Legislature(2003 - 2004)
04/07/2003 03:20 PM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 7, 2003
3:20 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Bob Lynn, Vice Chair
Representative Nancy Dahlstrom
Representative Carl Gatto
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 194
"An Act creating a tax credit under the Alaska Net Income Tax
Act for contributions to regional development organizations; and
providing for an effective date."
- MOVED CSHB 194(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 148
"An Act instructing the State Board of Registration for
Architects, Engineers, and Land Surveyors to adopt minimum
technical standards relating to the practice of surveying."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 218
"An Act relating to the exercise of peace officer powers by
employees of the Alcoholic Beverage Control Board, and
continuing the existence of the Alcoholic Beverage Control
Board."
- BILL HEARING POSTPONED
PREVIOUS ACTION
BILL: HB 194
SHORT TITLE:REGIONAL DEVELOPMENT ORG TAX CREDIT
SPONSOR(S): REPRESENTATIVE(S)ANDERSON
Jrn-Date Jrn-Page Action
03/14/03 0541 (H) READ THE FIRST TIME -
REFERRALS
03/14/03 0541 (H) CRA, L&C, FIN
04/01/03 (H) CRA AT 8:00 AM CAPITOL 124
04/01/03 (H) Moved Out of Committee
MINUTE(CRA)
04/02/03 0735 (H) CRA RPT 2DP 5NR
04/02/03 0735 (H) DP: ANDERSON, MORGAN; NR:
KOTT,
04/02/03 0735 (H) SAMUELS, WOLF, KOOKESH,
CISSNA
04/02/03 0735 (H) FN1: ZERO(CED)
04/02/03 0735 (H) FN2: ZERO(REV)
04/07/03 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
MARK GRABER, Auditing Manager
Division of Taxes
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Answered questions on HB 194.
MERTEN BENGEMANN-JOHNSON, Vice President
Anchorage Economic Development Corporation [AEDC]
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 194, noting that
AEDC helped recruit Federal Express to locate at the Anchorage
airport.
LEE THIBERT, Chief of Staff
Chugach Electric Association
Anchorage, Alaska
POSITION STATEMENT: Voiced support for HB 194 and noted that
ARDORs such as AEDC provide valuable support to businesses.
CARL BERGER, Executive Director
Lower Kuskokwim Economic Development Council
Bethel, Alaska
POSITION STATEMENT: Testified in support of HB 194 and
described his council's efforts to promote local fishing and
tourism.
TIM ROGERS, Legislative Program Coordinator
Municipality of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Spoke in support of HB 194, explaining that
the municipality supports and funds the work of the Anchorage
Economic Development Corporation.
ACTION NARRATIVE
TAPE 03-30, SIDE A
Number 0001
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:20 p.m. Representatives
Anderson, Lynn, Dahlstrom, and Crawford were present at the call
to order. Representatives Gatto, Rokeberg, and Guttenberg
arrived as the meeting was in progress.
HB 194-REGIONAL DEVELOPMENT ORG TAX CREDIT
Number 0056
CHAIR ANDERSON announced that the only order of business would
be HOUSE BILL NO. 194, "An Act creating a tax credit under the
Alaska Net Income Tax Act for contributions to regional
development organizations; and providing for an effective date."
CHAIR ANDERSON, as sponsor of HB 194, testified that several
corporations approached him, noting that many companies donate
to the state's 13 ARDORs [Alaska regional development
organizations] but do not receive a tax credit. He explained
that ARDORs do a variety of economic projects, from recycling to
port development. He noted that this bill gives Alaskan
corporations a tax credit for a donation up to $10,000 to an
ARDOR, but the bill does not change the existing $150,000 cap on
tax credits. He said the $10,000 tax credit does not take
revenue from the general fund. The bill has two zero fiscal
notes.
Number 0288
CHAIR ANDERSON moved to adopt the committee substitute (CS) for
HB 194, Version 23-LS0773\H, Kurtz, 4/4/03, as the working
document. Hearing no objection, Version H was before the
committee.
CHAIR ANDERSON explained the provisions of the proposed CS. The
Department of Community & Economic Development asked that the
following language be inserted. On page 3, lines 9-10 and lines
16-17, the CS reads in part:
For purposes of this subsection, "regional development
organization" means a nonprofit organization or
nonprofit corporation that ... (3) has been designated
by the Department of Community and Economic
Development as a regional development organization.
