Legislature(2019 - 2020)BELTZ 105 (TSBldg)
03/21/2019 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s): | |
| SB65 | |
| SB66 | |
| SB69 | |
| Confirmation Hearing(s) | |
| SJR8 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | SB 69 | TELECONFERENCED | |
| *+ | SJR 8 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 65 | TELECONFERENCED | |
| += | SB 66 | TELECONFERENCED | |
SB 69-EXEMPT CHARITABLE GAMING FROM PERMIT/FEES
1:53:44 PM
CHAIR REINBOLD reconvened the meeting and announced that the
next order of business would be SENATE BILL NO. 69, "An Act
establishing an exception from permit and fee requirements for
certain charitable gaming activities; relating to fees for
applicants for a charitable gaming permit; amending the
definition of 'permittee'; and providing for an effective date."
1:54:00 PM
BRUCE TANGEMAN, Commissioner Designee, Department of Revenue,
Anchorage, stated that the Department of Revenue issues
charitable gaming permits and licenses and collects fees and
taxes. Municipalities and qualified organizations that hold a
permit are authorized to conduct gaming activities. The annual
permit is based on a tiered fee structure. The department would
charge a $20 fee for an applicant with gross receipts of less
than $20,000, a $50 fee for an applicant with gross receipts
greater than $20,000 but less than $100,000, and a $100 fee for
an applicant with gross receipts greater than $100,000.
He said that SB 69 would eliminate the permit and fee
requirement for small charitable organizations with annual gross
receipts of less than $20,000. The bill would reduce costs and
workload for small charitable organizations to conduct these
activities. This reduction of regulation on small charitable
organizations is part of the governor's pledge to reduce
regulations, he said.
COMMISSIONER DESIGNEE TANGEMAN said this would result in the
lack of regulation for small charitable organizations, but the
department requires an annual certification of these
organizations that would serve as a quality check. Only those
that qualify for regulatory relief would benefit. He reported
that in 2017, of the 1,071 reports that were filed by
permitholders, 403 or approximately 38 percent reported gross
receipts of less than $20,000. He reported that of the $61,400
in permit fees, $8,000 was from those organizations with less
than $20,000 in gross receipts.
He summarized that SB 69 would provide an exemption from annual
permits and fees for qualified organizations with less than
$20,000 in annual gross receipts. Exempt organizations must file
an annual certification, under penalty of perjury, to certify
that the organization qualifies for the exemption. The bill
would take effect January 2020, so it would not have any effect
in calendar year 2019.
1:57:26 PM
COLLEEN GLOVER, Director, Tax Division, Department of Revenue,
Anchorage, reviewed the sectional analysis for SB 69. She read
Sections 1-4.
Section 1: Amends AS 05.15 to add a new section, AS
05.15.055, to allow a municipality or qualified
organization to conduct charitable gaming activity
without a permit and without paying a fee, if the
annual gross receipts from charitable gaming activity
are less than $20,000. Provides that a municipality or
qualified organization conducting limited charitable
gaming does not need to file a report or apply for
registration but must file an annual certification of
compliance. (Page 1, beginning on line 5)
Section 2: Amends AS 05.15.115(a) to use the words "a
permittee" rather than "a municipality or qualified
organization holding a permit to conduct an activity
under this chapter." (Page 2, beginning on line 3)
Section 3: Amends AS 05.15.185 to use the words "a
permittee" rather than "a municipality or qualified
organization holding a permit to conduct an activity
under this chapter." (Page 2, lines 9-18)
Section 4: Amends the definition of "permittee" in AS
05.15.690(35) to include a municipality or qualified
organization conducting limited charitable gaming
activity without a permit and without paying a fee.
(Page 2, lines 19-23)
1:59:12 PM
MS. GLOVER read Sections 5-8:
Section 5: This section repeals AS 05.15.020(c)(1) and
05.15.020(c)(2). (Page 2, line 24)
Section 6: Allows the Department of Revenue to adopt
transition regulations. (Page 2, lines 25-30)
Section 7: Provides an immediate effective date for
Section 6. (Page 2, line 31)
Section 8: Provides for an effective date of January
1, 2020, for Sections 1-5. (Page 3, line 1)
1:59:44 PM
MS. GLOVER said that the bill would replace the terms
"municipality or qualified organization holding a permit" with
the term "permittee" since smaller organizations would not hold
a permit. It also would define "permittee."
