Legislature(2003 - 2004)

04/01/2003 08:20 AM House CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE COMMUNITY AND REGIONAL AFFAIRS                                                                            
                       STANDING COMMITTEE                                                                                     
                         April 1, 2003                                                                                          
                           8:20 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Carl Morgan, Chair                                                                                               
Representative Kelly Wolf, Vice Chair                                                                                           
Representative Pete Kott                                                                                                        
Representative Tom Anderson                                                                                                     
Representative Ralph Samuels                                                                                                    
Representative Sharon Cissna                                                                                                    
Representative Albert Kookesh                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 194                                                                                                              
"An Act creating a tax credit under the Alaska Net Income Tax                                                                   
Act for contributions to regional development organizations; and                                                                
providing for an effective date."                                                                                               
                                                                                                                                
     - MOVED HB 194 OUT OF COMMITTEE                                                                                            
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
BILL: HB 194                                                                                                                  
SHORT TITLE:REGIONAL DEVELOPMENT ORG TAX CREDIT                                                                                 
SPONSOR(S): REPRESENTATIVE(S)ANDERSON                                                                                           
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/14/03     0541       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/14/03     0541       (H)        CRA, L&C, FIN                                                                                
04/01/03                (H)        CRA AT 8:00 AM CAPITOL 124                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MARK GRABER, Audit Manager Group 1                                                                                              
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered questions with regard to HB 194.                                                                  
                                                                                                                                
TIM ROGERS, Legislative Program Coordinator                                                                                     
Municipality of Anchorage                                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 194.                                                                            
                                                                                                                                
EDWARD LAMB, CEO                                                                                                                
Alaska Regional Hospital;                                                                                                       
Board Member, Anchorage Economic Development Corporation                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 194.                                                                            
                                                                                                                                
LARRY CRAWFORD, President                                                                                                       
Anchorage Economic Development Corporation                                                                                      
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Encouraged the  committee to  pass HB  194                                                               
from committee.                                                                                                                 
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 03-11, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
CHAIR  CARL  MORGAN  called  the  House  Community  and  Regional                                                             
Affairs  Standing  Committee  meeting   to  order  at  8:20  a.m.                                                               
Representatives Morgan,  Wolf, Kott,  Anderson, and  Samuels were                                                               
present  at  the  call  to order.    Representatives  Cissna  and                                                               
Kookesh arrived as the meeting was in progress.                                                                                 
                                                                                                                                
HB 194-REGIONAL DEVELOPMENT ORG TAX CREDIT                                                                                    
                                                                                                                                
CHAIR MORGAN announced  that the only order of  business would be                                                               
HOUSE  BILL NO.  194, "An  Act creating  a tax  credit under  the                                                               
Alaska  Net   Income  Tax  Act  for   contributions  to  regional                                                               
development organizations; and providing for an effective date."                                                                
                                                                                                                                
Number 0107                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ANDERSON,  speaking as  the  sponsor  of HB  194,                                                               
began by  saying that  HB 194  is about being  pro business.   He                                                               
informed  the  committee  that   there  are  18  Alaska  Regional                                                               
Development Organizations  (ARDOR), of  which the largest  is the                                                               
Anchorage Economic Development Council  (AEDC).  This legislation                                                               
enhances  the desire  to contribute  to  ARDORs by  giving a  tax                                                               
credit to corporations that do  so.  However, the established tax                                                               
credit limit of $150,000 is  maintained and thus the budget isn't                                                               
directly   impacted   under   the  $150,000   tax   credit   cap.                                                               
Representative Anderson  directed attention to  page 3 of  HB 194                                                               
which  illustrates  other tax  credits  that  can be  given  when                                                               
corporations  give to  certain entities  and HB  194 merely  adds                                                               
[ARDORs] to the list.                                                                                                           
                                                                                                                                
REPRESENTATIVE  ANDERSON pointed  out that  the committee  packet                                                               
should  include  a  zero  fiscal  note  from  the  Department  of                                                               
Community  & Economic  Development  (DCED).   He  noted that  the                                                               
Department  of Revenue  hasn't provided  a fiscal  note yet.   He                                                               
reviewed  various  entities  that will  be  positively  impacted,                                                               
including the  Municipality of Anchorage,  Providence [Hospital],                                                               
Copper   Valley  Economic   Development   Council,  and   Chugach                                                               
Electric.    There is  a  diverse  range  of entities  that  will                                                               
benefit  from HB  194.   This legislation  induces businesses  to                                                               
contribute [to ARDORs] and encourage  the growth of ARDORs, which                                                               
is a catalyst into regional economic development.                                                                               
                                                                                                                                
REPRESENTATIVE SAMUELS  inquired as to what  entities can utilize                                                               
[this tax credit].                                                                                                              
                                                                                                                                
Number 0535                                                                                                                     
                                                                                                                                
MARK GRABER, Audit  Manager Group 1, Tax  Division, Department of                                                               
Revenue, said that he doesn't have  a complete list.  However, he                                                               
identified  the  education  credit  and  the  mining  exploration                                                               
credits as probably the two largest credits.                                                                                    
                                                                                                                                
REPRESENTATIVE KOTT  inquired as  to how  much revenue  the state                                                               
loses in taxes by virtue of the tax credit provided in statute.                                                                 
                                                                                                                                
MR.  GRABER  said  that  he   could  provide  that  answer  after                                                               
reviewing the [Department of Revenue's]  annual report.  However,                                                               
he identified  the most significant  tax credit as  the education                                                               
credit.   In response  to Chair Morgan,  Mr. Graber  informed the                                                               
committee  that the  department did  prepare a  fiscal note  late                                                               
Friday and  it was  a zero  fiscal note.   However,  the analysis                                                               
questioned  what  a  regional  development  organization  is  the                                                               
department was  interested in  being precise  with regard  to who                                                               
the credit  would go  to.  After  hearing the  earlier statements                                                               
today,   Mr.  Graber   surmised  that   a  regional   development                                                               
organization is a fairly specific term of art.                                                                                  
                                                                                                                                
REPRESENTATIVE ANDERSON explained  that the legislation [creates]                                                               
a   tax  credit   for  contributions   to  regional   development                                                               
organizations.                                                                                                                  
                                                                                                                                
MR.   GRABER  explained   that   when  he   first  reviewed   the                                                               
legislation,  he  didn't understand  who  would  qualify for  the                                                               
credit.   However,  the  opening remarks  seem  to indicate  that                                                               
[ARDORs]  are a  sort  of sanctioned  organization  and thus  the                                                               
department will know which organizations these are.                                                                             
                                                                                                                                
REPRESENTATIVE ANDERSON  specified that  it would be  a statutory                                                               
business, a corporate business, or partnership.                                                                                 
                                                                                                                                
MR.  GRABER inquired  as to  how the  department would  determine                                                               
which entities would qualify for this tax credit.                                                                               
                                                                                                                                
Number 0860                                                                                                                     
                                                                                                                                
MITCH  BRAVO, Lobbyist  for  the  Anchorage Economic  Development                                                               
Corporation, pointed out  that there are 13  ARDORs recognized by                                                               
the  DCED  and those  organizations  are  organized under  Alaska                                                               
Statute.   However, the  Department of Revenue  has no  reason to                                                               
know that these organizations are organized as [ARDORs].                                                                        
                                                                                                                                
MR. GRABER  asked if it would  be appropriate to specify  that in                                                               
statute  as a  qualification for  the tax  credit, which  is done                                                               
with some other credits.                                                                                                        
                                                                                                                                
Number 0972                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CISSNA related  her  assumption  that this  would                                                               
apply  to a  broader group  than  just the  ARDORs and  suggested                                                               
[changing the language] to do so.                                                                                               
                                                                                                                                
REPRESENTATIVE  ANDERSON referred  to Section  7 which  specifies                                                               
the definition  of "regional  development organization"  as found                                                               
in AS  44.33.895.  He  then referred  to the second  paragraph of                                                               
the sponsor  statement, which in  part says "The  definition used                                                               
in  HB  194  for  'regional  development  organization'  is  from                                                               
statutory language used to define  an Alaska Regional Development                                                               
Organization (ARDOR)."   Therefore, this would only  apply to the                                                               
13  ARDORs.   He noted  that he  was nervous  with the  notion of                                                               
[broadening the legislation] too much.                                                                                          
                                                                                                                                
MR. GRABER  remarked that if  there is legislative intent  on the                                                               
record,  then [the  applicable entities  could be  identified] in                                                               
regulation.                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CISSNA  asked whether  it  would  be outside  the                                                               
boundaries of  the sponsor's thoughts to  broaden the legislation                                                               
a bit  so that  other groups conforming  with the  definition can                                                               
[utilize this tax credit].                                                                                                      
                                                                                                                                
REPRESENTATIVE ANDERSON commented  that would be a  great idea in                                                               
another piece  of legislation.   Representative Anderson  said he                                                               
didn't know  the fiscal implications  were the legislation  to be                                                               
expanded.                                                                                                                       
                                                                                                                                
Number 1287                                                                                                                     
                                                                                                                                
TIM  ROGERS,  Legislative  Program Coordinator,  Municipality  of                                                               
Anchorage, testified  in support of  HB 194.   He noted  that the                                                               
committee packet  should include a  letter of support for  HB 194                                                               
from the Municipality of Anchorage's  Mayor, Mayor George Wuerch.                                                               
Mr.  Rogers informed  the committee  that the  Anchorage Economic                                                               
Development  Corporation  has  been   a  key  tool  for  economic                                                               
development  within Anchorage.   This  legislation would  provide                                                               
another  tool to  that  organization in  its  mission to  provide                                                               
resources  to   existing  businesses  as  well   as  attract  new                                                               
businesses into Anchorage.   In conclusion, he  urged the passage                                                               
of HB 194 from committee.                                                                                                       
                                                                                                                                
Number 1360                                                                                                                     
                                                                                                                                
EDWARD  LAMB,  CEO,  Alaska   Regional  Hospital;  Board  Member,                                                               
Anchorage Economic Development  Corporation, testified in support                                                               
of HB  194.  Economic development  is critical for the  future of                                                               
Alaska   and  anything   that  would   encourage  businesses   to                                                               
contribute to these ARDORs would be helpful, he said.                                                                           
                                                                                                                                
Number 1431                                                                                                                     
                                                                                                                                
LARRY   CRAWFORD,  President,   Anchorage  Economic   Development                                                               
Corporation, highlighted  that there  are two caps.   One  cap is                                                               
the $150,000 cap  and the other is the $10,000  cap for this type                                                               
of tax  credit.   He encouraged  the committee  pass HB  194 from                                                               
committee.   He  characterized this  legislation as  bringing the                                                               
private sector  closer to economic  development, which  he viewed                                                               
as positive.                                                                                                                    
                                                                                                                                
CHAIR MORGAN,  upon determining  no one  else wished  to testify,                                                               
closed public testimony.                                                                                                        
                                                                                                                                
Number 1554                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KOTT  requested  that   Mr.  Graber  forward  the                                                               
information he requested earlier to his office.                                                                                 
                                                                                                                                
REPRESENTATIVE ANDERSON pointed out that  HB 194 has referrals to                                                               
the House  Labor and  Commerce Standing  Committee and  the House                                                               
Finance  Committee.    He  assured  committee  members  that  any                                                               
commerce  issues  would  be  addressed in  the  House  Labor  and                                                               
Commerce Standing Committee, which he chairs.                                                                                   
                                                                                                                                
REPRESENTATIVE  KOTT requested  that  Mr. Graber  explain how  he                                                               
arrived at a  zero fiscal note.  He surmised  that Mr. Graber was                                                               
basing the fiscal  note on the number of  entities that currently                                                               
have  a tax  incentive  without considering  that other  entities                                                               
might come on board to specifically contribute to ARDORs.                                                                       
                                                                                                                                
MR.  GRABER  said  that  it's difficult  for  the  Department  of                                                               
Revenue to  know which entities  not already taking  advantage of                                                               
this credit would do so.   Mr. Graber explained, "We were looking                                                               
at it from  the standpoint that you still have  that $150,000 cap                                                               
and  to the  extent  a  corporation or  a  taxpayer  is going  to                                                               
continue with the same level of  contributions, it will just be a                                                               
reclassification of one  contribution to the other."   He related                                                               
that  the  department would  probably  recognize  that [this  tax                                                               
credit]  would stimulate  additional  contributions, although  he                                                               
didn't know of any way to measure it.                                                                                           
                                                                                                                                
REPRESENTATIVE KOTT  noted his agreement and  confidence that [HB
194] will stimulate additional contributions.                                                                                   
                                                                                                                                
REPRESENTATIVE  ANDERSON explained  that the  assumption is  that                                                               
some of the companies that currently  give up to the $150,000 cap                                                               
would continue to do so, although  some may take $10,000 and give                                                               
it  to an  ARDOR  rather  than another  entity.   Therefore,  the                                                               
fiscal note would be zero due to the transfer.                                                                                  
                                                                                                                                
Number 1773                                                                                                                     
                                                                                                                                
REPRESENTATIVE KOTT moved to report  HB 194 out of committee with                                                               
individual recommendations and the  accompanying zero fiscal note                                                               
and  forthcoming fiscal  note [from  the Department  of Revenue].                                                               
There  being no  objection, HB  194 was  reported from  the House                                                               
Community and Regional Affairs Standing Committee.                                                                              
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Community  and Regional  Affairs Standing  Committee meeting  was                                                               
adjourned at 8:45 p.m.                                                                                                          

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