Legislature(1993 - 1994)
04/20/1993 05:05 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE April 20, 1993 5:05 p.m. MEMBERS PRESENT Senator Robin Taylor, Chairman Senator Rick Halford, Vice-Chairman Senator George Jacko Senator Suzanne Little Senator Dave Donley MEMBERS ABSENT All Members Present COMMITTEE CALENDAR SENATE BILL NO. 185 "An Act relating to the limitations period for assessments for certain state taxes, and for collection, after assessment, of taxes due the state; and providing for an effective date." HOUSE BILL NO. 225 "An Act relating to notice of certain appropriations from the dividend fund." HOUSE BILL NO. 112 "An Act relating to limited partnerships; and providing for an effective date." CS FOR HOUSE BILL NO. 69(FIN) "An Act relating to registration of and information about sex offenders and amending Alaska Rules of Criminal Procedure 11(c) and 32(b)." SENATE BILL NO. 161 "An Act relating to interest rates and calculation of interest under certain judgments and decrees and on refunds of certain taxes, royalties, or net profit shares; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 185 - No previous action to record. HB 225 - No previous action to record. HB 112 - See Judiciary minutes dated 4/14/93. HB 69 - See Judiciary minutes dated 4/14/93. SB 161 - See State Affairs minutes dated 4/2/93 & 4/7/93. See Judiciary minutes dated 4/14/93. WITNESS REGISTER Attorney General Charles Cole Department of Law P.O. Box 110300 Juneau, AK 99811-0300 POSITION STATEMENT: Offered information in support of SB 185 Richard Fineberg P.O. Box 278 Talkeetna, AK 99676 POSITION STATEMENT: Supports thrust of SB 185 Michael Morter, Staff to Representative Sean Parnell State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Offered information on HB 225 Tom Williams, Director Permanent Fund Dividend Division Department of Revenue P.O. Box 110460 Juneau, AK 99811-0460 POSITION STATEMENT: Offered information on HB 225 Joe Geldhof, Assistant Attorney General Department of Law P.O. Box 110300 Juneau, AK 99811-0300 POSITION STATEMENT: Offered information on SB 161 Larry Meyers, Director Income & Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, AK 99811-0420 POSITION STATEMENT: Offered information on SB 161 ACTION NARRATIVE TAPE 93-46, SIDE A Number 001 Chairman Robin Taylor called the Judiciary Committee meeting to order at 5:05 p.m. SENATOR TAYLOR introduced SB 185 (LIMITATIONS PERIOD FOR TAX ASSESSMENTS) as the first order of business. ATTORNEY GENERAL CHARLES COLE explained the purpose of SB 185 is to clarify ambiguities which presently exist in Alaska Statutes relating to the period during which amended assessments may be made for certain taxes owing to the State of Alaska. Section 2 of SB 185 provides that at any time an administrative consideration is being given to a taxpayer grievance, the Department of Revenue may increase or decrease the amount owing under its assessment. The same provision would apply to instances in which a claim for credit or refund is filed by the taxpayer. Section 3 of SB 185 provides that the period for collection of a tax is essentially tolled, and the proceeding must be begun within six years after the latest of: (a) the assessment of the tax; (b) the final administrative determination of the grievance if the taxpayer files a grievance, or the final judicial resolution of an appeal if the taxpayer appeals from a final adjudicative determination of a grievance. Speaking to Section 3, Attorney General Cole said at the present time, the law provides that the tax may be collected by levy or by a proceeding in court within six years of the assessment of the tax. Presently, pending before the Alaska Supreme Court in appeal is the issue of whether the period for determining finally a grievance filed by the taxpayer takes more than six years from the date the return is filed. Tesoro claims that even though it filed the grievance, and even though during this entire six-year period of time its grievance was being adjudicated, the statute was running. Tesoro claims that when the final determination was made on the grievance, the six-year period had run and, therefore, it was too late to collect the tax. Attorney General Cole then presented a chronology of the Tesoro Case. He said Tesoro claims that the six-year period had expired following the assessment of the tax, however, the delay resulted from administrative procedures initiated and pursued by the taxpayer. He said there is no reason under those circumstances that the state should be prejudiced by its statutory resolution of the taxpayer's grievance. Attorney