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COMM ITTEE M EETING I NFORM ATIO N September 12-13, 2013 Hampton Hotel Buffalo,

COMM ITTEE M EM BERS PRESENT Senator R. Ray Peterson, Cochairman Representative Michael Madden, Cochairman Senator (SD 28) Senator Cale Case Senator Senator Representative Gregg Blikre Representative John Eklund Representative Dan Kirkbride Representative Bunky Loucks Representative David Northrup Representative Ruth Ann Petroff Representative Mark Semlek

COMM ITTEE M EM BERS NOT PRESENT Representative W. Patrick Goggles

LEGISL ATIVE SERVICE OFFICE ST AF F Mark Quiner, Assistant Director Josh Anderson, Staff Attorney Matt Sackett, Research Manager

OTHERS PRESENT AT M EETING Please refer to Appendix 1 to review the Subcommittee Sign-in Sheet for a list of other individuals who attended the meeting.

The Committee Meeting Summary of Proceedings (meeting minutes) is prepared by the Legislative Service Office (LSO) and is the official record of the proceedings of a legislative committee meeting. This document does not represent a transcript of the meeting; it is a digest of the meeting and provides a record of official actions taken by the Committee. All meeting materials and handouts provided to the Committee by the Legislative Service Office, public officials, lobbyists, and the public are on file at the Legislative Service Office and are part of the official record of the meeting. An index of these materials is provided at the end of this document and these materials are on file at the Legislative Service Office. For more information or to review meeting materials, please contact the Legislative Service Office at (307) 777-7881 or by e-mail at [email protected] . The Summary of Proceedings for each legislative committee meeting can be found on the ’s website at www.wyoleg.gov. PAGE 2 OF 8

EXECUTIVE SUMMARY The Committee met for two days in Buffalo. The Committee directed staff to draft bills on the county property tax appeal process and the sales tax exemption for benevolent, secret and charitable organizations for consideration at its next meeting. The Committee also heard testimony on the state sales tax on beer and the streamlined sales tax agreement.

CALL TO ORDER (SEPTEMBER 12, 2013) Co-Chairman Peterson 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.

COUNTY PROPERTY TAX APPE AL PROCESS Mr. Dan Nobel of the Department of Revenue provided three handouts to the Committee on the county board of equalization process (see Appendix 3 for a copy of the handouts). Ms. Brenda Arnold of the Department of Revenue made a presentation to the Committee on the county board of equalization process. She noted that the taxpayer may request a review or contest the assessment. She stated that 19 counties have rules in place for the county board of equalization and that in some instances their decisions are affected by due process issues on appeal.

Ms. Arnold noted that the hearings and deliberations of the county board of equalization are open to the public, but statements of consideration are confidential and cause the hearing to be closed. She noted that typically the property owner presents their case first, then the assessor presents evidence. She said it often becomes an educational process. Ms. Arnold noted that the legal presumption through case law is that the assessor's valuation is presumed valid until overturned by credible evidence. On a publicly owned property, the presumption is that the property is exempt unless there is evidence to overcome that presumption.

Ms. Arnold stated that if the taxpayer does not attend, there is no adjustment in the assessment. She noted that after the hearing, the decision of the county board of equalization is entitled to a presumption and noted that if it is appealed by either the petitioner or the county assessor, the state board of equalization does not hear new evidence and is responsible for a review of the county board action.

Ms. Steve Olmstead, Mr. Tom Glause and Ms. Jane Mockler of the State Board of Equalization provided two handouts to the Committee on the county board of equalization process (see Appendix 4 for a copy of the handouts). Mr. Olmstead explained the two handouts. He stated that the state should be proud that we have the CAMA system which has resulted in fewer appeals. He noted that it is very hard to overcome the presumption of correctness and that it would have to be something very strange. He noted that one example would be where the records indicated that the basement was finished when it was actually an unfinished space.

Mr. Olmsted noted that one of the things that may help overcome some of the issues that had been raised related to the process would be to look at the tax calendar again and give the county boards extra time for written opinions. For example by moving the August 1 deadline to September or October 1. Another suggestion would be a review of rules and providing for uniformity of rules throughout the state for contested cases.

Mr. Glause noted that in 2013 there were 27 appeals across all counties, of those 13 were residential, 4 were vacant land, 3 were commercial and 7 were exemption requests.

