Legislature(2013 - 2014)HOUSE FINANCE 519

03/06/2014 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 297 HOME ENERGY RATING SYSTEM TELECONFERENCED
Moved CSHB 297(FIN) Out of Committee
+= HB 306 EVAL. INDIRECT EXPENDITURES; TAX CREDITS TELECONFERENCED
Heard & Held
-- Public Testimony --
                  HOUSE FINANCE COMMITTEE                                                                                       
                       March 6, 2014                                                                                            
                         1:35 p.m.                                                                                              
                                                                                                                                
1:35:50 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the House Finance Committee meeting                                                                     
to order at 1:35 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Lindsey Holmes                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Alan Austerman, Co-Chair                                                                                         
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Steve Thompson                                                                                                   
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Daniel   George,   Staff,   Representative   Bill   Stoltze;                                                                    
Representative  Lance  Pruitt,   Sponsor;  Brodie  Anderson,                                                                    
Staff,  Representative  Steve  Thompson; Mike  Satre,  Hecla                                                                    
Greens  Creek  Mine,  Juneau;  Deantha  Crockett,  Executive                                                                    
Director, Alaska Miners Association.                                                                                            
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Stacy Schubert, Alaska Housing Finance Corporation,                                                                             
Anchorage; Nannette Pierson, Self, Fairbanks.                                                                                   
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 297    HOME ENERGY RATING SYSTEM                                                                                             
                                                                                                                                
          CSHB 297(FIN) was REPORTED out of committee with                                                                      
          a "do pass" recommendation and with one new zero                                                                      
          fiscal note from the Department of Revenue.                                                                           
                                                                                                                                
HB 306    EVAL. INDIRECT EXPENDITURES; TAX CREDITS                                                                              
                                                                                                                                
          HB 306 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
HOUSE BILL NO. 297                                                                                                            
                                                                                                                                
     "An   Act  recognizing   the  Alaska   Housing  Finance                                                                    
     Corporation as  the authorizing agency to  approve home                                                                    
     energy rating systems for the  state; and providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
1:36:09 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Neuman MOVED  to  ADOPT  the proposed  committee                                                                    
substitute  for  HB  297, Work  Draft  28-LS1307\N  (Nauman,                                                                    
3/5/14).                                                                                                                        
                                                                                                                                
Co-Chair Stoltze OBJECTED for discussion.                                                                                       
                                                                                                                                
DANIEL   GEORGE,   STAFF,   REPRESENTATIVE   BILL   STOLTZE,                                                                    
explained  the  changes  in  the  CS.  The  CS  removed  the                                                                    
findings section in the original  bill. He read the findings                                                                    
that had appeared in the original bill:                                                                                         
                                                                                                                                
     "The   legislature    finds   that    recognizing   the                                                                    
     corporation as  the state's  home energy  rating system                                                                    
     authorizing  energy  services,   a  public  purpose  in                                                                    
     benefitting the  people of the state.  The corporations                                                                    
     shall  act as  the authorizing  agency for  purposes of                                                                    
     approving  home  energy  rating  systems  used  in  the                                                                    
     state."                                                                                                                    
                                                                                                                                
Mr. George shared that the  second sentence was the only one                                                                    
that  carried over  into  the latest  version  of the  bill;                                                                    
additionally  the  CS  placed   the  sentence  under  a  new                                                                    
section, Article 6 of AS  18.56, entitled Home Energy Rating                                                                    
Systems.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  LANCE   PRUITT,  SPONSOR,   understood  that                                                                    
Alaska Housing  Finance Corporation (AHFC) was  agreeable to                                                                    
the changes in the CS.                                                                                                          
Co-Chair  Stoltze WITHDREW  his  OBJECTION.  There being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
1:38:53 PM                                                                                                                    
                                                                                                                                
Representative  Pruitt explained  that the  bill would  make                                                                    
AHFC  the  authorizing  agency  for  approving  home  energy                                                                    
rating  systems. He  addressed a  prior question  related to                                                                    
authorizing raters. He  said that the system  that the state                                                                    
had invested in would be available for individuals to use.                                                                      
                                                                                                                                
STACY   SCHUBERT,   ALASKA  HOUSING   FINANCE   CORPORATION,                                                                    
ANCHORAGE  (via teleconference),  thought  that the  changes                                                                    
brought greater clarity to the bill.                                                                                            
                                                                                                                                
Co-Chair Stoltze  pointed to the  new zero fiscal  note from                                                                    
the Department of Revenue (DOR).                                                                                                
                                                                                                                                
