CSSB 377(FIN) AM: "An Act relating to state agency fiscal procedures, including procedures related to the assessment and collection of certain taxes; and providing for an effective date."

00CS FOR SENATE BILL NO. 377(FIN) am 01 "An Act relating to state agency fiscal procedures, including procedures related 02 to the assessment and collection of certain taxes; and providing for an effective 03 date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. LEGISLATIVE FINDINGS AND PURPOSE RELATED TO SECTIONS 8 06 AND 9. (a) The legislature finds that 07 (1) with respect to income taxes imposed under former AS 43.21 and oil and 08 gas production taxes imposed by AS 43.55, 09  (A) the Department of Revenue has interpreted AS 43.05.260 to permit 10 it to issue an amended assessment at any time during the administrative consideration 11 of an appeal or of a claim for credit or refund; 12  (B) the department's interpretation of AS 43.05.260 and 43.05.270 are 13 correct; and 14  (C) it is in the public interest that AS 43.05.260 and 43.05.270 be

01 clarified by amendment, effective from the date of enactment of those sections, to 02 reflect these longstanding administrative interpretations; 03 (2) the legal and factual issues arising out of the separate accounting methods 04 used in the levy and collection of income taxes imposed under former AS 43.21 and oil and 05 gas production taxes imposed by AS 43.55 are complex and require lengthy audits by the 06 Department of Revenue to accurately determine the amount of the taxes that are due the state 07 from the respective levies; 08 (3) two other factors have contributed to the lengthy period required to issue 09 accurate tax assessments for the taxes imposed by former AS 43.21 and AS 43.55: 10  (A) throughout the 1970's and the 1980's, the Department of Revenue's 11 ability to audit these tax returns effectively was constrained by its audit resources; and 12  (B) subsequent to the enactment of former AS 43.21 in 1978, taxpayers 13 requested suspension of action on assessments pending the outcome of a challenge to 14 the constitutionality of the separate accounting method as applied to the levy and 15 collection of the income tax; litigation arising out of this challenge was filed in 1979 16 and concluded in 1986; 17 (4) the six-year limitation on the collection of taxes, as applicable to income 18 taxes imposed by former AS 43.21 and production taxes imposed by AS 43.55, should be 19 amended retroactively to clarify that the limitation on collections is tolled during any 20 administrative or judicial consideration of an assessment; the adoption of the amendment 21 embodies the interpretation by and practice of the Department of Revenue since the enactment 22 of AS 43.05.270 by sec. 1, ch. 94, SLA 1976; 23 (5) often a tax levy cannot be made or a proceeding in court cannot be initiated 24 for the collection of unpaid taxes within six years after the assessment of that tax because 25  (A) the protest of an assessment begins a process that often takes 26 several years to complete; 27  (B) after a final administrative decision on a protest has issued, judicial 28 resolution of the protest often lasts several more years; and 29  (C) commencement of a separate collection action while an 30 administrative or judicial appeal of a taxpayer's protest of an assessment is pending 31 is impractical and an inefficient use of the resources of the executive and judicial

