Legislature(2011 - 2012)BARNES 124
03/22/2012 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB362 | |
| HB364 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 362 | TELECONFERENCED | |
| *+ | HB 364 | TELECONFERENCED | |
HB 364-TAX CRED: CONTR. TO HOMELESS SHELT/DETOX
8:25:16 AM
CHAIR MUNOZ announced that the final order of business would be
HOUSE BILL NO. 364, "An Act relating to a credit against the net
income tax for a contribution made by a taxpayer to a nonprofit
organization that provides an emergency shelter for the homeless
or a facility for alcohol or drug detoxification."
8:25:32 AM
TERRY HARVEY, Staff, Representative Munoz, Alaska State
Legislature, began by reviewing the various ways in which the
legislature has attempted to help the homeless. He reminded the
committee that the number of homeless in Alaska is staggering,
particularly in comparison to national statistics. In fact, the
Legislative Research Services report dated March 15, 2012, ranks
Alaska as the ninth state in the nation in terms of the highest
concentration of homeless people in 2010. He further reminded
the committee that homelessness comes in different forms,
including many youth, substance abusers, and victims of abuse.
Unfortunately, many of Alaska's shelters are bursting at the
seams and need help. This legislation offers a means to infuse
financial assistance to [nonprofit] organizations [that provide
an emergency shelter for the homeless or a facility for alcohol
or drug detoxification] through a tax credit. The legislation
attempts to encourage businesses in the state to make donations
to the aforementioned organizations by offering a tax credit
with limitations.
8:28:13 AM
MR. HARVEY said that any homeless/emergency shelter in the state
will qualify [for this proposed tax credit]. The legislation
allows a business entity to make a donation as large as it
desires, but it may only receive 50 percent of the amount of the
donation up to $200,000 in the form of a tax credit. The
homeless/emergency shelter would have to report to the
legislature if these donations are received. Mr. Harvey
characterized the program as a sort of pilot program since it
sunsets in 2018. If an entity took the tax credit off of its
state corporate income tax, they wouldn't be allowed to use it
in a federal tax credit situation.
8:31:00 AM
REPRESENTATIVE GARDNER assumed that corporations or businesses
write charitable donations off their federal taxes. She asked
if the state has a comparable blanket provision for businesses
that make donations.
8:31:28 AM
JOHANNA BALES, Deputy Director, Tax Division, Department of
Revenue, informed the committee that under the Alaska corporate
income tax, Alaska adopted the federal code. Under the federal
rules, if a corporation gives a contribution, the company is
allowed to deduct it from the company's gross income. Although
it's a deduction, it's limited to 10 percent of their net
income. Therefore, if someone made such a contribution now,
they would be allowed to deduct it from their Alaska corporate
income tax but it would be limited to 10 percent of their
corporate income tax. A credit is significantly different than
a deduction because it's taken after the tax liability is
calculated. A credit offsets the tax liability dollar for
dollar. This legislation is structured in such a way that
companies wouldn't be able to take a deduction and the credit;
companies would have to add the deduction when calculating net
income prior to applying the credit. Therefore, companies
aren't allowed both the deduction and the credit, she clarified.
8:32:40 AM
MS. BALES, in response to Representative Gardner, confirmed that
the aforementioned is related in the language on page 2, lines
9-10. The language also specifies that this contribution can't
be used to claim a credit in another tax program the state
administers. In further response to Representative Gardner, Ms.
Bales agreed that to a certain extent the state is buying the
credit. However, she noted that a tax credit is always more
attractive to taxpayers than a tax deduction.
8:33:31 AM
REPRESENTATIVE SADDLER asked if this proposal will refocus
corporate giving to homeless/detox shelters and away from less
remunerative contributions.
MS. BALES answered that could be the effect of legislation such
as HB 364 when a corporation has a limited amount of dollars to
contribute.
8:34:37 AM
REPRESENTATIVE FOSTER inquired as to other credit programs in
place. He recalled the recent passage of a credit program for
cultural institutions.
MS. BALES responded that in terms of Alaska-specific tax credits
toward corporate income tax, there is the film production tax
credit, the education tax credit, gas storage facility tax
credit, and exploration incentive credit. She related her
belief that Representative Foster was referring to the education
tax credit, which was expanded to allow [contributions] for
Alaska Native heritage type programs, intercollegiate sports
tournaments, and the Seward Sealife Center.
8:35:57 AM
REPRESENTATIVE FOSTER requested examples of businesses that
would be eligible to take advantage of this program.
