Legislature(2009 - 2010)BELTZ 105 (TSBldg)
02/12/2010 08:00 AM Senate EDUCATION
| Audio | Topic |
|---|---|
| Start | |
| SB236 | |
| SB209 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 209 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 235 | TELECONFERENCED | |
| = | SB 236 | ||
SB 236-TAX CREDITS FOR EDUCATIONAL CONTRIBUTIONS
8:03:47 AM
CO-CHAIR MEYER announced consideration of SB 236.
SENATOR HUGGINS joined the committee.
CO-CHAIR THOMAS moved to adopt the draft committee substitute
(CS) to SB 236, labeled 26-LS1191\W, as the working document of
the committee. There being no objection, version W was before
the committee.
8:04:54 AM
JOMO STEWART, aide to Co-Chair Meyer, walked through the
differences between the original bill version and the CS.
- The first change is in the title. The original bill spoke
of tax credits for cash contributions by taxpayers "for
certain educational purposes and college facilities"; the
CS deletes the word "college", so it simply reads
"educational purposes and facilities", allowing for
facilities both collegiate and non-collegiate, as long as
they are for educational purposes.
- A new Section 1 was added, which provides for an annual
report by the director of the Division of Insurance. As the
committee discussed on Monday, SB 236 impacts a number of
different tax brackets and different sections of law being
operated by two separate departments: the Department of
Commerce, Community and Economic Development (DCCED),
Division of Insurance, and the Department of Revenue (DOR).
- Section 2 includes three major changes. Page 2, line 27,
adds the authorization for tax credits for secondary school
programs "and facilities". Line 28 adds "for vocational
education courses, programs and facilities" operated by the
state. Lines 30 through 31 insert a new paragraph that
reads "(4) for a facility by a nonprofit, public or
private, Alaska two-year or four-year college accredited by
a regional accreditation association."
- In Section 3 and throughout the bill, the drafter has
written the old language into the new statute in order to
avoid the risk posed by the sunset date. The addition of a
sunset date in this section of the previous version caused
some people concern that if they sunset the whole program
and it is not reauthorized, they could lose not only the
new sections and credits, but the credits that have been in
existence for 20 years. It now says that if the new
language is not reauthorized, the statute simply reverts to
the old language.
- Section 5 speaks to giving tax credits for amounts in
excess of $200,000. In current statute, anything above
$200,000 is essentially ignored; paragraph (2) of this
section of the CS provides for a 50 percent credit for
contributions above $200,000.
- A new Section 6 begins on page 4, which addresses the cap
on tax credits. The committee initially pondered the
addition of a specific dollar limit, but conversations with
the Department of Revenue and others made clear that it is
virtually impossible to set that kind of hard, fixed cap.
Instead, they raised the existing cap from the current
$150,000 to $25 million. Legislative Affairs Legal Services
recommended that the phrase, "the basis for a credit" be
included on page 4, line 5, because they believe that
existing statute is not clear as to whether the cap is on
contributions or on credits; this phrase attempts to clean
up the language to make it clear that credits, not
contributions, are being capped at $25 million.
- Section 7 is a restatement of statute for the reversion.
- Section 8 adds a new subsection (f) in AS 21.89.070, which
says that credits under this section may not reduce a
person's tax liability below zero in any given tax year,
and unused credits or portions of credits may not be sold,
traded, transferred or rolled over into subsequent years.
8:09:21 AM
- Section 9 at the bottom of page 4 and continuing at the top
of page 5 is a restatement of the basis for credits and the
cap of $25 million.
- Sections 49, 50 and 51 make the reversion operational.
These provide that if the new language is not reauthorized
it will be repealed on a certain date and will revert back
to the old language.
8:10:09 AM
CO-CHAIR MEYER added that another concern about including a firm
sunset date in the bill is that some persons or entities may
want to spread their contributions over a several years, and a
sunset date could discourage them from doing that.
SENATOR STEVENS said he thinks this is a step forward. If a very
big corporation wanted to build a new science building on the
University of Alaska Fairbanks campus, the limit on tax credits
for their contribution might discourage them from doing so.
CO-CHAIR MEYER confirmed that this allows donors up to a $25
million tax credit, which translates to about a $50 million
donation, for every year that they donate.
8:12:09 AM
SENATOR HUGGINS referred to the requirements for qualifying
contributions on page 2, Section 2, which specifies
contributions to Alaska two and four-year accredited colleges.
He asked if any training programs that are not state operated or
are less than 2 years should be eligible for the program.
