Legislature(1995 - 1996)
03/17/1995 08:37 AM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
March 17, 1995
8:37 a.m.
MEMBERS PRESENT
Representative Joe Green, Co-Chairman
Representative Bill Williams, Co-Chairman
Representative John Davies
Representative Pete Kott
MEMBERS ABSENT
Representative Scott Ogan, Vice Chairman
Representative Alan Austerman
Representative Ramona Barnes
Representative Eileen MacLean
Representative Irene Nicholia
COMMITTEE CALENDAR
HB 59: "An Act relating to raffles and auctions of certain
permits to take big game; and providing for an effective
date."
HEARD AND HELD
HB 197: "An Act providing for exploration incentive credits for
activities involving locatable and leasable minerals and
coal deposits on certain land in the state; and providing
for an effective date."
HEARD AND HELD
WITNESS REGISTER
REPRESENTATIVE CON BUNDE
Alaska State Legislature
State Capitol, Room 108
Juneau, AK 99801
Phone: 465-4843
POSITION STATEMENT: Prime Sponsor of HB 59
RANDY WILD, Representative
Alaska Fish and Wildlife Safeguard
P.O. Box 56345
North Pole, AK 99705
Phone: 488-0541
POSITION STATEMENT: Supported HB 59
JOHN HARTWICK, Representative
Alaska Fish and Wildlife Safeguard
3432 Sharon Road
North Pole, AK 99705
Phone: 488-6593
POSITION STATEMENT: Supported HB 59
EDDIE GRASSER, Legislative Director
Alaska Outdoor Council
P.O. Box 2193
Palmer, AK 99645
Phone: 745-3772
POSITION STATEMENT: Supported HB 59
GERON BRUCE, Representative
Alaska Department of Fish and Game
P.O. Box 25526
Juneau, AK 99811-5526
Phone: 465-4100
POSITION STATEMENT: Supported HB 59 with amendments
LISA BLACKER, Representative
Alaska Environmental Lobby
P.O. Box 22151
Juneau, AK 99802
Phone: 463-3366
POSITION STATEMENT: Opposed HB 59
REPRESENTATIVE RICHARD FOSTER
Alaska State Legislature
State Capitol, Room 410
Juneau, AK 99801
Phone: 465-3789
POSITION STATEMENT: Prime Sponsor of HB 197
JOHN WALSH, Aide
Representative Richard Foster
State Capitol, Room 410
Juneau, AK 99801
Phone: 465-3789
POSITION STATEMENT: Answered questions on HB 197
REPRESENTATIVE AL VEZEY
Alaska State Legislature
State Capitol, Room 216
Juneau, AK 99801
Phone: 465-3719
POSITION STATEMENT: Co-Sponsor of HB 197
DAVID ROGERS, Representative
Council of Alaska Producers
P.O. Box 33932
Juneau, AK 99803
Phone: 586-1107
POSITION STATEMENT: Answered questions on HB 197
PREVIOUS ACTION
BILL: HB 59
SHORT TITLE: RAFFLE OR AUCTION OF BIG GAME PERMITS
SPONSOR(S): REPRESENTATIVE(S) BUNDE,Toohey
JRN-DATE JRN-PG ACTION
01/06/95 36 (H) PREFILE RELEASED
01/16/95 36 (H) READ THE FIRST TIME - REFERRAL(S)
01/16/95 36 (H) STATE AFFAIRS, RESOURCES, FINANCE
01/20/95 105 (H) COSPONSOR(S): TOOHEY
03/07/95 (H) STA AT 08:00 AM CAPITOL 102
03/07/95 (H) MINUTE(STA)
03/08/95 634 (H) STA RPT 5DP 2NR
03/08/95 634 (H) DP: JAMES,PORTER,GREEN,WILLIS,OGAN
03/08/95 634 (H) NR: IVAN, ROBINSON
03/08/95 634 (H) FISCAL NOTE (F&G)
03/17/95 (H) RES AT 08:00 AM CAPITOL 124
BILL: HB 197
SHORT TITLE: MINERAL EXPLORATION INCENTIVE CREDITS
SPONSOR(S): REPRESENTATIVE(S) FOSTER,Vezey
JRN-DATE JRN-PG ACTION
02/27/95 487 (H) READ THE FIRST TIME - REFERRAL(S)
02/27/95 487 (H) RESOURCES, FINANCE
03/08/95 (H) RES AT 08:00 AM CAPITOL 124
03/08/95 (H) MINUTE(RES)
03/17/95 (H) RES AT 08:00 AM CAPITOL 124
ACTION NARRATIVE
TAPE 95-35, SIDE A
Number 000
The House Resources Committee was called to order by Co-Chairman
Green at 8:37 a.m. Members present at the call to order were
Representatives Kott, Davies and Green. Members absent were
Representatives Williams, Ogan, Austerman, Barnes, MacLean and
Nicholia.
