Legislature(2023 - 2024)BELTZ 105 (TSBldg)
04/15/2024 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB235 | |
| SB237 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 235 | TELECONFERENCED | |
| += | SB 237 | TELECONFERENCED | |
SB 237-TAX CREDIT CHILD CARE/UTILITY/HOUSE/FOOD
1:52:24 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 237 "An Act establishing a
corporate income tax credit for certain expenditures on child
care services, utility rates, residential housing, and food
security and availability; and providing for an effective date."
1:53:23 PM
CHAIR BJORKMAN opened public testimony on SB 237; finding none,
he closed public testimony.
1:53:56 PM
MICHAEL WILLIAMS, Acting Deputy Director, Tax Division,
Department of Revenue (DOR), Anchorage, Alaska, introduced
himself and offered to answer questions on SB 237.
1:54:12 PM
SENATOR DUNBAR noted a separate bill under consideration in
another committee that has to do with income tax credit. He
asked how many tax paying entities SB 237 would apply to. He
suggested there were fewer than might be expected and he said
there are relatively few entities that pay the kind of tax at
issue. He noted Alaska is a state without personal income tax or
sales tax, so there is little to apply a tax credit against. He
further noted the indefinite, speculative nature of the
accompanying fiscal note from the Department of Revenue, OMB
Component Number 2476, dated February 14, 2024, for which there
was a wide range of possible outcomes. He reframed his question
to ask how many entities and what percentage of entities in
Alaska would be able to take advantage of the tax credit
proposed by the bill. He further asked how many, if any,
individuals would be able to take advantage of the tax credit.
1:55:23 PM
MR. WILLIAMS said there are approximately 18,000 entities that
file a tax return and around 11,000 of those are pass-through
entities, otherwise known as S-corporations and they typically
do not pay tax because of their pass-through nature and because
Alaska does not have a personal income tax. He said that leaves
approximately 7,000 C-corporations that file a return and of
that number, accounting for variations due to the cyclical
nature of some industries, roughly 1,000 corporations actually
pay tax. He said those with significant or meaningful tax
liability to the state account for a couple hundred
corporations. He said individuals do not have tax liability to
the state unless they happen to be a sole shareholder of a
corporation that owes tax, but he noted, even then, it is not
the individual paying the tax, but the business entity.
1:56:51 PM
SENATOR DUNBAR restated that SB 237 would only apply to a few
hundred out of 18,000 entities; concentrating the benefit to
comparatively few large corporations. He noted the bill would
cost $200 million and suggested another approach could be,
instead of forgoing the revenue from very large corporations,
the $200 million could be distributed to individuals and to
small corporations and businesses. He said this would result in
the same affordability and would benefit a wider variety of
Alaskans and not only the very largest corporations. He
appreciated the description of the business entities and asked
whether some of the largest employers in Alaska would be
impacted by SB 237. He noted the fishing industry, in particular
and asked whether a fishing boat or fishing family would be able
to take advantage of the tax break.
1:58:09 PM
MR. WILLIAMS answered that it would depend on how that
commercial enterprise is organized. The income tax only falls on
entities that are treated for federal tax purposes as a C-
corporation. So, if that fishing enterprise is organized as a C-
corporation and has a tax liability [SB 237 would apply].
However, he said, in his experience most family-owned businesses
are organized as a pass-through entity.
1:58:43 PM
SENATOR DUNBAR suggested an LLC.
MR. WILLIAMS concurred and added that a partnership or an S-
corporation were other possibilities.
1:59:01 PM
SENATOR DUNBAR asked whether village corporations and other
Alaska Native Claims Settlement Act (ANCSA)-created corporations
[would be included].
1:59:12 PM
MR. WILLIAMS said both ANCSA and village corporations file
federal tax returns which requires them to file a state tax
return and he said liabilities will vary from entity to entity,
so they potentially could take advantage of this tax credit to
the extent they have a tax liability.
1:59:52 PM
CHAIR BJORKMAN solicited the will of the committee.
1:59:55 PM
SENATOR GRAY-JACKSON moved to report SB 237, work order 33-
GS2419\A, from committee with individual recommendations and
attached fiscal note(s).
2:00:13 PM
CHAIR BJORKMAN found no objection and SB 237 was reported from
the Senate Labor and Commerce Standing Committee.