Legislature(2007 - 2008)
01/30/2008 03:41 PM House W&M
| Audio | Topic |
|---|---|
| Start | |
| HB156 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
January 30, 2008
3:41 p.m.
MEMBERS PRESENT
Representative Mike Hawker, Chair
Representative Anna Fairclough, Vice Chair
Representative Bob Roses
Representative Paul Seaton
Representative Peggy Wilson
Representative Sharon Cissna
MEMBERS ABSENT
Representative Max Gruenberg
COMMITTEE CALENDAR
HOUSE BILL NO. 156
"An Act relating to mining licenses, to the mining license tax,
and to production royalties on minerals and rents for property
involved in mining; and providing for an effective date."
- MOVED CSHB 156(W&M) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 156
SHORT TITLE: MINING PROD. & LICENSE TAXES/ROYALTIES
SPONSOR(s): REPRESENTATIVE(s) SEATON
02/26/07 (H) READ THE FIRST TIME - REFERRALS
02/26/07 (H) W&M, RES, FIN
03/16/07 (H) W&M AT 8:30 AM HOUSE FINANCE 519
03/16/07 (H) Heard & Held
03/16/07 (H) MINUTE(W&M)
03/21/07 (H) W&M AT 7:30 AM HOUSE FINANCE 519
03/21/07 (H) Heard & Held
03/21/07 (H) MINUTE(W&M)
03/23/07 (H) W&M AT 7:30 AM HOUSE FINANCE 519
03/23/07 (H) Heard & Held
03/23/07 (H) MINUTE(W&M)
01/30/08 (H) W&M AT 3:30 PM HOUSE FINANCE 519
WITNESS REGISTER
JOHANNA BALES, Deputy Director
Anchorage Office
Tax Division
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Presented testimony on HB 156.
MARCIA DAVIS, Deputy Commissioner
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Presented testimony on HB 156.
ACTION NARRATIVE
CHAIR MIKE HAWKER called the House Special Committee on Ways and
Means meeting to order at 3:41:06 PM. Representatives Hawker,
Roses, Cissna, Seaton, Wilson, and Fairclough were present at
the call to order.
HB 156-MINING PROD. & LICENSE TAXES/ROYALTIES
3:41:39 PM
CHAIR HAWKER announced that the first order of business would be
HOUSE BILL NO. 156, "An Act relating to mining licenses, to the
mining license tax, and to production royalties on minerals and
rents for property involved in mining; and providing for an
effective date."
REPRESENTATIVE FAIRCLOUGH moved to adopt Version 25-LS0548\M,
Bullock, 3/23/07 as the working document.
There being no objection, Version M was before the committee.
CHAIR HAWKER mentioned that there is one amendment being brought
before the committee that will roll all the effective dates in
HB 156 forward by one year. He asked that Representative Seaton
present the bill and the accompanying fiscal notes.
REPRESENTATIVE SEATON clarified that the proposed amendment
would roll the effective date forward to January 2009, the start
of the tax year. He said there is no intention to make HB 156
retroactive.
REPRESENTATIVE FAIRCLOUGH asked whether there is enough time for
regulations to be written and public testimony to be taken prior
to the effective date of the bill, should HB 156 be passed
during this legislative session.
3:44:27 PM
REPRESENTATIVE SEATON replied that the extent of the regulatory
changes would be up to the Department of Revenue (DOR). He
mentioned the bill will still need to go to the House Finance
Committee, which will also address the effective date. He noted
that his intention with the proposed amendment is to make
certain there is not a retroactive effective date. He offered
his belief that both DOR and the Department of Natural Resources
(DNR) would also ensure there was not a retroactive effective
date in the bill.
CHAIR HAWKER offered that the amendment was being monitored by
both DOR and DNR.
REPRESENTATIVE FAIRCLOUGH said she would probably offer an
amendment to allow for more time.
CHAIR HAWKER asked Representative Seaton to refresh the
committee about HB 156.
