Legislature(2003 - 2004)

04/02/2004 07:05 AM W&M

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS                                                                          
                         April 2, 2004                                                                                          
                           7:05 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mike Hawker, Chair                                                                                               
Representative Bruce Weyhrauch, Vice Chair                                                                                      
Representative Vic Kohring                                                                                                      
Representative Dan Ogg                                                                                                          
Representative Norman Rokeberg                                                                                                  
Representative Ralph Samuels                                                                                                    
Representative Peggy Wilson                                                                                                     
Representative Max Gruenberg                                                                                                    
Representative Carl Moses                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Paul Seaton                                                                                                      
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
HOUSE BILL NO. 538                                                                                                              
"An Act  relating to  taxes on  cigarettes and  tobacco products;                                                               
relating to tax  stamps on cigarettes; relating  to forfeiture of                                                               
cigarettes   and   of   property   used   in   the   manufacture,                                                               
transportation,  or sale  of  unstamped  cigarettes; relating  to                                                               
licenses  and   licensees  under  the  Cigarette   Tax  Act;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - MOVED CSHB 538(W&M) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 537                                                                                                              
"An Act relating  to the levy, collection,  and administration of                                                               
sales and  use taxes  on tourism services;  and providing  for an                                                               
effective date."                                                                                                                
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 538                                                                                                                  
SHORT TITLE: TOBACCO TAX; LICENSING; PENALTIES                                                                                  
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
03/18/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/18/04       (H)       W&M, L&C, FIN                                                                                          
03/24/04       (H)       W&M AT 7:00 AM HOUSE FINANCE 519                                                                       
03/24/04       (H)       Heard & Held                                                                                           
03/24/04       (H)       MINUTE(W&M)                                                                                            
03/26/04       (H)       W&M AT 7:00 AM HOUSE FINANCE 519                                                                       
03/26/04       (H)       Heard & Held                                                                                           
03/26/04       (H)       MINUTE(W&M)                                                                                            
03/31/04       (H)       W&M AT 7:00 AM HOUSE FINANCE 519                                                                       
03/31/04       (H)       Heard & Held                                                                                           
03/31/04       (H)       MINUTE(W&M)                                                                                            
04/02/04       (H)       W&M AT 7:00 AM HOUSE FINANCE 519                                                                       
                                                                                                                                
BILL: HB 537                                                                                                                  
SHORT TITLE: TOURISM SALES AND USE TAXES                                                                                        
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
03/18/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/18/04       (H)       W&M, L&C, FIN                                                                                          
03/24/04       (H)       W&M AT 7:00 AM HOUSE FINANCE 519                                                                       
03/24/04       (H)       <Bill Hearing Postponed to Fri. 3/26>                                                                  
03/26/04       (H)       W&M AT 7:00 AM HOUSE FINANCE 519                                                                       
03/26/04       (H)       <Bill Hearing Postponed to 3/31/04>                                                                    
03/31/04       (H)       W&M AT 7:00 AM HOUSE FINANCE 519                                                                       
03/31/04       (H)       Heard & Held                                                                                           
03/31/04       (H)       MINUTE(W&M)                                                                                            
04/02/04       (H)       W&M AT 7:00 AM HOUSE FINANCE 519                                                                       
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JOHANNA BALES, Excise Audit Manager                                                                                             
Tax Division                                                                                                                    
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the discussion of HB 538                                                                  
and answered questions.                                                                                                         
                                                                                                                                
MICHAEL BARNHILL, Assistant Attorney General                                                                                    
Commercial/Fair Business Section                                                                                                
Civil Division                                                                                                                  
Department of Law (DOL)                                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the discussion of HB 538                                                                  
and answered questions.                                                                                                         
                                                                                                                                
JOHN SHIVELY, Vice President                                                                                                    
Government and Community Relations                                                                                              
Holland America                                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 537.                                                                         
                                                                                                                                
KAREN REGINA, President and Chief Executive Officer                                                                             
Alaska Hospital Alliance                                                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 537.                                                                         
                                                                                                                                
JACK REISS, Vice President for Operations                                                                                       
Aramark Parks & Resorts                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 537.                                                                         
                                                                                                                                
JOHN BINKLEY Owner,                                                                                                             
Sternwheel Riverboats; Eldorado Gold Mine                                                                                       
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 537.                                                                         
                                                                                                                                
STEVE FRANK                                                                                                                     
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 537.                                                                         
                                                                                                                                
GARY MENDIVIL, Business Manager                                                                                                 
Eaglecrest Ski Area                                                                                                             
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the discussion of HB 537.                                                                 
                                                                                                                                
KEVIN BATTERS, General Manager                                                                                                  
Hilton Hotel                                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 537.                                                                         
                                                                                                                                
MARK HICKEY                                                                                                                     
American Cancer Society                                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in favor of HB 538.                                                                              
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 04-21, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
CHAIR MIKE HAWKER called the House Special Committee on Ways and                                                              
Means meeting to order at 7:05 a.m.  Representatives Hawker,                                                                    
Samuels, Kohring,  Weyhrauch, Wilson,  Gruenberg, Moses,  and Ogg                                                               
were  present at  the  call to  order.   Representative  Rokeberg                                                               
arrived as  the meeting was  in progress.   Representative Seaton                                                               
was also in attendance.                                                                                                         
                                                                                                                                
HB 538-TOBACCO TAX; LICENSING; PENALTIES                                                                                      
                                                                                                                                
Number 0145                                                                                                                     
                                                                                                                                
CHAIR HAWKER announced that the  first order of business would be                                                               
HOUSE BILL NO.  538, "An Act relating to taxes  on cigarettes and                                                               
tobacco products; relating to tax  stamps on cigarettes; relating                                                               
to  forfeiture  of  cigarettes  and   of  property  used  in  the                                                               
manufacture,  transportation, or  sale  of unstamped  cigarettes;                                                               
relating to licenses  and licensees under the  Cigarette Tax Act;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
Number 0316                                                                                                                     
                                                                                                                                
REPRESENTATIVE WEYHRAUCH moved to  adopt the committee substitute                                                               
(CS)  for HB  538,  Version 23-GH2116\H,  Kurtz,  4/1/04, as  the                                                               
working  document.   There  being  no  objection, Version  H  was                                                               
before the committee.                                                                                                           
                                                                                                                                
CHAIR HAWKER  explained that the language  regarding "possession,                                                               
barter, sell,  or exchange" has been  cleaned up.  He  said there                                                               
also was a "raising of the  bar" on the number of cigarettes that                                                               
can be  possessed.  The language  specifically addressed Sections                                                               
18 & 19, raising 1,000 to 5,000.   In the drafting process it was                                                               
identified that in  Section 6 the 1,000 number needed  to also be                                                               
changed  to  5,000.    The amendment  directed  the  drafters  to                                                               
incorporate conforming amendments as necessary.                                                                                 
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked if he  should offer that  idea as                                                               
an amendment.                                                                                                                   
                                                                                                                                
CHAIR HAWKER asked Representative  Gruenberg to defer making that                                                               
amendment until later in the meeting.                                                                                           
                                                                                                                                
Number 0600                                                                                                                     
                                                                                                                                
CHAIR HAWKER  moved to adopt Amendment  7, labeled 23-GH2116\H.1,                                                               
Kurtz, 4/1/04l, which read:                                                                                                     
                                                                                                                                
     Page 4, following line 19:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 15.  AS 43.50.550(b) is amended to read:                                                                    
          (b)  A licensee who submits an application for                                                                        
     the  purchase of  stamps  on  a deferred-payment  basis                                                                    
     shall, as  a condition of approval  of the application,                                                                
     post a bond  acceptable to the department  in an amount                                                                    
     equal to                                                                                                                   
               (1)  200 percent of the maximum dollar                                                                       
     amount of allowed monthly  purchases under this section                                                                    
     ; or                                                                                                                   
               (2)  100 percent of the maximum dollar                                                                       
     amount of allowed monthly  purchases under this section                                                                
     if the licensee                                                                                                        
               (A)      holds   a   license   issued   under                                                                
     AS 43.50.010  for a  physical location  in this  state;                                                                
     and                                                                                                                    
               (B)  has been in full compliance with the                                                                    
     provisions of this title  and regulations adopted under                                                                
     this  title  during  the  preceding  60  months  [AS  A                                                                
     CONDITION OF APPROVAL OF THE APPLICATION] ."                                                                               
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
Number 0620                                                                                                                     
                                                                                                                                
REPRESENTATIVE WEYHRAUCH objected for discussion purposes.                                                                      
                                                                                                                                
Number 0645                                                                                                                     
                                                                                                                                
JOHANNA BALES, Excise Audit Manager,  Tax Division, Department of                                                               
Revenue (DOR), introduced herself.                                                                                              
                                                                                                                                
CHAIR HAWKER asked Ms. Bales to explain Amendment 7.                                                                            
                                                                                                                                
MS. BALES replied  that the amendment offers two  ways to qualify                                                               
for a deferred payment plan.  The  first way is to post a bond in                                                               
the  amount  of 200  percent  of  the  monthly purchases  of  tax                                                               
stamps.  The second  way is to qualify is to post  a bond for 100                                                               
percent  [of monthly  purchases],  and in  order  to qualify  for                                                               
that, a  physical location in the  state is required.   "You have                                                               
to be in full compliance  with the cigarette and tobacco products                                                               
excise taxes  and you  had to  have been a  licensee and  in full                                                               
compliance for at least the previous five years," she explained.                                                                
CHAIR HAWKER asked if 200 percent is current statute.                                                                           
                                                                                                                                
MS. BALES said that is correct.                                                                                                 
                                                                                                                                
CHAIR HAWKER  asked if the  proposal in  the bill is  to actually                                                               
double the tobacco stamp tax rate.                                                                                              
                                                                                                                                
MS. BALES said yes.                                                                                                             
                                                                                                                                
CHAIR   HAWKER  said   that  [Amendment   7]  would   provide  an                                                               
alternative  for  Alaska resident  vendors  to  cut in  half  the                                                               
amount of  their bond.   In  other words,  the bond  amount would                                                               
stay at the current rate, he added.                                                                                             
                                                                                                                                
MS. BALES said that would be correct.                                                                                           
                                                                                                                                
CHAIR HAWKER  termed it a fair  remedy at this time  to alleviate                                                               
the concerns heard from the industry.                                                                                           
                                                                                                                                
REPRESENTATIVE  GRUENBERG referred  to line  14 [of  Amendment 7]                                                               
and asked if  DOR would like the discretion to  allow the posting                                                               
of a bond without the 60-month condition of approval.                                                                           
                                                                                                                                
MS. BALES replied  no, that the person would be  required to have                                                               
a five-year  record.  DOR  feels that five years  is appropriate,                                                               
she said.                                                                                                                       
                                                                                                                                
