Legislature(2023 - 2024)BELTZ 105 (TSBldg)
04/05/2023 03:30 PM Senate EDUCATION
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s) | |
| SB99 | |
| SB120 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 99 | TELECONFERENCED | |
| *+ | SB 120 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 120-EXTEND EDUCATION TAX CREDITS
4:08:43 PM
CHAIR TOBIN announced the consideration of SENATE BILL NO. 120
"An Act extending the education tax credits; providing for an
effective date by amending the effective date of secs. 1, 2, and
21, ch. 61, SLA 2014; and providing for an effective date."
4:09:22 PM
SENATOR BJORKMAN, District D, speaking as sponsor of SB 120,
introduced the legislation paraphrasing the following sponsor
statement:
[Original punctuation provided.]
Senate Bill 120 Extend Education Tax Credits
Sponsor Statement
Senate Bill 120 seeks to extend the very successful
Alaska Education Tax Credit (AETC) Program through
January 1, 2031. Currently the program will expire on
January 1, 2024.
Education tax credits allow businesses that pay
certain state taxes to claim credit for charitable
gifts made in support of education in Alaska. Eligible
recipients include non-profit, publicly, or privately
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.
Education tax credits can be used to offset many state
taxes including corporate income taxes, fisheries
business and fisheries resource landing taxes, oil and
gas production, and mining license taxes.
In addition to extending the Alaska Education Tax
Credit Program, Senate Bill 120 returns the program to
the credit provision in place before the program was
reduced in 2018. SB 120 allows education tax credits
up to 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
bill also raises the cap on the total credit per
taxpayer or group to $5,000,000. Currently, the cap is
$1,000,000.
4:14:01 PM
RAYMOND MATIASHOWSKI, Staff, Senator Jesse Bjorkman, Alaska
State Legislature, Juneau, Alaska, presented the sectional
analysis for SB 120:
[Original punctuation provided.]
Senate Bill 120 Extend Education Tax Credits
Version A Sectional Analysis
Section 1 Amends AS 21.96.070(b), which governs
insurance tax education credits, to set the amount of
the Alaska Education Tax Credit (ETC) at 50 percent of
contributions up to $100,000, 100 percent of
contributions from $100,001 through $300,000, and 50
percent of the amount of contributions that exceed
$300,000. Currently the insurance tax education credit
is limited to 50 percent of contributions.
Section 2 Amends AS 21.96.070(d), with governs
insurance tax education credits, to stipulate that
contributions claimed as a credit may not be used to
claim credit elsewhere under this title and may not be
combined with other credits to exceed a total of
$5,000,000. The current cap is $1,000,000. If the
taxpayer is a member of an affiliated group, the total
amount of credits for the group may not exceed
$5,000,000. Currently the cap is $1,000,000.
Section 3 Amends AS 43.20.014(b), which governs
income tax education credits, to align with the tax
credit amounts set forth in the Act.
Section 4 Amends AS 43.20.014(d), which governs
income tax education credits, to align with the total
cap on education credits set forth in this Act.
Section 5 Amends AS 43.55.019(b), which governs the
oil or gas producer education credit, to align with
the tax credit amounts set forth in this Act.
Section 6 Amends AS 43.55.019(d), which governs the
oil or gas producer education credit, to align with
the total cap on education credits set forth in this
Act.
Section 7 Amends AS 43.56.018(b), which governs the
property tax education credit, to align with the tax
credit amounts set forth in this Act.
Section 8 Amends AS 43.56.018(d), which governs the
property tax education credit, to align with the total
cap on education credits set forth in this Act.
Section 9 Amends AS 43.65.018(b), which governs the
mining business education credit, to align with the
tax credit amounts set forth in this Act.
Section 10 Amends AS 43.75.018(d), which governs the
mining business education credit, to align with the
total cap on education credits set forth in this Act.
Section 11 Amends AS 43.75.018(b), which governs the
fisheries business education credit, to align with the
tax credit amounts set forth in this Act.