HRES - 03/17/95
HB 59 - RAFFLE OR AUCTION OF BIG GAME PERMITS
REPRESENTATIVE CON BUNDE, PRIME SPONSOR, stated HB 59 is a revenue
generating piece of legislation. HB 59 would allow Alaska to join
a number of other states in issuing Governor's tags. He said there
are philanthropic hunters and people who feel a strong
responsibility to contribute to wildlife conservation, habitat
restoration, and sound fish and game management. In other states,
several hundred thousand dollars have been raised by auctioning off
sheep permits, elk permits, etc.
REPRESENTATIVE BUNDE explained the Alaska Department of Fish and
Game (ADF&G) has calculated that $25,000 will be raised the first
year, using this process, going up to $100,000 in future years. He
said a representative from the Outdoor Council has said his
organization alone, through these tags, has generated $100,000 for
the North American Foundation for Sheep. He felt that by using
this process, funds could be generated for ADF&G. He explained HB
59 allows the Governor's tags to consist of two harvest permits
each for dall sheep, bison, musk ox, brown or grizzly bear, moose,
caribou and wolf. He noted these tags will not affect the number
of permits made available to Alaskan residents.
REPRESENTATIVE BUNDE said people in the guiding industry have
expressed this program would offer a great opportunity to guide
these kinds of hunters, probably gratis, just for the referral
business they could potentially receive.
CO-CHAIRMAN GREEN noted for the record that Representative Williams
had joined the committee.
REPRESENTATIVE BUNDE reviewed two amendments he wished to offer.
The first amendment is on page 1, lines 12-14: Delete "(1) an
amount not to exceed 50 percent of the net proceeds, which the
qualified organization shall use to promote fish and game law
enforcement, and (2)". He said further research has shown this
verbiage would cause problems with the procurement code. He
explained these kinds of state sponsored events are generally
limited to 10 percent of the net proceeds and if the amount becomes
more than that, the procurement code goes into effect.
REPRESENTATIVE BUNDE stated amendment number two is on page 2, line
9: Delete "ethical", and on page 3, line 5: Delete "ethical". He
noted there has been discussion around the fact that the word
ethical is a fuzzy word, open to many interpretations and would
best not be in statute because it speaks to hunting which is
regulated by the applicable laws and those laws demand ethical
behavior.
Number 187
RANDY WILD, REPRESENTATIVE, ALASKA FISH AND WILDLIFE SAFEGUARD
(AF&WS), testified via teleconference and stated when this
legislation was started previously, AF&WS worked with Senator
Frank. He said AF&WS could not say that legislation was for
wildlife safeguard but added that AF&WS is the only organization
qualified and is established to promote fish and wildlife or fish
and game law enforcement. He noted that original statute is in HB
59 on page 1, line 4, AS 16.05.343. He explained that
Representative Bunde has basically attached paragraphs (b) and (c)
to the original legislation.
MR. WILD told committee members in the past AF&WS has provided
bison raffles in excess of $60,000. He expressed opposition to the
deletion contained in amendment number one because the procurement
code does say for the use of an individual organization. He said
the 50 percent, as written, states "which the qualified
organization shall use to promote fish and game law enforcement".
He stated it is the intent of Safeguard to use that for payment of
reward proceedings. He urged the committee to leave the language
in for that purpose.