REPRESENTATIVE SEATON confirmed that the updated fiscal note
from DNR contained no changes, whereas the updated fiscal note
from DOR did predict an increase for 2008 reflecting the
increase in mineral prices. Reading from the fiscal note, he
noted that in 2007 the mining industry saved in excess of $20
million by using percent depletion. Referring to the sponsor
statement update, he described changes to page 2, middle
paragraph, which now reflect the tax revenue increase to 6
percent, due to the escalation in mineral prices.
Representative Seaton turned the committee's attention to his
Powerpoint presentation titled "HB 156 Mining Taxes review
(v.M)". He highlighted that slide 2 references the Fraser
Institute, an industry consortium that collects and publishes
information from most of the active mining companies around the
world. The Fraser Institute rates mining jurisdictions and has
found that the industry considered Alaska to be the second most
favorable taxation regime in the world, in both 2006 and 2007.
The Fraser Institute has also found that Alaska has moved from
the 7th to the 4th most favorable in composite policy and
mineral potential from 2006 to 2007. He expressed the need for
Alaska to address this perception, and questioned whether Alaska
is leaving "too much money on the table." He recalled the ore
tax debate when the state tried to be in the middle of the
taxing jurisdiction pack.
REPRESENTATIVE ROSES commented that the analogy to oil taxes
being in the middle of the taxation pack did not bear up as
Alaska was no longer in the middle.
CHAIR HAWKER clarified that Representative Seaton's statement
was that the intent was for Alaska to be in the middle of the
taxation pack.
REPRESENTATIVE SEATON, continuing with the slide presentation
referred to slide 3 titled "Alaskans favor change..." a
Hellenthal poll which relates that Alaskans believe the state
should update its taxes since it has not been done since
statehood. Referring to the chart titled "Non-Renewable
Resource Tax Comparison Chart" included in the committee
packets, he explained the chart compares current mining tax
statutes, HB 156 and the proposed mining tax changes, and the
current oil and gas taxes. He pointed out that the proposed
mining license tax rates have changed in comparison to the
current taxes. He noted that under the current mining tax
rates, companies pay varying amounts on net income. The
proposed tax changes in HB 156 would provide an exemption to
companies with net incomes of $100,000 or less. He continued to
explain the taxes on each of the increased net income
categories. He identified a definite shift with HB 156 to allow
those lower producing mines to have a much lower tax burden. He
then explained the tax comparison chart and the three and one-
half year deferral proposal, referenced in Section 10 of HB 156.
This new proposal is a deferral, not an exemption as exists
under the current mining regulations. This deferral would allow
profitable mines, if taxes were due, to pay the taxes back over
a 10-year period, allowing the mining companies to recover their
costs more quickly. The tax comparison chart refers to Section
14 of HB 156, which proposes to change the allowance of either
percent depletion or cost depletion to only allowing cost
depletion. He highlighted that the state income tax is no
longer deductible under the proposed bill. He continued
reviewing the tax comparison chart, discussing the proposed
change in royalty payments, referenced in Section 1 and Section
2 for coal, and in Section 6 for metals. The proposed change
allowing the state to accept coal royalty in-kind would aid the
University of Alaska, Fairbanks, or any other state-owned coal
facility, as the state could accept the royalty in coal as
opposed to receiving a cash equivalent and subsequently
purchasing coal. He next discussed the sliding scales of rents,
which are not changes, but are being placed in statute. The
only change in rents would be to update the base year from 1989
to 2005 and add inflation.
4:00:49 PM
REPRESENTATIVE SEATON concluded his review of the basic tenets,
and asked to make one more observation on coal bids. He
explained that coal bids could include or not include a bid
variable for the royalty. The proposed bill would still allow a
bid variable for coal if the state wants to bid.
4:02:01 PM
REPRESENTATIVE ROSES related his understanding that HB 156
consists of the following proposals: change the tax rate, add a
progressivity factor, and eliminate deductions for the 3.5 year
exemption and state income tax. He asked if these were all the
proposed changes.
