Legislature(2015 - 2016)BILL RAY CENTER 208
06/01/2016 03:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4003 || HB4003 | |
| HB4005 | |
| HB4006 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB4003 | TELECONFERENCED | |
| += | HB4005 | TELECONFERENCED | |
| += | HB4006 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 4003
"An Act relating to the motor fuel tax; and providing
for an effective date."
Representative Wilson MOVED to ADOPT Amendment 1, 29-
GH2458\A.1 (Shutts/Nauman, 5/28/16) (copy on file):
Page 1, lines 11 - 12:
Delete all material and insert:
"(3) the tax on all aviation fuel other than gasoline
sold or otherwise transferred
(A) on the premises of an airport within the Alaska
international airport system, as that term is defined
in AS 44.42.290, is 3.2 cents a gallon;
(B) outside the premises of an airport within the
Alaska international airport system, as that term is
defined in AS 44.42.290, is 6.5 [IS THREE AND TWO-
TENTHS] cents a gallon; and"
Co-Chair Thompson OBJECTED for discussion.
Representative Wilson explained the amendment would exempt
international airports [from the motor fuel tax]. She
detailed international airports were currently self-
sustainable and actually gave more money than necessary.
She furthered that with the 6.5 cent tax, there would be 31
states lower than Alaska when it came to jet fuel tax. She
continued the airports paid leases and landing fees. She
explained there had been other increases at the airports as
well. She stressed the airports paid for more than just jet
fuel. She noted the administration had not provided
information on the impact of a 1 cent or 2 cent tax. She
reasoned the state could continue to raise the tax all it
wanted, but she wondered what would have been accomplished
if companies and jobs left. The amendment would help
smaller airports to be a bit more self-sustainable - she
believed they would never be completely self-sustainable.
She reminded committee members a meeting had been held the
prior summer regarding landing fees for smaller airports
where it was decided to increase taxes on fuel instead.
Unfortunately, the method taxed larger airports, which were
already paying much more. She expressed concern about the
negative impacts the tax could have on international
airports, which included Fairbanks and Anchorage (the
Juneau airport was municipal and was therefore not
included).
3:11:18 PM
Co-Chair Thompson relayed that Representative Gara had
joined the meeting. He asked if the governor's original
bill had proposed a 10 cent jet fuel tax.
Representative Wilson replied in the affirmative.
Co-Chair Thompson stated the current bill included a 6.5
cent tax. Representative Wilson affirmed.
Representative Gattis relayed she had not participated in
the committee meeting when landing fees in smaller airports
had been decided against. She recognized a fuel tax was
probably more advantageous than trying to monitor runway
landings. She believed it was not reasonable to hire a
person to collect landing fees at every airport. She shared
that she was a private pilot and was not certain how the
fee was paid with the exception of a box used to monitor
landings.
3:12:23 PM
Vice-Chair Saddler shared that he was a private pilot and
nationally the decision had been made to pay for many of
the services provided to the aviating public through fuel
because all planes required fuel.
Representative Kawasaki shared that his mom drove from one
side of town to the other to purchase gasoline that was 1
cent cheaper. He understood it did not logically make sense
to drive that far. He reasoned it was sort of an
international market and individuals gas up where they felt
they could get the "best bang for their buck." He continued
that sometimes planes had to gas up in Alaska before flying
internationally. He wondered about gas prices compared to
other nearby airport jurisdictions.
Co-Chair Thompson shared he had done a tour of the
Anchorage International Airport with its airport manager.
He relayed that no one knew how much each of the airlines
paid for their fuel. He elaborated fuel arrived at the port
and was delivered via pipe to large fuel tanks. The
information was proprietary - each of the air carriers had
made a deal with different companies to purchase fuel.
