Legislature(2017 - 2018)BUTROVICH 205

04/19/2018 03:30 PM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 87 CONFLICT OF INTEREST: BD FISHERIES/GAME TELECONFERENCED
<Bill Hearing Canceled>
+ HB 398 CORP TAX:PUBLIC UTILITY INCOME ALLOCATION TELECONFERENCED
Moved HB 398 Out of Committee
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 47 MUNICIPAL PERS CONTRIBUTIONS/INTEREST TELECONFERENCED
Moved HB 47 Out of Committee
+= HCR 19 GOVERNOR: AK NATIVE LANGUAGES EMERGENCY TELECONFERENCED
Moved SCS CSHCR 19(STA) Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         April 19, 2018                                                                                         
                           3:32 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Kevin Meyer, Chair                                                                                                      
Senator David Wilson                                                                                                            
Senator Cathy Giessel                                                                                                           
Senator John Coghill                                                                                                            
Senator Dennis Egan                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 398                                                                                                              
"An Act  relating to the  allocation and apportionment  of income                                                               
of a  public utility for  purposes of  the Alaska Net  Income Tax                                                               
Act; and providing for an effective date."                                                                                      
                                                                                                                                
     - MOVED HB 398 OUT OF COMMITTEE                                                                                            
                                                                                                                                
CS FOR HOUSE CONCURRENT RESOLUTION NO. 19(CRA) AM                                                                               
Urging  Governor Bill  Walker to  issue  an administrative  order                                                               
recognizing a linguistic emergency.                                                                                             
                                                                                                                                
     - MOVED SCS CSHCR 19(STA) OUT OF COMMITTEE                                                                                 
                                                                                                                                
HOUSE BILL NO. 47                                                                                                               
"An Act  requiring certain municipalities with  a population that                                                               
decreased  by more  than 25  percent between  2000 and  2010 that                                                               
participate in the defined benefit  retirement plan of the Public                                                               
Employees'  Retirement  System of  Alaska  to  contribute to  the                                                               
system an amount  calculated by applying a rate of  22 percent of                                                               
the  total of  all  base  salaries paid  by  the municipality  to                                                               
employees  of the  municipality  who are  active  members of  the                                                               
system during a payroll period;  authorizing the administrator of                                                               
the  defined benefit  retirement  plan of  the Public  Employees'                                                               
Retirement  System  of Alaska  to  reduce  the rate  of  interest                                                               
payable  by   certain  municipalities  that  are   delinquent  in                                                               
transmitting employee and employer contributions to the                                                                         
retirement plan; and providing for an effective date."                                                                          
                                                                                                                                
     - MOVED HB 47 OUT OF COMMITTEE                                                                                             
                                                                                                                                
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 87(FSH)                                                                                 
"An Act relating to participation in matters before the Board of                                                                
Fisheries and the Board of Game by the members of the respective                                                                
boards."                                                                                                                        
                                                                                                                                
     - BILL HEARING CANCELED                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 398                                                                                                                  
SHORT TITLE: CORP TAX: PUBLIC UTILITY INCOME ALLOCATION                                                                         
SPONSOR(s): FINANCE                                                                                                             
                                                                                                                                
02/23/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/18       (H)       FIN                                                                                                    
04/04/18       (H)       FIN AT 1:30 PM ADAMS ROOM 519                                                                          
04/04/18       (H)       Moved HB 398 Out of Committee                                                                          
04/04/18       (H)       MINUTE(FIN)                                                                                            
04/05/18       (H)       FIN RPT 4DP 7NR                                                                                        
04/05/18       (H)       DP: GARA, THOMPSON, SEATON, FOSTER                                                                     
04/05/18       (H)       NR: WILSON, KAWASAKI, GRENN, PRUITT,                                                                   
                         ORTIZ, GUTTENBERG, TILTON                                                                              
04/11/18       (H)       TRANSMITTED TO (S)                                                                                     
04/11/18       (H)       VERSION: HB 398                                                                                        
04/12/18       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/12/18       (S)       STA, FIN                                                                                               
04/19/18       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
                                                                                                                                
BILL: HCR 19                                                                                                                  
SHORT TITLE: GOVERNOR: AK NATIVE LANGUAGES EMERGENCY                                                                            
SPONSOR(s): ORTIZ                                                                                                               
                                                                                                                                
