Legislature(2013 - 2014)

04/19/2014 04:03 PM Senate FIN


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CS FOR HOUSE BILL NO. 306(FIN)                                                                                                
                                                                                                                                
     "An Act  relating to the  review and  administration of                                                                    
     tax  credit  programs;   requiring  the  Department  of                                                                    
     Revenue  to report  indirect expenditures;  relating to                                                                    
     the   duties   of   state   agencies;   requiring   the                                                                    
     legislative   finance  division   to  analyze   certain                                                                    
     indirect  expenditures;  relating  to lapse  dates  for                                                                    
     appropriations  for  capital  projects;  repealing  the                                                                    
     insurance   tax  education   credit,  the   income  tax                                                                    
     education  credit, the  veteran employment  tax credit,                                                                    
     the oil or gas producer  education credit, the property                                                                    
     tax  education credit,  the  mining business  education                                                                    
     credit,  the fisheries  business education  credit, the                                                                    
     fisheries   business   tax   credit   for   scholarship                                                                    
     contributions,  the fisheries  business salmon  product                                                                    
     development tax  credit, the fisheries  business salmon                                                                    
     utilization tax credit,  the fisheries business landing                                                                    
     tax   credit   for   scholarship   contributions,   the                                                                    
     fisheries   resource  landing   tax   credit  for   the                                                                    
     fisheries  resource   harvested  under   the  community                                                                    
     development quota,  the fisheries resource  landing tax                                                                    
     education credit,  and the film production  tax credit;                                                                    
     and providing for an effective date."                                                                                      
                                                                                                                                
5:20:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STEVE THOMPSON, presented HB 306:                                                                                
                                                                                                                                
     HB  306 is  sound fiscal  policy. HB  306 provides  the                                                                    
     legislature  with an  effective  tool  to identify  and                                                                    
     capture potential lost  revenue. A Legislative Research                                                                    
     report shows that  over the past five  years, the State                                                                    
     has  forgone  almost  half a  billion  dollars  through                                                                    
     identified  indirect spending  across all  departments,                                                                    
     inclusive of  $20 million in Department  of Revenue tax                                                                    
     credits not related to oil and gas.                                                                                        
                                                                                                                                
     HB   306  will   provide  a   mechanism  to   help  the                                                                    
     legislature   identify   its  spending   by   providing                                                                    
     information  on  indirect   expenditures,  and  capital                                                                    
     grants  to projects  by bringing  them back  before the                                                                    
     legislature for fiscal review.                                                                                             
                                                                                                                                
     HB 306 lapses grants to  capital projects that have not                                                                    
     begun substantial,  ongoing work  within five  years of                                                                    
     the effective date of  the appropriation or allocation.                                                                    
     Thereby, each  capital project without action  within a                                                                    
     five-year period  will lapse, if its  ongoing existence                                                                    
     is not justified for re-appropriation.                                                                                     
                                                                                                                                
     Secondly, HB 306 requires that  before the start of the                                                                    
     first  regular session  of  each  new Legislature,  the                                                                    
     Dept. of Revenue  provide to the chairs  of the Finance                                                                    
     Committees,  and the  Legislative  Finance Division,  a                                                                    
     report   on   indirect   expenditures.   An   "indirect                                                                    
     expenditure"  is  defined  in   HB  306  as  a  credit,                                                                    
     exemption,  deduction,  deferral, discount,  exclusion,                                                                    
     or other  differential allowance designed  to encourage                                                                    
     an activity  to benefit the public  by forgoing revenue                                                                    
     to  the  state,  an  example  being  the  credits  used                                                                    
     against corporate taxes.                                                                                                   
                                                                                                                                
     Then,  the  Legislative   Finance  Division  will  take                                                                    
     Department   of  Revenue's   report  and   analyze  the                                                                    
     indirect   expenditures   for   each   department,   as                                                                    
     scheduled in  the bill,  with subsequent  reviews every                                                                    
     six years.  The Legislative  Finance will then  issue a                                                                    
     report  to the  legislature  providing  an estimate  of                                                                    
     forgone  revenue due  to the  indirect expenditure,  an                                                                    
     estimate of monetary  benefits, whether the legislative                                                                    
     intent   of   the  statute   is   being   met,  and   a                                                                    
     recommendation  as  to   continuance  of  the  indirect                                                                    
     expenditure,  its economic  effect, and  an explanation                                                                    
     of the methodology used in preparing the report.                                                                           
                                                                                                                                
     Lastly,  the   bill  sunsets  specific   Department  of                                                                    
     Revenue Tax Credits,  not related to gas or  oil by the                                                                    
     end of  the Second Regular Session  of the Twenty-Ninth                                                                    
     Legislature. Bringing these  credits back before future                                                                    
     Legislatures for  a review  will continue  to guarantee                                                                    
    the effectiveness of the State's indirect spending.                                                                         
                                                                                                                                
