Legislature(2025 - 2026)SENATE FINANCE 532
04/09/2025 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB113 | |
| SB39 | |
| SB64 | |
| SB92 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 39 | TELECONFERENCED | |
| + | SB 64 | TELECONFERENCED | |
| + | SB 92 | TELECONFERENCED | |
| += | HB 56 | TELECONFERENCED | |
| += | SB 113 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
April 9, 2025
9:01 a.m.
9:01:47 AM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Donny Olson, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Mike Cronk
Senator James Kaufman
Senator Jesse Kiehl
Senator Kelly Merrick
MEMBERS ABSENT
None
ALSO PRESENT
Senator Bill Wielechowski, Sponsor; Senator Forest Dunbar,
Sponsor; Liz Harpold, Staff, Senator Donny Olson; David
Dunsmore, Staff, Senator Wielechowski; Sonja Kawasaki,
Legal Counsel, Senate Majority; Carol Beecher, Director,
Division of Elections, Office of the Lieutenant Governor;
Cathy Giessel, Sponsor; Doug Woodby, Self, Juneau; Kara
Moriarty, President and Chief Executive Officer, Alaska Oil
and Gas Association, Juneau; Leila Kimbrell, President and
Chief Executive Officer, Resource Development Council,
Juneau.
PRESENT VIA TELECONFERENCE
Tom Stewart, Director of Policy, Secure Democracy USA,
Baltimore; Kendra Kloster, Director of Government
Relations, Alaska Federation of Natives, Anchorage; Randy
Ruedrich, Self, Anchorage; Mike Garvey, Policy Director,
American Civil Liberties Union Alaska, Anchorage; Barbara
Warner, Executive Director, National Vote at Home
Institute, Portland; John LeTourneau, Certified Public
Accountant, Thomas Head and Greisen, Anchorage.
SUMMARY
SB 39 LOANS UNDER $25,000; PAYDAY LOANS
CSSB 39(FIN) was REPORTED out of committee with
three "do pass" recommendations, four "no
recommendations"; and one new fiscal note from
the Department of Commerce, Community and
Economic Development.
SB 64 ELECTIONS
SB 64 was HEARD and HELD in committee for further
consideration.
SB 92 CORP. INCOME TAX; OIL & GAS ENTITIES
SB 92 was HEARD and HELD in committee for further
consideration.
SB 113 APPORTION TAXABLE INCOME;DIGITAL BUSINESS
SB 113 was REPORTED out of committee with three
"do pass" recommendations, two "do not pass"
recommendations, two "no recommendations", and
with one new fiscal note from the Department of
Revenue.
CSHB 56(FIN) am(brf sup maj fld)
APPROP: SUPPLEMENTAL; FUND CAP
CSHB 56(FIN) am(brf sup maj fld) was SCHEDULED
but not HEARD.
SENATE BILL NO. 113
"An Act relating to the Multistate Tax Compact;
relating to apportionment of income to the state;
relating to highly digitized businesses subject to the
Alaska Net Income Tax Act; and providing for an
effective date."
9:03:09 AM
SENATOR BILL WIELECHOWSKI, SPONSOR, introduced the
legislation. He summarized that the bill changed Alaska's
corporate tax apportionment system to tax outside
corporations similarly to in-state corporations. He
emphasized that the bill did not raise taxes on any Alaskan
corporations.
Senator Kaufman remarked that the bill was raising taxes on
the products people procured in Alaska. He asked how to
know if the taxes would be additive to the cost of products
being purchased.
Senator Wielechowski replied that the apportionment system
was in place for at least 36 other states. Historical
experience in other states was that there was not an
increase in taxes for consumers. He relayed that the system
dealt generally with internet companies and noted that
generally the companies did not target states to tax them.
Senator Kaufman remarked that he often felt targeted and
mentioned companies that did not ship to Alaska. He was
concerned about adding to the problem. He expressed concern
for taxation in general and mentioned that the state didn't
have a spending cap.
Senator Wielechowski challenged Senator Kaufman to close
the $677.1 million deficit without taxing outside
corporations.
Senator Kaufman did not agree with embracing every
spending plan that came through the legislature and felt
that there needed to be moderation on both sides.
Senator Kiehl MOVED to REPORT SB 113 from committee with
individual recommendations and attached fiscal note. There
being NO OBJECTION, it was so ordered.
SB 113 was REPORTED out of committee with three "do pass"
recommendations, two "do not pass" recommendations, two "no
recommendation" recommendations, and with one new fiscal
note from the Department of Revenue.
9:07:28 AM
AT EASE
9:09:21 AM
RECONVENED
SENATE BILL NO. 39
"An Act relating to loans in an amount of $25,000 or
less; relating to the Nationwide Multistate Licensing
System and Registry; relating to deferred deposit
advances; and providing for an effective date."
9:10:02 AM
SENATOR FOREST DUNBAR, SPONSOR, introduced the legislation,
which involved regulations for payday lending businesses
imposing a 36 percent cap and removing the current
exemption. He continued that Alaska would join 19 other
states that established the 36 percent APR cap. There were
also federal laws that prevented businesses from targeting
loans for service members and their families.
