Committee on Revenue
January 24, 1997
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SENATOR KRISTENSEN: This bill has a number of provisions throughout it and, Cathy, normally we tell people to be brief and to be succinct in their testimony to help us move along, but with this bill the Committee would probably like you to take your time and walk us through what this one has and.... Okay, well, for the Committee members, is that an amendment, Cathy, that you're... ?
CATHERINE LANG-MORRISSEY: One of them is, and you also have it in your book.
SENATOR KRISTENSEN: Yeah, was going to say in our notebooks are those amendments. As Cathy's signing in, could I see a show of hands of those who will testify in favor of LB 270. Okay, a show of hands of those opposed to 270. And a show of neutral. Okay, very good. Good afternoon.
CATHERINE LANG-MORRISSEY: Senator Kristensen and Senators on the Revenue Committee, my name is Catherine Lang-Morrissey. I am the appointed Property Tax Administrator. As of yet, the confirmation process hasn't started, so I wouldn't want to jinx it or anything like that. I'm here today on behalf of the Property Tax Administrator of the Property Tax Division and the Revenue Committee to introduce LB 270. What is being handled out to you first all is the Division's version of LB 270. (Exhibit 1.) It is our proposed property tax legislation. We do have a caveat at the top of that page that explains that this version may differ slightly from the Bill Drafter's version just in the manner in which the words are ordered, but it is, for all intents and purposes, the exact same bill. It's formatted in two columns. One has the sections, and if a section has been repealed, we actually include the section in this version for easy review. In the second column is our justification for each and every section, every change that is contained in the bill. As we worked on this bill, and I do want to give a little history as to how it was developed, we felt this was easier than a section-by-section analysis which would be a separate
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January 24, 1997
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document from the bill, and we thought it'd be easier for you to read. Also in front of you, and I believe in the book, is AM 0014 for LB 270 (Exhibit 2). which is an amendment that we are offering and we probably have further amendments as well and I think-it will become clear why we have these amendments as I explain how this bill was developed. This amendment has ... deals specifically with some issues which I will go over with you. The bill was developed in the following manner. Last summer, in anticipation of a Property Tax Administrator, 1 asked the staff of the Property Tax Division to begin working with the county assessors to read every single property tax administrative statute and look at it from the aspect of how is it being dealt with procedurally in practice within a county versus what is in the statute, and are there more efficient and better ways to do some of the things that assessors or the Property Tax Division or Administrator are required to do? At the county assessors workshop, spring workshop last May, we asked for IS volunteers from the county assessors and we wanted county assessors from every size and shape of county that we have in our state, and so we did get 18 volunteers to work with John Hassler and Scott Gaines, the tax law conferees of the Division, to review the statutes. We provided them with the statutes; they reviewed the statutes. We had, I think, between two and three meetings and numerous phone calls going over the ... each. and every statute in the 77 hundreds that deal with property tax administration. At the fall workshop, we then presented to the assessors our first version of what a bill might look like to seek their input, and we met with the County Assessors' Legislative Committee at the fall workshop, took their input, reviewed it, considered it. We defined our purpose in looking at this to remove statutory restrictions or hurdles that prevent the efficient administration of the property tax, so we really looked at it from a highly technical point of view. But we, as a Division, knew full well that there were some larger issues that we wanted to tackle in the legislation, so after reviewing that we came back, taking into account the information that we had received from the assessors, and then coupling that with some of the big topics that we had, and I'll go over those with you as well because, obviously, not everybody agrees with us on some of our changes. We then provided a second draft to the assessors, to Mr. Jack Mills of the Nebraska Association of County Officials, to John Jordison and select
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January 24, 1997
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members of the Nebraska Tax Research Council, and also had meetings with county treasurers because, while it's not in this bill, there was some information that we did provide to the Counsel for the Revenue Committee for %se in LB 269 that came from a meeting that Mr. John Hassler had with the county treasurers, again from the aspect of what is currently in statute that is archaic, what is currently in statute that may be preventing efficiency. And so we have ... while we didn't get a separate county treasurer bill, I think simply we really did run out of time in working with them. We didn't start to work with them till November. We did get some of our ideas to the Counsel of the Revenue Committee. I'd like to start by, at this time then, to turn to the big issues that are in the bill and I've got a list here of, oh, probably 15 or 20 things, and then about 5 or 6 things in the amendment, and then I'll close. As I was preparing my testimony, I basically went through the bill in order and then picked out the big issues from probably the first section that you'll see on something. What you see in the very first section of the bill is a renaming of what used to be called the Tax Commissioner's Revolving Fund. We are asking that fund to be renamed to the Property Tax Division Revolving Fund. Later in the bill, you'll also see a specific section that we attempt, although I think it needs to be further refined through amendment by this Committee, the scope of that revolving fund and how it should be used and what money goes in and can come out of that. It's interesting, when I was looking in the 77-300's, there's another revolving fund for the Property Tax Division that deals with education with county assessors, and so I think there's some coordination that might need to occur between those two funds. At one point in time, it was thought that by renaming this fund that it would result in a problem of funding or funds within the Department of Revenue budget for the Tax Commissioner. However, my recent conversation this morning with Mr. Newell of the Department of Revenue indicates that there is another miscellaneous fund, revolving fund, for the Tax Commissioner and so they have a revolving fund and so -.!he change here does not cause any problems to the budgeting process or accounting within the Department of Revenue, as was explained today. Next thing you'll see in the bill are some new definitions and some clarification of existing definitions. Our goal was to make them, some of them, to make them consistent with appraisal terms, particularly 77-112 which defines the
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January 24, 1997
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actual value statute. The old language actually uses inaccurate terms with regard to appraisal terminology, so we have removed that language and inserted terns that are used in the appraisal profession, both mass and fee, and what we will do is, in regulation, more fully define those terms. But we felt, for statutory purposes, that it was sufficient to Just use those terms of art as -*%-.hey are used in the appraisal profession. And then you'll see some other definitions on improvements on leased land: what is omitted property; what is undervalued and overvalued property? We have a definition of "tax situs". We're defining the term "assessment". That has never existed in statute before. The word is used throughout the statutes, and we felt that it would be appropriate to have a definition. This definition basically is paraphrasing the IAAO definition of the assessment process. And then we define "tax district". The next thing that you'll see in 77-201, which is the taxable property valuation provision, ag land, the valuation for ag land has never really really been absolutely crystal-clearly stated and when you look here for other real property and for personal property and for motor vehicles, it says "the taxable value shall be" and it's right there. You. can find it. It's very simple. The cross reference that was for ag land you had to go ... kind of go dig around in a section until you could finally find, oh, we value agricultural land based on 80 percent of actual value. So we've modified that to put it right up here clearly with all of the other sections that define what is actual ... or what is taxable value of property. With regard to agricultural land, as you read through the bill you'll see some other things. One of the things we have asked to be removed is the ... what I will consider inappropriate earning capacity approach language. It doesn't match with an income approach. You can do an income approach for agricultural land and it can be quite helpful in helping you spread values within your county, but the language that is contained currently in the statute is, if you will allow me to use the word, kind of a holdover from LB 271 and the earning capacity approach that we used in the eighties. We're asking for that to be stricken. We are also asking, and this is an issue that has come up with the county assessors, and it is an issue that we know that some of them may have severe concerns about, and that is removing the acreage size restriction. In other words, what we're saying is that if you use that land for agricultural production and
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January 24, 1997
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even in counties that have zoning, a long as it's zoned ag, if you're not zoning it for something else, but you use it for agricultural production, it gets agricultural land value--80 percent of market. It doesn't matter if it's a five-acre tract of ground that's being farmed. It doesn't matter if it's a 19-acre tract of ground that's being farmed in conjunction with 160-acre tract of ground. It doesn't matter if it's a 160-acre tract of ground. If you are using it for agricultural production--crops, raising of livestock, and the definitions that we've left there in statute--you get 80 percent of market value. Yes, Senator.
SENATOR HARTNETT: But it has to be zoned, is that what you said?
CATHERINE LANG-MORRISSEY: If you are in a county that has zoning, it still has to be zoned.
SENATOR HARTNETT: Yeah, which I am, yeah.
CATHERINE LANG-MORRISSEY: Yes, exactly.
SENATOR HARTNETT: Okay.
CATHERINE LANG-MORRISSEY: That's right. And then all the greenbelt things flow through...
SENATOR HARTNETT: Yeah.
CATHERINE LANG-MORRISSEY: ...from there, so we... I don't think we've disrupted that.
SENATOR KRISTENSEN: You haven't ... you haven't changed the greenbelt qualification language.
CATHERINE LANG-MORRISSEY: No, we have not...
SENATOR KRISTENSEN: Okay.
CATHERINE LANG-MORRISSEY: ...changed greenbelt. We have made some changes to greenbelt, but not with regard to that qualification; ...
SENATOR KRISTENSEN: Okay.
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January 24, 1997
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CATHERINE LANG-MORRISSEY: ... a couple of' other minor changes that I will go over with you. Our reason for doing that is as the sales come in and as we look at the ... what we have considered over time a rather arbitrary distinction of 20 acres, we feel that it has caused more problems in understanding agricultural land value than it's really solved. In the past, perhaps, when we were under 271 and it was earning capacity approach you ... when you were looking at the income stream, in the manner it was being calculated anyway, maybe size was an easy break. The assessors have raised concerns about, well, now they're going to need to know, they're going to need to keep up on whether or not it's being used for ag production. If it's used for ag production, it gets it; if it's not, it doesn't. Nobody has to file anything or not. But I guess I would argue that that's true right now. You can have tracts, 40-, 60-, 160-acre tracts of ground that are being used for nothing and if I'm sitting in the middle of a 160-acre tract and I just want pristine, rolling hills and I don't use it for grazing cattle or any kind of livestock and I don't use it for production, I don't get ag value either, the 80 percent preference. I don't get that. However, we do understand that that's not being monitored either on... in some cases, and so we just felt that it was a cleaner break that if you're using it for ag production, you get ag value, ag value being the 80 percent of market value. And you will see that as you go through the bill. The next area as you go through the bill deals with exemptions. The one exemption that we are asking to be repealed, and we know that the Legislature has considered this, however, we wanted to raise this issue with you aside from all political concerns, and that is that the exemption that was granted a couple of years ago for, and I will paraphrase, property that's like household goods and personal effects and you lease it for less than 30 days, has caused a number of administrative problems. Now I know that's not a reason to necessarily repeal an exemption, but we feel that the property is not distinguishable enough from other like taxed property that we really do question the propriety of the exemption. And so we are offering it to you to be repealed. The other thing that we're doing in the exemption area is with regard to cemetery real property. As long as that land continues to be used for the internment of the human dead, and it is not owned by a for-profit organization, so it's either not profit or it doesn't have any organization
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January 24, 1997
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anymore that runs it, and there are a lot of those out there, once they file for an application for an exemption and it is qualified, it is perpetually exempted. However, we do require the county assessors to annually review all cemetery real property to assure that it's still being used for the internment of the human dead, it is not owned by a for-profit organization. They report that to the county board but the cemetery organization, for their real property, would not need to continually apply for the exemption for that real property. I think it is extremely rare when cemeteries are converted and the remains of those buried there are removed, and so I think that this is a relatively safe administrative efficiency that can be gained in that area. It does not apply to their personal property, so if you are an existing cemetery and you've got your equipment, you still will need to apply for your exemption for that because that can change annually. The other area with regard to exempt property is the penalty, and I will say right now that I'm going to bring up an issue later that deals with penalties in total. We've had some very thorough discussions this week with the county assessors at their workshop in Kearney and we have some real ... we would like to offer some clarification on penalties in total. But we do clarify, at least with the existing penalty that you have in law for charitable organizations, that it shall be applied, and the reason for that is that if you allow for a penalty to be permissive then I think you've offered to the person applying the penalty unbridled discretion. There's no standards, no guidelines of when or when not to apply the penalty, and you have a greater likelihood of nonuniform treatment among possibly similar... similarly situated taxpayers. We believe if there is a penalty it shall be applied and calculated in the manner specified by law. I was thinking there was ,ne other area ...
