82nd Legislative Session _ 2007

Committee: House Taxation
Tuesday, February 27, 2007

                                            P - Present
                                            E - Excused
                                            A - Absent

Roll Call
P    Bradford
P    Faehn
P    Feinstein
P    Juhnke
P    Lust
P    Noem
P    Novstrup (Al)
P    Olson (Ryan), Vice-Chair
P    Peters
P    Thompson
P    Turbiville
P    Van Etten
P    Weems
P    Wick
P    Dykstra, Chair

OTHERS PRESENT: See Original Minutes

The meeting was called to order by Chair Dykstra.

MOTION:     TO APPROVE THE MINUTES OF FEBRUARY 22, 2007 (7:45 AM)

Moved by:    Turbiville
Second by:    Van Etten
Action:    Prevailed by voice vote.

MOTION:     TO APPROVE THE MINUTES OF FEBRUARY 22, 2007 (3:23 PM)

Moved by:    Turbiville
Second by:    Peters


Action:    Prevailed by voice vote.

         SB 183: exempt the production of certain plants and sod from sales and use taxes.

Presented by:    Representative Carol Pitts
Proponents:    Tim Begalka, Self, Clear Lake (Handout #1)
Opponents:    Jan Talley, SD Dept of Revenue and Regulation

MOTION:     DO PASS SB 183

Moved by:    Noem
Second by:    Bradford
Action:    Prevailed by roll call vote.(9-5-1-0)

Voting Yes:    Bradford, Faehn, Juhnke, Noem, Novstrup (Al), Thompson, Van Etten, Weems, Dykstra

Voting No:    Feinstein, Lust, Peters, Turbiville, Wick

Excused:    Olson (Ryan)

         SB 173: revise certain provisions concerning the assessment of real property, to revise certain tax levy limitations for schools, to revise certain provisions regarding property tax levies for school districts, and to repeal the nonagricultural acreage classification.
        
Prior testimony heard on February 15, 2007.

Proponents:    Patrick McElgunn Jr., Rapid City Area of Chamber of Commerce
        Larry Gabriel, Secretary, Department of Agriculture
        Tammy Anderson, Self, DeSmet

Kirk Chaffee, SD Association of Assessing Officers, answered questions.
Senator David Knutson answered questions and gave the follow-up rebuttal.

MOTION:     AMEND SB 173

173fr
     On page 9, after line 9 of the Senate Taxation Committee engrossed bill, insert:

"      Section 18. That § 13-37-16 be amended to read as follows:


     13-37-16.   For taxes payable in 1997, and each year thereafter, the school board shall levy no more than one dollar and forty cents per thousand dollars of taxable valuation, as a special levy in addition to all other levies authorized by law for the amount so determined to be necessary, and such levy shall be spread against all of the taxable property of the district. The proceeds derived from such levy shall constitute a school district special education fund of the district for the payment of costs for the special education of all children in need of special education or special education and related services who reside within the district pursuant to the provisions of §§ 13-37-8.2 to 13-37-8.10, inclusive. The levy in this section shall be based on valuations such that the median level of assessment represents 85% of market value as determined by the Department of Revenue and Regulation. The total amount of taxes that would be generated at the levy pursuant to this section shall be considered local effort. Money in the special education fund may be expended for the purchase or lease of any assistive technology that is directly related to special education and specified in a student's individualized education plan. This section does not apply to real property improvements.

     For taxes payable in 2009, the total amount of revenue payable from the levy provided in this section may not increase more than the lesser of three percent or the index factor, as defined in §  10-13-38, over the maximum amount of revenue that could have been generated for the taxes payable in 2008. After applying the index factor, a school district may increase the revenue payable from taxes on real property above the limitations provided by this section by the percentage increase of value resulting from any improvements or change in use of real property, annexation, minor boundary changes, and any adjustments in taxation of real property separately classified and subject to statutory adjustments and reductions under chapters 10-4, 10-6, 10-6A, and 10-6B, except §  10-6-31.4, only if assessed the same as property of equal value.

