Legislature(1997 - 1998)
04/02/1997 03:23 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 2, 1997
3:23 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative John Cowdery, Vice Chairman
Representative Bill Hudson
Representative Jerry Sanders
Representative Joe Ryan
Representative Tom Brice
MEMBERS ABSENT
Representative Gene Kubina
COMMITTEE CALENDAR
* HOUSE JOINT RESOLUTION NO. 31
Requesting the United States Congress to amend the Federal Food,
Drug, and Cosmetic Act.
- MOVED HJR 31 OUT OF COMMITTEE
* HOUSE BILL NO. 72
"An Act repealing certain filing statements and bonds for
enforcement and collection of certain taxes and license fees;
relating to service of process on nonresident taxpayers; and
providing for an effective date."
- MOVED HB 72 OUT OF COMMITTEE
KASSENBAUM/KENNEDY DISCUSSION
(* First public hearing)
PREVIOUS ACTION
BILL: HJR 31
SHORT TITLE: FEDERAL FOOD, DRUG, AND COSMETIC ACT
SPONSOR(S): REPRESENTATIVE(S) KOTT
JRN-DATE JRN-PG ACTION
03/18/97 736 (H) READ THE FIRST TIME - REFERRAL(S)
03/18/97 736 (H) LABOR & COMMERCE
04/02/97 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 72
SHORT TITLE: SERVICE OF PROCESS ON NONRES TAXPAYERS
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
01/15/97 70 (H) READ THE FIRST TIME - REFERRAL(S)
01/15/97 70 (H) ECD, LABOR & COMMERCE, FINANCE
01/15/97 71 (H) 2 ZERO FISCAL NOTES (DCED, REV)
01/15/97 71 (H) GOVERNOR'S TRANSMITTAL LETTER
03/14/97 676 (H) ECD REFERRAL WAIVED
04/02/97 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
NICOLE POIRRIER, Intern
to Representative Pete Kott
Alaska State Legislature
Capitol Building, Room 204
Juneau, Alaska 99801
Telephone: (907) 465-3765
POSITION STATEMENT: Gave sponsor statement for HJR 31.
REPRESENTATIVE PETE KOTT
Alaska State Legislature
Capitol Building, Room 204
Juneau, Alaska 99801
Telephone: (907) 465-3777
POSITION STATEMENT: Sponsor of HJR 31.
BOB BARTHOLOMEW, Deputy Director
Income and Excise Audit Division
Department of Revenue
P.O. Box 110420
Juneau, Alaska 99811-0420
Telephone: (907) 465-2320
POSITION STATEMENT: Testified on HB 72.
MARIANNE BURKE, Director
Division of Insurance
Department of Commerce
and Economic Development
P.O. Box 110805
Juneau, Alaska 99811-0805
Telephone: (907) 465-2515
POSITION STATEMENT: Participated in Kassenbaum/Kennedy discussion.
CECIL BYKERK, Chairman
Board of Directors
Comprehensive Health Insurance Association;
Representative, Mutual of Omaha Insurance Company
9643 Oak Circle
Omaha, Nebraska 68124
Telephone: (402) 351-2534
POSITION STATEMENT: Participated in Kassenbaum/Kennedy discussion.
ACTION NARRATIVE
TAPE 97-31, SIDE A
Number 001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee to order at 3:23 p.m. Members present at the
call to order were Representatives Rokeberg, Ryan, Cowdery, Brice
and Sanders. Representative Hudson arrived at 3:25 p.m.
HJR 31 - FEDERAL FOOD, DRUG, AND COSMETIC ACT
Number 030
CHAIRMAN ROKEBERG announced the first order of business would be
HJR 31, "Requesting the United States Congress to amend the Federal
Food, Drug, and Cosmetic Act," sponsored by Representative Pete
Kott
Number 086
NICOLE POIRRIER, Intern to Representative Pete Kott, Alaska State
Legislature, came before the committee to address HJR 31. She said
the resolution asks Congress to take a look at the Federal Food,
Drug and Cosmetic Act. Currently, there are several products that
are in the testing phase that could be more rapidly approved to
assist patients suffering from various illnesses. She said HJR 31
asks Congress to speed up that process.
Number 149
REPRESENTATIVE TOM BRICE asked Ms. Poirrier if she has specific
recommendations of the Food and Drug Administration (FDA) about how
they could speed up that process.
REPRESENTATIVE PETE KOTT, sponsor of HJR 31, responded, "In
specific, there are no general areas that we're specifically
looking at. In generalities, that whole U.S. code is a fairly
extensive session. We actually ran off a copy, but not to bore you
with the details, we tried to peruse it as much as possible and
tried to glean from what steps are involved and it's a nightmarish
code that's really difficult to understand to begin with."