MR. WILD said Colonel John Glass, Director, Division of Fish &
Wildlife Protection, believes the best way to enhance the state's
enforcement ability is to have organizations, such as Safeguard, to
have the ability to get out to the public, bring an awareness
forward, and use self-policing type avenues, which is being
incorporated currently by providing a 1-800 number. He stressed to
continue Safeguard's program, the organization must have some type
of funding. He explained that Safeguard is not funded by any kind
of statute and the state courts are no longer allowing the
organization to receive various fines. In the past, the court
system allowed a person to pay a donation to Safeguard in lieu of
a fine, which is not now available.
MR. WILD pointed out if HB 59 could be amended to include one each
of the big game species listed in paragraph (b), in paragraph (a)
and retain the 50 percent for the payment of rewards, the program
could be funded. He said members of Safeguard volunteer because
they feel it is a good and necessary program. The money given to
the state is a side note for Safeguard, but a very good benefit.
He stated on January 5, 1994, Safeguard deposited $27,182 with the
ADF&G in proceeds from the bison raffle. He stressed Safeguard
supports the state in many ways including promoting the proper use
of game and providing funds as well. He urged committee members to
not delete the 50 percent of what is used to pay rewards and to
bring the big game species listed in paragraph (b) to paragraph (a)
so the program can be funded.
Number 268
REPRESENTATIVE BUNDE said he totally supports Safeguard and feels
they do a great job. He stated he would prefer to leave the 50
percent in the bill because it is money well spent. He noted if
the state had to pay for the hours the volunteers put in, it would
involve thousands and thousands of dollars. He explained the
department felt the 50 percent would not fly in the courts and
would lose ultimately. He knows Safeguard needs more money because
they cannot generate enough money just on a single bison raffle.
REPRESENTATIVE BUNDE called members attention to page 2, lines 7
and 8 where it says "a qualified organization" means a nonprofit
corporation established to promote fish and game law enforcement.
He said in his mind that qualifies Safeguard to apply for the
permits which are listed, as well as apply for their original bison
permit. He stated while the bill does not give Safeguard the 50
percent and all the tags, it does allow them to apply for the tags
plus have the bison raffle. He hoped that was a reasonable
compromise.
Number 298
JOHN HARTWICK, REPRESENTATIVE, ALASKA FISH AND WILDLIFE SAFEGUARD,
testified via teleconference. He stated last fall while hunting he
stopped at several of the fish and game offices in the states of
Montana and Wyoming and talked to them about their Safeguard
programs. Both states have state funded programs for wildlife
Safeguard. In Wyoming, the funding is through direct funding from
the Department of Fish and Game and in Montana, the program is
funded by taking one dollar off the top of every hunting license
sold. He noted that fund-raising has been a continual problem. He
stressed if HB 59 can be passed, preferably with the 50 percent
retained, it will allow Safeguard to continue in Alaska and provide
great benefits to all citizens.
Number 324
EDDIE GRASSER, LEGISLATIVE DIRECTOR, ALASKA OUTDOOR COUNCIL (AOC),
testified via teleconference and said AOC supported this
legislation last year and supports it this year. He agreed with
the comments of Mr. Wild and Mr. Hartwick regarding the 50 percent
retention. He wondered if it was ADF&G or the Department of Public
Safety that had problems with the 50 percent. He stated last year
when he talked to the ADF&G, there was no problem with the 50
percent.
MR. GRASSER said another concern is on page 2, lines 7-10 where it
reads "established to promote fish and game law enforcement or an
organization established to promote management of hunted game
species". He stated AOC's concern is the first qualifier is not
linked up with the second. He pointed out AOC would like Safeguard
to continue their program. AOC's concern is that other
organizations, that may be nonhunting or even anti-hunting, could
claim to promote fish and game wildlife enforcement.
Number 358
GERON BRUCE, REPRESENTATIVE, ADF&G, explained the question about
the 50 percent came up in the prior committee HB 59 was heard in.
The question was asked if the 50 percent would constitute a
diversion of fish and game funds. The department reviewed the
question and contacted the federal aid administrator, who informed
the department that a level at 50 percent could be construed as a
diversion, and recommended the 50 percent be adjusted to 10
percent.
MR. BRUCE said in looking at the fees organizations get for
providing the service, it has to be viewed like a vendor selling a
fishing or hunting license--they are allowed to keep a certain
percentage of the cost of the license for their own use. He stated
the reason for the concerns is the fish and game fund is one of
few, if not the only, dedicated fund in state government. The
reason the fish and game fund is a dedicated fund is because there
is a provision in the state Constitution which says funds can be
dedicated if federal laws require it in order to receive federal
funds. He noted that is exactly the case in this situation.
MR. BRUCE explained federal aid and restoration, for both sport
fish and wildlife, requires that all license fees be used for the
administration of the agency and the conduct of the programs, on
behalf of fish and wildlife resources for recreational folks, and
that the programs be directed at those. He said a small percentage
going to an organization could be viewed as a fee for conducting a
service and that could be part of the agency's administrative
function which it has contracted to a private party. However, when
it goes beyond that to the point the 50 percent does, that arena is
left and you begin to go into a point where you are starting to
provide funds out of the fish and game fund for other
organizations. He noted, regrettably, that is what led the
department to the recommendation of 10 percent instead of 50
percent.
MR. BRUCE stressed the department supports and highly values the
work Wildlife Safeguard does and wants to see it continued. He
said in Section (b) of the bill, the department supports adding
language that would make it clear that an organization like
Safeguard, which is involved in promoting law enforcement
activities related to hunting and fishing, would be a qualified
organization and able to auction off the two harvest permits per
year.
Number 420
REPRESENTATIVE BUNDE stated the agencies who will be allowed to
raffle the permits will be chosen by the department. He thought
there could be some level of confidence that the commissioner and
the department would not issue a permit to someone who is working
counter to the goals of sound fish and game management and the use
of game populations for hunting.
CO-CHAIRMAN GREEN noted for the record that Representatives VEZEY
and FOSTER were present.
REPRESENTATIVE JOHN DAVIES asked if there is anything in fish and
game regulations preventing the department from using an equivalent
amount raised through a raffle contractually to an organization
like Safeguard to provide a service.
MR. BRUCE responded he did not know. He said he would look into it
and get back to him.
REPRESENTATIVE DAVIES felt what Safeguard does is consistent with
the overall mission of the department and the department could
earmark an amount equivalent to the amount raised in this way for
that purpose and then make it available through a competitive
contract.
REPRESENTATIVE BUNDE stated he would like to see Safeguard funded
out of state monies. He said it was felt that taking funding out
of the appropriation process was wise because with the challenges
faced today, that money would be jeopardized and would not involve
a consistent cash flow from year to year. He pointed out Safeguard
has a little more control by raising their own money.
REPRESENTATIVE DAVIES said he understood that concern but on the
other hand, he would not regard his suggestion so much in the line
of general funds as in the line of program receipts. He felt the
department could determine a way to make it happen legally, in such
a way that it would not be that different than what is proposed in
HB 59.
CO-CHAIRMAN GREEN recalled there was another concern in Fairbanks
on page 2, line 8 about the word "or". He assumed that "or" was in
there so as not to be so restrictive as to require both conditions
be met.
REPRESENTATIVE BUNDE stated he reads it as either or not
restrictive. He said he would take the question back to the bill
drafter.
Number 485
LISA BLACKER, REPRESENTATIVE, ALASKA ENVIRONMENTAL LOBBY (AEL),
said AEL does not strongly oppose the intent of HB 59. However,
AEL feels that if the purpose of HB 59 is to raise money for the
fish and game fund, then all nonprofits should have an opportunity
to participate in the extension of this program. She said page 2,
lines 9-11, opens it up, beyond the Safeguard organization, to
other nonprofits to use this as a fund raiser for their own
organization. She stressed if that is the case, AEL feels it is
important to not be exclusive and all nonprofits should have an
opportunity to raise money for the fish and game fund and should be
able to have an opportunity to raise money for themselves.
REPRESENTATIVE PETE KOTT noted that on page 2, line 13, it
indicates brown or grizzly bear. He wondered if that meant either
or, or both.
REPRESENTATIVE BUNDE replied the term is brown or grizzly because
in many cases they are the same or close to the same. He stated
two separate species are not being referred to.
REPRESENTATIVE KOTT asked if there is a difference between the two.
