Legislature(2011 - 2012)BARNES 124
04/12/2011 04:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB23 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 23 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 23-FILM PRODUCTION TAX CREDIT/AUDITS
4:24:26 PM
CHAIR OLSON announced that the only order of business would be
SENATE BILL NO. 23, "An Act relating to transferable film
production tax credits; and providing for an effective date by
amending the effective dates of secs. 3 and 4, ch. 63, SLA
2008."
4:24:59 PM
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative
Affairs, Teamsters Local 959 (Teamsters) referred members to a
letter of support that outlines the reasons for the Teamsters
Local 959's support for SB 23. She stated that her organization
has observed firsthand a significant increase in employment with
the passage of the bill several years ago. She expressed
excitement over the proposed extension of the film production
tax credits. She said the Teamsters look forward to potential
training, since a limited number of Alaskans have the skills
needed. She commented that the Teamsters Local 959 is "behind"
anything with "wheels" pertaining to the film industry. She
hoped the bill would pass out today.
4:27:01 PM
WANETTA AYERS, Director, Anchorage Office, Economic Development
Section, Department of Commerce, Community & Economic
Development (DCCED), stated the department has vetted some of
the changes in the current committee substitute and has provided
comments. She offered to answer questions.
4:27:37 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 23.
CHAIR OLSON removed his objection. There being no further
objection, Version G was before the committee.
The committee took an at-ease from 4:28 p.m. to 4:30 p.m.
4:30:14 PM
REPRESENTATIVE JOHNSON asked for clarification on the letter
from the Department of Revenue (DOR) dated April 12, 2011.
JOHANNA BALES, Acting Director, Tax Division, Anchorage Office,
Department of Revenue (DOR) expressed concern that the proposed
committee substitute would allow the film credit to be applied
to all the other tax types administered by the DOR. She brought
up that the language in Version G may create some unintended
consequences which could affect municipal revenue sharing,
dedicated funds, and other programs. In some programs, such as
the cigarette taxes, specific tax revenue has been identified to
fund different activities within the state. She suggested that
the committee may wish to consider that opening the bill up to
other tax types may have some unintended consequences.
4:31:54 PM
REPRESENTATIVE JOHNSON asked whether taxpayers could buy the tax
credits for cigarette taxes and not deposit money into the
education fund as required under the tax laws.
MS. BALES related her understanding that taxpayers who owe
cigarette taxes could purchase film tax credits and reduce their
cigarette tax liability. A portion of the cigarette taxes are
designated to the school fund and the remaining is deposited in
the state's general fund. She was unsure if any of the
reduction as a result of the film credit would affect the amount
of the school fund since the taxpayer could potentially reduce
its entire liability for cigarette taxes. She suspected
provisions in the bill would affect the school fund and probably
the general fund, too. She pointed out that these are some of
the DOR's questions with the bill. The cruise ship taxes
present another example. Currently, the department participates
in revenue sharing with the first seven ports of call, and the
remaining amounts are designated to the Commercial Passenger
Vessel Tax Account (CPVTA), which is required to be used for
harbor improvements to facilitate cruise ship tourism. If
taxpayers used the tax credits, the department could still
revenue share since the taxes are based on $5 per port of call.
However, it is possible insufficient revenue would remain to
deposit to the CPVTA. Thus, funds may not be available for
harbor improvements.
4:34:06 PM
REPRESENTATIVE JOHNSON asked for a list of dedicated revenue
accounts.
MS. BALES responded that taxpayers could purchase the film
credits. In the event all of the taxpayers for gambling taxes
opted for film credits, revenue would not be available to
deposit into the specific account, she said. The department
has specific programs that could be affected with respect to
specific sub-accounts within the general fund. She indicated
that 50 percent of the alcoholic beverage tax is designated to
the Department of Health and Social Services to fund alcohol
cessation programs. It is possible the program could receive
less revenue unless a specific, additional appropriation was
made. She remarked that the list of taxes is actually fairly
long since rarely are 100 percent of the taxes collected
deposited to the state's general fund.
4:35:59 PM
REPRESENTATIVE CHENAULT asked whether the film tax credit would
also apply to motor fuel taxes collected in the state.
MS. BALES answered yes. All motor fuel taxes collected on
behalf of the state are deposited into separate sub-accounts in
the general fund. However, the aviation fuel tax collected is
deposited to the Aviation Fuel Account, which is shared with
local municipalities that own the municipal airports.
Additionally, the bill would apply to the highway fuel taxes,
which are deposited to a special Highway Use Account, she said.
REPRESENTATIVE CHENAULT related his understanding that the
department's concern is by establishing the film tax credit in
Title 43 might short fund municipalities on airports and road
projects based on fuel tax credits alone.
