Legislature(2015 - 2016)SENATE FINANCE 532
03/23/2015 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB64 | |
| SB15 | |
| SB30 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 30 | TELECONFERENCED | |
| + | SB 64 | TELECONFERENCED | |
| + | SB 15 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 15
"An Act relating to the tax on policy year premiums
for life insurance policies; relating to single and
group life insurance policies; and relating to other
types of insurance policies that insure the life of
one or more individuals."
9:33:09 AM
SENATOR JOHN COGHILL, SPONSOR, explained that the
legislation would install eight-tenths of a percent instead
of one-tenth of one percent on policies that exceeded
$100,000. He stated that the issue was broad to his
attention as he was dealing with some trust legislation for
estate planning. He remarked that the bill came by way of
request, dealing with some of the people that were involved
in state planning.
GERMAN BAQUERO, STAFF, SENATOR COGHILL, remarked that the
legislation would only affects the tax collected on life
insurance policies that exceed $100,000 by changing the tax
from one-tenth of a percent to 0.08 percent. The
legislation also added an applicability that would affect
all future life insurance policies from December 31, 2015.
He shared that there was a zero fiscal note that was from
the Division of Insurance. He read from the second page of
the fiscal note:
The reduction in tax is expected to have a negligible
fiscal impact on the Division, as the amount of
premium that is subject to this tax is very small. The
potential increase as a result of additional premium
sales is expected to negate any reduction in revenues,
if not increase the tax revenues beyond what they
previously.
9:38:16 AM
Senator Coghill Alaska had been a main player in the trust
investment strategy in the U.S. He remarked that other
states had followed Alaska's strategy in trust investments.
He felt that legislation would attract further investment
by reducing the tax rate.
Senator Olson wondered how the change affected the policy
purchaser or the policy pay out recipient. Senator Coghill
stated that legislation would have very little effect on
the purchaser or recipient.
Senator Olson surmised that the purchaser would not see an
increase in the cost of the premium. He further wondered if
there were consumer groups that would be affected by the
change. Senator Coghill responded that the estate planning
industry felt the legislation was a benefit to
beneficiaries by the lower tax rate.
Co-Chair MacKinnon looked at the South Dakota rates. She
wondered how Alaska compared to all states. She remarked
that the rate was reduced at the request of the insurance
companies. Therefore the insurance companies benefitted
from the change. She felt that Alaska could obtain addition
policies that had been lost over some of the years. She
wondered if Alaska wanted to be number one in the insurance
industry. Senator Coghill deferred to Mr. Baquero.
Mr. Baquero explained that the intent of the legislation
was to remain competitive with the other states.
9:43:11 AM
Co-Chair MacKinnon did not know if the lower taxes would be
good for the state. She remarked that the policies were
slightly reduced, but noted that the only people that
advocated for the legislation were the insurance companies.
Mr. Baquero replied there was no opposition for the
legislation. There was only support from the insurance
industry.
Co-Chair MacKinnon noted that South Dakota taxed on
annuities, but Alaska did not. She looked at insurance
policies under $100,000, Alaska was taxing at two-tenths of
a percent higher than South Dakota. She wondered why there
was not a reduction on the under $100,000. Mr. Baquero
replied that reducing the tax for under $100,000 was also a
policy issue.
Senator Coghill furthered that the issue was mostly related
to estate planning in the trust industry.
9:46:38 AM
LINDA HULBERT, SELF, FAIRBANKS (via teleconference),
testified in support of the legislation. She felt that the
insurance industry in Alaska should be competitive.
MATTHEW BLATTMACHR, VICE-PRESIDENT, ALASKA TRUST COMPANY,
ANCHORAGE (via teleconference), testified in support of the
legislation. He remarked that the insurance companies may
benefit from increased business, but the legislation also
benefitted the consumer. He stated that the legislation was
proposed to change the structure of the larger policies.
Senator Olson wondered how to reduce the "frenzy" between
Alaska and South Dakota. Mr. Blattmachr replied that it was
a valid concern, which is why the state was only matching
the rate in South Dakota. He furthered that it was possible
that South Dakota may lower their tax structure, but shared
that it was highly unlikely because their tax structure had
been established for a number of years.
