Legislature(2005 - 2006)HOUSE FINANCE 519
04/18/2006 10:00 AM FINANCE
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* first hearing in first committee of referral
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11:53:39 AM HOUSE BILL NO. 496 An Act relating to contributions from permanent fund dividends to certain educational organizations and to certain charitable organizations that provide a positive youth development program, workforce development, aid to the arts, or aid and services to the elderly, low-income individuals, individuals in emergency situations, disabled individuals, or individuals with mental illness; and providing for an effective date. LOUIE FLORA, STAFF, REPRESENTATIVE PAUL SEATON, explained that the bill would create a funding mechanism for charitable organizations in Alaska with a check-off on the electronic Permanent Fund Dividend (PFD) application form that would allow them to donate a portion of their check to an eligible organization, a community foundation, a campus of the University of Alaska or vocational training program. To qualify for the program, a charitable organization must provide a positive youth development programs, workforce development, aid to the arts, or aid and services to the elderly, low-income individuals and/or individuals with mental illness. HB 496 includes further eligibility requirements for charitable organizations to ensure that the organizational fit within the sideboards of the program. To qualify, an organization must: · Apply for inclusion on the contribution list for the st current dividend year before September 1 of the qualifying year · Have been exempt from taxation under 26 USC 501 ©(3) for the two calendar years preceding the year the application is filled · Be directed by a voluntary board or local advisory board, whose members are all residents of the State of Alaska and provide a qualifying service · Receive the lesser of $100,000 or 5% of its total annual receipts from contributions · Provide a financial audit for the preceding fiscal year if its annual budget exceeds $250,000 · Not make grants or contributions to an organization that is exempt from taxation under 15 USC 501©(4) or (6) Mr. Flora continued, HB 496 defines a community foundation and stipulates that they may make no more than 10% of their income from grants to ©(4)(6) organizations. That provides community foundations with flexibility in grant making to such organizations as a chamber of commerce; it promotes the continued growth of the local community foundations in Alaska. The program has a sunset date of 2009. The funding required to enact the pilot program will be provided through an agreement with the Rasmuson Foundation. 11:58:53 AM Representative Weyhrauch asked why it was limited to those that file electronically. Mr. Flora replied it was a cost issue. 11:59:33 AM SHARON BARTON, DIRECTOR, PERMANENT FUND DIVISION, DEPARTMENT OF REVENUE, pointed out that a Senate sponsor to simplify, on the behalf of the Permanent Fund Division had inserted language. Representative Weyhrauch inquired the percentage that file electronically. Ms. Barton responded that 55% filed electronically for the FY06 dividend. She agreed that the note will increase if paper applications are included and the costs have not been calculated. 12:01:14 PM Representative Weyhrauch asked the anticipated number of pages. Ms. Barton replied the Division hasn't "scoped that out yet". The Senate sponsor requested a sort function. Representative Weyhrauch asked how the chosen options were picked. Ms. Barton responded those were proposals by the sponsor; the Division was not consulted. Representative Weyhrauch worried about problems for the public in determining the amount to donate; he recommended adding percentages of the actual check. Ms. Barton thought that would be more complicated on the administrative side. Representative Weyhrauch asked the intent of the section involving the Certified Public Accountant (CPA) if assets exceed $250 thousand dollars. Mr. Flora explained that they had been working from the Senate State Affairs version including that criterion. He offered to research it. Representative Weyhrauch pointed out in Section D, the deduction of administrative costs, asking if there was a need for a fiscal note. Ms. Barton replied that Section D had been envisioned for a time after the agent was involved, the program would need to stand-alone. She understood that was the intent and that there would be no administrative fees deducted from the charitable donations. The sponsor and the Rasmuson Foundation established the arrangement. 12:07:29 PM Representative Weyhrauch asked if the fiscal note considered the hearing process. Ms. Barton did not know the number of hearings that might be encountered. She thought costs were included for one or two hearings. Representative Weyhrauch referenced the list-included recipients; he thought that the aid to the arts was an unusual placement. Mr. Flora understood that the human services matching grants had been decreasing; the legislation appears to be a way to boost funding for those organizations. He was not certain about that inclusion. 12:10:24 PM Representative Holm asked if all funding would come through the Rasmuson Foundation. Mr. Flora understood that was correct. 12:11:02 PM DIANE KAPLAN, PRESIDENT, RASMUSON FOUNDATION, stated that the foundation is prepared to cover the costs for the first three years. In the interest of promoting philanthropy in Alaska, the Foundation is willing to cover those costs for that time. 12:11:53 PM Representative Holm appreciated the interest of the Foundation. He voiced concern that the legislation would really accomplish anything except bringing a "false-hope", resting on the dividend program. Ms. Kaplan pointed out that they had looked at other states that offered a similar donation credit on taxes; there are about 25-30 states that allow individuals do it. In Alaska, individual giving is far below what is occurring in other thth states. Alaska ranks 49 or 50 in charitable giving. There is a lot of capacity to give in this State and sometimes the citizens need more encouragement. The anticipated estimate is $3-$5 million dollars. Representative Holm pointed out the high cost of living in Alaska. 12:15:30 PM Representative Weyhrauch stated there was no intent to limit it to the Rasmuson Foundation. Ms. Kaplan noted that the Foundation has no intent of being a recipient. 12:16:17 PM Representative Joule commented on the foundation grant awards and asked if it would influence other community grant programs. Ms. Kaplan replied that most grant reviews, look at the amount of local support. She hoped the legislation would provide a tool to get other members in the community to help leverage money. Representative Joule asked if there would be a way to track the contributions at the local level. Ms. Kaplan responded that any organization that holds a designation from the Internal Revenue Service (IRS) would be eligible. 12:20:11 PM PUBLIC TESTIMONY CLOSED Representative Weyhrauch MOVED to ADOPT Amendment #1. Co- Chair Chenault OBJECTED. Representative Weyhrauch noted that the amendment consists of three parts. He offered to speak with the sponsor regarding the amendment. 12:22:18 PM Representative Kelly voiced concern with the legislation, however, thanked the Rasmuson Foundation for their participation. HB 496 was HELD in Committee for further consideration.