Legislature(2005 - 2006)CAPITOL 106
04/04/2006 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB461 | |
| HB290 | |
| HB496 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 496 | TELECONFERENCED | |
| += | HB 461 | TELECONFERENCED | |
| += | HB 290 | TELECONFERENCED | |
| += | HB 438 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 496-CONTRIBUTIONS FROM PERM. FUND DIVIDENDS 9:28:38 AM CHAIR SEATON announced that the last order of business was HOUSE BILL NO. 496, "An Act relating to contributions from permanent fund dividends to certain educational organizations and to certain charitable organizations that provide a positive youth development program, workforce development, aid to the arts, or aid and services to the elderly, low-income individuals, individuals in emergency situations, disabled individuals, or individuals with mental illness; and providing for an effective date." CHAIR SEATON highlighted the purpose of the bill, [as described in the first paragraph of the sponsor statement, which read in part as follows]: This bill establishes a check-off on the electronic Permanent Fund Dividend application form that would allow an applicant to donate a portion of their PFD check to an eligible charitable organization, a community foundation, each campus of the University of Alaska, and postsecondary education and vocational training organizations. CHAIR SEATON noted that HB 496 is a House version of a similar Senate bill. He pointed out that there are letters of support included in the committee packet, including letters from the Rasmuson Foundation and from Samantha Castle Kirstein, the executive director of the Fairbanks Community Food Bank. 9:31:15 AM CHAIR SEATON said there are differences between the House and Senate versions of the bill. First, the title of HB 496 includes community foundations, and the following related language has been added to page 3, line 9: "for a community foundation, benefits to a defined geographic area". The other change is on page 3, line 18, which read: "this paragraph does not apply to a community foundation". He indicated that the latter reference would be subject to "a couple of amendments." He directed attention to page 4, line 7, which includes a definition of community foundation as follows: (i) For purposes of this section, "community foundation" means a nonprofit, autonomous, philanthropic institution that is organized and operated primarily as a permanent collection of endowed funds for the long-term benefit of a defined geographic area within one or more municipalities, that has a long-term goal of increasing its permanent unrestricted charitable endowment to benefit the area served, that primarily provides benefits by making grants and may also provide other forms of charitable services, that makes grants that are not limited to providing one type of benefit or to serving one population segment, and that makes grants to multiple grantees. 9:32:33 AM REPRESENTATIVE GRUENBERG moved to adopt the proposed committee substitute (CS), Version 24-LS1793\Y, Cook, 4/3/06, as a work draft. 9:33:10 AM CHAIR SEATON objected for discussion purposes. 9:33:18 AM REPRESENTATIVE LYNN said the bill makes the act of donating to charity convenient and he sees no particular problem with the bill. 9:33:41 AM CHAIR SEATON said there are some restrictions; it only applies to those people who file their PFD electronically, and there are certain terms the nonprofit agencies must meet [as listed in the bill]. 9:34:24 AM REPRESENTATIVE GRUENBERG revealed that his wife is involved in a nonprofit organization called, "Anchorage Unleashed," and because of that he declared a conflict of interest and asked to be excused from "everything with this bill." 9:34:56 AM REPRESENTATIVE LYNN objected. 9:35:07 AM CHAIR SEATON removed his previous objection; therefore, Version Y was before committee. 9:35:31 AM CHAIR SEATON disclosed that his family has a fund within the homeless community foundation, which, he said, is why he knows that community foundations are worthwhile. 9:35:36 AM REPRESENTATIVE GARDNER objected. 9:35:46 AM REPRESENTATIVE GATTO asked how a person's donation through the PFD application would be treated by the Internal Revenue Service (IRS). 9:36:14 AM CHAIR SEATON said he would call forwarded a representative of the Permanent Fund Division to answer that question. Not withstanding that, he offered his understanding that relating to taxes, there is no difference between checking off a box on the PFD and donating the money directly to a charity. 