02/10/2025 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB73 | |
| SB11 | |
| SB17 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 73 | TELECONFERENCED | |
| *+ | SB 11 | TELECONFERENCED | |
| *+ | SB 17 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
February 10, 2025
1:32 p.m.
MEMBERS PRESENT
Senator Jesse Bjorkman, Chair
Senator Kelly Merrick, Vice Chair
Senator Elvi Gray-Jackson
Senator Forrest Dunbar
Senator Robert Yundt
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 73
"An Act relating to the registration of marijuana
establishments; relating to a tax exemption for qualified small
businesses; relating to marijuana taxes; and providing for an
effective date."
- MOVED SB 73 OUT OF COMMITTEE
SENATE BILL NO. 11
"An Act relating to flood insurance; relating to property
insurance; establishing the Alaska Flood Authority and the
Alaska flood insurance fund; and providing for an effective
date."
- HEARD & HELD
SENATE BILL NO. 17
"An Act establishing the crime of airbag fraud."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 73
SHORT TITLE: MARIJUANA: TAX/REGISTRATION; INCOME TAX
SPONSOR(s): SENATOR(s) CLAMAN
01/24/25 (S) READ THE FIRST TIME - REFERRALS
01/24/25 (S) L&C, FIN
02/03/25 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/03/25 (S) Heard & Held
02/03/25 (S) MINUTE(L&C)
02/10/25 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 11
SHORT TITLE: FLOOD INSURANCE
SPONSOR(s): SENATOR(s) STEDMAN
01/10/25 (S) PREFILE RELEASED 1/10/25
01/22/25 (S) READ THE FIRST TIME - REFERRALS
01/22/25 (S) L&C, FIN
02/10/25 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 17
SHORT TITLE: CRIME COUNTERFEIT/NONFUNCTIONING AIRBAG
SPONSOR(s): SENATOR(s) CLAMAN
01/10/25 (S) PREFILE RELEASED 1/10/25
01/22/25 (S) READ THE FIRST TIME - REFERRALS
01/22/25 (S) L&C, JUD
02/10/25 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
SENATOR MATT CLAMAN, District H
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 73.
PAUL DISDIER, Owner
The Fireweed Factory LLC
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 73.
SAM HACHEY, Co-Owner
Tanana Herb Company
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of SB 73.
LACY WILCOX, Owner
Top Hat Cannabis
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 73.
GARY EVANS, representing self
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of SB 73.
LLOYD STIASSNY, Owner
Egan Management Group
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 73.
DAN STICKEL, Chief Economist
Tax Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Discussed and answered questions on the
fiscal note for SB 73.
BRANDON SPANOS, Deputy Director
Tax Division
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Answered questions regarding the fiscal note
for SB 73.
SENATOR BERT STEDMAN, District A
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 11.
ROSE FOLEY, Staff
Senator Bert Stedman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided the sectional analysis for SB 11.
SENATOR MATT CLAMAN, District H
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 17.
CARLY DENNIS, Staff
Senator Matt Claman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided the sectional analysis for SB 17.
CRAIG ORLAN, Director
American Honda Motor Company
Washington, D.C.
POSITION STATEMENT: Testified by invitation on SB 17.
ACTION NARRATIVE
1:32:23 PM
CHAIR BJORKMAN called the Senate Labor and Commerce Standing
Committee meeting to order at 1:32 p.m. Present at the call to
order were Senators Merrick, Gray-Jackson, Dunbar, Yundt and
Chair Bjorkman.
SB 73-MARIJUANA: TAX/REGISTRATION; INCOME TAX
1:33:26 PM
CHAIR BJORKMAN announced the consideration of SENATE BILL NO. 73
"An Act relating to the registration of marijuana
establishments; relating to a tax exemption for qualified small
businesses; relating to marijuana taxes; and providing for an
effective date."
1:33:53 PM
SENATOR MATT CLAMAN, District H, Alaska State Legislature,
Juneau, Alaska, as sponsor, he explained SB 73 proposes a single
wholesale tax on the marijuana industry to address concerns that
the current tax structure is driving business towards the black
market. He stated that the goal is to keep Alaska's legal
marijuana industry strong and healthy.
1:35:31 PM
CHAIR BJORKMAN opened public testimony on SB 73.
