Legislature(2011 - 2012)BARNES 124

04/11/2011 03:15 PM LABOR & COMMERCE

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Heard & Held
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
            SB 23-FILM PRODUCTION TAX CREDIT/AUDITS                                                                         
4:18:38 PM                                                                                                                    
CHAIR OLSON announced  that the final order of  business would be                                                               
the  CS  FOR  SENATE  BILL  NO.  23(FIN),  "An  Act  relating  to                                                               
transferable film production tax  credits and film production tax                                                               
credit certificates; requiring the  legislative audit division to                                                               
audit  the   Alaska  film   production  incentive   program;  and                                                               
providing for an  effective date by amending  the effective dates                                                               
of secs. 3 and 4, ch. 63, SLA 2008."                                                                                            
4:19:26 PM                                                                                                                    
KONRAD JACKSON,  Staff, Representative  Kurt Olson,  Alaska State                                                               
Legislature, introduced himself.                                                                                                
4:19:33 PM                                                                                                                    
REPRESENTATIVE  JOHNSON moved  to  adopt  the proposed  committee                                                               
substitute (CS),  labeled 27-LS0252\G,  Bullock, 4/10/11,  as the                                                               
working document.                                                                                                               
CHAIR OLSON objected for the purpose of discussion.                                                                             
[Version G was before the committee.]                                                                                           
4:20:06 PM                                                                                                                    
MR. JACKSON, on  behalf of the House Labor  and Commerce Standing                                                               
Committee,  chaired by  Representative Kurt  Olson, reviewed  the                                                               
changes contained  in Version G.   He  referred to page  2, lines                                                               
26-30.   This change  would require  the Division  of Legislative                                                               
Audit to conduct  audits of the Alaska  Film Production Incentive                                                               
Program at  the beginning  of the  legislative sessions  in 2013,                                                               
2017,  and 2021  at the  request of  the Division  of Legislative                                                               
Audit.   This  provision  would  allow an  audit  to the  initial                                                               
program prior to the proposed sunset of this program.                                                                           
MR.  JACKSON referred  to page  3, line  9, which  would add  the                                                               
language "in  the title"  to allow  credits to  be used  by other                                                               
taxpayers, including  those paying  fisheries taxes  or insurance                                                               
4:21:15 PM                                                                                                                    
MR.  JACKSON referred  page 3,  lines 20-21,  of Version  G which                                                               
would change the  amount of the aggregate amount  of the program.                                                               
This increases  the total amount  of film production  tax credits                                                               
that  may  be  authorized  from $100  million  to  $200  million.                                                               
Initially the program staggered the  total amount of $200 million                                                               
but this  would make the  entire $200 million available  to avoid                                                               
the possibility of a gap in the program.                                                                                        
MR. JACKSON referred  to page 4, lines 14-16  of proposed Section                                                               
8,  which would  require the  Alaska Film  Office to  include the                                                               
amount of  qualified expenditures and not  qualified expenditures                                                               
that were  paid to Alaska  businesses and to Alaska  residents as                                                               
wages in  its annual report  to the legislature.   Currently, the                                                               
report would contain qualified expenditures only.                                                                               
4:22:41 PM                                                                                                                    
MR. JACKSON  referred to page  5 lines 11-12 of  proposed Section                                                               
11.  This  change would require the state to  evaluate the effect                                                               
of  the program  on the  production on  natural resources  of the                                                               
state.  He  read the  specific  language,  "state policy  on  the                                                               
utilization  and  development of  the  natural  resources of  the                                                               
state."    He   explained  the  concern  that   the  state  would                                                               
potentially  allow   film  production  tax  credits   to  a  film                                                               
denouncing state's  aerial wolf hunting policy  or timber harvest                                                               
in the Tongass National Forest.                                                                                                 
MR.  JACKSON referred  to page  6 to  proposed Section  18, which                                                               
would require film  production companies to be  licensed in order                                                               
to do business in the state.                                                                                                    