MS. BALES informed the committee there are approximately 15,000
corporations that file returns, of which many are S corporations
that are exempt from corporate income taxes. If one were to
review chapter C corporations, which are required to pay
corporate income tax, they would include the oil industry,
Native corporations, and retail corporations. She opined that
there are a lot of multi-state large corporations that conduct
business in Alaska.
8:37:25 AM
REPRESENTATIVE AUSTERMAN, drawing from conversations with Ms.
Bales regarding fishing tax credits, asked if Ms. Bales is
comfortable with her understanding of the tax credit and how
it's applied.
MS. BALES opined that the language in HB 364 is open enough.
The credit in HB 364 requires identifying those 501(c)(3)
corporations that have provided an emergency shelter for the
homeless or a facility for alcohol/drug detoxification. She
further opined that the legislation provides ample guidance.
8:39:06 AM
REPRESENTATIVE AUSTERMAN recalled from his discussion with Ms.
Bales regarding the raw fish tax and the value-added tax credits
that the division has struggled to have enough auditors to do
the job. In fact, it has taken up to four years to audit the
value-added credit. When the value-added credit was denied, the
company is charged interest for those four years. Assuming the
division's existing auditors will do the audits for the proposed
tax credit in HB 364, he asked if the work load is such that the
division can truthfully have a zero fiscal note.
MS. BALES replied yes because the state adopts the internal
revenue code, the division can use the Internal Revenue Service
(IRS) audits and information to assist the state in its audits.
This proposed deduction is one that would be audited by the IRS
and the division would receive information if there was a
problem. Furthermore, she wasn't aware of a significant number
of these nonprofit entities in the state that would make it
difficult to identify them upfront and know that a contribution
to them was acceptable under HB 364.
8:41:14 AM
REPRESENTATIVE AUSTERMAN further recalled his discussion with
Ms. Bales regarding the ability for DOR to preapprove tax
credits so that entities don't find out four years after
applying that they are denied. He asked if that would apply to
the proposed tax credit in HB 364.
MS. BALES answered that the division would only do so if the
legislation included language specifying that a preapproval
process is required, which might not be a bad idea.
8:42:26 AM
REPRESENTATIVE SADDLER inquired as to how many C corporations,
under current tax law, obtain $200,000 worth of reduced tax
liability through charitable contributions.
MS. BALES said that she didn't know how many corporations make
charitable donations because the division doesn't look at that
unless it's looking for the Alaska-specific credits. For the
Alaska education tax credit, there are no more than 10
corporations that take advantage of the education tax credit.
In further response to Representative Saddler, Ms. Bales
explained that the fact that HB 364 proposes a 50 percent tax
credit means that the state will have to use 50 percent of its
dollars and a corporation will have to use 50 percent of its
dollars. Therefore, the corporation will have some of its funds
in the credit. Ms. Bales noted that it's difficult to determine
the thought process of corporations in terms of what's important
to them regarding charitable giving.
8:44:05 AM
REPRESENTATIVE SADDLER asked whether the tax credit proposed in
HB 364 is transferable.
MS. BALES replied no, and directed attention to the language on
page 2, line 11, which specifies the tax credit is
nontransferable and can't be carried forward.
8:44:31 AM
REPRESENTATIVE GARDNER, drawing from Ms. Bales remarks, surmised
that if an entity claims a credit in Alaska and is audited at
the federal level, the division relies on the federal audit to
confirm what has occurred in Alaska.
MS. BALES confirmed that [a federal audit] is one source. If
the federal government was to audit charitable contributions and
a change was made, the division would be notified of that
change. Such a notification would flag the division of a
potential need to review something. However, since the proposal
in HB 364 is an Alaska-specific credit, the division would
conduct its own audits although it could also rely somewhat on
the federal audit as well. Therefore, the division doesn't rely
entirely on the federal government to audit this.
REPRESENTATIVE GARDNER expressed interest in whether the federal
government notifies the state governments if they audit a
taxpayer or make any changes for a taxpayer.
MS. BALES responded yes, the state has agreements with the IRS
that "we" share audit information.
8:46:16 AM
REPRESENTATIVE AUSTERMAN moved to adopt CSHB 364, Version 27-
LS1425\M, Nauman, 3/20/12, as the working document. There being
no objection, Version M was before the committee.
