CSHB 36(CRA): "An Act relating to enterprise zones."

00 CS FOR HOUSE BILL NO. 36(CRA) 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 4A. Enterprise Zones. 05 Sec. 44.33.311. Designation and duration of enterprise zones. The 06 governor may designate up to four enterprise zones each year from the prioritized list 07 of applications provided to the governor by the department under AS 44.33.321(c). A 08 designation under this section lasts for 20 years. 09 Sec. 44.33.313. Eligibility for designation. In order for a geographical area 10 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 15 the boundaries of the applicant where the area is located;

01 (3) the unemployment rate of the area must be 1.5 times the average 02 unemployment rate in the state, or 20 percent or more of the households in the area 03 must be below the poverty level; and 04 (4) an eligible neighborhood development organization must operate in 05 the area; in this paragraph, "eligible neighborhood development organization" has the 06 meaning given in 42 U.S.C. 5318a(a). 07 Sec. 44.33.315. Application for designation. (a) A borough, a unified 08 municipality, or a city, if the city is not within a borough, may apply to the department 09 to have a geographical area that is located within the boundaries of the applicant 10 designated as an enterprise zone. 11 (b) The application must be in the form established by the department and 12 include 13 (1) a description of the location and boundaries of the proposed area; 14 (2) facts showing how the area satisfies the eligibility requirements of 15 AS 44.33.313; 16 (3) facts demonstrating the potential of the area for economic 17 development and neighborhood stabilization and revitalization; 18 (4) a general statement of the incentives that the applicant proposes to 19 provide to the area after designation as an enterprise zone in order to promote the 20 economic development and neighborhood stabilization and revitalization of the area; if 21 the area proposed by the applicant is designated as an enterprise zone, the applicant 22 shall provide in the enterprise zone the incentives proposed in the application; 23 (5) a description of the strategies that the applicant proposes to use to 24 promote the economic development and neighborhood stabilization and revitalization 25 of the area; and 26 (6) other information required by the department by regulation. 27 Sec. 44.33.317. Limit on number of zones located within qualifying 28 municipality. There may not be at the same time more than three enterprise zones 29 designated within a qualifying municipality. 30 Sec. 44.33.319. Local incentives. A qualifying municipality may identify as 31 incentives under AS 44.33.315

01 (1) reduction of the municipality's permit or user fees; 02 (2) credits on the municipality's property taxes or exemptions from the 03 taxes; 04 (3) flexibility in the municipality's regulation of the area, including 05 establishing special zoning districts, special processing for permits, and exemptions 06 from local ordinances; 07 (4) the proposed lease or sale of the municipality's real property to 08 private persons, except that the applicant may not propose the lease or sale of property 09 that is designated or otherwise targeted for public use. 10 * Sec. 2. AS 44.33 is amended by adding new sections to read: 11 Sec. 44.33.321. Department action. (a) The department shall verify the 12 information and eligibility of an area proposed in an application submitted to the 13 department under AS 44.33.315. 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 21 and 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 (d) If legislative action is needed to enable a particular incentive to be used in 25 an enterprise zone, the department shall recommend to the governor that the governor 26 introduce legislation to enable the incentive to be used or shall recommend to the 27 legislature that the legislature take the necessary legislative action to enable the 28 incentive to be used. An incentive under this subsection may include 29 (1) a reduction of state permit or user fees; 30 (2) credits on state income taxes or exemptions from the taxes; or 31 (3) the proposed lease or sale to private persons of the state's real

01 property that is not designated or otherwise targeted for public use. 02 Sec. 44.33.323. Review and appeal of department action. (a) A qualifying 03 municipality that submits an application under AS 44.33.315 may appeal to the 04 commissioner 05 (1) a determination by the department that the area proposed in the 06 application is not eligible under AS 44.33.313 for designation as an enterprise zone; 07 (2) a denial of the application by the department for a reason other than 08 (1) of this subsection; or 09 (3) the priority given to the application by the department. 10 (b) The determination of the commissioner under (a) of this section may be 11 appealed to the superior court by a qualifying municipality within 30 days after the 12 qualifying municipality receives written notice of the commissioner's determination. 13 (c) The department shall establish by regulation the procedure to be used for 14 the appeal under (a) of this section. 15 Sec. 44.33.325. Deadlines. The department shall establish by regulation 16 deadlines for the submittal, review, and other administrative handling of applications 17 for designation as an enterprise zone. The deadlines must be compatible with the 18 deadlines for applying for grants under 42 U.S.C. 5318a. 19 Sec. 44.33.327. Regulations. In addition to the regulations required under 20 AS 44.33.311 - 44.33.329, the department may adopt regulations to implement 21 AS 44.33.311 - 44.33.329. The regulations required or authorized under AS 44.33.311 22 - 44.33.329 shall be adopted under AS 44.62 (Administrative Procedure Act). 23 Sec. 44.33.329. Definitions. In AS 44.33.311 - 44.33.329 24 (1) "borough," "city," and "unified municipality" have the meanings 25 given in AS 29.71.800; 26 (2) "commissioner" means the commissioner of community and 27 economic development; 28 (3) "department" means the Department of Community and Economic 29 Development; 30 (4) "economic development and neighborhood stabilization and 31 revitalization" includes the development of new or existing businesses, the creation of