Vice-Chair Micciche wondered if the bill required an annual
review. Mr. Blattmachr responded that he did not know if
there would be an annual review. He stated that the issue
was monitored by the industry.
9:54:30 AM
Vice-Chair Micciche wondered if there were people that
would switch their date of service, because of tax policy.
Mr. Blattmachr replied in the affirmative. He stated that
trust accounts were created to purchase life insurance
policies.
DOUGLAS BLATTMACHR, PRESIDENT AND CEO, ALASKA TRUST
COMPANY, ARIZONA (via teleconference), spoke in support of
the legislation.
Co-Chair MacKinnon CLOSED public testimony.
MARTY HESTER, DEPUTY DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
stated that he was available for questions.
Co-Chair MacKinnon wondered why Alaska wanted to be number
one on a taxation issue. Mr. Hester responded that it was a
policy decision. He explained that he was available to
speak to the differences in premiums from the previous
years versus the small amounts.
Co-Chair MacKinnon asked if he had the current spreadsheet.
Mr. Hester replied that he had the updated spreadsheet.
9:58:13 AM
AT EASE
9:59:12 AM
RECONVENED
9:59:18 AM
Co-Chair MacKinnon looked at a spreadsheet titled, "Life
Insurance Companies Licensed in the State of Alaska" (copy
on file). She queried the difference in the premiums. Mr.
Hester replied that he had done calculations on 2013 and
2011, because they were the smallest and largest years. He
explained that in 2011, if the premium tax was reduced to a
0.08 percent, the difference to the state collection would
have been $88,656. In 2013, the state would have collected
a difference of $15,961. The amount of the collected taxes
would vary depending on the premium amount. He explained
that the increase in 2011 was due to a policy that was
written in excess of $300 million.
Co-Chair MacKinnon wondered if he said $3 million or $300
million. Mr. Hester replied that it was $300 million.
Senator Dunleavy wondered if the bill would translate into
state investment in which companies would hire more people.
Mr. Hester responded that he did not know the business
plans of the companies.
Senator Dunleavy stressed that he would like to know if the
companies would pursue instate hire. Ms. Hulbert replied
that the Alaska Trust Act passed in 1967 required that one
must have a major asset in Alaska in order to set up a
trust. The Alaska Trust, and the premium tax bills had
added financial capacity to Alaskan banks, as well as
attracted many individuals to invest in the state.
Co-Chair MacKinnon wondered if the Alaska Trust Company
located in Alaska. Mr. Blattmachr replied that the
corporate headquarters were located in Alaska.
Co-Chair MacKinnon remarked that there was a letter which
stated that 362 life insurers were licensed to do business
and none were domiciled in the state. She asked for more
information. Mr. Hester replied that a domesticated insurer
was an insurance company that was based in Alaska. He
stated that Alaska had seven domesticated insurers, and the
majority were property and casualty insurers. He stated
that the life insurers were domesticated in other states
and were admitted to write in any state they decide to
conduct business.
10:05:49 AM
Senator Olson felt suspicion when the corporations
attempted to speak in favor of consumers. He wondered if
there was an effect on the consumers. Mr. Hester responded
that the premium must reflect the risk if the premium was
less, and the premium taxes were built into the price of
the premium. He stressed that each risk must be determined
on its own merit.
Senator Olson surmised that consumer groups would be in
favor of the legislation. Mr. Hester replied that he had
not heard from any consumer groups regarding the
legislation.
Vice-Chair Micciche noted that there was an estimated
$16,000 reduction in taxes. He wondered if there was an
anticipated increase to make up the difference in revenue.
Mr. Hester replied that there could one or many policies to
make up the difference in revenue.
Vice-Chair Micciche wondered if there was a national trend
for a reduction in life insurance policies. Mr. Hester
replied that he was not aware of a trend, and agreed to
provide more information.
Vice-Chair Micciche remarked that the state should
understand the policy, and there should be some resistance.
SB 15 was HEARD and HELD in committee for further
consideration.
10:10:22 AM
RECESSED
12:14:00 PM
RECONVENED