HB 232: "An Act establishing an economic development tax credit; and providing for an effective date."
00HOUSE BILL NO. 232 01 "An Act establishing an economic development tax credit; and providing for an effective 02 date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 43.20 is amended by adding a new section to read: 05 Sec. 43.20.043. ECONOMIC DEVELOPMENT TAX CREDIT. (a) Subject 06 to the conditions set out in this section, and in addition to any other credit authorized 07 to the taxpayer by this chapter, a taxpayer may apply as a credit against the state tax 08 liability that may be imposed on the taxpayer under this chapter for a taxable year 09 after December 31, 1995, the amount approved as a credit by the Economic 10 Development Board under AS 44.33.070 for that taxable year. 11 (b) The credit allowed by this section 12 (1) may not exceed the amount approved as a credit by the Economic 13 Development Board under AS 44.33.070; and 14 (2) may not be claimed for more than 10 consecutive taxable years
01 after approval. 02 (c) If the commissioner determines that a taxpayer who has received a credit 03 under this section is not complying with the requirements of the tax credit agreement 04 or all of the provisions of this section and AS 44.33.070, the commissioner shall, after 05 giving the taxpayer an opportunity to explain the noncompliance, begin an enforcement 06 action against the taxpayer under AS 43.10. 07 (d) On or before March 31 each year, the commissioner shall submit a report 08 to the Economic Development Board on the tax credit program under this section. The 09 report must include information on the number of agreements that were entered into 10 under AS 44.33.070 during the preceding calendar year, a description of the project 11 that is the subject of each agreement, a summary of the status of projects under 12 agreements entered into before the preceding calendar year, and the sum of the credits 13 awarded under this section. 14 * Sec. 2. AS 44.33 is amended by adding a new section to read: 15 Sec. 44.33.070. ECONOMIC DEVELOPMENT BOARD. (a) The Economic 16 Development Board is established. The board consists of the following five members: 17 (1) the commissioner of commerce and economic development or the 18 commissioner's designee; 19 (2) the director of the office of management and budget; 20 (3) the commissioner of revenue or the commissioner's designee; and 21 (4) two public members appointed by the governor who shall serve 22 overlapping four-year terms. 23 (b) The commissioner of commerce and economic development or the 24 commissioner's designee shall serve as chair of the board. Three members of the 25 board constitute a quorum to transact and vote on the business of the board. 26 (c) The department shall assist the board in carrying out the board's duties 27 under this section. 28 (d) The board may make credit awards under this section to foster job creation 29 in the state. The credit may only be claimed for the taxable years specified in the 30 taxpayer's tax credit agreement and may not be applied retrospectively. 31 (e) A person that proposes a project to create new jobs in the state may apply
01 to the board to enter into an agreement for a tax credit under this section. The 02 commissioner of commerce and economic development shall prescribe the form of the 03 application. 04 (f) After receipt of an application, the board shall negotiate with the applicant 05 and may enter into an agreement with the applicant for a credit under this section if 06 the board determines that 07 (1) the applicant's project satisfies at least one of the following: 08 (A) the board 09 (i) verifies that at least one other state is being 10 considered for the project; 11 (ii) determines, using best available data, that the 12 projected costs for the applicant's project in this state would exceed the 13 costs of the project in the competing state, taking into account the 14 probable effect of the competing state's incentive programs based on 15 state, local, private, and federal funds available to the competing state; 16 and 17 (iii) finds that receiving the tax credit is a major factor 18 in the applicant's decision to proceed with the project and not receiving 19 the tax credit will result in the applicant not creating new jobs in the 20 state; 21 (B) the applicant's project will, upon completion, provide a net 22 increase of at least 25 percent in the number of new employees employed by 23 the applicant; or 24 (C) the applicant's project is economically sound and will, upon 25 completion, benefit the people of the state by increasing opportunities for 26 employment, strengthening the economy of the state, and significantly 27 expanding existing facilities in the state; 28 (2) awarding the tax credit will result in a net fiscal gain to this state, 29 as certified by the office of management and budget, using the best available data; and 30 (3) the credit is not prohibited by (g) of this section. 31 (g) A person is not entitled to claim the credit provided by this section for
