Revenue & Tax - Senate

The first bill that we're gonna here today is going to be house bill twelve sixty three by representative Richmond of if you would Mr gearing do you mind coming to the table because the way we've been handling this is to only put the bills that either have no physical but impact or just a minuscule amount on there we don't actually have that but Mr gearing from a different a is going to tell us today. That house bill twelve sixty three you've told me does not have a impact is that correct. side but on the side. Okay great thank you I thank you Mr chair Paul Goehring with DFA. so regarding the bills that are on the agenda of that DFA has not issued a fiscal impact statement those include house bill twelve sixty three house bill twelve twenty four as well as Senate bill two O. seven As well as house bill eleven ninety one we did review those bills when they were filed with the General Assembly we corresponded with the sponsors to let them know that we did review those bills they did not pertain to a tax license or fee that is administered by the department of finance administration so that we determine that there would not be a fiscal impact to those taxes that we administer so we are not issuing a fiscal impact on those for that reason okay and we just need to get that records as we did actually have the green sheet so well will let that suffice so thank you Mr hearing of representative Richmond the you're recognized whenever you want again Sir. But. Yes all right. Technologist NO one was strong points obviously. Again I'm state representative Marcus Richmond district fifty two with your permission Mister chair I'd like to ask for Mr Kelly boy doubling Commission office the join me at the table yes Sir. Thanks. And what will we do you have his first bill is one we have a House bill twelve sixty three okay is that a good that's great start with that's when we'll start Mr board just I think we all know you but if you don't mind if you turn back on in the introduce yourself so you can be. Included in the record thank you Mr chairman committee I'm Kelly Boyd deputy commissioner state lands. Mr board Mr Richman you're you're recognized. Thank you Sir the house bill twelve six three is designed to help address couple specific issues being faced by the commission of state lands the first is cash payment and Tax delinquent auctions being an Avenue to launder cash the possibility exists for an entity the pay a cash payment for tax liquid property than during the ten day period following the sale system the owner and redeeming the property once it is redeem the COS shall. State Bank Commissioner provides a payment by check to the purchaser for the full amount of the purchase. The land commission does not report traction transactions to the IRS in the past four years COS il has held delinquent parcels options in which individuals have paid as much as two hundred thousand dollars in cash for parcels purchased during the auction many of the larger sales have generated toll K. total cash purchase far in excess of this state land has held various meetings with a variety of law enforcement entities both state and federal who've expressed concern regarding this issue this is an issue that can be totally eliminated by passage of H. B. twelve sixty three the second issue is where individuals will wait to see if the partial cells before they redeem the property this of property selling today could be redeem by redeemer who simply waited to see if the property sold at auction or not what a property sales and is then redeem state lands commission must go through the process of refunding the money to the purchaser this is a cost inefficient process and ties the money of the purchaser up for thirty or more days while the process is completed there's been a hundred fifteen thousand one hundred thirty five parcels have gone through the process of being redeem and in the ten day window at least once and then return certified to the state land as tax delinquent one parcel has been certified here as tax delinquent ten times and has been redeem in the ten day period every time the next nine highest round trip parcels have gone through the process the same way nine times the state lands commission has a budget of process these refunds of somewhere in the range of twenty five million dollars or so it is simply a large part just the money transfer process that can be totally eliminated by the passage eight H. B. twelve sixty three. And I'm open for questions at this time. Any members have any questions regarding this center Payton thank you Mr and I really appreciate the language at the top of page four of the line six that paragraph. specifically says the. Will accept cash which I've been a proponent of. But I'm not seeing the language in this bill that says we won't somehow your testimony sounded like you were going to. This bill somehow eliminates the acceptance of cash. Mr I'd like for Mr board to answer these questions okay Mister Board. Senator thank you internal if you turn your back on this thank you Mister senator Payton we will be accepting cash for all these payments that's why that language is specifically in this bill. Okay so maybe I missed heard him. The problem of the worry. About people laundering money I mean this is a public. Transaction that subject to public records and nothing is hidden from federal authorities investigating it is that correct that is correct and the way that the mechanism for. Today if you purchase property at a TAXDELINQUENT option. Then. For ten more