Legislature(2015 - 2016)SENATE FINANCE 532
04/08/2015 01:30 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB15 | |
| SB39 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 26 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 39 | TELECONFERENCED | |
| += | SB 51 | TELECONFERENCED | |
| += | SB 15 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
April 8, 2015
1:36 p.m.
1:36:44 PM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 1:36 p.m.
MEMBERS PRESENT
Senator Anna MacKinnon, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Peter Micciche, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
German Baquero, Legislative Intern, Senator John Coghill;
Lori Wing-Heier, Director, Division of Insurance,
Department of Commerce, Community and Economic Development,
Juneau; Senator Bill Stoltze, Sponsor; Jerry Burnett,
Deputy Commissioner, Treasury Division, Department of
Revenue.
SUMMARY
SB 15 LIFE INSURANCE POLICY PREMIUM TAX
SSSB 15 was REPORTED out of committee with a "do
pass" recommendation and with one previously
published zero fiscal note: FN1 (CED).
SB 26 BUDGET: CAPITAL
SB 26 was SCHEDULED but not HEARD.
SB 39 REPEAL FILM PRODUCTION TAX CREDIT
CSSB 39 (L&C) was REPORTED out of committee with
a "do pass" recommendation and with a previously
published indeterminate fiscal note: FN1 (REV).
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."
1:37:34 PM
GERMAN BAQUERO, LEGISLATIVE INTERN, SENATOR JOHN COGHILL,
presented SB 15. He explained that the bill was a tax cut
on the premiums for life insurance policies. He pointed out
that in Section 1, the rate of tax on policies over
$100,000 would be changed from 0.1 percent to 0.08 percent.
He explained that the other feature of the legislation was
an applicability date set for December 31st, 2015. He
furthered that the bill was developed in conjunction with
members of the insurance industry and the trust industry in
Alaska as an effort to maintain the competitive edge the
state had in the insurance market across the United States.
He mentioned the state of South Dakota, which currently
taxed policies over $100,000 at 0.08 percent. He asserted
that the legislation was a means of attracting future life
insurance policies to be held in the state, thereby
bringing more revenue to the state.
1:40:03 PM
LORI WING-HEIER, DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
JUNEAU, affirmed that SSSB 15 would reduce the premium tax
on life insurance premiums over $100,000. She disclosed
that the industry believed that the legislation would
increase the revenues paid to the state by making insurance
in Alaska more competitive as compared to other states. She
commented that the state of South Dakota had passed a
similar piece of legislation in 2010; thereby increasing
the number of companies writing life insurance from 29 to
32 and increasing premiums from $97 million to $120 million
in four years.
Co-Chair MacKinnon stated that she was not convinced of the
merit of the legislation, and asked Ms. Wing-Heier to
justify the lowering of premium tax rates. Ms. Wing-Heier
related that the state was attempting to be competitive
with two other states (South Dakota and Connecticut) that
had also lowered their tax rates on premiums. She heard
from brokers that such a change would make Alaska an
attractive market for setting up trusts and financing for
retirements for residents as well as those outside of the
state.
Senator Dunleavy asked if Ms. Wing-Heier anticipated the
potential for job creation in the industry as a result of
the legislation. Ms. Wing-Heier anticipated an increase in
individuals hired in the insurance industry.
1:43:25 PM
Co-Chair MacKinnon asked Senator Dunleavy to address the
fiscal note.
Senator Dunleavy discussed the bill's fiscal note, which
had zero fiscal impact, and read from the narrative section
(copy on file):
SB15 would reduce the premium taxes collected by the
Division on individual insurance policies with a
written premium exceeding $100,000.00 from 0.1% to
0.08%. The reduction in tax is expected to increase
competition, potentially resulting in additional
policies issued in the state.
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.
1:44:30 PM
Senator Dunleavy MOVED to REPORT SSSB 15 out of committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
SSSB 15 was REPORTED out of committee with a "do pass"
recommendation and with one previously published zero
fiscal note: FN1 (CED).
1:44:49 PM
AT EASE
1:47:15 PM
RECONVENED
SENATE BILL NO. 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."
1:47:25 PM
SENATOR BILL STOLTZE, SPONSOR, stated that SB 39 would
repeal the film subsidy (tax credit) program currently
operated by the state. He thought the program had
benefitted certain groups of Alaskans and certain
communities, but had serious concerns regarding the return
on investment. He commented that there were many ways to
stimulate the economy more effectively, and thought it was
imperative for the state to use its money on
constitutionally mandated items such as education, basic
transportation and public safety infrastructure, prison
system reformation, public health, and retirement systems.
Senator Olson related that he had questions for the
Department of Revenue (DOR) regarding the bill.
Senator Olson noted that the film tax credit affected
people in his region, and asked if the governor had
suspended the program.
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, replied that in the governor's
budget for FY 16, there were no funds to operate the film
tax credit program. He furthered that under the budget as
passed by the House and Senate, the state would cease
operating the program on July 1, 2016. Suspension of the
program would result in the layoff of three existing
employees. He furthered that there were approximately $38
million potential liability in tax credits outstanding,
which would be paid regardless of the passage of the bill.
