Legislature(2011 - 2012)HOUSE FINANCE 519
04/13/2012 09:00 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB160 | |
| SCR24 | |
| SB91 | |
| SB19 | |
| SB23 | |
| SB210 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SCR 24 | TELECONFERENCED | |
| + | SB 91 | TELECONFERENCED | |
| + | SB 182 | TELECONFERENCED | |
| + | SB 83 | TELECONFERENCED | |
| += | SB 23 | TELECONFERENCED | |
| + | SB 25 | TELECONFERENCED | |
| += | SB 119 | TELECONFERENCED | |
| + | SB 210 | TELECONFERENCED | |
| + | SB 160 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 19 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 23(FIN)
"An Act relating to transferable film production tax
credits and film production tax credit certificates;
requiring the legislative audit division to audit the
Alaska film production incentive program; and
providing for an effective date by amending the
effective dates of secs. 3 and 4, ch. 63, SLA 2008."
4:43:28 PM
Vice-chair Fairclough MOVED to ADOPT proposed committee
substitute for CSSB 19(FIN), Work Draft 27-LS0252\XX
(Bullock, 4/13/12).
Co-Chair Stoltze OBJECTED for purpose of discussion.
Representative Costello highlighted the changes in the work
draft. The work draft incentivizes the Alaska Hire program.
The program was separated into two main sections. One
section referred to those in the film industry who were
considered "above the line", which include producers,
directors, writers, and editors; and the other section
referred to workers considered "below the line." The "below
the line" workers referred to electricians, caterers, and
much of the behind the scenes workers on film sets. She
stated that the "below the line" section sustained the base
tax rate at 30 percent overall, extended the program for
ten years, and continued the funding at the current level
at $200 million. The Alaska Hire bonus was doubled from 10
percent to 20 percent. The House Labor and Commerce
incentive for rural Alaskans would be set at 6 percent,
which was higher than the current program. The 2 percent
incentive remained the same for films that were produced in
the off-season.
Co-Chair Thomas clarified that the 6 percent incentive was
"additional" to the current incentive.
Representative Costello stated that the work draft removed
the 44 percent cap on the credits. The first scripted
television show to produce 16 episodes would be
incentivized, because episodic television brought more jobs
over the long term. The "above the line" credit had been
tied to Alaska Hire, and required spending on Alaska
businesses. The base rate for the "above the line" credit
was 5 percent, so companies could earn a higher credit by
hiring Alaskans and patronizing Alaska businesses. Fifty
percent of the amount that is spent on the wages and
benefits to Alaskans and Alaska business, would be credited
in the "above the line" section
4:48:45 PM
Representative Costello stressed that she wanted Alaskans
involved in the film productions that were produced in the
state. The bill aimed to increase the credibility of the
review process by creating the Alaska Film Incentive Review
Commission, housed in DOR. Four commissioners would sit on
the commission, including the commissioners from DOR, DNR,
DOL, and DCCED. A majority of the members of the commission
must approve the script and summary of the pre-qualifying
process.
Co-Chair Stoltze wondered if the commissioners from those
departments were the actual commissioners, or designees.
Representative Costello responded that the commissioners
would be the actual commissioners from those departments.
Representative Costello stated that the administrative
function of the program was put into DOR, because it is a
tax program. The promotion portion of the program would be
kept in DCCED, which is the department that was marketing
Alaska's development. A 75 cents on-the-dollar buy-back
option was included in the work draft to provide some
certainty for some smaller productions that may not be able
to find a corporate tax payer who could buy the credit. The
credit was adjusted to remove competition with the private
sector, but also provide some stability. In addition,
people were no longer allowed to broker the credit. She
looked at page 13, lines 9 through 11, "The commission may
not approve an application for a film production that the
commission finds is contrary to the natural resource
development policy of the state."
4:51:59 PM
Representative Doogan asked for more information regarding
page 13, lines 9 through 11. Representative Costello
explained that currently the program required a review of
the script to ensure that there was nothing in conflict
with Alaska's constitution. That portion of the program
remained the same, but language was changed from "shall" to
"will." By elevating the review board to the commissioner-
level, it added some additional accountability in the
review of the scripts.
Representative Doogan asked for an explanation about why
the script could not be against the natural resource policy
of the State. Representative Costello replied that an
example would be that the film could not include an
overview of fracking and its damage to the environment,
when the state was possibly considering fracking technology
in the state.