02/16/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/18       (H)       CRA                                                                                                    
03/06/18       (H)       CRA AT 8:00 AM BARNES 124                                                                              
03/06/18       (H)       Heard & Held                                                                                           
03/06/18       (H)       MINUTE(CRA)                                                                                            
03/08/18       (H)       CRA AT 8:00 AM BARNES 124                                                                              
03/08/18       (H)       Moved CSHCR 19(CRA) Out of Committee                                                                   
03/08/18       (H)       MINUTE(CRA)                                                                                            
03/09/18       (H)       CRA RPT CS(CRA) 5DP                                                                                    
03/09/18       (H)       DP:    SADDLER,    DRUMMOND,    LINCOLN,                                                               
                        RAUSCHER, PARISH                                                                                        
03/19/18       (H)       TRANSMITTED TO (S)                                                                                     
03/19/18       (H)       VERSION: CSHCR 19(CRA) AM                                                                              
03/21/18       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/21/18       (S)       CRA, STA                                                                                               
04/03/18       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
04/03/18       (S)       Heard & Held                                                                                           
04/03/18       (S)       MINUTE(CRA)                                                                                            
04/10/18       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
04/10/18       (S)       Moved CSHCR 19(CRA) AM Out of Committee                                                                
04/10/18       (S)       MINUTE(CRA)                                                                                            
04/11/18       (S)       CRA RPT 3DP                                                                                            
04/11/18       (S)       DP: BISHOP, GARDNER, HOFFMAN                                                                           
04/17/18       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
04/17/18       (S)       Heard & Held                                                                                           
04/17/18       (S)       MINUTE(STA)                                                                                            
04/19/18       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
                                                                                                                                
BILL: HB 47                                                                                                                   
SHORT TITLE: MUNICIPAL PERS CONTRIBUTIONS/INTEREST                                                                              
SPONSOR(s): FOSTER                                                                                                              
                                                                                                                                
