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Measure would alter personal property exemption

Small businesses whose personal property would be exempt from taxation under legislation that passed last year would be freed from having to file inventories of that property, under legislation introduced today. The Associated Press reports that the new bill from Rep. Leon Smith, R-Twin Falls, would allow those small businesses to file an affidavit stating that their property is valued at less than the taxable level. This is amending a tax break for businesses that hasn't even taken effect yet, because last year's personal property tax exemption doesn't take effect until state revenues improve; the measure also makes a change in the revenue trigger for when the tax break would begin to take effect. Click below to read the full story from AP reporter John Miller.

Bill would cut inventory burden on small Idaho biz
Associated Press Writer
BOISE, Idaho (AP) — A personal property tax exemption passed by Idaho lawmakers last year to reduce payments by businesses by about $17 million a year is due to be changed before it even takes effect.
The compromise legislation from a year ago would eventually exempt businesses with office equipment, such as computers, desks and chairs worth less than $100,000, from paying taxes on those items. The exemption would cover an estimated 60,000 businesses and reduce payments for the rest.
On Tuesday, Rep. Leon Smith, R-Twin Falls, introduced a bill that would eliminate what those same businesses complain is an onerous task: Having to inventory the items, a time-consuming job that some business owners say can cost more than the actual tax paid. Instead, businesses could file an affidavit claiming equipment has a taxable value of less than $100,000, without being forced to count every item and report it to the state.
"You spend $500 worth of time to pay $100 worth of tax," Smith said. "This would take that out of the equation. The idea is to get something there so a small business owner doesn't have to do that inventory every year."
Smith's measure, due a full House Revenue and Taxation Committee hearing in coming weeks, makes another significant change from the bill passed a year ago.
When House and Senate members agreed to the measure in April during the waning days of the 2008 session, they insisted state tax revenue grow by at least 5 percent from the previous fiscal year before the exemption could take effect. That was to ensure state government had enough money to reimburse counties for the cut in personal property taxes, should a faltering economy crimp revenue.
With state tax revenue forecast to fall by about 9.5 percent in the current fiscal year ending June 30, Smith is worried that could leave state government with a $17 million commitment to counties long before the economy recovers.
The existing law does not specify a base year, only that revenues increase at least 5 percent from the year before. Smith's bill would have the business equipment exemption take effect only when state tax revenue rises by 5 percent from the $2.9 billion received in fiscal year 2008, which ended last June 30. That would set the threshold at $3.045 billion.
Other Republicans on the committee said they support Smith's proposal, adding that preserving state revenue is more important than simply offering the tax relief.
"Where are we going to get the money?" said Rep. Dennis Lake, R-Blackfoot and chairman of the tax committee, adding there will be other legislation to require revenue rise 5 percent from 2008 levels, should Smith's bill not become law.
Alex LaBeau, the Idaho Association of Commerce and Industry's top lobbyist, has pushed for a complete repeal of the personal property tax for all businesses, which would save businesses about $100 million. The state so far has rejected that proposal as too costly.
"At this point, we haven't had a chance to review the legislation in detail," LaBeau said. "Conceptually, there are some ideas in there that seem to be reasonable."
Should Smith's bill pass, businesses that fraudulently seek the exemption while owning equipment worth more than $100,000 would be subject to a fine of $10,000 or more.
"You open yourself up to inspection," Smith told the tax committee.

Copyright 2009 The Associated Press.

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Eye On Boise

News, happenings and more from the Idaho Legislature and the state capital.