Legislature(1995 - 1996)
03/19/1996 01:40 PM House FIN
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* first hearing in first committee of referral
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HOUSE FINANCE COMMITTEE
MARCH 19, 1996
1:40 P.M.
TAPE HFC 96 - 79, Side 1, #000 - end.
TAPE HFC 96 - 79, Side 2, #000 - end.
TAPE HFC 96 - 80, Side 1, #000 - #212.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 1:40 P.M.
PRESENT
Co-Chair Hanley Representative Martin
Co-Chair Foster Representative Mulder
Representative Brown Representative Navarre
Representative Grussendorf Representative Parnell
Representative Kelly Representative Therriault
Representative Kohring
ALSO PRESENT
Representative Joe Green; Deborah Vogt, Deputy Commissioner,
Department of Revenue; Robert Briggs, Assistant Attorney
General, Oil, Gas and Mining Section, Civil Section,
Department of Law; Dan Seckers, Chairman, Tax Committee,
Alaska Oil and Gas Association (AOGA); Sharon Barton,
Director, Division of Administrative Services, Department of
Administration.
SUMMARY
HB 341 An Act establishing a tax court to consider and
determine certain taxes and penalties due and
collateral matters, and amending provisions
relating to taxpayer challenges to the assessment,
levy, and collection of taxes by the state; and
providing for an effective date.
CS HB 341 (FIN) was reported out of Committee with
a "do pass" recommendation and with fiscal notes
by the Department of Administration dated 3/12/96,
the Alaska Court System dated 3/12/96 and a zero
fiscal note by the Department of Revenue dated
1/26/96.
HOUSE BILL 341
"An Act establishing a tax court to consider and
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determine certain taxes and penalties due and
collateral matters, and amending provisions relating to
taxpayer challenges to the assessment, levy, and
collection of taxes by the state; and providing for an
effective date."
Representative Brown noted that she would offer Amendments
of Revenue. [Copy on file].
DEBORAH VOGT, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
spoke to Amendment #1 which would provide a technical change
to language already included in the legislation regarding
payment of the administrative appeal.
ROBERT BRIGGS, ASSISTANT ATTORNEY GENERAL, OIL, GAS AND
MINING SECTION, DEPARTMENT OF LAW, elaborated, Amendment #1
has been separated into two parts. The first section
relates to a reference on Page 9, addressing judicial
appeals from an administrative decision. The second portion
of the amendment relates to judicial appeals from a tax
assessment. Conflicts result in how payments are made when
an appeal is taken directly from a tax assessment
administrative decision.
He continued, conflict does result when determining what a
tax payer must pay in the decision to appeal to Superior
Court. The amendment would provide an alternative mechanism
for obtaining relief in paying the full due tax. Mr. Briggs
recommended that the language be made consistent and be cued
to the Alaska Rules of Appellate Procedure.
He interjected that there could exist a potential argument
if a change was made to the security appeal mechanism, at
which point, there could be a potential intrusion on the
purview of the Alaska Supreme Court and the rules of
appellate procedures.
REPRESENTATIVE JOE GREEN indicated that it was not his
intent to create a conflict within the language of the bill.
He voiced support of Amendment #1.
Representative Parnell asked if currently, a bond was
required. Within the Department of Revenue, Ms. Vogt
responded that the normal procedure would be to provide for
an appeal, to be filed after the informal hearing and
without paying. Typically, the bond is used in an appeal.
Mr. Briggs suggested that parts mentioned in the amendment
do not relate to the appeal of the administrative law judge,
but instead are the appeals from the law judges decision to
a court.
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Ms. Vogt added, the legislation as currently drafted,
requires bonding or showing of some letter from a creditor.
The amendment would change that, making the de novo route
free. The Department prefers that the route through the
administrative law judge be without payment. The Department
does not support the direct court provisions.
Co-Chair Hanley inquired, under current legislation, if a
party went to the administrative law judge, would they then
be required to post a bond or to be otherwise capable of
paying. Ms. Vogt replied that the party would be liable;
she referenced Section 2, Page 17. Co-Chair Hanley
understood that the amendment would provide a technical
approach to make the information consistent. Mr. Briggs
reiterated Amendment #1 would provide that when a party goes
to the Superior Court, they would then be required to make a
payment or post a bond. He mentioned concern in how the
security would be approved. Usually, when a bond is filed
in Superior Court, security is approved through the Appeal
Rules of Procedure.
Co-Chair Hanley agreed that the Department would not want to
become involved in the business of the Superior Court.
Changing the language in the amendment would provide a
different type of security. Mr. Briggs concurred, and
pointed out that the second section of Amendment #1 would
establish that security was provided by the tax payer and
then would be approved according to the rules of procedure.
Co-Chair Hanley reiterated that the amendment would not
change the rules regarding whether or not a person would
post a bond and/or pay. Ms. Vogt echoed, the amendment
would delete language that security must be provided for,
before a person goes before the administrative route.
Representative Brown MOVED to adopt Amendment #1.