SENATOR KRISTENSEN: Cathy, before you ...
CATHERINE LANG-MORRISSEY: Yes.
GEORGE KILPATRICK: Annual application.
CATHERINE LANG-MORRISSEY: Yes, application. Thank you.
SENATOR KRISTENSEN: Before you leave the exemption area, could you give us a couple of examples of the business
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January 24, 1997
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inventory, it's not household goods but it's leased for less than 30 days, just so we have... ?
CATHERINE LANG-MORRISSEY: What the assessors run into is you can have a rental organization that has lots of different sizes of, let's say, air compressors. Now, I can own an air compressor at home and, more likely than not, a household good and personal effect type air compressor is going to be a small one, a portable one, maybe one that's in my garage that I can't move around all that easily but it's going to be small in nature. But these places can rent huge air compressors out and I could rent one, but so could a business rent one as well from this same company. And the question becomes, are all those air compressors the kind that should be exempt; are only some of them the kind that should be exempt? And you just run the gamut of all sorts of administrative questions. More likely than not, if I were an aggressive taxpayer, I wouldn't list any of them because I do, on occasion, rent them to people like me because I just happen to need something of that size. But, more likely than not, I'm renting them out, the large ones, I'm renting them out to business. So you can get into it with machinery, little tractors to come out and maybe do some work on my acreage, disking up my yard, for example, because I want to put buffalo grass in instead of fescue, but that same tractor can be turned around and used in a commercial operation because the farmer's broke down and he needs it. So the question is, is, well, what are we talking about here? We have worked with the Assessors Association because they've asked us to on can you help us define this, and we've looked at it and we've worked on it and we've tried to set up examples and it just, when you get into the detail of it, it just starts to be... it starts to administratively fall ;.part. But those are the kind of things that we get the questions on, on, you know, a consistent basis throughout the year...
SENATOR KRISTENSEN: Okay.
CATHERINE LANG-MORRISSEY: ... and they come up every year.
SENATOR KRISTENSEN: And I had one other question while we're... 'cause I assume the Committee can ask questions as we go through...
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January 24, 1997
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CATHERINE LANG-MORRISSEY: Yes, oh please, that would be more helpful, yeah.
SENATOR KRISTENSEN: ... this instead of saving then. for the end.
SENATOR COORDSEN: I would have one on that before you leave.
SENATOR KRISTENSEN: Okay. Do you have a green copy of the bill?
CATHERINE LANG-MORRISSEY: Not with me. I have mine.
SENATOR KPISTENSEN: Could... can we get this... I'm looking at Section 19...
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR KRISTENSEN: ... and it's the one where we talk about the cemeteries.
CATHERINE LANG-MORRISSEY: Okay.
SENATOR KRISTENSEN: it's the section that talks about ... yeah, it's 77-370, it's after those changes.
CATHERINE LANG-MORRISSEY: Yes, it's the new...brand new language.
SENATOR KRISTENSEN: Right.
CATHERINE LANG-MORRISSEY: Right.
SENATOR KRISTENSEN: Towards the end of that new language you see the sentence that talks "on or before August 1st". This is on page 15.
CATHERINE LANG-MORRISSEY: Yup.
SENATOR KRISTENSEN: "The county assessor shall annually make a review of the ownership and the use of all real property." Would you have a problem if I nut in "all real cemetery property"?
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January 24, 1997
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CATHERINE LANG-MORRISSEY: No, not at all. No, that's absolutely an appropriate clarification.
SENATOR KRISTENSEN: Okay.
CATHERINE LANG-MORRISSEY: That is what we mean there.
SENATOR KRISTENSEN: Okay. So I...we'll probably put that.... I don't know, somebody will make...
CATHERINE LANG-MORRISSEY: That would be great.
SENATOR KRISTENSEN: ... an amendment. We want to make sure we get that in there to talk about...
CATHERINE LANG-MORRISSEY: Cemeteries.
SENATOR KRISTENSEN: ... cemetery property.
CATHERINE LANG-MORRISSEY: Exactly.
SENATOR KRISTENSEN: Senator Coordsen, thank you.
SENATOR COORDSEN: For the purpose of clarification in my mind, if I may, the conversation that you had with our Chairperson, does this striking of that part of that section, does that then exempt the owner of a business that is in the business of renting equipment exempt from personal property tax?
CATHERINE LANG-MORRISSEY: If I rent equipment and it's of the nature... it's limited to of the nature of household goods and personal effects, and I rent it out on a shorter term than, you know, 30 days or shorter, then I am, yes, I am exempt from listing that property with the county assessor and paying tax on it. And the question becomes is, is everything you have of this nature or only part of your equipment of this nature?
SENATOR COORDSEN: I understand that. I just had to make sure in my own mind that they were exempt from the personal property...
CATHERINE LANG-MORRISSEY: They would still need to make a filing of, let's say, their cash register and personal
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January 24, 1997
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property items that they would have, but they would not have to list these items.
SENATOR COORDSEN: For an example, if you were in a lawn care business and you purchased a sprayer that cost $5,000, you would have to list that as the personal property and would be depreciate ... or would be valued for tax purposes at the schedule that's provided for in statute.
CATHERINE LANG-MORRISSEY: Used in a trade or business, yes.
SENATOR COORDSEN: If I were in the rental business...
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR COORDSEN: ... and bought one of those to rent out, as long as I did not rent that on a... for a length of time that was greater than 30 days...
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR COORDSEN: ... then that would not be listed for the purposes of personal property tax, because it would be rental.... Okay.
CATHERINE LANG-MORRISSEY: That is absolutely correct.
SENATOR COORDSEN: So now we're back to the same situation that created a lot of comment from Senator Lynch when he was in the plumbing business that he had to pay personal property tax on his tractor or ... yeah, his tractor and backhoe and that...
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR COORDSEN: ...and a farmer did not.
CATHERINE LANG-MORRISSEY: And you've got...
SENATOR COORDSEN: So we're creating the same dichotomy now that existed then.
CATHERINE LANG-MORRISSEY: Exactly.
SENATOR COORDSEN: Okay, long as I understand the mess we're
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in, why, thank you.
CATHERINE LANG-MORRISSEY: Yup, that is the mess that we see.
SENATOR KRISTENSEN: And that's because that some of that stuff's in the nature of being a household good, or is it because it's in the nature of an inventory?
CATHERINE LANG-MORRISSEY: Because it's in the nature of a household good.
SENATOR KRISTENSEN: Okay. Okay.
CATHERINE LANG-MORRISSEY: And you would imagine a small sprayer, the kind that I would own. Of course...
SENATOR KRISTENSEN: Right.
CATHERINE LANG-MORRISSEY: ...I don't need to own one, but that's okay. The other thing that we do in the exemption is have annual application. Right now you have every four years you apply and then in every intervening year you file an affidavit. Well, the process is almost identical. The application form and the affidavit form are not that dissimilar. The process that goes through within a county administratively is not that dissimilar. And so we thought why do we have this process of these multiple forms, multiple processes that are basically the same? They are applying every single year, so we are proposing that they would apply every year for exemption of their property. I don't believe and my comment in our draft is that we do not believe that this will increase administrative cost to a taxpayer or a exempt entity in what they do because they need to file every year something anyway and the forms are so much alike. We don't believe it will increase costs for counties. They review these in a similar manner and so we believe that we have not caused a problem, but obviously testimony could bring that to our attention. We do clarify some procedures in the exemption statutes with regard to if I'm an exempt entity, I've never owned any property, but I buy it today so I'm now into the year, but I'm going to use it two weeks from now to do some exempt purpose. I have the ability to apply now during the year and Vie county board then can review ... the assessor gets the application, gets it
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to the county board, the county board reviews it. The procedure for that has never been well spelled out in the statutes so we have just simply set out some dates and times by which that would happen. Then we also clarify that for motor vehicle exemptions, a church owns three cars, and they need to apply for an exemption, in the past you would apply to the county assessor. But now that we've gone to one stop shop for registration and titling, a suggestion has been made that all motor vehicle functions follow to that person, so we've made a change in the legislation that the official responsible for motor vehicles will get this application cation. They will give it to the county board. The county board will review it in the manner that they have historically reviewed it in and grant or deny the exemption. But it just allows for all motor vehicle functions, if the county has so chosen to move it to one office, all of it will be done there. And, of course, that means that we, the Property Tax Division, may be working with other county officials, in the past it would have just been the assessor, to explain issues of exempt ... qualification for exemption and items such as that, but we would continue to do that with these new officials as well, or these other officials I should say. The other thing that, and this is something that we'd also like to continue to work on as the Committee considers the bill for possible amendments, is the clarification of the Property Tax Division within the Department of Revenue, the Property Tax Administrator, and what the authorities are that we might share or that we might all need to have or that we might individually need to have. If you look at particularly the 77-300s, there's some overlap, there's some gaps, and I think that just a basic cleanup now that we've gotten into this would be appropriate. We are proposing some changes to the 77-400s, which deal with education to assessors. Based on testimony that was given and part of the statewide plan of the Tax Equalization and Review Commission, one of the things that was stressed was education for county assessors. What we have asked in this bill is for a clarification that we, the Property Tax Division, the Administrator, shall hold an annual school which shall be attended by all county assessors or a designee of the assessor, and only with written permission may a county not attend this training. It would be administrative. The assessors themselves have training opportunities during their workshops and they have an annual school that is what I would consider a professionally
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conducted appraisal assessment school. What we would focus on is the day-to-day operation within the county assessor's office. Now, in the past there used to be a newly elected county assessor school and what we did in this proposal to kind of simplify it is we will hold the school sometime between June...January 15 and March 15. It doesn't say how long it has to be, but in the past those schools have usually been about three days to allow for travel time and what have you to the site, and we will focus on administrative issues that they deal with day in and day out. Holding this in that time of year allows us that if in November there were newly elected county assessors, we will have them at this school and we can then begin to train them and assist them with all their other assessors on issues of administration. We specify that we fund the school, meaning we provide the materials, we provide the instructors and we conduct it in whole or in part. In fact, this last week we had an instructor come out to do a brief seminar on lot development in subdivisions and we paid for that. We would pay for those kinds of things with this school. The assessors, though, and the county budgets would still be responsible for travel, meals and lodging. The next thing you'll see in the bill is some correction procedures for centrally assessed, and in the amendment you will see lots of them. What we have done with regard to centrally assessed property, both in the bill and the amendment, I'll cover this all at one time, is written into law what we've always done in regulation. The law has never said, when a railroad pays its property taxes. The law has never said, when a public service entity pays its property taxes and how, and so we have written all of that in there. We've also clarified some of the dates certain by which we must do things, send information out. One of the things you'll notice in the amendment in particular is that we have asked that particular documents filed by railroads and public service entities that cannot be obtained from any other public source, such as an annual report filed with the SEC or the FERC or anything like that, would remain confidential. We do receive financial information that, and we have had requests to this effect, where competing companies want to come in and look at their financial statements, so we're asking if that can be made confidential. And we also thought about, well, my gosh, if we're asking for this to be made confidential, is there something that affects local taxpayers as well of the same
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nature? And so we have also amended the statute that allows for the filing of your worksheets and your depreciation schedules for personal property tax. If those are in the hands of the county assessor, those are confidential. That has never been in there so we believe that, first of all, that change should be made anyway, but we did it in terms of we weren't going to do something special for centrally assessed people, but somehow local taxpayers are left hanging out there with confidential documents. Yes, Senator.