General Cole questioned what purpose would be served by the state issuing a levy within five years after the return is filed, because the amount of tax owing by the taxpayer has not yet been finally determined. He said in the future this will not be a problem to the State of Alaska, because if this amendment which is sought in SB 185 is not passed, the state, after five years, is going to issues levies and it is going to levy upon taxpayer property owing assessments, regardless of whether the amount of the tax has been finally determined. Attorney General Cole said it is the department's position that because it is fundamentally fair, because it would be a needless expenditure of administrative and judicial effort to seek to collect taxes before the final amount is owing, SB 185 should be passed into law. Turning to Section 2, subsection (a), Attorney General Cole said it is the position of the Department of Law that this is simply a statement of existing law and that it makes no change in existing law. However, in a proceeding pending before the Alaska Supreme Court, Exxon and certain affiliated companies claim that if it files a grievance asking for an informal or formal conference during the period that proceeding is taking place, the department may not issue an amended assessment if the three years have elapsed. The department feels that a clarification is desirable. Attorney General Cole commented that the state is not asking for anything that is unique in tax law, and he noted that Texas, the nation's leading oil producer, has a statute very similar to the proposed legislation. He questioned why Exxon is vigorously opposing this proposed legislation when it is consistent with and similar to the tax laws of Texas where Exxon recently set up their major headquarters. Attorney General Cole also pointed out that the three-year period of time is a limited period of time. There are many states which have substantially longer periods of times in which these assessments must be completed. Number 335 RICHARD FINEBERG of Talkeetna said that as a former member of the administration's litigation team and as a public frequent critic of the settlement process, that we are dealing with literally billion of dollars in an area in which we have a lack of information on the issues. He said in these areas where we have heard complexities before, it has been abundantly clear that one side has a vested interest and that is not necessarily the public's interest in the stewardship of the resource. Number 370 SENATOR DONLEY asked if Mr. Fineberg supports the bill. RICHARD FINEBERG answered that he supports the thrust of the bill with regard to the particulars, but that he wanted to point out that we are dealing with very scant information. Number 390 SENATOR TAYLOR stated SB 185 would held until the following day in order to give Exxon Corporation an opportunity to present their testimony to the committee. Number 396 SENATOR TAYLOR introduced HB 225 (NOTICE OF APPROPRIATIONS ON PFD'S) as the next order of business. MICHAEL MORTER, staff to Representative Sean Parnell, explained the HB 225 was developed as a vehicle to provide the Council on Domestic Violence and Sexual Assault with partial funding outside the general revenue stream. It was felt that a felon's permanent fund dividends are a pertinent source for the Council's work. Mr. Morter noted that the conference committee is working on the capital budget, and it has been proposed that $750,000 be shifted from what would be considered the "felon's permanent fund pool" to the Department of Public Safety and into the Councils' budget. Number 435 TOM WILLIAMS, Director, Permanent Fund Dividend Division, Department of Revenue, clarified for the committee that the legislation does not deal with attachments of individual dividends. There is an amount equivalent that would have been paid to incarcerated felons had they been ineligible, and those funds are being appropriated to agencies that deal with incarcerated felons. Incarcerated felons are denied eligibility for dividends and the amount that would have been paid to them is used to fund other government programs. SENATOR DONLEY asked if it was correct that these groups are eligible, but it is up to the legislature to write into the budget how much of that money goes to each of these groups. TOM WILLIAMS acknowledged that was correct. Number 450 There being no further testimony on HB 225, SENATOR TAYLOR asked for the pleasure of the committee. SENATOR DONLEY moved that HB 225 be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. Number 460 SENATOR TAYLOR stated