Co-Chair Neuman indicate he had also spoken with the
airport manager. He detailed the airlines had an
association where they bought their fuel. He furthered the
C-plan [contingency plan] had to be redone for Cook Inlet a
couple of years back when tanks had been expanded. He
believed the governor had an equitably crafted plan. He had
heard from industry on all three proposed taxes that it was
necessary to tax all three industries instead of one or
two. It was his understanding the governor had spoken with
the airline industry and had addressed landing taxes. He
shared that he had brought up landing tax as an issue when
he chaired the House Transportation Committee due to the
cost to airports. He mentioned people did not believe it
was appropriate to have extra landing fees for bypass mail.
He referred to the state-owned airport in Prudhoe Bay that
had no landing fees and costs were completely covered by
the state. He asked whether that was appropriate. He
relayed that money collected by the Anchorage and Fairbanks
International Airports stayed within their own units;
however, the two airports still had some large expenses. He
believed there were probably still state matches on federal
funding received by the airports for improvements. He
believed the governor had tried his best to craft a plan on
the taxes. He would not be supporting the amendment because
he did not know how it would affect the whole budget
proposal. He did have some issues with the motor fuel tax
related to how it would impact drivers.
3:17:04 PM
Vice-Chair Saddler clarified that motor fuel referred to
gasoline and diesel used on the road for cars and trucks.
Alternatively, aviation gasoline was used in aviation
aircrafts other than jets (i.e. 80 leaded or 100 low-lead).
Aviation fuel other than gasoline was kerosene jet fuel
(i.e. JP-6 and JP-4). He assumed motor fuel used in and on
water crafts was gasoline and diesel.
Representative Gara remarked on the long distance between
places like Alaska and New York, New York and California,
and Hawaii and Florida. He did not believe the change in
jet fuel taxes would have an effect on the industry - when
the state had the lowest fuel taxes in the country. He
continued that jets flew long distances to places with much
higher fuel taxes. He commented on the state's $4 billion
budget deficit. He did not believe the tax would impact
business and had not heard any evidence to the contrary. He
remarked that no one liked taxes, but he challenged others
to come up with an alternative plan to fill the budget
deficit.
Representative Guttenberg understood that international
flights did not pay taxes at airports.
Co-Chair Thompson replied in the affirmative.
Representative Guttenberg wondered if an analysis had been
done breaking out the detail on cost burden to various
types of aircrafts at different airports.
Co-Chair Thompson answered there had been discussions on
the topic throughout the committee process.
Representative Guttenberg surmised the burden fell on
aircrafts besides those on international flights in regards
to how much fuel was used.
3:19:56 PM
Representative Pruitt spoke in favor of the amendment. He
relayed he also had amendments in case the committee felt
the tax was higher than it should be. He discussed that
one-eighth of the Anchorage population was employed at its
international airport. He referred to a recent report
listing Providence Hospital as the state's largest
employer, but it had been the airport the previous year. He
disclosed he had previously worked for FedEx and was a
shareholder. He received the company's reports and relayed
it was buying 777 aircrafts, which would overfly Anchorage.
He provided a scenario of a flight plan with a departure
from Memphis where the air carrier paid the domestic tax.
When the carrier filled up in Anchorage it did not pay a
tax on its way to an international destination.
Alternatively, when the carrier flew from an international
location to Anchorage it would pay the tax on its way to
another domestic city. He was concerned about the company
buying 777 aircrafts intentionally to fly from a location
like China directly to Memphis. He reasoned at that point
it would impact jobs in Anchorage. He asked if the state
was more concerned about making a bit more money in taxes
over the potential job opportunities available in
Anchorage. He was concerned about increasing taxes too
much, too quickly. He continued Anchorage was constantly in
competition with other airports such as Vancouver,
Portland, and Seattle. He had spoken with the commissioner
of the Department of Administration under a previous
administration and they had agreed it was necessary to
market the Anchorage airport appropriately to maintain the
job opportunities. He believed it was important to be
cautious about the effect the tax would have on jobs at one
of the state's largest employers.