SENATOR KRISTENSEN: Cathy, is that...that's personal property worksheets? That is not the worksheet of real property where we list, you know, the number of improvements that are in there. 'Those are done for appraisal purposes. We have lots of requests for those. People do it for gaining a ballpark value, for a variety of things. That's not confidential, it's only the personal property worksheet?
CATHERINE LANG-MORRISSEY: And it's only... it's only the personal property worksheets that are of the nature that went to put together your federal tax return. In other words, the personal property schedule you file...
SENATOR KRISTENSEN: Oh, okay.
CATHERINE LANG-MORRISSEY: ... will still be...
SENATOR KRISTENSEN: It's still a public document.
CATHERINE LANG-MORRISSEY: ... still be a public document.
SENATOR KRISTENSEN: It's the work product to get there.
CATHERINE LANG-MORRISSEY: That's right.
SENATOR KRISTENSEN: Okay.
CATHERINE LANG-MORRISSEY: So, in other words, if I had to...if I'm a county assessor and I've got a company that is not cooperating with me on filing a personal schedule and I subpoena their federal income tax return, schedules and all worksheets related to depreciation, in the past another company knowing that could have come in and said, hey, you've got so-and-so's tax return, can I see it, and it
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would have been public. They could not have said no. Now, I don't think it ever happened, but we definitely want to make sure that it doesn't. We believe that that's being used as a discovery tool to get the listing of the property. The listing of the property will still be public, the eventual listing of the property, but not the worksheets that go into helping the assessor get that information, and they do do that.
SENATOR KRISTENSEN: What part of the section is that in our... ?
CATHERINE LAM-MORRISSEY: That would be in the... it's in our amendment. Yeah, that one is in the amendment.
SENATOR KRISTENSEN: Okay. Yeah.
CATHERINE LANG-MORRISSEY: Yeah. And so you'll find that and it's in the 1,200s and so you'll see that in the amendment, 77-1236.
SENATOR KRISTENSEN: Okay.
CATHERINE LANG-MORRISSEY: Section 56 of the amendment.
SENATOR KRISTENSEN: Thank you.
CATHERINE LANG-MORRISSEY: You bet.
SENATOR WICKERSHAM: Do we have any similar problem, in the homestead area?
CATHERINE LANG-MORRISSEY: You know, I ...
SENATOR WICKERSHAM: Because we also ... we can ask for federal tax return information to implement the homestead exemptions as well.
CATHERINE LANG-MORRISSEY: We ask for an income statement. I'm really speaking out of turn here. I should defer definitely to a Department of Revenue person for this, but we do ask for an income statement and it is based on information that may or may not have been on a federal return and that's a good question.
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January 24, 1997
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SENATOR WICKERSHAM: But it's a similar situation.
CATHERINE LANG-MORRISSEY: Yes, it is and assessors have expressed great concern about those documents in their office and should they be confidential and I would allow you to ... or certainly urge you to consider that with the Department of Revenue. But the assessors, I can tell you, have expressed concern about that. We then move to personal property and we have a lot of clarifications with regard to some definitions, and then we move into a number of sections on late filing, voluntary and involuntary filing. This is all what happens when a taxpayer doesn't file by May 1st. What happens after that date, you can have people who never report and are later discovered, you can have people that run in two days late and have filed late, you can have pieces of property omitted off an otherwise timely filed schedule, all sorts of things. Right now, the statutes have about two or three different ways to go about penalizing a taxpayer and it's based on whether they voluntarily filed or involuntarily filed, which of course has led to a lot of vagueness. And so one of the things that we took a look at was trying to simplify, once it's past May 1, what can you do, and what happens when a taxpayer comes in and said, gosh, I'm really sorry but here's my schedule, 'It's now the 15th of May. One of the issues that came up at the county assessors' workshop was a very thorough discussion about the penalty. Right now it's a 10 percent of value penalty if you're late and you voluntarily file; it's a 50 percent of value, i.e., then, therefore, tax penalty if you don't file and the assessor has to do it for you and, in a sense, then involuntarily file. And the question that we asked the assessors and we talked about at length yesterday afternoon was what is this penalty for? It's for late filing. Is there a more efficient way to set the penalty up? Because what I can tell you is that there is much inconsistency in application of the penalty, there is much inconsistency of when it is waived and when it is not, and my fear is, is that all is heading down the road of unbridled discretion where you feel real sorry for one taxpayer 'cause they give you a good story and so you waive it, but the next guy comes in you might have a grudge against, he might be not nice about it, he might have been late the year before. How do you make these decisions? You're standing there at the counter and what are you going to assess as the penalty? We think it should be much more easy to calculate, easy to
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January 24, 1997
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assess, therefore, will get uniform assessment of it and it's for being late. And in the old days, the reason I think, and this is what we discussed yesterday among the assessors, the reason for the 10 and the 50 is in the old days you'd have to go out there and you'd have to list it and you'd have to calculate the value and it was very time consuming for the assessor to do that. That's somewhat diminished now that we've gone to net book. So we wonder if the penalties shouldn't be completely rethought. For your information, we got a lot of wonderful, great ideas on ways to go ahead with this. What we propose to do with the assessors is we will work on an amendment. We will immediately propose something for them to review, get their feedback, and then we will bring it to you. But we believe that the whole thing should be looked at similar to the way the penalty for late filing of exemptions, exempt property, needs to be relooked at. And so what I would offer to you today is, you know, review what we have in the bill, ask any questions that you have about it, of course, but understand that we really think that the whole thing needs to be relooked at and offer an amendment to you based on our conversation and work with the assessors. Motor vehicles, we do have a provision in here to allow for refunds or credits of unexpired months for trade-ins on leases. In the past if you ... you had to have a change in ownership to get a refund or a credit for your motor vehicle, unexpired months on a registration period. Leasing is the way of doing business these days and we believe that the same provision ... we have been asked to consider doing the same thing for leased vehicles and so we have put it in this bill. We also extend the time for filing for that refund to a year. Right now it's 60 days and it is the taxpayers' money. If they're due a refund and they just don't get in because they've got other business going on and they haven't asked for their refund or their credit, we believe that that time frame should be extended. Before it was reduced to 60 days it was a year, so we're reverting to the way it was done in the past. Real property from a big picture perspective, what we have done in this bill is sort of try to very clearly define some roles. County assessors set value. That is their job. They need to have a date certain by which they must be done because I can tell you now, under current practice, values are being set into the year, into protest time. Values are being changed and it causes a lot of confusion to the taxpayer.
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January 24, 1997
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SENATOR KRISTENSEN: I think Senator Wickersham had a...
CATHERINE LANG-MORRISSEY: Oh, I'm sorry.
SENATOR WICKERSHAM- Well, you've moved on to a new topic, but motor vehicles, the leased motor vehicles, we've had prior legislation that dealt with leased motor vehicles, but that was in the sales tax area, wasn't it?
GEORGE KILPATRICK: Well, we've had both. We've had this proposal before, too.
SENATOR WICKERSHAM: Yeah. So what happens when you give someone a refund and the vehicle goes back to the owner that leased it out? Do you send them a tax statement, or do we forget three or four months or six months or seven months, or do they claim it's inventory or... ?
CATHERINE LANG-MORRISSEY: What has happened to try and get lessees the refund of the unexpired months is that usually is the obligation of the lessee. The lessor leases that vehicle and says, you pay all the taxes. So they go in and they register it and they're running around for a couple of years with this car. They're two months into the third year of the lease, third registration period, and they want to trade it in and lease a different kind of vehicle, so go back to the dealer who leased it. What they'll do is they'll take it back in their lease operation, roll it over on a change in title to their retail operation, which then gives the change in title so you can get the refund. Then they'll roll it back to their lease side and lease it out again, causing a lot of hoops to be jumped through to accomplish what really for the taxpayer is the same thing if I'm the owner of the vehicle. I'm getting something new. I have ten more months on a registration period. I'm not going to use it, so I want that refund as the taxpayer so that I can credit it against the new one that I lease or I buy or whatever it is that I do so that I can run it around for 12 months and for the next registration period. But they've done a lot of creative things to allow the lessee to be in the same shoes as a purchaser. And I guess the question is, is why there would be a difference, and we believe, that because there are such significant numbers of leases and the taxpayer is sitting in a similar position to
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January 24, 1997
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a buyer, that they should get a refund as well or a credit of those unexpired months only. And the registration is terminated at that point in time and rolled to another vehicle. Plates are removed, it goes back to the dealer.
SENATOR WICKERSHAM: And those are based on the prior year's levies.
CATHERINE LANG-MORRISSEY: Right.
SENATOR WICKERSHAM: The levies are a year late.
CATHERIINE LANG-MORRISSEY: Yeah, motor vehicles are an unusual beast anyway, I mean the way the value is set and the levy that you use and those sorts of things, so.... And the program allows for this to be quite easily handled by the officer doing this. I mean it's built into the program, the AS400 D14V program, so it's fairly automatic right now the way it comes up in that county official's office.
