Legislature(2015 - 2016)HOUSE FINANCE 519

03/18/2015 01:30 PM FINANCE

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* first hearing in first committee of referral
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= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 18, 2015                                                                                            
                         1:33 p.m.                                                                                              
1:33:03 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Thompson called the House Finance Committee                                                                            
meeting to order at 1:33 p.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Representative Mark Neuman, Co-Chair                                                                                            
Representative Steve Thompson, Co-Chair                                                                                         
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lynn Gattis                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Lance Pruitt                                                                                                     
MEMBERS ABSENT                                                                                                                
Representative Tammie Wilson                                                                                                    
ALSO PRESENT                                                                                                                  
Jerry Burnett, Deputy Commissioner, Treasury Division,                                                                          
Department of Revenue; Representative Jonathan Kreiss-                                                                          
Tomkins, Sponsor.                                                                                                               
PRESENT VIA TELECONFERENCE                                                                                                    
Brandon S. Spanos, Deputy Director, Tax Division,                                                                               
Department of Revenue.                                                                                                          
HB 68     ELECTRONIC DISTRIB. OF REPORTS                                                                                        
          HB 68 was HEARD and HELD in committee for further                                                                     
HB 88     FEES FOR TIRES                                                                                                        
          HB 88 was HEARD and HELD in committee for further                                                                     
Co-Chair Thompson discussed the meeting agenda.                                                                                 
HOUSE BILL NO. 88                                                                                                             
     "An Act relating to remittance of tire fees; and                                                                           
     providing for an effective date."                                                                                          
1:34:07 PM                                                                                                                    
JERRY  BURNETT,  DEPUTY   COMMISSIONER,  TREASURY  DIVISION,                                                                    
DEPARTMENT OF  REVENUE, testified that the  bill would align                                                                    
the filing  date for tire fees  with other taxes filed  on a                                                                    
monthly  basis.  He shared  that  tire  fees currently  were                                                                    
filed every  30 days, after  the beginning of  each quarter,                                                                    
rather than the end of the month.                                                                                               
BRANDON   S.   SPANOS,   DEPUTY  DIRECTOR,   TAX   DIVISION,                                                                    
DEPARTMENT  OF REVENUE  (via  teleconference), relayed  that                                                                    
the bill would align the  filing date for quarterly tire fee                                                                    
tax payers.  He said  that the tax  return and  payment were                                                                    
currently due after the end  of quarter, which confused some                                                                    
tax payers  during the months  of July, October  and January                                                                    
because  the quarter  ended one  day before  the end  of the                                                                    
month. He shared that the  confusion had led to late filings                                                                    
which  resulted  in their  losing  a  timely filing  credit,                                                                    
causing  complaints. He  stated that  the legislation  would                                                                    
eliminate confusion for tax payers,  as well as protect them                                                                    
from the 5 percent penalty for filing only one day late.                                                                        
1:37:16 PM                                                                                                                    
Co-Chair Thompson  recalled that  the committee  had studied                                                                    
the  change  when  it   examined  the  Indirect  Expenditure                                                                    
Report.  He  noted that  the  change  had the  potential  of                                                                    
costing  the state  money. He  believed  that filing  timely                                                                    
reports should be a practice of doing business in Alaska.                                                                       
Vice-Chair Saddler understood that there  was a credit to be                                                                    
earned by vendors who filed in  a timely manner as well as a                                                                    
5 percent penalty for filing late.                                                                                              
Mr.  Spanos replied  in the  affirmative. He  said that  the                                                                    
penalty applied  to all  tax types in  the division  and the                                                                    
timely filing credit  was specific to only a  few tax types,                                                                    
the tire fee being one of those tax types.                                                                                      
Vice-Chair  Saddler asked  how much  the fees  were and  how                                                                    
much of the fee was passed onto the consumer.                                                                                   
Mr. Spanos answered that the tax  was $2.50 per new tire and                                                                    
the  additional studded  tire fee  of $5.00;  a new  studded                                                                    