LIZ HARPOLD, STAFF, SENATOR DONNY OLSON, explained that the
bill sponsor had submitted a couple of changes to the bill
that would be incorporated into a Committee Substitute (CS)
that the committee would consider. The changes clarified
that pawnbroker business activities, unrelated to payday
loans, were exempt from the legislation; and that mutual
savings banks were not affected by the legislation as they
were already governed by existing statutes.
Co-Chair Stedman MOVED to ADOPT the committee substitute
for SB 39, Work Draft 34-LS0357\I. There being NO
OBJECTION, it was so ordered.
Co-Chair Stedman asked for clarification from the bill
sponsor. He did not think the bill was time sensitive but
wanted to make sure members understood the impacts of loans
that were up to $25,000. He thought the committee had not
spent much time discussing larger loans with accumulating
interest charges. He wanted to understand the impact on the
marketplace. He understood that commercial banks were not
in the market with the smaller loans and wanted to ensure
there was still access.
Co-Chair Hoffman noted that there were three people online
to answer questions.
9:14:13 AM
Senator Dunbar understood that in other states that had
passed such legislation, there were more traditional
lending institutions that would fill the gap. The entities
that had done the rollover had done very small amounts. He
thought there was a letter of support from a traditional
lender in the state, which indicated that it did want to
service a portion of the market. He discussed personal
experience with taking out a relatively short-term loan
from a traditional lender. He thought there were profits
from traditional lenders in the space. He mentioned a study
referenced by Senator Kiehl at the last bill hearing, which
had compared individuals on the edge of qualifying for a
loan. It was found that the individuals that qualified for
the loan were more likely to default on the loan. He
concluded that those that took out the loan had damage from
the product and became more vulnerable than if they had not
taken out the loan.
Senator Kiehl MOVED to REPORT CSSB 39(FIN) from committee
with individual recommendations and attached fiscal note.
There being NO OBJECTION, it was so ordered.
CSSB 39(FIN) was REPORTED out of committee with three "do
pass" recommendations, four "no recommendations"; and one
new fiscal note from the Department of Commerce, Community
and Economic Development.
9:17:19 AM
AT EASE
9:19:07 AM
RECONVENED
SENATE BILL NO. 64
"An Act relating to elections; relating to voters;
relating to voting; relating to voter preregistration
for minors at least 16 years of age; relating to voter
registration; relating to the Alaska Public Offices
Commission; relating to synthetic media in
electioneering communications; relating to campaign
signs; relating to public official financial
disclosures; relating to the crime of unlawful
interference with voting in the first degree; and
providing for an effective date."
9:19:34 AM
SENATOR BILL WIELECHOWSKI, SPONSOR, introduced the bill. He
relayed that the bill was a comprehensive package of
reforms aimed at removing barriers to voting, cleaning up
voting rolls, reporting election results faster, and making
needed changes to Alaska election laws. The bill included
provisions from 12 previous bills by members of all four
caucuses and the governor. The Senate State Affairs
Committee had worked to refine the bill over 8 meetings.
The bill removed barriers to voting by creating a ballot
curing process that allowed voters to correct mistakes and
repealed the witness signature requirement that
disproportionately affected rural and military voters. The
witness signature was never verified and had previously
disenfranchised roughly 10 percent of the voters throughout
rural Alaska in the special election in 2022. In 2024,
Joint Base Elmendorf-Richardson (JBER) had more mail
ballots rejected than any other district in the state. He
did not think it was a partisan issue.
Senator Wielechowski continued that in 2022 it was
estimated that the state voter registration list equaled
106 percent of the adult population. The bill clarified
residency definitions for voting. It improved Alaska's
voter roll clean up statutes and implemented a ballot
tracking system. It included numerous provisions to improve
the security and integrity of Alaska's elections. It
included a provision requiring synthetic media to include a
disclaimer on election communications. It included several
provisions to allow election results to be reported faster
and provide more transparency during the counting process.
Senator Wielechowski stressed that the bill required
preliminary ranked choice voting tabulations to be released
whenever updated results were released. It allowed election
to be certified five days earlier by creating a uniform
deadline for ballots to be received 10 days after the
election. He thought the bill was a comprehensive package
that would absolutely improve the state's election system.
Co-Chair Stedman wondered about automatic registration via
the Permanent Fund Dividend (PFD) application.
Senator Wielechowski replied that the bill did not change
or impact the automatic voter registration. He thought the
provision was added by voters via the initiative process,
which he thought had passed by the highest number of voters
in history.
9:22:57 AM
DAVID DUNSMORE, STAFF, SENATOR WIELECHOWSKI, relayed that
the only provision in the bill related to PFD registration
was added language to clarify that registering to vote via
the PFD application was not considered to be contacting the
division for purposes of the voter roll clean-up statutes.
Co-Chair Stedman had concerns related to automatic voter
registration. He thought the matter needed to be discussed
further.
