Legislature(2023 - 2024)BARNES 124
04/27/2023 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB133 | |
| HB134 | |
| HB153 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 133 | TELECONFERENCED | |
| += | HB 134 | TELECONFERENCED | |
| *+ | HB 153 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 153-OIL AND GAS PROPERTY TAX
8:55:13 AM
CHAIR MCCORMICK announced that the final order of business would
be HOUSE BILL NO. 153, "An Act relating to oil and gas
exploration, production, and pipeline transportation property
taxes; and providing for an effective date."
8:55:27 AM
REPRESENTATIVE CLIFF GROH, Alaska State Legislature, as prime
sponsor of HB 153, paraphrased the sponsor statement [included
in the committee packet], which read as follows [original
punctuation provided]:
Alaska's reliance on savings accounts to fill budget
deficits is no longer sustainable without risking the
future of the Permanent Fund. We need new revenues,
and changing the oil and property tax is one way to
raise new revenues in a predictable fashion.
This bill proposes to increase the maximum mill rate
from 20 mills (2%) to 30 mills (3%) on the full and
true value of oil and gas property assessed under
Alaska Statute 43.56. Currently, the total mill rate
is capped at 20 mills, and municipalities may collect
taxes up to that amount. The State retains the
property tax not otherwise collected by
municipalities, so the State's collections fall each
time a municipality raises its property tax rate.
Under this bill, the maximum municipal rate would
remain at 20 mills leaving local communities harmless,
but the State would tax an additional 10 mills that
would generate revenue reserved for the State.
HB 153 offers a fixed and predictable cost for the oil
and gas industry. The petroleum property tax has not
been raised since its establishment in 1973, and the
proposed increase in the mill rate will offer a
reliable source of revenue for the State.
Depending on the price of oil, the property tax
increase would be offset by existing oil production
taxes and royalties. Given that offset the state would
net up to approximately $250 million in new revenue
under this bill each year.
HB 153 suggests three tiers of designated
appropriation, while not dedicating the funds:
• 50% to the capital income fund to help pay down
the deferred maintenance backlog;
• 25% to the Department of Education and Early
Development for investments in early education,
including pre-K, childcare and early development; and
• 25% to higher education investment to enhance
the merit-based Alaska performance scholarship and
needs-based Alaska education.
HB 153 bill increases an existing, predictable revenue
source to improve Alaska's quality of life and build
opportunities for future generations. Thank you for
your consideration.
8:57:49 AM
CAMERON EBERSOLD, Staff, Representative Cliff Groh, Alaska State
Legislature, on behalf of Representative Groh, prime sponsor,
gave the sectional analysis for HB 153 [included in the
committee packet], which read as follows [original punctuation
provided]:
Section 1: Amends AS 43.56.010(a) to include a new
subsection (2) that increases the maximum mill rate an
additional 10 mills. This only applies to taxable
property as defined under AS 43.56.210.
Section 2: Amends AS 43.56.010(d) with conforming
language. This clarifies the municipal property tax
under (a)(1) of the bill can only be credited to the
taxpayer.
Section 3: The estimated balance of the taxes
collected in section one of this bill may be
appropriated by the legislature as follows:
1. 50% to the Alaska Capital Income Fund;
2. 25% to Department of Education and Early
Development for early childhood education
programs, including pre-elementary programs,
childcare, and educational programs; and
3. 25% to the Alaska higher education investment
fund.
Section 4: Establishes an effective date of January
1st, 2024.
8:59:07 AM
REPRESENTATIVE MCCABE asked whether a dedicated fund would be
established that may not be constitutional. He paraphrased a
section in the fiscal note, which read as follows:
For purposes of this fiscal note, the property tax
revenue increase is shown as Designated General Fund
but this bill directs the legislature to appropriate
revenue as follows: (1) 50% into the Alaskan Capital
Income Fund, (2) 25% to Department of Education and
Early Development for specified programs, and (3) 25%
into the Alaskan Higher Education Fund. While the bill
directs the aforementioned distribution, the revenues
are technically available for appropriation for any
purpose.
REPRESENTATIVE MCCABE stated that, in spirit, it may violate
what the Constitution of the State of Alaska disallows, which is
to earmark monies to go into specific funds.
9:00:05 AM
REPRESENTATIVE GROH replied that Section 3 of the bill read that
"the annual estimate balance of the account may be appropriated
by the legislature"; therefore, it would be consistent with the
constitutional language that is being referenced.
9:00:40 AM
REPRESENTATIVE RUFFRIDGE asked what the effective tax rate would
be by state - particularly in states that have a high amount of
oil and gas production; he noted North Dakota has no property
tax on oil and gas. He asked how Alaska ranked.
REPRESENTATIVE GROH replied there are a mix of taxes that
various states have, and he stated he did not have a precise
ranking. He said he understood there is room to raise revenues
here [in Alaska], and it should be seen in terms of the overall
package of taxes on the oil and gas industry.
REPRESENTATIVE RUFFRIDGE expressed concern over becoming a
competitive disadvantage if Alaska would be at "that highest tax
rate."
