Legislature(2015 - 2016)HOUSE FINANCE 519
04/11/2016 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB118 | |
| HB290 | |
| HB375 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 118 | TELECONFERENCED | |
| + | HB 243 | TELECONFERENCED | |
| + | HB 315 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 290 | TELECONFERENCED | |
| += | HB 375 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 11, 2016
1:36 p.m.
1:36:33 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 1:36 p.m.
MEMBERS PRESENT
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
Representative Mark Neuman, Co-Chair
ALSO PRESENT
Jane Pierson, Staff, Representative Steve Thompson; Gene
Therriault, Deputy Director, Statewide Energy Policy
Development, Alaska Energy Authority, Department of
Commerce, Community and Economic Development; Kathy
Wasserman, Alaska Municipal League; Laura Stidolph, Staff,
Representative Kurt Olson; Kris Curtis, Legislative
Auditor, Alaska Division of Legislative Audit; Sara
Chambers, Administrative Operations Manager, Division of
Corporations, Business and Professional Licensing,
Department of Commerce, Community and Economic Development;
Konrad Jackson, Staff, Representative Kurt Olson; Jerry
Burnett, Deputy Commissioner, Treasury Division, Department
of Revenue.
PRESENT VIA TELECONFERENCE
Karl Kassel, Mayor, Fairbanks North Star Borough; Tracy
Barickman, Alaska Real Estate Commission, Mat-Su.
SUMMARY
HB 118 MUNI ENERGY IMPROVEMNT ASSESSMNTS/BONDS
CSHB 118 (FIN) was REPORTED out of committee with
a "do pass" recommendation and with a new zero
fiscal note by the Department of Commerce,
Community and Economic Development.
HB 290 EXTENDING THE REAL ESTATE COMMISSION
HB 290 was REPORTED out of committee with a "no
recommendation" recommendation and with a new
accompanying zero fiscal note by the Department
of Commerce, Community and Economic Development.
HB 375 ELECTRONIC TAX RETURNS & REPORTS
CSHB 375 (FIN) was REPORTED out of committee with
a "do pass" recommendation and with a new
accompanying zero fiscal impact note by the
Department of Revenue.
Co-Chair Thompson reviewed the agenda for the day.
1:37:35 PM
HOUSE BILL NO. 118
"An Act adopting the Municipal Property Assessed Clean
Energy Act; authorizing municipalities to establish
programs to impose assessments for energy improvements
in regions designated by municipalities; imposing
fees; and providing for an effective date."
Vice-Chair Saddler MOVED to ADOPT the proposed committee
substitute for HB 118, Work Draft (29-GH1021\P). There
being NO OBJECTION, it was so ordered.
JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON,
reviewed the changes to the Committee Substitute by reading
from a prepared statement:
Sec 1: No change
Sec 2: No change
Sec 3: New section allowing second class boroughs to
authorize PACE financing under non area wide powers
Sec 4: Renumbered section with no change
Sec 5: Renumbered section with the following changes:
· Page 3, line 17
Modifies language to allow PACE financing to be
implemented within a region of a municipality
determined by the municipality through a public
process.
· Page 3, lines 30 - 31
Modifies language to allow PACE financing to be
implemented within a region of a municipality
determined by the municipality through a public
process.
· Page 4, line 24 through Page 5, line 3
Replaces proposed AS 29.49.050 with language that
allows a municipality wishing to authorize PACE
financing to do so by designating an area of the
municipality as a region for the program. The
area designated may include the entire
municipality, a single subset, or subsets of the
municipality. However, the entire PACE program
must be contained within the boundary of the
municipality.
· Page 5, line 15
Requires a municipality proposing to implement
PACE financing to provide a description of the
boundaries for the proposed program. Re-letter
the remaining subsections of AS 29.49.060 with no
change.
· Page 6, line 17
Requires that a map of the proposed PACE
financing program boundary be included in the
mandatory report that must be made available to
the public before a PACE program can be
initiated. Renumber the remaining subsections of
proposed AS 29.49.070 with no change.
· Page 10, lines 9 - 10
Adds language to acknowledge that PACE assessment
payments may come in from regions within the
municipality.
· Page 11, line 7, Page 11, line 10 and Page 11,
line 13
Clarifies that the prohibited acts established in
proposed AS 29.49.160 will apply to a PACE
financing program whether it is offered in a
portion of the municipality or the entire
municipality.