REPRESENTATIVE SEATON clarified that this is not a standard
deduction similar to the oil tax, as this bill allows full cost
depletion. He explained all of the actual costs are depleted,
and there is the three-and-one-half year deferral on taxes to
allow a quicker recovery. He said the depletion can be taken
over 10 years, or in the year that the cost is generated. The
idea is to offer some incentive. He explained that this bill
allows a full write-off of all costs in the year in which they
occur, unlike the oil tax which is subject to limitations on
what can be claimed. He pointed out there is no progressivity
feature similar to the oil tax, where the percentage of the tax
increases as the price of the commodity increases. However, he
described this as a progressive tax structure, which is updated
and gives higher exclusion on the lower end of net income and
changes rates for inflation, recognizing the different mining
types and values. He offered his belief that there is nothing
similar in HB 156 to the price based progressive feature of the
oil legislation.
4:05:10 PM
REPRESENTATIVE ROSES requested an explanation of the difference
between 3 percent of net income as opposed to 3 percent of net
smelter. He then inquired as to the impact that will have on
the state revenue.
CHAIR HAWKER advised that later in the meeting he will ask DOR
for that explanation with the fiscal notes.
REPRESENTATIVE SEATON provided that DOR has included three
graphs showing the revenue impacts Representative Roses
requested. He said he would skip the remainder of the slides,
as they are just a sectional analysis of HB 156. He referred to
the Department of Commerce, Community, & Economic Development
(DCCED) memorandum, dated October 17, 2007, which contains an
analysis of mining taxes. The memorandum was issued to the
administration's working group, DOR, DNR, and DCCED to discuss
Alaska mining taxes. He noted the memorandum introduction
addressed the same three issues as HB 156. He read from the
memorandum:
The most significant issue noted in the review is that
unlike other states, the Alaskan tax structure is
almost solely based upon the calculation of net income
in its treatment of mines. Due to this dependence on
net income the significance of this single calculation
cannot be overstated. However, due to allowed
deductions for Mineral Incentive Credits, other taxes,
percentage based depletion allowances and other
issues, the net income calculation may be a
questionable measure.
CHAIR HAWKER asked if this was the entire premise of HB 156.
REPRESENTATIVE SEATON replied that it was, and said he was glad
to hear this from a source other than himself.
4:09:03 PM
REPRESENTATIVE SEATON explained that the memorandum goes through
each one of the taxes: property taxes and how they compare in
each state; percent of depletion; royalties; and the mining
license tax. He directed the committee to the heading "Minerals
Exploration Incentive Credits" on page 5 of the memorandum, and
cited the second paragraph, last sentence, which read [original
punctuation provided]:
Since the maximum marginal tax rate for the corporate
income tax is 9.4 percent, this could allow a tax free
status for almost $213 million dollars of net income
and/or a reduction in royalties to the State of up to
$20 million dollars.
REPRESENTATIVE SEATON explained that since this incentive credit
is unlike the oil incentive credit or almost any other incentive
credit, this tax is currently able to be written-off against all
taxes. Therefore, it allows $213 million of mineral extraction
without any tax coming to the state. He clarified this is tax
due the state, but in some jurisdictions a local property tax
may still be due.
CHAIR HAWKER reminded the committee this memorandum refers to
the status quo. He thanked DCCED for an excellent memo, and
asked how HB 156 would affect the status quo just described.
4:11:42 PM
REPRESENTATIVE SEATON replied he will address that momentarily.
He referred to page 6 of the memorandum, under the heading
"Treatment of Ore Value," which, in part, read:
... it is difficult to see where the actual value of
the ore extracted is exposed to any substantial type
of taxation by or payment made to the State.
