Legislature(2013 - 2014)HOUSE FINANCE 519
04/12/2013 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB7 | |
| SB95 | |
| SB47 | |
| SB62 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 21 | TELECONFERENCED | |
| += | SB 18 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 7 am
"An Act relating to the computation of the tax on the
taxable income of a corporation derived from sources
within the state."
2:04:47 PM
Co-Chair Stoltze discussed the meeting schedule.
Representative Costello MOVED to ADOPT the proposed
committee substitute for SB 7 am, Work Draft 28-LS0104\C,
(Bullock, 4/9/13).
Co-Chair Stoltze OBJECTED for discussion.
DANIEL GEORGE, STAFF, REPRESENTATIVE BILL STOLTZE,
addressed the changes in the CS. He communicated that the
bill was the companion to HB 68. He explained that the tax
bracket for the first $25,000 had been zeroed out in the
Senate, which had inadvertently caused tax bracket
calculations to add up incorrectly; no relief was reflected
for corporations earning over $25,000. The CS added items
related to the film tax incentive program beginning in
Section 2. The first item was included on page 2, line 29
through page 3, line 6 and prohibited certain content
including news, weather, current event programming,
industrial and corporate purposes, advertisements and
infomercials, political advertisements, and sexually
explicit content. He stated that the items were originally
prohibited under the current film tax program that would
expire on June 30, 2013. He noted that the prohibitions had
not been carried forward when the program had been
continued the prior year.
Co-Chair Stoltze remarked that not carrying the
prohibitions forward had been an omission rather than
commission.
Mr. George addressed the second change to the film tax
incentive program (page 3). He pointed to a Legislative
Legal Services document (copy on file) that explained the
transition language. He relayed that the provision would
allow individual productions that qualified under the old
program to finish their productions and to continue
receiving the film tax credits instead of needing to
reapply in the new program.
Co-Chair Stoltze asked the department to comment on the
language.
2:09:46 PM
ROBERTA GRAHAM, ASSISTANT COMMISSIONER, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT (DCCED),
shared that DCCED believed the language provided the
necessary transition to allow the film office to complete
projects that had received a notice of qualification and
were currently underway. She expounded that without the
language there would be more than 55 productions that would
have to go through a reapplication process; the process
would require considerable time and effort. She stated that
the department supported the amendment.
Co-Chair Stoltze referenced some negative public reaction
to legislative efforts and remarked on working to do the
right thing despite the comments. He believed the reaction
would be forgotten once the bill had passed.
Representative Costello asked for comment about the first
addition included in Section 2. Ms. Graham responded that
Section 2 would exclude five types of productions that had
been in the original bill prior to a change made in the
previous year. She stated that the items were important to
exclude; DCCED supported the exclusion of news and weather
programming and sexually explicit films.
2:12:33 PM
Co-Chair Austerman asked how the department felt about the
benefit of having the film industry in Alaska versus the
amount of tax the state credited back to the industry.
Ms. Graham answered that the film industry was in its
infancy in Alaska. She referenced a 2012 legislative audit
that looked at the financial and the operational pieces of
the film incentive program, which estimated a return to the
state of approximately $18 million. She added that the
department's estimate of return to the state was more
conservative at approximately $10 million; it included the
ground spend in Alaska plus wages earned by Alaskans less
the tax credit. She expounded that the program had been
successful in its employment of Alaskans and in bringing
productions to the state.
Co-Chair Stoltze appreciated the department's endorsement.
He WITHDREW his OBJECTION. There being NO further
OBJECTION, Work Draft 28-LS0104\C was ADOPTED.
SENATOR CATHY GIESSEL, SPONSOR stated that SB 7 would
update the corporate income tax brackets. She explained
that idea for the legislation was a result of a
conversation with business owners who had pointed out
onerous tax brackets. She explained that the top tax
bracket was reached at a taxable income of $90,000. She
furthered that the tax brackets had been set in 1981; there
had been significant inflation since that time, which had
resulted in a tax increase for businesses. She communicated
that the legislation's primary benefit was to small and
medium sized C corporations. The top tax bracket would move
from $90,000 of taxable income to $220,000. The major
companies that would be impacted by the bill were
construction, transportation, and retail. She stressed that
the fiscal note was less than half of 1 percent of the
corporate income tax taken in by the state from C
corporations. She stated that the change was not a
significant impact to the state, but that it was
significant to the companies; it left more hard-earned
money in their hands.