Co-Chair Stoltze furthered that it would be anything
produced by Michael Moore.
Representative Doogan wondered if this would be considered
censorship.
4:55:15 PM
Representative Costello replied that the only time that the
issue of censorship was brought to the committee's
attention, was in relation to people who testify in public
hearings. She stated that there was nothing that could
prevent freedom of speech. However, in terms of "censoring
scripts", the State had an interest in reviewing the
scripts for the credit. There were several items in the
bill that the commission would be considering, and happened
to include Alaska's natural resources. Ninety percent of
Alaska's state government was funded from oil production.
The State had an interest in protecting its ability to
develop resources responsibly, without encouraging a public
relations campaign that could be detrimental to that
effort.
Representative Doogan wondered what would happen if a
person provided a script to the commission, and the script
was rejected because it did not "toe the party line", and
therefore the film company sued the State. He wondered if
this would be defensible in court. Representative Costello
deferred to Co-Chair Stoltze.
Co-Chair Stoltze replied that he did not believe it was
considered "free speech" if the State was paying for it.
Representative Doogan stressed that he was concerned
whether or not this change was "protected legal ground."
Co-Chair Stoltze replied that he only wanted to pass the
bill if it was considered "protected legal ground."
Representative Gara believed the legislation was important,
and shared the concerns of Representative Doogan. He
referred to a movie entitled, "Salmonberries." Someone
could have made the case that the movie made Kotzebue look
bad, or someone could say that the movie "opened peoples'
eyes" to a different part of the world. He was concerned
about allowing a State bureaucrat to determine whether or
not a movie was in the best interest of the state. He added
that censorship was also an issue in this discussion,
because he felt that the commission would be too partisan.
4:59:13 PM
AT EASE
4:59:37 PM
RECONVENED
Representative Doogan remarked that he did not want to have
a political debate.
4:59:52 PM
AT EASE
4:59:59 PM
RECONVENED
MATT MOSER, STAFF, SENATOR JOHNNY ELLIS, stressed that the
purpose of the bill was economic development. He remarked
that there was a provision in the bill that did not allow
pornography.
Co-Chair Stoltze remarked that Senator Ellis inserted the
provision on pornography, and Senator Ellis did not believe
that the provision on pornography was not considered
"censorship." Mr. Moser agreed.
Representative Neuman looked at page 4; lines 16 through
19, regarding the total number of tax credits in aggregate
may not exceed $100 million for a qualified production. He
wondered if that was $100 for only one production. Mr.
Moser replied that the intention was that there were $100
million in credits available for the first five years of
the program, and $200 million in credits in the second ten
years of the program.
Representative Neuman wondered if the $100 million was the
total amount of credits the State would provide, or if it
was for one individual production. Mr. Moser replied that
he had not had a chance to look at the draft, but it should
say $200 million for "productions" qualified under AS
44.25.120.
Representative Neuman surmised that it was a cumulative
number. Mr. Moser agreed.
Representative Gara understood that the side effect of the
"best interest of the state" issue would be a side effect
of attracting tourism in the state. Mr. Moser agreed.
Representative Gara commented that there did not have to be
an agreement for every provision of the bill, and accepted
Mr. Moser's response.
Co-Chair Stoltze would hold the bill to get an opinion from
Department of Law on the censorship issue.
Co-Chair Stoltze CLOSED public testimony.
5:04:50 PM
RECESSED
6:45:14 PM
RECONVENED
SENATOR JOHNNY ELLIS, SPONSOR, addressed most recent
concern with language in the bill. The committee substitute
elevates the script review of television and film
production scripts to the commissioner level, and he
supported that change. He stressed that the Alaska
Constitution requires the development of Alaska resources
for the maximum benefit of the people. So, if there was
ever a film or television project that was antithetical to
the Alaska Constitution and its purpose, the project could
be appropriately prohibited. The Parnell administration and
Alaskans should turn down movies or documentaries that were
not in the best interest of the people.
Co-Chair Stoltze thanked Senator Ellis.
Representative Neuman MOVED to ADOPT Amendment 1:
On page 4 line 16
Delete "a production"
Insert "productions"
On page 4 line 18
Delete "a production"
Insert "productions"
Representative Neuman explained that the amendment
represented the money as a cumulative amount and not per
production.
Senator Ellis approved the amendment.
