HB 50: "An Act relating to enterprise zones."

00HOUSE BILL NO. 50 01 "An Act relating to enterprise zones." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 44.33 is amended by adding new sections to read: 04 ARTICLE 10. ENTERPRISE ZONES. 05  Sec. 44.33.820. DESIGNATION AND DURATION OF ENTERPRISE 06 ZONES. The governor may designate up to four enterprise zones each year from the 07 prioritized list of applications provided to the governor by the department under 08 AS 44.33.830(c). A designation under this section lasts for 20 years. 09  Sec. 44.33.822. ELIGIBILITY FOR DESIGNATION. In order for a 10 geographical area to be eligible for designation as an enterprise zone, 11  (1) the area must consist of one census tract used in the latest 12 completed United States census; 13  (2) 25 percent or more of the households of the area must have annual 14 incomes that are less than 80 percent of the median annual household income within

01 the boundaries of the applicant where the area is located; 02  (3) the unemployment rate of the area must be 1.5 times the average 03 unemployment rate in the state, or 20 percent or more of the households in the area 04 must be below the poverty level; and 05  (4) an eligible neighborhood development organization must operate in 06 the area; in this paragraph, "eligible neighborhood development organization" has the 07 meaning given in 42 U.S.C. 5318a(a). 08  Sec. 44.33.824. APPLICATION FOR DESIGNATION. (a) A borough, a 09 unified municipality, or a city, if the city is not within a borough, may apply to the 10 department to have a geographical area that is located within the boundaries of the 11 applicant designated as an enterprise zone. 12  (b) The application must be in the form established by the department and 13 include 14  (1) a description of the location and boundaries of the proposed area; 15  (2) facts showing how the area satisfies the eligibility requirements of 16 AS 44.33.822; 17  (3) facts demonstrating the potential of the area for economic 18 development and neighborhood stabilization and revitalization; 19  (4) a general statement of the incentives that the applicant proposes to 20 provide to the area after designation as an enterprise zone in order to promote the 21 economic development and neighborhood stabilization and revitalization of the area; 22 if the area proposed by the applicant is designated as an enterprise zone, the applicant 23 shall provide in the enterprise zone the incentives proposed in the application; 24  (5) a description of the strategies that the applicant proposes to use to 25 promote the economic development and neighborhood stabilization and revitalization 26 of the area; and 27  (6) other information required by the department by regulation. 28  Sec. 44.33.826. LIMIT ON NUMBER OF ZONES LOCATED WITHIN 29 QUALIFYING MUNICIPALITY. There may not be at the same time more than three 30 enterprise zones designated within a qualifying municipality. 31  Sec. 44.33.828. LOCAL INCENTIVES. A qualifying municipality may

01 identify as incentives under AS 44.33.824 02  (1) reduction of the municipality's permit or user fees; 03  (2) credits on the municipality's property taxes or exemptions from the 04 taxes; 05  (3) flexibility in the municipality's regulation of the area, including 06 establishing special zoning districts, special processing for permits, and exemptions 07 from local ordinances; 08  (4) the proposed lease or sale of the municipality's real property to 09 private persons, except that the applicant may not propose the lease or sale of property 10 that is designated or otherwise targeted for public use. 11  Sec. 44.33.830. DEPARTMENT ACTION. (a) The department shall verify 12 the information and eligibility of an area proposed in an application submitted to the 13 department under AS 44.33.824. The department shall prioritize the applications 14 received by the department each year according to the degree of economic distress of 15 the areas demonstrated by the application, the potential of the area for economic 16 development and neighborhood stabilization and revitalization, and the feasibility of 17 the incentives and strategies that the applicant proposes to use to promote the 18 economic development and neighborhood stabilization and revitalization of the area. 19  (b) When determining the degree of economic distress of an area under (a) of 20 this section, the department shall use the income, employment, and other economic and 21 social data in the latest completed United States census. 22  (c) Each year the department shall transmit the prioritized list developed under 23 (a) of this section to the governor. 24  Sec. 44.33.832. REVIEW AND APPEAL OF DEPARTMENT ACTION. (a) 25 A qualifying municipality that submits an application under AS 44.33.824 may appeal 26 to the commissioner 27  (1) a determination by the department that the area proposed in the 28 application is not eligible under AS 44.33.822 for designation as an enterprise zone; 29  (2) a denial of the application by the department for a reason other than 30 (1) of this subsection; or 31  (3) the priority given to the application by the department.

