Legislature(1995 - 1996)
03/20/1995 08:08 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 20, 1995
8:08 a.m.
MEMBERS PRESENT
Representative Joe Green, Co-Chairman
Representative Bill Williams, Co-Chairman
Representative Scott Ogan, Vice Chairman
Representative Alan Austerman
Representative John Davies
Representative Pete Kott
Representative Eileen MacLean
MEMBERS ABSENT
Representative Ramona Barnes
Representative Irene Nicholia
COMMITTEE CALENDAR
HB 141: "An Act relating to the appointment of members of the
Board of Fisheries."
PASSED CSHB 141(FSH) OUT OF COMMITTEE
HB 59: "An Act relating to raffles and auctions of certain
permits to take big game; and providing for an effective
date."
PASSED CSHB 59(RES) OUT OF COMMITTEE
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."
PASSED CSHB 197(RES) OUT OF COMMITTEE
WITNESS REGISTER
REPRESENTATIVE ALAN AUSTERMAN
Alaska State Legislature
State Capitol, Room 434
Juneau, AK 99801
Phone: 465-2487
POSITION STATEMENT: Prime Sponsor of HB 141
JOHN WALSH, Legislative Assistant
Representative Richard Foster
State Capitol, Room 410
Juneau, AK 99801
Phone: 465-3789
POSITION STATEMENT: Prime Sponsor of HB 197
PATTI SWENSON, Legislative Assistant
Representative Con Bunde
State Capitol, Room 108
Juneau, AK 99801
Phone: 465-4843
POSITION STATEMENT: Reviewed changes in committee substitute
for HB 59
REPRESENTATIVE CON BUNDE
Alaska State Legislature
State Capitol, Room 108
Juneau, AK 99801
Phone: 465-4843
POSITION STATEMENT: Prime Sponsor of HB 59
DAVID ROGERS, Representative
Council of Alaska Producers
P.O. Box 33932
Juneau, AK 99803
Phone: 586-1107
POSITION STATEMENT: Answered questions regarding HB 197
JOE RYAN, Legislative Assistant
Representative Al Vezey
State Capitol, Room 216
Juneau, AK 99801
Phone: 465-3719
POSITION STATEMENT: Answered questions regarding HB 197
JULES TILESTON, Director
Division of Mining & Water Management
Department of Natural Resources
3601 C Street, Ste. 800
Anchorage, AK 99503
Phone: 762-2163
POSITION STATEMENT: Answered questions regarding HB 197
PAUL DICK, Representative
Income & Excise Audit Division
Department of Revenue
P.O. Box 110420
Juneau, AK 99811
Phone: 465-3691
POSITION STATEMENT: Answered questions regarding HB 197
REPRESENTATIVE AL VEZEY
Alaska State Legislature
State Capitol, Room 216
Juneau, AK 99801
Phone: 465-3719
POSITION STATEMENT: Commented on HB 197
PREVIOUS ACTION
BILL: HB 141
SHORT TITLE: TERM OF FISH & GAME BOARD MEMBERS
SPONSOR(S): REPRESENTATIVE(S) AUSTERMAN,Grussendorf,Elton
JRN-DATE JRN-PG ACTION
02/01/95 199 (H) READ THE FIRST TIME - REFERRAL(S)
02/01/95 199 (H) FSH, RES
02/15/95 (H) FSH AT 03:30 PM CAPITOL 124
02/20/95 (H) FSH AT 05:00 PM CAPITOL 124
02/20/95 (H) MINUTE(FSH)
02/21/95 431 (H) COSPONSOR(S): ELTON
02/27/95 (H) FSH AT 05:00 PM CAPITOL 124
02/27/95 (H) MINUTE(FSH)
03/01/95 526 (H) FSH RPT CS(FSH) 5DP
03/01/95 526 (H) DP: G.DAVIS,AUSTERMAN,MOSES,OGAN
03/01/95 526 (H) DP: ELTON
03/01/95 526 (H) ZERO FISCAL NOTE (F&G)
03/15/95 (H) RES AT 08:00 AM CAPITOL 124
03/15/95 (H) MINUTE(RES)
03/20/95 (H) RES AT 08:00 AM CAPITOL 124
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
03/17/95 (H) MINUTE(RES)
03/20/95 (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
03/17/95 (H) MINUTE(RES)
03/20/95 (H) RES AT 08:00 AM CAPITOL 124
ACTION NARRATIVE
TAPE 95-36, SIDE A
Number 000
The House Resources Committee was called to order by Co-Chairman
Green at 8:08 a.m. Members present at the call to order were
Representatives Green, Williams, Ogan, Austerman, Davies and Kott.
Members absent were Representatives Barnes, MacLean and Nicholia.
CO-CHAIRMAN JOE GREEN announced there is a quorum present and
turned over the gavel to Representative Williams.
HRES - 03/20/95
HB 141 - TERMS OF FISH & GAME BOARD MEMBERS
CO-CHAIRMAN BILL WILLIAMS recalled at the last hearing all
testimony had been heard and the committee was discussing whether
or not the Board of Game was going to be added to HB 141.
REPRESENTATIVE ALAN AUSTERMAN, PRIME SPONSOR, reiterated his
original position on the issue. He felt adding the Board of Game
to HB 141 would slow down the bill and create problems. He stated
adding the Board of Game to HB 141, along with that board's
controversies and different issues, would cloud the issue of the
problems being experienced with the Board of Fisheries. He noted
there have been no problems with confirmations of appointed members
to the Board of Game. He stressed the objective of HB 141 is to
clean up the confirmation of people to the Board of Fisheries. He
told committee members after talking to other members of the
committee, he preferred to move the bill as it is currently
written.
Number 077
REPRESENTATIVE SCOTT OGAN concurred with the sponsor.
REPRESENTATIVE JOHN DAVIES agreed the problems have been primarily
with the Board of Fisheries confirmations. He believed, however,
the same kind of politicization of the appointment process could
happen with the Board of Game and felt in the future that should be
looked at, but as a separate action.
REPRESENTATIVE GREEN made a MOTION to MOVE CSHB 141(FSH) with
attached fiscal note out of committee with individual
recommendations.
CO-CHAIRMAN WILLIAMS asked if there were any objections. Hearing
none, the MOTION PASSED.
CO-CHAIRMAN WILLIAMS turned the gavel back over to CO-CHAIRMAN
GREEN.