01 branches of the state government; 02 (6) substantial taxes assessed under former AS 43.21 and under AS 43.55 03 remain uncollected; 04 (7) these uncollected taxes are in large part the result of disputes over value 05 at the point of production for oil and gas produced in the state; 06 (8) substantial public revenue is at risk in the litigation to which reference is 07 made in (b)(2) of this section, and it is contrary to the public interest to allow these revenues 08 to go uncollected; 09 (9) because the department has had difficulties in obtaining information and 10 completing audits within the three-year period set out in AS 43.05.260(a) and has had to 11 amend assessments based on information developed during taxpayer appeals to reflect the 12 correct amount of tax due, a longer statutory period for assessments should be provided for 13 tax periods beginning after December 31, 1993; 14 (10) taxpayers also have an interest in finality and certainty with respect to the 15 amount of taxes due the state, and that interest will be promoted by having a five-year statute 16 of limitations on assessments, except as otherwise authorized by AS 43.05.260(c), after which 17 time no increases in the amount due the state will be allowed; and 18 (11) it is in the public interest to amend AS 43.05.260(a) prospectively to 19 provide for the issuance and amendment of assessments within five years from the date the 20 taxpayer's return is filed, except as provided in AS 43.05.260(c). 21 (b) The purposes of the amendment of AS 43.05.260(a), made by sec. 8 of this Act, 22 and of AS 43.05.270(a), made by sec. 9 of this Act, are 23 (1) to validate and affirm the longstanding administrative interpretation and 24 practices of the Department of Revenue in assessing and collecting taxes; 25 (2) to make clear specific existing law that resulted in the inconsistent 26 decisions of the state Superior Court reached in Tesoro Petroleum Corporation, et al., v. State 27 of Alaska, Department of Revenue, Superior Court No. 3AN-89-7130 Civ., and State of 28 Alaska, Department of Revenue v. Exxon Corporation, et al., Superior Court No. 3AN-89-5215 Civ. 29 (3) to make prospective changes to the statute of limitations for assessments 30 in AS 43.05.260 to allow the Department of Revenue five years from the date the taxpayer's 31 return is filed to complete its audit and issue or amend an assessment, for tax periods

01 beginning after December 31, 1993. 02 * Sec. 2. AS 37.05.180 is amended to read: 03  Sec. 37.05.180. TIME [TWO-YEAR] LIMITATION ON PAYMENT OF 04 WARRANTS. A warrant upon the state treasury may not be paid unless presented at 05 the office of the commissioner of revenue within one year [TWO YEARS] of the date 06 of its issuance. A warrant not presented within that time is considered paid and money 07 held at the expiration of that time in a special fund or account for the payment of the 08 warrant shall be transferred to the general fund, except where the warrant is for the 09 payment of a permanent fund dividend or where transfer is prohibited by the federal 10 government for state participation in a federal program. 11 * Sec. 3. AS 37.05.510(b) is amended to read: 12  (b) The Department of Administration shall allocate to the working reserve 13 account amounts appropriated to all state agencies for the benefits set out in (a) of this 14 section after the appropriation Act implementing the state operating budget is enacted. 15 The department shall charge the reserve account with all payments for the benefits set 16 out in (a) of this section. [IF PAYMENTS FOR A FISCAL YEAR EXCEED THE 17 UNEXPENDED BALANCE OF APPROPRIATIONS ALLOCATED TO THE 18 ACCOUNT, THE DEPARTMENT MAY, EXCEPT FOR PAYMENTS UNDER (a)(4) 19 OF THIS SECTION, PAY THOSE BENEFITS BY CHARGING THE 20 UNENCUMBERED BALANCE OF ANY APPROPRIATION ENACTED TO 21 FINANCE THE PAYMENT OF EMPLOYEE SALARIES AND BENEFITS THAT 22 IS DETERMINED TO BE AVAILABLE FOR LAPSE AT THE END OF THE 23 FISCAL YEAR.] 24 * Sec. 4. AS 37.07.060(b)(2) is amended to read: 25  (2) the governor's operating program and budget recommendations for 26 the succeeding fiscal year organized by agency as required by AS 37.07.020(a); if an 27 appropriation has been made from the constitutional budget reserve fund (art. IX, 28 sec. 17, Constitution of the State of Alaska), and until the amount appropriated 29 is repaid, the governor shall propose the amount of money in the general fund 30 available for appropriation at the end of the preceding fiscal year that shall be 31 appropriated to the constitutional budget reserve fund;

