Legislature(2023 - 2024)SENATE FINANCE 532
05/03/2023 01:30 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB94 | |
| SB122 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 94 | TELECONFERENCED | |
| += | SB 122 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 53 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
May 3, 2023
1:34 p.m.
1:34:43 PM
CALL TO ORDER
Co-Chair Olson called the Senate Finance Committee meeting
to order at 1:34 p.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Donny Olson, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Jesse Kiehl
Senator Kelly Merrick
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Senator Cathy Giessel, Sponsor; Jane Conway, Staff, Senator
Cathy Giessel; Representative Justin Ruffridge; Brandy
Seignemartin, Executive Director, Alaska Pharmacists
Association; Sylvan Robb, Director, Division of
Corporations, Business and Professional Licensing,
Department of Commerce, Community and Economic Development;
Senator Bill Wielechowski, Sponsor; Ken Alper, Staff,
Senator Donny Olson; David Dunsmore, Staff, Senator Bill
Wielechowski.
PRESENT VIA TELECONFERENCE
Ashley Schaber, Chair, Board of Pharmacy; Barry
Christiansen, Chair, Alaska Pharmacists Association;
Desiree Molina, Self, Palmer; Vince Hanks, Baxter Health
Care, Illinois; Brandon Spanos, Deputy Director, Tax
Division, Department of Revenue; Melissa Patack, Vice
President and Senior Counsel for State Government Affairs,
Motion Picture Association.
SUMMARY
SB 53 FIVE-YEAR INVOLUNTARY COMMITMENTS
SB 53 was SCHEDULED but not HEARD.
SB 94 PROFESSION OF PHARMACY
SB 94 was HEARD and HELD in committee for further
consideration.
SB 122 APPORTION TAXABLE INCOME; DIGITAL BUSINESS
SB 122 was HEARD and HELD in committee for
further consideration.
SENATE BILL NO. 94
"An Act relating to the Board of Pharmacy; relating to
the practice of pharmacy; relating to pharmacies;
relating to prescription drug manufacturers; relating
to prescriptions for epinephrine; relating to the
administration of epinephrine; and providing for an
effective date."
1:35:34 PM
SENATOR CATHY GIESSEL, SPONSOR, explained that the bill was
related to the profession of pharmacy and the Board of
Pharmacy. She reminded that the goal of regulatory boards
was to protect the public. She relayed that the bill
proposed to update outdated statutes related to the
profession of pharmacy. She highlighted that the bill was a
multi-year collaboration between multiple board iterations
and multiple chairs of the Board of Pharmacy, working along
with the Alaska Pharmacists Association, students,
retirees, and the Alaska Tribal Health Organization. She
cited a great deal of change in the practice of pharmacy
over the previous 20 years. She described that during the
Covid-19 pandemic, pharmacists had played a critical role
in healthcare delivery and filling service gaps.
Senator Giessel relayed that SB 94 covered statute areas
including the boards composition; the prescribing of
epinephrine auto-injectors (epi-pens); and the licensing
and inspection of out-of-state pharmacies, internet
pharmacies, wholesalers and distribution centers. The bill
clarified board powers, added a national background check
for pharmacists and pharmacy technicians, and repealed
obsolete language from the statutes. She noted that her
staff would identify the changes to the bill made in the
Senate Labor and Commerce Committee. She discussed
additional invited testimony.
Co-Chair Olson asked about Senator Giessels reference to
epi-pens.
Senator Giessel clarified that the bill would allow a
pharmacist to prescribe the epi-pen.
Co-Chair Olson asked if pharmacists would be able to
dispense epi-pens.
Senator Giessel answered affirmatively and noted that there
would be a required education program prior to
authorization.
1:38:29 PM
JANE CONWAY, STAFF, SENATOR CATHY GIESSEL, addressed a
Sectional Analysis document (copy on file):
Section 1. Amends AS 08.80.010(a) Creation and
membership of board; officers Alters composition of
the seven-member Board of Pharmacy by designating one
member to be a licensed pharmacy technician, and one
to be an individual with no financial interest in the
healthcare industry.
Section 2. Amends AS 08.80.030(b) Powers and Duties of
Board
(b)(10) Separates out the licensing/regulating
entities relating to manufacturing and distributing of
drugs and devices by use of the word "or"
(b)(12) adds an epinephrine auto-injector training
program. (b)(14) Clarifies that only pharmacists who
dispense federally scheduled controlled substances be
required to register with the Prescription Drug
Monitoring Program (PDMP). (b)(16) Adds pharmacies and
manufacturers from out-of-state to list of entities to
be licensed and inspected.
(b)(17) Adds internet-based pharmacies to list of
entities to be licensed if they are servicing
Alaskans.
(b)(18) adds language allowing the board to adopt
regulations pertaining to retired pharmacist status.
Section 3. Amends 08.80.145 Reciprocity; license
transfer (3) removes character requirement - "of good
moral character" (4) removes internship details this
is a national standard among schools of pharmacy.
