05/10/2007 03:00 PM House LABOR & COMMERCE

SB 141 - LIMITED LIABILITY COMPANIES                                                                                          
                                                                                                                                
CHAIR OLSON  announced that the  only order of business  would be                                                               
SENATE  BILL  NO. 141,  "An  Act  relating to  limited  liability                                                               
companies."                                                                                                                     
                                                                                                                                
3:10:59 PM                                                                                                                    
                                                                                                                                
MARIT CARLSON-VAN  DORT, Staff to  Senator Lesil  McGuire, Alaska                                                               
State Legislature,  explained on  behalf of the  sponsor, Senator                                                               
McGuire, that SB 141 will  clarify that an organization providing                                                               
professional services  can organize its business  using a limited                                                               
liability  company (LLC);  adoption of  this bill  will eliminate                                                               
speculation regarding  an organization's authority to  use an LLC                                                               
for  professional services.   She  shared her  understanding that                                                               
[some]  businesses providing  professional services  have already                                                               
been organizing  as LLCs.   Senate Bill  141 will also  delete AS                                                               
10.50.150(d) in order to allow a  founder of an Alaskan LLC to be                                                               
a co-manager without having all  of the company's assets included                                                               
in  the  founder's  gross  estate  for  purposes  of  calculating                                                               
federal tax.                                                                                                                    
                                                                                                                                
REPRESENTATIVE LeDOUX  asked where  "co-manager" is  addressed in                                                               
the bill.                                                                                                                       
                                                                                                                                
3:12:43 PM                                                                                                                    
                                                                                                                                
DAVID  G.  SHAFTEL,  Attorney  at Law,  after  relaying  that  he                                                               
specializes in tax,  trust, and estate planning  law, offered his                                                               
understanding  that for  federal  estate-tax  purposes, under  26                                                               
U.S.C.  Sec. 2036(a)(2),  if a  person  forms a  trust or  family                                                               
limited liability partnership (LLP) or  a family LLC, and retains                                                               
powers to effect  the enjoyment of interests that  the person has                                                               
given away or  sold, then all of those interests  "will be pulled                                                               
back into  that founder's estate and  taxed at death."   To avoid                                                               
this problem, an independent person  must be appointed as special                                                               
manager, and this person would  have authority over distributions                                                               
and would  be able  to decide  whether the  entity would  ever be                                                               
liquidated.   However,  "in order  to make  this effective,  " he                                                               
remarked,  AS  10.50.150(d)  must  be  deleted,  adding  that  it                                                               
doesn't serve any significant purpose anyway.                                                                                   
                                                                                                                                
MR. SHAFTEL,  in response to  a question,  said that the  bill is                                                               
not  intended  to  establish  or  clarify  a  tax  shelter.    He                                                               
explained  that  LLCs  and  LLPs   are  a  very  common  tool  in                                                               
legitimate  estate planning.   However,  in such  situations, one                                                               
must  be careful  with regard  to how  much control  is retained,                                                               
otherwise interests  will be  pulled back  into one's  estate and                                                               
taxed  at death.   Good  estate  planning will  prevent this,  he                                                               
noted.   In response to  comments, he  said that family  LLCs and                                                               
LLPs serve a number of purposes, one being asset protection.                                                                    
                                                                                                                                
MS. CARLSON-VAN DORT  added that SB 141 is offered  in the spirit                                                               
of keeping the state's trust and  estate planning laws up to date                                                               
and competitive,  thereby continuing  to bring more  business and                                                               
revenue into the state.                                                                                                         
                                                                                                                                
CHAIR  OLSON,  after ascertaining  that  no  one else  wished  to                                                               
testify, closed public testimony on SB 141.                                                                                     
                                                                                                                                
3:23:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LeDOUX  moved to  report SB  141 out  of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
note.   There being no  objection, SB  141 was reported  from the                                                               
House Labor and Commerce Standing Committee.