9:04:01 AM
REPRESENTATIVE MCKAY agreed with Representative Ruffridge and
said that he thought the concept needed a lot of study. He also
acknowledged the need to look at the constitutionality of
dedicated funds; it could be a big flaw with the bill, as well
as how boroughs where production takes place could be affected.
He reiterated his stance that the proposed legislation needs
significant study for consideration.
9:06:37 AM
REPRESENTATIVE GROH clarified that there would not be an effect
on the property tax revenues, and he stated Mr. Andreassen is
available to address what needs further clarification.
9:07:25 AM
MR. ANDREASSEN stated that as the bill is currently drafted, it
would not change existing law as it relates to local government
collection of property taxes, it would apply to oil and gas
property.
9:07:59 AM
REPRESENTATIVE MCKAY expressed concern about the money that
would be taken out in the private sector from the oil industry
that would otherwise be used to drill new wells and give new
production.
9:08:26 AM
REPRESENTATIVE MCCABE asked for confirmation that the tax has
nothing to do with production; it's simply land/property tax.
REPRESENTATIVE GROH replied that is correct, and he stated Ms.
Glover is available to address the issue further.
9:10:08 AM
COLLEEN GLOVER, Director, Division of Tax, Department of
Revenue, answered questions during the hearing of HB 153. She
said HB 153 is specific only to the oil and gas property tax,
and it has secondary impact on the production tax. She pointed
out the fiscal note shows some negative impact on general funds
because of the production tax. She explained there could also
be some impact on corporate income tax dependent on the
taxpayer. She provided a brief breakdown of percentages
directed towards boroughs that may be affected.
9:13:52 AM
REPRESENTATIVE HIMSCHOOT thanked Representative Groh for the
"creativity in how we may solve this structural deficit
problem." She asked to see the "full package" of how Alaska
taxes the oil industry.
9:14:47 AM
REPRESENTATIVE GROH replied that Ms. Glover can address the
question. He further commented on the various oil and gas
producing states that have suites or packages of taxes, of which
oil and gas property tax may or may not be one.
9:16:16 AM
MS. GLOVER explained that there are a few different taxes that
the state imposes on oil and gas producers: oil and gas
production tax; oil and gas property tax that the state
administers on a statewide level; and corporate income tax for
qualifying entities. She further explained that there are many
details that go behind each program, and she noted a
presentation is done each year and covers all the calculations
regarding "how it all works." She allowed that the department
is not an expert in other states' tax policies but could
research and follow up with information.
9:18:18 AM
REPRESENTATIVE GROH noted that the oil and gas property tax is a
much more stable form of revenue for the state; it has been
growing as a percentage of the oil and gas revenues.
9:19:26 AM
REPRESENTATIVE MCKAY commented that Alaska is unique in that its
reserves are publicly owned. He summarized what oil and gas
properties include, and that the properties are assessed
annually, which is then used to determine existing taxes paid.
He stated his concern the proposed legislation may
disincentivize further activity in the private sector, and he
opined that due to an incomplete bill and fiscal note, there are
open questions that need to be studied to determine whether
there may be unintended consequences of the bill.
9:22:14 AM
REPRESENTATIVE GROH responded that the additional revenues could
revive the structural deficit the state faces. He commented
that another committee could look at the issue that
Representative McKay has raised, but he reiterated that this is
a stable source of revenue.
9:23:31 AM
REPRESENTATIVE MCCABE questioned whether the structural deficit
in the state is a result of the major oil companies having been
driven out of state by "willy nilly" tax procedures and the
state focusing on the oil companies any time there is a fiscal
disturbance. He stated that the oil companies are not a "piggy
bank" or a revenue stream; they are a fixed asset.
9:24:59 AM
REPRESENTATIVE HIMSCHOOT agreed about the bill needing further
study.
9:25:48 AM
REPRESENTATIVE GROH noted that the proposed legislation has a
fixed cost, so it would provide more certainty. He also said
the state needs to look out for itself and its people, and the
proposed legislation would be one stab at confronting the
growing structural deficit.
9:27:55 AM
REPRESENTATIVE MCKAY referred to previous legislation and
commented on the decline and increase of oil production on the
North Slope. He stated his belief that the tax policies are
working now, and HB 153 would disturb that stability greatly.
He stressed the legislature must be very careful about the
taxation of the state's biggest industry.
9:30:03 AM
CHAIR MCCORMICK commented that it is important to be cognizant
of the different elements of the state and what makes up
Alaska's oil tax structure. He said he would like to see a
comparison, but raised concern about the amount of money it
would cost for a study that may turn out to be unnecessary.
CHAIR MCCORMICK announced that HB 153 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 133 Open Meeting Act-Sponsor statement.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 133 |
| HB 133 Sectional Analysis.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 133 |
| HB 153 DOR Fiscal Note.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 153 |
| HB 153 Sectional Analysis.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 153 |
| HB 153 Sponsor Statement.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 153 |
| HB 153 Selections from DOR Fall Revenue Source Book.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 153 |
| HB 133 Written Testimony.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 133 |
| HB 134 Written Testimony.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 134 |
| HB 153 Written Testimony.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 153 |
| HB 134 Written Testimony through 1000 4.26.23.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 134 |
| HB 134 Letter of Support Alaska REALTORS.pdf |
HCRA 4/27/2023 8:00:00 AM |
HB 134 |