Legislature(1997 - 1998)

03/20/1997 08:05 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HB 84 - PULL-TABS LIMITED TO 501(C)(3) OR (19)                              
 The next order of business to come before the House State Affairs             
 Standing Committee was HB 84, "An Act limiting the authority to               
 conduct pull-tab charitable gaming to qualified organizations that            
 are exempt from taxation under 26 U.S.C. 501(c)(3) or (19); and               
 providing for an effective date."                                             
 CHAIR JAMES called on Representative Terry Martin, sponsor of HB
 84, to present the bill.                                                      
 Number 0405                                                                   
 REPRESENTATIVE TERRY MARTIN, Alaska State Legislature, distributed            
 to the committee members a handout titled, "A Great Time to Brag."            
 People were concerned that the bill would stop their source of                
 money from the pull-tabs.  He told them it would depend on what               
 they told the committee and what they had been doing with the                 
 money.  If the money did not go towards charitable purposes, then             
 there would be a problem.  It was also a time for the charitable              
 groups and the citizens to brag about their programs and how they             
 had been helping true charitable purposes.  Had they been giving              
 their money to Beans Cafe, or to scholarships, for example?  Had              
 they been helping youth athletic programs?  Were organizations                
 giving out more scholarships now that they had a permit?  It was a            
 great time to see what was happening with the millions and millions           
 of dollars gained from pull-tabs.  From the state's perspective, 8            
 percent of the total of $270 million was not very much when illegal           
 gamblers paid 10 to 15 percent for protection.  He believed some of           
 the money went to the Alaska Charitable Gaming Association, Inc. to           
 protect what they were doing.  Some used the money to fight                   
 regulations in the courts instead of coming to the legislature                
 asking for adjustments.  He reiterated it was a great opportunity             
 to scrutinize what was happening in the pull-tab world.                       
 Number 0669                                                                   
 REPRESENTATIVE MARTIN further stated that HB 84 was strictly                  
 related to pull-tabs.  It had nothing to do with the organizations            
 that had a permit for auctions or bingos, for example.                        
 Number 0699                                                                   
 REPRESENTATIVE IVAN asked Representative Martin if HB 84 would                
 prohibit municipalities from selling pull-tabs?                               
 Number 0730                                                                   
 REPRESENTATIVE MARTIN replied it would be very interesting to find            
 out what the municipalities were doing.                                       
 CHAIR JAMES asked Representative Martin to answer the question of             
 Representative Ivan.                                                          
 REPRESENTATIVE MARTIN replied he did not know if the bill would               
 prohibit municipalities.  If they were not using the money for                
 charitable purposes then they should be questioned.                           
 CHAIR JAMES asked Representative Martin if the bill prohibited                
 REPRESENTATIVE MARTIN replied, "As I see it now it does, yes."  It            
 was up to the committee if municipalities should be put back in as            
 charitable organizations.  If they were using the money just for              
 more revenue instead of taxation, then they should be questioned.             
 Number 0774                                                                   
 REPRESENTATIVE IVAN asked Representative Martin if the                        
 unincorporated communities would also be impacted by HB 84?  Would            
 they be prevented from participating for example?                             
 Number 0826                                                                   
 REPRESENTATIVE MARTIN replied, from my point of view, they should             
 be if the money was not going for charitable purposes.  If the                
 money was going to the local administration then it was not very              
 charitable.  That was what taxes and other avenues of money were              
 for, even in unincorporated communities.                                      
 Number 0851                                                                   
 CHAIR JAMES asked Representative Martin to explain the identified             
 codes in the bill and which ones would be excluded.                           
 REPRESENTATIVE MARTIN deferred the question to Mr. Poshard,                   
 Director, Charitable Gaming Division, Department of Revenue.                  
 Number 0895                                                                   
 REPRESENTATIVE IVAN asked Representative Martin if he had                     
 documentation that accounted for the amount of dollars from pull-             
 tab sales being placed into campaigns?                                        
 Number 0925                                                                   
 REPRESENTATIVE MARTIN replied he was going to save that information           
 for his other bill - HB 156.  At such time, he would bring the                
 backup information that would give a person an idea of how much               
 money was going into the political process - directly and                     
 indirectly.  "It is absolutely amazing how much money.  They make             
 the oil companies look like little pimps."                                    
