Legislature(2013 - 2014)HOUSE FINANCE 519
03/11/2014 08:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB112 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 112 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 11, 2014
8:36 a.m.
8:36:53 AM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 8:36 a.m.
MEMBERS PRESENT
Representative Alan Austerman, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Mark Neuman, Vice-Chair
Representative Mia Costello
Representative Bryce Edgmon
Representative Les Gara
Representative David Guttenberg
Representative Lindsey Holmes
Representative Cathy Munoz
Representative Steve Thompson
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Johanna Bales, Deputy Director, Tax Division, Department of
Revenue.
SUMMARY
HB 112 REPEAL FILM PRODUCTION TAX CREDIT
HB 112 was REPORTED out of committee with "no
recommendation" and with one new zero impact
fiscal note from the Department of Commerce,
Community and Economic Development and one fiscal
impact note from the Department of Revenue.
HOUSE BILL NO. 112
"An Act repealing the film production tax credit;
providing for an effective date by repealing the
effective dates of secs. 31 - 33, ch. 51, SLA 2012;
and providing for an effective date."
8:37:18 AM
Co-Chair Stoltze asked if there were any amendments to the
bill.
Representative Costello discussed the zero fiscal note from
the Department of Commerce, Community and Economic
Development (DCCED) and the fiscal impact note from the
Department of Revenue (DOR).
Co-Chair Stoltze noted that there had been approximately
$40 million in credits redeemed and $60 million in credits
encumbrance; the total was $200 million.
Vice-Chair Neuman MOVED to REPORT HB 112 out of committee
with individual recommendations and the accompanying fiscal
notes.
Co-Chair Stoltze OBJECTED for discussion.
Representative Gara pointed to the $40 million used. He
wondered if there was an annual limit.
JOHANNA BALES, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT OF
REVENUE, responded that the limitation was by amount for a
period of time. The first $100 million in the program was
through the end of June 2013, and the additional $200
million was for the period running through 2023.
Representative Wilson wondered why the tax credits were
allowed to be sold versus the industry using them. Ms.
Bales replied that the producers receiving the tax credits
were typically not tax payers. They were not subject to any
of the eight different tax types, of which the credit could
be taken against. In order for the producer to receive
anything, they would need to transfer the credit to tax
payer.
Representative Wilson asked how the legislature or public
find out where the tax credits were used. Ms. Bales
responded that the department tracked where the credits
were used. She stated that when a tax payer purchases a tax
credit the receive a certificate which must be attached to
the tax return filing against the tax type that would be
claimed under the credit. She agreed to provide the
information in the aggregate.
Representative Wilson asked if the public saw the detail of
who utilizes the credits. Ms. Bales replied that she could
provide the tax types the credits were taken against, but
not the name of the tax payer.
Co-Chair Stoltze assumed that there was anonymity. Ms.
Bales replied that there were confidentiality statutes that
prohibited DOR from distributing that information.
Representative Thompson corrected the fiscal note.
Representative Costello restated the fiscal note from DOR
showed that the fiscal impact for FY 15 was $338,400, no
fiscal impact in FY 16 and FY 17, and a savings to the
state in FY 18 forward of $304,800.
8:43:58 AM
Representative Costello wondered about information on the
amount of money that went to salaries for Alaskans. Ms.
Bales replied that no tax credits had been issued under the
new program. The prior program had been overseen and
administered by DCCED. The department was working to
decipher the amount of wages that were paid directly to
Alaskans.
Co-Chair Stoltze asked if there were any industry
pronouncements to hire Alaskans. Ms. Bales replied that the
department did receive information from some of the
production companies, when they were seeking Alaska talent.
She stated that she did not have any information regarding
what the companies had done to promote hiring Alaskans.
Representative Costello remarked that the amount of the tax
credit would equal the amount of money that was paid to
Alaskans, because that was how the legislature drafted the
bill. She stressed that the number would be equal to the
salaries that were going to Alaskans.
Representative Munoz asked about clarification on
outstanding credits. Ms. Bales replied that $42 million had
been redeemed of $86 million rewarded. She stated that $8
billion had been prequalified under the new program, and
applications were currently being examined, and could be
prequalified before July 1, 2014.
Co-Chair Stoltze surmised that it was just higher than $100
million. Ms. Bales agreed.
Representative Munoz asked if the $200 million was
repealed, which would have carried forward to 2023.Ms.
Bales replied that the amount would be slightly less $200
million in potentially increased revenue if the program was
repealed.
Representative Wilson asked about residency requirements.
She understood that one had to be present in Alaska for 30
days. Ms. Bales replied in the affirmative. Below the line
wages would need to meet the Permanent Fund Dividend
residency requirements.
Representative Gara understood that there was a total $300
million allocation for the program over ten years, with $42
million since the program's inception. Apart from the $200
million leftover through 2023, he understood that there was
a certain amount that was encumbered. He queried a range of
estimates that the state would pay for pending applications
at the top and bottom end. Ms. Bales replied that the
department had approved $86 million in credits, meaning
that the companies had received a transferable tax credit
certificate. Of those, $42 million had been used against
taxes. The department had preapproved another $8 million,
which meant that a company had stated that they had
estimated expenses for a proposed production. She stated
that there were several current applications that had not
been prequalified for production. She announced that
approximately $100 million had been actually approved.
8:50:45 AM
Representative Guttenberg asked for clarification on the
prequalified number. Ms. Bales replied that the number was
$8 million.
Representative Guttenberg asked how many productions that
made up. Ms. Bales replied that there were 29 productions.
