04/19/2005 09:00 AM Senate FINANCE

                                                                                                                                
     CS FOR SENATE BILL NO. 112(CRA)                                                                                            
     "An Act imposing a tax on residents of regional educational                                                                
     attendance areas and relating to permanent fund dividend                                                                   
     applications; and providing for an effective date."                                                                        
                                                                                                                                
                                                                                                                                
12:12:48 PM                                                                                                                   
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Senator  Bunde moved  to adopt  Version 24-LS0505\X  as the  working                                                            
document.                                                                                                                       
                                                                                                                                
Co-Chair Green objected for explanation.                                                                                        
                                                                                                                                
Senator Bund, the bill's  sponsor, explained that the changes in the                                                            
Version  "X" committee  substitute  would  include  the addition  of                                                            
Legislation  Intent language  in Section 1,  page one, beginning  on                                                            
line seven, that would  allow the Legislature to utilize the revenue                                                            
resulting  from  the  tax  imposed  by the  bill  to  fund  regional                                                            
educational  attendance areas  (REAA). Language  in Sec. 2(c),  page                                                            
one,  lines  13 and  14,  would  levy  a $50  fee  per  request  for                                                            
information;  language in Sec. 4(a)(1)  and Sec. 4(a)(2),  page two,                                                            
lines  12 through  18,  would specify  that  the REAA  tax would  be                                                            
levied on individuals  over the age  of twelve but under  the age of                                                            
65 who  reside in  a REAA  as of  January 1  of the  tax year or  an                                                            
employee of  an REAA during a tax  year. A person who resides  in an                                                            
REAA and also  works for the REAA would only be required  to pay the                                                            
tax once.                                                                                                                       
                                                                                                                                
Senator  Bunde stated  that language  in Sec.  4(c)(1) through  Sec.                                                            
4(c)(3), page  two, lines 25 through  31, would define who  would be                                                            
exempt from the fee.                                                                                                            
                                                                                                                                
Senator Bunde continued  that language in Sec.4(a), page three, line                                                            
two, specifies  that the tax  must be paid  prior to April 1  of the                                                            
calendar  year in which  it is  imposed. Language  in Sec.  4(c)(1),                                                            
page three,  line 23 specifies exemptions  for those who  might have                                                            
already  paid the  tax.  In addition,  the  bill defines  the  terms                                                            
"family", "regional Attendance area", and "tax".                                                                                
                                                                                                                                
Conceptual Amendment  #1: This amendment deletes the  phrase "at any                                                            
time" from language  in Sec. 4(a)(2)(B), page two,  lines 17 and 18.                                                            
                                                                                                                                
In  addition, the  following  language  is inserted  following  "tax                                                            
year" in Sec. 4(a)(2)(B) on page two, line 18.                                                                                  
                                                                                                                                
     for 10 consecutive days or a normal pay period, whichever is                                                               
     less, or for more that 20 cumulative working days.                                                                         
                                                                                                                                
Senator Bunde moved to adopt Amendment #1.                                                                                      
                                                                                                                                
Senator Bunde  explained that this  amendment defines what  the term                                                            
employed means in relationship to this bill.                                                                                    
                                                                                                                                
Senator Hoffman objected  for further explanation. He apologized for                                                            
his and Senator  Olson's absence during  the initial explanation  on                                                            
this bill, as they had  been called to a meeting with Governor Frank                                                            
Murkowski.  This is an important  bill to  both himself and  Senator                                                            
Olson.                                                                                                                          
                                                                                                                                
Senator Bunde  explained that this  language was being offered  upon                                                            
the recommendation  of Legislative  Legal and Research Services,  as                                                            
it would further  clarify who would be considered  as being employed                                                            
by an  REAA. Specifically,  it  would apply  to someone  who held  a                                                            
temporary job with an REAA but who might reside out of State.                                                                   
                                                                                                                                
