Legislature(2017 - 2018)BARNES 124

04/01/2017 01:00 PM LABOR & COMMERCE

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Moved CSHB 103(L&C) Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         April 1, 2017                                                                                          
                           3:03 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Sam Kito, Chair                                                                                                  
Representative Adam Wool, Vice Chair                                                                                            
Representative Andy Josephson                                                                                                   
Representative Chris Birch                                                                                                      
Representative Gary Knopp                                                                                                       
Representative Colleen Sullivan-Leonard                                                                                         
MEMBERS ABSENT                                                                                                                
Representative Louise Stutes                                                                                                    
Representative Mike Chenault (alternate)                                                                                        
Representative Bryce Edgmon (alternate)                                                                                         
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 103                                                                                                              
"An Act relating to the practice of optometry."                                                                                 
     - MOVED CSHB 103(L&C) OUT OF COMMITTEE                                                                                     
HOUSE BILL NO. 124                                                                                                              
"An   Act    relating   to   corporations,    including   benefit                                                               
corporations, and other entities;  and providing for an effective                                                               
     - HEARD & HELD                                                                                                             
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 36                                                                                        
"An  Act bearing  the short  title of  the 'Fair  Contribution by                                                               
High  Profit Businesses  Act'; requiring  certain persons  in the                                                               
business  of oil  and  gas production  or  transportation to  pay                                                               
income  tax;  establishing  a  tax   on  the  income  of  a  sole                                                               
proprietorship, partnership,  limited liability company, or  an S                                                               
corporation;   relating   to   exemptions   from   the   tax   on                                                               
corporations; and providing for an effective date."                                                                             
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 103                                                                                                                  
SHORT TITLE: OPTOMETRY & OPTOMETRISTS                                                                                           
SPONSOR(s): REPRESENTATIVE(s) SPOHNHOLZ                                                                                         
02/03/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/03/17       (H)       HSS, L&C                                                                                               
03/14/17       (H)       HSS AT 3:00 PM CAPITOL 106                                                                             
03/14/17       (H)       Heard & Held                                                                                           
03/14/17       (H)       MINUTE(HSS)                                                                                            
03/16/17       (H)       HSS AT 3:00 PM CAPITOL 106                                                                             
03/16/17       (H)       Scheduled but Not Heard                                                                                
03/18/17       (H)       HSS AT 3:00 PM CAPITOL 106                                                                             
03/18/17       (H)       Moved CSHB 103(HSS) Out of Committee                                                                   
03/18/17       (H)       MINUTE(HSS)                                                                                            
03/22/17       (H)       HSS RPT CS(HSS) NT 5DP 1NR                                                                             
03/22/17       (H)       DP: JOHNSTON, TARR, SULLIVAN-LEONARD,                                                                  
                         KITO, SPOHNHOLZ                                                                                        
03/22/17       (H)       NR: EASTMAN                                                                                            
03/27/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/27/17       (H)       Heard & Held                                                                                           
03/27/17       (H)       MINUTE(L&C)                                                                                            
03/29/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/29/17       (H)       Heard & Held                                                                                           
03/29/17       (H)       MINUTE(L&C)                                                                                            
04/01/17       (H)       L&C AT 1:00 PM BARNES 124                                                                              
BILL: HB 124                                                                                                                  
SHORT TITLE: BENEFIT CORPORATIONS                                                                                               
SPONSOR(s): REPRESENTATIVE(s) KITO                                                                                              
02/15/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/15/17       (H)       L&C, FIN                                                                                               
04/01/17       (H)       L&C AT 1:00 PM BARNES 124                                                                              
BILL: HB  36                                                                                                                  
SHORT TITLE: TAX: INCOME FROM NON C CORP ENTITIES                                                                               
SPONSOR(s): REPRESENTATIVE(s) GARA                                                                                              
01/18/17       (H)       PREFILE RELEASED 1/13/17                                                                               
01/18/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/18/17       (H)       L&C, FIN                                                                                               
02/27/17       (H)       SPONSOR SUBSTITUTE INTRODUCED                                                                          
02/27/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/27/17       (H)       L&C, FIN                                                                                               
04/01/17       (H)       L&C AT 1:00 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
REPRESENTATIVE IVY SPOHNHOLZ                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  As the sponsor re-introduced HB 103.                                                                     
BIANCA CARPENETI, Staff                                                                                                         
Representative Sam Kito                                                                                                         
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  On behalf of Representative Kito, sponsor,                                                               
provided an overview of HB 124.                                                                                                 
STEPHEN TRIMBLE, Founder and Chief Executive Officer (CEO)                                                                      
Arctic Solar Ventures                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 124.                                                                          
REPRESENTATIVE LES GARA                                                                                                         
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  As the sponsor introduced SSHB 36 via a                                                                  
PowerPoint presentation entitled, "HB 36:  Fair Contribution by                                                                 
High Profit Businesses Act."                                                                                                    
JOHN LETOURNEAU, Certified Public Accountant                                                                                    
Thomas, Head & Greisen, PC                                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  As an invited witness answered questions                                                                 
related to SSHB 36.                                                                                                             
LAURA CHARTIER, Staff                                                                                                           
Representative Les Gara                                                                                                         
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions related to SSHB 36.                                                                   
MATTHEW GARDNER, Senior Fellow                                                                                                  
Institute on Taxation and Economic Policy                                                                                       
Washington, DC                                                                                                                  
POSITION STATEMENT:  Provided invited testimony on SSHB 36.                                                                   
ACTION NARRATIVE                                                                                                              
3:03:22 PM                                                                                                                    
CHAIR  SAM KITO  called  the House  Labor  and Commerce  Standing                                                             
Committee meeting  to order at  3:03 p.m.   Representatives Kito,                                                               
Sullivan-Leonard,  Knopp, Birch,  and Josephson  were present  at                                                               
the call  to order.   Representative Wool arrived as  the meeting                                                               
was in progress.                                                                                                                
                 HB 103-OPTOMETRY & OPTOMETRISTS                                                                            
3:04:06 PM                                                                                                                    
CHAIR KITO  announced that the  first order of business  would be                                                               
HOUSE  BILL  NO.  103,  "An  Act  relating  to  the  practice  of                                                               
optometry; and  providing for  an effective  date."   [Before the                                                             
committee was CSHB 103(HSS).]                                                                                                 
3:04:34 PM                                                                                                                    
REPRESENTATIVE IVY  SPOHNHOLZ, Alaska State  Legislature, Juneau,                                                               
Alaska,  as the  sponsor, re-introduced  HB 103.   She  explained                                                               
that HB  103 would update  the Board of [Examiners  in] Optometry                                                               
to be  more in line with  the practices that are  consistent with                                                               
those other  boards overseeing health professions  throughout the                                                               
state  of Alaska.    It would  give the  board  the authority  to                                                               
regulate  its   own  practice  and   would  move   management  of                                                               
optometrists away from the legislature and into the board.                                                                      
3:05:45 PM                                                                                                                    
CHAIR  KITO moved  to adopt  Amendment 1,  labeled 30-LS0459\J.5,                                                               
Bruce, 3/28/17, which read:                                                                                                     
     Page 2, lines 6 - 7:                                                                                                       
          Delete "standards for the practice of optometry                                                                   
     as provided"                                                                                                           
     Insert "whether optometry practice procedures or                                                                       
     policies comply with acceptable standards of the                                                                       
     practice of optometry, as provided"                                                                                    
3:05:57 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
3:06:34 PM                                                                                                                    
CHAIR KITO again moved to adopt Amendment 1.                                                                                    
3:07:04 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON said  he  is unable  to  tell what  the                                                               
[proposed] change is.                                                                                                           
REPRESENTATIVE SPOHNHOLZ explained Amendment  1 would tighten the                                                               
definition  of  standard   of  practice  in  a   manner  that  is                                                               
consistent with the  exact language that is used by  the Board of                                                               
Nursing.  She said the amendment  is at the recommendation of the                                                               
Department of Law  to ensure that the definition  of the standard                                                               
of  practice  is clearly  defined  as  complying with  acceptable                                                               
standards of practice of optometry.   According to the Department                                                               
of Law, she added, this  would tighten the definition of standard                                                               
of practice in a way that makes it more useful.                                                                                 
3:07:59 PM                                                                                                                    
There being no objection, Amendment 1 was adopted.                                                                              
3:08:04 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
3:08:42 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON moved to  adopt Amendment 2, labeled 30-                                                               
LS0459\J.1, Bruce, 3/27/17, which read:                                                                                         
     Page 1, line 9, following "disease":                                                                                   
     Insert "as provided under AS 08.72.272"                                                                                
CHAIR KITO objected for purposes of discussion.                                                                                 
3:08:52 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON explained Amendment  2.  He related that                                                               
in oral testimony and  written comments, several ophthalmologists                                                               
stated  that they  don't prescribe  anything  more powerful  than                                                               
hydrocodone, which, to  his knowledge, was not  controverted.  He                                                               
further related  that these ophthalmologists stated  that eyes do                                                               
not respond  well to pain medication.   He said that  as he reads                                                               
the bill, it would provide  that optometrists could prescribe any                                                               
[pharmaceutical] ever invented.                                                                                                 
REPRESENTATIVE JOSEPHSON  further explained  that Amendment  2 is                                                               
consistent  with  a  forthcoming  amendment  which  would  repeal                                                               
language  that  would  give optometrists  the  authority  through                                                               
their board to prescribe anything they  want to.  Amendment 2, he                                                               
stated, would return to existing  language in Alaska Statute (AS)                                                               
08.72.272.  He  said it would be hard to  say optometrists didn't                                                               
make  certain  arguments about  the  need  to oversee  their  own                                                               
practice.  However, he continued,  they didn't make any arguments                                                               
in testimony  or in writing about  why they needed to  expand the                                                               
kinds of prescriptions they make.   Given the crisis the state is                                                               
confronted with,  he said he  doesn't know why that  expansion is                                                               
necessary, which is why he is offering Amendment 2.                                                                             
3:11:13 PM                                                                                                                    
REPRESENTATIVE SULLIVAN-LEONARD inquired as  to what AS 08.72.272                                                               
describes in detail.                                                                                                            
REPRESENTATIVE  JOSEPHSON replied  that Amendment  2 would  bring                                                               
this  back  to current  law  that  exists under  [AS  08.72.272],                                                               
Pharmaceutical  Agents, subsection  (a), which  says optometrists                                                               
can prescribe  for assorted things.   Amendment 2, he  said, says                                                               
the  status  quo will  prevail  and  optometrists will  have  the                                                               
authority that they currently have to prescribe.                                                                                
3:12:11 PM                                                                                                                    
REPRESENTATIVE SPOHNHOLZ rebutted that part  of the intent of the                                                               
legislation  was to  simplify and  to streamline  the legislation                                                               
authorizing  the [Board  of Examiners  in  Optometry] to  oversee                                                               
their practice.   She related  that [the board] has  testified it                                                               
will continue to work with  the four-day limitation on the supply                                                               
