Tax Department asks legislature to delay repeal of phone property taxes, outlines budget reversions and childcare payroll-tax implementation savings

Tax Commissioner Craig Bolio told the House Appropriations Committee on Jan. 21 that the Department of Taxes is asking the Legislature to move the effective date for the repeal of the telephone personal property tax and the telephone gross receipts tax out one year to April 1, 2026.

Bolio said the change, proposed in the Budget Adjustment Act (BAA), follows work implementing Act 145, which modernized old statutory definitions for telephone-related taxes and envisioned moving those telephone-specific assets onto the regular grand list. The department, he said, needs an additional year to complete valuation support for local officials and to contract for outside expertise to ensure accurate and consistent local assessments.

Why it matters: The two telephone tax types are small but administratively complex, and the department said the shift to local grand-list valuation requires extra time and state assistance to avoid local burden. Bolio estimated the combined telephone tax revenue at about $2.5 million for fiscal year 2025.

Bolio also walked the committee through several reversion and adjustment items in the department’s budget. He said about $1,267,000 in operating savings arose because new positions tied to the childcare contribution payroll tax and to commercial appraisal and litigation assistance were recruited more slowly than anticipated, and because a renegotiated payment schedule with vendor Fast Enterprises delayed one payment into the next fiscal year. Bolio said those items are one-time timing effects and not expected to persist.

The commissioner described other smaller reversions: roughly $35,000 for reappraisal listing and about $38,000 for use-tax reimbursement (hold-harmless payments to towns). He said litigation and complex-valuation costs can fluctuate depending on where properties are in their appraisal or settlement cycles.

On the renter-benefit program, Bolio summarized changes to the long-standing renter rebate, now the renter credit. He said the Legislature increased income limits by about 30% last year; the department will use HUD values for indexing and expects the reform to move spending closer to the program’s long-standing $9.5 million budgeted level in future filing seasons. The department said federal subsidies that were present in early years made initial forecasting difficult and that analysts worked to isolate those effects.

Childcare contribution payroll tax implementation: Bolio described implementation savings tied to the new childcare payroll tax. Initial planning assumed a standalone tax type in the department’s tax system, which would have required larger IT work and higher startup costs. When the department implemented the contribution through employer withholding instead, IT and overhead costs were materially lower. Bolio said about 15 positions were recruited for administration of the childcare contribution (plus two commercial-appraisal positions), but that not all needed to be fully funded in year one, producing vacancy-savings in the department’s accounts. He estimated the special-fund startup and related items at just under $3.6 million before the reversion adjustments.

Bolio described early compliance and collection notes: the childcare payroll tax is 0.44% of payroll and is paid via employer withholding (the law permits employers to cover up to three-quarters of the tax and withhold up to one-quarter from employees). The department said initial outreach produced generally high compliance, automated and individualized outreach is underway for noncompliant filers, and the first major filing quarters are now coming in; department staff offered to provide Q1 collections and employer-share aggregates on request.

Other items: Bolio said the BAA language also shores up property-transfer-tax changes the Legislature adopted last year related to second-home surcharges; the department will provide data on revenues from that surcharge on request.

No formal committee action was taken during the presentation; members asked for follow-up figures on Q1 childcare collections, employer/employee share breakdowns, and the revenue impact of the second-home property-transfer surcharge.

Bolio's remarks were delivered as part of the committee's review of the governor's budget-adjustment language, and he told the committee the department wants to “get this right” before the telephone taxes move onto local grand lists.

Ending: Committee members thanked the commissioner and requested follow-up data by email; the committee then moved on to the Department of Financial Regulation presentation later in the afternoon.