1:35:47 PM
PAUL DSISDIER, Owner, The Fireweed Factory LLC, Juneau, Alaska,
testified in support of SB 73 and shared concerns about the
sustainability of the marijuana industry. He stated that at a
recent Marijuana Control Board meeting, cultivators expressed
difficulty operating under current conditions. Although his
company is doing well, he feared that if smaller growers go out
of business, those remaining will only produce enough to supply
local stores. He emphasized this could lead to a collapse of the
legal marijuana market and a shift back to the black market. He
urged immediate support to prevent industry failure.
1:39:19 PM
SAM HACHEY, Co-Owner, Tanana Herb Company, Fairbanks, Alaska,
testified in support of SB 73. He stated as the industry has
matured and as more people have come online there was originally
400 licensed cultivations and now there are about 200-210 active
cultivations. He highlighted a 50 percent failure rate among
cultivators due to high costs, including energy, labor, and
transportation. He advocated for adjusting the cannabis tax to
reflect market conditions, the other industries like oil, gas,
and fishing have seen adjustments. He emphasized that reforming
the tax would help the industry remain sustainable, support
employment, and generate more revenue for Alaska.
1:42:01 PM
LACY WILCOX, Owner, Top Hat Cannabis, Juneau, Alaska, gave the
following testimony in support of SB 73:
[Original punctuation provided.]
At our healthiest, our company employed 12 Alaskans at
a fair wage, offering retirement and health benefits.
These were good jobs, jobs that meant something in our
small city.
But today, in part because of the oppressive $50-per-
ounce excise tax, we've been forced to cut our
workforce down to just five employees. Two of those
are owners who hardly take a paycheck, and the
benefits and perks we once offered are gone. In a
community like ours, losing seven good-paying jobs is
devastating. These jobs are like gold, and they're
disappearing because of a tax structure that is simply
unsustainable and an industry that is being squeezed
from all sides.
The challenges we face go far beyond taxes. The cost
of growing indoors is incredibly high, and unlike
other industries, we are denied access to traditional
banking and financing due to cannabis being federally
illegal. The 280E tax code prevents us from deducting
standard business expenses, creating a double tax
burden. On top of that, the extreme regulatory hurdles
we navigate are exhausting and expensive. Costs have
not gone down, but the price customers are willing to
pay sure has.
To make matters worse, we are competing with two
unregulated markets that undermine everything we do.
First, the fully illicit market, which I believe makes
up around 60 percent of cannabis sales in Alaska.
Second, the 2018 Farm Bill accidentally authorized the
sale of intoxicating hemp products, creating a gray
market that directly competes with my business. These
products are sold online, delivered to your door, and
available to anyoneregardless of age. They are cheap,
potent, and often packaged in ways that appeal to
children. Even if we could create competing products
within our business model, our rules and regulations
prevent us from matching their potency, price, or
packaging appeal. And both of these competing markets
operate with little to no oversight or regard for
public safety, and certainly without any taxation.
Tariffs on supplies already hurt us, and they're
likely to increase. All of these factors work against
us, and without immediate relief, businesses like mine
will not survive. Next year will be too latewe will
shut down.
1:44:24 PM
MS. WILCOX continued with her testimony.
I also serve as the Vice President of the Southeast
Alaska Food Bank, and I am deeply aware of Alaska's
fragile food network. In the case of a food security
crisislike a barge not coming incannabis farms like
ours have the ability to pivot to food production.
This makes us a valuable community resource in times
of need. But to fulfill that potential, we must first
survive.
Senate Bill 73 is a lifeline. Reducing the excise tax
to $12 dollars per ounce will provide immediate
relief, allowing us to reinvest in our operations,
rehire employees, and hopefully restore the benefits
that once made us a proud employer in this community.
I also strongly support the language in SB 73 that
reinstates the C-Corp tax exemption for qualified
small businesses. This provision recognizes the unique
challenges all small Alaskan businesses face and helps
level the playing field.
The cannabis industry has generated significant
revenue for Alaska, growing from $1.7 million in 2017
to over $28 million in 2023. But the industry's growth
has plateaued, and without meaningful tax reform, we
risk losing these contributions entirely. SB 73 is a
crucial first step toward creating a sustainable and
competitive market.