the Chair would entertain a motion on HB 112 (UNIFORM LIMITED PARTNERSHIP ACT UPDATE). SENATOR HALFORD moved that HB 112 be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. Number 480 SENATOR TAYLOR brought CSHB 69(FIN) (SEX OFFENDER REGISTRATION) before the committee as the next order of business and asked for the pleasure of the committee. SENATOR DONLEY moved that CSHB 69(FIN) be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. Number 500 SENATOR TAYLOR brought SB 161 (INTEREST RATES: JUDGMENTS, TAXES, ROYALTIES) before the committee as the final order of business. He noted there was a proposed amendment for the committee's consideration. JOE GELDHOF, Assistant Attorney General, Department of Law, speaking to Section 1, explained that it requires that interest rates on judgments and prejudgment interest be set at the market rate, which reflects the administration's belief that market rates are superior to an arbitrary rate in statute. Number 514 SENATOR DONLEY asked how the rate of treasury bonds relate to what anybody can get in an ordinary savings account. Mr. Geldhof answered that currently the interest rate for the sale of 52-week treasury bonds is between three and four percent. The yearly average of those 52-week treasury bond sales establishes the prejudgment and judgment interest rates. Senator Donley voiced concern that it was not really an appropriate rate of interest. Number 528 SENATOR HALFORD commented that in one section of the bill, it's amending the rate that the state pays out, but not amending the rate that the state gets in. SENATOR TAYLOR asked for an explanation on overpayments on taxes, etc. LARRY MEYERS, Director, Income & Excise Audit Division, Department of Revenue, said Section 4 of the bill relates to amending the current rate between overpayment and underpayment. In 1991, the interest rate was amended to provide for a floating rate based on the discount rate. At that time, the overpayment and underpayment were at the same rates. SB 161 adjusts the rates so that in case the state has to pay back in an overpayment that it is at the prime plus 2 percent. Currently it is prime plus 5 percent, so there is a 3 percent discount between the overpayment and underpayment rates, he explained. He said making this change is something that is consistent with approximately 30 other states, including the Internal Revenue Service. SENATOR HALFORD stated he was strongly opposed to having a differential in the way we treat people. Mr. Meyers answered that there is an equity provision in the bill that provides that if the Department of Revenue over assesses and the taxpayer pays, the department will pay them back at the same rate that they charged them. Number 568 SENATOR LITTLE asked if there are other states that have an equity provision for judgment and prejudgment interest. Mr. Meyers responded that there are some states that don't make the distinction, and a majority of the states are going to a spread. TAPE 93-46, SIDE B Number 001 SENATOR DONLEY stated he was supportive of Section 2 and would like to see it passed, but that other sections of the bill are more complicated and need additional work. JOE GELDHOF pointed out that the real savings that will accrue by passage of the legislation is to the state agencies, particularly the Department of Transportation and Department of Administration that routinely pay judgments which accrue judgment and prejudgment interest that in some cases is significant. Presently, instead of funding agency programs or projects that may be more desirable, money is being deflected into judgment and prejudgment interest rates that are way over market. Number 040 SENATOR LITTLE asked for an explanation of the proposed amendment. SENATOR TAYLOR explained that currently, prejudgment interest on personal injury litigation is figured from the date of the occurrence of the injury. The amendment would change that to the date a written demand for payment for an injury has been sent. Number 060 SENATOR LITTLE moved amendment #1. SENATOR DONLEY objected. After brief discussion Senator Little withdrew her motion to adopt amendment #1. Number 120 SENATOR TAYLOR said the problem that Mr. Geldhof raised is a valid concern. The Department of Transportation, the Division of Risk Management, Department of Law, etc., are currently paying very high interest rates in situations where they should be paying much lower interest rates. However, he doesn't think the legislation has much chance of passing this legislative session. SENATOR TAYLOR closed the public hearing on SB 161 and adjourned the meeting at 6:00 p.m.