Chamber Goes to D.C., Talks Top Member Issues With Hoosier Delegation

The Chamber’s Caryl Auslander met with Sen. Todd Young last Wednesday in Washington, D.C.

Indiana Chamber members were once again represented in Washington as Caryl Auslander, VP of federal relations, returned to meet with over half of Indiana’s congressional delegation last week. On the agenda: the most pressing public policy matters the Chamber hears about from its member companies throughout the state.

On this trip, Auslander met with Sen. Todd Young, Rep. Susan Brooks (IN-05), Rep. Larry Bucshon, M.D. (IN-08) and Rep. Trey Hollingsworth (IN-09), as well as with key legislative staffers from the offices of Rep. Jim Banks (IN-03), Rep. André Carson (IN-07) and Rep. Pete Visclosky (IN-01).

Below are the five main policy areas discussed with these delegation members:

Health Care Reform
The Indiana Chamber wants to see lower health care costs and improvement to the overall system. We believe the Affordable Care Act is overly complex, administratively burdensome and financially unsustainable as-is. We support a “repeal and replace” approach, but in the absence of that, substantial changes should be made to make the law more workable and viable for the long term.

Infrastructure
The Chamber is looking for a stable, long-term way to pay for highway infrastructure, with a separate, sustainable and dedicated transportation funding source. Whatever the upcoming Trump and congressional plans entail, Indiana deserves its fair share of federal transportation dollars. Equity guarantee would ensure that all states receive a minimum level of funding relative to other states. All states should receive a minimum of 95% return on their share of fuel tax contributions and on any additional funding sources. Without an equity guarantee, overall funding may increase; however, Indiana could receive less overall or comparatively.

Regulatory Reform
The federal government has consistently overreached its authority, which has left Hoosier companies facing a multitude of complicated and changing federal regulations. It’s not only burdensome and time-consuming, but has created a lot of business uncertainty and hinders the ability to expand in the U.S. NOTE: Auslander reiterated the top regulations to overturn from the Chamber’s standpoint and gave the delegation another copy of the list.

Rural Broadband
The Chamber believes that advanced communications and digital infrastructure is critical to long-term economic development. Yes, we have come a long way, but still not enough is happening and not quickly enough. We encouraged our delegation to find more ways to bring the most rural parts of the country and state up to date technologically to help reverse downward economic trends. Broadband in rural communities helps businesses, schools and communities at-large; it is no longer a luxury but now a necessity.

Tax Reform
We need a tax code that is certainly simpler. It’s complicated and it costs way too much to comply with. Lowering the corporate income tax rate – which puts us at a competitive disadvantage globally – is something virtually everyone agrees on. We also urged getting rid of the ineffective alternative minimum tax (AMT) and the federal estate tax, which poses a real threat to small businesses and family farms. And while it is important for comprehensive tax reform, we need to do it in a way that does not increase the deficit.

A Success in Protecting Taxpayer Rights

Protecting and maintaining the rights of taxpayers (as they comply with procedural requirements or seek a determination regarding a tax dispute) became a chief cause of the Indiana Chamber in several cases this session.

First, there was a bill (SB 546) introduced to substantially reorganize the Tax Court. Why? This was our question. It seems that some feel that the governmental entities should win many more cases (meaning that taxpayers should be losing many more cases.) Yes, taxpayers do win more frequently than the officials in charge of assessing taxes. Why? Because the assessment determinations that are disputed are those where the taxpayer feels they are being charged more than the law requires them to pay – nobody needs to appeal when the government has gotten it right.

The Chamber strongly believes in the value of a specialized court with tax knowledge and expertise that allows for cases to be resolved in a consistent and uniform manner. That was the original purpose, and is the ongoing function of the Tax Court. The transition to a new judge a few years ago has been a little bumpy, but it is all smoothing out and restructuring the Court was exactly the wrong thing to do.Fortunately, we were able to convince others of this and, consequently, the bill did not receive a hearing.

Then there was the Department of Revenue (DOR) bill (SB 515); generally speaking, it’s a good bill, except that in connection with federal law changes it resulted in making corporate returns due on the same day as federal returns. Existing law gave preparers a 30-day breathing period before the state return came due. Meaning no harm, DOR and administration officials agreed to alter the provision to maintain the more favored status quo.

Another problem bill (SB 501) sought to revamp the property tax appeals procedures; it was later merged into SB 386 in the House. The objectives of the bill were admirable, and it included some real improvements to the process; most notably, it established a uniform June 15 appeal deadline statewide. Previously, the deadline was tied to the assessment notices and varied from county to county. However, the provisions of SB 501/386 extended a bit too far in attempting to streamline the process as it impacted a taxpayer’s ability to correct what are typically clerical type mistakes made by the assessor or other county officials.