9:36:45 AM SHARON BARTON, Director, Central Office, Permanent Fund Dividend Division, Department of Revenue, directed attention to page 2, [beginning on line 23, through line 26], which read as follows: In addition, the educational organization, community foundation, or charitable organization (1) must apply for inclusion on the contribution list for the current dividend year on the form required by the department before August 1 of the qualifying year; MS. BARTON said the August 1 deadline needs to be moved back to June 15, particularly in the first year, in order for the division to make computer changes and other adjustments, and to allow time for foundations to evaluate whether certain groups meet the set criteria. Then, she said, she will need time to go through the applications and the information provided by "the agent" to make an independent decision on each application. In response to a question from Chair Seaton regarding the June 15 date, she said that date would allow the United Way and Rasmuson Foundation 45 days for consideration, but she recalled that originally they had wanted more time; therefore, she recommended the committee check with those organizations. 9:40:42 AM CHAIR SEATON asked if there would be anything that would limit the [educational organization, community foundation, or charitable organization] from making their applications before June 15. 9:41:19 AM MS. BARTON responded that she views the June 15 date as a deadline, not a window of opportunity; therefore, she said those entities would certainly be allowed to apply before the deadline of June 15. 9:42:09 AM MS. BARTON recommended that the committee look at the random order requirement on page 2, [beginning on line 9], which read as follows: (b) The department shall list each campus of the University of Alaska and shall list each educational organization, community foundation, or charitable organization eligible under (c) or this section on the contribution list in random order, and the order shall be changed each year. MS. BARTON suggested that the random order will make it difficult for members of the public to find their charity among a list that possibly includes 500-700 charities. She talked about making the system user-friendly for the public. 9:43:23 AM REPRESENTATIVE GATTO asked if the information regarding the identity of the PFD applicants who check off a particular charity, for example, would be shared with that charity. 9:44:07 AM MS. BARTON replied that that is a question that the division has not yet worked through. She said the division will provide to the agent a list of those who have contributed, the amount they have contributed, and the organization to which they have contributed. She stated her assumption that the agent would inform the organization who those contributors are, but she said she has not yet confirmed that. MS. BARTON, in response to a remark made by Representative Gatto, explained that the division issues 1099 forms to everyone "for their dividend itself," and she indicated that the charitable gift will be reflected on that 1099 form. 9:46:16 AM REPRESENTATIVE GRUENBERG referred back to the August 1 deadline and asked if the division will require the organizations and foundations to prove that they ... "already have their 501(c)(3) approved by the IRS before you'll put them on the list." 9:46:55 AM MS. BARTON answered yes. 9:46:59 AM CHAIR SEATON directed attention to page 2, [paragraph] (3), which would require the organization or foundation to have qualified for tax exempt status "during the two calendar years that immediately precede the year the application is filed". Chair Seaton pointed out, "So, this is not something that somebody can just go out and say, 'I'm going to form and organization today and get somebody to check off those things tomorrow.'" 9:47:14 AM REPRESENTATIVE GRUENBERG said in a previous year, the committee dealt with the issue of a rolling ballot, and there was testimony that in an election there may be some advantage to being first on the list. He said he is wondering if that positional bias applies to a check-off list of charities. If not, he said he suggests the committee amend the bill to put the list in alphabetical order. 9:48:30 AM MS. BARTON suggested that the Rasmuson Foundation or United Way would be better able to answer that concern. 9:50:48 AM DIANE KAPLAN, President, Rasmuson Foundation of Alaska; Member, Operations Board, Four Acre Group, in response to a question from Chair Seaton regarding the previously suggested date change from August 1 to June 15, stated: The United Way in Anchorage is really the most adept organization in terms of handling these kinds of transactions. They currently administer the ... "SHARE" campaign for Alaska. And my sense from Michelle Brown, the president of United Way, is they would try and work within whatever timelines. Originally we were looking at August 1. I think June 15 would be a little tight, but not impossible, according to Michelle. And what we would try and do is ... maybe get together and start working on some of the documents right now, so that they could be ready to roll out as soon as the bill was signed. 