Legislature(2017 - 2018)ADAMS ROOM 519
04/13/2018 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB155 | |
| HB399 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 78 | TELECONFERENCED | |
| += | HB 399 | TELECONFERENCED | |
| += | SB 155 | TELECONFERENCED | |
HOUSE BILL NO. 399
"An Act disallowing a federal tax credit as a credit
against the corporate net income tax; repealing a
provision allowing the exclusion of certain royalties
accrued or received from foreign corporations for
purposes of the corporate net income tax; repealing
the reduced rate for the alternative tax on capital
gains for corporations; repealing an exemption from
filing a return under the corporate net income tax for
a corporation engaged in a contract under the Alaska
Stranded Gas Development Act; and providing for an
effective date."
10:08:17 AM
Co-Chair Foster reported that HB 399 was heard in committee
on April 9, 2018.
BRODIE ANDERSON, STAFF, REPRESENTATIVE NEAL FOSTER,
provided a brief summary of the bill. The bill eliminated
the following indirect expenditures: federal tax credits,
foreign royalty exclusions, reduced rate for capital gains,
and credit associated with the Stranded Gas Act. The
original version of the bill would have captured potential
lost revenue in the amount of $6.9 million but would change
if a proposed amendment was adopted.
10:09:58 AM
Representative Wilson MOVED to ADOPT Amendment 1 (copy on
file):
Page l, line l:
Delete "disallowing"
Insert "relating to the use ort
Page l , lines 9 - 13:
Delete all material and insert:
"* Section l. AS 43.20.021 (d) is amended to
read:
(d) Where a credit allowed under the Internal
Revenue Code is also allowed in computing Alaska
income tax, it is limited to 18 percent of the
portion of the federal tax credit that was
generated by business expenses incurred through
activities conducted in the state [FOR
CORPORATIONS OF THE AMOUNT OF CREDIT 12
DETERMINED FOR FEDERAL INCOME TAX PURPOSES WHICH
IS ATTRIBUTABLE TO ALASKA]. This limitation does
not apply to a special industrial incentive tax
credit under AS 43.20.042."
Page 2, line 12:
Delete "43.20.021 (d), 43.20.036(a),
43.20.036(b), 43 920.042,"
Page 2, line 16:
Delete "AS 43.20.021
Insert "AS 43.20.021
Page 2, line 18:
Delete "and (d), 43.20.036(a) and (b), 43.20.042"
Vice-Chair Gara OBJECTED for discussion.
Representative Wilson spoke to her amendment. She thanked
Co-Chair Foster for his assistance on the amendment. She
favored eliminating credits but was opposed to eliminating
federal credits that benefitted the state of Alaska.
Mr. Anderson responded that the amendment was a good
compromise. He explained that the idea behind indirect
expenditures was to identify and capture potential lost
revenue by eliminating indirect expenditures. The amendment
helped corporations keep money in the state.
Vice-Chair Gara did not understand the amendment and asked
the Department of Revenue (DOR) to further explain the
amendment.
10:11:47 AM
KEN ALPER, DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE,
relayed that the intent of the amendment was that 18
percent of any credit that a company earned against its
federal corporate income tax could be applied against
Alaska corporate income tax. The bill eliminated the
credit. He furhtered that Representative Wilson's amendment
allowed the credit if it was earned for an activity in
Alaska but maintained the elimination if it was earned for
activity in states other than Alaska.
BRANDON S. SPANOS, DEPUTY DIRECTOR, TAX DIVISION,
DEPARTMENT OF REVENUE (via teleconference), thought Mr.
Alper had done a good job of explaining that any current
company in Alaska that earned a federal credit for activity
in any state could deduct 18 percent of the credit against
their Alaskan corporate tax. The original bill eliminated
the credit completely. The amendment allowed that portion
of credit earned for activity in Alaska to be deducted.
Essentially the amendment was "converting" any federal
credit to an Alaska credit.
Vice-Chair Gara asked what the positive revenue impact to
the state was from the amendment. Mr. Alper responded that
the fiscal note showed a breakdown by component of revenue
estimates from the bill on page 2. The department estimated
the revenue gained at $1.8 million for the tax component
related to the amendment. Some fraction of the amount would
be in lost revenue but felt that it would be a small
amount. The ratio of a company's Alaskan activity compared
to their national activity was tiny. He estimated that the
amendment would reduce the revenue impact by roughly $200
thousand. Vice-Chair Gara asked whether the other revenue
gains would remain the same. Mr. Alper responded in the
affirmative.
10:15:19 AM
Mr. Spanos interjected that he had just talked with the
corporate income tax supervisor and relayed that there
would be an updated fiscal note forthcoming if the
amendment passed. He countered that the impact could be as
high as one-third of the $1.8 million or up to $600
thousand. He elaborated that the Enhanced Oil Recovery
(EOR) tax credits for the oil and gas industry added to the
deduction as the price of oil increased.
Representative Guttenberg inquired whether the credit would
spur more activity in Alaska. Mr. Alper was unsure what
federal corporate income tax credits existed. He indicated
that to the extent companies were earning credits for
activity in Alaska; the amendment did not add anything but
did not take anything away either. The amendment would
continue to earn the credit for the activity in the state
but would not remove any incentives.
10:18:00 AM
Representative Wilson commented that the amendment was an
incentive. She believed that the amendment would act as
another incentive to do business in Alaska when compared to
other states.
Vice-Chair Gara WITHDREW his OBJECTION.
There being NO OBJECTION, Amendment 1 was ADOPTED.
Co-Chair Seaton mentioned the reduced rate on capital gains
represented the largest portion of revenue at $3.4 million
but might be reduced based on a change to the federal tax
code for the alternative tax on capital gains. Mr. Anderson
explained that the bill was drafted before the federal tax
reform was passed that repealed the federal alternative tax
on capital gains. The bill also had repealed the reduced
rate on capital gains so the $3.4 million in revenue gains
remained intact. He deferred to the department for further
clarification.
Mr. Alper explained that the section in the state's
corporate income tax statute that referred to a lower tax
rate for capital gains was repealed in HB 399 and remained
unchanged. He understood that the bill's original intent
was to repeal the preferential rate on capital gains
however, since the federal government's repeal, the bill
was merely removing outdated language that referenced the
federal alternative tax on capital gains. He believed that
the language in the bill would clarify the issue. He stated
that whether the language in the bill was currently
necessary since the federal law changed was a "gray area."
Co-Chair Foster surmised that the $3.4 million in revenue
gains should remain in the bill. Mr. Alper responded in the
affirmative.
10:21:30 AM
Vice-Chair Gara reviewed the fiscal note from the
Department of Revenue. He noted that the zero fiscal note
from DOR, FN1 (REV), was allocated to the Tax Division and
estimated $3.45 million in revenue for half of FY 19 and
$6.9 million in the out years. He noted that the amendment
would change and show a slight decrease in revenue in an
updated forthcoming fiscal note.
Co-Chair Seaton MOVED to report CSHB 399 (FIN) out of
Committee with individual recommendations and the
accompanying fiscal note.
CSHB 399(FIN) was REPORTED out of committee with a "do
pass" recommendation and with a new fiscal impact note by
the Department of Revenue.
Co-Chair Foster reviewed the schedule for the following
meeting. [The meeting was recessed to the call of the chair
but never reconvened.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 78 - Amendment #1.pdf |
HFIN 4/13/2018 9:00:00 AM |
SB 78 |
| HB 399 - Amendment #1.pdf |
HFIN 4/13/2018 9:00:00 AM |
HB 399 |