of opioids, for  example.  Also, she  continued, other regulation                                                               
is being put  into practice regarding the  opioid epidemic, which                                                               
she strongly feels the legislature  needs to address by advancing                                                               
HB 159 for  that purpose.  She said she  understands the maker of                                                               
the amendment's  concerns, but  the statutory  language currently                                                               
in place  is outdated and  leaves [legislators] in a  position of                                                               
overseeing specific kinds of  medications for which [legislators]                                                               
don't  have the  expertise  to  be managing.    Therefore, it  is                                                               
better  to have  this authority  placed at  the board  level, she                                                               
3:13:19 PM                                                                                                                    
REPRESENTATIVE BIRCH spoke against Amendment  2.  He recalled the                                                               
committee  hearing  testimony  about what  an  optometrist  could                                                               
prescribe  and  that  nurses  could  not  prescribe  [narcotics].                                                               
However,  he continued,  he was  informed by  a friend  who is  a                                                               
nurse that  nurses can prescribe  narcotics in Alaska,  have done                                                               
so for  decades, and that  nurses need the same  Drug Enforcement                                                               
Administration  (DEA)  authority  as  a physician  or  any  other                                                               
clinician.    Therefore,  he  said,  he  is  not  troubled  about                                                               
providing the latitude proposed [in HB 103].                                                                                    
3:14:01 PM                                                                                                                    
REPRESENTATIVE  KNOPP asked  whether Section  4, page  2, of  the                                                               
bill does what the maker of the amendment is trying to do.                                                                      
REPRESENTATIVE JOSEPHSON  responded, "This brings us  back to the                                                               
overall."   What he means,  he continued,  is it makes  the board                                                               
the ultimate  decider about what  those prescriptions  should be,                                                               
and he  is not comfortable with  that.  The people  who testified                                                               
have spent  more time than  anyone else  working on eye  care and                                                               
they said  they never use  more than hydrocodone.   Under current                                                               
law, he continued, "optometrists can  do that very thing, but [HB                                                               
103] would lift that and say,  'prescribe what you want,' if that                                                               
[is]  what  the board  says,  'prescribe  what  you will.'"    He                                                               
further noted  it means that  the attorney general would  have to                                                               
look  at this  language  and determine  whether  the board  acted                                                               
consistent with  the language [of HB  103 in section 4,  page 2],                                                               
and he  would conclude that as  long as they establish  the what,                                                               
where, and  why of  what they  were doing,  maybe they  would say                                                               
yes.  "But," he added, "that is  our point   we'd make it valid                                                                 
and ? there's that argument  that the attorney general would have                                                               
to give them that authority."                                                                                                   
3:16:00 PM                                                                                                                    
REPRESENTATIVE WOOL  offered his understanding  that optometrists                                                               
can already prescribe certain controlled  substances.  He said he                                                               
doesn't  see  that as  being  a  problem in  the  past;  it is  a                                                               
responsibility that [optometrists] have handled.                                                                                
3:16:30 PM                                                                                                                    
CHAIR KITO maintained his objection to Amendment 2.                                                                             
A roll call  vote was taken.  Representatives  Josephson voted in                                                               
favor of  Amendment 2.  Representatives  Knopp, Sullivan-Leonard,                                                               
Wool, Birch, and  Kito voted against it.   Therefore, Amendment 2                                                               
failed by a vote of 1-5.                                                                                                        
3:17:10 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON moved to  adopt Amendment 3, labeled 30-                                                               
LS0459\J.2, Bruce, 3/27/17, which read:                                                                                         
     Page 2, lines 20 - 24:                                                                                                     
          Delete all material.                                                                                                  
     Renumber the following bill sections accordingly.                                                                          
3:17:12 PM                                                                                                                    
CHAIR KITO objected.                                                                                                            
REPRESENTATIVE JOSEPHSON  explained Amendment 3.   He said  it is                                                               
the same  argument as Amendment 2,  and that he is  not convinced                                                               
the board  has the  training, education,  and experience  to make                                                               
decisions about  pharmaceutical agents in  every case.   While he                                                               
is comfortable in some cases,  [the bill proposes] to expand this                                                               
in a way that is, in  his view, far beyond [the board's] training                                                               
and therefore he is offering Amendment 3.                                                                                       
REPRESENTATIVE  SPOHNHOLZ  opposed Amendment  3.    She said  her                                                               
comments on the  amendment are much the same as  for Amendment 2.                                                               
The  language  in  Section  4,  she stated,  is  clear  that  the                                                               
pharmaceutical  agent  prescribed  needs to  be  consistent  with                                                               
their standards of practice.   Like optometrists, there are other                                                               
professions  that  have the  authority  to  practice within  this                                                               
scope that have not gone to  medical school and therefore are not                                                               
under the [State Medical Board].                                                                                                
REPRESENTATIVE BIRCH  said he has  similar concerns as  he voiced                                                               
before in that if the board  is recognized as having the capacity                                                               
and  the  ability  to  make  those  recommendations,  it  is  not                                                               
dissimilar from other clinicians in that line of work.                                                                          
3:19:00 PM                                                                                                                    
CHAIR KITO maintained his objection to Amendment 3.                                                                             
A roll  call vote was  taken.  Representative Josephson  voted in                                                               
favor of  Amendment 3.  Representatives  Birch, Sullivan-Leonard,                                                               
Knopp, Wool, and  Kito voted against it.   Therefore, Amendment 3                                                               
failed to be adopted by a vote of 1-5.                                                                                          
3:19:30 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON moved to  adopt Amendment 4, labeled 30-                                                               
LS0459\J.3, Bruce, 3/27/17, which read:                                                                                         
     Page 2, following line 24:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec.  5. AS 08.72.273  is repealed  and reenacted                                                                  
     to read:                                                                                                                   
          Sec. 08.72.273. Non-invasive procedures. Except                                                                     
     as  provided in  AS 08.72.278, a  licensee may  perform                                                                    
     non-invasive procedures including                                                                                          
               (1)  removing superficial bodies from the                                                                        
     eye and its appendages;                                                                                                    
              (2)  epilating misaligned eyelashes;                                                                              
               (3)  placing punctal or lacrimal plugs;                                                                          
               (4)  diagnosing dilation and irrigation of                                                                       
     the lacrimal system;                                                                                                       
               (5)  performing orthokeratology;                                                                                 
               (6)  prescribing and fitting contact lenses                                                                      
     with the purpose of altering refractive error;                                                                             
               (7)  using diagnostic instruments that use                                                                       
     laser or ultrasound technology; and                                                                                        
               (8)  other similar procedures within the                                                                         
     scope and practice of optometry."                                                                                          
     Renumber the following bill sections accordingly.                                                                          
     Page 2, line 26, following "practice.":                                                                                  
          Insert "(a)"                                                                                                          
     Page 2, following line 29:                                                                                                 
     Insert a new subsection to read:                                                                                           
     "(b)   A licensee  may not perform  ophthalmic surgery.                                                                    
     In  this  subsection,  "ophthalmic  surgery"  means  an                                                                    
     invasive procedure where human  tissue is cut, ablated,                                                                    
     or otherwise  penetrated by  incision, laser,  or other                                                                    
     means  to treat  diseases of  the human  eye, alter  or                                                                    
     correct refractive error, or  alter or enhance cosmetic                                                                    
     appearance; "ophthalmic  surgery" does not  include the                                                                    
     procedures described under AS 08.72.273."                                                                                  
CHAIR KITO objected.                                                                                                            
3:19:42 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  described  Amendment  4  as  critical.                                                               
Qualifying  that he  is speaking  from memory,  he said  no fewer                                                               
than 20 optometrists  wrote him stating that HB 103  is not about                                                               
surgery,  but  rather about  controlling  their  own destiny  and                                                               
practice.   He explained Amendment 4  provides eight non-invasive                                                               
items that  can be done  by optometrists with  adequate training.                                                               
These would  be eight things  in the law that  optometrists don't                                                               
expressly have  now, he continued,  which would seem like  a good                                                               
thing if he were an optometrist.                                                                                                
REPRESENTATIVE  JOSEPHSON said  Amendment  4  also clarifies  the                                                               
opinion of optometrists.   He recounted that  the committee heard                                                               
from a  doctor of optometry  in Juneau who  wanted to do  a large                                                               
number  of  surgeries.    There   is  some  confusion  about  the                                                               
motivation for the  optometrists, he continued.   In the original                                                               
bill,  optometrists wanted  to do  ophthalmic  surgery and  while                                                               
that is  not before the  committee, it  is important to  ask what                                                               
the motivation  or intent is.   He  said page 2,  subsection (b),                                                               
comes from  Washington state law  and delineates the  things that                                                               
optometrists are not  trained to do.  The  difference in training                                                               
is enormous  and that is why  the delineation should be  made, he                                                               
stated.  The [State Medical  Board] says an ophthalmologist needs                                                               
four  years from  an  accredited medical  school;  needs to  pass                                                               
steps  one, two,  and three  of general  medical boards;  needs a                                                               
year  of  internship  consisting  of  intensive  care,  emergency                                                               
medicine, surgery,  internal medicine, often in  80-100 hour work                                                               
weeks,  including  the  performance   of  thousands  of  surgical                                                               
procedures; needs a three-year  ophthalmic residency, which would                                                               
include laser  and ophthalmic surgeries under  close supervision;                                                               
needs  one to  two  years of  surgical  fellowship consisting  of                                                               
intensive  education;  and  that the  total  education  comprises                                                               
22,000 hours of work and  training.  [Ophthalmologists] also need                                                               
to complete an American Board  of Ophthalmology exam on a 10-year                                                               
renewable cycle;  need to have  mandatory 60 hours of  class, one                                                               
continuing  medical  education;  an annual  review;  and  license                                                               
renewal by the [State Medical Board].                                                                                           
REPRESENTATIVE JOSEPHSON said he feels  that if the state doesn't                                                               
tightly  regulate surgical  eye care  there's really  no need  in                                                               
regulating  anything with  great  vigor.   While  that may  sound                                                               
alarmist,  he   continued,  he  feels   that  this   subject,  in                                                               
particular, needs  that sort of  scrutiny, and Amendment  4 would                                                               
essentially  mirror current  Washington state  practice.   If the                                                               
bill passes,  he pointed out, the  current law will say  that the                                                               
only  type of  invasive  surgery an  optometrist  can perform  is                                                               
removal  of a  foreign body  from the  eye, yet  the rest  of the                                                               
bill, CSHB 103(HSS), opens the door  for much more.  So, he said,                                                               
the bill already creates some  odd complications and he therefore                                                               
asks for support of Amendment 4.                                                                                                
3:24:05 PM                                                                                                                    
REPRESENTATIVE KNOPP offered  his appreciation for Representative                                                               
Josephson's  concerns,  but  said  he has  always  advocated  for                                                               
allowing the  board to regulate  its profession within  the scope                                                               
of the  license, education,  training, and  experience -  that is                                                               
the key point.   He said Amendment 4 would gut  the intent of the                                                               
bill and therefore he is against  it.  According to the sectional                                                               
analysis, he  continued, Section  5 provides  that the  board may                                                               
not authorize  any procedure beyond  the scope of  the licensee's                                                               
education and  experience.  The  whole intent  of the bill  is to                                                               
allow optometrists to practice their  business in the manner that                                                               
