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November 4 and 5, 2004
State Capitol, Room 302
Cheyenne, Wyoming
Senator Robert Peck, Co-Chairman
Representative Roy Cohee, Co-Chairman
Senator Jim Anderson
Senator Dick Erb
Senator Rae Lynn Job (November 5, 2004)
Senator Jayne Mockler
Representative Rodney “Pete” Anderson
Representative Pat Childers
Representative Lorna Johnson (November 5, 2004)
Representative Tom Lockhart
Representative Saundra Meyer
Representative Bill Thompson
Representative Jane Wostenberg
Senator Rae Lynn Job (November 4, 2004)
Representative Kurt Bucholz
Representative Lorna Johnson (November 4, 2004)
Mark Quiner, Assistant Director
Dean Temte, Fiscal Analyst
Don Richards, Senior Research Analyst (November 5, 2004)
Please refer to
Appendix 1 to review the Committee Sign-in Sheet
for a list of other individuals who attended the meeting.
Cochairman Cohee called the meeting to order at 8:30 a.m. The following sections summarize the Committee proceedings by topic. Please refer to Appendix 2 to review the Committee Meeting Agenda.
Minutes from the October 5 and 6, 2004, meeting were approved with no changes.
Internet sales of tobacco products and counterfeit/contraband products. Mr. Dan Noble, Department of Revenue, testified the department held meetings with the tobacco industry regarding internet sales of tobacco products and counterfeit/contraband tobacco products. He indicated this is a problem in Wyoming and the department has seized counterfeit tobacco that has not been taxed with the Wyoming cigarette tax stamp. He indicated the department is currently considering revoking up to three wholesale licenses in Wyoming for this reason. He indicated he is not sure how big the problem is, but the investigation is ongoing. He stated this was not a serious issue until the taxes were increased on tobacco from twenty cents to sixty cents a pack. He indicated many people are buying tobacco over the internet and not paying any tax. He further indicated the master settlement agreement requires the state to diligently enforce the law (see Appendix 3). Mr. Noble indicated he is working with industry on proposed legislation, and the bill needs further discussion on how to enforce the law.
Mr. Dave Pickard, representing Altrea Services, indicated he supports the department's efforts to address and enforce the law on contraband/counterfeit tobacco products. He indicated the draft bill gives more effort on enforcement.
Mr. Tom Jones, representing the Wyoming Wholesalers and Coin Operators Association, indicated a majority of his members are local family-owned businesses that have been in the state for many years. He indicated his members are not the problem and that his organization believes in enforcement of the laws since it is difficult to compete with counterfeit products. Mr. Jones testified he is not sure this bill draft will help and it would impose steep penalties on retailers who unintentionally sell counterfeit products.
After discussion, Representative Anderson moved the bill for discussion purposes. There were numerous amendments made to the bill (see Appendix 3). Following discussion, Representative Childers moved the bill be drafted with the amendments and the Committee be polled by postcard ballot on whether or not to sponsor the bill. The motion passed.
Tobacco Equity Fee Assessment. Mr. Noble explained the issue. He indicated the equity fee assessment relates to escrow agreements with nonparticipating members of the master settlement agreement. He stated the process is currently being challenged and there is little to report at this time. He indicated the department would keep the Committee informed of any developments in this area.
Six Percent Tobacco Stamp Discount. Mr. Noble explained that current law allows vendors to keep six percent of the tobacco taxes administered by them. He indicated this became more of an issue after the tobacco tax was tripled. Currently vendors are able to keep six percent of all taxes administered.
Mr. Jones testified against changing the six percent administration fee (see Appendix 4). Mr. Jones provided information regarding the true fiscal cost of administering the tobacco tax.
Mr. Lester Levi, Van's Wholesale in Laramie, operates a wholesale business and has been in the tobacco business for 25 years. He indicated he buys from one wholesaler and he stays in the cigarette business just to sell other lines to those buyers. He indicated he does not make much money off of cigarettes and has a cigarette stamp machine that is very expensive. He indicated he must buy a roll of 30,000 cigarette stamps for $16,000 and he makes around $1 per carton of cigarettes, plus the sixty cent stamp per pack.
