Legislature(2015 - 2016)HOUSE FINANCE 519
04/03/2015 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB100 | |
| HB41 | |
| HB49 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 80 | TELECONFERENCED | |
| + | HB 15 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| *+ | HB 155 | TELECONFERENCED | |
| *+ | HB 100 | TELECONFERENCED | |
| += | HB 41 | TELECONFERENCED | |
| += | HB 49 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 3, 2015
1:31 p.m.
1:31:59 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 1:31 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
ALSO PRESENT
Representative Mike Chenault, Sponsor; Donald Bullock,
council, Alaska Legislature House Majority; Steve Wendt,
Manager, Kenai Agrium Plant; Adam Diamond, Manager,
Government Relations, Agrium U.S.; Mr. Alan Tamaki, Vice
President, Tax, Agrium; David Izett, Senior Legal Counsel,
Agrium; Jane Pierson, Staff, Representative Steve Thompson;
Representative Cathy Tilton, Sponsor; Heath Hilyard, Staff,
Representative Cathy Tilton; Tom Brookover, Department of
Fish and Game; Representative Paul Seaton, Sponsor; Taneeka
Hansen, Staff, Representative Paul Seaton; Eric Trojian,
Director of Policy, B-Labs.
PRESENT VIA TELECONFERENCE
Ryan Makinster, Director, Southeast Alaska Guides
Organization; Andy Mezirow, Governor's Appointee, North
Pacific Fishery Management Council.
SUMMARY
HB 41 SPORT FISHING SERVICES
CSHB 41(FIN) was REPORTED out of committee with a
"no recommendation" recommendation and with a new
fiscal impact note from the Department of Fish
and Game.
HB 49 BENEFIT CORPORATIONS
CSHB 49(L&C) was REPORTED out of committee with a
"do pass" recommendation and with a new fiscal
impact note from the Department of Commerce,
Community and Economic Development.
HB 100 UREA/AMMONIA FACILITY TAX CREDIT
HB 100 was HEARD and HELD in committee for
further consideration.
HOUSE BILL NO. 100
"An Act establishing a credit against the net income
tax for an in-state processing facility that
manufactures urea or ammonia; and providing for an
effective date."
1:31:59 PM
Co-Chair Neuman MOVED to ADOPT the proposed committee
substitute for HB 100, Work Draft 29-LS0423\N, Nauman,
3/31/15. There being NO OBJECTION, it was so ordered.
REPRESENTATIVE MIKE CHENAULT, SPONSOR, introduced himself.
DONALD BULLOCK, COUNCIL, ALASKA LEGISLATURE HOUSE MAJORITY,
indicated there were changes between the original version
of the bill and the work draft.
Co-Chair Thompson recommended and explanation of the
differences between the two documents.
Mr. Bullock explained that there were three changes in the
proposed committee substitute: it addressed multiple owners
of the urea and ammonia plant; it clarified that the gases
delivered to the facility must be used by the facility; and
it addressed an affiliation issue to determine the value of
the gas for royalty purposes. He looked at page 2, lines 9
through 17, which was new language to state that the
Commissioner of the Department of Natural Resources (DNR)
would determine whether the lessee was affiliated with the
processing plant, owner of the processing plant, or the
purchaser of the gas produced by the plant. He explained
that Section 1 provided the establishment of the value for
royalty purposes, which was the contract between the lessee
and the plant. The language was similar to existing law for
sales to utilities and other fertilizer plants, and would
enhance the support that it was an objectively established
price.
1:37:42 PM
Co-Chair Neuman asked about the use of the manufacturing
component of the facility. Mr. Bullock responded that the
credit may be used for either the product or manufacturing
process.
Co-Chair Neuman wondered if the credit could be used for
heating of the plant. Mr. Bullock replied in the
affirmative.
Co-Chair Neuman asked if the state had a definition of
"manufacturing." Mr. Bullock was unsure whether there was a
definition of "manufacturing.