2:00:17 PM
SENATOR GRAY-JACKSON asked whether the fees were the same for
every organization.
MS. GLOVER answered that the fees were tiered based on the
amount of gross receipts.
SENATOR GRAY-JACKSON asked whether some organizations bring in
less than $20,000.
COMMISSIONER DESIGNEE TANGEMAN answered that the total fees for
all permittees was $61,400 and $8,000 of that was derived from
those organizations with gross receipts of less than $20,000.
2:01:37 PM
SENATOR GRAY-JACKSON asked for confirmation that the total was
$8,000.
COMMISSIONER DESIGNEE TANGEMAN answered yes.
2:01:47 PM
SENATOR BIRCH remarked that hockey teams from all over the state
are likely rejoicing that they do not have to dive into the
regulatory morass for modest fundraising for their kids. He
expressed gratitude for the bill.
2:02:09 PM
SENATOR BISHOP asked whether the organizations would be totally
unregulated.
COMMISSIONER DESIGNEE TANGEMAN answered that they would provide
a year-end report to prove they qualify for the exemption.
SENATOR BISHOP said he wanted to avoid fraud.
2:02:50 PM
SENATOR COSTELLO said she appreciates the comment about the
hockey organizations. She referred to an email that voiced
concern that it might be confusing to the public as to who would
need a permit. She asked how that would be addressed.
COMMISSIONER DESIGNEE TANGEMAN deferred to Ms. Glover.
MS. GLOVER answered that the division was currently discussing
this. She said that it would be part of the regulation packet.
She assured members that the department wants people to be
informed.
2:03:57 PM
SENATOR COSTELLO related another concern about criminal activity
such as altering pull tabs to resemble winning tickets. She
asked whether the department considered that the bill might
potentially increase illegal activity or if the department could
provide assurances that this will not happen.
MS. GLOVER answered that this bill does not affect pull tab
regulations. This bill only affects charitable organizations
that need a permit.
SENATOR COSTELLO requested the answer in writing for clarity.
MS. GLOVER agreed to provide a written answer to the committee.
2:06:12 PM
CHAIR REINBOLD opened public testimony on SB 69.
2:06:45 PM
SARAH OATES, President and CEO, Alaska Cabaret, Hotel,
Restaurant and Retail Association (CHARR), Anchorage, stated her
opposition to SB 69. She expressed concern that it would create
a massive loophole with no means of enforcement. Although CHARR
would not currently qualify for an exemption, nothing would
prevent them from creating new corporations that individually
would gross less than $20,000 per year. She said that the
department would not know whether an organization exceeded
$20,000 since it would only file a simple affidavit. If a
violation did occur, there would not be any means to impose a
civil penalty, suspend, or revoke a permit. She asked whether an
entity would have to retroactively file a report if they
exceeded the threshold or how the department would know about
new entities who anticipated they would gross less than $20,000
per year. She offered her belief that the $50 cost and supposed
regulatory burden was minimal at best. She urged members to
oppose the bill.
2:08:59 PM
STEVEN BORCHERDING, Manager, Gold Cache Bingo, Wasilla, stated
he has bingo operations in Wasilla and Anchorage. He reviewed
his background to show that he had considerable experience in
the industry and as a distributor. He said he has also served on
task force and regulatory committees.
He stated his opposition to SB 69. He said that the bingo and
pull tab industries are highly regulated ones. They require
substantial oversight similar to alcohol, tobacco, and
marijuana, he said. SB 69 would remove this oversight for the
smaller groups that likely need it because they probably lack
the knowledge and experience in the industry. He expressed
concern that this lack of knowledge would lead to problems. In
fact, it has already led to problems with smaller groups, he
said. The permit process ensures a certain level of oversight
and a basic knowledge of statutes and regulations, he said.
Members in charge and gaming managers must take a test to
receive a permit.