HRES - 03/20/95
HB 197 - MINERAL EXPLORATION INCENTIVE CREDITS
Number 115
JOHN WALSH, LEGISLATIVE ASSISTANT, REPRESENTATIVE RICHARD FOSTER,
PRIME SPONSOR, passed out another letter of support for HB 197. He
said since the last hearing, the sponsor and co-sponsor discussed
the considerations raised and incorporated some of those
considerations in a work draft committee substitute.
REPRESENTATIVE DAVIES requested a brief at ease to enable the
sponsor to pass out copies of the work draft committee substitute.
(AT EASE)
CO-CHAIRMAN GREEN called the meeting back to order. He said since
the work draft committee substitute needed reproducing, the
committee would hear HB 59 first and then go back to HB 197.
HRES - 03/20/95
HB 59 - RAFFLE OR AUCTION OF BIG GAME PERMITS
Number 176
PATTI SWENSON, LEGISLATIVE ASSISTANT, REPRESENTATIVE CON BUNDE,
told committee members the committee substitute before them
contains the amendments discussed at the last hearing. She
explained the committee substitute deletes the 50 percent on the
first page and makes the definition of qualified organization the
same on pages 2 and 3.
REPRESENTATIVE AUSTERMAN made a MOTION to ADOPT CSHB 59(RES).
CO-CHAIRMAN GREEN asked if there were any objections. Hearing
none, the MOTION PASSED.
REPRESENTATIVE PETE KOTT recalled at the last hearing he commented
on the possibility of a sealed bid. Since that time, he determined
that a sealed bid is included under the definition of raffle.
REPRESENTATIVE CON BUNDE, PRIME SPONSOR, urged the committee to
support HB 59 and stated he would answer any further questions.
REPRESENTATIVE KOTT made a MOTION to MOVE CSHB 59(RES) with
attached fiscal note out of committee with individual
recommendations.
CO-CHAIRMAN GREEN asked if there were any objections. Hearing
none, the MOTION PASSED.
HRES - 03/20/95
HB 197 - MINERAL EXPLORATION INCENTIVE CREDITS
Number 235
DAVID ROGERS, REPRESENTATIVE, COUNCIL OF ALASKA PRODUCERS, said he
would review the changes contained in the committee substitute for
HB 197. He stated these changes are a result of discussions
between a number of people, including the bill sponsors, and
requests from the Department of Natural Resources (DNR). He
explained the first change is on page 1, line 11. The previous
version of the bill included the phrase "feasibility of
development." He noted there was a concern that the phrase created
an ambiguity and could create things like an Environmental Impact
Statement preparation and other things which really are not
exploration related.
MR. ROGERS explained on page 2, lines 4-19, there is a new
subsection (b). He said the intent of the subsection is to clarify
when exploration stops and construction development begins. He
stated this subsection essentially says after mine construction
commencement, exploration activities are over and expenditures
incurred after that date are not qualified for the exploration
incentive credit. He noted the definition of mine construction
commencement date is the date the last permit is received allowing
a company to proceed.
REPRESENTATIVE OGAN clarified the incentive credit is only good for
up to the date a company receives their last permit.
MR. ROGERS responded that is correct.
Number 281
REPRESENTATIVE DAVIES wondered if hanging the definition entirely
on permits would open it up for potential abuse, where a company
would simply not get the last permit needed, proceed to spend a
great deal of money on constructing a mine and then when ready to
ship the first product, drop the last permit in the box.
MR. ROGERS replied it was possible. He felt HB 197 is further
governed by the list on page 1 which describes what activities are
eligible. He said generally it is not economically prudent to
delay a permit in order to gain a credit. He did not feel it would
ever happen. He said the ending point is a very difficult concept
to define. He noted the definition in the work draft committee
substitute does not necessarily deal with a situation of multiple
targets.
Number 307
JOE RYAN, LEGISLATIVE ASSISTANT, REPRESENTATIVE AL VEZEY, stated a
reason for the change being discussed is the problems encountered
with interpretations in HB 377 last year where there did not seem
to be a definite time limit when one phase would end and another
phase would begin. He said this change in HB 197 would set up a
definite cut off point and there would be no question as to when a
company is in production rather than exploration.
CO-CHAIRMAN GREEN wondered if there would be any problem with the
department formulating regulations which would alleviate the
problems Representative Davies mentioned.
MR. ROGERS said there is a desire to comprehensively deal with
issues in the bill to avoid the need for regulations. He stated
aside from that fact, these issues could be cleared up with
regulations. He felt if there is a genuine exploration activity
involved, it should be eligible for the credit and if there is not,
the department will be able to determine that fact.
Number 336
MR. ROGERS explained the next change in the committee substitute is
located at the bottom of page 2, PROCEDURE FOR OBTAINING THE
CREDIT. He said the DNR was concerned about the lack of guidelines
for the process and was afraid everything would be dumped in their
lap at the last minute, creating a lot of confusion, especially
given the time delay between the exploration activity and the
development activity. This change attempts to set up a process
where a company explores and then annually comes to the department
to certify its expenditures. The department then determines if the
list of expenditures are legitimate under HB 197, and certifies
those expenditures.
MR. ROGERS stated in addition to certifying the expenditures, the
department would also tell the company what data is needed at the
time of application for the credit. He explained at the end of the
process, the company presents its list of certified expenditures
and required data to the department. The department then reviews
the information and responds. He said if the data meets the
requirements stipulated, the credit is then approved. He noted if
the department does not respond within the time specified, the
credit is deemed approved. He told committee members these
provisions are contained on page 2, line 32 through page 4, line
16.
REPRESENTATIVE DAVIES clarified the committee is only looking at
the typed version M and none of the penciled in comments are
applicable.
MR. ROGERS said that is correct.
Number 386
MR. RYAN stated Representative Vezey had penciled in some thoughts
which might be appropriate. However, those thoughts can be
addressed at a later date.
MR. ROGERS said the next change is on page 4, lines 31-32. He
explained the original bill says the credit has to be used within
15 years after it is granted. He noted there had been concern
expressed that in some cases, people do not make money for the
first several years of their operation or there may be other
reasons why they do not want to take the credit immediately. He
stated the proposed change provides that a company has 15 years to
use the credit--the company does not have to start on the first
year and the years do not have to be consecutive.
