Senate Committee on Finance (01/19/2006)

Final
STAFF SUMMARY OF MEETING

SENATE COMMITTEE ON FINANCE

Date:	01/19/2006	ATTENDANCE

Time:	11:54 AM to 12:45 PM	Brophy	X
		Shaffer	X
Place:	SCR 354	Taylor	X
		Teck	X
This Meeting was called to order by		Tupa	X
	Senator Sandoval	Veiga	E
		Sandoval	X
This Report was prepared by
	Jason Schrock
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
SB06-070		Amended, Laid Over

11:54 AM -- Senate Bill 06-070

Senator Sandoval, chair, called the meeting to order. Senator Shaffer explained the provisions of SB 06-70 which governs lease agreements that include leased personal property. It states that for those leases in which the lessee is required to pay the lessor for personal property taxes, any excess payments must be refunded to the lessee by August 31 of the year in which the taxes were due or within 90 days of the termination of the lease. He explained the problem of lessors not refunding overpayments of property taxes. He did not know exactly how many times the situation occurs. However, there is no current requirement in law that lessors refund any over paid taxes.

The following persons testified on the bill:

11:57 AM -- Mr. Bob Hullinghorst, Boulder County Treasurer, testified in favor of the bill. He provided a fact sheet on the bill and some materials showing an example of a company that overpaid personal property taxes (Attachments A and B). He discussed the importance of having a sound, fair tax system. He discussed the problem of lessees overpaying personal property taxes in their leases. His office found that a majority of lessees were dealing with lessors who were not reducing the property tax payment when they had overestimated the tax. The bill is similar to when entities overpay sales or property taxes. He discussed an amendment that would extend the time period in which lessors would have to refund an overpayment of taxes. He explained that there was no fiscal impact to the bill because it just impacted lessees and lessors.

12:04 PM -- Mr. James Dehoon, representing himself, spoke in favor of the bill and discussed his experience in a lease in which he overpaid personal property taxes. He eventually received a refund.

Senator Shaffer discussed how personal property is depreciated over time and that some lessors may not correspondingly reduce the tax payments in leases.

12:09 PM -- Mr. Dennis Brown, Equipment Leasing Association, spoke in opposition to the bill. He agreed that overpayment of taxes should be refunded and thought that this issue was covered under contract law. He expressed his appreciation that the Boulder County Treasurer met with him and listened to his concerns. He explained that further discussions were needed because the current bill could cause his members to lose money.

12:15 PM -- Ms. Kelly Winslow, Key Equipment Finance, supported the intent of bill and explained that she wanted to provide her customers with the best service. She explained that her company currently makes adjustments to leases for changes in personal property taxes after five years because it is easier and less costly. If her company were to have to true up personal property tax payments annually it would increase the cost of leases. Her company manages lots of leases and it would be time consuming to adjust each lease yearly.

The committee discussed the issue of how personal property tax adjustments tend to work out over a five year adjustment. Ms. Winslow explained that lessees generally want to have the same payment each year.

12:20 PM

Senator Teck discussed how the personal property tax burden likely declines over time and discussed how payments for personal property taxes in a lease would be level over time. Ms. Winslow discussed how lease agreements are generally set up concerning personal property taxes. Senator Teck wanted to pass a bill that would encourage best business practices.

Senator Brophy discussed his belief that, in general, only smaller valued leases would increase in cost if leases would have to be adjusted annually. Ms. Winslow explained the largest division of her company is for smaller value leases and agreed costs would increase if her company had to look at the leases annually.

Senator Shaffer stated that he would be willing to look at the issue of requiring annual adjustments. He moved the bill to the Committee of the Whole.


BILL:	SB06-070
TIME:	12:27:57 PM
MOVED:	Shaffer
MOTION:	Motion to adopt L.001 (Attachment C). The motion passed without objection.
SECONDED:
		VOTE
	Brophy
	Shaffer
	Taylor
	Teck
	Tupa
	Veiga	Excused
	Sandoval
Not Final YES: 0 NO: 0 EXC: 1 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	SB06-070
TIME:	12:30:58 PM
MOVED:	Teck
MOTION:	Motion to adopt L.002 (Attachment D). The committee discussed how to deal with the issue of requiring annual adjustments to leases or at the end of leases due to personal property tax overpayments. The committee agreed that the bill should be taken off the table in order to come up with a proper amendment and agreement. Senator Teck withdrew his motion to adopt amendment L.002.
SECONDED:
		VOTE
	Brophy
	Shaffer
	Taylor
	Teck
	Tupa
	Veiga
	Sandoval
Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: TIE

12:40 PM

The committee continued to discuss allowing lease agreements to have the option of annual adjustments for personal property taxes as the bill provides, or at the end of the lease.


BILL:	SB06-070
TIME:	12:42:50 PM
MOVED:	Shaffer
MOTION:	Motion to adopt L.003 (Attachment E). The motion passed without objection.
SECONDED:
		VOTE
	Brophy
	Shaffer
	Taylor
	Teck
	Tupa
	Veiga	Excused
	Sandoval
Not Final YES: 0 NO: 0 EXC: 1 ABS: 0 FINAL ACTION: Pass Without Objection

12:45 PM

Senator Sandoval pulled the bill off the table so that the outstanding issues could be dealt with properly. The committee recessed.