Legislature(2003 - 2004)
04/08/2003 09:02 AM Senate FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 08, 2003
9:02 AM
TAPES
SFC-03 # 42, Side A
SFC 03 # 42, Side B
CALL TO ORDER
Co-Chair Gary Wilken convened the meeting at approximately 9:02 AM.
PRESENT
Senator Gary Wilken, Co-Chair
Senator Lyda Green, Co-Chair
Senator Ben Stevens
Senator Donny Olson
Senator Con Bunde
Also Attending: REPRESENTATIVE NORM ROKEBERG; DOUG LETCH, Staff to
Senator Gary Stevens; CHUCK HARLAMERT, Juneau Section Chief, Tax
Division, Department of Revenue; LANDA BAILY, Special Assistant and
Legislative Liaison, Department of Revenue
Attending via Teleconference: From Mat-Su: DAVID OWENS, Owens Home
Inspections; BERNIE SCHUYLER, Arctic Sky Enterprises, International
Conference of Building Officials (ICBO) Certified Home Inspector,
and Certified Commercial ICBO Inspector; BOB MILBY, Milby
Construction, registered general contractor and ICBO Certified
Inspector; From Kenai: ROCKY SMITH, Mechanical Contractor; STEVE
WISDOM, Owner, Wisdom and Associates, Inc.; From an off-net site:
DAVE MENAKER, Great Land Wines; ROBYNN WILSON, Department of
Revenue; From Kodiak: STEVE THOMSEN, Alaskan Wilderness Wines;
SUMMARY INFORMATION
HB 9-HOME INSPECTORS/CONTRACTORS
The Committee heard from the sponsor and home inspectors. Two
amendments were adopted and the bill was held in Committee.
SB 82-ALCOHOLIC BEVERAGE TAX FOR WINE & OTHERS
The Committee heard from the sponsor, the Department of Revenue,
and wine makers. The bill was held in Committee.
SB 106-FEE FOR STUDDED TIRES
The Committee heard from the Department of Revenue. A committee
substitute was adopted, three amendments were considered and one
was adopted. The bill was held in Committee.
SB 120-CLAIMS BY STATE-EMPLOYED SEAMEN
This bill was scheduled but not heard.
SENATE CS FOR CS FOR HOUSE BILL NO. 9(L&C)
"An Act relating to the registration of individuals who
perform home inspections; relating to regulation of
contractors; relating to registration fees for specialty
contractors, home inspectors, and associate home inspectors;
relating to home inspection requirements for residential loans
purchased or approved by the Alaska Housing Finance
Corporation; relating to civil actions by and against home
inspectors and to civil actions arising from residential unit
inspections; repealing a law that limits liability for damages
based on a duty to inspect a residential unit to damages
caused by gross negligence or intentional misconduct; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken explained this bill "creates a mandatory
registration of home inspectors. Under this legislation the
Division of Occupational Licensing administers the program without
a board and incorporates the registration within the construction
contractor registration program."
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REPRESENTATIVE NORM ROKEBERG, sponsor, noted this could be the 28
public hearing on this issue in the past five years. He informed
that this bill provides that home inspectors and associate home
inspectors would be regulated by the Division and creates the
framework for a regulatory process for a group of professionals
that currently do operate under any regulation. He reported that
the real estate industry encompasses approximately 25 percent of
the State domestic product, commenting, "It's an absolutely huge
industry." He remarked that every aspect of a real estate
transaction is currently regulated with the exception of home
inspections.
Representative Rokeberg stated that the home inspection industry is
the result of lending institution requirements imposed
approximately ten to twenty years ago to ensure that the "housing
stock product in this country was properly constructed and built."
He noted this applies to political subdivisions not governed by
building inspections, which encompasses most of Alaska.
Representative Rokeberg told the Committee this legislation
provides a "regulatory scheme" and removes some exemptions and
immunities from State statutes relating to home inspections
conducted for the Alaska Housing Finance Corporation (AHFC). He
commented this issue has been the "number one controversial
sticking point."
Representative Rokeberg added that the bill imposes statutory
limitations relating to the time in which a lawsuit could be
brought and "limits the length of report to 180 days".
