SPONSOR SUBSTITUTE FOR SENATE BILL NO. 230 "An Act establishing the film office in the Department of Commerce, Community, and Economic Development; and creating a transferable tax credit applicable to certain film production expenditures incurred in the state." Co-Chair Hoffman MOVED to adopt the Work Draft to SB 230, 25-LS1275/V, 2/28/08, Bullard. Co-Chair Stedman OBJECTED. 9:50:51 AM DARWIN PETERSON, STAFF, SENATOR STEDMAN, addressed the changes in CSHB 273: · Page 1 includes a title "and providing for an effective date". · Page 2, line 5 inserts a new section requiring the credits to be used within 3 years. · Page 2, line 29 added sections (c) and (d) requires the commissioner to appoint the director of the film office from a list of five names provided to the commission by the Alaska Film Group. The intent is to make sure that there is partnership between the public and private sector to ensure success of the office. · Page 3 line 9, increases the qualifying expenditures from $50,000 to $100,000. Additional language clarifies that the $100,000 has to be reached within a consecutive 24 month period. · Page 3, line 12, subsection (b) provides a list of productions that are not eligible for the credit. Three productions were removed from that section which takes them from the ineligible list, thereby making them eligible for the credit. The three productions removed are: finance, talk and game shows, sporting events and award shows. · Page 5, line 25 provides a list of expenses that qualify for the tax credit. The cost of state and municipal taxes levied on rental cars and lodging was added as a qualified expense. · Page 5, line 29, subsection (b) is a list of expenditures that do not qualify for credit. The addition to that list is on page 6, line 9; compensation and wages paid to a highly compensated individual, (defined on page 10). · Page 6, lines 16 & 18, definitions for "commissioner" and "department" were added. · Page 6, line 28 is repealer language due to the 5 year sunset for the tax credit. · Page 7, line 9 establishes the July 1, 2013 sunset language and transition language. Lines 1-8, allow a company to receive the tax credit if they qualify prior to the sunset date. Senator Elton asked about a change on page 2 regarding the hiring from a list provided by the Alaska Film Group. He registered concern that a special interest group would prepare the list and the commissioner was limited to hiring from that list. He was unaware of any other authority within government employing this form of hiring. Mr. Peterson said the previous film office had not been very successful. He explained that it is important that those hired for the position have an understanding of the film industry and the ability to establish and maintain a relationship with the private sector. 9:56:57 AM Senator Elton said there are many positions that require an ability to work with the private sector. He said he appreciated the reason for the accommodation, but was still uncomfortable with the change. He felt that it is the responsibility of the commissioner to resolve employee problems as well as hire adequately qualified staff. Senator Ellis said he appreciated the work of the Committee and that there has been a good collaborative process. Co-Chair Stedman said he felt that there has been success with the fish tax credit. The bill is an attempt to provide the same incentive to the film industry. The sunset date allows the legislature to review credits and the potential impact to the state treasury. It will allow them to determine if there is a benefit from the provision. 9:59:25 AM Senator Ellis said there have been over 75 letters of support for SB 230 including, cities, native corporations, municipal conferences, University of Alaska, labor, and business groups. Co-Chair Hoffman referenced page 6 line 25 and pointed out that Bethel would not be considered rural under the definition. He asked where "rural" is referred to in the bill. 10:01:11 AM Senator Ellis said SB 230 uses the standard definition of "rural" from other statutes. He said he would be open to a change if some adjustment needed to be accommodated. Co-Chair Hoffman said he thought the overall definition should be addressed at some point. He stated the community had grown over the years, changing the rural status. He wondered if there were other rural communities in a similar situation. He asked the sponsor to identify the reference to rural in the legislation. Senator Stedman was uncertain as to why Juneau would be included in the definition and Bethel would not be included. Senator Elton said he understood rural to be defined as "not connected by road or rail". The Alaska Marine Highway is not considered road and that is why Juneau would qualify as rural even though the population is over 30,000. He thought the reason for the distinction within the provision was to address the higher costs of production in rural areas. MAX HENSLEY, STAFF, SENATOR JOHNNY ELLIS, clarified that on Page 4, lines 13 & 14 provide for an additional 2 percent credit above the base credit, for qualified expenditures made in rural areas. Co-Chair Hoffman said he found no need to address the definition in SB 230. 10:03:04 AM Senator Elton addressed the issue of defining "rural". He noted that under the definition Juneau could qualify for the credit and Bethel may not. He thought that was odd as the costs for production would likely be much higher in Bethel. Mr. Hensley referenced page 6, line 25, which defines rural as a community with a population of 1,500 or a community with 5,500 or less that is not connected by road or rail to Anchorage and Fairbanks. 10:05:17 AM MARK BRINSTER (Testified via teleconference), in support of SB 230. He explained that when film makers come to Alaska they do not hire Alaskans. He felt this could be addressed by providing incentives to hire qualified local Alaskans. He questioned the allowed "qualified expenses" and explained that many of the expenses are not within the local economy. 10:10:17 AM TERRI GOTTSTEIN (Testified via teleconference), in support of SB 230. She endorsed comments regarding the diversification of our economy. She pointed out that film location selections are driven in two ways, by story; and by business. Alaska can do some things to promote story there are a number of things the state can do to promote business. She pointed out that the longer daylight hours provide the opportunity to shoot more footage in a day. She also pointed out that the cost of filming in Alaska is less than in Canada due to the value of the dollar. 10:13:08 AM PAM FOREMAN (Testified via teleconference), in support of SB 230 and provided examples of missed opportunities due to a lack of tax credits available to producers. She urged passage of SB 230. SANDY LORRIGAN, DIRECTOR, SITKA CONVENTION AND VISITOR BUROUGH (Testified via teleconference), in support SB 230. She provided examples of missed opportunities to for Alaskan productions. She underlined the importance of film tax incentives to attract film makers to Alaska. REED STOOPS, LOBBYIST, MOTION PICTURE ASSOCIATION, testified in support of SB 230. He explained that ten other states adopted similar legislation in the last year. He said both the tax credit and the reinstitution of the film office will encourage film production in Alaska. AT EASE: 10:18:54 AM RECONVEINE: 10:20:54 AM Co-Chair Stedman noted a previous concern by Senator Elton. 10:21:27 AM Senator Elton MOVED to adopt a conceptual amendment to reflect that the commissioner "shall" consider appointing the director of the film office from a list of 5 candidates submitted by the Alaska Film Group. This allows for the submission of names, but does not limit the commissioner's ability to hire outside of the list. Senator Ellis felt that the conceptual amendment was a reasonable compromise. There being NO OBJECTION, the conceptual amendment was adopted. Co-Chair Hoffman MOVED to REPORT CSSB 230 out of Committee, as amended, with individual recommendations and accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSSB 230(FIN) was REPORTED out of Committee with a "do pass" recommendation and with a new zero fiscal note by the Department of Revenue and with a new fiscal note by Department of Commerce, Community and Economic Development. 10:23:40 AM