Vice-Chair Saddler commented that it would be helpful to
have better analysis about the potential effects of the
taxes. He stated the committee had only heard from the
administration that there was a big deficit and the
proposed taxes were the needed amount. He did not believe
the information provided by the administration was
compelling enough when considering the points made by
Representative Pruitt. He stressed that taxes did influence
corporations and business decisions. He could have
considered the proposal more with additional information
about the "sweet spot" that would not cause damage to the
private sector.
3:23:58 PM
Co-Chair Thompson asked the Department of Revenue (DOR) to
address the committee. He asked for clarification on
Representative Pruitt's points. He wondered if air carriers
were charged tax when coming from a foreign country on
their way through Anchorage to another U.S. city.
3:24:18 PM
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE (DOR), relayed intent to provide the
statutory language.
KEN ALPER, DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE,
stated the topic was awkwardly within the definition of
motor fuel as it was an older law. He read from statute:
Fuel sold in a jet propulsion aircraft, either A) two
foreign countries or that continue from foreign
countries.
Mr. Alper detailed if the same flight was traveling from
China through Anchorage to Memphis it would not be taxable
fuel. He expected for the most part the fuel would not be
taxable in the scenario. He elaborated that roughly 80
percent of the jet fuel sold in Alaska was not taxable. He
specified that roughly 400 million gallons per year of non-
taxed jet fuel was sold in Alaska versus slightly over 100
million gallons of tax-on fuel.
3:25:32 PM
Vice-Chair Saddler asked if the same exemptions from
foreign flights applied to federal fuel taxes.
Mr. Alper responded that he did not know the nature of the
federal taxation. The state government had certain
restrictions (federal constitutional issues) from taxing
international trade. He did not know if the U.S. government
had a similar restriction.
Vice-Chair Saddler added that the issue was moot at the
current point.
3:26:16 PM
Representative Gattis shared that her husband was a retired
FedEx captain. She remarked on knowing how much fuel a
FedEx flight used on trips from Asia through Anchorage and
other locations. She thought the issue may play into the
reason FedEx had not been involved. She surmised that maybe
the company knew it was not paying - she had not been able
to get the company involved and had not received any
response. She added that it was not the first time the
conversation had occurred. She had not received contact
from anyone with FedEx. She had been a proponent of the
amendment, but thought it may be moot after learning more.
Representative Pruitt remarked that the committee had heard
concerns from UPS. He surmised the bill would adversely
impact the company in some capacity. He discussed in the
past there had been a flight from Taiwan to Anchorage to
New York. He detailed that when UPS and FedEx flights
landed in Anchorage there was a complete turnover that
occurred. He continued that UPS and FedEx were under
totally separate rules in certain instances. He elaborated
that UPS was under the Railroad Act, but it did not apply
to FedEx, which was largely a union issue.
Co-Chair Thompson added that UPS flew partial plane loads
from Seattle to Fairbanks to Seattle. He surmised the
company would pay the tax under that situation because the
flights were not international.
Representative Gattis suspected that FedEx and UPS had
flights from Seattle to Anchorage and back. She thought it
may be the 20 percent or smaller portion.
Representative Wilson stated the amendment related to that
two airports [Fairbanks and Anchorage international
airports] that already paid their way. She did not support
doubling the fuel tax on the specific airports. She read
from a prepared statement.
It is reported by several air carriers that jet fuel
at Anchorage is already five to ten cents more
expensive on average than our West Coast competitors.
Other airports compete for Alaska's business but they
have only been successful when offering strong
incentive packages. These incentives have a limited
duration and have had a relatively minor effect on
drawing business away from Alaska.
Representative Wilson referred to a question about taxes in
other locations. She shared that the tax in the State of
Washington was 0.04 - the proposed tax would exceed the tax
in Washington. She stressed they were not talking about
California or New York and noted Washington was not far
away. She referenced the state's deficit. She emphasized
the two airports were paying their way. She did not support
asking them for more money when the increase did not focus
on looking at the fact that other airports were not paying
their way. She was fine the airports were not paying
landing fees and she thought it was great they wanted
higher jet fuel. However, the bill would hit the state's
international airports with an increase to 6.5 cents. She
detailed to fill a 747 in Anchorage would cost $1,584 [in
taxes], which was twice the current amount. She stressed
the bill would double the costs for airports that were
paying their way. She remarked she may be off on her math
and noted shaking heads in the room. She had verified that
no state funding was provided to the international
airports. She remarked on fees, leases, and taxes on
airports. She did not support increasing costs for the two
airports to pick up the slack for other airports.