01/18/17       (H)       PREFILE RELEASED 1/13/17                                                                               

01/18/17 (H) READ THE FIRST TIME - REFERRALS

01/18/17 (H) CRA, FIN 02/28/17 (H) CRA AT 8:00 AM BARNES 124 02/28/17 (H) Heard & Held 02/28/17 (H) MINUTE(CRA) 03/02/17 (H) CRA AT 8:00 AM BARNES 124 03/02/17 (H) Moved HB 47 Out of Committee 03/02/17 (H) MINUTE(CRA) 03/03/17 (H) CRA RPT 4DP 1NR 1AM 03/03/17 (H) DP: WESTLAKE, DRUMMOND, FANSLER, PARISH 03/03/17 (H) NR: RAUSCHER 03/03/17 (H) AM: SADDLER 04/06/17 (H) FIN AT 1:30 PM HOUSE FINANCE 519 04/06/17 (H) Heard & Held 04/06/17 (H) MINUTE(FIN) 04/13/17 (H) FIN AT 1:30 PM HOUSE FINANCE 519 04/13/17 (H) Moved HB 47 Out of Committee 04/13/17 (H) MINUTE(FIN) 04/14/17 (H) FIN RPT 5DP 6AM 04/14/17 (H) DP: ORTIZ, GUTTENBERG, GARA, SEATON, FOSTER 04/14/17 (H) AM: WILSON, KAWASAKI, THOMPSON, TILTON, GRENN, PRUITT 05/15/17 (H) TRANSMITTED TO (S) 05/15/17 (H) VERSION: HB 47 05/16/17 (S) READ THE FIRST TIME - REFERRALS 05/16/17 (S) STA, FIN 04/05/18 (S) STA AT 3:30 PM BUTROVICH 205 04/05/18 (S) Heard & Held 04/05/18 (S) MINUTE(STA) 04/19/18 (S) STA AT 3:30 PM BUTROVICH 205 WITNESS REGISTER BRODIE ANDERSON, Staff Representative Foster Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Provided an overview of HB 398. CHRISTINE MARASIGAN, Staff Senator Meyer Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Provided an overview of the committee substitute for HCR 19. REPRESENTATIVE DAN ORTIZ Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Sponsor of HCR 19. XH'UNEI LANCE TWITCHELL, representing self Juneau, Alaska POSITION STATEMENT: Testified in support of HCR 19. DAVID ROBERT BOXLEY, representing self Metlakatla, Alaska POSITION STATEMENT: Testified in support of HCR 19. PAULETTE MARY MORENO, Grand Vice President Alaska Native Sisterhood Grand Camp Juneau, Alaska POSITION STATEMENT: Testified in support of HCR 19. BRANDON SPANOS, Deputy Director Tax Division Alaska Department of Revenue Anchorage, Alaska POSITION STATEMENT: Answered questions regarding HB 398. ACTION NARRATIVE 3:32:53 PM CHAIR KEVIN MEYER called the Senate State Affairs Standing Committee meeting to order at 3:32 p.m. Present at the call to order were Senators Wilson, Egan, Coghill, Giessel, and Chair Meyer. HB 398-CORP TAX: PUBLIC UTILITY INCOME ALLOCATION 3:34:20 PM CHAIR MEYER announced the consideration of House Bill 398 (HB 398). 3:34:52 PM BRODIE ANDERSON, Staff, Representative Foster, Alaska State Legislature, Juneau, Alaska, provided an overview of HB 398 as follows: House Bill 398 addresses foregone revenue and provides the state with the ability to capture new revenue in Alaska corporate income tax through the elimination of the public utility exemption for water's-edge reporting. A brief history on how we got this piece of legislation introduced. Back in 2004, legislation was passed that required both the Department of Revenue and Legislative Finance to create a report on indirect expenditures and the amount of foregone revenue not captured by the state. The first indirect expenditure report was submitted in 2015, in that report it identified a list of indirect expenditures within the Department of Revenue that should be terminated; then last year in the FY18 budget process, House Finance Subcommittee for the Department of Revenue reviewed these indirect expenditures and recommended that the House Finance Committee offer legislation that eliminates these indirect expenditures. House Bill 398 repeals a specific exemption from the recommendations offered in both of those reports. The indirect expenditure repealed in House Bill 398 is the public utility exemption and it was selected for the following reason: It did not meet the legislation intent and it was felt that it provided a loophole by allowing multi-state corporations operating a public utility in Alaska to choose their apportionment method that is complementary to providing the lowest tax liability possible for the corporation. Typically, multi-state corporations use three-factor formula for apportionment, this formula uses three fractions represented by ratios of the company's property, payroll and sales within the taxing state, this one being Alaska, to their total property payroll and sales within the United States or water's edge. The three ratios are multiplied together to produce a percentage of the company's total taxable income to be allocated to the taxing state, Alaska; this only applies to all non-oil-and-gas corporations, for oil- and-gas corporations we use a formula based on their Alaskan profits and their worldwide profits. The Department of Revenue cannot indicate the amount of potential new revenue captured because the small amount of taxpayers utilizing the exemption, they are required to keep that tax information confidential due to the size of the tax pool, they have indicated though that there will be new revenue if this passes according to their fiscal note provided to members in their packet. 3:37:51 PM CHAIR MEYER asked Mr. Anderson to review the sectional analysis for HB 398. MR. ANDERSON reviewed the sectional analysis as follows: Section 1 Adds a new section, AS 43.20.146, which removes the exemption of the multistate public utilities from water's-edge reporting from within the Multistate Tax Compact. Section 2 & Section 3 Are uncodified law dealing with the applicability of the effective date and transition language for the regulations that would be drafted not to be in effect until January 1, 2019. Section 4 The effective date which applies to Section 1 and Section 2 of the bill is January 1, 2019. 3:39:03 PM At ease. [CHAIR MEYER set HB 398 aside until later in the meeting.] HCR 19-GOVERNOR: ALASKA NATIVE LANGUAGES EMERGENCY 3:40:24 PM CHAIR MEYER announced the consideration of House Concurrent Resolution 19 (HCR 19). 3:42:05 PM At ease. 3:42:51 PM CHAIR MEYER called the committee back to order. 3:42:55 PM SENATOR GIESSEL moved to adopt the Senate committee substitute (CS) for CSHCR 19, version 30-LS1402\T, as the working document. 3:43:08 PM CHAIR MEYER announced hearing no objection, the Senate CS was before the committee. He asked Ms. Marasigan to explain the changes. 3:43:18 PM CHRISTINE MARASIGAN, Staff, Senator Meyer, Alaska State Legislature, Juneau, Alaska, provided the following overview of the Senate CS for CSHJR 19: After the meeting on Tuesday, I consulted with Senator Coghill's office, Senator Giessel's office, and Representative Ortiz's staff and the following changes were made: On page 1, line 2 and on page 2, line 24 the following language was added: the urgent need for language revitalization efforts. CHAIR MEYER noted that he meant to object to hear the changes. He asked if there were other changes in the bill. MS. MARASIGAN answered no, just at the beginning and end of the bill. 3:44:25 PM CHAIR MEYER removed his objection and announced that the Senate CS was before the committee. He asked Representative Ortiz if he was satisfied with the changes. 3:44:52 PM REPRESENTATIVE DAN ORTIZ, Alaska State Legislature, Juneau, Alaska, sponsor of HCR 19, replied as follows: I'm not going to oppose the CS that was put before you for HCR 19; with that said, language loss is a serious problem in the communities I represent and beyond. The district I represent is home to three of the state's Native languages: Tlingit, Haida, and Tsimshian; two of these languages, Haida and Tsimshian have fewer than 10 fluent speakers left in the state, Tlingit has less than 100 speakers. We recognize the people carrying the languages and thank them for their hard work. If the CS brings us to a step closer to revitalizing these languages, then I fully support the CS. 3:46:18 PM CHAIR MEYER announced that the committee will hear invited testimony. He noted that the testifiers were chosen on behalf of the individuals attending the committee meeting. 