I urge you to pass this bill without delay. It's not
just about supporting businesses like mineit's about
protecting jobs, strengthening our economy, and
ensuring the long-term viability of an industry that
has already provided immense value to our state.
1:45:44 PM
GARY EVANS, representing self, Fairbanks, Alaska, testified in
support of SB 73 and echoed previous testimonies. He emphasized
the struggles of the cannabis industry, particularly due to
competition from the growing black and gray markets. He stated
that marijuana is now widely available in the black market at
low prices, and this is hurting legal businesses. He warned that
if the state doesn't act, the industry could collapse, which
would have significant consequences for the economy.
1:47:45 PM
LLOYD STIASSNY, Owner, Egan Management Group, Anchorage, Alaska,
testified in support of SB 73 and highlighted the marijuana
industry's current struggles and its importance for local
employment and economic diversification. He stated that the
cannabis sector is described as a valuable industry for the
state, with potential for growth and employment. He stressed the
need for the small business exemption to be extended. He stated
that the exemption is crucial for the survival of small
businesses across Alaska. He urged for action to help these
businesses thrive in a challenging economic environment.
1:50:48 PM
CHAIR BJORKMAN closed public testimony for SB 73.
1:51:22 PM
DAN STICKEL, Chief Economist, Tax Division, Department of
Revenue, Juneau, Alaska, Discussed and answered questions on the
fiscal note for SB 73. He stated that the fiscal note outlines
two main revenue impacts: the reintroduction of a small business
exemption under the corporate income tax and changes to the
marijuana excise tax. He stated that the marijuana tax change is
estimated to have a net impact of over $11 million annually,
while the small business exemption is expected to impact revenue
by about $2.5 million per year. These two factors combined
represent the total revenue impacted.
1:53:07 PM
SENATOR DUNBAR discussed two parts of the bill; the cannabis
part, where many cultivators are struggling due to policy and a
broader corporate tax exemption part, that expired two years
ago. He stated that reinstating this exemption is expected to
cost around $2.65 million. He stated that the sponsor defined
small businesses as those with up to $50 million gross asset. He
asked where the $50 million amount comes from and what business
growth is expected if the exemption returns.
1:54:45 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue, Anchorage, Alaska, Answered questions regarding the
fiscal note for SB 73. He stated that the small corporate
exemption in SB 73 resurrects language from the Internal Revenue
Code (IRC) code 1202(e) that expired in 2023. This code defines
a small corporation, with a $50 million gross income threshold,
as a qualifying entity for Alaska's small business exemption.
The impact of the exemption was based on past revenue reductions
observed in prior years. He said there hasn't been a detailed
analysis conducted on the economic impact of the exemption. The
original intent of the exemption was to bring new business
growth, but instead, the exemption primarily benefited existing
businesses, with no clear increase in new revenue for the state.
1:56:34 PM
SENATOR DUNBAR said the tax policy should drive economic
benefits, not just reduce revenue. He questioned if the $50
million threshold required by federal law fits Alaska's needs
and suggested $2025 million might better stimulate business. He
asked whether the $50 million figure is required or just
convenient and if the tax division would consider a lower
threshold to balance growth with budget impact.
1:58:06 PM
MR. SPANOS clarified his role is a tax administrator not a
policy maker. He corrected his earlier testimony stating over a
five year period the marijuana industry constituted about 75
percent of credit claims, which was all new business. He
explained that with the IRC 1202(e) excluding farming,
cultivators may not qualify for the exemption, but the language
can be changed. He stated that the $50 million threshold isn't
required by federal law; the threshold was simply a convenient
reference and can be adjusted.
SENATOR DUNBAR asked for clarification on the comment that 75
percent of the tax exemption claims taken are by cannabis
businesses. He asked if the exemption applied to all C-Corps,
whether the organizational structure of some businesses makes
them ineligible for the exemption, and why the cannabis industry
receives such a large portion of the tax break.
MR. SPANOS answered that the tax credit applies only to C-Corp
entities, as these are the only businesses that pay corporate
income tax in Alaska. Other business types, such as S Corps,
partnerships, and LLCs, are not eligible unless they
specifically choose to be taxed as a C-Corp. He stated that
certain industries, like farming and healthcare, are excluded
from this credit under federal definition, although businesses
with a small portion of healthcare operations might still
qualify. The marijuana industry makes up most of the claims for
this credit because, as a new industry, many cannabis businesses
are structured as C-Corps and meet the qualifications.