01  (b) The determination of the commissioner under (a) of this section may be 02 appealed to the superior court by a qualifying municipality within 30 days after the 03 qualifying municipality receives written notice of the commissioner's determination. 04  (c) The department shall establish by regulation the procedure to be used for 05 the appeal under (a) of this section. 06  Sec. 44.33.834. DEADLINES. The department shall establish by regulation 07 deadlines for the submittal, review, and other administrative handling of applications 08 for designation as an enterprise zone. The deadlines must be compatible with the 09 deadlines for applying for grants under 42 U.S.C. 5318a. 10  Sec. 44.33.836. STATE INCENTIVES FOR ENTERPRISE ZONES. The state 11 is encouraged to provide to an enterprise zone incentives that include 12  (1) reduction of state permit or user fees; 13  (2) credits on state income taxes or exemptions from the taxes; and 14  (3) the proposed lease or sale to private persons of the state's real 15 property that is not designated or otherwise targeted for public use. 16  Sec. 44.33.838. REGULATIONS. In addition to the regulations required under 17 AS 44.33.820 - 44.33.840, the department may adopt regulations to implement 18 AS 44.33.820 - 44.33.840. The regulations required or authorized under AS 44.33.820 19 - 44.33.840 shall be adopted under AS 44.62 (Administrative Procedure Act). 20  Sec. 44.33.840. DEFINITIONS. In AS 44.33.820 - 44.33.840, 21  (1) "borough," "city," and "unified municipality" have the meanings 22 given in AS 29.71.800; 23  (2) "commissioner" means the commissioner of commerce and 24 economic development; 25  (3) "department" means the Department of Commerce and Economic 26 Development; 27  (4) "economic development and neighborhood stabilization and 28 revitalization" includes the development of new or existing businesses, the creation of 29 employment opportunities, and the development of affordable and sound housing; 30  (5) "enterprise zone" means a geographical area designated as an 31 enterprise zone under AS 44.33.820;

01  (6) "qualifying municipality" means a borough, a unified municipality, 02 or a city, except a city that is located in a borough. 03 * Sec. 2. AS 29.45.050 is amended by adding a new subsection to read: 04  (o) A borough, a unified municipality, and a city, except a city located in a 05 borough, may by ordinance partially or totally exempt from taxation property in an 06 enterprise zone designated under AS 44.33.820 or may provide a credit on taxes due 07 to the municipality on property in an enterprise zone designated under AS 44.33.820. 08 * Sec. 3. AS 43.20.021(d) is amended to read: 09  (d) Where a credit allowed under the Internal Revenue Code is also allowed 10 in computing Alaska income tax, it is limited to 18 percent for corporations of the 11 amount of credit determined for federal income tax purposes which is attributable to 12 Alaska. This limitation does not apply to a special industrial incentive tax credit under 13 AS 43.20.042 or to tax credits under AS 43.20.046 - 43.20.048. 14 * Sec. 4. AS 43.20 is amended by adding new sections to article 1 to read: 15  Sec. 43.20.046. ENTERPRISE ZONE INVESTMENT TAX CREDITS. (a) 16 In addition to any other tax credit allowed for the investment under this chapter, and 17 to the extent that the property qualifying as an investment under this section is used 18 solely and exclusively during the tax year in an enterprise zone, a taxpayer may apply 19 as a credit against the taxpayer's tax liability under this chapter, for a tax year 20 beginning on or after January 1 of the tax year when the investment is made, 15 21 percent of the investment made by the taxpayer in a new business facility during the 22 tax year. 23  (b) If the taxpayer has not operated the new business facility for the entire tax 24 year, the credit under this section shall be calculated by dividing the investment made 25 during the tax year by 12 and multiplying the result by the number of full months that 26 the taxpayer operated the facility during the tax year. 27  (c) If the new business facility replaces another facility, the credit determined 28 under (a) - (b) of this section is reduced by the average annual investment of the 29 taxpayer, or a related taxpayer, in the former facility for the three tax years that 30 preceded the tax year for which the credit is claimed. 31  (d) In this section,