Ms. Pierson referred to a legal opinion (copy on file)
dated April 2, 2015 in the member's backup packets. She
indicated the memo explained why the changes in the
Committee Substitute (CS) was necessary.
1:40:59 PM
Representative Guttenberg asked what the term "municipal"
encompassed. He asked whether a borough was included in the
definition. Ms. Pierson believed so but deferred to Mr.
Therriault for the answer.
Representative Kawasaki asked about local improvement
districts. He wondered whether the municipality would
determine a PACE (property assessed clean energy program)
area through a public process or would the municipal
government act on behalf of the property owners.
1:42:28 PM
GENE THERRIAULT, DEPUTY DIRECTOR, STATEWIDE ENERGY POLICY
DEVELOPMENT, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT
AUTHORITY, ALASKA ENERGY AUTHORITY, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT, answered Representative
Kawasaki's question. He explained that the public process
was delineated in the legislation. When a municipality was
considering a PACE program it must pass a resolution
detailing the location and how the program would be run.
The information would be included in a public report and
ultimately, a local government had to adopt an ordinance to
initiate the program.
Representative Guttenberg asked about the term
"municipality" used in the legislation and wondered what
the term encompassed. Mr. Therriault had consulted with the
Department of Law (DOL) and assured that the terminology in
the bill "struck the balance correctly."
1:44:20 PM
Representative Wilson offered that the bill provided
additional power to a second class borough. She wondered
whether the municipality then had the ability to add a tax
to the PACE area. Mr. Therriault responded in the negative.
He explained that the program allowed an individual
property owner to use the financing mechanism and repay the
loan through a voluntary property tax assessment. He noted
that the mechanism was similar to a utility assessment
except that the assessment was only levied for the
individual property owner in the program. He emphasized
that the bill allowed for a contractual arrangement between
a property owner and municipality to levy an extra
assessment on the individual's property in order to repay
the loan. Representative Wilson asked whether the
legislation was expanded to include residents. Mr.
Therriault responded that the bill restricted the PACE
program to businesses rather than residents. He added that
in the Fairbanks North Star Borough the program was
intended to assist businesses convert to natural gas when
an expanded supply was available. He delineated that some
states were attempting to expand the program to residential
properties and experienced problems with the secondary
lending market purchasers of residential property loans.
The authority decided to avoid any issues with residential
property and focused on businesses. Representative Wilson
asked whether the program was a voluntary mechanism rather
than any type of "forceful action." Mr. Therriault replied
that the program was completely voluntary for both the
municipality and the individual businesses.
Representative Gattis communicated that the program applied
to the building owner rather than the business owner unless
they were the same. She viewed the program as advantageous
to both the business and property owner.
Representative Munoz asked whether the municipality was the
entity repaying the lending institution. Mr. Therriault
confirmed that if the source of the loan was a private bank
that entered into a contractual agreement with the
municipality then the local government would pay the bank.
Another mechanism a municipality could employ would be a
revenue bond that would be repaid via the local government.
The program allowed the local government the flexibility to
search for federal sources of money, private lenders, or
revenue bonding at low interest rates and pass the
opportunity on to the business owner.
1:50:16 PM
Co-Chair Thompson OPENED public testimony.
1:50:34 PM
KATHY WASSERMAN, ALASKA MUNICIPAL LEAGUE, spoke in favor of
the legislation. She added that under state law the term
"municipalities" included boroughs and cities. The league
strongly supported the legislation as a tool that helped
businesses and included "safeguards."
1:51:58 PM
KARL KASSEL, MAYOR, FAIRBANKS NORTHSTAR BOROUGH (via
teleconference), urged members to support HB 118. He
strongly endorsed the legislation. He noted the support of
the communities and mayors of Fairbanks and North Pole. He
voiced that the bill helped businesses move forward with
cleaner energy and gas conversions as well as fostering an
economic "boost" for the communities.
Co-Chair Thompson CLOSED public testimony.
Mr. Therriault relayed that in the past year AEA and AIEDEA
had been looking for additional non-state sources of money
that could assist energy conversion in the state. He
relayed that according to Senator Murkowski's office, the
Rural Utility Service (RUS) division of the United States
Department of Agriculture was in the process of writing a
letter of support. The RUS approved the PACE mechanism as
one of the favored programs to access federal loan funds.
He reported that AEA was actively looking and identified a
source of funding with a zero interest rate for a local
government and another that carried a 2 percent to 2.5
percent interest rate.