tire  would  be  $7.00  total.   He  said  that  there  were                                                                    
exemptions for  tires not used  on roads, such as  tires for                                                                    
all terrain vehicles.                                                                                                           
Vice-Chair Saddler asked  how much revenue came  in from the                                                                    
tire fees.                                                                                                                      
Mr. Spanos replied that he did not have the figure on hand.                                                                     
Mr. Burnett  interjected that  the figure  was approximately                                                                    
$1 million annually.                                                                                                            
Co-Chair Thompson  noted that  the 5  percent of  the amount                                                                    
collected would  not exceed $900  per quarter. He  asked for                                                                    
further detail.                                                                                                                 
1:40:54 PM                                                                                                                    
Mr.  Spanos replied  that the  $900 per  quarter figure  had                                                                    
been created when  the fee was passed. He  believed that the                                                                    
cap stemmed from  concern that the state would  pay too much                                                                    
of an incentive for timely filing.                                                                                              
Co-Chair Thompson understood that  the maximum was $900. Mr.                                                                    
Spanos replied in  the affirmative; if 5 percent  of the tax                                                                    
exceeded $900  dollars then the  credit would be  limited to                                                                    
Representative  Kawasaki asked  for the  total value  of the                                                                    
indirect expenditure  credits. He  surmised that  the amount                                                                    
of money collected did not appear to be high.                                                                                   
Mr.  Spanos answered  that he  did  not have  the detail  on                                                                    
Co-Chair  Thompson wondered  why  the  vendors received  the                                                                    
credit.  He  did  not  believe the  state  gave  rental  car                                                                    
companies credits.                                                                                                              
Mr. Spanos relayed  that he did not know. He  pointed out to                                                                    
the committee that there was a vehicle rental tax in place.                                                                     
Mr.  Burnett  noted that  the  legislation  had been  passed                                                                    
during  the Murkowski  Administration. He  noted that  other                                                                    
credits were  being examined in  order to decide  whether it                                                                    
made sense to continue to honor them.                                                                                           
Co-Chair  Neuman   asserted  that  there   were  significant                                                                    
requirements   for  tire   sales  that   made  the   credits                                                                    
necessary. He  referred to  data provided  by Dave  and Judy                                                                    
Schneider, Diversified  Tires, Wasilla. He wondered  why the                                                                    
type of tire sold was of such importance.                                                                                       
Mr.  Spanos  replied  that  it  was  fairly  common  in  the                                                                    
division to  request gross  income before  a net  number was                                                                    
realized.  He  used  the example  of  cigarette  sales;  the                                                                    
division wanted  to know whether  the cigarettes  were being                                                                    
sold to  Indian Reservations  or being  exported out  of the                                                                    
state. He stated that for  exempt purposes the tire would be                                                                    
taxable except for the exemption; if  a tire was sold to the                                                                    
United States government for official  use then it would not                                                                    
be taxed  but the division  would still require a  record of                                                                    
the sale of the tire.                                                                                                           
1:45:59 PM                                                                                                                    
Co-Chair Neuman  noted that sellers were  required to report                                                                    
how  many tires  were  studded each  day.  He observed  that                                                                    
companies had  to stud  tires in September  to be  ready for                                                                    
the  winter season.  He opined  that the  businesses had  to                                                                    
physically  count  the  number  of  tires  each  season.  He                                                                    
believed  that  the  businesses were  subject  to  too  many                                                                    
Co-Chair Thompson observed that  state government was making                                                                    
the issue more complex than necessary.                                                                                          
Representative  Gattis relayed  that she  spoke to  the same                                                                    
business  owners. She  thought  that the  bill insulted  the                                                                    
intelligence    of    business   owners.    She    expressed                                                                    
embarrassment that  the legislation was under  debate during                                                                    
the current fiscal climate.                                                                                                     
Mr. Burnett rebutted that the  bill would make it easier for                                                                    