CHAIR ANDERSON commented that this change assures that a company
gets a tax credit for a contribution to one of the state's 13
designated ARDORs. He quoted Mayor George Wuerch, Municipality
of Anchorage, who wrote in his [March 28, 2003] letter of
support that "Without economic development, we cannot hope to
solve the state's fiscal dilemma nor can we ensure a vibrant
future for the state."
CHAIR ANDERSON listed the 13 ARDORs: Anchorage Economic
Development Corporation, Arctic Development Council, Bering
Straits Development Council, Copper Valley Economic Development
Council, Fairbanks North Star Borough Economic Development
Commission, Interior Rivers Resource Conservation and
Development Council, Kenai Peninsula Borough Economic
Development District, Lower Kuskokwim Economic Development
Council, Mat-Su Resource Conservation and Development Inc.,
Northwest Arctic Borough Economic Development Commission, Prince
William Sound Economic Development District, Southeast
Conference, and Southwest Alaska Municipal Conference. [The
work of the various ARDORs] reaches the entire state, he added.
Number 0480
REPRESENTATIVE CRAWFORD asked if these companies already take
full advantage of the $150,000 tax credit cap, would
[contributions to other charities be reduced] because of the
addition of ARDORs [to the tax credit law].
CHAIR ANDERSON responded that it's hard to predict.
Number 0536
REPRESENTATIVE CRAWFORD asked if HB 194 would hurt the United
Way. He said there's a social good in developing new
businesses. But when legislators created the $150,000 tax
credit, did they consider [ARDORs] as charities the same as food
banks or the United Way, he asked.
CHAIR ANDERSON noted that this [additional type of tax credit]
forces charities to compete for donations, and he said he
applauds that. Charities should compete to prove themselves
efficient and worthy, he said; ARDORs are equally important in
terms of development.
Number 0672
REPRESENTATIVE CRAWFORD asked if only $10,000 out of $150,000
cap could be given to an ARDOR.
Number 0765
MARK GRABER, Auditing Manager, Division of Taxes, Department of
Revenue, said there is a flat $10,000 limit for each
corporation, which could be divided among several ARDORs. But a
corporation can't get more than a $10,000 credit [for this type
of donation].
REPRESENTATIVE GATTO stated that a tax credit is a tax
forgiveness, dollar for dollar - a great deal for corporations.
He said corporations can use tax money that would go to the
state to donate to an ARDOR of their choice. How does the
public benefit, he asked; what is the advantage to the citizen
and to the state. He noted that the advantage to the
corporation is enormous.
Number 0903
MERTEN BENGEMANN-JOHNSON, Vice President, Anchorage Economic
Development Corporation [AEDC], stated that his organization
supports HB 194. He said he believes this bill will have a
positive impact on economic development. It will make it easier
for AEDC and other regional development organizations to solicit
contributions from corporate taxpayers to support local economic
development efforts. HB 194 will give regional development
organizations an incentive to build strong relationships with
local businesses. It may have a positive impact, not just on
the state budget, but also on local budgets by encouraging
economic growth, he testified.
Number 1016
REPRESENTATIVE GATTO questioned how the state gets a tool to
help develop businesses with HB 194.
MR. BENGEMANN-JOHNSON said this [new type of tax credit] is not
a matter of taking money away from the state. The $150,000
limit remains in place. The money would be used to recruit
businesses into the state and to help retain and expand existing
businesses, all activities that would increase the tax base, he
said.
REPRESENTATIVE GATTO said he would prefer to invest the $10,000
himself.
Number 1129
MR. BENGEMANN-JOHNSON explained that the AEDC is a public-
private partnership. The group receives funds to support
economic development from the [Municipality] of Anchorage, the
State of Alaska, and from private corporations. The AEDC, for
example, successfully recruited Federal Express to locate at the
Ted Stevens Anchorage International Airport.
CHAIR ANDERSON listed the letters of support received for HB 194
from various ARDORs, local governments, and businesses.
Number 1224
REPRESENTATIVE GATTO noted that the letters are from groups who
will benefit from the bill. He said he does not object to the
bill, but he disagrees that these corporations are allowed to
direct their tax money, something he said he'd like to be able
to do. Taxpayers are not allowed to chose how their tax money
is spent on the federal level, but it's okay [for corporations]
to do it on the state level, he said.
CHAIR ANDERSON reviewed the concepts behind HB 194. He
suggested that if Representative Gatto objects to the concept of
the tax credit, he needs a different bill to deal with that
objection. This bill simply says that a company can receive
another type of tax credit under the $150,000 tax cap.