Mr. Ed Schmidt, Director of the Department of Revenue, provided information on the property tax relief program and provided the Committee with a report on the current program indicating the program has been expensive and has suggestions for improvement (see Appendix 5). He indicated in 2003 there were 658 property tax refunds totaling $98,500.
Mr. Joel Shell, Converse County Treasurer, indicated he has no problem with the program or the form. He set up workshops in his county last year and assisted people with the forms, but only had four forms to file applying for the program.
Senator Peck moved the three suggestions on page 2 of Appendix 5 of Mr. Schmidt's recommendations for property tax relief be drafted into a bill and sponsored by the Committee. The motion passed with a roll call vote of 11 ayes and 3 excused (see Appendix 7).
Mr. Tom Teagarten spoke on the issue of intangible property appraisal. He worked for the State of Tennessee appraising public utilities. He explained the unit appraisal concept (see Appendix 6). He indicated the State of Wyoming is renowned for the good job they do in appraising state assessed property. He spoke on intangible property assessment and appraisal and how difficult it is. He indicated the most difficult part of property tax appraisal is valuing and appraising the intangible property.
Dr. Shelby Gerking, University of Central Florida, joined the Committee by conference call and provided information on the components that went into the creation of the mineral tax incentive econometric model. Dr. Gerking suggested the funding be discontinued for updating the model since the model is not currently being used. He indicated the minerals trona and uranium could be added as components to the model if so desired.
Following discussion, Senator Mockler moved the Committee draft a letter to Management Council stating the Revenue Committee reviewed the model and recommends further updates to the model should not be funded. The motion passed.
Mr. Noble reported on the progress of the sales and use tax exemption on manufacturing equipment for the exemption that was recently passed by the Legislature. He indicated the exemption has only been in place for four months and he does not have a lot of information on the exemption so far. He is trying to identify who the manufacturers are in the state, and the department is working with the Business Council to develop a database of manufacturers. He did have a suggested change to clarify the Northern American Industry Classification System (NAICS) code manual in statute. The statute refers to the 2003 version of that manual and indicated there is no such thing. He recommended the Committee sponsor a bill to change the NAICS manual from 2003 to 2002. Following discussion, Senator Peck moved the Committee sponsor a bill to change the NAICS code manual from 2003 to 2002. The motion passed with a roll call vote of 11 ayes and 3 excused (see Appendix 8).
Mr. Dean Temte, LSO, provided the Committee with a summary of the October 2004 CREG report and the Goldenrod dated October 20, 2004.
In regard to the October 2004 CREG report, Mr. Temte informed the Committee of how actual FY 2004 revenues compared with projected revenues from the January 2004 CREG forecast. FY 2004 General Fund revenues exceeded projections by $72.4 million. FY 2004 severance tax revenues exceeded projections by $90.1 million. FY 2004 federal mineral royalty (FMR) revenues exceeded projections by $59.6 million. Mr. Temte also discussed the updated revenue projections for the 2005-06 biennium, and compared them to amounts previously forecast. Total General Fund revenue for the 2005-06 biennium is now projected at $1.4631 billion, $96.7 million more than the amount previously projected. Total severance tax revenue for the 2005-06 biennium is now projected at $1.156 billion, $283.2 million more than the amount previously projected. Most of the increase in severance taxes is attributable to natural gas, which now provides over 60% of the total projected severance tax revenues. Total FMR revenue for the 2005-06 biennium (including coal lease bonus) is now projected at $1.2274 billion, which is $309.6 million more than the amount previously forecast. $54.8 million of this increase is from the recent NARO South coal lease sale, which will provide coal lease bonus payments of $27.4 million per year for FY 2005-09. The first $27.4 million payment should be received in November 2004. The NARO South is the only new coal lease bonus included in the October 2004 forecast. The recent Little Thunder coal lease sale was not included in the new forecast, but could be included in the January 2005 CREG forecast.
