With every passing minute, HB 3, the property tax reform bill, is looking less and less likely to survive its conference committee. It’s not necessarily dead, though, as the committee can still deliver a report for consideration by both chambers. But the clock is ticking on that option as well, since all conference committee reports must be printed and distributed by midnight Saturday. Sunday is the last day for the House to adopt conference committee reports, and Monday is officially the last day of session.
The bottom line: an agreement must be reached today or early tomorrow.
Here are the latest rumors on the negotiations:
- the House wants to raise $650 million in new franchise taxes, while the Senate wants $2 billion
- they can’t agree on a sales tax increase amount
- they have agreed to drop the snack tax and the .25% gross receipts tax and to set the increase on alcohol taxes at 13%
- Lt. Gov. Dewhurst claims it’s not the case, but there are reports they have agreed on a top property tax rate of $1.15 for next year and $1.10 the following year.
The House’s franchise tax proposal will not apply to general partnerships, proprietorships or passive investments. We believe that still leaves LLPs subject to the tax. Late last night some House conferees were floating yet another compromise version which would lower the property tax another $0.10 by raising the payroll tax rate by some amount above 1.15% and expanding the sales tax base. No mention has been made of taxing professional services.
Senate members of the conference committee reportedly offered a completely new business tax proposal, which was actually the old business activity tax proposal talked about at the beginning of the session – profits plus compensation as a tax base.
The other bottom line: both chambers are still all over the map on tax relief, and there’s less than a day to reach an agreement.
Recognizing that HB 3 is on life support, legislators are looking to other tax bills to finance public schools. HB 3540 and SB 1863 have both been substituted in their entirety with identical provisions, which as of this writing include …
- Language to close the “Delaware Sub” and “Geoffrey” franchise tax loopholes
- Sales taxes on used cars to be based on the “presumptive value” of the car
- Elimination of the permanent residence exemption to the hotel occupancy tax
- Increasing lobby registration fees from $300 to $500
- Delays in state employees’ eligibility for health benefits and incentives to opt out of such benefits
- Elimination of longevity pay and bonuses for employees who have retired and are now back at work
- Allowing the state to join a multi-state drug purchasing pool
- Elimination of the Telecommunications Infrastructure Fund tax (SB 1863); or,
- Continuation of TIF and removing the limit on fees collected (HB 3540)
- A so-called “Nanny Tax” on nursing homes
- Extension of fees on petroleum storage tanks for two years
- Diversion of traffic fines from the highway fund to general revenue
- Increased registration fees on cars less than six years old by $1.70
- Transfer tobacco settlement money into general revenue
- Sales tax exemption for college textbooks
- Imposition of water conservation programs for correctional facilities.
Odds are no compromise will be reached, but anything is possible. Expect legislators to work late tonight and throughout the weekend.