These type errors have historically always been correctable for up to three years, but the bill restricted many of them to a period of just 45 days. This over encompassing contraction of rights – restricting the remedy for taxpayers to correct errors – was unnecessary and unacceptable.

The Chamber concentrated its focus late in the session on reinstating the full complement of existing rights back into this procedural recodification. Here again, with the help of several stakeholders, including the Indiana Manufacturers Association and Indiana Farm Bureau, we were successful at protecting the legislation from impinging on taxpayer rights. The Chamber wishes to recognize the efforts of Rep. Mike Karickhoff (R-Kokomo) in working with the interested parties in the waning hours of the session to successfully resolve these concerns.

Separately, an issue that didn’t make the headlines but you could have felt in your wallet centers on school bonds. The rating entities had concerns about the state’s potential role in ensuring these payments are made by the individual schools. Legislators took care of this with SB 196 and Indiana avoided a rating downgrade. Otherwise, this would have triggered increased interest rates on these bonds and cost taxpayers millions in additional property taxes.

Budget Deal Reached in Congress – But Process Broken

The House and Senate passed a budget deal to secure federal funding until the end of September 2017 last week. The House passed the funding measure by a vote of 309 to 118 on Wednesday, and the Senate followed suit 79-18. It is important to note that the Indiana delegation was divided – and not by political party – on the $1.1 trillion spending proposal.

Republican House members Jim Banks (IN-03), Trey Hollingsworth (IN-09) and Todd Rokita (IN-04) voted against the measure, while both House Democrat members André Carson (IN-07) and Pete Visclosky (IN-01) voted yes with the rest of the Hoosier delegation.

Congressman Hollingsworth released the following statement after casting his vote against the continuing resolution. “The spending bill that was brought before the House of Representatives today failed, yet again, to address the conservative principles that Hoosiers and Americans demanded to see this past November. For this reason, I voted against the $1.1 trillion spending measure that neglected critical priorities such as our nation’s nearly $20 trillion debt.”

Similarly, Congressman Banks added: “This legislation fails to properly address our $20 trillion national debt and reduce the size and scope of the federal government. As work immediately begins on next year’s spending bills, I am hopeful that Congress will follow the regular budget order and work with the Trump Administration to cut spending and change the Washington status quo.”

Despite passage of this funding measure, negotiations will begin again soon to pass a budget starting October 1 – with many of the same arguments on spending to be rehashed. But this has become all too familiar. Congress has regularly failed to meet the deadlines required by the Congressional Budget Act of 1974 under both Republican and Democrat control. In fact, the last annual federal budget approved by the U.S. Senate was on April 29, 2009. The federal government has operated by enacting these series of continuing resolutions – short-term measures that keep the government running and spending money at previously adopted rates.

The Indiana Chamber believes this is a gross dereliction of duty, as the federal government has spent trillions since the last adopted budget, further adding to the debt.

What the Indiana Chamber would like to see is Congress move from a yearly (or semi-yearly) mad dash to a biennial budget system. This would take much of the politics out of the budget process and would encourage efficiency in the management, stability and predictability of federal funding, especially for Indiana. A biennial budget would also enhance congressional oversight of government operations and encourage better policy planning. Biennial budgets should occur during non-election years to promote bipartisanship (or at least lessen partisan tensions) in the budgetary process. We can dream!

Donnelly Talks Policy to Chamber Group

Indiana Sen. Joe Donnelly discussed a wide variety of issues with members of the Indiana Chamber’s Executive Committee during an hour-long visit last week. Among his comments on the issues before Congress:

  • Opioid crisis: Senators are working on a federal law that would limit painkiller prescriptions to one week (hopefully reducing addictive outcomes)
  • Transportation infrastructure: There will be a big bill and he believes it will pass as long as it gets paid for
  • Tax reform: Stuck for now because money to pay for it was going to come from the failed health care overhaul
  • Health care bill: Legislation can’t be passed that would result in fewer people having insurance coverage. Democrats, Donnelly noted, have ideas that should be considered

Other topics of conversion: immigration, trade agreements and global threats (Donnelly is a member of the Senate Armed Services Committee).

After Session: A Look at What Passed and What Didn’t

Now that the legislative session has concluded, learn the final status of key bills monitored and advocated for/opposed by the Indiana Chamber in 2017 (links are PDFs):

2017 passed bills

2017 defeated bills

A Pleasant (Revenue) Forecast

The revenue projections for the next two fiscal years were updated on Wednesday, giving the General Assembly revised numbers to use in finalizing a state budget before the session wraps up next week. The update also readjusted the current Fiscal Year 2017 numbers; the FY17 numbers that were reduced by nearly $300 million dollars in December were now adjusted back upward by $124 million (so FY17 won’t turn out as bad as previously thought).