01 jobs that the person relocates from one site in the state to another site in the state. 02 Determinations under this subsection shall be made by the board. 03 (h) In negotiating the credit amount that should be awarded, the board shall 04 take into consideration the following factors: 05 (1) the economy of the area where the projected investment is to occur; 06 (2) the potential effect on the economy of the state; 07 (3) the magnitude of the cost differential between the state and the 08 competing state; 09 (4) the incremental payroll attributable to the project; 10 (5) the capital investment attributable to the project; 11 (6) the amount the average wage paid by the applicant exceeds the 12 average wage paid within the area in which the project will be located; 13 (7) the costs to the state with respect to the project; and 14 (8) the financial assistance that is otherwise provided by the state and 15 the municipalities in the affected area. 16 (i) The board shall determine the amount and duration of a tax credit awarded 17 under this section. The credit amount may not exceed the lesser of 18 (1) the amount of the credit approved under (f) of this section, which 19 credit amount may not exceed five percent of the amount of gross wages payable as 20 compensation for new employees; or 21 (2) 25 percent of the tax due and payable by the taxpayer under this 22 chapter. 23 (j) The board shall enter into an agreement with an applicant that is awarded 24 a credit under this section. The agreement must include 25 (1) a detailed description of the project that is the subject of the 26 agreement; 27 (2) the duration of the tax credit and the first taxable year for which 28 the credit may be claimed; 29 (3) the credit amount that will be allowed for each taxable year; 30 (4) a requirement that the taxpayer shall maintain operations at the 31 project location for at least two times the number of years as the term of the tax
01 credit; 02 (5) a specific method for determining the number of new employees 03 employed during a taxable year who are performing jobs not previously performed by 04 an employee; 05 (6) a requirement that the taxpayer shall annually report to the board 06 the number of new employees who are performing jobs not previously performed by 07 an employee and any other information the commissioner of commerce and economic 08 development needs to perform the commissioner's duties under this section; 09 (7) a requirement that the commissioner of commerce and economic 10 development is authorized to verify with the appropriate state agencies the amounts 11 reported under (6) of this subsection and after doing so shall issue a certificate to the 12 taxpayer stating that the amounts have been verified; 13 (8) a requirement that the taxpayer shall provide written notification to 14 the commissioner of commerce and economic development and the board not more 15 than 30 days after the taxpayer makes or receives a proposal that would transfer the 16 taxpayer's state tax liability obligations to a successor taxpayer; and 17 (9) any other performance conditions that the board determines are 18 appropriate. 19 (k) A taxpayer claiming a credit under this section shall submit to the 20 department a copy of the certificate of verification under (j) of this section for the 21 taxable year. However, failure to submit a copy of the certificate does not invalidate 22 a claim for a credit. 23 (l) Biennially, the board shall provide for an evaluation of the tax credit 24 program authorized by this section. The evaluation must include an assessment of the 25 effectiveness of the program in creating new jobs in the state and of the revenue 26 effect of the program, and may include a review of the practices and experiences of 27 other states with similar programs. The board shall submit a report on the evaluation 28 to the governor and the legislature. 29 (m) In this section, 30 (1) "board" means the Economic Development Board established by this 31 section;
01 (2) "credit amount" means the amount agreed to between the board and 02 applicant under this section; 03 (3) "department" means the Department of Commerce and Economic 04 Development; 05 (4) "full-time employee" means an individual who is employed for 06 consideration for at least 35 hours each week or who renders any other standard of 07 service generally accepted by custom or specified by contract as full-time employment; 08 (5) "new employee" 09 (A) means 10 (i) a full-time employee employed by a taxpayer in the 11 project that is the subject of a tax credit agreement and who is first 12 employed by the taxpayer after the taxpayer enters into the tax credit 13 agreement; 14 (ii) notwithstanding (B)(i) of this paragraph, a new 15 employee who performs a job that was previously performed by an 16 employee who was treated under the agreement as a new employee and 17 was promoted by the taxpayer to another job; 18 (B) does not include 19 (i) an employee of the taxpayer who performs a job that 20 was previously performed by another employee if that job existed for 21 at least six months before hiring the new employee; 22 (ii) an employee of the taxpayer who was previously 23 employed in the state by a related member of the taxpayer and whose 24 employment was shifted to the taxpayer after the taxpayer entered into 25 the tax credit agreement; or 26 (iii) a child, grandchild, parent, or spouse, other than a 27 spouse who is legally separated from the individual, of any individual 28 who is an employee of the taxpayer and who has a direct or an indirect 29 ownership interest of at least five percent in the profits, capital, or value 30 of the taxpayer, as determined in accordance with 26 U.S.C. 1563. 31 * Sec. 3. This Act takes effect January 1, 1996.