Vice-Chair Saddler asked who was offering the zero percent
interest rate. Mr. Therriault responded that RUS was
offering a zero percent interest rate loan and the pool of
money nationwide was $70 million to $80 million. He
stressed the importance for municipalities to obtain access
to repayment mechanisms that lowered the default rate on
loans.
Vice-Chair Saddler reviewed the new zero fiscal note from
the Department of Commerce, Community and Economic
Development (DCCED).
Vice-Chair Saddler MOVED to REPORT CSHB 118 (FIN) out of
committee with individual recommendations and the
accompanying fiscal note(s). There being NO OBJECTION, it
was so ordered.
CSHB 118 (FIN) was REPORTED out of committee with a "do
pass" recommendation and with a new zero fiscal note by the
Department of Commerce, Community and Economic Development.
1:56:57 PM
AT EASE
1:59:00 PM
RECONVENED
HOUSE BILL NO. 290
"An Act extending the termination date of the Real
Estate Commission; and providing for an effective
date."
1:59:24 PM
LAURA STIDOLPH, STAFF, and REPRESENTATIVE KURT OLSON, read
from a prepared statement:
Before you today is HB290, this legislation extends
the termination date of the Real Estate Commission to
June 30, 2018.
Each year the Division of Legislative Audit reviews
state boards and commissions to determine if they
should be reestablished per AS 24.44. The Division of
Legislative Audit reviewed the activities of the Real
Estate Commission. The purpose of this audit was to
determine whether there is a demonstrated public need
for the board's continued existence and whether it has
been operating in an effective manner.
As the members noted in their review of the audit in
their packets, it is the opinion of our auditors, the
board is serving the public's interest by effectively
licensing real estate brokers, associate brokers, and
salespeople.
As the members also may have noted from the audit,
there were two recommendations. First, the
commission's chair and the DCCED Division of
Administrative Services director should work together
to procure a masters, errors & omissions policy.
Second, the Division of Corporation, Business, and
Professional Licensing should take action to ensure
cases are actively investigated.
To speak to the recommendations, Kris Kurtis of
Legislative Audit is here, Sara Chambers Director of
the Division of Corporations, Business and
Professional Licensing with the Department of
Commerce, Community & Economic Development, and Nancy
Davis, the Chair of the Commission is online from
Sitka.
In closing, the Real Estate Commission serves an
important role by improving operations and industry
practices by modifying and adopting regulations.
Thank you for your support of this legislation.
Representative Kawasaki asked about the original audit
recommendation. He wondered why the board extension was
only two years. Ms. Stidolph replied that the audit
recommended that the commission procure a master errors and
omissions insurance policy and if accomplished recommended
a 6 year extension. If the policy was not acquired, a four
year extension was suggested. She related that the sponsor
decided to reduce the extension to two years because the
policy was an important part of the commission's statutory
requirement that should be obtained in a reasonable amount
of time.
Representative Guttenberg asked why the commission did not
obtain the policy. Ms. Stidolph responded that in 2008, HB
357 (Real Estate Licensees/Recovery Fund) [CHAPTER 113 SLA
08 06/26/2008] the House Labor and Commerce Committee
sponsored a bill that changed the real estate surety fund.
She delineated that the fund was changed to the Real Estate
Recovery fund that allowed consumers via an administrative
hearing to receive up to $15 thousand in damages. The
legislation mandated that each realtor would have to obtain
the insurance policy in order to protect the public.
However, a clause in the bill stated that if the commission
did not obtain the umbrella policy coverage, individual
salespersons did not have to procure the policy either.
Since 2010, when the bill regulations were written,
disagreement ensued about whether the regulations were "too
prescriptive." The regulations stated that the maximum
premium for the insurance policy was $300, which was too
low. She commented that after six years of bureaucratic
wrangling the solution to require the commission to obtain
the masters policy was warranted.
2:04:55 PM
Vice-Chair Saddler wondered whether there were any other
measures that addressed the situation. Ms. Stidolph
indicated that there was currently SB 158 in the House
Labor and Commerce Committee, which dealt with real estate
broker licenses. The committee was offering an amendment to
repeal the provision in HB 357 that mandated the commission
to obtain the umbrella policy. Vice-Chair Saddler asked for
clarification. Ms. Stidolph further explained that each
individual would be required to obtain the policy until the
commission obtained the policy. Vice-Chair Saddler asked
what the timeline was and how it comported with the two
year extension of the commission. Ms. Stidolph indicated
that the repeal would occur in 2018. The date granted the
industry time to obtain the insurance and gave the real
estate commission more time to procure the policy. Vice-
Chair Saddler asked what would happen in the 2 year
timeline with adoption of the amendment. Ms. Stidolph
answered that all real estate salesperson and brokers would
operate under the policy within two years and in 2.5 years
a master policy would be obtained by the commission.
