Legislators mull personal property tax, insurance exchange

March 29 is the date legislative leadership is looking at as the date to adjourn the legislative session and Senate and House members are working hard to pass outstanding legislation before the session is ended.

Two bills of particular interest are House Bill 315 (H315) and House Bill 248 (H248). H315 deals with exemption of personal property tax and H248 is a new version of the health insurance exchange legislation that was passed by the Senate a couple of weeks ago.

Exempting personal property tax has been an issue before the Legislature for several years. Local governments have opposed exempting the tax because in some counties it represents as much as a quarter of local government tax revenue. Legislation that has been supported by large industry would have exempted all personal property from the tax rolls for a total loss of about $140 million to local governments.

H315 passed by the House and now before the Senate is compromise legislation submitted by the Association of Counties that exempts a portion of the personal property tax but essentially provides relief for about 90 percent of the businesses having to pay this tax. The loss in county revenue is only about $20 million.

H315 provides that effective Jan. 1 of this year, the first $100,000 of business personal property will be exempt from taxation, including operating property. Operating property generally refers to larger and more costly equipment used by public utilities and railroads, including utility poles, railroad track, etc.

The $100,000 cap on the exemption prevents exempting these more costly and larger operating properties which would have impacted counties revenues significantly.

The legislation also provides that taxable personal property purchased on or after Jan. 1 of this year with a purchase price of $3,000 or less will be exempted from taxation. Just as significantly, instead of having to file a personal property tax form every year as now required, taxpayers with a personal property tax inventory of $100,000 or less will only be required to file for the exemption once every five years as long as their total taxable value remains below $100,000.

The fiscal impact to county revenues is estimated at about $20 million as opposed to the $140 million impact in the legislation proposed by industry. The state general fund will be used to reimburse the local governments for the $20 million loss in local government revenues.

The personal property tax is an onerous tax requiring extensive reporting and payment on equipment that in often cases is old and depreciated in value but still requires a tax payment based on full value. It is a difficult tax to enforce and definitions of what is and what is not “personal property” are not applied consistently across the state. H315 provides a solution to the personal property tax issue that is reasonable, affordable and removes an onerous reporting burden to those small businesses that are most impacted.

On Feb. 21, the Senate passed Senate Bill 1042 (S1042) that approved implementation of a health insurance program in Idaho as an alternative to a federally implemented health insurance exchange program. The proposed legislation passed by a 23-12 vote.

When the legislation was transferred to the House, a new bill, House Bill 248 (H248), was developed based on changes to S1042 that added more conditions enhancing the ability of the state to control provisions of a state implemented program.

H248 passed the House by a 41-29 vote and was transferred to the Senate. The Senate passed the legislation by a 23-12 vote.

The Affordable Care Act is federal law and its provisions are going to be implemented, either through a federal process or a state process. I supported the state exchange simply because I believe a state exchange can offer a better choice of plans than a federal exchange and the overall cost for those purchasing insurance through an Idaho exchange will be less than if the exchange was implemented by the federal government.

I welcome and encourage comments on legislative matters but, because I anticipate the session ending on March 29, my contact information will be different. I can be reached by email at geskridge@coldreams.com, by phone at 265-0123, and by mail at P.O. Box 112, Dover, ID 83825.