Renumbering of statute items
Section 4. Amends AS 08.80.157(h) Licensing of
facilities (7)(A) allows the direct shipping of
dialysate and supplies from a wholesale drug
distributor to home dialysis patients that are FDA-
approved and meet the guidelines to do so set out by
the AK Board of Pharmacy.
Section 5. Amends AS 08.80.157 Licensing and
inspection of facilities outside the state (k) this
adds out-of-state pharmacies and manufacturers to the
list of entities that must be licensed.
Section 6. Amends AS 08.80.159 Licensing and
inspection of facilities outside the state (a) Adds
"distributor, pharmacy, manufacturer" to those out-of-
state entities that must be licensed and inspected.
Section 7. Amends AS 08.80.159 Licensing and
inspection of facilities outside the state (c) adds
pharmacies and manufacturers to list of those required
to be inspected to gain Alaska licensure.
Section 8. Amends AS 08.80.160 Fees (10) Removes the
word "registration" since the bill mandates licensure
of a facility.
Section 9. Amends 08.80.168 and adds a new subsection
Administration of vaccines and related emergencies
(e) Allows a pharmacist to administer epinephrine to a
person or prescribe an epinephrine auto-injector to
someone who has completed the epinephrine auto-
injector training.
1:42:08 PM
Ms. Conway continued to address the Sectional Analysis:
Section 10. Amends AS 08.80.270 Executive
administrator of the board
(a) Adds an additional salary range option for the
executive administrator, allowing flexibility for the
Division to select a pharmacist for the role.
Section 11. Amends AS 08.80.420 Certain advertising
prohibited (a) adds the term "apothecary" to list of
those that cannot be used in media or advertising
unless the store employs a licensed pharmacist with
regular hours.
Section 12. Amends AS 12.62.400 National criminal
history record check (a)(23) adds pharmacist and
pharmacy technician to list of professions where a
background check is required. Aligns with State of
Alaska's nursing requirements and pharmacy
requirements typical in other states. This adds a
national level background check.
Section 13. Amends AS 17.22.010 Prescription,
purchase, administration of epinephrine by a trained
individual Allows anyone over 18 to purchase or be
prescribed an epinephrine autoinjector, and to
administer epinephrine shot in an emergency to another
person if they have completed an epinephrine auto-
injector training program approved by the board. It
removes very outdated language from this section.
Section 14. Amends AS 17.22.020(a) Approval of
training programs (a) Allows the board, rather than
the department, to adopt standards for the epinephrine
auto-injector training program and deletes outdated
language.
Section 15. Amends AS 17.22.020(b) Approval of
training programs (b) Allows the board, rather than
the department, to approve an epinephrine auto-
injector training program that meets the board's
standards.
Section 16. Amends AS 17.22.030 Applicability States
that this chapter does not apply to someone currently
authorized under another law to administer
epinephrine, such as a nurse or doctor, or some other
authorized professional.
Section 17. Amends AS 17.22.040 Liability of certified
individual Outlines that a person may not be sued who
administers epinephrine to another in an emergency,
and in good faith, if he or she has completed the
epinephrine auto-injector training program approved by
the board.
Section 18. Amends AS 17.22.090 Definitions (3)
defines the "board" as the Board of Pharmacy
Section 19. Repealers
• Repeals 08.80.110(2) furnish the board with at least
two affidavits from reputable citizens that the
applicant has known for at least one year attesting to
the applicant's good moral character. This is not
required in medical, dentistry, or nursing statutes.
• Repeals 08.80.158 Registration of pharmacies located
outside the state since this bill would now require
licensure.
• Repeals AS 17.22.020(c) which is the Department's
epinephrine auto-injector training program.
• Repeals AS 17.22.090(1) that defines the department
as the Dept of Health since it will no longer be the
approving entity of the epinephrine auto-injector
training program.
Section 20. TRANSITION LANGUAGE for currently
registered pharmacies A new section that would allow
pharmacies previously registered to continue to ship,
mail or deliver prescription drugs to its customers in
Alaska until their registration expires. At that time,
they will then have to apply for licensure.
Section 21. TRANSITION: REGULATIONS Allows the Board
of Pharmacy and DCCED to adopt regulations to carry
out the changes laid out in this legislation.
Section 22. Sections 4 and 21 an immediate effective
date under AS 01.10.070(c)
Section 23: Effective date is set to coincide with the
Drug Supply Chain and Security Act that will go into
effect on November 26, 2023.
Senator Wilson referenced Section 2, page 3, line 21
relating to adopting regulations regarding retired
pharmacist status. He asked if the provision was intended
for retired pharmacists to be able to return to work. He
asked for more details.
Ms. Conway relayed that currently if a pharmacist retired,
the license lagged, while other professions typically had a
designated retirement status that provided more dignity,
importance, and recognition in the profession.