MS. BALES agreed. She suggested the committee review each of
the tax types to ensure that the state provides the appropriate
mechanism to ensure the historical level of funding for programs
could be maintained.
REPRESENTATIVE CHENAULT pointed out that the legislature could
always "backfill" the account with general fund provided excess
general funds existed.
MS. BALES answered yes.
4:39:27 PM
The committee took an at-ease from 4:39 p.m. to 4:45 p.m.
4:45:49 PM
KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State
Legislature, on behalf of the House Labor and Commerce Standing
Committee chaired by Representative Olson, related that he
planned to describe four potential amendments the committee
could consider to address issues discovered after Version G was
prepared. He referred to proposed Amendment 1, labeled 27-
LS0252\G.1, Bullock, 4/12/11, which read:
Page 6, line 10, following "accountant":
Insert ", licensed in the state and"
Page 6, line 11, following "office":
Insert ","
MR. JACKSON explained that the intent of proposed Amendment 1 is
to ensure that the certified public accountants used to audit
the film production tax credit program are licensed by the state
to operate in Alaska.
4:46:42 PM
MR. JACKSON referred to Amendment 2, labeled 27-LS0252\G.2,
Bullock, 4/12/11, which read:
Page 7, line 11, following "(10)":
Insert "subject to the limitation in (c) of this
section,"
Page 7, following line 27:
Insert a new bill section to read:
"* Sec. 19. AS 44.33.236 is amended by adding new
subsections to read:
(c) The qualified expenditures described in
(a)(10) of this section may not exceed
(1) 15 percent of the total production
budget after June 30, 2013, and before July 1, 2016;
(2) 12 percent of the total production
budget after June 30, 2016, and before July 1, 2018;
and
(3) 10 percent of the total production
budget after June 30, 2018.
(d) For the purposes of (c) of this section,
"total production budget" means the sum of the total
qualified expenditures and the total expenditures that
are not qualified expenditures that are incurred by
the producer in connection with a film production
approved by the film office."
Renumber the following bill sections accordingly.
MR. JACKSON explained that proposed Amendment 2 would be to
limit some of the above the line expenses and expenditures.
This process is a stepped process that would go into effect
beginning in 2013, 2016, and 2018, he said.
4:47:29 PM
MR. JACKSON referred to proposed Amendment 3, labeled 27-
LS0252\G.3, Bullock, 4/12/11, which read:
Page 8, line 30:
Delete "2024"
Insert "2029"
Page 8, line 31:
Delete "one year"
Insert "six years [ONE YEAR]"
MR. JACKSON referred to page 7, line 29-30 of Version G, which
changes the dates of the "look back" period for legal
proceedings from one year to six years for recovery of funds.
Proposed Amendment 3 would change one of the dates from July 1,
2024 to July 1, 2029. The date was inadvertently missed in
proposed Section 24 of Version G, he said.
4:48:21 PM
MR. JACKSON referred to proposed Amendment 4, labeled 27-
LS0252\G.4, Bullock, 4/12/11, which read:
Page 3, line 9:
Delete "this title"
Insert "AS 21.09.210, AS 21.66.110, AS 43.20,
AS 43.55, AS 43.56, AS 43.65, AS 43.75, and AS 43.77"
MR. JACKSON indicated that proposed Amendment 4 is specific to
the Department of Revenue. This proposed amendment would scale
back the potential credit or a portion of the credit to offset
taxes imposed from all taxes to some specific taxes in Title 43,
which is based on the current Alaska education tax program. The
programs that would qualify would be Alaska Corporate Income
Tax, the Fisheries Business Tax, the Fishery Resource Landing
Tax, the Title Insurance Premium Tax, the Mining License Tax,
Oil and Gas Production and Transportation Tax, and the Oil and
Gas Property Tax. He reiterated that the intent of Amendment 4
would be to make the credits more salable and more valuable to
enhance the film program.
4:50:31 PM
MS. BALES clarified she could not speak to insurance taxes. She
related her understanding that the Alaska Corporate Income Tax,
the Mining License Tax, and Oil and Gas Production are deposited
to the state's general fund so they seem fine. However, the way
the Fishery Resource Landing Taxes are shared, any tax credits
would reduce revenue sharing to those municipalities.
Currently, there are some other credits that can be taken
against the Fisheries Business Tax and Fishery Resource Landing
Tax but specific language exists that indicates revenue sharing
happens before the credit are taken. She said that the
committee would need similar language to ensure that revenue
sharing to municipalities would not be affected.
CHAIR OLSON asked for written comments to hand out to the
committee.