SENATOR WICKERSHAM: I'm not necessarily opposed to refunds. I think I might be eligible for one, but... (laughter)
SENATOR HARTNETT: You've got a ... you have a month or a year, excuse me, a year.
CATHERINE LANG-MORRISSEY: Yeah, now you'll have ... could have a year.
GEORGE KILPATRICK: Well, right now you only have a month.
SENATOR WICKERSHAM: Well, I have until...
GEORGE KILPATRICK: Two months.
SENATOR KRISTENSEN: Two months.
SENATOR WICKERSHAM: ...I have until June of next year to figure this out.
CATHERINE LANG-MORRISSEY: For real property what we tried to clarify was county assessor who jets value, responsible for setting value of locally assessed property needs to be done by April 1, because starting April 1 a whole lot of other stuff starts to happen. And so we have basically said
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January 24, 1997
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in this legislation by April 1, county assessor, you are finished touching value on your own. Then it goes to the ag regional boards for adjustment, it goes to the Tax Equalization and Review Commission for adjustment, and any adjustments made by those two bodies obviously needs to be reflected on my valuation so that if I know on June 1 what my value is, I can decide to protest--the whole point of why we changed the calendar. Therefore, the valuation change notices can be processed and whatever. So the assessor will make the changes for that reason up until June 1. But let's say the assessor finds that a piece of property has been missed, the value has been incorrectly reported, by whatever means the assessor learns this. Under current law there's a bunch of different ways you can go about getting that fixed. Sometimes the assessor can do it all on their own and nobody ever knows about it, just happens in their office. Or you go take some things to the county board and they can do some things with it. Because that's just so loose, to be very honest with you, we felt that anything that happens from April 1, except for TERC action or AHLVB action, the regional board action, the assessor needs to get all of that to the county board. I found that Senator Schellpeper's house is substantially overvalued. You don't even know it because you haven't looked, you don't know, but she's done some analysis and believes that your house is overvalued. She can take that to the county board for the county board to consider and, on their own motion, without a protest from you, they could adjust it. You could also file a protest. But all of that will go through the county board now--corrections; errors; undervaluation; overvaluation; omitted property, property that just isn't on the tax roll--because it will make it a more visible process, if you will. You will know what things are getting done to the property and there will be notices sent and we've set that all up in the statute changes that we've made to the 1,300s. We believe it clarifies the role for the assessor so they know if they find a house that was built two years ago how do you get it on the tax roll, what do you do with it, what do you do for past years, what do you do for current years. We've tried to tie all that together and clarify that with these statute changes. There is, for counties that don't have building permits, there is an information statement that has to be filed. So if I make an improvement, I'm in a county that doesn't have building permits and I make an improvement to my house, I add on, I finish the basement, I
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January 24, 1997
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add some new bathrooms, whatever it is, I need to file an information statement with the county assessor. Now if that's filed on time the assessor should have it in the information, calculate the value and go forward with it. If I don't file it, the assessor isn't going to know that happened. There's no building permit and, unless she hears from the coffee shop or something going on that I got a new basement in my house, she's not going to know that that happened and so she's not going to be able to know to get it on there. in those cases then it's a little more aggressive that we can go back and get that. But, basically, what we're trying to do is get that value in there, on there so that when those levies are set all that taxable value is accounted for by the 31st of August. Cut and dry... sort of ... it's somewhat cut and dry and that may be uncomfortable, an uncomfortable change in the process and, yet, we feel with levy limits coming ahead, that we need to get that value on there so that those levies are accurately calculated and the taxes can be paid.
SENATOR KRISTENSEN: How do people know that they're to file the information statement?
CATHERINE LANG-MORRISSEY: It is a requirement of law. There are forms available for doing that. It's a good question whether or not if you're in a county that doesn't have building permits, therefore enforcement of notification of changes to property, are you going to file it. But there are penalties for failure to do it, and so if you don't file the information statement and they find it later, they can penalize you.
SENATOR KRISTENSEN: How often is that done?
CATHERINE LANG-MORRISSEY: Well, that was another question we raised with the assessors, there's this nice 20 and 25 percent penalty for failure to report improvements; how many of you assess it, and we had a few hands.
SENATOR KRISTENSEN: And I assume it's a common practice.
CATHERINE LANG-MORRISSEY: Yeah.
SENATOR KRISTENSEN: Senator Coordsen.
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January 24, 1997
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SENATOR COORDSEN: Boy, do I have a burr underneath my saddle blanket and the mule is just jumping up and down I think. While we're on this topic, I was actually just simply reminded of something that happened to me. While we're revising all of these things, did any...in the discussion and meetings, the myriad meetings that you participated in with county assessors, did anyone ever identify a problem in determining an original value for a building that was built partially from salvaged material? The point is this, to illustrate a point; several years ago I built a machine shed and accumulated materials over a number of years--a mile of used telephone poles and several buildings that we had demolished and saved the lumber--and built a machine shed that cost something like $11,000. That's what my cost was. The only valuation mechanism that was available to the assessor was an imputed cost of a new pole frame building of that square footage, which was in the low twenties and then they factored off what was allowable, which made it 17,000-something or the other in appraised valuation for tax purpose ... or assessed valuation for tax purposes. Do or should assessors have the ability to modify off after inspection?
CATHERINE LANG-MORRISSEY: Let me answer your question by saying in 77-112, which are ... which cite the three methods for valuing property: you have the market approach; sales comparison approach, which is you build this building, what is the market value enhancement or detraction to the land that was already there; what ... how does the market...
SENATOR COORDSEN: I love this. I mean, she hasn't even seen it and she's making fun of it already. (Laughter)
SENATOR KRISTENSEN: Well, just listening to it's bad enough.
SENATOR COORDSEN: But going on...a
CATHERINE LANG-MORRISSEY: How does the market react to the addition of that improvement? Now, you can also do a cost approach, which is exactly what you just described. In this case, it didn't take into account the used lumber issue.
SENATOR COORDSEN: Nor, as I understand, was there any provision to allow the assessor to.
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January 24, 1997
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CATHERINE LANG-MORRISSEY: And there may not have been in the cost approach being used. It may not account for that. But let's say it had been a brand new pole building so that the cost approach was right, if you will.
SENATOR COORDSEN: Was accurate, um-hum.
CATHERINE LANG-MORRISSEY: The question still goes back to you get a cost and you can factor it, but the factors need to be based on market derived factors that say you can put $10,000 of cost on a piece of property and you may only change the market value of that property by something less or something more than the actual cost of that, and you factor that cost up or down based on those...
SENATOR COORDSEN: And how often does that happen? Pretty rarely, I would guess.
CATHERINE LANG-MORRISSEY: The fear is what had happened for numbers of years is that the cost would be calculated, a flat depreciation method would be used, and you weren't trying to track market. Cost approach is a great tool. It can help support what you're looking at in the market, but you've got to be cautious and careful that you are using adjustments to the cost derived from the market so that your pole building, old lumber or new lumber, is being treated in a similar manner to what the marketplace would recognize from that pole building. I've ... we have heard comments that you can put improvements out on ag sites and they won't add value at all in the marketplace when you go to sell it because of the way the market is and you need to ... they need to recognize that as they're doing their cost approach. But we have heard many stories like that.
SENATOR COORDSEN: There is a significant amount of flexibility then in current statutes to county assessors to make realistic adjustment based upon several mechanisms to approach the valuation.
CATHERINE LANG-MORRISSEY: Yes, sir.
SENATOR COORDSEN: Okay.
CATHERINE LANG-MORRISSEY: That's absolutely accurate.
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January 24, 1997
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SENATOR COORDSEN: Thank you.
CATHERINE LANG-MORRISSEY: Issue of notices, this is a big one and I'm going to tell you what's right and wrong with it and allow for the Committee to make their determination on this. You will notice in ... and I believe it's 77-1315. 1 need all my experts behind me citing the right statute or not. Yes, 77-1315. This is the provision of law that says by June 1 if a valuation notice is legally required, you send it and send it out. Under current law, county assessors send valuation change notices only to those properties that go up in value from last year to the next year. So if last year my house was valued at $60,000 and this year it's valued at $60,000, 1 get no notice. I can call the county assessor's office and ask what is my 1997 value and they'll say $60,000. If it goes up, $65-70,000, based on a market change or an improvement that I made or something, I will get a notice of that and so I will know aha, last year it was $60,000, this year it's $70,000. Am happy with it? Should I protest? I can go through that analysis and decide. If I do something to the property or the market changes in my area, and we do have areas in our county where market values are decreasing and the assessors are recognizing it, my value goes from $60,000 to $55,000, 1 won't get a notice of that. If I don't call on June 1 to ask, gosh, you know, I know the market's been really depressed in our area; are you recognizing that; what's my 1997 value, I won't know. And I may think that the $5,000 reduction is not appropriate; that for my property it should have been 10, but I won't have a notice. I can call. I'm not going to discount that. I can definitely, as a taxpayer, call and find out. When I will find out about it absolutely is when I get my tax statement in November or December and it says, your 1997 value is $55,000. Taxes might have gone up; taxes might have gone down. That's an issue of budget and spending. But I will know what my value is and if I'm not happy with it then, yes, I should have been in there in June, I should have checked, but I'm going to be in complaining in November that I sure wish I would have known ahead of time 'cause I would have protected it 'cause I think it should have been 50, it's too late. Time has run out. So what we have proposed here, and it is a compromise position and we specifically say that in our column on this document that I handed out to you today, is
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January 24, 1997
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that if the value changes up or down from one year to the next a notice should be given. If you touch my value, not if you relist it and it doesn't change my bottom line value, not if you adjust between improvements and land and it doesn't change my bottom line value, but you change the value of that parcel, the bottom line assessed valuation on that parcel, I should know. The problem is that will increase the cost. I cannot tell you by how much, but I will pretty much guarantee you that there will be assessors who expressed concern about this issue this week who will go back to their office and they will be calling their individual senator and saying this change in this bill, if I had had to do it last year, my mailing cost and my notice costs was $5,000; if I also had to send it to the decreases it would be something more than that.
SENATOR KRISTENSEN: Senator Wickersham.
SENATOR WICKERSHAM: Well, I ... I guess I don't know what position to take on changes in value up or down, but if the change is only due, for example, to depreciation, I wouldn't think it's necessary to send a notice.
CATHERINE LANG-MORRISSEY: We are saying if ... and this goes to a programming issue as well...
SENATOR WICKERSHAM: You understand the difference I'm getting at.
CATHERINE LANG-MORRISSEY: Right.
SENATOR WICKERSHAM: If market conditions have changed...
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR WICKERSHAM: ... and you're making a change on that basis, then maybe you have a stronger rationale for giving a notice. But if it's just administrative, in terms of depreciation, we depreciate the value of all improvements 2 percent.
CATHERINE LANG-MORRISSEY: I hope that's based on the market.
