On Thursday, the Senate Finance & Revenue Committee held its first hearing since the walkout ended, resulting in a marathon round of public hearings and work sessions on bills previously stuck in the first reading queue during the walkout. Among those bills is a noncontroversial series of administrative changes to the corporate activity tax, which may very well become controversial in the final days of the session.
Corporate Activity Tax Changes
Since the legislature enacted the corporate activity, the revenue committee chairs regularly deferred any material policy changes to the tax, saying the state needed complete tax return data before considering any major policy reforms or exemptions. Many assumed those statements meant the 2023 session would be the first real crack at reforming or exempting certain industries. However, the pandemic and economic uncertainty resulting from it changed the calculation. To this date, the state is without economic normalcy, making policy reforms an uphill climb, even more than usual in this legislature.
Throughout the session, the legislative revenue committees considered reform proposals, including a controversial proposal to exempt some businesses while raising taxes on others. Those offerings fell through quickly after appearing, but some of the sentiments and policy rationale behind them continue to linger. That was the case for HB 2073, a noncontroversial bill from the House making changes to the special certification for agricultural processors, exempting precious metal dealers, and allowing the Oregon Department of Revenue to align the tax return filing deadline with the income tax. In the Senate, however, the committee had other ideas in store.
Sen. Brian Boquist (I-Dallas) drafted an amendment to exempt reimbursements from publicly funded health insurance from the tax. These providers receive lower reimbursement rates than commercial carriers and advocates argue the tax disproportionately affects the ability of medical providers, especially providers in private practice, to see patients on these plans. The problem, however, is that exemptions cost money and the politics around exemptions are extremely tricky.
During the hearing, Chair Mark Meek (D-Oregon City) acknowledged he was likely the only member to support the underlining bill. Sens. Jeff Golden (D-Ashland) and Kayse Jama (D-SE Portland) opposed the underlining bill, saying they could not support one-off exemptions to the tax. Sen. Lynn Findley (R-Vale) opposed the bill because he felt the legislature was unlikely to make any movement on targeted exemptions during the short session. Although Sen. Boquist introduced the amendment, he said he would oppose the bill because it was likely going to fail and wanted the opportunity to move to reconsider at a later date.
After several minutes of conversation among committee members, Chair Meek announced he would roll the bill over, hoping that an agreement could be reached to resolve the tension.
- HB 2965: Cancels outstanding ad valorem property taxes and interest assessed on property transferred from federal government to port district. Do pass. (Unanimous)
- HB 2971: Provides that specially assessed irrigated farmland may not be disqualified from special assessment if landowner has active in-stream lease for water rights appurtenant to such irrigated farmland and farmland is being used according to accepted farming practices that are mode of operation customarily utilized in conjunction with farm use. Do pass. (Unanimous)
- HB 3194: Increases maximum dollar amounts used to determine whether addition of real property improvements constitutes "minor construction" for purposes of property tax law. Do pass. (Unanimous)
- HB 3221: Removes federal forest reserve revenues from list of revenues that are considered Local Revenues for purposes of State School Fund distributions to school districts. Do pass. (3 to 2; Nays: Boquist and Findley)
- HB 2073: Provides that if due date of corporate activity tax return falls on Saturday, Sunday or legal holiday, return is due on next business day. No vote.
- HB 2527: Amends certain provisions of program for special assessment of wildlife habitat land relating to monitoring of implementation by landowner of approved wildlife habitat conservation and management plan. Do pass. (Unanimous)
- SB 540: Exempts from state income for taxpayers 62 years of age or younger receiving retirement pay or pension for service in Armed Forces of the United States up to $17,500 in retirement pay or pension received for service in Armed Forces of the United States and up to $17,500 in retirement pay or pension received from other sources. Do pass with a -4 amendment. (4 to 1; Nay: Golden)