Mr. Temte then discussed the Goldenrod dated October 20, 2004. The left column reflects the fiscal status as of the end of the 2004 special session, based on January 2004 CREG projections. The right column reflects the October 2004 CREG forecast. $13.2 million was transferred from the General Fund to the Permanent Mineral Trust Fund Reserve Account and $3.2 million was transferred from the General Fund to the Common School Reserve Account, in accordance with the spending policy. No additional transfers to the spending policy reserve accounts are forecast during the 2005-06 biennium. The combined projected General Fund / Budget Reserve Account balance at the end of the 2005-06 biennium (as reflected on page one of the new Goldenrod) is now $606.8 million (which is $549.3 million more than previously projected). The projected balance in the School Foundation Program at the end of the 2005-06 biennium is now $246.9 million (which is $238.7 million more than previously projected). The projected balance in the School Capital Construction Account is now $55.0 million (which is $54.8 million more than previously projected). The grand total increase of all balances shown on the profile is $861.3 million.
Mr. Noble explained proposed amendments to the law to comply with the streamlined sales tax agreement (see Appendix 9).
Mr. Joe McQuade, Wyoming Woodworker's Supply, provided extensive information on his opposition to the streamlined sales tax agreement and the department's rules on the agreement (see Appendix 10). He indicated the Legislature should do three things: 1) the Legislature should nail down the cost of administering the SSTA; 2) the Legislature should rescind the Department of Revenue rules on the SSTA; and 3) the Legislature should implement a blended rate within the state, it is simpler and it will work.
There being no further business, the meeting was adjourned at 5:30 p.m.
Cochairman Peck called the meeting to order at 8:30 p.m.
The Committee then returned to the issue of the streamlined sales tax agreement.
Cochairman Cohee gave information on the streamlined sales tax agreement meetings. He indicated there are continuing talks on what is needed for legislation in other states to continue the agreement. Mr. Noble indicated the members of the agreement are working on a governing structure for other states. He indicated the administrative costs of the agreement will be around $400,000 per year and that will be divided by the 20 participating states. The member states are conducting a cost of collection study and that will have to be studied for the agreement to proceed. The member states also wish to form a nonprofit organization for the administration of the agreement. Mr. Schmidt indicated the agreement has been operating since 1999 and has received a great deal of scrutiny nationwide. Taxpayers and legislators have genuine concern over some of the issues. Mr. Schmidt provided the Committee with the Wyoming vendor sales and use tax return form (see Appendix 11) and a copy of Chapter 3 of the sales tax rules from the Department of Revenue (see Appendix 12).
The Committee then worked the proposed legislation from the Department of Revenue (see Appendix 9).
Representative Childers on moved page 5, line 25, delete "means" insert "includes". The motion passed.
Representative Childers on moved page 8, line 14, before "refunded" insert "credited or". The motion failed.
Following discussion, Representative Anderson moved the Committee sponsor the bill. The motion passed with a roll call vote of 13 ayes and 1 excused (see Appendix 13).
Senator Mockler, Chairman of the Taxation of Intangible Property Subcommittee, provided a report on the Subcommittee's activities (see Appendix 14). Senator Mockler introduced the members of the Subcommittee and provided extensive information on the work of the Subcommittee. Senator Mockler indicated that although the Subcommittee met three times and worked hard on the topic, the Subcommittee was unable to resolve all the issues and is recommending further study for the next interim.
Intangible property, 05LSO-0163.W2
Senator Mockler explained the bill. The bill would provide a definition of real property to include intangibles.
Following discussion, Senator Job moved the Committee sponsor the bill as a Senate File. The motion passed with a roll call vote of 12 ayes and 2 excused (see Appendix 15).
Intangible property taxation-study, 05LSO-0212.W1
Senator Mockler explained the bill. The bill creates an intangible property task force to study the taxation of intangible property further. She feels there should only be legislators on the task force.
Representative Anderson asked the bill be amended to include seven members, three from the Senate, four from the House, and that the members be selected by the Speaker of the House and the President of the Senate, with one Democrat from each house. The motion passed.
Following discussion, Senator Mockler moved the Committee sponsor the bill. The motion passed with a roll call vote of 13 ayes and 1 excused (see Appendix 16).
Property taxation-intangibles, 05LSO-0211.W1
Senator Mockler explained the bill, which is also in the report. Senator Mockler explained her amendments which would add language for the property tax year of 2005 (see Appendix 17). Following discussion, Senator Mockler also moved the bill be amended on page 1, line 12, "for the inclusion of other documentation as provided by department rule and regulation". The motion passed (see Appendix 18).