MS. BALES agreed to do so.
4:52:08 PM
REPRESENTATIVE JOHNSON asked for clarification on the percentage
of the tax credit on the dollar. He asked whether the
department has any ideas on the amount.
MS. BALES responded that the department is not privy to those
types of transactions and are only asked to transfer the credit
at its face value.
REPRESENTATIVE JOHNSON asked whether the tax credits could be
purchased for ten cents on the dollar and could substantially
reduce the taxes.
MS. BALES stated that while the taxpayer could buy the credit at
ten cents on the dollar, it would not affect the face value of
the credit and what can be applied against the tax liability.
She related a scenario in which the DOR would issue a tax credit
for $1 million, and if the tax credits sold for $100,000, the
department would still apply $1 million in tax credits.
4:53:27 PM
REPRESENTATIVE CHENAULT recalled prior legislation on tax
credits. He decided he would research the legislation himself.
MS. AYERS stated that anecdotally the department has heard the
tax credits market value ranges from 75 to 80 percent at the low
end. She stated that someone holding the tax credit certificate
has the incentive to try to sell the tax credit for the highest
price possible. She offered her belief that parties would take
into account the right amount of holding time. She reiterated
that at this point the department has heard that 75 to 80
percent falls in the normal range. She commented that the
department does not have a mechanism to track that at this time.
4:55:12 PM
MS. AYERS referred to proposed Amendment 2, and related the
department would prefer time to digest the limitations to the
qualified expenditures. She related her understanding of the
committee's desire to address the limitation for "above the line
expenses" within film production and how the credit would apply.
She expressed concern that going from 100 percent to 15 percent,
that the possible impact it could have on productions currently
queued up and for the future viability of the program. She
questioned the impact the bill could have on the viability for
Alaska script writers who may be compensated under these terms
once the industry matures. These types of terms could be more
likely to benefit a production without on-screen talent, such as
those films that rely largely on scenic or digital production
rather than the types of feature film productions that Alaska
hopes to attract. The attraction of the feature films would be
preferable due to the spin off ability for Alaska's businesses.
CHAIR OLSON suggested the department should provide its comments
as soon as possible.
4:56:49 PM
KATE TESAR, Director of Business Development, Evergreen Films,
stated that Evergreen Films is currently in negotiations with
parties and has been considering credits at 85 to 90 cents on
the dollar, which is closer to the range the tax credits have
been selling. She noted that the production companies are not
likely to give away the commodity. She clarified that the
company definitely wants the highest rate possible. She
predicted that as these tax credits become more available, the
prices will rise. The whole point of the credit is to provide
incentives to attract film productions to come to Alaska and
make films.
CHAIR OLSON asked whether she thought the tax incentive credits
were working.
MS. TESAR answered yes. She clarified that earlier discussions
the committee discussed, quoting lower percentages is definitely
not something that Evergreen Films would be interested in doing.
Evergreen Films would not consider selling its credits at the
rates mentioned. In fact, if the company did not get the rate
it wanted from one buyer it would seek another buyer, she said.
CHAIR OLSON asked whether proposed Amendment 4 would assist film
production companies.
MS. TESAR responded that Evergreen Films supports the language
that mirrors the education tax credits. She shares the concerns
that Ms. Bales expressed with respect to revenue sharing. She
elaborated that some discussions are ensuing since it is not
Evergreen Film's intent to adversely affect any communities.
She related her understanding that the education language has
been in effect for 25 years and has not impacted communities
thus far. The intention of the bill is to expand the tax
credits for companies doing business in Alaska but not to
adversely impact communities, she said.
[SB 23 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB23 Draft Proposed Amendment G.1.pdf |
HL&C 4/12/2011 4:15:00 PM |
SB 23 |
| SB23 Draft Proposed Amendment G.2.pdf |
HL&C 4/12/2011 4:15:00 PM |
SB 23 |
| SB23 Draft Proposed Amendment G.3.pdf |
HL&C 4/12/2011 4:15:00 PM |
SB 23 |
| SB23 Draft Proposed Amendment G.4.pdf |
HL&C 4/12/2011 4:15:00 PM |
SB 23 |
| SB23 Opposing Documents - Email Jerry LaVine 4-12-2011.pdf |
HL&C 4/12/2011 4:15:00 PM |
SB 23 |
| SB23 Opposing Documents - Article LA Times Richard Verrier 1-23-2011.pdf |
HL&C 4/12/2011 4:15:00 PM |
SB 23 |
| SB23 Opposing Documents - Article FDNM Demot Cole 2-23-2011.pdf |
HL&C 4/12/2011 4:15:00 PM |
SB 23 |