Legislature(1995 - 1996)
01/19/1996 09:05 AM House RES
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HOUSE RESOURCES STANDING COMMITTEE
January 19, 1996
9:05 a.m.
MEMBERS PRESENT
Representative Joe Green, Co-Chairman
Representative Scott Ogan, Vice Chairman
Representative Alan Austerman
Representative John Davies
Representative Pete Kott
Representative Don Long
MEMBERS ABSENT
Representative William K. "Bill" Williams, Co-Chairman
Representative Ramona Barnes
Representative Irene Nicholia
COMMITTEE CALENDAR
HOUSE BILL NO. 341
"An Act establishing a tax court to consider and determine certain
taxes and penalties due and collateral matters, and amending
provisions relating to taxpayer challenges to the assessment, levy,
and collection of taxes by the state; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 341
SHORT TITLE: ALASKA TAX COURT
SPONSOR(S): REPRESENTATIVE(S) GREEN
JRN DATE JRN-PG ACTION
05/09/95 2042 (H) READ THE FIRST TIME - REFERRAL(S)
05/09/95 2042 (H) RES, JUD, FINANCE
10/24/95 (H) RES AT 09:00 AM ANCHORAGE LIO
10/24/95 (H) MINUTE(RES)
01/19/96 (H) RES AT 09:00 AM CAPITOL 124
WITNESS REGISTER
JACK CHENOWETH, Attorney
Legislative Legal Counsel
Legislative Affairs Agency
130 Seward Street, Suite 409
Juneau, Alaska 99801-2105
Telephone: (907) 465-2450
POSITION STATEMENT: Explained changes for proposed committee
substitute for HB 341.
DEBORAH VOGT, Deputy Commissioner
Department of Revenue
P.O. Box 110405
Juneau, Alaska 99801-0400
Telephone: (907) 465-2300
POSITION STATEMENT: Available for questions on HB 341.
ACTION NARRATIVE
TAPE 96-5, SIDE A
Number 000
CO-CHAIRMAN JOE GREEN called the House Resources Committee meeting
to order at 9:05 a.m. Members present at the call to order were
Representatives Green, Austerman, Davies, Kott, Long and Ogan.
Members absent were Representatives Barnes, Nicholia and Williams.
HB 341 - ALASKA TAX COURT
CO-CHAIRMAN GREEN, sponsor of HB 341, explained that the bill had
been introduced the previous year. A hearing had been held in
Anchorage during the interim, at which time deficiencies in the
prior version were noted. Of primary concern was introduction of
a tax court, a special entity, which met with severe fiscal
problems. That version of HB 341 had been amended and the new
version was now before the committee.
CO-CHAIRMAN GREEN commented that under current law, when a tax bill
was rendered to a taxpayer, the taxpayer requested review by the
Department of Revenue before the issue ever went to the superior
court. The court then relied heavily on the Department of
Revenue's review process. He said this seemed like a stacked deck.
HB 341 was designed to provide a more impartial review to an
appellant.
Number 192
REPRESENTATIVE ALAN AUSTERMAN asked whether the bill addressed a
different type of review before the matter went to court.
CO-CHAIRMAN GREEN answered that the intention was to not have all
the review stay within the department that rendered the tax bill in
the first place.
Number 220
REPRESENTATIVE JOHN DAVIES asked if they were discussing version K;
Co-Chairman Green confirmed that was correct.
Number 230
JACK CHENOWETH, Attorney, Legislative Legal Counsel, Legislative
Affairs Agency, referred to version K, page 3, Section 3, and said
it amended the section of Title 43 dealing with taxation and
revenue. There was a process in place for appeals; HB 341 left
that process alone with respect to all the taxes in Title 43 except
those identified in subsection (a) of Section 4, page 3, lines 10
through 14. The purpose of Section 3 was to say that the
provisions of current law did not apply to the actions of the
Department of Revenue if those actions were subject to the appeal
provisions of AS 43.05.242.
MR. CHENOWETH referred to Section 4 and said it created a new
section covering the disposition on appeal of taxes and penalties
relating to taxes identified under that section in paragraphs 1 -
5. Identified to be covered by the new appeal provision were
questions arising under AS 43.19, the Multi-state Tax Compact; AS
43.20, the current corporate income tax; former corporate tax under
AS 43.21; the severance tax under AS 43.55; the mining license tax
under AS 43.65; and the fisheries taxes under AS 43.75.
Number 419
DEBORAH VOGT, Deputy Commission, Department of Revenue, noted that
AS 43.21 was a tax under which there were still a couple of old
disputes pending.