Senator Kiehl asked about proposed changes to clean-up of
voter rolls.
Mr. Dunsmore explained that there were several provisions
in the bill related to the voter roll cleanup. He mentioned
a provision clarifying the definition of residency, which
Senate Majority counsel had worked on. There were
provisions that expedited notice for those that had not
voted. Several provisions were added related to individuals
establishing residency in another state. Additional
provisions added in the Senate State Affairs Committee
related to hiring consultants to conduct regular reviews of
voter rolls to identify areas of needed improvement.
9:26:15 AM
SONJA KAWASAKI, LEGAL COUNSEL, SENATE MAJORITY, explained
that current law allowed that once a person established
residency, an individual did not lose the right to vote if
there was an intent to return. The change proposed in the
bill would require a person that had an absence from the
state have a reasonable and articulable plan to return to
the state. The sponsor believed the provision would set a
higher bar for residency. There were voter cleanup
provisions that would address people that appeared to be no
longer residents of Alaska. The individuals would be sent a
notice that assurance was necessary to be considered a
resident.
Senator Kaufman wanted to be sure about the concept of
residency in the state. He wondered if the bill could be
misconstrued to require returning to the exact same
address.
Ms. Kawasaki replied that current law required
establishment of residence in the House district in which
you were registered. Under the bill, if an individual left
the state and had an articulable and reasonable plan to
return at the residence at which they were registered, that
individual would still meet the qualifications for voting
in the House district. She thought that current law
dictated that if one moved within a Senate district, the
vote would count for statewide elections. The intent of the
bill was to allow a person to still vote if they moved
within the same House district.
Senator Kaufman asked if Ms. Kawasaki meant that a person
had to have an intent to return to the same House district.
Ms. Kawasaki answered, "in order to vote for elections in
that House district."
Senator Kaufman requested to follow up later.
9:30:54 AM
Senator Cronk asked about removal of the witness signature
and asked about issues with the signature.
Senator Wielechowski reiterated that in the 2022 special
election, roughly 10 percent of rural voters in the state
had votes thrown out for failing to provide a witness
signature. He discussed challenges in obtaining a witness
signature and noted that it disproportionately affected
people in rural areas and military districts. He understood
the rationale for a witness signature but pointed out that
it was not verified. He described a hypothetical situation
he discussed with the Division of Elections. He relayed
that the bill was a remedy for those that were
disenfranchised.
Senator Cronk shared that he had never had a constituent
call to describe the problem.
Mr. Dunsmore elaborated that the witness signature
requirement for absentee voting in the state law was a
unique provision. For other purposes, the division allowed
self-certification. He mentioned the ballot initiative
booklet. The witness signature did not provide election
integrity as there was no requirement that the person
signing verify the identity of the voter. He mentioned
service members overseas or Peace Corps volunteers. He
mentioned 2,700 ballots that were thrown out during the
special election.
Senator Kaufman asked how signatures were handled with
paper registration scanned and emailed.
Mr. Dunsmore asked if Senator Kaufman was referring to
voter registration.
Senator Kaufman answered affirmatively.
Mr. Dunsmore replied that he thought the division accepted
voter registration forms submitted electronically.
9:36:10 AM
CAROL BEECHER, DIRECTOR, DIVISION OF ELECTIONS, OFFICE OF
THE LIEUTENANT GOVERNOR, replied that for voter
registration forms, the signature was verified against
motor vehicle records or other identifiers if the signature
was not available.
Senator Kaufman asked if there was any provision for an
electronic signature.
Ms. Beecher replied in the negative but thought there was
an electronic signature provision in the bill. She noted
that the verifier signature was an image of the Division of
Motor Vehicles signature.
Co-Chair Stedman discussed automatic registration and
thought it had created problems for the Division of
Elections.
Ms. Beecher asked for more detail.
Co-Chair Stedman relayed that he was talking about
automatic voter registration through the PFD application.
Ms. Beecher described the automatic registration process
through the PFD application, which provided the division
with a list of individuals that had indicated they were
United States citizens on the application. The division did
not receive any forms from individuals that had noted they
were not a US citizen. Anyone on the list that was a new
registrant or had changed their address received a letter
asking if they wanted to be registered to vote. If the
letter was not answered, the individuals were automatically
registered.
Co-Chair Stedman thought individuals should have the
gumption to actively go register to vote and take an
interest in democracy, as opposed to automatic
registration. He found the process questionable.
Senator Kaufman mentioned that he had talked with a
surprising number of people during political campaigns that
relayed having not lived in the state for years but had
names on the voter lists. He asked if the bill would
address the problem.
9:40:30 AM
Ms. Beecher replied that the voter rolls would always
appear to be bloated if looking at the perspective of how
many eligible voters there were in Alaska compared to how
many eligible voters there were. The reason was due to the
intent to return language in statute. She listed examples
of individuals that could reside overseas (in the military)
or could be residing in another state and have the intent
to return to the state and still be eligible to vote in the
state. She discussed the amount of time it took to be
completely removed from voter rolls, which was in federal
law and lasted two general elections. If a person applied
for the PFD, it would be sufficient activity to continue on
the voter rolls.