Co-Chair Neuman responded that he believed that the intent
of the word "manufacturing" indicated a molecular change in
the gas used in the facility. He stressed that the credit
must not be used for an LNG export facility. Mr. Bullock
responded that the discussion had related to whether gas
continued to be gas in the manufacturing process, or what
the gas made into a different substance. The tax credit
related to gas delivered to the plant which was combined
with nitrogen to produce the Urea and Ammonia. He stressed
that a liquefaction process would produce the same gas
components, however it would be in a liquid state.
Co-Chair Neuman indicated that his staff had produced
information from February 23, 2010. He read from a prepared
definition of "manufacturing":
Manufacturing means chemically converting gas or
components of gas or chemically combining components
of gas with other substances to form valuable
compound. Manufacturing does not include gas
processing, gas treatment, dehydration, fracknation,
compression, or liquefaction.
Representative Chenault read from a prepared statement:
House Bill 100 creates a new corporate income tax
credit for owners of facilities using a manufacturer's
sale of Urea or Ammonia. When the gas is produced from
a state lease, the state receives a royalty, and if in
instate processing facility that manufactures or sells
urea or ammonia purchases the gas as feed stock from a
state lease, the credit is established. The amount of
the credit is the amount of the royalty paid to the
state, the credit could be used to abate state income
taxes under AS 43.20, but of the credit could not be
used to reduce the tax payer's liability below zero.
According to a McDowell study, a reopened Agrium
facility using a single train, would consume
approximately 28 BCF a year of gas, with 21 BCF coming
from state leases. It was anticipated that the total
royalty payments to the state would be approximately
$15 million annually. The benefits from a single train
production would result in approximately 140 direct
jobs with a payroll of approximately $14 million, and
approximately 340 total jobs to include direct,
indirect, and induced within the state with a payroll
of approximately $30 million. It was anticipated that
all of the employees would be Alaskan residents. The
plant rehabilitation would cost about $75 million, and
would require a temporary workforce of about 440
workers, which translates into a payroll of about $75
million over the two year estimate to rehabilitate the
facility. It would place Agrium among the top local
tax payers in the Kenai Peninsula Borough, with
approximately $42.2 million in tax revenue, not
including the sales tax revenue and new jobs. In light
of the Cook Inlet tax credits that are expiring in
2016, the new user Cook Inlet gas would continue to
encourage additional exploration and developing of the
gas fields in Cook Inlet.
1:44:31 PM
Representative Gara wanted to hear from the Department of
Revenue (DOR) about the foregone tax liability. He remarked
that the credits paid to Agrium would equal their tax
liability.
Co-Chair Thompson stated that DOR would be available at the
bill's next scheduled hearing.
Representative Gara understood that the Agrium plant was an
important job producer on the Kenai Peninsula. He wondered
why the Kenai Peninsula Borough did not waive the property
taxes on Agrium, rather than the state providing
approximately $3 million in foregone state tax revenue.
Representative Chenault responded that he was unsure. He
indicated that the intent to bring jobs back and to do
further exploration.
Representative Gara wanted to explore why the borough would
not contribute, because they would be the main
beneficiaries.
1:47:05 PM
Representative Wilson asked if the plant was currently
open. Representative Chenault replied that the plant was
not open.
Representative Wilson wondered if the state was currently
losing money. Representative Chenault responded that the
state was not losing money, and was not gaining any
revenue.
Representative Wilson queried the benefit to the state
related to the reopening of the plant. Representative
Chenault replied that if Agrium used gas from state leases,
the state would receive royalty.
Co-Chair Thompson asked that someone from Agrium come up to
answer questions.
STEVE WENDT, MANAGER, KENAI AGRIUM PLANT, placed himself on
the record.
ADAM DIAMOND, MANAGER, GOVERNMENT RELATIONS, AGRIUM U.S.,
placed himself on the record.
Representative Wilson wanted to understand what benefits
were lost because of the plant closure. She specifically
queried the plant's contribution to the state and
community. Mr. Diamond responded that at the time the plant
was open there were approximately 300 employees, and the
state received royalty revenue from gas.
Mr. Wendt furthered that at the height of the plant
operation, Agrium employed over 30 employees; used in
excess of 15 billion cubic feet annually; paid royalties on
the great majority of the gas on anything from state
leases; and used nearly 400 in state vendors, and spent $15
million annually.