Co-Chair Olson asked if the retired pharmacists Drug
Enforcement Agency (DEA) number automatically expired.
Senator Giessel suggested that invited testimony could
address Co-Chair Olson's question.
1:48:26 PM
REPRESENTATIVE JUSTIN RUFFRIDGE, shared that he was the
previous chair of the Board of Pharmacy and had worked on
the bill in that role. He affirmed that the bill was a
multi-year effort for multiple boards and multiple chairs
of the board. He thought it was important to know that the
board chair had worked on right touch regulations at the
request of the governor to update and modernize the
regulatory framework across all boards and commissions. He
asserted that the board had taken the charge very seriously
and had found that there were items that could not be
changed without legislative action. He supported the bill.
Co-Chair Olson referenced working in Barrow and mentioned
that the pharmacist there had been working on the
legislation. He asked about retired pharmacists and the
expiration of DEA numbers. He asked about the necessary
steps for a pharmacist to come out of retirement.
Representative Ruffridge explained that pharmacists were
not allowed to hold a DEA registration, and a change of the
practice had been considered at the federal and state
level. He mentioned pharmacists being a part of medication-
assisted treatment for opioid addiction, which would
require a DEA number. The topic would not be outlined in
the bill.
1:51:28 PM
Co-Chair Olson understood there was a school of pharmacy
that was out of state but had a facility in Alaska. He
asked about an internship, and whether it was mandatory.
Representative Ruffridge was excited about the opportunity
for kids in the state to be educated as doctors in
pharmacy, and he thought that the program was the only
doctorate level medical degree that could be obtained in
the state. He cited that the program was a joint and
collaborative effort between the University of Alaska and
Idaho State University (ISU). He described modern
technology and distance delivery methods to have classes at
the University of Alaska Anchorage (UAA) and at ISU.
Representative Ruffridge described that the education
profile for pharmacy education was a four-year
undergraduate degree usually in science, and an additional
four years for a doctoral degree. During the four years,
students were allowed to work as a licensed pharmacy intern
in order to gain experience. A number of intern hours were
required to qualify for licensure and sit for the exam.
Alaska required 1,500 hours, and the number differed by
state. He continued that at the end of four years of
schooling, a pharmacy student could enter a one- or two-
year residency program in specialized pharmacy practice. He
estimated that it could be from 8 to 10 years to become
licensed, depending upon the specialty.
1:53:54 PM
Co-Chair Olson referenced Section 13 and training of
pharmacists to dispense epi-pens. He mentioned detrimental
effects of mis-application of epinephrine, and asked about
the required training. He mentioned the danger of
anaphylactic shock.
Representative Ruffridge relayed that the ability to
provide epinephrine in the case of anaphylaxis had always
been a pharmacy statute as part of pharmacists ability to
prescribe and give vaccinations. Pharmacists were permitted
to administer epinephrine in the case of anaphylaxis due to
a vaccination. He explained that the training referenced in
Section 13 of the bill referenced a program that already
existed in the state. The bill proposed to move the
training program from the Department of Health to under the
purview of the Board of Pharmacy. The training would be
open to the public and would provide a certificate after
one day, after which a person could be provided
epinephrine. He listed individuals such as camp counselors
and flight attendants as examples of people who might need
access to epi-pens.
Co-Chair Olson asked about the difference in training for
epinephrine and the training for naloxone.
Representative Ruffridge relayed that the model for
language in the bill was the same that was already in place
for naloxone.
1:57:05 PM
ASHLEY SCHABER, CHAIR, BOARD OF PHARMACY (via
teleconference), relayed that she became the chair of the
pharmacy board in December and had served on the board for
almost two years. She had practiced as a pharmacist in the
state for almost 16 years.
Ms. Schaber discussed a presentation entitled "Senate Bill
94: Profession of Pharmacy" (copy on file). She turned to
slide 2, which showed the Alaska Board of Pharmacy 2023
Strategic Plan. She read the mission of the Board of
Pharmacy. She highlighted that the bill had been in the
works for several years and cited goal 4 - to grow the
economy while promoting community health and safety. She
highlighted strategies listed under the strategic plan
including to routinely review effectiveness of regulations
that reduce barriers to licensure, advocating for
legislation, and anticipating changes relating to the Drug
Supply and Security Act. She reviewed board membership
positions.
Ms. Schaber advanced to slide 3, "Background of SB 94":
•Result of multi-year, multi-chair review of statutes
and regulations to ensure the Alaska Board of Pharmacy
can continue to meet its mission
•SB 94 addresses changes by:
•Streamlining licensure process while improving
public safety
•Compliance with the Drug Supply Chain and
Security Act
•Alignment with other professional boards in
Alaska and pharmacy boards in other states
•Clarification of pharmacists' roles in
epinephrine access
•Collaborative effort between the Alaska Board of
Pharmacy and the Alaska Pharmacists Association
Ms. Schaber referenced important access to critically
needed dialysis fluids.