Co-Chair Hoffman thought that individuals attending college
out of state would be included.
Senator Kaufman thought that there was a financial
incentive for staying on the voter rolls.
Co-Chair Stedman considered all 50 states and wondered
about a comparison between Alaska's voter lists.
Ms. Beecher replied that she had spoken to a secretary of
state from another state that experienced challenges with
voter rolls due to summer employees.
Senator Kaufman wondered about drop boxes and asked about
what might be in the bill.
Ms. Beecher responded that under the bill every region
(there were five regions) would be required to have a drop
box.
Senator Kaufman asked Ms. Beecher to repeat her answer.
Ms. Beecher relayed that the bill required drop boxes in
each of the five regional locations.
Senator Kaufman asked if the bill only required a drop box
in each of the five regions.
Ms. Beecher agreed.
9:44:40 AM
Senator Kiehl was curious about notices sent to inactive
voters, and applying for the PFD being considered as
sufficient voter action to remain on the list. He asked if
Section 9 of the bill would address the issue.
Mr. Dunsmore replied in the affirmative.
Senator Kaufman asked about the cost of maintaining drop
boxes.
Ms. Beecher replied that the fiscal note reflected an
anticipated $23,000 for the five drop boxes. There were
also shipping costs and storage costs to store the drop
boxes. The total was estimated to be $30,000 for the
additional purchase, with some costs ongoing.
9:46:56 AM
TOM STEWART, DIRECTOR OF POLICY, SECURE DEMOCRACY USA,
BALTIMORE (via teleconference), spoke in support of the
bill. He supported the CS from the Senate State Affairs
Committee. He stressed that strengthening election security
and improving voter freedoms were not mutually exclusive
and were necessary to build public trust. His organization
had worked with the legislature in a bipartisan manner
since 2022 to review and pose improvements to election
administration and voting integrity. He thought the bill
would ultimately improve Alaska's trust and confidence in
future elections. He highlighted provisions such as list
maintenance practices to help keep voter rolls accurate,
improved voter registration practices, strengthened ballot
tracking, speeding up reporting of results, and creating a
uniform statewide ballot cure process.
Mr. Stewart referenced further bill provisions that would
strengthen the election process. He discussed elimination
of the witness signature requirement, which he considered
was unfair in its application and disenfranchised rural and
senior voters disproportionately. He thought there were
better ways to verify voters.
9:51:00 AM
Co-Chair Hoffman OPENED public testimony.
9:51:19 AM
KENDRA KLOSTER, DIRECTOR OF GOVERNMENT RELATIONS, ALASKA
FEDERATION OF NATIVES, ANCHORAGE (via teleconference),
testified in support of the legislation. She noted that the
Alaska Federation of Natives (AFN) was the largest native
organization in the state. She discussed AFN's support of
accessible elections and expressed concerns about voter
disenfranchisement. She noted that the state had no ballot
curing process. She mentioned proposed voter reforms
supported by AFN, which would provide easier access. She
cautioned for provisions that could limit access, such as
repealing automatic voter registration. Additionally, she
expressed concern about the idea of not counting votes
received after election day. She mentioned mail
difficulties, rural areas, and military members.
Co-Chair Stedman wondered if AFN saw a high correlation
between Western Alaska and small towns in Southeast dealing
with uncounted ballots due to lack of witness signature. He
wanted to get a sense of the magnitude of the issue.
Ms. Kloster replied that she could provide a breakdown that
she would send to the committee. In 2024's general election
there was about an 8 percent rejected rate for mission
signatures. Districts 38, 39, and 40 had an even higher
rejected rate of about 14 percent.
9:55:31 AM
RANDY RUEDRICH, SELF, ANCHORAGE (via teleconference), spoke
against the bill. He had worked on state elections for many
years. He recounted that in 2001 there had been more people
registered in the state of Alaska than there were of voting
age. He thought the problem had been present for some time.
He did not think automated voter registration created the
problem. He discussed residency and pondered a "snowbird
law" and a "dropout law." He thought it was nonsensical to
expect voters that moved to return to the same residence.
Mr. Ruedrich discussed the witness signature requirement.
He did not support elimination of the witness signature
requirement. He considered the number of witness signature
challenges in the 2024 election, which he did not think
were numerous. He thought there was a complete
mischaracterization of the problem with the required
witness signature. He did not think the state needed a
ballot cure process. He supported an election day deadline
for ballots.
10:01:56 AM
MIKE GARVEY, POLICY DIRECTOR, AMERICAN CIVIL LIBERTIES
UNION ALASKA, ANCHORAGE (via teleconference), spoke in
support of the legislation. He thought the bill would help
uphold the voting rights of Alaskans and improve the
integrity of elections. He supported repealing the witness
signature requirement and establishing a ballot curing
system. He discussed the ballot curing provision. He cited
data from the Division of Elections that indicated that in
the 2024 general election, 242 ballots were rejected in
districts of the committee members. He noted that the
Alaska Superior Court recently ruled that the
responsibility to implement a ballot curing system fell to
the legislature. He thought counting every eligible vote
was essential.
