Legislature(1997 - 1998)
05/05/1998 01:10 PM House JUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
CSSB 329(JUD) AM - INVESTMENT CLUB LICENSE EXEMPTION Number 1790 CHAIRMAN GREEN announced the next order of business to be CSSB 329(JUD) am, "An Act relating to the regulation authority, exemptions, and definitions of the Alaska Business License Act." MS. KREITZER stated that the Senate Labor and Commerce Committee introduced SB 329 at the request of the Alaska Regional Council, National Association of Investors Corporation after they called the Department of Commerce, Division of Occupational Licensing to ask whether they should be required to purchase a business license to operate an investors club. She stated that within their own division they have had conflicting opinions about whether this group of people would need to purchase a business license. She stated that no other state requires an investment group to purchase a business license because they are seen as educational tools for people to learn about investments, as profit is not the purpose of the group, education is. Number 1855 MS. KREITZER stated that Section 1 of CSSB 329(JUD) am gives broader regulatory authority to the Division of Occupational Licensing, Department of Commerce. She stated that their only authority under this section is to determine and collect fees. In order to implement these exemptions and to be able to lay things out plainly in the regulatory process they would like to have more authority. She explained that Section 2 just reorders the current business license exemption and adds investment clubs and a definition of security to the exemptions. She stated that the definition of "business," upon the request of the Division of Occupational Licensing, was made more plain. She stated that the only exemption that has been added in is the terms investment club and security and then the new definition of business. Number 1960 MS. KREITZER stated that she believed the committee had a suggested amendment because of SB 240, as it is not longer appropriate to include in the exemptions on page 1, line 14 "sales through coin- operated amusement and gaming machines". She stated that the sponsor agrees with the amendment. Number 1979 CHAIRMAN GREEN asked if SB 240 is now, in fact, law. UNIDENTIFIED SPEAKER replied yes it is. Number 1986 REPRESENTATIVE BUNDE made a motion to adopt Amendment 1 which reads: Page 1, line 14: Delete all material Page 2, line 1: Delete "(6)" Insert "(5)" Page 2, line 2: Delete "(7)" Insert "(6)" Page 2, line 4: Delete "(8)" Insert "(7)" CHAIRMAN GREEN asked if there was an objection. Number 2006 REPRESENTATIVE CROFT objected for discussion purposes. Number 2010 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division, Department of Revenue, stated that the amendment is just a technical clean-up because if that exemption was not removed there could be some businesses in Alaska who do only coin operation and would be allowed to operate without a license. Number 2036 REPRESENTATIVE CROFT removed his objection. Number 2042 CHAIRMAN GREEN asked if there was a further objection. Hearing none, Amendment 1 was adopted. Number 2061 CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development, stated that she strongly supports CSSB 329(JUD) AM. Number 2081 REPRESENTATIVE PORTER asked if she was familiar with the investment club. MS. REARDON stated that her understanding is started with the Beardstown Lady's Club; each member would contribute $30 and decide what stocks to invest in. She stated that based on their successes and a book that they put out, some more people started to form investment clubs. She stated that this legislation may have been requested by National Association of Investment Clubs so that it would be clear whether a business license is required in Alaska. She pointed out that a business license costs $50 for two years. There are about six investment clubs that have business licenses now and it is true that her staff has told some clubs that they need the licences and others that they do not have to get them, due to confusion over whether the goal of the clubs is to make money or if it was an educational activity. She stated that this bill would involve the potential loss of revenue of $250 every two years out of a program that brings over $1 million. She stated that it is a very nominal loss which is why there is a zero fiscal note. Number 2186 REPRESENTATIVE BUNDE stated that he thought it was against the law for investment clubs to advertise and asked if the clubs employ any one. He wondered if brokerages could be in existence under the guise of an investment club. Number 2213 MS. REARDON replied that business licensing has not been keeping a check on that. She stated that removing them from the requirement to get a business license would not have an effect on, violations of the banking, securities and corporations laws. She stated that it is the security laws that regulate the professions. Number 2245 REPRESENTATIVE NORMAN ROKEBERG asked isn't the business fee really a business tax and therefore, it does not give the division any enforcement power. MS. REARDON replied that is correct. REPRESENTATIVE ROKEBERG asked how is the definition of business different