Legislature(2001 - 2002)
04/04/2002 03:20 PM MLV
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 371-ALASKA VETERANS' MEM.ENDOWMENT FUND CHAIR CHENAULT announced that the final order of business would be HOUSE BILL NO. 371, "An Act establishing the Alaska veterans' memorial endowment fund and providing for credits against certain taxes for contributions to that fund; relating to other tax credits for certain contributions; and providing for an effective date." [The bill was sponsored by the House Rules Standing Committee by request of the governor.] Number 1705 CAROL CARROLL, Director, Administrative Services Division, Department of Military and Veterans' Affairs (DMVA), explained that HB 371 creates a veterans' memorial endowment fund in the Department of Revenue. It allows a credit like the one allowed in statute already for the University of Alaska, and is limited to $150,000. She reported that DMVA, in coordination with veterans' groups, allocates in the form of grants about 5 percent of the fund's value a year, to her belief, to maintain veterans' memorials across the state or to construct new ones. Donations of about $125,000 have been received from private corporations, and the request [in HB 371] is for $125,000 more. She said $250,000 would give veterans' organizations about $12,000 a year, which is sufficient to maintain the 78 or so memorials around the state, to the belief of those organizations. She noted that the Department of Revenue could answer more complicated questions. Number 1592 REPRESENTATIVE GREEN referred to page 6 and requested clarification about how the credit works. Number 1530 CHUCK HARLAMERT, Juneau Section Chief, Central Office, Tax Division, Department of Revenue, replied that the contribution can be as much as desired, but that the credit received is 50 percent of the first $100,000 and 100 percent of the second [$100,000]. Therefore, the credit total is [$150,000]. In response to a question from Chair Chenault, he said it is generally on a calendar-year or tax-year basis. Number 1500 REPRESENTATIVE MURKOWSKI surmised that the $12,000 a year is the 5 percent "spin-off" from the $250,000 endowment. MS. CARROLL acknowledged that as her own calculation. REPRESENTATIVE MURKOWSKI recalled testimony from [Pat] Carothers at a previous hearing about the shoestring budget with which memorials are maintained around the state, and offered her recollection that it was one or two thousand dollars a year. She said she wasn't suggesting it should be that low of a budget, but that $12,000 seems more than [these organizations] would know what to do with annually, since some [memorials] are simple plaques, for example. She asked whether the full $250,000 is necessary in the fund in order to provide the needed money on an annual basis. Number 1309 JOHN JENKS, Chief Investment Officer, Treasury Division, Department of Revenue, said he wished he could answer that question and wished that Mr. Carothers was present; he recalled hearing Mr. Carothers testify that he believed $12,500 would allow [the veteran's organizations] to do things that haven't been possible. Mr. Jenks said the endowment proposed in HB 371 could spin off 5 percent of its value each year and effectively protect the purchasing power of the endowment over time. Every $100,000 in the endowment will create approximately $5,000 in base purchasing power each year, forever, to maintain those [memorials and monuments] and to build any new ones. MS. CARROLL acknowledged that some memorials are small plaques, but indicated some of the 78 or so are more substantial. She also emphasized that in addition to maintenance, this is for construction and activities that honor veterans; she cited the "moving wall" [in honor of Vietnam War veterans] as an example. She said it doesn't seem $12,000 is very much. REPRESENTATIVE MURKOWSKI agreed, but contrasted it with what [veterans' organizations have operated on thus far to maintain memorials]. MS. CARROLL concurred, noting that they've done it voluntarily or through gathering bits of money to maintain some, but certainly not all [of the memorials]. CHAIR CHENAULT recalled testimony from Mr. Carothers about being able to raise a couple of thousand dollars, for example, to provide upkeep. Chair Chenault said even though [$12,000] may be a considerable increase, it may or may not be enough at certain times. Number 1098 REPRESENTATIVE KOTT asked where the [$125,000 in contributions] is maintained, and whether it earns interest. MS. CARROLL offered her understanding that it's currently "in a nonprofit in Southcentral," a location she could find out with one phone call, but said she didn't know about the interest. In response to further questions, she indicated that if it came into the state's possession, it would go into the general fund. She said [these donations] appear to have come from about 25 private-sector sources. REPRESENTATIVE KOTT requested confirmation that this legislation wouldn't affect the tax liability of those who'd already contributed. MS. CARROLL noted that the bill has an immediate effective date, but pointed out that the individuals who made the donations did so knowing that there was no statute in place for them to take the credit. She again offered to find out where the current donations are being held. Number 0905 REPRESENTATIVE MURKOWSKI asked whether it is possible to retroactively provide a tax credit, even though it now is beyond the year when the contributions were made. REPRESENTATIVE GREEN mentioned the ability to file an amended [tax] return. MR. HARLAMERT replied that it technically could be possible. He surmised that these contributions were made in calendar year 2001, and said an Alaska corporate tax return, for example, probably wouldn't be filed until October . He added: You could make the argument, although I might argue against it, that ... they've made a contribution, the bill is in effect, they're filing a return after the bill became effective, and the bill doesn't state either way in particular whether they could've or not [taken] the credit. And you could argue that claiming the credit now, on a return filed after the effective date of the bill, ... because it's for payments made for a tax year before the effective date of the bill, isn't relevant. So we might have an argument about that. I can't say ... what our position might be. It might be a good idea to clarify that in the bill, though. Number 0758 CHAIR CHENAULT expressed curiosity about whether there have been tax implications already [relating to the $125,000] from depositing [the contributions] into a nonprofit. MR. HARLAMERT responded: That may solve our problem right there, because if they've contributed already, ... then they're going to get a charitable-contribution deduction federally. But it didn't go straight into the fund; arguably, it wouldn't qualify anyway for the credit. Number 0721 REPRESENTATIVE KOTT asked whether, if a taxpayer contributed to this endowment fund, there would be an opportunity to get a write-off for the federal tax liability, in addition to the credit proposed in the bill. MR. HARLAMERT answered: They will take ... a charitable-contribution deduction on their federal return. They'll also, however, have their state income-tax deduction reduced by the amount of credit. So the net ... decrease in federal taxable income would be $50,000 on a $200,000 contribution, for example, and they would save, say, 20 percent of that, not the entire 200 [thousand dollars]. Number 0640 REPRESENTATIVE HAYES asked how much money is brought in from veterans' license plates. He suggested that might be an avenue to gain proceeds to help with the fiscal note. CHAIR CHENAULT responded that it's a good question and has been an item of discussion previously, but said he didn't remember the numbers. Number 0538 REPRESENTATIVE KOTT moved to report HB 371 out of committee with individual recommendations and the accompanying fiscal note(s). There being no objection, HB 371 was reported from the House Special Committee on Military and Veterans' Affairs.