8:47:26 AM
MR. TERRY informed the committee one of the changes encompassed
in Version M is that it will limit groups, to those that were
established by January 1, 2012, and therefore it would be
limited to existing facilities. Version M also requires that
the amount of the tax credit is 50 percent of the donation [or
$200,000], whichever is less. The reasoning behind the
aforementioned change was to ensure that the corporations had
some "skin in the game." Furthermore, Version M includes a
sunset provision such that there would be review and
consideration as to whether the tax credit had accomplished its
goals.
8:49:22 AM
WALTER MAJOROS, Executive Director, Juneau Youth Services (JYS),
related support for HB 364. He informed the committee that JYS
is one of the organizations that could potentially benefit from
the legislation. Juneau Youth Services has provided emergency
shelter services to homeless youth in Juneau for 51 years. Mr.
Majoros told the committee youth homelessness in Juneau is a
significant problem and is getting quite a bit of press at the
moment. In fact, there was an article within the last week
about youth homelessness in Juneau, which he encouraged members
to review. Homeless youth is a problem that is increasing in
Juneau. The article related that this year there are 200
homeless youth enrolled in the Juneau School District, which is
a 34 percent increase since 2006. The article further relates
that out of 120 students attending Yaakoosge Daakahidi High
School, the alternative high school in Juneau, 68 are homeless,
which ranks it in the 55th-60th percentile. He stressed that
the aforementioned information is only the homeless youth that
are enrolled in the school district. In fact, JYS estimates
that the actual total number of homeless youth is closer to 400
youth. Drawing from data from JYS, Mr. Majoros related that in
2010 JYS served 141 homeless youth in its emergency shelter and
59 youth in its transitional living program, which is a total of
200 separate youth. For the JYS emergency shelter alone, in
2011 the facility provided 3,416 bed nights, which is an average
of 9.4 youth per night. Alaska is ranked ninth nationwide in
terms of states with the highest concentration of homeless
people. The problem in Juneau is exacerbated by the lack of
available housing; the vacancy rate is zero percent in Juneau.
This legislation is important to JYS because financing for
emergency services/shelter is difficult. Although JYS receives
city, state, and federal funds, it loses several hundred
thousand dollars a year. He explained that only because other
aspects of JYS do better can it float the emergency shelter. If
JYS was to only operate the emergency shelter part of JYS, it
would be $300,000-$400,000 in arrears. One of the reasons for
the aforementioned is that although the census is unpredictable
in that there could be 10-11 youth one night and only 1 youth
the next night, staffing has to be maintained. The JYS is a
child residential program, and thus it must maintain state
mandated staffing ratios. The staffing expense is also driven
by the fact that JYS provides services all day, every day.
Furthermore, the length of stay is very short, which makes it
very difficult to generate Medicaid [funds] because the youth
don't stay long enough. Mr. Majoros then discussed the physical
state of the JYS facility, which he characterized as poor. The
facility has had multiple renovations; $1.2 million in completed
and recommended renovations over the last 20 years. Currently,
JYS has estimates for over $600,000 in renovations that are
necessary. The situation has become dire enough, that the JYS
board has voted to seek a new facility rather than perform the
renovations. Therefore, JYS is working with the City & Borough
of Juneau and the Juneau legislative designation to that end.
This legislation could benefit the operations of JYS as well as
its efforts to secure a new facility for homeless in Juneau. In
conclusion, Mr. Majoros urged the committee's support for
HB 346.
8:55:13 AM
CHAIR MUNOZ asked if Mr. Majoros has identified donors that
might take advantage of the opportunity in HB 364.
MR. MAJOROS replied no, but that's not to say JYS wouldn't
pursue that vigorously if HB 364 were to pass. At this point,
JYS doesn't operate on donations but rather operates on earned
income and grants. Therefore, JYS is primarily funded by grants
and Medicaid.
8:55:48 AM
REPRESENTATIVE CISSNA inquired as to the regularity of affording
the shelter and whether the tax credit in HB 364 might make a
difference in terms of surviving or not.
MR. MAJOROS reminded the committee that JYS has been in
operation and offering these services for 51 years. In terms of
sustainability, it's getting more difficult as the program loses
money every year. The program has been sustained because it has
other long-term programs that perform better financially than
the youth homeless/emergency shelter program. Still, the bottom
line for JYS is shrinking and it's operating at a deficit this
year. Since the ability to sustain the services is diminishing,
an additional revenue source as proposed in HB 364 could be
critical to the future sustainability of the JYS homeless
shelter.
8:57:25 AM
REPRESENTATIVE SADDLER inquired as to the funding sources for
the JYS homeless shelter.
