Legislature(2011 - 2012)BARNES 124

04/13/2011 03:15 PM LABOR & COMMERCE


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03:23:23 PM Start
03:23:34 PM SB23
03:52:51 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= SB 23 FILM PRODUCTION TAX CREDIT/AUDITS TELECONFERENCED
Moved HCS CSSB 23(L&C) Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         April 13, 2011                                                                                         
                           3:23 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Kurt Olson, Chair                                                                                                
Representative Craig Johnson, Vice Chair                                                                                        
Representative Mike Chenault                                                                                                    
Representative Dan Saddler                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Lindsey Holmes                                                                                                   
Representative Bob Miller                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 23(FIN)                                                                                
"An Act relating to transferable  film production tax credits and                                                               
film   production   tax   credit  certificates;   requiring   the                                                               
legislative audit  division to audit  the Alaska  film production                                                               
incentive  program;  and  providing  for  an  effective  date  by                                                               
amending  the effective  dates  of secs.  3 and  4,  ch. 63,  SLA                                                               
2008."                                                                                                                          
                                                                                                                                
     - MOVED HCS CSSB 23(L&C) OUT OF COMMITTEE                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 23                                                                                                                   
SHORT TITLE: FILM PRODUCTION TAX CREDIT/AUDITS                                                                                  
SPONSOR(s): SENATOR(s) ELLIS                                                                                                    
                                                                                                                                
01/19/11       (S)       PREFILE RELEASED 1/7/11                                                                                
01/19/11       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/19/11       (S)       L&C, FIN                                                                                               
02/17/11       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
02/17/11       (S)       Heard & Held                                                                                           
02/17/11       (S)       MINUTE(L&C)                                                                                            
02/22/11       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
02/22/11       (S)       Moved SB 23 Out of Committee                                                                           
02/22/11       (S)       MINUTE(L&C)                                                                                            
02/23/11       (S)       L&C RPT 4DP 1NR                                                                                        
02/23/11       (S)       DP: EGAN, DAVIS, PASKVAN, MENARD                                                                       
02/23/11       (S)       NR: GIESSEL                                                                                            
03/21/11       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/21/11       (S)       Heard & Held                                                                                           
03/21/11       (S)       MINUTE(FIN)                                                                                            
04/04/11       (S)       FIN RPT CS 7DP    NEW TITLE                                                                            
04/04/11       (S)       DP: HOFFMAN, STEDMAN, THOMAS, EGAN,                                                                    
                         MCGUIRE, OLSON, ELLIS                                                                                  
04/04/11       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
04/04/11       (S)       Moved CSSB 23(FIN) Out of Committee                                                                    
04/04/11       (S)       MINUTE(FIN)                                                                                            
04/06/11       (S)       TRANSMITTED TO (H)                                                                                     
04/06/11       (S)       VERSION: CSSB 23(FIN)                                                                                  
04/07/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/07/11       (H)       L&C, FIN                                                                                               
04/08/11       (H)       L&C AT 3:15 PM CAPITOL 106                                                                             
04/08/11       (H)       Heard & Held                                                                                           
04/08/11       (H)       MINUTE(L&C)                                                                                            
04/10/11       (H)       L&C AT 3:15 PM BARNES 124                                                                              
04/10/11       (H)       -- MEETING CANCELED --                                                                                 
04/11/11       (H)       L&C AT 3:15 PM BARNES 124                                                                              
04/11/11       (H)       Heard & Held                                                                                           
04/11/11       (H)       MINUTE(L&C)                                                                                            
04/12/11       (H)       L&C AT 4:15 PM BARNES 124                                                                              
04/12/11       (H)       Heard & Held                                                                                           
04/12/11       (H)       MINUTE(L&C)                                                                                            
04/13/11       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KONRAD JACKSON, Staff                                                                                                           
Representative Kurt Olson                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented amendments and answered questions                                                              
during the discussion of SB 23.                                                                                                 
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:23:23 PM                                                                                                                    
                                                                                                                                
CHAIR KURT  OLSON called  the House  Labor and  Commerce Standing                                                             
Committee meeting  to order at  3:23 p.m.  Representatives Olson,                                                               
Johnson, Saddler,  Thompson, Holmes,  and Miller were  present at                                                               
the  call to  order.   Representatives  Chenault  arrived as  the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
                                                                                                                                