9:52:28 AM MS. KAPLAN, in response to a question from Chair Seaton, said although she did not receive a copy of Version Y, she thinks she grasps the general thrust of the bill. In response to a follow- up question from Chair Seaton, she emphasized that the Rasmuson Foundation is a strong supporter of community foundations and has created a fund itself at the Alaska statewide community foundation to encourage private donations for parks and trails around the Anchorage area, as well as for a Rotary civic project. She listed other areas of the state in which the Rasmuson Foundation has given support. She talked about funds that are bequeathed to children who later leave Alaska, and she stressed the importance of community foundations as an important part of community development. 9:53:55 AM CHAIR SEATON asked Ms. Kaplan if she sees any problem in the bill language [on page 3, lines 17-19], which read as follows: (9) may not make grants or contributions to an organization that is exempt from taxation under 26 U.S.C. 501(c)(4) or (6); this paragraph does not apply to a community foundation. CHAIR SEATON indicated that there is an amendment yet to be offered related to this language. 9:54:46 AM MS. KAPLAN stated, "I think we're all in agreement that the objective here is to get donations to [create a bona fide] ... charitable organization. ... There are some groups like Chambers who do a lot of charitable activities in certain communities. ... Personally, I can't imagine that we would have a problem with those, but I think it's something you'd have to look at carefully." 9:55:26 AM CHAIR SEATON said, "This was just relating to community foundations, because they do offer some grants through those kind of organizations." He asked Ms. Kaplan to explain for the committee the Rasmuson Foundation's aide in implementing the bill. 9:55:50 AM MS. KAPLAN responded as follows: The foundation ... has become aware over time that Alaskans that are lower income and middle income tend to give very generously to charitable organizations in the state - at least around the median for other states - but the wealthier Alaskans actually do not give as much as they could. ... In fact, Alaska has ranked 49th or 50th in the country, in terms of charitable donations from people who earn $100,000 or greater. So, we've been looking at a lot of strategies on how to encourage people who have done well in Alaska to do well for Alaska, and community foundations are one strategy. We often do a lot of challenge grants to organizations, where if they can raise so many dollars, we'll match them .... And the idea of a permanent fund check-off, of course, was successfully utilized by one of our former board members ... years ago for the Olympics bid. There have been several other attempts to do a permanent fund check-off, but they've all seemed to have fallen down because of the fiscal note and the idea that the cost of administration to the state would be too great. So, the idea was if you could find an independent source of nonstate funds to support the administrative expenses so there wouldn't be any costs to the state for the initial term, and 100 percent of those monies people donated would go directly to the charities, ... that would give something like that a better chance of succeeding. So, our board committed - if the state legislature ... and the governor [was interested] in having something like this - to provide the initial expenses for the first three years, hoping that that would provide some comfort to give it some time to get going. 9:57:58 AM ROSEMARY HAGEVIG, Executive Director, Catholic Community Services (CCS), told the committee that CCS is a 501(c)(3) nonprofit organization that provides a wide array of social services, including services for senior citizens, families and children, and hospice and home health care. She stated her support of HB 496, as well as for its companion bill in the Senate. She complimented the Rasmuson Foundation and the Foraker Group for moving forward and making the recommendation to the legislature. She reported that the statistics she has had the opportunity to view indicate that if only 5 percent of the recipients of the permanent fund in Alaska were to give $100 a year, within five years there would be $50 million in this fund. MS. HAGEVIG stated that she thinks the means for donations that the bill proposes is something that the nonprofit sector in Alaska needs. She said that sector has become dependent upon grants for contracts, and it is a challenge to be continually having to raise funds while simultaneously providing services to people. She