Number 1421
LEE THIBERT, Chief of Staff, Chugach Electric Association,
explained that his company is the largest electric utility in
Alaska, serving 60,000 member-owners. He said that roughly half
of the retail load is from commercial customers, and these
small- and medium-sized businesses benefit the most from overall
economic development. He said that organizations such as the
Anchorage Economic Development Corporation provide valuable
information to businesses who are trying to expand and attract
new markets. Chugach Electric supports HB 194.
REPRESENTATIVE ROKEBERG asked whether Chugach Electric qualifies
for a tax credit [as a business] or whether it is a nonprofit
organization.
MR. THIBERT explained that Chugach Electric is a tax-exempt
organization so it will receive no direct benefit from HB 194.
Number 1506
CARL BERGER, Executive Director, Lower Kuskokwim Economic
Development Council, testified that the council is a very small
organization; he is the sole employee. The council operates in
Southwest Alaska and represents Bethel and 26 other villages
that are accessible only by air. The program has operated since
1992. He noted that the council receives $47,000 in state
funding and raises other funds to keep the program functioning.
The cost of doing business is much higher [in this part of the
state]. The new tax credit in HB 194 gives him one more tool,
but there's no guarantee that he'll get such a contribution.
Many local businesses assist with cash contributions as well as
in-kind contributions for the various activities promoted in the
region.
CHAIR ANDERSON noted the types of tax credits currently
available in state law: insurance tax credits for gifts to
colleges, insurance tax credit for gifts to the Alaska Fire
Standards Council, income tax education credit, oil or gas
producer education credit, oil or gas property education credit,
mining business education credit, fisheries business education
credit, and fisheries resource landing tax education credit.
Number 1647
MR. BERGER responded to two questions from Representative
Rokeberg about his council. The annual budget last year was
$74,170; $26,100 of that was cash contributions because of an
inadequate state grant. He described several successful
projects. The council provided ice bags to commercial
fishermen, which improved the quality of the catch, thereby
earning a slightly higher price. With the low return of fish in
the region, he said, there have been disaster declarations for
the last four out of five seasons. Another project involved the
visitor industry. The council sponsored familiarization trips
for travel industry representatives. He explained that these
visits demonstrated the local attractions of sport fishing,
river rafting, and bird watching. He indicated a small increase
in the number of visitors to the region; every new visitor
brings money to the region.
CHAIR ANDERSON noted these tax credits are related to business
enterprise and resource development.
Number 1902
MR. BERGER explained that his group is not a charity. Answering
two questions from Representative Guttenberg, he explained that
the council is a nonprofit with 501(c)(3) status from the IRS.
The council does not earn any income through gaming.
REPRESENTATIVE GUTTENBERG asked Mr. Berger to describe the
economics of the icing project and inquired whether it provides
enough of an enhanced product to pay for itself.
MR. BERGER replied that the council has received funds from
groups as diverse as the Alaska Conservation Foundation,
ExxonMobil Corporation, and the U.S. Department of Agriculture.
Most of the funds go into equipment for fishermen to use without
charge, for example, the flesh ice bags. In this fishery, he
noted, people use open skiffs, pick fish from the nets, put them
right into the bags filled with slush ice, then transport the
fish directly to the buyer. The single buyer, Coastal Village
Fisheries, insists on iced fish but is paying several cents more
a pound than it did in the past. This project gives a return to
the fishermen, he said, and it makes a good quality product.
The fishermen face tremendous shipping prices getting their fish
to market.
Number 2078
TIM ROGERS, Legislative Program Coordinator, Municipality of
Anchorage, explained that the municipality supports AEDC with
about $450,000 per year from tax revenues. He said this public-
private partnership has successfully promoted economic
development. AEDC has been instrumental in attracting Federal
Express, UPS, and several smaller businesses. He noted that HB
194 will not dilute the revenue that the state receives from
[corporate income] taxes.
REPRESENTATIVE GATTO quoted a letter of support from an ARDOR
that noted it had made 150 small business loans in order to
stimulate business opportunities. He asked if there is room for
abuse in loans and questioned who oversees these activities.
MR. ROGERS replied that AEDC does not make loans. Primarily it
attracts new businesses to Anchorage and provides technical
assistance to existing businesses.
CHAIR ANDERSON noted that Representative Gatto was quoting a
[March 26, 2003] letter of support from Mayor Roswell Schaeffer
Sr., of the Northwest Arctic Borough.
Number 2195
REPRESENTATIVE GUTTENBERG asked whether a corporation getting
this tax credit also gets a deduction off its federal return.