1:59:44 PM
Ms. Schaber referenced slide 4, "Goal: Streamline licensure
process while improving public safety":
•Eliminates unnecessary forms currently required in
statute
•Clarifies that only pharmacists who dispense
controlled substances are required to register with
the Prescription Drug Monitoring Program (PDMP)
•Adds national criminal background check
Ms. Schaber mentioned moral affidavit forms in reference to
eliminating unnecessary forms. She discussed the addition
of the national background check, which was thought to be
an added measure of protection for Alaskans through the
licensure process and was in line with 30 other states.
Co-Chair Olson referenced Ms. Schabers mention of dialysis
fluids. He asked if the bill contemplated the shipping of
dialysis fluid to rural Alaska.
Ms. Schaber relayed that the changes to SB 94 addressed
some of the current statutory barriers to providing home
dialysis. It had been identified that there were some
changes that could eliminate the requirement for facilities
distributing the fluid to be registered as a pharmacy. The
board reviewed the changes and felt like the proposed
changes were a good balance to ensure there were no
barriers to provide service to all areas of the state while
maintaining the integrity of the process.
Co-Chair Olson asked if the proposed change only
encompassed peritoneal dialysis.
Ms. Schaber answered affirmatively.
Co-Chair Olson asked about hemodialysis.
Ms. Schaber understood that only the peritoneal dialysis
fluids for home dialysis would be impacted by the proposed
change.
2:03:23 PM
Ms. Schaber spoke to slide 5, "Goal: Compliance with Drug
Supply Chain and Security Act":
•The federal Drug Supply Chain and Security Act
(DSCSA) further secures the U.S. drug supply through a
system to prevent harmful drugs from entering the
supply chain, detect harmful drugs if they do enter,
and enable rapid response when such drugs are found
•Boards of Pharmacy play a key role in this process
through appropriate licensing of drug distributors and
pharmacies
•SB 94 ensures the AK Board of Pharmacy powers and
duties support the DSCSA related to manufacturers,
out-of-state pharmacies, and internet pharmacies to
ensure Alaskans receive safe medications
Ms. Schaber noted that when considering the statute change,
there had been very few mail-order pharmacies that were
shipping into the state, but the number had exponentially
grown in recent years. The change from registration to
licensure would give the board jurisdiction. She mentioned
that concern had been raised that patients were not
receiving the same medication counseling from mail-order
pharmacies as they would from an in-state pharmacy.
Ms. Schaber addressed slide 6, "Goal: Alignment":
• Replaces one of the two public member seats with a
pharmacy technician seat
•Allows the board to adopt language for retired
pharmacist status
larifies the board executive administrator's salary,
allowing flexibility for a pharmacist to serve in this
role in the future
Ms. Schaber relayed that the proposed change to board seats
would modernize the board. She discussed the language for
retired pharmacist status. She discussed the complexity of
pharmacy and regulation.
2:08:33 PM
Co-Chair Olson asked how many pharmacists were in the
state.
Ms. Schaber did not have the information at hand.
Co-Chair Olson asked Ms. Schaber to address the difference
between a pharmacist and a pharmacy technician.
Ms. Schaber explained that a pharmacist would go through
professional pharmacy school as Representative Ruffridge
had described. She continued that a pharmacy technician was
a licensed individual in the state that helped a pharmacist
within a pharmacy practice. She noted that pharmacy
technicians could have multiple different roles that
included inventory, ordering medications, working through
drug shortages, medication histories, and providing
immunizations. She noted that the role of pharmacy
technicians had grown in previous years.
Co-Chair Olson summarized that the bill did not propose to
increase membership on the board, but rather replaced a
public member seat with a pharmacy technician member.
Ms. Schaber answered in the affirmative and noted that the
bill proposed to replace one of the two public member seats
on the board. She explained that up until about one month
previously, both of the public member seats had been
vacant. She continued that historically the public member
seats had been challenging to fill, and she thought the
change would help fill the membership as well as bring the
technician perspective to the board.
2:10:52 PM
Ms. Schaber spoke to slide 7, "Goal: Epinephrine Access":
•Moves epinephrine training program under Board of
Pharmacy oversight
•Clarifies that a pharmacist can administer
epinephrine to a person or prescribe epinephrine auto-
injectors to someone who has completed the training
program
•Increases epinephrine access for Alaskans with
anaphylactic emergencies
Ms. Schaber commented that access to epinephrine was
peculiarly important in rural areas, where access to higher
level care might be more challenging. She spoke to the
access to dialysis fluids, which was in line with the goal
of increasing access. She mentioned the process of changes
to the CS and discussed patients receiving dialysis at
home.
Ms. Schaber highlighted slide 8, "Support":
•The Board of Pharmacy respectfully requests your
support of SB 94, allowing us to further promote,
preserve, and protect the public health, safety, and
welfare of Alaskans by and through the effective
control and regulation of the practice of pharmacy.
•Thank you for your time!
Ms. Schaber thanked the committee for its time.
