02/28/2025 09:00 AM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB113 | |
| HB34 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 113 | TELECONFERENCED | |
| += | HB 34 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 28, 2025
9:02 a.m.
MEMBERS PRESENT
Representative Zack Fields, Co-Chair
Representative Carolyn Hall, Co-Chair
Representative Ashley Carrick
Representative Robyn Niayuq Burke
Representative Dan Saddler
Representative Julie Coulombe
MEMBERS ABSENT
Representative David Nelson
COMMITTEE CALENDAR
HOUSE BILL NO. 113
"An Act relating to a tax exemption for qualified small
businesses; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 34
"An Act establishing the Alaska Innovation Council; and relating
to financial disclosures for members of the Alaska Innovation
Council."
- MOVED CSHB 34(L&C) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 113
SHORT TITLE: TAX EXEMPTION: SMALL BUSINESS
SPONSOR(s): LABOR & COMMERCE
02/24/25 (H) READ THE FIRST TIME - REFERRALS
02/24/25 (H) L&C, FIN
02/28/25 (H) L&C AT 9:00 AM BARNES 124
BILL: HB 34
SHORT TITLE: AK INNOVATION COUNCIL
SPONSOR(s): HOLLAND
01/22/25 (H) PREFILE RELEASED 1/10/25
01/22/25 (H) READ THE FIRST TIME - REFERRALS
01/22/25 (H) L&C, FIN
01/29/25 (H) L&C AT 3:15 PM BARNES 124
01/29/25 (H) <Bill Hearing Canceled>
02/10/25 (H) L&C AT 3:15 PM BARNES 124
02/10/25 (H) Heard & Held
02/10/25 (H) MINUTE(L&C)
02/14/25 (H) L&C AT 3:15 PM BARNES 124
02/14/25 (H) Heard & Held
02/14/25 (H) MINUTE(L&C)
02/24/25 (H) L&C AT 3:15 PM BARNES 124
02/24/25 (H) Heard & Held
02/24/25 (H) MINUTE(L&C)
02/28/25 (H) L&C AT 9:00 AM BARNES 124
WITNESS REGISTER
TRISTAN WALSH, Staff
Representative Carolyn Hall
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Gave a PowerPoint presentation on HB 113,
on behalf of the House Labor and Commerce Standing Committee,
sponsor, on which Representative Hall serves as co-chair.
BRANDON SPANOS, Deputy Director
Tax Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
113 as an invited testifier.
REPRESENATIVE KY HOLLAND
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions from committee members
as prime sponsor of HB 34.
ACTION NARRATIVE
9:02:37 AM
CO-CHAIR ZACK FIELDS called the House Labor and Commerce
Standing Committee meeting to order at 9:02 a.m.
Representatives Coulombe, Burke, Carrick, Saddler, Hall, and
Fields were present at the call to order.
HB 113-TAX EXEMPTION: SMALL BUSINESS
9:02:50 AM
CO-CHAIR FIELDS announced that the first order of business would
be HOUSE BILL NO. 113, "An Act relating to a tax exemption for
qualified small businesses; and providing for an effective
date."
9:03:14 AM
CO-CHAIR HALL, on behalf of the House Labor and Commerce
Standing Committee, sponsor of HB 113, gave the sponsor
statement [included in the committee packet], which read as
follows [original punctuation provided]:
In 2012, the Alaska Legislature passed Senate Bill 23,
which created the small business tax exemption under
AS 43.20.012 for qualified small businesses and
shortly thereafter, in 2013, passed Senate Bill 83,
which provided for a real on July 1st, 2023.
Following the expiration of the tax exemption in FY
2024, small businesses began to advocate to re-instate
it so that they could continue their operations in
Alaska. The House Labor & Commerce Co-Chairs believe
that helping small businesses thrive and do business
in Alaska allows their payrolls to flow into
communities and their commerce to continue to serve
Alaskans.
Restoring this small business tax exemption will
ensure revenue not collected by the state is returned
several times into local communities.
9:04:08 AM
TRISTAN WALSH, Staff, Representative Carolyn Hall, Alaska State
Legislature, gave a PowerPoint, titled "HB 113 Small Business
Tax Exemption" [hard copy included in the committee packet], on
behalf of the bill sponsor, the House Labor and Commerce
Standing Committee, on which Representative Hall serves as co-
chair. He moved to the second slide of the PowerPoint
presentation, "HB 113 An Act Relating To A Tax Exemption for
Qualified Small Businesses," which read as follows [original
punctuation provided]:
In 2023, a small business tax exemption in AS
43.20.012 was allowed to expire.