REPRESENTATIVE SEATON explained that by treating ore value as
net income and allowing deductions and depreciations against
that under the current tax, the situation has arisen in which
substantial amounts of ore are extracted without ever being
exposed to any taxation. He read the following from page 6,
paragraph 5 under "Treatment of Ore Value":
Indeed it would appear that using the current
percentage depletion allowance, the cost of these
resources is being expensed at far above the actual
cost.
REPRESENTATIVE SEATON announced this was why HB 156 removed the
"percentage depletion" allowance. He explained all of the
capital that is invested in a mine is recovered not only as
"cost depletion" but also as "percent depletion". He directed
the committee to the last paragraph of page 7, which, in part,
read:
While the bill does not address all of the issues
presented in this report, it does address many of
them.
REPRESENTATIVE SEATON clarified that HB 156 does not address all
of the issues that the DCCED memorandum discussed as problematic
for the Alaska tax system. He offered his belief that HB 156
did identify the issues that are most appropriate to be changed,
based on the legislative procedure and several years of review.
4:14:09 PM
REPRESENTATIVE SEATON said, in response to an earlier question
with regard to writing-off the incentive credit, that this issue
had not been specifically addressed except that the corporate
income tax cannot be written-off against the mining tax. He
referred the committee to the charts in the DCCED memorandum,
which offer an analysis of the current situations and prices,
state and municipal tax revenues, and how they are all
increasing as the price of minerals increases. He reminded the
committee there has been more activity in mining and the gross
revenue has increased. He referred to the bar graph titled
"Rents and Royalties as a Percent of Production Value 2005"
which is on page 16 of the memorandum. He explained this was an
independent analysis of the percentage of resource value that
accrues to the state, based on the 2005 statutes.
REPRESENTATIVE ROSES asked if there is a graph comparing the
difference in percentages to the proposed changes in HB 156.
REPRESENTATIVE SEATON responded this graph will be shown with
the DOR report. He asked if there were any questions about the
memorandum from DCCED.
4:17:42 PM
CHAIR HAWKER reiterated that DCCED did an excellent job.
REPRESENTATIVE SEATON reviewed the contents of the committee
packet which should include the following: the Bristol Bay
Native Association letter in support of HB 156 dated December
14, 2007; the Legislative Research Report dated December 21,
2007, which supports the sponsor statement; and three DOR graphs
in pink and blue reflecting the current tax rates compared to
different projected scenarios. He explained the graph titled
"Mining License Tax Revenues-Total Effect of HB 156" details the
current mining license tax revenues versus the projected tax
revenues with HB 156. The second graph titled " Mining License
Tax Revenues-Effect of Tax Rate Change, % Depletion Allowed"
compares the same two revenues with percent depletion allowed.
The third graph titled "Mining License Tax Revenues-Effect of %
Depletion" compares mining license tax revenues under the
current tax rates allowing and not allowing percent depletion.
4:20:24 PM
REPRESENTATIVE SEATON mentioned that percent depletion is
inconsistent with any thought pattern Alaska has. He explained
it is better for Alaska to allow a company full capital cost
depletion, not paying taxes for the first three-and-one-half
years and then paying those taxes over 10 years to recover their
costs earlier, than to allow percent depletion, because the
company "made money on it and it's no longer left in the ground
for you to get in the future." He referred to percent depletion
as "an idea whose time has gone."
REPRESENTATIVE ROSES asked if the resolution from Bristol Bay
Native Association is from the same organization which testified
against mining in this region during earlier House Special
Committee on Fisheries and House Resources Standing Committee
meetings.
REPRESENTATIVE SEATON responded that he did not remember if
Bristol Bay Native Association or its CEO Ralph Andersen took a
position on HB 134.
4:23:55 PM
JOHANNA BALES, Deputy Director, Anchorage Office, Tax Division,
Department of Revenue (DOR), said the change to the existing tax
rate structure shown in the fiscal note is based on HB 156,
Version E, not the current working draft, Version M. However,
she said she did not believe Version M changed the fiscal note.