Representative  Gara MOVED  to REPORT  CSHB 297(FIN)  out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
                                                                                                                                
There being NO OBJECTION, CSHB  297(FIN) was REPORTED out of                                                                    
committee with a  "do pass" recommendation and  with one new                                                                    
zero fiscal note from the Department of Revenue.                                                                                
                                                                                                                                
1:41:47 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:43:00 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE BILL NO. 306                                                                                                            
                                                                                                                                
     "An Act  relating to tax credits  and administration of                                                                    
     tax  credit  programs;   requiring  the  Department  of                                                                    
     Revenue  to report  indirect expenditures;  relating to                                                                    
     the   duties   of   state   agencies;   requiring   the                                                                    
     legislative   finance  division   to  analyze   certain                                                                    
     indirect  expenditures;  relating  to lapse  dates  for                                                                    
     appropriations for capital  projects; repealing certain                                                                    
     statutes   authorizing   indirect   expenditures;   and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
1:43:06 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  relayed  his  decision  to  close  public                                                                    
testimony  with the  intention of  reopening it  at a  later                                                                    
date.                                                                                                                           
                                                                                                                                
BRODIE  ANDERSON,  STAFF,   REPRESENTATIVE  STEVE  THOMPSON,                                                                    
introduced the bill.                                                                                                            
                                                                                                                                
Co-Chair  Stoltze commented  that  tax  credits were  really                                                                    
general  fund expenditures.  He  believed that  they were  a                                                                    
large  part of  the annual  budget and  that any  amount was                                                                    
relevant to committee discussion.                                                                                               
                                                                                                                                
Mr.  Anderson  addressed  the   definition  of  an  indirect                                                                    
expenditure. He  shared that the expenditures  had no review                                                                    
after  being created;  the credit  could  run in  perpetuity                                                                    
without  requiring  future  legislative review.  He  relayed                                                                    
that  the Indirect  Expenditures Report  (copy on  file) had                                                                    
discovered over  $400 million in indirect  expenditures. The                                                                    
bill addressed  how to  set up a  mechanism to  require that                                                                    
indirect expenditures  come back before the  legislature for                                                                    
review.  The  bill  would implement  sunset  dates  for  the                                                                    
majority of tax credits found in Title 43.                                                                                      
                                                                                                                                
1:48:26 PM                                                                                                                    
                                                                                                                                
Mr. Anderson  continued to discuss indirect  expenditures in                                                                    
various  departments. He  relayed  that the  bill  set up  a                                                                    
definition   for  the   term   "indirect  expenditure".   He                                                                    
presented the sectional analysis:                                                                                               
                                                                                                                                
     Section 1  makes an amendment conforming  to the repeal                                                                
     of AS 21.96.075 (insurance tax  credit for gifts to the                                                                    
     Alaska Fire Standards Council).                                                                                            
                                                                                                                                
     Section 2 requires the  Legislative Finance Division to                                                                
     prepare  and deliver  to  the  legislature an  indirect                                                                    
     expenditure report.                                                                                                        
                                                                                                                                
     Section 3 sets out a  schedule of the departments to be                                                                
     reviewed and  the contents of the  indirect expenditure                                                                  
     report prepared by the Legislative Finance Division.                                                                     
                                                                                                                                
     Section 4  lapses an appropriation  or allocation  to a                                                                
     named  recipient  for a  project  it  five years  after                                                                    
     appropriation  or  allocation,   the  project  has  not                                                                    
     begun.                                                                                                                     
                                                                                                                                
     Section 5  lapses an appropriation or  allocation to an                                                                
     unincorporated community  for a  project ii  five years                                                                  
     after appropriation or allocation,  the project has not                                                                    
     begun.                                                                                                                   
                                                                                                                                
     Section  6  amends  AS  37.25.020   to  state  that  an                                                                
     appropriation made  for a capital project  is valid for                                                                    
     the life of the project  unless work on the project has                                                                    
     not begun  within five years  after the  effective date                                                                    
     of the appropriation.                                                                                                      
                                                                                                                                
     Section 7  makes an amendment conforming  to the repeal                                                                
     of   AS  27.30   (administration  of   the  exploration                                                                    
     incentive credit).                                                                                                         
                                                                                                                                
     Section 8  makes an amendment conforming  to the repeal                                                                
     of   AS  27.30   (administration  of   the  exploration                                                                    
     incentive credit).                                                                                                         
                                                                                                                                
