Legislature(2017 - 2018)SENATE FINANCE 532

01/19/2018 09:00 AM RESOURCES

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09:01:50 AM Start
09:03:09 AM HB111OVERVIEW:REGULATIONSPACKAGEFORHOUSEBILL111(CHAPTER3SSLA17)
10:06:39 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Joint with the Senate Finance Committee TELECONFERENCED
Overview of Regulations for
House Bill 111 (Ch 3, SSLA 17):
- Department of Revenue Tax Division
-- Testimony <Invitation Only> --
                 ALASKA STATE LEGISLATURE                                                                                     
                       JOINT MEETING                                                                                          
            SENATE RESOURCES STANDING COMMITTEE                                                                               
                 SENATE FINANCE COMMITTEE                                                                                     
                     January 19, 2018                                                                                           
                         9:01 a.m.                                                                                              
                                                                                                                              
MEMBERS PRESENT                                                                                                               
                                                                                                                                
SENATE FINANCE                                                                                                                  
                                                                                                                                
 Senator Lyman Hoffman, Co-Chair                                                                                                
 Senator Anna MacKinnon, Co-Chair                                                                                               
 Senator Click Bishop, Vice-Chair                                                                                               
 Senator Donny Olson                                                                                                            
 Senator Gary Stevens                                                                                                           
 Senator Natasha von Imhof                                                                                                      
                                                                                                                                
SENATE RESOURCES                                                                                                                
                                                                                                                                
 Senator Cathy Giessel, Chair                                                                                                   
 Senator John Coghill, Vice-Chair                                                                                               
 Senator Natasha von Imhof                                                                                                      
 Senator Kevin Meyer                                                                                                            
 Senator Bill Wielechowski                                                                                                      
 Senator Click Bishop                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
SENATE FINANCE                                                                                                                  
                                                                                                                                
 Senator Peter Micciche                                                                                                         
                                                                                                                                
SENATE RESOURCES                                                                                                                
                                                                                                                                
 Senator Bert Stedman                                                                                                           
                                                                                                                                
OTHER LEGISALTORS PRESENT                                                                                                     
                                                                                                                                
Representative Dave Talerico                                                                                                    
Representative Andy Josephson                                                                                                   
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW: REGULATIONS PACKAGE FOR HOUSE BILL 111 (CHAPTER 3                                                                     
SSLA 17)                                                                                                                        
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Ken Alper, Director                                                                                                             
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
POSITION   STATEMENT:  Provided   overview  of   regulations                                                                  
package for HB 111.                                                                                                             
                                                                                                                                
John Larsen, Audit Master                                                                                                       
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
POSITION STATEMENT: Participated  in overview of regulations                                                                  
package for HB 111.                                                                                                             
                                                                                                                                
Mary Hunter Gramling, Assistant Attorney General                                                                                
Department of Law                                                                                                               
POSITION STATEMENT: Participated  in overview of regulations                                                                  
package for HB 111.                                                                                                             
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
9:01:50 AM                                                                                                                    
CHAIR GIESSEL called the Joint  Senate Resources and Finance                                                                    
Committee meeting to order at  9:01 a.m. Resources Committee                                                                    
members present at  the call to order  were Senators Bishop,                                                                    
Meyer, von Imhof, Wielechowski,  Coghill, and Chair Giessel.                                                                    
Senator Stedman was excused.                                                                                                    
                                                                                                                                
CO-CHAIR  MACKINNON,  Senate Finance  Committee,  introduced                                                                    
the Senate Finance Committee members  present at the call to                                                                    
order: Senators Olson, von  Imhof, Stevens, Bishop, Co-chair                                                                    
Hoffman  and   Co-chair  MacKinnon.  Senator   Micciche  was                                                                    
excused.                                                                                                                        
                                                                                                                                
CHAIR  GIESSEL also  welcomed  Representatives Talerico  and                                                                    
Josephson, who serve with her on the HB 111 Working Group.                                                                      
                                                                                                                                
^#HB111  OVERVIEW: REGULATIONS  PACKAGE FOR  HOUSE BILL  111                                                                  
(CHAPTER 3 SSLA 17)                                                                                                           
                                                                                                                                
     OVERVIEW: REGULATIONS PACKAGE FOR HOUSE BILL 111                                                                       
                    (CHAPTER 3 SSLA 17)                                                                                     
                                                                                                                                
9:03:09 AM                                                                                                                    
CHAIR GIESSEL  recounted that the legislature  had passed HB                                                                    
111  months previously,  which affected  tax credits.  Those                                                                    
laws are  passed on to  departments where  bureaucrats (def:                                                                    
ruling from the  desk) write rules, which have  the force of                                                                    
law.  She wanted  to ensure  that the  rules match  the laws                                                                    
that   were  passed   and  intended   by  the   legislature.                                                                    
Legislators  spend a  lot of  time deliberating;  hear facts                                                                    
from experts, debate issues, and  wrestle those facts to the                                                                    
ground  and write  laws. She  reiterated that  she wants  to                                                                    
make  sure those  rules that  are written  to enforce  those                                                                    
laws are accurate.                                                                                                              
                                                                                                                                
Today  they would  examine one  regulation  package that  is                                                                    
almost  complete. A  second package,  which  members have  a                                                                    
copy of, is  out for public comment now  and she understands                                                                    
that a third package of rules  will be coming out later. She                                                                    
welcomed the "chief maker of  rules," Department of Revenue,                                                                    
(DOR) Tax  Director, Ken Alper,  and his Audit  Master, John                                                                    
Larsen, to the table.                                                                                                           
                                                                                                                                
9:05:32 AM                                                                                                                    
KEN  ALPER, Director*  Tax Division*  Department of  Revenue                                                                    
(DOR)*  clarified  that  the  HB  111  legislation  has  two                                                                    
packages of  regulations. One  of them  is complete  and has                                                                    
been  signed  and now  has  the  force  of law.  The  second                                                                    
package is  in its  process now, which  means he  can't talk                                                                    
about some of the details.                                                                                                      
                                                                                                                                
He introduced John  Larsen, who is not new to  the state but                                                                    
might be  new to committee  members. He is an  Audit Master,                                                                    
one of the subject matter  experts and one of the production                                                                    
tax  specialist  positions  that  was  created  when  Alaska                                                                    
switched to the  net profits-based tax. Mr.  Larsen had been                                                                    
with the  department for 10  years and had the  primary role                                                                    
of  leading the  regulations drafting  process for  the last                                                                    
several  oil  and  gas  tax   bills  that  have  passed  the                                                                    
legislature.                                                                                                                    
                                                                                                                                