SENATOR WICKERSHAM: Well, whatever.
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January 24, 1997
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CATHERINE LANG-MORRISSEY: (Laugh)
SENATOR WICKERSHAM: That I don't know if you need to give notice of that.
CATHERINE LANG-MORRISSEY: What if the taxpayer felt that that 2 percent depreciation was not appropriate and it should have been 5? Now ... and I know the argument is, well, they can call and find out what their value was and they can argue that issue in a protest, absolutely. But we've heard so much about the fact that the taxpayers don't understand this process; that they don't get information. And maybe we're going to overload them with information. Maybe we're going to give them more than they could ever use and digest. But we truly ... we are ... we believe that they should get a notice if something is being done to affect that bottom line value. Now we polled the assessors and we asked how many of you ... well, we asked the first question of you, are there any of you that don't send notice if you change value, and thank goodness no one raised their hand. But we also asked how many of you, as a matter of course right now, send valuation change notices to those that go up and go down, and I would guess, this is a guess, that about a third of them raised their hand that they do that right now. I asked how many of you send valuation change notices every year, and I did have one that raised their hand for that, and that's the compromise position because one issue that has been raised in correspondence to the Revenue Committee Counsel is notices shall go out to everybody every year. That has been proposed as a concept. We did not adopt that here because it is going to be expensive. I'm not going to pretend that it's not. The other... I was trying to think of another example that came up as we talked. Oh, some counties send valuation notices to everybody if big things are happening, such as they're doing a reappraisal of all residential, they're implementing a soil survey, where there is lots of changing going on up and down. And so for that first year they do it and they do it as a matter of courtesy, not as 9. matter of law here. The other idea I threw out to them to consider is for the purpose of the benefit of the taxpayer, ,,ould it be something that maybe a periodic notice, a periodic like every three or every five years everybody gets a notice? That way maybe, even though I know land and property can change, maybe that way you keep
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January 24, 1997
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sort of a track of if you don't change value for five years it's a way of telling the taxpayer at least every three to five years your value's still the same. I throw that out. They are concerned about this issue. You will be hearing from your assessors on costs. I am certain of that. Greenbelt, we've made a couple of changes and it's probably the only provision of law in this bill that absolutely needs the E clause for the county that has offered it. Made a change to,, in the past it used to say that you couldn't ... you could no longer get greenbelt if you subdivided for residential use. Well, what if you subdivide for commercial use? Why should you still continue to get greenbelt? So we have stricken the language that says residential use so that if it's subdivided the greenbelt now disappears whether it's commercial or residential. But the other change is to the filing date. Right now, and really it has.... Oh, yes, air.
SENATOR HARTNETT: Cathy, with the greenbelt, what, about three counties use that or are there more now?
CATHERINE LANG-MORRISSEY: No, actually, we have quite a few counties that use it, not in total. We have ... this year we believe we will have five counties using it in total. Right now, I don't think Cass uses it in total but Sarpy and Douglas do use it in total; Lancaster's in part; Washington's putting it on and I think it's in total. I think Cass, if they haven't gone in total, they will this year. They've phased it in countywide. But we do have another... a number of other counties, I think the total is 20, I'm going to look at Denny, 20-some. Yeah, 20-some counties that have some parts of their county, around the rime of cities and things like that, and we do have parcel accounts on that as well. Right now you have to file by May 1 for greenbelt. If a county, such as Washington, is implementing it for the first year, on June 1 you're going to get a valuation notice, and if you didn't know to apply you're going to get a valuation notice that has your market value. You don't even get an ag land value. You're going to get market value of $5,003 an acre. Last year you were at $1,200. If you didn't know to apply by May 1, and hopefully there will be lots of public relations going on to get people in there, but let's say you just plain missed it and you're using it for ag, you would otherwise qualify. You go into the county board and the county board says, oh,
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January 24, 1997
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you're absolutely right, you should get greenbelt but it's too late, you can't apply, you should have been in here in May. But I didn't know. I didn't get my valuation change notice. I didn't know any of this was going on. I missed it. So we've proposed, and we have talked with Lancaster County about this and they were the ones that actually brought the idea forward and, because they're implementing it for this year they have asked that this is the portion that needs the E clause, that you could apply by August 1st, and the reason for that would be that if you got in there to the county board and they said, well, you're right, you would otherwise quality but it's too late, they can now say to you, you're right, you would otherwise qualify, get an application in here by August 1 and you can be greenbelted; now here's what your value will be. And they may still have an issue as to value, but we can take care of the issue as to greenbelt. And August 1 is important because you're going to want to know who's greenbelted and who's not for purposes of finalizing your values for certification of your levies, 'cause it's going to have a huge, potential huge impact on levy setting. So that's why August 1 was the date picked for that.
SENATOR HARTNETT: Cathy.
CATHERINE LANG-MORRISSEY: Yes.
SENATOR HARTNETT: As more and more counties go, if the number keeps going higher, would you need something that they have this? I'm a county, County A, and this is my first year that I need this window rather than just this year or... I mean, just listening to you.
CATHERINE LANG-MORRISSEY: You know, if counties, when they did greenbelt, and this is not specified in statute so it can go both ways, if counties did greenbelt countywide all the time I would tend to agree that that might be the case. The problem is that they don't have to. They can do it in increments and then, until you finally get the whole county in there.... The other thing is you can have some ... well, that wouldn't occur. I was thinking you could have some situations where a change in ownership and the person doesn't come in and apply, but that's not a requirement. Once you got to the county full zoning I ... or full greenbelt I guess you wouldn't need it, but it's no-- hurting anybody
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January 24, 1997
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to have it there I guess would be my position.
SENATOR KRISTENSEN: Senator Coordsen I think has a question too.
CATHERINE LANG-MORRISSEY: Yes, sir.
SENATOR COORDSEN: Yeah, Cathy, listening to your presentation and Senator Hartnett's question, what would be the downside of amending our greenbelt law to provide the greenbelt applied automatically to all agricultural land without any application, without coming in, wherever it was located in the state? And if it was converted to residential or commercial then the recapture of... is there any value in really turning this whole thing on its ear in ... keeping the principle of the idea but... ?
CATHERINE LANG-MORRISSEY: One of the things that wouldn't allow ... that would be of concern to me is you are making a fairly substantial financial decision when you say I want greenbelt or I don't. And so the filing for it is to signify to the assessor I want this lower value, I'm still using it for ag purposes but I know that I've just bought into the recapture. What if I'm in a situation where I don't want to deal with that recapture? I know the city's moving my direction and I know I'm going to convert it. I don't want to deal, even for a year, with the issue of recapture. I'm willing to have it out there at its full market value. I'd be surprised that that would be there, but it's possible.
SENATOR COORDSEN: I would be ... yeah.
CATHERINE LANG-MORRISSEY: Yeah, but it is...
SENATOR COORDSEN: Under current law.
CATHERINE LANG-MORRISSEY: Under current law you're not...I guess, I think, that the taxpayer needs to make that choice. They need to say I want this preference; I want to be only at ag value and, yes, I understand you can recapture on me if I do something converting it and, therefore, pulling myself out of the greenbelt allowances. But it's signifying and it's also putting something on record that this parcel's greenbelted and this one isn't, so if I'm a purchaser out
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January 24, 1997
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there and they're both for sale there's a difference. That could affect the offer that I make. And so ... you're right though, if it was on everybody, I guess everybody'd know it was there.
SENATOR COORDSEN: This is the thing, because this is a totally ... total different departure and if it was sold any land that was classified as agricultural, horticultural, all of those classifications, was sold for a purpose other than that...
CATHERINE LANG-MORRISSEY: One of the things that is ...
SENATOR COORDSEN: ...than the valuation recapture. Now the way it is outside of greenbelt, if you... if 1, for an example, I'm so far outside of greenbelt they almost call me Kansas, but if I were to sell a corner off of some piece of property, I can't imagine why anyone would want to buy anything I have, but should that happen, I don't ... doesn't cost ... there's no recapture of anything because all of a sudden the valuation changes because the fertilizer dealer builds a distribution facility there and that then goes forward...
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR COORDSEN: ... and I have no recapture.
CATHERINE LANG-MORRISSEY: One of the other issues...
SENATOR COORDSEN: So, yeah, I like it better the way it is when I think about it.
CATHERINE LANG-MORRISSEY: Okay. The other thing you raised in your question that we didn't talk about was the idea that right now you have to have it zoned ag, which means you have to have zoning. And so that's an issue that Senator Dierks has looked at and that the assessors have ... we, in fact, we had a meeting on accretion ground and greenbelt for accretion ground, and so there's a number of other issues out there that are on greenbelt and we're not raising them here, but I wouldn't be surprised but to see them come forward.
SENATOR HARTNETT: On zoning, how many counties do use
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zoning?
CATHERINE LANG-MORRISSEY: You know, I do not know the answer to that. The next issue in the real property area is improvements on leased land. Trying to do a concise example of this. I lease 'Land from Senator Hartnett and I build an improvement on it and, of course, Senator Hartnett doesn't want to pay the tax on my improvement, he wants me to pay the tax on my improvement. And when we look at the value of that whole, the assessor's going to say, well, gosh, with the Senator and Cathy combined on the marketplace this property would sell for $60,000. And based on the kind of lease we have, more of that value, even more than the improvement, the raw improvement value might pass to me based on the benefit that I'm deriving from the lease and less to Senator Hartnett. And so the assessor allocates that and can allocate it based on information that you and I give them, make an allocation, and the whole is being taxed. All the real property, the land, the improvement, and all the rights pertaining to that real property are taxed. However, same exact situation, same market value, but the property that I am on is owned by a governmental subdivision so the land is exempt. And right now the improvement on leased land statute says the improvements can be taxed to the owner of the improvements and that's it. And what has happened in practice is what gets lost in all of that is the value and quite substantial in some of our areas of our state, particularly recreational property, the substantial value that I paid for the lease to be able to put that house out there. The market value was $60,000. That's what I paid for it. But the improvement is a $5,000 mobile home. And so the question in the past, and what we did is go back and pull old language out of the 1970s wherein for improvements on leased land it states that it shall include the value of the lease. The value of the lease doesn't necessarily mean it increases its value. It could be a terrible lease. It could be the end of a 99-year lease, and it isn't going to add to the value of the improvement. But if it's a good lease, a beneficial lease to the lessee and I am paying $60,000 for that lease interest, I'm the owner of that lease interest and I'm taxable, and we're concerned that there is value out there and there are situations that are not being treated proportionately. So we've added back into the improvements on leased land statute, which are the 77-1374, is the provision I'm speaking of specifically,
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where it will say improvements on leased land shall be assessed together with the value of the lease to the owner of the improvement. So if I'm out there and I paid $60,000 for a vacant piece of property and I put up a $5,000 improvement, I'll have, based on market value, potentially 65, plus or minus, thousand dollars in value taxable. And it would be true as well on private land, so we've tried to make them consistent. I cannot tell you why the language was struck in the 1970s, but from that date forward, from that time forward, the assessment practice of improvements on leased land did change.