REPRESENTATIVE SEATON offered his understanding the exemption
amount was increased slightly from Version E to Version M. He
recalled that the original bill did not have the $100,000
exemption. He then offered, for clarification, that the new
bill contains a marginal tax rate.
MS. BALES, in response to a question, noted her agreement that
there would not be a material affect on the fiscal note. She
explained that in conjunction with the fiscal note there are
three graphs included in the members' packets that identify the
different sections in the bill and the tax effect of those
proposed changes. She referred to the graph on page 2, which
only reflects the change to the existing tax rate. She
projected the state would receive additional revenue of $30-$40
million each year.
CHAIR HAWKER commented that this number has substantially
increased from estimates in prior years.
MS. BALES explained the estimated increase is due to an increase
in mineral prices. She offered that this fiscal note is based
on projections for mineral prices to remain at higher than
historical prices.
CHAIR HAWKER asked if these are short range projections.
MS. BALES confirmed that these are short-range projections. She
went on to explain that the second part of the changes to the
mining license tax deals with repealing percentage depletion and
allowing cost depletion only. She said the DOR calculation of
increased revenue was $3-20 million each year, explaining that
the reason for the large differential is because percentage
depletion is so favorable to companies that they don't provide
any cost depletion information. Although there may have been
cost depletion taken, DOR did not have the data to make an
actual comparison, and thus estimated what they felt the
increased revenues might be.
4:29:25 PM
CHAIR HAWKER opined that the wide range of revenue was due to
lack of data.
MS. BALES discussed the section which repeals the three-and-one-
half-year exemption, instead creating a deferral. She relayed
that, based on previously filed tax returns, DOR had not seen
any companies take advantage of the exemption. She attributed
the aforementioned to low mineral prices because even though
production had started, the companies showed very low net
incomes. She said that DOR saw no effect on revenue with the
change from an exemption to a deferral, based on historical tax
returns.
REPRESENTATIVE WILSON asked if it would be easier for the mining
companies to use whole year, instead of half year, increments
for their tax preparations.
4:30:54 PM
MS. BALES replied that companies filing corporate tax returns
are used to deferring tax advantages, and therefore this would
not be a difficulty for either DOR or the industry.
CHAIR HAWKER added that the half year currently exists in
statute.
MS. BALES offered a final analysis to bring these three
significant changes together. She referred to the graph titled
"Mining License Tax Revenues-Total Effect of HB 156" on page 1
included in members' packets which shows the effect of all the
tax changes, a revenue increase of $33-60 million each year
based on new conservative prices.
CHAIR HAWKER asked if this fiscal note is based solely on mines
currently in production.
MS. BALES responded that the revenue projection did not take
into account any mines not currently permitted.
4:33:03 PM
CHAIR HAWKER asked the committee if there were any questions.
MARCIA DAVIS, Deputy Commissioner, Department of Revenue (DOR),
asked to share a progress report. She reported that although
the administration has had its hands full with oil and gas
issues, they do recognize that mining is very important to the
state. Therefore, the administration wanted to provide good
economic analysis and data for the committee. She described
that the administration has formed a talented economic analysis
team from DOR, DNR, and DCCED as a tool for the committee. This
team is creating a model to analyze four prototype mining
projects, small to large, but with no reference to any existing
mines, in order to preserve the confidentiality of any existing
mines' data. She expressed hope that this model will enable
immediate feedback of the economic impact of proposed change to
tax levels, rental levels, lease levels, royalty levels, etc.
She then expressed the need to ensure an independent view of the
economics of mining in Alaska so the state is equipped to
understand the data it has received from the industry and
independent third party sources. Understanding the economic
analysis is only one piece of the puzzle, and the team hopes to
have the models completed in the next three weeks.
CHAIR HAWKER, acknowledging the DOR work is in progress, asked
if Ms. Davis sees any information before the committee that the
model might disprove.
MS. DAVIS responded that DOR is very comfortable with HB 156
moving on to another committee, and DOR saw no inappropriate
economic analysis.