Representative Wilson wondered if there was any other state
revenue, besides the revenue from the gas, as a result of
reopening the plant. Mr. Diamond responded that the over
300 contractors would provide between $15 million and $20
million to the state.
Co-Chair Thompson asked Agrium reps to discuss the
fertilizer usage for farmers. He stated that the cost of
fertilizer quadrupled after the plant's closure. Mr. Wendt
responded that they had provided fertilizer for in state
agricultural usage. He stated that it was important for the
local fertilizer users, however was a small impact on
Agrium itself.
1:52:04 PM
Representative Pruitt asked why Agrium shut down. Mr. Wendt
responded that it was due to a lack of gas.
Representative Pruitt noted that there was currently a
surplus of gas, but wondered if Agrium would be able to
stay open if there was suddenly a lack of gas. Mr. Wendt
responded that through previous legislation that
successfully incentivized capital investment in Cook Inlet.
He stated that there were continually new gas discoveries,
and he believed that the discoveries were enough to reopen.
He stated that Agrium would invest $275 million to bring
the plant back to near new condition for a 20 year run.
Representative Pruitt asked what would prevent Agrium from
reopening, without the tax credit, if there was plenty of
gas in the basin. Mr. Diamond replied that there would be a
significant capital expenditure to reopen the plant. Agrium
had a limited capital budget, and there had been internal
dialogue regarding which projects would bring the best rate
of return. He stressed that the company was attempting to
provide the most attractive offer, in order to make the
project as attractive as possible for a reopening.
Representative Gara queried the estimated corporate tax
under legislation; the corporate tax that was previously
paid on an annual basis; and the corporate tax that would
have been paid without the bill. Mr. Diamond deferred to
Mr. Tamaki.
MR. ALAN TAMAKI, VICE PRESIDENT, TAX, AGRIUM, stated that
the plant had been closed for so many years, that he did
not have that information available. He estimated that the
tax saved under the credits was approximately $2 million to
$3 million, and he assumed that sum was similar to what was
paid under previous operation. He stated that the current
payment was approximately $40,000 to $50,000.
Representative Gara recalled that the estimated unpaid
generated corporate tax was $3 million to $4 million. He
wondered if that was incorrect. Mr. Tamaki deferred to Mr.
Diamond. Mr. Diamond responded that the previous estimate
was $3 million to $4 million annually, and the Alaska
Division of Tax had agreed with that estimate.
1:57:26 PM
Representative Gara stated that there were a number of
other ways that businesses finance projects, other than tax
waivers. He wondered why Agrium did not request a property
tax waiver from the borough. Mr. Diamond stated that Agrium
was looking for a positive benefit to both the state and
Agrium.
Co-Chair Neuman asked how much gas would be used. Mr. Wendt
indicated 28 bcf would be used annually, and three-quarters
of that gas would come from state leases. The state leased
gas would generate $12 million to $15 million in new
revenue from the state.
Co-Chair Neuman queried the daily rate. Mr. Wendt responded
that it would be 80 million cubic feet (MCF) per day.
Co-Chair Neuman queried current royalty rate in Cook Inlet.
Mr. Wendt responded that it was approximately 12.5 percent.
Representative Gara did not approve of lobbyists
approaching the table to provide responses. Co-Chair
Thompson announced that he would ensure that it did not
occur.
Representative Wilson noted that there was currently no gas
produced from the plant. She wondered if the state would
simply not receive as much tax from the production. Mr.
Diamond responded affirmatively. He reported that the bill
did not require any expenditures from the state, and did
not reduce any existing state revenue stream from Agrium. T
Representative Wilson noted that the state was currently
receiving zero revenue from Agrium. Mr. Diamond agreed.
Representative Wilson queried the number of years the plant
was hoping to remain open. Mr. Diamond responded that there
was an estimate of a 20 year run.
2:03:24 PM
Representative Pruitt asked if Agrium's opening was
dependent on the legislation. Mr. Diamond replied that the
credit would not guarantee that the plant would reopen, and
would inhibit the plant from reopening. The legislation
would only provide an attractive factor in the decision
making. He hoped that the legislation would provide an
attractive investment for the company.