SENATOR KRISTENSEN: Senator Wickersham.
SENATOR WICKERSHAM: I'm assuming some place there's a definition of public lands?
CATHERINE LANG-MORRISSEY: No, Senator, there's not. We're...land owned by a governmental entity is what we mean here.
SENATOR WICKERSHAM: Okay. And we have some situations where in lieu of taxes are paid voluntarily, what is equivalent to in lieu of taxes. Game and Parks does that. I'm not aware that they lease any sites for homes or other purposes, but they might. We also have a constitutional amendment that we'll be proposing again and that would expressly allow for in lieu of taxes. So if... I guess maybe I shouldn't worry about what might happen in the future, but if that amendment passed and if we had in lieu of taxes, wouldn't it be appropriate to make some provision so we didn't, in fact, have double taxation?
CATHERINE LANG-MORRISSEY: Well, and I guess...
SENATOR WICKERSHAM: Because the lease... if you lease the property and you give that lease a value, you've taken, the old property law in law school...
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR WICKERSHAM: ... taken the bundle of sticks...
CATHERINE LANG-MORRISSEY: Um-hum.
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SENATOR WICKERSHAM- ...apart a little bit.
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR WICKERSHAM: You've got one stick over here and you've got that value; you've got the others over here, they should have some other value. How should we net those values out so we don't tax twice?
CATHERINE LANG-MORRISSEY: And, I guess, the question would be is, if you're doing an in lieu of tax, I'm an entity that owns a lake and we're using it for irrigation purposes but we sell sites all around that lake and the leases are selling for $20,000 and people are putting their improvements up. The... I guess the question would be is what is the in lieu of tax trying to tax out there? And you're right, we would have to consider that depending on how that in lieu of tax calculation is done. If it's a fee, maybe you don't have an issue. If it's based on some sort of value, then you're going to need to want to allocate back what's the value of the lessor in this case if that ... of that land remaining and based on the leases that they've given out.
SENATOR WICKERSHAM: Yeah. Well, wouldn't ... wouldn't the simplest thing to do here is just simply amend what you have in front of us and say "unless in lieu of taxes are paid by the owner"?
CATHERINE LANG-MORRISSEY: Well, right now...
SENATOR WICKERSHAM: Because that's the way we treat...that's the way we treat private parties because we don't ... we don't unbundle...
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR WICKERSHAM: ...a private tract that's !eased.
CATHERINE LANG-MORRISSEY: Right, and you're still going to tax Senator Hartnett on his...
SENATOR WICKERSHAM: And expect that...
CATHERINE LANG-MORRISSEY: ... proportionate ownership.
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SENATOR WICKERSHAM: ... and expect that to be paid...
CATHERINE LANG-MORRISSEY: Right, by him.
SENATOR WICKERSHAM: ... as ... by agreement between the lessor and the lessee.
CATHERINE LANG-MORRISSEY: Right.
SENATOR WICKERSHAM: But we don't unbundle it.
CATHERINE LANG-MORRISSEY: No, we don't. The problem is right now.... And it will depend. Different entities have different in lieu of tax calculations. Game and Parks is now at current market value or current assessed value, I should be careful, 'cause if it's agricultural land it's 80 percent, but irrigation districts are not.
SENATOR WICKERSHAM: No.
CATHERINE LANG-MORRISSEY: So that's a good question. I ...
SENATOR WICKERSHAM: Well, if the constitutional amendment passes, we might be able to fix all that up.
CATHERINE LANG-MORRISSEY: That's right. That's correct.
SENATOR WICKERSHAM: But I'm...
CATHERINE LANG-MORRISSEY: Make it...
SENATOR WICKERSHAM: ... but I'm wondering if we should really... in fact, I'm wondering if we should do this. Because if they pay in lieu of taxes, then there's no reason to unbundle it and say we're going to tax the lease differently.
CATHERINE LANG-MORRISSEY: And I would agree with you for in lieu of...
SENATOR WICKERSHAM: Okay.
CATHERINE LANG-MORRISSEY: ... taxes paid on a current market value or a current assessed value. The other kind I would
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argue they have no relation to what's the value of the property. They're more like a...
SENATOR WICKERSHAM: Yeah.
CATHERINE LANG-MORRISSEY: ... they become like a fee almost.
SENATOR WICKERSHAM: Yeah. Well, I ...
CATHERINE LANG-MORRISSEY: Because they're locked in then.
SENATOR WICKERSHAM: Yeah, okay. Well, I don't want you to be astonished if I may make some suggestions about how to...
CATHERINE LANG-MORRISSEY: Okay.
SENATOR WICKERSHAM: ... change this section.
CATHERINE LANG-MORRISSEY: Not at all. The next group of provisions deal with the county board. Most of these changes are to harmonize what we just talked about with the county assessor being done by April I and then bringing all those issues to the county board, be it corrections, errors, omitted property, undervaluations, overvaluations. And so those changes in the 1,500s deal with harmonization with the other issue that I've already discussed with you. And then lastly...
SENATOR WICKERSHAM: That ... the county board changes, there's a provision that I was curious about. It says that you'll specifically allow the county board to make use of knowledge known to them...
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR WICKERSHAM: ... in the equalization process. I am assuming that, not to be overly technical about this, I am assuming that is supposed to be something equivalent to judicial notice.
CATHERINE LANG-MORRISSEY: What that is, is in the past.... This is in 1504, is it not?
SENATOR WICKERSHAM: Well, and let me...
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CATHERINE LANG-MORRISSEY: Yeah.
SENATOR WICKERSHAM: ... let me follow up here just a moment. What I'm concerned about is if... I mean they've got to file a record of the action that they took with you.
CATHERINE LANG-MORRISSEY: Yes.
SENATOR WICKERSHAM: I'm assuming that when they file a record of action, they're also going to file something that says why they did it.
CATHERINE LANG-MORRISSEY: Um-hum.
SENATOR WICKERSHAM: But if they did it simply because they knew something and didn't take notice of it on the record, how are you going to know that they knew it?
CATHERINE LANG-MORRISSEY: Well, that...
SENATOR WICKERSHAM: (Laugh) Okay, does that make ...
CATHERINE LANG-MORRISSEY: ... and that happens with ...
SENATOR WICKERSHAM: And will that ever show up? So shouldn't we perhaps, if we're ... and I'm not... I'm not afraid of county boards saying what they know...
CATHERINE LANG-MORRISSEY: Right.
SENATOR WICKERSHAM: ...but I'm afraid that this encourages them to know what they know without telling us...
CATHERINE LANG-MORRISSEY: Telling anybody.
SENATOR WICKERSHAM: ... that they know what they know.
CATHERINE LANG-MORRISSEY: And that goes to the completion of that protest form and making that record. That is correct. A lot of times protest forms will come in and say we agreed with the assessor. Because...? It'd be nice to know why.
SENATOR WICKERSHAM: Because, well, because ... because we knew they were right.
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CATHERINE LANG-MORRISSEY: We knew they were right, that's right. Hopefully, if you went out and listened to the tape recording...
SENATOR WICKERSHAM: But this encourages them to...
SENATOR KRISTENSEN: Well, but doesn't it...the only time it matters is if you're going to appeal that, right? I mean, that's when it becomes...
SENATOR WICKERSHAM: Yeah.
SENATOR KRISTENSEN: ... important.
SENATOR WICKERSHAM: Yeah.
SENATOR KRISTENSEN: And the fact that, depending on how those appeals are taken...
SENATOR WICKERSHAM: Yeah.
SENATOR KRISTENSEN: ... that may be ...
SENATOR WICKERSHAM: Well, I'm just ...
SENATOR KRISTENSEN: ... much ado about nothing,...
CATHERINE LANG-MORRISSEY: They may need to defend...
SENATOR KRISTENSEN: ... or they may have to defend what their actions are and that's going to be a matter of their appeal right.