MR. CHENOWETH explained that under subsection (b), beginning on
line 15, a person subject to one of the included taxes had the
opportunity to challenge a determination by the Department of
Revenue. The challenge could be brought through an informal
hearing. A taxpayer who disagreed with the outcome of that hearing
had two choices. First, under subsection (c)(1), the taxpayer
could appeal to the superior court in the judicial district where
he or she resided. Second, under subsection (c)(2), the taxpayer
could ask for a formal hearing.
Number 525
REPRESENTATIVE DAVIES asked whether the formal hearing was within
the Department of Revenue; Mr. Chenoweth confirmed that it was.
Number 540
REPRESENTATIVE AUSTERMAN commented that there had been a flow chart
the previous year that showed the process. He requested that
another flow chart be created for the new scenario, because it
greatly simplified understanding the process.
CO-CHAIRMAN GREEN replied that they would produce a flow chart for
the following Wednesday's hearing, and would have available both
the existing chart and the new one.
Number 611
MR. CHENOWETH returned to his earlier discussion. He referred to
Section 1 and said that on page 1, subsection (d)(1) restated
existing law as it related to the superior court's consideration of
an appeal from an inferior court. HB 341 removed the reference to
an administrative agency. Mr. Chenoweth added that all
administrative agency references were now at the top of page 2. He
explained that paragraph 2, page 2, provided the taxpayer an
opportunity to have the matter heard before the superior court and
to require a trial de novo, as a matter of right, on appeal from a
decision at an informal hearing. It would not be discretionary
with the court to give a trial de novo on appeals at that stage.
Number 818
MR. CHENOWETH referred to paragraph 3 and said it covered appeals
to the superior court from a formal hearing. There, the law would
remain the same as current law. The appeal would remain on the
record unless the superior court, in its discretion, granted a
trial de novo in whole or in part. Mr. Chenoweth then referred to
paragraph 4 and said it covered all other administrative agency
appeals. There again, the law remained the same as current law.
REPRESENTATIVE DAVIES asked for confirmation that in current law
the issue of trial de novo was discretionary with the superior
court.
Number 690
MR. CHENOWETH confirmed that was the case. He added that paragraph
2, by making the trial de novo a matter of right, affected an
appellate procedure court rule, which change was noted in Section
10 of HB 341. He then referred to page 4, line 16, and said there
was language in AS 43.05.244 that clarified payments of tax
penalties and interest before an appeal was taken. He said
language in AS 43.05.245 amended existing law relating to
collection of tax penalties and interest to pick up reference to
the appeals that may be taken under either AS 43.05.240, which is
current law, or the new AS 43.05.242 on page 5, line 5.
Number 911
MR. CHENOWETH referred to Section 6 and said it discussed methods
of handling overpayments. The amendment in Section 7 joined in the
new section covering the appeal process of AS 43.05.242. He said
Section 8 was similar. In Section 9, he explained, since the
severance tax under AS 43.55 would be shifted from being the
subject of an appeal under AS 43.05.240 to the subject of an appeal
process under AS 43.05.242, the reference to AS 43.05.240 was being
deleted on line 10 and the reference to AS 43.05.242(c)(2) was
being inserted.
Number 945
MR. CHENOWETH returned to page 2, line 28, which expanded the
references relating to where money went in terms of the budget
reserve fund on the basis of the outcome of tax appeals. He added
that the heart of HB 341 is in Section 4, the administrative appeal
provisions, as well as in the granting of de novo trials as a
matter of right in Section 1, paragraph 2, at the top of page 2.
Number 1004
REPRESENTATIVE LONG asked if in Section 4, in particular, these
were compilations of law already on the books.
MR. CHENOWETH said that was correct. He explained the practice was
to draft in order by number, which sometimes put the most important
part of a bill in the middle or at the end. Therefore, when he
explained a bill, he tried to focus on the major change and then
show what needed altered because of those amendments or deletions.
Number 1052
REPRESENTATIVE LONG questioned whether the language under
consideration was new.
MR. CHENOWETH explained that new language was either underlined or
said "is amended by adding new subsections to read," followed by
the new wording.
Number 1090
REPRESENTATIVE KOTT asked Mr. Chenoweth to explain the significance
of interchanging the terms "person" and "taxpayer" throughout.
MR. CHENOWETH replied that "person" would be the taxpayer; he said
the terms should be consistent within each chapter despite not
being consistent throughout Title 43.
Number 1141
REPRESENTATIVE SCOTT OGAN asked Mr. Chenoweth whether the de novo
trial portion of HB 341 would add costs to the state.
MR. CHENOWETH responded that if a taxpayer opted to use the
informal hearing, was dissatisfied with the outcome, and chose to
appeal to the superior court, the record of the informal hearing
was not the only evidence the superior court would consider.
Rather, the court would essentially start with a blank page and
expect the parties to bring forward whatever evidence they felt
necessary to resolve the matter. He added that would also be true
if the taxpayer went through the informal hearing process, went to
a formal hearing, and then decided to appeal to the superior court
under subsection (c)(1). In this latter instance, however, the law
stated that the granting of a trial de novo was discretionary with
the superior court; the case could be decided based on the prior
record at the administrative level. Mr. Chenoweth admitted that he
did not know under what circumstances the court would or would not
grant a trial de novo.
Number 1277
REPRESENTATIVE OGAN asked whether under a de novo trial the
superior court could consider new evidence above and beyond what
the Department of Revenue had considered.
MR. CHENOWETH explained that a trial de novo opened up a matter as
if there were no record.
REPRESENTATIVE OGAN further questioned whether if there were a
trial de novo, parties and witnesses would have to be deposed
again.
MR. CHENOWETH responded that he did not know if they needed to
reconsider material touched on before. But there was an
opportunity to bring in additional evidence, including evidence
previously deemed inadmissible by the Department of Revenue.
Number 1389
REPRESENTATIVE DAVIES asked whether, as a matter of right, the
taxpayer would have the right to depose people again. He said he
was concerned about the impact it might have on deadlines within
the process. He then asked what signals the termination of the
process and how did a person know when the hearing was over. He
further asked how long a taxpayer had to bring a request for either
an informal or a formal hearing.
Number 1457
MR. CHENOWETH replied that in an earlier version of the bill, they
had added a provision making use of a reference to "final
decision." Mr. Chenoweth referred to a draft prepared in December
which said a decision of the Department of Revenue was final if the
decision disposed of either the entire case or the entire issue in
controversy, and may include an order entered on a motion for
summary or partial summary judgment if the order constituted final
disposition of an entire issue in controversy. Mr. Chenoweth
commented that he had removed that language because he did know
what the consequences of the language would be. He said that if
the committee needed that kind of certainty, they would have to
reinsert that language to fit the context in which it was being
offered. He stated that the language was as loose in HB 341 as it
was in current law. In all fairness, he said, the sponsor had
tried to make the language more certain; but Mr. Chenoweth said he
himself had decided to remove it only because he did not see how it
needed to be worded to fit into HB 341. If certainty was required,
that language needed to be built back into the bill.
REPRESENTATIVE DAVIES asked what the time line was to request the
hearings in the first place.
Number 1535
MR. CHENOWETH replied that on page 3, line 16, after a
determination was made by the Department of Revenue, the taxpayer
had 60 days from the date of mailing of the notice of determination
to request an informal hearing. Under either subsection (c)(1) or
(c)(2), the taxpayer then had 30 days after the date of decision
resulting from an informal hearing to either request a formal
hearing or appeal to the superior court.
Number 1535
CO-CHAIRMAN GREEN asked if there were any other questions as to the
intent of the bill.
REPRESENTATIVE DAVIES referred to the list of taxes in Section 4
and asked what the decision process had been in choosing those
taxes. Specifically, he wanted to know if other taxes had been
omitted from the list and what the rationale was for those on the
list.
Number 1608
MR. CHENOWETH responded that Section 4 did not address, for
example, questions involving the estate tax, taxes on coin-operated
devices and punch boards, the motor fuel tax, the tobacco tax, the
pipeline property tax, the oil and gas conservation tax, taxes on
alcoholic beverages, the Business License Act tax or the existing
salmon enhancement tax. All those, he said, continued to be
resolved by the appeal process under AS 43.05.240, which was the
appeal process in current law. He added that the selection of the
particular taxes listed went back to the original work order
request that came from the sponsor of the bill. He noted that when
the bill originated, it was with the idea of a separate tax court.
Now, there was no separate tax court being considered, but the
appeal process was being modified in relation to the same taxes
originally being considered under the bill.
Number 1661
REPRESENTATIVE DAVIES redirected his question to the sponsor of the
bill, Co-Chairman Green, asking how the particular taxes listed in
HB 341 had been chosen.
CO-CHAIRMAN GREEN explained that these were major taxes and
affected fewer members of the general public than would, for
example, the tobacco tax or gasoline tax. He suggested these taxes
were of more consequence and of a higher visibility for dispute
than some others. The intent was not to resolve disputes over the
existence of the taxes, but rather to resolve differences in case-
by-case applications involving how the amounts were calculated. In
contrast, he said, methods of figuring taxes on gasoline and
tobacco would not be under dispute in individual cases.
Number 1736
REPRESENTATIVE LONG asked for clarification that not all state
taxes were being affected by HB 341.
CO-CHAIRMAN GREEN confirmed that it was only certain taxes, and
added that they were not eliminating those taxes. It affected
methods of deriving taxes and the final dollar amounts owed, not
the question of whether taxes were owed at all.
Number 1777
REPRESENTATIVE PETE KOTT asked whether under AS 43.65, the mining
license tax, there had ever been a dispute. He wondered why that
had been included and said he felt it was an oddball in the group.
MR. CHENOWETH responded that, to his best recollection, the mining
license tax was a bit of a misnomer. Although it was a license
tax, part of the liability was determined with respect to the
amount of deduction. Consequently, there was potential for a
significant question on liability based upon something that was or
was not produced.
Number 1856
CO-CHAIRMAN GREEN noted that although they had not been requested
to include timber, that might be a category to be added.
REPRESENTATIVE AUSTERMAN asked whether timber fell under the
severance portion of the bill.
CO-CHAIRMAN GREEN said he did not know and deferred to Deborah Vogt
for a response.
MS. VOGT explained that the severance tax included in HB 341 was
the oil severance tax. As to the mining license tax, to her
knowledge, there had never been a significant dispute, nor even any
significant revenue resulting from it.
CO-CHAIRMAN GREEN asked Ms. Vogt to address the timber portion in
order to answer Representative Kott's question.
MS. VOGT replied she did not know the answer.
Number 1965
MR. CHENOWETH said he knew of no separate levy on timber.
CO-CHAIRMAN GREEN agreed it was a good question and suggested that
it would be looked into and addressed at the next meeting.
REPRESENTATIVE KOTT asked Mr. Chenoweth about page 3, line 24. He
wondered if after the informal hearing, there would be written
notification to the taxpayer and if so, could it be tied to the
date of mailing of the notice as it was on page 3, line 15. He
also wanted to know how much time the Department of Revenue needed
to prepare and provide the records to the taxpayer.
MR. CHENOWETH replied that he did not know the mechanics of how the
Department of Revenue formally advised the taxpayer of the outcome
of an informal conference or hearing. He noted that page 3, lines
20 and 21, states that if the department determines a correction is
warranted, the department shall make the correction. He said he
assumed the outcome would be communicated either by phone or in
writing to the taxpayer, regardless of the outcome. He added that
AS 43.05.240 was the model for this part of HB 341. He further
stated that the language could be expanded to tie in with the
outcome of the informal hearing to the first day the taxpayer had
to either appeal to the superior court or to request a formal
hearing.
Number 2038
REPRESENTATIVE KOTT asked, if the Department of Revenue needed 28
days to get the records to the taxpayer, giving the taxpayer two
days to look them over, would that be enough time.
Number 2040
MS. VOGT responded that the Department of Revenue issued written
informal conference decisions. She noted that the one thing
different was that an informal conference was an optional procedure
that can be skipped. She said the taxpayer's files are always
available to the taxpayer throughout any proceeding. However,
there might be attorney work product that was unavailable to the
taxpayer under any circumstances. In an informal conference
decision, most of what the taxpayer would not have seen would be
the decision itself. She added she foresaw no problem with the 30-
day period that already existed between the informal conference
decision and the deadline for appeal. She added that within the
department, they would have the power to grant an extension and she
could not imagine they would not do so if it were warranted.
Number 2196
REPRESENTATIVE OGAN asked Ms. Vogt to explain how the bill would
affect how the Department of Revenue operated, and asked whether it
would detrimentally affect the revenue stream of the state of
Alaska.
MS. VOGT conveyed her understanding that there would be no
testimony at the meeting, and added that she was not prepared to
respond.
CO-CHAIRMAN GREEN reminded the committee that these issues would be
addressed at the full hearing on Wednesday. The current meeting
was for familiarization only.
MS. VOGT clarified that she would gladly address technical aspects
about how the Department of Revenue operates.
Number 2245
CO-CHAIRMAN GREEN added that the Department of Revenue had
introduced a bill similar to HB 341. He said that by Wednesday,
the committee would have looked at the two bills to determine if
there was some way to combine them.
MS. VOGT noted that the bill was HB 427, with SB 224 being an
identical bill on the Senate side.
Number 2290
REPRESENTATIVE KOTT moved to adopt CS for HB 341 as a working
document.
CO-CHAIRMAN GREEN asked if there was any objection to adopting the
committee substitute for HB 341, version K, as the working draft.
There being no objection, it was so ordered.
REPRESENTATIVE OGAN expressed his appreciation at hearing the bill
before adopting it as a working document.
Number 2315
ADJOURNMENT
There being no further business to conduct, CO-CHAIRMAN GREEN
adjourned the House Resources Committee meeting at 9:50 p.m.
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