Legislature(2013 - 2014)HOUSE FINANCE 519
03/06/2014 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB297 | |
| HB306 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 297 | TELECONFERENCED | |
| += | HB 306 | TELECONFERENCED | |
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 |