tire dealers  to know  when to report.  He noted  that there                                                                    
had  been  confusion on  the  issue  and cited  examples  of                                                                    
businesses  reporting  at  the   incorrect  time  and  being                                                                    
penalized.  He said  that the  department had  reviewed some                                                                    
internal processes and that this  particular issue had risen                                                                    
to the forefront.                                                                                                               
1:49:23 PM                                                                                                                    
Representative Kawasaki  thought the  change should  be made                                                                    
in regulation, not statute.                                                                                                     
Mr. Burnett  replied that there  was a specific date  set in                                                                    
statute, which could not be changed by regulation.                                                                              
Representative   Kawasaki  wondered   whether  it   was  the                                                                    
department's intention to include  language that changed the                                                                    
date to a specific day of the month.                                                                                            
Mr. Burnett replied  that the date would be the  last day of                                                                    
the calendar month.                                                                                                             
Representative  Kawasaki understood  that a  previous months                                                                    
tire receipts were due 15 days into the following month.                                                                        
Mr. Spanos  clarified that  it was  currently 30  days after                                                                    
the  end of  the  calendar quarter.  He  explained that  the                                                                    
change would  be to the  end of  month following the  end of                                                                    
the calendar quarter.                                                                                                           
Representative Kawasaki queried how  many Alaskans filed the                                                                    
tire tax.                                                                                                                       
Mr.  Spanos  replied that  the  data  was available  in  the                                                                    
division's annual  report. He believed it  was approximately                                                                    
100 filers.                                                                                                                     
Representative  Kawasaki   asked  for   the  title   of  the                                                                    
division's report.                                                                                                              
Mr.  Spanos  answered  that  it  was  the  department's  tax                                                                    
division's annual report.                                                                                                       
Representative Kawasaki wondered if  the report was provided                                                                    
to the legislature in paper form.                                                                                               
Mr. Burnett replied  no. He shared that the  report could be                                                                    
found online.                                                                                                                   
Representative Guttenberg understood that  the bill had been                                                                    
crafted as a  result of complaints from tire  tax filers. He                                                                    
wondered how many filers were  repeat offenders and what the                                                                    
average penalty was.                                                                                                            
1:53:14 PM                                                                                                                    
Mr. Spanos  responded was not  sure about  repeat offenders.                                                                    
He said that when filers  appealed they had claimed that the                                                                    
date had confused them and should be clarified.                                                                                 
Representative  Guttenberg asked  how  the businesses  filed                                                                    
for the tax.                                                                                                                    
Mr. Spanos answered  that the process included  a new online                                                                    
filing  option. Previously  filing  had been  only in  paper                                                                    
form; filers now had both options.                                                                                              
Representative Guttenberg asked about  any feedback given on                                                                    
the integration of the two options.                                                                                             
Mr.  Spanos  replied  that  there   had  been  hiccups,  but                                                                    
feedback had primarily been positive.                                                                                           
Representative Guttenberg  whether the date change  would be                                                                    
problematic for the computerized filing process.                                                                                
Mr. Spanos  replied no; it  involved in simply  changing the                                                                    
field on the computerized spreadsheet.                                                                                          
Representative  Gara stated  that  the bill  was to  protect                                                                    
businesses who had been caught in  the glitch in the law. He                                                                    
thought that the  bill offered a simple fix  that would save                                                                    
the  state  money.  He  expressed  confusion  at  individual                                                                    
committee member's opposition to the legislation.                                                                               
1:58:09 PM                                                                                                                    
Vice-Chair  Saddler believed  that  the  bill would  provide                                                                    