 Number 0955                                                                   
 CHAIR JAMES asked Representative Martin if campaign finance reform            
 last year eliminated political contributions from pull-tab                    
 Number 0963                                                                   
 REPRESENTATIVE MARTIN replied, "We attempted to."  But the words              
 and phrases did not accomplish what we wanted to.  The backup                 
 information would show the loopholes.  The biggest loophole, he               
 declared, was the prevention of corporations and unions from                  
 contributing.  The legislation did not prevent non-profit                     
 organizations, however.                                                       
 Number 1004                                                                   
 CHAIR JAMES replied that campaign finance reform made it                      
 specifically clear that only individuals could make political                 
 Number 1017                                                                   
 REPRESENTATIVE MARTIN replied there were big loopholes that needed            
 to be closed.                                                                 
 Number 1032                                                                   
 REPRESENTATIVE BERKOWITZ asked Representative Martin if he was                
 seeking to exclude certain non-profits from qualifying?                       
 Number 1044                                                                   
 REPRESENTATIVE MARTIN replied the challenge of HB 84 was to find              
 out which groups were not fulfilling the idea of charitable                   
 purposes from the sale of pull-tabs.  They had not been challenged            
 in 10 years.  "Just because they are our friends and neighbors and            
 everything else, doesn't mean the monies they earn from pull-tabs             
 go to charitable purposes."                                                   
 Number 1083                                                                   
 REPRESENTATIVE BERKOWITZ asked Representative Martin if he had a              
 list of the organizations that he was seeking to exclude?                     
 CHAIR JAMES stated the Administration was going to come forward to            
 answer that question.                                                         
 Number 1096                                                                   
 REPRESENTATIVE IVAN commented that the legislature was trying to              
 downsize government.  Therefore, he believed that this bill would             
 have a detrimental impact on some of the communities that he                  
 represented.  He asked Representative Martin what was his opinion?            
 Number 1136                                                                   
 REPRESENTATIVE MARTIN replied it could go either way.  It depended            
 on what the committee discovered.  Part of the reason that pull-              
 tabs came about was to help the charitable needs of a community.              
 In addition, of the $270 million, less than 8 percent went to                 
 actual charities.  And from that charity alone maybe one-half of              
 the 8 percent went to an actual charitable purpose.  Other states             
 mandated that 30 percent off of the top went to charity.                      
 Number 1210                                                                   
 CHAIR JAMES asked Representative Martin if HB 84 did that?                    
 Number 1226                                                                   
 REPRESENTATIVE MARTIN replied HB 84 scrutinized what the groups               
 were doing.                                                                   
 CHAIR JAMES asked Representative Martin if HB 84 had anything to do           
 with the percentages?                                                         
 REPRESENTATIVE MARTIN replied, "No."  His second bill addressed the           
 CHAIR JAMES stated that the committee members should focus on HB
 REPRESENTATIVE MARTIN replied HB 84 focused on what groups should             
 be allowed and which groups should not be allowed.                            
 Number 1250                                                                   
 DENNIS POSHARD, Director, Charitable Gaming Division, Department of           
 Revenue, explained that the division and the department had not               
 taken a position of either for or against the bill.  "We feel that            
 the legislature has every right to decide who does and who does not           
 deserve to receive a permit to conduct charitable gaming                      
 activities."   It had been difficult to come up with an accurate              
 fiscal note because no state agency maintained a list of                      
 501(c)(3)'s, 501(c)(19)'s or any other 501(c) type of organization.           
 The Income, Excise and Audit Division and the Corporation Division            
 maintained a list of 501(c)'s, but with no further designation.  As           
 a result, the division contacted the Internal Revenue Service (IRS)           
 that provided a list of all of the designations.  The division                
 received it last week, therefore, he did not have the time to redo            
 the fiscal note.  The division was currently comparing the list of            
 501(c)(3)'s and 501(c)(19)'s from the IRS with the division's list            
 of pull-tab permitees.  The division intended to create three                 
 lists:  organizations that currently had pull-tab permits that                
 would no longer be eligible; organizations that currently had pull-           
 tab permits that would remain eligible; and organizations that did            
 not have a pull-tab permit but would be eligible.  The lists would            
 - hopefully - be available tomorrow, March 21, 1997.                          
