Legislature(2005 - 2006)BUTROVICH 205
03/15/2006 08:30 AM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB222 | |
| SB206 | |
| SB306 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 206 | TELECONFERENCED | |
| + | SB 306 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 222 | ||
SB 306-UNEMPLOYMENT INSURANCE FUND & TAXES
10:07:14 AM
CHAIR RALPH SEEKINS announced SB 306 to be up for consideration.
SENATOR CON BUNDE explained SB 306 addresses unemployment
insurance avoidance schemes by unscrupulous employers. Failure
to pass the bill would result in the de-certification of the
Alaska UI program and employers in this state would lose a
federal offset credit of 5.4 percent, resulting in $103 million
dollars in additional taxes to the employer and the state would
lose $30.8 million in administrative and operation funding for
UI programs.
SENATOR GRETCHEN GUESS asked what would happen when someone
doesn't comply simply because they don't understand the
procedure.
JANE ALBERTS, Staff to Senator Bunde, surmised that there would
be notification sent to businesses that, in the event that they
purchase or acquire another business they would be required by
law to notify the Department of Labor and Workforce Development.
CHAIR SEEKINS said it appears that a business owner would have
to knowingly intend to deceive the Department and that they
would have to be in violation of AS 42 U.S.C. 503(k) (SUTA
Dumping Prevention Act of 2004).
10:12:17 AM
PAULA SCAVERA, Special Assistant, Department of Labor and
Workforce Development (DOLWD), introduced Pat Shier to answer
questions.
PAT SHIER, Acting Deputy Director, Department of Labor and
Workforce Development (DOLWD) offered to answer questions. He
explained the bill was intended to stop willful
misrepresentation for the purpose of obtaining a lower rate. The
bill complies with the federal intent that there be more
meaningful penalties for the specific purpose of misleading the
DOLWD in order to fraudulently obtain an artificially low
unemployment tax rate.
SENATOR GUESS referred to her original question and asked what
happens when the employing unit purchases another business and
does not notify the DOLWD.
CHAIR SEEKINS asked the definition of "employing unit."
MR. SHIER explained an employing unit is defined as a person or
an organization that has people working for it for a certain
number of days.
CHAIR SEEKINS asked whether a self-employed person was an
employing unit.
MR. SHIER said no.
10:15:53 AM
MR. SHIER responded to Senator Guess's earlier question and said
the section of the bill in question has been in effect since
prior to Alaska Statehood. When an employer fails to notify the
DOLWD, they are not automatically penalized. The bill is
designed to codify in law that there is that obligation. There
is no penalty associated with a failure to report. As the
Department becomes aware of the failures, they assist the
business owner to comply with state and federal law.
10:18:36 AM
SENATOR GUESS referred to Section 23.20.297 (a) and asked Mr.
Shier to explain paragraphs (1-2).
MR. SHIER said it was important to note lines 16-17, which is
the purpose they are attempting to describe. If an employer
transfers its trade or business to a smaller business, they have
to take their higher rate with them. The rates are then
recalculated based on existing regulations. Paragraph (2)
describes the situation if the person is not an employer at the
time they acquire another business and it governs how the rate
would be applied.
SENATOR GUESS asked for clarification whether the business owner
would have to be in a merge situation in order for the bill to
apply.
MR. SHIER responded the "common ownership" portion of the bill
is the language that the federal government required in order to
allow states to identify the person at the root of the transfer.
The intent of the bill is to identify the business owner that is
attempting to purchase another business with a smaller tax rate
and then to claim that smaller tax rate for the merged larger
business.
SENATOR GUESS referred to paragraph (2) and questioned the
reason for involving the commissioner.
MR. SHIER responded paragraph (2) deals with a person who is not
an employer and has no rights or responsibilities under the Act.
It is for someone who is trying to obtain a lower rate, such as
a person who closes a business for a period of time and then
purchases another business and then re-opens the closed business
and claims the lower tax rate. Paragraph (2) allows the
Department to examine the prior business and investigate whether
or not the person closed the business for the sole purpose of
obtaining a lower tax rate.
10:27:38 AM
MR. SHIER added he could not answer as to the reason for
involving the commissioner in paragraph (2), but that it was
based on federal guidelines.
SENATOR GUESS noted the bill was very confusing to read.
CHAIR SEEKINS said the fraudulent acts would occur under AS
23.20.295(d)(1) and (4).
SENATOR GUESS said regardless of what the purpose is, AS
23.20.297(1-2) should be part of the system regardless of
whether they are fraudulent or not.
CHAIR SEEKINS said subsection (d)(2) and (3) are not fraudulent
acts whereas 23.20.295(d)(1) and (4) would be if the
commissioner found intent.
10:30:41 AM
MR. SHIER claimed "intent and knowing" are very high standards
and difficult to prove. The reason for SB 306 is due to federal
government compliance and state employers stand to lose millions
of dollars in tax credits.
SENATOR GUESS reiterated her opinion that the bill was written
in an extremely unclear manner. She said a business couldn't be
charged with a crime and asked whom the person would be that
would be charged with the felony.
MR. SHIER responded it would be the individual who has the duty
to pay.
CHAIR SEEKINS held the bill in committee.
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