5:27:07 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  wondered if the  legislation repealed                                                                    
the  film  tax credit.  She  surmised  that the  legislation                                                                    
generally examines all  tax credits. Representative Thompson                                                                    
replied  that the  legislation gave  the film  tax credit  a                                                                    
sunset  date  for  the  end  of  2016,  at  which  time  the                                                                    
legislature would  review the tax credit.  He explained that                                                                    
the film  tax credit  was developed  with $300  million, and                                                                    
there  were already  commitments  for over  $100 million  of                                                                    
that  fund.   He  stated  that   the  fund  would   need  to                                                                    
recapitalize at the end of 2015.                                                                                                
                                                                                                                                
Vice-Chair Fairclough  wondered if there was  any additional                                                                    
information.                                                                                                                    
                                                                                                                                
BRODIE  ANDERSON,   STAFF  REPRESENTATIVE   STEVE  THOMPSON,                                                                    
stated  that  Representative   Thompson  covered  the  major                                                                    
components of the legislation.                                                                                                  
                                                                                                                                
5:28:58 PM                                                                                                                    
                                                                                                                                
PATRICIA  HULL, MEMBER,  ALASKA  FILM  GROUP, JUNEAU,  spoke                                                                    
against HB 306.  She related that film tax  credit had built                                                                    
the  industry in  Alaska. She  thought that  eliminating the                                                                    
film  production  tax  credit  would kill  the  industry  in                                                                    
Alaska.                                                                                                                         
                                                                                                                                
Vice-Chair Fairclough  noted that there was  still confusion                                                                    
and requested  an explanation of  the inclusion of  the film                                                                    
tax  credit in  the legislation.  Mr. Anderson  replied that                                                                    
legal  aspect of  the legislation  dealt with  a sunset  and                                                                    
repeal  the same  way and  that it  was the  legislature. He                                                                    
stated that the intent was to review the credits.                                                                               
                                                                                                                                
5:35:07 PM                                                                                                                    
                                                                                                                                
STACEY BOLES, PROGRAM DIRECTOR,  ALASKA NEW MEDIA, ANCHORAGE                                                                    
(via   teleconference),  testified   against  HB   306.  She                                                                    
remarked that the  film tax credits provided  an increase to                                                                    
Alaska's economy.                                                                                                               
                                                                                                                                
5:38:13 PM                                                                                                                    
                                                                                                                                
AUDRA  HENDERSON,  SELF,  UNIVERSITY  OF  ALASKA  ANCHORAGE,                                                                    
ANCHORAGE (via  teleconference), spoke  against HB  306. She                                                                    
explained  that she  had  a career  in  film in  television,                                                                    
which  started at  the David  Letterman Show.  She hoped  to                                                                    
continue her  career in  the state. She  felt that  the film                                                                    
tax  credits encouraged  and strengthened  Alaska's economy,                                                                    
and it needed more time to fully develop.                                                                                       
                                                                                                                                
5:39:50 PM                                                                                                                    
                                                                                                                                
LAWRENCE DAVID  FOLDES, MEMBER, AWARDS  EXECUTIVE COMMITTEE,                                                                    
ACADEMY  MOTION  PICTURE ARTS  &  SCIENCES  IN LOS  ANGELES,                                                                    
ANCHORAGE  (via teleconference),  testified against  HB 306.                                                                    
He  related  that  financing  for   the  film  industry  was                                                                    
difficult, especially  in Alaska. He remarked  that the film                                                                    
tax credits helped to encourage  the development of film and                                                                    
television  in  Alaska.  He  stressed  that  it  was  a  new                                                                    
program,  and needed  much  more time  to  be developed  and                                                                    
become fully integrated and utilized.                                                                                           
                                                                                                                                
5:44:04 PM                                                                                                                    
                                                                                                                                
DEBORAH  SCHILDT,  SELF,   ANCHORAGE  (via  teleconference),                                                                    
spoke against  HB 306. She  stated that Alaskans  across the                                                                    
state  supported   the  film  tax  credits,   and  the  film                                                                    
industry.  She  stressed  that  the  program  gave  Alaskans                                                                    
unique career  opportunities, and exposed the  state to much                                                                    
needed marketing.                                                                                                               
                                                                                                                                
5:47:14 PM                                                                                                                    
                                                                                                                                
BOB  CROCKET, GENERAL  MANAGER, PIKSIK  LLC, ANCHORAGE  (via                                                                    
teleconference),  testified against  HB  306.  He felt  that                                                                    
there would be  great ramifications of the  film industry in                                                                    
Alaska. He  felt that the  jobs and businesses would  have a                                                                    
great negative  effect, and remarked that  the film industry                                                                    
was growing in Alaska.                                                                                                          
                                                                                                                                
