04/20/2006 08:30 AM House FINANCE

SENATE BILL NO. 306                                                                                                           
                                                                                                                                
"An  Act  requiring  an  employing  unit  with  a  change  in                                                                   
ownership,  management,  or  control  or  similar  change  to                                                                   
notify the Department  of Labor and Workforce  Development of                                                                   
the change;  relating to  the unemployment contribution  rate                                                                   
of an  employing unit;  defining 'business'  for purposes  of                                                                   
statutes    setting    unemployment    contribution    rates;                                                                   
establishing the  crime of obtaining an unemployment  rate by                                                                   
deception; and providing for an effective date."                                                                                
                                                                                                                                
SENATOR  BUNDE, SPONSOR,  spoke to  the bill.   He  explained                                                                   
that  the  bill  provided  deterrents   to  unemployment  tax                                                                   
avoidance.   He stated  that some  businesses tried  to avoid                                                                   
paying unemployment tax by acquiring  a business with a lower                                                                   
rating, and using  that as a basis for their  obligation.  He                                                                   
noted that this costs the system and other businesses.                                                                          
                                                                                                                                
Representative Bunde stated that  the bill requires employers                                                                   
to notify  the Department  of Labor of  a business  change or                                                                   
acquisition,  implements standards  addressing transfers  and                                                                   
assignment of  rates, and establishes the crime  of obtaining                                                                   
an unemployment  rating by deception  and sets  penalties for                                                                   
that  crime.    He  proposed  that  the  bill  maintains  the                                                                   
integrity  of  the  unemployment  system,  and  prevents  the                                                                   
increase  of   rates  through   under-funding,  as   well  as                                                                   
promoting meaningful penalties for tax avoidance.                                                                               
                                                                                                                                
9:18:18 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer opened the floor to public testimony.                                                                            
                                                                                                                                
WAYNE STEVENS, ALASKA STATE CHAMBER  OF COMMERCE testified in                                                                   
strong  support of  the  bill.   He  pointed  out that  SB306                                                                   
addresses the issues of State  Unemployment Tax dumping.  The                                                                   
federal   legislation   established  a   nationwide   minimum                                                                   
standard  for  curbing  certain  unemployment  insurance  tax                                                                   
avoidance activities  by employers.  He noted  that if states                                                                   
do not  adopt similar  language as  contained in the  federal                                                                   
legislation, the  state and businesses in those  states stand                                                                   
to  lose   significant  exemptions  currently   available  to                                                                   
businesses.                                                                                                                     
                                                                                                                                
Mr. Stevens  went on to state  that failure to pass  the bill                                                                   
would   result  in   the  de-certification   of  the   Alaska                                                                   
Unemployment  Insurance  (UI) program  and  employers in  the                                                                   
state  would  lose  their  federal  offset  credit  of  5.4%,                                                                   
resulting   in  $103.9   million  in   additional  taxes   to                                                                   
employers.     The  state  would   lose  $30.8   million  for                                                                   
administrative and  operational funding for UI  programs.  He                                                                   
concluded that  the businesses community believes  passage of                                                                   
this legislation is imperative.                                                                                                 
                                                                                                                                
TOM  NELSON,  DIRECTOR, DIVISION  OF  EMPLOYMENT  SECURITIES,                                                                   
DEPARTMENT OF LABOR  testified regarding the bill.   He noted                                                                   
that they  currently lacked  the penalties  to prevent  those                                                                   
tax avoidance behaviors that are  already being tracked.  The                                                                   
bill would provide those needed penalties.                                                                                      
                                                                                                                                
9:22:14 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer closed public testimony on the bill.                                                                             
                                                                                                                                
Representative Foster    MOVED   to  Report  SB  306  out  of                                                                   
Committee with individual recommendations  and one previously                                                                   
published   zero  fiscal   note  (LWF).     There  being   NO                                                                   
OBJECTIONS, it was so ordered.                                                                                                  
                                                                                                                                
SB306  was Reported  Out  of  Committee with  one  previously                                                                   
published   zero    fiscal   note   (LWF)    and   Individual                                                                   
Recommendations.