Legislature(2001 - 2002)

04/04/2002 03:20 PM MLV

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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 [2002].  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.                                                                            

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