05/05/2003 09:16 AM House FIN

HOUSE BILL NO. 216                                                                                                            
     An Act relating to municipal taxation of refined fuel                                                                      
     products.                                                                                                                  
                                                                                                                                
Co-Chair  Harris  MOVED  to ADOPT  work  draft  #23-LS0822\U,                                                                   
Cook,  5/4/03,  as  the  version   of  the  bill  before  the                                                                   
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
JOSH   APPLEBEE,   STAFF,   REPRESENTATIVE    TOM   ANDERSON,                                                                   
accompanied Randy Ruaro to the table.                                                                                           
                                                                                                                                
RANDY RUARO, STAFF, REPRESENTATIVE  BILL WILLIAMS, noted that                                                                   
changes  had been  made  to Section  3,  which addresses  the                                                                   
"scope" of the bill.  The previous  version was broad and the                                                                   
language  needed  to  be  narrowed so  that  the  bill  would                                                                   
prohibit tax  on both sale  transfers of fuel  refined within                                                                   
the boundaries of  the borough.  He stated  that the previous                                                                   
version   created  issues   across  the   State  within   the                                                                   
municipalities.   He  claimed that the  proposed version  was                                                                   
acceptable.                                                                                                                     
                                                                                                                                
Representative  Croft  questioned  the  changes.   Mr.  Ruaro                                                                   
stated  that  the entire  Section  3  had been  rewritten  to                                                                   
preclude taxes  on wholesale transfer of fuel  refined within                                                                   
the boundaries of a borough.                                                                                                    
                                                                                                                                
Representative  Croft  noted   that  language  from  the  "Q"                                                                   
version  would be  deleting  fuel used  in  the aircraft  and                                                                   
leaving  in  the  wholesale  transfer  portion.    Mr.  Ruaro                                                                   
replied that  the initial  difference was  in regard  to what                                                                   
the prohibition  actually could  apply to.   In the  previous                                                                   
"Q" version, it would apply to  any borough around the State,                                                                   
whereas,  the current  version  allows it  to  be limited  to                                                                   
boroughs where  the prohibition  applies.   He added  that in                                                                   
the  previous  version, fewer  boroughs  could  apply.   That                                                                   
language is listed on Page 1, Lines 11 & 12.                                                                                    
                                                                                                                                
Co-Chair Harris asked  if the bill dealt with  an increase to                                                                   
the fuel  tax.  Mr.  Ruaro responded  that the bill  does not                                                                   
levy a fuel tax.                                                                                                                
                                                                                                                                
Representative Joule inquired  why would the Legislature want                                                                   
to remove  a tool from the  municipalities.  He  thought that                                                                   
section  would   "hurt"  the   municipalities.     Mr.  Ruaro                                                                   
clarified that it had been a policy  decision.  He noted that                                                                   
Mr.  Cook had  addressed  the idea  in  a previous  committee                                                                   
hearing.   Representative  Joule understood  that the  bill's                                                                   
language currently only affects a few areas in the State.                                                                       
                                                                                                                                
Representative  Croft  advised   that  the  policy  was  more                                                                   
logical  than  that.   It  currently  states that  the  "only                                                                   
boroughs that can not access the  tax, would be the ones that                                                                   
have the  refinement in their  district".  He  commented that                                                                   
it  would be  best to  indicate only  boroughs that  actually                                                                   
refine  it,  could tax  it.    By passing  the  "U"  version,                                                                   
Fairbanks could  not tax but every other  municipality could.                                                                   
Representative  Croft  warned  that there  will  be  problems                                                                   
within the multiple jurisdictions.                                                                                              
                                                                                                                                
Representative  Whitaker agreed  with Representative  Croft's                                                                   
interpretation.    In  response   to  Representative  Joule's                                                                   
concerns, he admitted that he  too had concerns.  He believed                                                                   
that it would  be challenged and overturned.   The conclusion                                                                   
is that the only tax that remains  in place would be the ones                                                                   
imposed within  the boundaries of  the borough.  He  noted, a                                                                   
broader statewide  concern is that  by allowing a  borough to                                                                   
tax,  then  the  transfer  of  goods  becomes  essentially  a                                                                   
"restraint  of  trade".    He   believed  that  would  create                                                                   
problems for the  State.  He added that the  legislation does                                                                   
have significant merit.  Representative  Whitaker agreed with                                                                   
the concerns voiced by Representative Croft.                                                                                    
                                                                                                                                
Mr.  Ruaro referenced  the May  29th,  2002, letter  received                                                                   
from  attorney, Mr.  Avrum Gross,  regarding  the ability  of                                                                   
successive  jurisdictions to tax.   The  version of  the bill                                                                   
does not  give authority to  the successive jurisdictions  to                                                                   
impose a  tax.  (Letter  in Packet).   He reiterated  that in                                                                   
the proposed bill, that question would be left unanswered.                                                                      
                                                                                                                                
Representative  Croft noted  that it  would remove the  right                                                                   
that municipalities  know they have and leave  the right that                                                                   
we are not sure they have.  He  did not understand the "fix".                                                                   
                                                                                                                                
Co-Chair Williams  noted that he would like to  hold the bill                                                                   
in Committee until some of the  questions have been answered.                                                                   
                                                                                                                                
Co-Chair Harris noted that the  "Q" version deals with turban                                                                   
powered  aircraft.  He  asked why  that had  not been  in the                                                                   
proposed version.     Mr. Ruaro replied  that section  of the                                                                   
"Q"  version was  part  of a  tax  that would  occur  outside                                                                   
borough  boundaries  and  have   refineries  in  them.    The                                                                   
committee substitute  was changed  to apply only  to boroughs                                                                   
with refineries within their boundaries.                                                                                        
                                                                                                                                
Co-Chair  Williams  noted  that  HB  216  would  be  HELD  in                                                                   
Committee for further consideration.