9:07:24 AM                                                                                                                    
MR.  ALPER said  the Department  of Law  (DOL) asked  him to                                                                    
read  a  brief disclaimer  about  the  current process,  and                                                                    
turned to slide 2, "Statement on Process:"                                                                                      
                                                                                                                                
     "We have  been asked  to present on  recent regulations                                                                    
     from  a process  standpoint. Importantly,  DOR has  one                                                                    
     set  of  regulations  that are  currently  noticed  for                                                                    
     public comment.  This legislative  hearing is  not part                                                                    
     of  the  public comment  process  for  the adoption  of                                                                    
     regulations.  The committee  members,  as  well as  any                                                                    
     member of  the public  who is  listening who  wishes to                                                                    
     comment on  the regulations should comment  as provided                                                                    
     in the  public notice. The  notice as well as  the full                                                                    
     text of  the proposed regulations are  available on the                                                                    
     department's  website....  The  public  comment  period                                                                    
     closes next Friday, January 26.                                                                                            
                                                                                                                                
     For  the pending  regulations,  we  cannot discuss  how                                                                    
     they would  be applied.  Testimony today should  not be                                                                    
     construed  as   any  pre-determination  of   any  final                                                                    
     regulations.  Our  presentation  today  is  focused  on                                                                    
     factual information about the  DOR's recent and ongoing                                                                    
     regulations process."                                                                                                      
                                                                                                                                
9:08:31 AM                                                                                                                    
JOHN  LARSEN,  Audit  Master, Tax  Division,  Department  of                                                                    
Revenue, Juneau, Alaska, introduced himself for the record.                                                                     
                                                                                                                                
MR.  ALPER said  in the  last two  legislative sessions  two                                                                    
major bills  have passed  that both fit  into this  realm of                                                                    
tax credit  reform, a  ramping back  from the  more generous                                                                    
historic program of providing  direct support to exploration                                                                    
and development, and  he wanted to recap the  content of the                                                                    
bills as follows:                                                                                                               
                                                                                                                                
     HB 247 passed in June 2016                                                                                                 
       Phased  out Cook  Inlet tax  credits and  reduced the                                                                    
     Middle Earth  tax credits. Tax credits  are still being                                                                    
     offered in Middle Earth.                                                                                                   
     ? Extended Cook Inlet gas  tax cap. It was scheduled to                                                                    
     sunset in  2022 and a new  tax of $1/bbl cap  was added                                                                    
     to Cook Inlet oil.                                                                                                         
     ? Added  sunset provisions, referred to  as "graduation                                                                    
     provisions" to  the North  Slope gross  value reduction                                                                    
     (GVR),  the  new oil  reduced  tax  treatment that  was                                                                    
     originally  passed   to  be   indefinite  and   is  now                                                                    
     somewhere between 3 and 7  years depending on the price                                                                    
     of oil. That  treatment will go away, and  the oil will                                                                    
     "graduate" and  begin to be  taxed as legacy  oil after                                                                    
     that point.                                                                                                                
      Inserted  an annual  cap on  cash  through the  credit                                                                    
     system that  a company could receive  per-company, per-                                                                    
     year.                                                                                                                      
       Created a resident-hire  priority for allocating cash                                                                    
     payments in times of restricted revenues.                                                                                  
       Added  limited transparency with an  annual report to                                                                    
     the  public  of how  much  cash  was received  by  each                                                                    
     company in aggregate  over the course of  the year. The                                                                    
     first of those reports came  out in April 2017 based on                                                                    
     2016 information.                                                                                                          
     ? Increased  the interest rate  to just  the production                                                                    
     tax for  a period of  three years, and then  reduced it                                                                    
     to zero.                                                                                                                   
        Cleaned up  technical  provision  remnants from  old                                                                    
     laws or things that  weren't working properly that were                                                                    
     also passed with HB 247.                                                                                                   
       Adopted  a regulation  package that went  through the                                                                    
     same process he  is about to describe today  for HB 111                                                                    
     and those regulations became effective January 2017.                                                                       
                                                                                                                                
9:11:24 AM                                                                                                                    
MR. ALPER said that HB 111 was in many ways more                                                                                
aggressive, because it eliminated the regime of the state                                                                       
buying cash tax credits:                                                                                                        
                                                                                                                                
     HB 111 passed in July 2017                                                                                                 
     ?  Most  credits  were no  longer  eligible  for  state                                                                    
     repurchase after  July 1, 2017,  with the  exception of                                                                    
     the refinery  and LNG storage  credits that  have their                                                                    
     own built-in sunset in the next couple years.                                                                              
       The Net  Operating Loss (NOL) (formerly  known as the                                                                    
     carried-forward annual loss credit)  credit (by far the                                                                    
     largest  component  of  the cash  credit  program)  was                                                                    
     repealed effective January 1, 2018.                                                                                        
       It was replaced with  a new system of carried-forward                                                                    
     lease  expenditures.  A  large   portion  of  the  bill                                                                    
     detailed  the treatment  of how  those carried  forward                                                                    
     losses were  to be  calculated and eventually  how they                                                                    
     were  to be  recaptured  when a  company brought  their                                                                    
     field into  production. One key provision  was known as                                                                    
     the "ring-fence,"  the idea that these  carried forward                                                                    
     losses can't  be used until the  underlying leases come                                                                    
     into  production.  Flexibility   was  given  where  the                                                                    
     taxpayer could choose how much  they did or didn't want                                                                    
     to use  in a given  year to maximize  their flexibility                                                                    
     to use any  other tax credits or  reductions they might                                                                    
     have available to them.  Limitations specified that the                                                                    
     carried forwards  could be used  to reduce  taxes below                                                                    
     the minimum tax.                                                                                                           
       A  new provision was  added to  say that if  they are                                                                    
     not  used for  10 years,  they begin  to start  to lose                                                                    
     value  on a  graduated  scale referred  to  as a  "down                                                                    
     lift."                                                                                                                     
                                                                                                                                