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 3 OF 8

County Board of Equalization 14LSO0-104.W4 Representative Gingery provided a handout of a draft bill on the county board of equalization process to the Committee (see Appendix 5 for a copy of the bill). He noted that as deputy county attorney he had been working on these issues for quite a while. He stated that while he had some suggested changes the system was not broken. He stated that when there is a downturn in the market, comparable sales data is not available and it makes things more difficult. He stated that most counties do not have many appeals and when they do have a hearing they need to figure out how the process works.

Representative Gingery walked the Committee through the bill. He noted that the change in the time frame for the process as previously discussed is not included in the draft but it might be good to move that deadline. He explained that he was recommending a change to clear and convincing evidence because of a need to clarify the standard. He noted that clear and convincing would represent about 75% certainty, the level for the current standard of credible evidence is unclear and there is currently a debate over what the standard is. He noted that the process would also be easier if statements of consideration were considered public documents.

Mr. Jim Huddleson of the Wyoming County Commissioners Association stated that they support most of the things in the bill and noted that it was important to make sure the taxpayer is protected.

Commissioner Gibbs of Johnson County noted that the CAMA system was great for the process. He stated that the state needs to drop confidentiality in statement of consideration because that information can be found anyway and the notion that it should be confidential is outdated.

Mr. Pat Meyer, Park County Assessor provided a handout to the Committee of the statewide appeal summary (see Appendix 6 for a copy of the handout). He noted that out of over 374,000 properties there were 1,732 requests for review, 128 appeals files and 35 hearings held. He stated that it was important to be accountable to taxpayers and that the rules need to be uniform. He stated that requiring a court reporter is a good idea and that the hearings should be electronically recorded. He stated that he does not think the process is broken at all.

After additional discussion, the Committee directed staff to draft a bill on this issue for consideration at the next meeting of the Committee. The Committee recommended that the bill be drafted based on the draft presented by Representative Gingery with the following changes: the county assessor be required to present their side of the case at the hearing, the State Board of Equalization be authorized to promulgate statewide rules for the hearings, that the reference to "clear and convincing evidence" be removed and the related repealed language be restored, clarify that the decision be due the first Monday in October, clarify that the dismissal is without prejudice, provide that notice be provided to the assessor and not the clerk, specify that a court reporter or other qualified professional is appropriate for recording the meetings, specify that the county attorney represents the county board of equalization, remove the requirement that the taxpayer present their side of the case first and remove the requirement that the hearing officer be certified.

PROPERTY TAX EXEMPTIONS FOR BENEVOLENT, SECRET AND CHARIT ABLE ORGANIZATIONS Ms. Brenda Arnold provided a handout on charitable trusts and secret benevolent and charitable organizations (see Appendix 7 for a copy of the handout). Ms. Arnold explained the handout. In response to a question she stated that typically the use is to the owner so if the property is leased to a benevolent organization, the use to the owner is an income producing property and so it would not fall under the

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 4 OF 8 exemption. She noted that in some cases, a portion of a property may be taxable while another portion may be exempt and there are many different situations that can arise.

Ms. Arnold noted that the Department cannot provide a value of these properties because the assessors are not valuing these properties once they are exempt.

Property tax exemption-charities 14LSO-102.W3 Representative Gingery provided a draft bill on property tax exemptions for charities to the Committee (see Appendix 8 for a copy of the bill). Representative Gingery explained the bill. He noted that the purpose of the bill was to address two different issues. The first was that in one instance land had been transferred to the University of the Andes in Peru which was a charitable trust. He suggested that the charitable trust should have a benefit to the state of Wyoming.

The second issue was the definition of “secret, benevolent and charitable” which according to rules of the Department, the “and” means “or”. Representative Gingery noted that there are many charitable organizations and if all property owned by them is exempt it could cause issues and does not seem to match the original intent of the exemption. He noted that he was not advocating for page 2-lines 13 through 18 of the bill draft but that was included as an option for how to write it if there was a desire to make the property of charitable organizations exempt.

Mr. Dan Nobel noted that the definition in rules came from looking at how the IRS deals with these types of organizations and that they are treaded as three separate classifications which are classified differently by the IRS. If they had to be all three types of organizations at once, nobody would qualify. He stated that it may be beneficial to come up with a definition of exactly what types of organizations are intended to qualify for the exemptions.