Co-Chair Thompson recognized Representatives Liz Vazquez,
Sam Kito, and Louise Stutes in the committee room.
Representative Wilson clarified the $1,584 she had
mentioned was how much the tax on fuel [for a 747] would be
under the legislation.
Co-Chair Thompson MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gattis, Munoz, Pruitt, Saddler, Wilson, Neuman
OPPOSED: Edgmon, Gara, Guttenberg, Kawasaki, Thompson
The MOTION to Adopt Amendment 1 PASSED (6/5). There being
NO further OBJECTION, Amendment 1 was ADOPTED.
Representative Pruitt WITHDREW Amendments 2 and Amendment 3
(copy on file).
3:34:23 PM
AT EASE
3:37:41 PM
RECONVENED
Representative Guttenberg WITHDREW Amendment 4 (copy on
file).
3:38:14 PM
Representative Gara MOVED to ADOPT Amendment 5 (copy on
file). [Note: due to the length of the amendment it is not
included in the minutes. See copy on file for detail.]
Co-Chair Thompson OBJECTED for discussion.
Representative Gara explained that the amendment was similar
to amendments discussed in other committees. Under the
amendment when the price of oil was low the price of fuel
would be lower; when the price of oil was high the price of
fuel would be higher. He elaborated that the fuel tax
addition in the bill started to disappear when oil prices
were high and the price of fuel was high for consumers and
the state no longer needed the revenue as much. The fuel tax
would remain the same up to $100 per barrel (a price that
high was not included in any near-term forecasts). He
continued that when the state started receiving real oil
revenue, but when consumers started paying very high prices
at the pump, the fuel tax increase of 8 cents would be cut
in half to 4 cents. When the price was above $120 per
barrel, the additional 8 cents would disappear. The
amendment reflected what the state needed in revenue and
what the costs of consumers would be at high prices.
Co-Chair Thompson asked DOR about how it would handle making
adjustments whenever the oil price changed. He did not
believe prices would be as high as those the amendment
addressed for a long time. He remarked that the current
legislators may not have to deal with the issue, but he
surmised someone would have to deal with it in the future.
He asked if the amendment would be workable for the state's
IRIS [Integrated Resource Information System].
Representative Gara stated what he tried to make the issue
workable. The amendment provided a two-month lag for the
department to adjust the tax. For example, if the price of
fuel hit $121 in January the tax could not be changed
because it had already happened; therefore, the fuel
appropriate fuel tax would occur in March.
3:41:50 PM
RANDALL HOFFBECK, COMMISSIONER, DEPARTMENT OF REVENUE,
agreed the amendment was doable, but it would not be easy.
The practicality of having to do the programming necessary
to coordinate two different taxes with a lag of about one
month in which to flip the fuel price on or off when the
price points was possible, but it was outside the scope of
the department's current work.
Co-Chair Thompson spoke to the practicality of the
amendment.
Commissioner Hoffbeck remarked the changes under the
amendment were not practical.
Mr. Alper elaborated that both taxes would have to be
programmed into the system. The calculation would have to be
done by a certain date. He stated that all the motor fuel
tax payers would receive a month-to-month notice showing the
rate; it would be a new system DOR would need to establish.
He stated the work would not be impossible, but it added a
complexity to the current system.
Commissioner Hoffbeck added the department would also have
to notify entities collecting motor fuel tax to flip the
rate back and forth.
Co-Chair Thompson asked if the gasoline stations would have
to send several different returns to the department for
different amounts.
Mr. Alper answered that the distributors filling tanks at
gas stations were generally the taxpayers (not gas stations
directly). When a load was delivered the tax was built in.