     Section  9  requires  the   Department  of  Revenue  to                                                                
     prepare  and deliver  to the  legislature  a report  of                                                                    
     indirect  expenditures.   The  section  sets   out  the                                                                    
     contents  of the  report and  directs all  departments,                                                                    
     agencies,  and  public   corporations  to  provide  the                                                                    
     commissioner  of the  Department  of  Revenue with  any                                                                    
     information   necessary   to  complete   the   indirect                                                                    
     expenditures   report.   The   section   also   defines                                                                    
     "indirect expenditures."                                                                                                   
                                                                                                                                
     Section 10 makes an amendment  conforming to the repeal                                                                
     of   AS  27.30   (administration  of   the  exploration                                                                    
     incentive credit).                                                                                                         
                                                                                                                                
     Section 11 makes an amendment  conforming to the repeal                                                                
     of  AS  43.77.040  (credit  tbr  the  fishery  resource                                                                    
     harvested under the community development quota).                                                                          
                                                                                                                                
1:51:39 PM                                                                                                                    
                                                                                                                                
Mr. Anderson spoke to Section 9, which required the                                                                             
Department of Revenue (DOR) to prepare and deliver a report                                                                     
that would:                                                                                                                     
                                                                                                                                
   · Name the indirect expenditure,                                                                                             
   · Give a brief description                                                                                                   
   · Provide statutory authority                                                                                                
   · Provide a sunset date                                                                                                      
   · Have the legislative intent                                                                                                
   · Have the public purpose stated                                                                                             
  · List the estimate annual effect for the past 5 years                                                                        
  · List the cost to administer the indirect expenditure                                                                        
   · List the number of beneficiaries                                                                                           
   · Be prepared by November 1st before the 1st regular                                                                         
     session of each new legislature                                                                                            
                                                                                                                                
Mr. Anderson said that there  was also enabling language for                                                                    
DOR  to be  able  to work  with  agencies, departments,  and                                                                    
public corporations in  an effort to prepare  the report. He                                                                    
related that the section officially  gave the department the                                                                    
power  to  create  the  report.   He  explained  that  under                                                                    
Sections  2 and  3  the Legislative  Finance Division  (LFD)                                                                    
would use  the report to  estimate the loss of  revenue from                                                                    
the indirect  expenditure, estimate the monetary  benefit of                                                                    
the  indirect   expenditure  to   the  recipients,   make  a                                                                    
determination as to whether the  legislative intent was met,                                                                    
offer  a  recommendation   whether  the  expenditure  should                                                                    
continue,  and give  an explanation  of the  methodology and                                                                    
assumptions used in  creating the report. He  relayed that a                                                                    
schedule cycle had  been created for LFD to  follow; in 2015                                                                    
LFD  would  evaluate  the   indirect  expenditures  for  the                                                                    
Departments  of  Fish and  Game  (DF&G),  Health and  Social                                                                    
Services  (DHSS), Labor  (DOL), and  Revenue (DOR).  In 2017                                                                    
LFD  would   evaluate  the   Court  System,   Department  of                                                                    
Administration  (DOA),  Department  of Education  and  Early                                                                    
Childhood  Development (DEED),  Department of  Environmental                                                                    
Conservation (DEC),  Department of Natural  Resources (DNR),                                                                    
Department of  Transportation and Public Works  (DOT&PW); in                                                                    
2019  all other  remaining  agencies would  be reviewed.  He                                                                    
explained that after the initial  evaluation the cycle would                                                                    
occur every 6 years. He stated  that the report would be due                                                                    
on the first day of the  first regular session because if it                                                                    
took  the legislature  up to  2 years  to pass  a bill,  and                                                                    
extension bills  were being considered, it  would be helpful                                                                    
to  provide the  legislature  with the  materials that  they                                                                    
would need before the first day of session.                                                                                     
                                                                                                                                
Mr. Anderson spoke  to Sections 4, 5 and  6, which pertained                                                                    
to  unspent capital  appropriations and  lapsing grants.  He                                                                    
said that  currently in statue  the only entity  required to                                                                    
"use or lose"  in 5 years a capital  appropriation before it                                                                    
was  taken   back  were  municipalities  and   boroughs.  He                                                                    
furthered    that    unincorporated    communities,    named                                                                    
recipients, and  departments did  not have statutory  use or                                                                    
lose requirements.  The sections  created the  same language                                                                    
for municipalities  and boroughs  as for  the unincorporated                                                                    
communities, named recipients and departments.                                                                                  
                                                                                                                                
