Legislature(1993 - 1994)
1994-04-22 Senate JournalFull Journal pdf
1994-04-22 Senate Journal Page 3876 SB 377 SENATE BILL NO. 377 "An Act relating to state agency fiscal procedures; and providing for an effective date" was read the second time. Senator Pearce moved and asked unanimous consent for the adoption of the Finance Committee Substitute offered on page 3839. Senator Adams objected. The question being: "Shall the Finance Committee Substitute be adopted?" The roll was taken with the following result: 1994-04-22 Senate Journal Page 3877 SB 377 SB 377 Second Reading Adopt Finance Committee Substitute? YEAS: 12 NAYS: 8 EXCUSED: 0 ABSENT: 0 Yeas: Frank, Halford, Jacko, Kelly, Kerttula, Leman, Miller, Pearce, Phillips, Rieger, Sharp, Taylor Nays: Adams, Donley, Duncan, Ellis, Lincoln, Little, Salo, Zharoff and so, CS FOR SENATE BILL NO. 377(FIN) was adopted. CS FOR SENATE BILL NO. 377(FIN) was read the second time. Senator Kerttula offered Amendment No. 1 : Page 1, line 1, after "procedures": Insert ", including procedures related to the assessment and collection of certain taxes" Page 1, after line 3: Insert a new bill section to read: "* Section 1. LEGISLATIVE FINDINGS AND PURPOSE RELATED TO SECTIONS 8 AND 9. (a) The legislature finds that (1) with respect to income taxes imposed under former AS43.21 and oil and gas production taxes imposed by AS43.55, (A) the Department of Revenue has interpreted AS43.05.260 to permit it to issue an amended assessment at any time during the administrative consideration of an appeal or of a claim for credit or refund; (B) the department's interpretation of AS43.05.260 and 43.05.270 are correct; and (C) it is in the public interest that AS43.05.260 and 43.05.270 be clarified by amendment, effective from the date of enactment of those sections, to reflect these longstanding administrative interpretations; 1994-04-22 Senate Journal Page 3878 SB 377 (2) the legal and factual issues arising out of the separate accounting methods used in the levy and collection of income taxes imposed under former AS43.21 and oil and gas production taxes imposed by AS43.55 are complex and require lengthy audits by the Department of Revenue to accurately determine the amount of the taxes that are due the state from the respective levies; (3) two other factors have contributed to the lengthy period required to issue accurate tax assessments for the taxes imposed by former AS43.21 and AS43.55: (A) throughout the 1970's and the 1980's, the Department of Revenue's ability to audit these tax returns effectively was constrained by its audit resources; and (B) subsequent to the enactment of former AS43.21 in 1978, taxpayers requested suspension of action on assessments pending the outcome of a challenge to the constitutionality of the separate accounting method as applied to the levy and collection of the income tax; litigation arising out of this challenge was filed in 1979 and concluded in 1986; (4) the six-year limitation on the collection of taxes, as applicable to income taxes imposed by former AS43.21 and production taxes imposed by AS43.55, should be amended retroactively to clarify that the limitation on collections is tolled during any administrative or judicial consideration of an assessment; the adoption of the amendment embodies the interpretation by and practice of the Department of Revenue since the enactment of AS43.05.270 by sec.1, ch.94, SLA 1976; (5) often a tax levy cannot be made or a proceeding in court cannot be initiated for the collection of unpaid taxes within six years after the assessment of that tax because (A) the protest of an assessment begins a process that often takes several years to complete; (B) after a final administrative decision on a protest has issued, judicial resolution of the protest often lasts several more years; and 1994-04-22 Senate Journal Page 3879 SB 377 (C) commencement of a separate collection action while an administrative or judicial appeal of a taxpayer's protest of an assessment is pending is impractical and an inefficient use of the resources of the executive and judicial branches of the state government; (6) substantial taxes assessed under former AS43.21 and under AS43.55 remain uncollected; (7) these uncollected taxes are in large part the result of disputes over value at the point of production for oil and gas produced in the state; (8) substantial public revenue is at risk in the litigation to which reference is made in (b)(2) of this section, and it is contrary to the public interest to allow these revenues to go uncollected; (9) because the department has had difficulties in obtaining information and completing audits within the three-year period set out in AS43.05.260(a) and has had to amend assessments based on information developed during taxpayer appeals to reflect the correct amount of tax due, a longer statutory period for assessments should be provided for tax periods beginning after December 31, 