02/28/2002 08:10 AM House CRA
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
February 28, 2002
8:10 a.m.
MEMBERS PRESENT
Representative Kevin Meyer, Co-Chair
Representative Carl Morgan, Co-Chair
Representative Andrew Halcro
Representative Drew Scalzi
Representative Lisa Murkowski
Representative Gretchen Guess
Representative Beth Kerttula
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 296
"An Act relating to mergers and consolidations of
municipalities."
- MOVED CSHB 296(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 355
"An Act relating to the taxation of mobile telecommunications
services by municipalities; and providing for an effective
date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 296
SHORT TITLE:MUNICIPAL MERGER AND CONSOLIDATION
SPONSOR(S): REPRESENTATIVE(S)WHITAKER
Jrn-Date Jrn-Page Action
01/14/02 1952 (H) PREFILE RELEASED 1/4/02
01/14/02 1952 (H) READ THE FIRST TIME -
REFERRALS
01/14/02 1952 (H) CRA
02/28/02 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 355
SHORT TITLE:MOBILE TELECOMMUNICATIONS TAX
SPONSOR(S): LABOR & COMMERCE BY REQUEST
Jrn-Date Jrn-Page Action
01/23/02 2045 (H) READ THE FIRST TIME -
REFERRALS
01/23/02 2045 (H) CRA, L&C
01/23/02 2045 (H) REFERRED TO CRA
02/28/02 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE JIM WHITAKER
Alaska State Legislature
Capitol Building, Room 411
Juneau, Alaska 99801
POSITION STATEMENT: Testified as the sponsor of HB 296.
TAMARA COOK, Director
Legal and Research Services Division
Legislative Affairs Agency
Alaska State Legislature
Terry Miller Legislative Office Building, Room 329
Juneau, Alaska 99801
POSITION STATEMENT: Provided clarification on HB 296.
DAN BOCKHORST, Staff
Local Boundary Commission
Department of Community & Economic Development
550 West Seventh Avenue, Suite 1770
Anchorage, Alaska 99501-3510
POSITION STATEMENT: Testified on HB 296.
PETE ROBERTS, President
Citizens Concerned About Annexation
PO Box 1134
Homer, Alaska 99603
POSITION STATEMENT: Testified in support of HB 296.
AMY ERICKSON, Staff
to Representative Murkowski
Alaska State Legislature
Capitol Building, Room 408
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of HB
355, the House Labor & Commerce Standing Committee.
DAN YOUMANS, Director
External Affairs
AT&T Wireless
(No address provided)
POSITION STATEMENT: Testified in support of HB 355.
DARRELL BELL, Director of Taxes
AT&T Wireless
(No address provided)
POSITION STATEMENT: Testified on HB 355 and indicated agreement
with adopting the federal act by reference.
CHUCK HARLAMERT, Juneau Section Chief
Tax Division
Department of Revenue
PO Box 110420
Juneau, Alaska 99811-0420
POSITION STATEMENT: Discussed the fiscal note analysis for HB
355.
ACTION NARRATIVE
TAPE 02-11, SIDE A
Number 0001
CO-CHAIR CARL MORGAN called the House Community and Regional
Affairs Standing Committee meeting to order at 8:10 a.m.
Representatives Morgan, Meyer, Halcro, Scalzi, and Guess were
present at the call to order. Representatives Murkowski and
Kerttula arrived as the meeting was in progress. Co-Chair
Morgan introduced Close-Up students who were in attendance.
HB 296-MUNICIPAL MERGER AND CONSOLIDATION
CO-CHAIR MORGAN announced that the first order of business would
be HOUSE BILL NO. 296, "An Act relating to mergers and
consolidations of municipalities."
Number 0097
REPRESENTATIVE JIM WHITAKER, Alaska State Legislature, testified
as the sponsor of HB 296. This legislation deals with the most
basic tenet of democracy, self-determination. Representative
Whitaker informed the committee that a large community can, by
virtue of a vote, determine that a smaller community should
become part of the larger community, no matter the decision of
the smaller community. "This particular bill would correct that
affront to democracy and self-determination," he explained.
REPRESENTATIVE WHITAKER explained that Section 1 of HB 296
merely cleans up existing statute. The current statute allows
an indefinite amount of time for signatures to be collected in
order to place a consolidation effort before the voters.
Signatures may be collected over a period of time, five to ten
years, and some of those signatures may be from people who no
longer live in the area, yet those signatures would still count.
This legislation would change that by requiring that signatures
for such be collected in a period of one year.
Number 0368
REPRESENTATIVE WHITAKER turned to Section 2 of HB 296. To
uphold the basic tenet of self-determination, that is community
self-determination, it is unacceptable that a larger community
simply absorbs an existing governmental entity. Representative
Whitaker clarified that this discussion isn't about annexation.
This legislation addresses the situation in which an existing
city is absorbed by a borough, for example, and a consolidated
government is formed. This happens even when a majority of the
smaller entity preferred [not to be absorbed by the larger
governmental entity]. Therefore, the smaller community's right
to self-determination has been taken away.
REPRESENTATIVE SCALZI recalled the request, during the Homer
annexation, that smaller second class cities become involved in
the dialogue during an annexation. Therefore, he requested that
Representative Whitaker draw the distinction.
REPRESENTATIVE WHITAKER reiterated that annexation is a separate
subject and doesn't apply to consolidation or unification, which
this bill addresses. He deferred to Tam Cook, Legislative Legal
Services, regarding the specific distinctions.
Number 0596
REPRESENTATIVE GUESS inquired as to whether [HB 296] will result
in the problem of one [local government] providing services to
another [local government] which could create an incentive for
voters [of the smaller community] to not vote for
[consolidation/unification].
REPRESENTATIVE WHITAKER agreed that could be a possibility.
However, he emphasized the need to not, in the search for
expediency and efficiency, trump a basic tenet such as self-
determination. Representative Whitaker, in further response to
Representative Guess, said he wasn't aware of any cases like
Representative Guess had described.
REPRESENTATIVE GUESS requested that Representative Whitaker
review Section 3.
Number 0729
REPRESENTATIVE WHITAKER requested that Section 3 be deleted
because that section [posed a problem for the Local Boundary
Commissions (LBC)], and it wasn't a battle he felt could be won.
CO-CHAIR MEYER asked that Representative Whitaker elaborate as
to why he felt that he wouldn't win the battle with the LBC over
Section 3.
REPRESENTATIVE WHITAKER remarked that [this battle] isn't worth
fighting over. The LBC had significant objections to [Section
3] in relation to the it's ability to conduct their business.
Representative Whitaker said that he didn't want HB 296 to
become a review of the LBC and its powers.
REPRESENTATIVE SCALZI requested clarification of the
relationship of annexation of a second class city to a larger
city such as in the Homer annexation. How does [HB 296] differ
from [the Homer situation], he asked.
Number 0986
TAMARA COOK, Director, Legal and Research Services Division,
Legislative Affairs Agency, Alaska State Legislature, stated
that the Homer situation is different in several regards. She
explained that there are two ways in which to accomplish local
boundary changes. One way to accomplish a local boundary change
is by proposal by the LBC subject to legislative oversight. The
second way is through local option. In the Homer situation, the
first method, proposal by the LBC subject to legislative
oversight, was utilized. However, Article X, Section 12 of the
Alaska State Constitution does allow for local option boundary
changes. The last sentence of Article X, Section 12, says, "The
commission or board, subject to law, may establish procedures
whereby boundaries may be adjusted by local action." Therefore,
the statute being amended in HB 296 is a local action statute
that has nothing to do with the LBC's authority over
consolidation.
MS. COOK also pointed out that there are procedures for
annexation that are separate from those for consolidation.
Representative Scalzi is correct in that there could be a
situation in which annexation involves including one city into
another city, although those issues are somewhat different. The
statutes [encompassed in HB 296] deal with merger and
consolidation, which always involve municipalities that join
together. [Mergers and consolidations] never involve land that
is unincorporated or borough land, which was the case in the
Homer situation. Literally, merger and consolidation means that
two municipalities come together to form a single municipality.
Ms. Cook explained, "This particular provision is the local
option merger and consolidation statute. The Local Boundary
Commission could still, if it chose to get involved in a merger
or consolidation, submit a proposal and do the route that we saw
in Homer." Therefore, the constitution specifies that the
legislature can pass laws that deal with the procedure for local
option changes. The LBC does get involved in that it reviews
local option merger and consolidation petitions. Ms. Cook
pointed out that if the local option route is taken, a vote is
taken. That [vote] is required by statute. Therefore, HB 296
places two more procedures into the already established
statutory framework.
Number 1201
MS. COOK explained that Section 1 of HB 296 changes [statute]
such that only a year is allowed to collect signatures for a
merger and consolidation petition. [Section 2] changes the vote
requirement that currently exists for merger and consolidation
[petitions]. Currently, all the people that would be included
in the new proposed municipality vote and are counted in order
to determine passage [of the merger/consolidation]. The
significant change in Section 2 is that the votes of the areas
will be tabulated separately, which Ms. Cook viewed as a
legislative policy choice.
CO-CHAIR MEYER inquired as to whether there is a problem with
the current method of doing mergers and consolidations.
MS. COOK said that she wasn't familiar with any facts on that
matter.
Number 1344
DAN BOCKHORST, Staff, Local Boundary Commission; Department of
Community & Economic Development (DCED), testified via
teleconference. Mr. Bockhorst noted that the LBC hasn't yet
formally considered HB 296. However, he noted that he has
discussed HB 296 with the LBC Chairman, Kevin Waring, who agrees
with the views he will state today. In regard to Section 1, Mr.
Bockhorst said that the department considers it to be reasonable
and thus endorses it. In regard to Section 2, Mr. Bockhorst
concurred with Ms. Cook's comments that Section 2 is a policy
decision. He pointed out that Article X, Sections 3 and 7, of
the Alaska State Constitution impose the duty on the legislature
to determine which municipal governments will be merged and
consolidated. Therefore, the department views Section 2 as a
legitimate public policy proposal deserving serious
consideration.
Number 1470
MR. BOCKHORST noted that the current law provides for an
areawide vote. That law has been in place since 1972, and was
reenacted in 1985 when Title 29 was comprehensively rewritten.
He turned to the policy debate on the merits of providing a
requirement for separate votes in each municipal government.
The Alaska Supreme Court has held that the constitutional policy
of minimizing the number of local government units - as
established in Article X, Section 1, of the Alaska State
Constitution - is served when city and borough governments do
join. Therefore, the more difficult it is to merge or
consolidate, the less the aforementioned constitutional policy
is served.
MR. BOCKHORST informed the committee that in 1991 the
legislature created an ad hoc task force on governmental roles,
which was intended to address efficiencies and effectiveness.
That ad hoc committee presented its report to the legislature in
1992. Among the conclusions of the ad hoc committee was that
merger, consolidation, and unification of city governments and
borough governments should be encouraged, when possible, in
order to achieve more efficient and cost-effective service
delivery. Since HB 296 would require a vote of each
municipality, it would - to varying degrees - raise the bar for
municipal mergers and consolidations. However, Section 2
wouldn't have created particularly extreme situations in the
recent proposals before the LBC. The recent proposals before
the commission have been such that a single city government and
a single borough government have proposed consolidation. In all
cases, the city governments have encompassed a substantial
portion of the borough population -- ranging from approximately
40 percent to 75 percent of the population of the total borough.
The LBC has dealt with proposals for the consolidation of the
following: the City of Haines and the Haines Borough, the City
of Ketchikan and the Ketchikan Gateway Borough, and the City of
Fairbanks and the Fairbanks North Star Borough. However, slight
changes in those proposals could have resulted in Section 2 of
HB 296 making it more difficult to merge or consolidate. For
example, the Ketchikan Gateway Borough consists of the City of
Ketchikan and the City of Saxman. If Section 2 had been in
place and had the City of Saxman been included in the Ketchikan
consolidation proposal, voter approval from each of the three
municipal governments effected would have been required.
Because of the characteristics of the City of Saxman, such a
situation would have allowed 2-3 percent of the voters to block
a consolidation, even if the remaining voters had endorsed the
consolidation.
Number 1723
MR. BOCKHORST turned to Representative Scalzi's comment
regarding the merger/consolidation of the City of Homer and the
City of Kachemak. This is a situation in which the provisions
of HB 296 might make it more difficult to consolidate the
aforementioned local governments, if the local option process
was used. Under current law, the consolidation of the City of
Homer and the City of Kachemak would require a majority of the
total votes cast. Requiring separate voter approval could
result in a situation in which roughly 4 percent of the total
number of votes cast in that proposal could prevent the
consolidation. However, he stressed that there are alternatives
such as a proposal for legislative review annexation of the City
of Kachemak to the City of Homer. In the past there have been
instances in which city governments have been consolidated or
merged through annexation. For example, the City of Port
Chilkoot was annexed to the City of Haines in 1970. An extreme
example of a situation in which the separate vote requirement
could impact the outcome of consolidation is with the City of
Kupreanof, which joins the City of Petersburg. The City of
Kupreanof receives services from the City of Petersburg. If the
separate voter approval requirement was in place, less than one-
half of one percent of the total voters could preclude
consolidation of the City of Kupreanof and the City of
Petersburg. However, the consolidation, in effect, could occur
through a legislative review annexation.
REPRESENTATIVE HALCRO related his understanding that in a
situation in which one community provides services to another
community, a small number of voters in the smaller city could
block a consolidation or merger. However, if the case is strong
enough, the city providing the services could propose its claim
to the LBC through the annexation process.
MR. BOCKHORST answered yes. In further response to
Representative Halcro, Mr. Bockhorst agreed that in the most
egregious cases, when a consolidation is being refused for all
the wrong reasons, there is a safety net [in the legislative
review annexation].
Number 1926
PETE ROBERTS, President, Citizens Concerned About Annexation,
testified via teleconference. Mr. Roberts announced support of
HB 296 [in order to maintain] self-determination and local
control. He pointed out that [the U.S.] legal system includes
many built-in provisions to thwart a large majority from rolling
over a smaller minority. Mr. Roberts said he feels Section 2 is
appropriate. He pointed out that Article I, Section 2, of the
Alaska State Constitution says, "All political power is inherent
in the people." Mr. Roberts expressed the need to review
boundary changes by decree. There needs to be due process.
Number 2122
CO-CHAIR MEYER noted that his earlier question regarding
examples of this problem had been answered through the examples
specified by Mr. Bockhorst and through the information in the
committee packet regarding the Fairbanks North Star Borough.
CO-CHAIR MORGAN, in response to Representative Halcro, announced
that there is a fiscal note.
REPRESENTATIVE GUESS pointed out that the size of the fiscal
note would depend upon who is in charge of the election.
REPRESENTATIVE WHITAKER, in response to Co-Chair Meyer, answered
that HB 296 is not an unfunded mandate.
CO-CHAIR MEYER indicated that under HB 296 cities would be
required to do more work.
REPRESENTATIVE WHITAKER replied no, and explained that there
would be one election with separate counts [for the separate
local governments]. He acknowledged that such might take an
hour more of work.
REPRESENTATIVE GUESS asked if it was Representative Whitaker's
belief that this change should occur so that one-half of one
percent could actually block a merger.
REPRESENTATIVE WHITAKER replied:
It is not my intent to allow any obstructionist
effort; it is my intent to continue to provide the
right to self-determination. As a result of that,
there may be circumstances and situations wherein one-
half of one percent may be viewed by the other ninety-
nine point five percent as being obstructionist.
However, the rights of that one-half of one percent
have been maintained.
Number 2270
REPRESENTATIVE GUESS moved that the committee amend HB 296 by
deleting Section 3. There being no objection, Section 3 was
deleted.
Number 2303
REPRESENTATIVE SCALZI moved to report HB 296 as amended out of
committee with individual recommendations and the accompanying
zero fiscal note. There being no objection, CSHB 296(CRA) was
reported from the House Community and Regional Affairs Standing
Committee.
The committee took a brief at-ease from 8:43 a.m. to 8:45 a.m.
HB 355-MOBILE TELECOMMUNICATIONS TAX
CO-CHAIR MEYER announced that the next order of business before
the committee would be HOUSE BILL NO. 355, "An Act relating to
the taxation of mobile telecommunications services by
municipalities; and providing for an effective date."
REPRESENTATIVE GUESS announced that she had a conflict of
interest with HB 355 due to her employment.
REPRESENTATIVES SCALZI and KERTTULA objected and thus
Representative Guess was required to participate.
Number 2345
AMY ERICKSON, Staff to Representative Murkowski, Alaska State
Legislature, testified on behalf of the sponsor, the House Labor
& Commerce Standing Committee. Ms. Erickson said:
House Bill 355 conforms Alaska statutes to the federal
Mobile Telecommunications [Sourcing] Act to allow for
the appropriate taxes and fees on wireless services in
Alaska. State and local governments tax mobile
telecommunication services in a variety of ways.
Because of the mobility of wireless equipment,
determining which state and local taxes apply to a
wireless call is complicated. The process of
determining where a transaction is taxable is commonly
referred to as "sourcing." In order to create a more
uniform system for taxing wireless telecommunications,
Congress passed the Mobile Telecommunications
[Sourcing] Act, the crafting of which was a joint
effort between industry, state and local, and tax
officials. This was enacted in 2000.
States have until August 1st of this year to conform
to the federal act. If [Alaska] fails to conform as a
state, we'll be unable to impose taxes on most calls
made outside of where the customer's primary use
occurs - that's called "roaming."
Implementation of HB 355 creates the concept that the
customer has a "primary place of use." That is, the
residential or business street address where the
customer uses the mobile service, which determines
which jurisdiction has the right to tax the wireless
call. Additionally, the bill prevents multiple
taxation, achieves administrative simplicity and cost
savings in the billing process, and avoids expensive
audit litigation when multiple states claim
jurisdiction to tax the same call.
MS. ERICKSON informed the committee that until this morning
there was no known controversy with HB 355 and thus she urged
the committee's support.
REPRESENTATIVE MURKOWSKI noted that the fiscal note was not
received until last evening.
Number 2514
DAN YOUMANS, Director, External Affairs, AT&T Wireless,
reiterated that HB 355 would place Alaska in compliance with the
Mobile Telecommunications Sourcing Act, which was the result of
a collaborative effort between the wireless industry and a
number of organizations, including the National Governor's
Association, the National Conference of State Legislatures, the
federal tax administrators, the Multi-State Tax Commission, and
the National League of Cities. Mr. Youmans informed the
committee that HB 355 is supported by both AT&T Wireless and
ACS. As mentioned, the federal law is intended to simplify how
taxes are collected and remitted by wireless carriers. This
[federal law] was necessary because the existing law speaking to
fixed telecommunications didn't clearly specify which
jurisdiction should be allowed to tax revenues from wireless
phones. Additionally, the federal act specified changes in how
wireless services were sold. Today, wireless calls are no
longer sold on a call-by-call, minute-by-minute basis. New rate
plans now include buckets of air time, which generally provide
better deals to customers of wireless service. However, these
plans have made the assessment of local taxes very difficult.
For example, a rate plan may include 300 minutes of air time, a
bucket of minutes, and may cost $29.99 and also come with 1,000
free [minutes] for nights and weekends. Therefore, assessing
taxes on these calls that are made from different municipalities
becomes extremely complex. For example, what if the customer
doesn't use all the minutes in a month or what if the customer
uses all of the minutes and buys additional minutes at a higher
rate.
MR. YOUMANS pointed out that the Mobile Telecommunications
Sourcing Act has greatly simplified this process by allowing the
jurisdiction of a customer's primary place of use to tax all the
charges all the month no matter where the customer made the
calls in the United States. In HB 355, the primary place of use
is defined as the customer's residential street address or
primary business address. Therefore, if a customer's
residential street address is in the City of Seward, the only
jurisdiction that could apply taxes would be Seward, no matter
where the customer uses his/her wireless phone. Mr. Youmans
informed the committee that on a state-by-state basis he has
found this proposal to be revenue-neutral.
Number 2712
MR. YOUMANS summarized by saying that the bill has the following
three benefits. First, HB 355 greatly simplifies the wireless
carriers' administration of local taxes and jurisdictional
audits for such taxes. Second, HB 355 helps consumers by
clarifying which taxes apply to their bills. Without this
clarification a consumer could be in a position in which
multiple jurisdictions attempt to charge that customer for
taxes. Third, HB 355 ensures that taxes are collected on all
appropriate revenue of wireless users whose resident or primary
business address is in their jurisdiction. Mr. Youmans
concluded by requesting that the effective date be changed from
July 1, 2002, to August 1, 2002, which is when the federal law
officially goes into effect.
