Legislature(2013 - 2014)SENATE FINANCE 532
02/21/2013 09:30 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB7 | |
| SB12 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 7 | TELECONFERENCED | |
| + | SB 12 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
February 21, 2013
10:02 a.m.
10:02:50 AM
CALL TO ORDER
Co-Chair Meyer called the Senate Finance Committee meeting
to order at 10:02 a.m.
MEMBERS PRESENT
Senator Kevin Meyer, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Kevin Meyer, Co-Chair
Senator Anna Fairclough, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Senator Cathy Giessel; Vern Jones, Chief Procurement
Officer, Department of Administration.
PRESENT VIA TELECONFERENCE
Johanna Bales, Deputy Director, Tax Division, Department of
Revenue; Dave Glenn, Self, Palmer; Mike Koskovitch, Self,
Wasilla.
SUMMARY
SB 7 CORPORATE INCOME TAX
SB 7 was HEARD and HELD in committee for further
consideration.
SB 12 PUBLIC PROCUREMENT
SB 12 was HEARD and HELD in committee for further
consideration.
Co-Chair Meyer apologized for the delay in starting the
meeting and explained that he had been in a meeting with
Senator Lisa Murkowski.
SENATE BILL NO. 7
"An Act relating to the computation of the tax on the
taxable income of a corporation derived from sources
within the state."
10:04:09 AM
SENATOR CATHY GIESSEL, introduced SB 7 and stated that the
legislation adjusted the corporate income tax in Alaska to
align with the consumer price index. She related that the
last time the corporate tax brackets were set was in 1981.
She discussed a research document in members' packets that
contained a chart, which laid out the current income tax
brackets and what the bill would alter them to. Currently,
the ten tax brackets moved up in increments of $10,000
each. The brackets began at $10,000 of taxable income for a
corporation, which was for a C corporation. The highest tax
bracket, which had a 9.4 percent tax, was reached at
$90,000 of income. The adjustment for inflation would make
the highest tax bracket achieved at $222,000. She shared
that the bill made an adjustment for inflation and would
create a significant benefit for Alaska's small and medium
sized businesses; these businesses included C corporations
in a variety of industries. She discussed the fiscal note
attached to the bill.
Co-Chair Meyer inquired if there were nine tax brackets.
Senator Giessel responded that there were ten tax brackets.
Co-Chair Meyer queried how the current tax brackets were
arrived at. Senator Giessel responded that in 1981, the tax
brackets were adjusted and that in the supporting documents
there was a document from Legislative Research Services
(copy on file); the third page of the document contained
the current tax brackets. She related that the top chart
represented the current brackets and that the bottom chart
reflected what the brackets would look like if the bill
passed. She noted that nearly 14,000 of the state's
corporations were making less than $10,000 in taxable
income and would fall into the lowest tax bracket. She
pointed out that the $90,000 taxable income bracket, which
paid 9.4 percent, was paid by around 559 filers. In the
second chart, which showed the proposed tax brackets, the
number of filers shifted and more people appeared in the
lower to medium income brackets. She offered that the bill
would leave more money in the hands of small and medium
sized business owners and would allow the expansion of
businesses, additional hires, etc. She explained that the
adjustment would not affect the very large companies and
that if the bill passed, $222,000 or more in income would
be the highest tax bracket; these filers would continue to
pay the 9.4 percent.
Co-Chair Meyer noted there was an attachment that showed
the other states and how they did their income tax; He
noted that the other states seemed to vary on how it dealt
with the issue. Senator Giessel responded that the document
was an interesting summary and that there were a
"plurality" of states that had a 6 percent tax. She
believed that there were four states that had a higher
corporate income tax than Alaska; Minnesota, Illinois,
Pennsylvania, and the District of Columbia all had a top
bracket that was higher than a 9.4 percent.
10:09:53 AM
Co-Chair Meyer observed that Ms. Bales should speak to the
fiscal note and offered that it was concerning when there
was less revenue coming to the state; however, he
acknowledged that the state might be spending the same
amount attempting to collect a "small amount" from the
small businesses.
Senator Olson queried what the definitions of small and
medium sized corporations were. Senator Giessel replied
that although there was no specific definition, a company
that was making $74,000 of taxable income was not a large
business. She related that C corporations could be
transportation and construction companies. Senator Olson
pointed out that he knew the difference between a C and an
S corporation. He offered that if there were no specific
definitions for small and medium corporations, they were
being defined by corporate income. He opined that there
could be a very large corporation that was losing money and
would be eligible under the bill. Senator Giessel replied
that she was using generic terms such as small and medium
sized businesses. She stated that her district had some
small local businesses, some of which were C corporations
and reiterated that the bill affected small, local
businesses. She added that Senator Olson's questions would
be best answered by Ms. Bales.
