Legislature(1995 - 1996)

04/24/1996 09:25 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
       CS FOR HOUSE BILL NO. 269(FIN)                                          
       "An Act relating  to credits against certain  taxes for                 
       contributions to  certain public educational  radio and                 
       television networks and stations  and to endowments for                 
  public    educational  radio  and  television  networks  and                 
  stations,      increasing the amounts that may be claimed as                 
  credits against     certain  state  taxes,   and  precluding                 
  claims of the  contributions as both credits  and deductions                 
  against the    taxes;  amending  the  manner   of  computing                 
  refunds to local    governments  of  the  fisheries business                 
  tax and the fishery      resource landing tax;  establishing                 
  credits against the fishery   resource   landing  tax;   and                 
  terminating the public educational      radio and television                 
  credits authorized by this Act at the end    of  five years;                 
  and providing for an effective date."                                        
  Mr.  Tom  Wright,  staff  aide  to Representative  Ivan  was                 
  invited to join the  committee.  He explained the new CS and                 
  said they would  be working from the "J" version.   The main                 
  change was to lower the contribution rate to 50% of $300,000                 
  and  would separate  the  Public Broadcasting  contributions                 
  from  the  University.     Another   change  would  be   the                 
  establishment   of   a   Public    Broadcast   Trust   fund.                 
  Contributions go to  the trust fund and  said the department                 
  would explain the mechanics of the fund.  An endowment would                 
  be set  up for  broadcast stations  around the  state.   The                 
  sunset date  would remain 31  December 2001.   Senator Frank                 
  asked if  there was a limit on the overall amount that could                 
  be credited and Mr.  Wright advised that the  overall credit                 
  would  be  $300,000.    There  would  be  $150,000   to  the                 
  University  and $150,000  to  Public Broadcasting.   Senator                 
  Frank asked  if there was an updated  fiscal note to the new                 
  CS  and Mr.  Wright said at  this time  there was not  a new                 
  fiscal note but the Department of Revenue  could explain the                 
  fiscal impact.  He said there was an analysis of various tax                 
  credit scenarios  and under scenario  (b) that would  be the                 
  estimation of what the contribution  amount would be and the                 
  credit.    The  contribution  amount  would  be  about  $2.6                 
  Bob Bartholomew, Department  of Revenue was invited  to join                 
  the  committee and  said in  calculating the  amount of  the                 
  credit there had been some changes in the bill that it would                 
  be hard to  determine what the  impact of the  contributions                 
  would  be.   The current  bill allowed contributions  to the                 
  trust  and  previous  calculations included  a  look  at the                 
  history  of donations to Public Broadcasting, which included                 
  contributions  directly  to stations.    The amount  of $2.6                 
  million  of   total  contributions  would  assume  that  the                 
  incentive of the  tax credit would double  the contributions                 
  received last year.   If  that assumption is  high that  the                 
  contributions coming to  the trust would double,  in redoing                 
  the fiscal note a range of between $800,000 and $1.3 million                 
  of loss revenue  would be used.   Senator Frank asked if one                 
  would  get  a credit  for a  sponsorship  they made  and Mr.                 
  Bartholomew said under this legislation in  order to get the                 
  credit one would  have to give to the trust fund that is set                 
  up.  The Public Broadcasting Commission would decide how the                 
  money would be  spent.  Senator  Sharp referred to Title  43                 
  and said there was  a cluster of  taxes including oil &  gas                 
  productions,  etc.    He  wanted  to  know if  oil  and  gas                 
  properties were different  from those listed  in Title 43.                   
  Mr. Bartholomew  said the taxes  listed under Title  43 were                 
  based on net income and  therefore expenditures were allowed                 
  as a deduction.   One  could not calculate  a deduction  and                 
  credit at the  same time.   This would  prevent double  dip.                 
  Senator Sharp referred  to page 2,  section 2, line 9  about                 
  taxpayer cash contribution and said it was only listed under                 
  the  University portions but  not under Public Broadcasting.                 
  Mr.  Bartholomew referred to  page 5, section  5 and Senator                 
  Sharp said it  did not say  cash contributions in (a)  above                 
  under section 5, but  rather taxpayers contributions.    Mr.                 
  Bartholomew said it was always the intent to keep it at cash                 
  and said it could be corrected by adding  the word "cash" in                 
  front of "contributions".  Senator Sharp said it  would have                 
  to be made in every other sections in order to conform.  Mr.                 
  Bartholomew concurred.  Mr. Wright said it was the sponsor's                 
  understanding that it  was cash contributions and  there was                 
  no objection.   Senator  Sharp asked  how many  corporations                 
  were in a position to take advantage under the five areas of                 
  taxation in the State of Alaska.  Mr. Bartholomew said there                 
  were approximately ten  to fifteen corporations that  have a                 
  tax liability in excess of $500,000.   Senator Sharp said he                 
  did  not agree  with  taxpayers being  able to  target where                 
  their  taxes  go  without  going  through  the appropriation                 
  process and  smaller taxpayers not having  that opportunity.                 