     Any school district created or reorganized after January 1, 2007, is exempt from the limitation provided by this section for a period of two years immediately following its creation.

     For taxes payable in 2010, 2011, 2012, and 2013, the total amount of revenue payable from the levy provided in this section may not increase more than the lesser of three percent or the index factor, as defined in §  10-13-38, over the maximum amount of revenue that could have been generated for the taxes payable in 2008 plus any unused index factor from the previous years. After applying the index factor, a school district may increase the revenue payable from taxes on real property above the limitations provided by this section by the percentage increase of value resulting from any improvements or change in use of real property, annexation, minor boundary changes, and any adjustments in taxation of real property separately classified and subject to statutory adjustments and reductions under chapters 10-4, 10-6, 10-6A, and 10-6B, except §  10-6-31.4, only if assessed the same as property of equal value.

     For taxes payable in 2009, 2010, 2011, 2012, and 2013, the levy limitation of one dollar and forty cents per thousand dollars of taxable valuation does not apply to any school district.


     Section 19. That § 13-37-35.1 be amended to read as follows:

     13-37-35.1.   Terms used in chapter 13-37 mean:

             (1)      "Level one disability," a mild disability;
             (2)      "Level two disability," a mental retardation or emotional disorder;
             (3)      "Level three disability," hearing impairment, deafness, visual impairment, deaf-blindness, orthopedic impairment, or traumatic brain injury;
             (4)      "Level four disability," autism;
             (5)      "Level five disability," multiple disabilities;
             (5A)      "Level six disability," prolonged assistance;
             (6)      "Index factor," is the annual percentage change in the consumer price index for urban wage earners and clerical workers as computed by the Bureau of Labor Statistics of the United States Department of Labor for the year before the year immediately preceding the year of adjustment or three percent, whichever is less;
             (7)      "Local effort," shall be calculated for taxes payable in 2006 and thereafter using a special education levy of one dollar and twenty cents per one thousand dollars of valuation 2009 shall be the amount of revenue that could have been generated for the taxes payable in 2008 using a special education levy of one dollar and twenty cents per one thousand dollars of valuation increased by the lesser of three percent or the index factor, as defined in § 10-13-38, plus a percentage increase of value resulting from any improvements or change in use of real property, annexation, minor boundary changes, and any adjustments in taxation of real property separately classified and subject to statutory adjustments and reductions under chapters 10-4, 10-6, 10-6A, and 10-6B, except § 10-6-31.4, only if assessed the same as property of equal value.
                      For taxes payable in 2010, 2011, 2012, and 2013, the total amount of local effort shall be increased by the lesser of three percent or the index factor, established pursuant to § 10-13-38 plus a percentage increase of value resulting from any improvements or change in use of real property, annexation, minor boundary changes, and any adjustments in taxation of real property separately classified and subject to statutory adjustments and reductions under chapters 10-4, 10-6, 10-6A, and 10-6B, except § 10-6-31.4, only if assessed the same as property of equal value. ;
             (8)      "Allocation for a student with a level one disability ," for the school fiscal year beginning July 1, 2004, is $ 3,533.13. For each school year thereafter, the allocation for a student with a level one disability shall be the previous fiscal year's allocation for such child increased by the lesser of the index factor or three percent;
             (9)      "Allocation for a student with a level two disability ," for the school fiscal year beginning July 1, 2004, is $ 8,277.21. For each school year thereafter, the allocation for a student with a level two disability shall be the previous fiscal year's allocation for such child increased by the lesser of the index factor or three percent;
             (10)      "Allocation for a student with a level three disability ," for the school fiscal year beginning July 1, 2004, is $ 12, 580.73. For each school year thereafter, the allocation for a student with a level three disability shall be the previous fiscal year's allocation for such

child increased by the lesser of the index factor or three percent;