2:07:25 PM
KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF
LEGISLATIVE AUDIT, reported that the audit recommended a 6
year extension because at the time Legislative Audit
understood that the commission could procure the policy by
January 2016. She spoke to the recommendations. The first
recommendation regarded obtaining the master policy and the
second recommendation requested that the Division of
Corporations, Business, and Professional Licensing (DCBPL)
chief investigator take action to ensure cases were
investigated and completed in a timely manner. She noted 29
cases of "significant periods of inactivity" in a sample of
36.
Representative Kawasaki asked when the next audit was
required with only a two year extension. Ms. Curtis relayed
that the division would conduct the audit in the spring or
summer of 2017. Representative Kawasaki asked about the
cost of the audit. Ms. Curtis responded that the audit
would be succinct and short having just completed an audit.
However, she was unable to guarantee the possibility of a
short audit. Representative Kawasaki cited the audit report
that identified 36 of the 235 open investigative cases and
that 29 of the cases had periods of inactivity ranging from
124 to 1,669 total days. He noted that some cases were
closed due to the length of investigation. He thought the
situation appeared "problematic." He wondered why the
investigations took so long. Ms. Curtis replied that the
finding was consistently discovered within DCBPL. She
communicated that in the current case "excessive time lags
were due to inadequate monitoring and insufficient
oversight to ensure investigations were completed timely."
Representative Kawasaki thought the DCBPL was not serving
the "major public purpose" of the board. He expressed
concern with the excessive timelines. Regardless of the
issues, he announced that he would offer a conceptual
amendment that would increase the extension "by a couple of
years."
2:12:30 PM
Representative Guttenberg offered that he was "troubled" by
both recommendations. He wondered what the "mechanical
problem" was that kept the commission from obtaining the
master policy. Ms. Curtis explained that she had heard
various different reasons why the policy was not obtained
but that "no one could really answer the why." She recently
discovered that the original legislation was "flawed" and
not in line with a policy that actually was possible to
procure. She added that "no one could really pinpoint" why
it took since 2008 and still no real progress was made to
procure the policy. She shared that recently the commission
and the division, in response to the audit made great
effort towards obtaining the policy.
Representative Guttenberg asked about the second
recommendation regarding the timing and inactivity of the
investigations. He wondered whether a correlation existed
between the functioning of the board and the two
recommendations. Ms. Curtis clarified that he was asking
whether the "efforts of the board impacted the
recommendations." Representative Guttenberg deduced that
regarding the first recommendation the commission was
"unfocused" and decide what to do in the face of a muddled
statute and recently sprang into action because of the
sunset. The second recommendations had to do with the
inactivity regarding complaints. He wondered whether the
board was "functional." Ms. Curtis responded that the board
was functioning and able to serve the public interest. She
commented that Legislative Audit would not recommend the
extension if the audit determined the board was not
functional. She noted that the investigative lags were
"reflective" of a "lack of good case management" and
constantly experienced the problem. She reminded the
committee that the audit was "looking backward" and
currently the issue could have been resolved.
2:17:38 PM
Vice-Chair Saddler asked whether the licensing fees covered
the commission's costs and investigations. Ms. Curtis
responded in the affirmative and confirmed that the board
had a surplus of $274 thousand as of March 2015. Vice-Chair
Saddler wondered how much of the surplus would remain after
the master policy was obtained and whether the cost would
affect the licensing fees. Ms. Curtis expected that some
indirect costs would be incurred in obtaining the policy
but the expense would not impact the surplus. Vice-Chair
Saddler asked whether the indirect costs were due to the
policy premium. Ms. Curtis answered that the licensee would
pay the premiums to the board under the umbrella policy.