Representative Rokeberg expressed satisfaction that this
legislation "avoids setting up a board or commission," explaining
that with approximately 100 practitioners in the State, biannual
license fees would need to be $1,500. Instead, he stated that the
inspectors would be included with specialty contractors, at the
recommendation of the Alaska Homebuilder's Association, which would
lower the biannual license fees to approximately $246. He
emphasized the higher license fees could impact the price of home
inspections and have an impact "on the commerce of the State of
Alaska." He stressed the intent to encourage homebuyers to obtain
home inspections for both existing and new homes.
Representative Rokeberg spoke to a proposed amendment, which he
explains makes a technical correction to reflect the name change of
the International Code Council, formally the International
Conference of Building Officials [This matter is addressed as
Amendment #2 later in the hearing.]
Senator Bunde clarified the cost of the business license would pay
the expenses to operate the program; therefore this would be a
revenue neutral program.
Representative Rokeberg affirmed and noted the statutes relating to
occupational licensing require that all occupational licensing
programs to be self-supporting.
Senator Olson asked how this would impact areas with a shortage of
home inspectors.
Representative Rokeberg responded that use of a home inspector is
discretionary for the homebuyer, unless the lending institution
requires an inspection. He concluded this legislation would
therefore have minimal impact. He told of a mechanical inspector in
Kotzebue who has testified in other legislative committees that
because he only conducts approximately ten inspections annually,
the licensing costs could be prohibitive. Representative Rokeberg
disagreed that the proposed $125 annual license expense would cause
undue hardship, as inspections typically cost $350 in Anchorage and
are likely higher in rural locations. He qualified that the Alaska
Housing Finance Corporation (AHFC) requires housing inspections for
new construction and that the Corporation supports this
legislation.
Senator Olson noted the majority of homes located in rural areas
are included in a regional housing authority. He asked how this
legislation would affect the inspections of those houses.
Representative Rokeberg replied that a licensed inspector would be
required to conduct any inspections, unless exempted under this
legislation. He pointed out that entities advertising as home
inspectors would be required to be licensed. He admitted that some
"unique circumstances" exist in rural Alaska, and did not oppose
flexibility for these communities, provided that those conducting
inspections undertake proper training.
Senator Olson agreed and noted the bill does not currently exempt
regional housing authorities.
Amendment #1: This amendment adds regional housing authorities, as
defined under AS 18.55.996(b), to the list of exemptions related to
home inspectors in AS 08.18.156(a)(1), on page 16 of the committee
substitute.
Senator Olson moved for adoption.
Co-Chair Wilken objected for an explanation.
Representative Rokeberg explained this amendment would "raise the
regional housing authorities to the same level as a political
subdivision that had their own inspections." He gave an example of
the Municipality of Anchorage, which employs building inspectors
and is exempt from the provisions of this legislation. He noted the
Municipality has undertaken the "obligation to undertake whatever
inspections they so desire," as would regional housing authorities,
if this amendment is adopted. He clarified that a privately
operating home inspector would not be exempt from the provisions of
this legislation. He did not object to the adoption of this
amendment.
Co-Chair Wilken removed his objection and the amendment was ADOPTED
without objection.
Amendment #2: This amendment deletes "Conference of Building
Officials" and inserts "Code Council" in the six places this
language appears in the committee substitute.
Senator B. Stevens moved for adoption.
Co-Chair Wilken objected for an explanation.
Senator B. Stevens deferred to the bill sponsor.
Representative Rokeberg reiterated this is a "conforming" amendment
to reflect the name change of the International Code Council.
Co-Chair Wilken removed his objection and the amendment was ADOPTED
without objection.
DAVID OWENS, Owens Inspection Services, testified via
teleconference from Mat-Su that he primarily conducts "code
inspections" on new homes and commercial facilities. He noted he
occasionally conducts inspections on existing homes and he spoke to
the "vast" differences between a new code home inspector and a home
inspector as described in this legislation. He pointed out that
errors and omission insurance is only available to home inspectors
of existing or already built homes. He stressed this insurance is
not available for new construction home inspectors.