from the Labor and Commerce Committee's definition of business. Number 2279 MS. REARDON replied that Representative Rokeberg is referring to HB 438 which was a companion bill to this bill. She stated that it had a slightly different definition of business. Both are attempts to define it more simply. Number 2302 CHAIRMAN GREEN asked Representative Rokeberg if it was his intent to change the definition. REPRESENTATIVE ROKEBERG replied no, he just wanted to remind himself what his committee came up with as they spend a great deal of time on the definition. He asked Ms. Reardon to read the definition. Number 2316 MS. REARDON stated that HB 438 defined "business" as "a profit or nonprofit entity engaging or offering to engage in a trade, a service, a profession, or an activity with the goal of receiving a percunary benefit in exchange for the provision of services or goods or other real or person property or nonprofit activity." She stated that the primary difference is "a profit of nonprofit entity" is added and there are more synonyms for activity at the end of the definition in this version. Number 2352 REPRESENTATIVE ROKEBERG asked if there was any discussion in the Senate Judiciary Committee on the issue of nonprofit. Number 2366 MS. KREITZER replied there was not. She stated that they were aware of (indisc.--coughing) in the House Labor and Commerce Committee and the Senate chairman chose not to include it in this version. Number 2375 REPRESENTATIVE ROKEBERG stated that the only reason he is bringing it up is because they are defining what a business is in the state of Alaska and it will be referred to in other statutory references. The issue is whether to include nonprofit in the definition. Number 2397 CHAIRMAN GREEN replied that is why he asked Representative Rokeberg earlier if his question was leading to an amendment or just background information. REPRESENTATIVE ROKEBERG replied that it was background information because he did not remember what he did in committee. He stated that it is an issue to be considered. Number 2412 REPRESENTATIVE JAMES stated that she is not real comfortable with the definition of business, as it is skimpy. She stated that the business license is a tax and does not consider $25 a year a real tax. She stated that it seems like it is for some other reason. She asked if she wanted to know who owned a business could she call to division to find out. Number 2450 MS. REARDON replied that the reason a data collection benefited business licensing is that people can get lists .... TAPE 98-83, SIDE B Number 0042 MS. REARDON stated that people can look on the Internet to find out what kinds of business there are. She stated that they do not register business names, as that is in statute under the Banking Securities and Corporations Division. Therefore, ten people may get the same name, as it is not exclusive. She stated that a person could call up and she could search to see who owned a business. She stated that in the terms that it is a tax there is no public protection aspect, a business license is not a good house keeping seal that the business is being run properly. Number 0050 REPRESENTATIVE JAMES asked if she gets many calls of people wanting to know who has a license. She stated that if there was not a fee, the division would be doing it for free so she is suggesting that it is not necessarily a tax. Number 0072 MS. REARDON stated that they do get quite a few calls. REPRESENTATIVE CROFT asked if they would give a license to "Mimi's House of Prostitution." MS. REARDON replied that yes, as the statute does not give criteria for denying licenses for that type of reason. She stated that it is important how the definition of business is defined and sees either definition of business as a great improvement over the current statute's definition. She did not want the bill to die over the definition of business. Number 0116 REPRESENTATIVE CROFT stated that there seems to be a major question about profit or nonprofit. He stated that to him, by adding the words real or personal to property does not change the word property. Pecuniary is a synonym for financial, therefore, the only other substantive difference is adding "a service to trade profession or the generic activity with the goal of receiving a financial benefit." He asked if the division licenses nonprofit businesses now. Number 0144 MS. REARDON stated that they do license some nonprofit businesses. The Salvation Army has a business license because it is bringing in money for its activities. She stated that she wanted to clarify something that she said at a previous time. If a nonprofit business was not selling anything to the general public and was just receiving grants they would not need a business license. Number 0200 REPRESENTATIVE ROKEBERG stated that is his concern and that is why that provision was put in the definition. It is a major addition to cleaning up the statutes and the way the definition is in CSSB 329(JUD) AM, it would exclude the ability to license a nonprofit organization. Number 0241 REPRESENTATIVE BUNDE stated that with the Salvation Army they have to get a business license yet, there is no enforcement ability. He asked what would happen if they did not get one. Number 0252 