MR. ROGERS explained an additional change is on page 5, lines 9-11,
which addresses a concern expressed at the last hearing. This
change makes it clear that once the credit has been assigned to a
successor in interest, the applicant who assigned it cannot use the
credit.
CO-CHAIRMAN GREEN asked if the phrase on page 4, line 31, "must be
used within any 15 tax years" means in any taxable 15 year period.
He also wondered if a company does not use the credit within that
time frame, is the credit lost.
MR. ROGERS said the company has 15 years to use the credit.
REPRESENTATIVE DAVIES stated he read it as any individual 15 years.
MR. ROGERS responded the way it works is the credit has to be
prorated over a 15 year period. He said a company could prorate up
to 15 years of credits. For example, if a company has a $100,000
credit, the credit could be prorated over 15 years or the credit
could be taken faster, but the credit could not be prorated over
any greater length of time.
CO-CHAIRMAN GREEN said he did not read it the same as
Representative Davies. Reading it his way, he wondered if a
company is approved in 1995 and the credit is not used until some
time in the 21st century, even though it is a 15 year period, does
the credit have to be used before 2010 or does it mean any 15 year
period.
MR. ROGERS replied any 15 year period. He stated ultimately it
means the credit has to be prorated over a maximum of 15 years. He
noted the credit is fixed and a company can take all of the credit
in one year or over a period of years. He explained the proration
period is limited to 15 years, so that is the maximum time it can
be prorated but the credit can be taken at any time. If a
company's mine lasts 30 years, the company can take the credit up
to 30 years, there just has to be a decision on how to allocate the
credit over a 15 year period.
MR. ROGERS noted the original problem was that 15 years was fixed
and some mines do not make money early on. Therefore, if a company
had to take the credit the first year and there was no income to
take the credit against, it would be lost. He thought that would
limit a company's flexibility to make financial decisions about how
to use the credit.
Number 459
REPRESENTATIVE DAVIES clarified what Mr. Rogers is attempting to
say is within a period of any 15 tax years. He wondered if it
would clarify that intent by inserting the words "period of" after
the word "any" on page 4, line 31. He asked what is meant by
royalty payment periods.
MR. ROGERS replied that is a calendar year or 12 month period.
CO-CHAIRMAN GREEN wondered, if there was a situation where the mine
was oscillating on and off for whatever reason, would this mean the
company could start in year one, skip two or three, take another
one, then skip two or three, etc.
MR. ROGERS responded that is another reason for the problem of 15
years because the business is an up and down kind of business. He
noted that mining companies sometimes have years which are slow and
sometimes shut down and then start up again. He stressed a company
could use up its 15 years and actually not have 15 years of taxable
income to use the credit against. He stated he is not sure any
limit is necessary. He said the 15 years came in last year and
reflects a concept of production but he is not sure that time
period was fully evaluated at the time.
Number 485
MR. RYAN stated when purchasing gold shares, most people look to
find a 10-12 percent return per year over the life of the mine,
hoping to amortize their investment to make a profit. The majority
of mines, with the exception of South Africa, very seldom last 10-
15 years. He noted the company mines out the available mineral and
then goes on to new properties. He said deposits being the way
they are and technology being what it is, a 15 year mine is a very
good investment.
MR. RYAN said there is beginning to be a move from placer to hard
rock mining but no one, with the exception of Fort Knox, has found
an amount of material which would take longer than a 15 year
period. He noted there are oscillations in the market depending on
things like foreign exchange, the value of the dollar, direct labor
costs, etc. He pointed out it is not necessarily profitable to
mine in a certain time period. He stated any tax year within 15
years allows the industry, when it is profitable to mine gold, to
take their deduction over that particular time period and when it
is not profitable, to shut down the operation and commence at
another time when the price of gold increases.
CO-CHAIRMAN GREEN asked if a company is allowed to take those
deductions, would that tend to make the mine profitable and would
the company want to take the credit as early as possible.
MR. ROGERS replied that is his gut reaction, but every mine has its
own set of financial issues it deals with, so there may not be a
rule. He stressed a company has to first make a profit before it
can take a tax credit. He felt the time period should be left
flexible, allowing individuals to make their own decision.
REPRESENTATIVE DAVIES observed Mr. Ryan is suggesting that in the
vast majority of cases, 15 years would be the universal basis. He
felt there is not much utility in adding this additional
flexibility, and for profitability reasons, most mines would want
to take the credit within the first 15 years it is available. He
stated in order to eliminate the confusion, he felt the word "any"
should be deleted on page 4, line 31.
REPRESENTATIVE DAVIES stated there is another issue involved. He
said the reason for having a limit is if a mine opens, gets
permission to proceed, then closes and reopens over a period of 30
years and 30 years down the road they ask for their credit but
the state feels the company did not do certain things and
litigation results, then the record becomes very stale. He
stressed that is the reason the state has a statute of limitations.
He felt a time limit would also put a larger burden on the company
to prove. He did not feel it is practical to think of a situation
where the credit could be extended much beyond 15 or 20 years, just
for the reason of record keeping.
CO-CHAIRMAN GREEN asked how the sponsor feels about the suggestion
to drop the word "any" on page 4, line 31.
MR. RYAN said one of the purposes of HB 197 relates to the world
situation on liquidity. He noted in the last five or six years
there have been 3.5 billion people added to the consumer market
with India and China changing their policies and the break up of
the Soviet Union and Eastern Europe. All of these people want
washing machines, toasters, etc. Therefore, there are great
markets for investment. He stated Alaska finds itself in the
position, with interest rates and the hassle factor of doing
business in Alaska, as being a very poor place to invest. He
pointed out that other markets around the world are offering very
high rates for return on investments, so money is flowing out of
America.
MR. RYAN told committee members there is a desire to attract
capital to Alaska and HB 197 addresses that desire by offering
incentives to companies who come to the state. He said the state
may not benefit as much directly in regard to taxation, but
stressed these people will spend real dollars going to the state's
businesses and people will be employed. He noted that money
circulates through the economy and makes Alaska a better place to
live. He pointed out the philosophy behind HB 197 is to attract
this capital and make Alaska a better place to do business.
CO-CHAIRMAN GREEN said he still has a mental block. He observed if
a company is going to make an investment in Alaska this year
because Alaska is going to give an extended period of time to
charge off exploration costs and the company opens its mine in the
year 2000, by the time the company is getting credit for the costs,
15 plus years down the road, the present worth of that is almost
zero. He thought the company would want to show that as far
forward as possible in the present work basis to get that money
back, so it can be reinvested somewhere else. He felt a 30 year
discount on the dollar is a penney.
