Legislature(2023 - 2024)ADAMS 519
05/15/2023 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB140 | |
| SB48 | |
| SB77 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 48 | TELECONFERENCED | |
| + | SB 75 | TELECONFERENCED | |
| + | SB 140 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 178 | TELECONFERENCED | |
| += | SB 77 | TELECONFERENCED | |
SENATE BILL NO. 77
"An Act relating to municipal property tax; and
providing for an effective date."
9:26:12 PM
SENATOR FORREST DUNBAR, SPONSOR, gave a brief summary of
the bill. He explained that SB 77 was brought forward to
incentivize further economic development by providing local
government with two additional and optional tools. Firstly,
it would allow municipalities to fully exempt property
taxes for economic development purposes and secondly, it
would allow local governments to levy a "blight tax, which
was a temporary increase in property taxes for heavily
deteriorated properties that were negatively impacting the
surrounding neighborhoods. The tax would be capped at 50
percent of a property's value and could not be applied to a
primary residence. The blight tax would be removed once the
property owner submitted a remediation plan, received
approval from the local government, and began remediating
the property. Additionally, there were standards that a
property must meet in order to be designated as blighted.
He reiterated that both tools were optional and local
governments could decide whether it would like to utilize
the tools.
Co-Chair Foster understood that one of the concerns about
the blight tax was that it would apply to residential
properties. He asked if the tax would only apply to
commercial properties or if it would apply to residential
properties as well.
Senator Dunbar responded that it could apply to residential
properties. In Anchorage, it could apply to multi-family
housing or rental properties, but it could not apply to a
primary residence.
Representative Tomaszewski asked for clarity on whether the
tax could be up to 50 percent of the property value.
Senator Dunbar responded that he meant the tax could be up
to 50 percent of the existing tax paid by the property. In
other states the figure could be two or three times higher,
but he felt that a lower cap would be prudent for Alaska.
It was not intended to be a revenue-generating device, but
as an incentive for people to remediate their properties.
Representative Tomaszewski understood that if a property
paid $1,000 per year in property taxes, the blight tax
could add up to $500 per year.
Senator Dunbar responded in the affirmative.
Co-Chair Foster suggested that the committee hear the
fiscal note.
SANDRA MOLLER, DIRECTOR, DIVISION OF COMMUNITY AND REGIONAL
AFFAIRS, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, (via teleconference), referenced the fiscal
note by Department of Commerce, Community and Economic
Development with OMB component 2879 and the control code
qeRGn (copy on file). She explained that it was a zero
fiscal note.
Co-Chair Foster indicated that the committee would begin
the amendment process.
9:30:17 PM
Representative Tomaszewski MOVED to ADOPT Amendment 1, 33-
LS0416\U.4 (Dunmire, 5/12/23) (copy on file):
Page 1, following line 2:
Insert new bill sections to read:
"*Section 1. AS 29.45.030(c) is replaced and reenacted
to read:
(c)Property described in (a)(3) or (4) of this
section from which income is derived is exempt from
general taxation only if the income is from
(1) use of the property by a nonprofit
religious, charitable, or hospital group that is
exempt from federal taxation under 26 U.S.C.
501(c);
(2) use of the property by a nonprofit
educational group exclusively as classroom space;
(3) use of the property for fundraising for
a nonprofit religious, charitable, hospital, or
educational group; or
(4) the owner's leasing of the property to a
nonprofit organization or an individual in
pursuit of the property's exempt purpose and the
leasing is incidental to and reasonably necessary
for the accomplishment of the owner's exempt
purpose; this paragraph does not apply to
property owner by an educational group.
*Sec. 2. AS 29.45.030 is amended by adding a new
subsection to read:
(o) Property described in (a)(3) of this section
that is under construction or reconstruction and
intended to be used exclusively for exempt purposes
upon completion is exempt from general taxation if the
construction or reconstruction is completed within two
years after the date a building or zoning permit is
issued for the property. In this subsection,
construction or reconstruction is completed on the
first day the property is occupied and used for the
exempt purpose."
Page 1, line 3:
Delete "Section 1"
Insert "Sec.3"
Renumber the following bill sections accordingly.
Representative Josephson OBJECTED for discussion.
Representative Tomaszewski explained that the amendment
would add language in regard to nonprofit organizations. It
would clarify property taxation based on income by
nonprofit properties that would fall under AS 29.45.030.
The legislation was a result of conversation between
stakeholders of the former HB 70 [withdrawn by the sponsor
Representative Tomaszewski]. The intent was to reduce and
prevent litigation between nonprofits and municipalities in
the future. He directed attention to a document regarding
tax code that he had distributed to committee members (copy
on file). He indicated that AS 29.45.030(c)(1) was tied to
federal tax code 26 U.S.C 501(c) exemption and if
activities triggered federal taxes, the property would no
longer be exempt from taxes. He relayed that (c)(2) allowed
for exemption of general taxation for non-profit
educational groups on income derived from classroom spaces.
