Legislature(2017 - 2018)BELTZ 105 (TSBldg)
02/08/2018 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB105 | |
| SB155 | |
| SB116 | |
| HB126 | |
| SJR12 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 155 | TELECONFERENCED | |
| *+ | SB 116 | TELECONFERENCED | |
| + | HB 126 | TELECONFERENCED | |
| *+ | SJR 12 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 105 | TELECONFERENCED | |
SB 116-EDUCATION TAX CREDITS;SUNSET;REPEALS
2:25:33 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 116.
2:26:01 PM
SENATOR JOHN COGHILL, Alaska State Legislature, Juneau, Alaska,
sponsor of SB 116, stated that this is a tax credit bill and an
effort to get industry and educational programs to work
together. The legislation does two primary things. It extends
the effective date of the repeal of the education tax credits to
January 1, 2025, and it ensures that the existing credits will
maintain until January 1, 2025 instead of narrowing in scope on
January 1, 2021.
2:28:53 PM
CHAD HUTCHINSON, Staff, Senator John Coghill, Alaska State
Legislature, Juneau, Alaska, introduced SB 116 speaking to the
following sponsor statement:
This bill does the following:
1. Extends the effective date for the repeal of
the education tax credits from December 31,
2018 to January 1, 2025.
2. Ensures that the credits that exist in statute
today, will maintain until January 1, 2025
(instead of narrowing in scope and decreasing
in value on January 1, 2021).
Education tax credits encourage private businesses to
make charitable contributions to certain educational
institutions and programs in Alaska, including
contributions to the University of Alaska. In total,
eligible recipient entities include: non-profit,
public or private accredited Alaska two-year or four-
year colleges; non-profit elementary or secondary
schools and school districts; state operated
vocational education and training schools; non-profit
regional vocational training centers; apprenticeship
programs; Alaska Native cultural programs; the Alaska
higher education investment fund; and postsecondary
institutions providing dual-credit courses.
The credits are non-transferable and non-refundable
and can be used against the following taxes: corporate
income tax; fisheries business tax/fisheries resource
landing tax; insurance premium tax/title insurance
premium tax; mining license tax; oil and gas
production tax; and the oil and gas property tax.
Currently, the credit provision allows for 50 percent
of the annual contributions up to $100,000, 100
percent of the next $200,000, and 50 percent of annual
contributions beyond $300,000. The total credit per
taxpayer, across all tax types, may not exceed $5
million [per year].
Historically, well over two dozen companies have used
this benefit. The contributions are good for the
companies, and good for the recipient institutions.
Passage of SB 116 is a great benefit for Alaska.
MR. HUTCHINSON said a recent example of the credit provision
being used to fill a specific need is the UAF engineering
building that received private contributions from BP,
ConocoPhillips, and Usibelli. This potentially increases the
opportunity for future engineers which helps the Alaska
workforce, the mining community and the state.
He advised that the Department of Revenue (DOR) submitted a zero
fiscal note.
MR. HUTCHINSON provided an overview of the sectional analysis
for SB 116.
Section 1 has legislative findings and intent. It clarifies that
the legislature is extending the effective date for the repeal
of the education tax credits from December 31, 2018 to January
1, 2025. It also ensures that the education tax credits in
statute today will be carried forward to January 1, 2025.
Currently the credits are on course to decline in dollar value
and narrow in scope on January 1, 2021, even if the effective
date of repeal was extended to 2025.
Section 2 is the nuts and bolts of the bill. It repeals multiple
statutory provisions pursuant to legislative drafting
guidelines. The full sectional talks about each statute twice to
show what happens with the 2021 reduction if there is no
legislative action.
Section 3 repeals the narrowing of scope that is anticipated to
occur in 2021.
SENATOR GARDNER asked him to talk about the statutes that were
expected to drop out with the narrowing of scope but will not
under this provision.
MR. HUTCHINSON explained that in 2010 the maximum cap for the
tax credit increased from [$150,000] to $5 million. In 2011 and
2014 the entities to which industry can contribute and receive a
tax credit was expanded to include facilities, Native cultural
programs, and the Coastal America Partnership. Without this
legislation those broader beneficiaries go away, and the
contributing party will no longer receive a credit for those
contributions.
SENATOR MICCICHE asked why there is a change in revenue before
2021 if the narrowing occurs after that time.
MR. HUTCHINSON deferred to the Department of Revenue.
2:36:35 PM
KEN ALPER, Director, Tax Division, Department of Revenue (DOR),
said Mr. Hutchinson explained that the program is set to sunset
on December 31, 2018. If no bill passes, the tax credit would be
zero beginning January 2019. Because there have been multiple
changes to the statute in the last six or so years, there is a
lot of overlap in language and effective dates, he said. The
narrowing of scope although it takes place in 2021 would be sort
of moot if the underlying program wasn't extended because there
would be nothing for which the scope would reduce.
He clarified that while the cost of administering the program is
zero, the fiscal note reflects a reduction in revenue that is
tied to the extension of the program. The calculation is the
average amount of the tax credit claimed for the last three
years projected forward for future years. The donor subtracts
the contribution from their taxes and DOR sees it in the form of
reduced revenue.
SENATOR GARDNER commented that it's a nice deal for the donor.
They receive a charitable credit on their federal taxes and a
reduction on their tax bill to the state. Hopefully they'll also
get a workforce that's trained in a relevant area.
MR. ALPER said he couldn't speak to the federal tax impact but
that's his expectation.
SENATOR MEYER asked if DOR knows the total contributions and
which organization has contributed the bulk thus far.
