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House substitutes HB 78 after extended debate over corporate tax phaseout and apportionment
Summary
After extended floor debate, the House substituted HB 78 to adopt a revised apportionment formula (double-weighted sales factor) while deferring a proposed five-year corporate tax phaseout; the substitute passed 39–29 and was circled for later consideration amid fiscal-note concerns.
House Bill 78, addressing corporate franchise and individual income tax amendments, drew extended debate on tax apportionment, a proposed phaseout of the corporate income tax and potential impacts on school funding.
Representative Harper described a two-part approach in the original bill: adopting a double‑weighted sales factor for apportionment and phasing out the corporate income tax over five years. He said the phaseout would move the corporate rate from 4% down to 0% over five years and framed the change as an economic-development tool tied to the governor's revitalization program.
Representative Dunnegan offered a first substitute that preserved the double‑weighted sales apportionment but removed the five‑year phaseout. Dunnegan and supporters argued the substitute addresses business concerns about apportionment without creating the long‑term $200 million revenue risk to schools that a full phaseout would create.
Floor discussion included questions about fiscal notes and the multi‑year phased impact on state revenues. Representative Bigelow and others warned that the $7 million fiscal note reflects near‑term costs but that longer‑term phased effects could be larger. The motion to substitute passed 39 yes to 29 no. Members later moved to "circle" the substituted bill to allow more time for consideration on fiscal impacts and overall tax reform.
Next steps: The first substitute to HB 78 was adopted on the House floor; members circled the bill for further consideration and requested additional fiscal review and time to consider the long‑term implications for school funding.