The tax exemption applied only to qualified small
businesses under IRS (Internal Revenue Service) code
and had under $50m in assets.
In FY23, this amounted to approximately $2.5m across
47 beneficiaries.
MR. WALSH moved to the third slide and gave an overview of the
eligibility criteria for HB 113, which read as follows [original
punctuation provided]:
-The corporation must be engaged in an active business
as described in 26 U.S.C.A §IRC 1202 (e);
-Corporate assets may not exceed $50m of all
affiliates (80% of which must be used in the active
conduct of one or more trades or businesses.)
-Includes any business except: engineering, law,
health, architecture, accounting, actuarial science,
performing arts, consulting, athletics, financial
services, brokerage services?(See Supporting Document
IRS Federal Tax Code 26 USC 1202 (eff'd 2012), page 5)
MR. WALSH moved to the fourth slide, drawing committee members'
attention to a table graph representing the tax brackets for the
Alaska corporate net income tax. He noted that HB 113
essentially exempts qualified businesses from the Alaska
corporate net income tax under AS.43.20.011.
MR. WALSH, noting that the proposed legislation is a
reinstatement of an expired tax credit from 2012, moved to the
fifth slide to give an overview of additional requirements,
which read as follows [original punctuation provided]:
Qualification will be determined on the first day
of the tax year for which the corporation claims it
qualifies.
Must be incorporated in or authorized to do
business in Alaska.
All corporations that are members of the same
parent subsidiary-controlled group shall be treated as
one corporation.
MR. WALSH moved to the sixth and final slide, drawing committee
members' attention to a table graph representing "Corporate
Income Tax Small Business Exemption History." He noted that the
revenue collected from tax was approximately $2.5 million in
fiscal year 2023 (FY 23). Mr. Walsh concluded by inviting
questions from committee members.
9:07:42 AM
CO-CHAIR FIELDS commented that HB 113 came to fruition after the
Chamber of Commerce and a local small business owner notified
him of the expired tax credit.
9:08:06 AM
REPRESENTATIVE COULOMBE queried the reason for the original 10-
year expiration date.
9:08:26 AM
MR. WALSH explained that the original bill, sponsored by former
Senator Ellis, was Senate Bill 23, passed in 2012 [during the
Twenty-Seventh Alaska State Legislature]; it was an omnibus tax
credit bill, which began as a film tax credit and later included
oil tax credits. He reported that the following year, in 2013,
the provision for a 10-year expiration was added while
correcting interest rates charged to construction companies. He
stated that, in many cases, the legislature might include
expiration provisions so that an issue can be reconsidered at a
future date. He further stated that he did not know the exact
intent behind the original 10-year expiration date.
9:09:31 AM
REPRESENTATIVE COULOMBE asked whether the loss of revenue would
affect any local government.
9:09:41 AM
MR. WALSH offered his belief that the state would be primarily
affected but deferred to Deputy Director Spanos.
9:10:31 AM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue, responded that all the revenue that would be forgone
would otherwise be going into the general fund (GF) and subject
to appropriation.
9:10:57 AM
REPRESENTATIVE CARRICK asked if all of the forgone revenue
normally goes into the UGF (Unrestricted General Fund) and
further asked the total of forgone revenue.
MR. SPANOS confirmed that the total forgone revenue typically
goes to the UGF. He further stated that the total forgone
revenue would be an estimated $2,722,000, based on the last
three fiscal years.
REPRESENTATIVE CARRICK asked for clarification that the
exemptions are based on the Internal Revenue Service (IRS) tax
code.
MR. WALSH answered yes.
9:14:06 AM
REPRESENTATIVE SADDLER asked the reason for removing the sunset
clause and making the proposed legislation "permanent."
9:14:23 AM
CO-CHAIR HALL offered her belief that small businesses in Alaska
should have exemptions to allow more dollars to circulate
locally and contribute to a thriving local economy. She stated
that she is not in favor of a sunset clause.
9:14:49 AM
REPRESENTATIVE SADDLER stated he understood the benefit of
consistent tax credits. He further asked the cost of re-
imposing the tax exemption.
9:15:31 AM
MR. SPANOS replied that the costs to reprogram the system would
include staff time. He noted that, because the exemption had
existed previously, it would not take a lot of time.