            SB 23-FILM PRODUCTION TAX CREDIT/AUDITS                                                                         
3:23:34 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the  only order of business  would be                                                               
CS FOR SENATE BILL NO.  23(FIN), "An Act relating to transferable                                                               
film  production  tax  credits  and film  production  tax  credit                                                               
certificates; requiring  the legislative audit division  to audit                                                               
the Alaska  film production incentive program;  and providing for                                                               
an effective date by amending the  effective dates of secs. 3 and                                                               
4, ch. 63, SLA 2008." [Before the committee was Version G.]                                                                     
                                                                                                                                
3:24:09 PM                                                                                                                    
                                                                                                                                
KONRAD JACKSON,  Staff, Representative  Kurt Olson,  Alaska State                                                               
Legislature, on behalf  of the House Labor  and Commerce Standing                                                               
Committee offered  to explain  the draft amendments  to SB  23 in                                                               
members' packets.                                                                                                               
                                                                                                                                
3:24:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  THOMPSON  made a  motion  to  adopt Amendment  1,                                                               
labeled 27-LS0252\G.1, Bullock, 4/12/11, which read, as follows:                                                                
                                                                                                                                
     Page 6, line 10, following "accountant":                                                                                   
          Insert ", licensed in the state and"                                                                              
                                                                                                                                
     Page 6, line 11, following "office":                                                                                       
          Insert ","                                                                                                        
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
MR. JACKSON explained Amendment 1  was recommended by a committee                                                               
member   who  wanted   to  ensure   that  any   certified  public                                                               
accountants (CPAs)  conducting the audits on  the film production                                                               
tax credits are licensed by the State of Alaska (SOA).                                                                          
                                                                                                                                
3:25:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER acknowledged  Amendment  1 would  require                                                               
CPAs conducting audits  to be licensed to practice  in the state.                                                               
He asked whether the business must also be domiciled in Alaska                                                                  
                                                                                                                                
MR.  JACKSON answered  that the  specific  requirement for  being                                                               
domiciled  in  Alaska is  not  specified  in  the language.    He                                                               
offered his belief  that a person would not need  to be domiciled                                                               
in  Alaska to  obtain a  business license.   He  also offered  to                                                               
confirm this with the department.                                                                                               
                                                                                                                                
REPRESENTATIVE THOMPSON  assumed licensure  in Alaska  meant that                                                               
the CPA's  credentials would be  approved by the Alaska  Board of                                                               
Public Accountancy.                                                                                                             
                                                                                                                                
MR.  JACKSON referred  to  page  6, line  7,  of  Version G,  and                                                               
related  the  proposed  section  addresses  the  verification  by                                                               
independent certified public accountants.                                                                                       
                                                                                                                                
REPRESENTATIVE HOLMES  clarified that the question  the committee                                                               
is considering  is whether  the CPA conducting  the audit  on the                                                               
film production  tax credits must  have a  CPA license or  only a                                                               
business license from the SOA.                                                                                                  
                                                                                                                                
MR. JACKSON  remarked he  did not delve  into that  detail during                                                               
the  discussion  on  licensure.    He  offered  his  belief  that                                                               
"licensed"  in the  SOA  referred to  the  business license,  not                                                               
necessarily to the  CPA's license.  He offered  to obtain further                                                               
clarification  from  the  Department  of  Commerce,  Community  &                                                               
Economic Development  (DCCED) or the  legal drafter.  He  said he                                                               
was unsure if this provision covered both licenses.                                                                             
                                                                                                                                
REPRESENTATIVE JOHNSON stated the  language of Amendment 1 reads,                                                               
as follows:   "independent  certified public  accountant licensed                                                               
in the state and..."                                                                                                            
                                                                                                                                
REPRESENTATIVE  THOMPSON  recalled  previous wording  related  to                                                               
licensure.   He  suggested that  language read:  certified public                                                               
accountant firm  doing business in  and licensed in the  State of                                                               
Alaska."                                                                                                                        
                                                                                                                                
MR. JACKSON  referred to the  regulations in 3 AAC,  which listed                                                               
the requirement that  the CPA must hold a  current license issued                                                               
under AS  08.04 by the  Board of  Public Accountancy.   Thus, the                                                               
CPAs would be required to hold the CPA license by regulation.                                                                   
                                                                                                                                