Representative Kott said it is his understanding that Congress
currently has two measures, one in the House and one in the Senate,
that analyzes the code for those red tape areas that could expedite
products coming to market much more sooner than they currently are.
He pointed out many of the products are in the testing stage and
could take three to eight years to be released. He said an example
is AZT, which treats AIDS (acquired immune deficiency syndrome),
was in the experimental stage for about four and a half to five
years. He said he thinks that those people who suffered from the
virus would have liked to have taken their chances early on versus
not having anything for treatment. Representative Kott said the
resolution asks Congress to look at that area in the code and
determine what areas need to be changed that could potentially
expedite these products coming to market.
Number 307
REPRESENTATIVE JOE RYAN said Representative Kott talked about
dissemination of information. He asked him if he knows if Congress
has any plans in "ringing" in these people a little bit. He said
he has noticed that lately they prohibit anybody from saying
(indisc.) to say what benefits may be derived from using a certain
vitamin and yet, physicians will give you certain vitamins during
pregnancy to make sure certain diseases don't happen because it
could be from a vitamin deficiency that causes these diseases. Yet
the FDA won't allow anybody to put on a vitamin label any
information as to what the use of vitamins will do to help you.
They shut down people's ability to make statements that are proven
scientific facts.
REPRESENTATIVE KOTT said he isn't aware of any of the specifics
that Representative Ryan is addressing. He pointed out many of the
products that are currently being dispensed are dispensed for a
certain ailment that a product has been approved to be dispensed
for. He said, "What I am of the understanding is that we're also
asking, through the Congressional legislation, is for those
products that are currently approved to at least provide
additional, and this is the pharmaceuticals, provide information to
those physicians for some of the ailments that the product is not
approved for that could lead to them at least assisting in the
discussion and dialogue with patients perhaps offering additional
options." He said the whole process is basically one that's a very
difficult one and there is a lot of red tape and hurdles to jump
through. He noted he thinks we have come a long ways from the
initial writing of the code and it's time to revisit it. He said
maybe there needs to be a preapproval stage for those cases that
are terminal.
Number 528
CHAIRMAN ROKEBERG said he noticed in his committee file that there
is a page of information referencing the activities of the 104th
Congress and specific references to SB 1477 and HR 3199. He asked
if those are Senate joint and the House resolutions regarding this
activity.
REPRESENTATIVE KOTT said that is correct.
CHAIRMAN ROKEBERG asked where those currently are in the realm of
things.
REPRESENTATIVE KOTT said they're moving through the process at a
relatively stable and slow rate as most Congressional actions move.
He said HJR 31 asks Congress to continue moving that legislation
through the process. He said he is not asking that public safety
be jeopardized in any shape of fashion. It asks them to look at
the procedures involved to see if we can maintain public safety as
well as to move those products to market.
CHAIRMAN ROKEBERG said HJR 31 is intended to spur along the passage
of those particular Congressional actions.
REPRESENTATIVE KOTT said that is correct.
CHAIRMAN ROKEBERG asked if the Pharmaceutical Association is
interested in this activity.
REPRESENTATIVE KOTT indicated they are supportive.
Number 632
REPRESENTATIVE BILL HUDSON asked if this is something that is
moving through the National Conference of State Legislatures (NCSL)
where there is a broad base of states that are appealing for this
kind of legislation.
REPRESENTATIVE KOTT said he isn't sure if it is supported by the
NCSL, but said he wouldn't be surprised if it is because they are
generally in support of this kind of legislation. He noted there
are 20 plus states that have submitted resolutions of similar
nature.
Number 711
REPRESENTATIVE JOHN COWDERY made a motion to move HJR 31 out of
committee with individual recommendations.
CHAIRMAN ROKEBERG asked if there was an objection. Hearing none,
HJR 31 moved out of the House Labor and Commerce Standing
Committee.
HB 72 - SERVICE OF PROCESS ON NONRES TAXPAYERS
Number 747
CHAIRMAN ROKEBERG announced the committee would hear HB, 72
"An Act repealing certain filing statements and bonds for
enforcement and collection of certain taxes and license fees;
relating to service of process on nonresident taxpayers; and
providing for an effective date," sponsored by Rules by request of
the Governor.
BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division
Department of Revenue, came before the committee to explain the
bill. He said his division is responsible for administering what
is called the nonresident tax affidavit bond program. Mr.