CATHERINE LANG-MORRISSEY: It also depends on another question that I'll raise for you, and I'll raise it right ,low 'cause it has come up in Senator Wickersham's question and that is these forms are filed with us. Now, this last year they weren't. In the past, Form 422, the protest forms, were always filed with the Nebraska Department of Revenue, a copy of it, and we put them in a box and we send them to the Air Base. We read them, you know, on occasion and whatever. This last year they were filed with the Tax Equalization and Review Commission and they did review them, but they also don't have the capacity or capability to do
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anything with them beyond that. So they're stacked, you know, you just have thousands if protest forms that are just stacked there. Same is true with exemption applications. So what we have proposed here and Mark Reynolds may, the Chairperson of the Commission, may also testify to this either today or on the bill next Wednesday, is these forms, if the state's going to get them, we should do something with them. And my question that I offer the Revenue Committee is we can certainly catalog them, enter them, do things with them, do analysis with them in the manner that we do analysis with the taxes that are levied and the values that are levied and provide information about how many protests are filed and how many ... how many values are adjusted and maybe by how many dollar if we could enter them in a database and do analysis with it. But that also costs time and money to do that. So I do offer that to you. We're going to get them and my question is, is if we're not to do something with them then we might ... why have a four-part form? They're more expensive. They've got mailing requirements to send them in to them. Do we need them at all? But if we're going to get them, we'd like to put them to some useful purpose. So I'm glad you brought that up 'cause I would have forgotten all about that issue, so thank you very much. And, yes, you're right, what's on them? And with regard to 1504, the section itself, this provision has always allowed, not necessarily in writing in statute, but in practice and procedure, based on their own knowledge. So, yes, we've just basically codified that. I think the last, there's some other minor changes. You'll see a lot of that in here and I hope that we've specified for you what we've done. The other thing that we are removing from our current requirements with regard to school adjusted valuations, when we complete the process of calculating the adjusted valuation for a school district, we are required by law to send that to the Department of Education so they can put it into the formula, send each school administrator their information and how we got there and what we did to it so that they can analyze it for purposes of protest. and then the law says that we shall also publish notice of such adjustment in a newspaper published or of general circulation in each county in Nebraska, and we have done that. We believe that that requirement should be removed. One, the only people who can protest or the only entities that can protest adjusted valuations are school districts and they are required by law
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and are getting specific notice as to their adjusted valuations. The notice that we're putting in the paper right now is we're done, they're there, the school adjusted valuation process is complete, we have complied with the law. We don't list all of the school districts and all their adjusted valuations in the notice and so we believe that it's an expense that we incur in small part right now, however, if we were supposed to put more in that notice to make it useful to anybody, it would be an expensive notice. And so we're asking you to remove that restriction because the people who can appeal, the parties that can appeal are getting individual notice right now of their adjusted valuation. That is the bill. The amendment, I've already covered two of the issues; that's the centrally assessed payment dates, clarifications, procedures already in regulations; the confidentiality of documents not available from another public source for public service entities, and the issue that we talked about with personal property filings for local assessment. We have, and this goes to the other issues that we want to raise in this bill and would work with the Committee in furthering the amendment, and that is the role of the Property Tax Division, the role of the Property Tax Administrator internally within ourselves, and that goes to the 77-300s; what authorities we should have, there's some overlap and some gaps, as I suggested earlier, within our relationship with the Department of Revenue; and our role with regard to assessment of real property in the county. You will look at the 77-1300s and find 16 sections that deal with appraisals, reappraisals, joint appraisals, and I would...and I can tell you that in the past the Department of Revenue Property Tax Division conducted appraisals. We were out there as a potential contractee with a county to do an appraisal and, administratively, that practice was ceased a good 10 to 12 years ago, and the appraisers who were on staff, and by statute are required to be on staff, were used for other functions but not appraisals in counties. So those statutes basically have collected cobwebs for that period of time. They do exist. My question for you, for the Committee, is we would offer that they should all be repealed; that we should continue to prescribe regulations for appraisal contracts so that assessors know when they enter into a contract what do they need to have in that contract to protect their office in the.... These are expensive propositions to do reappraisals or appraisals, and we
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believe that we would be a good source for providing information on what should be in those contracts and we should look at them. But I don't believe we should monitor them. We are not currently monitoring them. Contracts are being entered into that we do not receive for our approval and they do it on their own. They are an independent. That's independent government out there. That's the county choosing to enter into a contract and they ... we do not always get the contracts from them. But we would offer that those ... all those sections be repealed, but for the one to do regulations on contracts. One other thing, and that is that ... this goes to LB 397, which will be heard on Wednesday, the statewide plan of equalization. Right now, there's a report that's required to be filed every year by the assessors in February. It's called the appraisal maintenance report and it says I'm doing all this stuff under my appraisal budget to do all these great things for valuation for this year. And the assessors fill them out, mail them in to us. We believe that that form, one, needs to be filed in a totally different time and needs to be turned into a completely different format. We believe that it should be filed in time for the Tax Equalization and Review Commission to use it for the statewide plan. We believe it should have budget information contained therein, staffing information, what kind of computer technology do you have in your county, what things did you budget for. And, by the way, the date would be August 1st. Your budget is being set right now., What did you budget for and what are your plans for assessment for the coming next valuation year? Then the Tax Equalization and Review Commission members can use all of that information that we would get compiled, reduced to reports and provide to them in raw copy as well, to know what are counties doing to gear-up for the next assessment year. How are they going to tackle the issue of their COD and their PRD? What are they going to do with regard to mobile homes and vacant land that are either way overvalued or way undervalued, whatever the case could possibly be? Are they implementing a reappraisal of rural improvements, and shouldn't the Tax Equalization and Review Commission know that so that as they're developing a statewide plan, they can take all that information into consideration? Obviously, testimony could be elicited on all of those factors, but I guess I would put forth that it would be a lot easier to have a standardized report, all the counties submit it, it's submitted in a time that can be
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useful to not just us, for us looking at what they're doing, but for the statewide plan, and that section is in these ... or at least that form is mentioned in these sections and we would offer to modify it, clarify what this form should be and have the date be August 1st. But , other than that, 77-1301.01 to 77-1301.16 would be repealed. And I think that concludes my introduction and testimony on LB 270 and our amendment.
SENATOR KRISTENSEN: I'm almost afraid to ask if there are any questions. (Laughter)
SENATOR WICKERSHAM: I was afraid by the reference to next Wednesday that we were going to be here awhile. (Laughter)
CATHERINE LANG-MORRISSEY: I hope not.
SENATOR KRISTENSEN: Okay. Any questions by the Committee? Senator Hartnett.
SENATOR HARTNETT: Yeah, Cathy, the suggestion that you made right...or just previously to eliminate it, is that part of next Wednesday's bill? Are you proposing it be part of it? I guess that's my question I had.
CATHERINE LANG-MORRISSEY: The form, we will certainly want to discuss it next Wednesday 'cause we also have some other broad issues we'd like to raise with you regarding the statewide plan, but we could have it part of the amendment here and, therefore, be part of this bill. We have another question of whether or not it's possible that this bill could even be merged with that bill. We're talking about a lot of similar things here, we've got some statutes that overlap one another. But we know we have some things in our bill that is going to probably slow it way down so that's okay, we understand that, but we would offer that.
SENATOR KRISTENSEN: Okay, any other questions? Thank you very much, Cathy.
CATHERINE LANG-MORRISSEY: Thank you.
SENATOR KRISTENSEN: Testimony of those in favor of this measure. Those opposed. okay. Come forward. The doctrine of equal time may have an exception. (Laughter.)
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JIM CUNNINGHAM: Having come without prepared written testimony, I couldn't write long enough or fast enough to be able to meet it anyway. I will sign in when I'm concluded in order to save a little time. Senator Kristensen, members of the Committee, my name is Jim Cunningham and I represent the Nebraska Catholic Conference, which is a statewide public affairs organization for the three Catholic diocese. And as an organization which sponsors several hundred church facilities throughout the state, as well as schools and cemeteries and numerous charitable ministries, we have concerns and curiosity about any legislation which proposes to change policy and procedures in relation to tax exemption for properties owned by religious organizations and used by these organizations for religious purposes. I'm testifying in order to ensure that the record reflects our note of concern about some provisions of this bill. And our attention is focused on Sections 13 and 14 of the bill. This is the part that proposes to change the process and procedure of an application in every year that is divisible by four, followed by the intervening continued exempt use affidavit in the three years following before the application is filed once again. I really am one who appreciated the Property Tax Administrator's explanation. It was very good, very informational, and very educational. I'm not sure that she might have understated, however, the difference between the full application and the intervening year continuing exempt use affidavit, but I also am not sure ... but what I would have a difficult time convincing you that the differences in those two forms are so substantial that they would constitute an unreasonable burden on organizations that generally have very limited staffing for administrative purposes. However, there would also appear to be some additional aspects involved here. Section 13 of the bill amends statute Section 77-202.01. Section 14 of the bill amends Section, statute, 77-202.03. Now, in between there is a statute, 77-202.02, and I do have copies of that in case that is not readily available to you. (Exhibit 3.) But that statute, as I read it, says that in the application year, the County Board of Equalization, upon notice of hearing to all applicants, reviews and makes a decision about whether or not to grant or not grant exemption based on the application. And then following it's decision, certifies to all applicants the determination that the county board has made. Now, my understanding and my
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reading of that statute is that that happens in the year that is divisible by four, the year that the full application is made, and does not happen, necessarily ... although there is permissive language to allow a review to happen in the intervening year, but is not required as it is in the fourth year, or the divisible by four year. Now, that would certainly seem to suggest that there would be more administrative process ... perhaps, it could be said, as much as three times more administrative process if you go to an every year application as the bill suggests. I'm not sure how that serves the cause of efficiency or less expensive government, and I'm also not sure the extent to which that might not put additional burden on organizations which are comfortable and used to the process that's in place now. But it does, to me, suggest that there will be more of a difference than simply having a different form if you malice this change to every year applications, and that would be as a result of 77-202.02. Another distinction that I would like to point out for you has to do with the issue of the late filing. It appears to me in reading the statutes and the bill that there will be a difference in that particular process, in that, as I understand the way the statutes are now, if you file a late application in the year divisible by four, it is necessary... if you meet the deadline... it is necessary, still, to make a showing of good cause to the county board in that year in order to be granted a waiver of that deadline, and then there is the ability of the county board to assess a penalty. My understanding of the intervening year process is that if you are late in the intervening year, your late intervening year affidavit is accepted by the county board without the necessity of a showing of good cause, although it still does have the permissiveness with regard to the penalty. So, again, that does seem to me to suggest additional administrative process and procedures which could be burdensome, to some extent, on both county government and on the exempt organizations that would be affected by this change to an every year process. And those are my comments in reflecting our concerns about this change. Thank you.
SENATOR KRISTENSEN: Thank you, Jim. Questions by the committee? Thank you very much. Anyone else opposed?
THOMAS O'NEILL: Mr. Chairman, members of the Revenue
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Committee, my name is Thomas O'Neill and I'm President of the Association of Independent Colleges and Universities of Nebraska. Mr. Cunningham and I discussed the testimony relative to LB 270 today, and I do not want to, certainly, repeat his testimony. I do share his concerns and also the concerns that were raised by you, Senator Kristensen, in terms of the cemetery property, in the amendment, I think it's Section 19. So, I would ask that you do amend that provision to make it...to clarify it with what I consider to be the intent of the bill. Other than that, I have no further comments.
SENATOR KRISTENSEN: Thank you. knew, Mr. O'Neill, the cemeteries that are run by your organizations probably would have that ... some interest. So,...
THOMAS O'NEILL: That's right. That's right.
SENATOR KRISTENSEN: Yeah. Okay. Any other questions by the Committee? I see none. Thank you. Any other opposition? Neutral testimony.
JACK MILLS: Senator Kristensen and members of the Revenue Committee, my name is Jack Mills. I'm appearing here on behalf of the Nebraska Association of County Officials in a neutral position. First, let me tell you that I want to echo what Cathy Lang-Morrissey has said that... and repeat for those of you who were not here ... much of 270 was put together by assessors who met many times during the year, and I think today you've had a bit of a lesson of what goes on in some of these assessor's offices and these nuances. I would like to make a couple of comments to you. One is that I think we ought to put together a white copy. When all of this is put together, we need to be able to look at it again and see what is there because these affect ... we're not so concerned about how they affect the assessor, but how they affect people and their "POs", et cetera. So, I'd like to ask if you ... as you move through, you might want to put this in a white copy. Secondly, I want to bring to your attention what was just discussed. The assessors, when they brought this forward , that amendment to the application for those exemptions from taxation, were not trying to make their work easier, they were trying to help out the groups who make those filings. If you look at those two documents, 478 and 478A, or whatever they are, they're
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almost identical. They're almost identical. While one has called for the exemption, the other is the affidavit. Nonetheless, we think there is...they are so close to the same, the procedure for the county is so close to the same ... this is the reason why it was brought forward. In fact, we thought it was enough of it. We introduced a bill of that same discussion point, and I'm hoping that you will look at it, and we have one more point to that bill, and that is ... when a ... and it happened here in Lincoln, it happened with, I believe, Lincoln General Hospital ... they missed the filing deadline. Somebody... I forgot who it was. And that ... the penalty was great, I mean it's huge. And so what we're saying here in our ... in the bill, and I hope you might consider it here, we won't even need our bill, that is, there's a maximum amount they're going to have to pay. I mean, when you look at what a big hospital or a big entity would have to pay, for somebody to have missed that deadline, we think they shouldn't have to pay over $5,000, and that's what we have in the bill. So, if you look at the value of what some of these would be, they'd be paying $25,000-$30,000 if they missed that exemption. Again, that's in the law today, that if they miss it, there's that penalty. So, we would suggest that ... we'd like to... I don't even know what the bill number is, but I'll provide it to you. Naturally, the assessors, as they work through this...and again, this hasn't been just the last thirty days. They began last spring, they've had numerous meetings. Cathy and her folks have been to the meetings. They've gone through this. There was one provision in here, Cathy... I was out of the room for a while, and I think it's in this one, where there was the $100 fine?