10:04:53 AM
BARBARA WARNER, EXECUTIVE DIRECTOR, NATIONAL VOTE AT HOME
INSTITUTE, PORTLAND (via teleconference), testified in
support of the bill. She thought the bill would expand
access to mail ballots and the systems that supported
voters' confidence in them. She discussed best practices
proposed in the bill including eliminating the witness
signature requirement, implementing ballot tracking and
curing, providing drop boxes and prepaid postage for
returning ballots, and allowing for pre-processing of
ballots for election day. She supported adding a provision
to allow for a single sign-up, which would allow for voters
to receive all mail-in ballots going forward. She thought
the single sign up resulted in significant cost savings.
She discussed the popularity of mail-in ballots. She
referenced a resolution by the Anchorage Assembly that
allowed for mail-in ballots.
Co-Chair Hoffman CLOSED public testimony.
10:09:09 AM
Senator Kiehl reviewed the fiscal notes. He listed a zero
fiscal note from the Department of Administration, Alaska
Public Offices Commission, OMB Component 70.
Senator Kiehl addressed FN 3 from the Office of the
Governor, Division of Elections, OMB Component 21. The note
did not show a cost for FY 26, but showed an FY 27 cost of
$338.8 thousand in UGF for one full-time position and five
temporary positions. In the out years, the division
levelized the even and odd years for an average of $290.1
thousand. The one full-time position was constant, and the
temporary positions were for every other year.
Senator Wielechowski thanked the committee.
10:10:37 AM
AT EASE
10:11:08 AM
RECONVENED
SB 64 was HEARD and HELD in committee for further
consideration.
10:11:20 AM
AT EASE
10:13:13 AM
RECONVENED
SENATE BILL NO. 92
"An Act establishing an income tax on certain entities
producing or transporting oil or gas in the state; and
providing for an effective date."
10:13:44 AM
CATHY GIESSEL, SPONSOR, introduced the legislation. She
discussed the presentation, "SB 92 version S S-Corporation
Tax Structure" (copy on file). She pointed to slide 2:
C Corporations are taxed separately from their owners,
meaning they pay taxes on their profits and then the
shareholders pay taxes again on any dividends they
receive.
S Corporations pass their profits and losses directly
to their shareholders' personal tax returns, avoiding
the perceived "double taxation" seen with C
Corporations. S Corporations were created in the tax
code on January 1, 1958.
There are specific requirements and restrictions for
an entity to qualify as an S Corporation:
• Does not have more than 100 shareholders
• Does not have a shareholder who is not an
individual (with the exception for various tax-
exempt organizations, estates and trusts)
• Does not have a nonresident alien as a
shareholder
• Does not have more than one class of stock
(DCCED, Div of Corp, business & prof licensing)
There are 11,700 S Corporations registered in Alaska.
(Alaska Department of Revenue Indirect Expenditure
Report 2024)
Senator Giessel pointed to slide 3, "Limited Liability
Companies":
Limited Liability Company (LLC) were first introduced
in Wyoming in 1977, but did not catch on until the
1990s. A limited liability company is a legal business
entity, considered its own "person" by law, which
exists separate from its members. An LLC shares the
limited liability features of a corporation but has
the management and tax efficiencies of a partnership.
Members' liabilities are limited to their financial
contributions meaning an individual members' liability
is only extends to what they contribute to the LLC.
Limited liability does not shield owners of the LLC
from negligence liability.
LLCs have an array of tax options. For example,
members may file taxes as one of the following, but
not limited to:
• Single member LLC taxed as Sole Proprietorships
(Sole Prop)
• Partners in an LLC taxed as a Traditional
Partnership (LLP)
• LLC taxed as a Corporation, including S
Corporations or C Corporations (S-Corp, C-Corp)
LLCs can elect to be taxed as S Corporations if they
meet the requirements, but they have more flexibility
in structure and management compared to traditional S
Corporations. So, if an LLC opts for S Corporation
status, it's taxed similarly to other S Corporations,
but with the added flexibility of the LLC framework.
According to the Department of Commerce, Community and
Economic Development, as of 2024, there are 67,133
active LLCs registered in Alaska. This number can
fluctuate with new formations and dissolutions
10:17:39 AM
Senator Giessel highlighted slide 4, "Alaska Linkage to
Federal Code":
Federal Code Linkage: Alaska generally follows federal
tax rules for federal tax purposes but does not have
its own state income tax code. Instead, Alaska uses
federal tax rules as a basis for compliance and
reporting for businesses operating within the state.
This means that while there's no separate state income
tax code, businesses and individuals must adhere to
federal tax regulations for their federal tax filings.
Both S Corporations and LLCs enjoy similar tax
treatments in Alaska due to the state's lack of a
state income tax.
Individual Income Tax Repeal: Alaska originally
implemented an individual income tax in 1949. However,
this income tax was repealed in 1979. The repeal came
as a result of the state's new revenue source, the
Alaska Permanent Fund, which was established to manage
oil revenues. The creation of the Permanent Fund
reduced the need for individual income taxes.