2:02:06 PM
CHAIR BJORKMAN asked to what extent the division considered the
impact on tax revenue if marijuana cultivators go out of
business due to lack of changes to the current tax structure.
2:03:04 PM
MR. STICKEL answered that the revenue impact is based on the
analysis of the Fall 2024 revenue forecast, assuming steady
consumption with population growth and possible cannabis
industry consolidation. He said a 1 percent drop in retail price
would lead to a demand increase of 1 percent. While elasticity
varies, lowering taxes would likely boost legal market activity.
2:04:59 PM
CHAIR BJORKMAN asked whether the fiscal note assumptions account
for cultivators going out of business if no action is taken and
assumed reducing the wholesale tax would increase activity.
2:05:38 PM
MR. STICKEL answered that the analysis does not explicitly
forecast the closure of any specific businesses. The baseline
assumption is that the marijuana industry will maintain a stable
level of activity.
CHAIR BJORKMAN asked if out-of-state growers and producers who
sell hemp products in Alaska and compete with our local market
pay a tax if they come into Alaska from out of state.
2:06:31 PM
MR. SPANOS answered that there are 25 tax types, so the out of
state businesses might be subject to other taxes but they
wouldn't pay the marijuana tax.
CHAIR BJORKMAN said the State of Alaska is adding high taxes on
those businesses complying with state law but the state isn't
collecting taxes from the people importing legal or non-legal
products. He asked if Alaska is missing revenue from the
imported products.
2:07:13 PM
MR. SPANOS responded that is correct. He said black market
marijuana sales aren't taxed along with legal hemp sales. He
stated that he isn't fully familiar with all hemp regulations
and uses the word legal loosely.
2:07:33 PM
SENATOR DUNBAR stated that last year's bill included a retail
sales tax to offset the tax cut. He asked whether the state
could tax toxic hemp products at gas stations like cigarettes
and does the state know how much toxic hemp is on the market.
2:08:16 PM
MR. SPANOS answered that almost any product that is sold at
retail can be taxed either excise tax or sales tax. He stated
that with imported products, a retail tax would be easier to
track and administer. The Department of Revenue would need more
data to come up with an estimated potential revenue.
2:09:27 PM
CHAIR BJORKMAN solicited the will of the committee.
2:09:30 PM
SENATOR MERRICK moved to report SB 73, work order 34-LS0324\G,
from committee with individual recommendations and attached
fiscal note(s).
2:09:48 PM
CHAIR BJORKMAN found no objection and SB 73 was reported from
the Senate Labor and Commerce Standing Committee.
2:10:01 PM
At ease.
SB 11-FLOOD INSURANCE
2:11:38 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 11. "An Act relating to flood
insurance; relating to property insurance; establishing the
Alaska Flood Authority and the Alaska flood insurance fund; and
providing for an effective date."
2:12:02 PM
SENATOR BERT STEDMAN, District A, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 11. He stated that he is looking
to create a system to replace federal flood insurance. He said
this issue came up years ago when he noticed high premiums being
paid in his district with very few claims. He said over time his
office saw that the federal program not only provides limited
coverage of $250 thousand for homes and $500 thousand for
businesses but also imposes strict development rules on coastal
properties. He stated that despite repeated records requests, he
couldn't get data on premiums paid by Alaskans, so he added
language to the operating budget to require a state report. The
report showed most premiums went out with few claims in return,
and strict compliance rules made results worse with the
insurance company requiring a person to elevate or rebuild their
home if repairs exceed 50 percent of the home's value. He said
these rules are a fairness issue. Most people's biggest asset is
their home and being forced to tear their home down or jack
their home up because it's older or slightly too low in value
isn't fair. He stated that the system traps homeowners by
requiring flood insurance to qualify for loans in certain zones
and is enforced through banks and the secondary mortgage market.
2:17:55 PM
SENATOR STEDMAN said the federal flood insurance program
restricts coastal development by openly discouraging builds on
beaches, using pilings, or adding rock fill. That doesn't fit in
places like Juneau or Ketchikan, where most valuable property is
on the shoreline. He stated that his office started looking into
the Federal Emergency Management Agency (FEMA) program when his
office saw Alaskans paying high premiums with almost no claims.