2:13:43 PM
BRANDY SEIGNEMARTIN, EXECUTIVE DIRECTOR, ALASKA PHARMACISTS
ASSOCIATION, testified in support of the bill. She was a
licensed pharmacist and was there to speak on behalf of the
Alaska Pharmacists Association. She asserted that some of
the provisions of greatest concern were related to patient
safety. She mentioned the proposed background checks for
all licensees coming into the state, which she thought
would protect Alaskans. She pointed out that licensing out-
of-state pharmacies, internet pharmacies, and other
entities would give the board direct oversight if
medication errors occurred. She mentioned that the drug
supply chain had been a target of attacks by criminals, and
without strong protections Alaskans could be at risk for
unsafe or counterfeit medications. She considered that by
giving full authority to the board to regulate the
entities, protections would be strengthened.
Ms. Seignemartin discussed epinephrine auto-injectors and
the ability of pharmacists to dispense them to qualified
individuals. She thought Representative Ruffridge had done
a good job in describing the training and requirements. She
discussed the importance of access to epi-pens in certain
circumstances and the importance of the drug in live-saving
care. She expressed appreciation for the change in allowing
a pharmacist to serve as the executive administrator of the
board, and adding a pharmacy technician to a seat on the
board. She mentioned and supported provisions related to
retired pharmacists.
2:17:43 PM
Co-Chair Olson OPENED public testimony.
2:17:48 PM
BARRY CHRISTIANSEN, CHAIR, ALASKA PHARMACISTS ASSOCIATION
(via teleconference), testified in support of the bill. He
relayed that he had been a practicing pharmacist for 35
years. He recognized that the bill represented years of
work by previous boards. He cited that there were currently
1,000 licensed pharmacists in the state.
Co-Chair Olson asked how many pharmacy technicians were
licensed in the state.
Mr. Christiansen estimated that there were perhaps four to
five times the number of technicians than pharmacists. He
offered to follow up with more information.
Co-Chair Olson asked what kind of improvements or additions
to the bill would create additional benefits to the end
user, including people in remote areas with limited access.
Mr. Christiansen thought the bill helped to modernize
pharmacies. He cited that there were a dozen graduates in
pharmacy per year in Anchorage. He thought having a modern
statute base with provisions like the epinephrine
prescribing program was important for getting pharmacists
where they were needed. He did not have additional ideas to
offer.
2:20:58 PM
DESIREE MOLINA, SELF, PALMER (via teleconference), spoke in
support of SB 94. She relayed that she was a fourth year
student in the UAA/ISU Doctor of Pharmacy program and a
recent graduate of a masters of business administration
program. She was employed as a pharmacist intern and was an
executive intern for the Alaska Pharmacists Association.
She thought the bill created efficiencies in licensing and
increased public safety. She planned to continue practicing
in Alaska after graduation. She supported increased access
to epinephrine.
2:23:12 PM
VINCE HANKS, BAXTER HEALTH CARE, ILLINOIS (via
teleconference), spoke in support of the bill and was
available for questions. He thought the bill was important
for all aspects of pharmacy in Alaska. He supported the
testimony of previous testifiers.
Co-Chair Olson asked about Mr. Hanks' knowledge of the
state.
Mr. Hanks relayed that he travelled to the state often and
had a distribution center in Anchorage.
Senator Merrick asked about the training courses for
administration of the epi-pen and if a person would have to
purchase the medication.
Senator Giessel suggested asking the question of Dr.
Schaber.
Ms. Schaber thought some insurance companies would pay for
the medication. She offered to follow up in greater detail
as to how other states handled the matter.
Senator Merrick recalled that Narcan was being supplied to
the public.
Ms. Schaber thought Naloxone was more widely available than
epinephrine, and recalled that there were various sites
around the state that provided the drug to have on hand.
She mentioned Project Hope, which was a program through the
state. She hoped the bill would increase access to
epinephrine.
Co-Chair Olson asked about the shelf life for an epi-pen.
Ms. Schaber replied usually a year or two, and noted that
the time varied by manufacturer.
2:27:04 PM
SYLVAN ROBB, DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS
AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT, cited that in FY 22,
there were 1,130 licensed pharmacists and 1,649 licensed
pharmacy technicians.
Ms. Robb addressed a new fiscal note from the Department of
Commerce, Community and Economic Development, OMB Component
2360. She cited a cost of $751,200 in FY 25 into the out
years, and noted that only $269,000 of the amount was
General Fund and was related to the addition of five staff
members. She listed the positions as one full-time
Administrative Assistant, one full-time Records and
Licensing Supervisor, two full-time Occupational Licensing
Examiners, and one full-time Investigator 3.
Ms. Robb discussed changes that were the source of the
additional cost. She noted that the bill proposed to move
out-of-state pharmacies from registering to being licensed,
and the previous year there were over 1,400 out-of-state
pharmacies. Additionally, the bill required internet
pharmacies to be licensed and inspected.