Senator Giessel looked at slide 5:
AS 43.20.021
Current Statutes for companies filing as S
Corporations
• "Under Alaska's adoption of the Internal
Revenue Code [AS 43.20.021], corporations that
have elected S Corporation status are generally
not subject to tax.
• Prior to 1980, the stakeholders' share of
income was subject to Alaska's personal income
tax.
• Since the 1980 repeal of the state's personal
income tax, the income is taxed neither at the
corporate level nor at the shareholder level"
-Legislative Finance Division Indirect
Expenditure Report January 2021
Senator Giessel looked at slide 6, "Nine States No
Personal Income Tax":
• Alaska, Florida, Nevada, New Hampshire, South
Dakota, Tennessee, Texas, Washington, Wyoming
• 14 states have a flat tax rate
• 27 have graduated rates similar to the federal tax
system.
Senator Giessel highlighted slide 7, which showed the
current structure for C-corporations, which were taxed
based on profits. The shareholders were also taxed via
personal tax on profits.
Senator Giessel pointed to slide 8, which showed what was
proposed in the bill for S-corporations that were engaged
in the oil and gas industry. There was a $5 million credit
(or deduction) for any taxes under $5 million. At $5
million or more, a company would fall under the top bracket
of 9.4 percent. She thought the tax credit was significant
went compared to C-corporations tax credit of $222,000.
10:21:24 AM
Senator Giessel addressed slide 9, which showed a January
2021 indirect expenditure report from the Legislative
Finance Division. In the report, the various taxes and
sources of revenue were evaluated. The edition pictured
made the suggestion that the S-corporation loophole be
terminated. She read the statement from the report:
Without a state personal income tax, these
corporations receive the legal benefits of
incorporation without any state tax liability.
Senator Giessel discussed slide 10, which showed
information presented by Department of Revenue (DOR)
Commissioner Linda Mahoney. She recalled that Co-Chair
Stedman and Senator Kiehl were part of the legislature's
Fiscal Policy Working Group in 2021, which had proposed
taxing oil and gas pass-through entities at the same rate
as the current corporate income tax on C-corporations. She
emphasized that what the bill proposed was not a new idea.
Senator Giessel spoke to slide 11, which showed a page from
the state's latest revenue forecast. The page showed
petroleum corporate income tax on C-corporations. She
mentioned ConocoPhillips and Exxon Mobil. In FY 24, the tax
amount was $210 million. In FY 25 it was forecast to be
$190 million and in FY 26 it was estimated to be $230
million. She explained that the tax was a substantial
revenue for the state.
Senator Giessel displayed slide 12, which showed a table
comparing Alaska Taxable Income and Tax Owed between C-
corporations and S-corporations. She emphasized that DOR
was restricted through confidentiality requirements to not
be able to disclose how many S-corporations in the state
would be liable under the bill for tax revenue. The Senate
Resources Committee had asked a Certified Pubic Accountant
(CPA) what it would look like to apply the provisions of
the bill to a company making $1 billion in profits. She
noted that the CPA was available to present the
calculations to the committee.
10:26:21 AM
Senator Giessel pointed to slide 13, "Hilcorp investment
locations." She noted that Texas and Wyoming were the two
states other than Alaska that did not have personal income
tax. The chart on the slide came from the website of a
large S-corporation (Hilcorp) operating in the state in the
oil and gas industry. The chart showed the six locations in
which Hilcorp did work, and reflected state and local taxes
paid, number of barrels per day, gross acres of production,
and other information. She noted that Alaska was at the
bottom of the chart and had "N/A" listed under "state and
local taxes paid."
Senator Giessel thought the argument had been stated that
if the tax was updated it would be incredibly burdensome
for the state's S-corporations because of the challenging
and expensive environment. She noted that the average
royalty in Texas fields was over 20 percent, while Alaska's
royalty rate was 16.6 percent and 12 percent. She thought
it had been stated that it was ten times more expensive to
work in Alaska, while others had confirmed that total costs
were closer to two times higher. She thought many of the
companies were invested in all three of Alaska's oil
producing regions. She mentioned companies' investment in
different parts of the state, and the lack of information
available due to DOR's confidentiality restrictions.
10:30:26 AM
Co-Chair Stedman thought it would be helpful for the
committee to look at the matter from a different
perspective than offered by the sponsor. He suggested
looking back to the passage of SB 21, a major oil and gas
tax reorganization bill passed in 2013. At the time, the
legislature had considered the net revenue for the state
and federal government. In considering the sharing
relationship with the industry, the state's share was
comprised of four major components of corporate income tax,
property tax, royalties, and severance tax. Corporate
income tax had a smaller weighting than the other
components. He thoguht corporate income tax was not
discussed much as it was mostly static. The three major
players in the state had been ExxonMobil, ConocoPhillips,
and BP.