After additional discussion, the Committee directed staff to draft a bill based on the bill provided by Representative Gingery except that it not include the exemption on page 2-lines 13 through 18 and that each exemption include a provision that it applies to property owned and used by that type of organization, to the extent that it is not used for private profit.

MEETING RECESS The Committee recessed at 3:30 p.m.

CALL TO ORDER (SEPTEMBER 13, 2013) Co-chairman Madden called the meeting to order at 8:30 a.m.

STATE TAX ON BEER Mr. Dan Noble of the Department of Revenue and Mr. Greg Cook of the Liquor division addressed the Committee on the tax on beer. Mr. Noble provided a handout to the Committee on the malt beverage excise tax history (see Appendix 9 for a copy of the handout). He noted that the tax had remained the same since it was imposed in 1935. He stated that the liquor division does not control the sale of malt beverages and the distributors report to the department of revenue. He noted that the department also receives a report from the breweries on the number of gallons sold which provides a check and balance to the reporting system.

Mr. Nobel noted that Wyoming has the lowest beer tax although there are some other states which are not very much higher. He noted that the department spends 3 to 4 hours a month on collecting reports from 30 wholesalers and 50 vendors that are microbreweries and that it is not a large amount of effort to collect

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 5 OF 8 this tax. He noted that the revenue from alcohol has been growing over the years with $14 to 15 million associated with spirits and wine, but malt beverages are a relatively small part.

Mr. Mike Mosier of the State Liquor Association provided a handout to the Committee (see Appendix 10 for a copy of the handout). He noted that while alcohol provides about $14 million of revenue to the state, the excise tax on beer is a small part. He noted that the system works very well but the cost of collection of the tax to the private sector is high. He noted that in the retail competition area even if an increase would only be pennies, customers are price sensitive and will travel to surrounding states. He stated that there is a need to keep our prices competitive and noted that the beer tax is a regressive tax where the tax is higher on cheaper beer. He noted that the idea of earmarking this revenue for substance abuse centers is not necessarily appropriate and that while the gas tax was a user fee this would not be a user fee unless everyone who drinks beer also goes to a substance abuse center. He suggested that it may be appropriate to consider removing the tax as it may cost more to collect than it brings in.

Mr. Pat Higgins of Wyoming Beer Wholesalers provided a handout to the Committee (see Appendix 11 for a copy of the handout). He noted that distributors provide jobs and are a big part of the community. He noted that it is not really a burden to pay the tax but for microbrewers it probably is a burden. He noted that the end consumer will pay the tax and beer is highly price sensitive and customers will buy from out of state. He noted that the tax on beer is a regressive tax with a higher impact on lower income customers.

Mr. Chris Brown for the Wyoming Lodging and Restaurant Association noted that the profit margin is only 3-5% so there would be a need to pass any increase to the customers. He noted that any menu increase threatens customer spending and that it may result in people not buying an appetizer or not having a second beer which plays a role in the already small profit margin. He noted that the majority of customers are responsible drinkers.

Mr. Tim Barnes of Blacktooth Brewing stated that they are a small brewery and a young growing business. He stated that an increase in tax will be detrimental. He noted that it is monotonous and cumbersome to report but that is not the real issue. He noted that breweries diversify the job economy of the state and represent real jobs.

Mr. Ron Warpness, Mayor of Riverton provided a handout to the Committee on the issue of the beer tax (see Appendix 12 for a copy of the handout). He noted that they have a population of 10,000 and serious alcohol problems. He stated that the national average for a beer tax is 28 cents per gallon and that is a reasonable figure for Wyoming to consider. He noted that people are dying from alcohol and it is a poison for some people. He said that in his city 80 to 85% of police calls are estimated to be alcohol related. He stated that the industry helping to create the problem needs to help carry the load and any increase would be an improvement. He stated that the revenue from taxes on alcohol needs to be designated for substance abuse treatment.

Mr. David Bernie of Peak Wellness Center stated that he was in support of an increase in the tax. He noted that supporting treatment centers benefits everyone, not just the users of the program. He noted that the programs can have an impact on drunk driving, crimes, use of the health care system, employment issues and family violence which provides benefits for the whole community. He noted that the current funding stream is not stable.