He said the program is underfunded and uses the Alaskan people's
premiums to subsidize disasters in places like Florida, the
Carolinas, and the Gulf of Mexico(America). He stated that
Alaskans get limited coverage and face strict rebuilding
requirements if damaged often forcing people to elevate or
demolish homes. He said because flood insurance is required in
designated zones to get a mortgage, residents are forced into
the program through the banking system. He stated that his
office reached out to the Division of Insurance, which helped
show how unfair these premiums are and that private insurers
wouldn't be allowed to charge these rates in Alaska. He stated
that his office began drafting a bill to create a state
authority, not as a charity, but as a self-funded alternative.
Residents would pay regulated premiums, rising with losses and
falling when risk is low. He said the authority might need seed
funding, but that could be paid back.
2:23:47 PM
SENATOR STEDMAN stated that from 2008 to 2021, Kenai paid nearly
$3.7 million in premiums but had only $103,000 in claims. Sitka
paid $1.5 million and had just one $20,000 claim. He said that
the one claim was filed only because filing with the insurance
was easier than dealing with the city. Ketchikan paid $1.5
million and had $100,000 in claims. Fairbanks paid $11 million
and got back $1.7 million. Meanwhile, Federal Emergency
Management Agency (FEMA) recently added 1,100 more properties in
Ketchikan to the flood zone. He said SB 11 would create an
Alaska based flood insurance authority. SB 11 would raise
coverage limits from $250 thousand to $1 million for residential
and from $500 thousand to $2 million for commercial properties
which is more in line with coastal property values. He said SB
11 also avoids many of FEMA's development restrictions and uses
a broader definition of flood. He stated that as FEMA expands
coverage and takes in more land, it's clear the state needs a
better solution for Alaskans.
2:27:51 PM
SENATOR STEDMAN stated that the Mendenhall River in Juneau and
Ketchikan Creek are known flood areas, with some losses over the
decades. Mendenhall Valley is becoming more at risk due to
glacial changes, and FEMA may soon impose strict requirements on
homeowners there. He said the goal is to create an authority
that raises coverage, lowers premiums, and removes unnecessary
restrictions allowing local planning authorities to manage
zoning. No one's asking for a free ride, just a fair system. He
stated that if any planning authority starts approving permits
below the tideline, they likely won't last long.
2:29:36 PM
SENATOR MERRICK asked if there were any analyses on earthquake
insurance.
2:29:46 PM
SENATOR STEDMAN answered that SB 11 is focused on floods but
issues like earthquakes, landslides, and mudslides could be
addressed later. He said SB 11 could be a phased approach by
getting the core structure in place, then expand it.
2:30:42 PM
SENATOR DUNBAR asked if a home is in a designated flood zone the
federal government requires the homeowner to have flood
insurance but not necessarily the federal governments insurance.
2:31:05 PM
SENATOR STEDMAN answered that's his understanding.
SENATOR DUNBAR said with the numbers clearly showing homeowners
are overpaying and opens doors for an entrepreneur to come in to
offer better rates and make a profit. He asked why the free
market isn't offering this product and why shouldn't the state
allow the free market to displace the federal government.
SENATOR STEDMAN answered the restrictions from the federal
government would still be in place, unless the legislature
passes SB 11 to remove those restrictions. He stated that the
Division of Insurance is better suited to answer questions about
private flood insurers but added that Alaska's small population
makes it difficult to attract insurance carriers. He stated that
if the state shuts down coastal development, the communities
risk job loss and the states development.
SENATOR DUNBAR stated that the federal government requires
[coastal homeowners] carry some kind of insurance that state law
cant override unless its specifically allowed. He asked how SB
11 would remove federal development restrictions and wouldn't
those restrictions still apply even with state or private
insurance.
SENATOR STEDMAN answered the whole goal of SB 11 is to get rid
of the restrictions.
SENATOR DUNBAR asked if the restrictions and development are
built into the policies or do they exist in some other
regulation.
SENATOR STEDMAN answered that the restrictions are coming
through FEMA, and the goal is to get rid of the whole federal
environment and have the state offer policies to get out from
the high premiums.
2:34:32 PM
ROSE FOLEY, Staff, Senator Bert Stedman, Alaska State
Legislature, Juneau, Alaska, read the sectional analysis on SB
11 as follows:
[Original punctuation provided.]