Number 2755
REPRESENTATIVE MURKOWSKI turned to the fiscal note and its
analysis. The analysis of the fiscal note points out that
although the language of HB 355 is somewhat patterned after the
federal act, it isn't verbatim and so "some differences may
produce unintended consequences." Therefore, the fiscal note
recommends adoption of the federal act by reference.
Representative Murkowski inquired as to how HB 355 differs from
the federal act.
MR. YOUMANS remarked that he was concerned to hear that the
Department of Revenue has some issues with HB 355 because he
worked closely with the department on this legislation.
Number 2839
DARRELL BELL, Director of Taxes, AT&T Wireless, testified via
teleconference. Mr. Bell informed the committee that he did
most of the drafting, in conjunction with the Department of
Revenue. Great pains were taken to reword the bill to exactly
follow the federal bill. Therefore, he, too, was surprised.
However, Mr. Bell announced that he didn't oppose incorporating
the entire act by reference because there was never any intent
to differ from what the federal act achieves.
REPRESENTATIVE MURKOWSKI pointed out that the fiscal note
analysis also mentions that HB 355 is restricted to the
municipal taxes in Alaska. Therefore, the Department of Revenue
recommends changing HB 355 so that it applies to state as well
as municipal taxes. She inquired as to [Mr. Bell's] thoughts on
that.
MR. BELL said that recommendation would be fine. He said that
the only state tax he was aware of was the Universal Service
Fund tax. However, he wasn't aware of that tax during the
drafting of HB 355 and thus the legislation was drafted to deal
with the borough and city issues. Mr. Bell emphasized the
preference of changing HB 355 so that it applies to state as
well as municipal taxes.
CO-CHAIR MEYER inquired as to what the Telephone Cooperative
Gross Receipts Tax is that is mentioned in the fiscal note
analysis. [There was indication that this question could be
answered by the department during their testimony.]
Number 2944
REPRESENTATIVE KERTTULA turned to the new section, AS 29.45.780,
and inquired as to whether those customer procedures differ from
how one deals with the telephone bill.
MR. BELL explained that [HB 355] requires that the carrier
respond to the customer within 60 days [once there is a
complaint] regarding the taxes on the bill. This is the first
step for the customer in obtaining a correction of an error.
REPRESENTATIVE KERTTULA asked if this has to be done in writing
for telephone lines or can one call the carrier.
MR. BELL said he guessed that under HB 355 one could just call.
TAPE 02-11, SIDE B
REPRESENTATIVE KERTTULA pointed out that the language says, "If
a customer believes that an amount of tax, charge, or fee or an
assignment of place of primary use or taxing jurisdiction
included on a billing is erroneous, the customer shall notify
the home service provider in writing."
Number 3003
REPRESENTATIVE GUESS inquired as to whether [HB 355] includes
mobile data as well.
MR. BELL replied, "Yes, to the extent mobile data is taxable."
REPRESENTATIVE GUESS also inquired as to who is in charge of the
database.
MR. BELL explained that the state can choose to do nothing in
regard to a database, and therefore the carriers would continue
to use a nine-digit zip code approach. If the state chooses to
do a database, it has to be done by the state or an entity with
which all the cities and boroughs agree. That database would be
used to correctly assign customers to their jurisdiction.
REPRESENTATIVE GUESS surmised then that HB 355 doesn't force the
state to have an active role in creating a database.
MR. BELL agreed. If the state chooses to provide a database,
the carrier must use that database if it desires to be held
harmless in how customers are assigned jurisdictions. Mr. Bell
suspected that many states wouldn't do a database in the hopes
that the two or three vendors [in their state] would become
providers of these databases and thus the state would endorse
the database if it likes it.
Number 2872
REPRESENTATIVE GUESS pointed out that HB 355 refers to the
primary business street address but doesn't refer to the primary
residential address. Therefore, she inquired as to why
"primary" wasn't specified for the residential address while it
was for the business address.