Ms. Erin Taylor of the Wyoming Taxpayers Association noted that the Association did not have a position yet. She stated that these types of taxes are tricky and that while the gas tax is a user fee this is

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 6 OF 8 not the same type of situation. She noted that the legislature can fund these programs through an appropriation from the general fund but it is a different issue when talking about earmarking.

Co-chair Peterson provided the Committee with a bill draft on the beer tax (Alcohol taxes to treat substance abuse 14LSO-0103.W1, see Appendix 13 for a copy of the bill). Senator Peterson explained the bill and noted that it would increase the tax and designate the funds for substance abuse programs.

After additional discussion, Senator Anderson made a motion that LSO draft a bill which eliminates the malt beverage excise tax. The motion was seconded and failed by voice vote.

Senator Peterson moved that the Committee consider a draft based on the bill draft he provided for consideration at the next meeting. The motion was seconded and failed by voice vote.

Senator Case moved that LSO draft a placeholder bill which would provide for an increase in the tax without earmarking and the motion was seconded. The motion failed by roll call vote (see vote form in Appendix 14).

STREAMLINED SALES TAX Mr. Dan Noble made a presentation to the Committee on the streamlined sales tax (see Appendix 15 for a copy of the presentation). Mr. Noble explained the presentation. He noted that this effort represents states working together to increase sovereignty in an effort to try to ensure that everything is taxable. He noted that the first effort of the states was to create the use tax, but in practice it is hard to discover those taxes and a large portion go untaxed. He noted that many people do not understand that they owe the use tax and the only way to find it is to conduct audits which are limited to businesses.

Mr. Noble noted that as a result of an important case, Quill v North Dakota, if a retailer has no physical presence they are not required to collect the tax due to the complexities of laws which would create an interference with interstate commerce. He said that with more and more business being done over the internet, local businesses suffer from lack of level playing field. He noted that Wyoming’s share of these types of losses is estimates at $61.7 million in revenue. Mr. Noble noted that the streamlined sales tax agreement is an effort amongst states to create simpler system which will make congress say that vendors have to collect the tax even without physical presence.

Mr. Noble noted that in 2003 Wyoming was the first state to pass the agreement and there are currently 21 full members, 22 with Ohio, and 2 associate members. He noted that one important component is that there be one rate per state with two exceptions, food and drugs can be different. He noted that local options are allowable as long as it is the same tax base. He noted that some other important components are uniform sourcing of the tax and uniform definitions.

Mr. Chris Brown of the Wyoming Retail Association provided a handout to the Committee (see Appendix 16 for a copy of the handout). He noted that it was important to keep this issue at the forefront. He noted that the current process puts main street retailers at an unfair competitive disadvantage. He noted that the effort to collect these taxes is not a new tax and that the consumers already owe these taxes. He stated that collecting these taxes would put everyone on the same level playing field.

MEETING ADJOURNMENT There being no further business, Co-Chairman Madden adjourned the meeting at 12 noon.

Respectfully submitted,

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 7 OF 8

Senator Peterson, Co-Chairman Representative Madden, Co-Chairman

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 8 OF 8

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Appendix Agenda Item Appendix Description Appendix Provider

1 Committee Sign-In Sheet Lists meeting attendees Legislative Service Office

2 Committee Meeting Provides an outline of the topics the Legislative Service Office Agenda Committee planned to address at meeting

3 County board of County board of equalization process Department of Revenue equalization

4 County board of CBOE appeals from mill levy report State Board of equalization Equalization

5 Bill draft 14LSO-0104 County board of equalization Representative Gingery

6 County board of County board of equalization appeal Park County Assessor equalization summary

7 Tax exemptions Tax exemptions on charitable trusts and Department of Revenue secret, benevolent and charitable organizations

8 Bill draft 14LSO-0102 Property tax exemption- Representative Gingery charities.

9 Malt beverage tax Malt beverage excise tax history Department of Revenue

10 Malt beverage tax 2002 Fact Sheet State Liquor Association

11 Wyoming beer wholesalers Wyoming beer wholesalers Wyoming beer wholesalers

12 City of Riverton City of Riverton City of Riverton

13 Bill draft 14LSO-0103 Alcohol taxes to treat Senator Peterson substance abuse

14 Vote form Vote form – motion to draft bill on beer tax Legislative Service Office

15 Streamline sales tax Streamline sales tax Department of Revenue

16 Marketplace fairness Marketplace fairness Wyoming Retail Association

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov