03/10/2010 08:00 AM House EDUCATION

        HB 367-TAX CREDITS FOR EDUCATIONAL CONTRIBUTIONS                                                                    
                                                                                                                                
9:49:15 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON announced that the  final order of business would be                                                               
HOUSE BILL  NO. 367,  "An Act  relating to  tax credits  for cash                                                               
contributions  by   taxpayers  that  are  accepted   for  certain                                                               
educational  purposes  and  facilities;   and  providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
9:49:20 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MUNOZ,  speaking as the  prime sponsor of  HB 367,                                                               
said the  bill allows tax  credits for  educational contributions                                                               
to  postsecondary institutions  and vocational  education schools                                                               
and universities.   Current law allows a tax  credit of $150,000,                                                               
and the  bill would expand  the tax credit  to beyond that,  as a                                                               
way  to encourage  further investment  in Alaska's  postsecondary                                                               
institutions.  She  then moved the Committee  Substitute (CS) for                                                               
HB 367, 26-LS1538\R, Bullock, 3/9/10, as the working document.                                                                  
                                                                                                                                
9:50:07 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON objected for the purpose of discussion.                                                                            
                                                                                                                                
9:50:24 AM                                                                                                                    
                                                                                                                                
KENDRA  KLOSTER,  Staff  to Representative  Cathy  Munoz,  Alaska                                                               
State  Legislature,  presented  HB  367,  paraphrasing  from  the                                                               
sponsor statement,  which read  as follows  [original punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
     Under   current  law,   tax  payers   that  make   cash                                                                    
     contributions to  an Alaskan educational  or vocational                                                                    
     institution receive  a maximum tax credit  allowable in                                                                    
     any given year of $150,000.                                                                                                
                                                                                                                                
     House Bill 367 would  increase the higher education tax                                                                    
     credits   to  50   percent  for   the  first   $100,000                                                                    
     contribution,  100   percent  for   contributions  over                                                                    
     $100,000  and  up  to  $300,000,   and  50  percent  on                                                                    
     contributions that  exceed $300,000.  A  cap was placed                                                                    
     in the amount of $25,000,000.                                                                                              
                                                                                                                                
     The  current limitation  has a  constraining effect  on                                                                    
     corporate donations and  investments in educational and                                                                    
     vocational  institutions.    In 2008,  only  11  donors                                                                    
     contributed  enough  to  the University  of  Alaska  to                                                                    
     maximize the current tax credit.                                                                                           
                                                                                                                                
     Many   major  employers   in   Alaska  understand   the                                                                    
     importance of  educating Alaskans  to create  a skilled                                                                    
     workforce.   These  businesses  want  to hire  Alaskans                                                                    
     from  vocational schools,  colleges, and  universities.                                                                    
     By expanding  the educational tax credit  companies can                                                                    
     help  Alaska's   universities  expand   their  existing                                                                    
     research  and  development   capacities,  and  help  to                                                                    
     maximize the potential for economic development.                                                                           
                                                                                                                                
     By  facilitating greater  cooperation between  Alaska's                                                                    
     business   and  education   sectors,  and   encouraging                                                                    
     greater  financial   support,  HB  367   will  leverage                                                                    
     important  workforce  and economic  development  goals.                                                                    
     With Alaskans  working together  we can  strengthen our                                                                    
     workforce,  increase collaboration  between school  and                                                                    
     local business, diversify  funding sources for Alaska's                                                                    
     higher   education    institutions,   enhance   student                                                                    
     activities   and  facilities,   and  develop   research                                                                    
     programs  that contribute  to the  economic development                                                                    
     of Alaska.                                                                                                                 
                                                                                                                                
9:51:52 AM                                                                                                                    
                                                                                                                                
MS. KLOSTER  then explained  provisions in  the CS  would require                                                               
the director  of insurance to  submit an annual  report informing                                                               
the legislature of the success  of the program.  Furthermore, the                                                               
CS will be  redrafted to fully reflect the intent  of the sponsor                                                               
to  keep the  first $100,000  contribution  at a  50 percent  tax                                                               
credit, the  second $100,000 contribution  at an 100  percent tax                                                               
credit,  and,   for  contributions   from  $200,000   and  above,                                                               
contributors  would receive  a 50  percent tax  credit.   The cap                                                               
amount would remain at $25,000,000.                                                                                             
                                                                                                                                
CHAIR  SEATON clarified  that the  50 percent  tax credit  on the                                                               
first  $100,000, and  the 100  percent tax  credit on  the second                                                               
$100,000, is now existing law.                                                                                                  
                                                                                                                                
MS. KLOSTER said correct.                                                                                                       
                                                                                                                                
9:53:21 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON removed  his objection, and, there  being no further                                                               
objection, announced  that CSHB  367, Version  R, was  before the                                                               
committee.                                                                                                                      
                                                                                                                                
9:53:32 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MUNOZ moved Conceptual Amendment 1, which read:                                                                  
                                                                                                                                
     The amount of the credit is                                                                                                
                                                                                                                                
     (1)  50  percent  of contributions  of  not  more  than                                                                    
     $100,000; and                                                                                                              
     (2) 100  percent of contributions of  the next $100,000                                                                    
     of contributions; and                                                                                                  
       (3) 50 percent of the amount of contributions that                                                                   
     exceed $200,000.                                                                                                       
                                                                                                                                
9:54:03 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON objected for the purpose of discussion.                                                                            
                                                                                                                                
9:54:15 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON removed  his objection, and, there  being no further                                                               
objection, announced Conceptual Amendment 1 was adopted.                                                                        
                                                                                                                                
9:54:57 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON opened public testimony.                                                                                           
                                                                                                                                
9:55:23 AM                                                                                                                    
                                                                                                                                
MARY  RUTHERFORD,  President,  University of  Alaska  Foundation;                                                               
Chief  Development  Officer,  University   of  Alaska,  spoke  in                                                               
support  of  HB 367,  and  said  that  the university  is  always                                                               
excited  to  see new  opportunities  and  incentives that  foster                                                               
close relationships.   Tax credits  have been an  effective tool,                                                               
and  the   expansion  will  garner  increased   support  for  the                                                               
university system from  groups that support programs  such as the                                                               
Summer Bridge and K-12 Outreach programs.                                                                                       
                                                                                                                                
9:57:00 AM                                                                                                                    
                                                                                                                                
JAMES JOHNSEN,  Senior Vice  President of  Administration, Doyon,                                                               
Limited,  testified in  favor HB  367, and  stated that  the bill                                                               
would increase  business support  for higher  technical education                                                               
in Alaska.   He  described Doyon, Limited,  as follows:  owned by                                                               
17,500  Alaska  Native  shareholders; owns  12,500,000  acres  of                                                               
land; operates  subsidiary companies in  oil field and  gas field                                                               
services,   government   contracts,   and   land   and   resource                                                               
development;  is  proud  to  rank   number  one  of  the  top  10                                                               
privately-owned Alaska companies, in  the percentage of employees                                                               
who are Alaskan.  Doyon, Limited,  is a for profit company, which                                                               
makes  money for  its shareholders  primarily  by developing  two                                                               
resources:    natural  resource development  and  human  resource                                                               
development.   In fact, in  2009, Doyon explored for  natural gas                                                               
in the Nenana  Basin at a cost  of about $15 million.   The state                                                               
recognized the  importance of this  exploration by granting  a 50                                                               
percent incentive tax  credit.  He conjectured that  if Doyon had                                                               
invested an  equal amount in internships,  scholarships, research                                                               
programs, facilities,  endowed shares, and  workforce development                                                               
programs, the company would have  only received a one percent tax                                                               
credit  in the  amount  of $150,000.    The proposed  legislation                                                               
would balance the state's support  for private sector investments                                                               
in  human resources,  with  what is  available  for investing  in                                                               
natural resources.   Mr.  Johnsen stressed  that by  enacting the                                                               
bill, the  legislature would effectively encourage  businesses to                                                               
invest  in postsecondary  education-vocational/technical programs                                                               
to  university  programs-in  order  to open  up  another  revenue                                                               
source  for higher  education,  and  strengthen the  relationship                                                               
between colleges and the businesses  that employ the graduates of                                                               
these  programs.   Furthermore, the  bill encourages  a long-term                                                               
collaboration in support  of economic development in  Alaska.  He                                                               
concluded by informing the committee  that Doyon is one of twelve                                                               
regional Native corporations in Alaska,  and the effort being put                                                               
into this bill is a high priority amongst the corporations.                                                                     
                                                                                                                                