Representative Pruitt surmised that the legislation was
only a factor in considering reopening Agrium. Mr. Diamond
agreed with that summation.
Representative Gara asked if the plant may open without the
tax credit. Mr. Diamond responded affirmatively.
Representative Gara asked if there was investment monies
available inside the company.
DAVID IZETT, SENIOR LEGAL COUNSEL, AGRIUM, responded that
Agrium was currently looking at a number of alternatives
for capital.
Co-Chair Thompson assumed that the credit would be a
positive factor in determining the plant reopening. Mr.
Izett replied in the affirmative.
2:07:03 PM
Representative Gara wondered if Agrium would respond
positively to an only 50 percent tax discount. Mr. Diamond
responded that he would put the most attractive position in
front of Agrium. He could not indicate what would or would
not enhance the decision. He reiterated that the credit
would have a positive impact on the decision to reopen the
plant.
Co-Chair Thompson wondered how long the plant would need to
reopen, if the legislation passed in the current year. Mr.
Wendt replied that there was a hope to begin production on
July 1, 2017.
Representative Guttenberg asked how Agrium was assured that
they were not repeating its previous mistake. Mr. Wendt
responded that it was being very careful in examining the
reopening. The evaluation team was looking at reserve
reports.
Representative Guttenberg wondered if the company was still
concerned whether there was enough gas to produce. Mr.
Wendt replied in the affirmative.
Representative Guttenberg asked that if the bill was
passed, he wanted to know the earliest start date of a
reopening. Mr. Wendt responded July 1, 2015.
HB 100 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 41
"An Act relating to sport fishing services, sport
fishing operators, and sport fishing guides; and
providing for an effective date."
2:12:54 PM
Co-Chair Neuman MOVED to ADOPT the proposed committee
substitute for HB 41, Work Draft 29-LS0238\, Bullard,
3/25/15. There being NO OBJECTION, it was so ordered.
JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON,
explained the changes in the committee substitute. She
stated that Sections 1 and 2 were eliminated in the current
version.
Co-Chair Neuman wondered if the elimination of the two
sections resulted in a positive fiscal note. Ms. Pierson
responded affirmatively.
REPRESENTATIVE CATHY TILTON, SPONSOR, explained that the
bill was a sunset repealer of the sport fishing licensure.
She spoke in support of the committee substitute, and
appreciated the work to make a positive fiscal note.
Co-Chair Neuman queried the issue of federal log books and
whether electronic monitoring would occur in the current
year. Representative Tilton responded that the bill did not
cover the issue of federal log books. .
HEATH HILYARD, STAFF, REPRESENTATIVE CATHY TILTON, referred
to Mr. Johnson who had come in front of the committee
regarding the federal issue as related to the log books. He
agreed with Mr. Johnson's concerns, but stressed that the
bill could not fix those concerns.
2:17:37 PM
Representative Munoz asked about the issue of the
electronic submission of the data, and wondered if the
system would work in concert with the federal programs. Mr.
Hilyard responded that the log books were interrelated. The
Department of Fish and Game (DFG) collected the halibut
data and submitted the data to the National Marine Fishery
Service. That data would then influence determinations on
annual harvest measures.
Representative Munoz asked if the goal was to keep the data
limited to one-time input. Mr. Hilyard deferred to DFG.
TOM BROOKOVER, DEPARTMENT OF FISH AND GAME, replied that
the log book program was intended to cover both the federal
and state requirements. The electronic log book program
would expand its license modernization effort through a
pilot electronic log book program on the Kenai River.
Representative Munoz asked about the issue of bear boats as
an exemption from the charter requirements. She wondered
how that activity was in the charter regulations. Mr.
Hilyard replied that the issue was about the point at what
constitutes a "charter." He explained that there were some
various business models that may or may not provide guides
on those boats. He stated that the council had adopted a
new regulation that only incentivized operators to be
cleverer about how to structure their operation. The
current regulation stipulated that an outfit could not
provide further assistance, once the angler line was in the
water.