CATHY LANG-MORRISSEY: (Inaudible.)
JACK MILLS: Okay. I want to touch upon that. I don't... I was out of the room for a while and so I don't know if Cathy touched upon it and it's in there, though, that if an assessor misses this filing date, there's a $100 penalty to the assessor for that. While the assessors understood that and acknowledged it, let me raise my objections here. First of all, you know, Senator Kristensen, that the statutes demand that any county official or employee who has erred will have to be defended by the county. They have to be defended by the county. So, if the assessor erred or their staff erred and they didn't get this filed, there cannot be
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a personal, there cannot be a personal fine to them. The county must defend that, and it's 100 bucks, so the county's going to pay it. I mean, that's all there is to it. I think there's other ways to address this. I think Cathy and the assessors would agree. There's other ways to do it. If they want to do something to the assessor for not meeting a deadline, a $100 fine is not the way to do it when the counties have to pay for it. I think, Senator Kristensen, that was all I have. We ... there are a lot of good things in here. It is magnanimous and it needed to be done. There's some things that need to be repealed. We agree with what Cathy said about a number of those areas that need to be repealed, and we would like to work with you, also. Again, I want to suggest... I hope we can put this in one big copy so we can sit down and look at it, the assessors can look at it, to help you. Thank you.
SENATOR KRISTENSEN: We might need it, too. (Laughter.) So, I appreciate it. Questions for Mr. Mills? Thank you very much.
JACK MILLS: Thank you.
SENATOR KRISTENSEN: Any other neutral testimony?
JACK MILLS: We have one more.
SENATOR KRISTENSEN: Okay. Very good. Good afternoon, Jean. This isn't Transportation.
JEAN SIDWELL: I'm in the right place.
SENATOR KRISTENSEN: Okay. Good.
JEAN SIDWELL: Chairman Kristensen and members of the Revenue Committee, I'm Jean Sidwell, Buffalo County Treasurer, and I'm just appearing today in a neutral position on this bill. We just sort of have gotten this bill and a chance to read through it, and there were just a couple things that I would like to pass by this Committee in the event that it goes out of this Committee much in the same form that it's printed. I'd like to see a few changes made. One of them...they're kind of minor, but they would be useful to treasurers if they were fixed now rather than us coming in at a later date and giving you more legislation
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to work on. I would ask that on page 32, line 14 ... where Cathy Lang-Morrissey brought up the idea or the change in the law that would give people one year from the date of transfer to get a refund on a motor vehicle. And I would like to suggest to the Committee that they leave it at sixty days, just as it is now. We used to have an unlimited time for people to come in and get refunds on motor vehicles after they transferred or sold vehicles. And it, frankly, gave us a working nightmare with people that could come in at any point and get money back on a vehicle they sold. if you allow somebody to get a refund up to a year after they sold a vehicle, do you realize that that vehicle's registration may have expired eleven months ago? And yet, they would still be coming in for a refund at a much later date. They may not even have had it in their possession for eleven months. So, it causes quite a problem for us, and since there is no proof required to get a refund, you don't have to prove that you sold or transferred a vehicle in order to get your money back. I think that extending that time frame to a year really will give us a lot of problems. So, I would ask the Committee to consider leaving it at its present sixty day time frame. And I would also then just like ... technically, on line 18, it ... the county ... or the county assessor, it really should be the designated county official. Again, it's very minor and I realize that there will be a lot of things to bring up like this.
SENATOR KRISTENSEN: Where ... Jean, where was that at?
JEAN SIDWELL: That's on line ... or page 32 also.
SENATOR KRISTENSEN: Okay.
JEAN SIDWELL: Line 18.
SENATOR KRISTENSEN: Thank you.
JEAN SIDWELL: It really needs to read, "the designated county official shall certify the county treasurer."
SENATOR KRISTENSEN: Okay.
JEAN SIDWELL: And then, if you would move down to line 23, where it says "no refund of less than two dollars shall be paid." That, frankly, is language that's existed for a long
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time and is unnecessary now that we have the statewide computer system. It used to be in the days when everybody was typing out these things. It was really kind of dumb to take the time to type out a two dollar refund, but frankly, you can strike, I think, that language appropriately now because the computer already figures that refund on the tax portion of a car. Now, unfortunately, the law never struck or never had a minimum on the registration side of the law anyway. So the treasurers were always giving back a dollar twenty-five registration refund anyway. You follow that? It's a little crazy, but we were always giving back a dollar twenty-five registration fee and this law only struck the two dollar refund on the tax side of a car registration. So, in this day of computerization, frankly, the computer automatically pops in a tax amount. We're already giving back money on the registration side. We might as well leave it all in there and give the full thing back.
SENATOR KRISTENSEN: Is there any purpose in saying it costs us more than two dollars to generate that check?
JEAN SIDWELL: No. Actually, it takes ... we're going to have to give back the dollar twenty-five anyway because the law doesn't give us the right not to give back the dollar twenty-five. We're already stuck writing the check for a dollar twenty-five anyway.
SENATOR KRISTENSEN: Maybe we ought to look at that as well.
JEAN SIDWELL: Well, that would be fine for...
SENATOR KRISTENSEN: Well, I mean...
JEAN SIDWELL: ... setting a minimum, but...
SENATOR KRISTENSEN: I mean, at some point in time the cost of issuing a check for under five dollars...
JEAN SIDWELL: Oh.
SENATOR KRISTENSEN: ... isn't worth the headache to do it. I mean, by the time you generate the check and the computer storage, the time, the list...
JEAN SIDWELL: I agree. I think it is.
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SENATOR KRISTENSEN: Why do that?
JEAN SIDWELL: The legislation isn't before us now, and the reason I suggest we strike this part of it is because it actually takes more time for us now to go in and get rid of this...
SENATOR KRISTENSEN: Okay.
JEAN SIDWELL: ... two dollar minimum than to just leave the money in the way the computer generates the amount of money we're giving back.
SENATOR KRISTENSEN: I think this bill opens up so many sections that just about every law's on the table? So... sorry to interrupt. Go ahead.
JEAN SIDWELL: It would help, I think, most people who are working on refunds would like to see that language struck that there's no minimum now, and all that needs to be done is just strike that word. "But no refund of less than two dollars shall be paid" can be completely deleted. And then, I would also like to suggest that on page 60 of this bill that the whole Section 77-1704.01 be struck. That has been on the books for a long time and it's one of those sort of annoyances to county treasurers that we've never liked, but it was, sort of, not worth coming in and trying to change the law. This section requires the county treasurers to have printed an itemized list of all the tax aid dollars that are going out there, and to stuff that little sheet in with each tax statement that we mail out. I'm sure that most of you who have received a tax bill at home have received one of those in your envelopes and, maybe you understood what it is, but I would tell you that the general population probably does not understand what that is, and it's, frankly, a waste of county money to have that printed and it's a waste of our time to sit there and stuff that into those envelopes. I'm sure, originally, it was put there for good reason, but I really think that it's outlived it's usefulness. And with that, that's all I have. I welcome any questions about the few things that I've talked about. Like I said, we haven't really had time to look through much of this bill and to even look at the kinds of dates that are in there and how they work out for county
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treasurers, but we will be doing so.
SENATOR KRISTENSEN: Senator Hartnett.
SENATOR HARTNETT: I think when Cathy was talking, she was talking about leased cars. Should we treat them differently, or you're suggesting treat them both the same. You know, if I trade a car ... you know, treat, I think, the leased car differently than a car that I would sell, say, to Senator Schellpeper or something like that.
JEAN SIDWELL: I ...
SENATOR HARTNETT: That's a ... you know, owner to owner.
JEAN SIDWELL: Right. I think most treasurers concur that when you lease a vehicle and you either give that back to the leasing company or use it as a trade for another lease car that you should be giving a refund to that person who leases the car. I think we are happy with those sections that allow us to do that. It has ... there's a lot of customer dissatisfaction when we don't give that money back. They feel duly entitled to that money and I think most of us think they should have it back. So, yes, I think we agree that they should be treated the same, as a regular owner...
SENATOR HARTNETT: But also...
JEAN SIDWELL: ... of a car in that situation.
SENATOR HARTNETT: But not the year, but the sixty days?
JEAN SIDWELL: Yes, the sixty ...
SENATOR HARTNETT: For both ... that's what my question...
JEAN SIDWELL: Oh. I'm sorry.
SENATOR HARTNETT: For both
JEAN SIDWELL: Okay.
SENATOR HARTNETT: For... yeah. For lease versus owner of the...
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JEAN SIDWELL: It's kind of hard to imagine, but if you let people come back in eleven months after registration has expired for a refund, it just opens up the door to all kinds of people doing strange things with their registrations. Getting money back, pocket money back, is what it amounts to. And there's no proof involved. And so, I think on leased cars I guess I would concur that that's sufficient time, too. Leased cars generally ... most of those people are going to be back because on a leased car, you're talking about a newer vehicle anyway, so there's a substantial amount of money involved in the refund in that case. So most of those people are pretty much on top of it and would, naturally, be there within the sixty days because they've got quite a chunk of change coming back. Older vehicles, we're talking about minimal amounts and they're really a nuisance.
SENATOR KRISTENSEN: Any other questions by the Committee? Thank you very much.
JEAN SIDWELL: Thank you.
SENATOR KRISTENSEN: Anyone else in neutral? I see none. That will close our hearing. Senator McKenzie, did I see her here somewhere? Very good. That bill, obviously, took us a considerable amount of time. It's a big bill for the Committee and we appreciate your patience sitting through that. That's one we're going to spend a lot of time in the future on. As Senator McKenzie signs in, can I see a show of hands of those who are going to testify on LB 187. Okay. Either for or against. Okay. A couple. Could I also see a show of hands of those who are going to testify on LB 28. Okay. Thank you, ma'am. Those who are going to testify on LB 86. Two. Those who are going to testify on LB 317. Okay. Very good. Thank you very much, and we've got four bills left this afternoon, so we appreciate your patience and cooperation, and we'll get through them here as succinctly as we can. Senator McKenzie, welcome.
SENATOR McKENZIE: Senator Kristensen, thank you. And I'm in no hurry. (Laughter.) Natural Resources Committee is probably going to be there until eight, so ...
SENATOR KRISTENSEN: You might find that's ...