MURRAY RICHMOND, aide to Senator Thomas, said a number of
vocational schools are federally run through different programs;
a lot of them are related to the AGIA program and training
people for the workforce. Under the current legislation, these
programs are not eligible. It would take a major reworking of
these statutes to include them, because they are not locally
accredited, and some of them do not offer certificates.
SENATOR HUGGINS said he is willing to bet some of those that are
not federal and are less than two years should be included.
8:14:38 AM
MR. STEWART commented that the two-year or four-year requirement
refers to colleges.
SENATOR HUGGINS pointed out that the problem on line 29 is that
it says "state-operated", which narrows the category. He said
there should be a provision to allow tax credits for donations
to a training facility that is not operated by the state.
8:15:31 AM
MR. MURRAY said an institution would have to be a non-profit to
do that. If a private company set up a training center to train
people for welding or something like that, it would not be
eligible for the tax credit.
SENATOR HUGGINS pointed out that non-profit institutions can be
eligible even though they are not state-operated.
MR. STEWART said this discussion really surrounds accreditation,
which is a way to ensure that the donations are going to
reputable organizations that will provide a certain level of
training expertise. He opined that the potential for a sizable
tax credit may incentivize some training programs to seek a
certification or accreditation.
8:17:36 AM
SENATOR HUGGINS asked if VA accreditation qualifies.
MR. STEWART noted that the committee has the power to strike the
words "state-operated" and insert "certified by the state", but
then the state would have to set up some kind of a certification
program.
SENATOR HUGGINS asked how the legislature came up with the
breakdown for tax credits, which puts the "sweet spot" of 100
percent in the middle. If the idea is to encourage contributors
to give more, he said, that does not seem to be a good idea.
8:19:12 AM
CO-CHAIR MEYER conceded that is a difficult point.
SENATOR HUGGINS suggested that raising the 100-percent credit
level to greater than $200,000 might encourage larger
contributions.
CO-CHAIR MEYER said they believed the larger credit at that
level might bring in a greater number of contributions in that
range.
MR. STEWART added that what was previously the high end has
become the sweet spot. In the original statute, the 100 percent
credit kicked in from $100,000 to $200,000 and was simply capped
at $200,000. The CS does encourage donations in the $100,000 to
$200,000 range, which are more likely to come from private
donors or family trusts.
SENATOR HUGGINS suggested they think about raising the cap to
$250,000 or $300,000. That wouldn't push people out of the
circle; it would just encourage them to give more.
8:20:54 AM
SENATOR STEVENS observed that obtaining accreditation is not
easy to do; it is a very high standard. He stressed that he
wants to be sure they are talking about a major regional
accreditation society that has real meaning behind it and are
not creating some kind of diploma mill.
8:22:10 AM
DIANE BARRANS, Executive Director, Alaska Commission on
Postsecondary Education, Juneau, Alaska, agreed with Senator
Stevens, but pointed out that regional accreditation is
typically available only to public or non-profit colleges. A
number of national accreditation associations are approved by
the U.S. Secretary of Education for the purposes of recognizing
a school to participate in the Title IV federal student
financial aid, and that standard is generally seen as
acceptable. She explained that national accreditation usually
allows a school to issue diplomas and terminal degrees, meaning
that the credits earned there won't transfer to a public or
private four-year institution for the purposes of transcripting.
Short of accreditation, she said, the Alaska Commission on
Postsecondary Education has statutory authority to authorize
institutions to operate in Alaska and to exempt certain
institutions from authorization. Exempt institutions are
basically those offering short courses that don't necessarily
offer a vocational certificate of any kind and some religious
institutions that offer only religious awards leading to service
within a particular church.
8:24:23 AM
SENATOR STEVENS asked Ms. Barrans if she thinks this bill opens
up the possibility of diploma mills.
MS. BARRANS answered no. To Senator Huggins question, she
remarked that even an institution that seeks accreditation
through one of the national organizations recognized by the U.S.
Secretary of Education would not qualify under this standard.
8:25:01 AM
SENATOR HUGGINS said, as Ms. Barrens just pointed out, a number
of training sites are accredited by some mechanism and should be
considered, not just excluded by overly narrow language. He
asked for Ms. Barrans' recommendation.
8:25:31 AM
MS. BARRANS said she does not have an opinion on what types of
institutions the legislature might want to grant tax credits to,
but conceded that some institutions have other than a regional
accreditation and offer a quality education that leads to
placement in a field or career.
8:26:11 AM
CO-CHAIR MEYER said as he remembers it, their discussion on this
issue was that they want a standard in place to ensure the
quality of those institutions eligible to receive tax credits,
so whether this is the right standard is up to the committee.