business days that property can be retained right so this eliminates that ten day period the purchase the the owner of the property still has a minimum four years to redeem this property this eliminates that ten day period that means the day that it goes to auction itself if it sells at the auction itself and so there will be a refund so there won't be any cash transaction trying thank I understand now and I think that's a great idea because I'm an auctioneer and it's obviously going to bring us closer to market price that way when the buyers do not have the fear of wasting their time so I think that's a great move and obviously the property owner has had a lot of time to take care their tax burden and if it sells for a higher price because the conditions are more favorable to a buyer than anything above that the tax debt is reverted back to the owner of the property anyway is that correct they have two years to claim and then if no one claims at the end of that time it goes back to the county in which property was located thank you thank you represent a written. Thank you senator Payton any other members have any other questions or Garces bill. We have anyone in the audience and wishes to speak for this bill anyone wish to speak against it your closer yes Sir Mr I'm close the appreciate a good vote from the committee. Go ahead Senator call will. A portion of. Section two of four a the record I have displayed in a. of sales before auction for initial makes it to the public okay. Senator Dismang you're recognized I think I've already done this once but again also I work as an accounting error in an accounting function for an entity that buys and sells to actually properties have for years this point. So. All right we have those disclosures I'm sure those are in there Senate Senate file additionally so So you're closed. I have a motion do pass by Senator call well we have a second by Senator pie right now all in favor say aye opposed Like sign seeing none graduations you've passed your bill. Right it's my understanding the. Representative Rick Richman that you're going to run house bill twelve twenty four and you have the authorization by the sponsor to do that is that correct. When you're recognized whenever you're ready is Mr board gonna people stay with you on this one Mister Moore is going to stay with me on all of this sounds good you're ready to go. Thank you Mr thank you committee again house bill twelve forty four there's a growing problem in the in the issue of non sufficient funds checks being written and given to the the pay for a property and things that that end up bouncing. In the last four years with a total of one hundred fifty four instruments have been submitted for payment and either discard or the payment was stopped by the purchaser redeemer this is a growing problem in just the last two years seventy four instruments have been submitted and this honor for a total of one million six hundred thirty seven dollars three hundred eighteen and three hundred eighteen eighty three cents section one twenty six thirty seven to on one thirty seven is simply says that duplicate language found elsewhere in the Arkansas code allows for to be implemented penalty of ten percent or twenty dollars whichever is greater in the event or payor stops payment or the payment is this are this language is a duplication of language found in the part of the finance administration again the primary problem situations are an owner of a parcel up for sale and a TAXDELINQUENT auction will redeem the property by check just park prior to the sale and then the check is either dishonor or the check is stopped by the writer the stop the process and the tax delinquent property never goes to sale at the auction it was the next year's sale and this is a frequent occurrence and I'm open any questions any. Senate but you're recognized Sir thank you Mister chair I'm just curious where any of those credit cards or they all checks. They were all. Survey and they were all checks and. The book over non sufficient funds. But there were a significant number of very large ones that were stop payments and in Arkansas they're treated as a non sufficient funds check it presented them to climb so this will mere language at the department of finance ministration has to allow us to apply we will notify a right of first. Of a dishonored instrument by phone we we contact everyone on the phone and give them a chance to make good on the instrument before we would do anything else thank you thank you Mr. Any other members have any questions on that I guess I will okay so we go to auctions may right to check check bounces. So did I understand you to say at that point the property will not go back for auction for a year. Yes Sir Senator correct. If the sale cancels right has to wait another year before we can bring it back up. So what we're doing is allowed anybody to come down there and just say well for twenty dollars or more we'll do that I don't know that the language is strong enough person I appreciate what you are trying to do are we not to own up on something like that are we not going to the prosecutor I mean because if they if they written a J. Haak check reflect where we're going with insufficient funds. I mean and they're stopping the sale. I mean like to me that that could be done on purpose I mean we should be per pursuing them to the prosecutor because of the transaction when completed senator we do that but will be surprised how many of these are out of state. There are no Any other questions. Hey Senator paid. Just to