Sectional Analysis
Senate Bill 11 version A
Section 1: Requires insurance rates for flood
insurance be based primarily on actual
historical flood and damage data.
Section 2: Provides a definition of "flood".
Section 3: Adds a new Article 2 to AS 21.60 creating
the Alaska Flood Authority.
Sec. 21.60.100 Creates the Alaska Flood
Authority (authority) as a nonprofit entity
and requires all insurers licensed to
provide property insurance in Alaska to
maintain membership in the authority and to
provide all information required by the
board or director.
Sec. 21.60.110 Defines membership on the
board of the authority and requires an
annual report by September 1 of each year
detailing the effectiveness of the
operations of the authority; the benefits
of the insurance program; and identifies
penalties or sanctions imposed on the state
under the National Flood Insurance Act.
Sec. 21.60.120 Establishes the powers of
the authority. Sec.
21.60.130 Outlines the required facets of
the plan of operation for the authority, to
be submitted to the director of the
division of insurance.
Sec. 21.60.140 Exempts the authority from
AS 44.62 (Administrative Procedures Act).
2:36:11 PM
MS. FOLEY continued with the sectional analysis for SB 11:
Sec. 21.60.150 Exempts the authority from
any real and personal property taxes.
Sec. 21.60.160 Requires the authority to
make at least one plan available to a
person who is eligible for coverage and
prohibits refusal by the authority to offer
coverage to a qualified person.
Sec. 21.60.170 Provides that the policies
offered by the authority shall be at least
equivalent to those offered by the National
Flood Insurance Program. Specifies coverage
limits of authority plans.
Sec. 21.60.180 Requires premiums to be
fair, and to be based primarily on actual
historical flood damage data.
Sec. 21.60.190 Outlines the duties of the
authority. These include performing the
administrative and claims payment functions
of this act, and providing the director of
insurance a semiannual report of the plan
of operation.
Sec. 21.60.200 Details funding for the
authority and the insurance program. Each
member will pay dues in an amount
determined by the board and share in any
losses of the insurance program.
Additionally, the board will make an annual
determination whether a fiscal year end
assessment is necessary to operate the
program and issue the assessment if needed.
This section also allows for a legislative
appropriation of up to $5 million to
satisfy a claim if the member assessments
are insufficient.
Sec. 21.60.210 Defines eligibility for
state flood insurance as any person with an
insurable interest in insurable property.
This section allows the board, with the
approval of the director of the division of
insurance, to create additional eligibility
requirements.
2:38:03 PM
MS. FOLEY continued with the sectional analysis of SB 11:
Sec. 21.60.220 Outlines how an eligible
person enrolls in a state insurance plan.
Sec. 21.60.230 Provides the authority 30
days after receiving an application to
notify the applicant if the application has
been accepted or rejected.
Sec. 21.60.240 Stipulates that insurance
coverage begins immediately upon receipt of
the first premium.
Sec. 21.60.250 Requires the authority to
notify people who live in flood zones of
the state insurance plan. Requires an
insurance provider that denies a flood
insurance application to notify the
applicant of the state insurance plan and
application process.
Sec. 21.60.260 Instructs the director of
the division of insurance to formulate
general policy and adopt regulations
necessary to administer the state flood
insurance plan.
Sec. 21.60.270 Clarifies the state is not
liable for acts or omissions of the
authority. Sec. 21.60.280 Exempts board
members from civil and criminal liability
for an act or omission if that act or
omission was done in good faith and within
the scope of duties.
Sec. 21.60.290 Creates the Alaska Flood
Insurance Fund as a separate fund in the
state treasury and establishes a framework
for use of the Fund.
2:39:35 PM
MS. FOLEY continued with the sectional analysis of SB 11:
Sec. 21.60.300 Provides definitions for the
Alaska Flood Authority.
Section 4: Stipulates that assessments and civil
penalties collected by the Alaska Flood
Authority are defined as program receipts
that are accounted for separately, and that
appropriations of these funds are not made
from the unrestricted general fund.
Section 5: Clarifies the Section 1 applies only to
insurance policies or contracts entered
into or renewed on or after the effective
date of this legislation.