REPRESENTATIVE ROSES asked if the three-and-one-half year
deferral rather than exemption has any impact on incentive
credits.
MS. BALES replied there was no effect on the credit as this
credit is a finite amount, $20 million, and can be taken against
royalties, corporate income tax, or the mining license tax. She
relayed that in any given year, it can be taken against all
three of the aforementioned, up to $20 million. The deferral
does not change the total credit.
REPRESENTATIVE ROSES clarified that this did not mean they have
to recapture those credits.
REPRESENTATIVE FAIRCLOUGH asked if the administration is in
support of additional taxation on the mining industry through HB
156.
MS. BALES responded the administration is waiting to finish its
modeling before offering comments on which alternative it feels
most appropriate.
CHAIR HAWKER asked if there were any concluding comments.
MS. BALES offered that the fiscal note is based on historical
information of mines and operations. She expressed the hope
that the modeling will allow review of current and future mines.
4:40:01 PM
REPRESENTATIVE FAIRCLOUGH asked if the administration is
engaging in conversation with the mining industry to see if
there are any effects or unintended consequences the committee
has overlooked.
MS. DAVIS responded she is speaking with representatives from
the producers to ensure they are informed how the administration
is approaching this work. She said the team is clearly looking
for insights, comments, and ideas to preserve the independent
aspect of the analysis.
REPRESENTATIVE FAIRCLOUGH professed her concern that the credit
system for the mining industry is outdated, as some incentive
factors were not being used, counter to what is being presented
today. She asked that Alaska not just receive its highest and
best value, but also encourage employment opportunities, and
investments in the state for mining.
MS. DAVIS responded the work of assessing the fiscal impacts of
modifying tax, royalty, and rental rates is only one piece of
the model, and the other piece is assessing the enormous
economic benefit which mining brings, including jobs and income,
to parts of the state with no industry other than mining. She
said the model is so important to the state because it would
help to ensure that tax incentives, credits, and tax structures
are designed to encourage and improve the competitive position
of Alaska. She indicated that to ensure this happens DOR needs
to have a dialogue with industry, look at how they are using
these tools, and make sure the state system is modernized and
updated to achieve the best value.
REPRESENTATIVE FAIRCLOUGH disclosed that she did take a trip to
the Red Dog mine, and it was a unique experience to watch a
large open pit mine in production. She said the mine was an
economic engine for Northwest Arctic Native Association (NANA)
that put individuals in depressed areas to work. She related
her hope the administration would review the economic factors
that residually affect property owners in other portions of the
state with the royalties they receive, and the people they
employ. She said there is a ripple effect throughout the
economy when we change the taxation structure. She said she has
told the industry it is time to review the current taxation, so
she will vote to move this forward and out of committee. She
expressed concern with the ripple effects of taxation changes.
4:44:19 PM
CHAIR HAWKER proffered his thanks to Ms. Bales and Ms. Davis.
4:44:45 PM
REPRESENTATIVE SEATON moved to adopt Amendment 1, labeled 25-
LS0548\M.1, Bullock, 1/24/08, which read:
Page 4, line 4:
Delete "2008"
Insert "2009"
Page 4, line 19:
Delete "2007"
Insert "2008"
Page 7, line 5:
Delete "2007"
Insert "2008"
Page 10, line 12:
Delete "2007"
Insert "2008"
Page 10, line 13:
Delete "2008"
Insert "2009"
REPRESENTATIVE FAIRCLOUGH objected.
REPRESENTATIVE SEATON explained that Amendment 1 changes the
dates so no dates are retroactive in this bill, if the bill
should pass this year. He emphasized that there is no desire to
make a retroactive tax change with HB 156.