be clear is it twenty dollars or is it ten percent of the purchase price the main floor of twenty dollars I may miss read that wrong sole Mr boys it's twenty dollars or ten percent of the purchase price whichever is greater greater register check for sixty thousand dollars it will be twenty Bucks thank you ma'am and I didn't say that right so the mistake on that was my poor so it. Yes Senator Petty so are the are those that are tendering insufficient funds doing what Senator Hickey referred to just trying to buy more time or are they trying to get something for nothing and at what point will would they receive the deed to the land in this process. Senator Patty there are several circumstances we have one in sterling county last year another state purchaser came down paid us sixty three thousand dollars and a check. They then went out doing their due diligence found the property not what they wanted it to be and stopped to check. And this I don't wanna say that's the primary reason we're doing this but that's a good bit of it you're going to always have the person that wrote the check out the wrong account we call them they make a good right of way what we're seeking is a state. To add to the bill. Thank. Senator days your question Sir do you and is there any reason for the year time frame in other words could we could we expedite that process on a on a on delinquent sell and also would be possible just to go to the next highest bidder we consider either of those. The check Senator days the check will be found bad until after the sale and we are required a partial first has to sail Act tax delinquent option that's in the code so I can't put it into any other sale function until it has sold at auction so we don't hold the sales but once a year so what by law has to wait an additional year. Any other questions. Anyone from the audience will speak for the bill it will speak against the bill. Your closer yes Sir Mr I'm closed and would appreciate a good vote all right we have a motion by Senator Payton. I have a second by Senator Colwell all in favor say aye opposed Like sign C. N. nine that also passed with that Do you have another one I've got one more it's HB eleven ninety one Sir. Okay. So H. bill H. B. eleven ninety one. That one's actually your bill is that correct yes Sir all right you're recognized thank you Sir. In an H. B. eleven ninety one probably ninety five percent of the stock of the changes that you have in this particular bill is technical corrections because getting the language in referring to partial since the land and having consistency within the bill also there was uh legislation several years ago I don't know specifically which one that also make some of the bill obsolete that language been struck but I can go through and I'll tell you what each section does in section one that gives the Commissioner of State land the option to invest in T. bills or savings bonds in the bent the interest rates are higher than CD's. This happens through much of last fall when we were being offered rates between one and two percent while treasury securities were in the three to five range or three yeah three five to four or higher range section two will help clean up problems we're of the Commissioner state lands does not have the ability to return back to the county as single incorrectly certified partial when Parcells a certified to the Commissioner state lands the county sends them in as a batch if we find a partial with the problem that is not existent incorrect name incorrect legal description the Commissioner state land has to either keep the partial and sell it dealing with the fallout after the sale or return to enter the entire certification back to the county. In the House service questions about will house how can there be a partial for land is not there was sometimes rivers and things like that will actually a road a piece of land to the point where it's it's gone the other thing is maybe highway or something like that gets bill crucial changes the structure of that so that's that's the answer one of those things section three five six seven eight nine thirteen fourteen are all simply replacing the word land or the word property with the word partial to help stand right standardized the code section four removes the requirement to publish the assessed value of the partial with notification of the sales may assess values have played no role in selling tax delinquent parcels since two thousand thirteen in section ten delete obsolete language referring to the change in the code made in two thousand five in two thousand eighteen section eleven clarifies how long excess proceeds shall remain in escrow there's been some misunderstanding regarding how long the period is and this language clarifies that section twelve specifies that would someone who is not the owner reading someone else's TAXDELINQUENT partial redemption deed goes to the owner and the redeemer receives a redemption receipt if the owners the redeemer the owner would receive both the deed and receipt the reason to clarify that languages because there was people out there that that thought if they would go in and pay the taxes that they could take possession of the land and so just trying to make that more clear that so people will be making a mistake in the understand what they're actually paying for section fifteen repeals obsolete language since assessment buyers are no longer part of the process the tax delinquent parcels to that the commissioner state lands. Any questions on this bill by the members. Anyone in