He continued that (c)(3) allowed for property exemption for
fundraising for qualifying nonprofits. He explained that
(c)(4) allowed for income derived from leasing to another
nonprofit in order to generate income if the income
generated also supported the mission of the organization.
Finally, Section 2 would allow for a grace period of two
years for construction or reconstruction of a nonprofit
facility.
9:32:52 PM
Senator Dunbar noted that HB 70 was only heard twice in its
first committee of referral. He noted that the House
Finance Committee was the final committee of referral for
SB 77 and the amendment would be a substantial policy
change. He did not support the amendment and reiterated
that the tools proposed by the bill were optional through
the adoption of a local ordinance. The amendment would be
automatically enacted upon passage and would impact the
entire state. He did not think the amendment had been
thoroughly vetted, unlike the underlying bill.
Co-Chair Edgmon shared that he had spoken with
Representative Tomaszewski about the fact that SB 77 would
be optional and a local government could determine whether
it wanted to participate. He asked why the provision in the
amendment needed to be put into law when the decision was
up to the local municipality.
Representative Tomaszewski responded that the language
expressed the intent to illuminate grey areas within the
code itself. There was a case in Fairbanks that had been
going on for the past five years in which an assessor
thought that a property should be paying property taxes for
various causes. The case had gone to the Superior Court
which ruled in favor of the plaintiff and sent it back to
the borough. The borough then appealed the case to the
Alaska Supreme Court, which also ruled in favor of the
plaintiff and sent the case back again to the borough. He
relayed that the situation was just one example. The
situation that was the catalyst for the amendment was the
borough going after the local food bank and charging
property taxes for certain situations that the food bank
deemed to be unacceptable or exclusive. The next step for
the food bank was also to appeal to the Superior Court. He
clarified that his intent was to utilize the amendment
process to address grey areas in which a municipality or
nonprofit could work together to alleviate such differences
without appealing to the courts.
9:36:49 PM
Co-Chair Edgmon understood that Amendment 1 included the
content of the withdrawn HB 70.
Representative Tomaszewski responded that it was
essentially a committee substitute from HB 70 and there was
little left of the bill in the amendment.
Co-Chair Edgmon thought it should be a separate bill.
Representative Ortiz asked Representative Tomaszewski to
summarize (c)(1) and (c)(2) of the amendment.
Representative Tomaszewski responded that (c)(1) tied to
federal tax code. If activities triggered federal taxes,
the exemption would no longer apply. He explained that
(c)(2) was a property used by a nonprofit organization or
group and intended exclusively for classroom space. He had
heard from homeschools and charter schools that there would
be a loophole in the legislation without the language.
Representative Ortiz asked Representative Tomaszewski to
summarize (c)(3) and (c)(4).
Representative Tomaszewski replied that property exception
under (c)(3) and (c)(4) was allowed to be used for
fundraising for the used properties. He explained that the
food bank held an annual fundraiser where local ceramic
artists made bowls and donated the bowls to the food bank
and the public had the opportunity to purchase the bowls.
The entirety of the money from the sales was donated to the
food bank. The bank used a part of a building for the event
and a borough assessor determined that because a portion of
a building was used, it was no longer exempt from property
taxes. The food bank was taxed for the portion of the
building. The exemption would ensure that similar
fundraising would remain tax exempt.
Representative Ortiz asked for confirmation that it would
be tax exempt.
Representative Tomaszewski clarified that the property
taxes would be tax exempt. He was not speaking to income
taxes.
9:41:32 PM
Representative Coulombe commented that the amendment was
addressing a specific local issue. She thought it would be
better addressed at the local level rather than at the
state level. She would not be supporting the amendment.
Representative Tomaszewski responded that it was an issue
in Fairbanks at the moment but the issue would not stay in
Fairbanks in perpetuity. He argued that it would become an
issue in other areas of the state.
Representative Coulombe would like to see the
municipalities deal with the issue as it arose.
Representative Josephson asked if Alaska Municipal
League(AML) had offered its stance on the amendment.
Representative Tomaszewski responded that he collaborated
with a representative for AML to amend the language.
Representative Josephson noted there was an allowance in a
succeeding section of AS 29.45.050 that included
opportunities for nonprofit organizations. He had been told
that there were qualifying entities in Fairbanks. He asked
whether the food bank had sought an exemption through AS
29.45.050.
Representative Tomaszewski responded that he did not know
if the food bank had sought an exemption. He thought that
if there was duplicative language that Legislative Legal
Services would have caught it.
Representative Josephson commented that he was not certain
that it was a question of duplication. He was concerned
about the impacts on the large Providence Hospital campus
in Anchorage and the fair-assessed tax receipts from the
campus.
Representative Tomaszewski responded that he was not
familiar with the details of the organization.
Representative Josephson commented there was a vast amount
of caselaw on the question of exemptions and the amendment
would not solve the problem. All of the case laws would be
binding and would steer the parties to an answer and the
laws therefore served a useful purpose. He was concerned
that the exceptions might "swallow up" the rule.