Mr. Owens referenced a letter to the Legislature, dated March 7,
2003 that he submitted [copy on file], which proposes three
amendments to the version of the bill passed by the House of
Representatives, as follows.
1) Remove the language from title page 1, line 6 through 8,
that states "repealing a law that limits liability for damages
based on a duty to inspect a residential unit to damages
caused by gross negligence or intentional misconduct."
2) Remove the word "two" on page 10, line 6 and replace it
with the word "one".
3) Remove the language from Section 41, page 22 line 21 that
states "AS 18.56.300(C) is repealed."
Mr. Owens supported this legislation with the exception of the
three areas: repeals law pertaining to limit of liability
Mr. Owens indicated results of a survey of home inspectors.
Co-Chair Green interjected she had a summary of the report titled,
"HB 9, New Home Inspector Survey" [copy on file] and would
distribute it for Member's consideration.
AT EASE 9:20 AM / 9:22 AM
Co-Chair Wilken noted the information was distributed.
Co-Chair Green explained the summary was compiled from the 25
responses from home inspectors obtained by her staff.
Mr. Owens spoke to the information, surmising that this legislation
would regulate 79 of the 182 operating home inspectors in the
State. He characterized most of these inspectors as certified, hold
a business license, and carry liability insurance. He relayed that
none of the inspectors he contacted had been notified of the
proposed changes by AHFC or other government agency.
Mr. Owens asserted the primary question included in the survey is
whether inspectors could remain in business and survey found that
13 respondents indicated they could, seven indicated they could not
and six others were unsure. He stressed that if unable to purchase
errors and omission insurance, inspectors could no longer stay in
business.
Mr. Owens listed another survey question relating to the fairness
of holding private inspectors to a higher liability limit than
government inspectors. He reported that every respondent judged
this to be unfair. He furthered that the 79 inspectors who would be
impacted by this legislation were asked whether they felt
discriminated against under the provisions of this legislation and
that the 26 respondents answered in the affirmative.
BERNIE SCHUYLER, Arctic Sky Enterprises, International Conference
of Building Officials (ICBO) Certified Home Inspector, and
Certified Commercial ICBO Inspector, testified via teleconference
from Mat-Su about the inability to obtain errors and omissions
insurance for inspectors. He warned that he would be out of
business if this legislation were passed, since he would be unable
to risk losing his assets, which could occur if he was without
liability insurance. He added that the exemption of government
inspectors is unfair.
Senator Olson asked if the witness had another occupation.
Mr. Schuyler responded that inspections is his sole means of
support
Senator Olson asked the number of inspections the witness conducts
annually.
Mr. Schuyler estimated he performs approximately 200 inspections
each year.
BOB MILBY, Milby Construction, testified via teleconference from
Mat-Su that he is a registered general contractor and ICBO
Certified Inspector, and only performs inspections on new
construction. He expressed that inspections on new construction is
significantly different than on existing dwellings. He was
concerned about the liability issue this legislation would present
and predicted that AHFC could be required to employ home inspectors
and provide the necessary liability insurance itself. He understood
the need for consumer protection, but argued that the ICBO systems
are in place for new construction and provide adequate protection.
Mr. Owens spoke to Amendment #2, which clarifies the name of the
professional organization.
ROCKWELL SMITH, Mechanical Contractor, testified via teleconference
from Kenai about his concerns with the language relating to
liability, on page 10, line 6 of the committee substitute. He
shared that as a mechanical contractor, inspectors continually
inspect his work and that he is held liable for his mistakes
without any exemptions. He next addressed the proposed certificate
of registration for home inspectors that would be issued upon
passage of "the appropriate home inspection" examination, and
informed that the open book examination in question requires no
prerequisite education or experience. He questioned how an
inspector should be held to a lesser standard than a mechanical
contractor.
STEVE WISDOM, Owner, Wisdom and Associates, Inc., testified via
teleconference from Kenai to reference his written testimony [copy
on file]. He supported the regulation of home inspectors although
was concerned about the repeal of the "gross negligence" clause for
new inspections and the insurance requirements proposed in this
bill. He stated that for years his firm was only one in Alaska that
carried errors and omissions insurance for new code compliance;
however if this bill passes and all inspectors are required to
carry the insurance, his provider has informed him the company
would no longer offer the coverage. Instead, he learned that
insurance coverage similar to that carried by municipalities would
only be available, at a premium cost of $10,000.