That FY17 readjustment serves as a foundation for the forecasters’ confidence that the slow but steady economic growth will continue at a moderate pace over the coming biennium. The pleasant result: a modestly higher revenue forecast for FY2018 and FY2019. The forecast increase resulted from projected growth in sales tax collections (2.7% in FY18 and 3.4% in FY19), sales tax being the source that Indiana is most dependent on, and the larger percentage increase but smaller cumulative dollar increase anticipated in income tax collections (3.4% in FY18 and 5.9% in FY19) – the source that represents the next largest contributor to the state coffers.

The bottom line is that the forecast adds $200 million, only about six-tenths of one percent of the roughly $32 billion that the lawmakers now can expect to see collected in tax revenue over the next two years. While it is a small addition, it is still $200 million that they hadn’t planned on when they put together the budget numbers in HB 1001.

Understandably, the fiscal leaders caution against any major changes to what they have formulated to this point, but as the budget negotiations continue into the last days, they are certain to hear this additional money referenced as justification for some new or additional funding requests. Read the details from the forecasters’ presentation.

Ways and Means Chooses Not to Act on Internet Sales Tax Collection Bill

For unknown reasons, the House Ways and Means Committee – after taking testimony – elected not to take a vote on SB 545 last week prior to the deadline for committee passage.

The bill represented a well thought out and sound approach for collecting Indiana sales tax on online transactions. While the bill died in committee, there remains the possibility that its provisions could find their way into another bill before the session ends. The Chamber will continue to advocate for this bill to be incorporated into another piece of legislation.

Road Funding Set for Conference Committee Showdown

The Chamber was pleased to see the Senate pass a long-term road funding bill (34-13). During the floor vote, the Chamber lobbying team worked to get additional votes for what might have been a much closer margin. Five Republican senators voted against the Chamber on HB 1002: John Crane (Avon), Mike Delph (Carmel), Aaron Freeman (Indianapolis), Jean Leising (Oldenburg) and Andy Zay (Huntington). One Democrat, David Niezgodski (South Bend), voted with the Chamber.

There are differences between the House and Senate proposals, however:

  • House version raises just over $1.1 billion per year; the Senate about $672 million a year.
  • House version converts all sales tax collected (well over $300 million) on fuel sales to road funding; the Senate does not.
  • House version has $15 annual registration fee for regular automobiles and $150 for electric cars; the Senate adds $75 fee for hybrids (the Chamber supports this addition).
  • House version has a 10-cent fuel tax increase for both gasoline and diesel fuel, with annual increase based on index from 2019-2024. The Senate phases in the fuel taxes: five cents per year for two years; diesel tax is three cents a year for two years. Both are indexed at no more than one cent a year per gallon from 2019-2014.
  • House version requires the Indiana Department of Transportation to seek a federal tolling waiver; the Senate says it may seek the same waiver but with the approval of the Governor.
  • Senate version contains a $5 per new tire sale use fee in addition to the current 25-cent fee; the House does not.
  • Senate version increases registration fees for trucks in lieu of additional diesel taxes.
  • Senate version adds a 10-cent per gallon aviation fuel excise tax, with revenue from that going to the airport development grant fund.

The “swim lanes” of the bill are now clearly defined. Work will continue during the next two weeks by the Chamber and our coalition partners to reconcile the differences between the two versions. We believe Indiana will finally end up with a long-term sustainable transportation infrastructure funding bill, one of our Indiana Vision 2025 goals.

Call to Action: Please contact your legislators to encourage them to support HB 1002. Let them know today that long-term funding is important to you and your company!

Internet Sales Tax Collection Bill Heard in House

The Chamber again testified in support of SB 545 last week. We are pleased it is receiving broad, bipartisan support. As we have noted previously, this bill represents an important step toward the Legislature requiring online retailers who have no physical presence in Indiana to collect Indiana sales tax from their Indiana customers when they make online purchases.

Senate Bill 545 is a well thought out and sound approach. Senator Kenley is to be commended for his pursuit of this legislation that will serve the dual purposes of leveling the playing field between in-state brick and mortar retailers and their online competitors, while also boosting Indiana’s sales tax base. The bill will further a key objective in the Chamber’s Indiana Vision 2025 plan.

Hits and Misses: The Indiana Legislature Halftime Report

We are pleased that several of our top priorities are alive and in good shape at the midpoint – including long-term transportation funding, pre-K expansion and anti-smoking legislation. All of these tie directly to the Indiana Vision 2025 economic development plan.

