SENATE JUDICIARY COMMITTEE April 21, 1993 1:45 p.m. MEMBERS PRESENT Senator Robin Taylor, Chairman Senator Rick Halford, Vice-Chairman Senator George Jacko Senator Suzanne Little Senator Dave Donley MEMBERS ABSENT All members present COMMITTEE CALENDAR SENATE BILL NO. 185 "An Act relating to the limitations period for assessments for certain state taxes, and for collection, after assessment, of taxes due the state; and providing for an effective date." HOUSE BILL NO. 181 am "An Act relating to the state's right to appeal in criminal cases; relating to sentence appeals; amending Rule 202 of the Alaska Rules of Appellate Procedure; and providing for an effective date." CS FOR HOUSE BILL NO. 254(JUD) am(ct rule fld) "An Act relating to open meetings of governmental bodies." PREVIOUS SENATE COMMITTEE ACTION SB 185 - See Judiciary minutes dated 4/20/93. HB 181 - No previous action to record. HB 254 - No previous action to record. WITNESS REGISTER Larry Meyers, Director Income & Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, AK 99811-0420 POSITION STATEMENT: Testified in support of SB 185 Paul Sullivan Exxon Co. USA 240 Main St., #202 Juneau, AK 99801 POSITION STATEMENT: Opposes SB 185 Attorney General Charles Cole Department of Law P.O. Box 110300 Juneau, AK 99811-0300 POSITION STATEMENT: Supports SB 185 Eric Musser, Staff to Representative Brian Porter State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Offered information on HB 181 Richard Monkman Alaska State Hospital & Nursing Home Association One Sealaska Bldg. Juneau, AK 998-1 POSITION STATEMENT: Addressed concerns with Section 3 of HB 254 Wendy Redman, Vice President for University Relations University of Alaska 910 Yukon Drive Fairbanks, AK 99775-2388 POSITION STATEMENT: Supports HB 254 Ken Swisher Alaska Municipal League 217 2nd St. Juneau, AK 99801 POSITION STATEMENT: Supports HB 254 ACTION NARRATIVE TAPE 93-47, SIDE A Number 001 Chairman Robin Taylor called the Judiciary Committee meeting to order at 1:45 p.m. SENATOR TAYLOR introduced SB 185 (LIMITATIONS PERIOD FOR TAX ASSESSMENTS) as the first order of business. LARRY MEYERS, Director, Income & Excise Audit Division, Department of Revenue, stated the department's support for SB 185. Number 040 SENATOR TAYLOR asked Mr. Meyers what currently is the oldest unresolved tax case. LARRY MEYERS responded that the oldest unresolved tax case in the Income & Excise Audit Division was approximately ten years old. Number 075 PAUL SULLIVAN, General Tax Counsel, Exxon Company, U.S.A., stated the company's strong opposition to SB 185. Mr. Sullivan said the committee is being asked to consider a bill containing statements of "legislative findings and purpose" that are clearly incorrect and not factually supported. He said the facts are: (1) This bill is merely an after the fact administrative interpretation of the current assessment deadline statute. The interpretation is an issue the department has flip-flopped on since 1978. (2) The department's prior interpretation of the assessment deadline statute is not correct and the Alaska Court has told the department so. (3) The department's ability to audit tax returns is not constrained by its audit resources. (4) Taxpayers did not contribute to any delay in the period required to issue tax assessments. (5) Arguments that substantial public revenues are at risk in pending litigation cannot be substantiated. (6) The statement that the decisions reached by the Superior Court in the Exxon and Tesoro Petroleum Corporation cases are inconsistent is not supportable; in fact they're not even related. (7) Three years is enough time to analyze a taxpayer's return and determine the taxes due the state. In addition, the statute allows for further written extensions if necessary. Exxon has always granted division requests for extensions. Mr. Sullivan said that there should be no doubt that this legislative proposal attempts to completely change the statute under which taxpayers have conducted their business for the last 17 years. He said Exxon has had a long-standing interpretation and practice with respect to the existing statute. The difference between Exxon's interpretation and that state's is that Exxon's has been reviewed by the Alaska Court and accepted, while the state's interpretation, first revealed in May of 1989, was reviewed and has been rejected. Mr. Sullivan outlined the following reasons why SB 185 is bad legislation: (1) It removes any incentive for the division to bring cases to final resolution while they try to create new ways to extract more money from the taxpayers that will ultimately not be supportable. (2) It leaves taxpayers at the whim of the division and never able to finally resolve their tax years in Alaska. (3) It will increase an already over burdensome litigation situation on tax issues in Alaska since taxpayers will be required to defend against some entirely new and perhaps misdirected interpretation embodied in an assessment that could be issued 15, 20 or more years after the fact. Referring to testimony at a previous hearing on SB 185, Mr. Sullivan said it was suggested that the Texas statute on assessments was similar to SB 185. He said that is not true. Texas has a four-year period for assessments, except in the case of taxpayer refund claims. No new assessments may be made after the four-year period, the only exception being taxpayer refund claims. Concluding his testimony, Mr. Sullivan urged rejection of SB 185. Number 415 ATTORNEY GENERAL CHARLES COLE, Department of Law, stated he disagreed with Mr. Sullivan's testimony. Attorney General Cole said Exxon was incorrect in stating that the assessment may not be amended if there is an administrative appeal. He noted an assistant attorney general had spoken to the Texas comptroller earlier in the day and she was assured that the theory of the Alaska proposed statute, which was before the committee, was applicable in Texas. Attorney General Cole said one of reasons that the state wants to have SB 185 enacted is so that there won't be any misunderstanding or confusion in the Alaska Supreme Court about what the law of this state should be as declared by the legislature. He said they ask by virtue of this legislation to make clear to the Alaska Supreme Court as to what the legislative policy is in Alaska. Attorney General Cole declared that SB 185 is not changing the substantive law of taxation in the State of Alaska, as was indicated by Exxon. He said it is only a situation where it affects tax law dealing with the statute of limitations. Attorney General Cole said it is a uncontroverted fact that the resources of the Department of Revenue to audit the returns in this area have been constrained. In addition, resolving these cases takes so long because