Senator Olson inquired if tax credits were covered under
the corporate income tax. Senator Giessel replied that she
believed that they were, but that Ms. Bales could provide
more specifics about the bill. She explained that although
the bill's fiscal note was estimated to be $3.8 million, it
would likely not be that large as a result of tax credits
that lowered tax liability. She pointed out that the chart
in members' packets showed the number of actual filers in
FY11.
Senator Olson inquired what effect the bill would have on
the tax credits. Senator Giessel replied that the effect of
tax credits was somewhat reflected on second chart by
Legislative Research Services, which expected the same
number of filers. She added that the highest bracket would
still "fall into these" and lowest bracket that had less
than $25,000 of taxable income would "still be present
also."
10:13:08 AM
JOHANNA BALES, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT OF
REVENUE (via teleconference), addressed an earlier question
by Co-Chair Meyer regarding the bill's fiscal note and
related that the Department of Revenue (DOR) had taken a
look at the last few years of corporate income tax; DOR
then recalculated the tax liability based on the new
brackets, which was where the $3.8 million projection came
from. She related that under the proposed legislation, the
maximum tax savings to any one corporation would be $5,828
per year. She stated that the legislation defined small tax
payers as those that averaged about $300,000 or less of
taxable income per year. She pointed out that the small tax
payers, as defined by the legislation, would benefit the
most from the bill because they would have the higher
percentage of tax savings. In response to a question by
Senator Olson, she indicated that small and medium
corporations were defined in terms of taxable income. She
pointed out that there were some large multi-national
corporations that conducted a limited amount of activity in
Alaska. She shared that some large multi-national
corporations would benefit by the legislation; however, the
maximum savings was around $5,800 per year. She
acknowledged that there were a lot of Alaskan businesses
that were in the lower tax brackets that would benefit from
the legislation. In response to a question by Senator
Olson, She stated that DOR first calculated the tax
liability, which was based on taxable income; once the tax
liability was calculated, the credits were then deducted.
She offered that the credits did not have any effect on the
tax structure scheme in the bill because the credits were
taken after tax liability was calculated.
Senator Olson requested confirmation that some of the large
multi-national corporations such as oil companies that did
business in Alaska would have a benefit from the
legislation. Ms. Bales responded in the affirmative and
related that DOR had conducted an analysis to determine how
much savings the bill would represent to the oil and gas
industry in total. She continued that historically, there
had been 27 to 30 oil and gas corporations that filed taxes
with DOR and that if all of those corporations received the
maximum benefit from bill, the savings to the oil and gas
industry would be $157,000 of the $3.8 million. She
concluded that the oil and gas industry as a whole would
benefit very slightly from the legislation.
10:18:23 AM
Senator Olson queried if there were organizations that
would have state or federal tax credits jeopardized as a
result of the bill. Ms. Bales responded in the negative.
Senator Dunleavy queried if the tax was based on the gross
or net. Ms. Bales responded that the corporate income tax
was a net tax and that the tax liability was based on the
net income that was earned.
Co-Chair Meyer noted Senator Olson's concerns regarding the
net tax and stated that a large corporation could benefit
from the bill; however, he acknowledged the benefit would
be very minimal.
Senator Olson inquired if there would be a change in the
fiscal note if the brackets were consolidated and reduced
in number. Ms. Bales responded that there would be some
changes to the fiscal note, but expected that they would be
minor; furthermore, DOR would have to run the calculation
based on how the brackets were collapsed.
Co-Chair Meyer queried how the bill's effective date
affected businesses filing for their taxes. He requested an
explanation of the effective date in the legislation. Ms.
Bales replied that the bill would be effective immediately,
but that the legislation was for tax periods that started
after the effective date. She shared by example that if the
bill went into effect July 1st, it would not affect a
corporation that filed on a calendar year until January 1st
of the following year.
Senator Olson noted that his corporations had alternating
dates when the corporate income taxes were filed. He
inquired when the bill would take effect for an entity that
was a fiscal year filer. Ms. Bales related by example that
if the bill took effect on July 1st, a fiscal year filer
whose taxable fiscal year started on September 1st would
file on September fist of the same year. She added that if
the legislation went into effect on July 1st, a filer whose
fiscal year started April 1st would not be able to take
advantage of the new rates until April 1st of the following
year; the timing depended on when the fiscal year started.
10:22:57 AM
Co-Chair Meyer CLOSED public TESTIMONY on SB 7.
Co-Chair Meyer stated that he did not know if the brackets
were set correctly for meeting the bill's objective and
inquired if the administration had a position on the
legislation. Ms. Bales replied that the administration was
currently neutral on the bill.
Co-Chair Meyer stated that the committee would take a day
to think about the bill before bringing it back.
