Legislature(2015 - 2016)BELTZ 105 (TSBldg)
02/19/2015 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB5 | |
| SB39 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 5 | TELECONFERENCED | |
| *+ | SB 39 | TELECONFERENCED | |
SB 39-REPEAL FILM PRODUCTION TAX CREDIT
2:03:21 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 39. "An Act repealing the film production
tax credit; providing for an effective date by repealing the
effective dates of secs. 31 - 33, ch. 51, SLA 2012; and
providing for an effective date." She stated that public
testimony would be taken on February 24.
2:04:44 PM
SENATOR BILL STOLTZE, sponsor of SB 39, stated that he
introduced the legislation because he has never supported the
subsidy, even in times of high revenue. He maintained the intent
is not a punitive attack on the industry; it is due to the
fiscal impacts. He spoke to the following sponsor statement:
Senate Bill 39 repeals the film production tax credit
program as passed by the 27th Legislature, but will
leave the film production program office in place.
The bill also authorizes the Department of Revenue to
review and audit the record for previous recipients of
film tax credits and allows the Department of Revenue
the ability to recover certain damages.
2:11:43 PM
DANIEL GEORGE, Staff, Senator Bill Stoltze, provided the
following sectional analysis for SB 39:
Section 1 removes a reference to the film tax credit
from AS 43.75.130(f), related to the revenue sharing
with local governments of the fisheries business tax.
The effective date of this section in July 1, 2015.
Section 2 removes a reference to the film tax credit
from AS 43.75.130(f) as it is amended in sec. 14, ch.
61, SLA 2014. The effective date of this section is
the same as the effective date of sec. 14, December
31, 2016.
Section 3 removes a reference to the film tax credit
from AS 43.77.060(e), related to the revenue sharing
with local governments of the fisheries resource
landing tax. The effective date of this section is
July 1, 2015.
Section 4 removes a reference to the film tax credit
from AS 43.77.060(e), as it is amended in sec. 17, ch.
61, SLA 2014. The effective date of this section is
the effective date of sec. 17, ch. 61, SLA 2014,
December 31, 2016.
Section 5 makes amendments conforming with the repeal
of AS 44.25.100 - 44.25.190, related to the film
production incentive program. The effective date of
this section is July 1, 2015.
Section 6 removes a reference to the film tax credit
from sec. 28(b), ch. 61, SLA 2014, (the transition
language of SCS CSHB 306(FIN) am S of the 28th
Legislature) relating to the repeal of the film tax credit
and other tax credits. This section has an immediate
effective date.
Section 7 repeals AS 24.20.271(12) (related to the duty of
the legislative audit division to conduct audits of the
film production incentive program), and AS 44.33.231(c)
(administration of the Alaska film production incentive
program (AS 44.25.110). The effective date of this section
is July 1, 2015.
Section 8 repeals AS 44.25.135, effective July 1,
2021, allowing six years for the recovery of the film
production tax credit after the credit program is
repealed if the film office determines that the film
producer or production is liable for damages to the
state, or any political subdivision of the state. This
section has an immediate effective date.
Section 9 repeals multiple sections of ch. 51, SLA
2012 and ch. 61, SLA 2014, related to the film tax
credit. The effective date of this section is July
2015.
Section 10 provides transition language for the repeal
of the film tax credit. The effective date of this
section is July 1, 2015.
Section 11 repeals certain sections of ch. 51, SLA
2012, related to the film tax credit. The effective
date of this section is July 1, 2015.
Sections 12-15 provide the effective dates for the
bill, noted above. These various dates are necessary
because 2014 legislation will amend some sections in
2016, and to allow recovery of damages after the
program is repealed.
2:15:27 PM
SENATOR STOLTZE advised that he introduced the bill last year
with Representative Thompson and it is back again with more
urgency.
CHAIR COSTELLO asked Mr. Burnett to review the information he
provided relating to the program.
2:17:53 PM
JERRY BURNETT, Deputy Commissioner, Department of Revenue (DOR),
stated that under the current program, which started July 1,
2013, $28.3 million in credits have been approved. Under current
statute this leaves $171.7 million in potential tax credits
between now and 2018.
He reviewed the status report of the Alaska film production
incentive for FY2009 to FY2013 under the Department of Commerce,
Community and Economic Development (DCCED). About $38 million in
tax credits were approved for 11 commercial films, 19
documentary films, 29 feature films, 65 TV-nonfiction films, and
1 TV-drama. About $117 million in expenditures were reported.
CHAIR COSTELLO asked how the credit works.
MR. BURNETT explained that a commercial entity pays a fee and
submits a detailed application to the Alaska Film Incentive
Commission, which is comprised of the commissioners or their
designees from the Department of Labor and Workforce
Development, the Department of Natural Resources, the Department
of Commerce, Community and Economic Development, and Department
of Revenue. The executive director of the film office, who works
in the Tax Division of DOR, reviews the applications and makes
recommendations. Because the applicants are commercial entities,
the information is confidential. The Alaska Film Incentive
Commission makes a qualifying determination and a narrow appeal
opportunity is available under the Administrative Appeals Act.