Mr. Wisdom furthered that the language providing the inspector
would be liable for two years should be reduced to a one-year
period, arguing that contractors are only liable for one year. He
cautioned that in the event of failure, such as a leak caused by a
missing "nail plate" the inspector would be the only liable party.
Mr. Wisdom requested the Committee review the requirements to
become a "joint" inspector, noting the requirements to become a
code inspector are more stringent.
Representative Rokeberg commented on the public testimony. He
understood Mr. Smith's testimony to indicate the requirements for
inspectors should be higher.
Representative Rokeberg shared that he has been in contact with Mr.
Wisdom and heard the concerns regarding the limited immunity
provided for in Section 21 of the committee substitute. However,
Representative Rokeberg disagreed that the two categories of home
inspectors is troublesome, as both should "be under this umbrella
of consumer protection." He surmised that Mr. Wisdom misunderstood
the issue of the length of liability.
Representative Rokeberg qualified the argument regarding the
separate examination requirements for new home inspectors and
existing home inspectors "might have some merit", but suggested
regulatory authority could address the matter.
Representative Rokeberg informed that the AHFC "wants to enjoy
their limited immunity now; that's the issue here before us
really."
Representative Rokeberg was sensitive to the cost and availability
of errors and omission insurance issue given the increased premiums
imposed as a result of the events of September 11, 2001.
Co-Chair Wilken asked if this bill was heard in either the House of
Representatives, or Senate Judiciary committees.
Representative Rokeberg listed the House of Representatives
Judiciary Committee and the Senate Labor and Commerce Committee as
holding hearings on this bill.
Co-Chair Green commented the insurance issue troubled her. She also
asked for clarification of the different types of inspectors.
Representative Rokeberg responded that 79 of the 182 inspectors are
not employees of a government agency, such as the Municipality of
Anchorage. He stated that those who are employed by a government
are exempt from the provisions of this bill, although the others
"have no immunity under the theory of sovereign immunity." He added
that private inspectors have "some limited immunity for Alaska
Housing Finance loans only. That's a distinction that's not being
made in the testimony." He explained that new home inspections on
construction financed through a conventional lender in an area,
such as the Mat-Su, that is not under the jurisdiction of local
building codes have no limited immunity. He stated that
inspections performed on facilities financed by the AHFC "currently
enjoy limited immunity on gross negligence and intentional
misconduct. That's a very high standard. So it's almost de facto
immunity."
Representative Rokeberg agreed that at issue is the difficulty in
obtaining errors and omissions insurance and the feasibility of
inspectors passing the expense to their customers. He suggested
that many inspectors could operate without the insurance because
"they're good practitioners and they're doing their job." He
challenged that inspectors hired by a contractor to verify that
subcontractors have completed their jobs should not enjoy "some
artificial immunity" if the construction is financed by AHFC rather
than Wells Fargo, Countrywide Mortgage, or other conventional
lender.
Representative Rokeberg disputed that AHFC finance projects should
be afforded "some special legal privilege" and informed that AHFC
supports this legislation.
Representative Rokeberg emphasized, "this bill grants super
numerary exclusions for bringing a cause of action by limiting the
time in which a cause of action can be filed. So it's even greater
protection to an existing home." He furthered that cause of action
on the findings of the inspection would be limited to one year for
new construction and two years for existing homes. He also
indicated a limitation related to a report saying, "The report here
in it's validity and how it can be picked up and used by somebody
is limited to 180 days."
Representative Rokeberg opined that this legislation extends "some
pretty extraordinary legal protection here" to inspectors,
explaining the balance in "removing this limited immunity with the
additional grants of a statutory immunity from additional
lawsuits". He stated the testifiers were speaking to "a limited
immunity to the standards of gross negligence and intentional
misconduct."
Co-Chair Green remarked, "I hope the sponsor did not intend to
impugn the reputation of builders and inspectors in the Mat-Su
Valley the way he did." She requested additional time to review
this legislation.