Vice-Chair Saddler reiterated whether the surplus would pay
the premiums. Ms. Curtis replied that the licensees would
participate and collectively pay for the policy. She
suggested that Vice-Chair Saddler clarify the question for
the department. Vice-Chair Saddler mentioned the audit's
unfavorable findings of the investigator. He asked whether
the investigator was a staffer or contractor. Ms. Curtis
responded that the investigators were employees of the
DCBPL and sometimes an investigator was assigned to a
specific board and others were shared among boards. Vice-
Chair Saddler had heard in the past that some investigators
were independent contractors. Ms. Curtis answered in the
negative.
2:20:52 PM
SARA CHAMBERS, ADMINISTRATIVE OPERATIONS MANAGER, DIVISION
OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
Co-Chair Thompson understood that the division was "in
charge" of investigators and investigations. Ms. Chambers
answered in the affirmative. Co-Chair Thompson asked why
the problem with investigators repeatedly happened over the
years. Ms. Chambers confirmed that the problem had been
identified over the "last few years." She detailed that the
scope of the audit was 2010 through 2015. In the summer of
2014, the division hired a new chief investigator that
created a management shift. The new manager had put into
place some new policies and procedures and supervisory
restructuring in an attempt to resolve the issues that were
due to a lack of management in a particular unit prior to
2014. She suspected that the samples in the audit were
prior to late 2014. She blamed the issue on a "management
oversight responsibility." She pointed out that the new
measures resulted in a reduction in caseload and turnaround
time.
2:23:08 PM
Representative Guttenberg hoped that the situation was
remedied. He asked about conflicting statues that
interfered with the commission obtaining a master policy.
He wondered what mechanism was preventing the board from
purchasing the policy. Ms. Chambers explained that the
statute required individual licensees to carry the policy
but the commission was not required by use of the word
"may." However, the other clause stated that individuals
were not required to carry the policy until the commission
obtained an umbrella policy. She summarized that individual
brokers and salesperson were not required to obtain the
policy until the commission procured an umbrella policy yet
everyone was required to obtain it and the commission was
not required to procure the umbrella policy all at the same
time. She could not speak to the situation prior to her
involvement in mid-2014 but "sensed that someone was
dragging their feet." She reported that she "dug in" to
remedy the situation and was hopeful that the policy could
be attained by January 2016. The "intent to bid" process
was initiated and the department received "zero response"
from the market. She indicated that the premium level set
in statue was far too low and the potential bidders were
concerned that they did not have enough information
regarding the brokers and agents they would be covering to
assess the risk. In response, the division reexamined the
regulation setting process to evaluate resetting the
premium. She stated that the insurance process was complex
and the procurement process was unusual. The policy covered
individuals and was not just "a simple contract with the
state."
2:27:42 PM
Representative Guttenberg restated his concern that action
only took place when the commission was bumping up against
the sunset date. He agreed that the insurance policy
sounded complex. He wondered whether the two year extension
was an adequate amount of time to clear up the issue. He
asked her to comment on the 2-year sunset. Ms. Chambers
shared her concern that the length of time was not adequate
due the short time period before the new sunset audit would
commence.
Vice-Chair Saddler asked about the reasons for the
shortcomings with the investigation process and whether she
was confident the issue was remedied. Ms. Chambers was very
confident in the actions and progress of the investigators
under the new management. She referred to a detailed
department response on page 26 of the audit that provided
great feedback. She delineated that prior to the
restructuring, the investigations unit had one manager to
19 investigators. The department added a level of senior
investigators working under the chief to allow "more hands-
on" supervision and accountability to meet guidelines. She
reported that a new guideline was that every 30 days an
investigator reviewed her caseload and worked with
management to discern why any inactivity occurred and how
to address it. She relayed that other audit's results and
end of fiscal year statistics proved that the remedy was
working.
2:33:02 PM
Co-Chair Thompson OPENED public testimony.