CHAIR HAWKER asked  if the five-year rule would  leave out anyone                                                               
who has been in business in the state, currently.                                                                               
                                                                                                                                
MS. BALES  replied that it would  not.  All of  the taxpayers who                                                               
are currently  posting a bond  have significantly more  than five                                                               
years of history with DOR, she added.                                                                                           
                                                                                                                                
Number 1022                                                                                                                     
                                                                                                                                
REPRESENTATIVE   WEYHRAUCH  said   he   thought  Mr.   Elerding's                                                               
testimony  from the  previous hearing  was  especially good,  and                                                               
yesterday he spoke with Mr. Roger  Shattuck who issues bonds as a                                                               
business.   Representative  Weyhrauch  asked what  the effect  of                                                               
capping the bond would be on a business that continues to grow.                                                                 
                                                                                                                                
CHAIR  HAWKER  rephrased the  question  to  say, "As  a  business                                                               
continues  to grow  would their  bonding requirement  continue to                                                               
grow even under this proposal?"                                                                                                 
                                                                                                                                
MS. BALES  replied yes,  the bond  requirement would  continue to                                                               
grow as the business grows,  even under this proposal.  "Everyone                                                               
needs to be  made aware that, basically, the  department would be                                                               
floating one  month of tax  stamps on credit to  these licensees.                                                               
As their  business grows,  their bond will  grow, and  also their                                                               
credit being extended will grow, as well," she noted.                                                                           
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  said he is  going to look  more closely                                                               
at  HB 538  as  it  goes through  the  House  Labor and  Commerce                                                               
Standing Committee.                                                                                                             
                                                                                                                                
CHAIR HAWKER  said that  this provision  would continue  to merit                                                               
effort,  particularly by  the House  Labor and  Commerce Standing                                                               
Committee, as they address the industry complications.                                                                          
                                                                                                                                
Number 1159                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON asked  for  clarification  on the  wording                                                               
"allowed monthly purchases."   He wondered if there  is a certain                                                               
amount of stamps that is able to be purchased.                                                                                  
                                                                                                                                
MS. BALES  replied that DOR  sets that  amount after the  bond is                                                               
reviewed.                                                                                                                       
                                                                                                                                
Number 1250                                                                                                                     
                                                                                                                                
REPRESENTATIVE  WEYHRAUCH  removed   his  objection  to  adopting                                                               
[Amendment  7].   There being  no  further objection,  it was  so                                                               
ordered.                                                                                                                        
                                                                                                                                
CHAIR HAWKER noted the arrival of Representative Rokeberg.                                                                      
                                                                                                                                
Number 1400                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  moved to adopt Amendment  8, labeled 23-                                                               
GH2116\D.2, Kurtz, 3/30/04, [and changed  to conform to Version H                                                               
and previously adopted amendments], which reads as follows:                                                                     
                                                                                                                                
     Page 2, following line 26:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 6.  AS 43.50.090(d) is amended to read:                                                                     
          (d)  The tax imposed under (a) of this section                                                                        
     does not apply to the  first 100 cigarettes imported by                                                                    
     an  individual  for  personal  consumption  during  the                                                                    
     calendar month  or the first 600  cigarettes personally                                                                
     transported into  the state by  an individual  for that                                                                
     individual's personal  consumption during  the calendar                                                                
     month."                                                                                                                
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 3, following line 28:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 12.  AS 43.50.190(c) is amended to read:                                                                    
          (c)  The tax imposed under (a) of this section                                                                        
     does not apply to the  first 100 cigarettes imported by                                                                    
     an  individual  for  personal  consumption  during  the                                                                    
     calendar month  or the first 600  cigarettes personally                                                                
     transported into  the state by  an individual  for that                                                                
     individual's personal  consumption during  the calendar                                                                
     month."                                                                                                                
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 8, following line 16:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 19.  AS 43.50.650(a) is amended to read:                                                                    
          (a)  A person commits the crime of misconduct                                                                         
     involving unstamped cigarettes or  stamps in the second                                                                    
     degree if the person                                                                                                       
               (1)  with reckless disregard that the                                                                            
     cigarettes are unstamped                                                                                                   
               (A)  sells or distributes at least one but                                                                       
     fewer  than  5,000  unstamped cigarettes  in  a  single                                                                    
     transaction;                                                                                                               
               (B)  owns or possesses at least one but                                                                          
     fewer than  5,000 unstamped cigarettes, with  intent to                                                                    
     sell; [OR]                                                                                                                 
               (C)  acquires, holds, transports, imports,                                                                       
     or possesses at  least 601 [ONE] but  fewer than 10,000                                                                
     unstamped cigarettes; or                                                                                                   
               (D)  acquires, holds, transports, imports,                                                                   
     or possesses at least one  but fewer than 601 unstamped                                                                
     cigarettes that are not for personal consumption; or                                                                   
               (2)  is not licensed under this chapter or                                                                       
     otherwise  authorized  by  the  department  to  possess                                                                    
     stamps and possesses  a stamp that is not  affixed to a                                                                    
     cigarette package."                                                                                                        
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
REPRESENTATIVE WEYHRAUCH objected for discussion purposes.                                                                      
                                                                                                                                
CHAIR HAWKER noted that Amendment 8  was drafted to the D version                                                               
of the  bill and has  been changed to  conform to the  H version.                                                               
He  asked   the  sponsor  to   make  sure  that   the  conforming                                                               
adjustments are correct.                                                                                                        
                                                                                                                                
Number 1444                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  suggested that  Amendment 8 should  be a                                                               
conceptual  amendment  to  make   sure  that  the  conforming  is                                                               
correct.    He  explained  that under  current  law  having  five                                                               
packages of  cigarettes, or 100  cigarettes, constitutes  a crime                                                               
under Section  19, and  it trips  a requirement  to pay  taxes on                                                               
cigarettes  used   for  personal  consumption  in   excess  of  5                                                               
packages,  or  100  cigarettes.    He said  his  concern  is  for                                                               
Alaskans who travel to other  states and purchase cigarettes.  He                                                               
opined that these  people should be able to import  for their own                                                               
personal consumption up to three  cartons of cigarettes.  He said                                                               
it does  not in any way  change the obligation to  pay taxes, and                                                               
it is  only intended  to apply  for transportation  of cigarettes                                                               
into the state for personal consumption.                                                                                        
                                                                                                                                
REPRESENTATIVE  WEYHRAUCH  asked how  many  cigarettes  are in  a                                                               
carton.                                                                                                                         
                                                                                                                                
REPRESENTATIVE ROKEBERG replied that there are 200.                                                                             
                                                                                                                                
REPRESENTATIVE  GRUENBERG referred  to page  1 [Amendment  8] new                                                               
Sections 6  and 12, and  said that the underlined  language looks                                                               
like a substitution  for the language that is already  there.  He                                                               
suggested saying "to the first 600  cigarettes."  He said he does                                                               
not see any difference between the two phrases.                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG  said the  word "or" makes  a distinction                                                               
between the  two phrases.   He referred to  line 6 and  said that                                                               
"transported into the state" is the distinction.                                                                                
                                                                                                                                
REPRESENTATIVE   GRUENBERG   asked  for   clarification   between                                                               
"personally transported" and "transported,"  and for a reason why                                                               
the distinction is important.                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG  replied that it  is a policy  call about                                                               
which level of personal possession  or importation is needed.  He                                                               
said it would be simpler to  adopt the "600 cigarette rule."  The                                                               
intent  is  to make  sure  that  the importation  for  personally                                                               
consumed tobacco products  does not trip any kind  of criminal or                                                               
other tax impositions.                                                                                                          
                                                                                                                                
REPRESENTATIVE GRUENBERG said  that there are a  number of people                                                               
who  do  smoke  and they  have  the  right  to  do so.    From  a                                                               
prosecutor's  viewpoint  it's  going  to  be  more  difficult  to                                                               
prosecute  because the  focus is  on  how the  cigarette got  [to                                                               
Alaska], he opined.  He suggested just making the number 600.                                                                   
                                                                                                                                
REPRESENTATIVE  ROKEBERG  replied that  having  five  packs as  a                                                               
trigger is not realistic.  He requested DOR's opinion.                                                                          
                                                                                                                                
CHAIR HAWKER asked if DOR or  DOL should address the issue.  [The                                                               
committee aide faxed copies of the amendments to Ms. Bales.]                                                                    
                                                                                                                                
Number 2135                                                                                                                     
                                                                                                                                
CHAIR HAWKER  referred to  [Section 19  of proposed  Amendment 8]                                                               
and said that it looks  like that section amends AS 43.50.650(a),                                                               
which  is language  that originally  came  from a  bill that  was                                                               
passed last year requiring the use  of tax stamps.  He noted that                                                               
the amount  of 1,000  has been  raised to  5,000 in  the previous                                                               
amendment.  He  said that this is the section  defining the crime                                                               
of  misconduct involving  unstamped  cigarettes at  the low  end.                                                               
This is  not the felony issue,  he stated.  "We've  got more than                                                               
one, but less than, now,  5,000 unstamped cigarettes and we're in                                                               
fact selling these - reselling  these - without stamps," he said.                                                               
He asked  Representative Rokeberg  to explain  [subparagraphs (C)                                                               
and (D)].                                                                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG replied that  in this particular criminal                                                               
misconduct section,  [subparagraph (C)]  on line 11  changes from                                                               
acquiring,  holding, transporting,  importing,  or possessing  at                                                               
least  one cigarette  and raises  it up  to 601,  but fewer  than                                                               
10,000.                                                                                                                         
                                                                                                                                
CHAIR HAWKER asked  if it is conforming to the  first page of the                                                               
amendment where the bar is raised.                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG  replied that it conforms  to the ability                                                               
to  possess, but  it also  raises  the low-end  trigger from  one                                                               
cigarette to 601 cigarettes.                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS noted  that it  appears in  [subparagraph                                                               
(D)] on  page 2 [of Amendment  8], that when "imports"  is added,                                                               
the standard is changed.                                                                                                        
                                                                                                                                
REPRESENTATIVE   ROKEBERG  answered,   "In   terms  of   criminal                                                               
prosecution ...."                                                                                                               
                                                                                                                                
REPRESENTATIVE SAMUELS said, "You owe  the tax, but they can't do                                                               
anything to you if you don't pay it."                                                                                           
                                                                                                                                
REPRESENTATIVE  ROKEBERG replied,  "Right, for  three cartons  of                                                               
cigarettes, right."                                                                                                             
                                                                                                                                
REPRESENTATIVE  SAMUELS said  he agrees,  but he  is starting  to                                                               
agree  with  Representative Gruenberg.    If  a person  buys  100                                                               
cigarettes  on  the Internet  and  is  liable  for the  tax,  but                                                               
there's absolutely  no penalty ...  [the language]  should either                                                               
be conformed or taken out of the second part, he opined.                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG  replied that  he  would  not object  to                                                               
that.  It is a policy call  that's up to the committee, he added.                                                               
He said  his concern in this  section has to do  with criminality                                                               
and importation.                                                                                                                
                                                                                                                                