Co-Chair  Green removed  her objection  to the  adoption of  Version                                                            
"X".                                                                                                                            
                                                                                                                                
Senator Hoffman asked that  further discussion of the bill occur, as                                                            
this "major policy  decision" would have "major impact"  on both his                                                            
and Senator Olson's regions.                                                                                                    
                                                                                                                                
Senator Bunde  restated his earlier explanation of  the bill as well                                                            
as the Conceptual Amendment being offered.                                                                                      
                                                                                                                                
12:20:35 PM                                                                                                                   
                                                                                                                                
Senator Hoffman  asked whether any  consideration had been  given to                                                            
military personnel  who, because they  live on military bases,  "are                                                            
exempt  from taxation".  "They are  not paying  for their  education                                                            
either."                                                                                                                        
                                                                                                                                
Senator  Bunde  stated  that  military  personnel  who live  near  a                                                            
community  that imposes  a sales tax  would pay  such taxes.  "Their                                                            
payment in  lieu of taxes,  of course, passes  through to the  local                                                            
school  district there."  Nonetheless  he  did not  consider that  a                                                            
local  contribution. The  State is  prohibited  from taxing  federal                                                            
property. "No is the short answer."                                                                                             
                                                                                                                                
Senator  Hoffman  noted that  he has  used  that "exact  reason"  in                                                            
regards to  Western Alaska "in which  "well over 95-percent  of land                                                            
is federal  and  the State  of Alaska  receives payment  in lieu  of                                                            
those taxes for  all of those federal lands that are  non-taxed". He                                                            
appreciated  the fact that  Senator Bunde  recognized that  fact and                                                            
has used that  "same argument" in regards to this  bill. "Under this                                                            
legislation,  those people  would be  paying this  tax plus the  tax                                                            
that is being charged on those properties in lieu of taxes."                                                                    
                                                                                                                                
12:22:22 PM                                                                                                                   
                                                                                                                                
Senator  Bunde countered  "that  it swings  both  ways" as  military                                                            
personnel  who live near  a military base  in an urban Alaska  area,                                                            
pay to support  their local schools  as well as the payment  in lieu                                                            
of  taxes money  that  passes through  to  the school  district.  He                                                            
"rejected  any claim"  that the  latter  should be  recognized  as a                                                            
local  contribution  for "it  is simply  federal  money that  passes                                                            
through".                                                                                                                       
                                                                                                                                
Senator  Hoffman  argued  therefore   that  were  the  land  private                                                            
property rather than federal  property, the land would be subject to                                                            
taxation; however,  "by virtue that  it isn't, that prohibits  those                                                            
areas from even the possibility of being considered…"                                                                           
                                                                                                                                
Co-Chair Green recognized  this as "a function of military service".                                                            
Many military  personnel who  live in local  communities do  support                                                            
local programs.                                                                                                                 
                                                                                                                                
Senator Hoffman  clarified that his argument is specific  to federal                                                            
lands such  as the Yukon Kuskokwim  Delta National Wildlife  Refuge,                                                            
which "are federal parks that are not available for taxation".                                                                  
                                                                                                                                
12:23:55 PM                                                                                                                   
                                                                                                                                
Senator Bunde stated that  "the argument is … a little disingenuous"                                                            
as a borough must  be formed in order to impose taxes.  There has no                                                            
interest  shown  in that  regard.  Thus, even  if those  lands  were                                                            
private, it  is uncertain whether  a tax base would be provided  for                                                            
the area's schools.                                                                                                             
                                                                                                                                
Co-Chair  Green  stated  that the  amendment  would  be readdressed                                                             
during the April 20th Committee meeting.                                                                                        
                                                                                                                                
[NOTE: No action  on the motion to  adopt a committee substitute  or                                                            
the amendment  transpired  during this hearing.  Refer to the  April                                                            
20, 2005 hearing in this regard.]                                                                                               
                                                                                                                                
The bill was HELD in Committee.