MR. BELL recalled that the League of Cities wanted a primary
business address so that the customer couldn't shop around for
the lowest rate of all his/her business locations. He said, "We
were trying to focus in on what they call 'gaming' on coming up
with a service address that would be the point of taxation." He
explained that there was a compromise in the specifications of
the primary area of use.
REPRESENTATIVE GUESS inquired as to whether the customer bears
any obligation to notify his/her service provider that the
customer will be temporarily moving their residential address,
although the primary residential address hasn't changed.
MR. BELL replied no, and explained that the primary place of use
has to be one which is reflected in the customer's call activity
across the board. [This] attempts to move away from identifying
the location of every call.
MR. YOUMANS interjected that [the primary place of use] has to
be within the carrier's service area. Therefore, if the
secondary residence isn't in the carrier's service area, then
that wouldn't be considered the customer's primary place of use.
REPRESENTATIVE GUESS said that she understood that there was a
compromise, but she feels it seems sloppy to not [require] the
primary residence address. She said she didn't want to be in a
situation in which Juneau, as well as Anchorage, thinks it can
tax her during the four months she is in Juneau.
MR. BELL remarked that [the carriers] don't want to be in a
situation of tracking the customer's activity and change [the
primary place of use] every couple of months.
Number 2696
REPRESENTATIVE MURKOWSKI asked what would happen if Alaska fails
to come into compliance with the federal act.
MR. YOUMANS explained that the problem would relate to the
authority a local jurisdiction would have in Alaska to charge
taxes on calls made out of that jurisdiction. For example, when
a customer who lives in Seward uses his wireless phone in
Seattle, [Seward] wouldn't be able to collect the taxes it was
owed for those calls made in Seattle because the municipality
wouldn't have the authority to tax outside of its jurisdiction.
MR. BELL pointed out that the federal act takes away the right
to tax customers traveling into an area whose primary place of
use is outside of the state. If Alaska doesn't come into
compliance with the federal act, then the aforementioned revenue
stream from roaming will be lost.
REPRESENTATIVE GUESS questioned whether not specifying a primary
residential address could be setting up a situation in which
Juneau would decide that it should receive some of the tax
revenue from those who move to Juneau [for part of the year].
MR. BELL said that if one uses their phone primarily in Juneau,
then an audit would be required in order to change the primary
place of use to Juneau.
MR. YOUMANS interjected that the determination would come from
an audit.
REPRESENTATIVE GUESS questioned, "Again, tell me why we
shouldn't change this to primary residential."
MR. YOUMANS commented that perhaps it's something that should be
reviewed. He echoed earlier comments that the language was a
compromise so that [a customer] isn't linked to one address in
recognition of people moving around a bit. If there was a
question, then the customer would show their phone records to
from where the primary calls are made [in order to determine]
the primary place of use.
REPRESENTATIVE GUESS remarked that it seems to place quite a
burden on the customer.
REPRESENTATIVE MURKOWSKI pointed out that Alaska probably has a
greater population of folks that are mobile. She noted that she
uses her cell phone more in Juneau than she does in Anchorage.
MR. YOUMANS offered to review this issue.
MR. BELL related his belief that changing the language to the
primary residential address would probably follow what is
[currently] being done more closely. Therefore, "we" probably
wouldn't argue with that change, although one state - Alaska -
would have a little different wording.
Number 2425
CHUCK HARLAMERT, Juneau Section Chief, Tax Division, Department
of Revenue, began by apologizing for the late arrival of the
fiscal note. He echoed earlier comments that the department had
worked closely with Mr. Bell and Mr. Youmans over the last year.
The department reviewed the first draft of HB 355 and suggested
changes, which were carried through. He noted that he spoke
with Mr. Bell and Mr. Youmans last September and gave them the
impression that the department was satisfied, which it was at
the time. Upon further accumulation of information from
[similar] legislation being brought forward in other states, the
fiscal note was developed. The suggestions of the fiscal note
are minor technically. Mr. Harlamert said that the [department]
believes that the bill is a great idea.
MR. HARLAMERT turned to the suggestion of adopting the federal
act by reference. He explained, "So the extent that our law
does not change to match the federal law, we lose the ability to
tax -- we only get the tax where they overlap. Our basic theme
is to stay on par with the federal law, as closely as possible.
