HOUSE BILL NO. 233 "An Act relating to the insurance tax education credit, the income tax education credit, the oil or gas producer education credit, the property tax education credit, the mining business education credit, the fisheries business education credit, and the fisheries resource landing tax education credit; providing for an effective date by repealing the effective dates of secs. 3, 5, 7, 10, 14, 16, 18, 21, 23, 25, 28, 30, 32, 35, 37, 39, 42, 44, 46, 49, 51, 53, and 55, ch. 92, SLA 2010, sec. 14, ch. 7, FSSLA 2011, secs. 15, 17, 19, 21, 23, and 25, ch. 74, SLA 2012, sec. 49, ch. 14, SLA 2014, secs. 37, 40, 43, and 46, ch. 15, SLA 2014, and secs. 26 and 31, ch. 61, SLA 2014; providing for an effective date by amending the effective date of secs. 1, 2, and 21, ch. 61, SLA 2014; and providing for an effective date." Co-Chair Foster relayed that the committee had last heard HB 233 on March 27, 2018. At the hearing the committee had an introduction of the bill and closed public testimony. The committee had 2 amendments for the bill. He called Representative Tuck and his aide, Kendra Kloster, to the table. He provided the opportunity for the bill sponsor to make comments. 2:46:01 PM REPRESENTATIVE CHRIS TUCK, SPONSOR, introduced himself. He explained that originally, when he was looking at extending education tax credits, he was aware there were several statutes involved. He had thought about ways to make improvements and to make things cleaner when considering introducing the legislation. He continued that because of the time restrictions and the expiration date approaching, he decided to make it a clean bill only extending it. He might try to work on other items at a future date. Co-Chair Seaton MOVED to ADOPT Amendment 1 30-LS0152\O.1 (Nauman, 3/28/18) (copy on file). Representative Wilson OBJECTED for discussion. Co-Chair Seaton thought the amendment brought up an issue that needed to be discussed in detail. There was a situation where after the first $100,000 the state was giving a 100 percent tax credit for the following $200,000. It was essentially allowing someone that wanted to donate not to donate at all. It would direct the taxes they would pay to the state to one of the approved groups by doing it without any additional money coming from an organization or tax payer. The amendment was structured at the 50 percent tax credit and would stay the same across the entire $5 million range. He was aware that a significant amount of discussion would be necessary. He thought the topic was very important, especially because of the state's current fiscal situation. He wanted to encourage contribution to educational institutions. The question was how much the state wanted to put into the tax payer's hands without any additional skin in the game. He thought the issue was definitely something to look at and discuss. He did not think it was currently the appropriate time. He thought the issue should be dealt with in a separate bill. Co-Chair Seaton WITHDREW Amendment 1. Co-Chair Seaton MOVED to ADOPT Amendment 2 30-LS0152\O.5 (Nauman, 3/29/18) (copy on file). Representative Wilson OBJECTED for discussion. Co-Chair Seaton moved Conceptual Amendment 1 to Amendment 2: In line 2 of the amendment insert the words "as they" after "delete" and before "appear" Representative Wilson OBJECTED for discussion. Co-Chair Seaton explained that when Legislative Legal Services drafted the amendment, they did not take out all of the words that needed to be removed. Representative Wilson WITHDREW her OBJECTION. There being NO OBJECTION, it was so ordered. Conceptual Amendment 1 to Amendment 2 was ADOPTED. Co-Chair Seaton explained Amendment 2. The amendment was eliminating one of the criteria for a tax credit for cash contributions; an annual intercollegiate sports tournament. The item occurs in several places with several different taxes. The words being deleted would be "or an annual intercollegiate sports tournament." Representative Kawasaki commented on the way the amendment read. He was wondering if the word "by" should be replaced with "of" [Line 19 of the amendment]. 2:52:11 PM AT EASE 2:53:25 PM RECONVENED Co-Chair Foster invited Mr. Spanos to comment. 2:53:39 PM BRANDON S. SPANOS, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE, responded that the "by" was referring back to subsection (a) where it read "for contributions accepted." It would be "by the non-profit, public or private, Alaska two-year or four-year college." It was not referring back to the facility, but the funds that were received by the organization. Representative Grenn assumed that the item was in reference to the Great Alaska Shootout which no longer existed. He asked if there were other annual intercollegiate sports tournaments that had received funds through this particular tax credit. Mr. Spanos responded that he was not aware of any. Representative Grenn relayed that he was looking for any unintended consequences of the removal. Representative Pruitt asked about other sports that might potentially put on a tournament. With adopting this amendment there would no longer be the ability for people to utilize the tax credit to support other potential tournaments. He noted a number of sports that might have a tournament in the future. Mr. Spanos indicated, based on the plain language, that was how he would interpret it. Representative Pruitt suggested that if Alaska was to host a regional final, donors would not be able to utilize the education tax credit. Mr. Spanos replied that a corporation would no longer be able to receive a tax credit. Representative Pruitt did not see harm in leaving the credit available. He did not believe getting rid of it was needed. Co-Chair Seaton clarified that the tax credit was meant for an annual event rather than a onetime credit. He argued that the tax credit should be concentrated on pre-K, K-12, and University education. It was not a sports credit. 