Legislature(2015 - 2016)BARNES 124
02/10/2016 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB248 | |
| HB252 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 194 | TELECONFERENCED | |
| *+ | HB 263 | TELECONFERENCED | |
| *+ | HB 248 | TELECONFERENCED | |
| *+ | HB 252 | TELECONFERENCED | |
HB 252-ELCTRNC TAX RETURNS; VESSEL PASSENGER TAX
3:56:35 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 252, "An Act requiring electronic submission of a
tax return or report with the Department of Revenue; repealing
the tax reduction for local levies for the commercial vessel
passenger excise tax; amending the definition of 'voyage'; and
providing for an effective date."
3:56:59 PM
CHRIS HLADICK, Commissioner, Department of Commerce, Community &
Economic Development, provided a PowerPoint presentation
entitled, "Commercial Passenger Vessel Tax HB252," dated
2/10/16. Commissioner Hladick informed the committee HB 252 is
an act requiring electronic submission of a tax return,
repealing the tax reduction for local levies for the commercial
vessel passenger excise tax, amending the definition of
'voyage,' and providing an effective date [slide 2]. He noted
the cruise ship head tax was created by the [Alaska Cruise Ship
Tax Initiative, Measure 2, approved 8/22/06 (cruise ship
initiative)], and major changes to it made in 2010 were: tax
reduced from $46 to $34.50 per passenger; increased number of
ports that can receive $5 per passenger sharing; credit for
municipal port fees added; tax restricted to voyages that were
in Alaska waters for at least 72 hours [slide 3]. He further
explained the proposed bill repeals credit for local head taxes
of $8 in Juneau and $7 in Ketchikan, amends the definition of
'voyage' thereby restoring the tax to all trips greater than 72
hours, and requires electronic filing, including an exemption
process [slide 4]. The Department of Revenue (DOR) estimates
increasing the commercial passenger vessel tax will raise an
additional $16.6 million per year, of which $14.8 million would
be kept by the state, and $1.8 million would go to
municipalities. The increase in municipal share is largely due
to the change to the 72-hour rule [slide 5]. The assumptions
behind the revenue estimates are as follows: 900,000 total
passengers before the tax change; 12 percent increase due to the
repeal of the 72-hour rule; $34.50 per passenger, for a total of
$34.5 million; 3.5 ports per voyage receive $5 municipal share;
and the number of voyages and passengers would stay roughly
constant [slide 6]. In a similar manner to the other tax
initiatives, DOR must update the Tax Revenue Management System
(TRMS), the Revenue Online (ROL) filing, and create the tax
return forms. There is a one-time implementation cost of
$100,000 to recreate the tax forms, and reprogram and test the
tax system, and there are no additional costs to administer the
tax program [slide 7]. Slides 8 and 9 illustrated the fiscal
year 2016 (FY16) budget, and the revenue from tourism adding $15
million to total reductions and new revenue. The impact of the
cruise ship tax proposal would be that voyages are slightly more
expensive for the passengers and/or companies [slide 10].
Commissioner Hladick began the sectional analysis [slides 11 and
12]:
· Section 1 adds a $25 or 1 percent tax penalty for failure
to file electronically
· Section 2 requires electronic submission of tax returns,
license applications, and other documents submitted to DOR;
changes all tax statutes and applies to all tax types
administered by DOR; provides a process to request an
exemption if a taxpayer does not have the technological
capability to file online
· Section 3 amends the definition of voyage to mean any trip
or itinerary lasting more than 72 hours
· Section 4 repeals current law which allows for a tax
reduction in the amount of certain local levies - this is
the most important section of the bill
· Section 5 adds transitional language allowing for
regulations
· Section 6 is the immediate effective date for the
transitional regulatory language
· Section 7 sets the effective date
4:01:28 PM
REPRESENTATIVE LEDOUX recalled that when head taxes were first
addressed by a previous legislature there was a question about
the constitutionality of head taxes.
COMMISSIONER HLADICK deferred to the Department of Law.