4:46:08 PM
REPRESENTATIVE FAIRCLOUGH offered an analogy to the
implementation of the PPT [production profits tax], expressing
her concern that more time will be necessary to re-write the
many regulations for compliance that may not be specifically
addressed with this revenue-specific bill. She then offered her
belief that given the time necessary to wait for the economic
model mentioned by Ms. Davis, move the bill out of House Finance
Committee, and hear public testimony, it would be more
appropriate and realistic to implement HB 156 in 2010. She
noted her agreement with Representative Seaton that the bill
should not be retroactive. She said that she would still
support moving HB 156 out of committee whether or not the dates
were changed.
4:48:00 PM
REPRESENTATIVE SEATON expressed concern with comparing HB 156 to
the PPT, as HB 156 is changing tax rates, tax brackets, and
exemption amounts, not creating an entirely new tax structure.
He opined that there would not be any regulatory problem with
implementation. He said he preferred not to put things off for
two years, even for the consideration of bringing the mining
industry into discussions. He reiterated his desire for the
bill not to be retroactive and said he would prefer to move
forward with his amendment, even though things may be changed as
the process evolves.
4:49:43 PM
REPRESENTATIVE FAIRCLOUGH declined to offer an amendment, but
said she would prefer the committee consider a 2010
implementation of HB 156. She said if Amendment 1 failed, she
would then offer an amendment with an implementation date of
2010. She pointed out she did not want to delay the passage of
the bill, only to allow the administration time to prepare the
regulations, and additional time for the department to talk with
the industry. She explained the extra time she was requesting
would allow both the administration and the industry to take
stock of the bill and respond in their development and planning
procedures.
CHAIR HAWKER asked if Representative Fairclough had a proposed
amendment in writing, or would it be conceptual.
REPRESENTATIVE FAIRCLOUGH responded she would just amend
existing Amendment 1, moving the dates a year to the future.
REPRESENTATIVE WILSON offered her belief that the mining
industry should not be expected to make payments based on
regulations that have not yet been written.
CHAIR HAWKER asked Representative Wilson to hold that for debate
on the effective debate amendment. He offered that this is not
as simple as changing one effective date on a bill that says
effective on a certain date. He pointed out the numerous
changes, a contract entered into by a certain date, some other
actions, and in Section 18, on the last page, the act itself
taking effect. He proposed that moving the effective date of
the bill, without changing the dates to which transactions
become effective means it is only necessary to change one date.
However, he opined that moving the process forward one year
would be accomplished by taking the "insert" dates from
Amendment 1, and moving them forward one year. He summarized
that would become a conceptual amendment to Amendment 1 and he
would entertain this from Representative Fairclough.
REPRESENTATIVE FAIRCLOUGH moved to adopt Conceptual Amendment 1
to Amendment 1, as follows:
Page 4, line 4:
Delete "2008"
Insert "2010"
Page 4, line 19:
Delete "2007"
Insert "2009"
Page 7, line 5:
Delete "2007"
Insert "2009"
Page 10, line 12:
Delete "2007"
Insert "2009"
Page 10, line 13:
Delete "2008"
Insert "2010"
REPRESENTATIVE SEATON offered that the effect of Conceptual
Amendment 1 to Amendment 1 would be to change the effective date
of the entire bill until 2010. He asked if this was the maker's
intent.
REPRESENTATIVE FAIRCLOUGH responded that the intent is to move
all dates out one year, allow the industry time to prepare for
the change, and allow the administration time to put all the
regulations in place.
4:55:32 PM
REPRESENTATIVE SEATON objected to Conceptual Amendment 1 to
Amendment 1 for the reasons he had stated previously. He
assured the committee that the sponsors had tried for four years
to get the industry to come talk, and this conceptual amendment
was merely a good way to push back the effective date.
4:57:29 PM
REPRESENTATIVE FAIRCLOUGH expressed her disagreement, stating
this was not a delay tactic, but a good business practice. She
relayed that mine owners need to plan far in advance. To change
a tax structure, with six months necessary for the
administration to write new regulations so a company can
appropriately understand those regulations, requires a year. As
the legislature cannot provide a full year, given the
scheduling, she said she is trying to be practical and fair to
the industry. She offered an analogy to hotel rates and the
necessary lead time to print seasonal rack cards with rates.