Co-Chair Olson asked if a patient in the state could send
out a prescription to an out-of-state pharmacy that would
send the prescription.
Ms. Robb informed that out-of-state pharmacies would have
to be licensed in Alaska in order to send medications to
Alaskans.
SB 94 was HEARD and HELD in committee for further
consideration.
2:29:27 PM
AT EASE
2:31:12 PM
RECONVENED
SENATE BILL NO. 122
"An Act relating to the Multistate Tax Compact;
relating to apportionment of income to the state;
relating to highly digitized businesses subject to the
Alaska Net Income Tax Act; and providing for an
effective date."
2:31:16 PM
Co-Chair Olson relayed that the committee had heard SB 122
on April 17, at which time the committee had taken public
testimony. The committee had worked with the sponsor and
the Department of Revenue (DOR) and had a Committee
Substitute (CS) to consider.
2:31:37 PM
SENATOR BILL WIELECHOWSKI, SPONSOR, relayed that he was in
support of the changes in the CS.
Senator Kiehl MOVED to ADOPT proposed committee substitute
for SB 122, Work Draft 33-LS0663\H (Nauman, 5/2/23).
Co-Chair Olson OBJECTED for discussion.
2:32:21 PM
KEN ALPER, STAFF, SENATOR DONNY OLSON, explained that the
CS had taken a portion of SB 14, an oil and gas tax bill
that was heard earlier in the week, and put it within SB
122. The portion put into SB 122 was related to non-
corporations and the requirement to pay something
comparable to corporate income tax for all oil and gas
business entities. The section was put within SB 122, which
was also a corporate income tax bill and related to
internet businesses. He noted that the rest of the changes
proposed in the CS conformed to the larger change and made
some technical corrections that had been brought to light
by DOR.
Mr. Alper noted that the first 20 pages of the bill were
amendments to the multi-state tax compact and were the same
as the original version of the bill. The content had to do
with the market-based sourcing provisions, which made sure
that the location of the sale in Alaska was what was used
for the purpose of the sales factor of a corporate portion.
Mr. Alper addressed a Summary of Changes document (copy on
file):
1) Adds Section 2, new AS 43.20.019, which establishes
a 9.4% tax on income over $4 million per year on "oil
and gas entities" other than corporations.
2) Adds Section 3, amending AS 43.20.030(a), the
filing requirement in the current corporate income
tax, to add other oil and gas entities.
3) Adds Section 4, amending AS 43.20.031(i),
describing the accounting method used for companies
with activity both inside and outside the state, to
add other oil and gas entities.
4) Adds Section 9, amending AS 43.20.144(h)(2), to add
other oil and gas entities to the definition of a
"consolidated business."
Mr. Alper noted that he had inadvertently omitted a
description of new language added to Section 11(e) on page
25, line 9. The so-called single-factor apportionment,
which was a core portion of the original bill, stated that
highly digitized entities would use a sales factor rather
than the payroll or property factor. It had been clarified
that the section would not apply to a public utility or
telecommunications company. The companies would continue to
use the three-factor apportionment in current law. He noted
that he would make an amended version of the document for
public record.
2:35:53 PM
Mr. Alper continued to address the Summary of Changes
document:
5) Adds Section 12, amending AS 43.20.340 to add two
new definitions for "entity" and "oil and gas entity."
6) Adds a new subsection to Section 13, an uncodified
applicability section, to confirm that the new tax
sections apply to an oil and gas entity with taxable
income over $4 million from a source in the state, for
a tax year beginning on or after January 1, 2023.
7) Adds Section 14, an uncodified transition section,
to confirm that the 2023 taxes are not due until the
regular due date for 2023 taxes, October 1, 2024.
Because of the retroactivity, any penalties and
interest for late payment are waived.
8) Adds Section 15, an uncodified regulations section,
to authorize the Department of Revenue to draft
regulations that are retroactive to the effective
date.
9) Adds Sections 16 and 17, which have the retroactive
January 1, 2023 effective date for the "oil and gas
entity" tax and an immediate effective date for the
uncodified sections.
Mr. Alper commented that the underlying bill and single
factor apportionment was for the most part unchanged, with
the exception of adding the piece about telecommunications
companies. The main change was adding the oil and gas
entity tax to the legislation.
2:37:59 PM
AT EASE
2:38:41 PM
RECONVENED
Co-Chair Olson invited the sponsor to comment on the CS.
Senator Wielechowski commented that he supported the CS as
it was written.
Senator Wilson spoke to the original bill, which was
related to the multi-state compact. He thought oil and gas
taxes were different, and wondered if the subjects were
related enough.
Senator Wielechowski explained that the bill related to
corporate income tax, and he thought it was more important
for the S-corporation provision to be added. He thought
some would agree with the addition, and some would
disagree. He noted that the committee was discussing the
bill rather than discussing passage of the bill.
Senator Wilson felt that the provision should be separate
item from the original bill.