MR. RYAN stated the logistics of doing business in Alaska are much
higher than anywhere else because there are not many roads and most
transportation is by air which is very expensive. As to a company
amortizing their investment, it would be prudent for the company to
take the credit up-front as much as possible. He noted that has
been limited to 50 percent. He noted the window has been left open
primarily due to the nature of the beast. The country's balance of
payments and the dollar on the international market would influence
a company on whether or not it wanted to mine gold because the
price of gold is directly attributable to those factors.
Number 601
REPRESENTATIVE DAVIES reiterated the number of cases where this
credit will actually work as an incentive...where having this 15
year limit would be a problem, is so small as to not be a concern.
He said on the other hand, the number of cases where not having
this time limit might develop into lawsuits or stale records is
very real and that is why the state has statutes of limitations on
the books. He felt providing a statute of limitation in HB 197
would make good public policy sense.
REPRESENTATIVE AUSTERMAN asked what the difference is between a tax
year and a royalty payment period.
MR. ROGERS replied he was not sure. He thought the royalty payment
period was a one year annual period but he did not know when it
begins and when it ends. He said the royalty payment period may
not be parallel with the tax period.
REPRESENTATIVE AUSTERMAN wondered if there is a desire to tie the
credit to 15 years, would the royalty payment period change that.
Number 642
JULES TILESTON, DIRECTOR, DIVISION OF MINING & WATER MANAGEMENT,
DNR, stated in regard to the phrase contained on page 4, line 31,
"within any 15 tax years," part of the concern he had raised
earlier was if many of the line operations are looked at, they
sometimes shut down, such as Greens Creek. Therefore, with the 15
years, a company may be penalized for no fault of their own.
He added there is only a three and one-half year period when the
tax liability is extremely low. He said the language previously
looked at was to recognize those things and make the period within
any 15 year period, recognizing that most mines generally have a
10-15 year life. He noted there are a range of mines involved. He
told committee members he could not answer the question on the
royalty payment period as he had not seen that language before.
MR. ROGERS asked if the typical royalty payment period is one year.
MR. TILESTON replied yes.
MR. ROGERS asked if the royalty payment period typically runs
January 1 through December 31.
MR. TILESTON said he could not answer the question but could
provide the answer later.
CO-CHAIRMAN GREEN stated in regard to the phrase "within any 15 tax
years," the concern the committee expressed was that by possibly
deferring the credit, for instance in a 40 year mine, memories get
dim, records go to archives, etc., and to try and come in during
the 40th year to exercise the 15th tax year credit might create a
lot of concern and consternation. He said on the other hand, it
would seem logical the quicker a company can claim the tax credit,
the better off the company is from a present worth value of its
investment.
CO-CHAIRMAN GREEN observed testimony has indicated a mine normally
lasts 15 years and only by exception does a mine go on and on. He
said if a mine goes on and it does not seem to apply cyclic--the
company is probably operating each year and by having this time
period afloat, a concern is being created which might be addressed
on a practical basis by having a certain time period, making it a
finite number.
Number 680
MR. TILESTON responded the 15 year time period is probably an
appropriate term when looking at a normal mine life. He felt if
the department goes to an annual approval as part of the record
system, the long term responsibility for keeping records is an
easily managed solution.
MR. ROGERS stated that was the intent of the two phase system of
getting expenditures certified annually and data being brought in
at the end of the process. He noted the system would provide that
a company have an ongoing discussion with the department about what
it is doing. He felt that would address Representative Davies
concern about staleness and confusion.
TAPE 95-36, SIDE B
Number 000
REPRESENTATIVE DAVIES recalled at the last hearing on HB 197, the
committee discussed that HB 197 had a relatively small fiscal note
attached because it was not going to require much record keeping on
the part of the state. He noted now it seems like the volume of
record keeping has ballooned.
MR. ROGERS stated he did not believe the process is any different
other than it is more rational. He said at some point, the
department has to review expenditures and data to issue a credit.
He did not think there was going to be any change in the
administrative burden.
MR. TILESTON agreed with Mr. Rogers. He said the department looks
at the documentation normally submitted, either to the DNR or the
Department of Revenue (DOR), on an annual basis. He stated the
desire was to tie phase one into the existing system rather than
create a new system.
REPRESENTATIVE DAVIES asked Mr. Tileston if he is satisfied there
is enough information in those annual reports for the department to
make a decision, if the department is asked to certify a request
for a credit 15 years down the road.
MR. TILESTON responded in meeting with industry representatives
last week, a minor change should be made. He said that change
would provide that the company, industry, or claim holder desiring
to accrue a credit would annually file and request a credit,
submitting a ledger sheet to be used and approved at that point of
time. He noted supplemental information would have to be provided
because the general information received currently at the DNR says
a company is going to conduct certain types of geophysical or
exploration activities in a given area. That information is
reviewed but the fiscal data regarding the costs involved or the
fact the claim holder or agent may desire to get that credit...the
department sees it as a check on an existing form and then a follow
up with a ledger sheet, not detailed accounting.
Number 074
CO-CHAIRMAN GREEN stated as a hypothetical situation, "We are doing
this during the 1995-2000 time frame. Each year the applicant
comes in and adds some more costs, the costs are approved and the
pot of money they are going to be seeking tax credits against is a
running ledger, which is current and then it might be several years
before they start pecking away at that. They do not have to re-
approve it, they just say they want to take so much of a percentage
of that this year, next year, and so on."
MR. TILESTON replied that is correct. He noted HB 197 establishes
limitations on how much is taken in any given year.
REPRESENTATIVE DAVIES clarified a company is going to submit a
ledger of bills it wants to have credit for and the state is going
to approve that list on an annual basis. He said that does not
sound like something the state is doing currently.
MR. TILESTON responded the state is not doing the fiscal side
currently. He said, "the department would see the other thing
saying this is our expenditure and this is the data that we will
deliver to you when we request final approval in phase two." He
noted those two items will be a matter of record, agreed to by all
the parties at the time it was done and then that record would
exist and be available to the company.