6:52:19 PM
DAN BRANCH, SENIOR ASSISTANT ATTORNEY GENERAL,
COMMERCIAL/FAIR BUSINESS SECTION, DEPARTMENT OF LAW,
introduced himself.
Representative Doogan asked the way the bill is drafted in
a way that certain people could make a decision not to fund
a production and wanted to know whether that is legal. Mr.
Branch replied that the language was legal. The reason is
because the bill does not restrict speech but the way the
state decides to spend its money.
Representative Neuman MOVED to ADOPT Amendment 1. There
being NO OBJECTION it was so ordered.
6:55:18 PM
Vice-chair Fairclough asked for clarification pertaining to
the fiscal notes attached to the bill. She pointed out that
the fiscal notes reflected and addition of $100 million;
she understood that the intention was to add $200 million.
Representative Costello replied that page 2 of the
Department of Revenue fiscal note, under the section
"revenues," declared that the bill would increase the total
tax credit from $100 million to $200 million, and was not a
correct reflection of the bill. She explained that the
legislation intended to increase the credit from $100
million to $300 million because of the addition of $200
million over the next ten years. She concluded that the
fiscal note would need to be changed to reflect the
intended fiscal impact of the bill.
Vice-chair Fairclough interjected that the legislation
would affect the DOR's taxation division. She spoke to
fiscal note #3, dated 4/13/2012, 5:45p.m. She purported
that the projected spending from FY14 to FY18 increased
funding to support 4 positions: $460,000 in FY14; $448,400
in FY15 through FY18. She noted that the bill language
referenced in the analysis should be changed to reflect a
$200 million tax credit between 2013 and 2023.
Additionally, the total accumulation should be changed to
$300 million. She pointed out that the revenues section of
the analysis should be changed to reflect increases in the
total tax credits from $100 million to $300 million. She
explained that it would allow for approximately $20 million
in tax credits, per year, over three separate 5 year
periods. She relayed that under expenditures it should be
noted that there were 2 positions that DOR was proposing to
be transferred in, and 2 that were additions.
Vice-chair Fairclough discussed the NEW fiscal note, which
affected the Department of Commerce, Community and Economic
Development (DCCED). She shared that the department was
proposed to spend between FY13 and FY 18; $281.200, with 2
full-time positions.
Vice-chair Fairclough stated that the NEW fiscal note,
which was allocated to the Legislative Audit Division,
reflected zero fiscal impact.
Co-Chair Stoltze wondered if DOR had been assisting DCCED
with tax auditing.
CURTIS THAYER, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT, replied that DOR was
currently assisting with the tax certification portion of
the program.
Vice-chair Fairclough requested further explanation of the
two additional auditing positions discussed on the DOR
fiscal note under expenditures.
Mr. Thayer responded that the department currently had two
people helping to manage the program that the department
wished to retain. The fiscal note proposed that the two
positions remain within DCCED because the department was
responsible for the promotion, follow-up, coordination, and
the marketing of the film program.
Co-Chair Stoltze maintained confusion as to where the extra
work was being generated that required the two additional
positions.
Mr. Thayer deferred the question to DOR.
Co-Chair Stoltze asked if the new positions would have been
necessary if the program were handled exclusively by DCCED.
Mr. Thayer responded that the auditing had been done by the
business development specialist. He said that when the
program was originally designed, DCCED handled the pre-
qualifications, the auditing function of going through the
applications, and the final application. He stated that
DCCED had turned those responsibilities over to DOR. He
furthered that DCCED had also been responsible for the
marketing function and the coordination functions, which
had been split up because it was believed that the same
individual should be doing the auditing and handling the
pre-qualifications at the same time.
7:01:57 PM
JOHANNA BALES, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT OF
REVENUE (via teleconference), understood that the bill
created an executive director position to work with the
newly created review commission. Additionally, the bill
required an on-site liaison to consult producers on large
productions, which had necessitated the creation of the
second position.
Representative Costello commented that the intent was not
to have a full-time liaison position.
Co-Chair Stoltze suggested that the fiscal note would need
to be adjusted according to interpretation of the bill.
Representative Costello thought that it would be prudent to
reduce the number of positions, and to keep in
communication with the department as staffing needs were
brought to light.
7:04:32 PM
Vice-chair Fairclough directed attention to the fiscal note
from DOR, which suggested the extraction of two employees
from DCCED; however, the same two positions were also
listed on the fiscal note for DCCED. She stated that from
a legislative perspective, the additional two people had
not been anticipated. She said that she understood why DOR
would want one dedicated person, requested further
explanation of the DCCED request for 2 additional
positions.
