Legislature(1995 - 1996)
02/20/1996 01:36 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 397
"An Act relating to the seafood marketing assessment;
and providing for an effective date."
Co-Chair Hanley provided members with a spreadsheet
detailing Education Credits claimed in FY 94 and FY 95
prepared by the Department of Revenue on HB 397 (Attachment
2). He noted that an amendment was provided by
Representative Brown to include the Winn Brindle Scholarship
in HB 397 (Attachment 3).
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NEIL SLOTNICK, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW
explained Amendment 1, Attachment 3. He observed that
Amendment 1 corrects an oversight. The amendment would
incorporate the Winn Brindle Scholarship into the Landing
Tax credit.
Co-Chair Hanley noted that Amendment 1 would make the
credits equal. Mr. Slotnick noted that the two taxes have a
compensatory tax doctrine. The legislation would eliminate
arguments by tax payers of discrimination.
Co-Chair Hanley asked when the Winn Brindle Scholarship was
added.
BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME AND EXCISE AUDIT
DIVISION, DEPARTMENT OF REVENUE noted that the Winn Brindle
Scholarship was added to the Fisheries Business Tax in 198.
The credit against the Fisheries Business Tax for the Winn
Brindle Scholarship was $446.0 thousand dollars in FY 95.
He noted that $39 million dollars was collected for the
Fisheries Business Tax. The tax credit is limited to 5
percent of liability.
Co-Chair Hanley summarized that the revenue loss would be
approximately $51.0 thousand dollars for the Education
Credit and $80.0 thousand dollars for the Scholarship Fund.
Representative Navarre asked if the calculation considers
what percentage is available for deduction that the tax
credit has not previously been used against. Mr.
Bartholomew explained that each individual tax payer under
the education credit is going to have a cap of $150.0
thousand dollars that can be taken against any of six taxes.
The Division looked at which tax payers had contributed to
the Education Credit under the corporate tax and the
Fisheries Business Tax. He observed that there is not a lot
of duplication. A new series of taxpayers will be eligible
by adding the Education Credit to the Fish Landing Tax.
Those that have already taken the maximum credit would not
be affected. The first $100.0 thousand dollars is subject
to the 50/50 split. The majority of tax payers who work in
off shore fisheries are not based in Alaska.
(Tape Change, HFC 96-44, Side 2)
In response to a question by Representative Navarre, Mr.
Bartholomew explained that businesses that are organized as
taxable corporations would be subject to the corporate
income tax. Companies not based in Alaska pay corporate
income tax based on an apportionment. A formula based on
the amount of wages, sales and property in Alaska is used to
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allocate income and pay taxes. There are 4,000 corporations
that are registered as S Corporations for tax purposes and
are not subject to state or federal corporate income tax.
Mr. Bartholomew explained that $7.0 million was collected in
FY 95 for the Landing Tax. Seven thousand of this amount
went to the Alaska Seafood Marketing Institute (ASMI). He
observed that HB 397 would align the Fisheries Business Tax
to the Fisheries Resource Landing Tax. Co-Chair Hanley
summarized that after the reduction for the Alaska Seafood
Marketing Institute the 50/50 split would be $3.15 million
dollars each. All the credits come out of the $3.15 million
dollars that goes to the State. If there is a million
dollars worth of credits the State would receive $2.15
million dollars.
Representative Brown noted that the State spends between
$62.0 and $100.0 thousand dollars a year to administer the
program. She suggested that the cost be spread to the
municipalities which are receiving part of the benefit. She
asked what the State would receive in offsetting revenue if
local governments pick up their share of the administrative
costs. Mr. Bartholomew replied that wording could be added
to clarify that the State and local governments would share
the amount less the allocated costs of administrating the
tax program. The State would receive back the local
government share of $100.0 thousand dollars. He noted that
more than 90 percent of the shared taxes relate to fishery
programs.
Representative Brown stated that she would prefer to
eliminate the credit. Co-Chair Hanley summarized that
Representative Brown would like to not adopt the amendment
and eliminate the education credit. Representative Brown
added that the credits would have to be eliminated for the
Fisheries Resource Landing Tax and the Fisheries Business
Tax. Co-Chair Hanley noted that there would be a $596.6
thousand dollar decrease to the institutions that are
receiving the credits and a $596.6 thousand dollar increase
to the State. Mr. Slotnick noted that the Education Credit
and/or the Winn Brindle Scholarship Credit could be retained
as long as they are in or out of both the Fisheries Resource
Landing Tax and the Fisheries Business Tax.