REPRESENTATIVE DAVIES said it seems one of two situations has to
exist. Either the state is going to look at enough data on an
annual basis to approve the expenditures and then it would be a
matter of taking the credits sometime in the future when people
agreed on it, or the state is going to agree to a limiting list and
will have to review the underlining data at some point in the
future. He pointed out in the latter case, his concern about
staleness of records is reinstated.
Number 133
MR. TILESTON stated the department does not, at this time, review
the financial records associated with a mining activity. The
department envisions, since companies do have and do attract
projects by financial things, that companies would look at those
items expressly identified as being potential credit items, they
would say these are the expenditures associated with those credits,
this is the data collected but not the data itself...all of that
would be agreed on and entered into a running tabulation which is
updated every time that company or its assignee asks to apply for
a credit.
CO-CHAIRMAN GREEN clarified that information would include the
value.
MR. TILESTON replied it would include the value. He explained the
department would have a running tabulation on two things on an
annual basis--new records, which is the credit itself (dollars),
and the data that credit is applied to. Therefore, when the
project was reached, the department could say data in year five was
X and the costs were Y and there would be no dispute on what those
values are or what the data is.
REPRESENTATIVE DAVIES clarified it still will be the case that
whenever this credit is actually claimed, the state will have to
review the underlining financial data to verify that the amounts
tabulated were acceptable.
MR. TILESTON responded the department will do that at the time the
credit is accrued. He said if data submitted by company A is not
sufficient, the department would go back to company A at that point
in time, ask specific questions, and get responses at that time so
the ledger sheet which goes forward will be something that is money
in the bank and data to be delivered.
REPRESENTATIVE DAVIES maintained there would be significant fiscal
impact in the early years.
MR. TILESTON replied it would be a one person increase and the
record keeping will be incorporated into the existing system.
MR. RYAN said if deductions cannot be substantiated, they cannot be
used.
Number 200
PAUL DICK, REPRESENTATIVE, INCOME & EXCISE AUDIT DIVISION,
DEPARTMENT OF REVENUE, said he agreed with Mr. Ryan on deductions
and substantiation.
REPRESENTATIVE DAVIES said that sounds very simple but reminded
everyone there was a special session held last year on that
subject. He did not feel it is that simple and he wants to avoid
setting the legislature up for that kind of train wreck in the
future.
Number 223
MR. ROGERS stated the next change is on page 5, lines 20-22, which
makes it clear that if the department prematurely releases
confidential data, they would be liable for damages for violating
the confidentiality requirements of this section. He noted once
the information is submitted, it is confidential for 36 months and
if the department releases the information early, this change
clarifies there is no sovereign immunity for premature release of
confidential information.
CO-CHAIRMAN GREEN asked if the intent is that this be the normal
confidentiality. He said there are some disclosures within the
division who get the information. For example, petroleum company
records are not only disclosed to the Alaska Oil and Gas
Conservation Commission but are also disclosed to the DNR and are
still considered confidential.
MR. ROGERS said the concern regarding confidentiality is more with
other companies and the general public, not within departments.
MR. RYAN remarked the country was settled by the disclosure of
large gold strikes. He said if a company makes a large strike,
they do not want everyone claiming the rest of the land.
Number 255
REPRESENTATIVE DAVIES questioned if the nature of the damages
should be limited to actual damages on page 5, line 20. He
wondered if the current verbiage referred to punitive damages.
MR. ROGERS replied the verbiage makes no distinction. He said it
would give lawyers all the tools they currently have under existing
law.
REPRESENTATIVE AL VEZEY, CO-SPONSOR HB 197, said he is not aware of
any law allowing punitive damages in cases of a torte nature of
this sort. He stated this would be strictly a uniform commercial
code type of situation.
CO-CHAIRMAN GREEN asked Mr. Tileston if he was aware of any
punitive nature damages available under current law for disclosure.
MR. TILESTON replied he was not.
CO-CHAIRMAN GREEN asked Mr. Tileston if he has any problems with
page 5, lines 20-22.
MR. TILESTON said no.
Number 276
MR. ROGERS explained the next change is on page 5, lines 29-31, and
clarifies that the costs of obtaining permits, approvals, etc.,
related to exploration work are also included as eligible costs
under HB 197.
MR. ROGERS stated because of a miscommunication with the drafter,
there was a section included in the committee substitute which was
not desired. He explained page 6, lines 15-18, section viii,
should be deleted.
MR. ROGERS said another change is on page 6, lines 7 and 8, which
states that insurance and bond premiums associated with exploration
activities would also be considered eligible costs.
REPRESENTATIVE OGAN wondered if mines are going to pay any
royalties whatsoever to the state.
MR. ROGERS replied there is a cap of 50 percent combined royalty
tax obligations per year.
REPRESENTATIVE OGAN asked what the current royalty rate is for
mining.
MR. TILESTON responded the current royalty rate for mining is 3
percent of net profit.
MR. ROGERS stated another change is on page 6, lines 24-30,
subsection (2). He said this section previously appeared earlier
in HB 197 but because of the restructuring of the process for
reviewing and certifying credits, it makes more sense to place the
subsection in this part of the bill.
CO-CHAIRMAN WILLIAMS made a MOTION to ADOPT CSHB 197, version M.
CO-CHAIRMAN GREEN asked if there were any objections. Hearing
none, the MOTION PASSED.
REPRESENTATIVE DAVIES made a MOTION to AMEND CSHB 197(RES), on page
2, line 7, delete the word "on" and insert the words "no later
than". He said lines 6 and 7 would read, "In this subsection,
`mine construction commencement date' means the date no later than
which all of the following have occurred:"
REPRESENTATIVE DAVIES said this change sets a limit but would allow
the department to also issue regulations to set the date earlier,
if a significant amount of exploration activity had occurred, in
terms of financial expenditures.
Number 366
MR. ROGERS stated another change he failed to mention is contained
on page 5, lines 15 and 16, which prohibits the adoption of
regulations to implement HB 197.
CO-CHAIRMAN GREEN expressed concern that the drafters may feel the
words "no later than" and the word "on" mean the same thing. He
wondered if there would ever be a difference.
REPRESENTATIVE DAVIES replied yes. He said the change allows for
the occurrence of an earlier date.
MR. RYAN said the co-sponsor has asked him, when preparing work
drafts of legislation, to make them as comprehensive as possible in
order to address the problems in law and to get away from the
regulatory process. He noted there have been shining examples of
legislation being passed and then regulations being written
circumventing the original intent. He felt the only remedy seems
to be going to court.