2:57:48 PM Representative Pruitt MOVED Conceptual Amendment 2 to Amendment 2. Delete only the word "annual" Representative Kawasaki OBJECTED. Representative Pruitt explained his amendment to the amendment. He believed that sports were a part of education. He suggested that the National Collegiate Athletic Association (NCAA) consistently promoted that their athletes did very well in school and moved on to become very successful. He spoke of Olympic athletes and the discipline they learned and applied in many areas of their lives. He felt that sports were important, and it would be an opportunity for people to support an event where they showcased student athletes. Vice-Chair Gara spoke to his objection. He suggested that with this tax credit the legislature did not get to direct where the funds went. The state gave up $6.8 million in revenue per year. He understood the benefits but did not believe they had been sorted out. For example, if a person donated to any collegiate sports event at the university, they could donate through the non-profit which was tax deductible at the federal level already. A person was likely receiving a 25 percent tax deduction, which was similar to a credit of their federal taxes. Certainly, the university could go to Exxon or GCI and request a donation. He was unsure if a state tax credit on top of a federal tax credit made much of a difference. He agreed with Co-Chair Seaton that the bill got amended when the state had a huge amount of money. Currently, the state had a deficit of roughly $2.5 billion. He would rather rely on a federal tax bonus that a donor received by being able to deduct the costs from their federal taxes. He noted the importance of ranking things. He was not willing to forego state revenue. Representative Guttenberg objected to the amendment. He thought there were many bragging rights that accompanied sponsorship. Corporations and individuals participated for a variety of reasons. He thought the cream of having an additional tax deduction was beyond the pale. 3:02:55 PM Representative Thompson asked for Representative Pruitt to repeat the conceptual amendment. Co-Chair Foster responded that the amendment to the amendment removed the annual part of the language. Representative Pruitt explained that the conceptual amendment would leave the language "or an intercollegiate sports tournament" in the various places in the bill. The only portion being removed was the word, "annual." He thought the first two lines would have to be removed. It would allow for donations to a collegiate tournament like the Great Alaska Shootout. Representative Thompson thought that even if the word "annual" was left in, the bill was still being altered, He spoke of several intercollegiate tournaments. He thought it would be beneficial to the state if there could be more intercollegiate tournaments and suggested the amendment might clarify things. Representative Pruitt's intent was that even something that was held annually but not in Alaska would be able to participate in the tax credit. Co-Chair Seaton indicated that the amendment was broadening the tax deductions and making it so that more general fund revenue could be diverted from being received in the general fund. The donor could receive a 100 percent tax credit with donations between $100,000 - $300,000. It would be diverting money that otherwise would go into the general fund. He did not believe the state was in a fiscal situation to be broadening tax credits. He opposed the conceptual amendment. It not only gutted the restrictions but expanded where tax credits applied. Representative Wilson suggested that by taking the word "annual" out, it would mean that the committee would be deleting "or an intercollegiate sports tournament". The word annual would be left in the bill. She did not believe that was the intent of the maker of the amendment. 3:07:36 PM Representative Pruitt explained that in the conceptual amendment the brackets were placed around the word "annual", rather than where they were currently in the amendment. Representative Wilson commented that the amendment made more sense. Representative Kawasaki cautioned that the conceptual amendment would broaden the tax credit. He was unaware of the fiscal impact but thought it could be high. He would be opposing it. Representative Kawasaki MAINTAINED his OBJECTION. A roll call vote was taken on the motion. IN FAVOR: Pruitt, Thompson, Tilton, Grenn OPPOSED: Wilson, Gara, Guttenberg, Kawasaki, Ortiz, Foster, Seaton The MOTION to adopt Conceptual Amendment 2 to Amendment 2 FAILED (4/7). Representative Pruitt did not have a problem with an event such as the Great Alaska Shootout or the Top of the World Classic tournament returning. He did not see a problem with leaving the language in the bill. He thought it would be great to have the credit available. He continued to speak in favor of leaving the language in statute. 3:11:17 PM Representative Thompson commented that the Great Alaska Shootout and the Top of the World Classic tournament had millions of dollars' worth of impact on communities. He thought the option should remain open for future utilization. Vice-Chair Gara was a big supporter of the Great Alaska Shootout and the Top of the World Classic tournaments. Businesses could still be approached with the incentive of a 25 percent tax deduction off their federal corporate taxes if they contributed. He posed the questions whether the tax credit really did anything and whether the state could afford it. He wondered about where the issue fell on everyone's priority list. He did not believe it was a priority. He appreciated the efforts of the American Legion. They had been working diligently to bring tournaments back. Representative Wilson WITHDREW her OBJECTION. Representative Pruitt OBJECTED. Representative Pruitt reiterated that there was no harm in leaving the language in place. He thought it was a means of encouragement and celebration. He did not think the state was losing anything, as there were currently no tournaments. A roll call vote was taken on the motion. IN FAVOR: Wilson, Gara, Guttenberg, Kawasaki, Seaton, Foster OPPOSED: Pruitt, Thompson, Tilton, Grenn, Ortiz The MOTION to adopt Amendment 2 as amended PASSED (6/5). Vice-Chair Gara reported that the fiscal note continued the estimated cost in lost revenue for the tax credits. He relayed that for half of FY 19, by continuing, lost revenue would be $3.42 million. In the out years it was estimated to continue at its current level, $6.84 million per year, of tax credits the state did not receive in revenue. Co-Chair Foster asked if the bill sponsor had any closing comments. Representative Tuck remarked that there had been a good dialog and thanked the committee. Co-Chair Seaton MOVED to report CSHB 233 (FIN) out of Committee with individual recommendations and the accompanying fiscal note. Representative Wilson OBJECTED for discussion. Representative Wilson asked whether there would be a forthcoming fiscal note or a previously published fiscal note. Co-Chair Seaton responded that it was a previously published fiscal note. Representative Wilson WITHDREW her OBJECTION. There being NO OBJECTION, it was so ordered. CSHB 233 (FIN) was REPORTED out of committee with four "do pass" recommendations, three "no recommendation" recommendations, and four "amend" recommendations, and with one previously published fiscal impact note: FN1 (REV). 3:16:58 PM AT EASE 3:18:24 PM RECONVENED