MR. ALPER said the analysis section of the fiscal note
identifies the amount of credit claimed to average $6.84
million. The donations leading to that credit are between $10
million and $11 million per year. The rate at which the credit
is applied is currently $250,000 of the first $300,000 of a
donation. DOR's experience is that a lot of the donations come
in at that rate because the company receives the maximum
benefit.
SENATOR MEYER asked which recipient receives the bulk of the
donations.
MR. ALPER said the University of Alaska is the largest recipient
and about 40 percent is going to vocational education
organizations.
2:41:21 PM
SENATOR COGHILL said the university is the primary beneficiary
when compared to the mining and fishing industries. He reminded
the members that a tax credit means some reduction to the state
but there's a 50 percent increase of new money that is a
positive to the state generally.
CHAIR COSTELLO asked what is considered vocational education
because she wanted to make sure that programs like Project Lead
the Way at Dimond High School and the nursing program at Service
High School would qualify to receive contributions under the
education tax credit program. These are programs that train
young people to have jobs upon graduation.
2:43:24 PM
MR. ALPER said job training programs at a public secondary
school should qualify but he couldn't make a predetermination on
a specific donation. He suggested the committee feel free to
clear up any ambiguities it sees in the qualification sections
because there are a lot of gray areas.
SENATOR MICCICHE referenced the report from DOR that shows the
total contributions reported by the different tax types and the
total education tax credits claimed. He asked if the list of
secondary vocational and "other" entities listed on the second
attachment were recipients of the contributions.
SENATOR COGHILL suggested that public testimony would be a
better measure of advocacy than looking back.
2:45:48 PM
CHAIR COSTELLO opened public testimony on SB 116.
2:46:17 PM
ROBERT ONDERS, Interim President, Alaska Pacific University,
Anchorage, Alaska, said he strongly agrees with the sponsor's
initial comments that it's critical that education and industry
work together. The education tax credit program is mutually
beneficial, and it facilitates the connection between education,
research, and workforce development. The resources and
partnership generated by the education tax credits support rural
and tribal communities in generating community-based research as
well as academic curriculum. He encouraged the committee to pass
SB 116.
2:47:19 PM
SHERI BURRETTA, Board Chair, Chugach Alaska Corporation (CAC),
Anchorage, Alaska, said she is speaking in support of SB 116.
Chugach Alaska Corporation has been using the education tax
credit program since 2011. About one-third of their
contributions go to the Alaska Pacific University and the
University of Alaska and another third goes to vocational
programs such as the Kenai Peninsula Borough School District
Project GRAD and to fund cultural camps and education for
villages. Using this tool CAC has been able to fund its
education endowment to $30 million and generate scholarships of
more than $1 million a year. CAC has been focused on
collaboration and creating pathways and links (particularly to
remote rural villages) to get through high school and access
higher education.
This has been an excellent link for the corporation and has
allowed CAC to work with the university through the Alaska
Native Science and Engineering Program (ANSEP) School of
Business to integrate Alaska Native history and contemporary
Alaska Native corporations to change the perspective about what
Alaska Native corporations can do in partnership with the
university to develop economic opportunities moving forward.
MS. BURRETTA said she became a University of Alaska Regent in
2015 and it's been a challenge that funding has been declining
since then. Thus, tools such as the education tax credit are
essential to the future of the university.
2:50:10 PM
BRAD HARRIS, Professor, Alaska Pacific University, Anchorage,
Alaska said he was speaking in support of SB 116 from the
perspective of an educator. He teaches fisheries ecology and
directs the research laboratory that works closely with the
commercial fishing industry as well as state and federal
agencies to produce information that is needed to deal with the
resource challenges that Alaska faces. He said the education tax
credit program is working the way it's designed to work. It is
providing opportunities for students in Alaska to receive a
high-quality education that is applied directly to the needs of
the state.
PROFESSOR HARRIS explained that the money he receives from the
education tax credit program allows him to recruit excellent
students. Some come to Alaska from different places and Alaska
benefits from that. Students are also recruited from rural
communities that face challenges. Once those students are in the
university system they receive support through applied projects
and assistantships to help offset their tuition costs. The
program also allows him to invest in strategically important
research areas. He serves on the Scientific and Statistical
Committee of the North Pacific Fisheries Management Council
which allows him to connect students to areas of applied
research and to develop robust synergistic partnerships.
Because of the resources through the education tax credit
program and the opportunity to work in ecosystems like the
Bering Sea, partners are attracted to UA from universities
around the world. Faculty from Cornell University and
Northeastern University and researchers from the Smithsonian are
working with Alaska students on applied questions, largely
facilitated by the education tax credit. Finally, the program is
expanding the university's internal research capacity. The
opportunity for students to work with these world-class
researchers brings them skills and abilities that map through to
the careers the students end up taking. He noted his letter in
the packets that includes information about students from the
fisheries and natural resources program. It demonstrates that
students who receive this support end up working for Alaska
state agencies, federal agencies, consulting companies, and
universities. They are providing benefit back to the state.
PROFESSOR HARRIS urged the committee to continue the program in
recognition that it provides a level of stability that has
become a critical part of the future.
2:54:19 PM
SENATOR STEVENS asked how the program is marketed.
PROFESSOR HARRIS said the university does what it has to do to
see its research programs evolve. His team applies to the North
Pacific Research Board, seeks other funds, and talks about ways
to leverage the education tax credit program.
2:55:34 PM
CHAIR COSTELLO found no further questions or testimony and
closed public testimony on SB 116.
2:55:51 PM
SENATOR MEYER moved to report SB 116 from committee with
individual recommendations and attached fiscal note(s).
2:56:10 PM
CHAIR COSTELLO announced that without objection, SB 116 moved
from the Senate Labor and Commerce Standing Committee.