they went to school  and were taught and trained to  do.  He said                                                               
he  cannot  see  them  doing  anything  outside  of  that  scope;                                                               
therefore, he is  speaking against Amendment 4 and  in support of                                                               
the bill.                                                                                                                       
3:25:18 PM                                                                                                                    
REPRESENTATIVE SULLIVAN-LEONARD  recalled discussions  within the                                                               
Health  &  Social  Services   Standing  Committee  regarding  the                                                               
formation of the board  and the work of the board.   She said her                                                               
hope  is   that  additional  information   could  come   back  to                                                               
legislators in a year or two  that provides more detail about the                                                               
type of non-invasive procedures that  optometrists do.  She asked                                                               
whether this  is something the  sponsor thinks would  work better                                                               
than to try to amend the bill with this concept now.                                                                            
REPRESENTATIVE SPOHNHOLZ  answered that, if the  bill passes, the                                                               
legislature's  role   is  to  ensure   that  the  law   is  being                                                               
implemented in  ways that the  legislature thinks  are consistent                                                               
with  its original  intent.    She added  that  having the  board                                                               
provide  presentations  on the  evolution  of  the board  process                                                               
seems like a reasonable thing to  do.  Regarding the amendment as                                                               
a  whole,  she  said  she   agrees  with  Representative  Knopp's                                                               
characterization that  it takes away the  guts of the bill.   The                                                               
intent  of  the bill  is  to  delegate  the authority  to  manage                                                               
optometrists  and the  practice  of optometry  to  the [Board  of                                                               
Examiners in Optometry].                                                                                                        
REPRESENTATIVE  SPOHNHOLZ added  that she  doesn't disagree  with                                                               
Representative  Josephson's  characterization  of  the  extensive                                                               
education of  ophthalmologists who  are trained surgeons.   Using                                                               
an analogy, she noted that  the distinction between dentistry and                                                               
oral surgeons  is fairly similar    the amount of  education that                                                               
dentists receive  is fairly  similar to  the amount  of education                                                               
that optometrists receive.   Dentists oversee their  own scope of                                                               
practice through their board and  there are not huge problems and                                                               
conflicts between  oral surgeons  and dentists.   The  problem is                                                               
not  the distinction  between  optometry  and ophthalmology,  she                                                               
continued,  but rather  that the  legislature  is overseeing  it.                                                               
Taking politics  out of good  governance in health  programs, and                                                               
health practice in particular, is  the way get the best evidence-                                                               
based efforts and  management and that is why HB  103 proposes to                                                               
delegate that  authority as described specifically  to the [Board                                                               
of Examiners in Optometry].                                                                                                     
3:28:30 PM                                                                                                                    
REPRESENTATIVE WOOL stated he is  not able to list the procedures                                                               
that would be  performable by an optometrist and  doesn't want to                                                               
limit an optometrist's  practice just to that.  He  said the bill                                                               
would allow  the [Board  of Examiners in  Optometry] to  say what                                                               
optometrists  can  and  cannot  do  within  the  scope  of  their                                                               
training and practice.                                                                                                          
REPRESENTATIVE WOOL  related that  over the  last week  he called                                                               
some optometrists in his home  community who hadn't called in and                                                               
were not following this in  committee and asked them whether they                                                               
wanted to  do surgery.  He  said their reply was  absolutely not.                                                               
One  optometrist, he  continued, told  him there  is a  procedure                                                               
that optometrists  are trained to  do, but  it cannot be  done in                                                               
Alaska and will  not be something optometrists will do  if HB 103                                                               
passes.   While  he respects  the argument  for 20,000  hours, he                                                               
said every medical doctor goes  through medical school whether to                                                               
be an ophthalmologist, heart surgeon,  or podiatrist, and much of                                                               
those 20,000  hours is studying  cardiology and cancer  and other                                                               
things, and  all those  hours are not  applicable exactly  to the                                                               
eye.   Optometrists spend  a lot  of hours  studying specifically                                                               
the eye, he continued, and they do  not want to do surgery out of                                                               
this bill; they just want to have control of their professions.                                                                 
3:30:47 PM                                                                                                                    
CHAIR KITO maintained his objection to Amendment 4.                                                                             
A roll  call vote was  taken.  Representative Josephson  voted in                                                               
favor  of  Amendment  4.   Representatives  Wool,  Birch,  Knopp,                                                               
Sullivan-Leonard,  and   Kito  voted  against  it.     Therefore,                                                               
Amendment 4 failed to be adopted by a vote of 1-5.                                                                              
3:31:18 PM                                                                                                                    
CHAIR KITO announced that HB 103,  as amended, was now before the                                                               
3:31:31 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON offered  comments  for the  legislative                                                               
record.   He recalled the  sponsor and  her aide as  both stating                                                               
that the bill does not touch AS  08.72.273.  The only way to read                                                               
that, he said, is to derive  the conclusion that the only type of                                                               
invasive surgery  that would be  allowed if this bill  became law                                                               
is removal  of a  foreign body.   This section  for removal  of a                                                               
foreign  body is  not intended  to permit  a licensee  to perform                                                               
invasive   surgery.     He   noted  that   Section   72  of   the                                                               
aforementioned  statute  covers  the entire  optometrists'  code.                                                               
So, he  continued, it  is not  just about  foreign bodies,  it is                                                               
about  all types  of  surgeries.   He  stated  that his  previous                                                               
amendment would  have helped optometrists by  saying that without                                                               
question those eight  things can be done, but now  there could be                                                               
a debate about that.                                                                                                            
REPRESENTATIVE  JOSEPHSON added  that  this reminds  him in  some                                                               
ways about his response to SB  91, which he is mentioning because                                                               
he tends  to be cautious  about things  that can hurt  people and                                                               
things that  can hurt  the natural environment.   He  pointed out                                                               
that  the concerns  of the  ophthalmologists are  almost entirely                                                               
not economic.   Ophthalmologists have  spent their  lives working                                                               
in  eye  care  and  care  about  the  standard  of  practice,  he                                                               
continued, and while that is  not to say that optometrists don't,                                                               
the way  the bill is  written optometrists  can do any  manner of                                                               
things.   He  recollected that  in a  March 14  hearing before  a                                                               
different committee,  [Assistant Attorney General  Harriet] Milks                                                               
had  stated that  the  attorney general  would  not intervene  on                                                               
matters of  policy or  comment on  how the  optometrists regulate                                                               
themselves;  if they  are  promulgating  regulations within  this                                                               
bill,  they can  do it.   In  some respects,  this is  just being                                                               
moved to  a different  venue, he  said, and  people are  going to                                                               
continue reading about this in the newspaper.                                                                                   
3:34:23 PM                                                                                                                    
CHAIR  KITO  drew attention  to  Section  5  of the  bill,  which                                                               
states,  "A licensee  may perform  the services  of optometry  as                                                               
defined  in AS  08.72.300 only  if  the services  are within  the                                                               
scope of  the licensee's education,  training, and  experience as                                                               
established by regulations adopted by the  board."  He said he is                                                               
familiar  with this  type  of  thing because  he  is an  engineer                                                               
regulated under the [State Board  of Registration for Architects,                                                               
Engineers,  & Land  Surveyors].   As  an engineer,  he noted,  he                                                               
could theoretically  design a bridge, but  without any experience                                                               
designing a  bridge that bridge  could collapse and  hurt people.                                                               
With his  experience, he  continued, he  could design  a roadway,                                                               
breakwater, sewer,  or outfall, all of  which he has done  and in                                                               
which he has education, training, and  experience.  He said it is                                                               
his responsibility  within that  license to perform  those duties                                                               
that  he has  the training  for  and it  is  up to  him with  the                                                               
knowledge of  his education to  know when  and how to  apply that                                                               
experience.   Optometrists have much more  education and training                                                               
in their field  than he does in engineering, he  stated, and they                                                               
should be allowed to identify what  the scope of practice is that                                                               
is  consistent with  their experience,  education, and  training,                                                               
and he believes that  this bill goes there.  He  said he does not                                                               
believe  that  optometrists  will  be  practicing  outside  their                                                               
knowledge and experience and offered  his support for the passage                                                               
of HB 103.                                                                                                                      
3:36:21 PM                                                                                                                    
REPRESENTATIVE WOOL  moved to report  CSHB 103(HSS),  as amended,                                                               
out  of   committee  with  individual  recommendations   and  the                                                               
accompanying  fiscal  notes.   There  being  no  objection,  CSHB                                                               
103(L&C) was reported from the  House Labor and Commerce Standing                                                               
3:36:41 PM                                                                                                                    
The committee took an at-ease from 3:36 PM to 3:38 PM.                                                                          
                   HB 124-BENEFIT CORPORATIONS                                                                              
3:38:48 PM                                                                                                                    
CHAIR KITO  announced that  the next order  of business  would be                                                               
HOUSE BILL NO.  124, "An Act relating  to corporations, including                                                               
benefit corporations,  and other  entities; and providing  for an                                                               
effective date."                                                                                                                
CHAIR  KITO, sponsor,  stated that  his  interest in  introducing                                                               
this bill is to modify  Alaska's corporate structure to allow for                                                               
the  ability  of  a  corporation   to  establish  itself  with  a                                                               
charitable component  as opposed to being  fiducially responsible                                                               
to shareholders.  A corporation would  be able to use some of its                                                               
profits,  earnings,   or  other   assets  to  benefit   other  or                                                               
charitable  or nonprofit  organizations.   This would  allow many                                                               
corporations  that would  like to  provide some  type of  support                                                               
outside  their  primary  business  mode,  or  even  within  their                                                               
business mode, that is not reflective of expending profits, and                                                                 
allow them to do that without violating their fiduciary                                                                         
CHAIR KITO drew attention to the sponsor statement and noted                                                                    
that the first paragraph might need to be amended because it                                                                    
appears to be a carryover from another bill.                                                                                  
3:40:20 PM                                                                                                                    
BIANCA CARPENETI, Staff, Representative Sam Kito, Alaska State                                                                  
Legislature, explained the purpose of HB 124 on behalf of                                                                       
Representative Kito, sponsor.  She spoke as follows:                                                                            
     The  purpose of  HB 124  is to  expand the  options for                                                                    
     Alaskan entrepreneurs  and investors  by placing  a new                                                                    
     type  of corporate  entity -  Benefit Corporation  or B                                                                    
     Corp - in  Alaska statute.  A benefit  corporation is a                                                                    
     for-profit  corporation that  includes public  benefits                                                                    
     and   community   improvements  into   their   business                                                                    
     practices,   no  matter   the  principal   services  or                                                                    
     products provided.                                                                                                         
     Corporate  law   generally  requires   corporations  to                                                                    
     consider the financial impact  to their shareholders as                                                                    
     the  top priority  when making  decisions.   Maximizing                                                                    
     corporate  returns can  interfere with  other corporate                                                                    
     goals, such as electing  to do something beneficial for                                                                    
     the  community by  enhancing social  benefit.   Some of                                                                    
     the defining  characteristics of a  benefit corporation                                                                    
     include expanded purpose  beyond maximizing share value                                                                    
     to  explicitly  include  general  and  specific  public                                                                    
     benefit.   A  benefit  corporation  also considers  and                                                                    
     balances  the impacts  of their  decisions not  only on                                                                    