5:50:16 PM                                                                                                                    
                                                                                                                                
NATALIA LAMONT, SELF,  ANCHORAGE (via teleconference), spoke                                                                    
against  HB 306.  She  stated that  she was  a  part of  the                                                                    
Alaska New Media  program, and hoped to develop  a script in                                                                    
order to  make a  successful screenplay.  She felt  that the                                                                    
film  tax credits  would  make it  possible  to develop  her                                                                    
screenplay.                                                                                                                     
                                                                                                                                
5:52:50 PM                                                                                                                    
                                                                                                                                
JOE   MATHIS,  VICE   PRESIDENT,   EXTERNAL  AFFAIRS,   NANA                                                                    
DEVELOPMENT  CORPORATION,  testified   against  HB  306.  HE                                                                    
expressed  concerns  about the  inclusion  of  the film  tax                                                                    
credit  in  the bill.  He  stated  that  NANA had  over  $40                                                                    
million invested  in Alaska's film industry,  and hoped that                                                                    
the industry would continue to  flourish. He discouraged the                                                                    
sunset of the film tax credit program.                                                                                          
                                                                                                                                
5:54:28 PM                                                                                                                    
                                                                                                                                
RON HOLMSTERON,  SAG-AFTRA, ANCHORAGE  (via teleconference),                                                                    
spoke against  HB 306. He  worked in the film  industry, and                                                                    
knew many  people working  in the  Alaska film  industry. He                                                                    
felt  that  the  legislation  would have  a  great  negative                                                                    
impact on his industry, his peers, and the state.                                                                               
                                                                                                                                
5:56:02 PM                                                                                                                    
                                                                                                                                
SARAH   SAARLOOS,  SELF,   GIRDWOOD  (via   teleconference),                                                                    
testified against  HB 306. She expressed  concerns about the                                                                    
inclusion of  the film  tax credit  in the  legislation. She                                                                    
stated that  the Alaska film industry  supported her family.                                                                    
She  witnessed the  positive impacts  of  the film  industry                                                                    
across the state.                                                                                                               
                                                                                                                                
KENT  SCHELER,  MOUNTAIN  SAFETY LOGISTICS,  ANCHORAGE  (via                                                                    
teleconference), testified  against HB  306. He  stated that                                                                    
the film  tax credits had  encouraged the production  of ski                                                                    
films in Alaska.  He felt that the film  industry provided a                                                                    
great support and infrastructure in Alaska.                                                                                     
                                                                                                                                
6:01:12 PM                                                                                                                    
                                                                                                                                
CEDAR   CUSSINS,   GECKO   SERVICES  LLC,   ANCHORAGE   (via                                                                    
teleconference),  testified  against  the inclusion  of  the                                                                    
film tax credit  in HB 306. She stated that  her husband had                                                                    
worked on the production of  the movie, "Big Miracle", which                                                                    
had a great positive impact  on her company. She stated that                                                                    
his  work  on  the  film   catapulted  her  company  into  a                                                                    
successful Alaskan business.                                                                                                    
                                                                                                                                
6:02:39 PM                                                                                                                    
                                                                                                                                
RICHARD GEIGER, SELF,  ANCHORAGE (via teleconference), spoke                                                                    
against the inclusion  of the film tax credit in  HB 306. He                                                                    
felt  that sun  setting the  film tax  credit program  would                                                                    
destroy Alaska's film industry.                                                                                                 
                                                                                                                                
6:04:03 PM                                                                                                                    
                                                                                                                                
TESS   WEAVER,   SELF,   ANCHORAGE   (via   teleconference),                                                                    
testified against  the inclusion of  the film tax  credit in                                                                    
HB 306.                                                                                                                         
                                                                                                                                
6:05:07 PM                                                                                                                    
                                                                                                                                
KATHY   ROBINSON,   WHEEL    GOOD   FOOD,   ANCHORAGE   (via                                                                    
teleconference),  supported  the  removal of  the  film  tax                                                                    
credit from HB 306.                                                                                                             
                                                                                                                                
6:06:53 PM                                                                                                                    
                                                                                                                                
LAUREN  TRAWYER,   SELF,  ANCHORAGE   (via  teleconference),                                                                    
testified in  support of removing  the film tax  credit from                                                                    
HB 306.                                                                                                                         
                                                                                                                                
6:09:51 PM                                                                                                                    
                                                                                                                                
DK   JOHNSTON,   TRI    SEVEN   PICTURES,   ANCHORAGE   (via                                                                    
teleconference),  requested  the  removal of  the  film  tax                                                                    
credit sunset form the legislation.                                                                                             
                                                                                                                                
6:11:19 PM                                                                                                                    
                                                                                                                                
BETH   SKABAR,   SELF,   ANCHORAGE   (via   teleconference),                                                                    
testified against  the inclusion of  the film tax  credit in                                                                    
HB 306.                                                                                                                         
                                                                                                                                
Vice-Chair Fairclough CLOSED public testimony.                                                                                  
                                                                                                                                
CSHB 306(FIN)  was HEARD and  HELD in committee  for further                                                                    
consideration.                                                                                                                  
                                                                                                                                

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