The second meeting of the Industrial Processing Exemption Study Committee (“Committee”) was held on Friday, February 27, 2004, in the Hoover State Office Building in Des Moines, Iowa. Co-Chairs Dwayne Vande Krol and Jason Wilson called the meeting to order at approximately 10:00 a.m.
Members Present: Paul Chovan, Mike Eversmeyer (by telephone), Mike Rubino, Jeff Johnson, Stacey Johnson, Dave Krutzfeldt, Ted Miller, Steve Roberts, Rick Smith, Dwayne Vande Krol, Jason Wilson, Daryl Jendras, David Casey, Darwin Clupper, Marcia Mason
Members Absent: Bill Burns, Erv Fett
1. Mike Rubino, Deere & Company, was introduced as a replacement for Tom Iles, who is moving to serve as Deere’s government relations director in the southeastern U.S. Mike was welcomed by the Committee.
2. The Committee reviewed the list of issues identified at the previous meeting, which the co-chairs had divided into “technical” versus “procedural” issues and organized as a matrix. The Committee agreed that this matrix would serve as a good “working document” to keep track of the issues involved and prioritize the action steps to be taken. The Committee also briefly discussed the potential of setting up subcommittees at a later date to address some or all of the issues.
3. The Committee added the following to the list of technical issues to be addressed:
• The treatment of “tools, dies, and jigs.”
• Sharpening services.
• Bundled transactions, especially those involving both replacement parts and repair services.
4. The Committee discussed the Department’s proposed amendment to Rule 701-18.58 defining “equipment” for purposes of the manufacturing machinery and equipment exemption. The Department reported that the current definition of “equipment” would be deleted and a new definition provided at a later date. Members of the Committee expressed concern that the new definition would not be provided at the time the current one was deleted. The Department indicated that it would consider postponing publication of the proposed rule change until a new definition of equipment could be drafted.
5. Because one of the specific tasks listed by the General Assembly in the legislation that created the Committee was to review and make recommendations concerning administrative rules related to the industrial processing exemption, it was decided that a discussion of the status of proposed rule changes would be included on the agenda at all future meetings.
6. The Committee commenced an in-depth discussion of several items included on the list of technical issues. This discussion included an analysis of the Department’s interpretation of how the law currently applies to the issue in question. The Committee also brainstormed potential improvements to how the industrial processing exemption could be applied to each issue, including identifying those that could be accomplished through clarifications to the rules and regulations versus those requiring statutory changes.
7. As part of the discussion related to technical issues, it was noted that a number of the issues may involve a situation where there is presently a difference of opinion between the Department and taxpayers as to whether a change to the current interpretation is supported by Iowa’s existing statutes (and thus could be handled by merely adding clarifications to the rules) or whether the change would require drafting new statutes. The Committee agreed that, if it decides to address one of the issues where this difference of opinion currently exists, the Committee (and/or a subcommittee) would first draft proposed rules for the Department’s consideration. The Department would then make the determination whether such a regulatory change could be made under current statutes, as well as whether the change is necessary, and accept or reject the Committee’s proposed rule accordingly. It would then be up to the Committee as to whether and how it wished to pursue the issue further, potentially including drafting proposed legislation.
8. Due to time constraints, the Committee was only able to discuss about half of the technical issues and none of the procedural issues. The Committee decided to resume the discussion at its next meeting. The Committee also agreed that, due to the number and complexity of issues to be addressed, the meetings should be longer (approximately 4 hours) with a break for lunch.
9. The co-chairs adjourned the meeting at approximately noon.
Next Meeting: The next meeting was set for Friday, April 2, 2004, in the Hoover State Office Building. The meeting was set to begin at 10:00 a.m. and continue until the early afternoon. The option to participate via conference call was also made available as necessary.