Part of the problem was the tax was paid at the end of the
following month after delivery of the gas; therefore, it may
be hard for them to keep their information straight. For
example, a distributor did not know what the price would be
when they delivered a load at the beginning of March and the
tax was paid at the end of April.
Co-Chair Thompson was worried about potential confusion.
3:43:57 PM
Representative Munoz asked if the tax would be remitted
monthly. Mr. Alper replied in the affirmative. The tax was
generally paid at the end of the month for the prior
month's sales. He referred to his previous example.
Representative Gara stated the tax was paid at the end of
the month and the amendment gave the department an extra 30
days to let taxpayers know what the tax would be. He
provided a hypothetical scenario - if the average price of
oil was determined in January, the department had until the
end of February to let payers know what the tax would be.
He wondered why it would be difficult.
Mr. Alper explained the department would have to determine
the actual average price for the month of January and let
taxpayers know by the end of February so that any
deliveries on March 1 would be recalibrated for the higher
or lower tax. Additionally, it would require time to
communicate with the tax payers. With the new system,
communications with the taxpayers were mostly electronic
and could be instantaneous. He stated anything could be
done, but anything that added wrinkles or complexity gave
the department a bit of anxiety.
3:45:35 PM
Representative Gattis relayed that she had many commuters
in her district. She believed the issue was important and
she understood what Representative Gara was trying to do.
She spoke to supporting making the price of fuel less
expensive [for consumers]. She wondered how the department
would suggest setting the structure up. She appreciated the
amendment, but she wondered how the goal could be
accomplished without adding complexity to the system. She
asked if the department would look at the issue quarterly,
every six months, or other. She asked for the department's
recommendation.
Mr. Alper suggested that quarterly taxes would be more
manageable. The department currently adjusted the interest
rate on taxes every quarter and sent out notices. The
department did not forget there was no legal requirement
for the price of fuel to move up and down with the tax
rate. He furthered just because someone may get 8 cents cut
off the tax rate did not mean they would immediately pass
it on to their consumers. He surmised the tendency may be
to leave the rate higher, which would mean a windfall for
the distributor in the months the rates went down. The
customer would not know whether the tax went up or down and
would therefore not be looking for the price of fuel to
increase or decrease.
3:47:23 PM
Representative Gattis believed in the free market. She
remarked some companies would not reduce the price of fuel;
however, she recognized the ones that did reduce the prices
would probably have more customers. She stated every penny
added up after a while. She surmised making a change
quarterly would be more workable than monthly.
Co-Chair Thompson noted Representatives Andy Josephson,
Paul Seaton, and Gabriele LeDoux were in the audience.
Representative Gara disagreed that if the consumers did not
know the price that it did not matter. He explained there
would be competition between suppliers. He asked if a
three-month lag would be better.
Mr. Alper stated that it was not the lag that was the
issue. He explained the amendment could still mean the
potential for 12 adjustments over the course of a year,
which was where a significant portion of the workload would
come from. He deferred the question to a colleague for
further detail.
3:49:23 PM
BRANDON S. SPANOS, DEPUTY DIRECTOR, TAX DIVISION,
DEPARTMENT OF REVENUE, restated his understanding of the
question. He stated that the first concern was about making
changes to the form, system, and online system. He
discussed changes that would be necessary to the form if
there were two different rates. He explained the department
would need to time to notify the public [Note: audio
quality poor]. He stated that quarterly adjustments would
be easier from an administrative standpoint; it would
provide more time to notify the public. He commented on the
ability for people to fill out the forms correctly.
Representative Gara would be happy to work with the
administration to get the amendment language right.
Co-Chair Thompson asked if Representative Gara wanted to
make a conceptual amendment.
Representative Gara was not sure how to make changes to the
amendment to adjust taxes quarterly because it would mean
bulking four months together. He did understand providing a
longer lag-time.
Mr. Alper referred to page 4, lines 3 and 20 of Amendment
5. He suggested the changing the language "the second month
following a month" to "following a quarter." He believed
the change would be sufficient.