10:24:10 AM
SB 7 was HEARD and HELD in committee for further
consideration.
Senator Giessel stated that there would be more letters of
support forthcoming in members' packets from chambers of
commerce and companies across the state.
Co-Chair Meyer noted that he did see some letters of
support from the Juneau Chamber of Commerce and the Alaska
State Chamber of Commerce.
10:24:51 AM
AT EASE
10:25:09 AM
RECONVENED
SENATE BILL NO. 12
"An Act relating to state and public entity
procurement, including the State Procurement Code,
procurement preferences, contract awards, the use of
small procurement provisions for certain amounts of
leased space, the Alaska business license requirement
for Alaska bidder and other procurement preferences,
the proof of registration of construction contract
bidders and offerors, the establishment and
maintenance of lists of persons who want to provide
supplies or services to the state, state agencies, and
state instrumentalities, electronic bids and
proposals, the chief procurement officer, small
procurements, and writings; relating to the meaning of
'Alaska bidder'; and providing for an effective date."
10:25:38 AM
Vice-Chair Fairclough stated that SB 12 was an attempt to
modify the procurement code and streamline the procurement
processes. She pointed out that currently, there was some
ambiguity in calculating the procurement bids. She related
that the bill provided a specific point in time when an
Alaska business license was required and increased the
threshold under which state agencies may use an informal
procurement process; the threshold was increased from
$50,000 to $100,000 for good and services and from $100,000
to $200,000 for construction. The bill also increased the
small procurement leased-space threshold from $3,000 to
$7,000. She related that the legislation advanced the state
into an electronic world through which electronic bids and
signatures would be accepted. The bill eliminated an
outdated vendor list and relocated all the preferences into
the same spot in the Alaska Statutes, as well as clarified
which preferences may be stacked and which one could not be
combined. The legislation eliminated the "employers with
disabilities" preference, reduced the chief procurement
officer's pay from a range 27 to a range 25; collectively,
the changes streamlined the procurement process and
provided Alaskans a way to enter and engage in Alaska state
service. She concluded that the bill provided more
opportunities for Alaskans, particularly in rural Alaska.
VERN JONES, CHIEF PROCUREMENT OFFICER, DEPARTMENT OF
ADMINISTRATION, introduced himself for the record. He
related that the bill simplified, modernized, and clarified
the procurement process. He pointed out that increasing the
small procurement threshold made it possible to conduct
more procurements in a less formal mode, which was easier
for smaller businesses, particularly in rural areas. He
stated that the bill would particularly help building
owners who were leasing space to the state and that the
legislation simplified the preferences. Currently, the
Division of Vocational Rehab was required to get
verification from an individual's doctors to verify
disability status; the bill would allow for the acceptance
of third party qualifications from entities such as the
Social Security Administration and the Veterans
Administration (VA). He believed the bill was easier to
understand than the current law on the state practitioner
side, as well as for the businesses that were engaging with
the state.
10:30:31 AM
Vice-Chair Fairclough was prepared to present a sectional
analysis of the bill, but preferred to take questions
afterwards in respect for those who were waiting online to
testify.
DAVE GLENN, SELF, PALMER (via teleconference), testified in
support of the SB 12 and related that the stated Department
of Labor and Workforce Development (DLWD) did not recognize
disability certification from the VA. He related a personal
story about DLWD rejecting a contract that he had submitted
because his paperwork had been submitted from the VA. He
stated that the DLWD's stance on this issue was
inconsistent with everything else the state did for
disabled veterans. He shared that his VA certification was
recognized for discounted license plates, free hunting
licenses, the state park and ferry systems, etc. He added
that DLWD was the only department in the state that did not
recognize disability certification from the VA. He recalled
serving in the Vietnam War and being an "Agent Orange"
victim. He expressed concerned for the troops returning
from duty in Afghanistan and pointed out that he did not
want to see these veterans treated like he had been when he
returned home from Vietnam. He offered that veterans should
not be discriminated against over a technicality, but
should be afforded every opportunity to get their lives
back in order. He concluded that the bill eliminated having
to satisfy DLWD's requirements of a whole system of private
doctors, expenses, etc.
MIKE KOSKOVITCH, SELF, WASILLA (via teleconference), spoke
in support of SB 12 and related his experiences with "Agent
Orange." He believed that a disability certification from
the VA should satisfy any requirement by the State of
Alaska. He observed that veterans should be treated with
the dignity and honor that they deserved and should not
have to deal with bureaucratic obstacles.
Co-Chair Meyer CLOSED public TESTIMONY on SB 12.
10:35:27 AM
SB 12 was HEARD and HELD in committee for further
consideration.
Co-Chair Meyer discussed the following meeting's agenda.
10:35:55 AM
ADJOURNMENT
The meeting was adjourned at 10:36 a.m.