CHAIR  OLSON  removed his  objection.    There being  no  further                                                               
objection, Amendment 1 was adopted.                                                                                             
                                                                                                                                
3:28:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON  made  a  motion to  adopt  Amendment  2,                                                               
labeled 27-LS0252\G.2, Bullock, 4/12/11, which read:                                                                            
                                                                                                                                
     Page 7, line 11, following "(10)":                                                                                         
          Insert "subject to the limitation in (c) of this                                                                  
     section,"                                                                                                              
                                                                                                                                
     Page 7, following line 27:                                                                                                 
          Insert a new bill section to read:                                                                                    
       "* Sec. 19. AS 44.33.236 is amended by adding new                                                                    
     subsections to read:                                                                                                       
          (c)  The qualified expenditures described in                                                                          
     (a)(10) of this section may not exceed                                                                                     
               (1)  15 percent of the total production                                                                          
     budget after June 30, 2013, and before July 1, 2016;                                                                       
               (2)  12 percent of the total production                                                                          
      budget after June 30, 2016, and before July 1, 2018;                                                                      
     and                                                                                                                        
               (3)  10 percent of the total production                                                                          
     budget after June 30, 2018.                                                                                                
          (d)  For the purposes of (c) of this section,                                                                         
     "total production  budget" means  the sum of  the total                                                                    
     qualified expenditures and  the total expenditures that                                                                    
     are  not qualified  expenditures that  are incurred  by                                                                    
     the  producer  in  connection with  a  film  production                                                                    
     approved by the film office."                                                                                              
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
3:28:40 PM                                                                                                                    
                                                                                                                                
MR. JACKSON  explained Amendment 2  would help limit some  of the                                                               
"above  the  line"  expenditures  that  would  qualify  for  film                                                               
production tax  credits.  The  intention of Amendment 2  would be                                                               
to limit  some "above the  line" costs to  make more of  the film                                                               
production tax credits  available for the "below  the line" costs                                                               
related to film production.                                                                                                     
                                                                                                                                
REPRESENTATIVE SADDLER  asked whether "above the  line" refers to                                                               
costs  including actors,  producers, and  directors.   He related                                                               
his understanding that Amendment 2  would limit the percentage of                                                               
the entire  project's cost for  productions that  companies could                                                               
receive related to the film production tax credits.                                                                             
                                                                                                                                
MR. JACKSON  answered yes.   He elaborated that "above  the line"                                                               
is a  term of art  in the film  industry which refers  to actors,                                                               
writers,  and  producers,  or the  higher  paid  individuals,  as                                                               
opposed to  the "below  the line" which  he characterized  as the                                                               
"worker bees."                                                                                                                  
                                                                                                                                
REPRESENTATIVE SADDLER  asked how the  15 percent credit  and the                                                               
"stair step"  down percentages were determined  as the percentage                                                               
amounts of the tax credit.                                                                                                      
                                                                                                                                
MR. JACKSON  answered that the  "stair step" would range  from 15                                                               
percent  to 12  percent  and  then to  10  percent  of the  total                                                               
production  budget.   He  related  "stair  step" approach  is  an                                                               
attempt to avoid a "major hit"  to the entire film production tax                                                               
credit  program in  the  early years.   The  goal  of the  credit                                                               
program  is to  build  up the  film industry  in  Alaska and  the                                                               
attractiveness of Alaska to the  industry.  Amendment 2 addresses                                                               
a concern that Alaska does not  have a full labor pool to perform                                                               
the production work.  The  intention would be to gradually reduce                                                               
the tax credits to allow Alaska's labor pool to increase.                                                                       
                                                                                                                                
REPRESENTATIVE  SADDLER   related  his  understanding   the  film                                                               
production  tax  credits  would   be  wider  initially  and  then                                                               
decrease as the industry becomes  more established in Alaska.  He                                                               
asked how the specific percentages were determined.                                                                             
                                                                                                                                
MR. JACKSON  explained that the  film industry would  be directly                                                               
affected  by this  so obtaining  industry  input on  the cap  was                                                               
important so as to not damage the  program.  The goal has been to                                                               
provide incentives  to hire Alaskans.   "We did not want  to kill                                                               
the golden goose so to speak," he said.                                                                                         
                                                                                                                                