             (11)      "Allocation for a student with a level four disability ," for the school fiscal year beginning July 1, 2004, is $ 12, 001.80. For each school year thereafter, the allocation for a student with a level four disability shall be the previous fiscal year's allocation for such child increased by the lesser of the index factor or three percent;
             (12)      "Allocation for a student with a level five disability ," for the school fiscal year beginning July 1, 2004, is $ 15, 882.21. For each school year thereafter, the allocation for a student with a level five disability shall be the previous fiscal year's allocation for such child increased by the lesser of the index factor or three percent;
             (12A)      "Allocation for a student with a level six disability ," for the school fiscal year beginning July 2004, is $8,122.23. For each school year thereafter, the allocation for a student with a level six disability shall be the previous fiscal year's allocation for such child increased by the lesser of the index factor or three percent;
             (13)      "Child count," is the number of students in need of special education or special education and related services according to criteria set forth in rules promulgated pursuant to §§ 13- 37-1.1 and 13-37-46 submitted to the Department of Education in accordance with rules promulgated pursuant to § 13-37-1.1;
             (14)      "Average daily membership," the average number of kindergarten through twelfth grade pupils enrolled in all schools operated by the school district during the previous regular school year plus the average number of pupils for whom the district pays tuition;
             (15)      "Nonpublic school," a sectarian organization or entity which is accredited by the secretary of education for the purpose of instructing children of compulsory school age. This definition excludes any school that receives a majority of its revenues from public funds;
             (16)      "Nonpublic average daily membership," the average number of children under age sixteen who are approved for alternative instruction pursuant to § 13-27-2 during the previous school year plus:
             (a)      For nonpublic schools located within the boundaries of a public school district with an average daily membership of six hundred or more during the previous school year, the average number of kindergarten through twelfth grade pupils enrolled during the previous regular school year in all nonpublic schools located within the boundaries of the public school district;
             (b)      For nonpublic schools located within the boundaries of a public school district with an average daily membership of less than six hundred during the previous school year, the average number of resident kindergarten through twelfth grade pupils enrolled during the previous school year in all nonpublic schools located within the State of South Dakota;
             (17)      "Special education average daily membership," average daily membership plus nonpublic average daily membership;
             (18)      "Local need," an amount to be determined as follows:
             (a)      Multiply the special education average daily membership by 0.1013 and multiply the result by the allocation for a student with a level one disability;
             (b)      Multiply the number of students having a level two disability as reported on the

child count for the previous school fiscal year by the allocation for a student with a level two disability;

             (c)      Multiply the number of students having a level three disability as reported on the child count for the previous school fiscal year by the allocation for a student with a level three disability;
             (d)      Multiply the number of students having a level four disability as reported on the child count for the previous school fiscal year by the allocation for a student with a level four disability;
             (e)      Multiply the number of students having a level five disability as reported on the child count for the previous school fiscal year by the allocation for a student with a level five disability;
             (f)      Multiply the number of students having a level six disability as reported on the child count for the previous school fiscal year by the allocation for a student with a level six disability;
             (g)      Sum the results of (a) through (f);
             (19)      "Effort factor," the school district's special education tax levy in dollars per thousand divided by $1.20 for taxes payable 2009, 2010, 2011, 2012, and 2013 shall be the amount of taxes payable for the year divided by the amount of local effort as calculated in subdivision (7) . The maximum effort factor is 1.0. . ".

Moved by:    Juhnke
Second by:    Olson (Ryan)
Action:    Prevailed by voice vote.

MOTION:     AMEND SB 173

173fq
     On page 9, after line 9 of the Senate Taxation Committee engrossed bill, insert:

"
     Section 18. There is hereby established the Senate Bill 173 Implementation and Oversight Task Force. The task force shall consist of the following eleven members:

             (1)    The speaker of the House of Representatives shall appoint three members of the House of Representatives, no more than two of whom may be from one political party;
             (2)    The president pro tempore of the Senate shall appoint three members of the Senate, no more than two of whom may be from one political party; and
             (3)    The secretary of the Department of Revenue and Regulation shall appoint five members representing locally elected and appointed officials and the general public, no more than three of whom may be from one political party.

     The task force shall review the implementation of the provisions of Senate Bill 173 by the Department of Revenue and Regulation and advise the department regarding the rules promulgated by the department to administer the provisions of Senate Bill 173. The legislative members of the task force may make recommendations to the 2008 Legislature regarding changes to the programs established by Senate Bill 173.".