MR. MAJOROS responded that funding for the JYS homeless shelter
includes a small federal grant, a small city grant, a larger
state grant, and limited Medicaid funds. In further response to
Representative Saddler, Mr. Majoros said that in part the JYS
homeless shelter doesn't pursue donations because it doesn't
want to compete with organizations that don't have opportunities
for earned income like JYS does.
8:58:34 AM
REPRESENTATIVE SADDLER directed attention to the footnote on the
first page of the Legislative Research Services report dated
March 15, 2012, which relates that the U.S. Department of
Housing and Urban Development (HUD) requires communities to
submit a single comprehensive Continuum of Care (CoC)
application. He asked if JYS takes part in a CoC process in
Juneau.
MR. MAJOROS replied yes.
8:59:05 AM
REPRESENTATIVE GARDNER questioned whether the fact that HB 364
requires entities receiving state funding to report the amount
of donations received to the legislature that information could
be used to reduce state funding.
MR. MAJOROS answered that it's difficult to speculate. For JYS
to be able to reduce its request to the state would require JYS
to generate $300,000-$400,000 annually on the operations side
alone. The aforementioned, he pointed out, doesn't take into
consideration the $6.2 million necessary to construct a new
shelter facility. Therefore, it would require a lot of
contributions to reduce JYS's need for state funding.
9:00:19 AM
REPRESENTATIVE SADDLER asked whether the services JYS provides
to homeless youth are palliative or curative.
MR. MAJOROS said that there have been many examples in which the
JYS services to youth can be the first step to get them off the
streets, into permanent housing, and to receive the services
they need long term to be successful in society. He highlighted
that JYS is fortunate in that it offers a range of services,
including chemical dependency services, family outpatient
services, school-based services, and residential programs. The
homeless programs in and of themselves won't result in major
life changes as it's primarily geared toward immediate safety.
However, the homeless program is a gateway to other long-term
services that will make a tremendous difference in the lives of
these youth.
REPRESENTATIVE SADDLER inquired as to how many other homeless
shelters share the same paradigm as JYS.
MR. MAJOROS said that Juneau is fortunate in that these services
are available through a single agency. He related his belief
that Juneau is the only community in the state with that
ability. In larger communities, such as Anchorage and
Fairbanks, the homeless shelter is a stand-alone program that's
offered by an agency and the supportive services are available
in the community through other organizations.
9:02:48 AM
CHAIR MUNOZ noted that she has had the opportunity to tour the
JYS facilities and opined that it would be helpful to organize a
tour for legislators.
MR. MAJOROS welcomed them.
9:03:24 AM
REPRESENTATIVE SADDLER inquired as to how Mr. Majoros would
envision this proposed tax credit working.
MR. MAJOROS said that it would be speculation. Furthermore, he
said he can't predict if [homeless/emergency shelters] would
lose other revenue sources. All factors being equal, he
predicted that existing shelters/programs would be able to serve
more homeless individuals rather than more shelters being
constructed.
9:04:08 AM
REPRESENTATIVE DICK inquired as to an estimated percentage of
the homeless youth who also suffer from a mental illness versus
those homeless youth that come from unfortunate circumstances.
MR. MAJOROS estimated that roughly 50 percent of homeless youth
suffer from a mental illness and 50 percent from unfortunate
circumstances.
9:05:29 AM
JOHN GAUGINE, President, Juneau Christian Cooperative
Ministries, informed the committee that Juneau Christian
Cooperative Ministries has for 30 years operated the Glory Hole,
which is a soup kitchen and homeless shelter in downtown Juneau.
He related the organization's support for HB 364 as the Glory
Hole would clearly benefit from it. Unlike JYS, the Glory Hole
has no fee for services. The Glory Hole gets by through
generous support from the community, the state, federal grants,
state grants, and foundation grants. However, occasionally the
Glory Hole has been on the brink of major financial problems.
Therefore, the Glory Hole could use more funds. The Glory Hole
facility is old and constantly requires renovation. At this
point, the Glory Hole doesn't offer services, although staff
encourages people to seek services. If the Glory Hole had more
money, it would try to pay its staff a living wage and even
perhaps provide health benefits.
9:07:45 AM
REPRESENTATIVE CISSNA inquired as to the number of employees the
Glory Hole has.