Representative Gara began as mildly supportive of the
program. He believed the program should be maintained. The
state's economy was not diverse. The Native corporations
had become a driving force, so did not have a broad based
economy. The program did not cost the state a lot of money.
It equated to approximately $20 million per year. The state
had increased the amount of money going to local hire, and
it had a side effect of benefitting the state's tourism
economy. The flaw in all of the state's tax credits was
that companies only paid a corporate tax when they were a C
corporation. He discussed the loophole in the corporate tax
program. He believed the committee would have to look at
the issue in the future.
8:56:07 AM
Representative Gara continued discussing taxes in Alaska.
He believed the bill helped move the economy forward. He
pointed to past testimony that the program had created many
desirable jobs for Alaskans. He reiterated that the state
did not have many ways to diversify the economy. If a
person was not interested in the oil industry or the health
field there were other jobs offered. He restated that the
program cost approximately $20 million per year; a cap had
been put on the amount intentionally. He discussed that
Senator Johnny Ellis had been the prime sponsor of the
program. He pointed to locations films ad been produced in
the past; films were now filmed in Alaska due to the credit
program. The program brought jobs to rural Alaska. He did
not believe getting rid of the program was necessary. He
spoke in support of the program.
Vice-Chair Neuman spoke against the program. He pointed to
an audit of the program (copy on file). He read from the
audit. He spoke to the fiscal impact of the bill. He stated
that $21 million of investment brought in $1 million to the
state. He pointed to difficult fiscal times and spoke about
reductions in the operating budget. He wondered where the
state would come up with the money. He acknowledged that
some money went to Alaskans. He supported the bill.
9:02:15 AM
Representative Costello spoke against the program. She
treated the program like capital project. As the
legislature weighed whether it wanted to spend money, and
stressed the efforts the state had the responsibility to
spend money on. She voted to move the bill from committee.
She believed the full legislature should have a voice on
the issue.
Representative Thompson went back and forth on the issue.
He felt like the there was an effect happening as a result
of the program; however, he looked at the state's budget.
He wondered if repealing the program would reduce the
number of employed persons in Alaska. He had not made up
his mind on the issue.
9:05:16 AM
Representative Munoz spoke from the perspective of a small
business owner. She did not believe it made sense to pull
back completely on the program. She pointed to television
programs and advertising; she believed the program was
providing Alaska with media benefits. She recalled a John
Sales film that had been filmed in the state years earlier.
She wanted to see the program continue. She acknowledged
that it may need to be ramped back. She spoke against the
bill.
Representative Guttenberg spoke in support of the program.
He believed repealing the program would be pulling the rug
out from underneath a new industry that did not have the
feet to be self-sustaining at the time. He stressed that it
was important to optimize what the state had. He reiterated
that the industry was gaining momentum. He spoke to the
development of talent. He pointed to an Alaskan who had
just received an academy award for work done outside of
Alaska. He stressed the importance of bringing those people
home.
9:12:33 AM
Representative Gara referred to a Legislative Budget and
Audit (LB&A) study, and believed the study was done prior
to 2012. Co-Chair Stoltze agreed.
Representative Holmes noted that the numbers reflected the
old program. There were not updated numbers. She liked to
see talent developed locally. She was struggling with the
issue. She would like to support tourism, small businesses
and other industry, but noted that the credits issued may
have a negative impact on state funds.
Co-Chair Austerman spoke to his encouragement of how to
expand the state's economic base. Until the state figured
out what its tax base and tax structure would look like, it
would be difficult to measure the success of the program.
He stated that $20 million per year provided no comparison
to the oil industry. He believed the state needed to
continue to pursue developing new industries in the state.
He pointed to other legislation taking a look at how tax
credits benefited the state. He did not oppose moving the
bill from committee but could not support it on the floor.
Representative Wilson would not stop the bill; however, she
was concerned about data collection in the state related to
taxes. She noted it was not the fault of the industry. She
read from the audit. She stated that $20 million per year
was significant. She was concerned about whether the
program was beneficial to the state because of the way it
portrayed the state. She stated that small miners felt they
were regulated more because some of the shows made it look
like they were not adequately regulated. She pointed to
another bill in committee related to tax credits, and
emphasized that the companies were out of state. She agreed
that Alaska should focus developing our talents, but
reminded about that when oil taxes were changed the
subcontracting jobs moved out of state. She stated that it
was important to pressure the companies making the movies
to know where the credits were going.
9:20:32 AM
Co-Chair Stoltze remarked that the tax credits were
subsidies. He felt that the program would only work with an
income tax, but he would not support an income tax. He
stressed that a tax credit would only work within an actual
tax structure. He stressed that any dollar put into the
program was money that was taken away from savings.
Co-Chair Stoltze WITHDREW his OBJECTION.
There being NO further OBJECTION HB 112 was REPORTED out of
committee with "no recommendation" and with one new zero
impact fiscal note from the Department of Commerce,
Community and Economic Development and one fiscal impact
note from the Department of Revenue.
Co-Chair Austerman discussed the agenda for the afternoon
meeting.
ADJOURNMENT
9:24:07 AM
The meeting was adjourned at 9:24 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 112 Public Testimony PKT- 1 - 2014.pdf |
HFIN 3/11/2014 8:30:00 AM |
HB 112 |
| HB 112 Public Testimony PKT- 2 - 2014.pdf |
HFIN 3/11/2014 8:30:00 AM |
HB 112 |
| HB 112 DOR Response to Rep. Stoltze.pdf |
HFIN 3/11/2014 8:30:00 AM |
HB 112 |
| HB 112 Alaska Film Office Reports.pdf |
HFIN 3/11/2014 8:30:00 AM |
HB 112 |