He specified that there was another $172 million of
authorization possible if the bill did not pass and the
program continued.
1:53:34 PM
Senator Olson asked if DOR was still accepting applications
for the program. Mr. Burnett stated that the program was in
effect through June 30, 2015; it was still possible to
submit an application, but approval was unlikely.
Senator Olson asked about the likelihood of an additional
application being approved. Mr. Burnett thought the chance
of an application being approved was close to zero,
considering the fiscal situation.
Senator Olson pointed out that the program had a sunset
date of 2018 and wondered if the legislation to suspend the
program was a moot point. Mr. Burnett did not consider the
bill a moot point, and thought that the legislation made a
clear point to the industry that the program was decisively
ended rather than merely suspended.
Senator Olson commented on the prior state income tax, and
suggested that if past legislative bodies had suspended the
income tax with a trigger point to reinstate the tax, it
would have saved the committee a considerable amount of
work. He wondered if such an idea could be applicable to
the film tax credit program. Mr. Burnett was not able to
speculate on the subject.
1:56:23 PM
Senator Bishop asked if there had been films scheduled for
production in Alaska that had since changed plans after
hearing of the legislation. Mr. Burnett had not heard of
any films that had done so.
1:56:56 PM
AT EASE
1:57:46 PM
RECONVENED
Co-Chair MacKinnon asked Mr. Burnett if he could discuss
the remaining balance of the funds that were set aside for
the program. Mr. Burnett stated that the program was
authorized with a $200 million cap. He specified that the
funds were processed as a direct reduction in tax liability
to companies rather than being an appropriation, with a
film company receiving a tax credit certificate which they
would in turn sell to a corporate taxpayer. He surmised
that of the $200 million cap, there was $172 million
remaining in the authorization should the program continue.
1:59:00 PM
Senator Dunleavy asked if DOR had a position on the bill.
Mr. Burnett relayed that the department had not taken a
formal position on the bill, but considered that the
legislation would provide clarity. He continued that DOR
did not intend to operate the program regardless of the
outcome of the bill.
Senator Dunleavy asked if Mr. Burnett if he could clarify
the difference between a tax credit and a subsidy. Mr.
Burnett explained that a tax credit was a reduction in tax
liability that would come out before revenues were
received, whereas a subsidy to a program was generally an
appropriated amount of money available to pay a company for
doing something. He clarified that the companies making
films were not generally Alaska taxpayers, so the state was
essentially just reducing its revenue.
Senator Dunleavy asked if the program behaved as a true tax
credit rather than a subsidy. Mr. Burnett stated that the
program behaved as a tax credit from the state's
perspective.
Senator Dunleavy asked for Mr. Burnett to describe the
original purpose of the program. Mr. Burnett stated that
his understanding was that it was intended to build a new
industry in Alaska.
2:01:45 PM
Senator Dunleavy discussed the fiscal note, which had
indeterminate fiscal impact, and read from the analysis
section (copy on file):
Expenditures:
The original film credit program was established in
2008 with a sunset provision of June 30, 2013. The
aggregate amount of film credits available to be
authorized during the original 5
million. Chapter 51, SLA 12, extended the film program
10 years to June 30, 2023 and increased the aggregate
amount of film credits allowed to be awarded to $300
million. Three positions were created in the
Department of Revenue to administer the program.
The Governor's FY 2016 Amended Budget removes funding
for the three positions which currently administer the
Film Office in the Department of Revenue, at a savings
of $346.7. The Department will absorb the
responsibilities of the Film Office into the Excise
Tax Group within the Tax Division. As a result of the
funding changes in the Governor's budget, the repeal
of the film production tax credit would result in no
additional changes to personal service since the three
positions currently administering the program would be
eliminated from the department's budget beginning in
FY 2016. This bill provides that any tax credits
preapproved prior to July 1, 2015 would still be
allowed under previous law. The department will need
to process tax credits that were preapproved and which
have 2 years to submit a final application and an
additional year for the state to challenge the
validity of the tax credit. We anticipate these
remaining functions of the film office that are not
repealed by this bill can be implemented in the Tax
Division using this existing staff and resources.
Senator Dunleavy moved to report the bill from committee.
[Note: The incorrect bill number was inadvertently referred
to during the motion. Senator Dunleavy restated the motion
at 2:06 p.m. See below for detail].
2:03:53 PM
AT EASE
2:06:17 PM
RECONVENED
Senator Dunleavy corrected himself and MOVED to REPORT CSSB
39 (L&C) out of committee with individual recommendations
and the accompanying fiscal note. There being NO OBJECTION,
it was so ordered.
CSSB 39 (L&C) was REPORTED out of committee with a "do
pass" recommendation and with a previously published
indeterminate fiscal note: FN1 (REV).
ADJOURNMENT
2:07:38 PM
The meeting was adjourned at 2:07 p.m.