by a county to any newly incorporated incorporated areas, uh, during the 180 day holdover period. Um, it updates the motor vehicle exemption applicable to motor vehicle rental tax, uh, tourism, recreation cultural convention at airport facilities. And lastly, requires taxing entities to provide the tax commission a notice for the reauthorization of local sales tax and prohibits the tax commission in enforcing a reauthorized sales tax if timely notice is not provided. We've had some issues where, um, entities did not maybe follow the proper truth in taxation. And so this just makes it very clear they need to, uh, notify the commissioner if they're going to to do that. Uh, the next section, uh, re relates to property tax. It restates the requirements for the county assessment of HOA common areas in the property tax statute, um, increases the trigger threshold or for county automatic review of property, uh, increases from one 50 to three 50. I do expect, uh, an amendment to take that back down to, to one 50, which is, uh, definitely supportive of that. Increases the county reporting trigger threshold for the automatic review from 50,000 to 250,000 and requires counties to report the reason for the property value increase, uh, to the tax commission. So, brings a little bit more accountability to increases in the property tax area, modifies the definition of indigent individual and the property tax relief statute by removing language that limits the finding of extreme hardship to counties. Um, and then the last section, other kind of miscellaneous issues. It repeals the inheritance tax. So that's a, that's a good thing, but that's an obsolete tax provision because it's non-existent in the federal code. So again, a repeal that, that makes sense. Uh, it consolidates a couple of tax commission reports to reduce the amount of work they have to do and the reports that we have to read. And then lastly, it consolidates, doesn't not change the, um, the privilege tax exemptions. It simply pulls them all from the different sections of the code and puts him into one area that's easier for practitioners and, and the tax commission to reference. So that's the, the basics of, uh, what the bill does, uh, Mr. Speaker and, um, happy to answer any questions.

Thank you, Mr. Speaker. I move the adoption of Amendment two in my name.

Yes, I would. So part of the, uh, impact of this bill is that it gives the assessors less obligation to review, um, excessive property value increases and in the way the bill was originally drafted. It just has a broad based jump for all properties. So if your property jumps from, say, a hundred thousand dollars to $200,000 or 300,000, 400,000, at some point somebody says, Hey, maybe the assessor ought take a look at that in the bill. The, the old threshold is 150% increase and the new bill moves at a 350% increase, which makes sense for vacant land or for some commercial properties. I don't know that it makes sense for residential properties. So Amendment two just keeps the residential properties at the old one 50% and allows the vacant land in the commercial properties to have that higher, higher trigger threshold of three 50%.

Uh, I'm supportive of that amendment. Thank you

Uh, thank you Mr. Speaker. Uh, this, this is the conglomeration of a lot of different policies that in times past could have ended up in different bills, but we think that that's been vetted very well and is completely appropriate to, uh, consolidate them into this, uh, this larger bill. So, uh, uh, common sense changes. Appreciate your support. Thank you.

Representative Now present,

Thank you President. Uh, house bill 77 is a lovely bill. Uh, it's actually about 14 or maybe 15 bills all rolled into one. Uh, but it does a lot. Um, and it is the result of a lot of our cleanup work. Uh, throughout the, uh, throughout the, uh, interim, uh, we took, instead of having a bunch of bills, we consolidated them into one. And I'm just pulling up the bill so I can tell you some of the things that it does. Uh, let's see. We're working, uh, just as we get started, if you start with the fiscal note, there's a $4 million positive fiscal note that we're working with the tax commission to still try and straighten out. Uh, it has to do with how, um, taxation is collected and we're trying to make sure that that works out right. Uh, this also takes and takes our salt deduction that we created as part of the state and extends it to, uh, match the federal limits and makes it, and makes it permanent as opposed to a, um, as opposed to something that is temporary. Um, this, uh, let's see. I'm just rolling through things that, uh, expands the definition of ubit, which is unrelated, uh, business income tax, uh, as applied to corporate income tax to include, uh, allocated taxes. It modifies the taxpayer credit to align with federal tax changes that were made in HR one. Uh, it changes the definition of short term rental as applied to sales and use tax to include the rentals, uh, that involving real property as well as tangible property. Uh, it requires, uh, the county that imposes a 1% local option tax and u sales and use tax to distribute the revenue collected within a newly incorporated municipality to that municipality for a period of time as authorized by the authorization of the voters. Um, there is a list of a few other things, but with that point, uh, I'm happy to yield to specific questions if there are any. Um, but I would be surprised this is mostly, uh, this is all cleanup language. Thanks President.

Thank you. I'll move the house. Bill 77, Be read for a third time.

Thank you Mr. President. Uh, motion to lift first house, substitute house bill 21 from tabled on third to the third top of the third reading calendar. Is that where you want it? It, this, this did this had a fiscal note that had not caught up. The fiscal note is now zero. Yeah, we probably just need to leave it on the third reading calendar overnight, but, uh, okay. So, so Motion to would be you can top the bottom. I think we'll get to all of 'em on tomorrow, so it Won't really matter. Okay. Okay. Thank you. That's My motion. So we have a motion

First substitute house bill 21. First Substitute house bill 21 to the top of the third reading calendar.

It too Late for me to encircle on the, on the third?

Thank you Mr. President. Uh, this is a, uh, this is the House Revenue and Taxation Collection collection of interim bills. Um, we rolled them all into one bill. It says several impacts across many different areas of tax. You probably haven't been lobbied on any of them. Uh, the one thing that you will want to notice when you look at the fiscal note, it does have a positive fiscal note, but this is because of the Trump administration's changes in HR one. In HR one, they took the salt deduction from 10,000 to 40,000. When we, when we, when we take that and put that into our code, what it does, and it ends up decreasing the amount that some entities will be able to receive as part of the salt deduction as a result of that change, it's actually a positive fiscal note for the state. And the only way to change that is to decouple from the federal system on state and local taxes. So the, I I've rolled through this in several different ways and there, this is the, this is the way to fix it, unfortunately, absent decoupling. And so while, uh, it, it's just in how the state and local taxes calculated on the federal system and then rolls onto the state return, that rolling or that change in HR one is when we change our code to accommodate that, we end up with this positive fiscal note. And so that's the one thing that I want everybody to be aware of as they're, as they're talking about it. Uh, and, uh, if anybody has any questions, I'm happy to answer them, them. But here we are in third, I was trying to find a way that we could neutralize it or do something else. And everything it does creates unintended consequences that are much worse. And so here we are. Uh, this is just one thing to look at you. You, uh, and this is an actuarial count, so, you know, uh, based on analytics, we don't actually know how many will, you know, how much this will affect, but there it is. It's four, it's a $4 million positive fiscal note that, um, that change to go to decouple from the federal system on state and local tax will hurt small business, hurt small employers, hurt all of our lcs that are single pass through entities. And so that's the one issue with that. Uh, Mr. President, I'm happy to answer any questions about the tax and if somebody else has a better idea, I'm all in. Thank you for listening. For looking for, uh, discussion.

Thank you. Uh, Mr. President, I don't know that I have a better idea, but I'm a little concerned to start decoupling. We, uh, from the, the, uh, you know, from from a GI as the basis of our, uh, uh, of our income tax, we've talked about that over several years for several different things. And every time it's come up, the, the feedback, at least that I've always gotten is that it would create such problems that it's not worth the decoupling. And while I don't have a better idea at this point, that's because I'm being introduced to it here, um, with, without a lot of time to think about it. Um,