Legislature(2011 - 2012)BUTROVICH 205
02/17/2012 03:30 PM Senate RESOURCES
Audio | Topic |
---|---|
Start | |
SB192 | |
Analysis of Oil Industry Investment Strategies Presentation by Pfc Energy | |
SB176 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+= | SB 192 | TELECONFERENCED | |
+ | HB 144 | TELECONFERENCED | |
+= | HB 185 | TELECONFERENCED | |
= | SB 176 | ||
SB 176-EXEMPTIONS FROM MINING TAX 5:04:44 PM CO-CHAIR WAGONER announced consideration of SB 176 [version 27- LS1201\M was before the committee]. CO-CHAIR PASKVAN moved to bring CSSB 176( ), version \B, before the committee for purposes of discussion. CO-CHAIR WAGONER objected for discussion purposes. MARGRET DOWLING, staff to Senator Wagoner, explained that the CS to SB 176, removes standing gravel operations, quarry rock operations and marketable earth from the mining licensing tax. This is because it is extremely cumbersome to both industry and the state. For example, in the last five years an average of about $268,000 was collected as a result of the mining license tax, and it cost the Department of Revenue about $150,000 to collect it. In addition, in FY2011 when the 182 operations were subject to the tax, that included both sand and gravel operations and quarry rock operations. Of those 182 operations, only 17 were actually required to pay the tax, largely because many of them were small operations serving their local communities that fell within the $40,000 exemption for net taxable income. 5:07:30 PM MS. DOWLING said it's cumbersome to tax these businesses, because they produce many products - different grades of aggregate, sand, concrete, concrete blocks, pit run and the like - and in order to comply with this tax, all of the expenses associated with each product have to be tracked. Sometimes one expense can be attributed to a number of different products and their task, then, is to try to determine which part of the expense is attributable to which product and to allocate it appropriately. It gets fairly complex and involves quite a bit of record keeping. A letter in their packets from Secon said it takes about 200 hours per year to do the recording keeping required to file a tax return and respond to audit requests. If a company owns more than one pit, it has to file a tax return and a schedule for each pit. Even if an operation is so small that it qualifies for the $40,000 net income exemption, it still must file a tax return and keep records. That is why the burden of this tax is pretty extraordinary relative to the actual tax revenue that is generated. 5:09:27 PM MS. DOWLING pointed out that 60 to 80 percent of the material that comes out of the ground in Alaska goes into public works projects that serve state residents in local communities. So, what really happens is that the state ends up paying on both sides of the equation; they pay to collect the tax and then as a consumer it ends up paying for the tax again. In addition, it pays for the overhead portion for the bookkeeping that these companies have to add to the price of their materials. 5:10:28 PM MS. DOWLING explained that the reason marketable earth was included in this measure was to address a Department of Revenue and industry concern that once they took out sand and gravel that someday some regulator or some member of the public would see marketable earth and wonder if it included sand and gravel. She understood that there are no tax returns filed under marketable earth now, so it wouldn't cause any harm. In addition, she said, the reason quarry rock was excluded was because there are just too few of them. In the last five years only four to six companies have filed tax returns under that designation. So keeping quarry rock in would not be achieving the efficiencies they are trying to achieve with this legislation. 5:11:40 PM SENATOR WIELECHOWSKI said they had heard a lot over the last few years about rare earth minerals and he wanted to be absolutely certain that taking out marketable earth was not removing those sorts of things. 5:12:23 PM JOHANNA BALES, Deputy Director, Tax Division, Department of Revenue (DOR), said her understanding is that marketable earth includes things such as peat, top soil and clay. She said the Department of Law looked at the rare earth elements to determine whether or not that would cause a problem, but to be honest, they weren't sure those types of elements were even covered under the mining license tax. Another good point to consider was that rare earth elements, unlike the marketable earth, such as peat and top soil, are locatable minerals, and excluding the marketable earth wouldn't affect them, but this issue should lead to a further conversation and some research in the future if the rare earth elements start being produced. 5:13:33 PM SENATOR WIELECHOWSKI said he thought the conversation needed to happen now if they are contemplating removing it from the state's tax structure. Taxes are hard to change down the line if someone discovered and started to mine rare earth minerals, which are extremely valuable. He said he supported the concept of exempting sand, quarry rock and gravel, but he didn't want to go far beyond that. He strongly preferred clarifying the definition. 5:14:32 PM MS. BALES responded that that was a valid concern. The definition of mining in statue includes "valuable metals, ores, minerals," and that she would immediately consult with the Department of Law on whether or not rare earth elements would fit under that language. 5:15:11 PM CO-CHAIR WAGONER asked her to do that and said they would probably hold this bill until next Tuesday. SENATOR FRENCH concurred with that and asked why the department spends $150,000 each fiscal year examining and auditing sand and gravel tax returns (on page 2 of the fiscal note). MS. BALES explained that that amount has been expended over the last five years. Back in 2006, the Matanuska Susitna Borough contacted them about several sand and gravel operators that could not get permits from the borough because they didn't have the state's mining license. At that point, the department realized that a significant number of sand and gravel operators were actually not in compliance. So, they spent the last five years bringing several hundred sand and gravel operators into compliance. The same page of the fiscal note indicates there were only 11 licensees at the time, and in 2011 there were 189. So, about 170 taxpayers were brought into compliance and the resulting tax was negligible. Until they did that exercise they had no idea that most of the operators were small and because of the $40,000 exemption, didn't pay tax. She said the department had already started moving resources back to other excise tax programs after diverting them to help with this. 5:17:42 PM CO-CHAIR WAGONER opened the public hearing. 