Representative Martin asked if the share amount given to
ASMI could be used to provide their state match.
DWAYNE PEEPLES, ADMINISTRATIVE OFFICER, ALASKA SEAFOOD
MARKETING INSTITUTE testified that ASMI receives three
sources of revenues, assessments against the processors,
assessments against fishermen and a federal grant matched by
state general funds. He observed that currently the state
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match is currently made with general fund dollars. He
stated that these funds are program receipts and could be
used for the federal match. He added that the ASMI Board of
Directors is presenting a plan to phase out the state match
over the next few years. He requested that ASMI's state
match be held harmless in FY 96. He noted that the price of
salmon is currently low.
Representative Brown asked if the program would be revenue
neutral if both the credits and administrative costs were
taken off the top.
Representative Grussendorf spoke in support of maintaining
the Educational Tax Credit. Co-Chair Hanley observed that
when the credit was allowed against the Fisheries Resource
Landing Tax it was not understood that the Fisheries
Business Tax needed to be treated equally. He stated that
the credits could be continued in both programs with the
administrative costs taken from both portions.
Representative Navarre suggested that unless the State is
able to choose which taxes the credit is applied against a
shifting would occur from what the credit is counted against
toward taxes that are not shared with municipalities. This
would minimize the impact on municipalities.
Representative Navarre suggested the Committee address all
taxes collected in which the administrative costs are not
charged. He observed that municipalities receive a
significant benefit from taxes collected by the State.
Co-Chair Hanley clarified that the corporate net income tax
is a pure state revenue which is not shared. Representative
Navarre observed that companies can take the credit against
any tax they want. He suggested that municipalities would
encourage businesses to take the tax against the corporate
tax.
Representative Navarre suggested that the House Finance
Committee draft a bill to address the whole issue. He noted
that HB 397 corrects an immediate legal problem. He spoke
in support of passage of HB 397.
Representative Austerman urged the Committee to pass HB 397
from Committee. He recommended that all taxes collected by
the State for municipalities be addressed in separate
legislation at another time.
Representative Navarre MOVED to adopt Amendment 1. There
being NO OBJECTION, it was so ordered.
Representative Brown pointed out that a new fiscal note is
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needed to show the negative impact on the General Fund. Co-
Chair Hanley noted that a Department of Revenue fiscal note
should show a negative $130.0 thousand dollar impact on the
General Fund.
Representative Navarre estimated that $130.0 thousand
dollars is overstated. Representative Brown observed that
use of the tax credit has increased. She expressed concern
that the tax credit is unconstitutional because of the
provision against public support for private education. She
asked that the House Finance Committee consider legislation
to require the administrative cost of all shared taxes be
taken from both the state and local share.
Representative Mulder asked for a legal opinion regarding
the constitutionality of the Educational Tax Credit.
Members discussed which taxes should be identified in a
proposed House Finance Committee bill. Representative
Navarre suggested that all shared taxes should have the
administrative cost taken off the top before they are
shared. He suggested that the amount could be graduated
over a period of years.
Mr. Bartholomew clarified that $130.0 thousand dollars is
what it costs to administrate the sharing of the collected
tax. Additional costs are associated with collection and
processing. The total cost of administrating the tax
programs would be more than $130.0 thousand dollars.
Representative Navarre pointed out that some taxes collected
by the state pass 100 percent back to municipalities. He
added that the majority of the increase in tax credits were
in Corporate Net Income and Insurance Premium Tax. He
stressed that the impact of HB 397 would be negligible.
Representative Navarre MOVED to report CSSSHB 397 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal notes.
Co-Chair Hanley directed Mr. Bartholomew to provide the
Committee with draft legislation which would take the
administrative cost of share programs off the top of the
collected tax before sharing. Representative Brown
recommended that if the amount is significant the Committee
consider a phase-in approach. Mr. Bartholomew observed that
the cost of collection of the Fisheries Business Tax is
several hundred thousand dollars. He stated that the
Division would prepare a spread sheet listing options for
the Committee.
Mr. Bartholomew noted that the Community Development Quota
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(CDQ) is the only other credit allowed. Co-Chair Hanley
asked that a spreadsheet be developed to show CDQ's. He
also asked that the spreadsheet identify which taxes are
shared.
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