9:13:28 AM                                                                                                                    
       Because of  the carving out of  production tax versus                                                                    
     other taxes, interest rates were  aligned among all tax                                                                    
     types administered by the Department  of Revenue and no                                                                    
     sunsetting  of the  interest,  which  continues for  as                                                                    
     long  as the  delinquency remains  or an  appeal, which                                                                    
     can go on for 10 years.                                                                                                    
        A  new  provision  was added  that  credits  can  be                                                                    
     carried-back and  used by the originator  of the credit                                                                    
     or by the purchaser of  the credit against a prior year                                                                    
     tax   liability  including   offsetting  interest   and                                                                    
     penalties  associated with  past year  liabilities. The                                                                    
     key   limitation  is   the  Alaska   Constitution.  The                                                                    
     Constitutional Budget Reserve Fund  (CBRF) says the tax                                                                    
     liabilities related  from an  administrative proceeding                                                                    
     or a  settlement for  certain lawsuits  must go  to the                                                                    
     CBRF. That  cannot be superseded  by law. So,  any past                                                                    
     year liabilities  that fit  the CBRF  definition cannot                                                                    
     be offset with tax credits.                                                                                                
     ?  Conditional exploration  tax  credits  became a  new                                                                    
     provision,  because  they often  take  a  long time  to                                                                    
     review  for a  variety of  reasons, and  once time  and                                                                    
     money became  issues, they were  falling behind  in the                                                                    
     queue  in  the line  to  receive  cash payments.  These                                                                    
     credits would allow  a company to reserve  its place in                                                                    
     line  in  advance  of  getting  the  final  review  and                                                                    
     awarding of those tax credits for exploration.                                                                             
       The seismic credit on  the North Slope and Cook Inlet                                                                    
     had previously sunset before last  year, but it remains                                                                    
     in Middle Earth and that  was repealed January 1, 2018.                                                                    
     ? Exploration credits  in Middle Earth can  now be used                                                                    
     to  offset the  explorer's  corporate  income tax.  For                                                                    
     perspective,  there is  no production  of  oil and  gas                                                                    
     from Middle Earth, yet. The  hope is that someone finds                                                                    
     it and develops  it. The companies that  are doing that                                                                    
     work tend  to be the regional  Native corporations like                                                                    
     Ahtna. The exploration tax credits  they are earning on                                                                    
     that  work  can  be  used to  offset  those  companies'                                                                    
     corporate income tax liability.                                                                                            
       Because the tax credit fund  is no longer going to be                                                                    
     needed after  the last credit  is paid, which  could be                                                                    
     any  time  between  next  year   and  2026,  a  delayed                                                                    
     repealer is built in.                                                                                                      
     • Established the Legislative working group.                                                                               
                                                                                                                                
9:16:50 AM                                                                                                                    
MR. ALPER  stated that  the Governor signed  it into  law on                                                                    
July 28 and the DOR realized  it was too big to implement in                                                                    
one  set  of regulations,  in  part  because certain  things                                                                    
needed to  be done relatively  fast. The rules needed  to be                                                                    
in place  by January 1 for  a variety of reasons  related to                                                                    
the interest  or the idea  of carried back. But  the carried                                                                    
forward lease  expenditures were  very complicated  and very                                                                    
sensitive and needed more time  to be developed, and frankly                                                                    
didn't  need  to  be  entirely pinned  down  by  January  1,                                                                    
because no  one was going to  try to use them  until the end                                                                    
of the 2018.  So, they split the package in  half; the first                                                                    
package was the carry-back of  credits against a prior year,                                                                    
interest rates, and  most changes other than  the new carry-                                                                    
forward loss structure.                                                                                                         
                                                                                                                                
The second  package was related  to the carry  forward lease                                                                    
expenditures  and  related issues  -  how  they are  earned,                                                                    
calculated,  and allocated,  and most  importantly how  they                                                                    
are used once the field comes into production.                                                                                  
                                                                                                                                
MR. ALPER  explained that before either  package was written                                                                    
a pre-regulation scoping workshop  was held. It was designed                                                                    
to get input from  the affected parties, primarily industry,                                                                    
as to  what they  expected to see  in the  regulations, what                                                                    
their understanding  of the laws  that passed was,  and what                                                                    
the hot button  issues might be that  needed more attention.                                                                    
It had 22 attendees from  industry, plus those on the phone,                                                                    
and DOR  staff. Comments  were accepted after  the workshop,                                                                    
and the  deadline was  extended because  the Alaska  Oil and                                                                    
Gas Association  (AOGA) members have offices  in Houston and                                                                    
were  impacted   by  Hurricane  Harvey  last   summer.  They                                                                    
received  comments from  eight different  parties, including                                                                    
Senator Giessel and Representative Seaton.                                                                                      
                                                                                                                                
9:19:15 AM                                                                                                                    
CHAIR  GIESSEL  said   she  appreciated  the  pre-regulation                                                                    
scoping workshop, because it is a complex subject.                                                                              
                                                                                                                                
MR.  ALPER   stated  the  meetings  were   helpful  but  not                                                                    
required. They  like to have them  when possible. Sometimes,                                                                    
a  ticking clock  that makes  it harder.  In this  case, the                                                                    
bill  passed with  retroactive  regulatory authority.  Well,                                                                    
they can't go backwards to  2010, but should the regulations                                                                    
take effect because  of all the process  after the effective                                                                    
date of  the bill, January  1, 2018, the regulations  can be                                                                    
taken back  to the effective date  of the bill. This  is the                                                                    
important authority that  gives them the leeway  to spend an                                                                    
extra few weeks in process.  He pointed out that bills don't                                                                    
usually pass in July; they usually  pass in April or May and                                                                    
that couple of months makes a big difference.                                                                                   
                                                                                                                                
9:20:27 AM                                                                                                                    
Slide 7: "Initial Regulation Process to Implement HB 111"                                                                       
                                                                                                                                
MR. ALPER  said the  scoping workshop identified  key issues                                                                    
to  be  addressed  in  drafting  the  regulations.  Examples                                                                    
include:                                                                                                                        
                                                                                                                                
1. Defining  exploration expenditures in the  context of the                                                                    
"ring fence."  When the expenditures developing  a field are                                                                    
ring-fenced you know those expenses  are tied to that field.                                                                    
But   what  if   you   are   exploring:  drilling   multiple                                                                    
exploration wells and  only one of them  finds something, is                                                                    
there  a mechanism  for the  company  to be  able to  regain                                                                    
value  from  the  failed  exploration  wells?  The  language                                                                    
provided was  "reasonably related"  to a lease  or property,                                                                    
and that had to be fleshed out.                                                                                                 
                                                                                                                                
2. Another  issue was determination  of what the  ring fence                                                                    
is.  The  triggering  provision   for  the  use  of  carried                                                                    
forwards was  when a field  came into  "regular production."                                                                    
That  is  an  Alaska  Oil and  Gas  Conservation  Commission                                                                    
(AOGCC) definition  - not  from the tax  statutes -  and the                                                                    
idea  that HB  111 talked  about regular  production from  a                                                                    
lease  or  property needed  to  be  aligned with  the  AOGCC                                                                    
reference to production from an "individual well."                                                                              
                                                                                                                                
3. Determining and allocating  the amount of carried-forward                                                                    
lease expenditures  when a producer  has both  producing and                                                                    
nonproducing  properties   and/or  exploration  expenditures                                                                    
that might  put them into  a loss situation for  the overall                                                                    
year and  making sure that only  the amount of the  loss was                                                                    
tied  up in  the  ring fence  and not  the  entirety of  the                                                                    
expenditure on the new development.                                                                                             
                                                                                                                                
4. Another  interesting concern was  with gas  used in-state                                                                    
(GUIS).  They use  the term  "segment," which  is a  taxable                                                                    
area; for  instance, North Slope  oil and gas is  a segment.                                                                    
In  other words,  the taxes  are calculated  differently for                                                                    
each segment  and lease expenditures get  allocated for each                                                                    
segment. Gas  used in-state is  a separate segment  and pays                                                                    
tax at  the Cook  Inlet gas  tax cap rate  of 17  cents. But                                                                    
because  of  that,  the  lease   expenditures  have  to  get                                                                    
allocated to  the gas  used in state.  That became  a little                                                                    
complex and industry wanted to  know more about how that was                                                                    
done.                                                                                                                           
                                                                                                                                
5. Finally, the retroactive  regulation question: he thanked                                                                    
them  for  giving  DOR  that   authority  to  allow  a  more                                                                    
interactive  drafting  process.  They are  still  not  done,                                                                    
presuming  they  get  to the  public  comment  deadline  and                                                                    
redraft the regulations, then the  DOL does its review, then                                                                    
it goes  to the  Lieutenant Governor,  and finally  they get                                                                    
filed and  made official 30  days after they are  signed. It                                                                    
will be somewhere  in March before they are  done, but these                                                                    
regulations  will  have  the  effect of  law  on  January  1                                                                    
because of that retroactive authority.                                                                                          
                                                                                                                                
9:23:51 AM                                                                                                                    
Slide 8: "Necessary Steps in the Regulations Process"                                                                           
                                                                                                                                
MR. ALPER said the regulations  process "is a lot of statute                                                                    
and a  little bit of  custom." An administrative  order (AO)                                                                    
recommended  these workshops  but did  not mandate  them, as                                                                    
well as a discussion of  the pre-official draft. That AO was                                                                    
used to say let's have a workshop.                                                                                              
                                                                                                                                
The  second  step  was publication  of  draft  language  for                                                                    
packet  two. The  draft language  has  a tightly  prescribed                                                                    
series  of  steps:  published  in  a  newspaper  of  general                                                                    
circulation,  posted  on  the Alaska  Online  Public  Notice                                                                    
System,  furnished to  the  department's interested  parties                                                                    
list and the Department  of Law, furnished electronically to                                                                    
all state  legislators and  the Legislative  Affairs Agency,                                                                    
chairs  of the  standing committees  with jurisdiction  over                                                                    
the   subject,   the    Administrative   Regulation   Review                                                                    
Committee,  and   Legislative  Council.   Approximately  140                                                                    
people  are  signed  up  for  the  Department  of  Revenue's                                                                    
"Interested Parties" list.                                                                                                      
                                                                                                                                
9:25:11 AM                                                                                                                    
Slide 9: "Necessary Steps in the Regulations Process"                                                                           
                                                                                                                                
The Administrative Procedures Act,  AS 44.62.190, requires a                                                                    
minimum  30  days  of public  notice  before  the  adoption,                                                                    
amendment,  or   repeal  of   a  regulation.   Although  not                                                                    
mandatory, the  department typically holds a  public hearing                                                                    
for  regulations on  oil and  gas production  taxes. Ideally                                                                    
that is done  somewhere in the middle of  the public comment                                                                    
period,  which   provides  an  opportunity   for  interested                                                                    
parties  to evaluate  and incorporate  information from  the                                                                    
public  hearing  into  their  written  comments.  After  the                                                                    
public   comment  deadline,   all   comments  received   are                                                                    
published on the department's website.                                                                                          
                                                                                                                                
9:26:26 AM                                                                                                                    
CO-CHAIR  HOFFMAN asked  if the  public record  includes who                                                                    
made the comments.                                                                                                              
                                                                                                                                
MR. ALPER answered in the affirmative.                                                                                          
                                                                                                                                
MR. ALPER  continued discussing  slide 9.  He said  prior to                                                                    
drafting  final regulations,  the Administrative  Procedures                                                                    
Act requires  that the department  must consider  all public                                                                    
comments  received  and to  keep  a  record  of its  use  or                                                                    
rejection  of them.  The document  is  called  Affidavit  of                                                                    
Agency  Record of  Public Commentand     is submitted  along                                                                    
with the final adopted regulations.                                                                                             
                                                                                                                                
9:27:38 AM                                                                                                                    
Slide 10: "Necessary Steps in the Regulations Process"                                                                          
                                                                                                                                
MR. ALPER said the draft  is revised into a final regulation                                                                    
proposal and adopted and signed  by the DOR Commissioner and                                                                    
then  it goes  to the  DOL to  ensure that  the proposal  is                                                                    
within  the authority  conferred  by the  department by  the                                                                    
law, itself, that it's not  conflicting with other statutes,                                                                    
not repeating any statutes, and  making sure the regulations                                                                    
are  not  over-reaching.  That usually  takes  a  couple  of                                                                    
weeks.                                                                                                                          
                                                                                                                                
The legislature  is informed of pending  regulations and has                                                                    
the  option  to review.  Typically,  the  Department of  Law                                                                    
makes  technical revisions  to language  and then  the final                                                                    
version  is   presented  to  the  Lieutenant   Governor  for                                                                    
signature. Then they  are officially law 30  days after that                                                                    
unless another date is specified.                                                                                               
                                                                                                                                
9:29:08 AM                                                                                                                    
Slide 11: "Regulations Packet 1"                                                                                                
                                                                                                                                
MR.  ALPER  said  package  1   is  everything  except  carry                                                                    
forwards  with  the carry  back  provisions  being the  most                                                                    
complex. These  were signed by  the Lieutenant  Governor and                                                                    
published, and by January 1, they were the law of the land.                                                                     
                                                                                                                                
He said the  clear legislative intent was  to strengthen the                                                                    
secondary market, the ability  of companies that are holding                                                                    
cashable tax  credits, where the  state might not  have cash                                                                    
available,  to be  able  to sell  these  credits to  another                                                                    
company who could  then use them to offset  their taxes. For                                                                    
a  variety  of  reasons,  that market  had  not  been  used,                                                                    
primarily because  the state had  been buying all  that were                                                                    
presented for about  eight years, and there was  no need for                                                                    
it.                                                                                                                             
                                                                                                                                