4:23:44 PM                                                                                                                    
MR. JACKSON referred  to page 7, line 26-28 of  Section 19, which                                                               
would  add a  new  section to  the  bill at  the  request of  the                                                               
department.   This  change  would increase  the  limit for  legal                                                               
proceedings from one year to  six years for wrongfully issued tax                                                               
credits.   He referred  to the statute  of limitations  in Alaska                                                               
Statute (AS) Title 09.                                                                                                          
MR. JACKSON referred  to page 8, line 1, to  proposed Section 19,                                                               
which would clarify the definition of  rural area to mean a rural                                                               
area located  in Alaska  since concern  was expressed  that rural                                                               
could be interpreted as rural Arkansas.   He pointed out that the                                                               
legal  drafter did  not think  this would  be the  case, but  the                                                               
specific language was added for clarity.                                                                                        
MR. JACKSON  commented that the  committee will continue  to work                                                               
on additional amendments to the bill.                                                                                           
4:25:08 PM                                                                                                                    
REPRESENTATIVE SADDLER referred to  proposed Section 4 of Version                                                               
G and asked for clarification on which taxes applied.                                                                           
MR. JACKSON  answered that any  taxes paid  under AS 43  would be                                                               
eligible for  the film  production tax  credits.   Currently, the                                                               
film  production   tax  credits   offset  corporate   income  tax                                                               
liability.  This  change would allow it to apply  to other taxes,                                                               
such as insurance taxes and fishery taxes.                                                                                      
4:25:53 PM                                                                                                                    
CHAIR OLSON  added one reason  for this  change is that  the film                                                               
production tax  credits would not  be of  any value to  a company                                                               
unless corporate taxpayer is able to use the tax credits.                                                                       
REPRESENTATIVE  SADDLER asked  whether a  taxpayer could  use tax                                                               
credits all in one section.                                                                                                     
MR. JACKSON deferred to the department.                                                                                         
4:26:35 PM                                                                                                                    
THOMAS R. DALY,  Owner, HiSpeed Gear, Member,  Alaska Film Group,                                                               
referred to  Alaska's economy as a  three-legged stool consisting                                                               
of government, energy, and all  other activity.  He reported that                                                               
as an Alaskan business owner,  his company suffered a significant                                                               
loss of income three years ago  when the state chose to not allow                                                               
Alaskan-owned  companies in  the business  equipment industry  to                                                               
bid  on state  contracts.   This  may have  ended  badly but  the                                                               
company was able to replace a  portion of its income by providing                                                               
services  to  the  Alaska  Film  Industry.    The  production  of                                                               
Everybody  Loves  Whales  (ELW),  which was  completely  shot  in                                                             
Alaska,  benefited from  the Film  Production Incentive  Program.                                                               
This  program also  provided  him with  an  opportunity to  work.                                                               
This film  had an estimated  direct and indirect  economic impact                                                               
of   $16.5  million   in  the   Anchorage,  Barrow,   and  Seward                                                               
communities.   Over the past  two years, ELW benefited  35 Alaska                                                               
communities.   The  economic  benefits surfaced  in  a number  of                                                               
ways, from  1,000 casting  roles, 100  crew positions  behind the                                                               
cameras,  28  drivers,  and  7,900 man  hours.    Staff  provided                                                               
security  services,  catering,   equipment  rentals,  and  12,100                                                               
nights of  hotel rooms.  He  remarked that it would  take a hotel                                                               
renting a  one hotel room  for 7 nights a  week over the  next 33                                                               
years  to match  the significant  impact  provided by  ELW.   The                                                               
direct  benefits also  extended to  multiple sectors  of Alaska's                                                               
economy.  His business has  subsequently decided to invest in the                                                               
further  training   and  development  of  talent   and  technical                                                               
positions in  order to  work on  other films.   He is  working to                                                               
retrain the  technical operatives  to use  digital versions  of a                                                               
loader  and to  provide the  data dense  hard drive  requirements                                                               
needed to conduct modern filming with qualified professionals.                                                                  