MR. GRABER, Department of Revenue, responded that the federal
rules operate independently of the state tax credit. Whether
the corporation receives a federal deduction depends on whether
the ARDOR has a 501 [charitable organization] federal
designation. He answered another question from Representative
Crawford, saying that the corporation could get a tax credit
from the state and a deduction from the federal government [for
the same contribution to an organization with a 501 charitable
status].
Number 2277
MR. GRABER, at the request of Chair Anderson, clarified that the
education credit currently in the statute goes to four-year
colleges in Alaska and is limited to $150,000. Under the
$150,000 cap in state law, there are three types of current
credits: the education credit, a credit to the Alaska Fire
Standards Council, and a new third credit for the Alaska
Veterans Memorial Fund. HB 194 would add a fourth credit type
for ARDORs. [Contributions to ARDORs] shouldn't affect
charitable contributions at all, but there might be an [an
impact on donations to] colleges and universities.
CHAIR ANDERSON reiterated that corporate donations to charities
are not affected by this bill.
TAPE 03-30, SIDE B
Number 2360
REPRESENTATIVE ROKEBERG asked Mr. Graber to clarify whether a
corporation is double-dipping with a contribution to an ARDOR -
if it has 501 status - because it receives both a state tax
credit and a deduction on its federal return. He asked if the
language on page 3, lines 18-21, prevents such double dipping.
This language reads in part:
(b) A contribution claimed as a credit under this
section may not
(1) be claimed as a credit under another
provision of this title;
(2) also be allowed as a deduction under 26
U.S.C. 170 against the tax imposed by this chapter;
MR. GRABER replied that this language means for Alaska income
tax purposes, a corporation cannot take a [state] charitable
deduction [in addition to a state tax credit]. He added that
Alaska has no say over whether the corporation claims a federal
deduction. In response to a question from Representative
Rokeberg, he surmised that the federal government wouldn't care
about Alaska's tax credits; states commonly treat charitable
contributions differently than the federal government. He
explained that the section of the bill references the federal
revenue code because [AS 43.20], the Alaska Net Income Tax Act,
adopts the Internal Revenue Code with some exceptions. That
rule says that if a business takes a credit for an Alaskan
purpose, the business won't get the deduction on the Alaska
income tax return.
Number 2218
REPRESENTATIVE GUTTENBERG asked if HB 194 throws ARDORs into the
same pool [competing for donations] as [charitable organizations
such as] Big Brothers Big Sisters.
REPRESENTATIVE ROKEBERG noted that a business can "double-dip"
by donating to a charity such as Big Brothers Big Sisters,
getting a deduction on both state and federal returns; but the
business doesn't also get a tax credit on its Alaska income tax.
He confirmed with Mr. Graber that HB 194 involves a tax credit
instead of a tax deduction, so it's a dollar for dollar
reduction in the taxes owed, rather than a reduction of its
adjusted gross income. He noted that the tax credit offered for
a contribution to an ARDOR is a more inviting donation for
corporations because they get a better tax benefit.
CHAIR ANDERSON noted, as a board member of [the Anchorage] Big
Brothers Big Sisters, that various corporations regularly donate
to this organization. He said he did not think they would stop
giving because of HB 194.
CHAIR ANDERSON closed the public testimony.
Number 2000
REPRESENTATIVE DAHLSTROM moved to report the proposed CSHB 194,
Version 23-LS0773\H, Kurtz, 4/4/03, out of committee with
individual recommendations and the two accompanying zero fiscal
notes.
Number 1985
REPRESENTATIVE GUTTENBERG objected. He noted that all the
sources of funding for nonprofits - the legislature, the federal
government, and other grantors - are decreasing, and HB 194 is
one more consideration [making it harder for nonprofits to raise
money]. Development is important to get out of the [economic]
hole, but he said, he's not sure where the return [to the state]
is on HB 194.
REPRESENTATIVE CRAWFORD said HB 194 is a zero gain under the
existing $150,000 tax credit. He said the fact that businesses
making donations get a dollar for dollar credit for ARDORs but
only a deduction for charities disturbs him greatly. However,
he noted, HB 194 is the wrong vehicle for looking at the whole
tax credit issue.
Number 1903
REPRESENTATIVE GUTTENBERG removed his objection.
Number 1893
With no further objection, CSHB 194(L&C) passed out of the House
Labor and Commerce Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:20 p.m.
| Document Name | Date/Time | Subjects |
|---|