     shareholders but also on  their stakeholders. ? Benefit                                                                    
     corporations  must  make  available  to  the  public  a                                                                    
     regular  benefit  report  that assesses  their  overall                                                                    
     social and  environmental performance against  a third-                                                                    
     party standard.                                                                                                            
     Three arguments in support  of laws establishing public                                                                    
     benefit  corporations are:    First,  it creates  legal                                                                    
     requirements  that  regulate corporations  claiming  to                                                                    
     work   toward  social   good.     Becoming  a   benefit                                                                    
     corporation  as a  legal entity  means a  business that                                                                    
     says it  is dedicated to  the public good will  have to                                                                    
     substantiate this  claim, similar to how  qualifying as                                                                    
     tax-exempt  helps  define  non-profits  as  charitable.                                                                    
     Moreover, benefit  corporations' reporting requirements                                                                    
     to shareholders,  the state,  and the public  provide a                                                                    
     degree   of   transparency   the   corporations   could                                                                    
     otherwise  refuse  to  provide.    Second,  these  laws                                                                    
     promote  societal  benefits   by  clarifying  fiduciary                                                                    
     duty.   Entrepreneurs are more  likely to  pursue lines                                                                    
     of business in  a socially beneficial way  when the law                                                                    
     ensures that the pursuit of  profit does not need to be                                                                    
     the  highest priority.   Likewise,  investors concerned                                                                    
     with the public good are  given an alternative.  Third,                                                                    
     this provides legal protection  for companies that seek                                                                    
     purpose-driven   partnerships.     Benefit  corporation                                                                    
     legislation   allows  them   to  undertake   beneficial                                                                    
     partnerships that conventional  corporations might shun                                                                    
     out of  fear that  shareholders would not  see it  as a                                                                    
     venture likely to be profitable.                                                                                           
3:43:33 PM                                                                                                                    
MS. CARPENETI  turned to a  discussion of  the bill itself.   She                                                               
said  Section   1  amends   Alaska  Statute   (AS)  10.06.633(a),                                                               
regarding how  corporations may be dissolved,  to include benefit                                                               
MS.  CARPENETI stated  that Section  2  adds to  AS 10,  Alaska's                                                               
corporation  code,  a  new   chapter,  Chapter  60,  establishing                                                               
benefit corporations.  Article 1,  she continued, establishes how                                                               
a  new  business corporation  or  existing  entity may  become  a                                                               
benefit corporation,  and it also  declares that an  amendment of                                                               
an existing corporation  must be adopted by at  least the minimum                                                               
two-thirds vote.   She said  Article 2 establishes  seven factors                                                               
that  the  board  of  directors and  individual  directors  of  a                                                               
benefit  corporation  shall   consider  while  discharging  their                                                               
duties.    She   pointed  out  that  directors   of  the  benefit                                                               
corporation are  not required  to give priority  to any  of these                                                               
listed factors unless  the intention to prioritize  them has been                                                               
identified   in    the   benefit   corporation's    articles   of                                                               
MS. CAPENETI  continued to address  Section 2 and said  Article 3                                                               
allows  the  board to  include  a  benefit  director who  is  not                                                               
financially liable if  acting in good faith.   She explained that                                                               
Article  4  directs  an  officer  of  a  benefit  corporation  to                                                               
consider  the  factors  enumerated  by the  board  of  directors.                                                               
Article 4 also states that  an officer of the benefit corporation                                                               
is not  personally liable for  monetary damages if  the officer's                                                               
duties  are performed  in compliance  with Alaska  statute.   She                                                               
said Article 5 identifies who  may bring action or claims against                                                               
a  benefit  corporation  for  a  failure  to  pursue  general  or                                                               
specific public benefit.                                                                                                        
MS.  CARPENETI stated  that Article  6  of Section  2 requires  a                                                               
benefit  corporation  to  file   a  biennial  benefit  report  in                                                               
addition to the biennial report,  and it also provides details of                                                               
what  must  be in  that  report.    She  related that  Article  7                                                               
establishes  a status  change for  a  merger or  amendment for  a                                                               
benefit corporation  or a domestic  entity other than  a business                                                               
corporation, which  must be approved  by at least  two-thirds the                                                               
vote  of all  shareholders  entitled  to vote.    Article 7  also                                                               
establishes statutory  guidelines for third-party  standards used                                                               
as an  assessment tool in  the required benefit report  to ensure                                                               
that  the general  or specific  public benefits  are being  done.                                                               
She  said Article  8 provides  for general  provisions, including                                                               
regulations, definitions, and applicability.                                                                                    
MS. CARPENETI  advised that  the remaining  sections of  the bill                                                               
deal with regulations and effective date.                                                                                       
3:45:47 PM                                                                                                                    
MS. CARPENETI added  that it is important to  note the following:                                                               
First,   that  benefit   corporations  are   voluntarily  formed.                                                               
Second, that  benefit corporations  have the  same tax  status as                                                               
for-profit corporations.   Third,  that benefit corporation  is a                                                               
legal  designation,   not  a  marketing  label.     Fourth,  this                                                               
legislation specifies  the requirements for the  biennial benefit                                                               
report, which does two things:   1) It provides accountability to                                                               
the shareholders  who will be  able to track and  direct benefit,                                                               
and 2) it  provides transparency to investors who  will know what                                                               
the benefits are.                                                                                                               
MS.  CARPENETI concluded  by stating  that HB  124 establishes  a                                                               
solid  foundation  for  long-term  mission  alignment  and  value                                                               
creation.    It  protects  mission  through  capital  raises  and                                                               
leadership changes  and creates more flexibility  when evaluating                                                               
potential  sale and  liquidity options.   Further,  she said,  it                                                               
prepares businesses to lead a mission-driven life.                                                                              
3:46:54 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  brought attention  to page 3  where the                                                               
types of benefits that could be  provided are laid out.  He asked                                                               
what would  constrain the legislation from  becoming politicized;                                                               
for example, a debate about what a public benefit was.                                                                          
MS. CARPENETI  replied that a  benefit corporation  is responsive                                                               
to its shareholders.  She  inquired whether the question is about                                                               
abuse of this system or what might happen in that event.                                                                        
REPRESENTATIVE JOSEPHSON said he  assumes shareholders would know                                                               
that if they  have invested in Ben and Jerry's  they are going to                                                               
get  a  certain  benefit  corporation  investment,  and  if  they                                                               
invested in Dow Chemical, they might get a different one.                                                                       
MS. CARPENETI  responded that  that is the  point of  the benefit                                                               
report   it outlines what the  company is doing.  In its articles                                                               
of   incorporation,   a   corporation  outlines   any   potential                                                               
priorities that  it might  have for the  corporation.   Those are                                                               
publically  available,  so  as informed  consumers  [people]  can                                                               
decide if that is  the company they want to invest  in.  In terms                                                               
of holding the  company accountable, she said she  would point to                                                               
the biennial report as being  the mechanism by which shareholders                                                               
would be  able to track  what the corporation  is doing and  if a                                                               
shareholder has concerns  about the action, or  concerns that the                                                               
corporation is  not conforming to its  previously stated benefits                                                               
or  mission, then  a shareholder  would potentially  have grounds                                                               
for bringing claim against the directors or the board.                                                                          
3:48:45 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  related  that   he  once  invested  in                                                               
Calvert Investment  Funds, an  ethics fund  that was  supposed to                                                               
have  a benign  impact on  the world,  at least  as perceived  by                                                               
Calvert Investments.   He said  he is mentioning that  because he                                                               
knew going in with his small  investment that the return might be                                                               
6 percent  instead of 10  percent.   He inquired whether  that is                                                               
something [benefit corporation] shareholders would understand.                                                                  
MS. CARPENETI  answered that  the way  it is set  up it  is often                                                               
called  the double  bottom line.   So,  instead of  the board  of                                                               
directors being  responsible for  only making decisions  based on                                                               
the financial impact, the board  could also base its decisions on                                                               
other factors, including social good.                                                                                           
3:49:52 PM                                                                                                                    
REPRESENTATIVE  KNOPP asked  whether public  benefit corporations                                                               
exist today.                                                                                                                    
MS.  CARPENETI replied  that Alaska  is  not groundbreaking  with                                                               
this legislation.   Thirty-one other states  have adopted similar                                                               
legislation and other states are considering it.                                                                                
REPRESENTATIVE KNOPP requested Ms.  Carpeneti to provide examples                                                               
of benefit corporations.                                                                                                        
MS. CARPENETI responded by first  clarifying that Ben and Jerry's                                                               
is not technically a benefit  corporation, but rather a Certified                                                               
B  Corp, which  means the  company has  gone through  third party                                                               
analysis that says  the company provides this good.   Examples of                                                               
current benefit  corporations include  Patagonia and  King Arthur                                                               
Flour, the oldest flour producer in America.                                                                                    
REPRESENTATIVE  KNOPP  asked  what public  benefit  services  are                                                               
provided by the aforementioned corporations.                                                                                    
MS. CARPENETI answered  that she would get back  to the committee                                                               
with a list  of all the public benefits  that Patagonia provides,                                                               
but that Patagonia is dedicated to outdoor recreation.                                                                          
REPRESENTATIVE KNOPP inquired whether  this is talking about only                                                               
publicly  traded corporations,  given  not  all corporations  are                                                               
publicly  traded.   He further  inquired whether  there is  a tax                                                               
benefit to the  corporation to do this.  Lastly,  he inquired why                                                               
any  publicly traded  corporation could  not in  its articles  of                                                               
incorporation or  in its prospectus  to shareholders  list itself                                                               
as public benefit.                                                                                                              
MS.  CARPENETI  replied that  corporate  law  says a  corporation                                                               
could become liable if its  shareholders disagree with doing this                                                               
and bring suit against the  corporation for not deciding based on                                                               
the financial  impact of its  decisions in expanding to  a public                                                               
benefit good.   The bill  would provide legal protection  for the                                                               
corporation to  include those  benefits into  its decision-making                                                               
REPRESENTATIVE KNOPP  reiterated his question about  whether this                                                               
is  talking only  about publicly  traded corporations  that trade                                                               
stock on an exchange.                                                                                                           
MS. CARPENETI offered her belief that the answer is yes.                                                                        
CHAIR  KITO interjected  that  he would  get  this clarified  and                                                               
provide the information  to the committee.  He said  it is in the                                                               
corporation  statutes and  offered  his belief  that any  company                                                               
filing  an incorporation  notice with  the state  could become  a                                                               
benefit corporation.  The corporation  would still be required to                                                               
file  its   articles  of  incorporation,  but   the  articles  of                                                               
incorporation may provide  a public benefit as opposed  to just a                                                               
fiduciary responsibility.                                                                                                       
3:52:54 PM                                                                                                                    
REPRESENTATIVE BIRCH asked  what the genesis is  for the proposal                                                               
and whether someone requested that it be done.                                                                                  
CHAIR KITO replied it was  a proposal put forth by Representative                                                               
Seaton in a  past session.  He  said he thought the  bill a great                                                               
idea and  so took  it forward  with the idea  that a  Native for-                                                               