10:00:25 AM                                                                                                                   
                                                                                                                                
CHAIR     SEATON    observed     that    the     bill    includes                                                               
vocational/technical training,  as well as facilities  to provide                                                               
a variety of postsecondary training,  courses provided by a state                                                               
operated vocational school, and  facilities for non-profit public                                                               
or private  accredited institutions.   Further, he said  the bill                                                               
is an  expansion of the amount  of tax credit that  would be used                                                               
to  help  leverage  additional   private  funds.    Chair  Seaton                                                               
requested comments from the Department of Revenue (DOR).                                                                        
                                                                                                                                
10:02:38 AM                                                                                                                   
                                                                                                                                
JOHANNA BALES, Deputy Director, Tax  Division, DOR, said that the                                                               
department  does not  object  to the  intent of  the  bill.   She                                                               
directed attention  to the attached  fiscal note, and said  it is                                                               
difficult to know the exact  amount of giving that increasing the                                                               
tax  credit   might  promote.    The   department  reviewed  2008                                                               
corporate income  tax filers  and estimated that  if each  of the                                                               
corporations  took advantage  of the  opportunity provided  by HB
, to  the fullest  extent, the  state would  suffer a  drop of                                                               
$200 million in corporate income tax.   Ms. Bales said a complete                                                               
analysis  has not  been completed,  and pointed  out other  taxes                                                               
that could  be affected such  as mining license  taxes, fisheries                                                               
business  taxes, fisheries  resource landing  taxes, oil  and gas                                                               
production  taxes,  property taxes,  and  insurance  taxes.   She                                                               
concluded  that  the  revenue  impacts  may  potentially  be  far                                                               
reaching, depending on  how many taxpayers take  advantage of the                                                               
program.                                                                                                                        
                                                                                                                                
CHAIR  SEATON  surmised that  the  projections  were based  on  a                                                               
contribution cap of $25 million, or  in the case of a corporation                                                               
with a  tax liability of  $400,000, basing the projection  on its                                                               
tax liability.                                                                                                                  
                                                                                                                                
MS. BALES said that is correct.                                                                                                 
                                                                                                                                
10:05:01 AM                                                                                                                   
                                                                                                                                
CHAIR SEATON  asked for the  state's contribution in  tax credits                                                               
under current law.                                                                                                              
                                                                                                                                
MS.  BALES   reported  the  number  and   approximate  amount  of                                                               
education tax credits claimed under  the most recent filings were                                                               
as  follows:   16  corporate  taxpayers  for  $1 million  in  tax                                                               
credits;  3  insurance  premium taxpayers  for  $450,000  in  tax                                                               
credits; 1 fishery resource landing  taxpayer for $150,000 in tax                                                               
credits; 3 business  taxpayers for $450,000 in tax  credits.  The                                                               
credits totaled $2.1 million, and  she added that there were none                                                               
from the  tax categories of  oil and  gas, or production  tax and                                                               
property tax.   This can  be explained because the  categories of                                                               
oil  and  gas  taxes,  production   taxes,  property  taxes,  and                                                               
corporate income  taxpayers can  only take  a total  of $150,000,                                                               
regardless of  the tax type the  credit is claimed against.   Ms.                                                               
Bales confirmed  that this disincentive  would not be  changed by                                                               
the proposed legislation.                                                                                                       
                                                                                                                                
10:06:43 AM                                                                                                                   
                                                                                                                                
CHAIR SEATON closed  public testimony and said that  HB 367 would                                                               
be held over.