4:29:17 PM                                                                                                                    
MR. DALY related  that he is aware of other  businesses who would                                                               
like to  invest in bigger items  such as 10-ton grip  trucks at a                                                               
cost of $250,000;  generator trailers at a cost  of $100,000, and                                                               
lights  at  $20,000-$45,000  each.   He  pointed  out  that  film                                                               
equipment is  specialized and  expensive.   An entry  level sound                                                               
stage can  range from $10-$20 million  to build.  He  stated that                                                               
Alaska's  businesses   need  assurances  that  the   state  is  a                                                               
competitive environment for filming.   He offered his belief that                                                               
the current film production incentive  program is competitive but                                                               
will end.   He related  that British Columbia produces  200 films                                                               
and its  program does not  have a  sunset clause.   He emphasized                                                               
that businesses need  companies to make long  term investments in                                                               
order  for  the  industry  to  grow  in  Alaska  to  provide  the                                                               
stability and  attract new dollars.   He recapped the  reasons he                                                               
is firmly  in favor of  SB 23, including  that it will  help keep                                                               
the state competitive in the  film production industry, assist in                                                               
the  growth  of a  more  diversified  economy, and  will  endorse                                                               
private investment.  He urged  the committee to support a minimum                                                               
10-year renewal as provided by SB 23.                                                                                           
4:30:42 PM                                                                                                                    
REPRESENTATIVE CHENAULT  asked whether he has  same passion about                                                               
the oil industry.                                                                                                               
MR.  DALY remarked  that the  oil industry  put him  through high                                                               
school and any college years he acquired.                                                                                       
4:31:25 PM                                                                                                                    
WES  SCHACHT, Owner,  Omnitour Alaska,  stated that  he has  been                                                               
around the film industry for approximately  30 years.  He said he                                                               
fully supports SB 23.                                                                                                           
4:31:57 PM                                                                                                                    
MICHAL NEECE, Owner,  Alaska Film Works, stated  that his company                                                               
trains people  vocationally and academically.   He has  worked in                                                               
the film  industry for almost 30  years.  He suggested  the state                                                               
work  in the  same vein  as  British Columbia  and Halifax,  Nova                                                               
Scotia  has done  to develop  their film  industries.   He agreed                                                               
with Mr. Daly.   He said he supports SB 23 and  would like to see                                                               
the bill passed.                                                                                                                
4:33:08 PM                                                                                                                    
GREG KERN,  Owner, A K  Grip and Lighting,  stated that he  has a                                                               
small  mom/pop business  that  provides  lights, generators,  and                                                               
grip trucks  to the  film industry.   He said  he supports  SB 23                                                               
which will  allow him to  obtain the long-term financing  to grow                                                               
his business.  He would like to  hire more employees.  He said he                                                               
worked  on  the  ELW  project.   However,  he  observed  lots  of                                                               
equipment  come  and  go  when  the project  was  finished.    He                                                               
characterized  this  activity  as   carpetbagger  activity.    He                                                               
related that  he is struggling to  make it in Alaska  and needs a                                                               
chance to "sink  my teeth into this stuff" and  get the financing                                                               
to allow him  to compete with Lower 48 firms.   He commented that                                                               
these firms are  large corporations that are well  funded.  These                                                               
companies are accustomed  to setting up shop in  other states and                                                               
send money home  to California or New York.   He stressed that he                                                               
and other small vendors are trying to preempt this.  He asked                                                                   
for the opportunity to build an industry from the ground up.                                                                    
[SB 23 was held over.]                                                                                                          

Document Name Date/Time Subjects
SB23 Draft Proposed CS ver G.pdf HL&C 4/11/2011 3:15:00 PM
SB 23
SB23 Opposing Documents - Email Jerry LaVine with attachment 4-8-2011.pdf HL&C 4/11/2011 3:15:00 PM
SB 23
SB23 Supporting Documents - States With Film Tax Credits.pdf HL&C 4/11/2011 3:15:00 PM
SB 23
HB72 Supporting Documents - Flow Chart AAG Sniffen.pdf HL&C 4/11/2011 3:15:00 PM
HB 72
HB72 Supporting Documments - Illinois Brick Repealer Map.pdf HL&C 4/11/2011 3:15:00 PM
HB 72
SB23 Letter - DCCED to Rep Johnson 4-11-11.pdf HL&C 4/11/2011 3:15:00 PM
SB 23
SB23 Letter - Rep Johnson to Commissioner Bell 4-10-2011.pdf HL&C 4/11/2011 3:15:00 PM
SB 23