profit  corporation  might  want  to  try  doing  something  that                                                               
benefits  heritage.   Right now,  many corporations  have a  for-                                                               
profit as  well as a  non-profit heritage group,  which sometimes                                                               
share  boards of  directors.   However,  he  continued, the  for-                                                               
profit  has to  make its  decisions in  supporting some  of those                                                               
other  organizations based  on what  is  a responsible  fiduciary                                                               
manner as  opposed to,  say, what  might be  culturally desirable                                                               
for a Native corporation.  Whether  or not it gets used that way,                                                               
he  said,  he saw  the  opportunity  to  strongly link,  or  more                                                               
strongly link, the  for-profit motive of a  Native corporation or                                                               
any  other corporation  to  the values  of  the shareholders  and                                                               
allow a  corporation to provide  opportunities and benefits  to a                                                               
cultural group or charity.  It  is a voluntary choice, he pointed                                                               
out, but  if it  is chosen  then the  corporation has  to outline                                                               
everything  it  is going  to  be  doing  in its  articles,  which                                                               
thereby allows  the corporation to  not have  to make all  of its                                                               
goals fiduciary goals.                                                                                                          
REPRESENTATIVE  BIRCH  reiterated  his  question  as  to  whether                                                               
someone specifically came to Chair Kito.                                                                                        
CHAIR KITO  answered that  nobody came to  him specifically.   He                                                               
further  offered his  belief that  nobody went  to Representative                                                               
Seaton specifically.                                                                                                            
REPRESENTATIVE BIRCH  said he is  familiar with  non-profits that                                                               
are set  up with public  charitable purpose  and while he  is not                                                               
opposed to  the bill,  he doesn't fully  understand the  need for                                                               
CHAIR KITO responded  that the purpose is to  get the information                                                               
out and discover who might be interested in utilizing it.                                                                       
REPRESENTATIVE BIRCH stated he is  more used to someone coming to                                                               
a  legislator with  a  problem that  needs  solving, rather  than                                                               
throwing  something out  there and  asking whether  anyone has  a                                                               
problem with it.                                                                                                                
MS.  CARPENETI noted  that there  is correspondence  accompanying                                                               
Representative Seaton's  previous iteration  of the bill  from an                                                               
individual  with  the business  Earth  Friendly  Coffees who  had                                                               
expressed interest.   Additionally, she advised,  Stephen Trimble                                                               
of Anchorage  will be testifying  today that he is  interested in                                                               
gaining benefit corporation status for his business.                                                                            
3:56:27 PM                                                                                                                    
REPRESENTATIVE WOOL  offered his understanding that  the proposed                                                               
concept would allow  a corporation to make a  decision that isn't                                                               
totally financial  as a benefit  for something else,  rather than                                                               
being required  to give top  priority to financial.   He surmised                                                               
that this  concept changes how  a corporation would  practice its                                                               
business as opposed to what it does with its profits.                                                                           
MS. CARPENETI  replied yes, this establishes  a legal designation                                                               
for  a corporation  that  wants  to be  recognized  as a  benefit                                                               
corporation.   It  doesn't  change  how traditional  corporations                                                               
operate; it just sets up  the standards for benefit corporations.                                                               
She added  that it allows a  great deal of latitude  to the board                                                               
of directors of  the company to decide what that  balance is.  It                                                               
doesn't provide any sort of table  or schedule saying this is how                                                               
the company must allocate its profits  or this is how the company                                                               
must  act  as  a  benefit   corporation.    It  just  allows  the                                                               
flexibility for  a corporation to  decide how to operate  as best                                                               
suits its mission and what it is trying to do.                                                                                  
REPRESENTATIVE WOOL  offered his understanding that  all Newman's                                                               
Own profits  go to charity.   He  surmised this is  what Newman's                                                               
Own does with  its profit and is not necessarily  how it operates                                                               
its  business.   He  asked  whether  Newman's  Own is  a  benefit                                                               
corporation  or whether  it is  more a  corporate decision  as to                                                               
what Newman's Own does with its profits.                                                                                        
MS. CARPENETI  responded that she  would look at Newman's  Own to                                                               
see whether it  is established as a benefit  corporation and will                                                               
get back to the committee with an answer.                                                                                       
CHAIR KITO pointed  out that his intent is not  to change the way                                                               
the corporation would operate, but  just to allow the corporation                                                               
to have more flexibility with what it does with its profits.                                                                    
3:58:50 PM                                                                                                                    
REPRESENTATIVE BIRCH  inquired whether a  traditional corporation                                                               
could transition  to a benefit  corporation and whether  it would                                                               
take a shareholder vote.                                                                                                        
MS. CARPENETI answered yes, a  corporation can start as a regular                                                               
corporation and then  if HB 124 became law  the corporation could                                                               
opt to change through a two-thirds vote of its shareholders.                                                                    
3:59:32 PM                                                                                                                    
REPRESENTATIVE  KNOPP  asked whether  there  is  anything in  the                                                               
Internal Revenue Service (IRS) code  as far as tax structures, or                                                               
in  states that  have benefit  corporations, that  allow benefit.                                                               
For example,  he asked,  whether the  benefits that  are expended                                                               
are taxable benefits to the corporation.                                                                                        
MS. CARPENETI replied that benefit  corporations do not enjoy any                                                               
special tax status, they are taxed the same as corporations.                                                                    
4:00:16 PM                                                                                                                    
REPRESENTATIVE  WOOL offered  his  understanding  that a  benefit                                                               
corporation would  not get any  special tax status.   He observed                                                               
that  next on  the  committee's  calendar is  a  bill related  to                                                               
taxing   [non-C  corporations].     He   asked  whether   benefit                                                               
corporations could  in theory avoid  a tax given that  they would                                                               
have a different designation than other types of corporations.                                                                  
MS.   CARPENETI  responded   she  is   hesitant  to   comment  on                                                               
legislation  she hasn't  seen  and how  it  would impact  benefit                                                               
corporations.   She  deferred  an answer  to  someone with  legal                                                               
expertise and tax expertise.                                                                                                    
REPRESENTATIVE WOOL surmised  that if there are  certain tax laws                                                               
that  affect  certain  types  of corporations  and  this  is  yet                                                               
another type  of corporation, then  he would expect that  the law                                                               
would have to address that  type of corporation, which hasn't yet                                                               
MS. CARPENETI replied that that is a reasonable expectation.                                                                    
4:01:53 PM                                                                                                                    
CHAIR KITO opened public testimony on HB 124.                                                                                   
4:02:14 PM                                                                                                                    
STEPHEN  TRIMBLE, Founder  and  Chief  Executive Officer,  Arctic                                                               
Solar Ventures, speaking  on behalf of his  company, testified in                                                               
support of HB 124, which  would authorize the creation of benefit                                                               
corporations in Alaska  law.  He said Arctic Solar  Ventures is a                                                               
residential and commercial solar  design and installation company                                                               
that  operates statewide.    He  noted that  his  company is  the                                                               
second Certified B Corp in the history of Alaska.                                                                               
MR. TRIMBLE explained  that the difference between  a Certified B                                                               
Corp and  benefit corporation  is that  a certified  B Corp  is a                                                               
third-party  global standardized  certification that  is sort  of                                                               
like a  fair-trade certification  for coffee for  businesses that                                                               
incorporate social and environmental  benefit into their mission.                                                               
He said benefit corporation legislation  is a compendium piece to                                                               
certified  B Corp  status that  allows companies  like his  to be                                                               
able  to also  acknowledge  that commitment  to  society and  the                                                               
environment within the structure of state law.                                                                                  
MR.  TRIMBLE  advised  that  his   company,  a  leading  socially                                                               
responsible business in Alaska,  plans on becoming Alaska's first                                                               
benefit  corporation after  the passage  of HB  124 and  has been                                                               
actively working  on it.   During the  previous iteration  of the                                                               
bill  by  Representative  Seaton,  he continued,  he  called  and                                                               
expressed  interest in  the bill  and urged  it be  passed.   His                                                               
company has been  following this for the past two  to three years                                                               
and  has  been  pressing  for its  adoption  because  the  entire                                                               
company believes this  is an incredibly valuable  tool for Alaska                                                               
businesses to be able to differentiate themselves.                                                                              
MR. TRIMBLE  stated that this  is uniquely critical to  the "DNA"                                                               
of his  business and it  will also present many  other businesses                                                               
the opportunity  to codify  their commitment  to society  and the                                                               
environment  within  their  bylaws.   Differentiating  businesses                                                               
within  their  communities and  within  the  global community  at                                                               
large sends  a clear message that  Alaska is a leading  place for                                                               
socially  responsible businesses  to  form and  thrive, he  said.                                                               
Profit,  societal  benefit,  and  environmental  stewardship  can                                                               
powerfully  coexist within  business.   He  urged  that the  full                                                               
legislature support  the enabling  of Alaska businesses  to fully                                                               
commit  themselves to  making the  world a  better place  through                                                               
their practices and policies.                                                                                                   
4:06:03 PM                                                                                                                    
REPRESENTATIVE  KNOPP  asked  whether Mr.  Trimble's  company  is                                                               
publicly traded on an exchange and whether it issues shares.                                                                    
MR. TRIMBLE responded  that his is a  privately held corporation.                                                               
He  advised it  is not  required  that a  benefit corporation  be                                                               
publicly traded.                                                                                                                
REPRESENTATIVE KNOPP inquired  as to the number  of board members                                                               
for Mr. Trimble's company.                                                                                                      
MR. TRIMBLE replied that his corporation has five board members.                                                                
REPRESENTATIVE KNOPP  asked why  Mr. Trimble's  corporation would                                                               
need  to  be   a  benefit  corporation  if  the   purpose  is  to                                                               
disseminate information about the  purpose of the corporation and                                                               
the company only has board members and no shareholders.                                                                         
MR.  TRIMBLE  answered that  this  legislation  would enable  his                                                               
corporation to consider, as a  company, other aspects of societal                                                               
and  environmental benefit  as opposed  to merely  profit as  its                                                               
predominant driver and  measure of business success.   This is an                                                               
incredibly   powerful  tool   for  businesses   to  be   able  to                                                               
differentiate   themselves  within   the   local  community,   he                                                               
reiterated,  because making  those commitments  public and  being                                                               
upheld  to those  commitments in  the form  of reporting  is very                                                               
powerful.   It goes far  above and  beyond just saying  a company                                                               
does good   the company has to  actually show it does good.  That                                                               
is also  the reason why  his corporation has already  pursued the                                                               
extremely  stringent  third-party  B Corp  certification.    It's                                                               
different than simply just being  able to report to the company's                                                               
shareholders or board.                                                                                                          
4:08:43 PM                                                                                                                    
REPRESENTATIVE BIRCH inquired as to  what the distinction is that                                                               
[HB 124]  would offer  Mr. Trimble  and his  business aspirations                                                               
versus a conventional configuration.                                                                                            
MR.  TRIMBLE replied  that this  would allow  his corporation  to                                                               
volunteer  to a  higher level  of scrutiny  and obligation  to do                                                               
good in its business practices.   It is a voluntary thing, but to                                                               
be  able  to offer  yourself  to  be  held  up to  the  reporting                                                               
requirements  to a  broader mission  beyond  profit is  something                                                               
that every Alaskan  company should want to  do because businesses                                                               