simplicity and consistency.                                                                                                     
Representative Gattis  recommended that the  inventory forms                                                                    
for businesses be reviewed and changed.                                                                                         
Representative Pruitt  wondered why  this tax item  had been                                                                    
chosen as  a priority.  He probed  whether there  were other                                                                    
opportunities within the tax division  for change that could                                                                    
be included in the bill.                                                                                                        
Mr. Burnett answered  that the bill had come  up through the                                                                    
tax  division  to  the commissioner's  office  in  the  time                                                                    
needed  to get  a bill  introduced at  the beginning  of the                                                                    
current  legislative session.  He  believed  there would  be                                                                    
additional items in the future.                                                                                                 
Representative  Pruitt wondered  whether the  possible other                                                                    
items would be introduced in multiple small bills.                                                                              
Co-Chair Thompson replied in the negative.                                                                                      
HB  88  was   HEARD  and  HELD  in   committee  for  further                                                                    
HOUSE BILL NO. 68                                                                                                             
     "An Act relating to the preparation, electronic                                                                            
     distribution, and posting of reports by state                                                                              
2:02:08 PM                                                                                                                    
REPRESENTATIVE     JONATHAN     KREISS-TOMKINS,     SPONSOR,                                                                    
communicated  that  the  bill   sought  to  digitize  annual                                                                    
reports and other printed public  records. He felt that this                                                                    
could save  the state $.5  million per year in  printing and                                                                    
production costs.  He relayed that  the bill had  a negative                                                                    
fiscal note.                                                                                                                    
Co-Chair  Thompson  appreciated  the negative  fiscal  note,                                                                    
which  reflected a  savings to  the  state of  approximately                                                                    
$400,000 per year.                                                                                                              
Representative Kreiss-Tomkins  said that  additional figures                                                                    
from  the  Department  of Transportation  and  Public  Works                                                                    
reflected a possible savings of $580,000 per year.                                                                              
Co-Chair Thompson  understood there  were some  reports that                                                                    
were required to be printed.                                                                                                    
Representative  Kreiss-Tomkins replied  in the  affirmative.                                                                    
He elaborated  that the printing  of the reports was  at the                                                                    
discretion of  commissioners. He anticipated  that documents                                                                    
with wide  public circulation would  need to be  printed. He                                                                    
shared that publishing  of certain reports could  cost up to                                                                    
$20 per copy.                                                                                                                   
2:06:48 PM                                                                                                                    
Representative  Gara relayed  that one  of the  money savers                                                                    
related  to  contracting out  for  graphic  design. He  gave                                                                    
former Representative  Kyle Johannsen  credit for work  on a                                                                    
similar bill in the past.                                                                                                       
Co-Chair  Thompson  noted  that  there were  people  in  the                                                                    
audience available for invited testimony.                                                                                       
Representative Edgmon  spoke in support of  the legislation.                                                                    
He believed the  bill reflected that the  state was becoming                                                                    
more connected by broadband. He  wondered if the sponsor had                                                                    
received any pushback due to  a lack of broadband capability                                                                    
in areas of the state.                                                                                                          
Representative  Kreiss-Tomkins replied  in the  negative. He                                                                    
shared that  he had  consulted with libraries  statewide and                                                                    
learned  that  libraries  would  sent  physical  reports  to                                                                    
residents statewide.                                                                                                            
2:10:38 PM                                                                                                                    
Vice-Chair  Saddler felt  that  the bill  presumed that  the                                                                    
public  interest  in  state government  could  be  satisfied                                                                    
online.  He wondered  whether the  benefit of  the estimated                                                                    
savings would  outweigh the benefit of  offering the fullest                                                                    
possible access to public information.                                                                                          
Representative  Kreiss-Tomkins  did  not believe  that  bill                                                                    