Moved by:    Noem
Second by:    Juhnke
Action:    Failed by roll call vote.(7-8-0-0)

Voting Yes:    Bradford, Faehn, Juhnke, Noem, Olson (Ryan), Turbiville, Dykstra

Voting No:    Feinstein, Lust, Novstrup (Al), Peters, Thompson, Van Etten, Weems, Wick

MOTION:     AMEND SB 173

173fi
     On page 2, line 6 of the Senate Taxation Committee engrossed bill, overstrike " capitalized " .

     On page 2 , line 7, overstrike " capitalized " .

     On page 2 , line 13, overstrike " capitalized " .

     On page 2 , delete line 22 , and insert " capitalized at seven and three-fourths divided by the adjustment factor of six and sixteen hundredths percent.".

Moved by:    Noem
Second by:    Juhnke
Action:    Prevailed by roll call vote.(9-6-0-0)

Voting Yes:    Bradford, Faehn, Juhnke, Lust, Noem, Olson (Ryan), Thompson, Turbiville, Dykstra

Voting No:    Feinstein, Novstrup (Al), Peters, Van Etten, Weems, Wick

MOTION:     DO PASS SB 173 AS AMENDED

Moved by:    Noem
Second by:    Juhnke
Action:    Was not acted on.


MOTION:     SUBSTITUTE MOTION AMEND SB 173

173fp
     On the Senate Taxation Committee engrossed bill, delete everything after the enacting clause and insert:

"
     Section 1. The Executive Board of the Legislative Research Council shall establish an interim committee to conduct a thorough review of the assessment of real property, the classification of real property, and property tax levies. The committee shall study the current limitations on the sales that may be used to value property and the potential impacts if changes are made to these limitations. The committee shall also consider alternative methods to assess property, including methods used by other states. The committee shall report its findings to the Executive Board and present legislation to the 2008 Legislature.

     Section 2. Whereas, this Act is necessary for the immediate preservation of the public peace, health, or safety, an emergency is hereby declared to exist, and this Act shall be in full force and effect from and after its passage and approval."


Moved by:    Feinstein
Second by:    Peters
Action:    Failed by roll call vote.(7-8-0-0)

Voting Yes:    Feinstein, Novstrup (Al), Peters, Thompson, Van Etten, Weems, Wick

Voting No:    Bradford, Faehn, Juhnke, Lust, Noem, Olson (Ryan), Turbiville, Dykstra

MOTION:     DO PASS SB 173 AS AMENDED

Moved by:    Noem
Second by:    Juhnke
Action:    Was not acted on.

MOTION:     SUBSTITUTE MOTION DEFER SB 173 TO THE 41ST LEGISLATIVE DAY

Moved by:    Wick
Second by:    Feinstein
Action:    Prevailed by roll call vote.(8-7-0-0)

Voting Yes:    Feinstein, Lust, Novstrup (Al), Peters, Thompson, Van Etten, Weems, Wick


Voting No:    Bradford, Faehn, Juhnke, Noem, Olson (Ryan), Turbiville, Dykstra

         SB 164: permit certain taxing districts to revise the amount of revenue payable from property taxes.

Presented by:    Michael Kenyon, Department of Revenue and Regulation
Proponents:    Yvonne Taylor, SD Municipal League

MOTION:     DO PASS SB 164

Moved by:    Feinstein
Second by:    Lust
Action:    Prevailed by roll call vote.(13-1-1-0)

Voting Yes:    Faehn, Feinstein, Juhnke, Lust, Noem, Novstrup (Al), Peters, Thompson, Turbiville, Van Etten, Weems, Wick, Dykstra

Voting No:    Bradford

Excused:    Olson (Ryan)

MOTION:     ADJOURN

Moved by:    Turbiville
Second by:    Peters
Action:    Prevailed by voice vote.

Linda Daugaard

____________________________

Committee Secretary
Joel D. Dykstra, Chair