Legislature(2009 - 2010)CAPITOL 106
03/12/2010 08:00 AM House EDUCATION
| Audio | Topic |
|---|---|
| Start | |
| HB297 | |
| HB367 | |
| HB350 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 413 | TELECONFERENCED | |
| *+ | HB 393 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 297 | TELECONFERENCED | |
| += | HB 367 | TELECONFERENCED | |
| += | HB 350 | TELECONFERENCED | |
HB 367-TAX CREDITS FOR EDUCATIONAL CONTRIBUTIONS
9:09:17 AM
CHAIR SEATON announced that the next order of business would be
HOUSE BILL NO. 367, "An Act relating to tax credits for cash
contributions by taxpayers that are accepted for certain
educational purposes and facilities; and providing for an
effective date."
REPRESENTATIVE MUNOZ moved to adopt the committee substitute
(CS) for HB 367, Version E, as the working document.
9:09:32 AM
CHAIR SEATON objected for the purpose of discussion.
9:09:45 AM
KENDRA KLOSTER, Staff to Representative Cathy Munoz, Alaska
State Legislature, informed the committee Version E incorporates
the amendment previously adopted, and also removes Sec. 4 of
Version R by request from the Department of Revenue (DOR). She
explained that according to DOR, the general rule in tax
administration is that tax credits are not refundable, do not
enjoy "carry-forward," and cannot be transferred or sold unless
the privilege is written into the law. Further, the "default"
interpretation is that a tax credit is only good to apply in the
same tax year. Therefore, if the language in Sec. 4, Version R,
is included in the bill, it is suggested that credit in these
sections is "silent" and may be refunded, carried-forward, or
transferred.
9:12:08 AM
CHAIR SEATON confirmed that Sec. 4 does not appear in Version E,
and asked for further changes, if any.
9:12:22 AM
REPRESENTATIVE GARDNER asked whether Version E provides that
taxpayers may sell, trade, transfer, or apply tax credits to
subsequent years.
MS. KLOSTER said no, and added that DOR's intent was to ensure
consistency with other insurance tax credit law, and to avoid
setting a precedent in statute.
9:13:41 AM
REPRESENTATIVE BUCH asked for a brief summary of the bill.
9:14:07 AM
MS. KLOSTER summarized that current law allows a 50 percent tax
credit for the first $100,000 donation and an 100 percent tax
credit for the second $100,000 donation. The proposed bill
extends a 50 percent tax credit for over $200,000 in donations,
adds a $25,000,000 cap, and allows donations to facilities and
programs.
9:14:56 AM
CHAIR SEATON removed his objection thus CSHB 367, Version E, was
the working document before the committee.
9:15:15 AM
REPRESENTATIVE P. WILSON questioned the zero fiscal note
attached to the bill. She pointed out that as the proposed
legislation allows entities tax credits against their charitable
contributions, the state will collect less tax income, and the
fiscal note should reflect this loss.
9:15:36 AM
MS. KLOSTER directed attention to the fiscal note from DOR.
REPRESENTATIVE P. WILSON asked for clarification of the fiscal
note.
MS. KLOSTER deferred to DOR.
9:16:14 AM
ROBYNN WILSON, Income Audit Manager, Tax Division, Department of
Revenue (DOR), informed the committee DOR provided a fiscal note
dated 3/9/10. She directed attention to the analysis attached
to the fiscal note and explained that fiscal notes are
indeterminate on credit bills because the department has no way
of knowing who may take advantage of the tax credits. The
fiscal note indicated that for corporate application, the loss
to state revenue may be approximately $200 million, if all
corporate taxpayers take the maximum credit allowed by the
proposed legislation. In response to Chair Seaton, she added
that the $200 million estimate does not include losses from
other taxes such as mining license taxes and fish business
taxes.
9:18:43 AM
REPRESENTATIVE P. WILSON heard corporations are enthusiastic
about the bill, and estimated that the loss of income to the
state could be $50,000,000.
9:20:11 AM
REPRESENTATIVE GARDNER asked whether there is active
participation within the existing tax credit structure.
MS. WILSON said approximately 15 corporate taxpayers took
advantage of the credit during the last fiscal year. Three
corporations took advantage of the insurance premiums tax, one
corporation for fisheries resource landing tax, and three
corporations for fisheries business tax. No corporation
taxpayers took advantage of the program for oil and gas
production tax, nor for property tax. Ms. Wilson advised the
current limit of $150,000 probably causes a corporation that is
subject to all three taxes, to direct all of its credit under
one tax.
9:22:08 AM
REPRESENTATIVE GARDNER requested a list of the claims for the
last three years, including the donations and the fiscal impact
to the state.
MS. WILSON responded in the last fiscal year the total claims
for credits were approximately $2,000,000, based on total
contributions of $3,000,000. However, that figure does not
include possible contributions above the limit for tax credits.
9:23:17 AM
CHAIR SEATON concluded $3,000,000 in contributions and
$2,100,000 in credits claimed meant corporations took credits up
to the current limit of $200,000, although more contributions
could have been made, but not reported.
MS. WILSON said that is correct, and added that contributions
could have been over and above $3,000,000, but the tax return
only indicated the $200,000 that generated the credit.
9:24:24 AM
REPRESENTATIVE MUNOZ asked for the number of corporate taxpayers
in the state.
MS. WILSON answered that there are about fifteen thousand
corporations, but only one-half pay income tax in the state.
REPRESENTATIVE MUNOZ observed from 7,500 corporations, about 11
donors take advantage of the tax credit.
MS. WILSON indicated yes, and added that some of these
corporations may not be paying taxes due to losses or other
reasons.
9:25:24 AM
REPRESENTATIVE GARDNER asked whether all of the taxpayers who
make donations to the University of Alaska (UA) also receive
federal tax relief.
MS. WILSON said yes, and continued to say contributions to UA
would be subject to the federal charitable contribution
deduction and therefore, also qualify for a state income tax
benefit.
9:26:09 AM
REPRESENTATIVE P. WILSON gave the example of a corporation with
taxes of $100,000 that contributes $200,000 to charitable
entities. She asked for the difference in income tax due
between the example corporation and one with an equal tax
liability that makes no charitable contributions.
MS. WILSON advised that big corporate taxpayers are often doing
business in multiple states and/or countries. If said
corporation does 10 percent of its business in Alaska, the state
would tax 10 percent of the corporation's federal taxable
income. Thus, if a corporation contributes $500,000 to UA, it
would deduct $500,000 from its federal tax liability, Alaska
would receive 10 percent of the federal taxable income, and the
corporation would receive a benefit of its apportioned
charitable contributions. In response to Chair Seaton, she
estimated that the corporate Alaska taxpayer in the example
would receive a deduction for $50,000. However, under current
statute, the state allows either the deduction for the
charitable contribution, or the tax credit, but not both. Ms.
Wilson concluded that for the state's purposes, said corporation
would be allowed an $150,000 credit, which comes directly off
the state income tax.
9:31:18 AM
REPRESENTATIVE P. WILSON asked whether the deduction and the
credit would be added together for a total of $200,000.
MS. WILSON further explained that for state purposes, the
corporation would receive the credit of $150,000, and she
assumed the federal tax benefit would be approximately $175,000.
9:32:05 AM
CHAIR SEATON confirmed that a corporation in Alaska that does
not receive the credit can receive a $50,000 deduction, but not
the $50,000 deduction and the $150,000 tax credit.
MS. WILSON said correct.
9:32:39 AM
REPRESENTATIVE P. WILSON re-stated her question as to the
difference in taxes between a corporation that participates and
one that does not, in order to determine the incentive for
participation, and to determine the impact to the state in lost
revenue.
9:33:50 AM
REPRESENTATIVE MUNOZ estimated the corporate tax liability to
the state in the example was 10 percent, or $50,000.
MS. WILSON clarified that her reference was to apportionment in
a multistate environment. She changed her example to that of a
corporation operating only in Alaska, and said that an Alaskan
corporation, at the top of the tax bracket, that makes a
charitable contribution to UA could enjoy a 9.4 percent tax
break. The corporation then would have a choice of whether to
take the tax deduction or the proposed tax credit: a tax
deduction of about $18,000, or a tax credit of $150,000. Ms.
Wilson provided a personal tax liability example of the
difference between a mortgage interest deduction and a childcare
expense tax credit; in fact, it is "always a higher benefit to
look at a credit, than a deduction."
9:36:11 AM
CHAIR SEATON proposed the scenario of a corporation that
contributed to the construction of a $10,000,000 vocational
center.
MS. WILSON advised the bill would provide a 50 percent rate on
the incremental, additional contribution equal to a tax credit
of $5,000,000, compared to a deduction that would equal about
$940,000.
CHAIR SEATON observed the benefit would result in a $10,000,000
building that a corporation could build for a $5,000,000
investment.
9:38:08 AM
REPRESENTATIVE P. WILSON opined the difference between a
liability of $940,000 and $4,000,000 would be an incentive for
corporations.