Number 2521                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  said  he  can't wait  to  get  into  a                                                               
courtroom and ask, "Where did you get this cigarette?"                                                                          
                                                                                                                                
REPRESENTATIVE  WILSON asked  if changing  1,000 to  5,000 was  a                                                               
mistake originally and is now corrected.                                                                                        
                                                                                                                                
CHAIR  HAWKER  said  it  was  an amendment  made  in  a  previous                                                               
committee meeting.                                                                                                              
                                                                                                                                
REPRESENTATIVE  SAMUELS  deferred  to Ms.  Bales,  but  suggested                                                               
eliminating "imports".                                                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG   suggested  talking  to   the  attorney                                                               
general  about it.   He  asked Mr.  Barnhill for  his opinion  on                                                               
Section  19   [in  Amendment  8],   which  deals   with  criminal                                                               
misconduct and the change in the amount of cigarettes.                                                                          
                                                                                                                                
Number 2719                                                                                                                     
                                                                                                                                
MICHAEL  BARNHILL,  Assistant Attorney  General,  Commercial/Fair                                                               
Business  Section,  Civil  Division,  Department  of  Law  (DOL),                                                               
replied that in  the first two provisions of  the amendment there                                                               
is    a   distinction    between    importation   and    personal                                                               
transportation, which  is not  made on page  2 of  the amendment.                                                               
He  said it  may be  easier to  do what  Representative Gruenberg                                                               
suggested and make it a 601 threshold for everything.                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked if DOL  would ever take up  a case                                                               
dealing with one cigarette.                                                                                                     
                                                                                                                                
MR. BARNHILL  said it  is an  issue for  the criminal  section to                                                               
answer, and  he opined  it is highly  unlikely that  the criminal                                                               
section  would spend  any enforcement  time on  three cartons  of                                                               
cigarettes.                                                                                                                     
                                                                                                                                
REPRESENTATIVE WEYHRAUCH suggested  that it may open  the door to                                                               
probable  cause when  the crime  has been  committee to  open the                                                               
door  to  a  search  or  some  issue  related  to  that  person's                                                               
possession  of cigarettes.   He  termed  it a  "seamless web"  of                                                               
criminal investigation prosecution.                                                                                             
                                                                                                                                
CHAIR HAWKER  asked Representative  Rokeberg if the  intention of                                                               
Amendment  8 would  be  accomplished if,  instead  of adding  the                                                               
additional language,  100 is changed  to 600 [on the  first page]                                                               
and then  on page  2, [subparagraph  (D)] is  not added,  and the                                                               
change "601" is incorporated in [subparagraph (C)].                                                                             
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  he  would not  object, subject  to                                                               
DOR's opinion on enforcement.                                                                                                   
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  removed his objection to  the motion to                                                               
adopt Amendment 8.                                                                                                              
                                                                                                                                
REPRESENTATIVE GRUENBERG  maintained his  objection.  He  said he                                                               
does not  want to see  people "entering  into a web,  seamless or                                                               
otherwise" for one cigarette.                                                                                                   
                                                                                                                                
MR. BARNHILL suggested that if the  language on the first page is                                                               
changed to "600",  the language on the second page  could be left                                                               
as it is.  "What the legislative  drafter is trying to do here is                                                               
distinguish  between  unstamped  cigarettes  that  are  used  for                                                               
personal consumption  and unstamped  cigarettes that  are brought                                                               
in not for personal consumption," he concluded.                                                                                 
                                                                                                                                
Number 3000                                                                                                                     
                                                                                                                                
REPRESENTATIVE SAMUELS moved to amend Amendment 8 as follows:                                                                   
                                                                                                                                
     Page 1, lines 4 and 15                                                                                                     
     Change "100" to "600"                                                                                                      
     Delete the underlined language on lines 6-8                                                                                
     Delete the underlined language on lines 17-19                                                                              
                                                                                                                                
REPRESENTATIVE  ROKEBERG objected.   He  said he  wished to  hear                                                               
from  DOR before  moving forward.   He  requested that  Ms. Bales                                                               
comment on the amendment to Amendment 8, and Amendment 8 itself.                                                                
                                                                                                                                
Number 3233                                                                                                                     
                                                                                                                                
MS. BALES said that, in  her opinion, the way that Representative                                                               
Rokeberg's Amendment 8  reads makes more sense  and causes better                                                               
protection of state revenues.  If  the change is made from 100 to                                                               
600 [cigarettes],  which is 30  packs, someone who smokes  a pack                                                               
of cigarettes  a day would be  allowed to go on  the Internet and                                                               
avoid the  entire state  tax, she  said.   That would  negate the                                                               
whole reason why the tax is  being raised to begin with, which is                                                               
to make price effect consumption, she added.                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS withdrew his amendment to Amendment 8.                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG, looking  at page  2 [of  Amendment 8],                                                               
which deals with  criminal prosecution, pointed out  a problem in                                                               
current  law.   "They  can  prosecute  somebody, right  now,  for                                                               
having one  unstamped cigarette.   That's a Class  A misdemeanor.                                                               
That penalty  seems to  me to  be draconian," he  said.   He said                                                               
[Amendment 8]  says that if the  cigarette is for sale,  a person                                                               
could be prosecuted for one  unstamped cigarette, but if it's for                                                               
personal  consumption, the  amount is  30 packs.   He  maintained                                                               
that a whole group of Alaskans  will be criminalized if page 2 is                                                               
not amended.  He  said DOR may not like page  1 of the amendment,                                                               
but asked for comments regarding page 2.                                                                                        
                                                                                                                                
MS. BALES  said she understands what  Representative Gruenberg is                                                               
saying, and  noted that DOR  has no objections to  [Amendment 8].                                                               
She wondered if [subparagraph (D)] is even needed.                                                                              
                                                                                                                                
Number 3544                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  moved  to  divide the  question.    He                                                               
called page 1, Amendment 8a and page 2, Amendment 8b.                                                                           
                                                                                                                                
REPRESENTATIVE  ROKEBERG  objected.   He  suggested  it would  be                                                               
easier to just amend [Amendment 8].                                                                                             
                                                                                                                                
CHAIR HAWKER asked Ms. Bales to  restate her opinion of page 1 of                                                               
Amendment 8 without  the proposed amendment to it.   "Is page one                                                               
of Conceptual Amendment 8 troublesome to you?" he asked.                                                                        
                                                                                                                                
MS. BALES said  [DOR] has no problem  with it.  She  said this is                                                               
an area where [DOR's] enforcement efforts are not focused.                                                                      
Number 3700                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  withdrew  his  motion  to  divide  the                                                               
question and moved to amend Amendment 8 as follows:                                                                             
                                                                                                                                
     Page 2                                                                                                                     
     Delete new [subparagraph (D)]                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG objected.                                                                                               
                                                                                                                                
REPRESENTATIVE GRUENBERG  said it is  simpler for DOR if  on line                                                               
11, "[ONE]" is changed to "601".                                                                                                
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said  there is  a  distinction  between                                                               
[subparagraphs (C) and (D)], and he  noted that in (C) the "loose                                                               
cigarette" is gotten rid of.   The actual possession of one isn't                                                               
a  criminal  offense,  but  601  is,  and  (D)  is  for  personal                                                               
consumption, he explained.                                                                                                      
                                                                                                                                
REPRESENTATIVE GRUENBERG  said he  understands that, but  what he                                                               
is saying  is, "You're going to  wind up with very  small amounts                                                               
of  cigarettes  potentially  being criminalized  and  making  the                                                               
whole  focus  of  the  criminal  prosecution,  whether  this  one                                                               
cigarette, or a  pack of cigarettes was for  yourself or somebody                                                               
else."  He said it would make it much simpler.                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG said  that the "loosey problem"  is a big                                                               
problem and [subparagraph (A)] prohibits  that.  The (C) language                                                               
gets  rid  of   the  single  cigarette,  but   the  (D)  language                                                               
incorporates it, he said.                                                                                                       
                                                                                                                                
REPRESENTATIVE   GRUENBERG  replied   that   one   is  the   sale                                                               
transaction (A), and  (B) is if you own or  possess at least one,                                                               
but fewer than 5,000, with intent  to sell, which is very similar                                                               
to (D).  He asked why (D) is needed.                                                                                            
                                                                                                                                
REPRESENTATIVE   ROKEBERG  asked   for  clarification   from  Mr.                                                               
Barnhill.                                                                                                                       
                                                                                                                                
MR.  BARNHILL replied  that Representative  Gruenberg has  a good                                                               
point.   Under (B)  there has to  be an intent  to sell  one, but                                                               
fewer than 5,000.  The distinction  is, under (B) there has to be                                                               
an intent  to sell, and in  order to prove intent  under criminal                                                               
law -  that's a fairly  high standard, he  said.  "Under  (D) all                                                               
that has to be proved is that  they don't have an intent to sell,                                                               
but  they're not  going to  use it  for personal  consumption, so                                                               
that's potentially a lower standard," he said.                                                                                  
Number 4057                                                                                                                     
                                                                                                                                
REPRESENTATIVE  OGG focused  on  the word  "possesses", which  he                                                               
noted is not on page 1 [of Amendment 8].  He related:                                                                           
                                                                                                                                
     And so  what you're  doing here  is saying  that people                                                                    
     who happen  to just possess,  they're not the  ones who                                                                    
     brought the cigarettes into the  state, they're not the                                                                    
     ones  who transported  it into  the state,  they're not                                                                    
     the ones  who imported  it, they're  the ones  who just                                                                    
     happened to  possess it.   Their  friend gave  them the                                                                    
     pack.  They're exempt.                                                                                                     
                                                                                                                                
REPRESENTATIVE OGG  agreed that  what Representative  Rokeberg is                                                               
suggesting covers it.                                                                                                           
                                                                                                                                
REPRESENTATIVE GRUENBERG said, looking  at the difference between                                                               
(D) and (B), the operative word  is "possess" and argued that (B)                                                               
is not needed.                                                                                                                  
                                                                                                                                
Number 4314                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  moved to amend Amendment  8 by deleting                                                               
[subparagraph (B)].                                                                                                             
                                                                                                                                
Number 4424                                                                                                                     
                                                                                                                                
CHAIR HAWKER repeated the motion and stated his objection.                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG also objected.                                                                                          
                                                                                                                                
A  roll  call  vote  was  taken.    Representatives  Samuels  and                                                               
Gruenberg  voted in  favor of  adopting the  second amendment  to                                                               
Amendment  8.   Representatives Weyhrauch,  Kohring, Ogg,  Moses,                                                               
Wilson, Rokeberg,  and Hawker voted  against it.   Therefore, the                                                               
motion failed by a vote of 2-7.                                                                                                 
                                                                                                                                
REPRESENTATIVE GRUENBERG withdrew his objection.                                                                                
                                                                                                                                
REPRESENTATIVE  WEYHRAUCH mentioned  that there  are a  number of                                                               
people in the state who barter  for cigarettes.  He asked if that                                                               
would be considered the same  kind of commercial transaction like                                                               
a sale subject to prosecution.                                                                                                  
                                                                                                                                
CHAIR HAWKER  remarked that  Ms. Bales was  no longer  present to                                                               
answer questions.                                                                                                               
                                                                                                                                
Number 4456                                                                                                                     
                                                                                                                                
CHAIR HAWKER  asked if there  were any further objections  to the                                                               
motion to  adopt Amendment 8.   There being no objection,  it was                                                               
so ordered.                                                                                                                     
                                                                                                                                
[CHAIR HAWKER set aside HB 538.]                                                                                              
                                                                                                                                
HB 537-TOURISM SALES AND USE TAXES                                                                                          
                                                                                                                                
TAPE 04-21, SIDE B                                                                                                            
Number 4360                                                                                                                     
                                                                                                                                
CHAIR HAWKER announced  that the next order of  business would be                                                               
HOUSE BILL  NO. 537,  "An Act relating  to the  levy, collection,                                                               
and administration  of sales and  use taxes on  tourism services;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
CHAIR HAWKER  opened public testimony  on HB  537.  He  said that                                                               
since the last meeting the  committee has received the governor's                                                               
transmittal letter of March 16, 2004, and Mr. Shively's letter.                                                                 
                                                                                                                                
Number 4241                                                                                                                     
                                                                                                                                
JOHN   SHIVELY,   Vice   President,  Government   and   Community                                                               
Relations,  Holland America,  said that  most of  his points  are                                                               
made  in  his  letter  to  the committee.    He  noted  that  the                                                               
governor's transmittal  letter and [DOR] have  indicated that $19                                                               
million will  be raised [from  the tourist tax] this  fiscal year                                                               
and $49 million  thereafter, and he said that has  not seen those                                                               
calculations.   He said that  is something the committee  and the                                                               
cruise  industry need  to see  because, "We  don't know  how they                                                               
calculated those  amounts."  He  emphasized that it  is important                                                               
for the committee  to get answers [from DOR] to  the questions he                                                               
raised in the letter.                                                                                                           
                                                                                                                                
MR. SHIVELY  stated that some  of the problems raised  are unique                                                               
to the cruise  industry because it sells about 90  percent of the                                                               
cruises through travel agencies.   "We don't know everything that                                                               
they collect.   In  addition, the  way this  bill is  written, if                                                               
they bundle services  like airline fares from  Chicago to Seattle                                                               
or  Vancouver, and  transfers and  busses, all  of that  would be                                                               
part of the tax.  So  you're really taxing things that are taking                                                               
place out of the state," he said.                                                                                               
                                                                                                                                
MR.  SHIVELY emphasized  that  Alaska is  in  a very  competitive                                                               
position right  now.  The  market share  peaked in 1996  at about                                                               
9.5  percent   and  is  under   8  percent,  currently,   due  to                                                               
competition from  the Caribbean, Eastern Canada,  Mexico, Hawaii,                                                               
and Europe, he said.  He noted  that many people can now drive to                                                               
a cruise  and price is  an issue.  He  opined that this  tax will                                                               
make the  cruise more  expensive, and that  is not  exclusively a                                                               
"cruise bill", as mentioned earlier.                                                                                            
                                                                                                                                
CHAIR  HAWKER  thanked  Mr.  Shively  and  said  he  would  stand                                                               
corrected  if he  did refer  to it  as a  cruise bill,  saying it                                                               
would affect the whole travel industry in Alaska.                                                                               
                                                                                                                                
Number 4040                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG,  referring  to  the  letter  from  Mr.                                                               
Shively, asked about the paragraph  on page 4, after question 11,                                                               
which says,  "These questions are  not meant to  be all-inclusive                                                               
as we  have not had enough  time to thoroughly analyze  the bill.                                                               
He said that  indicates that Mr. Shively may  have further issues                                                               
with  the  bill.   Representative  Gruenberg  requested that  Mr.                                                               
Shively send the remainder of his concerns to the committee.                                                                    
                                                                                                                                
MR. SHIVELY said he would.                                                                                                      
                                                                                                                                
Number 3939                                                                                                                     
                                                                                                                                
KAREN  REGINA,  President  and Chief  Executive  Officer,  Alaska                                                               
Hospital Alliance,  which includes  the Alaska Hotel  and Lodging                                                               
Association, and the Alaska  Restaurant and Beverage Association,                                                               
shared her organization's reasons for  opposing HB 537.  She said                                                               
she opposes  targeted taxes on  [the tourist industry]  which are                                                               
not earmarked exclusively for tourism  marketing.  She noted that                                                               
the  industry  does  contribute   significantly  to  the  state's                                                               
economy,  and should  be  part  of the  solution  to solving  the                                                               
budget  deficit.   "To  achieve that,  we  believe a  broad-based                                                               
solution  is necessary,  rather  than an  approach that  unfairly                                                               
targets  specific industries  and  businesses.   We also  believe                                                               
that a broad-based  solution is achievable, in fact,  to that end                                                               
we support the  governor's POMV [percent of  market value] plan,"                                                               
she related.                                                                                                                    
                                                                                                                                
MS. REGINA  spoke of  the bill's utilization  of a  tax mechanism                                                               
that  local  regions  rely on  for  tourism  marketing,  economic                                                               
development, and local government.   Tourism enhances the quality                                                               
of life  in Alaska  in many ways,  both directly  and indirectly,                                                               
and a  bill such  as this  sends the  wrong message,  she opined.                                                               
She pointed  out that  the tax is  targeting businesses  that are                                                               
already paying local taxes.   The hotel and lodging industry paid                                                               
more than  $46 million  in tax to  local municipalities  in 2002,                                                               
she said.   The cumulative impact of an additional  5 percent tax                                                               
would  bring the  tax  on  hotels in  many  regions  up to  13-17                                                               
percent.   She repeated her  organization's opposition to  HB 537                                                               
and  urged  the  committee  to consider  other  more  broad-based                                                               
solutions.                                                                                                                      
                                                                                                                                
Number 3628                                                                                                                     
                                                                                                                                
JACK  REISS,  Vice  President for  Operations,  Aramark  Parks  &                                                               
Resorts, said his  company operates the concessions  and tours in                                                               
Denali National Park  and Preserve, as well as two  lodges in the                                                               
Denali  corridor.   He  related that  visitations  to Denali  are                                                               
approximately 80 percent  cruise line related, and  over the past                                                               
three  years,  visitation has  been  going  down approximately  5                                                               
percent a year.   He said that fewer tourists  are venturing into                                                               
the interior of  Alaska for a variety of reasons.   He stated his                                                               
belief  that  this tax  targets  the  tourism industry  and  will                                                               
continue to deter travelers from  going into interior Alaska.  He                                                               
called  it,  "Shooting  the  goose that  lays  the  golden  egg."                                                               
Denali only  operates about 120  days a year and  most businesses                                                               
rely  on  cruise line  tourism,  and  this bill  jeopardizes  all                                                               
business management in the Denali corridor, he concluded.                                                                       
                                                                                                                                
Number 3430                                                                                                                     
                                                                                                                                
JOHN BINKLEY,  Owner, Sternwheel Riverboats; Eldorado  Gold Mine,                                                               
said his  businesses employ  about 150  people.   He said  he has                                                               
been  very supportive  of Governor  Murkowski's drive  to develop                                                               
the resources  in Alaska.  Tourism  is also a resource,  he said,                                                               
and he  stated his  opposition to  HB 537  because of  the effect                                                               
that it  has on the  development of  this resource.   He compared                                                               
tourism to  other resources that  bring new dollars  from outside                                                               
of the  state into its  economy.  He  urged the committee  to not                                                               
pass this legislation.                                                                                                          
                                                                                                                                
Number 3124                                                                                                                     
                                                                                                                                
STEVE  FRANK  said that  he  is  the  owner  of a  small  tourism                                                               
business  consisting  of a  hotel,  restaurant,  and RV  park  in                                                               
Fairbanks.   He stated  that he is  almost entirely  dependant on                                                               
visitors to support his business and  the 100 jobs created by his                                                               
business.   He opined that  HB 537  would cost jobs  because less                                                               
people  will  come  to  his   business,  and  it  does  not  seem                                                               
appropriate to tax an industry  that supports general government.                                                               
He stated  his support  for a mechanism  to enhance  the economic                                                               
development  of tourism  through  SB 254,  which  is an  industry                                                               
self-assessment   that  would   put  money   back  into   tourism                                                               
marketing.   A 5 percent  tax, added to  an 8 percent  hotel tax,                                                               
would make  for a  13 percent tax,  which will  discourage people                                                               
from booking tours to Alaska, he said.                                                                                          
                                                                                                                                
Number 2657                                                                                                                     
                                                                                                                                
GARY  MENDIVIL,  Business  Manager, Eaglecrest  Ski  Area,  spoke                                                               
about his  concerns with the definition  section of HB 537.   The                                                               
language  leaves  a  number of  things  open  to  interpretation,                                                               
specifically in the definition of  guided activities, which might                                                               
be  determined to  include  ski and  snowboard  lessons or  field                                                               
trips operated  by local  community groups  or schools,  he said.                                                               
He  described  the ski  industry  in  Alaska as  one  destination                                                               
resort,  Alyeska, six  community ski  areas, and  four ski  areas                                                               
located on military bases.                                                                                                      
                                                                                                                                
Number 2452                                                                                                                     
                                                                                                                                
KEVIN  BATTERS, General  Manager,  Hilton Hotel,  in stating  his                                                               
opposition to  HB 537, said  that his hotel relies  on convention                                                               
and tour  business for  the majority  of its  business throughout                                                               
the year.   This tax will  make it extremely hard  to continue to                                                               
run the  business effectively, he said.   If there is  a decrease                                                               
in any of these areas, it  will prevent Anchorage from becoming a                                                               
year-round destination and it will decrease jobs, he opined.                                                                    
                                                                                                                                
CHAIR HAWKER closed public testimony.                                                                                           
                                                                                                                                
[HB 537 was held over.]                                                                                                       
                                                                                                                                
HB 538-TOBACCO TAX; LICENSING; PENALTIES                                                                                      
                                                                                                                                
Number 2305                                                                                                                     
                                                                                                                                
CHAIR HAWKER announced the return to  HOUSE BILL NO. 538, "An Act                                                               
relating to  taxes on cigarettes  and tobacco  products; relating                                                               
to  tax   stamps  on  cigarettes;   relating  to   forfeiture  of                                                               
cigarettes   and   of   property   used   in   the   manufacture,                                                               
transportation,  or sale  of  unstamped  cigarettes; relating  to                                                               
licenses  and   licensees  under  the  Cigarette   Tax  Act;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
Number 2228                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  moved to adopt Amendment  9, labeled 23-                                                               
GH2116\D.3, Kurtz, 3/30/04, which read:                                                                                         
                                                                                                                                