REPRESENTATIVE BUNDE responded the generally accepted definition
indicates a grizzly bear is defined by where it lives. If it is
within 75 miles of salt water, it is a brown bear and if it is
further away, it is a grizzly bear. He said the bear's diet
contributes to the size differences.
REPRESENTATIVE AL VEZEY stated any bear north of the 63rd parallel
is considered a grizzly.
REPRESENTATIVE BUNDE added the definition he uses is that which the
different hunting organizations use when they record trophies.
REPRESENTATIVE KOTT asked the sponsor if he had thought about
including a sealed bid along with the auction or raffle.
REPRESENTATIVE BUNDE said the definition of auction could be
construed to be a silent auction as well as a cry out auction. He
stated in the past when these auctions occur, there is a large
convention of hunters who take pride in spending money to support
their sport. He noted in many cases, the cry out auction provides
some psychological rewards for those who spend the money. He
suspected in many cases a raffle would raise the most money. He
pointed out it is in the organization's best interest to choose the
vehicle which will raise the largest amount of money because they
are in for a percentage of the amount raised.
REPRESENTATIVE KOTT agreed with that. He said if it is desired,
outsiders' sealed bids might generate more money.
HRES - 03/17/95
HB 197 - MINERAL EXPLORATION INCENTIVE CREDITS
Number 576
REPRESENTATIVE RICHARD FOSTER, PRIME SPONSOR, said HB 197 offers an
incentive to the mining industry to not only continue their
exploration but also possibly expand it. He stated under HB 197,
exploration dollars invested in development of a producing mine
would be eligible for credit against taxes due as a result of
production revenues. If the prospect never advances to the
production phase, no credits are released. He explained without
tax incentives, current trends will most certainly continue. He
added HB 197 is priority one for the Alaska Minerals Commission.
He noted HB 197 is the same bill he introduced two years ago, which
made its way through the House and Senate and got lost in the last
five minutes of adjournment.
Number 600
JOHN WALSH, AIDE, REPRESENTATIVE RICHARD FOSTER, stated a variety
of issues raised at the last hearing on HB 197 have been reviewed,
but the sponsor feels confident in the original bill. He
encouraged the committee's endorsement on passing the bill out to
the next committee of referral.
REPRESENTATIVE VEZEY, CO-SPONSOR, said the purpose of HB 197 is to
recognize that mining is a very risky and capital intensive
endeavor. He stated the purpose of HB 197 is to recognize there is
a need to change the state policy to one where the state does not
try to collect revenue off of those who are willing to take risks,
explore, and attempt to develop. With HB 197, the state will move
its desire to collect revenues over into the production phase and
will take risks with entrepreneurs, trying to encourage them to
risk their capital and expertise to develop Alaska's resources.
Number 619
CO-CHAIRMAN GREEN noted there is a fiscal note from the Department
of Natural Resources (DNR) attached to HB 197 for a modest amount
out of the general fund. He said the concept of HB 197 is that
unless the mine actually becomes a productive entity to the state,
there will not be any granting of anything the state would not
otherwise have. He expressed concern that a fiscal note is
attached to HB 197 which many might view as a deterrent because it
is general fund spending in an atmosphere of a desire to cut costs.
He wondered if there should be more mention made that what HB 197
provides would significantly more than offset costs if the mine
proves up.
REPRESENTATIVE VEZEY stated he had not seen the DNR fiscal note
previously. He said it is highly speculative. There may be a
little disruption in the cash flow for a year or two while the
system is being changed. He stressed the idea in HB 197 is to
increase revenues to the state, not to decrease revenues or raise
the costs of running state government.
MR. WALSH stated there are two fiscal notes attached to HB 197--one
from DNR and one from the Department of Revenue (DOR). He noted
the fiscal note from DNR has a $62,000 personal services cost which
is projected out for the next five years. He pointed out that
beginning in fiscal year 1999, DNR estimates a beginning of a loss
of revenue would occur but he stressed that is speculative, it
assumes there is a producing mine in place and the state is getting
less revenue than it would have if that mine had not been there.
He added hopefully, the incentive is what caused the mining company
to come to the state in the first place.