Bartholomew pointed out that currently in statute is a program that
was established in 1955 to try to give the state some additional
tools in collecting tax liabilities. It effects nonresident
corporations, which is any business whose primary headquarters is
not registered in Alaska. It could be fish processors in Seattle
or the oil companies on the West Coast. They have to annually file
a two or three page affidavit and form with the Department of
Revenue. The department's staff processes it. They have to go to
an insurance company and get a bond or pledge real estate to cover
their tax liability. Mr. Bartholomew said in all the years the
department has been administering this, staff can't remember ever
using the affidavits or the bonds to secure tax liabilities. He
said the department basically goes against their bank accounts or
they take away their business license. He said the department
hasn't used this tool and are spending about 800 hours a year,
between three people in the department's compliance unit, to
administer the program. He said the department feels it has enough
tools to collect taxes and the businesses haven't seen a benefit
from this program.
MR. BARTHOLOMEW said a similar piece of legislation made it through
the Senate, but there wasn't time for it to move through the House.
He noted the Senate bill has been heard in two Senate committees
this year and moved with all "do pass" recommendations. He also
noted there is a zero fiscal note and the reason for that is the
department has been taking budget reductions every year for the
last three years and they are trying to catch up. They have more
work that bodies. Mr. Bartholomew informed the committee they also
receive a lot of complaints from businesses, whether they are motor
fuel, tax payers or fishery business tax payers, that they are
paying their taxes and they want to make sure the other guy is too.
They want the department to increase compliance. He said the
department knows they won't get new positions and they are looking
at ways to do it and that is why they are trying to refocus the 800
hours that go into processing this tax bond.
Number 996
CHAIRMAN ROKEBERG said, "That was certainly one of mine that
relates to the fiscal note because it should be a negative fiscal
noted, if you will. But that's where you're redirecting the 800
hours. Is that the $30,000."
MR. BARTHOLOMEW explained it is about 800 staff hours, so it is the
equivalent personal services that would cover and then there are
some mailing costs that they would no longer be incurring. He
informed the department has tried several ways to beef up
compliance. They have implemented a new computer system two years
ago to try and automate a lot of in-house analysis before they
decide where there might be trouble or who might not be paying
taxes.
Number 1047
REPRESENTATIVE COWDERY asked, "How does this differ from in-state
to out-of-state people? How does it differ?"
MR. BARTHOLOMEW pointed out that the statute only requires the
Department of Revenue to administer this for nonresident
corporations. So if you are a 100 percent Alaska corporation and
your incorporation paperwork states "Alaska," then you are not
subject to this requirement. If your official headquarters is
Washington, Oregon, California, New York, then you come under this
act and have to fill out the paperwork and register with the
department in addition to normal tax filings. Mr. Bartholomew said
people in the department spoke with the Anchorage Chamber and the
State Chamber and there was the issue of, "Is there something here
that we don't want to do that would disadvantage in-state
businesses?" They also went to the small business development
program and the university and all three of them felt that from a
business perspective it was in the best interest of all businesses
to eliminate a layer of paperwork. At this point, in-state are not
effected and wouldn't be if the bill passes.
Number 1128
REPRESENTATIVE COWDERY asked if the information that is provided by
outside corporations is confidential or public information.
MR. BARTHOLOMEW said the way the statute is structured is any
information that is provided on a tax return is confidential. He
noted any information provided on a business license application is
public information and would continue to be public information.
REPRESENTATIVE HUDSON asked if there are other areas, in statute,
that require a bond posting. He also asked if the legislature has
ever acted on those.
MR. BARTHOLOMEW said the other area that his division is involved
in relates to fisheries. He said some fishery businesses do post
a bond and the reason that has been required was that historically,
there were certain situations where fishermen weren't getting paid
for the fish. They would catch them, deliver them to a processor
or an intermediate boat that hauled them off. There were
situations where fishermen weren't paid so the legislature enacted
a bond. He said he knows that probably several times a year they
do pay on those bonds to fishermen.
REPRESENTATIVE HUDSON asked how the department accesses those
bonds.
MR. BARTHOLOMEW said it generally requires a court action. The
court would establish that there is a legal debt and that is all
the department needs. He said the department either has an
insurance bond or a cash bond. If it is cash, the department would
then cut a warrant, via the court document, to the person claiming
it. If it through an insurance company where a bond has been
posted, it is his understanding that the person would work directly
with the insurance company.
Number 1297
CHAIRMAN ROKEBERG referred to information from 1996, which said
that $2,119,584 was prepaid by 239 corporations and interest of
approximately $58,000 was earned. He asked what the $2,119,584
was.