CHAIR  OLSON related  his assessment  of the  bill's chances  for                                                               
support also determined the percentage of the tax credit.                                                                       
                                                                                                                                
3:31:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER offered  this provision  would relate  to                                                               
people that  would not likely  be Alaskan residents,  for example                                                               
actors.   He asked whether  Amendment 2  would limit the  type of                                                               
production.   He further asked  whether this would mean  only big                                                               
budget  productions  or  small television  productions  would  be                                                               
interested.                                                                                                                     
                                                                                                                                
MR. JACKSON related he heard  anecdotally the effect of Amendment                                                               
2  could limit  big star  productions.   He pointed  out that  it                                                               
really is a policy call for  the committee and the legislature as                                                               
to  whether the  limits  are appropriate.    He acknowledged  the                                                               
committee  has not  had sufficient  time to  vet the  percentages                                                               
used,  but offered  that Amendment  2 would  offer some  steps to                                                               
encourage local hire on productions in Alaska.                                                                                  
                                                                                                                                
3:32:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SADDLER  related   everyone   has  heard   about                                                               
Everybody  Loves Whales.   He  asked  for the  percentage of  tax                                                             
credit the film production film received.                                                                                       
                                                                                                                                
MR. JACKSON  answered he did  not have  the figures.   He offered                                                               
his belief that  the final expenditures have not  yet been filed.                                                               
He suggested  the film  office may  be able  to address  any cost                                                               
claims on the film.                                                                                                             
                                                                                                                                
CHAIR OLSON  removed his objection  to Amendment 2.   There being                                                               
no further objection, Amendment 2 was adopted.                                                                                  
                                                                                                                                
3:33:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON  made  a  motion to  adopt  Amendment  3,                                                               
labeled 27-LS0252\G.3, Bullock, 4/12/11, which read:                                                                            
                                                                                                                                
     Page 8, line 30:                                                                                                           
          Delete "2024"                                                                                                     
          Insert "2029"                                                                                                     
                                                                                                                                
     Page 8, line 31:                                                                                                           
          Delete "one year"                                                                                                     
          Insert "six years [ONE YEAR]"                                                                                     
                                                                                                                                
CHAIR OLSON objected for purpose of discussion.                                                                                 
                                                                                                                                
MR. JACKSON referred  to page 7, lines 28-30  of proposed Section                                                               
19 of  Version G, which  changed the  "look back" period  for the                                                               
state to  recover film production  tax credits after an  audit is                                                               
conducted.   Amendment 3 corrects  a corresponding change  at the                                                               
tail end of bill that would go  six years beyond the date the tax                                                               
credit  was awarded.    Thus,  the date  of  2029 represents  the                                                               
corresponding change, and changing one year to six years.                                                                       
                                                                                                                                
CHAIR  OLSON  removed his  objection.    There being  no  further                                                               
objection, Amendment 3 was adopted.                                                                                             
                                                                                                                                
3:35:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON  made  a  motion to  adopt  Amendment  4,                                                               
labeled 27-LS0252\G.4, Bullock, 4/12/11, which read:                                                                            
                                                                                                                                
     Page 3, line 9:                                                                                                            
          Delete "this title"                                                                                               
          Insert "AS 21.09.210, AS 21.66.110, AS 43.20,                                                                     
     AS 43.55, AS 43.56, AS 43.65, AS 43.75, and AS 43.77"                                                                  
                                                                                                                                
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
MR. JACKSON  referred to Amendment  4.  Initially,  the intention                                                               
was to make tax credits  available to other corporate tax payers,                                                               
including programs in all of Title  43.  It was decided to narrow                                                               
the tax  credit to  eight programs.   He previously  outlined the                                                               
programs  affected when  he introduced  Amendment 4,  but it  was                                                               
subsequently discovered  the Fisheries  Business Tax  and Fishery                                                               
Resource  Landing  Tax  are  taxes   tied  to  municipal  revenue                                                               
sharing.    The  concern  was  that  some  communities  may  lose                                                               
funding.    He  asked  the committee  to  consider  a  conceptual                                                               
amendment  to delete  line  4, which  read:   "AS  43.75, and  AS                                                           
43.77" which  would eliminate the  two fisheries taxes  which may                                                           
adversely affect revenue sharing to some communities.                                                                           
                                                                                                                                