MR. WALSH said the actual costs of the DNR staff is an
interpretation on their part as to how to mechanically implement
the program. He stated there are two schools of thought. A
company could go exploring and not tell the state, discover the ore
body, work with the private land holder, get the mine going and
then come to the state to talk about the credit, showing records
from the exploration history. In the meantime, there would be no
need for DNR staff. He explained the other option is what the DNR
suggests. Annually, those who are exploring should be checking in
with DNR and DNR would be tracking them in the event they ever do
come in and ask for a production credit. In that case, the
department suggests they would have a staff and a fiscal impact.
MR. WALSH recalled that Steve Borell, Executive Director, Alaska
Mining Association, stated in a hearing last week that the process
would be much simpler and the burden should come to the one
requesting the credit, and to the satisfaction of the commissioner,
those credits would be applied at the time they actually come in.
He said it may be that a person never comes back with a producing
mine and did not spend a lot of time in the bureaucracy, talking
about potential credits and potential production. That person
might rather spend time pursuing the ore body, develop it and then
if it goes into production, reduce their tax impacts by going back
and recouping the credits.
TAPE 95-35, SIDE B
Number 000
CO-CHAIRMAN GREEN thought there was a requirement that on land
granted for mining, there has to be an annual showing of a minimum
of expenditure to maintain the lease.
MR. WALSH responded if the land is state or federal lands,
assessment work has to be completed, or in the state situation, by
paying an annual rental. He added if the land is private sector
land, there is no obligation to do an annual assessment.
Number 025
REPRESENTATIVE VEZEY noted that Alaska's corporate income tax had
not entered into the discussion. He said since the majority of
mining exploration and development is very capital intensive, it is
usually done by corporations. He stressed should a corporation
ever become profitable, the state collects a 9.5 percent income
tax.
CO-CHAIRMAN GREEN clarified what is contained in HB 197 will be
available to a mom and pop operation also.
MR. WALSH replied yes. He added a mom and pop operation would have
to define when exploration stopped and when the production began.
He noted that most mom and pop operations are producing at the same
time they are exploring. He said practically speaking, HB 197
pertains to large...where the ore body has to be defined, which
involves very high costs, or there is significant scientific
exploration ongoing prior to anyone talking about building a road
to the port, etc. He felt in the industry, there is a clear
separation between exploration and actual production.
MR. WALSH stressed the credit can go against corporate income taxes
as does the oil and gas incentive bill passed recently by the
legislature. He noted there are numerous support letters in
committee member folders from industry and Native corporations who
have massive land holdings but have limited geologic expertise on
staff and do not have the ability to launch into major exploration.
The sponsor feels HB 197 will be a significant incentive for
partnership arrangements with multi-national companies who can then
bring in the expertise and develop properties which are otherwise
dormant, helping the state to get off its dependence on oil.
Number 096
REPRESENTATIVE DAVIES felt it will be incumbent upon the
department, should HB 197 pass, to promulgate some very clear
regulations as to what a mom and pop operation has to do in order
to eventually qualify for these credits. He said it is important
to make it very clear so the state does not get embroiled in a
bunch of lawsuits later on. He agreed that the burden needs to be
on the person making the claim to keep adequate records, but the
state needs to tell that person up-front what adequate means. He
noted to that extent, it is reasonable the department would have
some expense in the first year to develop those regulations and get
them through the process.
REPRESENTATIVE VEZEY said he has observed over and over again in
state government, the duplication of efforts of other agencies,
particularly the federal government. He stated mining has been
subject to income taxes since 1913 and noted there are pages and
pages of Internal Revenue Service regulations governing mining--how
to handle exploration expenses, how to handle development expenses,
how to handle production expenses. He stressed for the state to
reinvent that wheel would be ludicrous and would be grounds to take
some state bureaucrat and remove him from office.
Number 144
REPRESENTATIVE DAVIES maintained that even if all those regulations
exist in some federal register, it still is going to require that
someone take a significant amount of time to select those
regulations the state wants to apply, modify them in the way
desired to apply to the state of Alaska and then to go through the
public process of implementing those regulations. He felt a little
money spent up-front to do that process right will save the state
a lot of money downstream in having arguments about what the state
meant and did not mean.