  He felt that education was a  better cause.  Mr. Bartholomew                 
  said  the Department of  Revenue had  been working  with the                 
  sponsor and the  Department of  Administration and felt  the                 
  administration  would  like  to  show  support   for  Public                 
  Broadcasting and the  concept of  having a five-year  sunset                 
  puts a time certain on that support.                                         
  Senator Frank said he was concerned about tax credits and if                 
  a corporation  is already  doing a  sponsorship and  getting                 
  institutional advertising  for it  that there  should be  no                 
  credit allowed for a contribution.  It seems that it  is not                 
  the intention because the money would  be going to the trust                 
  fund, however he would like to see language making a clearer                 
  distinction that  one could not  get free advertising.   Mr.                 
  Wright said  the advertising  was limited  to the  statement                 
  that the program was brought  through contributions from "x"                 
  company.    Senator  Sharp  said   a  disclaimer  should  be                 
  mandatory informing the public the company was getting a tax                 
  Bob  Jenkins, Executive  Director,  APBC  and Jon  Newstrom,                 
  Coordinator  Coastalaska were invited to join the committee.                 
  Mr.   Jenkins  said   the  Public   Broadcasting  Commission                 
  supported the bill.   He explained financial  restructuring,                 
  strategic planning process and the satellite interconnection                 
  process.    He  said under  the  trust  formation individual                 
  broadcasting stations were restricted  from direct benefits.                 
  Donations must go to  a central trust  fund in order to  get                 
  tax credit.   The  principal donation  must be  held in  the                 
  trust  and  only the  earnings  could be  distributed.   The                 
  stations   are   licensed   as  non-commercial   educational                 
  broadcasters  and  therefore do  not  advertise.   The money                 
  going to a central trust inhibits the on-air acknowledgement                 
  of the contribution because  it did not go to  an individual                 
  station.   Mr.  Newstrom said  the  only way  a  sponsorship                 
  announcement would come  up is that federal law requires the                 
  public  be  informed  that  a  contribution   was  received.                 
  Senator Zharoff  asked  if money  were given  to a  specific                 
  station does the  station acknowledge that donation  and Mr.                 
  Newstrom said that was  correct but there was no  tax credit                 
  given in that  case.  Mr. Jenkins said the  kind of donation                 
  that generates the  underwriting announcement  does not  get                 
  the tax credit.                                                              
  Senator Phillips moved  CS CSHB 269  work draft "J"  version                 
  and  without  objection  it  was  adopted.   Senator  Rieger                 
  referred  to  page 4,  lines 22  and 23  and said  there was                 
  concern that the  management of the  fund could be  invested                 
  primarily  in  interest earning  securities or  fixed income                 
  bonds.  Traditionally,  those would  be lower yielding  than                 
  stocks.  He said he had a proposed amendment that would have                 
  an inflation proofing like feature to the trust fund.                        
  Alison Elgee,  Department of  Administration was  invited to                 
  join the committee.   She said the intent behind  this trust                 
  set up  was to  allow for  a long  term investment  strategy                 
  because it was an endowment trust.   It recognizes that part                 
  of the growth of the trust corpus itself will accrue through                 
  the investment in  an equity  portfolio where capital  gains                 
  and  losses  would be  realized.   An  opportunity  has been                 
  included  for  the  trustees to  inflation-proof  the  fund,                 
  recognizing that may not be sufficient in and of itself each                 
  year to  keep the  principal of  the fund  up, however,  the                 
  thought is that the two would work together.  The Department                 
  of Revenue  has  indicated that  before there  is an  equity                 
  portfolio there  must be  a fund  in excess  of $2  million.                 
  Initially one  would be looking at a fixed income investment                 
  portfolio where  there would be  a need to  inflation proof.                 
  Senator  Rieger  asked if  the bill  as drafted  allowed for                 
  inflation  proofing  until equities  are  gotten into.   Ms.                 
  Elgee referred to page 4, line 29 as  one of the uses of the                 
  fund would be  effective inflation on the  fund's principal.                 
  Mr. Bartholomew said the Department of Revenue realizes that                 
  this is a trust being set  up for Public Broadcasting and it                 
  may not need to be set up like other trusts.  Therefore, the                 
  languages  here  have not  been  tailored specifically,  but                 
  rather similar to  other trusts.   The only concern was  the                 
  ability  to  inflation proof  and he  felt it  was available                 
  under the current  bill language.    Senator  Sharp moved  a                 
  conceptual  amendment adding the word "cash" in front of the                 
  word "contribution" in sections  5, 7, 9 and 11  and without                 
  objection it was adopted.                                                    
  Following  further  discussion  between   committee  members                 
  Senator  Rieger  moved  SCS  CSHB   269(FIN)  and  with  the                 
  objection of  Senator Sharp  being duly  noted the  bill was                 
  reported out  of committee  with individual  recommendations                 
  and  an up-dated  zero  fiscal note  from the  Department of                 

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