Mr.  Anderson  spoke  to Section  7,  which  was  conforming                                                                    
language  for removing  the Mineral  Exploration Tax  Credit                                                                    
from the coal section of the  Alaska Land Act. Section 8 was                                                                    
conforming language  for the Mineral Exploration  Tax Credit                                                                    
from the production royalty section.                                                                                            
                                                                                                                                
1:55:21 PM                                                                                                                    
                                                                                                                                
Mr.  Anderson   noted  that  the  definition   of  "indirect                                                                    
expenditure"  could  be  found  in Section  9;  an  indirect                                                                    
expenditure  is a  credit,  exemption, deduction,  deferral,                                                                    
discount,  exclusion,   or  other   differential  allowances                                                                    
designed  to  encourage an  activity  or  a benefit  to  the                                                                    
public or at tax payer.  He revealed that the definition was                                                                    
developed  after reviewing  the brief  and finding  out what                                                                    
was offered by  the state in indirect  expenditures, as well                                                                    
as looking at  other states that were attempting  to rein in                                                                    
similar types of lost revenues.                                                                                                 
                                                                                                                                
Co-Chair  Stoltze hoped  that the  repealers  in Section  12                                                                    
could  be   enumerated  to  enhance  public   awareness  and                                                                    
understanding. He  felt that repealers  were often  the most                                                                    
important part of  a bill and requested that  they be posted                                                                    
to  BASIS  as  soon  as possible.  Mr.  Anderson  agreed  to                                                                    
provide the information.                                                                                                        
                                                                                                                                
Co-Chair Stoltze handed the gavel to Vice-Chair Neuman.                                                                         
                                                                                                                                
1:56:36 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:57:02 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Mr.  Anderson  continued  with the  sectional  analysis.  He                                                                    
stated that  Sections 10 and  11 were  conforming languages;                                                                    
one  applied  to the  Mineral  Exploration  Tax Credit,  the                                                                    
other for the  CDQ Credit in the  Fisheries Resource Landing                                                                    
Tax. He continued to Section 12:                                                                                                
                                                                                                                                
     Section 12 repeals, on the day after the last day of                                                                   
     the second regular session of the twenty-ninth                                                                             
     legislature,   the  following   credits  and   statutes                                                                    
     related to the administration of credits:                                                                                  
                                                                                                                                
     -  AS 21.66.110(b)  (related to  the administration  of                                                                    
     the insurance tax education credit;                                                                                        
     - AS 2                                                                                                                     
     1.96.070 (insurance tax education credit);                                                                                 
     - AS  21.96.075(c)(2) (administration of  the education                                                                    
     tax credits  and the  cap on  the insurance  tax credit                                                                    
     for gifts to the Alaska Fire Standards Council);                                                                           
     -   AS  24.20.271(12)   (administration  of   the  film                                                                    
     production tax credit);                                                                                                    
     - AS 27.30.0 10 -                                                                                                          
     27.30.099 (administration of  the exploration incentive                                                                    
     credit);                                                                                                                   
     - AS 43.20.0 14 (income tax education credit);                                                                             
     - AS 43 .20.044 (exploration incentive credit);                                                                            
     - AS 43 .20.048 (veteran employment tax credit);                                                                           
     -  AS  43.55.0  19   (oil  or  gas  producer  education                                                                    
     credit);                                                                                                                   
     - AS 43.56.018 (property tax education credit);                                                                            
    - AS 43.65.018 (mining business education credit);                                                                          
     - AS 43.75.0 18 (fisheries business education credit);                                                                     
     -AS  43.75.032  (fisheries   business  tax  credit  for                                                                    
     scholarship contributions);                                                                                                
     -AS  43.75.03  5  (fisheries  business  salmon  product                                                                    
     development tax credit);                                                                                                   
     - AS  43.75.036 (fisheries business  salmon utilization                                                                    
     tax credit);                                                                                                               
     -  AS  43.75.130(b)  (administration of  the  fisheries                                                                    
    business tax credit for scholarship contributions);                                                                         
     -  AS  43.75,l30(t  (administration  of  the  fisheries                                                                    
     business   salmon  product   development  tax   credit,                                                                    
     fisheries business  salmon utilization tax  credit, and                                                                    
     the film production tax credit);                                                                                           
     -  AS  43.75.130(g)  (administration of  the  fisheries                                                                    
     business   salmon  product   development  tax   credit,                                                                    
     fisheries business  salmon utilization tax  credit, and                                                                    
     the film production tax credit);                                                                                           
     - AS  43.77.035 (fisheries resource landing  tax credit                                                                    
     for scholarship contributions);                                                                                            
     - AS  43.77.040 (fisheries resource landing  tax credit                                                                    
     for the fishery resource  harvested under the community                                                                    
     development quota);                                                                                                        
     -   AS  43.77.045   (fisheries  resource   landing  tax                                                                    
     education credit);                                                                                                         
     -  AS  43.77.060(e)  (administration of  the  fisheries                                                                    
     resource   landing    tax   credit    for   scholarship                                                                    
     contributions,    fisheries   resource    landing   tax                                                                    
     education credit, and the film production tax credit)                                                                      
     - AS 43.98.030 (film production tax credit);                                                                               
     AS 44.25.100 - 44.25.190 (administration of the film                                                                       
     production tax credit).                                                                                                    
                                                                                                                                