Senator Bunde asked if municipal building inspectors inspect new
home construction located in a municipality.
Representative Rokeberg affirmed.
Senator Bunde then asked if inspections are optional for new home
construction located in an area not governed by municipal building
codes if AFHC is not the lender.
Representative Rokeberg again affirmed.
Senator Bunde asked if inspection of existing homes is optional at
the time of resale.
Representative Rokeberg answered yes.
Representative Rokeberg expressed it was not his intent, "to make
any disparaging comments at all in the Mat Valley. I was just using
it as an example." He apologized if he did so and added, "not that
they couldn't use a little help out there."
Co-Chair Wilken ordered the bill HELD on Committee.
CS FOR SENATE BILL NO. 82(L&C)
"An Act relating to the state alcoholic beverage tax for
certain wine and other beverages."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken explained this bill "exempts from the State tax on
alcoholic beverages, wine in the amounts sold in, or consigned for
shipment into the State that does not exceed 100 gallons a month."
DOUG LETCH, Staff to Senator Gary Stevens, testified this bill
would replace the federal yearly sales eligibility excise tax limit
of 100,000 gallons with a tax exemption of 100 gallons per month.
He informed that currently wineries are taxed at a rate of $2.50 a
gallon. He stated that this reduction would decrease the impact on
State revenues by approximately $18,600 annually, however "at the
same time stimulating and supporting small Alaska wineries."
Mr. Letch reported that two of the wineries impacted are located on
Kodiak Island, another is located in Haines and a fourth operates
from Anchorage. He expressed, "this burgeoning Alaska industry does
need the support of our Legislature to prosper while continuing to
contribute to the State's changing economy." He surmised that this
legislation would provide one form of assistance. He predicted that
although revenue would be lost to the State under the provisions of
this bill, all revenue from this source could be lost without the
tax exemption.
SFC 03 # 42, Side B 09:52 AM
Mr. Letch indicated winery operators would present testimony to the
bill.
Co-Chair Wilken commented that the sponsor statement does not
address the issue and asked the motivation of this legislation.
Mr. Letch shared that the winery operators located on Kodiak Island
approached Senator Gary Stevens and requested assistance in
mitigating the impacts of the increased alcohol tax passed the
previous legislative session.
Mr. Letch told of the efforts, in conjunction with the Department
of Revenue, to draft this legislation to accommodate the needs of
the growing winery industry in Senator Gary Steven's election
district. He stated this legislation attempts to exempt local
wineries in a similar manner as Alaska breweries are exempted from
the increased taxation.
Co-Chair Wilken referenced the sponsor statement indicates an
exemption of 100,000 gallons of wine per year, although the witness
testified the exemption would be 100 gallons per month.
Mr. Letch responded the sponsor statement was in error.
Co-Chair Wilken asked about the federal eligibility excise tax
mentioned in the sponsor statement.
Mr. Letch explained the federal exemption is limited to 100,000
gallons per year.
Co-Chair Wilken clarified that the alcohol tax would not be
required for the first 100 gallons of wine produced each month.
Mr. Letch affirmed this is the intent of the legislation.
Co-Chair Wilken asked if this would "set aside the liability for
the excise tax under the federal government."
CHUCK HARLAMERT, Juneau Section Chief, Tax Division, Department of
Revenue, testified the exemption proposed in the bill is
"completely unrelated" to the federal tax credit.
Senator Olson understood the struggles of new businesses and asked
the annual production of the wineries in question.
Mr. Letch could only speak to two wineries and listed the average
monthly production of one winery as 120 gallons, during the busier
months, noting the business is seasonal dependant. The other
winery, he stated produced approximately 350 gallons total the
previous year.
Senator Olson questioned the mathematics, noting the wineries
produce more than 100 gallons per month and would not be completely
exempt from the alcohol tax.
Mr. Letch replied that this bill attempts to promote wineries as a
growth industry "and give them room to grow". He told of hearings
on this bill in the Senate Labor and Commerce Committee in which an
annual production total of 1,000 gallons per year was considered.