Section 6: Allows the director of the division of
insurance to adopt regulations to carry out
this act if the Alaska Flood Authority
fails to submit a plan of operation by
January 1, 2027.
Section 7: Establishes an effective date of July 1,
2026.
2:41:03 PM
CHAIR BJORKMAN held SB 11 in committee.
SB 17-CRIME COUNTERFEIT/NONFUNCTIONING AIRBAG
2:41:31 PM
CHAIR BJORKMAN announced the consideration of SENATE BILL NO. 17
"An Act establishing the crime of airbag fraud."
2:41:36 PM
SENATOR MATT CLAMAN, District H, Alaska State Legislature,
Juneau, Alaska, as sponsor of SB 17 he delivered the following
sponsor statement:
[Original punctuation provided.]
Senate Bill 17 was brought by Honda Motor Company and
the automotive anti-counterfeiting council. In Alaska
today, there is no law to prohibit the installation or
reinstallation of airbags that do not meet federal
safety standards. While airbags are made to protect us
from serious injuries, counterfeit or nonfunctioning
airbags are known to improperly deploy or not deploy
at all, potentially resulting in serious injuries.
2:42:14 PM
REPRESENTATIVE CLAMAN continued:
By establishing airbag fraud as a crime, SB 17
prohibits dangerous actors from knowingly selling,
installing, or manufacturing these dangerous and
improper devices. The bill references both counterfeit
and nonfunctioning airbags. A counterfeit airbag is
defined as a replacement airbag displaying an
unauthorized mark that is similar to the mark of a
motor vehicle manufacturer. A nonfunctioning airbag is
an inoperable or damaged airbag, or an airbag that has
previously been deployed or that was removed from a
vehicle because it created an unreasonable safety
risk.
Similar legislation has passed in over 30 states. For
example, the Michigan penal code takes a more severe
approach to this crime and punishes airbag fraud as a
felony punishable by 4 years of imprisonment or a fine
of $10,000.00. In comparison, SB 17 defines airbag
fraud as a class a misdemeanor punishable by up to 1
year of imprisonment, a fine of up to $25,000 or both
and as a class c felony punishable by up to 5 years of
imprisonment, a fine of up to $50,000 or both if
serious injury or death is involved.
Passage of this legislation will support federal
efforts to stop the importation of counterfeit or
nonfunctioning airbags through the federal unfair
trade practices act. Passage of this law will allow
federal authorities to seize these products at
Alaska's border.
Senate Bill 17 is supported by the coalition against
insurance fraud, which believes in the protection of
consumers and the idea that consumers should be able
to trust their airbags.
The state has a responsibility to protect all Alaskans
from counterfeit and nonfunctioning airbags. This bill
acknowledges victims of airbag fraud and provides
consequences for those who knowingly install or
provide dangerous devices. This bill also provides a
protection for any party involved who might not be
aware of this fraud, such as owners and employees of
dealerships who unknowingly install or sell those
devices.
2:44:22 PM
CARLY DENNIS, Staff, Senator Matt Claman, Alaska State
Legislature, Juneau, Alaska, read the sectional analysis for SB
17 as follows:
[Original punctuation provided.]
Senate Bill 17
Sectional Analysis-Version A
Section 1
AS 28.35.248. Airbag fraud
Establishes and defines airbag fraud as knowingly
selling, offering for sale, installing, reinstalling,
or manufacturing a counterfeit or nonfunctioning
airbag or device that is intended to conceal a
counterfeit or nonfunctioning airbag, or intentionally
selling, leasing or trading a vehicle that the person
knows has a counterfeit or nonfunctioning airbag.
Establishes airbag fraud as a class A misdemeanor or a
class C felony if death or serious physical injury to
another person occurs as a result of the counterfeit
or nonfunctioning airbag.
Establishes that the liability of any party in a civil
action is not precluded. Provides that this
legislation does not create a duty to inspect a
vehicle for a counterfeit or nonfunctioning airbag
before its sale.
This section excludes a person installing,
reinstalling, or replacing an airbag on a vehicle
used solely for police work; an owner or employee of a
motor vehicle dealership or the owner of a vehicle who
does not have knowledge that the vehicle's airbag is
counterfeit or nonfunctioning; a person who transfers
a vehicle title to an insurance company to satisfy an
insurance claim; or an insurance company that sells or
otherwise disposes of a vehicle as authorized by law
or regulation.