Mr. Anderson stated  that Section 13 stated  that if credits                                                                    
had  already been  issued and  for some  reason the  sunsets                                                                    
came and there  was no extension, the credits  that had been                                                                    
issued  to  that  point  would  still  be  viable.  Finally,                                                                    
Section 14  was the  actual date of  when the  repealer went                                                                    
into  effect; the  day after  the  last day  of the  regular                                                                    
session of the 29th Legislature 2016.                                                                                           
                                                                                                                                
1:59:16 PM                                                                                                                    
                                                                                                                                
Representative Wilson  asked for  verification that  all tax                                                                    
credits on the  books were listed in the  bill. Mr. Anderson                                                                    
replied that the credits included  everything listed in DOR,                                                                    
non-oil and gas.                                                                                                                
                                                                                                                                
Representative Wilson wondered why  oil and gas credits were                                                                    
not included. Mr. Anderson replied  that many of the oil and                                                                    
gas credits  had sunset dates.  He elaborated that  over the                                                                    
past  few  years there  had  been  extensive debate  on  the                                                                    
subject  of oil  and gas  credits; the  credits in  the bill                                                                    
were credits  that had  not garnered  much debate  but could                                                                    
run into perpetuity.                                                                                                            
                                                                                                                                
Representative  Wilson  requested  a  list of  oil  and  gas                                                                    
credits  without  a  sunset date.  Mr.  Anderson  agreed  to                                                                    
follow up with  the list. He noted that  the credits without                                                                    
sunset dates were exploration credits.  Sunsets were not put                                                                    
on  exploration credits  because  decisions  to invest  were                                                                    
made  years  in  advance  and  the  long-term  impact  of  a                                                                    
sunsetting  exploration  credit  could  have  an  impact  on                                                                    
investments made far into the future.                                                                                           
                                                                                                                                
2:01:37 PM                                                                                                                    
                                                                                                                                
Representative  Holmes  asked  about the  interplay  between                                                                    
Sections  3,  12, and  14.  She  asked  whether all  of  the                                                                    
credits  listed in  Section 12  were  under the  departments                                                                    
that  would be  in the  first  2015 round  of analysis.  She                                                                    
wondered whether  a repealer would  need to be added  to the                                                                    
bill  for the  credits that  would be  reviewed in  2017 and                                                                    
2019.                                                                                                                           
                                                                                                                                
Mr.  Anderson  responded  that all  of  the  sunsetting  tax                                                                    
credits were a  part of the FY 15 review  under DOR. He said                                                                    
that  the crafters  of the  bill  had attempted  to set  the                                                                    
mechanism  in  place without  binding  the  hands of  future                                                                    
legislatures.  He explained  that by  setting up  the review                                                                    
cycle,  in 2015  legislators  would need  to  come forth  to                                                                    
offer an  extension bill for the  sunsetting credits, future                                                                    
legislators could  also look through  the report  for things                                                                    
they may want to repeal.                                                                                                        
                                                                                                                                
2:04:22 PM                                                                                                                    
                                                                                                                                
Representative  Holmes  asserted   that  the  cycle  created                                                                    
confusion  by setting  up a  three-step review  process with                                                                    
the people in the first batch having a repealer.                                                                                
                                                                                                                                
Mr. Anderson shared that the  credits in DOR had been chosen                                                                    
specifically   because   of   the   exhaustive   amount   of                                                                    
information that  was there currently  without a  report. He                                                                    
felt  it  was  premature  to  identify  and  sunset  credits                                                                    
without all  of the available  information; the idea  was to                                                                    
set up  the mechanism  first and  then let  the next  set of                                                                    
bills reflect the repealers, extensions, and sunsets.                                                                           
                                                                                                                                