 MR. POSHARD further explained that the fiscal notes contained                 
 several assumptions:  that all 1995 charitable, educational and               
 religious organization that were issued permits were considered               
 501(c)(3)'s; and that the veteran organizations that were issued              
 permits were 501(c)(19)'s.  He discovered there were some that were           
 designated as 501(c)(4).  The division also assumed that all other            
 1995 organizations - IRA Native villages, volunteer fire                      
 departments, fraternal organizations, fishing derby associations,             
 dog mushing associations, municipalities, labor organizations, non-           
 profit trade associations, and civic or service organizations -               
 were not designated as 501(c)(3)'s.  The division, therefore,                 
 calculated that approximately 362 charities that currently had                
 pull-tab permits would no longer be authorized to sell pull-tabs.             
 And the total estimated loss would be about $12 million, slightly             
 reducing the division's budget.  It did not mean that the division            
 would have 362 less reports or applications to process because many           
 of those organizations conducted raffles as well, for example.  The           
 division, however, would see a slight reduction in its program                
 receipts because it received a 3 percent pull-tab tax of the ideal            
 net of every pull-tab game, and a 1 percent fee of the $12 million            
 in proceeds.                                                                  
 Number 1561                                                                   
 CHAIR JAMES stated that the fiscal note also said that the division           
 would lose two full-time positions.                                           
 MR. POSHARD replied, "Correct."                                               
 CHAIR JAMES asked Mr. Poshard if the $117,000 marked on the fiscal            
 note was the two positions?                                                   
 MR. POSHARD replied, "Correct."                                               
 CHAIR JAMES asked Mr. Poshard if the reduction in lost revenues was           
 expected to be $1,155,300?                                                    
 MR. POSHARD replied, "Correct."                                               
 CHAIR JAMES replied then actually the division would only spend               
 $117,000 less.                                                                
 MR. POSHARD replied, "Correct."                                               
 CHAIR JAMES replied there was a bigger gap in the division's income           
 versus its expenses.                                                          
 Number 1597                                                                   
 REPRESENTATIVE DYSON asked Mr. Poshard if the 362 groups would not            
 be able to operate pull-tabs now because they did not qualify under           
 the federal non-profit regulations?                                           
 Number 1621                                                                   
 MR. POSHARD replied, "Correct."  The number was an estimation based           
 on the assumptions mentioned earlier.  The current estimation was             
 that 362 organizations would not qualify because they did not have            
 501(c)(3) or 501(c)(19) status with the IRS.                                  
 Number 1652                                                                   
 REPRESENTATIVE DYSON asked Mr. Poshard if many of them would                  
 qualify if they applied?                                                      
 MR. POSHARD replied some would be able to qualify just by applying            
 with the IRS, and some would not because they were not                        
 incorporated.  He explained incorporation was not a requirement,              
 currently.  However, some had already received a designation, such            
 as 501(c)(4).  They would have difficulty applying with the IRS to            
 receive a different designation because the designations were very            
 Number 1730                                                                   
 REPRESENTATIVE DYSON wondered if that was because their activity              
 fell outside of the framework of the charitable non-profits.                  
 Number 1750                                                                   
 MR. POSHARD replied, "Correct."  According to the IRS code, a                 
 501(c)(3) was typically a, "religious, educational, charitable,               
 scientific, literary, testing for public safety, to foster national           
 or international amateur sports competition, or prevention of                 
 cruelty to children or animals organization."  A 501(c)(19) was               
 designated as, "post or organization of past or present members of            
 the armed forces."  Therefore, if they were not an organization               
 that fell under those categories, they could potentially be                   
 designated in a different (c) status.                                         
 Number 1786                                                                   
 REPRESENTATIVE DYSON asked Mr. Poshard if there would be 70 or a              
 100 or so of the 362 that would not qualify with their current                
 stated purpose?                                                               
 Number 1798                                                                   
 MR. POSHARD replied it was difficult to estimate, but a majority              
 would probably not be able to qualify.  The list was being run now.           
 Number 1819                                                                   
 REPRESENTATIVE MARK HODGINS asked Mr. Poshard if he had a                     
 description of the 501 designations?                                          
 Number 1837                                                                   
 MR. POSHARD replied that he had two lists - the IRS codes and a               
 layman's term list.                                                           
 Number 1850                                                                   
 REPRESENTATIVE HODGINS asked Mr. Poshard for a list of the 501                
 groupings that currently had pull-tab licenses, if possible.                  
 CHAIR JAMES explained that the division was working on the list               
 now.  She asked Mr. Poshard how soon would the list be ready?                 