would  jeopardize the  public's  access  to information.  He                                                                    
countered that a  large number of the reports  that would be                                                                    
affected  by the  legislation were  not  in circulation,  in                                                                    
hard copy, for the general public.                                                                                              
Vice-Chair Saddler  asked about  confidence in  the $530,000                                                                    
savings to the state.                                                                                                           
Representative    Kreiss-Tomkins    believed    there    was                                                                    
variability around the number.  He believed that there would                                                                    
be  a  savings to  the  state,  but  that  it could  not  be                                                                    
precisely projected how much.                                                                                                   
Co-Chair  Thompson remarked  that glossy  cardstock used  in                                                                    
printing increased the cost.                                                                                                    
Vice-Chair  Saddler thought  that  any savings  could go  to                                                                    
expanded broadband in the state.                                                                                                
Representative  Kawasaki   queried  the  types   of  reports                                                                    
covered in the bill.                                                                                                            
Representative Kreiss-Tomkins  answered that the  bill would                                                                    
apply to all  state publications. He stated  that there were                                                                    
publications that the departments  would choose to print. He                                                                    
said that many  of the documents that had  inspired the bill                                                                    
were the ones read by legislators and their staff.                                                                              
Representative  Kawasaki wondered  if the  legislature would                                                                    
have  less  access  to  publications.  He  referred  several                                                                    
reports that he would have missed in an email link.                                                                             
Representative   Kreiss-Tomkins  replied   that  legislators                                                                    
might need to scrutinize their  email more closely or search                                                                    
for reports  online. He thought  that the  legislation would                                                                    
require  legislators to  be more  proactive  in seeking  out                                                                    
2:19:22 PM                                                                                                                    
Representative Kawasaki  wondered whether there would  be an                                                                    
opt-out element to the program.                                                                                                 
Representative  Munoz  spoke in  support  of  the bill.  She                                                                    
wondered  about  agencies  that provided  publications  that                                                                    
were key  to their  mission. She  provided examples  such as                                                                    
the Alaska Marine Highway System (AMHS) and tourism.                                                                            
Representative Kreiss-Tomkins answered  that language in the                                                                    
bill that would  preempt the problem was located  on page 3,                                                                    
lines  14-15; exceptions  would be  allowed for  agencies to                                                                    
print necessary reports for the public.                                                                                         
2:22:04 PM                                                                                                                    
Representative Guttenberg asserted  that the assumption that                                                                    
residents statewide  had internet access was  inaccurate. He                                                                    
strongly  advocated  for   broadband  expansion  across  the                                                                    
state. He  spoke to Section 3  of the bill. He  worried that                                                                    
the  documents  would  difficult   to  locate,  and  queried                                                                    
whether the  documents would be  easily found in  a specific                                                                    
place  online. He  wondered if  libraries  would be  charged                                                                    
with the responsibility of tracking the documents.                                                                              
Representative Kreiss-Tomkins  spoke to the  universality of                                                                    
internet access in  Alaska. He opined that  there were areas                                                                    
his district  that had  poor internet  access. He  felt that                                                                    
public access  to information was  relative; the  bill would                                                                    
not  manifestly  impair  access to  public  information.  He                                                                    
offered  that operations  like  the  Alaska Housing  Finance                                                                    
Corporation, for instance, did not  currently send a copy of                                                                    
their  annual  report  to  every   resident  of  Alaska.  He                                                                    
explained that the Alaska Online  Public Notice System would                                                                    
be the repository for documents  and the State Library would                                                                    
keep  5 hard  copies  on file  in  perpetuity; the  archival                                                                    
would be  dual, digital  and analog.  He suggested  that the                                                                    
public  notice system  would need  to be  assessed for  user                                                                    
2:28:08 PM                                                                                                                    