9:46:28 PM
Representative Cronk commented that he was grateful to not
live in organized area. He thought it was mind-boggling for
there to be a tax on nonprofits. He noted that it was
outside of his area of expertise but that he would support
the amendment.
Representative Stapp shared that there was a saying in
Fairbanks of "the interior likes to stick together" and he
would vote for the amendment.
Representative Ortiz offered a hypothetical scenario in
which there was a church in a community that had a property
on which it paid taxes, but the church rented the property
out for vehicle rental space. He asked if the church would
be exempted from paying property tax if the amendment were
to pass.
Representative Tomaszewski asked for clarification that
Representative Ortiz was speaking about a parking lot owned
by a church that charged individuals to park their vehicles
in the lot.
Representative Ortiz responded in the affirmative and added
that the church would pay property taxes under current law.
Representative Tomaszewski replied that he did not think
the amendment would impact the situation. The scenario did
not involve fundraising and he thought it would trigger
federal tax code and the church would lose its tax
exemption. He noted that it was not his area of expertise
and he was not an attorney.
Senator Dunbar relayed that he respected the food bank in
Fairbanks and thought it did great work; however, he was
concerned about the impact of the amendment on other
nonprofits. For example, in 2016 the Providence campus in
Anchorage had about $400 million of untaxed property and
$100 in property on which the hospital paid property tax.
He was unsure how the amendment would impact the hospital
and he was not in support of it.
Representative Tomaszewski reiterated that the amendment
addressed a problem that been impacting Fairbanks for
several years. The amendment had been reviewed by
legislative legal and there were no identified legal
problems. He did not want nonprofits like a food bank to go
to court to defend itself when it was already a vulnerable
organization. He thought that an assessor removing the food
bank's tax exemption was uncalled for and there was
presently no recourse for a nonprofit other than to go to
court.
Representative Josephson MAINTAINED the OBJECTION.
9:52:15 PM
A roll call vote was taken on the motion.
IN FAVOR: Cronk, Stapp, Tomaszewski, Foster
OPPOSED: Galvin, Hannan, Josephson, Ortiz, Coulombe, Edgmon
Co-Chair Johnson was absent from the vote.
The MOTION to adopt Amendment 1 FAILED (4/6).
Representative Tomaszewski WITHDREW Amendment 2.
9:53:38 PM
Representative Coulombe MOVED to ADOPT Amendment 3, 33-
LS0416\U.3 (Dunmire, 5/4/23) (copy on file):
Page 2, line 13:
Delete "include the following requirements"
Insert "specify that a property is blighted if at
least one of the following applies
Co-Chair Foster OBJECTED for discussion.
Representative Coulombe explained that she was moving the
amendment on behalf of the sponsor and deferred to the
sponsor for an explanation.
Senator Dunbar explained that Amendment 3 and the
forthcoming Amendment 4 were cleanup amendments. He thought
Representative Hannan had pointed out that there was a
drafting error and the amendments would fix the issue. He
asked that the committee adopt both amendments.
Co-Chair Foster WITHDREW the OBJECTION. There being NO
further OBJECTION, Amendment 3 was ADOPTED.
9:55:04 PM
Representative Coulombe MOVED to ADOPT Amendment 4, 33-
LS0416\U.2 (Dunmire, 5/2/23) (copy on file):
Page 2, line 18:
Delete all material.
Reletter the following subparagraphs accordingly.
Page 2, line 21, following "property":
Insert "has been vacant for not less than one
year and"
Co-Chair Foster WITHDREW the OBJECTION. There being NO
further OBJECTION, Amendment 4 was ADOPTED.
9:55:50 PM
AT EASE
9:56:08 PM
RECONVENED
9:56:13 PM
Co-Chair Edgmon MOVED to report CSHB 77 (FIN) out of
Committee with individual recommendations.
CSSB 77(FIN) was REPORTED out of committee with nine "do
pass" recommendations and with one "no recommendation"
recommendation.
Co-Chair Foster reviewed the meeting agenda for following
morning.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 77 Amendments 1-4 051323.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 77 |
| HB 178 ANHB White Paper - Ongoing Barriers to Access Water and Sanitation in Rural Alaska 2023.pdf |
HFIN 5/15/2023 1:30:00 PM |
HB 178 |
| HB 178 CS WORKDRAFT 050223 v.B.pdf |
HFIN 5/15/2023 1:30:00 PM |
HB 178 |
| HB 178 VSW DEC Water 042723.pdf |
HFIN 5/15/2023 1:30:00 PM |
HB 178 |
| SB 140 Supporting Document What does it cost.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 140 |
| SB 140 Public Testimony 051523.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 140 |
| CS for SB48(FIN) Sectional Analysis.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 48 |
| SB48 Summary of Changes in Senate committees.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 48 |
| SB48 DNR Presentation to House Finance Committee 5-15-23.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 48 |
| SB 140 Amendent 1 Johnson 051523 - S.2.doc.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 140 |
| SB 77 Public Testimony Rec'c by 051523.pdf |
HFIN 5/15/2023 1:30:00 PM |
SB 77 |