Following adoption of both of her amendments, Senator Mockler moved the Committee sponsor the bill as a Senate File. The motion passed with a roll call vote of 13 ayes and 1 excused (see Appendix 19).
Representative Childers, Chairman of the Taxation of Well Services Subcommittee, explained the difficulty in taxing oil field services with a 250 foot perimeter well site definition in the law.
Mr. Don Richards, LSO, provided information on his report entitled Excise Taxes on Oilfield Services in Other States (see Appendix 20).
Sales tax on mineral well services, 05LSO-0220.W1
Representative Childers explained the proposed legislation which offers two options: exempt mining industry manufacturing equipment from sales tax or repeal the 250 foot well site definition in the statute (see Appendix 21).
Following discussion, Representative Childers moved the bill be redrafted to repeal the 250 foot definition and then repeal subparagraph (K) as well. This would exempt all oilfield services from taxation. When the bill is redrafted, poll the Committee with a postcard ballot to see if the Committee will sponsor the bill. The motion passed.
Ms. Jody Gerin, Vice Mayor of the City of Laramie, provided the Committee with information on the revenue projections of changing the tax exempt status of the University of Wyoming (see Appendix 22). Her research shows if the tax exempt status was repealed, the City of Laramie would realize an additional $423,000 in property tax and an additional $216,000 in sales tax.
Mr. Sleeter Dover, Director of the Department of Transportation, as well as other members of his staff, provided information on the transportation funding concerns for the State of Wyoming (see Appendix 22A). Mr. Dover indicated the state highway system is in need of major funding for improvements and the Department of Transportation does not have sufficient funding at the current time to meet all the needs.
Mr. Quiner, LSO, explained the current version of both bills, with updates from the last meeting. He indicated this was just for the Committee's information since the Committee had previously voted to sponsor the bills (see Appendices 23 and 24).
Representative Childers explained the bill would provide an optional procedure for imposing a specific purpose excise tax by counties, cities and towns (see Appendix 25).
Following discussion, Representative Childers moved the Committee sponsor the bill. The motion failed with a roll call vote of 3 ayes and 10 noes (see Appendix 25).
Producer Processed Gas. Mr. Schmidt presented information on the problem of valuing producer processed gas (see Appendix 26). Mr. Schmidt indicated the proper methodology to use in valuing producer processed gas has been an ongoing concern of the department for quite some time. He indicated he thinks the netback methodology is the best one to use for producer processed gas. He indicated the coal statutes have a way to provide for the department to value producer processed coal if there is an issue with the valuation methodology. Mr. Schmidt would like to see a similar provision used in the oil and gas statutes.
Mr. Bruce Hinchey, Executive Director of the Petroleum Association of Wyoming, indicated the natural gas processing plants that have been placed in Wyoming cost hundreds of millions of dollars to build. He indicated sour gas is worthless until it is processed. He further indicated that companies are seeking specificity in the law and the industry proposed the netback method for House Bill 87 several years ago and that bill was vetoed by the Governor. He indicated any future gas plants must be built with tax certainty. Without that certainty, there will not be any plants built.
Mr. Larry Wolfe, representing Burlington Resources, Exxon-Mobil and other natural gas producers, indicated several important issues are currently pending before the Wyoming Supreme Court on the issue of valuation of natural gas.
Following discussion, Representative Anderson moved the Committee sponsor House Bill 87 as a Committee bill as it passed the Legislature in 2003. The motion passed with a roll call vote of 13 ayes and 1 excused (see Appendix 27).
Aircraft Repair Exemption. Mr. Noble provided information on the aircraft repair exemption for sales and use taxes recently passed. He indicated there is a potential problem in that a person could interpret the law to mean that any aircraft built solely from parts could be exempt from sales tax (see Appendix 28). Following discussion, Cochairman Cohee moved the Committee sponsor the proposed change. The motion passed with a roll call vote of 13 ayes and 1 excused (see Appendix 29).
There being no further business, the meeting was adjourned at 2:00 p.m.
Respectfully submitted,
Representative Roy Cohee, Cochairman