DAN SECKERS, CHAIRMAN, TAX COMMITTEE, ALASKA OIL AND GAS
ASSOCIATION (AOGA), ANCHORAGE, stated that AOGA did not have
an official position on the amendment, however, he agreed
with Representative Therriault that payment of the bonds
would be one of the deterrents from using the "straight
route" to the courts.
Representative Mulder thought the amendment would require
payment of the bond. Co-Chair Hanley commented that the
bill as it currently exists, requires that the bond be
posted whether they go to the administrative law judge or
directly to the court. Under the amendment, the party would
only be responsible for posting the bond when they go to the
court.
Representative Brown responded to Representative
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Therriault's question regarding the intent of the amendment.
She stated, in continuing to use the direct court of appeal
approach would then provide a means to use the
administrative route. She thought the amendment provided a
reasonable approach.
There being NO OBJECTION, Amendment #1 was adopted.
Representative Brown explained that Amendment #2 would
address how the administrative law judges would be
appointed. [Copy on file]. Ms. Vogt advised that the
current draft clarifies that administrative law judges would
be appointed by the Governor and confirmed by the
Legislature. AOGA suggested that the administrative law
judge be appointed by the Legislature. The Administration
pointed out that the confirmation of an employee within the
Department of Administration by the Legislature, would
violate the Constitution. AOGA then recommended having a
board. She pointed out that the Administration feels that
having a board to review tax cases creates an awkward and
overly elaborate approach for an administrative law judge.
Ms. Vogt continued, the Administration recognizes the need
for independence from the Department of Revenue within the
legislation. Taxpayers need to be confident that
administrative law judges are chosen in an unbiased manner.
The Administration proposes that the constitutionally
created Judicial Council be called upon for that duty. The
administrative law judge would then be appointed by the
Governor from a list of names submitted by the Judicial
Council. Amendment #2 provides language to make that
change.
Representative Green voiced objection to the amendment,
stating that the action would change the "basic" purpose of
the legislation. He thought that the Legislature should
have some authority in the confirmation of judges.
Representative Navarre countered that the Legislature ought
not have confirmation authority, emphasizing that the
responsibility for administration of a tax system rests with
the Executive Branch.
Co-Chair Hanley inquired if appointed judges could only be
removed for "cause". Ms. Vogt stated that the appointed
judge position would not change with each new governor, and
would be placed for a specific term limit. She reminded the
Committee that the members of Judicial Council are confirmed
by the Legislature.
Representative Green mentioned that there are other agencies
which directly affect the protection of the State and
resources, which are appointed by the Governor and confirmed
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by the Legislature. The original language of the bill
removes the involvement of the Administration.
DAN SECKERS, CHAIRMAN, TAX COMMITTEE, ALASKA OIL AND GAS
ASSOCIATION (AOGA), ANCHORAGE, stated that AOGA had no
position on the amendment, although, found merit in the
confirmation process.
Representative Parnell advised that confirmation by the
Legislature would create a more fair process. He thought
that the Judicial Council would be more impartial than the
Administration. Representative Navarre advised that the
confirmation process has become "politicalized" over the
past ten years. Representative Mulder alluded that the tax
process should not lend itself to a bipartisan support in
order to be fair. Representative Navarre countered that the
Legislature can change the tax laws. He emphasized that the
administration of the tax code should be within the
Executive Branch.
(Tape Change, HFC 96-79, Side 2).
Representative Brown MOVED to adopt Amendment #2.
Representative Mulder OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Brown, Grussendorf, Navarre.
OPPOSED: Kelly, Kohring, Martin, Mulder, Parnell,
Therriault, Hanley, Foster.
The MOTION FAILED (3-8).
Representative Brown MOVED to adopt Amendment #3. [Copy on
file]. Ms. Vogt stated that Amendment #3 would delete the
provisions permitting the tax payer to appeal directly to
the court and would require the tax payer to use the tax
tribunal established by the board. Ms. Vogt distributed two
charts which illustrate State with Independent Tribunals and
the States Where Tax Authorities Conduct Tax Appeals. [Copy
on file]. She provided an overview of the charts.
Discussion followed regarding information on the charts.
Representative Navarre inquired if the taxpayer would have
the ability to go to court under the system proposed. Ms.
Vogt stated that parties could agree to skip the
administrative agency appeal. With Amendment #3, the
situation would continue as it has been in the past.
Representative Navarre agreed that the taxing authority
ought to have the final decision. Representative Green
argued that if the Department did not agree, de novo could
only be granted under the discretion of the Superior Court.
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Ms. Vogt commented, when the Superior Court exercises their
independent judgement, they review the information fresh
each time, and to the extent that there is concern regarding
legal questions, information will always be reviewed de
novo.
Representative Green asked how many Superior Court cases now
are granted de novo versus those heard on the record. Ms.
Vogt replied that almost all cases include factual
determination which are heard under an appellate standard.
Mr. Seckers voiced concern with the issue of "fairness".
The option to provide a check and balance on the system
would be provided in the language of the bill. If the
system continues to be fair and impartial, then taxpayers
will most often choose the Superior Court. He pointed out
that there are many costs associated with going to the
Superior Court. The amendment would eliminate one level of
review.