MR. BARTHOLOMEW said, "There were 2,000 corporations that filed the
affidavit, and of the 2,000, 239 of them rather than going to an
insurance company and giving a bond, they actually put a cash
deposit with the Department of Revenue. We collect that, we put it
on account - we basically put it in the general fund and do an
accounting of it. The state does earn interest on that. The money
still belongs to the business and if they pay their taxes, we would
pay them back their cash. As stated in that bullet, the state
earned $58,000 in interest last year on that money. And it's the
Department of Revenue's position that that is a loss of interest
income, but that one that is probably more appropriately -- the
businesses interest income and if they get to retain the cash,
would earn the interest. And we feel that by redirecting the 800
hours that in our compliance work, we would more than recover
what's lost in interest. That's another reason why we wanted to
show the $58,000, but we didn't put it in a fiscal note because we
feel that we're gonna collect more than that through the compliance
efforts."
Number 1418
REPRESENTATIVE HUDSON asked if current regulations restrict the
manner in which the department can invest these kinds of deposits.
He said he received a telephone call from somebody who said, "Do
you realize that there is millions of dollars that are collected
from contractors from all over the state of Alaska and, by law,
they can only invest them in the lowest income producing mechanisms
available, the IRAs or what ever they are." He said they also
asked him if he would consider changing the law to provide for a
better investment return on their money. Representative Hudson
asked Mr. Bartholomew if he is involved in the investment of these
kinds of monies.
MR. BARTHOLOMEW said through the Department of Revenue, the
Treasury Division does have the responsibility for investing all of
the funds and there is quite an array of accounts and funds that
are invested. In the general fund with all the subaccounts, which
would include bonds or any other kinds of deposits on account, they
would be invested by the Treasury Division. They do try to look at
the individual accounts and what they are for. If a bond is on
account, his assumption would be that they will only invest that in
short-term. This is because they don't know when it will be
called. If there was a problem where the bond was called, and
whenever there is an uncertainty as to when it will be demanded,
they put it into those short-term categories.
Number 1516
REPRESENTATIVE RYAN said he understands if people overpay their
taxes, they receive 11 percent interest on the overpayment. He
asked where the difference comes between that and putting an amount
of money on deposit with the state as a bond, etc. He asked where
the distinction was made.
MR. BARTHOLOMEW explained the distinction was actually made in the
tax code and they do specifically address the overpayment of taxes
or refunds due. He said, "The 11 percent, what it is is it's -
we're gonna pay you a certain percentage over the federal discount
rate or 11 percent, whichever is more. And at this point the
federal rate is like around 5 percent or 5 and a 1/4. So the 11
percent is actually quite high compared to what you'd earn in the
market, but it is also what taxpayers who are delinquent have to
pay us. So they've kind of tied them together. And, again, we
feel though we do pay out a little more than the market and we have
a risk of people using us as a bank, it has been such a good tool
for the department to encourage the larger taxpayers to come
forward and not hold out and take everything through appeal and
through the courts when they're having to pay us 11 percent.
That's was part of the incentive during Governor Hickel's
Administration we caught up on a lot of the old oil cases. They
changed the law from what was 5 or 6 percent to 11 and it pretty
amazing how many people stepped forward to payoff large tax
liabilities rather than accrue that interest liability."
CHAIRMAN ROKEBERG asked what the will of the committee is.
Number 1629
REPRESENTATIVE HUDSON moved and asked unanimous consent to pass HB
72 out of committee with a zero fiscal note and individual
recommendations. Hearing no objection, HB 72 was moved out of the
House Labor and Commerce Standing Committee.
Number 1697
CHAIRMAN ROKEBERG called for an at-ease at 3:53 p.m. He called the
meeting back to order at 3:58 p.m.
KASSENBAUM/KENNEDY DISCUSSION
TAPE 97-31, SIDES A & B
TAPE 97-32, SIDE A
SUMMARY OF INFORMATION
MARIANNE BURKE, Director, Division of Insurance, Department of
Commerce and Economic Development, participated in
Kassenbaum/Kennedy discussion.
CECIL BYKERK, Chairman, Board of Directors, Comprehensive Health
Insurance Association; Representative, Mutual of Omaha Insurance
Company, participated in Kassenbaum/Kennedy discussion.
COMMITTEE ACTION
The committee took no action.
ADJOURNMENT
The meeting was adjourned at 5:02 p.m.
NOTE:
The meeting was recorded and handwritten log notes were taken. A
copy of the tapes and log notes may be obtained by contacting the
House Records Office at 130 Seward Street, Suite 211, Juneau,
Alaska, 99801-1181, (907) 465-2214, and after adjournment of the
second session of the Twentieth Alaska State Legislature, in the
Legislative Reference Library.
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