CHAPTER 271

FORMERLY

SENATE BILL NO. 386

AMENDED BY SENATE AMENDMENT NO. 1

AN ACT TO AMEND SECTION 8305, CHAPTER 83, TITLE 29 OF THE DELAWARE CODE BY PROVIDING FOR BIENNIAL REPORTS TO THE GOVERNOR AND THE GENERAL ASSEMBLY CONCERNING THE IMPACT OF TAX PREFERENCES ON STATE REVENUE.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend Section 8305, Chapter 83, Title 29 Delaware Code, by adding thereto a new subsection (6) as follows:

"(6) On or before November 15, biennially, in the year preceding the convening of a new General Assembly, the Division of Revenue, under the supervision of the Secretary of the Department of Finance, shall make a report to the Governor and the General Assembly concerning the effect of certain tax preferences on the revenues collected by the State. For the purposes of this section, "tax preferences" means any law of the United States or the State of Delaware which exempts, in whole or in part, certain persons, income, goods, services or property from the impact of established taxes, including, but not limited because of failure of enumeration, to those devices known as tax deductions, tax exclusions, tax credits, tax deferrals and tax exemptions. "Tax preference" shall not include variations in the rate of income tax, 30 Del. C. Section 1103; standard deductions, 30 Del. C. 1108: or personal exemptions, 30 Del. C. Section 1110.

a. Declaration of Policy. State governmental policy objectives are sought to be achieved both by direct expenditure of governmental funds and by the granting of special and selective tax relief or tax preferences. Both direct expenditures of governmental funds and tax preferences have an effect on the ability of the state government to lower tax rates or to increase expenditures. As a result, tax preferences should receive a regular and comprehensive review by the Governor and the General Assembly as to (1) their total cost, (2) their effectiveness in achieving their objectives, (3) their effect on the fairness and equity of the distribution of the tax burden, and (4) the public and private cost of administering tax preference financed programs. The purpose of this section is to facilitate such review by providing for the generation of information concerning tax preferences and thier effect upon state revenues.

b. Components of the Report. The taxes to be reviewed in the report shall include, but need not be limited to, the personal income tax, corporate income tax, motor vehicle fuel taxes and public utility taxes. The report shall include the following:

1. Each tax preference, its statutory basis, and its purpose.

2. An estimate of the revenue loss to the State, or one of its subdivisions, caused by each tax preference for the last fiscal year and the estimated revenue loss caused by each tax preference for the current fiscal year.

3. An assessment of whether each tax preference is the most fiscally effective means of achieving its purpose and whether or not each tax preference has been successful in meeting the purpose for which it was enacted, and, in particular, whether each tax preference benefits those originally intended to be benefitted, and if not, those who do benefit.

4. A statement of any unintended or inadvertent effects, benefits, or harm caused by each tax preference, including whether each tax preference conflicts with any other state laws or regulations."

Section 2. The first report mandated above shall be made to the Governor and the General Assembly on or before November 15, 1986. The first report shall deal with tax preferences which have been enacted as part of the Delaware Code. In addition, the first report shall report on a study of what would be required to have the second, and subsequent, reports include the impact of all tax preferences, including both those enacted as part of the Delaware Code and those which result from the State's "coupling" with the Federal Tax Code.

Section 3. Sunset Provision: Preparation of the report, as called for in Sections 1 and 2 of this Act, shall be discontinued after preparation of the second report, unless otherwise provided for by action of the General Assembly.

Section 4. The subject report shall be considered a public record in accordance with Title 29, Section 10002 (d).

Approved May 28, 1986.