continued: I also never miss the opportunity to share with policy makers the fact that because of the unique local government structure in Alaska, what the nonprofit sector provides in the way of services in our state represents the work that is traditionally done by county governments in other states. And the huge difference between that, of course, is that county governments have taxation authority, and, of course, nonprofit organizations do not. ... It is what it is, but it does present those of us who are in the business of providing the services with a number of really significant challenges. MS. HAGEVIG concluded by saying she applauds the committee's interest in the bill, and she offered CCS's support in moving the bill forward. 10:01:09 AM MS. HAGEVIG, in response to a question from Chair Seaton regarding the issue of random versus alphabetical listing of the organizations and foundations, speculated that the kind of people who would take advantage of the opportunity to donate probably have a good idea of where they would like to see their funds go, thus, she said alphabetical order would probably be the most effective and practical approach. 10:02:15 AM REPRESENTATIVE GARDNER said she is stunned by the statistic that Alaska ranks 49th or 50th in the country [as related previously by Ms. Kaplan]. She said she thinks perhaps many people intend to donate money but don't get around to it. She asked if there would be advertising to let people know about [the opportunity to donate through the check-off box on the PFD application]. If so, she added, she said she thinks sharing that statistic would be valuable. 10:02:56 AM MS. HAGEVIG said she has not had an opportunity to consider the idea. Notwithstanding that, with the involvement of United Way and the affiliation that most of the 501(c)(3) nonprofit organizations have with organizations such as the Foraker Group and the Rasmuson Foundation, she said she thinks [CCS] would participate in some sort of collaborative effort. She continued: Each of the organizations that I'm aware of already [do] a flurry of advertising and independent fundraising, and in fact, I would imagine that you've noticed that one of the target times, in addition to the holiday season, is the flurry of requests that you get in the mail just prior to the PFD checks coming out. So, the nonprofit sector is already acutely aware of the influx into the economy of additional money at this time, and it is close enough to the end of the year that ... we encourage people to think about their IRS situation, and that this is a good opportunity to share this piece of public wealth in the state of Alaska with those ... who are less fortunate. REPRESENTATIVE GARDNER stated, "It seems to me that if this is a new way of doing it that would happen when you apply for the PFD, it actually would give nonprofits a second bite of the apple, and it's easier for people to say yes when it's something in the future. We know that for commitments of time, as well as money." 10:04:38 AM MS. HAGEVIG responded: I can't speak for my colleagues in the nonprofit sector, but I know that our board of directors works very hard and tries never to miss an opportunity ... to raise friends and funds. And much of our fundraising efforts are to get our mission out there, to make people aware of the work that we're doing and, in fact, to encourage volunteer participation, which we value just as much, if not more, than the financial contribution that people make. 10:06:31 AM MS. KAPLAN, in response to a question from Representative Gruenberg, agreed that many people write their charity donation checks at year's end. She said there will continue to be marketing toward the end of the year, but providing a box to check on the PFD will just provide another opportunity to donate. 10:07:29 AM MS. HAGEVIG said people have to turn in their PFD applications by the last day of March, which is close to [the April 15] IRS tax filing deadline. She suggested that people's financial situation is at the forefront of their minds when they write a check to the IRS, and she added that "we, of course, would like to share in the IRS's wealth." 10:08:45 AM CHAIR SEATON, after ascertaining that there was no one else to testify, closed public testimony. 10:08:57 AM REPRESENTATIVE GRUENBERG noted that currently there is a check- off box on the PFD application for the college savings program. He asked why the donation can only be made up to 50 percent. MS. BARTON said she would research an answer for Representative Gruenberg. 