The idea is that it's revenue-neutral for everybody." He
reiterated the belief that HB 355 is a good bill, and he said he
hoped it would go through. Mr. Harlamert turned to the problems
the department had with the bill, which he viewed as rather
technical. Some of the minor differences between the bill [and
the federal law] can't be explained by the department because
the department doesn't have expertise in this industry. He
pointed out, "If you build in the potential for our law
deviating from the federal law, you, by nature, limit our
ability to tax this activity. It just doesn't make any sense,
in my opinion, to do that. We should, as closely as possible,
mimic the federal law."
MR. HARLAMERT, in response to Co-Chair Meyer, explained that the
Telephone Cooperative Gross Receipts Tax is a state tax on local
telephone cooperatives and it's in lieu of any other state tax.
This tax is shared directly with the communities in which the
telephone cooperative operates. This tax was mentioned only to
illustrate why one would want to include state taxes in HB 355.
Mr. Harlamert said that [the department] can't measure the
amount of the Telephone Cooperative Gross Receipts Tax that
could be attributable to mobile services. Most of the
cooperatives have a taxable subsidiary that handle mobile
services. Mr. Harlamert stated that it's not really a critical
issue to the department.
CO-CHAIR MEYER noted that he would like to know the financial
impact to the state if this bill passes because that would
determine whether HB 355 needs to go to the House Finance
Committee.
Number 2131
REPRESENTATIVE MURKOWSKI expressed her frustration with
receiving the fiscal note late. She asked if Mr. Harlamert
could provide an example of the unintended consequences
mentioned in the analysis of the fiscal note.
MR. HARLAMERT said that he couldn't be specific because he isn't
competent to discuss the underlying industry. He said he could
only provide the observation that federal law overrides the
state law and the state can't step beyond the sourcing
provisions granted by the federal law. Therefore, any deviation
from the federal law limits [the state] and thus has the
potential to generate an unintended difference between what the
state law allows the state to tax and the federal law allows the
state to tax. The best scenario is to match the [federal] law
as closely as possible.
REPRESENTATIVE MURKOWSKI expressed her hope that the committee
would be willing to hold HB 355 in order that the department
could meet with Mr. Bell and Mr. Youmans and anyone else
interested. She related her understanding that the department
needs the expertise of the industry. She also expressed her
hope that this could be worked out in order to have a strong
zero fiscal note.
MR. HARLAMERT pointed out that even with the adoption of the
federal law verbatim, the risk of it becoming outdated would
remain. Therefore, adopting the federal law by reference is the
simplest way to automatically build into Alaska's system any
changes that occur to the federal law.
Number 1912
REPRESENTATIVE GUESS related her understanding that the
department would like for HB 355 to include state taxes and tie
the bill to federal law. She asked if the tie to the federal
government would take into consideration prepaid telephones and
other things coming in the wireless industry.
MR. HARLAMERT clarified that the latter change, tying our law to
the federal law, would make the other suggestion, including
state taxes, irrelevant. The federal law applies to state and
municipal taxation. In further response to Representative
Guess, Mr. Harlamert agreed that his opinion is that this
legislation needs to be tied to the federal law.
MR. YOUMANS noted that he would be happy to work with the
department on [adopting the federal law by reference].
MR. BELL added that the route being suggested is the route that
[the industry] wanted to go in the first place. He informed the
committee that in many states when this route has been
attempted, the state has pointed out that there are certain
restrictions on drafting the statutes and thus the federal act
couldn't be adopted by reference. He thought that was the case
in Alaska and was why all the work on HB 355 happened. However,
"if we can do it by reference, we'll do it by reference," he
said.
Number 1774
REPRESENTATIVE KERTTULA related her belief that it can be done
in statute, but the regulations would be a different matter.
One of the difficulties with regulations is that you don't know
what will happen, and furthermore agencies only have certain
authorities. She said she feels that there is a little more
latitude with the statutes.
MR. YOUMANS clarified that he didn't mean [adopting the federal
law] by regulation but rather by reference.
MR. BELL interjected that there is no desire to have this done
by regulation.
CO-CHAIR MEYER announced that HB 355 would be held.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:28 a.m.
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