Once the  demand was there,  there wasn't very  much market,                                                                    
primarily  because  of low  oil  prices,  and the  potential                                                                    
buyers  of  those  credits,  Alaska's   major  oil  and  gas                                                                    
producers, didn't  have enough tax  liability to be  able to                                                                    
buy credits  to further reduce  them. But the intent  of the                                                                    
legislature was to strengthen that secondary market.                                                                            
                                                                                                                                
This is  important, the typical  past year tax  liability is                                                                    
in an  audit. It is  clearly an administrative  proceeding -                                                                    
the  court   has  said  -   and  that  money  goes   to  the                                                                    
Constitutional  Budge  Reserve   (CBRF).  However,  a  major                                                                    
settlement  is still  being finalized  on  the Trans  Alaska                                                                    
Pipeline System (TAPS) tariffs going  back to about 2010/11.                                                                    
The  Attorney  General  has  said  that  is  not  litigation                                                                    
related to  tax; it is  related tariffs, and the  fact there                                                                    
are  more taxes  is a  secondary impact  of it.  If you  can                                                                    
imagine, the  allowable tariffs were  being reduced  for oil                                                                    
through the pipeline and that means  the value of the oil up                                                                    
at the well  head is a little bit higher.  That higher value                                                                    
translates  through  as a  larger  royalty  liability and  a                                                                    
larger tax liability. That tax  liability did not have to go                                                                    
to the  CBRF, therefore  creating a little  bit of  a window                                                                    
for a  secondary market where  companies who might  owe that                                                                    
tax could purchase tax credits  to offset that liability, an                                                                    
estimated  $165 million  for 2011/12/13  they  hope will  be                                                                    
used to absorb some of  the hanging tax credit balances that                                                                    
are out there.                                                                                                                  
                                                                                                                                
MR. ALPER  stated that some  changes were made prior  to the                                                                    
regulations   being  final.   The  conditional   exploration                                                                    
certificates  were issued  right  away.  The department  had                                                                    
close  to $100  million  worth  of exploration  applications                                                                    
sitting in the  work pool, and all of those  were able to be                                                                    
2017 tax credit certificates.                                                                                                   
                                                                                                                                
As they  are ranked for  cash, the  process is to  first pay                                                                    
off all of  the 2016 originating certificates,  then pay off                                                                    
all the  2017s, and all  of the  2018s. Within the  2017s is                                                                    
where the local hire rank order  will come in, but the first                                                                    
and most important rank order is by year of origin.                                                                             
                                                                                                                                
9:34:02 AM                                                                                                                    
CHAIR GIESSEL asked  if it was possible for  the division to                                                                    
deny a conditional credit.                                                                                                      
                                                                                                                                
MR. ALPER replied  that the guidance per HB 111  is that the                                                                    
conditional credit  is given when  it's requested,  so there                                                                    
is no  review initially.  But the conditional  credit cannot                                                                    
be sold  or cashed. It's  simply a place holder.  They can't                                                                    
get any money until the  department has issued it. The audit                                                                    
process will kick  in between the issuing of  the credit and                                                                    
the finalizing of  it, and that is where  some adjustment is                                                                    
made or  perhaps denying  them outright  if for  some reason                                                                    
the  applicant is  not eligible.  Up until  that point,  the                                                                    
conditional  certificate is  for 100  percent of  the amount                                                                    
requested.                                                                                                                      
                                                                                                                                
CHAIR  GIESSEL   asked  the  likelihood  of   a  conditional                                                                    
application being denied.                                                                                                       
                                                                                                                                
MR.  ALPER  replied  it  is  very  rare  for  a  conditional                                                                    
application to  be denied. He  explained to qualify  for the                                                                    
exploration credit  expenditures have to be  from outside of                                                                    
a unit boundary;  sometimes an application is  a hybrid for,                                                                    
for instance, a  seismic shoot where some of it  is inside a                                                                    
unit and some  of it is outside, and the  acreage inside the                                                                    
unit  has  to  qualify  for the  operating  loss  credit  or                                                                    
something similar. So, they have to be reallocated.                                                                             
                                                                                                                                
A reserve fee for a rig  that never got used during the year                                                                    
can't be credited in that year, but  if the rig is used in a                                                                    
subsequent  year, those  costs  can be  brought forward  and                                                                    
claimed  then.  Adjustments  can  always be  made,  but  the                                                                    
auditors are  much deeper into  those details. He  could say                                                                    
that it would be very unusually  for a credit to be rejected                                                                    
outright.                                                                                                                       
                                                                                                                                
9:36:36 AM                                                                                                                    
CHAIR GIESSEL  asked if the conditional  credit was accepted                                                                    
with the adjustments.                                                                                                           
                                                                                                                                
MR. ALPER replied that once  the adjustments are made, it is                                                                    
no  longer a  conditional application.  For instance,  for a                                                                    
$10  million credit  application, the  department will  give                                                                    
them  a  $10 million  conditional  credit  to reserve  their                                                                    
place in line.  It's worth only a $9.5 million  but now it's                                                                    
a real credit and it's eligible for cash.                                                                                       
                                                                                                                                
CHAIR  GIESSEL asked  now  that real  credit  that has  been                                                                    
reviewed goes  into the  queue in  priority, is  it possible                                                                    
they moved from slot 4 to slot 10.                                                                                              
                                                                                                                                
MR. ALPER recalled that DOR  gave out 12 conditional credits                                                                    
in August.  Of those  12, 7  were finalized  before December                                                                    
31,  anyway. So,  it  wouldn't have  mattered,  but for  the                                                                    
other 5 who  won't be getting their  final certificate until                                                                    
sometime in  2018, they are  reserving their  identical spot                                                                    
in the 2017 pool.                                                                                                               
                                                                                                                                
No 2017 certificates  have been purchased yet  and there are                                                                    
about $400 million worth of  2016 certificates on the books.                                                                    
The next  $400 million appropriated by  the legislature will                                                                    
pay off  those 2016  certificates before  getting to  any of                                                                    
the   2017   certificates.   The    caveat   is   that   the                                                                    
administration will possibly bond for  this and pay them off                                                                    
in a different manner.                                                                                                          
                                                                                                                                
