03/10/1998 08:00 AM House STA

HB 449 - ROTH IRA EXEMPTION                                                    
                                                                               
Number 0408                                                                    
                                                                               
CHAIR JAMES announced the committee would hear HB 449, "An Act                 
relating to certain individual retirement accounts," sponsored by              
Representative Therriault.                                                     
                                                                               
Number 0418                                                                    
                                                                               
JOSEPH BALASH, Legislative Secretary to Representative Gene                    
Therriault, Alaska State Legislature, came before the committee.               
He read the following statement into the record:                               
                                                                               
"Under the Alaska Exemptions Act, retirement plans are protected               
from creditor claims.  However, it does so by listing each type of             
retirement plan by reference to the Internal Revenue Code section              
governing that plan.                                                           
                                                                               
"The 1997 Taxpayer Relief Act passed by Congress created the Roth              
IRA under Internal Revenue Code Section 408A.  This section will               
allow taxpayers to make nondeductible contributions to a Roth IRA              
and then later take all distributions from the account tax-free                
subject to certain specified conditions.  These qualified                      
distributions must be included in gross income, but for 1998 only,             
the tax will be spread over four years rather than the customary               
one.                                                                           
                                                                               
"This is a great opportunity to convert all future IRA account                 
earnings into tax-free income and spread the current tax bite over             
four years.  However, those Alaskans who take advantage of this are            
removing their assets from the list of those protected under state             
law under the Alaska Exemptions Act.                                           
                                                                               
"This option is available only during 1998.  Beginning in 1999,                
contributions from regular IRA accounts that are rolled into Roth              
IRAs will be fully taxed in the year of the rollover.  In order for            
Alaskans to maintain their protection while taking advantage of                
this opportunity, legislation must be passed this session."                    
                                                                               
Number 0445                                                                    
                                                                               
REPRESENTATIVE BERKOWITZ asked if there has been any opposition to             
the bill.                                                                      
                                                                               
MR. BALASH indicated that he isn't aware of any opposition.                    
                                                                               
Number 0448                                                                    
                                                                               
REPRESENTATIVE HODGINS made a motion to move HB 449 out of                     
committee with individual recommendations and with the attached                
zero fiscal notes.                                                             
                                                                               
CHAIR JAMES indicated there was someone wishing to give testimony.             
                                                                               
Number 0458                                                                    
                                                                               
THOMAS YERBICH, Attorney, testified via teleconference from                    
Anchorage, in support of HB 449.  He noted he represents debtors in            
bankruptcy.  He stated he has a serious concern that if the bill is            
not enacted this year, he believes a number of people will not                 
realize that they are giving up an important protection that                   
currently exists under state law.                                              
                                                                               
Number 0465                                                                    
                                                                               
REPRESENTATIVE HODGINS noted the committee was just given a                    
proposed amendment.  He then moved to adopt the amendment.                     
                                                                               
CHAIR JAMES said Representative Hodgins can't move the amendment               
because there is a prior motion to move the bill.  She asked                   
Representative Hodgins to withdraw his previous motion.                        
                                                                               
REPRESENTATIVE HODGINS withdrew his motion to move the bill.                   
                                                                               
CHAIR JAMES asked if there is an objection to withdrawing the                  
motion to move the bill from committee.                                        
                                                                               
Number 0475                                                                    
                                                                               
REPRESENTATIVE BERKOWITZ objected for the purpose of discussion.               
He asked, "Is the effective date so we can come in under the wire              
with the upcoming tax season?"                                                 
                                                                               
Number 0476                                                                    
                                                                               
MR. BALASH responded that may be a possibility.  He stated, "It was            
an oversight, on our part, in trying to get the legislation into               
the Clerk's office before the deadline for personal legislation.               
It's something we've intended to have included.  As far as how it              
affects this current deadline, in all reality I don't know that                
that was our intention, but it may favor those who would be                    
affected by this."                                                             
                                                                               
REPRESENTATIVE BERKOWITZ withdrew his objection.                               
                                                                               
CHAIR JAMES said there is no objection to removing the motion on               
the floor which was to move the bill.                                          
                                                                               
Number 0485                                                                    
                                                                               
REPRESENTATIVE HODGINS moved that Amendment A-1, be adopted.                   
Amendment A.1 was written as follows:                                          
                                                                               
  Page 1, line 1, following "accounts":                                        
    Insert "; and providing for an effective date"                             
                                                                               
  Page 1, following line 9:                                                    
    Insert a new bill section to read:                                         
  "*Sec. 3. This Act takes effect immediately under                            
           AS 01.10.070(c)."                                                   
                                                                               
CHAIR JAMES asked if there is an objection to the adoption of                  
Amendment 1.  There being none, Amendment 1 was adopted.                       
                                                                               
Number 0419                                                                    
                                                                               
REPRESENTATIVE HODGINS made a motion to move HB 449, as amended,               
out of committee with individual recommendations and with the                  
attached fiscal notes.  There being no objection CSHB 449(STA)                 
moved out of the House State Affairs Standing Committee.