8:26:42 AM
SENATOR STEVENS ventured that if a trucking association wanted
to establish a training program for some type of certification
for truckers, it could work with Seward Skill Center, the
University, or Alaska Pacific University.
8:27:14 AM
CO-CHAIR MEYER agreed that accreditation would give the
legislature some assurance of quality.
SENATOR HUGGINS recommended that they consult with some donors
on the benefits of adjusting the numbers.
CO-CHAIR MEYER asked Senator Huggins if he would like to have
some more time to work with donors to find that magic number.
8:27:53 AM
SENATOR HUGGINS proposed conceptual Amendment 1 to strike
"$200,000" on page 3, line 21, and insert "$300,000".
8:28:47 AM
CO-CHAIR MEYER objected for purposes of discussion.
SENATOR DAVIS asked that Co-Chair Meyer's staff speak to the
change.
8:29:23 AM
MR. STEWART said he thinks it still meets the intent. He had
some concern about changing too many of the percentages however,
because of the Department of Revenue's concern that more credits
at higher values present greater risk to the treasury.
8:30:48 AM
MR. RICHMOND reminded the members that this is a new program and
studying past behavior won't necessarily predict what donors
will do with the new tax credits. The annual reporting
requirement in this bill will allow them to review the program
in three years and adjust the numbers if they haven't hit the
sweet spot by the time the bill is up for revision.
8:31:17 AM
SENATOR HUGGINS asserted that they are here because they are
trying to raise the limits and this is one area where they can
do that.
8:31:35 AM
CO-CHAIR MEYER said he thinks $300,000 is fine; as Mr. Richmond
mentioned, they will get annual reviews and can adjust it if
they need to. He agreed that this should encourage even the
smaller donors to give a little more.
CO-CHAIR MEYER removed his objection to Amendment 1.
8:32:35 AM
CO-CHAIR MEYER asked if there are other objections to the
amendment.
8:32:50 AM
GINGER BLAISEDELL, Legislative Liaison, Department of Revenue,
Juneau, Alaska, clarified that "100 percent of the next $100,000
of contributions" on page 3, line 20, needs to be changed to
read "the next $200,000", so there isn't any confusion with the
$300,000 on line 21.
SENATOR HUGGINS confirmed that she is correct.
CO-CHAIR MEYER announced that, without objection, Amendment 1 is
adopted.
SENATOR STEVENS asked for a review of the sunset, particularly
the 20-year span of time for investment.
MR. RICHMOND explained that the tax credits will reduce revenues
to the state, and the sunset gives the legislature the
opportunity to review what effect that has had on the budget. If
it has had a negative effect, they can revert to what was in
place before SB 236.
SENATOR STEVENS reiterated that someone referred to a 20-year
period and asked where that comes in.
MR. STEWART said that was his comment; the existing statute has
been in place for 20 years. He added that the last line on page
17 states that if everyone is comfortable that the program is
working well at the higher values, they will simply push the
2014 date back.
CO-CHAIR THOMAS stated his concern about allowing the program to
sunset. Worst case, he said, he wants the statute to go back to
the way it is now.
8:35:54 AM
SENATOR HUGGINS said they don't have a philosophical umbrella
under which to operate with regard to tax credits. He
recommended that they have a consulting review to shape what tax
credits will be provided by the state of Alaska in various
areas.
CO-CHAIR MEYER said Senator Huggins has a very good point; they
don't know what the impact of all of these tax credits will be
until they see what legislation gets passed.
8:37:04 AM
SENATOR STEVENS asked if anyone from the University has spoken
to this.
CO-CHAIR MEYER said he does not recall who spoke for them, but
they are very supportive.
MR. STEWART advised that Mary Rutherford, President of the
University of Alaska Foundation, spoke for the University.
CO-CHAIR THOMAS asked if the amendment that was just made
affects all of the areas in the bill that now refer to $150,000.
MR. STEWART said it does.
SENATOR HUGGINS thought they should align this opportunity with
the governor's scholarship bill.
8:38:42 AM
MR. STEWART responded that existing statute allows corporations
to donate to or create endowments, so any one of them could set
up an endowment to give out scholarships in conjunction with or
parallel to the governor's scholarship program.
SENATOR HUGGINS asked if they would be precluded from getting
tax credits.
MR. STEWART said no, they would receive tax credits and are
actually eligible to do so under existing statutes.
8:39:10 AM
CO-CHAIR THOMAS moved to report the CS for SB 236, labeled 26-
LS1191\W, as amended, from committee with individual
recommendations and attached fiscal note(s). There being no
objection, CSSB 236(EDC) moved from the committee.
| Document Name | Date/Time | Subjects |
|---|