MR.  ALPER stated  that hypothetically,  if the  legislature                                                                    
appropriated  $500  million  in   the  coming  budget  cycle                                                                    
towards tax  credits, that would  entirely pay off  the 2016                                                                    
pool and the first $100 million  of the 2017 pool. Then they                                                                    
would  get to  the rank  order question.  Under the  current                                                                    
rules, the  priority among the  2017 pool would go  to those                                                                    
with the highest Alaska resident hire.                                                                                          
                                                                                                                                
CHAIR GIESSEL said she appreciated the clear explanation.                                                                       
                                                                                                                                
9:39:21 AM                                                                                                                    
SENATOR  BISHOP wondered  if  he had  ever  seen a  positive                                                                    
adjustment for conditional credits.                                                                                             
                                                                                                                                
MR. ALPER answered  yes, although it's less  common, and not                                                                    
just for  exploration credits.  All credit  applications are                                                                    
reviewed and  occasionally a  company has  made an  error in                                                                    
the state's favor and the state will correct it.                                                                                
                                                                                                                                
CO-CHAIR  MACKINNON asked  if Mr.  Alper was  at liberty  to                                                                    
share the  legal opinion  from the  Attorney General  on the                                                                    
department's ability  to divert money  from the CBRF  to pay                                                                    
tax credits.                                                                                                                    
                                                                                                                                
MR. ALPER  replied that he  did not  know if he  could share                                                                    
the actual document,  but he had shared the content  of it a                                                                    
couple slides ago.                                                                                                              
                                                                                                                                
9:40:46 AM                                                                                                                    
MARY  HUNTER GRAMLING,  Assistant Attorney  General* Natural                                                                    
Resources  Section* Department  of Law*  commented that  she                                                                    
didn't have  authority today  to say  whether they  would be                                                                    
able to  provide that document  to the committee.  She could                                                                    
say  that it  was in  part based  on a  recent Alaska  court                                                                    
decision in  Wielechowski versus State where  the state took                                                                    
the position  that the  Permanent Fund  as a  dedicated fund                                                                    
should  be construed  narrowly. When  they were  factoring a                                                                    
dedicated  fund analysis  into HB  111, the  CBRF is  also a                                                                    
dedicated fund  and should be  construed narrowly,  as well,                                                                    
just to  be consistent.  The bill  passed, and  the decision                                                                    
came down on another  dedicated constitutional fund, and DOL                                                                    
took another look at it.                                                                                                        
                                                                                                                                
CO-CHAIR  MACKINNON said  she could  only speak  for herself                                                                    
regarding the  use of  the CBRF and  moving funds  away from                                                                    
deposit, that the  legislature has tried to  pay tax credits                                                                    
two times  through the CBRF  and the Governor has  chosen to                                                                    
veto them. So,  she needed to see that legal  opinion to see                                                                    
if it's consistent with the case she is referring to.                                                                           
                                                                                                                                
MS. GRAMLING stated that sections 9,  11, and maybe 16 of HB                                                                    
111  incorporate some  CBRF language  and that  is why  that                                                                    
interpretation  was required  to implement  this bill.  That                                                                    
carry   back   concept  was   not   a   suggestion  by   the                                                                    
administration.  Mr.  Alper said it had to be  in there, but                                                                    
she didn't know  if that is necessarily true. It  is the law                                                                    
now  that   carry  backs  can't  divert   money  that  would                                                                    
otherwise go  to the CBRF.  As a  matter of law,  she didn't                                                                    
know if that restriction could be deleted.                                                                                      
                                                                                                                                
CO-CHAIR  MACKINNON clarified  that she  wanted to  pay back                                                                    
the tax credits and wants  to be legally consistent with how                                                                    
funds are deposited into the CBRF.                                                                                              
                                                                                                                                
9:44:09 AM                                                                                                                    
SENATOR BISHOP said  what got his attention on  this was the                                                                    
TransAlaska Pipeline System (TAPS)  valuation that drove the                                                                    
$165 million  and it sounds like  a tariff is not  a tax. He                                                                    
needed some clarification on that.                                                                                              
                                                                                                                                
MR.  ALPER stated  that  a tariff  is  not a  tax;  it is  a                                                                    
commercial transaction  paid from  the company  shipping oil                                                                    
to the  company that  owns the  pipeline. The  CBRF receives                                                                    
revenue  resulting  from  an  administrative  proceeding  or                                                                    
settlement  of litigation  and a  whole  series of  clauses,                                                                    
related to tax. Because the tariff  isn't a tax, the guts of                                                                    
this  AG's opinion  was they  didn't pay  enough taxes,  and                                                                    
those lawsuits definitely  go to the CBRF.  But because it's                                                                    
really  a  tariff issue,  the  tax  indirectly impacted  the                                                                    
tariff calculation  and there wasn't  a hard  requirement to                                                                    
divert that money to the CBRF.                                                                                                  
                                                                                                                                
9:45:48 AM                                                                                                                    
Slide 12: "Regulations Packet 2"                                                                                                
                                                                                                                                
MR. ALPER  said this  is the regulations  packet that  is in                                                                    
the  public review  period right  now. The  "carried forward                                                                    
annual  losses"  had  some   issues:  the  allocation  among                                                                    
properties  and segments,  application  of the  "ringfence,                                                                     
and taxpayer flexibility on use.                                                                                                
                                                                                                                                
One provision  that evolved working through  the legislative                                                                    
process had  to do  with: ok, I've  spent a  billion dollars                                                                    
and  I'm  holding   this,  and  now  my  oil   field  is  in                                                                    
production. How do I use  that billion dollars per year? One                                                                    
version of  the bill said  it could be  used to get  down to                                                                    
the minimum tax level, but the  problem with that is what if                                                                    
that means  I can't use  my per  barrel credits. What  if my                                                                    
tax liability per  the tax calculation is  $500 million, but                                                                    
my actual  tax owed is only  $100 million. So, I'm  going to                                                                    
have $400 million worth of  per barrel credits. The way that                                                                    
provision was  written they would  have lost the  ability to                                                                    
use that  $400 million. So, by  allowing maximum flexibility                                                                    
for  the taxpayer,  they get  to preserve  their ability  to                                                                    
carry  those lease  expenditures forward  into future  years                                                                    
and not potentially lose that value.                                                                                            
                                                                                                                                
He said  that Mr. Ruggiero, the  LB&A consultant, frequently                                                                    
testified  about   maximizing  the  ability  to   use  carry                                                                    
forwards, because cost  recovery is an essential  tenet in a                                                                    
net profits-based  system. And  the legislature went  to the                                                                    
maximum degree to preserve the  ability for cost recovery in                                                                    
the final language.  That is in AS 43.55.165(m)  or (n), the                                                                    
new  subsections that  were added  to the  lease expenditure                                                                    
sections of law.                                                                                                                
                                                                                                                                