 MR. POSHARD replied - hopefully - tomorrow.                                   
 Number 1877                                                                   
 REPRESENTATIVE BERKOWITZ asked Mr. Poshard if the list included the           
 organizations that would be affected by HB 84?                                
 MR. POSHARD replied, "Yes."  The division was working on three                
 lists:  current 501(c)(3) and (19) designations that did not have             
 pull-tab permits; 501(c)(3) and (19) designations that did have               
 pull-tab permits; and organizations that had pull-tab permits and             
 did not have a 501(c)(3) or (19) designation.                                 
 Number 1918                                                                   
 REPRESENTATIVE ELTON stated that part of the problem with the bill            
 was the suggestion that the money collected was not going where it            
 ought to go.  He asked Mr. Poshard if it was possible to see                  
 information from his office on these organizations?                           
 Number 1960                                                                   
 MR. POSHARD replied the division had an annual report that                    
 summarized that information.  In addition, all of its records were            
 considered public information.  Each permittee was required to file           
 a schedule E that required a list of every check that it wrote to             
 show how it used its proceeds.                                                
 Number 2002                                                                   
 REPRESENTATIVE ELTON asked Mr. Poshard if he went to his office and           
 asked to see the file of the Auke Bay Volunteer Fire Department,              
 for example, it would be available?                                           
 MR. POSHARD replied, "Correct."  He could look at the file to see             
 how it spent its money, how it made its money, and/or its expenses.           
 Number 2023                                                                   
 CHAIR JAMES stated that this was convoluted because of the                    
 description of the statements made by the sponsor indicating that             
 he had another bill related to this.  The question of wanting to              
 know the contents of their file was irrelevant.  House Bill HB 84             
 said that if an organization was not entitled to be tax-exempt from           
 the IRS then it was not entitled to a pull-tab permit.  Thus, those           
 who would qualify and who would give money to the right places had            
 nothing to do with the bill.  Part of the requirement was that no             
 political activities were allowed in a 501(c)(3) designation.  It             
 was also her understanding that it did not have to do with whether            
 or not an organization was putting its money in the right places or           
 handling its money correctly, as-much-as, it was a philosophical              
 opinion.  Therefore, anything that the committee would do to the              
 bill would totally change the philosophical bent of the bill.  "So,           
 I think all of this other information is superfluous to the issue             
 before us."   It was not clear in HB 84 that the intent was to                
 scrutinize how the money was being spent.                                     
 Number 2140                                                                   
 REPRESENTATIVE ELTON replied he agreed with the interpretation of             
 Chair James.  However, before he could make a decision on the bill            
 he wanted to know the impact on the organizations that would be               
 excluded and on the charities that they supported.                            
 Number 2150                                                                   
 CHAIR JAMES replied the list that the committee members were going            
 to get from the Charitable Gaming Division would allow him to do              
 Number 2160                                                                   
 MR. POSHARD stated that the division could add the amount of net              
 proceeds that each of the charitable organizations received from              
 their pull-tab activity.  It would take a little bit more time to             
 prepare the list, however.                                                    
 CHAIR JAMES replied that was a good idea.  She reiterated that                
 those issues were irrelevant to the intent of the bill; however, to           
 narrow those organizations that qualified for pull-tabs as a money            
 making entity.                                                                
 Number 2208                                                                   
 REPRESENTATIVE HODGINS asked Mr. Poshard if it would be possible to           
 provide how many of the pull-tab organizations used operators?                
 Number 2223                                                                   
 MR. POSHARD replied it was another designation that could be added            
 to the report.  It would not be a significant amount; however, not            
 as much as one-half.                                                          
 Number 2246                                                                   
 GERALD J. DORSHER, Legislative Officer, Veterans of Foreign Wars,             
 was the first person to testify in Juneau.  Some good points were             
 raised today in regards to where the committee was going with the             
 bill.  The veterans of foreign wars had for some reason been                  
 designated as a 501(c)(4) when it should be a 501(c)(19).  The                
 department was pursuing the issue at this time through its mother             
 organization.  The department hoped that Representative Martin                
 would include a 501(c)(4) during the interim of its designation as            
 a 501(c)(19).                                                                 
 Number 2318                                                                   
 CHAIR JAMES asked Mr. Dorsher if there were any other advantages              
 for the veterans to be a 501(c)(19) as opposed to a (4), besides a            
 pull-tab permit?                                                              
 Number 2331                                                                   
 MR. DORSHER replied, "No."  The IRS designated past and present               
 military organizations as a 501(c)(19).                                       
 Number 2340                                                                   
 REPRESENTATIVE AL VEZEY announced that he had the definitions of              
 the 501(c) designations.  A 501(c)(19) was a special classification           
 for veteran organizations entitling them to a tax-exempt status.              