9:16:26 AM
REPRESENTATIVE COULOMBE asked for clarification that the
proposed legislation is the same as the prior exemption that
expired.
MR. WALSH responded that the language in HB 113 is the same as
the original legislation from 2012, without the sunset clause.
REPRESENTATIVE COULOMBE asked for an explanation of the salmon,
salmon egg, and shellfish exemptions.
MR. WALSH responded that when the original bill in 2012 was
receiving hearings, there was concern that non-profit hatcheries
were having difficulty with the IRS and the exemptions for
salmon, salmon egg, and shellfish were a result of an effort to
hold the hatcheries harmless.
REPRESENTATIVE COULOMBE asked whether the exemptions were still
necessary.
MR. WALSH replied that he would get back to the committee.
9:18:09 AM
REPRESENTATIVE SADDLER requested information on the effects and
benefits of the proposed legislation.
9:18:34 AM
MR. WALSH replied that he would get back to the committee after
working with the Department of Revenue (DOR). He remarked that,
anecdotally, small businesses reported that they saw an increase
in taxes of roughly $2,000. He stated that for many small
businesses, the repeal of the tax exemption came as a surprise.
9:19:11 AM
CO-CHAIR FIELDS noted that his office would share correspondence
with small businesses regarding the discovery of the tax credit
expiration.
9:19:17 AM
CO-CHAIR HALL offered her belief that it is very important to
create stable fiscal environments for small businesses.
9:19:43 AM
REPRESENTATIVE SADDLER questioned whether DOR's information
technology (IT) systems were up to the task.
9:20:12 AM
MR. SPANOS responded that DOR upgraded its system in 2014 and
then upgraded the system again in 2024. He noted that taxpayers
could use their phones to file tax returns, and the legislature
requires electronic filing. He stated that DOR would need to
make some adjustments to the program but would not need an
entirely new system. He called the current system "state of the
art."
9:21:39 AM
CO-CHAIR FIELDS announced that HB 113 was held over.
HB 34-AK INNOVATION COUNCIL
9:22:01 AM
CO-CHAIR FIELDS announced that the final order of business would
be HOUSE BILL NO. 34, "An Act establishing the Alaska Innovation
Council; and relating to financial disclosures for members of
the Alaska Innovation Council." [Before the committee, adopted
as a working document on 2/24/25, was the proposed committee
substitute (CS) for HB 34, Version 34-LS0353\G, Gunter, 2/24/25
("Version G").]
9:22:12 AM
The committee took an at-ease from 9:22 a.m. to 9:25 a.m.
9:25:44 AM
CO-CHAIR FIELDS invited questions from committee members. There
being no questions, Co-Chair Fields invited amendments from
committee members.
9:26:01 AM
REPRESENTATIVE COULOMBE moved to adopt Amendment [1] to HB 34,
Version G, labeled 34-LS0353\G.3, Gunther, 2/27/25, which read
as follows:
Page 3, line 16:
Delete "at least"
Insert "telephonically or by electronic means"
Page 3, line 17:
Delete "and place"
Delete "and places"
Page 3, lines 18 - 20:
Delete "A member of the council may attend a
meeting telephonically or by electronic means if the
member obtains approval from the chair."
Page 3, line 23:
Delete ", but are"
Insert "and are not"
Page 3, line 24:
Delete "as provided in"
Insert "under"
Page 3, lines 24 - 27:
Delete "A legislator serving on the council is
entitled to only transportation and per diem expenses
as provided in AS 39.20.180 when not otherwise
entitled to transportation or per diem expenses by
another law."
9:26:07 AM
CO-CHAIR FIELDS objected for the purpose of discussion.
9:26:17 AM
REPRESENTATIVE COULOMBE stated her primary concern with the
proposed legislation was the cost. She further explained that
she worked with the sponsor [Representative Holland] on
Amendment 1. She explained that Amendment [1] would change the
meetings under HB 34 from in-person to electronic, removing any
costs associated with travel.
9:26:44 AM
REPRESENATIVE KY HOLLAND, Alaska State Legislature, prime
sponsor of HB 34, stated that he was supportive of Amendment 1
to HB 34. He stated that Amendment 1 would bring clarity to the
proposed legislation.
9:27:02 AM
REPRESENTATIVE CARRICK asked whether the meetings would still
take place in person with the option to telephone in, or whether
the meeting would be entirely electronic. She voiced concerns
about meetings taking place in the same place every time.