MR. ALPER said the  "downlift" calculation is interesting in                                                                    
what triggers it: if lease  expenditures are not used for 10                                                                    
years,  they begin  to  lose  value at  10  percent of  that                                                                    
amount per  year. But  the syntax of  that was  subjected to                                                                    
competing ideas: is  it 10 percent of the  entire value that                                                                    
is lost  every year  or 10 percent  of the  remaining value?                                                                    
For example,  if you have 100  and you lose 10  percent, the                                                                    
next year  you have 90. If  you still haven't used  them the                                                                    
year  after that  do you  go down  to 80  or do  you use  10                                                                    
percent  of the  90 and  go down  to 81?  Given the  way the                                                                    
section was written,  the answer was 81,  but some preferred                                                                    
80.  So,  the regulations  were  written  to assure  the  81                                                                    
definition.                                                                                                                     
                                                                                                                                
Also,  a fair  amount  of  time was  spent  on  the idea  of                                                                    
"reasonably related." The  regulation package made available                                                                    
to the committee  is long and a  lot of the pages  in it are                                                                    
examples for illustrative purposes  to interpret the intent,                                                                    
and  in  many  ways  are   the  most  helpful  part  of  the                                                                    
regulations   package.   The   department   is   trying   to                                                                    
appropriately interpret  the will of the  legislature in the                                                                    
guidance they gave to through the bill, itself.                                                                                 
                                                                                                                                
Where are  we in  the process? Mr.  Alper answered  that the                                                                    
discussion draft went out. This  package has already had two                                                                    
drafts, a preliminary  draft went out on  November 18th, and                                                                    
because  it wasn't  an official  public  notice, they  could                                                                    
talk freely  with companies about  it, and get  their input,                                                                    
and that was  very helpful in cleaning up  the public notice                                                                    
of the  official draft package  2 which didn't  happen until                                                                    
December  21.  Mr.  Alper  said they  decided  to  have  the                                                                    
hearing during the holidays because  it was important to get                                                                    
it done.  They apologized  to industry and  the legislature,                                                                    
but  they ran  out of  calendar and  wanted to  get it  done                                                                    
before the session. The public  comment period closes in one                                                                    
week.                                                                                                                           
                                                                                                                                
9:51:00 AM                                                                                                                    
CHAIR GIESSEL  considered the statement from  the Department                                                                    
of Law  and said that  the regulation package 2  actually is                                                                    
not something the committee could  comment on today, because                                                                    
it is still out, and this is not official public testimony.                                                                     
                                                                                                                                
MR. ALPER responded  that she could comment  on anything she                                                                    
wants,  but she  might not  be satisfied  with the  depth to                                                                    
which they could respond to them.                                                                                               
                                                                                                                                
CHAIR GIESSEL asked if they  were free as citizens to submit                                                                    
written comments to him on that package.                                                                                        
                                                                                                                                
MR. ALPER answered yes.                                                                                                         
                                                                                                                                
SENATOR  VON IMHOF  referenced slide  11  and the  language,                                                                    
"additional tax liability due to  the recent TAPS settlement                                                                    
is not  required to go  to the CBR,"  and asked if  the TAPS                                                                    
settlement  going  into  the  CBR  generated  any  interest,                                                                    
because she  sees regular additions  into the  CBR financial                                                                    
statements.                                                                                                                     
                                                                                                                                
MR. ALPER  answered that  ultimately the  settlement changed                                                                    
tariff  calculations and  reduced  the  allowable amount  of                                                                    
transportation expenditure  for the oil that  was shipped in                                                                    
the  affected   years.  That  reduced   transportation  cost                                                                    
filtered its way through the  tax calculation and lead to an                                                                    
additional tax liability. Then,  yes, interest is charged on                                                                    
that tax liability.                                                                                                             
                                                                                                                                
He explained  that the  authority granted  by the  bill that                                                                    
passed last year stated not  just the tax but the associated                                                                    
intertest  could be  offset by  transferred tax  credits. If                                                                    
for example, company  X owed $20 million in  taxes and turns                                                                    
into $30 million with all  of that compounded interest, they                                                                    
could go out  and buy $30 million worth of  tax credits from                                                                    
another  company for,  maybe, $25  million and  use that  to                                                                    
offset the full $30 million obligation.                                                                                         
                                                                                                                                
9:54:29 AM                                                                                                                    
CHAIR GIESSEL  asked about  regulation language  relating to                                                                    
sections 6,  9, and 16 in  HB 111 that refers  to the carry-                                                                    
back  tax credit  being applied  to satisfy  a tax  interest                                                                    
penalty,  fee, or  other charge;  yet  the regulations  have                                                                    
much  more limited  language  that refers  only  to the  tax                                                                    
interest and/or penalty  and left out "fee  or other charge"                                                                    
in various  places in  section 305(c).  She asked  Mr. Alper                                                                    
when  the  department writes  the  actual  language if  they                                                                    
focus on extracting  the actual language from  the bill that                                                                    
passed the  legislature. In HB  111 it  was in Section  6 AS                                                                    
43.55.023(c)).                                                                                                                  
                                                                                                                                
MR.  LARSEN  answered that  the  language  reads: "[3)  may,                                                                    
regardless  of  when  the  credit was  earned,  be  used  to                                                                    
satisfy  a  tax, interest,  penalty,  fee,  or other  charge                                                                    
that" and prohibitions follow under  paragraphs (A) and (B).                                                                    
Paragraph  (A)  says, "[except  for]  a  surcharge under  AS                                                                    
43.55.201 -  43.55.299 or  43.55.300...." He  explained that                                                                    
the reason the  language was proposed and adopted  as it was                                                                    
is that the  department is not aware of  any additional fees                                                                    
other  than the  principal  portion, the  interest, and  the                                                                    
penalty. The  penalty would  be considered to  be a  part of                                                                    
the administrative proceeding because  it normally falls out                                                                    
from  the  issuance of  a  letter  from the  department  for                                                                    
something like a late filing.   However, the language of the                                                                    
regulation  says if  someone self-reports  a  penalty -  for                                                                    
example,  if they  knew they  misfiled or  filed late  - and                                                                    
thereby  avoid the  administrative  proceeding (letter  from                                                                    
the audit department) they can  use the carry-back credit to                                                                    
pay that portion of the penalty.                                                                                                
                                                                                                                                
9:58:32 AM                                                                                                                    
CHAIR  GIESSEL said  her fundamental  understanding of  that                                                                    
was  the  rationale  for  leaving  out  the  "fee  or  other                                                                    
charges" is  at this point  the tax division  doesn't charge                                                                    
any other fees or other charges.                                                                                                
                                                                                                                                