     Page 3, following line 28:                                                                                                 
          Insert a new bill section to read:                                                                                    
        "* Sec.  11.   AS 43.50.190 is  amended by  adding a                                                                
     new subsection to read:                                                                                                    
     (d)   A  portion  of  the annual  proceeds  of the  tax                                                                    
     levied under  (a) of  this section  equal to  the total                                                                    
     proceeds  of  the tax  multiplied  by  the quotient  of                                                                    
     seven  divided  by  62  shall  be  deposited  into  the                                                                    
     tobacco  use education  and cessation  fund established                                                                    
     in AS 37.05.580.  This deposit  shall be in addition to                                                                    
     any    sums    deposited    into   the    fund    under                                                                    
     AS 37.05.580(a)."                                                                                                          
                                                                                                                                
REPRESENTATIVE WEYHRAUCH objected for discussion purposes.                                                                      
                                                                                                                                
REPRESENTATIVE   ROKEBERG  stated   his   frustration  over   the                                                               
allocation  of resources  from the  Master Settlement  Agreement.                                                               
He  said the  intent  of  Amendment 9  is  to provide  sufficient                                                               
amounts  of money  to  fund  the minimum  amount  of tobacco  use                                                               
education  cessation as  recommended by  the Centers  for Disease                                                               
Control and  Prevention (CDC), or  approximately $8 million.   He                                                               
emphasized that  the state should  provide funding to  help those                                                               
people who wish  to stop smoking, if the tax  is implemented.  He                                                               
noted that  historically there has  been a shortfall in  the area                                                               
of  cessation education.   When  the Master  Settlement Agreement                                                               
was created, the state received  about $668 million over a period                                                               
of   25  years,   80  percent   of  which   has  been   spent  on                                                               
infrastructure  in  Alaska,   leaving  cessation  education  only                                                               
partly  funded,  he related.    He  maintained, "Smokers  deserve                                                               
their fair share of  the money to help them quit."   It should be                                                               
the public policy of the state, he added.                                                                                       
                                                                                                                                
Number 1731                                                                                                                     
                                                                                                                                
CHAIR HAWKER  asked if the intent  of [Amendment 9] is  to direct                                                               
approximately  $8 million  into the  tobacco education  fund from                                                               
the proceeds that this tax would raise.                                                                                         
                                                                                                                                
REPRESENTATIVE ROKEBERG said that is  correct.  The net amount of                                                               
the appropriations would be that amount, he added.                                                                              
                                                                                                                                
CHAIR HAWKER said it would continue  into the general fund as was                                                               
originally envisioned in  the bill.  The fiscal  note proceeds of                                                               
the  tax are  about $35.3  million, and  those proceeds  would be                                                               
multiplied  by a  factor  of seven  and then  divided  by 62,  he                                                               
calculated.  He said that is about  11 percent or $4 million.  He                                                               
asked what part of the calculation is missing.                                                                                  
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  his  understanding is  that it  is                                                               
about  $3.4 million  against the  current  appropriation of  $4.6                                                               
million, which would yield $8 million.                                                                                          
                                                                                                                                
CHAIR HAWKER  said he  stands corrected  in his  understanding of                                                               
the intent of Amendment  9.  The intent is not  to add $8 million                                                               
from  this  tax into  the  tobacco  fund,  but  is to  raise  the                                                               
aggregate annual contribution.                                                                                                  
                                                                                                                                
REPRESENTATIVE  ROKEBERG  replied,  yes,   enough  to  yield  the                                                               
minimum amount of approximately $8 million.                                                                                     
                                                                                                                                
CHAIR  HAWKER   asked  if  that   could  be  done   by  diverting                                                               
approximately $4  million of  the proceeds of  this tax  into the                                                               
tobacco cessation fund.                                                                                                         
                                                                                                                                
REPRESENTATIVE  ROKEBERG   said  that  the  problem   is  how  to                                                               
accomplish it in a bill that is not an appropriation bill.                                                                      
                                                                                                                                
Number 1444                                                                                                                     
                                                                                                                                
REPRESENTATIVE OGG asked for  clarification of [AS 37.05.580(a)].                                                               
He wondered why a percentage  isn't used in [Amendment 9] instead                                                               
of the "quotient language"                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG  said it is  a good question  and perhaps                                                               
the drafters missed  the intent of the amendment.   He added that                                                               
it is  not a  appropriation bill.   He said he  is trying  to set                                                               
public policy and would like  more clarification of the amendment                                                               
by Mr. Hickey [from the American Cancer Society].                                                                               
                                                                                                                                
REPRESENTATIVE GRUENBERG  said he thinks  it is a  good amendment                                                               
and he suggested adding a conceptual intent section to it.                                                                      
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said   he  agrees  with  Representative                                                               
Gruenberg that  statutory intent language should  be incorporated                                                               
into the bill.                                                                                                                  
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  suggested asking  Mr. Hickey  for input                                                               
on the intent of the amendment.                                                                                                 
                                                                                                                                
Number 1017                                                                                                                     
                                                                                                                                
MARK  HICKEY,  American Cancer  Society,  said  he was  asked  by                                                               
Representative  Rokeberg to  help with  an amendment  proposal to                                                               
fund the program,  but stated that his  organization supports the                                                               
bill even without [Amendment 9].                                                                                                
                                                                                                                                
REPRESENTATIVE  WEYHRAUCH  asked  what   program  Mr.  Hickey  is                                                               
referring to.                                                                                                                   
                                                                                                                                
MR.  HICKEY   replied,  "The  tobacco   control  program   -  the                                                               
cessation, education program -  [it] is Representative Rokeberg's                                                               
intent is  to fund that at  a minimum recommended level  of about                                                               
$8 million.   The actual recommended guidelines  from the Centers                                                               
for Disease Control are about $8.3 million."                                                                                    
                                                                                                                                
REPRESENTATIVE WEYHRAUCH asked  if the quotient of  7/62 is found                                                               
somewhere else.                                                                                                                 
                                                                                                                                
Number 0915                                                                                                                     
                                                                                                                                
MR.  HICKEY said  that it  was  how the  drafters wrote  it.   He                                                               
explained,  "In law  today  you have  the  tobacco use  education                                                               
cessation  fund  which  was  created three  years  ago,  and  the                                                               
statute referenced,  I believe, is  AS 37.05.580.   Currently, 20                                                               
percent  of   the  Master  Settlement  payment   goes  into  that                                                               
annually."  He  said it is not a dedicated  fund, but is intended                                                               
to implement the  program and the legislature has  been very good                                                               
at providing the money for it.   The amount right now, the annual                                                               
cash flow,  is about  $4.4 million  a year.   This  proposal will                                                               
take  an  additional  amount  out  of the  general  fund  tax  on                                                               
cigarettes and put it into that  fund and the amount works out to                                                               
be  about $4.2  million of  additional money  based on  DOR's own                                                               
estimates, he explained.   He related that the way  it works is a                                                               
cigarette tax increase will generate  about a $36 million tobacco                                                               
tax increase.  There are two  pieces to the tobacco tax increase,                                                               
$30  million from  the cigarette  part  and the  rest from  other                                                               
tobacco products  (OTP).   One mill  generates about  $600,000 in                                                               
revenue  right  now.    Seven mills  would  generate  about  $4.2                                                               
million.  "You would  take seven mills, put it in  this fund.  At                                                               
your discretion you  can then appropriate it on  an annual basis.                                                               
And  a dollar  impact right  now, today,  is adding  another $4.2                                                               
million,  so I  would actually  put $8.6  million, using  today's                                                               
numbers, into that fund," he concluded.                                                                                         
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  asked if that  is where the  seven came                                                               
from.                                                                                                                           
                                                                                                                                
MR. HICKEY said yes.                                                                                                            
                                                                                                                                
REPRESENTATIVE WEYHRAUCH asked where 62 came from.                                                                              
                                                                                                                                
MR. HICKEY  replied that 62  is what the  new mill rate  would be                                                               
with the dollar-a-pack increase.  The  mill rate right now is 12,                                                               
he added.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  WEYHRAUCH asked  if there  is any  reason why  it                                                               
couldn't just be 11 percent or  11.4 percent and achieve the same                                                               
objective.                                                                                                                      
                                                                                                                                
Number 0644                                                                                                                     
                                                                                                                                
MR. HICKEY said, "I think you could  go that way.  The main piece                                                               
of  this,  and  trying  to  find a  way  to  meet  Representative                                                               
Rokeberg's  desire, was  to  take advantage  of  the fund  you've                                                               
already set up,  which is very clear as to  what its purposes are                                                               
for, and make available, at least  in the front, a certain amount                                                               
to get to  the minimum, and then at your  discretion you would be                                                               
able to elect to appropriate that for the cessation program."                                                                   
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  asked if  this provision would  only be                                                               
reasonably considered  if the tobacco  tax goes into  effect, and                                                               
wouldn't be a stand-alone provision.                                                                                            
                                                                                                                                
MR. HICKEY said that is his understanding.                                                                                      
                                                                                                                                
CHAIR HAWKER  said that  there are  a couple  of perils  that the                                                               
committee is facing.   One is the dedication of  funds issue, and                                                               
the other  is a concern that  this is not an  appropriations bill                                                               
of itself.  He asked Representative Gruenberg for his opinion.                                                                  
                                                                                                                                
REPRESENTATIVE  GRUENBERG  said  he  sees  three  parts  to  that                                                               
solution:    the intent  of  putting  money  into the  fund,  the                                                               
drafting of the language in the  text, and providing for a second                                                               
intent provision  as to  what the  fund should  or should  not be                                                               
used  for.    He  suggested   addressing  each  of  those  issues                                                               
separately.                                                                                                                     
                                                                                                                                
MR.  HICKEY  addressed  the  last  point  and  pointed  out  that                                                               
existing  law enacted  in 2000  and  sponsored by  Representative                                                               
Rokeberg, already deals with the  Department of Health and Social                                                               
Services'  duties.    "It  tracks  the  recommendation  from  the                                                               
coalition   that   I'm   representing,  as   well   as   national                                                               
recommendations, as to the  pieces, counter marketing, cessation,                                                               
enforcement -  it goes through a  list - and the  fund already in                                                               
place  makes a  connection that  the purpose  of the  fund is  to                                                               
implement that program," he explained.   He said that the fund is                                                               
not viewed as a dedicated fund,  but is a fund within the general                                                               
fund  at  the  legislature's  discretion whether,  on  an  annual                                                               
basis, to follow what amounts to intent.                                                                                        
                                                                                                                                
