CSHJR 41(RLS): Urging the United States Congress to repeal sec. 511 of P.L. 109-222 (Tax Increase Prevention and Reconciliation Act of 2005).
00 CS FOR HOUSE JOINT RESOLUTION NO. 41(RLS) 01 Urging the United States Congress to repeal sec. 511 of P.L. 109-222 (Tax Increase 02 Prevention and Reconciliation Act of 2005). 03 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 WHEREAS sec. 511 of P.L. 109-222 (Tax Increase Prevention and Reconciliation 05 Act of 2005) will require states, cities, counties, and boroughs that spend more than 06 $100,000,000 each year on goods and services after December 31, 2010, to withhold three 07 percent of their payments to nearly all vendors and contractors for federal income purposes 08 and to report nonwage payments; and 09 WHEREAS sec. 511 of P.L. 109-222 (Tax Increase Prevention and Reconciliation 10 Act of 2005) was added by a congressional conference committee without benefit of any 11 public hearings in either the United States House of Representatives or the United States 12 Senate; and 13 WHEREAS, although sec. 511 of P.L. 109-222 (Tax Increase Prevention and 14 Reconciliation Act of 2005) was inserted into the legislation to save approximately 15 $7,000,000,000 in federal taxes between 2011 and 2015, the effect of the provision is to 16 increase the burden and costs to state and local governments by making these governments
01 uncompensated and involuntary federal tax collectors because no federal funding is provided 02 to cover the costs of implementing sec. 511 of P.L. 109-222 (Tax Increase Prevention and 03 Reconciliation Act of 2005); and 04 WHEREAS sec. 511 of P.L. 109-222 (Tax Increase Prevention and Reconciliation 05 Act of 2005) creates another unfunded federal mandate that will add a cost to state and local 06 governments that exceeds the threshold of P.L. 104-04 (Unfunded Mandates Reform Act of 07 1995), and sec. 511 of P.L. 109-222 (Tax Increase Prevention and Reconciliation Act of 08 2005) will therefore short circuit the public process required by P.L. 104-04 (Unfunded 09 Mandates Reform Act of 1995) and thus violate that Act; and 10 WHEREAS the Department of Administration, the University of Alaska, the 11 Municipality of Anchorage, the Fairbanks North Star Borough, and the Anchorage School 12 District, all governmental entities in Alaska that are affected by sec. 511 of P.L. 109-222 (Tax 13 Increase Prevention and Reconciliation Act of 2005), have expressed serious concerns about it 14 and have urged its repeal; and 15 WHEREAS local governmental officials have stated that sec. 511 of P.L. 109-222 16 (Tax Increase Prevention and Reconciliation Act of 2005) will be extremely difficult and 17 expensive to implement, requiring major programming changes to financial and accounting 18 systems and the hiring of additional staff; and 19 WHEREAS, because of the three percent withholding requirement, local businesses 20 will be discouraged from bidding on state and local governmental contracts for products and 21 services, thereby dampening competitive bidding and driving up the prices to offset the three 22 percent withholding and that this, in turn, is likely to increase the cost of procurement by state 23 and local governments; and 24 WHEREAS sec. 511 of P.L. 109-222 (Tax Increase Prevention and Reconciliation 25 Act of 2005) will pose significant difficulties for the State of Alaska in its efforts to procure 26 goods and services for the state, because 27 (1) the state accounting system is 23 years old and cannot accommodate 28 mandatory backup withholding; 29 (2) it would take about a year to make the necessary systemic changes and 30 require substantial additional record keeping to reconcile the amounts paid to vendors and 31 those amounts reported and remitted to the Internal Revenue Service;
01 (3) obtaining exemptions to sec. 511 of P.L. 109-222 (Tax Increase Prevention 02 and Reconciliation Act of 2005) would be difficult and costly; and 03 (4) vendors might inflate their bids to compensate for the tax withheld, 04 resulting in higher prices to the state; and 05 WHEREAS the state government accounting system does not currently have the 06 capability to withhold vendor payments, and the state need only report payments for services 07 over $600 a year to each unincorporated vendor; sec. 511 of P.L. 109-222 (Tax Increase 08 Prevention and Reconciliation Act of 2005) will increase the accounting burden on the state 09 by 10 (1) requiring most but not all payments, no matter how small, to be reported 11 (an extremely expensive and burdensome mandate); 12 (2) requiring payments to all corporations to be reported, significantly 13 increasing the number of vendors for which information reports would have to be submitted 14 to the Internal Revenue Service; 15 (3) requiring withholding on credit card purchases, a process of unknown 16 complexity; and 17 (4) exempting certain types of payment that will likely require manual 18 intervention, which would drive up the cost of compliance with sec. 511 of P.L. 109-222 (Tax 19 Increase Prevention and Reconciliation Act of 2005) even further; and 20 WHEREAS government agencies will have to obtain employee identification 21 numbers or social security numbers for numerous individual vendors to allow reporting to the 22 Internal Revenue Service, thereby invading those citizens' rights of privacy and exposing 23 them to the dangers of identity theft; and 24 WHEREAS complying with sec. 511 of P.L. 109-222 (Tax Increase Prevention and 25 Reconciliation Act of 2005) will have serious adverse effects on the procurement practices of 26 larger local governments in Alaska; for example, the Municipality of Anchorage, the state's 27 largest city, with a population of about 261,446, which is 42 percent of the state's total 28 population, will incur costs of approximately $250,000 a year to reprogram municipal 29 computers and financial systems, plus an estimated $100,000 to $200,000 a year of additional 30 costs for ongoing operating expenses; the Municipality of Anchorage's financial computer 31 system is not set up for this procedure and will require extensive modifications at a significant
01 cost, including the hiring of at least one full-time municipal employee; the use of 02 procurement-cards by the Municipality of Anchorage may have to be discontinued and the use 03 of checks, which are slower and more costly, may be reinstituted; the Municipality of 04 Anchorage's online purchasing system will have to be modified and likely will no longer be 05 cost-effective; and 06 WHEREAS the additional costs of complying with sec. 511 of P.L. 109-222 (Tax 07 Increase Prevention and Reconciliation Act of 2005) will place the State of Alaska and Alaska 08 local governments at a competitive disadvantage in the procurement of goods and services; 09 and 10 WHEREAS, as a result of these burdens and difficulties, the state and affected local 11 governments believe that sec. 511 of P.L. 109-222 (Tax Increase Prevention and 12 Reconciliation Act of 2005) will not accomplish its stated goal of closing the budget gap; and 13 WHEREAS these concerns were previously expressed by the state to the United 14 States Congress through the National Association of State Auditors, Comptrollers and 15 Treasurers; and 16 WHEREAS S. 777 and H.R. 1023 have been introduced in the 110th United States 17 Congress to repeal sec. 511 of P.L. 109-222 (Tax Increase Prevention and Reconciliation Act 18 of 2005); 19 BE IT RESOLVED that the Alaska State Legislature urges the United States 20 Congress to repeal sec. 511 of P.L. 109-222 (Tax Increase Prevention and Reconciliation Act 21 of 2005). 22 COPIES of this resolution shall be sent to the Honorable Ted Stevens and the 23 Honorable Lisa Murkowski, U.S. Senators, and the Honorable Don Young, U.S. 24 Representative, members of the Alaska delegation in Congress; and all other members of the 25 110th United States Congress.