Exxon and other taxpayers and producers string them out themselves. They can quickly ask for a formal hearing, a formal hearing can be held and the issue can be resolved expeditiously. In his closing comments, Attorney General Cole reiterated that the State of Texas has the very same statute that is being sought in SB 185. TAPE 93-47, SIDE B Number 005 SENATOR LITTLE asked Attorney General Cole why is was a good idea to have the bill retroactive. ATTORNEY GENERAL COLE answered that first it all it is constitutional, and in the state's view the issue should be clarified that the Legislature intended that if the taxpayer appeals from an assessment during the administrative appeal process and the judicial appeal process, that the department may raise as well as lower the assessment so that the assessments need not be litigated through the courts for the next ten or fifteen years to resolve this issue. SENATOR LITTLE asked if the state would be in the position of gaining additional revenues if the bill passes and changes were made by the Department of Revenue in the amount owed in the assessment. ATTORNEY GENERAL COLE answered that it is conceivable that if the legislation is not enacted, the Alaska Supreme Court could get confused and it would be very costly to the state. Number 145 PAUL SULLIVAN said Exxon has kept their books and records and they continue to keep them with respect to known assessments. His concern is 20 years down the road when the people who were involved in the transactions are no longer there or can't remember, particularly when you have legislation which is retroactive 17 years. Number 175 There being no further testimony on SB 185, SENATOR TAYLOR closed the public hearing. Number 180 SENATOR TAYLOR brought HB 181 am (APPEALS BY STATE IN CRIMINAL CASES) before the committee as the next order of business. Number 185 ERIC MUSSER, staff to Representative Brian Porter, said the thrust of HB 181 is to allow the state a right of appeal in adjudicated criminal cases without infringing on a defendant's constitutional right to double jeopardy. He noted Margo Knuth of the Department of Law was present to address any technical questions on the legislation. There being no further testimony on HB 181 am, SENATOR TAYLOR asked for the pleasure of the committee. SENATOR DONLEY moved that HB 181 am be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. Number 210 SENATOR TAYLOR introduced CSHB 254(JUD) am(ct rule fld) (OPEN MEETING ACT) as the next order of business. RICHARD MONKMAN, testifying on behalf of the Alaska State Hospital and Nursing Home Association, said his comments would be on Section 3 of the legislation. The Association's only concern with the bill is the proposal to delete language which speaks to the governing body or any committee of the hospital from the exemptions to the Act. Under present law, meetings of governing bodies of a hospital on subjects relating to hospital privileges are exempt from the Open Meetings Act. He said this is important for two reasons: patient privacy and the physicians reputation being at issue. Mr. Monkman said his understanding of the intent of the amendment to the statute was to roll in the phrase "public body." However, there are private hospitals, public hospitals, as well as quasi public hospitals, which are private hospitals that receive some sort of public funds. The Hospital Association's preference would be not to change this section at all, but, if it is changed, they request that it be made clear that the meetings of the governing body or committee of the hospital be kept exempt from the Open Meetings Act. Mr. Monkman added that the present statute works in terms of protecting the physician's reputation and protecting the patient interest. Number 330 SENATOR DONLEY moved the following amendment to Section 2: Page 2, line 15: After the words "attorney-client" insert "or doctor-patient privilege." SENATOR LITTLE objected to adoption of the amendment, stating she didn't think the proposed amendment resolves the issue. SENATOR DONLEY commented that he strongly believes in open meetings, and, if there are some hospitals that may be a public body, then they should be subject to the Open Meetings Act. Number 400 There was extensive discussion on the definition and clarity of "public body." Senator Donley withdrew his amendment until the committee could obtain more information on the issue. Number 515 KENT SWISHER, representing the Alaska Municipal League, testified in support of HB 254, stating it deals with a problem they have been concerned with for some time and does many of the things the League has hoped to achieve. Mr. Swisher said the League has prepared an amendment which would: clarify the definition of "public body" so that the Open Meetings Act does not apply to administrative staff meetings and other similar gatherings; provide that any number of officials from a public body may attend meetings and conferences without violating the Open Meetings Act; provide that the court may decide whether an action taken in violation of the Act should be declared voidable; and an individual member of the council or assembly would not be named as the subject of a suit. TAPE 93-48, SIDE A Number 020 SENATOR DONLEY acknowledged that there are some problems with the application of the law, but he said he also thinks that the law hasn't been enforced by the courts the way it was intended by the people. He said he is concerned with new language that says an action is voidable, because the courts don't even do it when it says it is void. Number 050 WENDY REDMAN, Vice President, University of Alaska, stated the Board of Regent's support for HB 254, and said their interest is at the heart of the bill, which is the definition of a "meeting." Also, they have some concern with Section 3, and Ms. Redman said she would submit those concerns in writing. Ms. Redman said the University is not covered under the state's Personnel Act, so committees like faculty tenure committees for their non-organized faculty really work, according to the court, as a subordinate group of the Board of Regents and, therefore, are subject to the Open Meetings Act. She said it does not work well to have those committees open to the general public. Number 095 SENATOR TAYLOR commented that the definition of "meeting" in Section 6 was poorly drafted and he has requested that staff provide the members with a copy of the AML proposed legislation that can be laid along side of HB 254 and possibly be used as a working document. He invited any suggestions and input into the legislation and said it would be back before the committee after it has been worked on. There being no further business to come before the committee, the meeting was adjourned at 3:37 p.m.