REPRESENTATIVE  GRUENBERG  suggested   that  the  committee  pass                                                               
Amendment 9  with the suggestion  to Representative  Rokeberg and                                                               
Mr. Hickey to "morph it" further.                                                                                               
                                                                                                                                
REPRESENTATIVE  ROKEBERG  agreed.    He said  he  has  drafted  a                                                               
conceptual letter  of intent to add  to the bill, and  he offered                                                               
to  work  further  with  the  various  parties  to  achieve  more                                                               
clarity.   He  said  he is  a  member of  the  next committee  of                                                               
referral.                                                                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked if Representative  Rokeberg would                                                               
offer [the letter of intent] before this committee.                                                                             
                                                                                                                                
Number 0010                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG read  the  conceptual  letter of  intent                                                               
[which later became Conceptual Amendment 11] as follows:                                                                        
                                                                                                                                
     It  is  the  intent   of  the  legislature  to  provide                                                                    
     aggregate  funding  to  meet   the  minimum  amount  of                                                                    
     tobacco  control programs  recommended  by the  Centers                                                                    
     for Disease  Control on tobacco  taxes and  the tobacco                                                                    
     use and cessation fund establishing AS 37.05.580.                                                                          
                                                                                                                                
REPRESENTATIVE  GRUENBERG suggested  [adopting  Amendment 9]  and                                                               
the letter of intent to be included in [HB 538].                                                                                
                                                                                                                                
TAPE 04-22, SIDE A                                                                                                            
                                                                                                                              
CHAIR HAWKER asked if the letter  of intent should be added on to                                                               
Amendment 9.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  he  will offer  it  as a  separate                                                               
amendment.                                                                                                                      
                                                                                                                                
CHAIR  HAWKER clarified  that the  discussion  is leading  toward                                                               
passing Amendment  9, recognizing  that it has  some difficulties                                                               
but the  intent is there,  and then offering the  intent language                                                               
as a separate amendment.                                                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said  he   wants  to  have  the  intent                                                               
language included within the bill.                                                                                              
                                                                                                                                
REPRESENTATIVE GRUENBERG  removed his  objection to  Amendment 9.                                                               
He  suggested that  the wording  in the  amendment be  changed to                                                               
language instead of figures.                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG replied that  it can't be figures because                                                               
it is a  moving target and it will be  subject to appropriations.                                                               
He termed it a policy statement.                                                                                                
                                                                                                                                
CHAIR HAWKER  noted that Representative Gruenberg's  objection is                                                               
maintained only for discussion purposes.                                                                                        
                                                                                                                                
REPRESENTATIVE WILSON  said she  thinks that this  particular tax                                                               
is very important  as a policy statement because it  is as much a                                                               
social and health issue as an economic issue.                                                                                   
                                                                                                                                
Number 0211                                                                                                                     
                                                                                                                                
REPRESENTATIVE  OGG commended  Representative  Rokeberg [for  the                                                               
intent wording] because  it gives purpose to the bill.   Up until                                                               
this concept was  added, the bill had no purpose  other than as a                                                               
revenue device,  he opined.   He  said he  is very  supportive of                                                               
increasing  a  tobacco  tax  for  the  purpose  of  accomplishing                                                               
[tobacco cessation] education, and not as just a revenue device.                                                                
                                                                                                                                
REPRESENTATIVE GRUENBERG  removed his objection to  the motion to                                                               
adopt Amendment 9.                                                                                                              
                                                                                                                                
REPRESENTATIVE WEYHRAUCH also removed his objection.                                                                            
                                                                                                                                
Number 0303                                                                                                                     
                                                                                                                                
CHAIR  HAWKER  asked  if  there  was  any  further  objection  to                                                               
adopting  Amendment 9.    There  being no  objection,  it was  so                                                               
ordered.                                                                                                                        
                                                                                                                                
Number 0324                                                                                                                     
                                                                                                                                
CHAIR HAWKER  moved to adopt  Amendment 10, which  read [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     Page 2, Line 30                                                                                                            
     Delete [1,000]                                                                                                             
     Insert 5,000                                                                                                               
                                                                                                                                
REPRESENTATIVE SAMUELS objected for discussion purposes.                                                                        
                                                                                                                                
CHAIR HAWKER explained that the  amendment further solidifies the                                                               
conformity  throughout   the  document  by  raising   the  1,000-                                                               
cigarette hurdle for various benchmarks to 5,000.                                                                               
                                                                                                                                
REPRESENTATIVE SAMUELS removed his objection.                                                                                   
                                                                                                                                
CHAIR  HAWKER asked  if there  was any  further objection  to the                                                               
motion to adopt  Amendment 10.  There being no  objection, it was                                                               
so ordered.                                                                                                                     
                                                                                                                                
Number 0425                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  moved to adopt Conceptual  Amendment 11,                                                               
which read [original punctuation provided]:                                                                                     
                                                                                                                                
     It  is  the  intent   of  the  legislature  to  provide                                                                    
     aggregate  funding  to  meet   the  minimum  amount  of                                                                    
     tobacco control programs recommended  by the Center for                                                                    
     Disease Control from tobacco taxes  and the tobacco use                                                                    
     and cessation fund establishing in AS 37.05.580.                                                                           
                                                                                                                                
CHAIR HAWKER objected for discussion purposes.                                                                                  
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  it is  the intent  section of  the                                                               
bill  and he  would like  to have  it as  a conceptual  amendment                                                               
added  to the  bill  itself as  a statement  of  policy from  the                                                               
legislature.                                                                                                                    
                                                                                                                                
CHAIR HAWKER removed his objection.                                                                                             
                                                                                                                                
REPRESENTATIVE  WEYHRAUCH mentioned  that  it  should say  "meet"                                                               
instead of "met".                                                                                                               
                                                                                                                                
CHAIR  HAWKER, hearing  no further  objections to  the motion  to                                                               
adopt Conceptual Amendment 11, it was so ordered.                                                                               
                                                                                                                                
Number 0526                                                                                                                     
                                                                                                                                
REPRESENTATIVE  OGG  offered  [Conceptual Amendment  12]  stating                                                               
that  the  amount of  tax  increase  conforms  to the  intent  of                                                               
[Conceptual] Amendment 11.                                                                                                      
                                                                                                                                
CHAIR HAWKER asked for clarification.                                                                                           
                                                                                                                                
REPRESENTATIVE OGG said that the  increase in the tax should only                                                               
be  enough to  fund the  amount  stated in  the intent  language,                                                               
which will decrease the total amount of tax raised.                                                                             
                                                                                                                                
CHAIR HAWKER objected.                                                                                                          
                                                                                                                                
REPRESENTATIVE GRUENBERG  said he  would appreciate  first taking                                                               
up the amendments that he plans to offer.                                                                                       
                                                                                                                                
CHAIR HAWKER said [Conceptual Amendment  12] stands in order, but                                                               
he  assured Representative  Gruenberg that  [the committee]  will                                                               
get to all  of the amendments.  He  repeated Conceptual Amendment                                                               
12, which is  to reduce the amount of incremental  tax imposed by                                                               
this  legislation to  the  amount necessary  to  comply with  the                                                               
intent language just passed.                                                                                                    
                                                                                                                                
REPRESENTATIVE OGG said that is clear enough.                                                                                   
                                                                                                                                
REPRESENTATIVE WILSON asked  if the total amount  raised would be                                                               
no more than $8 million and  it would go to tobacco cessation and                                                               
there  would be  nothing left  for  the original  purpose of  the                                                               
bill.                                                                                                                           
                                                                                                                                
REPRESENTATIVE OGG replied yes.                                                                                                 
                                                                                                                                
REPRESENTATIVE GRUENBERG objected.                                                                                              
                                                                                                                                
CHAIR  HAWKER maintained  his objection.   A  roll call  vote was                                                               
taken.   Representatives Kohring  and Ogg voted  in favor  of the                                                               
motion  to  adopt  Conceptual   Amendment  12.    Representatives                                                               
Weyhrauch,  Wilson,  Samuels,  Rokeberg,  Gruenberg,  and  Hawker                                                               
voted  against it.   Therefore,  the motion  to adopt  Conceptual                                                               
Amendment 12 failed by a vote of 2-6.                                                                                           
                                                                                                                                
Number 0940                                                                                                                     
                                                                                                                                
REPRESENTATIVE  OGG responded  that he  wished to  reconsider and                                                               
withdraw [Conceptual Amendment 12].                                                                                             
                                                                                                                                
CHAIR  HAWKER accepted  Representative Ogg's  wish to  reconsider                                                               
and withdraw Conceptual Amendment 12.                                                                                           
                                                                                                                                
Number 1000                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG moved  to adopt  Amendment 12,  labeled                                                               
23-GH2116\H.2, Kurtz, 4/1/04, which read:                                                                                       
                                                                                                                                
     Page 5, line 23:                                                                                                           
          Delete "AS 43.50.500 - 43.50.700"                                                                                     
          Insert "AS 43.50.500 - 43.50.640 or 43.50.660 -                                                                       
     43.50.700"                                                                                                                 
                                                                                                                                
     Page 5, line 26:                                                                                                           
          Delete "AS 43.50.500 - 43.50.700"                                                                                     
          Insert "AS 43.50.500 - 43.50.640 or 43.50.660 -                                                                       
     43.50.700"                                                                                                                 
                                                                                                                                
     Page 5, line 28 - 29:                                                                                                      
          Delete "AS 43.50.500 - 43.50.700"                                                                                     
          Insert "AS 43.50.500 - 43.50.640 or 43.50.660 -                                                                       
     43.50.700"                                                                                                                 
                                                                                                                                
     Page 6, line 24 - 25:                                                                                                      
          Delete "or 43.50.650"                                                                                                 
                                                                                                                                
     Page 7, line 22:                                                                                                           
          Delete "or 43.50.650"                                                                                                 
                                                                                                                                
REPRESENTATIVE  GRUENBERG  explained  that  he  had  the  drafter                                                               
technically  conform  the  amendment to  Representative  Samuels'                                                               
amendment,  which  was to  make  the  forfeitures only  apply  in                                                               
felony cases.   He  checked with  Representative Samuels  to make                                                               
sure that he agreed with the amendment.                                                                                         
                                                                                                                                
REPRESENTATIVE SAMUELS said  that was the intent  of the original                                                               
amendment.                                                                                                                      
                                                                                                                                
CHAIR HAWKER objected for discussion  purposes.  He asked for Mr.                                                               
Barnhill's opinion of the amendment.                                                                                            
                                                                                                                                
MR. BARNHILL said the amendment is fine.                                                                                        
                                                                                                                                
CHAIR  HAWKER  removed  his  objection to  the  motion  to  adopt                                                               
Amendment  12.   There  being  no further  objection,  it was  so                                                               
ordered.                                                                                                                        
                                                                                                                                
Number 1200                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG moved  to adopt  Amendment 13,  labeled                                                               
23-GH2116\H.3, Kurtz, 4/1/04, which read:                                                                                       
                                                                                                                                