REPRESENTATIVE  JOHNSON  made  a  motion to  adopt  a  Conceptual                                                               
Amendment  1 to  Amendment  4 to  delete line  4,  which read  as                                                               
follows:                                                                                                                        
                                                                                                                                
     AS 43.75, and AS 43.77"                                                                                                
                                                                                                                                
There being no  objection, Conceptual Amendment 1  to Amendment 4                                                               
was adopted.                                                                                                                    
                                                                                                                                
CHAIR  OLSON  removed his  objection.    There being  no  further                                                               
objection, Amendment 4, as conceptually amended, was adopted.                                                                   
                                                                                                                                
3:37:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON   made  a  motion  to   adopt  Conceptual                                                               
Amendment 5, labeled, By Representative  Olson, (Olson #1), which                                                               
read, as follows [original punctuation provided]:                                                                               
                                                                                                                                
     Page 7, line 11:                                                                                                           
                                                                                                                                
     Delete                                                                                                                     
                                                                                                                                
     "payroll"                                                                                                                  
                                                                                                                                
     Insert                                                                                                                     
                                                                                                                                
     "expenditures"                                                                                                         
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
3:38:01 PM                                                                                                                    
                                                                                                                                
MR.  JACKSON referred  to page  7,  line 11,  and explained  that                                                               
Conceptual  Amendment  5  would   help  to  ensure  expenses  are                                                               
covered.   It  was discovered  that some  actors, the  "above the                                                               
line"  members,   are  sometimes   paid  via   limited  liability                                                               
corporations (LLCs)  and are not  included as part of  the direct                                                               
payroll.                                                                                                                        
                                                                                                                                
CHAIR  OLSON  removed his  objection.    There being  no  further                                                               
objection, Conceptual Amendment 5 was adopted.                                                                                  
                                                                                                                                
3:38:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON   made  a  motion  to   adopt  Conceptual                                                               
Amendment 6,  labeled, By  Representative Saddler,  (Saddler #1),                                                               
which read [original punctuation provided]:                                                                                     
                                                                                                                                
     Page 5, line 7                                                                                                             
                                                                                                                                
         After (2), insert "both the immediate and long-                                                                    
     term prospects for"                                                                                                    
                                                                                                                                
     Page 5, line 9                                                                                                             
                                                                                                                                
         After (3), insert "both the immediate and long-                                                                    
     term prospects for"                                                                                                    
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
REPRESENTATIVE  SADDLER  explained  that Conceptual  Amendment  6                                                               
attempts to  extend language on  page 5, line  5 and apply  it to                                                               
the  other two  paragraphs in  proposed  Section 11.   Since  the                                                               
proposed  section  would  consider the  immediate  and  long-term                                                               
prospects  for the  film industry  it  made sense  to extend  the                                                               
short and long-term  effects of the production  to the employment                                                               
of Alaska residents and the economy of the state.                                                                               
                                                                                                                                
CHAIR OLSON  remarked that Conceptual  Amendment 6  would provide                                                               
more tools.                                                                                                                     
                                                                                                                                
REPRESENTATIVE SADDLER pointed  out that some cases  may exist in                                                               
which the short-term benefits may exceed the long-term benefits.                                                                
                                                                                                                                
CHAIR  OLSON  removed his  objection.    There being  no  further                                                               
objection, Conceptual Amendment 6 was adopted.                                                                                  
                                                                                                                                
3:40:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON   made  a  motion  to   adopt  Conceptual                                                               
Amendment  7, labeled  By Representative  Saddler, (Saddler  #2),                                                               
which read [original punctuation provided]:                                                                                     
                                                                                                                                
     Page 4, lines 16 - 20:                                                                                                     
          Delete all material.                                                                                                  
                                                                                                                                
          Insert                                                                                                                
                                                                                                                                
        "(5) the total amount of qualified expenditures                                                                       
     that were paid by productions                                                                                            
        qualifying for the film production tax credit to                                                                      
     Alaska businesses; and                                                                                                   
         (6) the total amount of qualified expenditures                                                                       
     that were paid by productions                                                                                            
        qualifying for the film production tax credit to                                                                      
     Alaska residents as wages."                                                                                              
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
3:40:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  explained   the  purpose  of  Conceptual                                                               
Amendment 7 is  to breakout more information with  respect to how                                                               
much was  spent on  wages to  Alaska residents  and how  much was                                                               
spent with Alaska businesses.  This  could help provide a tool to                                                               
assess the benefits of the  film production tax credit program on                                                               
Alaska's businesses and its residents.                                                                                          
                                                                                                                                