REPRESENTATIVE COULOMBE replied that it would be optional to
meet in-person or electronically and that she intended to leave
the decision up to the Alaska Innovation Council proposed under
HB 34.
9:27:43 AM
REPRESENTATIVE SADDLER noted that HB 34 includes provisions
stating that the proposed Alaska Innovation Council shall meet
at least three times a year and does not designate an upper
limit to the number of meetings. He offered his support for
Amendment 1.
9:28:07 AM
CO-CHAIR FIELDS withdrew his objection to the motion to adopt
Amendment 1 to HB 34, Version G. There being no further
objection, Amendment 1 was adopted.
9:28:18 AM
REPRESENTATIVE COULOMBE moved to adopt Amendment [2] to HB 34,
Version G, as amended, labeled 34-LS0353\G.5, Gunther, 2/27/25,
which read as follows:
Page 1, line 11:
Delete "15"
Insert "12"
Page 2, lines 2 - 5:
Delete all material.
Renumber the following paragraphs accordingly.
Page 2, line 6:
Delete "five"
Insert "seven"
Page 2, line 12:
Delete "one member who is"
Insert "two members who are"
Page 2, line 16:
Delete "one member who has"
Insert "two members who have"
Delete "that was"
Page 2, line 17:
Delete "that used"
Insert "using"
Page 2, line 24, following "state;":
Insert "and"
Page 2, lines 25 - 28:
Delete all material.
Renumber the following paragraph accordingly.
Page 2, line 29:
Delete "two members"
Insert "one member"
Page 2, line 30:
Delete "represent"
Insert "represents"
Page 2, line 30, through page 3, line 1:
Delete "; the members appointed under this
paragraph must include one member who is experienced
in applied-research focused on the state and one
member who"
Insert "and"
Page 3, line 3:
Delete "(b)(5) - (10)"
Insert "(b)(3) - (6)"
Page 3, lines 9 - 10:
Delete all material.
Reletter the following subsections accordingly.
Page 3, lines 24 - 27:
Delete "A legislator serving on the council is
entitled to only transportation and per diem expenses
as provided in AS 39.20.180 when not otherwise
entitled to transportation or per diem expenses by
another law."
Page 5, line 18:
Delete "AS 44.33.850(b)(5)"
Insert "AS 44.33.850(b)(3)(A) and (B)"
Page 5, line 20:
Delete "AS 44.33.850(b)(6), (7), and (10)"
Insert "AS 44.33.850(b)(3)(C) and (D)"
Page 5, line 22:
Delete "AS 44.33.850(b)(8) and (9)"
Insert "AS 44.33.850(b)(3)(E) and (4) - (6)"
Page 5, line 24:
Delete "AS 44.33.850(f)"
Insert "AS 44.33.850(e)"
9:28:24 AM
CO-CHAIR FIELDS objected for the purpose of discussion.
REPRESENTATIVE COULOMBE explained that Amendment 2 would reduce
the total membership in the proposed Alaska Innovation Council
by two. She explained that the proposed amendment would remove
the executive director of the Alaska Industrial Development and
Export Authority (AIDEA) or designee and the executive director
of the Alaska Commission on Postsecondary Education (ACPE) or
designee. She stated Amendment 2 would add two additional
members to the private sector, one with a rural focus and one
with an urban focus. She stated that Amendment 2 would also
remove the legislators from the commission and reduce the number
of members from the University of Alaska (UA) from two to one.
She further explained that Amendment 2 would remove the member
from UA who is experienced in applied research focused on the
state. She advised that her intention in reducing the total
membership of the proposed Alaska Innovation Council was to
reduce the cost.
9:29:40 AM
REPRESENTATIVE HOLLAND shared that he is supportive of the
changes in Amendment 2 but stated that the proposed changes are
not without cost. He offered his belief that Alaska's future
would be dependent on how research translates to practical
ventures and the proposed amendment would remove the seat that
would bring in more focused research. He recalled that some of
the goals of the proposed Alaska Innovation Council were to
identify opportunities from commercialized research. He
additionally stated his hope that legislators would be involved
in the proposed Alaska Innovation Council, as well as AIDEA
playing a larger role in supporting economic diversification and
emerging sectors. He acknowledged the desire to reduce the size
of the proposed Alaska Innovation Council, thereby reducing the
fiscal note. He offered his hope in recognizing that the
meetings that would take place under HB 34 would be purposeful
in inviting the individuals that are taken off the council in
the legislative process. He further noted that the proposed
Alaska Innovation Council was not meant to be a tight,
functioning group; rather, it would serve as a convening of
individuals.