2:23:22 PM
Representative Munoz was concerned with anglers in small
boats that belong to lodges. She wondered how to get a
handle on the out of state fish shipments. Mr. Hilyard
pointed out that salmon was a state-managed fish, so the
state could put a limitation based on residency. He
furthered that halibut was a federally regulated fish, so
there was no limitation based on residency. He stated that
the federal government put limitations on guided versus
unguided fish.
Representative Wilson asked what would happen if the bill
does not pass. Mr. Hilyard responded that DPS was offering
stopgap permits, but did not receive any revenue. He
deferred to Mr. Brookover.
Mr. Brookover said that without the bill, a fee could not
be required.
Representative Wilson wanted to understand all of the
requirements of the permit. She wondered if the bill
disadvantaged those people who were only trying to fish for
personal reasons.
Co-Chair Thompson commented about the definition of a
friend. He stressed there should be safety measures in
place.
2:28:49 PM
Representative Wilson wanted to hear the difference between
someone who wanted to fish for food, but could not afford
their own boat; versus a visitor who wanted an Alaskan
experience.
Representative Kawasaki asked about the original intent of
the bill. He surmised that there was a growth in sport fish
charter operators. Mr. Hilyard responded that regardless of
the significant restrictions on harvest levels for charter
fishing, the charter fishery did exceed its allocation of
halibut by a very significant margin. He stressed that
there was still a concern about the fishery continuing to
exceed its harvest.
Representative Kawasaki queried the original intent of the
original 2004 legislation. Mr. Brookover responded that the
information on guide numbers and their fishing activities
was very limited or not available in many parts of the
state. There was a registration requirement at the time,
but anyone could come in and register. It was discovered
that a licensing requirement providing information about
who was actively participating in the fishery.
2:33:02 PM
Representative Kawasaki asked why there was a five-year
sunset placed on the original legislation, and another five
years in 2009. Mr. Brookover replied that he did not know
the reason for the five-year sunset.
Representative Kawasaki recalled a discussion about the
need for some receipts to enact the log book program. He
explained that there was a discussion in 2009 about DFG
needing a revenue stream to continue the log book. Mr.
Hilyard replied that he was not aware of that conversation.
Co-Chair Neuman said that he had spent some time on the
legislation, so he offered some responses to some committee
members' inquiries. In response to a question from
Representative Kawasaki, he said that DFG did not need
additional funds to fully implement and expand the log book
program. The department had completed the electronic
licensing program, so no further funds were necessary. He
stated that the program was initially formulated to ensure
safety.
Representative Gattis looked at it from the standpoint of
how it affected her district. She did not feel it affected
the Mat-Su. She stressed that it was truly about the
electronic log book.
2:39:26 PM
Representative Pruitt wanted to return to the bare boat
situation. He wanted to know if those were exempt. Mr.
Hilyard replied that they may or may not be exempt.
Representative Pruitt wondered if there were individuals
who were taking money from other Alaskans by not
participating in the program. Mr. Hilyard replied that the
ethical businesses were paying their taxes, but may not be
licensed to guide.
Co-Chair Neuman shared that there were skiff rentals in
Southeast Alaska that did not require guides.
2:42:51 PM
RYAN MAKINSTER, DIRECTOR, SOUTHEAST ALASKA GUIDES
ORGANIZATION (via teleconference), spoke in favor of the
bill. He stated that the program had worked well in the
past, and was beneficial to his organization's members and
the industry. He stated that the industry standards, safety
requirements, insurance, and ability to track data in the
log book were all beneficial to the industry.
2:45:00 PM
ANDY MEZIROW, GOVERNOR'S APPOINTEE, NORTH PACIFIC FISHERY
MANAGEMENT COUNCIL (via teleconference), spoke in favor of
the bill. He understood that there was some resistance to
doubling the fee, but felt that the fee increase would
stabilize the program to 2026. He felt that the industry
would help the current budget crisis. He remarked that the
log books were used to determine the guided angler
participation, catch levels, and release mortality. Each
guide must be identified in order to proper regulate the
industry.
Co-Chair Thompson CLOSED public testimony.