 The 501(c)(3) category was not just a public-welfare organization,            
 but a tax-deductible organization.  Many public welfare                       
 organizations did not try to get a tax deductible status -                    
 501(c)(4) and 501(c)(8) - for example.  Therefore, we should                  
 consider more than just the 501(c)(3) and 501(c)(19) designations.            
 There were valid reasons to be a (c)(4) rather than a (c)(19); it             
 expanded what could be done without jeopardizing the tax-exempt               
 Number 2408                                                                   
 CHAIR JAMES stated that she did not want to do anything to distress           
 the veterans.  They were the most valued citizens.                            
 Number 2420                                                                   
 GEORGE WRIGHT, Representative, Alaska Native Brotherhood (ANB) Camp           
 Number 2, was the next person to testify in Juneau.  The ANB Camp             
 Number 2 opposed the bill because it eliminated a lot of the                  
 gambling for villages that use it for a fund raiser.  "It would               
 completely knock the Brotherhood out."  It had applied for a                  
 501(c)(3) and (c)(8) status which had not been attained yet.  The             
 Alaska Native Brotherhood Grand Camp was a (c)(8) which covered all           
 of the ANB camps.  The bill, however, did not include (c)(8).                 
 "It's a bad bill."  It simply chopped off everything else that was            
 irrelevant, such as:  how it spent its money and how it earned its            
 money.  He was part of a task force to rewrite the gaming rules and           
 regulations and for some reason neither body had reviewed the                 
 recommendations; for example, to finance the department with extra            
 man power so that it could go after the people....                            
 TAPE 97-29, SIDE B                                                            
 Number 0001                                                                   
 MR. WRIGHT further said that the ANB followed the guidelines of a             
 fraternal organization on the one hand and the guidelines of a                
 501(c)(3) on the other.  The board members were having a hard time            
 trying to get its certificate with the IRS.  Under a 501(c)(3)                
 designation the organization could not donate money to its members.           
 "Well everybody in the village is somehow related and that kind of            
 chopped them off at the knees."  How do you break it up if you're             
 all related and you started this organization and you want to give            
 money to your son.  This is a very bad bill."  The ANB did like the           
 tax-exempt portion of the bill, however.  Mr. Elton established the           
 city sales tax in Juneau to raise revenues from pull-tabs.                    
 Currently, the city taxed the gross dollar amount of sales.  If a             
 ticket sold for $1, the city would put a 4 cents sales tax on every           
 ticket in the box.  The city did not give any consideration to the            
 price pay-outs or the play-backs.  The city taxed the whole amount            
 which was 39 percent of the ANB's profits.  The ANB paid 51 percent           
 to the city of Juneau because of its tax structure after covering             
 the cost of business.  "They refuse to recognize that the charity             
 only controls the money that they take to the bank.  They don't               
 control the money that they pay out in prizes.  That money is held            
 in trust until somebody wins it, but they tax it."  He suggested if           
 a bill was going to be written to examine the tax structure, it               
 would force a lot of people out of business in Juneau then Mr.                
 Martin would not have to worry about HB 84.                                   
 Number 0099                                                                   
 REPRESENTATIVE VEZEY asked Mr. Wright if the ANB was organized                
 under 501(c)?                                                                 
 MR. Wright  replied the grand camp was organized under 501(c)(8).             
 The ANB Camp Number 2 was a subordinate just like the Moose Lodges.           
 REPRESENTATIVE VEZEY asked Mr. Wright if he would object to the               
 bill if it incorporated 501(c)(8)?                                            
 MR. WRIGHT replied he would object because some of the villages               
 could not be that way.  For example, the spring carnival in some              
 villages were the biggest event of the year, of which, pull-tabs              
 were used to raise money for prizes to draw the people back to the            
 villages for the carnival.  If they wanted to grandfather the bill            
 then there would not be a problem.  If they wanted to eliminate               
 those that were not operating to the color of the law then let's              
 take the matter to the Charitable Gaming Division and give it more            
 investigators.  "Two investigators to do 1,600 permits in the state           
 of Alaska is quite skimpy."  He suggested that the committee                  
 members look at the task force rewrites and the recommendations.              