     Page 7, line 26:                                                                                                           
          Delete "shall"                                                                                                        
          Insert "may"                                                                                                          
                                                                                                                                
     Page 7, line 28, following "seized":                                                                                       
          Insert "or to another municipality affected by                                                                        
      the crime for which the property was forfeited.  The                                                                      
     state shall notify all municipalities affected by the                                                                      
     crime of the forfeiture proceeding"                                                                                        
                                                                                                                                
REPRESENTATIVE WEYHRAUCH objected.                                                                                              
                                                                                                                                
REPRESENTATIVE  GRUENBERG  explained  that  this  amendment  also                                                               
deals with  the forfeiture provision  of the  bill.  He  said the                                                               
amendment is  about getting  the property that  is seized  by the                                                               
state to a  municipality.  It requires that the  property must go                                                               
to a municipality.                                                                                                              
                                                                                                                                
REPRESENTATIVE WEYHRAUCH asked  if it could go  to an unorganized                                                               
borough.                                                                                                                        
                                                                                                                                
REPRESENTATIVE GRUENBERG said yes, or  they might want to keep it                                                               
for the  state if it is  a valuable airplane needed  for fish and                                                               
game or something like that, he  said.  The second change is that                                                               
it makes it  possible for the property to go  to the municipality                                                               
it  was seized  in  or to  go to  another  municipality that  was                                                               
affected  by  the  particular  crime,  he  explained.    It  also                                                               
requires the state  to notify all of  the relevant municipalities                                                               
of the forfeiture proceeding.                                                                                                   
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  removed his objection.   There being no                                                               
further objection, Amendment 13 was adopted.                                                                                    
                                                                                                                                
Number 1500                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG moved to  adopt Amendment 14, which read                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
       Page 7, line 7:  Insert new subsection (f) and re-                                                                       
     letter subsections accordingly:                                                                                            
                                                                                                                                
          (f) The court may allow the owner of property                                                                         
     that  is  subject  to  forfeiture  under  (a)  of  this                                                                    
     section to redeem  the property by paying  an amount to                                                                    
     be determined by the court  to be the fair market value                                                                    
     of the property.                                                                                                           
                                                                                                                                
CHAIR HAWKER objected for discussion purposes.                                                                                  
                                                                                                                                
REPRESENTATIVE GRUENBERG explained that  what this amendment does                                                               
is allow  the owner  of the  property to put  up the  fair market                                                               
value  in cash.    It would  save  the state  the  cost of  going                                                               
through the auction process, he said.                                                                                           
                                                                                                                                
Number 1553                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG   said  this  amendment  causes   a  few                                                               
complications.   He asked if  this means  it should be  the first                                                               
right of refusal  or first right of  offer.  He said  there is an                                                               
appraisal problem, also, about what is fair market value.                                                                       
                                                                                                                                
REPRESENTATIVE  GRUENBERG said  that could  be determined  by the                                                               
court.                                                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG noted  that this would be  called a first                                                               
right of offer.                                                                                                                 
                                                                                                                                
REPRESENTATIVE   GRUENBERG  said   it  would   be  a   commercial                                                               
appraisal.                                                                                                                      
                                                                                                                                
CHAIR  HAWKER  removed  his  objection to  the  motion  to  adopt                                                               
Amendment  14.   There  being  no further  objection,  it was  so                                                               
ordered.                                                                                                                        
                                                                                                                                
Number 1670                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG moved to  adopt Amendment 15, which read                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     Page 6, line  28 to Page 7, line  19: Amend subsections                                                                    
     (e) and (f) as follows:                                                                                                    
                                                                                                                                
          (e) The owner of property subject to forfeiture                                                                       
     under (a)  of this section  is entitled to  relief from                                                                    
     the  forfeiture  in  the nature  of  remission  of  the                                                                    
     forfeiture if, in an action  under (d) of this section,                                                                    
     the owner shows that the owner                                                                                             
  (1)        was not a party to the violation; and                                                                          
               (2) had no actual knowledge or reasonable                                                                        
     cause to believe  that the property was used  or was to                                                                    
     be used in the violation of the law[; AND                                                                                  
               (3)  HAD NO ACTUAL KNOWLEDGE OR REASONABLE                                                                       
     CAUSE  TO  BELIEVE  THAT   THE  PERSON  COMMITTING  THE                                                                    
     VIOLATION HAD                                                                                                              
                    (A) A CRIMINAL RECORD FOR VIOLATING                                                                         
     THIS CHAPTER; OR                                                                                                           
                    (B)  COMMITTED OTHER VIOLATIONS OF                                                                          
     THIS CHAPTER].                                                                                                             
          (f) A person other than the owner holding, or the                                                                     
     assignee  of, a  lien,  mortgage  or conditional  sales                                                                    
     contract  on, or  the right  to possession  to property                                                                    
     subject  to forfeiture  under (a)  of  this section  is                                                                    
     entitled to  relief from the  forfeiture in  the nature                                                                    
     of remission  of the forfeiture  if in an  action under                                                                    
     (d) of this section, the person shows that                                                                                 
   (1)       the person was not a party to the violation;                                                                       
     and                                                                                                                    
               (2) had no actual knowledge or reasonable                                                                        
     cause to believe  that the property was used  or was to                                                                    
     be used in the violation of the law[; AND                                                                                  
               (3)  HAD NO ACTUAL KNOWLEDGE OR REASONABLE                                                                       
     CAUSE  TO  BELIEVE  THAT   THE  PERSON  COMMITTING  THE                                                                    
     VIOLATION HAD                                                                                                              
                    (A) A CRIMINAL RECORD FOR VIOLATING                                                                         
     THIS CHAPTER; OR                                                                                                           
                    (B) COMMITTED OTHER VIOLATIONS OF THIS                                                                      
     CHAPTER].                                                                                                                  
                                                                                                                                
CHAIR HAWKER objected for discussion purposes.                                                                                  
                                                                                                                                
REPRESENTATIVE  GRUENBERG  explained,  "Right  now  it's  an                                                                    
affirmative defense to  the relief, if the  owner shows that                                                                    
the  owner wasn't  a party  to violation  and had  no actual                                                                    
knowledge or  reasonable cause to believe  that the property                                                                    
was used  to be used  in the  violation."  "Number  three is                                                                    
the provision that  caused me some problem," he  added.  The                                                                    
question  would be  whether the  person had  a knowledge  of                                                                    
whether the perpetrator had a  criminal record for violating                                                                    
the chapter  or had ever  committed any other  violations of                                                                    
the chapter, he  said.  This is especially  true for smaller                                                                    
communities, he opined.  He said  it seemed to reach too far                                                                    
and  to  not  be  fair,  and  that  is  why  [Amendment  15]                                                                    
eliminates it.   "You still have to show, to  get out of it,                                                                    
that you  weren't a  party to  it and  you had  no knowledge                                                                    
that this was going to be  used in any violation, and that's                                                                    
the essence of what ought to be shown," he concluded.                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked for input from  DOL about the                                                                    
amendment.                                                                                                                      
                                                                                                                                
Number 1907                                                                                                                     
                                                                                                                                
MR. BARNHILL  said what this  does is lower the  standard or                                                                    
threshold for  an innocent owner,  or for an  innocent owner                                                                    
of a  security interest in  the property, to  get remission.                                                                    
He said it is essentially a policy call.                                                                                        
                                                                                                                                
REPRESENTATIVE  SAMUELS  asked  if  the  standard  is  being                                                                    
lowered all that far.                                                                                                           
                                                                                                                                
MR.  BARNHILL  replied  that  it begs  the  question  as  to                                                                    
whether the person is just looking the other way.                                                                               
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  asked if it is  the maker's intent                                                                    
to lower the threshold.                                                                                                         
                                                                                                                                
Number 2115                                                                                                                     
                                                                                                                                
Representative Gruenberg said  no.  He said he  is trying to                                                                    
address, particularly in small  communities where people may                                                                    
have done  something in  their youth  long age,  a situation                                                                    
where a  person has no  possible reason to believe  that the                                                                    
car or  airplane is being  used illegally, but they  do know                                                                    
that their friend was convicted of something long ago.                                                                          
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  suggested that  due to  the nature                                                                    
of the offense an expungement might be in order.                                                                                
                                                                                                                                
CHAIR HAWKER  concurred with that  idea.  He noted  that the                                                                    
language in [Amendment 15] is  not exactly like the language                                                                    
in the bill.   He referred to [page 7, line  1, of the bill]                                                                    
the  words "did  not have  actual knowledge"  as opposed  to                                                                    
"had no actual knowledge" [in Amendment 15].                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  said that should be  taken care of                                                                    
by the drafter.                                                                                                                 
                                                                                                                                
CHAIR HAWKER  asked if Representative Gruenberg's  intent is                                                                    
to  demonstrate changes  to Version  H [of  HB 538],  rather                                                                    
than an attempt to rewrite the language.                                                                                        
                                                                                                                                
REPRESENTATIVE GRUENBERG replied absolutely.                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG  suggested that  it be  a conceptual                                                                    
amendment.                                                                                                                      
                                                                                                                                
Number 2255                                                                                                                     
                                                                                                                                
CHAIR HAWKER  said it  is now Conceptual  Amendment 15.   He                                                                    
asked if  [paragraph (3)] should  be eliminated  "as further                                                                    
establishing a bar  to someone being asked  to forfeit their                                                                    
property".   He opined that  it does  seem like it  is being                                                                    
lowered to  a lesser  standard, by eliminating  the language                                                                    
in [paragraph (3)] and he said he is troubled by that.                                                                          
                                                                                                                                
REPRESENTATIVE  GRUENBERG  replied  that  he  is  trying  to                                                                    
prevent an  injustice and  does not want  to lower  the bar.                                                                    
He said, "In a small state  like Alaska, we know a lot about                                                                    
our neighbors  - this isn't a  big state - and  that doesn't                                                                    
mean you have  any criminal intent at all, or  any intent to                                                                    
violate the law.  You just happen to know your neighbor."                                                                       
                                                                                                                                
REPRESENTATIVE WEYHRAUCH agreed.                                                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG said he supports the amendment.                                                                         
                                                                                                                                
REPRESENTATIVE WILSON maintained her objection.                                                                                 
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  stated that  this is  a conceptual                                                                    
amendment   now,  and   he  suggested   that  Representative                                                                    
Gruenberg is not offering Amendment 15 as written.                                                                              
                                                                                                                                
REPRESENTATIVE  GRUENBERG   clarified  that   the  amendment                                                                    
deletes lines 16-19 on page 7, and it is not conceptual.                                                                        
                                                                                                                                