9:32:18 AM
REPRESENTATIVE CARRICK clarified that Amendment 2 would result
in a net reduction of three individuals. She further asked how
much the amendment would reduce the fiscal note.
9:32:29 AM
REPRESENTATIVE COULOMBE replied that the proposed amendments
could bring the fiscal note down to $130,000 from the original
fiscal note of $500,000.
9:32:48 AM
CO-CHAIR FIELDS withdrew his objection to Amendment 2 to HB 34,
Version G, as amended.
9:32:55 AM
REPRESENTATIVE CARRICK objected.
REPRESENTATIVE CARRICK stated that she appreciates the work that
the amendment sponsor put into reducing the fiscal note and
shares concern over costs. She further stated that the bill
sponsor made a good argument related to retaining the research
position from UA and the executive director of ACPE, as
essential to the innovation environment. She further clarified
that she would oppose the amendment, with some hesitation, due
to the removal of those two specific aforementioned members.
9:33:43 AM
REPRESENTATIVE COULOMBE reminded members that the proposed
Alaska Innovation Council was being requested "on the states
dime." She asserted that the removed members could be invited
to meetings. She urged committee members to vote yes.
9:34:22 AM
CO-CHAIR FIELDS stated that he understood Representative
Carrick's concerns but would vote yes because he worked with the
amendment sponsor in good faith.
9:34:36 AM
REPRESENTATIVE SADDLER stated that he appreciated the amendment
and felt that it was reflective of the state's fiscal
environment.
REPRESENTATIVE CARRICK maintained her objection to Amendment 2
to HB 34, Version G, as amended.
9:35:31 AM
A roll call vote was taken. Representatives Coulombe, Saddler,
Burke, Hall, and Fields voted in favor of the motion to adopt
Amendment 2 to HB 34, Version G, as amended. Representatives
Carrick voted against it. Therefore, Amendment [2] was adopted
by a vote of 5-1.
9:35:41 AM
REPRESENTATIVE SADDLER shared concerns about the powers of the
proposed Alaska Innovation Council. He further stated that,
philosophically, he felt uncomfortable with the legislature
formalizing and channeling drive for innovation.
9:37:12 AM
CO-CHAIR FIELDS entertained a motion.
9:37:18 AM
CO-CHAIR HALL moved to report CSHB 34, Version 34-LS0353\G,
Gunter, 2/24/25, as amended, out of committee with individual
recommendations and the accompanying fiscal notes.
9:37:33 AM
REPRESENTATIVE SADDLER objected.
A roll call vote was taken. Representatives Burke, Carrick,
Coulombe, Hall, and Fields voted in favor of the motion to
report CSHB 34, Version 34-LS0353\G, Gunter, 2/24/25, as
amended, out of committee with individual recommendations and
the accompanying fiscal notes. Representative Saddler voted
against it. Therefore, CSHB 34(L&C) was reported out of the
House Labor and Commerce Standing Committee by a vote of 5-1.
9:38:18 AM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
[9:38] a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0113A.pdf |
HL&C 2/28/2025 9:00:00 AM |
HB 113 |
| HB 113 Sponsor Statement 2.27.2025.pdf |
HL&C 2/28/2025 9:00:00 AM |
HB 113 |
| HB 113 Ver A Sectional Analysis 2.27.2025.pdf |
HL&C 2/28/2025 9:00:00 AM |
HB 113 |
| HB 113 Supporting Document-PPT 2.27.2025.pdf |
HL&C 2/28/2025 9:00:00 AM |
HB 113 |
| HB 34_HLC_CS.pdf |
HL&C 2/24/2025 3:15:00 PM HL&C 2/28/2025 9:00:00 AM |
HB 34 |
| HB34_G_explanation of changes.pdf |
HL&C 2/24/2025 3:15:00 PM HL&C 2/28/2025 9:00:00 AM |
HB 34 |
| HB 34 Amendment G.3.pdf |
HL&C 2/28/2025 9:00:00 AM |
HB 34 |
| HB 34 Amendment G.4.pdf |
HL&C 2/28/2025 9:00:00 AM |
HB 34 |
| HB 34 Amendment G.5.pdf |
HL&C 2/28/2025 9:00:00 AM |
HB 34 |