MR. RYAN stated the costs of implementing regulations nationwide
exceeds the costs of what individuals pay in taxes. He told
committee members the co-sponsor felt by writing comprehensive
legislation addressing the problem, it could work and in the future
if there seemed to be a few things needing to be fixed, those
problems could be brought back to the legislature. The legislature
could then address those concerns, leaving the decision making in
the policy body rather than giving that discretion to the
Administration. He pointed out that is the philosophy behind
prohibiting regulations in HB 197.
Number 409
REPRESENTATIVE DAVIES stated the ability to implement any policy
the legislature decides is clearly given to the Administration to
follow through. He said the reason the legislature requests the
Administration to construct regulations is to implement policy
decisions made. He felt if the legislature really desires to
totally eliminate all regulation writing activities of the
departments, the legislature will need to meet 365 days a year.
REPRESENTATIVE DAVIES stressed the legislature should be setting
the policy in this case. He said the policy is the legislature
wants to provide incentives for new mines. He did not believe
there is a desire to spend days writing the regulations under which
that policy gets implemented. He felt in writing policy
statements, the legislature should make those statements as clear
as possible and provide as many bright lines in statutes as
possible.
REPRESENTATIVE DAVIES stated the legislature should not make the
situation simpler than what it really is. He said life is a little
more complicated than desired and that is why there is a need to
flush out the policy decisions the legislature makes with
regulations. He expressed concern with the specific case at hand,
that while it is a bright line, it may open itself up to abuse. He
felt there is a need for flexibility on the part of the
Administration to deal with that abuse, should it arise. He did
not feel there is a need to have every single possible turn and
twist to come back to the legislature for another statutory change.
REPRESENTATIVE OGAN stated he has a lot of problems with regulatory
agencies. He previously served on a regulatory board and felt that
board was responsive to the industry in making changes. He
concurred with Representative Davies. He said the legislature does
not necessarily have the expertise to super-define the statutes
like regulations. He told committee members he has a problem with
creating a regulation-type statute.
CO-CHAIRMAN GREEN asked, referring to page 2, lines 8-19, if there
will be any time when a company might start construction or start
operations without having the three things accomplished and if not,
is not that the date "on which the following have occurred."
MR. ROGERS responded a company has to have its permits to proceed.
CO-CHAIRMAN GREEN wondered if at the time a company pulls the
switch to start if it needs to comply with all three. He asked if
there would ever be a time when that would not be the date when
"all of the following have occurred:" and would there ever be a
time when a company would start earlier than that which it is
required to do.
MR. ROGERS stated he could not think of one. He stated the words
"no later than" might create an ambiguity as to what the cut off
date really is.
CO-CHAIRMAN GREEN shared that concern.
Number 482
REPRESENTATIVE DAVIES replied if in most cases this would be the
time when mine construction commencement begins, he did not feel
the wording is ambiguous. He stated the wording he proposes says
when the three things listed have been done, there is a bright line
which says mine construction has begun. He said in most cases the
wording "no later than" would function the same way as having the
word "on" but in a few cases, where there may be some attempts to
jiggle the permit process in order to allow the construction of
roads, etc., the wording would allow the department to deal with
those exceptional cases. He felt in most cases the change would
not have any effect but in a few cases where there might be a
loophole, it would allow the department to close the loophole.
CO-CHAIRMAN GREEN OBJECTED to the MOTION.
CO-CHAIRMAN GREEN asked for a roll call vote. Voting in favor of
the amendment were Representatives Austerman, Ogan, Davies and
Williams. Voting against the amendment were Representatives Kott
and Green. The MOTION PASSED 4-2.
REPRESENTATIVE DAVIES made a MOTION to AMEND CSHB 197(RES), on page
4, line 31, deleting the word "any."
CO-CHAIRMAN GREEN asked if there were any objections. Hearing
none, the MOTION PASSED.
REPRESENTATIVE DAVIES made a MOTION to AMEND CSHB 197(RES) on page
5, lines 15-16, deleting the entire section.
Number 525
MR. RYAN stated nothing precludes the department from developing a
policy as to how to administer any particular statute. He said
policies can easily be changed through the commissioner having a
discussion with the people affected. Once regulations are written,
they are law. He pointed out the process for writing regulations
is cumbersome and requires public hearings for approval and the
same process has to be followed to remove them, which in turn
serves as a disincentive for people to make changes. He felt the
language should be left in the bill.
REPRESENTATIVE AUSTERMAN expressed support for the amendment. He
agreed the legislature should set policy and allow the
Administration to actually manage and run the business as it should
be run. He noted there are options available if there is a problem
with the way a regulation has been implemented which totally
destroys the original intent of the legislation. He felt what is
contained in this section (Regulations Prohibited) is an overall
policy which should be made by the entire legislature rather than
drafting it into this bill.
MR. WALSH felt the intent of both sponsors is to minimize the
amount of regulations needed to govern the statute. He said there
are some issues which are unclear in terms of definitions, dates,
and actual mechanics but the intention is to make the bill as
straightforward as possible.
MR. TILESTON felt it would be a mistake to restrict the ability to
clarify. He recalled there was a comment earlier about policy and
the fact the department could issue some policy statements. He
said it has been his experience both in state and federal
government, in a dispute that goes to court as far as departmental
policy is concerned, the department loses. He felt there does need
to be a mechanism to provide for regulations, if they are needed.
REPRESENTATIVE AUSTERMAN felt there are many times the departments
do overregulate and write regulations which are totally off track.
He stressed when that happens, the legislature needs to go back and
address those specific instances rather than eliminating the
ability of the department to write a regulation. He said if it is
the intent of the maker of the legislation to get a message to the
department to not overregulate, he felt a letter of intent along
with HB 197 would be appropriate, but to actually prohibit
regulations is not the right step.
(Representative MACLEAN joined the committee.)
Number 597
REPRESENTATIVE OGAN felt this amendment is important. He said he
would appreciate hearing from each committee member in regard to
the amendment. He thought CSHB 197(RES) is almost like a
regulatory statute and is very extensive. He wondered how much
time was spent drafting the changes in the committee substitute and
how many people were involved.
MR. RYAN said the industry, Mr. Tileston, John Walsh, David Rogers,
Paul Dick and him were involved in a cooperative effort to address
problems and added that many issues were brought up. He stated the
desire was to address all the issues in the bill and make the bill
comprehensive, so a good document would go forward, doing the job
of getting the policy implemented. He reiterated that
Representative Vezey has directed him to be as comprehensive as
possible in all the legislation he drafts for him.