Section 12 Amends AS 43.75.018(d), which governs
fisheries business education credit, to align with the
total cap on education credits set forth in this Act.
Section 13 Amends AS 43.77.045(b), which governs the
fisheries resource landing tax education credit, to
align with the tax credit amounts set forth in this
Act.
Section 14 Amends AS 43.77.045(d), which governs the
fisheries resource landing tax education credit, to
align with the total cap on education credits set
forth in this Act.
Section 15 Provides for January 1, 2031, effective
date for the expiration of the Education Tax Credit
program.
Section 16 Sets the effective date for this Act as
January 1, 2024.
4:17:55 PM
SENATOR KIEHL asked whether the tax credit is applied to both
the municipal share and the state's share.
MR. MATIASHOWSKI replied that he did not know and would get back
to the committee.
4:18:36 PM
SENATOR KIEHL stated that the tax cap increases by a factor of
five, but the foregone revenue to the state doesn't increase by
the same magnitude, as indicated in the fiscal note. He
requested information on whether there was a historical basis
for this difference, specifically regarding when the maximum
amounts were reduced. He also inquired about the rationale
behind the modeling used in SB 120.
4:19:03 PM
MICHAEL MASON stated that Ms. Glover, the tax director, might be
able to address the questions.
4:19:17 PM
COLLEEN GLOVER, Director, Tax Division, Department of Revenue
(DOR), Anchorage, Alaska, stated that department personnel had
examined historical data. As Senator Bjorkman mentioned, SB 120
essentially reinstated higher thresholds that existed in the
past. Her department considered the average contributions during
that period, which averaged around $6.6 million, as the basis
for their projections. This historical data served as the
foundation for the fiscal note. She also mentioned that the bill
extended the timeframe and increased the thresholds, drawing
from historical data, even though there is no certainty that the
same patterns will occur in the future. She pointed out that the
department provides an annual report to the legislature that is
available on their website. She said it is challenging to
predict with certainty whether the same trends observed in the
past with similar thresholds would continue.
4:20:35 PM
SENATOR GRAY-JACKSON requested that an answer be provided to
Senator Kiehl's question, regarding SB 120 and municipal taxes.
MR. MATIASHOWSKI replied he would follow up with an answer.
SENATOR GRAY-JACKSON asked if Ms. Glover could answer since she
is from the tax agency.
MS. GLOVER stated her belief that SB 120 only applies to the
state portion, but she would double check.
4:21:34 PM
SENATOR GRAY-JACKSON stated she too thought it only applied to
the state portion.
4:21:43 PM
CHAIR TOBIN asked for an overview of the fiscal note for SB 120.
4:21:58 PM
MS. GLOVER said that SB 120 impacted seven different tax
programs, with six falling under the Department of Revenue Tax
Division, and one in commerce. She noted that the fiscal note
only forecasted the effect on the programs specific to the
Department of Revenue. She explained that for all the tax
programs affected, the funding contributed to the general fund,
so any tax credit represented a reduction in the general fund.
She mentioned that the current statute was set to sunset at the
end of the year, and by extending it, an additional half fiscal
year of credits would be provided, resulting in a $1.7 million
credit for FY 2024. In future years the impact of extending the
repeal time and increasing the percentage would generate an
estimated $6.6 million in annual credit usage.
MS. GLOVER noted that historically, the usage of the credit had
been higher, with more participation from taxpayers or donors
when there were higher credit thresholds. However, there has
been a reduction in participation over the last three years,
which could be attributed to various factors, such as changes in
credit provisions and economic conditions.
4:24:20 PM
CHAIR TOBIN announced invited testimony on SB 120.
4:24:49 PM
CHAD HUTCHINSON, Director, State Relations, University of Alaska
System, Fairbanks, Alaska, said that the university had reviewed
SB 120 and expressed strong support for the sunset provisions,
indicating there were no objections to the provisions that would
revert to the statute's pre-2018 state.
MR. HUTCHINSON turned to slide 1 and said he would provide a
general overview, primarily focused on respecting the taxpayers
contributing to the University of Alaska. He characterized the
presentation as a broad generalization of how the university
viewed its role as a beneficiary and how it was addressing
Alaska's workforce needs through contributions from third-party
entities.
4:26:03 PM
MR. HUTCHINSON turned to slide 2 and highlighted examples of
contributions, including a million-dollar donation from Kinross
to the Troth Yeddha' Indigenous Studies Center in Fairbanks. He
noted the university's collaboration with private sector third-
party entities to address educational needs in Alaska,
particularly in terms of workforce development. These
contributions could be in the form of cash or equipment,
reflecting the interest of many companies in ensuring a well-
prepared future workforce by providing necessary funding and
equipment for university programs.
4:26:47 PM
MR. HUTCHINSON turned to slide 3 and shared a document borrowed
from the Department of Revenue. The document outlined the value
of credits, contributions made, and the specific benefits to the
University of Alaska in the calendar year 2022.
The total contributions listed in the second column amounted to
$2.1 million. For most of the tax programs, approximately 50
percent of the credits were claimed. An example was the fishery
resource landing tax, where a 50 percent credit was claimed. The
contributions made directly impacted academic programs,
equipment provision, and research efforts. In cases like
commercial fisheries, contributors showed interest in specific
fisheries populations and made direct contributions to the
university, benefiting both the university and the contributors.
He also noted that the oil and gas property tax total
contribution was $40,000, and the entire amount was given to the
University of Alaska.
4:28:18 PM
MR. HUTCHINSON turned to slide 4 and provided historical
examples of donors to the university, illustrating the program's
broad range of contributors, including mining interests,
commercial fishing, Alaska Airlines, and Holland America. He
highlighted that many major industries in Alaska had
participated in the program, and it had been highly successful:
[Original punctuation provided.]
A Few Tax Paying Entities that Historically Contribute
to the University of Alaska
1. Glacier Fish Company, LLC
2. American Seafoods Company
3. Hecla Greens Creek Mining Company
4. Fairbanks Gold Mining, Inc.
5. ConocoPhillips Alaska, Inc.
6. Alaska Airlines Inc.
7. Holland America Princess - Alaska
8. Ravn Alaska
9. Aurora Animal Clinic
10. Bristol Bay Native Corporation
11. Northrim Bank
12. Teck Alaska, Inc.
MR. HUTCHINSON acknowledged that contributions had declined
since the statutory change in 2018. He expressed gratitude for
the legislative debate aimed at revising the contribution
amounts, and stated his belief that the university would be
pleased with a positive outcome.
4:29:11 PM
SENATOR GRAY-JACKSON asked whether a corporation's contribution
also qualifies for a federal tax write off.
4:29:23 PM
MR. HUTCHISON deferred the question to DOR.
4:29:38 PM
MS. GLOVER replied she could not speak to federal income tax
laws for corporations.
4:30:00 PM
SENATOR GRAY-JACKSON said she was hopeful that DOR could answer
her question but did not expect the department to speak for the
Internal Revenue Service.
4:30:32 PM
STEPHANIE MADSEN, Executive Director, At-Sea Processors
Association, Juneau, Alaska, expressed her gratitude to Senator
Tobin, Senator Bjorkman, and the committee for addressing the
Pollock Conservation Cooperatives' involvement in the education
tax credit program, emphasizing its importance to her fleet.
She detailed the cooperative's history and mission to enhance
the conservation and utilization of Alaska's marine resources.
The Pollock Conservation Cooperative Research Center at the
University of Alaska Fairbanks was created in 2000, funded
through direct donations and education tax credit funds. Ms.
Madsen noted that her members had been contributing since 2000,
likely making them the largest private contributor, with a total
contribution of about $16 million over the years.
4:31:48 PM
MS. MADSEN highlighted the allocation of these funds, with a
significant portion directed toward research aimed at promoting
the conservation and management of marine resources in the
Bering Sea. The contributions also supported graduate
fellowships for students pursuing master's and graduate degrees,
addressing a crucial funding gap for graduate students. She
mentioned that many of the students funded by the Pollock
Conservation Cooperative Research Center, had gone on to work in
government agencies such as the State of Alaska and the National
Marine Fisheries Service.
She further discussed contributions to dual enrollment programs,
specifically the UAS fisheries technology program in Sitka,
which benefits high school students through remote learning
using iPads. Additionally, they consistently supported the
Northwest Alaska Career and Technical Center in Nome,
contributing to workforce development.
MS. MADSEN emphasized the program's vital role in preparing
Alaska's workforce and sparking high school students' interest
in fisheries. She expressed her extreme gratitude for the
committee's consideration and reiterated strong support for all
elements of the legislation.
4:35:01 PM
CHAIR TOBIN opened public testimony on SB 120.
4:35:17 PM
DOUG WALRATH, Director, Northwestern Alaska Career and Technical
Center, Nome, Alaska, testified in support of SB 120, which aims
to extend the education tax credits sunset and return the credit
to its pre-2018 legislative session form.
He noted that the Northwestern Alaska Career and Technical
Center (NACTEC) had been a beneficiary of education tax credit
contributions from the Pollock Conservation Cooperative for over
a decade. He emphasized that the tax credit had allowed NACTEC
to seek funding from business partners since 2009, which had
significantly benefited their programs. Specifically, it had:
1. Led to the creation of a new Alaska Vocational Technical
Center (AVTEC) transitions program.
2. Enabled the development of junior high residential career
exploration programs.
3. Supported the purchase of advanced motion-based simulators
for aviation and maritime training.
He highlighted that from FY 2015 to FY 2019, NACTEC's industry
partners contributed an average of $511,000 annually, equivalent
to 30 percent of their budget. However, after the credit became
less corporate-friendly from FY 2020 to FY 2022, contributions
averaged $195,000 annually, representing 10 percent of their
annual budget. This amounted to a 62 percent decrease in
education tax credit contributions since 2018 when the
legislation changed.
He further pointed out that the education tax credit had a
positive impact on NACTEC's programming, with higher graduation
rates and career exploration outcomes for students attending
their programs. He concluded that when business and industry
collaborate with education providers like NACTEC, it benefits
all parties involved. He urged the committee to recognize the
effectiveness of the education tax credit program and extend its
sunset.
4:38:35 PM
SENATOR KIEHL expressed his support for the program and his
desire to see it extended. He noted Mr. Walrath's comment
regarding the decrease in corporate contributions starting in
2018 and inquired about the factors contributing to this
decline. He specifically asked if it was due to the lower limits
set by the program or the lower federal corporate tax rates and
whether Mr. Walrath had been able to discern which of these
factors was the primary driver of reduced corporate giving and
eligibility.
4:39:13 PM
MR. WALRATH responded that he had not specifically investigated
whether the reduced corporate contributions were primarily
driven by the lower limits or the lower federal corporate tax
rates. He mentioned that he had been proactive in pursuing
funding before the friendly nature of the previous provision
began to phase down. However, he hadn't conducted a detailed
analysis to determine the exact reasons behind the decline in
corporate contributions.
4:40:24 PM
TARA RIEMER, President, Alaska Sea Life Center, Seward, Alaska,
testified in support of SB 120. She stated that the Alaska Sea
Life Center served as a beneficiary of the Alaska Education Tax
Credit due to its role as a coastal ecosystem learning center.
She emphasized that SB 120 would extend the education tax credit
program and potentially increase tax credits from corporations.
She thanked the committee for sponsoring SB 120 and specifically
for restoring the caps on tax credit ratios to their previous
levels.
She underscored the effectiveness of the education tax credit
program in introducing philanthropy to Alaska corporations and
noted that it played a crucial role in introducing potential
corporate donors to the idea of supporting the Alaska Sea Life
Center. However, she pointed out that the program had been more
compelling in the past.
4:42:08 PM
CHAIR TOBIN closed public testimony on SB 120.
4:42:12 PM
CHAIR TOBIN held SB 120 in committee.