3:46:50 PM XH'UNEI LANCE TWITCHELL, representing self, Juneau Alaska, testified in support of HCR 19. He disclosed that he is the Assistant Professor-Alaska Native Languages for the University of Alaska Southeast. He disclosed that he speaks and teaches the Tlingit language. He said he has spent a good portion of his life studying the root causes of language death in Alaska as well as effective measures of language revitalization. He noted that Sarah Dybdahl, Director for the Central Council of Tlingit & Haida Indian Tribes of Alaska's Cultural Heritage & Education program, suggested in October to the Alaska Native Language Preservation and Advisory Council that the governor declare a state of emergency for native languages. He asserted that Alaska natives that work on Alaska native languages daily understand what is going on. He said he has seen Alaska native languages creep closer and closer to language death. He recounted the historical decline in Alaska Native speakers. He said he questioned the use of "urgency" rather than "emergency" in the resolution. He continued as follows: We are asking you to move this forward. If changing a word and saying, "Well, it's not quite an emergency," if that's your stance, then that is fine. MR. TWITCHELL said there was no need to debate and asked legislators to, "talk to them." 3:55:09 PM CHAIR MEYER commented that committee members were very respectful in what the testifiers were hoping to do. He said he guessed that the bill would move out of committee. 3:56:27 PM DAVID ROBERT BOXLEY, representing self, Metlakatla, Alaska, testified in support of HCR 19. He revealed that he was 36 years old and when he was born there were 150 fluent speakers of his language in his village and currently there were 5 fluent speakers. He said the efforts to revive his language has been met with modern-world problems that are not of Alaska natives' choosing. He noted that he is part of a non-profit organization in Metlakatla to revive the Tsimshian language. He continued as follows: Whether we argue about the semantics of a couple of words at this moment is not going to benefit our hopes, but I do want to reiterate that if there was ever a reason to call something an emergency, I can't think of a better reason. 4:00:11 PM PAULETTE MARY MORENO, Grand Vice President, Alaska Native Sisterhood Grand Camp, Juneau, Alaska, testified in support of HCR 19. She emphasized that words are important and asked that the resolution be passed because Alaska natives have everything to lose. 4:05:07 PM At ease. 4:08:02 PM CHAIR MEYER called the committee to order. 4:09:08 PM SENATOR GIESSEL moved to report SCS CSHCR 19(STA), version 30- LS1402\T from committee with individual recommendations and attached zero fiscal note. 4:09:22 PM CHAIR MEYER announced that being no objection the motion carried. 4:09:29 PM At ease. HB 398-CORP TAX: PUBLIC UTILITY INCOME ALLOCATION 4:14:13 PM CHAIR MEYER called the committee back to order. He announced the committee's continuation of the hearing on HB 398. SENATOR WILSON asked if there is opposition to the bill. MR. ANDERSON replied that the bill has not received opposition. He confirmed from previous hearings in the House Finance Committee that the bill will not affect the state's nonprofit- public utilities, strictly multi-state corporations that have a public utility within Alaska's boundaries. He detailed that approximately one to five corporations might be impacted. CHAIR MEYER asked if the corporations that will be adversely impacted know that HB 398 was working through the process. MR. ANDERSON replied that he has contacted specific lobbyists that have contracts within some of the multi-state corporations to figure out whether they would be impacted and what type of opposition might come against HB 398. He disclosed that he has not received opposition notification from the corporations. 4:17:46 PM BRANDON SPANOS, Deputy Director, Tax Division, Alaska Department of Revenue, Anchorage, Alaska, confirmed that he has spoken with specific taxpayers on the legislation's impact. He assumed that those impacted the most know about HB 398. CHAIR MEYER said he was concerned that the corporations currently receiving the tax exemption will pass the added cost from the legislation on to Alaskan. He asked if the Regulator Commission of Alaska (RCA) has oversite. MR. SPANOS explained that the RCA does not regulate all utilities. He pointed out that telecommunications used to be regulated, but currently falls under that utility definition. CHAIR MEYER remarked that he questioned Mr. Sponos' response. He said he believed that the RCA does have regulatory oversite and noted that he had dealt with a bill that addressed the topic. MR. SPANOS admitted that he was not an expert in the regulation field. 4:20:04 PM CHAIR MEYER pointed out that HB 398 has a zero fiscal note. He asked if the hope is the state will get some money back. MR. ANDERSON answered yes. He explained that the fiscal note reflects an increase of some sort due to the potential change in tax liability for corporations utilizing the exemption. CHAIR MEYER noted that Mr. Anderson mentioned that the normal process is a three-step process and the affected corporations do not have to meet the three-step process. MR. ANDERSON answered correct. He detailed as follows: Back when we first wrote the Alaska Corporate Tax Code, banking organizations, financial organizations and public utilities, multi-state corporations, were exempt. In the '80s, Alaska removed financial organizations but at that point no public utility was utilizing this exemption so when the Department of Revenue removed the exemption, it did not come under the radar that public utilities had an exemption. So, we fast forward until I believe the document from the Department of Revenue said about 10 to 15 years ago, public utilities or at least a couple started to utilize the exemption and that's why they felt that they needed a statutory change rather than a regulatory change to get rid of this exemption and that's with water's-edge reporting for calculating all other multi-state corporations use water's-edge reporting where you compare, you create the formula for your Alaska sales, payroll and property against your U.S. or water's-edge sales, payroll and property, and then out of that the percentage is calculated for you Alaska tax liability; that formula, that percentage is exempt for public utilities that are multi-state corporations because of the exemption and as long as it is in line with what Department of Revenue agrees with, they can calculate their own apportionment. 4:22:22 PM CHAIR MEYER opened and closed public testimony. 4:22:48 PM SENATOR GIESSEL moved to report HB 398, version 30-LS1231\D from committee with individual recommendations and attached zero fiscal note. 4:23:01 PM CHAIR MEYER announced that being no objection, the motion carried. 4:23:04 PM At ease. HB 47-MUNICIPAL PERS CONTRIBUTIONS/INTEREST 4:25:20 PM CHAIR MEYER called the committee back to order and announced the consideration of House Bill 47 (HB 47). He noted that the bill has an updated fiscal note. 4:26:41 PM PAUL LABOLLE, Staff, Representative Foster, Alaska State Legislature, Juneau, Alaska, announced his availability to address questions regarding the updated fiscal note for HB 47. CHAIR MEYER said the Senate Finance Committee will address the bill's fiscal note. He explained that the Senate State Affairs Committee is more concerned from a policy standpoint and a legitimate policy question was previously brought up. He remarked that there may be concern that a precedent will be set; however, he conceded that the sponsor of HB 47 and Mr. Labolle presented a good case. 4:27:53 PM SENATOR GIESSEL moved to report HB 47, version 30-LS0281\A from committee with individual recommendations and attached fiscal note. 4:28:03 PM CHAIR MEYER announced that there being no objection, the motion carried. 4:28:08 PM At ease. 4:28:36 PM CHAIR MEYER called the committee back to order. 4:29:37 PM There being no further business to come before the committee, Chair Meyer adjourned the Senate State Affairs Standing Committee at 4:29 p.m.