Co-Chair Stedman continued that as BP phased out of the
state, it sold to Hilcorp, which was an S-corporation. The
state had hypothetically lost a third of the corporate
income tax, which had reduced the state's share and created
an imbalance. He pondered the marginal benefit of losing
the revenue with the marginal increase in production that
Hilcorp brought to the state with its lower overhead and
more nimble production. He thought there was an undeniable
increase in marginal production since Hilcorp was present.
He pondered the net benefit between the lost revenue and
new production. He thought corporate income tax was a few
hundred million. He pondered how to calculate the net gain
and loss. He mentioned the perceived instability from
changing the tax structure.
Co-Chair Hoffman agreed.
10:36:23 AM
Senator Giessel replied that the Senate Resources Committee
had asked the Department of Natural Resources (DNR) to come
to the table, which it had. The agency had compared (at
$68/bbl) the difference in revenue and pointed out there
would be a 2 percent decrease in producer take home, which
would equate to a .40 cent decrease in take home per barrel
at the same oil price with state corporate income tax put
in place. She noted that DNR had more extensive slides that
the committee would find of interest. She thanked Co-Chair
Stedman for his ideas.
Senator Kaufman pondered the net total return and whether
the bill incentivized or disincentivized production. He
agreed with Co-Chair Stedman's perspective.
Senator Kiehl thoguht it was difficult to set tax policy by
looking at the past. He considered the category of those
that paid taxes and taxing those in the same category the
same. He pondered if the category should be oil and gas
companies or should rather be corporate structure or
investment activity. He thought of C-corporations that were
investing heavily and would be paying the tax. He posed the
question of how to look at the category of taxation.
10:39:20 AM
Senator Giessel thought it would be difficult to attempt to
reach an equal or fair tax between C-corporations and S-
corporations. She reminded that corporations paid the tax
as an entity, and shareholders also paid taxes on
dividends. She noted that S-corporations received a $5
million credit before any tax liability. She pointed out
that it was the purview of the committee to change the bill
in any way it wished. She noted that the bill included
entities that were in the transportation industry. She used
the hypothetical of a C-corporation with subsidiaries,
which would be unitized and not taxed separately. She noted
that there were more complex facets of the bill than were
presented.
Co-Chair Hoffman offered a hypothetical situation and
considered what the committee would do if Conoco and Exxon
became S-corporations. He thought the answer was clear, and
in light of the hypothetical consideration, he was in
support of the legislation.
10:42:20 AM
AT EASE
10:43:46 AM
RECONVENED
Co-Chair Hoffman relayed that the committee would hear
invited testimony from the CPA referenced by Senator
Giessel.
10:44:14 AM
JOHN LETOURNEAU, CERTIFIED PUBLIC ACCOUNTANT, THOMAS HEAD
AND GREISEN, ANCHORAGE (via teleconference), addressed the
legislation. He discussed the presentation, "CSSB 92(RES)S:
Tax analysis" (copy on file), which was designed to
illustrate the hypothetical situation of two similarly
situated companies that had the same amount of taxable
income but were taxed as a C-corporation and an S-
corporation.
Mr. Letorneau looked at slide 2, which showed that for $1
billion of federal taxable income, under current law a C-
corporation would pay the state $93 million while an S-
corporation would pay nothing.
Mr. LeTourneau looked at slide 3, which showed the total
gross income tax liability paid at the corporate level for
C-corporations ($93,990,150) versus S-corporations ($0).
Mr. LeTourneau spoke to slide 4, which illustrated the
impact of the bill as proposed with the hypothetical $1
billion in taxable income and a C-corporation would pay
almost $94 million, and an S-corporation would pay slightly
less, with the difference being the impact of $5 million
exemption.
Senator Kaufman wondered about the term, "loophole." He
asked if the present tax policy was a loophole. He asked
Mr. LeTourneau to discuss the concept.
Mr. LeTourneau replied that in tax parlance, a loophole was
a benefit that someone received that another person does
not receive. He used the example involving a person
choosing a state of residence due to tax reasons.
Senator Kaufman wondered why the term "loophole" was used
when the committee was discussing tax policy that was
already in place. He pondered if the state wanted
production, and what was it doing to enhance production and
the total return. He did not know if using the term
"loophole" was on the right track.
10:48:54 AM
Co-Chair Hoffman OPENED public testimony.
DOUG WOODBY, SELF, JUNEAU, supported the bill. He reasoned
that the bill honored the constitution in telling the
legislature to make sure the public received the maximum
revenue for its resources. He thought the state needed the
revenue badly. He noted that he was a grandfather with
grandchildren in the Juneau school system. He thought the
public school system was hurting.
10:50:19 AM
KARA MORIARTY, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
ALASKA OIL AND GAS ASSOCIATION, JUNEAU, spoke against the
legislation. She discussed the Alaska Oil and Gas
Association (AOGA), which advocated for the long-term
viability of the oil and gas industry. She relayed that
AOGA firmly opposed targeted taxes, and thought the bill
imposed a discriminatory and retroactive tax on select
entities in the industry. She thought the legislation was
trying to tax one company in particular and overlooked the
company's efforts to increase production on the North
Slope. She thought the bill undermined investor confidence
in the state's fiscal stability. She thought the bill
needed more modelling and analysis to know the full impact.