Representative  Holmes   surmised  that  the   repealers  in                                                                    
Section 12 were a subset  of other items. She believed there                                                                    
would be further discussion later.                                                                                              
                                                                                                                                
Representative  Munoz asked  whether the  bill included  any                                                                    
credits  that  had  statutory  sunset  dates.  Mr.  Anderson                                                                    
replied  that he  would  get  a list.  He  offered that  the                                                                    
Salmon Production Credit had a  sunset in 2015, and the Film                                                                    
Production Credit would sunset in 2023.                                                                                         
                                                                                                                                
2:07:51 PM                                                                                                                    
                                                                                                                                
NANNETTE  PIERSON,  SELF,  FAIRBANKS  (via  teleconference),                                                                    
spoke in support  of the Film Tax Incentive  Credit. She did                                                                    
not  believe people  would  come to  Alaska  to make  movies                                                                    
without  the  incentive.  She   asserted  that  without  the                                                                    
incentive the same  movies could be made in  Canada for half                                                                    
the cost.  She did  not believe her  family would  remain in                                                                    
Alaska if  the credits  were repealed.  She stated  that the                                                                    
credits  produced   a  substantial  amount  of   money.  She                                                                    
discussed  that it  was difficult  to keep  hotel rooms  and                                                                    
restaurants full in  the winter in Fairbanks.  She said that                                                                    
there had been  a film made in Fairbanks  that had generated                                                                    
a half million dollars, in January.                                                                                             
                                                                                                                                
Representative Wilson  clarified that  there were  two bills                                                                    
on the issue. Ms. Pierson understood.                                                                                           
                                                                                                                                
Representative  Gara revealed  that when  he initially  read                                                                    
the  bill  he  understood  that   it  was  a  mechanism  for                                                                    
reviewing many tax credits; however,  he now understood that                                                                    
the bill could remove many credits.                                                                                             
                                                                                                                                
2:11:47 PM                                                                                                                    
                                                                                                                                
MIKE  SATRE, HECLA  GREENS CREEK  MINE, JUNEAU,  agreed with                                                                    
the  intent  of  the  bill; however,  he  expressed  concern                                                                    
related to Section 12. He shared  that the mine had used the                                                                    
Education  Tax Credit  to establish  the  Pathway to  Mining                                                                    
Careers Program  at the University  of Alaska  Southeast. He                                                                    
shared  that the  program had  been extremely  successful in                                                                    
taking high  school students and teaching  them about mining                                                                    
opportunities. He  recommended that the repealer  section be                                                                    
removed and that the report  be utilized to examine indirect                                                                    
expenditures  in the  future. He  believed many  of the  tax                                                                    
credits were very useful to many industries.                                                                                    
                                                                                                                                
Representative  Guttenberg  spoke  to  one  of  the  mineral                                                                    
exploration  repealers. He  felt that  the credit  was doing                                                                    
what it had been intended to do.                                                                                                
                                                                                                                                
Mr.  Satre replied  that this  was  a classic  example of  a                                                                    
credit that was working. He  provided some background on the                                                                    
credit.                                                                                                                         
                                                                                                                                
Representative  Gara directed  the committee's  attention to                                                                    
Page 5, section 10, which  he interpreted would do away with                                                                    
AS  27.30 Exploration  Incentive Credits.  He wondered  what                                                                    
effect  ending   that  credit  would  have   on  the  mining                                                                    
industry.                                                                                                                       
                                                                                                                                
2:16:48 PM                                                                                                                    
                                                                                                                                
Mr.  Satre  replied  that the  industry  took  into  account                                                                    
whether it  would be able  to take advantage of  credits. He                                                                    
believed that  removal of  the credit  would be  damaging to                                                                    
investment in the state.                                                                                                        
Representative  Gara  believed  it  was  important  to  look                                                                    
closely at all of the credits prior to making a decision.                                                                       
                                                                                                                                
Representative  Munoz  appreciated  the  discussion  on  the                                                                    
education credit.                                                                                                               
                                                                                                                                
2:18:54 PM                                                                                                                    
                                                                                                                                
DEANTHA   CROCKETT,   EXECUTIVE  DIRECTOR,   ALASKA   MINERS                                                                    
ASSOCIATION, spoke in opposition to  Section 12 of the bill.                                                                    
She  testified that  the association  used the  minerals and                                                                    
mining credits.  She relayed that the  association hoped the                                                                    
credits would remain untouched.                                                                                                 
                                                                                                                                