10:10:07 AM CHAIR SEATON moved to adopt Amendment 1, which read as follows [original punctuation provided]: Page 4, line 10 Delete "one or more municipalities," Insert "municipality," 10:10:16 AM REPRESENTATIVE GRUENBERG objected for discussion purposes. He moved to adopt Amendment 1 to Amendment 1, so that the word "one" is not deleted and the phrase would be "one municipality". He described that as a technical amendment. CHAIR SEATON objected and recommended using "a municipality" instead of "one municipality". REPRESENTATIVE GRUENBERG stated his agreement, and therefore, Amendment 1 to Amendment 1 read as follows: Page 4, line 10 Delete "one or more municipalities," Insert "a municipality," CHAIR SEATON asked if there was any objection. There being none, Amendment 1 to Amendment 1 was adopted. 10:11:14 AM REPRESENTATIVE GRUENBERG talked about the development of Cook Inlet in the Anchorage area, and he stated, "I would hate to have this limited to only one municipality. It would seem you very well might have a community foundation that would cover more than one." 10:12:37 AM CHAIR SEATON, in response to Representative Gruenberg's remarks, withdrew Amendment 1, as amended. 10:12:51 AM REPRESENTATIVE GARDNER said in trying to imagine a type of foundation that would expand municipalities, suggested a highway safety group that works on the entire Kenai Peninsula. CHAIR SEATON clarified that a city within a borough does not count as more than one municipality under the definition. 10:13:23 AM CHAIR SEATON moved to adopt Amendment 2, which read as follows [original punctuation provided]: Page 3, line 19, following "foundation." Delete "." Insert "unless a majority of its funds over the past two calendar years that immediately precede the year the application is filed went to an organization exempt from taxation under 26 U.S.C.501(c)(4) or (6)." 10:14:02 AM REPRESENTATIVE LYNN objected for discussion purposes. 10:14:10 AM CHAIR SEATON moved Amendment 1 to Amendment 2, to delete "a majority" and replace it with "more than 10 percent". 10:14:32 AM REPRESENTATIVE LYNN withdrew his objection [to Amendment 1, as amended]. 10:14:42 AM REPRESENTATIVE GARDNER objected to Amendment 2, as amended, for discussion purposes. She asked for further clarification. 10:14:55 AM CHAIR SEATON explained, "What this would be is that if an organization had more than 10 percent of its grants in the previous two years to an organization that did 501(c)(4) or (c)(6) items, then they wouldn't qualify to be on this list." 10:16:21 AM REPRESENTATIVE GARDNER removed her objection. 10:16:28 AM REPRESENTATIVE GRUENBERG [objected for discussion purposes]. He questioned the phrase, "an organization". He explained that there could be a 501(c)(3) organization "that is basically a funnel that gives to a number of organizations that are (c)(4) or (c)(6), and that's all that it does." He added, "And they would escape under this." 10:16:39 AM CHAIR SEATON said he would accept Representative Gruenberg's suggestion as [Amendment 2 to Amendment 2], which would strike "an organization" and insert "organizations" in its place. He asked if there was any objection to [Amendment 2 to Amendment 2 was adopted]. There being none, it was so ordered. CHAIR SEATON asked if there was any objection to Amendment 2 [as amended]. [Representative Gruenberg's objection to Amendment 2, as amended, was treated as removed.] There being no further objection, Amendment 2, as amended, was adopted. 10:18:12 AM CHAIR SEATON moved to adopt Amendment [3], as follows: On page 2, line 25: Delete "August 1" Insert "June 15" REPRESENTATIVE GRUENBERG objected for discussion purposes. He said he would like the opinions of both Ms. Barton and Ms. Kaplan. 10:19:25 AM MS. BARTON said both the Rasmuson Foundation and the division need to have enough time to review documents, because they can expect appeals. Until the division knows the number of organizations, it will need to "plug those organizations right in to the computer programs." She said she thinks June 15 would work for the division. 10:21:03 AM MS. KAPLAN said June 15 would be a tight timeline, because the Rasmuson Foundation does not have any control regarding when the bill is signed. She expressed a preference for July 15. CHAIR SEATON explained that based on what he has heard from the division, without an early enough date, "we're going to miss the entire year." 10:22:22 AM REPRESENTATIVE GRUENBERG removed his objection to Amendment 3. There being no further objection, Amendment 3 was adopted. 10:22:51 AM CHAIR SEATON moved Amendment 4, which read as follows: On page 2, line 11: Delete "random" Insert "alphabetical" CHAIR SEATON asked if there was any objection. There being none, Amendment 4 was adopted. 10:23:09 AM REPRESENTATIVE GARDNER moved to report CSHB 496, Version 24- LS1793\Y, Cook, 4/3/06, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 496(STA) was reported out of the House State Affairs Standing Committee.
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