CHAIR  OLSON  removed his  objection.    There being  no  further                                                               
objection, Conceptual Amendment 7 was adopted.                                                                                  
                                                                                                                                
3:41:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON   made  a  motion  to   adopt  Conceptual                                                               
Amendment 8,  labeled: By  Representative Saddler,  (Saddler #3),                                                               
which read [original punctuation provided]:                                                                                     
                                                                                                                                
     Page 5, line 11                                                                                                            
                                                                                                                                
     After (4) insert "the public perception of"                                                                              
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
3:41:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER explained  the importance  of considering                                                               
the  productions subsidized  by  the film  production tax  credit                                                               
program to ensure the tax  credits don't harm Alaska's interests.                                                               
A large part  of the interest in Alaska is  the public perception                                                               
of how well state government  safeguards and provides stewardship                                                               
of its natural resources and  our wildlife.  Conceptual Amendment                                                               
8 would  seek to include  consideration of the  public perception                                                               
of  the state's  policy  on utilization  and  development of  the                                                               
state's natural resources.                                                                                                      
                                                                                                                                
3:42:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MILLER asked for further clarification.                                                                          
                                                                                                                                
REPRESENTATIVE  SADDLER  referred  to  page  5,  lines  1-12,  of                                                               
Version G, as modified by Conceptual Amendment 8, which read:                                                                   
                                                                                                                                
     (b) In determining under (a)  of this section whether a                                                                    
     production  is not  contrary to  the best  interests of                                                                    
     the state, the film office may consider                                                                                    
          [(1)] the effect of the production on                                                                                 
          (1) both the immediate and long-term prospects                                                                      
     for the film industry in Alaska;                                                                                           
          (2) [THE EFFECT OF THE PRODUCTION ON] the                                                                             
     employment of                                                                                                              
     Alaska residents; [AND]                                                                                                    
          (3) [THE EFFECT OF THE PRODUCTION ON] the economy                                                                     
     of the                                                                                                                     
      state; and                                                                                                              
          (4) the public perception of state policy on the                                                                  
     utilization and development of  the natural resource of                                                                
     the state.                                                                                                             
                                                                                                                                
CHAIR  OLSON  removed his  objection.    There being  no  further                                                               
objection, Conceptual Amendment 8 was adopted.                                                                                  
                                                                                                                                
3:43:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON  made  a  motion to  adopt  Amendment  9,                                                               
labeled, 27-LS0252\G.11, Bullock, 4/12/11, which read:                                                                          
                                                                                                                                
     Page 1, line 6, through page 2, line 29:                                                                                   
          Delete all material.                                                                                                  
                                                                                                                                
     Page 2, line 30:                                                                                                           
          Delete "Sec. 2"                                                                                                     
          Insert "Section 1"                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 8, line 12:                                                                                                           
          Delete "July 1, 2023 [JULY 1, 2013]"                                                                              
          Insert "July 1, 2012 [2013]"                                                                                      
                                                                                                                                
     Page 8, following line 20:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "*  Sec. 22.  The  uncodified law  of  the State  of                                                                
     Alaska is amended by adding a new section to read:                                                                         
          AUDIT OF PROGRAM. The legislative audit division                                                                      
     shall conduct  an audit of  the Alaska  film production                                                                    
     incentive program  (AS 44.33.231 - 44.33.239)  and make                                                                    
     the  audit available  on the  first day  of the  Second                                                                    
     Regular  Session  of  the Twenty-Seventh  Alaska  State                                                                    
     Legislature  in   2012.  The  audit  must   include  an                                                                    
     itemized  accounting of  all  approved and  disapproved                                                                    
     expenditures   that  were   submitted   for  the   film                                                                    
     production incentive tax credit."                                                                                          
                                                                                                                                
     Page 8, line 24:                                                                                                           
          Delete "2023"                                                                                                     
          Insert "2012"                                                                                                     
                                                                                                                                