2:47:41 PM
Representative Munoz queried the difference between the
nonresident and resident fishing limits on salmon. She
wondered if a person on a bare boat would have different
fishing limits than a guided operation. Mr. Hilyard
responded the salmon limit was based on residency, not
whether the angler was with a guide or no guide. He
believed that the limit for king salmon in Southeast was 3
per day for a resident, and 2 per day - with a maximum of 6
annually - for a nonresident.
Co-Chair Neuman remarked that it was anticipated that the
regulations be implemented March 31, 2016. He remarked that
staff must be in place to work on the log books. Mr.
Brookover agreed. He stated that the department was issuing
log books in 2015, and proceeding accordingly. He was
confident that the regulations could be in place by the
deadline.
2:51:34 PM
Co-Chair Neuman asked Representative Tilton about making
sure there was not a gap with funding and the effective
date.
Co-Chair Neuman discussed the fiscal note.
Co-Chair Neuman MOVED to report CSHB 41(FIN) out of
Committee with individual recommendations and the
accompanying fiscal note.
There being NO OBJECTION, CSHB 41(FIN) was REPORTED out of
committee with a "no recommendation" recommendation and
with a new fiscal impact note from the Department of Fish
and Game.
2:55:14 PM
AT EASE
2:57:05 PM
RECONVENED
HOUSE BILL NO. 49
"An Act relating to corporations, including benefit
corporations, and other entities; and providing for an
effective date."
2:57:41 PM
REPRESENTATIVE PAUL SEATON, SPONSOR, explained the bill. He
stated that HB 49 expands the options for Alaskan
entrepreneurs and investors by placing a new type of
corporate entity, the benefit corporation, in Alaskan
statute. A benefit corporation is a for-profit corporation
which incorporates public benefits and community
improvement into its business practices, no matter the
principal service or product provided. Allowing the
creation of benefit corporations will give business owners
more choice in how to run their business and will bring to
Alaska a slice of the $6.6 trillion that is invested
nationally in similar corporations. Corporate law generally
requires a corporation to consider the financial impact to
their shareholders as the top priority when making
decisions. Under the benefit corporate structure, owners
and boards have the freedom to take actions which
positively impact their communities without fear of
violating a fiduciary duty. Benefit corporations are formed
voluntarily and have the same tax status of any other for-
profit corporation. By electing in their articles of
incorporation to become a benefit corporation, a business
simply gains the flexibility to include mission and social
impact in their business practices. Twenty-seven other
states have passed benefit corporation legislation and many
more have benefit bills in process. Over 1400 benefit
corporations have incorporated in those states, including
Ben & Jerry's, Patagonia, Rasmussen College, Epic Coffee,
and King Arthur Flour Company (America's oldest flour
company). Each of these companies works to benefit the
public and their communities in the way that matters most
to them. HB 49 also includes measures to ensure
accountability and transparency. Just as a traditional
corporation provides their shareholders with financial
reports, a benefit corporation will additionally create and
publish a biennial benefit report describing how the
company has pursued the general public benefit. This
report, which is held against a third party standard,
allows shareholders, investors, and the public to
confidently invest in benefit corporations that share their
values.
3:00:36 PM
Representative Wilson wondered why the legislation was
needed. Co-Chair Thompson provided his understanding of the
current system related to corporations. He stated that the
shareholders currently had a sizeable profit in the
corporation, but the corporation gave 80 percent of its
earning to charity. The bill would protect the corporation
from being sued by a shareholder.
Representative Seaton agreed, but felt it was an extreme
example. The legislation was intended to benefit the
community.
Co-Chair Neuman asked if corporations could currently give
a percentage of their profits to other entities, even
though there was a risk of being sued by the shareholders.
Representative Seaton replied in the affirmative.
Co-Chair Neuman pointed out how this legislation could be a
"two-edged sword." He felt that there could be a conflict
of interest. He furthered that the bill made the
corporation identify who receives the benefit, and how much
was given. Representative Seaton replied in the
affirmative. He stated that the corporation must file a
benefit report.
Co-Chair Neuman asked if they had to pay any taxes, before
the benefits were paid. Representative Seaton replied that
it was like a C corporation.
3:06:28 PM
Representative Pruitt queried the rights of the
shareholders. Representative Seaton looked at page 14, and
noted the stockholders dissent language.