However, he stated the monthly calculations would be more conducive
for the Department of Revenue administration of the alcohol tax. He
qualified he has not had input on the current proposed exemption
structure from the wineries.
Senator Olson asked if the wineries are in "danger" of going out of
business if an exemption is not provided.
Mr. Letch stated that such "inference" has been received.
Mr. Harlamert stated that the current calculation structure was
"designed to maximize the impact on Alaska producers and minimize
the unintended tax benefits flowing to other wineries." He
explained that several methods exist to calculate an exemption,
however, exemptions could not be limited to in-state producers.
Therefore, he stated the "trick" is to structure the tax exemption
to benefit local producers, without extending the exemption to
wineries located outside Alaska. He assured the proposed method
would best accomplish this.
Senator Olson asked if the Department of Revenue supports this
legislation.
Mr. Harlamert remarked that the Department of Revenue has not taken
a position on the tax exemption matter.
Co-Chair Wilken asked if the language "on amounts sold in or
consigned for shipment into the state that exceed 100 gallons a
month" inserted by this legislation into AS 43.60.010(a)(3), on
page 2, lines 2 and 3 of the committee substitute speaks to the
federal tax exemption.
Mr. Harlamert answered that this language is unrelated to the
federal constitutional restriction prohibiting states from
discriminating against interstate commerce. He explained that the
language clarifies that any entity that brings alcohol into the
State for sale or produces alcohol in the State is a "taxpayer".
Senator Bunde understood during hearings on this bill in the Senate
Labor and Commerce Committee that this legislation is an "attempt
at fairness" because microbreweries had received some tax exemption
for which the wineries did not qualify. He commented that although
he did not generally support tax exemptions, he would support this
legislation based on the issue of fairness in comparison to the
breweries operating in the State, as well as the unlikelihood that
the winery industry would expand to the extent that it could
significantly contribute to the State's general fund.
DAVE MENAKER, Great Land Wines, testified via teleconference from
an off-net location that the annual taxes and permit fees for his
operation is approximately $2,200 not including taxes imposed on
any wine produced, and sold. He expressed this is a significant
amount for small business. He appreciated any assistance in
securing some tax relief.
Senator Bunde asked number of gallons the Great Lands winery
produced per year.
Mr. Menaker informed that the facility has approximately 450-500
gallons currently on site in various stages of fermentation or
packaging. He commented that with the "economic spiral down" in
Haines, business was "not good", although he expected the situation
to improve. He estimated the winery produces between 200 and 250
gallons during the season, which occurs in late summer and early
fall, at the time blueberries and other wild fruit ripen.
Senator Bunde clarified the annual production is 300 to 500 gallons
of wine.
Mr. Menaker affirmed, "If I'm lucky, that would be the maximum."
Co-Chair Wilken asked for clarification of the imposition of the
tax, specifically whether the production limits are calculated
monthly or commemoratively.
Mr. Menaker stated the tax would be levied upon the sale of the
product. He explained that the wine he produces today would not be
ready for sale for one year.
Co-Chair Wilken gave a scenario of 100 gallons sold one month and
150 gallons sold the next month and asked if all but 50 gallons
would be exempt from the tax under the proposed legislation.
Mr. Menaker understood this to be correct.
STEVE THOMSEN, Alaskan Wilderness Wines, testified via
teleconference from Kodiak that the matter arose with the increased
alcohol tax passed under HB 25 the previous legislative session,
which raised the tax from 85 cents per gallon to $2.50 per gallon.
He noted that breweries were exempted for the first 60,000 barrels
produced per year, based on the federal "reduction amount". He
stated that this exemption is inequitable for wineries. Because
wineries are a similar trade, he opined they should receive a
similar tax discount. He expressed the need to assist wineries in
Alaska without significantly impacting State revenue.
Mr. Thomsen informed that occasionally monthly sales from a winery
would exceed the exemption limit, although predicted this would be
infrequent. He listed his total annual sales of 300 gallons the
previous year, with approximately one-third of the sales occurring
over the Christmas holiday season.
Co-Chair Wilken noted the negative fiscal note indicating it would
be discussed further.
Co-Chair Wilken ordered the bill HELD in Committee.