5:17:57 PM TONY JOHANSEN, partner, Great Northwest, Inc., Fairbanks, and president, AGC of Alaska, supported SB 176. He said early last year his company received a two-page audit request from the Department of Revenue concerning their sand and gravel sales. The request listed 19 detailed sets of information and data needed to perform an audit of the mining license tax for the years 2008 and 2009, paperwork that would take their office manager weeks to assemble. In frustration, he said, he contacted John MacKinnon, the executive director of the AGC of Alaska, and after researching the issue last summer, the AGC approached the DOR about the problems and with suggestions on how the present requirements could be improved. After researching the revenues generated and the cost of their collection, the administration recommended that the simplest and best solution was to exempt quarry rock and sand and gravel operations from the mining license tax requirements. Everyone recognized it as a "true nuisance tax." 5:20:15 PM MARK COTTINI, Professional Civil Engineer and Vice President, Alaska Rock Products Association, Mat-Su, said he supported SB 176. He said he represented 10 gravel pits in the Mat-Su Borough and that he is also vice president of a gravel screening business and owns a pit that receives gravel royalties from the company that operates it. He had never paid mining taxes to the state of Alaska, he said, and all of the small gravel pit owners and the small gravel pit screening business think the mining tax is broken and concurred with the earlier presenter that they should be exempted from the mining licensing tax. 5:22:06 PM BEN SIMMONS, Vice President and Controller, Anchorage Sand and Gravel (ASG), Anchorage, said he has extensive experience with the mining license tax and supported SB 176. He concurred with prior testimony that the statute is very ambiguous as it pertains to sand and gravel. For the most part the other metals and minerals that are covered by the statute are gold, silver, zinc, lead and so forth, but Anchorage Sand and Gravel currently produces and stocks 20 to 40 products made with sand and gravel. Complying with the current audit requirements of determining fair market value for each product is very cumbersome, time consuming and requires a lot data and a lot of paper. He said the tax is inconsistent as it's applied to sand and gravel producers, because each producer is different. A supplier like Anchorage Sand and Gravel sells approximately 70 percent of its production to third parties and uses 30 percent for its internal operations compared to a general contractor, who, for instance, sells approximately 30 percent of his product to third parties and uses 70 percent internally for large construction jobs. The average sales prices calculation for each of those exact same products is different from one supplier to another and from producers. MR. SIMMONS said it just took him more than 18 months and cost more than $50,000 to complete an audit for tax years 2005 and 2006, and the amount of taxes collected were negligible compared to what the state had to do to get them. 5:25:21 PM CO-CHAIR WAGONER thanked him and went to Cheryl Shafer. 5:25:30 PM CHERYL SHAFER, owner, Dibble Creek Rock, Kenai, said she supported SB 176. She said her family runs a small sand and gravel and ready mix business on the Lower Kenai Peninsula. She reiterated what everyone had been saying that the mining tax is burdensome. Because they own a number of pits, she has to file a double mining tax for each piece of property simply because the property is in their family name and she is currently being audited by the DOR for three years of past mining taxes. She only has a two-person office and has spent weeks supplying information and answering questions. It is difficult to separate out the mining activities from the family's integrated activities. More time is actually spent with trying to comply with filing a correct mining tax return than for her filling out her corporate tax return. 5:27:36 PM CO-CHAIR WAGONER added that this is an opportunity that every politician looks forward to - taking something off the books not putting something on the books. He found no further testimony and closed the public hearing. He said SB 176 would be held in committee awaiting the information on rare earth minerals.
Document Name | Date/Time | Subjects |
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PFC Energy_Bios_Feb_2012.pdf |
SRES 2/17/2012 3:30:00 PM |
SB 192 |
23 - SB 176 Support Testimony ARPA 021512.pdf |
SRES 2/17/2012 3:30:00 PM |
SB 176 |
1 CSHB144 Sponsor Statement.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 144 |
2 CSHB144 ver I.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 144 |
3 CSHB144(RES) Sectional Analysis.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 144 |
4 CSHB144(RES) Summary of Changes.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 144 |
5 CSHB144-Fiscal Note-HB144-DNR-LATD-02-23-11.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 144 |
6 CSHB144 Fiscal Note-HB144-DFG-SFD-02-17-11.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 144 |
7 HB144-DNR-MLW-12-13-2011.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 144 |
8 HB 144 Support Docs Combined.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 144 |
1 CSHB185res Sponsor Statement.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 185 |
2 HB0185A.PDF |
SRES 2/17/2012 3:30:00 PM |
HB 185 |
3 HB0185B.PDF |
SRES 2/17/2012 3:30:00 PM |
HB 185 |
4 HB185-DEC-WQ-03-11-11.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 185 |
5 HB185-DEC-WQ-12-03-11.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 185 |
6 DEC Response to (H) RES HB 185- Munitions Ltr.PDF |
SRES 2/17/2012 3:30:00 PM |
HB 185 |
7 AK_CWA_Support_Letter_Mar_2011.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 185 |
8 DMVA Letter to Support CWA Amendment.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 185 |
9 FEDERAL WATER POLLUTION CONTROL ACT Summary.pdf |
SRES 2/17/2012 3:30:00 PM |
HB 185 |
PFC Energy_Alaska_Senate Resources_Slides_Feb_17_2012.pdf |
SRES 2/17/2012 3:30:00 PM |
SB 192 |