01 * Sec. 5. AS 37.07 is amended by adding a new section to read: 02  Sec. 37.07.085. PRORATION OF PAYMENTS. (a) At the beginning of each 03 fiscal year, an agency that administers grants, reimbursement, revenue sharing, public 04 assistance, or other programs to distribute state money under a statute shall determine 05 whether appropriations for the fiscal year are sufficient to pay all anticipated claims 06 and entitlements under the statute. Except as provided in (d) of this section or as 07 otherwise provided by law prescribing agency action in response to insufficient 08 appropriations, if appropriations are not sufficient, the agency shall reduce the amount 09 to be paid to eligible recipients by prorating the shortfall among the eligible recipients. 10  (b) An agency that is paying reduced payments under (a) of this section shall 11 determine, on December 30 of the fiscal year, whether money available is sufficient 12 to fund the reduced payment level for the remainder of the fiscal year. 13  (c) An agency that has determined that appropriations are insufficient under 14 (a) or (b) of this section shall report to the governor, and the governor shall report to 15 the legislature by the 10th day of the next regular legislative session, the amount of 16 additional money needed for the remainder of that fiscal year to fund payments at the 17 reduced level and the amount of additional money needed to make full payments to 18 eligible recipients. 19  (d) An agency that has determined that appropriations are insufficient under 20 (a) of this section may not reduce payments if the reduction would violate the terms 21 of an agreement between the state and the federal government or would violate a 22 requirement for participation in a federal program in which the state is participating. 23 As required by (c) of this section, the agency and the governor shall report regarding 24 the amount of money needed to make full payments to eligible recipients. 25  (e) The commissioner of administration may adopt regulations necessary to 26 implement this section. 27 * Sec. 6. AS 37.25.010(b) is amended to read: 28  (b) An indebtedness arising from a prior year for which the appropriation has 29 lapsed shall be paid from the current year's appropriations, if 30  (1) this expenditure does not exceed the balance lapsed; and 31  (2) the original obligation date is not more than four [TWO] years

01 from the requested date of disbursement. 02 * Sec. 7. AS 39.20.250(a) is amended to read: 03  (a) Terminal leave for unused personal leave shall be allowed upon separation 04 from service. The payment equals the personal leave balance at the date of 05 separation multiplied by the officer's or employee's rate of pay at the date of 06 separation expressed on an hourly basis [COMPENSATION THAT THE OFFICER 07 OR EMPLOYEE WOULD HAVE RECEIVED IF THE OFFICER OR EMPLOYEE 08 HAD REMAINED IN THE SERVICE UNTIL THE EXPIRATION OF THE PERIOD 09 OF UNUSED PERSONAL LEAVE]. A payment of terminal leave to an employee 10 shall be made as a lump sum payment [OR IN INSTALLMENTS OVER A PERIOD 11 OF TIME, AS THE EMPLOYEE ELECTS]. 12 * Sec. 8. AS 43.05.260(a) is amended to read: 13  (a) Except as provided in (c) of this section and AS 43.20.200(b), the amount 14 of a tax imposed by this title must be assessed 15  (1) for tax periods ending before January 1, 1994, within three years 16 after the return was filed, whether or not a return was filed on or after the date 17 prescribed by law; however, at any time during the administrative consideration 18 of a taxpayer grievance or of a claim for credit or refund, based upon a tax 19 imposed by former AS 43.21 or by AS 43.55, the department may increase or 20 decrease the amount of tax due by issuing or amending an assessment; 21  (2) for tax periods beginning after December 31, 1993, within five 22 years after the return was filed, whether or not a return was filed on or after the 23 date prescribed by law; the department may increase or decrease the amount of 24 tax due by issuing or amending an assessment within the five-year period; after 25 that five-year period, the department may not increase an assessment under this 26 subsection. [IF THE TAX IS NOT ASSESSED BEFORE THE EXPIRATION OF 27 THE THREE-YEAR PERIOD, PROCEEDINGS MAY NOT BE INSTITUTED IN 28 COURT FOR THE COLLECTION OF THE TAX.] 29 * Sec. 9. AS 43.05.270(a) is amended to read: 30  (a) When the assessment of a tax imposed by this title has been made within 31 the period of limitation under AS 43.05.260, the tax may be collected by levy or by