are here  to make Alaska  a better place.   As founder  of Arctic                                                               
Solar Ventures, he said, this is  his company's DNA.  To have the                                                               
state  acknowledge that  and join  his company  in its  voluntary                                                               
reporting of that is hugely important.                                                                                          
4:10:28 PM                                                                                                                    
REPRESENTATIVE WOOL  asked whether  Mr. Trimble's  business could                                                               
still operate  the same way it  does and make the  same decisions                                                               
without  the  benefit  corporation  designation  other  than  the                                                               
recognition of it.                                                                                                              
MR.  TRIMBLE responded  that his  business, through  its internal                                                               
practices,  does that  now,  but he  can't  guarantee that  other                                                               
companies will do  the same.  If a company  is volunteering to be                                                               
held to that standard and  wanting to receive the public relation                                                               
benefits that  are associated with  being in a business  that has                                                               
considerations above  and outside of  pure profit, he  said, then                                                               
the company needs  to be held to a standard.   This structure has                                                               
been designed and implemented by  other states so that businesses                                                               
can't claim societal  benefit without a standard  and proof under                                                               
the state's corporate structure.                                                                                                
MR. TRIMBLE  addressed the  committee's earlier  discussion about                                                               
the use of  profits and how that  plays in.  He  pointed out that                                                               
there is no  requirement under HB 124 that profits  be donated to                                                               
a non-profit  or used  for a  non-profit, which  is the  case for                                                               
benefit corporation  structure anywhere.   It  has nothing  to do                                                               
with  how profits  are  dispersed  or where  they  should go,  he                                                               
advised,  rather  it  has  to  do  with  internal  practices  and                                                               
policies  of  the business.    For  example, his  company  firmly                                                               
believes  that one  of its  public  benefits is  that it  deploys                                                               
clean  energy  and  the  deployment  of  clean  energy  has  many                                                               
societal  benefits.   His  company  is  creating local  jobs  and                                                               
stimulating  the  local  economy,  as  well  as  reducing  carbon                                                               
footprints of people  and cleaning the air.  It's  not only about                                                               
being  able  to  be  acknowledged  for being  held  to  a  higher                                                               
standard, he reiterated, but that  the company is volunteering to                                                               
be held to that standard, and that is why HB 124 is important.                                                                  
4:14:02 PM                                                                                                                    
REPRESENTATIVE  WOOL  offered  his  understanding that  it  is  a                                                               
standard of corporate  behavior that a company  would be adhering                                                               
to,  as well  as  the  public recognition  and  benefit that  the                                                               
company  would  get  from  being   identified  as  that  type  of                                                               
MR. TRIMBLE confirmed that that is a very fair assessment.                                                                      
4:14:26 PM                                                                                                                    
REPRESENTATIVE KNOPP  inquired whether B Corp  Certification is a                                                               
federal certification.                                                                                                          
MR. TRIMBLE  answered that it  is an  international certification                                                               
with over 4,000 corporations now  certified throughout the world,                                                               
and that this certification is  administered by the organization,                                                               
B Lab,  LLC.  He  explained that B  Lab is the  organization that                                                               
helped states develop the  first benefit corporation legislation.                                                               
The idea behind  B Corp Certification and the  B Lab organization                                                               
was to create  a global framework where  businesses can volunteer                                                               
to be  a part of this  very rigorous assessment and  to work with                                                               
states  to  then  develop  the  benefit  corporation  designation                                                               
within  their  corporate state  structure,  so  it completes  the                                                               
puzzle.  The benefit corporation  piece is a U.S. specific piece,                                                               
he said, but the B Corp Certification is a global certification.                                                                
4:15:49 PM                                                                                                                    
CHAIR KITO held over HB 124.                                                                                                    
          HB  36-TAX: INCOME FROM NON C CORP ENTITIES                                                                       
4:16:03 PM                                                                                                                    
CHAIR KITO  announced that the  final order of business  would be                                                               
SPONSOR SUBSTITUTE  FOR HOUSE  BILL NO. 36,  "An Act  bearing the                                                               
short title of  the 'Fair Contribution by  High Profit Businesses                                                               
Act'; requiring  certain persons in  the business of oil  and gas                                                               
production or  transportation to  pay income tax;  establishing a                                                               
tax on the income of  a sole proprietorship, partnership, limited                                                               
liability company,  or an S  corporation; relating  to exemptions                                                               
from  the tax  on corporations;  and providing  for an  effective                                                               
4:16:24 PM                                                                                                                    
REPRESENTATIVE  WOOL  moved  to   adopt  the  proposed  committee                                                               
substitute  (CS)  for  SSHB   36,  Version  30-LS0148\E,  Nauman,                                                               
3/29/17,  as the  working document.   There  being no  objection,                                                               
Version E was before the committee.                                                                                             
4:16:50 PM                                                                                                                    
REPRESENTATIVE  LES  GARA,  Alaska   State  Legislature,  as  the                                                               
sponsor  introduced   SSHB  36  via  a   PowerPoint  presentation                                                               
entitled, "HB  36:  Fair  Contribution by High  Profit Businesses                                                               
Act."    He  explained  SSHB  36  tries  to  close  a  number  of                                                               
exemptions that Alaska has [slides  1-3].  Until 1980 when Alaska                                                               
had  an  income tax,  every  business  in the  state  contributed                                                               
towards  the state's  public services  and roads  - the  business                                                               
owners paid an  income tax.  He said the  profits that the owners                                                               
owned   through  their   business,   whether  lawyers,   doctors,                                                               
engineers,  architects,  oil  field  service  companies,  or  any                                                               
business of  which the state  has 40,000,  paid a portion  of the                                                               
business's profits to the state to help support public services.                                                                
REPRESENTATIVE  GARA said  SSHB  36 tries  to  solve the  state's                                                               
current  problem,  which is  that  the  9,000 C  corporations  in                                                               
Alaska are  subject to the  state's corporate business  tax while                                                               
most other  businesses are not.   Most people see  C corporations                                                               
as  publicly traded  corporations, he  noted, but  they are  more                                                               
than that.   Although some businesses are subject  to a fisheries                                                               
tax or  a mining tax,  most other businesses    lawyers, doctors,                                                               
architects    pay no tax  to the state  other than a  $50 license                                                               
fee per  business.  So, a  company making $10 million  in profits                                                               
contributes $50 to  the state.  He advised that  SSHB 36 tries to                                                               
recognize that struggling businesses cannot  afford to pay a tax,                                                               
but that those who are doing  much better in terms of profits can                                                               
afford to  contribute to the state's  schools and infrastructure.                                                               
People who are successful benefit  from the things the state pays                                                               
for, such as  roads and infrastructure, energy  projects, and the                                                               
public  schools  that produce  the  employees  who work  for  the                                                               
business.    Members   of  society  want  to   support  the  next                                                               
generation that  benefits from those  things, which is  the point                                                               
of contributing back.                                                                                                           
4:20:00 PM                                                                                                                    
REPRESENTATIVE  GARA pointed  out  that 9,000  S corporations  in                                                               
Alaska pay  no corporate  tax [slide 4].   Regardless  of whether                                                               
these S  corporations make  $10 million  or $500,000  in profits,                                                               
their tax  is only  the $50  in license  fees paid  per business.                                                               
Obviously, jobs in this economy  are important, he continued, but                                                               
in some  sense for  the state treasury  every business  right now                                                               
actually  costs the  state money    for  roads, schools,  and the                                                               
other  infrastructure that  is provided  by  the state.   From  a                                                               
budget standpoint, one  would hate to have businesses  be a money                                                               
drain,  but  that  is  the  way things  are  set  up  in  Alaska.                                                               
Businesses certainly help with local  property taxes, but for the                                                               
state  budget businesses  cost  more money  than  the state  gets                                                               
back.   He noted that  there are  45,000 businesses in  the state                                                               
that  are not  S corporations,  and related  that when  he was  a                                                               
salaried attorney at a law firm,  the firm took in $10-15 million                                                               
in profits and paid $100 to  the state with two lines of business                                                               
license fees.   This is  the same  for doctors' offices  and many                                                               
other businesses, he continued.  He  said he didn't feel that the                                                               
law firm  contributed back and when  he became a partner  at that                                                               
firm,  he felt  the firm  should  contribute back  more than  the                                                               
license fee that it paid.                                                                                                       
REPRESENTATIVE  GARA advised  that  the  number of  non-corporate                                                               
businesses  that pay  tax in  Alaska is  zero, regardless  of the                                                               
amount  of their  profits [slide  5].   He said  the corporations                                                               
that  do pay  tax are  the roughly  9,000 C  corporations in  the                                                               
state as there is a tax  structure for C corporations.  The types                                                               
of  business  not  currently  paying  tax  in  Alaska  include  S                                                               
corporations, limited  liability companies  (LLCs), partnerships,                                                               
and sole proprietorships.  Those  are the classes of the [45,000]                                                               
businesses that don't pay a tax in Alaska.                                                                                      
4:22:27 PM                                                                                                                    
REPRESENTATIVE GARA  stated that  the matter  of fairness  is one                                                               
reason why  he introduced SSHB 36  [slides 8-9].  He  offered his                                                               
belief that people  who are successful in society  should chip in                                                               
to help  society run.   The state's  current exemption,  which is                                                               
every business that  is not a C corporation, does  not help close                                                               
the state's deficit.                                                                                                            
REPRESENTATIVE   GARA  pointed   out  that   Alaska  law   has  a                                                               
confidentiality provision and every business  that does not pay a                                                               
tax is  considered a  taxpayer under Alaska  law because  that is                                                               
how  the law  is written  [slides 10-11].   That  confidentiality                                                               
provision  for  taxpayers,  even   taxpayers  that  pay  no  tax,                                                               
requires that  the Department of  Revenue not reveal the  name of                                                               
any business that  does not pay a  tax.  In some  sense, he said,                                                               
it is  almost good not to  know the names of  the businesses that                                                               
don't pay taxes.   The purpose of  the bill is not  to target any                                                               
business.   It  is to  say  that if  a business  makes a  certain                                                               
amount of  income it should  chip in  toward the ability  for the                                                               
state to provide public services.                                                                                               
REPRESENTATIVE  GARA stated  that SSHB  36 tries  to draw  a line                                                               
between those businesses  that are successful and  those that are                                                               
struggling because  it is  not wanted  to tax  a business  out of                                                               
business [slide 12].  He said he  drew a line that says the first                                                               
$200,000  of  profit/net income  is  nontaxable  under the  bill,                                                               
which  he thinks  is  generous.   The bill  does  not change  the                                                               
current corporate tax  on C corporations, he  explained, and less                                                               
profitable  businesses  will  remain   fully  exempted  from  any                                                               
business tax under SSHB 36.   He allowed there could be differing                                                               
views on whether the $200,000 mark is the right mark.                                                                           
4:24:58 PM                                                                                                                    
REPRESENTATIVE GARA  advised that  SSHB 36  would not  tax Alaska                                                               
Native corporations  specifically, which the bill  states [slides                                                               
13-14].  Most,  if not all, Native corporations are  covered as C                                                               
corporations  given the  number of  shareholders that  they have,                                                               
and if they make  a profit, they probably pay a  tax to the state                                                               
under  the C  corporation  tax.   He  said it  is  the same  with                                                               
village  corporations and  that  the  village corporations  often                                                               
don't make a profit.                                                                                                            
REPRESENTATIVE GARA pointed  out that the tax  schedule set under                                                               
SSHB 36  is lower than  the schedule under the  current corporate                                                               