Vice-Chair Neuman  CLOSED public  testimony with  the intent                                                                    
to reopen it at a later time.                                                                                                   
                                                                                                                                
2:20:34 PM                                                                                                                    
                                                                                                                                
Representative Gara revealed  his expanding understanding of                                                                    
the  legislation. He  expressed concern  with the  number of                                                                    
tax  credits  that could  be  repealed  under the  bill.  He                                                                    
thought  that further  review and  analysis  should be  done                                                                    
before any of the credits were repealed.                                                                                        
                                                                                                                                
Mr.   Anderson   replied   that   he   would   discuss   the                                                                    
recommendation with  the bill sponsor. He  acknowledged that                                                                    
the  state was  experiencing difficult  financial times.  He                                                                    
thought  that  sunsetting could  be  an  option for  cutting                                                                    
expenses.                                                                                                                       
                                                                                                                                
Representative  Wilson  wondered  about sunsetting  all  the                                                                    
credits at once rather than  staggering the repeals over the                                                                    
years.                                                                                                                          
                                                                                                                                
Mr. Anderson replied that a  considerable amount of research                                                                    
had gone into crafting the bill.  He said the question as to                                                                    
what   specific   legislatures   could  demand   of   future                                                                    
legislatures   had  been   considered  while   drafting  the                                                                    
legislation. He explained  that the credits in  the bill had                                                                    
been chosen  because of the sponsor's  familiarity with them                                                                    
and the research available.                                                                                                     
                                                                                                                                
2:24:45 PM                                                                                                                    
                                                                                                                                
Representative  Wilson  restated  her question.  She  stated                                                                    
that  she was  trying to  understand the  difference between                                                                    
repealing and sunsetting the credits.                                                                                           
                                                                                                                                
Mr. Anderson  responded that the  bill would  sunset credits                                                                    
with  the expectation  that sunset  dates could  be extended                                                                    
into  the  future.  He  relayed   that  as  long  as  future                                                                    
legislators  took  action to  extend  the  sunset dates  for                                                                    
credits they would  not be repealed. He  likened the process                                                                    
to boards and  commissions sunset bills. He  stated that the                                                                    
expectation was that the credits  that legislators wanted to                                                                    
extend sunset dated for would do so in the future                                                                               
                                                                                                                                
Representative     Wilson     discussed     the     scenario                                                                    
hypothetically. She  asked what happened when  a credit made                                                                    
it through the first round.                                                                                                     
                                                                                                                                
Mr.  Anderson  answered  that the  future  legislation  that                                                                    
would reflect the  extension date would have  a date written                                                                    
into it and it would be  up to the purview of the legislator                                                                    
that introduces  the legislation. He  noted that the  6 year                                                                    
rotation was only for the review cycle.                                                                                         
                                                                                                                                
2:27:36 PM                                                                                                                    
                                                                                                                                
Vice-Chair Neuman  looked at page  2, line 9 related  to LFD                                                                    
duties under  the bill.  He asked what  would happen  if the                                                                    
governor did not give permission  to LFD to serve ex officio                                                                    
on the governor's budget review committee.                                                                                      
                                                                                                                                
Mr.  Anderson replied  that the  provision was  currently in                                                                    
statute. He detailed  that the only changes Page  2 were the                                                                    
deletion of word "and" on Line  10, the addition of the word                                                                    
"and" on Line 13, and the addition of Subsection 8.                                                                             
                                                                                                                                
Vice-Chair  Neuman looked  at the  new subsection.  He noted                                                                    
that LFD  made many  determinations and  recommendations. He                                                                    
spoke  to  Line  17,  section 5  and  inquired  whether  the                                                                    
sponsor  had contemplated  the methodologies  that would  be                                                                    
used  and  the  assumptions  that  would  be  made  to  give                                                                    
direction to LFD when they examined the credits.                                                                                
                                                                                                                                
Mr.  Anderson  responded that  that  the  language and  been                                                                    
added  because when  reviewing the  reports  created by  LFD                                                                    
most  of the  reports included  and explanation  of how  the                                                                    
recommendations were determined.                                                                                                
                                                                                                                                
Vice-Chair Neuman  surmised that  a new methodology  had not                                                                    
been created. Mr. Anderson replied no.                                                                                          
                                                                                                                                