01 a proceeding in court [, BUT ONLY] if the levy is made or the proceeding is begun: 02  (1) within six years after the latest of any of the following: 03  (A) the assessment of the tax; 04  (B) the final administrative determination of the grievance, 05 if the taxpayer files a grievance from an assessment; or 06  (C) the final judicial resolution of an appeal, if the taxpayer 07 appeals from a final adjudicative determination of a grievance; or 08  (2) before the expiration of a period for collection agreed upon in 09 writing by the department and the taxpayer before the expiration of the six-year period; 10 a period agreed upon may be extended by subsequent agreements in writing made 11 before the expiration of the period previously agreed upon [; THE PERIOD 12 PROVIDED BY THIS PARAGRAPH DURING WHICH A TAX MAY BE 13 COLLECTED BY LEVY MAY NOT BE EXTENDED OR CURTAILED BECAUSE 14 OF A JUDGMENT AGAINST THE TAXPAYER]. 15 * Sec. 10. AS 43.23.055 is amended to read: 16  Sec. 43.23.055. DUTIES OF THE DEPARTMENT. The department shall 17  (1) annually pay permanent fund dividends from the dividend fund; 18  (2) subject to AS 43.23.011 and [PARAGRAPH] (8) of this section, 19 adopt regulations under AS 44.62 (Administrative Procedure Act) that establish 20 procedures and time limits for claiming a permanent fund dividend; the department 21 shall determine the number of eligible applicants by October 1 of the year for which 22 the dividend is declared and pay the dividends by December 31 of that year; 23  (3) adopt regulations under AS 44.62 (Administrative Procedure Act) 24 that establish procedures and time limits for an individual upon emancipation or upon 25 reaching majority to apply for permanent fund dividends not received during minority 26 because the parent, guardian, or other authorized representative did not apply on behalf 27 of the individual; 28  (4) assist residents of the state, particularly in rural areas, who because 29 of language, disability, or inaccessibility to public transportation need assistance to 30 establish eligibility and to apply for permanent fund dividends; 31  (5) annually determine, in cooperation with the Department of

01 Corrections, the number and identity of individuals ineligible for a permanent fund 02 dividend under AS 43.23.005(d); 03  (6) adopt regulations that are necessary to implement AS 43.23.005(d); 04  (7) adopt regulations that establish procedures for the parent, guardian, 05 or other authorized representative of a disabled individual to apply for prior year 06 permanent fund dividends not received by the disabled individual because no 07 application was submitted on behalf of the individual; 08  (8) adopt regulations that establish procedures for an individual to apply 09 to have a dividend warrant reissued if it is returned to the department as undeliverable 10 or it is not paid within one year [TWO YEARS] of the date of its issuance; however, 11 the department may not establish a time limit within which an application to have a 12 warrant reissued must be filed; 13  (9) adopt regulations establishing an optional longevity bonus program 14 to provide for the direct payment by the department of an individual's permanent fund 15 dividend to an annuity program selected by the individual. 16 * Sec. 11. AS 47.20.070 is amended by adding a new subsection to read: 17  (d) The department may award grants necessary to the performance of its 18 duties under this chapter. If the department determines that it is appropriate to further 19 program objectives, the department may award grants for a period of two years, subject 20 to legislative appropriation. 21 * Sec. 12. AS 39.20.250(b) is repealed. 22 * Sec. 13. Under the provisions of AS 01.10.030, if any provisions of this Act, or the 23 application thereof to any person or circumstance is held invalid, the remainder of this Act and 24 the application to other persons or circumstances shall not be affected thereby. 25 * Sec. 14. Sections 8 and 9 of this Act are retroactive to January 1, 1976. 26 * Sec. 15. Sections 8, 9, 13, and 14 of this Act take effect immediately under 27 AS 01.10.070(c). 28 * Sec. 16. Except as provided in sec. 15 of this Act, this Act takes effect July 1, 1994.