01 employment opportunities, and the development of affordable and sound housing; 02 (5) "enterprise zone" means a geographical area designated as an 03 enterprise zone under AS 44.33.311; 04 (6) "qualifying municipality" means a borough, a unified municipality, 05 or a city, except a city that is located in a borough. 06 * Sec. 3. AS 29.45.050 is amended by adding a new subsection to read: 07 (q) A borough, a unified municipality, and a city, except a city located in a 08 borough, may by ordinance partially or totally exempt from taxation property in an 09 enterprise zone designated under AS 44.33.311 or may provide a credit on taxes due to 10 the municipality on property in an enterprise zone designated under AS 44.33.311. 11 * Sec. 4. AS 43.20.021(d) is amended to read: 12 (d) Where a credit allowed under the Internal Revenue Code is also allowed in 13 computing Alaska income tax, it is limited to 18 percent for corporations of the 14 amount of credit determined for federal income tax purposes that [WHICH] is 15 attributable to Alaska. This limitation does not apply to a special industrial incentive 16 tax credit under AS 43.20.042 or to tax credits under AS 43.20.046 - 43.20.048. 17 * Sec. 5. AS 43.20 is amended by adding new sections to article 1 to read: 18 Sec. 43.20.046. Enterprise zone investment tax credits. (a) In addition to 19 any other tax credit allowed for the investment under this chapter, and to the extent 20 that the property qualifying as an investment under this section is used solely and 21 exclusively during the tax year in an enterprise zone, a taxpayer may apply as a credit 22 against the taxpayer's tax liability under this chapter, for a tax year beginning on or 23 after January 1 of the tax year when the investment is made, 15 percent of the 24 investment made by the taxpayer in a new business facility during the tax year. 25 (b) If the taxpayer has not operated the new business facility for the entire tax 26 year, the credit under this section shall be calculated by dividing the investment made 27 during the tax year by 12 and multiplying the result by the number of full months that 28 the taxpayer operated the facility during the tax year. 29 (c) If the new business facility replaces another facility, the credit determined 30 under (a) - (b) of this section is reduced by the average annual investment of the 31 taxpayer, or a related taxpayer, in the former facility for the three tax years that

01 preceded the tax year for which the credit is claimed. 02 (d) In this section, 03 (1) "investment" means the value of the real and tangible personal 04 property, except inventory or property held for sale to customers in the ordinary 05 course of the taxpayer's business, constituting a facility or used in the operation of a 06 facility; in this paragraph, 07 (A) "net rental rate" means the rental rate less the rental 08 payments received by the taxpayer from subrentals; 09 (B) "value" means the total purchase price if purchased, or the 10 net rental rate if rented, paid for the property; 11 (2) "related taxpayer" means a person under the control of the taxpayer 12 or a person, except an individual, controlled by a person who is controlled by the 13 taxpayer; in this paragraph, 14 (A) "control" or "controlled" means the direct or indirect 15 ownership of at least, with regard to a 16 (i) corporation, 80 percent of the total combined voting 17 power of all classes of stock entitled to vote and 80 percent of all other 18 classes of stock of the corporation; 19 (ii) limited liability company, 80 percent of the limited 20 liability company interests issued by the company; in this sub- 21 subparagraph, "limited liability company interest" has the meaning 22 given in AS 10.50.990; 23 (iii) partnership or an association, an 80 percent interest 24 in the capital or profits of the partnership or association; 25 (iv) trust, 80 percent of the beneficial interest in the 26 principal or income of the trust; 27 (B) "person" includes, in addition to the entities identified in 28 AS 43.20.340, a limited liability company, and an organization that is not a 29 corporation, a limited liability company, a partnership, or a trust. 30 Sec. 43.20.047. Credit for new business facility employees. (a) Subject to 31 the limitation in (b) of this section, a taxpayer who establishes a new business facility

01 for at least one year in an enterprise zone may apply, as a credit against the taxpayer's 02 tax liability under this chapter for the first full income tax year of the new business 03 facility, $500 for each new business facility employee who works in the zone. 04 (b) The number of new business facility employees that the taxpayer may 05 claim for credit under this section is determined by 06 (1) totaling the number of new business facility employees employed 07 on the last business day of each operating month of the facility during the tax year; 08 and 09 (2) dividing the result in (1) of this subsection by the number of 10 months the facility was in operation during the tax year. 11 (c) In this section, "new business facility employee" means an individual who 12 (1) is employed by the taxpayer in the operation of a new business 13 facility during the tax year for which the credit allowed by this section is claimed; and 14 (2) works on 15 (A) a regular, full-time basis; 16 (B) a part-time basis if the individual customarily worked at 17 least 20 hours a week throughout the taxable year; or 18 (C) a seasonal basis if the individual works for substantially all 19 of the season customary for the individual's position. 20 Sec. 43.20.048. Definitions for AS 43.20.046 - 43.20.048. In AS 43.20.046 - 21 43.20.048, 22 (1) "enterprise zone" means an area designated as an enterprise zone 23 under AS 44.33.311; 24 (2) "facility" means a factory, mill, plant, refinery, feedlot, warehouse, 25 processing plant, or other building located within an enterprise zone, including the 26 land on which the facility is located and all machinery, equipment, and other real and 27 tangible personal property located at or within the facility, and used for the operation 28 of the facility; 29 (3) "new business facility" means a facility, except the portion of the 30 facility that the taxpayer leases to another person or does not use in the operation of a 31 facility.

01 * Sec. 6. AS 44.33.020 is amended by adding a new paragraph to read: 02 (44) implement AS 44.33.311 - 44.33.329. 03 * Sec. 7. The uncodified law of the State of Alaska is amended by adding a new section to 04 read: 05 TRANSITIONAL PROVISION. AS 43.20.021(d), as amended by sec. 4 of this Act, 06 and AS 43.20.046 - 43.20.048, enacted by sec. 5 of this Act, apply to tax years beginning on 07 or after January 1, 2002.