REPRESENTATIVE DAVIES pointed out that all of the regulatory
agencies issue regulations on a daily basis to implement policies.
The vast majority of those regulations work fine and are not a
problem. He felt the regulations which rise up to be problems
number less than a fraction of 1 percent of the regulations
promulgated. He said to use a major hammer such as what is
contained in this section to solve what really is a small problem
is overkill.
REPRESENTATIVE DAVIES noted in those cases where there is a
problem, the legislature needs to change the statute to preclude
the variation the department is proposing as a regulation. He
stressed that is the quickest, most effective and reasonable public
process of dealing with those issues. He said the idea that a
small group of people outside the public process is going to set
what these regulations are going to be and what the departmental
policies are going to be, with respect to implementing policies, is
contrary to open government.
REPRESENTATIVE DAVIES stated the reason the regulatory process is
somewhat cumbersome is the requirement for public hearings but he
reminded everyone that is what democracy is all about. He felt
there is a need to have the deliberations of the legislature and
the deliberations of the department, as they are implementing the
regulations, carried out in the public process. He agreed there
are some regulations which go beyond the original intent but he did
not feel this section is the way to solve that problem.
Number 655
REPRESENTATIVE EILEEN MACLEAN stated she liked the section
prohibiting regulations. She felt regulations are very onerous and
believed once a bill is passed, the agencies tend to implement
regulations more stringent than what was proposed in the law.
CO-CHAIRMAN WILLIAMS felt the amendment was good. He said there
has been a lot of effort put forth to get the bill to work and he
would not want to see what is contained in CSHB 197(RES) delayed
due to what the legislature is like at a certain time. He stressed
the main focus of CSHB 197(RES) is to get companies to come to
Alaska and regulations should be written in a way to encourage
those companies to come to the state.
TAPE 95-37, SIDE A
Number 000
CO-CHAIRMAN GREEN asked Mr. Tileston if the department proceeds as
normal in writing regulations, would the intent in CSHB 197(RES) be
delayed any significant amount of time due to the time required to
write the regulations.
MR. TILESTON responded if CSHB 197(RES) was enacted without lines
15 and 16, on page 5, the DNR and DOR would get together with
industry to determine whether or not any clarifications are needed.
He stated that would be done within one year because there is a
need for the department to provide industry the message that the
state not only wants them to come to the state, but also that the
state has the mechanism in place to remove any uncertainties on
industry's part.
CO-CHAIRMAN GREEN asked if there were any objections to the motion.
REPRESENTATIVE MACLEAN OBJECTED.
CO-CHAIRMAN GREEN asked for a roll call vote. Voting in favor of
the amendment were Representatives Davies, Ogan, Austerman, Kott,
Williams and Green. Voting against the amendment was
Representative MacLean. The MOTION PASSED 6-1.
Number 087
REPRESENTATIVE DAVIES made a MOTION to AMEND CSHB 197(RES) on page
5, line 20, inserting the word "actual" prior to the word
"damages."
MR. ROGERS asked Representative Davies what he meant by actual. He
said putting the punitive question aside, the word "actual" may
limit the ability of the agreed party to get full justice.
REPRESENTATIVE DAVIES stated his concern is in the realm of
punitive issues. He noted there had been testimony indicating that
is not an issue and he felt if that is not an issue, then there
should not be a problem inserting the word "actual." He said his
intent is to limit the claim to direct actual damages resulting
from the release of this data and not any consequential damages.
MR. ROGERS clarified Representative Davies wants to tighten up the
language.
REPRESENTATIVE DAVIES said that is correct.
MR. ROGERS stated it is preferred there be the ability to pursue
whatever legal remedies currently available for this sort of
problem. He suspected the word "actual" would limit that.
CO-CHAIRMAN GREEN stated he would object to the amendment because
he is concerned that if company A brings information in and the
department is lax, the information gets out before adequate
safeguards have been taken, and company B comes in and creates a
problem, actual damages might be difficult.
Number 134
MR. RYAN said gold being what it is, it is where it is found. He
stated gold is like the oil business--there is a need to keep
exploring. If a department employee tells the newspaper, the
chances of following through to adjacent land are done because
everyone is going to rush in and stake. He stated the sponsors
felt there should be compensation. He wondered how the damages
would be determined.
REPRESENTATIVE DAVIES agreed. He asked how are the damages
determined.
CO-CHAIRMAN GREEN said dealing with an uncertain science of
determining what is available below the surface, the damages which
could accrue, especially with years, could be determined by a
preponderance of the evidence but it may not yet have been damaged
because company A might not have been going to do something for
some number of years so there were no damages when the slip
occurred but this company lost a mother lode because some guy had
a loose lip.
MR. TILESTON stressed the department employees who handle
confidentiality material put a very high responsibility on keeping
that information confidential. He felt the department has an
excellent track record particularly on oil and gas issues.
CO-CHAIRMAN GREEN said the committee was not casting any
aspersions. Rather the committee is trying to determine if actual
damages can be determined at the time a cause of action might be
brought, as opposed to determining damages. For example, if a
company says it lost $15, that would be the reward.
MR. TILESTON stated the committee is discussing an area in which he
has no expertise.
CO-CHAIRMAN GREEN and REPRESENTATIVE MACLEAN OBJECTED to the
motion.
CO-CHAIRMAN GREEN asked for a roll call vote. Voting in favor of
the amendment was Representative Davies. Voting against the
amendment were Representatives Ogan, MacLean, Austerman, Kott,
Williams and Green. The MOTION FAILED 6-1.
Number 200
REPRESENTATIVE MACLEAN wondered since the committee deleted lines
15 and 16 on page 5, should some sort of statement be attached to
the committee report saying the commissioner may adopt minimized
regulations as necessary and those minimized regulations should be
implemented.
CO-CHAIRMAN GREEN responded the wording determining what the
commissioner might adopt may not hold, but a letter from the
committee encouraging minimal regulations is appropriate. He noted
HB 197 is an incentive type bill--there is a desire to send the
word to the rest of the world that Alaska wants companies to come
to Alaska and invest their money and that while Alaska will
continue with the way it does business, the state wants to minimize
any restrictions which might otherwise impede that flow of money
coming in.
