CS FOR SENATE BILL NO. 102(L&C) "An Act increasing the amount of revenue received by the state from charitable gaming activities; relating to taxes on pull- tabs; and providing for an effective date." This was the second hearing for this bill in the Senate Finance Committee. LARRY PERSILY, Deputy Commissioner, Department of Revenue, explained to the Committee that while the Department has not finalized its determination as to whether charitable gaming operations should be exempt from a proposed three percent State sales and use tax, he recommended "the specific exemption" of pull- tab operations as he opined that it would incur "an unfair and excessive burden" on those operations. Co-Chair Wilken noted that this issue has also been a point of discussion in separate legislation. Senator Bunde asked whether the Committee should further discuss this legislation's affect on the local sales tax issue. Co-Chair Wilken voiced that rather than continuing to discuss the issue in this Committee, the intent is to report the bill from Committee and allow the issue to be addressed by subsequent committees once the Department of Revenue has reached a determination regarding whether charitable gaming operations should be exempt from the proposed statewide sales tax. Senator Bunde moved to report the bill from Committee. Senator Olson objected to the motion. Senator Bunde withdrew the motion to report the bill from Committee. There being no objection, the motion was WITHDRAWN. AT EASE 10:04 AM / 10:06 AM [NOTE: Due to technical difficulties, the following portion of the meeting is not recorded.] Amendment #1: This amendment inserts new language into the bill as follows. Page 1, line 1: Following "Act" insert "relating to charitable gaming;" Page 1, following line 13: Insert a new bill section to read: Sec.2. AS 05.15.180(g) is amended to read: (g) A municipality or a qualified organization may award a maximum of $1,500,000 [$1,000,000] in prizes each year in activities authorized under this chapter; however, if a municipality or a qualified organization contracts with an operator to conduct on its behalf activities authorized under this chapter, the municipality or qualified organization may award a maximum of $500,000 in prizes each year. The holders of a multiple-beneficiary permit under AS 05.15.100(d) may award a maximum in prizes each year of $1,000,000 times the number of holders of the permit for activities authorized under this chapter. In this subsection, "activities authorized under this chapter" means all activities subject to this chapter other than bingo." Senator Olson moved to adopt Amendment #1. Co-Chair Green objected. Senator Olson commented that this amendment would allow charitable gaming operators to increase the maximum level of prize money being awarded from one million dollars to $1.5 million. He noted that this increase is supported by the Iditarod Trail Sled Dog Race organization because the prize payout limit, which was adopted in 1988, has become a limiting factor in the continuing growth and success of the Race. He stated that a letter [copy on file], dated May 6, 2003, from the Iditarod Trail Sled Dog Race has been provided to Committee members. Mr. Persily stated that the downside of the amendment is that some operators offer games on a rotation basis. Therefore, he continued, a game with a higher payout might delay the play of the subsequent game. Co-Chair Wilken asked whether the Iditarod Trail Sled Dog Race has reached the million-dollar prize limit. Senator Olson responded yes, as is specified in the letter. Co-chair Wilken clarified that the letter specifies that the organization has "come dangerously close." Senator Olson noted that the concern that the play of another game might be delay does not apply in the case. Co-Chair Green asked whether the amendment could specifically exempt the Iditarod Sled Dog Race rather than the whole "universe" of operators from the current prize limitation. Co-Chair Wilken stated that he could not support this amendment, as further study on its ramifications is necessary. Mr. Persily assured that the Department would provide recommendations regarding the downstream affect of raising the prize limit. Senator Taylor interjected that raising the prize limit would generate additional revenue. Mr. Persily responded that this might be correct for the specified entity; however, he continued that the question is whether it would negatively affect other entities' games. Senator Taylor clarified the intent of his comment to be that raising the limit would raise more money for the State as well as for the entity. Co-Chair Wilken voiced that the issue must be further developed to determine the range of ramifications. A roll call was taken on the motion. IN FAVOR: Senator Hoffman, Senator Olson, and Senator Taylor OPPOSED: Senator Bunde, Senator Stevens, Co-chair Green and Co- chair Wilken The motion FAILED (3-4) Amendment #1 FAILED to be adopted. Senator Bunde moved to report the bill from Committee with individual recommendations and accompanying fiscal note. Senator Hoffman objected. Senator Taylor objected. He voiced concern regarding the local sales tax issue. Mr. Persily affirmed that the bill does not include provisions addressing local sales taxes. Co-Chair Wilken reiterated that the issue would be further addressed in subsequent committees upon the issuance of a recommendation from the Department of Revenue regarding local taxation on pull-tab games. Senator Taylor clarified that a pull-tab operation would be paying the equivalent of a six percent tax were a three percent local tax and a three-percent State tax imposed. Co-Chair Wilken affirmed that the issue would be addressed. A roll call was taken on the motion. IN FAVOR: Senator Ben Stevens, Senator Bunde, Co-chair Green and Co-chair Wilken OPPOSED: Senator Taylor, Senator Hoffman and Senator Olson The motion PASSED (4-3) CS SB 102(L&C) was REPORTED from Committee with fiscal note #2 in the amount of $180,000 from the Department of Revenue. AT EASE 10:18 AM / 10:20 AM