     Page 8, line 30:                                                                                                           
          Delete "2024"                                                                                                     
          Insert "2018"                                                                                                     
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
REPRESENTATIVE JOHNSON explained that  Amendment 9 would create a                                                               
one year sunset  of the Alaska film  production incentive program                                                               
until the legislative  audit program is conducted.   He expressed                                                               
concern  over  extending  the Alaska  film  production  incentive                                                               
program for  an additional ten  years since this program  has not                                                               
yet been audited.   He further expressed concern  about the state                                                               
"writing  checks"  to  companies  that are  not  licensed  to  do                                                               
business in  the SOA, which  has happened.   He said, "If  we are                                                               
not watching it any closer  than that, it raises great concerns."                                                               
He reiterated  his concern  over extending  this program  for ten                                                               
years, without an  audit or an accelerated audit  of the program.                                                               
He  would  like to  see  an  audit  prior  to the  program  being                                                               
extended for ten years, he said.                                                                                                
                                                                                                                                
3:44:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MILLER  asked whether the Division  of Legislative                                                               
Budget  and Audit  has the  capability to  conduct an  audit that                                                               
quickly.                                                                                                                        
                                                                                                                                
CHAIR  OLSON  recalled discussing  this  with  Pat Davidson,  the                                                               
Legislative  Auditor.   He pointed  out  that any  member of  the                                                               
legislature  can   request  the  Legislative  Budget   and  Audit                                                               
Committee (LB&A) conduct  an audit.  He offered his  belief if an                                                               
audit was requested and the  division could not conduct the audit                                                               
that  it  could   be  contracted  out  and   completed  within  a                                                               
reasonable time frame.                                                                                                          
                                                                                                                                
3:44:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON  expressed his  concern, with  any measure                                                               
that is  rushed through the  process, noting these  bills require                                                               
additional scrutiny.  He related  that the Alaska film production                                                               
incentive  program would  benefit from  substantial funds.     He                                                               
recalled that New  Mexico has experienced returns of  $.12 on the                                                               
dollar.   He referred to a  study he obtained that  questions the                                                               
validity of the film production  tax credit programs, noting many                                                               
states  are revisiting  their programs.   He  further noted  that                                                               
cases involving  fraud in  Iowa have  involved prosecutions.   He                                                               
maintained his concern to have  this bill move so quickly through                                                               
the  process.   He  related  that  Amendment  9 would  allow  the                                                               
legislature  to  revisit the  film  production  tax credits  next                                                               
year.   He said he thought  it was prudent to  review the program                                                               
prior to  spending $100 million.   He pointed out that  the state                                                               
has not yet expended the initial  $100 million.  He remarked that                                                               
SB 23  would double the  state's appropriation for  this program.                                                               
This  bill would  also  extend  the program  prior  to the  first                                                               
audit.  He  related that it is  harder to "put the  genie back in                                                               
the bottle than it is to let it out in the first place."                                                                        
                                                                                                                                
3:46:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HOLMES asked  for clarification  on Amendment  9.                                                               
She offered her belief that  Amendment 9 would delete the current                                                               
audit requirements and replaces it  with an immediate audit to be                                                               
completed by January  2012.  It would also sunset  the program in                                                               
one year.                                                                                                                       
                                                                                                                                
CHAIR OLSON related that it would effectively "gut the bill."                                                                   
                                                                                                                                
REPRESENTATIVE  JOHNSON  argued  that  it  would  not  take  away                                                               
everything in the  bill, only the ability to  provide tax credits                                                               
without an audit.  He  stressed his seriousness to scrutinize the                                                               
Alaska  film production  incentive program.   He  highlighted his                                                               
substantial concern that  the SOA would pay over $1  million to a                                                               
company not licensed to do business in the state.  He said:                                                                     
                                                                                                                                
     Red flags,  red lights go  off.   It causes me  a great                                                                    
     amount  of concern.   This  is something  I will  watch                                                                    
     very,  very closely.   I  will  request an  audit.   It                                                                    
     happened very quickly.  I  do recognize that it does do                                                                    
     serious  damage to  the  bill.   Having  said that  and                                                                    
     expressed my concerns and put  it on the record, I will                                                                    
     withdraw Amendment 9.                                                                                                      
                                                                                                                                
REPRESENTATIVE JOHNSON withdrew Amendment 9.                                                                                    
                                                                                                                                