TRACY BARICKMAN, ALASKA REAL ESTATE COMMISSION, MAT-SU (via
teleconference), supported HB 290. She reported having 20
years of experience in the industry and was a commissioner
on the board. She relayed that she was also a subject
matter expert on a national level for Pearson Vue [Testing
Services of Philadelphia, Pennsylvania contracted by the
Real Estate Commission of Alaska]. She noted that she was
sitting in for the chair of the commission, Nancy Davis who
had medical issues. She supported the extension. She
recounted that the commission operated well within its
budget due to adequate licensing fees and was not a burden
the state's budget. She worked with the state's
investigator to review complaints as a result of a
transaction or licensees interaction with the public. She
reported that most complaints were legitimate and in many
cases licensees were disciplined through education, fines,
and at times suspension or revocation of their license. She
stated that without the board the only recourse for
consumer complaints was through litigation and the consumer
might not have the resources to take a case to court. She
believed the scenario would allow improper actions to
continue. She noted that the audit failed to recognize the
remedies that were already established in response to the
investigative inactivity. The 65 case backlog took place
from 2011 through 2014 and the new investigator had cleared
all of the cases. Currently the investigator had 23 cases
with the oldest dating back from 2015. She indicated that
the commission constantly improved industry standards via
the modification and adoption of regulations. She
communicated that the low premium set in statute and a lack
of historical data prohibited the board from procuring the
master policy. She suggested that the simple solution was
to remove AS 8.88,172 sub paragraph (e). The statute
eliminated the requirement of the umbrella policy. Once
that was established the insurance companies could gather
the historical data. She stressed that the low premium
estimate of $300 was not practical. The premium should be
$1,200 to $20,000 per year depending on the size of the
brokerage and what services were offered. She added that
property management coverage even was more expensive.
2:39:12 PM
Co-Chair Thompson CLOSED public testimony.
Ms. Stidolph noted that the Labor and Commerce Committee
was offering additional provisions to another bill that
removed the requirement to carry the Errors and Omissions
insurance in two years. The provision was expected to
rectify the situation.
2:40:37 PM
Representative Kawasaki commented that the committee should
not discuss other legislation. He did not have a problem
with extending the date of the sunset. He believed that the
short period of time for the sunset burdened the audit
division. He offered the following conceptual amendment.
Representative Kawasaki MOVED Conceptual Amendment 1
extending the sunset year from 2018 to 2022.
Representative Kawasaki WITHDREW Conceptual Amendment 1.
Representative Kawasaki MOVED Conceptual Amendment 2
extending the sunset year to 2020.
Representative Wilson OBJECTED for discussion.
Representative Wilson read from the audit Findings and
Recommendations:
… However, the legislation also required errors and
omissions insurance as a condition of real estate
licensure. The new insurance requirement has not
successfully protected the public because the
commission has not obtained a master policy and
licensees have continued to practice without this
important consumer protection in place.
Representative Wilson believed that the finding pointed out
that an important aspect of consumer protection was
lacking. She felt that the pressure of a sunset would bring
about a resolution to the problem. She maintained her
objection to the amendment.
Vice-Chair Saddler shared Representative Wilson's concerns.
He also expressed some concerns regarding the problems with
the commission's investigations. He acknowledged that some
improvements were put into effect but felt the two year
sunset was warranted.
Representative Wilson MAINTAINED her objection.
A roll call vote was taken on the motion.
IN FAVOR: Kawasaki
OPPOSED: Munoz, Pruitt, Saddler, Wilson, Edgmon, Gattis,
Guttenberg, Thompson.
The MOTION FAILED (1/8).
Representative Gara and Representative Neuman were absent
from voting.
Vice-Chair Saddler reviewed the fiscal impact note. He
noted that new zero Department of Commerce, Community and
Economic Development fiscal note that appropriated the
amount of $8.7 thousand dollars and was included in the
governor's budget request.
2:45:45 PM
Vice-Chair Saddler MOVED to REPORT HB 290 out of committee
with individual recommendations and the accompanying fiscal
note(s).
There being NO OBJECTION, it was so ordered.
HB 290 was REPORTED out of committee with a "no
recommendation" recommendation and with a new accompanying
zero fiscal note by the Department of Commerce, Community
and Economic Development.
2:46:06 PM
AT EASE
2:48:05 PM
RECONVENED
HOUSE BILL NO. 375
"An Act requiring the electronic submission of a tax
return or report with the Department of Revenue; and
providing for an effective date."
2:48:30 PM
KONRAD JACKSON, STAFF, REPRESENTATIVE KURT OLSON,
introduced the bill that required the electronic submission
of a tax return or report with the Department of Revenue
(DOR). He noted that the governor introduced six tax bills
that all included provisions for electronic submissions of
tax returns and reports. He stated that electronic
submission of documents had become commonplace and was a
time saving and cost cutting measure for both the taxpayer
and the state. He furthered that there were only two
sections that made substantive changes to current statute;
the first authorized electronic filing and the second
assessed a civil penalty for failing to file
electronically.