the audience will speak against the bill will speak for the bill. You closed closer. Motion by Senator Payton second by Senator crow all in favor say aye opposed. Hearing none your bill do pass thank you thank you Mr chair thank you Committee you guys have a great day. Is there anyone else here to run a bill that's on the agenda. I'm sorry senator Johnson. Okay Senator Johnson you're recognized to run is B. two oh seven. Your would allow US secretary of state the. Come up. Yes Sir. You get the table Sir you recognize yourself for the record. Good morning I'm said Rosenbaum director business and commercial services for the secretary of state's office you'd have you senator Johnson you're recognized you. Members of the this bill is brought to me by the secretary of state's and this process the franchise tax as whenever you file to have a corporation or LLC the that process is two thousand nine. The has been done by an outside vendor and the fees on section three it is being called a fide those fees that have been collected by the outside vendor and the procurement process has not been in place this software is out of date and they want to bring this in house and we we passed some some stuff over there this morning to begin that process of bringing it in house in those fees will be used to keep the software up to date. Do you have anything to add or. Senate is playing you're recognized for a question hi so I apologize I'm just reading this for the first time Page three we're talking about that for you the structure I'm a little bit confused so right now. And I guess programs and change but you're allowed the batch file franchise tax returns so you can file for the two companies at one time GPAs are going to do that entity or. Owners of multiple companies are going to do that they're gonna batch file as it as it sees fit when I'm reading this it says show collected processing fee for each document required in this chapter would live about electronic means when I batch file there are there is a document for every single franchise tax return is filed and you get into the rest of language it talks about a four percent or four dollar cap on fifty dollars less five fifty one three percent on about one sixty seven. So does the cap replied to the human of total that's paid during the batch or does it apply to the total amount being paid so the the full three percent no Sir it it's to each each LLC that's matters filed so it's it's not will change at all what's being done right now I'm I just think the language says that it made because it says for each document required in this chapter one delivered it says one fifty versus fifty less one fifty and then three percent of the total which the taught that I think that's what with that speak to is a corporate filer that may have a higher franchise tax then the typical one hundred and fifty I'm not sure it speak to the batch file or that may have a bill that's. Yeah eight thousand dollars because that's number entities they're associated with correct we we have we interpreted just like it's being done and has been done for many years and I've is major batch filer then it's going to be for each individual person that that files that you filed on behalf of so that is. What you mean by that well so would be the five dollars if it's if your LLC is a hundred and fifty dollars and you pay with a credit card it would be a one line it would be the five dollars or we send out batch coupons some people do that batch filers and then they sent us a check back it would just be the hundred fifty this strictly be if it's an online payment but most people most batch filers get a coupon and they start are you gonna last so we're going to continue with the coupon press so I'm gonna go file that's read over the deadline is and you're going to send me a bill a week later or whatever it is that you process and then we're going to check in with us for about this the that's correct yes Sir okay thank you. Senator Petty you're recognized. So and and maybe I'm just misreading this you're referring to the hundred fifty dollars LL see fee which I'm familiar with we we pay those batch processing like Senator Dismang talks about but is there is separate section dealing with corporations to make it a minimum of three hundred or are now all the LLC is going to be a minimum of three hundred as well no Sir that's not changing at all the amount of the tax that's staying the same this is just basically the convenience fee when somebody pays online it's just it's just the same that's been that the secretary state's been been doing for many many years now. Senator Payton thank you so that last statement the secretary of state's been doing for many years why would we need to codified if they've already been doing because it's fees currently being collected by a third party administrator for I. T. system and we're looking at getting a new system in order to do that we need to be able to collect the fee to pay for the new system okay and some other question is what percentage of your fathers are doing this electronically and what percentage is doing that with the coupons last year was seventy eight percent online filing electronically. So so we're imposed in this for you then on close to eighty percent of the transactions. What would that fiscal impact me on how much money are we talking about well this is not a new fee this is currently being done by a third party administrator so what happens is when you as analyses pay online you pay a hundred fifty dollars plus the five dollar convenience