Legislature(2015 - 2016)BELTZ 105 (TSBldg)
02/26/2015 01:30 PM Senate LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB15 | |
| SB47 | |
| SB39 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 15 | TELECONFERENCED | |
| *+ | SB 47 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 39 | TELECONFERENCED | |
SB 15-LIFE INSURANCE POLICY PREMIUM TAX
1:31:53 PM
CHAIR COSTELLO announced the consideration of SB 15. "An Act
relating to the tax on policy year premiums for life insurance
policies."
SENATOR JOHN COGHILL, sponsor, SB 15, stated that this
legislation is designed to keep Alaska competitive in the field
of trusts. He deferred further introduction to his intern.
1:33:19 PM
GERMAN BAQUERO, Intern, Senator John Coghill, introduced SB 15
speaking to the following sponsor statement: [Original
punctuation provided.]
SB 15 requires that taxes for single or group life
insurance policies shall be set at 0.08 percent
exceeding $100,000.
In 2014, taxes on insurance premiums constituted 8.6
percent of non-petroleum unrestricted revenues,
approximately 55 million dollars. In 2015 the forecast
for life insurance revenue is projected to rise to 9.5
percent, approximately 57 million dollars, and in 2016
it is expected to remain at the same level but rise to
approximately 59 million dollars.
Back in 1998 because of virtually no collection of
taxes on policies of over $100,000 the Commissioner of
Insurance dropped taxes from 2.7 percent to 0.1
percent over $100,000 for insurance premiums. Yet
already by 2006 the state of South Dakota had matched
the state of Alaska and then some, dropping down to
0.08% over $100,000, thereby undercutting revenue for
Alaska. This has resulted in a sizable reduction of
the number of life insurance policies over $100,000
sold in this state.
In order to remain competitive Alaska then must match
South Dakota now, and a cut in the premium from 0.1
percent to 0.08 percent is the appropriate response to
South Dakota's success and good solution for Alaska.
1:37:32 PM
SENATOR STEVENS asked if this legislation puts Alaska on par
with South Dakota and if other states would still be more
advantageous.
MR. BAQUERO confirmed that this legislation will put Alaska on
par with South Dakota. He couldn't speak to the rates in other
states.
SENATOR COGHILL added that Alaska has been on the competitive
edge for estate planning since 1998, which has attracted a lot
of investment cash. This legislation attempts to bring Alaska
policy in line with leading states such as New Jersey and South
Dakota.
CHAIR COSTELLO expressed appreciation for the legislation and
offered her belief that it will benefit Alaska.
SENATOR GIESSEL asked if the bill has a fiscal note.
MR. BAQUERO deferred to the director of the Division of
Insurance to explain the fiscal impact.
SENATOR MEYER asked how many times the interest rate has been
changed since 1998.
MR. BAQUERO offered his understanding that it hasn't changed
since 1998.
1:41:45 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), stated
that the division submitted an indeterminate fiscal note because
it seems that the industry could make up any difference by
attracting more business with the reduced rate. She noted that
in the last year, the difference between collecting 0.10 percent
versus 0.08 percent would have resulted in $15,961 less to state
coffers. Looking back to 2011, the largest difference, based on
105 policies, was $89,000.
SENATOR MEYER asked if the legislation pertains to a particular
type of life insurance policy.
MS. WING-HEIER replied it could be any type of policy but she
believes most would be whole life because those policies are
used for estate planning.
1:44:13 PM
SENATOR STEVENS asked to what extent Alaskans will benefit from
this legislation.
MS. WING-HEIER replied Alaskans as a consumer will benefit
because they'll pay 0.02 percent lower on their premium;
Alaskans as a whole will benefit from the anticipated increase
in volume in premium tax, which will result in a larger
contribution to the state coffers.
CHAIR COSTELLO asked Mr. Blattmachr to discuss how this
legislation fits in with Alaska's role in the insurance
industry.
MATHEW BLATTMACHR, Vice President and Trust Officer, Alaska
Trust Company, explained that in 1998 Alaska adopted new age
trust planning rules. Since then the legislature has added to
those in an effort to stay at the forefront of trust planning.
Fifteen states have passed laws similar to Alaska's and 11
others have some form of what Alaska has on the books. SB 15
seeks to keep Alaska on the competitive edge and levels the
playing field with South Dakota. That state currently has the
lowest tax rate on insurance policies, whereas Alaska is second.
SENATOR MEYER asked if the legislation pertains to a particular
type of life insurance policy.
MR. BLATTMACHER replied it could apply to all policies with
premiums greater than $100,000 per year, but it's likely to be
used more for permanent types of insurance rather than term.
1:47:15 PM
LINDA HULBERT, representing herself, said she's worked in the
insurance industry for 25 years and has enjoyed watching it grow
since the inception of the Alaska Trust Act. When the
legislation first passed there were very few policies that had
premiums that exceeded $100,000. Since then many people,
Alaskans included, have been attracted to Alaska to do their
estate planning. Changing the premium tax rapidly increased the
amount of money that's come into the state for use in the
general treasury. She said she supports the reduction in the tax
rate to make Alaska competitive with South Dakota. She described
the legislation as good public policy, which will attract
additional revenue.
1:49:52 PM
CHAIR COSTELLO announced she would hold SB 15 in committee for
further consideration.