Co-Chair Thompson observed that Section 1 of the bill
allowed for a waiver if a taxpayer did not have access to
computers. Mr. Jackson deferred the question to the
department. Co-Chair Thompson wondered how the taxpayer
would apply for a waiver. Mr. Jackson deferred the question
to the department.
Representative Munoz asked how the waiver process would
work. She favored the benefits of electronic filing but was
concerned about the segment of the population that was
"disadvantaged" by the requirement.
Vice-Chair Saddler wondered what electronic meant. He asked
whether the method included a fillable form or an
electronic PDF format. Mr. Jackson responded that the basic
language in the bill referred to a form prescribed by the
department.
2:53:40 PM
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, responded that the department
envisioned the waiver process to include a paper form the
taxpayer filled out to request a waiver. He reported that
currently all tax payers were businesses or corporations.
The department expected a very small number of waiver
requests.
Representative Munoz asked whether the bill included
employment security taxes. Ms. Burnett responded that
employment security taxes were filed through the Department
of Labor and Workforce Development (DOLWD). Representative
Munoz wondered what percentage of current tax payers used
paper filing. Ms. Burnett replied that the department only
recently introduced electronic filing for businesses and
corporate filing had already mandated electronic filing.
Representative Kawasaki asked what the percentage of filers
that filed by paper was. Mr. Burnett responded that the
department was transitioning out of paper filing. He did
not have statistics and expected that very few taxpayers
would choose paper filing due to the convenience of
electronic filing. Representative Kawasaki asked about the
satisfactory evidence requirement in the bill in order to
receive a waiver. Mr. Burnett responded that satisfactory
evidence would entail not having the ability or
practicality to access the internet.
2:58:06 PM
Representative Kawasaki referred to Section 7 that
contained the transitional provisions. He recounted that
DOR will adopt regulations for implementation of electronic
filing. He wondered how long the time was between the
passage of the bill and when electronic filling would be
implemented. Mr. Burnett expected the regulations would be
quickly implemented but was not sure of the specifics.
Representative Kawasaki wanted to ensure that the
transition time was sufficient and allowed tax payers' time
to adjust and prepare for the change. Mr. Burnett commented
that the regulation process would implement a time period.
He explained that the state did not have a large number of
tax payers in any area other than corporate tax payers. He
ensured the committee that the department would engage in
some kind of outreach. He did not anticipate any issues in
the transition. Representative Kawasaki mentioned that the
waiver system included a civil penalty and wondered whether
the bill contained "typical language" when dealing with tax
filing. He preferred that penalties would be deferred until
after the first set of electronic filing was due. Mr.
Burnett relayed that "it was typical for a taxing agency to
have mandatory language." Representative Kawasaki wondered
about the zero fiscal note. He was under the impression
that electronic filing saved time and money and did not see
savings reflected in the fiscal note. Mr. Burnett answered
that most taxpayers were already filing electronically. He
noted that over the past several years the department
"ramped down" staffing levels as the electronic system came
online. He indicated that the effect on budgetary savings
was gradual and were currently difficult to define. He
offered that when the Permanent Fund Division instituted
electronic filing staffing decreased from over 100 to over
70 employees.
Vice-Chair Saddler wondered whether the bill was necessary.
Mr. Burnett responded that legislation was necessary
because some taxpayers were just not willing to file
electronically. He voiced that "there was no business
reason" for a taxpayer not to file electronically and the
few paper filers affected efficiency. Vice-Chair Saddler
asked about the digitization of forms and asked if the
taxpayer's information was sent directly into the
department's database. Mr. Burnett replied in the
affirmative. He expounded that the department had a web
portal and information went directly into the system.
3:05:03 PM
Representative Edgmon related that broad based taxes were
on the horizon and asked whether there would be any need to
provide some exceptions for rural communities without
access to reliable internet. Mr. Burnett answered that how
DOR handled individual taxes would be examined as a
separate issue. Representative Edgmon indicated that if the
state implemented an income tax electronic filing would
certainly aid the department especially with non-residents
filing. He thought an exemption for smaller rural
communities should be an option. Mr. Burnett replied that
the legislation allowed for a regulatory process as a means
for the department to deal with the issue of income taxes.
Representative Guttenberg was happy to see the state move
forward electronically. However, he was concerned with
internet accessibility. He remarked that if he personally
had to go through a portal to complete his filing he would
unlikely not be able to complete it. He felt that the state
was "not up to speed" in terms of having sufficient
internet service in Alaska; much of the state had
inadequate or dysfunctional internet service.