CHAIR OLSON  pointed out  a letter in  members' packets  from the                                                               
Pat Davidson,  Legislative Auditor  which outlines  those issues.                                                               
He reiterated that Amendment 9 has been withdrawn.                                                                              
                                                                                                                                
3:48:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HOLMES  moved  to  report  Version  G,  HCS  CSSB                                                               
23(L&C), labeled  27-LS0252\G, Bullock, 4/10/11, as  amended, out                                                               
of   committee   with    individual   recommendations   and   the                                                               
accompanying fiscal notes.                                                                                                      
                                                                                                                                
3:49:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CHENAULT objected.   He  spoke to  his objection.                                                               
He recalled  previous concern about  the length of time  that the                                                               
film  production tax  credits  would apply.    He also  expressed                                                               
concern about  the way the  credits are applied and  who receives                                                               
the  tax  credits.    He  highlighted  that  he  likes  the  film                                                               
industry, noting his son graduated  from a film school.  However,                                                               
he expressed concern about the tax  credits and the ten year time                                                               
frame,  yet the  legislature  does  not know  what  the level  of                                                               
revenues will be in ten years.   He maintained his concern on the                                                               
amount of  the film production tax  credits and the way  in which                                                               
the  Alaska film  production incentive  program is  administered.                                                               
He concluded that  he would not object to moving  the bill out of                                                               
committee, but he hoped the  legislature would review all issues,                                                               
including that  the revenue stream  in the state is  derived from                                                               
the finite  resources of the state.   He pointed out  the state's                                                               
primary resource  is on the  decline, yet the  legislature spends                                                               
hours in  committee to  consider ways to  "give our  money away."                                                               
He  contended  that  the  legislature   has  not  had  meaningful                                                               
conversations  in  terms  of  the health  of  the  industry  that                                                               
provides  the  money  to  give away  these  film  production  tax                                                               
credits.  As  the legislature continues to provide  more and more                                                               
money to agencies  and opportunities, it is  important to realize                                                               
the source of the state's revenue.   He concluded by not ensuring                                                               
the  healthy resource  development  in the  state,  that "we  are                                                               
setting ourselves  up for a fall."   He removed his  objection to                                                               
moving the bill out of committee.   He added his belief committee                                                               
members  and all  Alaskans need  to  understand the  state has  a                                                               
revenue stream  that is  continuing to decline.   The  only thing                                                               
masking the problem that the SOA  does not have compared to other                                                               
states in the U.S. is the high  price of oil.  He reiterated that                                                               
he removed his objection.                                                                                                       
                                                                                                                                
3:52:04 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON recapped  the work the committee has taken  on SB 23.                                                               
He explained that  when SB 23 first came before  the committee it                                                               
was lacking  any audit trigger  or a sunset  date.  Now  the bill                                                               
contains  three LB&A  audit provisions.   He  offered his  belief                                                               
that the bill has been significantly tightened up.                                                                              
                                                                                                                                
3:52:39 PM                                                                                                                    
                                                                                                                                
There  being  no further  objection,  the  HCS CSSB  23(L&C)  was                                                               
reported from the House Labor and Commerce Standing Committee.                                                                  
                                                                                                                                
3:52:51 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
3:52 p.m.                                                                                                                       

Document Name Date/Time Subjects
SB23 Draft Proposed Conceptual Amendment Olson.1.pdf HL&C 4/13/2011 3:15:00 PM
SB 23
SB23 Draft Proposed Conceptual Amendment Saddler.1.pdf HL&C 4/13/2011 3:15:00 PM
SB 23
SB23 Draft Proposed Conceptual Amendment Saddler.2.pdf HL&C 4/13/2011 3:15:00 PM
SB 23
SB23 Draft Proposed Conceptual Amendment Saddler.3.pdf HL&C 4/13/2011 3:15:00 PM
SB 23
SB23 Letter - DOR to Rep Olson 4-12-11.pdf HL&C 4/13/2011 3:15:00 PM
SB 23
SB23 Draft Proposed Amendment G.11.pdf HL&C 4/13/2011 3:15:00 PM
SB 23
SB23 Opposing Documents - Email Samuel Pelant 4-13-2011.pdf HL&C 4/13/2011 3:15:00 PM
SB 23
SB23 Supporting Documents - AK Education Tax Credit Information.pdf HL&C 4/13/2011 3:15:00 PM
SB 23