Long-term transportation funding – tolling around the corner?
This is the Chamber’s top priority in 2017. House Bill 1002 is the proposal to take care of the state’s transportation needs; the 20-year infrastructure plan addresses the erosion in funding that has taken place and the lost purchasing power from the enhancements in automotive technology and fuel efficiency.

We believe that the bill’s proposed gas tax increase is pretty solid. Senator Luke Kenley (R-Noblesville), who appears to be taking the lead on this bill in the Senate, may change things like dedicating all of the sales tax on gasoline to transportation needs and put a heavier emphasis on tolling, which would enable the state to undertake major projects like adding additional lane miles to Interstate 70 and Interstate 65 throughout Indiana. Overall, we are very encouraged by the commitment we have seen to date from the House, Senate and Governor. We also realize this will be a little tougher sell in the Senate and are prepared for a strong advocacy effort.

Tax threats avoided; overall outlook good
Everyone should be thrilled that two detrimental proposals – on mandatory combined reporting and sales tax on services – didn’t really get out of the gate. And that’s thanks to the good work of the Chamber’s Bill Waltz over the course of the summer. That means there are no big, threatening tax bills looming for us to worry about.

Instead, this session has brought some positive activity that will improve things procedurally within the Department of Revenue. Additionally, while not involving the Legislature, the Chamber has provided substantial input to the Department of Local Government Finance on a rule with respect to the so-called big box commercial/industrial property assessments. (That input was made possible thanks to a subgroup of the Chamber’s Tax Committee that analyzed the big box assessment issue; we are always grateful to our members for lending their expertise!)

On track: expansion of the state’s pre-K pilot for children from low-income families
Obviously, the expansion – to $16 million total in the Senate (including funds for a new online pre-K pilot); at $20 million in the House proposal – is not as significant as we would like, but we recognize this is still a very young program and are encouraged that what’s being debated is the level of increased funds, not the merit. We also appreciate all of the programmatic language that allows for potential expansion into all 92 counties (SB 276) and increases the income thresholds for eligible families (HB 1004). That said, we are going to continue to work to get as many dollars as possible directed to this. It’s vital for children to have that strong early education as a foundation.

Making the superintendent of public instruction an appointed position still can happen
We remain optimistic this longstanding Chamber goal will be realized this session. Yes, House Bill 1005 will have to be amended because it’s too similar to the one the Senate voted down last week. What happened there was, by all accounts, a blunder created by a perfect storm of factors – including little caucus discussion before the vote. But the good news is that the House bill is alive AND Senate leader David Long (R-Fort Wayne) has assigned it to the Senate Rules Committee that he chairs, so he’s going to go to work on it and will ultimately determine how much of it needs to be changed. We speculate that requiring Indiana residency – which is not currently in HB 1005 – could be one modification. It definitely will have to be different than the failed bill to pass the Senate Rules Committee.

Comprehensive smoking reform, now in HB 1001 and HB 1578, would send big message
We are hopeful that the increased tax on cigarettes ($1 per pack) and funding for a more robust smoking cessation program will stay in the budget bill (HB 1001). Likewise, that the repeal of the special civil rights privileges for smokers will survive on its own in HB 1578; this marks the first time that policy has been passed by either house, so we are making progress. Seeing these three elements cross the finish line would be a clear indication that the state is taking seriously the ever-increasing costs to employers of Hoosiers smoking – more than $6 billion annually in health care costs and lost productivity on the job.

The provision raising the cigarette buying age from 18 to 21 is most likely not happening this session after its removal in the House Ways and Means Committee. That group felt there wasn’t enough definitive information or testimony.

ISTEP, energy and technology updates
The Chamber is supporting legislation that will replace ISTEP with a shorter, more focused assessment. You can put all the debates and disagreements aside because this has to happen this session.

We are encouraged by the Senate’s passing of SB 309, an energy bill, which, among other things, addresses net metering for those investing in wind and solar energy; we believe the bill is consumer-friendly. Moreover, utilities have offered up some ideas and concessions that we think will help control electricity prices. The water infrastructure proposal (SB 416), while not funded, sets up the appropriate framework and keeps that needed policy moving along.

The budget bill (HB 1001) contains some pro-technology priorities, including the transferability and expansion of the venture capital tax credit. This would incentivize additional out-of-state investors without state tax liability to invest in promising early stage Indiana companies. Additionally, the open data measure (HB 1470) would allow public access, in an appropriate way, to the tremendous amount of data the state has collected. This is one of a couple of new initiatives coming from our Indiana Technology & Innovation Council policy committee. To see these efforts making progress right away, in their first session, is very encouraging.

A disappointment for the Indiana Chamber
There were several bills centered on litigation that couldn’t get out of committee. That’s because there are too many attorneys on both civil justice committees who are standing with trial lawyers, which essentially is blocking any sort of tort reform.