MR. ALPER  clarified that Mr.  Larsen said in  the reference                                                                    
to  AS 43.55.200-300  that  the surcharge  is  the nickel  a                                                                    
barrel  conservation  surcharge  that   goes  to  the  Spill                                                                    
Cleanup and Response Fund that  could be construed as a fee,                                                                    
but  that was  specifically carved  out from  this. So,  the                                                                    
chair  is correct,  the department  doesn't  have any  other                                                                    
fees.                                                                                                                           
                                                                                                                                
CHAIR  GIESSEL said  if the  department were  to impose  any                                                                    
other  fees at  some point  in the  future, the  legislative                                                                    
intent is  the application of  the statute in that  case for                                                                    
future  fees to  be offset  by credits,  but the  word "fee"                                                                    
isn't in the regulations.                                                                                                       
                                                                                                                                
MR. LARSEN  added that  he was  unsure under  what authority                                                                    
the department  would impose  any other  fees. If  fees were                                                                    
added, at  that point in  time, that "fee or  other charges"                                                                    
language  would probably  be added  to the  regulation.   In                                                                    
working on language  with the DOR and DOL  the consensus was                                                                    
that since there  are no other fees that  it was appropriate                                                                    
to not include that language in the regulation now.                                                                             
                                                                                                                                
MR. ALPER added  that if another fee was added,  it would be                                                                    
through  legislation, and  the appropriate  regulation would                                                                    
be added at that time.                                                                                                          
                                                                                                                                
10:01:00 AM                                                                                                                   
SENATOR VON  IMHOF asked  if the original  intent of  HB 111                                                                    
was to disallow  a carry-back tax credit from  being used to                                                                    
create a  tax overpayment over a  claim for a refund  or was                                                                    
the carry  forward just going to  be used a little  bit each                                                                    
year  and then  kicked forward  until  it was  used up.  She                                                                    
recalled  that the  legislature didn't  want to  create that                                                                    
restriction.                                                                                                                    
                                                                                                                                
MR. ALPER  answered the circumstance he  was concerned about                                                                    
and brought to the  Senate Finance Committee's attention was                                                                    
what if  someone has paid their  2011 taxes in full  but was                                                                    
going to  buy a tax  credit and apply  it to the  2011 taxes                                                                    
that  would  now  be  overpaid,  the  cash  refund  being  a                                                                    
possible workaround  to the limitation  on cash  through the                                                                    
Tax Credit Fund.   He had not perceived that  as the will of                                                                    
the  committee,  and  in fact,  Co-Chair  MacKinnon  read  a                                                                    
statement saying  that was  not the intent  of the  bill and                                                                    
the department felt like it  had clear guidance to make sure                                                                    
to not  create the opportunity for  a purposeful overpayment                                                                    
leading  to a  cash refund  and implemented  the regulations                                                                    
that way.                                                                                                                       
                                                                                                                                
SENATOR VON IMHOF  said she understood the  example of taxes                                                                    
being closed  and paid but  what about taxes that  are still                                                                    
open? She remembers that six  years of back taxes were still                                                                    
under review.  She asked if  a company could apply  a credit                                                                    
to a tax audit that is still open.                                                                                              
                                                                                                                                
MR. ALPER replied typically  companies refile taxes multiple                                                                    
times over  the years  because something changes.  This TAPS                                                                    
settlement  is one  example. What  will  actually happen  in                                                                    
practice  - 2011/12/13  were high  tax  years and  companies                                                                    
were paying  the state  billions of dollars  - is  company X                                                                    
thought it owed $1.1 billion  and now they owe $1.2 billion.                                                                    
The  thinking would  be  to  buy credits  to  pay that  $100                                                                    
million  of incremental  tax.  If the  tax  account is  open                                                                    
because  it is  being audited,  that  audit is  in the  CBRF                                                                    
restriction. It's  offset-able anyway  and it falls  out the                                                                    
carry back.   If there had been a refile  of some other sort                                                                    
that leads  to a  tax liability, that  tax liability  can be                                                                    
offset with these carry-backs. The  department wants to make                                                                    
sure  if there  is  no refile  and no  indication  of a  tax                                                                    
liability,  disputed  or  otherwise, that  the  tax  credits                                                                    
could be  applied to overpay  something that  doesn't exist.                                                                    
He added  that he might  need a  little more clarity  on her                                                                    
envisioned circumstance.                                                                                                        
                                                                                                                                
SENATOR VON IMHOF said he  answered it. She believes that it                                                                    
makes  sense  if due  to  a  refile  there is  a  subsequent                                                                    
liability,  yes,  they ought  to  be  able  to use  the  tax                                                                    
credits to offset that.                                                                                                         
                                                                                                                                
MR. ALPER responded  that is he understood it;  there has to                                                                    
be liability, some justification in  the math, that says the                                                                    
liability exists.                                                                                                               
                                                                                                                                
SENATOR VON IMHOF said she understood and thanked him.                                                                          
                                                                                                                                
10:04:47 AM                                                                                                                   
CO-CHAIR  MACKINNON  asked if  it  is  illegal to  purposely                                                                    
overpay taxes.                                                                                                                  
                                                                                                                                
MR. ALPER answered  not to his knowledge, but  he wanted Mr.                                                                    
Larson to answer that.                                                                                                          
                                                                                                                                
MR. LARSEN said he agreed with Mr. Alper.                                                                                       
                                                                                                                                
CHAIR  GIESSEL thanked  them for  the overview.  She pointed                                                                    
out that  the Administrative Regulation Review  Committee no                                                                    
longer  exists,   and  that  review  is   a  function  being                                                                    
performed  by  the  joint meeting  today.  She  thanked  the                                                                    
committees for their time.                                                                                                      
                                                                                                                                
10:06:39 AM                                                                                                                   
CHAIR GIESSEL,  finding no  further comments,  adjourned the                                                                    
meeting at 10:06 a.m.                                                                                                           
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
Sen Resources Agenda - Jan 19 - 2018.pdf SRES 1/19/2018 9:00:00 AM
Sen Resources
SenRes SenFin Presentation from Dept of Rev - Regulations Re HB 111 - Jan 19 - 2018.pdf SRES 1/19/2018 9:00:00 AM
HB 111
HB 111 Reg Package Number 1.pdf SRES 1/19/2018 9:00:00 AM
HB 111
HB 111 Reg Package Proposed Number 2.pdf SRES 1/19/2018 9:00:00 AM
HB 111