MS. REARDON stated that what she meant when referring to their enforcement ability was, they do not have the right to take away the business license if the business is doing shady business. She stated that they do advise people on whether or not they need to obtain a license, if someone was to refuse to get a license the district attorney would then have to handle the case and it would be a misdemeanor. Usually people do get a business license, as the fee is so low. Number 0297 REPRESENTATIVE BUNDE said that since there is some sort of prosecution then there is some regulatory aspect to it. Number 0313 MS. REARDON stated that there is a law that states that they must have a business license but it is not regulatory in terms of how they practice their business. Number 0321 REPRESENTATIVE PORTER stated that the original intent of the bill was to exempt investment clubs and he has some concerns about that. He stated that he could envision having the E. F. Hutton investment club. Number 0360 MS. KREITZER referred to information in the committee members' packet from Mr. Damron and reiterated that no other states require investment clubs to purchase business licenses. She stated that the definition of investment clubs is "a group of individuals incorporated or otherwise organized, that engages primarily in investing in securities, that does not sell investment services to another person, and the primary purpose of which is educational. " She stated that the purpose of the amended version of the bill was to make it easier for the public and so there is not conflicting advise. She stated that it is her understanding that it does not exclude nonprofit and, therefore, if it does not specifically exclude it, it includes it. Number 0432 REPRESENTATIVE JAMES stated that Representative Rokeberg's definition says something about rentals or properties and this definition does not clarify that. Number 0448 REPRESENTATIVE ROKEBERG stated that the biggest distinction between the definitions relates to the profit/nonprofit. He stated that he would like the public to know what a law is saying, the definition in the Senate bill is not clear. Number 0518 MS. KREITZER asked if he is suggesting an amendment and asking for the sponsor's response. Number 0531 REPRESENTATIVE ROKEBERG stated that he would defer to Representative Croft. REPRESENTATIVE CROFT stated that he as a possible amendment, that if on line 7 after person insert "that does not advertise," it would put some more restrictions on investment clubs. Number 0569 MS. KREITZER replied that would be fine. Number 0579 CHAIRMAN GREEN asked if an investment club put out a flyer would that be a problem with this new language. REPRESENTATIVE CROFT replied that if it is for internal information purposes it wouldn't but if it was to attract new members then it would be. Number 0888 REPRESENTATIVE CROFT made a motion to adopt Amendment 2. Number 0632 CHAIRMAN GREEN asked if there was an objection. Hearing none, Amendment 2 was adopted. Number 0647 REPRESENTATIVE ROKEBERG stated that the bill is already amended and asked of there would be an objection to adding the profit/nonprofit entity into the definition of business. Number 0667 MS. KREITZER stated that anything that would help make it clear to the public and Administration is fine because that is the intent of the rewriting the definition of business. Number 0671 REPRESENTATIVE ROKEBERG asked Ms. Reardon, "If we were to go back to a portion of this (indisc.--mumbling) and just add the business means a profit or nonprofit entity, add the word service and then 'or nonprofit activity' at the end of the sentence and not go into the real or personal property." He stated that the word pecuniary is a better word because means involving money and has a broader definition then "financial". Number 0773 MS. REARDON stated that it would be fine but perhaps the final reference to nonprofit may not be included because it was already stated at the beginning. REPRESENTATIVE ROKEBERG replied that would be okay, therefore, not every nonprofit business would qualify for a license but some would. MS. REARDON stated that it would be her intent. Number 0785 REPRESENTATIVE PORTER stated that if the intent is to make this understandable to the public he would resist the word pecuniary. The term financial benefit is pretty much understood the term pecuniary is generally not understood. CHAIRMAN GREEN agreed. Number 0822 REPRESENTATIVE CROFT moved to adopt Amendment 3, which would take Section 3, and delete the definition and insert "business means a profit of nonprofit entity engaging or offering to engage in a trade, a service, a profession or an activity with the goal of receiving a financial benefit in exchange for the provision of services or goods or other property;" Number 0877 CHAIRMAN GREEN asked if there was an objection. Hearing none, Amendment 3 is adopted. Number 0915 REPRESENTATIVE ROKEBERG made a motion to move CSSB 329(JUD) AM, as amended, out of committee with the attached fiscal note and with individual recommendations. Number 0940 CHAIRMAN GREEN asked if there was an objection. Hearing none, HCSCSSB 329(JUD) moved from the House Judiciary Standing Committee.
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