Legislature(1993 - 1994)

04/19/1994 05:40 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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  CS FOR HOUSE BILL NO. 498(FIN)                                               
                                                                               
       An  Act providing for exploration incentive credits for                 
       activities  involving  locatable and  leasable minerals                 
       and  coal deposits  on certain  land in the  state; and                 
       providing for an effective date.                                        
                                                                               
  Co-chair  Pearce directed that CSHB 498  (Fin) be brought on                 
  for discussion and referenced the following amendments:                      
                                                                               
                                                                               
       Amendment No. 1, by Senator Kerttula                                    
       Amendment No. 2, by Co-chair Frank                                      
       Amendment No. 3, by Senator Kelly                                       
       Amendment No. 4, by Senator Kelly                                       
       Amendment No. 5, by Senator Kelly                                       
                                                                               
  Senator  Kerttula   noted  that  Amendment  No.  1  contains                 
  language that would  "amend into" a subsequent  amendment by                 
  Senator Kelly.  He then MOVED  for adoption of Amendment No.                 
  1.  In response  to a question from Co-chair  Frank, Senator                 
  Kerttula explained that the amendment responds to his belief                 
  that all hire should be local, and the tax credit should not                 
  apply to hire  that is not local.   No objection having been                 
  raised, Amendment No. 1 was ADOPTED.                                         
                                                                               
  Co-chair Frank said that Amendment  No. 2 involves technical                 
  amendments to the bill.  He then asked that department staff                 
  speak to the change.  JERRY GALLAGHER, Director, Division of                 
  Mining, Dept. of Natural Resources,  advised of concern that                 
  the granting of tax credits on trust land would create legal                 
  complications.  Insertion of  "unless otherwise provided  by                 
  law" allows the  commissioner to  withhold tax credits  from                 
  such  lands.    Co-chair  Pearce  called for  objections  to                 
  adoption  of  Amendment No.  2.   No  objection  having been                 
  raised, Amendment No. 2 was ADOPTED.                                         
                                                                               
  Senator  Kelly  explained  that  Amendment   No.  3  removes                 
  retroactive application of  the credit  to January 1,  1994.                 
  He said that supporters of the legislation have no objection                 
  to removal since the January  date was arbitrarily selected.                 
  He then  MOVED for  adoption of  Amendment No.  3.   Senator                 
  Kerttula concurred  in support.   No  objection having  been                 
  raised, Amendment No. 3 was ADOPTED.                                         
                                                                               
  Speaking to Amendment  No. 4,  Senator Kelly explained  that                 
  research   into  legislation  dealing   with  oil   and  gas                 
  exploration credits indicates  a $5  million limit per  site                 
  and a  limit of $50 million total.   In order to ensure that                 
  limitations  are  in  place,  he  proposed addition  of  the                 
  following language:                                                          
                                                                               
       The  amount  of  an  exploration incentive  credit                      
       extended under  this  chapter may  not  exceed  an                      
       amount per parcel  or site,  as determined by  the                      
       commissioner by regulation.                                             
                                                                               
  The  Senator  reiterated   need  for  oversight   of  totals                 
  associated with  these types  of credits.   Co-chair  Pearce                 
  referenced  fiscal  note  information  indicating  that  the                 
  maximum amount  of credits that  could have been  claimed in                 
  1993 totals approximately $17 million.                                       
                                                                               
  End:      SFC-94, #66, Side 1                                                
                                                                               
                                                                               
  Begin:    SFC-94, #66, Side 2                                                
                                                                               
  Senator  Kelly  stressed that,  in  light of  ongoing budget                 
  cuts, the  legislature must protect  existing revenues  from                 
  erosion.                                                                     
                                                                               
  Co-chair Frank  inquired concerning  the types  of taxes  to                 
  which credits would be applied.  Mr. Gallagher said that the                 
  bill applies to three separate payments:                                     
                                                                               
       1.   Royalty on state land.                                             
       2.   The mining license tax that applies to all lands--                 
  a form                                                                       
                 of severance tax.                                             
       3.   Corporate income tax.                                              
                                                                               
  Senator Kelly  explained that the  oil and gas  lease credit                 
  bill contains  the above-mentioned  cap to fix  a figure  in                 
  statute.    Rather than  try  to do  that,  he  said he  was                 
  proposing the language within Amendment No. 4.                               
                                                                               
  Co-chair Frank requested that he be  allowed a day to review                 
  implications of  the  proposed amendment.   Co-chair  Pearce                 
  directed  that  Amendment  No.  4  be  held  for  subsequent                 
  consideration.                                                               
                                                                               
  Speaking  to Amendment No.  5, Senator Kelly  noted that the                 
  oil and  gas tax  credit bill  was limited  to 50%  on state                 
  lands and 25% on lands not owned by the state.  The proposed                 
  amendment attempts to duplicate that requirement in CSHB 498                 
  (Fin).  He said that he saw  no reason for the Alaska public                 
  to subsidize the exploration tax credit on private property.                 
  Senator Kerttula concurred,  saying that there should  be no                 
  subsidy on non-state-owned properties.                                       
                                                                               
  Co-chair Frank requested  that Amendment No. 5 also  be held                 
  for subsequent discussion.                                                   
                                                                               
  Senator  Kelly  referenced  language  within  the  amendment                 
  relating  to  "eligible  costs."    He  explained  that  the                 
  language was  added by the  drafter to delineate  costs that                 
  are eligible  for  tax  from those  that  are not.    It  is                 
  intended to prevent an organization  from padding the actual                 
  cost  of exploration  at  the site  with overhead  and other                 
  types of costs that are not directly related.  Amendment No.                 
  1, by Senator  Kerttula, relating  to labor costs  dovetails                 
  with these provisions.                                                       
                                                                               
  Senator Sharp voiced  his understanding that the  credit was                 
  limited to labor only.  Senator Kelly advised that it covers                 
  other eligible costs.                                                        
                                                                               
  Co-chair  Pearce  directed  that CSHB  498(Fin)  be  HELD in                 
  committee for additional review.                                             
                                                                               
                                                                               

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