She reiterated her support to moving the bill out of committee,
while disavowing any intent to allow the mining industry
additional opportunity to lobby against the bill.
4:59:15 PM
REPRESENTATIVE CISSNA offered support of the sponsor's Amendment
1. She relayed for the last four to five years, she has been
participating in responsible long-term revenue planning. She
acknowledged that the resource industry has experienced a lot of
change and upheaval, which the state had no way of predicting.
She offered her belief that the resource industry is aware of
proposed HB 156, and if the industry is concerned with these
proposed changes, they should be here. She emphasized that it
is the legislature's responsibility to review revenue
production. She opined the mining industry has not been unduly
taxed, and proposed HB 156 appears to be very reasonable, so she
offered her support of Amendment 1.
5:01:26 PM
REPRESENTATIVE ROSES recalled the mining industry did weigh in
on proposed HB 156 with testimony during the 2007 session. He
offered that mining representatives had visited his office
during the last week, and the conversations were similar to
those expressed by Representative Fairclough. He reported the
mining industry has been engaged in discussions, does anticipate
change, and will still have opportunity to offer testimony as
proposed HB 156 moves forward.
5:03:08 PM
A roll call vote was taken. Representatives Wilson, Fairclough,
and Roses voted in favor of Conceptual Amendment 1 to Amendment
1. Representatives Cissna, Seaton, and Hawker voted against it.
Therefore, Conceptual Amendment 1 to Amendment 1 failed by a
vote of 3-3.
REPRESENTATIVE FAIRCLOUGH withdrew her objection to Amendment 1.
There being no further objection, Amendment 1 was adopted.
5:04:43 PM
REPRESENTATIVE WILSON moved to adopt Amendment 2, which read
[original punctuation provided]:
Page 10, line 12:
Delete the "." after the date "2008"
Insert ",subject to completion of regulations."
5:05:45 PM
The committee took an at ease from 5:05 p.m. to 5:08 p.m.
5:08:28 PM
REPRESENTATIVE SEATON objected to Amendment 2.
REPRESENTATIVE WILSON explained that her intent with Amendment 2
is to hold the effective date subject to the completion of the
regulations.
CHAIR HAWKER clarified this would be creating a conditional
effective date within the bill such that the bill does not take
effect until the regulations to implement the bill have been
completed.
REPRESENTATIVE ROSES surmised if proposed HB 156 is passed with
Amendment 2 and proceeds to the governor, should the governor
not like the bill, she could allow the bill to die without a
veto by ordering the regulations not be written.
REPRESENTATIVE WILSON confirmed this was probably correct.
REPRESENTATIVE SEATON observed that Amendment 2 should be
amended on line 13, as the amendment's current language only
deals with the leases entered into or re-negotiated after the
date specified.
5:10:44 PM
CHAIR HAWKER noted that Representative Wilson agreed with the
change to line 13 instead of line 12 and he accepted the change
as a friendly amendment. [The committee treated the suggested
change as adopted and therefore Amendment 2 would now read as
follows]:
Page 10, line 13:
Delete the "." after the date "2008"
Insert ", subject to completion of regulations
REPRESENTATIVE SEATON offered that regulations are not usually
cited in statutes, rather regulations should flow from statutes.
He related his understanding that the idea of Amendment 2 is to
speed the regulations, but he maintained his objection to
Amendment 2.
5:12:05 PM
A roll call vote was taken. Representatives Wilson, Fairclough,
and Hawker voted in favor of Amendment 2. Representatives
Seaton, Roses, and Cissna voted against it. Therefore,
Amendment 2 failed by a vote of 3-3.
5:13:20 PM
REPRESENTATIVE SEATON moved to report HB 156, Version 25-
LS0548\M, Bullock, 3/23/07, as amended, out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, CSHB 156(W&M) was reported from the
House Special Committee on Ways and Means.
5:13:57 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
5:13 p.m.
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