4:02:12 PM
CHRIS PELOSO, Assistant Attorney General, Environmental Section,
Civil Division (Juneau), Department of Law, in response to
Representative LeDoux, informed the committee that in 2009 there
was a lawsuit filed by the Alaska Cruise Association (ACA)
following the establishment of the original head tax by the
cruise ship initiative. In 2010, the lawsuit was dropped
because there was a settlement agreement between the state and
ACA that the state would lower the tax rate from $46 to
[$34.50], and provide an exemption to municipalities. Mr.
Peloso opined that if the state makes further changes, the
settlement agreement is still valid because the settlement is
related to legislative action taken in 2010. However, he
cautioned that ACA may revisit its stance which was based on "an
obscure constitutional provision called the Duty of Tonnage -
the tonnage clause. Without endorsing their argument, their
argument was that any fee ... any tax collected by the state
that doesn't go towards docks or other ship expenses is
unconstitutional."
REPRESENTATIVE LEDOUX questioned whether the debate was related
to interstate commerce laws.
MR. PELOSO stated that the tonnage clause is in Article 1,
Section 10 of the U.S. Constitution, and there are also
interstate commerce issues. He advised that the issues raised
in 2009 would be the same whether the head tax is $46 or
[$34.50].
REPRESENTATIVE LEDOUX surmised that if the state raises the tax
and nullifies the settlement, the state may win [a new lawsuit]
and collect more tax, or may lose and get no tax.
MR. PELOSO agreed with that result if the tax were held
unconstitutional, however, he could not speak to whether the
cruise industry would revisit a lawsuit, or to a court ruling in
this regard.
4:05:51 PM
REPRESENTATIVE LEDOUX observed that the state entered into a
settlement agreement and asked whether that creates a problem
with legally raising the tax.
MR. PELOSO informed the committee that a court case does not
affect legislative actions. All of the provisions of the
settlement agreement have been fulfilled, thus HB 252 would not
be in violation of the settlement agreement. In further
response to Representative LeDoux, he advised that the cruise
association dropped its lawsuit with prejudice, although there
are potentially ways it could start a new lawsuit, and he could
not speak for the cruise association.
4:07:34 PM
KEN ALPER, Director, Tax Division, Department of Revenue,
advised that the possibility of the state losing a lawsuit and
being held to a retroactive liability are somewhat limited. He
pointed out that during the years 2007-2010, the state was
receiving about $25 million per year from the head tax, and the
funds were defined in a section of the capital budget for
projects expressly for dock and harbor projects, as related to
the tonnage clause. Since enactment of the legislation in 2010,
the state receives about $2 million per year after the reduced
tax and increased municipal sharing, and the money is easily
identified as supporting dock and harbor projects.
4:08:40 PM
REPRESENTATIVE HUGHES directed attention to slide 10, and urged
for the administration to think about the proposal's impact to
the people of Alaska. She remarked:
My understanding was back after the initiative that
the number of passengers did go down by 15, 20
percent, there were fewer ships coming into our ports
and you might think that just impacted Southeast, but
it actually impacted up in my area ... it impacted the
whole state and it particularly impacted small
business.
REPRESENTATIVE HUGHES expressed her disappointment at the lack
of analysis on the proposal's impact to communities, and then
asked whether the money can only be used for ports and harbors
or can be deposited to the general fund (GF).
MR. ALPER explained that the lawsuit was never resolved, thus
restrictions on the use of the funds are unknown; however, the
state intends to use the money to pay for tourism-related
expenditures, and could be targeted "towards things that would
meet any sort of theoretical constitutional restriction on the
use of the funds."
REPRESENTATIVE HUGHES said there are strict federal requirements
on the use of the funds. She asked, "What is being paid out of
the general fund right now for those, those kind of things, my
understanding it's, there's not, money coming out of the general
fund for, being paid for those kind of things, and so now we're
going to be doing things that we might not otherwise be doing."
MR. ALPER explained that the state does not spend as much from
the capital budget on grants to municipalities for dock and
harbor projects as in prior years. He acknowledged that the
state does spend money in support of tourism marketing, and in
support of DCCED tourism activities.