Representative Munoz remarked that she was old fashion and
still filed paper federal tax returns. She thought a longer
exemption period might be better. She suggested a 3 or 5
year tome period for exemptions.
3:12:05 PM
Representative Gara thought an option to file by paper
should remain due to the fact that in some places the
capability to file online did not exist. Mr. Burnett agreed
that a business might be located in a place without
adequate internet service and reported that an exemption
provision existed in the legislation.
Representative Pruitt asked whether business licenses were
required to be filed online. Mr. Burnett was uncertain
whether it was mandated. Representative Pruitt supported
the legislation as a step in the right direction and
believed electronic filing for many state purposes was the
preferred method that increased efficiency and lowered
costs. He wondered whether any of the state's online filing
was required.
Representative Wilson asked whether the Department of Labor
and Workforce Development could benefit from the same kind
of bill.
Representative Gara thought that applying for a waiver was
a cumbersome process and thought that the response might be
slow and cause late filing. He wondered whether a taxpayer
could just call and request a paper file. Co-Chair Thompson
ascertained that the waiver process would be handled in
regulations.
Mr. Burnett indicated that the bill authorized the
department to design the regulations for the exemption
process and could be handled as suggested by Representative
Gara. Representative Gara interpreted Section 1 as
prohibiting sending the form upon request without proving
necessity. He believed that the department's administrative
costs would be lowered if a paper copy would be provided
upon request without employing staff time reviewing waiver
criteria. He thought the process was "cumbersome."
Representative Gattis agreed with Representative Gara. She
relayed from personal experience that sometimes paper
filing was necessary or preferred. She wanted to ensure the
waiver process was much easier until the online process was
in more universal use in the state.
Co-Chair Thompson supported the legislation. He offered
that electronic filing had already resulted in efficiency
and cost savings for the department and HB 375 contained a
provision to obtain a waiver when necessary.
3:20:25 PM
Co-Chair Thompson OPENED public testimony.
3:20:34 PM
Co-Chair Thompson CLOSED public testimony.
Representative Munoz MOVED Conceptual Amendment 1.
Representative Munoz moved conceptual amendment 1 related
to page 2, line 4 extending the exemption period from two
years to five years.
Representative Wilson OBJECTED for discussion.
Representative Munoz thought 2 years was onerous for some
who needed to file via paper and would have to reapply for
the waiver after only two years.
Representative Wilson WITHDREW her objection.
Representative Kawasaki shared Representative Munoz's
concern. He was unsure whether the amendment was up to 5
years or extended for a full five years.
Representative Munoz WITHDREW Conceptual Amendment 1
Representative Munoz MOVED Conceptual Amendment 2 that
applied to page 2, line 4 of the bill removing "2" and
replacing it with "5". She clarified that the amendment
extended the exemption period to 5 years.
Representative Kawasaki OBJECTED for discussion.
Representative Kawasaki related that the department had
already experienced a savings with electronic filing and
that it would take time for the exemption regulations to be
written. He recognized the need to file paper returns but
felt that 5 years was "too long a time period" to allow
compliance. He opposed the amendment.
Representative Gara did not believe people were reading the
statute correctly. He deduced that the exemption was only
granted if a taxpayer was unable to file electronically and
not because the taxpayer merely resisted change. He
supported conceptual amendment 2.
Representative Wilson supported the amendment.
Vice-Chair Saddler indicated he favored the amendment.
A roll call vote was taken on the motion.
IN FAVOR: Guttenberg, Munoz, Saddler, Wilson, Edgmon, Gara,
Gattis
OPPOSED: Kawasaki, Pruitt, Thompson
The MOTION PASSED (7/3).
Representative Neuman was absent from voting.
3:26:40 PM
Vice-Chair Saddler reviewed the zero fiscal impact note
from DOR.
3:26:59 PM
Vice-Chair Saddler MOVED to REPORT HB 375 as amended out of
committee with individual recommendations and the
accompanying fiscal note(s). There being NO OBJECTION, it
was so ordered.
CSHB 375 (FIN) was REPORTED out of committee with a "do
pass" recommendation and with a new accompanying zero
fiscal impact note by the Department of Revenue.
Co-Chair Thompson reviewed the agenda for the following
day.
ADJOURNMENT
3:27:59 PM
The meeting was adjourned at 3:27 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 118 AEA Graphic.pdf |
HFIN 4/11/2016 1:30:00 PM |
HB 118 |