tax,  mostly  because the  first  $200,000  of income  is  exempt                                                               
[slide 15].   He noted  that the top  tax rate under  the current                                                               
corporate tax for  C corporations is 9.4 percent  of income above                                                               
$222,000 a year, and that there  is a smaller tax on lower levels                                                               
of income.  He explained that  by exempting the first $200,000 of                                                               
income  the proposed  tax is  a lower  tax and  the proposed  tax                                                               
gradually  moves  the  tax  from  5 percent  to  9.4  percent  at                                                               
$1,000,000.    He allowed  it  is  for  the committee  to  decide                                                               
whether those are  the right graduations, but  that the exemption                                                               
under the current  C corporation statute only  excludes the first                                                               
$25,000 of  income.  One  reason a  less aggressive tax  than the                                                               
corporate  tax  is  sought  is that  many  larger  companies  and                                                               
publicly  traded   companies  are  going   to  be  under   the  C                                                               
corporation  tax.    A  larger company  probably  has  a  greater                                                               
ability to   weather the  storm  in  down years  with a  tax than                                                               
would a much smaller company.                                                                                                   
REPRESENTATIVE GARA  reiterated that  the first $200,000  is tax-                                                               
free  and then  the  tax  starts at  5  percent  for income  over                                                               
$200,000.  At $500,000 the tax  goes to 7.5 percent and at income                                                               
above $1  million it caps out  at the current corporate  tax rate                                                               
of 9.4  percent, whereas  the current corporate  tax rate  is 9.4                                                               
percent  at income  above $222,000.    He noted  that the  bill's                                                               
effective  tax rate  is even  lower because,  like the  corporate                                                               
tax, it is deductible from federal  income tax.  Thus, under this                                                               
bill the effective  payment may possibly be  20-39 percent lower.                                                               
For  example, a  9.4 percent  tax would  be closer  in effect  to                                                               
about 6 percent tax because it is deductible from federal tax.                                                                  
4:29:10 PM                                                                                                                    
REPRESENTATIVE GARA  pointed out that  there is one  exception to                                                               
what he  has said so  far - Alaska  has a separate  corporate tax                                                               
for oil and gas producers and  pipeline owners [slide 17].  If it                                                               
is  a C  corporation it  pays the  9.4 percent  tax at  $222,000.                                                               
Under current  law, an oil and  gas producer or a  pipeline owner                                                               
that  is formed  as an  S  corporation or  as an  LLC avoids  the                                                               
corporate tax.  He said SSHB  36 would put all companies that are                                                               
inside the  state's oil and  gas corporate tax into  the existing                                                               
corporate tax structure - an oil  and gas producer formed as an S                                                               
corporation would be treated as a  C corporation.  That tax has a                                                               
different definition  on income  than the  corporate tax  for all                                                               
non-oil and  gas companies.   He  noted that  under the  bill, if                                                               
[Hilcorp Alaska,  LLC], the fourth  largest oil and  gas producer                                                               
in the  state, made profits it  would be subject to  the existing                                                               
oil and gas corporate tax, while currently it is not.                                                                           
REPRESENTATIVE  GARA said  SSHB 36  uses the  same definition  of                                                               
taxable income as  existing law because he didn't  want to create                                                               
a new definition.  He stated:  "There is one definition of income                                                               
for non-oil and  gas companies that's based on  a multi-state tax                                                               
compact  that's  designed  so  many states  don't  tax  the  same                                                               
income.   Income for oil  and gas  companies will be  defined the                                                               
way  it's defined  for  oil  and gas  companies;  it's a  complex                                                               
formula that is ? referred to as worldwide apportionment."                                                                      
4:31:29 PM                                                                                                                    
REPRESENTATIVE  GARA  continued  his discussion  of  how  taxable                                                               
income is  defined (slide 19).   A few policy calls  were made in                                                               
the bill,  he said, and  one was whether  to tax the  business or                                                               
the individual shareholders.   It was decided to levy  the tax on                                                               
the business to minimize the  cost of administration for both the                                                               
business and the  state, but primarily to minimize  the costs for                                                               
the businesses  and their  shareholders.   Rather than  make each                                                               
shareholder or each partner pay  tax separately, SSHB 36 provides                                                               
that the business pay the tax  on the business's net income.  The                                                               
business  can then  apportion its  net  income and  the tax  paid                                                               
between its shareholders.                                                                                                       
REPRESENTATIVE  GARA  reported  that  the  corporate  income  tax                                                               
produces roughly $100  million annually (slide 20),  but that the                                                               
amount of  oil and  gas corporate income  tax produced  each year                                                               
depends very much on oil prices.   For example, in 2016 there was                                                               
a  negative  amount.   It  was  negative, he  explained,  because                                                               
companies pay  estimated taxes  and by  the end  of the  year the                                                               
Department  of  Revenue  (DOR)  owed money  back.    The  current                                                               
projections for  2017 and  2018 are about  $100 million  and $200                                                               
million, respectively, as oil prices are projected to rise.                                                                     
4:33:23 PM                                                                                                                    
REPRESENTATIVE  GARA stated  that originally  the thought  was to                                                               
only cover  those corporations that  are not covered  (slide 21).                                                               
So,  he continued,  why does  this bill  go beyond  corporations?                                                               
Why  does  it  add  partnerships?     Why  does  it  add  general                                                               
businesses?   He explained that  as an  attorney he could  form a                                                               
law  firm as  a corporation,  which many  law firms  do.   Or, he                                                               
could form a law  firm as a partnership.  Or, he  could form as a                                                               
sole proprietorship and  hire a number of lawyers.   He said that                                                               
if a law firm  took in $10 million in profits,  he could not find                                                               
an answer  as to  why he should  pay a  tax if he  files as  an S                                                               
corporation but not  if he files as a sole  proprietorship.  It's                                                               
the same  business activity,  the same  benefits from  the state,                                                               
and the same  cost to the state (for example,  the court system).                                                               
He said he therefore doesn't  think the form that someone creates                                                               
a corporation under  should determine whether or  not that person                                                               
pays a tax;  rather, the activity and the level  of profit should                                                               
determine whether  or not someone pays  a tax.  He  added that he                                                               
cannot come  up with a logical  reason why he would  tax the same                                                               
business that  forms as an  LLC differently than a  business that                                                               
does the  same exact thing  and makes the  same exact money  as a                                                               
sole proprietorship, for example.                                                                                               
REPRESENTATIVE GARA  said much  time was  spent on  ensuring that                                                               
there would be no double  taxation under the bill (slides 22-23).                                                               
Any income taxed under SSHB 36  would be exempted from a personal                                                               
income tax  if one were adopted  in Alaska.  The  bill is modeled                                                               
as  much as  possible under  existing  law -  the definitions  of                                                               
income  used in  the bill  are the  same as  under existing  law.                                                               
Also,  he continued,  the bill  avoids double  taxation in  cases                                                               
where one business  owns another business.  There would  not be a                                                               
tax on the owner  business as well as a tax  on the business that                                                               
it  owns.   The owning  business is  already going  to be  paying                                                               
taxes  on the  business that  it  owns.   Additionally, he  said,                                                               
current  C  corporation  law  says that  if  a  corporation  pays                                                               
another tax,  such as a  fishing or  mining tax, those  taxes are                                                               
deducted from the company's corporate  tax, and this same rule is                                                               
followed in SSHB 36.                                                                                                            
REPRESENTATIVE GARA  stated that  the bill's  biggest goal  is to                                                               
make sure  everyone is   chipping in together   (slide 24).   The                                                               
bill  is  one  way  to  help address  the  state's  $2.8  billion                                                               
deficit.    In  looking  at  the  various  plans  out  there,  he                                                               
continued,  there  are  none  on   the  table  that  would  allow                                                               
legislators  to both  fill the  deficit  and return  to having  a                                                               
capital budget.  A number  of different approaches are needed, he                                                               
said, and  it is  his hope  that as many  good ideas  as possible                                                               
will  advance  forward and  people  will  decide which  ones  are                                                               
needed as a fiscal plan.                                                                                                        
4:38:38 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON observed that  the first bullet on slide                                                               
19  states, "To  minimize  the costs  of  administration, tax  is                                                               
placed on  the business and  the individual owners".   He further                                                               
observed that  the second  bullet on  slide 19  states, "Business                                                               
will  apportion taxes  based on  ownership shares,  so that  each                                                               
owner does not  have to hire their own accountant".   He said the                                                               
second bullet seems to be the opposite of the first bullet.                                                                     
REPRESENTATIVE GARA replied  that the tax would be  placed on the                                                               
business  so  only one  filing  would  have to  be  made.   If  a                                                               
business had 20  shareholders and the individual  was taxed, then                                                               
20 filings  would have to be  made and those 20  different people                                                               
might have  to hire 20  different accountants.   When the  tax is                                                               
placed on  the business, then  the business will  apportion taxes                                                               
based on a  person's shares for what the person's  net income was                                                               
and what the taxable portion attributed  to that was.  Then, each                                                               
person can figure out his or her federal taxes.                                                                                 
4:39:37 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  said it  appears to  be in  the Gardner                                                               
memo that  Alaska is  one of  only two  states that  fully exempt                                                               
this sort of income.  He inquired whether this is correct.                                                                      
REPRESENTATIVE GARA offered his belief  that that is correct.  He                                                               
further offered his belief that 41  states have an income tax and                                                               
business  owners pay  their share  of  the income  they get  from                                                               
their  law firm,  oil  field  services company,  or  store as  an                                                               
income tax.   Some states have both an income  tax and a business                                                               
tax, he  advised, and most states  that don't have an  income tax                                                               
have  some   sort  of   law  like  SSHB   36  that   taxes  non-C                                                               
corporations;  they may  just tax  S corporations  and LLCs.   He                                                               
reiterated his  earlier statement that he  doesn't understand why                                                               
a state would tax the same business  as an LLC but let them avoid                                                               
taxation if they formed under some  other form.  He added that he                                                               
thinks some states go beyond LLCs.                                                                                              
4:40:44 PM                                                                                                                    
REPRESENTATIVE BIRCH  expressed his  concern that the  bill would                                                               
[create double taxation]  and that, in the absence  of imposing a                                                               
statewide  personal  income  tax,  an entry-level  tax  on  pass-                                                               
through businesses  would in fact  double up.   He said  the bill                                                               
needs  a  lot  more  work  because he  is  very  concerned  about                                                               
cranking up  the taxes when  [the legislature] is not  making the                                                               
budget reduction that needs to be done.                                                                                         
REPRESENTATIVE GARA  answered that  much care  and work  has been                                                               
taken to ensure there will be no  double tax under the bill.  "If                                                               
an  income tax  were to  be adopted,"  he explained,  "the income                                                               
that you pay under this tax would  not be subject ? to the income                                                               
tax."  He pointed out that  this provision is on page 2, starting                                                               
on line 5.  He added that  SSHB 36 also avoids the other possible                                                               
double taxation issue of an  entity that owns another entity that                                                               
would  be taxed  under this  bill.   He said  he understands  the                                                               
concern  of  whether  members believe  people  should  be  paying                                                               
taxes, but that there is no double taxation under SSHB 36.                                                                      
4:42:29 PM                                                                                                                    
CHAIR KITO turned to invited testimony.                                                                                         
4:42:56 PM                                                                                                                    
JOHN  LETOURNEAU, Certified  Public  Accountant,  Thomas, Head  &                                                               
Greisen, PC, stated he doesn't  have prepared testimony, but, per                                                               
the sponsor's  invitation, he is  before the committee  to answer                                                               
questions on  SSHB 36 as a  person who is a  practicing certified                                                               