CS FOR SENATE BILL NO. 106(TRA)
"An Act relating to studded tires; and providing for an
effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
AT EASE 10:11 AM / 10:13 AM
Senator Bunde moved to adopt CS SB 106, 23-GS1127\U as a working
draft.
Co-Chair Wilken objected to give an explanation.
Co-Chair Wilken stated the proposed committee substitute includes
all changes discussed at the previous hearing. He noted language in
Section 2, amending AS 43.98.025(a). Tire fees., would impose a fee
of $2.50 on the retail sale of every tire for motor vehicles
designed for use on a highway. He commented this would apply to
tires for cars and all weights of trucks. Referencing earlier
testimony regarding heavy studs and lightweight studs and the
subsequent damage they cause to roads, he noted the committee
substitute language amending AS 43.98.025(b), would also impose an
additional $5 fee per tire for those tires fitted with heavy studs.
He noted this provision would take effect July 1, 2004, one year
after the effective date of the bill, which he stated would allow
retailers to update inventory to include tires fitted with
lightweight studs.
Co-Chair Wilken continued that the committee substitute language
amending AS 43.98.025(d) and (e), provide for quarterly reporting
and remittance of the tax receipts by retailers to the Department
of Revenue.
Co-Chair Wilken next noted language in the committee substitute,
amending AS 43.98.025(h) defines "highway" and "motor vehicle"
according to AS 28.40.100.
Co-Chair Green asked if motor vehicle, in this context would
include off-road vehicles.
Co-Chair Wilken cited AS 28.40.100(a)(14) as follows: ""motor
vehicle" means a vehicle which is self-propelled except a vehicle
moved by human or animal power." However, he stated that tires for
a 4-Wheeler would not be subject to the tax as such a vehicle is
not designed for highway travel.
Senator Bunde opined it would be simpler to outlaw heavy studs, as
it would achieve the goal of reducing the use of the heavy studs,
however he anticipated this tax would decrease their use. Although
funds could not be dedicated, he predicted the increased fee for
heavy studded tires would allow generate additional income to
offset the cost of the damage caused by the tires.
Co-Chair Wilken removed his objection to the adoption of the
committee substitute and it was ADOPTED without objection.
Co-Chair Wilken announced the committee substitute would require a
new fiscal note for this bill.
LANDA BAILY, Special Assistant and Legislative Liaison, Department
of Revenue testified on behalf of Governor Murkowski and
Commissioner Corbus in support of this legislation. However, she
requested amending the language in Section 2 to provide that the
tax receipts be remitted by sellers in a timely manner. She stated
this would be consistent with statutes governing the remittance of
motor fuel tax receipts.
Ms. Baily also requested amending the language in Section 2,
relating to AS 43.98.025(g), to clarify the tax would be exempted
on the sale of tires sold for resale. She stated this would prevent
the tax from being imposed twice.
Amendment #4: This amendment inserts "timely" into Sec.
43.98.025(e) of the committee substitute. The amended language
reads as follows.
(e) A seller timely remitting the fees collected under
this section to the department within 30 days after the last
day of the preceding calendar quarter may retain five percent
of the amount collected, not to exceed $900 a quarter, to
cover expenses associated with collecting and remitting the
fees.
Co-Chair Green moved for adoption.
ROBYNN WILSON, Department of Revenue, testified via teleconference
from an off-net location that the definition of timely in relation
to the submission of motor fuel tax receipts in contained in
regulation rather than in statute. She stated the intent is to
receive the revenues in a timely manner.
Senator B. Stevens understood the language requiring remittance
within 30 days of the last day of a quarter, is equivalent to
"timely". He asked if similar language is contained in the
regulations governing motor fuel tax collection.
Ms. Wilson replied that the motor fuel tax regulation in question
pertains to the submission of a report of the amount collected. She
determined the existing language in the committee substitute would
be adequate.
Co-Chair Wilken asked whether the insertion of "timely" would be
redundant.
Senator B. Stevens surmised it would be and noted Ms. Wilson
affirmed this in pointing out that the motor fuel tax regulations
pertain to reporting, while the committee substitute language
pertains to the collection of fees. He asked if the reporting would
be submitted annually with remittance occurring quarterly.