1993; (10) taxpayers also have an interest in finality and certainty with respect to the amount of taxes due the state, and that interest will be promoted by having a five-year statute of limitations on assessments, except as otherwise authorized by AS43.05.260(c), after which time no increases in the amount due the state will be allowed; and (11) it is in the public interest to amend AS43.05.260(a) prospectively to provide for the issuance and amendment of assessments within five years from the date the taxpayer's return is filed, except as provided in AS43.05.260(c). (b) The purposes of the amendment of AS43.05.260(a), made by sec.8 of this Act, and of AS43.05.270(a), made by sec.9 of this Act, are (1) to validate and affirm the longstanding administrative interpretation and practices of the Department of Revenue in assessing and collecting taxes; 1994-04-22 Senate Journal Page 3880 SB 377 (2) to make clear specific existing law that resulted in the inconsistent decisions of the state Superior Court reached in Tesoro Petroleum Corporation, et al., v. State of Alaska, Department of Revenue, Superior Court No. 3AN-89-7130 Civ., and State of Alaska, Department of Revenue v. Exxon Corporation, et al., Superior Court No. 3AN-89-5215 Civ. (3) to make prospective changes to the statute of limitations for assessments in AS43.05.260 to allow the Department of Revenue five years from the date the taxpayer's return is filed to complete its audit and issue or amend an assessment, for tax periods beginning after December 31, 1993." Page 1, line 4: Delete "* Section 1." Insert "* Sec. 2." Renumber the following bill sections accordingly. Page 3, after line 30: Insert new bill sections to read: "* Sec. 8. AS43.05.260(a) is amended to read: (a) Except as provided in (c) of this section and AS43.20.200(b), the amount of a tax imposed by this title must be assessed (1) for tax periods ending before January 1, 1994, within three years after the return was filed, whether or not a return was filed on or after the date prescribed by law; however, at any time during the administrative consideration of a taxpayer grievance or of a claim for credit or refund, based upon a tax imposed by former AS43.21 or by AS43.55, the department may increase or decrease the amount of tax due by issuing or amending an assessment; (2) for tax periods beginning after December 31, 1993, within five years after the return was filed, whether or not a return was filed on or after the date prescribed by law; the department may increase or decrease the amount of tax due by issuing or amending an assessment within the five-year period; after that five- year period, the department may not increase an assessment under this subsection. [IF THE TAX IS NOT 1994-04-22 Senate Journal Page 3881 SB 377 ASSESSED BEFORE THE EXPIRATION OF THE THREE-YEAR PERIOD, PROCEEDINGS MAY NOT BE INSTITUTED IN COURT FOR THE COLLECTION OF THE TAX.] * Sec. 9. AS43.05.270(a) is amended to read: (a) When the assessment of a tax imposed by this title has been made within the period of limitation under AS43.05.260, the tax may be collected by levy or by a proceeding in court [, BUT ONLY] if the levy is made or the proceeding is begun: (1) within six years after the latest of any of the following: (A) the assessment of the tax; (B) the final administrative determination of the grievance, if the taxpayer files a grievance from an assessment; or (C) the final judicial resolution of an appeal, if the taxpayer appeals from a final adjudicative determination of a grievance; or (2) before the expiration of a period for collection agreed upon in writing by the department and the taxpayer before the expiration of the six-year period; a period agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon [; THE PERIOD PROVIDED BY THIS PARAGRAPH DURING WHICH A TAX MAY BE COLLECTED BY LEVY MAY NOT BE EXTENDED OR CURTAILED BECAUSE OF A JUDGMENT AGAINST THE TAXPAYER]." Renumber the following bill sections accordingly. Page 5, after line 6: Insert new bill sections to read: "* Sec. 13. Under the provisions of AS01.10.030, if any provisions of this Act, or the application thereof to any person or circumstance is held invalid, the remainder of this Act and the application to other persons or circumstances shall not be affected thereby. 1994-04-22 Senate Journal Page 3882 SB 377 * Sec. 14. Sections 8 and 9 of this Act are retroactive to January1, 1976. * Sec. 15. Sections 8, 9, 13, and 14 of this Act take effect immediately under AS01.10.070(c)." Renumber the following bill section accordingly. Page 5, line 7: Delete "This" Insert "Except as provided in sec. 15 of this Act, this" Senator Kerttula moved for the adoption of Amendment No. 1. Senator Kelly objected. Senator Pearce moved the question of whether Amendment No. 1 was germane. President Halford stated in Mason's Manual, Section 402, the question of whether the proposed amendment is germane is to be decided by the body.