TANEEKA HANSEN, STAFF, REPRESENTATIVE PAUL SEATON,
responded that the shareholders had the ability to dissent,
at the time a corporation may decide to become a benefit
corporation. Establishing a benefit corporation requires a
two-thirds vote of the board of directors to become
established. She looked at a section that allowed the
shareholders the right to bring action, as related to the
specific benefit purpose. If that shareholder felt that the
benefit corporation was not perusing its public benefit
purpose, they could bring corrective action.
3:09:16 PM
Representative Pruitt surmised that the shareholder could
sue, if they felt that the corporation had not provided
enough benefit. Mr. Hansen replied that the shareholder
could bring action, but not for monetary damages. They
could only bring corrective action.
3:10:26 PM
ERIC TROJIAN, DIRECTOR OF POLICY, B-LABS, explained that B-
Labs worked to bring investors and social entrepreneurs. He
stated that there was an impediment in corporate law that
inhibited the stakeholders from receiving the full revenue.
He stressed that the purpose of the legislation would
protect the legislature, by allowing the shareholder to
sue, if the company was not considering the social mission.
He stated that Idaho had recently enacted an almost
identical bill. He shared that there were currently 2200
benefit corporations nationwide, and there were several
million dollar deals within those companies. He felt that
the bill was a deregulation of a purpose of a corporation
from a sole requirement to maximize profits to deregulating
by allowing the market direct the company's action. The
shareholder will then understand the direction of the
company, via the specific style of the corporation as
outlined in the corporation certificate. He stressed that
there were some benefit corporations that were thriving.
3:17:22 PM
Co-Chair Thompson asked if the federal government treated a
B corporation any differently than the C corporations. Mr.
Trojian responded in the negative, because the bill did not
address any tax issues.
Representative Wilson wondered what would occur if only 60
percent of the shareholders wanted to contribute to a local
nonprofit. She asked if the other 40 percent had a right to
sue. Mr. Trojian responded that the board of directors made
those decisions. The shareholders had a right to vote out
the board of directors. He explained that the benefit
corporations did not give large amounts of money to
nonprofits. The benefit corporations wanted to instill a
certain moral or mission within the company. He used the
example of Patagonia and King Arthur Flour using organic
materials. He stated that the benefit corporations made
decisions with the community and shareholders in mind.
Representative Wilson wondered if the same concept could
occur within the shareholders, versus creating an entirely
new corporation. Mr. Trojian indicated no. He reported that
no because the purpose of that corporation was to maximize
profits.
Representative Pruitt queried the goal of B-Labs. Mr.
Trojian responded that his entity's mission was to use the
power of business to solve social and environmental
problems. His organization felt that there were too many
problems in the world for only government to solve.
Representative Pruitt asked for examples of companies where
shareholders may have sued, because they did not believe
that the company went far enough to contribute to society.
Mr. Trojian responded that there was not any case law at
present related to the legislation.
3:24:13 PM
Representative Gara stressed that the law did not require a
specific social cause. Mr. Trojian responded in the
affirmative.
Representative Gattis surmised that the bill allowed for a
greater participation by the consumer to contribute to a
greater cause. Representative Seaton agreed, but stressed
that the corporations would pay taxes and benefit the
community.
Co-Chair Thompson CLOSED public testimony.
Co-Chair Neuman MOVED to report CSHB 49(L&C) out of
Committee with individual recommendations and the
accompanying fiscal note.
Representative Pruitt OBJECTED. He felt as if the state
would be opening up the doors to a problem to greater
environmental attacks on Alaska. He focused his concerns on
environmental taxes.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki, Munoz, Neuman,
Thompson
OPPOSED: Gattis, Pruitt, Wilson
The MOTION PASSED (6/3).
CSHB 49(L&C) was REPORTED out of committee with a "do pass"
recommendation and with a new fiscal impact note from the
Department of Commerce, Community and Economic Development.
Co-Chair Thompson discussed the agenda for the following
meeting.
ADJOURNMENT
3:31:29 PM
The meeting was adjourned at 3:31 p.m.