Document Name Date/Time Subjects
HB 398 Sponsor Statement 4.3.18.pdf SSTA 4/19/2018 3:30:00 PM
HB 398
HB 398 Version D.PDF SSTA 4/19/2018 3:30:00 PM
HB 398
HB 398 Sectional Analysis v.D 4.3.18.pdf SSTA 4/19/2018 3:30:00 PM
HB 398
HB 398 Additional Documents - Legislative Legal Services Memo 1.9.2018.pdf SSTA 4/19/2018 3:30:00 PM
HB 398
HB 398 Additional Documents - Dept. of Revenue Letter of Explanation 4.3.18.pdf SSTA 4/19/2018 3:30:00 PM
HB 398
HB 398 Additional Documents - 2015 Indirect Expenditure Report-Public Utility Exemption.pdf SSTA 4/19/2018 3:30:00 PM
HB 398
HB 398 Fiscal Note.pdf SSTA 4/19/2018 3:30:00 PM
HB 398
HB 47 Fiscal Note OMB 2866.pdf SSTA 4/19/2018 3:30:00 PM
HB 47
HB 47 Actuarial Letter Conduent 4.5.2018.pdf SSTA 4/19/2018 3:30:00 PM
HB 47
ANLPAC2018 Report to the Governor and Legislature.pdf SSTA 4/19/2018 3:30:00 PM
HCR 19
HCR 19 Version T.pdf SSTA 4/19/2018 3:30:00 PM
HCR 19