Mr. Thayer replied that the purpose of the film production
promotion program was to work with organizations in the
private sector for expansion and development of the film
production industry in the state; to promote Alaska as an
appropriate location of a film production; to provide
production assistance through connecting film directors,
makers, and producers with Alaska location scouts and
contractors, including contractors providing assistance
with permit applications. He stated that those
responsibilities were currently covered by DCCED in
addition to the pre and post application. He understood
that the fiscal note requested 2 positions but that the
department often had 4 or 5 people splitting duties to
handle all of the aforementioned activates. He testified
that as deputy director he had dedicated, at one point, 20
percent of his working day to this program.
Representative Gara understood that the department
currently had liaisons that promote Alaska. He wondered
where the extra work for the department was going to come
from. Mr. Thayer replied that the work would continue with
the existing amount of employees.
Representative Gara thought that that the fiscal notes
could be zeroed because most of positions were being
transferred between agencies. Mr. Thayer reiterated that
the program had the promotional component, the pre
application component and the final application part of the
program. He said that some of the workload was still being
handled by, and would remain in the department by statute.
7:07:52 PM
Vice-chair Fairclough moved to amend the DOR fiscal note;
FY14 through FY18, $230.200 and 2 positions. She believed
that the money would fund one Tax Auditor III (Range 20)
and one Tax Technician ii (Range 12).
Ms. Bales asked about the provision in the bill that
expects an executive director consult the newly formed
commission and to oversee the staff of the Film Office.
Representative Costello interjected that there was
currently an individual within DCCED that was serving in
the position. She stressed that it had not been the intent
of the subcommittee to hire a new executive director.
Co-Chair Stoltze asked if the handling of the position was
to be left up to the department.
Representative Costello responded that the bill stated that
the departments should work together to determine how the
position was filled.
Representative Doogan understood that the fiscal notes
could be improved by requesting two positions in DOR and
two in DCCED. Vice-chair Fairclough replied that that was
the intent of her motion.
7:10:51 PM
Representative Gara expressed confusion as to why DCCED
needed the two new positions. He felt that DOR needed two
new positions for taxes, and there was obvious
coordination.
Vice-chair Fairclough explained that DOR had not been doing
audits; Legislative Audit had been handling audits from the
legislative side. The effort would now move to DOR; DCCED
would continue to work with DOR, as well as continuing to
promote and interface in a variety of ways to put the Film
Office to work for the state of Alaska. She said that the
request from DCCED had been that the committee would
recognize that if the program was successful DOR would need
to be involved. She added that the functionality could be
revisited in 2013.
Vice-chair Fairclough asked if there was any reason why the
executive director should not reside in the Film Office.
Mr. Bales stated that she saw no reason why the executive
director could not reside in the Film Office. She felt that
DOR would be content with two auditor positions to oversee
the applications.
Vice-chair Fairclough stated that the subcommittee had been
trying to establish a working arrangement that provided
transparency for the film industry and for the credits
being used.
Ms. Bales explained that there was a provision in the
legislation that stated that the executive director must
oversee the staff. She thought that there should be a
separation of duties written into legislation.
7:14:10 PM
Representative Wilson thought that the fiscal note from
DCCED would not add two more positions, but would maintain
an already established full-time development specialist,
and a full-time administrative assistant II; detailed half-
time to the film promotion program. She queried what the
other half-time duties would include. Mr. Thayer responded
that the administrative assistant to the program would
additionally serve as the administrative assistant for
DCCED in Anchorage.
Representative Wilson understood that the two positions
already existed and were not being created. Mr. Thayer
replied that the department remain at the status quo.
7:15:26 PM
AT EASE
7:18:03 PM
RECONVENED
Representative Costello MOVED to report HCS CSSB 23(FIN)
out of committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered
HCS CSSB 23(FIN) was REPORTED out of committee with a "do
pass" recommendation and with two new fiscal impact notes
from the Department of Revenue and the Department of
Commerce, Community and Economic Development and one new
zero note from the Legislature. [Note: The committee
rescinded its action to report out HCS CSSB 23(FIN) on
4/14/12 and took corrective action. See House Finance
Committee minutes dated 4/14/12, 10:25 a.m.]
7:19:41 PM
AT EASE
7:23:37 PM
RECONVENED