 Number 0169                                                                   
 REPRESENTATIVE HODGINS asked Mr. Wright to give him information               
 about the Native groups and how many used operators and where were            
 they located.                                                                 
 Number 0184                                                                   
 REPRESENTATIVE ELTON commented that Mr. Wright and he had a                   
 history.  The city of Juneau did apply a sales tax to pull-tabs in            
 the same way that it applied a sales tax to a loaf of bread.  The             
 sales tax was not applied to the profit; it was applied to the sale           
 Number 0200                                                                   
 CHAIR JAMES asked Representative Elton if she paid $1 for a pull-             
 tab, did she have to pay $1.04?                                               
 REPRESENTATIVE ELTON replied in Juneau she would have to pay $1.05.           
 CHAIR JAMES replied she did not think that was the way it worked.             
 REPRESENTATIVE ELTON explained the assembly recognized that $1.05             
 could inhibit the sale of a pull-tab rather than $1.  Therefore,              
 the assembly gave the operators an option to charge $1.05, lower              
 the pay-out of the game by 5 cents, or absorb the cost.  He could             
 not think of anybody in town charging $1.05 now.                              
 Number 0247                                                                   
 MR. WRIGHT replied, "No."  Playing pull-tabs was a sporadic thing.            
 The ANB did not have a problem paying the tax on the $1 spent.  It            
 had a problem with paying the tax on the ticket that was won                  
 because generally the individual exchanged the winning amount of              
 the ticket for more tickets.  Thus, no money was exchanged; but,              
 the city took 5 cents for each one of the tickets.                            
 REPRESENTATIVE ELTON replied the city appreciated it.                         
 MR. WRIGHT explained the Ketchikan court ruled that pull-tabs were            
 intangible objects.  It was not a retail product, nor like anything           
 else that was sold in a store.  It was an object sold with a                  
 liability - the price pay-out.                                                
 Number 0304                                                                   
 CHAIR JAMES stated this was an interesting conversation.  She did             
 not buy pull-tabs but her husband did.  It was called "fun raising"           
 not "fund raising" at the Elks on Friday nights.  She knew that he            
 was paying only $1 for a ticket which meant that the 5 cents was              
 coming out of the sale.  It was not a tax on the person, therefore.           
 In this case the seller paid the tax because $1.05 would be very              
 inconvenient for the buyer.                                                   
 Number 0376                                                                   
 CHAIR JAMES announced, for the record, that Mr. Minor W. Thomas III           
 from the Loyal Order of Moose in Juneau, was opposed to HB 84.  He            
 urged it to be defeated and asked that his letter be part of the              
 "I am sorry that I cannot be there in person to testify on this               
 bill, however please accept my gratitude for allowing me t submit             
 written testimony.                                                            
 "We here at the Juneau Moose and the other lodges around the state            
 are vehemently opposed to H.B. 84.  First, why is Representative              
 Martin excluding Sec. 501 C-8 organizations from this bill?  That             
 would include all of the Moose lodges in the state and I don't know           
 how many other organization.                                                  
 "Moose lodges are organized under 501(C8) as non-profit fraternal             
 organizations with no political ties and none allowed.  We are                
 organized under a strict members only policy and any monies made by           
 Moose lodges must come from its members and not the general public.           
 This includes any pull tab monies we make.  It must be remembered             
 that we support many charities with our pull tab monies as                    
 evidenced with the information packs given to Representative Elton            
 and Hudson.  Along with the information for Juneau, you could look            
 at the Craig lodge who sent thousands of dollars back into the                
 community.  In fact, they are the major contributor to the                    
 Ambulance Corp.  The Petersburg lodge donated over $100,000 back to           
 the community last year.  In Anchorage along last year $123,000 was           
 given to charity.                                                             
 "With figures like these it is hard to fathom how anyone could deny           
 501(C8) organizations the right or privilege to sell pull tabs to             
 its members.                                                                  
 "If we cannot sell pull tabs who is going to fund and support the             
 many charities.                                                               
 "Again, we urge that H.B. 84 be defeated.                                     
 "Thank you for your time and consideration."                                  
 Number 0401                                                                   
 REPRESENTATIVE MARTIN distributed to the committee members the                
 report on what was happening to charitable dollars and how the                
 money got into the political process - directly and indirectly.               