Senator Giessel communicated that the bill had received
wide support from individuals and many state chambers of
commerce throughout Alaska including the state chamber and
chambers in Fairbanks, Anchorage, Seward, Chugiak-Eagle
River, Juneau, and Wasilla. She referenced a letter of
support from the Nana Corporation pointing out that its
shareholder businesses would benefit from the change. She
stated the change was a principle of reduced government
take. She expressed delight about an amendment made in the
Senate that would zero out the first tax bracket. She added
that the amendment had resulted in the readjustment of some
of the numbers included in the bill.
2:17:24 PM
Senator Giessel referred to a legislative affairs research
paper in members' packets (copy on file). She pointed to a
chart on page 3 and stated that the lower half of the
brackets showed the current system. She discussed that her
colleague in the Senate had stated that the zeroing out of
the first tax bracket would impact 14,000 companies that
were eligible to pay corporate income tax in 2011. She
corrected that only 1,300 companies would be impacted
(there were 14,000 companies that fell into the bracket
(some were S Corporations and LLCs), but due to various
deductions the companies would not all be affected). She
reiterated that the bill would leave more hard earned money
in the hands of small businesses.
2:19:26 PM
Co-Chair Stoltze CLOSED public testimony.
Representative Costello discussed a fiscal note from the
Department of Revenue (DOR) that showed no fiscal impact to
operating expenditures and an annual $5 million loss in
state revenue from FY 15 through FY 19.
Representative Kawasaki asked for verification that the $5
million change in revenue would result from a decrease in
tax filers. He asked if fewer DOR employees would be needed
to process taxes if there was a reduction in filers.
JOHANNA BALES, EXECUTIVE DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE (via teleconference), stated that there would
not be fewer filers. The bill affected tax rates only;
filers in the zero tax bracket would still be required to
file a return.
Representative Gara asked for verification that the state
would collect $5 million less per year beginning in FY 15
because of the reduction to the tax rate. Ms. Bales replied
in the affirmative. She detailed that the bill would adjust
the tax rate down; every current tax payer would receive a
reduction in their tax liability. She stated that the
fiscal note of $5 million was an estimate. There were close
to 1,500 tax payers who would see some reduction; some of
tax payers would fall into the zero tax liability bracket.
2:22:04 PM
Representative Costello addressed a zero impact fiscal note
from the Department of Commerce, Community and Economic
Development.
Representative Costello MOVED to REPORT HCS SB 7(FIN) out
of committee with individual recommendations and the
accompanying fiscal notes.
Representative Gara OBJECTED for discussion. He would be
comfortable eliminating taxes for businesses making less
than $25,000 per year or lowering the rate for businesses
making less than $50,000 per year. He questioned how the
state would pay for things if various revenue reducing
bills and budget costs were passed; he stressed that $5
million was a significant amount of money. He communicated
that he would probably cosponsor the legislation in a
different year; however, under the budget circumstances he
could not support it. He discussed whether the state was
taxing too much and stated that the high bracket only
included a 9 percent tax on taxable income over $2,000;
below $2,000 was bracketed. He wished he could support the
bill, but pointed to items that needed funding including
infrastructure, schools, slowing down the depletion of the
state's savings (until it was known whether current oil tax
legislation was working - if implemented), funding a
gasline, energy projects, university buildings, and other.
He pointed to two $100 million university buildings
currently in need of funding and surmised that there would
be more $100 million buildings needing funding in the
future. He did not believe the state could afford the
legislation. He opined that there were other ways to reduce
taxes in a less costly way, such as time limited taxes for
new businesses, and eliminating "nuisance" taxes at the low
end. Representative Gara WITHDREW his OBJECTION.
There being NO further OBJECTION, HCS SB 7 was REPORTED out
of committee with a "do pass" recommendation and with one
new fiscal note from Department of Revenue and one new zero
note from Department of Commerce, Community and Economic
Development.
2:26:28 PM
AT EASE
2:31:28 PM
RECONVENED
Vice-Chair Neuman took over as Chair.
| Document Name | Date/Time | Subjects |
|---|---|---|
| CS-FIN SB 7, version C (with FilmFix).pdf |
HFIN 4/12/2013 1:30:00 PM |
SB 7 |
| Memo 13-232 lnd (for CS-FIN SB 7, version C).pdf |
HFIN 4/12/2013 1:30:00 PM |
SB 7 |