Ms. Wilson responded the reporting would be submitted quarterly.
Co-Chair Wilken and Ms. Wilson established the amendment was not
necessary.
Co-Chair Green WITHDREW her motion to adopt the amendment without
objection.
Amendment #5: This amendment inserts "sold for resale" on page 2,
line 14 of the committee substitute. The amended language of AS
43.98.025(g) reads as follows.
(g) The fees imposed in this section do not apply to
tires sold for resale or services sold to federal, state, or
local government agencies for official use.
Co-Chair Green moved for adoption.
Co-Chair Wilken objected for the purpose of discussion.
Senator Bunde asked if the intent of this amendment is to establish
that the tax would be collected at the point of sale to the
consumer.
Ms. Baily affirmed.
Co-Chair Green asked whether this language could be construed to
apply to a used or second-hand tire.
Ms. Baily replied the intent is to levy the tax on each tire only
once.
Co-Chair Wilken indicated the matter would be reviewed to avoid Co-
Chair Green's concern.
Co-Chair Wilken removed his objection and the amendment was
ADOPTED.
Co-Chair Wilken announced intent to consider this bill with the
updated fiscal note at the following meeting.
Senator Olson understood the intent of the fee to generate revenue
to offset the impacts vehicles have on roads. He asked if tires
sold for vehicles that do not utilize the road system would be
exempt from this tax.
Co-Chair Wilken cited AS 28.40.100(a)(12) as follows.
(12) "highway" means the entire width between the
boundary lines of every way that is publicly maintained when a
part of it is open to the public for purposes of vehicular
travel, including but not limited to every street and the
Alaska state marine highway system but not vehicular ways or
areas;
Senator Olson surmised if the tires would be mounted on a vehicle
located in an area containing no public roads the fee would not be
levied. He gave an example of a resident in the Village of Savoonga
who would drive a truck along the beach to reach a fish camp.
Co-Chair Wilken remarked the intent of this legislation is to levy
the tax on the purchase of all motor vehicle tires in Alaska.
Senator Olson clarified no exemption would be given to tires
designed for highway use.
Co-Chair Wilken affirmed.
Senator Bunde pointed out that the same driver in Savoonga is also
paying the motor fuel tax.
Amendment #1: This amendment inserts a new subsection to Section
43.98.028(d) to read as follows.
(2) studded tires exclusively for use on a motor
vehicle that meets the qualifications under AS 28.22.011(a)(1)
for exemption from the motor vehicle liability insurance
requirement of AS 28.22.011.
[Note: This amendment was also referenced as Amendment #6.]
Senator Olson moved for adoption.
Co-Chair Wilken objected for an explanation.
Senator Olson noted Departmental testimony to the damage caused by
studded tires and heavy traffic use on publicly maintained roadways
and the need to generate revenue to assist with maintenance
expenses. He stated that tires that would not be used on publicly
maintained roads should not be charged this tax. He spoke to the
importance of studded tires for safe travel along unmaintained
roads.
Senator Olson pointed out that vehicles operating in areas without
publicly maintained roads are exempt from registration and he
remarked that tires for these vehicles should also be exempted.
Co-Chair Wilken clarified that tires purchased for mounting on
vehicles operating in communities exempt from vehicle registration
would be exempt from the fees proposed in this legislation.
Senator Olson affirmed.
Co-Chair Wilken maintained his objection.
Senator Bunde also objected to the amendment, arguing that
supplies, equipment, and goods are transported over publicly
maintained roads and highways for use in these communities.
Senator Olson countered that the tire tax would be paid on the
tires mounted on the vehicles used to transport those goods.
A roll call was taken on the motion.
IN FAVOR: Senator Olson
OPPOSED: Senator Bunde, Senator B. Stevens, Co-Chair Green and Co-
Chair Wilken
ABSENT: Senator Taylor and Senator Hoffman
The motion FAILED (1-4-2)
The amendment FAILED to be adopted.
Co-Chair Wilken ordered the bill HELD in Committee.
ADJOURNMENT
Co-Chair Gary Wilken adjourned the meeting at 10:36 AM
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