She argued that the construction of the bill created
confusion and ambiguity. She mentioned further technical
concerns with the bill. She offered to return to share the
concerns in more detail at a future meeting.
10:54:07 AM
LEILA KIMBRELL, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
RESOURCE DEVELOPMENT COUCIL, JUNEAU, testified against the
bill. She relayed that the Resource Development Council
(RDC) was a non-profit trade association representing
multiple industries. She asserted that RDC had long
advocated that responsible fiscal policy, meaningful
spending limit, a diverse private sector, and stable tax
policies were critical for maintaining competitiveness for
all industries. She contended that the bill unfairly
targeted certain S-corporations and only one company. She
thoguht the bill was retroactive and discriminatory and
raised legal and constitutional issues. She thought the
legislature should consider how the bill affected future
development and the state's long-term competitiveness. She
suggested that the bill threatened investment and
opportunity in the state and would ultimately result in
decreased jobs and revenue for the state.
Co-Chair Hoffman relayed that he would reopen the public
hearing at a later time.
Co-Chair Hoffman CLOSED public testimony.
SB 92 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:57:04 AM
The meeting was adjourned at 10:57 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 39 03.26.25 SFIN Follow-Up to 03.20.25 Hearing.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 Sectional Analysis version N 2.25.2025.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 Sponsor Statement Version N 2.25.2025.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 Summary of Changes Version N 2.25.2025.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 Supporting Documents.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 Letters of Opposition 2.25.2025.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 Letters of Support 2.25.2025.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 OLA - Alaska Comment Letter.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 Hudson Cook Testimony.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 Opposition Testimony ILPA AK.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 Miller Testimony 2025.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 AFSA comment letter - AK SB 39 rate caps 03.20.2025.pdf |
SFIN 3/20/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 2025 03 31 OLA Ltr re SB 39 Testimony Inaccuracies.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 Watson Testimony.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 CRL Written Response re AK SB 39.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 INFiN AK Statement.3.20.25.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 mark up rate calculation TILA.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 64 Summary of Changes I to W 4.2.2025.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 64 |
| SB 64 Sponsor Statement version W 4.2.2025.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 64 |
| SB 64 Sectional Analysis version W 4.2.2025.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 64 |
| SB 64 Letters of Opposition 3.26.25.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 64 |
| SB 64 Letters of Support 3.26.25.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 64 |
| SB 92 DOR Presentation to SRES.pdf |
SFIN 4/9/2025 9:00:00 AM SRES 4/2/2025 3:30:00 PM |
SB 92 |
| SB 92 Email DOR to SRES Staff 3.11.25 re DOR Response to Questions.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Email DOR to Senators 3.4.25 re Meeting Follow Up & Docs.pdf |
SFIN 4/9/2025 9:00:00 AM SRES 4/2/2025 3:30:00 PM |
SB 92 |
| Legislative Research on S-Corps in Other States.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| Hilcorp - Where We Operate.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Invited Testimony Presentation - CPA Tax Analysis Slides $10B.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Wuestenfeld.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Presentation to Senate Finance 4.9.25.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Fiscal Note DOR - OLD NOTE.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Sectional Analysis v.S |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Public Testimony.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Legislative Research Alaska Business Entities and Taxation.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 IRS Qualified Business Income Deduction.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 IRS 2024 Form 6251.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Historical Documents Provided by (S)RES.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 DOR Presentation to SRES.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Long.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Demers.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Griswold.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Maurer.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Faust.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Brown.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Baily.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Martin.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Allmeroth.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 39 Explanation of Changes ver. N to ver. I April 7 2025.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 work draft version I.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 113 3-24-25 CTIA Alaska SB 113 Letter.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Banuelos Testimony.pdf |
SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Public Testimony Allmeroth.pdf |
SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Research - CCH AnswersConnect - Market Based Sourcing.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Sponsor Statement version A 2.26.25.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Sectional Analysis version A 2.26.25.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Research - CCH AnswersConnect - Apportionment Formulas.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Research Tax Division 2024 Annual Report excerpt.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 39 2025 04 07 OLA Letter to Sen Kaufman re SB 39.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 39 RBFC AK SB 39 Opposition Letter.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 113 Public Testimony.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 64 OOG DOE 040425.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 64 |
| SB 92 Explanation of Changes v.L to v.S.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Sectional Analysis v.S.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Sponsor Statement.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 39 RBFC AK SB 39 Opposition Letter (2).pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 39 |
| SB 64 2025.4.8 NM SB 64 Letter of Support.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 64 |
| SB 92 Testimony Fredeen.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 testimony Stead.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Support Letter 4_02_25.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Droop.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Schmidt.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Rennolds.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimoy Kandror.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 – Opposition Carlstrom.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 Testimony Stokes.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |
| SB 92 citizen testimony.pdf |
SFIN 4/9/2025 9:00:00 AM |
SB 92 |