Vice-Chair Neuman  turned to Sections  4 and 5. He  asked if                                                                    
funds were granted toward a  capital project and the project                                                                    
had fund  sequestered for design and  engineering would that                                                                    
qualify as money being encumbered for the project.                                                                              
                                                                                                                                
Mr.  Anderson  replied  that  the  Department  of  Commerce,                                                                    
Community and  Economic Development had  a system set  up to                                                                    
review  lapsing  grants. He  deferred  the  question to  the                                                                    
department. He said he would  follow up on the question with                                                                    
the department.                                                                                                                 
                                                                                                                                
2:31:34 PM                                                                                                                    
                                                                                                                                
Representative Gara stated that  the tax credits included in                                                                    
the bill had  been subject to extensive debate  in the past.                                                                    
He  hypothesized if  a legislator  wanted  to reintroduce  a                                                                    
sunsetted Mineral  Exploration Credit they would  need to go                                                                    
before  2 or  3 committees  on each  side, hire  experts and                                                                    
bring in  testifiers. He  asserted that  the credits  in the                                                                    
bill would  be substantially  more difficult  to reauthorize                                                                    
than a board or a commission.                                                                                                   
                                                                                                                                
Mr. Anderson replied in the  affirmative. He agreed that the                                                                    
boards  and  commissions sunset  analogy  may  have been  an                                                                    
inadequate example.                                                                                                             
                                                                                                                                
Representative  Guttenberg  discussed  some of  the  credits                                                                    
that had  been left  out of the  bill. He  requested further                                                                    
discussion on how the credits in the bill were selected.                                                                        
                                                                                                                                
Mr. Anderson  replied that the brief  provided contained all                                                                    
of the  oil and  gas, and marine  highway credits,  the only                                                                    
department  that  was  not  listed  was  the  University  of                                                                    
Alaska.  He   said  that  the  sponsor   had  requested  all                                                                    
departments  and  agencies  under DOR,  but  had  difficulty                                                                    
receiving information  from the  University. He  stated that                                                                    
the  expenditure   report  contained  all  of   the  credits                                                                    
identified  by the  Division  of  Legislative Research;  the                                                                    
bill excluded oil  and gas. He stressed that  the credits in                                                                    
the bill were the  majorly, statutorily assigned tax credits                                                                    
found in Title 43.                                                                                                              
                                                                                                                                
Representative Guttenberg he clarified  that he was speaking                                                                    
to whatever  it took for  industry to plan ahead  in respect                                                                    
to  future spending;  all of  those things  were in  the DOR                                                                    
report except  for oil and  gas. Mr. Anderson  specified for                                                                    
DOR only.                                                                                                                       
                                                                                                                                
Representative  Guttenberg  asked  whether  there  had  been                                                                    
discussion about leaving  the Mineral Tax Credit  out of the                                                                    
bill.                                                                                                                           
                                                                                                                                
2:36:28 PM                                                                                                                    
                                                                                                                                
Mr.  Anderson  replied  that   there  had  been  significant                                                                    
discussion on  how to  set up the  mechanism for  the sunset                                                                    
date  in Section  12.  He there  had  been discussion  about                                                                    
assigning it  to title  38, which  was Alaska  Public Lands,                                                                    
and excluding  credits that could  impact that.  He believed                                                                    
that the sponsor  would be willing to further  discuss how a                                                                    
mechanism could be set up.                                                                                                      
                                                                                                                                
Representative  Guttenberg  expressed concern  that  credits                                                                    
would sunset before the legislature  had a chance to examine                                                                    
them.  He thought  that companies  would stop  relying on  a                                                                    
mineral exploration  tax credit  because at a  certain point                                                                    
it would not be available.                                                                                                      
                                                                                                                                
HB  306  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Vice-Chair Neuman discussed housekeeping.                                                                                       
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:38:57 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:38 p.m.                                                                                          

Document Name Date/Time Subjects
HB 297 CS WORKDRAFT 28-LS1307-N.pdf HFIN 3/6/2014 1:30:00 PM
HB 297
HB 297 AHFC Provided Backup - List of AHFC Approved Energy Raters for Energy Rebate Program.pdf HFIN 3/6/2014 1:30:00 PM
HB 297
HB 297 AHFC Provided Backup - IRS Reply Letter.pdf HFIN 3/6/2014 1:30:00 PM
HB 297
HB 297 AHFC Provided Backup - Counsel letter to IRS.pdf HFIN 3/6/2014 1:30:00 PM
HB 297