 Number 0440                                                                   
 CHAIR JAMES asked Representative Martin if he would do this again             
 after the 1998 campaign to see what the changes would be because of           
 campaign finance reform?                                                      
 Number 0449                                                                   
 REPRESENTATIVE MARTIN replied it depended on if he was reelected.             
 The report showed each individual candidate and how much money came           
 in from groups that had a pull-tab permit.  It also showed how much           
 went to the political parties and then to the candidates                      
 illustrating the loopholes in the system.  He cited the Home                  
 Builders Association raised a lot of money.  He did not see how it            
 was a charitable organization, however.                                       
 Number 0519                                                                   
 CHAIR JAMES replied it was a public policy decision to determine if           
 the organizations met the ordinary understanding of charitable                
 issues.  House Bill 84 would change it so that only recognized                
 charitable activities would be able to be funded from pull-tabs.              
 Number 0566                                                                   
 REPRESENTATIVE MARTIN replied this was just the beginning.  It was            
 not to be exclusive of anything.  There was confusion with the IRS            
 in regards to what organization was a charity.                                
 CHAIR JAMES replied she disagreed with the fact that the IRS was              
 confused.  "They tell us who is and who isn't.  They aren't                   
 confused about that at all."                                                  
 REPRESENTATIVE MARTIN replied the IRS was confused in regards to              
 what Alaska called a charity.                                                 
 CHAIR JAMES replied the IRS did not care if the state was confused            
 because they were not confused.                                               
 REPRESENTATIVE MARTIN reiterated it was confusing to the IRS in               
 regards to what the state called charity.                                     
 CHAIR JAMES replied that was none of its business.  The IRS was a             
 taxing authority and it could tax the way it wanted to and it was             
 none of its business what the state did.                                      
 REPRESENTATIVE MARTIN replied this was charity and not tax.  "If              
 you're saying in the name of charity that we're letting these                 
 people have all of these millions of dollars then we can stick our            
 heads in the sand.  We don't care if we're going to touch                     
 motherhood and apple pie."                                                    
 Number 0634                                                                   
 REPRESENTATIVE ELTON stated he understood what Representative                 
 Martin was trying to accomplish.  He wondered, however, if it could           
 be accomplished by drafting legislation that said the proceeds                
 could only be used in a manner that would be contemplated under               
 501(c)(3) or 501(c)(19).  Therefore, it would not limit those who             
 could do it, but it would limit how the proceeds could be used.               
 Number 0662                                                                   
 REPRESENTATIVE MARTIN replied he could have done a thousand                   
 different things.  "I do take the challenge of bringing it open and           
 they're talking about motherhood and apple pie."  No one expected             
 1,600 people to get a pull-tab permit when almost any three or four           
 individuals could call themselves a non-profit organization and               
 they did not qualify for the intent of the legislation.                       
 Number 0683                                                                   
 REPRESENTATIVE ELTON replied this was like hunting sparrows with a            
 shotgun.  If there were legitimate purposes by the VFW, for                   
 example, that was a (c)(4) designation, the bill would get rid of             
 it no matter how it used the proceeds.  The better way to approach            
 this would be to say what the proceeds could be used for rather               
 than saying who could sell pull-tabs.                                         
 Number 0712                                                                   
 REPRESENTATIVE MARTIN replied the challenge for the committee was             
 to look and to say that Representative Martin was a complete idiot.           
 The legislature should see what was happening with the money.  "If            
 you don't want to then vote VFW and motherhood."  The Chiropractor            
 Association was not a charitable organization, he declared.                   
 Number 0736                                                                   
 REPRESENTATIVE ELTON asked Representative Martin if the money went            
 to charities then what was the difference?                                    
 REPRESENTATIVE MARTIN replied the Chiropractor Association put a              
 lot of money into the political process and it put a lot of money             
 into its own organization; and, yes, it did contribute $250 to a              
 little league.  But, when it gained $50,000 and only gave out $250,           
 that was not charity.                                                         
 CHAIR JAMES announced that the bill would be held in the committee.           
 Number 0766                                                                   
 REPRESENTATIVE ELTON introduced his shadow for the day, Joel                  
 Cladouhos from Juneau Douglas High School.  His unfortunate duty              
 was to follow him around today so he was trying to make it pleasant           
 for him.                                                                      

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