Number 2518                                                                                                                     
                                                                                                                                
REPRESENTATIVE WILSON  inquired if there is  anyway to "come                                                                    
half-way between those two."   She said she likes both sides                                                                    
of the  issue, and does  not want  to see anyone  in trouble                                                                    
who shouldn't  be, but at  the same  time she said  she does                                                                    
not  want  to  see  someone get  away  with  something  they                                                                    
shouldn't be getting  away with.  She asked if  there is any                                                                    
middle ground.                                                                                                                  
                                                                                                                                
MR. BARNHILL replied  yes, a temporal aspect  could be added                                                                    
to the  language.  He  said that  Representative Gruenberg's                                                                    
concern is  that someone [committed  a crime] 30  years ago,                                                                    
so  language  could  be  inserted  to  say  "had  no  actual                                                                    
knowledge  or reasonable  cause to  believe that  the person                                                                    
committing the  violation had  within the  last X  number of                                                                    
years  a  criminal record  for  violating  this chapter,  or                                                                    
committed other  violations of this chapter."   He suggested                                                                    
a number could be picked, and "that would come half-way."                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG  said if [the committee]  wished to                                                                    
do that it  is fine, and he repeated that  he is just trying                                                                    
to avoid an injustice.                                                                                                          
                                                                                                                                
Number 2700                                                                                                                     
                                                                                                                                
REPRESENTATIVE  WILSON  related  that she  would  like  that                                                                    
[addition].                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  suggested   an  amendment  to  the                                                                    
amendment could  be made, similar  to the  alcohol statutes.                                                                    
For a  DUI [driving  under the influence]  there is  a look-                                                                    
back  provision of  10  years for  a  felony, he  explained.                                                                    
There is currently  a bill that [has  a look-back provision]                                                                    
for 15 years for a misdemeanor,  he added.  It would have to                                                                    
be  decided  if forfeiture  is  a  felony or  a  misdemeanor                                                                    
first.                                                                                                                          
                                                                                                                                
REPRESENTATIVE WEYHRAUCH asked if  that is for driving under                                                                    
the influence.                                                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG said that is correct.                                                                                   
                                                                                                                                
CHAIR HAWKER  asked Mr. Barnhill  how he would  craft [look-                                                                    
back language] into this amendment.                                                                                             
                                                                                                                                
MR. BARNHILL suggested inserting  the words "within the last                                                                    
X years".                                                                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG suggested five years.                                                                                  
                                                                                                                                
REPRESENTATIVE WILSON suggested ten years.                                                                                      
                                                                                                                                
REPRESENTATIVE  GRUENBERG   agreed  [to  ten  years].     He                                                                    
suggested that  the language say,  "had, within the  last 10                                                                    
years,".   He said, in  place of the entire  [Amendment 15],                                                                    
insert on line 17, page 7,  the phrase ", within the last 10                                                                    
years,".  He said he considers this a friendly amendment.                                                                       
                                                                                                                                
MR. BARNHILL  pointed out that  the language also  needed to                                                                    
be inserted on page 7, line 4.                                                                                                  
                                                                                                                                
REPRESENTATIVE  GRUENBERG  moved   to  adopt  Amendment  15,                                                                    
rewritten as  previously stated.   He asked if  the language                                                                    
needed to be inserted anywhere else.                                                                                            
                                                                                                                                
MR. BARNHILL said he hopes not.                                                                                                 
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked that the drafter  be allowed                                                                    
to put  [the language]  in anywhere else  as needed,  and he                                                                    
called Amendment 15 a conceptual amendment.                                                                                     
                                                                                                                                
Number 2954                                                                                                                     
                                                                                                                                
CHAIR  HAWKER restated  Conceptual Amendment  15.   He asked                                                                    
Representative  Gruenberg  if  a   sidebar  is  required  to                                                                    
explain the time certain in the last 10 years.                                                                                  
                                                                                                                                
Number 3130                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG replied,  "It is  the intent  that                                                                    
the date  of the  previous conviction  must be  earlier than                                                                    
ten years before the date of this offense."                                                                                     
                                                                                                                                
REPRESENTATIVE WILSON  withdrew her objection to  the motion                                                                    
to adopt Conceptual Amendment 15.                                                                                               
                                                                                                                                
CHAIR HAWKER,  hearing no further objection,  announced that                                                                    
Conceptual Amendment 15, as rewritten, was adopted.                                                                             
                                                                                                                                
REPRESENTATIVE OGG  noted that on  page 5 of Version  H, the                                                                    
terms "barter,  or exchange" remain,  when they  should have                                                                    
been removed.                                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG asked if that is an amendment.                                                                         
                                                                                                                                
CHAIR HAWKER replied that it is a question, so far.                                                                             
                                                                                                                                
REPRESENTATIVE  GRUENBERG suggested  that Legislative  Legal                                                                    
and Research Services look at it.                                                                                               
                                                                                                                                
The committee took an at-ease from 9:15 a.m. to 9:18 a.m.                                                                       
                                                                                                                                
CHAIR HAWKER  said that Legislative  Legal and  Research Services                                                               
was  directed to  remove the  words "barter  or exchange",  which                                                               
still appear in  Version H on page  5, lines 22, 25, and  26.  He                                                               
said that  has not been  correctly done  so it will  be requested                                                               
again.   He pointed out  that the  directive was in  Amendment 4,                                                               
which was adopted in a previous meeting.                                                                                        
                                                                                                                                
REPRESENTATIVE GRUENBERG asked, in view  of all of the amendments                                                               
that have been  offered, if the title needed to  be expanded.  He                                                               
explained  that  some of  the  content  of  the bill  relates  to                                                               
criminal  statutes, also.   He  wondered if  the language  in the                                                               
title covers  that and asked that  the title be conformed  to the                                                               
changes that [the committee] has made.                                                                                          
                                                                                                                                
CHAIR HAWKER pointed out that  the language regarding the tobacco                                                               
cessation  fund  would also  need  to  be incorporated  into  the                                                               
title.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  GRUENBERG  emphasized,  "We  don't  want  it  any                                                               
broader that what we've done.  We  do not want an Act relating to                                                               
cigarettes, or something like that."                                                                                            
                                                                                                                                
CHAIR HAWKER echoed,  "We would like a  tight title conformancy."                                                               
He  said that  the committee  would get  a chance  to review  the                                                               
final  committee  substitute before  reporting  the  bill out  of                                                               
committee.                                                                                                                      
                                                                                                                                
REPRESENTATIVE GRUENBERG  also pointed out that  the numbering of                                                               
the amendments may have to be changed.                                                                                          
                                                                                                                                
Number 3804                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG expressed his  thanks to Chair Hawker for                                                               
his  indulgence in  the various  amendments.   He brought  to the                                                               
committee's  attention  another  amendment  concept  which  would                                                               
grandfather in, prohibit  any further taxation on  tobacco by any                                                               
political subdivisions,  and reserve  the rights for  any further                                                               
taxation  to the  state.   He  pointed out  that  at least  three                                                               
municipalities  have  an additional  tobacco  products  tax.   He                                                               
opined  it necessary  to reserve  certain areas  of taxation  for                                                               
different political subdivisions so  that there is a coordination                                                               
of policy  and impacts  on markets  and businesses.   He  said he                                                               
would  not  appeal  any  current local  taxes,  but  opined  that                                                               
[tobacco  taxation]  should be  reserved  for  the state  in  the                                                               
future.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  GRUENBERG replied  that  he hopes  Representative                                                               
Rokeberg  does  not offer  that  amendment  because it  could  be                                                               
controversial, it  is late in  the session, and it  might involve                                                               
another  referral   to  House  Community  and   Regional  Affairs                                                               
Standing Committee.                                                                                                             
                                                                                                                                
Number 4004                                                                                                                     
                                                                                                                                
REPRESENTATIVE  WILSON   said  that   because  [the   state]  has                                                               
eliminated revenue  sharing to the municipalities,  they are very                                                               
limited in the ways that they  can raise revenue.  She stated her                                                               
hesitation to take any options away from cities.                                                                                
                                                                                                                                
REPRESENTATIVE OGG  also urged against such  an amendment because                                                               
some  boroughs have  "health powers"  and  use a  tobacco tax  to                                                               
enhance revenues  for that  purpose.   He said  he would  hate to                                                               
discourage that.   The  taxing power  by municipalities  would be                                                               
waived by the  people who make the decision on  their own public,                                                               
which is a further check that is already in place, he opined.                                                                   
                                                                                                                                
CHAIR HAWKER  said he  finds Representative  Rokeberg's arguments                                                               
compelling.  He  said he is troubled by the  perspective that all                                                               
traditional  revenue sources  used by  public entities  should be                                                               
reserved and  given priority  by cities,  leaving the  state with                                                               
very little.   He also agreed  it is wise not  to incorporate the                                                               
amendment into this legislation.                                                                                                
Number 4310                                                                                                                     
                                                                                                                                
REPRESENTATIVE WEYHRAUCH  moved to  report CSHB 538,  Version 23-                                                               
GH2116\H,  Kurtz,  4/1/04,  as amended,  out  of  committee  with                                                               
individual recommendations and the accompanying fiscal notes.                                                                   
                                                                                                                                
REPRESENTATIVE   KOHRING  objected.      He   spoke  of   several                                                               
philosophical concerns  with the  bill.   He said  enforcement of                                                               
existing  laws should  be looked  at  before raising  taxes.   He                                                               
suggested  that there  is  evidence that  increasing  the tax  on                                                               
tobacco  in   other  states  and   countries  resulted   in  more                                                               
smuggling.   Canadian studies reported  a 40 percent  increase of                                                               
youth smoking  as a result  of a  cigarette tax increase,  so the                                                               
tax was  lowered in order  to keep smuggled cigarettes  away from                                                               
kids,  he related.    He  said he  has  not  seen any  compelling                                                               
evidence that  shows a decrease in  youth smoking as a  result of                                                               
the  tax  increase  in  Alaska.    Price  elasticity  is  another                                                               
concern, he  stated.  He  opined that a  $2 increase in  tax will                                                               
not lead  to a  decrease in  smoking.  He  termed tobacco  use an                                                               
individual responsibility,  and suggested that parents  should be                                                               
the ones to discourage their children from smoking.                                                                             
                                                                                                                                
Number 4620                                                                                                                     
                                                                                                                                
A roll call  vote was taken.   Representatives Weyhrauch, Wilson,                                                               
Samuels,  Rokeberg,  Gruenberg,  and  Hawker voted  in  favor  of                                                               
reporting   CSHB    538,   as   amended,   out    of   committee.                                                               
Representatives  Kohring,  Ogg,  and   Moses  voted  against  it.                                                               
Therefore, CSHB  538(W&M) was reported  out of the  House Special                                                               
Committee on Ways and Means by a vote of 6-3.                                                                                   
                                                                                                                                
TAPE 04-22, SIDE B                                                                                                            
                                                                                                                              
CHAIR HAWKER made closing announcements.                                                                                        
                                                                                                                              
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Special Committee on Ways and Means meeting was adjourned at                                                                    
9:30 a.m.                                                                                                                       

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