This has happened once and the appeal was successful. Once the
applicant is qualified, the entity does the work, reports its
expenditures to the Tax Division, and receives a transferable
credit certificate that can be sold to a taxpayer. The taxpayer
can use the credit to reduce their tax liability.
MR. BURNETT reviewed the status report of the Alaska film
production incentive that was released yesterday, February 18,
2015. It is the first annual report under the new program that
stated on July 1, 2013 when the law changed.
2:23:59 PM
At ease
2:24:24 PM
CHAIR COSTELLO reconvened the hearing.
MR. BURNETT reviewed the FY2014 annual report under the DCCED
program that existed prior to July 1, 2013, AS 44.25.105(a). The
tax credits disbursed amounted to $5,543,701. The qualified
expenditures paid by productions qualifying for the film
production tax credit amounted to [$17,417,134]. The qualified
expenditures paid by productions qualifying for the film
production tax credit to established Alaska businesses totaled
[$5,730,621]. The qualified expenditures paid by productions
qualifying for the film production tax credit to Alaska
residents as wages totaled [$1,344,918]. The qualified
expenditures paid by productions qualifying for the film
production tax credit for wages paid to non-residents totaled
[$5,667,782]. The number of residents employed by productions
qualifying for the film production tax credit totaled 188. The
number of individuals employed by productions qualifying for the
film production tax credit who were not residents totaled 192.
The expenditures paid by productions qualifying for the film
production tax credit that were not qualified expenditures
totaled $34,141,296.
FY2014 data under the new Department of Revenue program shows 50
applications of which 40 were approved. The estimated credits
totaled $18,263,211. There were 8 applications rejected, 1
withdrawn, and 1 was under review at the end of the fiscal year.
Two tax credits were disbursed but the dollar amount of tax
credits disbursed is confidential when fewer than 3 credits are
issued.
The information for calendar year 2014 is similar. There were 40
applications and 24 were approved. The total amount of estimated
credits approved was $16,192,992. Just 4 tax credits were
disbursed for a total of $585,984. The qualified expenditures
that were paid by productions qualifying for the film production
tax credit totaled $1,461,063. The qualified expenditures
totaled $601,529. Ninety one residents and 64 non-residents were
employed on those 4 productions. The expenditures that were paid
by productions qualifying for the film production tax credit
that were non-qualified expenditures totaled $11,118,329.
2:30:15 PM
CHAIR COSTELLO asked if there are any outstanding credits.
MR. BURNETT offered to follow up with the aggregate amount.
CHAIR COSTELLO noted that the statute was amended to focus on
Alaskan jobs and Alaskan companies. She asked if the report
reflects full-time equivalent jobs.
MR. BURNETT clarified that it is the number of individuals
employed, not the number of jobs. He advised that there have
been 2 meetings since the beginning of 2015 and 1 application
was approved at a January meeting.
CHAIR COSTELLO asked what the governor has done to affect the
program.
MR. BURNETT explained that the Governor's FY2016 budget removed
funding for the DOR staff in the Alaska Film Office. The
practical effect under AS 44.25.110 is that qualified credits
will be processed and the program will be suspended after July
1. Due to the current fiscal climate, is unlikely that the
incentive commission will approve any further applications.
CHAIR COSTELLO asked the practical difference between the
Governor's action and the bill.
MR. BURNETT explained that under the Governor's action new
legislation would not be required to reinstate the program,
whereas SB 39 eliminates the program.
CHAIR COSTELLO asked him to characterize the current fiscal
situation.
MR. BURNETT explained that the State of Alaska will bring in
about 40 percent of the general fund revenue it is expending in
FY2015, which is potentially a deficit of more than $3.5
billion. Money has to come out of savings to pay for the budget
and the state has ample savings for the next several years.
Going forward the deficit appears to stay in place and perhaps
get worse, which is a concern. He opined that the film tax
incentive legislation isn't consistent with the fiscal structure
of the state and doesn't bring much revenue into the state
coffer.
2:39:41 PM
SENATOR STEVENS questioned the apparent disparity between the
fiscal note that says that tax credits preapproved prior to July
1, 2015 would be allowed, and the testimony that the commission
isn't expected to make further approvals.
MR. BURNETT clarified that he said it is unlikely that any
further applications would be approved, but there could be a
special circumstance that makes an application stand out.
SENATOR STEVENS asked if there is any difference between the
Governor's suspension and the bill with regard to the July 1,
2015 date.
MR. BURNETT offered his belief that it's the same in both cases.
CHAIR COSTELLO stated that she would hold SB 39 in committee and
take public testimony on February 24.