2:40:43 PM
BRANDON SPANOS, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE (via teleconference), thought the CS seemed to
do what the sponsor had stated.
Co-Chair Stedman thought it would be nice to know if the
department supported the bill.
Mr. Spanos had not been informed whether the bill was
supported by the governor and therefore the Tax Division of
DOR was neutral on the bill.
Co-Chair Olson WITHDREW his OBJECTION.
Senator Merrick OBJECTED. A roll call vote was taken on the
motion.
IN FAVOR: Bishop, Kiehl, Hoffman, Olson, Stedman
OPPOSED: Merrick, Wilson.
The MOTION PASSED (5/2). The CS for SB 122 was ADOPTED.
2:42:44 PM
MELISSA PATACK, VICE PRESIDENT AND SENIOR COUNSEL FOR STATE
GOVERNMENT AFFAIRS, MOTION PICTURE ASSOCIATION (via
teleconference), explained that the members of the Motion
Picture Association (MPA) were the major producers and
distributers of movies, television programs, and streaming
series; and were the owners of most of the national
broadcast and cable networks. She emphasized that she was
speaking about the issue of how income was apportioned for
national broadcast and cable networks was about the way to
tax the networks rather than the amount paid. She explained
that market-based sourcing, as proposed in SB 122, taxed
companies on their revenue from customers.
Ms. Patack cited that broadcast and cable networks had
three types of customers and sources of revenue:
individuals that were subscribers to streaming services,
licensing customers, and advertising customers. She
explained that revenue from the customers would go into the
Alaska sales tax factor. She contended that the direct
relationships between the broadcasting cable networks and
customers could be verified and made it easier to
administer the system for the taxpayer and DOR. She noted
that Mr. Alper had described market sourcing as taxing on
the basis of the location of the sale.
Ms. Patack continued her testimony. She considered that the
taxing of broadcast and cable networks on the income earned
from direct customers was consistent with SB 122s market-
based sourcing. She thought the method was the modern
approach that many states had adopted through statute, such
as Illinois and Tennessee. She referenced the audience
method of taxing broadcast networks, which had been adopted
in the 1990s. She asserted that the industry had undergone
significant changes since the adoption of the audience
method and that the method would lead to uncertainty in the
administration of the tax system. She relayed that MPA had
provided suggested language to be added to the bill.
Senator Bishop asked about the recommended changes
submitted by Ms. Patack.
2:46:30 PM
AT EASE
2:49:26 PM
RECONVENED
Co-Chair Olson requested that Mr. Spanos comment on the
testimony offered by Ms. Patack.
Mr. Spanos affirmed that he listened to Ms. Patacks
testimony.
Co-Chair Olson asked Ms. Patack to restate her concern.
Ms. Patack referenced submitting amendment language in a
document from the Motion Picture Association dated April
17, 2023 (copy on file). The language would allow for
market sourcing by customer location for broadcast and
cable networks.
Co-Chair Olson asked Mr. Spanos if he had a copy of the
letter with the suggested amendment language.
Mr. Spanos affirmed that he had seen the letter. He relayed
that the division's position was that nuances had
previously been handled in regulation, which allowed for
pivoting quickly with changes in industry. He thought that
the issue could be handled through regulation. He thought
the regulations Ms. Patck mentioned could be a starting
point and could be modernized. He did not identify anything
in the letter that was problematic.
Co-Chair Olson summarized that Mr. Spanos was indicating
there was nothing in the MPA letter that could not be
handled with regulation.
Mr. Spanos answered affirmatively.
2:52:16 PM
Co-Chair Stedman thought it was possible that regulations
could result in the different implementation than
contemplated in the statute. He suggested that the
committee consider modified language in the bill to ensure
the regulations were in line with what the committee was
thinking.
Senator Wielechowski understood that the department could
fix the problem referenced by Ms. Patack if it chose. He
referenced the question regarding the administration's
support of the bill. He could not speak to whether the
administration supported the bill, but could speak to the
fact that the the highly digitized part of the bill was a
provision suggested by former DOR Commissioner Lucinda
Mohoney to the Fiscal Policy Working Group. The sponsor had
worked with the department to craft the bill language. He
recounted that the former commissioner had testified to the
working group that the governor would support the
provision.
Senator Wielechowski referenced committee discussions
regarding the S-corporation change, and recalled that
former Commissioner Mahoney had testified to the Senate
Finance Committee that the administration was planning to
introduce changes to fix the S Corp loophole. He
recounted that the loophole was created when Hilcorp had
acquired BPs assets. He recalled that the administration
had a similar provision to what was in the bill. He
summarized that there had been indications of support for
both provisions in the bill.
2:55:12 PM
Senator Wilson asked about S-corporations, and commented
that the committee had not heard testimony or presentations
from industry or the Regulatory Commission of Alaska
regarding whether the costs would be passed on and cause
rate changes.