2:45:49 PM
SENATOR DUNBAR asked if SB 17 is different than last year's
bill.
2:46:01 PM
SENATOR CLAMAN answered that its identical to last year's bill.
SENATOR DUNBAR stated that there have been issues in several
industries, including automotive, where companies limit repairs
to happen only at the companies' shops. Since airbags fall under
federal safety rules he asked if manufacturers require their own
branded airbags and installers and if there are consumer
protections that allow independent shops or generic replacements
to help keep costs down.
2:47:12 PM
SENATOR CLAMAN responded he was not certain since that is market
question, like Ford selling an oil filter but a person can buy a
compatible one at an auto parts store with the same
specifications Ford claims its filter is better consumers but
most convenient and affordable. He stated that he's not sure how
that works with airbags, but SB 17 highlights the risk of
someone producing fake airbags that don't meet federal safety
standards. He said Mr. Orlan from Honda is on the line and could
possibly answer that question.
2:48:21 PM
SENATOR DUNBAR stated that the State of Alaska is using the
state's police power, ability, and criminal law to enforce
safety regulations. He asked if the state is sort of unwittingly
a monopoly power in the airbag market.
2:48:50 PM
CRAIG ORLAN, Director, American Honda Motor Company, Washington
D.C, answered questions and testified by invitation on SB 17. He
stated that the auto industry already shares tools and
diagnostics with independent parts makers and repair shops,
supporting aftermarket repairs. This model is often cited by
right-to-repair advocates. He said there's currently no generic
airbag market, not due to legal barriers, but because airbags
are costly, low-margin, high-liability products with low
replacement volume. SB 17 doesn't change the cost or legality.
Anyone can legally make airbags that meet federal safety
standards. He stated that SB 17 targets bad actors intentionally
selling fake airbags filled with debris like T-shirts, not real
safety equipment.
2:51:46 PM
CRAIG ORLAN stated that counterfeit, non-functional airbags are
a serious threat everywhere. This isn't an issue with the
legitimate auto supply chain, it's others installing fake
airbags after accidents. The fake airbags have included sawdust,
rags, and even explosive devices. He said there was a case in
L.A. where the airbags were so dangerous the airbags had to be
detonated by the bomb squad. A Wall Street Journal investigation
linked these counterfeits to injuries and deaths nationwide. He
said in Florida, a repair shop owner was charged for installing
over 350 fake airbags. He stated that most of these products
come from overseas, especially China. While federal agencies
like Customs and Border Patrol and the FBI are supportive,
they're limited in what the federal agencies can do since most
fakes don't violate federal laws. State laws fill the gap
allowing better enforcement, helping e-commerce platforms crack
down, and stopping dangerous products before the airbags reach
cars. He stated that SB 17 has support from automakers, repair
shops, law enforcement, insurers, and consumers. Similar laws
have passed in 38 states with bipartisan backing and no public
opposition.
2:54:52 PM
CHAIR BJORKMAN asked the reason why SB 17 excludes those who
work on vehicles solely for law enforcement purposes. He said SB
17 includes a clause that exempts people who didn't know the
airbag was counterfeit or defective and asked what stops someone
from claiming ignorance to avoid liability.
2:55:29 PM
SENATOR CLAMAN stated he will answer the second question. He
said the intent SB 17 is to avoid creating a duty to inspect for
fraudulent airbags. If someone unknowingly buys and drives a car
with a fake airbag, then later sells the airbag to a dealer who
also doesn't know, neither is criminally liable. It's about not
punishing those with no knowledge. He stated that criminal
liability requires knowledge though civil liability could still
apply, SB 17 doesn't address it.
2:56:59 PM
CRAIG ORLAN stated that the exemption for police vehicles was
added based on law enforcement feedback. Some modificationslike
removing airbags for barriers or performing PIT maneuversare
necessary for their operations. He said these vehicles don't
enter the consumer market, and the intent is to avoid
unintentionally affecting law enforcement while targeting
consumer safety.
2:58:25 PM
CHAIR BJORKMAN held SB 17 in committee.
2:58:54 PM
There being no further business to come before the committee,
Chair Bjorkman adjourned the Senate Labor and Commerce Standing
Committee meeting at 2:58 p.m.