fee to our third party administrator under this you'd pay the same amount we would we would take the hundred fifty five of the five dollars would be used for a new system well I think changes at all and I understand that I guess I guess part of this is because I said on budget but us it's going to be added to your budget as revenue and and the expense of creating this in house system is going to be in your budget as expense and I'm I'm just trying to find out what those numbers are on the clock I mean are you collecting enough the covered or too much to cover I just have questions about the fiscal impact in the budget of your part you know the secretary of state's budget line items and and the revenue coming in that it be spent according. To a. To the need for credit than having revenue coming in that that may be excessive and can be used for other items so I have a lot of questions about that I don't know if my colleagues do or not thank you yes Sir. I don't know who's first in dismay. I mean I think the question I think it's a good one is there's a lot of efficiency that's created in paying online not just for the pair but also the you know that the into this being paid to so many I hate for instance when you're paying your property taxes online in the future so substantial even though you're creating benefit on both sides what I don't mind is making up the difference that you're being charged by you to process that so there's a a credit card companies going to charge a fee to be able to utilize their service and for you to transmit those funds. I don't argue about the efficiency there but. In the benefit that we have secretary state but how much of this is over what is actually going to be charged by the processor you know to to collect that electronic payment if that makes sense to me is it the standard three percenters the process for charging you know one and a half there's one half percent float I mean what is the. I guess question our our best guesstimate is two percent of that of that fee so that's typical processing fees but we would put that out for an RFQ to the payment process so so if we write in the law that will be three percent it will be three percent you have no financial incentive to make it less than three percent I mean typically these are written I think. to guarantee a loss you know you can't charge more you're not supposed to be charging more than your processing fees are Anyway it I'll I'll stop there I think that's essentially what Senator Payton was driving at how much of this is going to be a revenue generated for the sos and how much of it is actually to cover the the payments required I mean that the processing fees that you're required to pay to you know whoever your vendors going to be. Can you answer a question specifically I mean I I think I heard a man will always domestic credit card discount or whatever that they're going to pay me is this a revenue producer to you all yes Sir it will be to pay for the new system that we desperately need okay so I you know we're thinking about half and half half process credit card processing fees half will be going to the IT system and IT system okay. And how do you know how long that is to the pay out on that you know I understand you gonna have the cash flow to make the payment out you know to it's it's over but yes Sir it in a private while because we have ongoing maintenance for the system so. Members this this last flight center if you don't mind that synergies I should've already recognized obscenities you thank you store on your mind just a quick clarification I see on page five and six throughout there's a lot of a. changing a forfeiture to to revoked language all throughout. And my question was. Was there around you know with with L. sees does that change by moving to that definition of that word change that have anything to do with her Jean delinquent LLC's that haven't paid their would would that help with that hurt with a slow down the process is specifically run names that are available for new businesses to come in a choir forfeited forfeiture or revoked now names yes Senator right now seven years this would change it to five years before company becomes a what's in forfeited charter and that name immediately becomes available for others to use so we would be taken from seven years to five years which would allow more names become available for new entities that are trying trying to form going from four forty going to revoked doesn't doesn't hurt the definition of any that at all or no Sir thank you. If any other questions Senator Johnson did you have so fails to the the relevance in the collection of these fees whenever they bring this in house is they will have the revenues to be able to to maintain it rather than it going to this third party vendor that has not maintained their system and and it was down last week two days yes so you know whatever that system is in the house and and they're collecting the fleet fees rather than this outside vendor that had went over procurement process is two thousand nine I don't think any of us agree with that and this would make it more accountable. The other questions. You will notice will speak for the bill about against the bill. Your clothes Senator Johnson I'm close I make a motion to pass all right Senate Johnson's main motion do pass. We have a second second by Senator duties all in favor say aye opposed. Okay I'm more of a rule that it passes. congratulations. In any other business entity of the members have the we need to discuss okay with that. German.