REPRESENTATIVE DAVIES concurred with Co-Chairman Green's comments.
He said a committee letter of intent would be appropriate.
CO-CHAIRMAN GREEN stated if that is the wish of the committee, he
will prepare a letter of intent and pass it by the committee for
approval.
REPRESENTATIVE DAVIES made a MOTION to AMEND CSHB 197(RES), on page
5, line 32, delete the word "including" and add the word "and." He
felt the change would better reflect the intent.
MR. ROGERS stated that is a good change.
CO-CHAIRMAN GREEN asked if there were any objections. Hearing
none, the MOTION PASSED.
Number 246
REPRESENTATIVE DAVIES made a MOTION to AMEND CSHB 197(RES), on page
6, lines 15-18, subsection viii, delete the entire subsection.
REPRESENTATIVE MACLEAN OBJECTED to hear the reason for deleting the
subsection.
MR. ROGERS said the intent, when HB 197 was redrafted, was to
ensure the costs of getting exploration related permits and
approvals are eligible costs, which is covered on page 5. He
stated this subsection goes beyond that and moves into the
development arena which is not the intent of the bill. He felt it
was a miscommunication with the drafter.
REPRESENTATIVE MACLEAN WITHDREW her OBJECTION.
REPRESENTATIVE DAVIES noted the previous "and" should be eliminated
and the semi-colon should be changed to a period which he assumes
the drafter will take care of.
CO-CHAIRMAN GREEN asked if there were any objections to the motion.
Hearing none, the MOTION PASSED.
Number 289
REPRESENTATIVE KOTT wondered on page 7, line 5, what the term
"natural person" means.
MR. ROGERS responded a person under state law includes
corporations, partnerships, etc., so a natural person is like
Representative Kott or him. He stated an unnatural person is a
corporation or a business entity, which are listed also.
REPRESENTATIVE KOTT wondered why there is a need to include the
word "natural."
MR. ROGERS stated he would have to look at the statute to ensure
those business entities listed below are included in the law.
CO-CHAIRMAN GREEN felt the point is well made. He clarified what
is desired is the allowance for a single guy to go out and have his
own mine without having to be a corporation.
MR. ROGERS replied that is correct. He said the desire is to have
the credit apply to anyone who is otherwise qualified.
Number 314
REPRESENTATIVE OGAN observed the fiscal note from the DOR had
comments attached and he had some concerns regarding those
comments. He noted on page 3 of the fiscal note, the department
recommends the bill be amended to add "nonrefundable" before
references to the credit.
MR. DICK responded that corporations are required to file taxes on
a combined basis, which essentially combines operations inside and
outside of Alaska, as long as it is the same mining business. He
stated he outlined a scenario in the comment section of the fiscal
note where a company might have a site in Alaska, which proves to
be very profitable, and the measurement of the credit is based on
50 percent of the taxes attributable to that site. For example, a
company has a $100,000 tax liability from that site. When that
company goes to file its corporate income tax return, it will
combine and file on a combined basis for all of their operations in
the U.S.
MR. DICK explained if there are losses for the company in a mine
down in Nevada, when all of the income is put into the pie,
suddenly there may be, on a combined basis, only a $50,000 total
tax liability for the company. Therefore, the company will take
that credit, one-half of the $100,000 or $50,000 for Alaska and
apply it against the $50,000 combined tax liability and the company
will not pay any tax. He went on further to explain there may be
only $40,000 in the combined pie and therefore, the company would
take the credit against the $40,000, which would give the company
a negative $10,000 scenario. He stated the DOR would argue the
amount is nonrefundable. He said the department felt the bill
would be enhanced by including the term "nonrefundable" to clarify
that it is a nonrefundable credit, which is consistent with what
the Internal Revenue Service does.
MR. ROGERS stated he had not fully thought the issue out. He was
not sure there was a problem or not. He wondered about a case
where there is a pre-pay and the tax liability is less than what
someone has paid based on the credit. He asked if that person
should be entitled to some recognition of that, at least in terms
of a carry forward.
MR. DICK responded pre-pay is like a payment on the tax and the
credit involves a different scenario. He agreed the company would
get their money back, but it would be after the credit is deducted,
so that would increase the amount returned.
MR. ROGERS felt adding the word "nonrefundable" throughout the bill
would confuse the issue.
MR. DICK stated as long as the word "nonrefundable" is associated
with credit there would not be a problem. He stressed it would be
a nonrefundable credit.
MR. ROGERS asked what the effect would be.
MR. DICK stated the credit could be taken only to the amount of the
tax liability and whatever the pre-payment is would be mutually
exclusive. The pre-payments would be compared against the tax
liability.
Number 401
REPRESENTATIVE OGAN said he was even more confused.
REPRESENTATIVE MACLEAN advised Representative Ogan could amend CSHB
197(RES) by inserting the word "nonrefundable" wherever the term
exploration incentive credit appears.
CO-CHAIRMAN GREEN asked Mr. Dick if that was the intent or would
there only be certain areas where the word "nonrefundable" should
appear.
MR. RYAN stated the unitary taxation structure was set up to
realize gains downstream from the oil industry. He felt now it is
coming back to haunt the legislature in this instance. He said
mining is not as profitable as oil. He noted there are operations
in the Lower 48 where people would have large deductions.
Downstream in the oil industry is where the major profits are made
rather than the basic field productions. He pointed out by trying
to capture that percentage and increase its wealth by the
downstream on this end, the state may end up losing. He noted he
understood the concerns of the DOR, but there needs to be a review
of how their suggestion might affect the overall bill.
REPRESENTATIVE OGAN felt these issues should be addressed by the
Finance Committee.
REPRESENTATIVE DAVIES said if changes are going to be made, they
should be made by inserting a new subsection (c) on page 4.
Number 444
REPRESENTATIVE MACLEAN felt the committee should direct the Finance
Committee, via a letter, to review the issue carefully and also
include in the letter the concerns the committee discussed.
REPRESENTATIVE MACLEAN made a MOTION to MOVE CSHB 197(RES) as
amended, with attached fiscal notes, out of committee with
individual recommendations.
CO-CHAIRMAN GREEN asked if there were any objections. Hearing
none, the MOTION PASSED.
ADJOURNMENT
There being no further business to come before the House Resources
Committee, Co-Chairman Green adjourned the meeting at 10:10 a.m.
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