public  accountant (CPA)  and involved  in  preparing income  tax                                                               
returns  for  C  corporations,  S corporations,  LLCs,  and  sole                                                               
4:43:32 PM                                                                                                                    
REPRESENTATIVE BIRCH  posed a  scenario of  a group  of attorneys                                                               
that have  an S  corporation.   He asked  whether the  tax return                                                               
would roll down to where  it would be individually accountable to                                                               
each partner.                                                                                                                   
MR. LETOURNEAU  replied yes.  He  posed a scenario of  a group of                                                               
attorneys that  choose to form  a corporation and do  business as                                                               
an Alaska for-profit corporation that elects  to be taxed as an S                                                               
corporation.  The attorneys as  shareholders would be allocated a                                                               
share of  the taxable income of  the S corporation, he  said, and                                                               
they would  report that on their  federal income tax return.   If                                                               
the attorneys  were residents  of the  state of  California, they                                                               
would also pay tax  on their share of the income  to the State of                                                               
California.   If the attorneys  were residents of Alaska  and all                                                               
the  operations of  the law  firm were  in the  state of  Alaska,                                                               
there would be no income tax on the profits of the law firm.                                                                    
4:44:50 PM                                                                                                                    
REPRESENTATIVE KNOPP surmised that the  focus is really on taxing                                                               
S corporations.   He asked  whether the  multi-national companies                                                               
operating in  Alaska, such  as Tesoro,  Walmart, or  Fred Meyer's                                                               
would be C  corporations subject to taxation  under the structure                                                               
currently in place.                                                                                                             
MR.  LETOURNEAU responded  yes and  offered his  belief that  the                                                               
most  common form  of business  organization for  a large  multi-                                                               
national entity  is to be taxed  in the U.S. as  a C corporation.                                                               
However, he pointed out, certain  transportation companies in the                                                               
oil and  gas industry    public  pipelines    have elected  to be                                                               
organized as limited liability companies  (LLCs).  They would not                                                               
be taxed under  the C corporation rules for income  tax, but they                                                               
might be taxed under the special oil and gas rules.                                                                             
REPRESENTATIVE KNOPP posed  a scenario of an oil  and gas company                                                               
doing business in Alaska as an  S corporation that the state does                                                               
not tax.   He inquired whether  an S corporation or  an LLC might                                                               
consider changing to a C corporation should SSHB 36 pass.                                                                       
MR. LETOURNEAU answered  that it is possible  for an organization                                                               
to make different tax elections.   However, in his experience, an                                                               
organization that would consider that  would be driven largely by                                                               
the federal  tax implications  first and  foremost and  then they                                                               
would consider the state tax  implications.  So, he continued, it                                                               
would  be unusual  for an  entity  that had  elected to  be an  S                                                               
corporation for  federal income tax  purposes to elect  to change                                                               
to a C  corporation simply as a result of  this proposed statute.                                                               
But, he added, any analysis would be very company specific.                                                                     
4:47:40 PM                                                                                                                    
REPRESENTATIVE WOOL recalled [slide  6] says 9,000 C corporations                                                               
[do pay tax] and [slide 4]  says 9,000 S Corporations [do not pay                                                               
tax].  He  asked whether those numbers are  a typographical error                                                               
or a coincidence.                                                                                                               
LAURA  CHARTIER, Staff,  Representative  Les  Gara, Alaska  State                                                               
Legislature, confirmed the numbers are  correct.  She pointed out                                                               
that the fiscal note repeats those  same data points.  Out of the                                                               
18,000 corporations, roughly half  are C corporations and roughly                                                               
half are S corporations, which is the federal designation.                                                                      
REPRESENTATIVE WOOL remarked  that it is a  funny coincidence and                                                               
seems like  a lot of  corporations for a  state with less  than a                                                               
million people.  He recalled that  Alaska had an income tax prior                                                               
to  1980  and inquired  whether  it  is  correct that  all  these                                                               
entities would have  paid state tax through their  income tax and                                                               
so this corporate tax was not necessary.                                                                                        
REPRESENTATIVE  GARA replied  that  this  exemption didn't  exist                                                               
before 1980 because all the  non-C corporations distributed their                                                               
profits  to their  owners and  then  their owners  would pay  the                                                               
income tax on  that share of their profits.   When the income tax                                                               
was eliminated in 1980, he continued,  the state did not impose a                                                               
business tax and so that left  C corporations taxed and all other                                                               
business and corporate  forms untaxed other than  the $50 license                                                               
fee.  He  asked Mr. Letourneau whether this is  something that an                                                               
accountant could  do for a  business if SSHB  36 were to  pass as                                                               
currently written.                                                                                                              
MR. LETOURNEAU offered his belief  that, yes, an accountant could                                                               
file the tax return  based on this bill.  Based on  how it is set                                                               
forth  in  the  bill,  he  said  he  would  anticipate  that  the                                                               
Department of  Revenue (DOR) would  issue regulations  and forms,                                                               
which he doesn't  think would be tremendously  different than the                                                               
forms and regulations  governing C corporations.   He stated that                                                               
accountants already  deal with taxation of  C corporations, LLCs,                                                               
S  corporations,  and  sole  proprietorships,  and  therefore  he                                                               
doesn't think this  is something an accountant would  have a hard                                                               
time helping clients and taxpayers comply with.                                                                                 
4:50:54 PM                                                                                                                    
REPRESENTATIVE  GARA said  his concern  is that  a C  corporation                                                               
might say the  tax is lower under this new  bill and might decide                                                               
to become an  S corporation but recalled that  Mr. Letourneau had                                                               
responded that that would be  difficult.  He asked Mr. Letourneau                                                               
to address C corporations becoming S corporations.                                                                              
MR. LETOURNEAU  answered that the  Alaska state  corporate income                                                               
tax is adopted  by reference to the Internal  Revenue Code (IRC).                                                               
There is a provision that if  a C corporation elects to become an                                                               
S corporation  it is considered  a prospective election  with the                                                               
possibility that the  C corporation could pay a toll  charge.  It                                                               
is  referred  to  as  a  toll charge  in  the  applicable  Alaska                                                               
statute.  It's called a built-in  gains tax, he continued, and is                                                               
a  tax that  Congress has  chosen to  levy when  a C  corporation                                                               
chooses to change  its form of organization.   This would present                                                               
a substantial issue for any  C corporation thinking that it could                                                               
change  to an  S  corporation.   He further  pointed  out that  S                                                               
corporations  are much  more restricted  than  C corporations  in                                                               
terms of their allowable shareholders,  so not all C corporations                                                               
would have the opportunity to convert to S corporations.                                                                        
4:53:14 PM                                                                                                                    
MATTHEW  GARDNER,  Senior  Fellow,   Institute  on  Taxation  and                                                               
Economic Policy, provided invited testimony  on SSHB 36.  He said                                                               
that most  states currently tax the  income of both of  the broad                                                               
types of  businesses that  have been  discussed    C corporations                                                               
through the  corporate income  tax and  pass-through corporations                                                               
through   the  personal   income   tax.     Nine  states   depart                                                               
meaningfully from this,  he continued, and within  that there are                                                               
two states  that exempt all  the income of  pass-through entities                                                               
while  fully taxing  the income  of  C corporations.   Those  two                                                               
states are Alaska and Florida.                                                                                                  
MR. GARDNER  explained that in the  42 states with both  types of                                                               
taxes, the  main concern of  policymakers about  the relationship                                                               
between  these two  types of  business taxes  is whether  the tax                                                               
system  is  prompting businesses  to  make  their entity  choices                                                               
based  on the  tax rules.   If  there is  a big  gap between  the                                                               
personal corporate income  tax rate and the  corporate income tax                                                               
rate,  are companies,  going to  change their  entity form  based                                                               
only on  tax reasons?   In most states  and at the  federal level                                                               
this isn't really  a concern, he said.  Where  this concern crops                                                               
up most is  in exactly the situation that Alaska  finds itself in                                                               
now and has found itself in for  the last 30 years, which is that                                                               
Alaska has  a corporate tax rate  that tops out around  9 percent                                                               
and a pass-through business tax rate of 0 percent.                                                                              
MR.  GARDNER  recounted  that  15  years  ago  a  deputy  revenue                                                               
commissioner argued  that in a place  with no state income  tax a                                                               
person would be  an idiot to start  up a C corporation.   He said                                                               
he thinks  that is overstating  things because there  are non-tax                                                               
reasons, regulatory reasons in  particular, why businesses choose                                                               
the entity  that they choose.   The federal tax system  is a much                                                               
bigger driver to the extent tax rates matter at all.                                                                            
MR.  GARDNER noted,  however, that  other things  equal there  is                                                               
still  a clear  incentive in  place  in Alaska  for companies  to                                                               
shift  toward the  pass-through  form.   He  said  SSHB 36  would                                                               
reduce that incentive by narrowing  the gap between the 0 percent                                                               
rate  that currently  exists on  pass-through businesses  and the                                                               
9.4  percent  top  marginal  rate  that  currently  exists  on  C                                                               
corporations.   The  proposed bill  wouldn't  end that  incentive                                                               
because the  rates aren't exactly  equal between the two,  but it                                                               
would sharply  reduce that  incentive.  The  main benefit  of the                                                               
proposal, he continued, is that it  would get the state of Alaska                                                               
closer to the  principle of tax neutrality  where individuals and                                                               
businesses make their investment  decisions based on the economic                                                               
merits  of  those  choices rather  than  making  those  decisions                                                               
purely  or even  primarily for  tax  reasons, which  is the  main                                                               
point that he wanted to add to the discussion.                                                                                  
4:57:11 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON inquired whether  a corporation, such as                                                               
Coca  Cola, that  is nationally  a C  corporation could  pursue a                                                               
different structure within Alaska.                                                                                              
MR.  GARDNER replied  that such  a  corporation could  not.   The                                                               
choice of entity  for a multi-national company like  Coca Cola is                                                               
a monolithic  choice and  it is  going to  be made  primarily for                                                               
reasons  having to  do with  the federal  tax laws  and with  the                                                               
other regulatory framework within which these companies operate.                                                                
4:58:04 PM                                                                                                                    
CHAIR  KITO stated  that public  testimony  on SSHB  36 would  be                                                               
taken on  [April 3,  2017].   He noted that  the public  can also                                                               
provide written  comments via  email, letter,  or other  means to                                                               
his office and those would be included in the committee packet.                                                                 
4:58:47 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
4:59 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB124 Fiscal Note DCCED-CBPL 3.24.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 124
HB124 Sponsor Statement 3.22.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 124
HB036 Fiscal Note DOR-TAX 3.24.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Sponsor Statement version I 2.28.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Sectional Analysis version I 2.28.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Brief Explanation of Changes ver J to ver I 2.28.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Supporting Documents-Alaska Journal of Commerce Article 3.29.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Supporting Documents-Current Oil Tax Apportionment 3.29.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Supporting Documents-Legislative Research Report 04.131 Corp Taxation in AK 3.29.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Supporting Documents-Side by Side Comparison Current Corporate Tax and HB 36 3.29.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Supporting Documents-Taxes in Other States 3.29.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 version E 3.29.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Brief explanation of changes version I to version E 3.29.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Sectional Analysis version E 3.31.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Sponsor Statement version E 3.29.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 36
HB036 Presentation-Sponsor 4.1.17.pptx HL&C 4/1/2017 1:00:00 PM
HB 36
HB124 Sectional Analysis 4.4.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 124
HB103 Supporting Documents-Letters of Opposition 4.1.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 103
HB103 Supporting Documents-Letters of Support 4.1.17.pdf HL&C 4/1/2017 1:00:00 PM
HB 103