Representative Guttenberg reiterated his concerns.                                                                              
Vice-Chair Saddler  cautioned that  savings due to  the bill                                                                    
in  paper  and  trees  would  not be  reflected  in  all  of                                                                    
Alaska's  natural  resources.  He expounded  that  graphite,                                                                    
petroleum,  gold  and  other resources  would  be  used.  He                                                                    
warned  that radical  technological  changes had  unforeseen                                                                    
consequences.   He  worried   that   the   files  might   be                                                                    
inaccessible in 15  - 100 years. He  encouraged libraries to                                                                    
employ  archival  storage   techniques  when  handling  hard                                                                    
copies.  He  wondered  if  the  sponsor  would  consider  an                                                                    
amendment to  allow for a  transition period from  analog to                                                                    
digital and that there be  public notice when a document was                                                                    
no longer going to be physically available.                                                                                     
Representative  Kreiss-Tomkins replied  that  the spirit  of                                                                    
the amendment  was well  received. He  wondered that  if the                                                                    
transition could  be eased by  agencies opting to  alert the                                                                    
public in advance of expiring documents.                                                                                        
Representative  Gara directed  the committee's  attention to                                                                    
Page 3, line 20:                                                                                                                
     Sec. 44.99.260. Print copy requests.                                                                                     
     A person  may obtain,  at no charge,  up to  five print                                                                    
     copies of  reports from the state  library distribution                                                                    
     and data access  center under AS 14.56.170  each day. A                                                                    
     person may  obtain additional  print copies  of reports                                                                    
     from  the state  library distribution  and data  access                                                                    
     center for a reasonable fee under AS 14.56.170.                                                                            
He highlighted Page 2, line 3:                                                                                                  
     Except   as  provided   in  AS   44.99.260,  reasonable                                                                
     [REASONABLE]  fees for  reproduction or  printing costs                                                                    
     and for  mailing and distribution  of materials  may be                                                                    
     charged by the center.                                                                                                     
He wondered about the difference between the two passages.                                                                      
Representative   Kreiss-Tomkins  replied   that  the   state                                                                    
library fee  referenced in the  bill was $0.10 per  copy. He                                                                    
said  that the  first 5  copies would  be free,  beyond that                                                                    
there would be a minimal user fee.                                                                                              
Representative Gara concluded that  physical copies would be                                                                    
available to  the public. He  thought that the  public could                                                                    
be easily  alerted to hard  copies expiring with a  one page                                                                    
document.  He  said  that  the   public  would  always  want                                                                    
Department  of Fish  and Game  documents available  in print                                                                    
and  the  bill would  make  that  possible. He  referred  to                                                                    
publications from the executive  branch and wondered how the                                                                    
sending of documents would be approved by that branch.                                                                          
Representative  Gattis remarked  that the  documents in  the                                                                    
Capitol  Building alone  required a  large amount  of paper.                                                                    
She spoke  in support of  the legislation. She  believed the                                                                    
issue was timely.                                                                                                               
2:36:56 PM                                                                                                                    
Representative Kawasaki  wondered whether the  bill included                                                                    
the legislative  and judicial branches under  the "agencies"                                                                    
Representative   Kreiss-Tomkins   replied  that   he   would                                                                    
investigate the issue further.                                                                                                  
HB  68  was   HEARD  and  HELD  in   committee  for  further                                                                    
Co-Chair Thompson discussed housekeeping.                                                                                       
2:38:45 PM                                                                                                                    
The meeting was adjourned at 2:38 p.m.                                                                                          

Document Name Date/Time Subjects
HB88 Sponsor Statement.pdf HFIN 3/18/2015 1:30:00 PM
HB 88
HB 68 Sectional Analysis.pdf HFIN 3/18/2015 1:30:00 PM
HB 68
HB 68 Sponsor Statement.pdf HFIN 3/18/2015 1:30:00 PM
HB 68
HB 68 Supporting Documents - ASCC Letter.pdf HFIN 3/18/2015 1:30:00 PM
HB 68
HB 68 Supporting Documents - Leg Research Report.pdf HFIN 3/18/2015 1:30:00 PM
HB 68
HB 68 Supporting Documents - OMB Report.pdf HFIN 3/18/2015 1:30:00 PM
HB 68
HB68 Summary of Changes ver A to ver H.pdf HFIN 3/18/2015 1:30:00 PM
HB 68
HB 88 NEW FN DOR.pdf HFIN 3/18/2015 1:30:00 PM
HB 88
HB 88 DOR Tire Fee Form.pdf HFIN 3/18/2015 1:30:00 PM
HB 88
HB 68 Response to HFIN Qustions.pdf HFIN 3/18/2015 1:30:00 PM
HB 68
HB 88 DOR Tire Fee Form.pdf HFIN 3/18/2015 1:30:00 PM
HB 88