Senator Wielechowski understood that Hilcorp would testify
on Friday, and suggested that Senator Wilson query the
company. He stressed that Hilcorp was currently threatening
to withhold production or development or exploration in
Cook Inlet. He furthered that the state had contracts that
were expiring because Hilcorp was refusing to invest,
develop and produce under the terms of the contract it was
legally obligated to do in Cook Inlet. He thought Hilcorp
should be questioned about whether it would continue to
invest on the North Slope and why investment was reduced
from $847 million in 2014 to $220 million the previous
year. He pondered why the state was providing over $500
million in oil tax credits when Hilcorp was only investing
$220 million. He queried factors such as Hilcorp's rate of
return, internal rate of return, and net present value. He
stressed not basing decisions based on hyperbole and
statements that had no foundation.
Senator Wilson clarified his statements were not in defense
of any entity. Rather, he wanted to know the effects on
users of the system if the S-corporation statutes were
changed.
Senator Bishop suggested that the commissioner or a
designee addressed questions when the bill was considered
in committee in the future. He referenced a fiscal plan
that had been discussed by the administrator. He wanted to
know whether the administration was committed or not. He
was not interested in passing more tax legislation without
a commitment from the administration.
Senator Wielechowski thought Senator Bishop had posed a
great question, and would love to see the administration
come out in support of the bill after previously expressing
support for the provisions. He noted that Hilcorp was not a
utility and therefore was not regulated by the RCA.
3:00:31 PM
DAVID DUNSMORE, STAFF, SENATOR BILL WIELECHOWSKI, wanted to
follow up on Senator Wielechowski's comments addressing
Senator Wilson's concerns. He understood that there were no
regulated utilities that would be non-corporation oil and
gas entities. He cited that the RCA did have oversight over
gas sales agreements between regulated utilities. He
furthered that it would not be possible for the RCA to pre-
judge a proposed contract. In the past the RCA had looked
at market price conditions, and he thought it was unlikely
that the changes proposed in the bill would be a factor in
deliberations.
Senator Wilson understood that Hilcorp was not a utility,
but shared a concern that contractual gas of sales to
providers could change rates of service.
Senator Wielechowski emphasized that Hilcorp had taken out
a lease with terms that required it to explore, develop,
produce, and market gas. He continued that Hilcorp had an
obligation to do so if it could make a reasonable profit.
He noted that gas prices in Cook Inlet went from the lowest
in North America to the highest in North America in the
span of the last decade. He asserted that if Hilcorp was
put in a position of being impacted in the ability to make
a profit, it had the ability to go before the department
and ask for royalty relief. He thought the royalties and
production tax in Cook Inlet were probably the lowest in
the world. He emphasized that Hilcorp should be asked for
specific details.
Senator Merrick was curious if there were any other
entities aside from Hilcorp that would be affected by the S
corporation portion of the bill.
Senator Wielechowski could not answer Senator Merrick's
question because of what he considered "some of the worst
financial transparency laws" for oil and gas companies in
the world. He mentioned testimony pertaining to the
financial transparency laws. He made note of the inability
to determine the companies profits.
Senator Kiehl referenced removing all impact of corporate
income tax from downstream ratepayers, and noted that he
had two C-corporations that provided regulated utility
service in his district. He thought the idea would be a
much bigger statewide change than what was contemplated in
the bill.
Co-Chair Olson noted that the bill would be back up for
consideration later in the week, and there would be an
amendment deadline for Thursday at 6 oclock.
SB 122 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
3:05:31 PM
The meeting was adjourned at 3:05 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 94 DCCED CBPL 042823.pdf |
SFIN 5/3/2023 1:30:00 PM |
SB 94 |
| SB 94 Sectional Analysis vsn R.pdf |
SFIN 5/3/2023 1:30:00 PM |
SB 94 |
| SB 94 23.04.27 ANHB to Senator Giessel re. SB 94 support Profession of Pharmacy - Final.pdf |
SFIN 5/3/2023 1:30:00 PM |
SB 94 |
| SB 94 Sectional Analysis vsn R.pdf |
SFIN 5/3/2023 1:30:00 PM |
SB 94 |
| SB 122 work draft version H.pdf |
SFIN 5/3/2023 1:30:00 PM |
SB 122 |
| SB 122 Summary of Changes version H.pdf |
SFIN 5/3/2023 1:30:00 PM |
SB 122 |
| SB 114 Opposition Letters 2.pdf |
SFIN 5/3/2023 1:30:00 PM |
SB 114 |
| SB 114 Support Letters 3.pdf |
SFIN 5/3/2023 1:30:00 PM |
SB 114 |
| SB 94 Responses to Questions SFIN 05-04-23.pdf |
SFIN 5/3/2023 1:30:00 PM |
SB 94 |
| SB 94 23.05.07 ANHB to Senator Giessel re. Support for SB94- Profession of Pharmacy.pdf |
SFIN 5/3/2023 1:30:00 PM |
SB 94 |