01  (1) "investment" means the value of the real and tangible personal 02 property, except inventory or property held for sale to customers in the ordinary course 03 of the taxpayer's business, constituting a facility or used in the operation of a facility; 04 in this paragraph, 05  (A) "net rental rate" means the rental rate less the rental 06 payments received by the taxpayer from subrentals; 07  (B) "value" means the total purchase price if purchased, or the 08 net rental rate if rented, paid for the property; 09  (2) "related taxpayer" means a person under the control of the taxpayer 10 or a person, except an individual, controlled by a person who is controlled by the 11 taxpayer; in this paragraph, 12  (A) "control" or "controlled" means the direct or indirect 13 ownership of at least, with regard to a 14  (i) corporation, 80 percent of the total combined voting 15 power of all classes of stock entitled to vote and 80 percent of all other 16 classes of stock of the corporation; 17  (ii) partnership or an association, an 80 percent interest 18 in the capital or profits of the partnership or association; 19  (iii) trust, 80 percent of the beneficial interest in the 20 principal or income of the trust; 21  (B) "person" includes, in addition to the entities identified in 22 AS 43.20.340, an organization that is not a corporation, a partnership, or a 23 trust. 24  Sec. 43.20.047. CREDIT FOR NEW BUSINESS FACILITY EMPLOYEES. 25 (a) Subject to the limitation in (b) of this section, a taxpayer who establishes a new 26 business facility for at least one year in an enterprise zone may apply, as a credit 27 against the taxpayer's tax liability under this chapter for the first full income tax year 28 of the new business facility, $500 for each new business facility employee who works 29 in the zone. 30  (b) The number of new business facility employees that the taxpayer may 31 claim for credit under this section is determined by

01  (1) totaling the number of new business facility employees employed 02 on the last business day of each operating month of the facility during the tax year; 03 and 04  (2) dividing the result in (1) of this subsection by the number of 05 months the facility was in operation during the tax year. 06  (c) In this section, "new business facility employee" means an individual who 07  (1) is employed by the taxpayer in the operation of a new business 08 facility during the tax year for which the credit allowed by this section is claimed; and 09  (2) works on 10  (A) a regular, full-time basis; 11  (B) a part-time basis if the individual customarily worked at 12 least 20 hours a week throughout the taxable year; or 13  (C) a seasonal basis if the individual works for substantially all 14 of the season customary for the individual's position. 15  Sec. 43.20.048. DEFINITIONS FOR AS 43.20.046 - 43.20.048. In 16 AS 43.20.046 - 43.20.048, 17  (1) "enterprise zone" means an area designated as an enterprise zone 18 under AS 44.33.820; 19  (2) "facility" means a factory, mill, plant, refinery, feedlot, warehouse, 20 processing plant, or other building located within an enterprise zone, including the land 21 on which the facility is located and all machinery, equipment, and other real and 22 tangible personal property located at or within the facility, and used for the operation 23 of the facility; 24  (3) "new business facility" means a facility, except the portion of the 25 facility that the taxpayer leases to another person or does not use in the operation of 26 a facility. 27 * Sec. 5. AS 44.33.020 is amended by adding a new paragraph to read: 28  (34) implement AS 44.33.820 - 44.33.840. 29 * Sec. 6. TRANSITIONAL PROVISION. AS 43.20.021(d), as amended by sec. 3 of this 30 Act, and AS 43.20.046 - 43.20.048, enacted by sec. 4 of this Act, apply to tax years beginning 31 on or after January 1, 1996.