REPRESENTATIVE HUGHES expressed her concern that it is unknown
whether these funds can be put in GF and used in a way to help
close the budget gap. She requested additional specific
information in this regard.
4:12:11 PM
COMMISSIONER HLADICK agreed with Representative Hughes' request
for additional information because as the city manager of
Unalaska, he received grants for its harbor from the Department
of Transportation & Public Facilities.
CHAIR OLSON asked whether HB 248 or HB 252 are included in the
Institute of Social and Economic Research (ISER), University of
Alaska Anchorage, study of economic impact.
MR. ALPER said yes, the ISER request for proposal (RFP)
contained "the suite of possible revenue measures that we put
together over the summer."
CHAIR OLSON asked when the ISER report would be received.
MR. ALPER responded that either an executive summary or a first
draft is due [2/15/16]. In further response to Chair Olson, he
said the executive summary would be a summary of impacts and a
table of key data.
4:14:06 PM
REPRESENTATIVE JOSEPHSON noted the "totally valid" comments
about the impacts of the governor's plan on industry and on
citizens, and pointed out that cuts also have tremendous impact,
such as those to the University of Alaska, which has lost 500
employees. He returned to the settlement agreement between the
cruise ship industry and the state, and observed that if the
settlement was with prejudice, there could not be a retroactive
rescission of the settlement agreement.
MR. PELOSO agreed; however, another party that was not part of
the lawsuit could file a similar lawsuit based on the original
argument.
REPRESENTATIVE JOSEPHSON asked what taxes were received by
municipal and state governments prior to 2010, and after 2010.
MR. ALPER stated that at the time the state was receiving the
$46 head tax - approximately from 2007 through 2010 - the state
received $15 million to $20 million per year. He offered to
document a complete history thereof. One of the changes in the
2010 amendment increased the number of ports that could receive
the "shared $5" which totaled $15.5 million in the operating
budget last year. He stressed that the important difference is
to the portion that is kept by the state, which was made by the
legislative change that reduced the tax to $34.50 and created
the offset. For example, in 2008, a cruise ship passenger paid
$61: $46 to the state, $8 to Juneau, and $7 to Ketchikan. The
tax cut to $34.50, less the Juneau and Ketchikan taxes, meant
the state is now receiving $19.50. Almost all of the reduction
of $26.50 per passenger came out of the state's portion of the
tax.
4:18:19 PM
REPRESENTATIVE LEDOUX inquired as to how much municipalities
receive each year through this tax.
MR. ALPER offered to provide a report which shows each
municipality that receive $5 per taxable passenger. He recalled
that the total for the current year is $15.5 million, and the
amount each municipality receives is disparate because the
amount is based on the number of each municipality's visitors.
In response to Chair Olson, he said he would provide a 5-year
history of payments.
REPRESENTATIVE LEDOUX posited that if the state incorrectly
assumes that the cruise ship industry would not bring a
successful lawsuit, the result would impact not only the state
but each community as well.
MR. PELOSO stated that is impossible to say what the
repercussions of a lawsuit would be; however, a court may decide
the tax is acceptable as long as the state ensures that the
money goes to municipalities.
REPRESENTATIVE HUGHES asked how much the head tax would affect
fares on tourists from California or Washington.
MR. ALPER said he was unsure about docking fees and head taxes
outside of the state's jurisdiction, or how they are collected
by the industry.
[HB 252 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB248 ver A.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 248 |
| HB248 Sponsor Statement-Governor's Transmittal Letter 1-15-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 248 |
| HB248 Fiscal Note-DOR-TAX-01-13-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 248 |
| HB252 ver A.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 252 |
| HB252 Sponsor Statement-Governor's Transmittal Letter 1-15-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 252 |
| HB252 Sectional Analysis.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 252 |
| HB252 Fiscal Note-DOR-TAX-01-13-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 252 |
| HB252 DOR-Presentation to HLAC 2-9-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 252 |
| HB248 DOR-Presentation to HLAC 2-9-16.pdf |
HL&C 2/10/2016 3:15:00 PM |
HB 248 |