Co-Chair Thompson believed the change would apply on page
2, line 4 as well.
Representative Gara agreed.
Mr. Alper reiterated the change would need to be applied to
page 2, lines 4 and 21; and page 4, lines 3 and 20.
Representative Gara MOVED to AMEND proposed Amendment 5.
The conceptual amendment would change the language "the
second month following a month" to "the second month
following a quarter." The change would be applied to page
2, lines 4 and 21; and page 4, lines 3 and 20. The
amendment to Amendment 5 would include any conforming
language necessary.
Representative Wilson OBJECTED.
3:53:36 PM
AT EASE
3:54:08 PM
RECONVENED
Representative Wilson wanted to know how the amendment
would affect the taxpayer. She relayed she had just filed
her sales tax online for her small business. She noted she
collected the tax all month; therefore, the calculations
were not that difficult. She wondered how the change would
work for a gas station with automated systems. She asked if
the change would impact the quarter after it occurred. She
remarked that some places had sophisticated systems and
others did not.
Mr. Alper stated that the taxpayer was the distributor that
brought gas to stations. He provided a scenario of how the
system would work: for the first quarter the calculation
would be done sometime during the month of April. The
second month meant that on May 1 the gas station would
receive a delivery at the new tax rate (the distributor was
responsible for paying the tax). He furthered the new tax
would be built into the price the gas station was paying.
He understood the gas station business adjusted its rates
whenever receiving a new delivery. The change in the market
price and tax for the fuel would be baked into the delivery
price.
Co-Chair Thompson asked for verification the gas station
did not pay the tax to the state and that the distributor
was responsible for paying the tax. Mr. Alper agreed.
Representative Wilson WITHREW her OBJECTION.
Vice-Chair Saddler OBJECTED for discussion. He referred to
page 2, line 21. He wondered if the proposed amendment to
Amendment 5 would properly indicate the tax would proceed
indefinitely after the conditions were met or only for the
one 30 or 31-day period after the quarter.
Mr. Alper stated that it was an awkwardness that would
hopefully be resolved through conforming amendments. He
detailed the intent that the tax rate would change
quarterly and remain in effect until the next change was
triggered, was on the record. The department would make
adjustments in the regulatory process if the actual bill
language did not properly clarify the issue.
3:57:43 PM
Vice-Chair Saddler added that the amendment sponsor had
indicated any necessary conforming language could be made
at a later time. He WITHDREW his OBJECTION.
There being NO OBJECTION, conceptual amendment to Amendment
5 was ADOPTED.
Co-Chair Neuman referred to lines 14 through 20 on page 2
of Amendment 5 related to alcohol and blended fuels. He
asked if the language was included in the original bill.
Co-Chair Thompson believed it was page 3, line 4.
Representative Gara relayed he had asked Legislative Legal
Services to change only the motor fuel tax and not the
aviation, marine, or fuel blended with alcohol tax.
Co-Chair Neuman asked for verification that all the other
taxes would remain the same.
Representative Gara answered the amendment did not intend
to effect any of the other forms of fuel.
Co-Chair Thompson WITHDREW his OBJECTION to the amended
Amendment 5. There being NO further OBJECTION, Amendment 5
as amended was ADOPTED.
Representative Gara remarked that the motor fuel tax issue
had been addressed the last time a major fiscal crisis
occurred (before he was in the legislature). He had
conceived the idea for the amendment at that time. He
appreciated members' support.
Co-Chair Thompson planned to bring the bills before the
committee the following day to try to report them out of
committee.
HB 4003 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4006 UFA letter.pdf |
HFIN 6/1/2016 3:00:00 PM |
HB4006 |
| HB 4006 New Amendment 4 Gara.pdf |
HFIN 6/1/2016 3:00:00 PM |
HB4006 |
| HB 4006 New Amendment 3 Wilson.pdf |
HFIN 6/1/2016 3:00:00 PM |
HB4006 |