CO-CHAIRMAN GREEN asked if company A spends X number of dollars
that would qualify for a credit and does not formulate an existing
mine and company B comes along, either in the same mine or a
different mine and buys up those credits, is there anything in that
vein in view.
MR. WALSH replied the credit can be transferred with the property.
He pointed out that on page 3, line 15, number (2) mentions for the
purposes described in AS 27.30.010(b), the credits may be assigned
to the applicant's successor.
CO-CHAIRMAN GREEN noted in some cases where tax credits are sold,
there is no intent for that either now or in the future.
MR. WALSH clarified he was asking about separating the credit from
the property.
CO-CHAIRMAN GREEN said yes.
MR. WALSH stated he did not believe that is the intent of HB 197.
REPRESENTATIVE VEZEY said although he could be wrong about the
interpretation, if a person invested capital in exploration and
perhaps in development, and then sold that work, they would have
income. They could choose to use their credit against that income
or they could choose to sell the investment credit which went with
it and turn their rights over. He noted when there is a transfer
of property right, there is income to one person and an investment
by the other.
Number 199
CO-CHAIRMAN GREEN said company A invests $1 million in an area and
sells that area to company B for $500,000 and then takes that
credit against what they spent on a tax purpose basis. He asked
does that amount of costs track with the property, so company B
does not get another $1 million, but gets the balance between $1
million and what was taken by company A.
DAVID ROGERS, REPRESENTATIVE, COUNCIL OF ALASKA PRODUCERS,
responded that point is not clear. He said the transfer has to be
related to the site so the successor in interest who purchased the
credit can only use the credit if the credit is used against
production from that site. He noted the specific language is "may
be assigned by the qualified applicant to the applicant's successor
in interest for the site at which the exploration activities
occur..."
MR. ROGERS stated in terms of how much of the credit a person gets,
he believed the only credit which applies, and it is not clear in
HB 197, is the credit which was accrued, not any additional premium
paid for purchasing the credits. For example, if person A spends
$100,000 and sells that credit to person B, person B gets a credit
for $100,000. If person A sells the credit for $150,000, person B
still only gets a credit for $100,000.
REPRESENTATIVE DAVIES clarified if $100,000 is spent, the person
only gets $50,000 credit.
MR. ROGERS responded no, the person gets the full credit but can
only take one-half of the credit per year. He said the credit is
limited to 50 percent of a person's combined tax royalty
obligations per year, but that person gets 100 percent of the
expenditure.
CO-CHAIRMAN GREEN said, "the question is though if in that case you
gave, you then get money from me and that is reportable income that
you take a credit against this money which was spent or does that
all track to the new purchaser?"
MR. ROGERS responded he does not get the credit anymore, the new
guy gets the credit. He noted a separate question is how his
receipt of the income for that credit relates to his income tax
obligations. He stated the credit transfers to the next guy who
then takes it against taxes and royalties relating to production
from the site.
MR. ROGERS clarified a person is not going to be able to use the
credit until he has income from the site. For example, person A
does exploration, sells person B the credit, person B goes into
production and takes that credit off his tax obligation.
MR. ROGERS said in regard to the individual who sells the credit,
that is income to that person and has to be reported as such.
CO-CHAIRMAN GREEN clarified that person cannot use the credit.
MR. ROGERS responded no.
MR. WALSH stated the transfer of the title of the property would be
the extinguishing of access to a credit. He said the buyer would
buy that property with an element of credit in it. He stressed
there has to be production and income in order to receive the
credit. He pointed out that much of the money spent may not turn
into a credit but the money will be spent in the economy and will
provide jobs.
MR. ROGERS added that in talking with people in other states, it is
felt HB 197 just might work.
Number 268
CO-CHAIRMAN GREEN wondered if company A spends a lot of money
acquiring permits, will those costs be deductible.
MR. ROGERS responded it is not clear and that still is an issue.
He felt that to the extent the money was spent towards getting
permits necessary for exploration activities, it would qualify for
a credit.
ADJOURNMENT
There being no further business to come before the House Resources
Committee, Co-Chairman Green adjourned the meeting at 9:35 a.m.
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