04/26/1995 03:45 PM Senate RES

      CSHB 197(RES) MINERAL EXPLORATION INCENTIVE CREDITS                     
                                                                              
 Number 140                                                                    
                                                                               
 SENATOR LEMAN brought  CSHB 197(RES)  before the committee as the             
 next order of business.  He noted there was a draft committee                 
 substitute and asked for a motion for its adoption as a working               
 document.                                                                     
                                                                               
 SENATOR HALFORD moved that SCS CSHB 197(RES) (version "Z") be                 
 adopted as a working document.  Hearing no objection, the motion              
 carried.                                                                      
                                                                               
 JOHN WALSH, staff to Representative Richard Foster, said in the               
 drafting of the committee substitute, they took into consideration            
 the testimony of the Department of Revenue in the computation of              
 the credit with respect to the Alaska Corporate Income Tax for                
 mining activity, resolving their major concern.  They will not have           
 to compute the  credit using AS 43.20, which was a problem with the           
 Department of Revenue because of the apportionment (water's edge)             
 income method of calculation.  The computation comes from the                 
 mining license tax, which is sited specific.                                  
                                                                               
 Another change made in the legislation was that the credit will not           
 go against rents because of the fear of potential litigation, which           
 is agreeable to industry, as well as the Department of Natural                
 Resources, which gets program receipts off of that rent.                      
                                                                               
 There is a provision in the legislation that clarifies the                    
 procedure for abandoned mines that are now back into production and           
 the credits that may exist to get that mine back into production.             
                                                                               
 The wording of "application" for a tax credit was changed to                  
 "request" for a tax credit.  It clarifies that an operation would             
 request credits annually with the Department of Natural Resources,            
 certify those expenses for that year, and accumulate those until              
 shifting into a production mode, whereby they would then start to             
 deduct those credits against the taxes due.                                   
                                                                               
 Mr. Walsh noted that the legislation provides that a credit can be            
 carried forward to and applied during a subsequent tax year or                
 royalty payment period.  An exploration incentive credit must be              
 applied within 15 tax years or royalty payment periods after the              
 taking of the credit is approved, but they need not be 15                     
 consecutive years.   After 15 years of usage, the credits on the              
 table at that point would expire.                                             
                                                                               
 The legislation also allows the credits of a mine being assigned to           
 the new interest holder when the mine is sold.  Some confusing                
 language in a previous draft of that section of the bill was                  
 deleted to make the intent of the section clearer.                            
                                                                               
 The bill further provides that it is up to the applicant to keep              
 track of how its credits were used in the past and be able to at              
 any time verify how he has applied those in previous years.                   
                                                                               
 Concluding his comments, Mr. Walsh stated he believes the new                 
 committee substitute is an improvement and he encourages its                  
 passage.                                                                      
                                                                               
 Number 260                                                                    
                                                                               
 DAVID ROGERS, representing the Council of Alaska Producers, pointed           
 out that at the request of the Department of Natural Resources, the           
 bill now contains a definition of "mining operation."                         
 Number 270                                                                    
                                                                               
 SENATOR HALFORD asked what kind of retroactive incentive is being             
 created for investment that may or may not have occurred after                
 December 31, 1994.  MR. ROGERS responded that rather than having it           
 take effect in June or July, the decision was made to have it take            
 effect at the beginning of 1995.  SENATOR HALFORD added that he               
 would encourage that this not apply to investments made before the            
 start of the legislature and that it be changed to a later date.              
                                                                               
 SENATOR HALFORD moved to change "December 31, 1994" to "May 15,               
 1995."  Hearing no objection, SENATOR LEMAN stated the amendment to           
 the Resources SCS was adopted.                                                
                                                                               
 Number 290                                                                    
                                                                               
 JULES TILESTON, Director, Division of Mining & Water Management,              
 Department of Natural Resources, testified from Anchorage in                  
 support of the changes made in the Resources SCS.                             
                                                                               
 Number 297                                                                    
                                                                               
 DEBORAH VOGT, Deputy Commissioner, Department of Revenue, stated              
 the Resources SCS is a technical improvement over the previous                
 version, but the department still has some philosophical problems             
 of a fiscal nature which might be more appropriately adjusted in              
 the Senate Finance Committee.                                                 
                                                                               
 Number 300                                                                    
                                                                               
 SENATOR TAYLOR moved that SCS CSHB 197(RES), as amended, and the              
 Letter of Intent be passed out of committee with individual                   
 recommendations.  Hearing no objection, it was so ordered.