MR. GAUGINE answered that at the moment the Glory Hole has an
executive director and about eight full-time employees, although
several of those are on call and cover infrequent shifts. The
Glory Hole also employs an outreach coordinator that is working
on the homeless survey and there are about three full-time
cooks. He informed the committee that the downstairs [gathering
and eating area] is open 112 hours per week.
9:08:37 AM
REPRESENTATIVE SADDLER inquired as to how many programs similar
to the Glory Hole are there in Juneau.
MR. GAUGINE responded that there are none totally comparable to
the Glory Hole. Although St. Vincent does have a shelter, it
offers longer-term stays and is geared more toward families.
The Glory Hole, he opined, is essentially the only adult
homeless shelter in Juneau.
REPRESENTATIVE SADDLER then inquired as to how many alcoholism
and substance abuse treatment facilities are located in Juneau
or Southeast Alaska.
MR. GAUGINE offered that there is the Rainforest [Recovery
Center] in Juneau, a facility in Sitka, and a facility in
Ketchikan, but beyond those he didn't know. In further response
to Representative Saddler, Mr. Gaugine wasn't aware of any for-
profit homeless shelters, detox facilities, or treatment
facilities.
9:10:17 AM
CHAIR MUNOZ recalled that Representative Austerman had discussed
a possible amendment that would require DOR to list eligible
facilities.
MR. TERRY offered to work with DOR and Legislative Legal
Services on language that would require preapproval of a tax
credit.
9:11:03 AM
CHAIR MUNOZ announced her intention to bring back HB 364 and any
amendments to it at the next meeting and forward the legislation
from committee at that time.
9:11:18 AM
REPRESENTATIVE GARDNER reminded the committee that there is a
national movement in which some states are trying to recover the
land that was promised to them for schools. For example, Utah
did obtain the land it was promised and every school district in
Utah receives funds that comes from the investment of the school
lands. Alaska did obtain title to some of its land and there
was an effort to get accounting of how school portions were used
and why they don't get them. If the movement to obtain the
lands that were promised for schools arose, she wasn't sure
Alaska school districts would necessarily receive more funding
since those places where it has been most successful is where
the funding comes from property taxes. However, if Alaska
school districts were able to obtain funds from these lands, she
was afraid it would supplant state funding and ultimately
schools wouldn't receive more money. Therefore, she expressed
organizations viewing HB 364 as a boon to be cautious.
9:13:39 AM
REPRESENTATIVE AUSTERMAN expressed the need for legislators to
be totally aware of the results of their actions when passing a
budget. He then expressed interest in obtaining a list from DOR
of all of the available tax credits and the amount of each,
particularly in terms of the cumulative effect.
9:14:33 AM
REPRESENTATIVE CISSNA expressed the need to look at the total
picture in order to avoid creating silos. She then asked if
other tax credits require reporting in order to determine
whether other tax credits have resulted in successes.
CHAIR MUNOZ informed the committee that in Juneau a local
company made a donation, which was eligible for the educational
tax credit, to the high school that established a training
program.
9:16:45 AM
REPRESENTATIVE SADDLER pointed out that the federal and state
governments provide grants to support homeless and detox
programs. He inquired as to whether there has been any estimate
of the response of the relatively small pool of large donors to
this proposed tax credit.
MR. HARVEY said he would appreciate the opportunity to review
that for the committee and inform it of his findings.
9:18:02 AM
REPRESENTATIVE SADDLER directed attention to the list of
Anchorage area homeless shelters, in particular the Chalet Alley
in Eagle River. The Chalet Alley was advertised as one bedroom
in a private home for a mother and child seeking a new start.
He then inquired as to how many facilities would qualify for
this proposed tax credit.
9:18:36 AM
CHAIR MUNOZ related her understanding that the possible
amendment from Representative Austerman would be to specify the
existing facilities that would be eligible in order to thwart
any confusion for the department.
9:18:50 AM
REPRESENTATIVE SADDLER inquired as to who was the driver of this
legislation.
MR. HARVEY answered that several homeless organizations
approached a Senator and the Senate Community and Regional
Affairs Standing Committee regarding the idea and possible
funding opportunities. The idea came to this committee from the
Senate Community and Regional Affairs Standing Committee.
9:19:57 AM
REPRESENTATIVE SADDLER acknowledged that there are many well-
meaning people, but asked whether there is any way to ensure
funds go to the most effective programs.
9:20:25 AM
REPRESENTATIVE DICK related his belief that corporations will
determine where to best spend their funds.
9:20:57 AM
CHAIR MUNOZ announced that HB 364 would be held over.
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