A roll call was taken on the MOTION to adopt Amendment #3.
IN FAVOR: Grussendorf, Navarre, Brown.
OPPOSED: Kelly, Kohring, Martin, Mulder, Parnell,
Therriault, Foster, Hanley.
The MOTION FAILED (3-8).
Ms. Vogt explained the fiscal notes. The Department
currently employees three hearing officers. The employees
determine hearings on Child Support Enforcement Division
(CSED) appeals, Permanent Fund Dividend (PFD) appeals and
tax appeals. Each division has an appeal officer to decide
the tax dispute. The hearing officer in the Commissioner's
office would be the "impartial" judge. Co-Chair Hanley
questioned if the hearing officer was necessary. Ms. Vogt
advised that position was very much needed and currently
driven by the backlog.
Co-Chair Hanley voiced concern that the prepared fiscal note
provides for an increased position for a hearing officer.
He pointed out that under the normal process, that position
would be requested at that time. He added that the hearing
officer positions were range #22, and the senior hearing
officer was at a range #25. He asked why the senior hearing
officer was based in Seattle. Ms. Vogt replied that the
Seattle based hearing officer was the last one remaining
from when the State had a Seattle field office. From
Seattle, that hearing officer does mostly Child Support
Enforcement hearings, conducted mostly by telephone. She
pointed out that the Seattle field officer is paid 21% less
than a range #25 would be paid if living in Alaska. That
salary includes the cost-of-living differential.
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Co-Chair Hanley referenced Section #17, which stipulates
that a hearing officer could be assigned other departmental
work if their load was not full. He recommended reducing
the Department of Revenue by one hearing officer and then
allowing that provision as stipulated to take effect.
Ms. Vogt replied that the fiscal note requested by the
Department of Administration addresses fiscal concerns of
the board. If the Committee opts to create a board, the
cost would become significantly more than placing one
hearing officer in the Department of Revenue.
Representative Green felt that the fiscal portion of the
bill was stacked "against" the legislation's intent. Co-
Chair Hanley inquired if the personal services line was
reduced by $66 thousand dollars, and then placing $33
thousand dollars in a contractual line, would then allow a
part-time base employee as needed.
SHARON BARTON, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF ADMINISTRATION, commented that the
fiscal note had been written straight to the bill. She
noted that questions regarding the administrative law
judges, would need to be deferred to the Department of Law
or the Department of Revenue.
Representative Brown suggested changing the language on Page
19, Lines 30 & 31, deleting "....until the office of tax
appeals has a full caseload, and", which would leave open
the possibility of hiring two full time employees. She
thought that there could be "other" work within State
government that those employees could provide. Mr. Briggs
thought if there were part-time board members, there could
exist a "conflict of interest". Board members complying
with the bill under the code of judicial conduct, could
prevent them from having outside employment. He reiterated
that would make it difficult for those members to be
employed part-time and be able to earn a living.
Representative Grussendorf supported the concept of the
Judicial Council. He suggested, first the Governor would
appoint members for the two year term and then when
reappointed, those members would be subjected to a
Legislative confirmation. This action would keep the
Judicial Council in the "loop".
Representative Mulder supported reducing the fiscal note to
the Department of Revenue.
(Tape Change, HFC 96-80, Side 1).
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Representative Mulder encouraged consideration of removing
the range #25 hearing officer position within the Department
of Revenue which currently resides in Seattle.
Representative Mulder MOVED to report CS HB 341 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. Representative Brown requested
to amend Page 19, (c), Lines 30 & 31, before the motion to
move the bill from Committee. Representative Mulder
WITHDREW the MOTION to move the bill from Committee. There
being NO OBJECTION, it was withdrawn.
Representative Brown felt that if hearing officers had
excess time, they should be given the flexibility to work
within other departments. She suggested deleting the
language "....until the office of tax appeals has a full
caseload, and". She understood that deletion would allow
for flexibility of use and efficiency of resources.
Co-Chair Hanley thought that language clarified the use of
the remaining portion of that section. Discussion followed
regarding deleting the language. Ms. Vogt stated that the
language was drafted as a transition provision, covering the
need to move into the realm when the case load became full.
She thought the recommendation was ambiguous.
Representative Brown asked to amend the previous language by
deleting "until" and inserting "unless" and making any
conceptual changes to qualify that intent. Representative
Brown MOVED that amendment. Representative Martin OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Kelly, Kohring, Mulder, Navarre,
Parnell, Therriault, Brown, Grussendorf,
Hanley, Foster.
OPPOSED: Martin.
The MOTION PASSED (10-1).
Representative Mulder MOVED to report CS HB 341 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CS HB 341 (FIN) was reported out of Committee with a "do
pass" recommendation and with fiscal notes by the Department
of Administration dated 3/12/96, the Department of Revenue
dated 1/26/96 and the Alaska Court System dated 3/12/96.
ADJOURNMENT
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The meeting adjourned at 3:15 P.M.
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