MR. BORCHERDING said that the permit and regulatory process
currently requires businesses to provide proof of insurance,
payroll submissions, tax documentation, manager contracts, and
various other requirements. The state oversees these operations
through the permitting process and applicants prove legitimacy,
in part, by providing a physical address where gaming operations
will occur. The state can revoke permits, but without a permit,
these businesses would have no reason to comply. For example,
the bill does not have any reporting requirements, even though
previous testimony indicated an annual report would be required.
He said that he has taught several courses at AFN {Alaska
Federation of Natives] conventions on gaming. Just because an
operation is a small one does not mean that it should not be
regulated in this highly regulated industry. He urged members
not to pass the bill.
2:13:22 PM
CHAIR REINBOLD asked him to submit written testimony to
[email protected].
2:14:03 PM
SENATOR BIRCH asked what percentage of net revenues from bingo
are given to charities. He recalled that it was substantial.
MR. BORCHERDING answered that it was over $20 million. This year
Gold Cache Bingo donated about $2.2 million to charities. He
offered his belief that the gross revenue for charitable gaming
was about $300 million.
CHAIR REINBOLD asked Commissioner Designee Tangeman to respond
to Mr. Borcherding's testimony.
2:15:29 PM
COMMISSIONER DESIGNEE TANGEMAN deferred to Ms. Glover.
2:15:44 PM
MS. GLOVER responded that the bill would require an annual
certification for small charitable organizations that would be
exempt from the permit application process and fees. They would
not be required to submit an annual report of revenues, but they
must certify their gross revenues, she said.
She explained this permit process would apply to charitable
organizations with less than $20,000 in gross receipts that
often contract with operators, such as a bingo parlor or pull
tab operators. Bingo and pull tab entities would not be affected
by this bill. Regulations for pull tab operators, manufacturers,
or distributors would not change.
MS. GLOVER said the division was still considering how to handle
retroactive permits for entities who exceeded the $20,000 gross
receipts limit but had not applied for a permit. The department
planned to address the issue of identifying small organizations
by regulation, likely by requiring an initial certification at
the beginning of the year rather than the end of the year.
2:18:41 PM
SENATOR BISHOP asked whether the 38 percent of organizations in
the category of small organizations would fall under the realm
of raffle tickets.
MS. GLOVER said she did not have that information.
2:19:23 PM
KATRINA MITCHELL, Gaming Group Manager, Tax Division, Department
of Revenue, Juneau, said she thought that the primary
organizations with $20,000 or less in gross receipts would
conduct raffles. She said that organizations involved in bingo
or pull tabs would easily and quickly surpass the $20,000
threshold.
2:20:01 PM
SENATOR BIRCH recalled earlier testimony with concern that an
unscrupulous operator might try to keep the operation's gross
receipts under $20,000. He asked her to address the concern.
MS. GLOVER replied that the question related to operators, but
they will not be impacted by this bill. This bill would only
affect small charitable organizations or municipalities. She
said she did not see any risk.
2:21:18 PM
SENATOR COSTELLO asked for the difference between a permit and a
certification, whether a permit must be displayed publicly,
whether operators are regulated, and if operators are required
to pay corporate income tax to the state.
MS. GLOVER answered that when an organization applies for a
permit, the division would approve or disapprove the permit. The
required annual certification includes a report, under penalty
of perjury, on the gross annual receipts. She deferred the next
three questions to Ms. Mitchell.
MS. MITCHELL confirmed that the gaming permit must be publicly
displayed where the activity occurs. The operators are
regulated. They must obtain a license, post a bond depending on
the number of permittees they game for, and file quarterly and
annual reports with the division. In response to whether
operators must pay state corporate income tax, she explained
that an applicant must be a natural person in order to obtain an
operator's license. She did not think that operators would be
required to pay state corporate taxes unless they have a
subsidiary.
2:24:33 PM
SENATOR COSTELLO asked what purpose is the statute requiring the
applicant to be "a natural person" as opposed to a business or
corporation.
MS. MITCHELL answered that she was unsure of the reason.
CHAIR REINBOLD stated that she would hold SB 69 in committee.