CHAIR SEATON affirmed that the proposed bill provides an
incentive for corporations to make large contributions to
educational institutions. In fact, a corporation could build a
needed facility "from out of their corporate pocket, instead of
the state bonding, or the state ... building the building for
100 percent.... Do we want to provide that kind of incentive
... for that kind of response from corporations?"
9:39:50 AM
REPRESENTATIVE P. WILSON asked whether a group affiliated with a
university, such as a foundation, could contribute to UA and pay
"half of what they normally would pay." She again expressed
concern about the possible loss of state revenue.
9:40:47 AM
MS. WILSON expressed her understanding that the University of
Alaska Foundation was a tax exempt organization.
REPRESENTATIVE P. WILSON acknowledged the proposed legislation
would be beneficial to universities; however, she questioned the
impact of the legislation on the general fund.
9:41:49 AM
REPRESENTATIVE GARDNER re-stated her interest in the impact of
tax credits that have been granted under legislation in previous
years.
CHAIR SEATON pointed out that many contributions are limited by
the $200,000 cap. He disagreed with a policy that allows
taxpayers to direct where their taxes are credited, which is the
effect of an 100 percent tax credit. Chair Seaton then asked
for confirmation on whether a corporation that was currently
receiving tax credits for the exploration and development of oil
and gas, would qualify for additional credits under the proposed
bill.
9:44:19 AM
MS. WILSON clarified that the current statute provides for an
overall credit maximum of $150,000. As most of the oil and gas
related taxpayers are subject to income tax, production tax, and
property tax, these corporations have a choice of where to apply
the $150,000 tax credit. Most, for the sake of convenience,
apply the tax credit to income tax. Further, the statutes do
not direct how credits would be applied.
9:45:35 AM
CHAIR SEATON called attention to page 3, lines 14-15, which
read:
(2) when combined with contributions that are the
basis for credits taken during the taxpayer's tax year
under AS 21.89.075, AS 43.20.014, AS 43.55.019, AS
43.56.018, AS 43.65.018, AS 43.75.018, or AS
43.77.045, result in the total amount of credits
exceeding $25,000,000 [EXCEED $150,000].
MS. WILSON explained that the above section does not address
credits, but provides that notwithstanding all of the taxes that
apply to an entity, the maximum tax credit allowable is
$150,000.
9:46:58 AM
CHAIR SEATON noted that Version E of the bill raised the limit
on tax credits to $25,000,000 and asked whether an oil company
that receives $100,000,000 in oil production tax credits, would
be allowed to receive additional tax credits for contributions
to educational organizations.
MS. WILSON began another example . . .
9:48:14 AM
CHAIR SEATON returned attention to page 3, lines 14-17, and
asked:
Doesn't that mean that the total amount of credits
that they can get from all of these combined is
$25,000,000 for a year, and you can't take this
education one ... when combined with the contributions
for these others?
9:49:12 AM
MS. WILSON, in response to Chair Seaton, agreed to provide the
committee a written explanation of this section. She advised
that these tax sections of the bill refer only to the education
credits; for example, AS 21.89.070 would be the education tax
credit applicable to the insurance tax. Thus the sections do
not address any other sort of credit, such as exploration
credits, but only establish a limit on education credits at
$25,000,000.
9:50:13 AM
CHAIR SEATON said a further explanation in writing was not
necessary.
9:50:23 AM
REPRESENTATIVE P. WILSON concluded that a petroleum corporation
could apply other tax credits, and then contribute to an
education entity and qualify for education tax credits of up to
$25,000,000.
MS. WILSON said yes, and added that a corporation with
sufficient tax liability could apply other credits; in fact, the
Alaska statute is largely silent with respect to the order of
credits. An exception is the gas development credit, which must
be applied first, due to carry-forward provisions.
CHAIR SEATON requested that Ms. Wilson provide a memo regarding
the order of credits and the effect of carry- forward
provisions.
9:53:06 AM
The committee took an at-ease from 9:53 a.m. to 9:54 a.m.
9:54:39 AM
REPRESENTATIVE P. WILSON also requested advice from DOR on how
to limit the scope of the tax credit provisions.
9:55:47 AM
CHAIR SEATON further requested a spreadsheet depicting the
effects of the bill on hypothetical taxpayers with a tax
liability of $5,000,000.
MS. WILSON expressed her understanding that the requested
scenario depicts a $5,000,000 tax liability over and above the
current $200,000.
9:56:29 AM
REPRESENTATIVE SEATON modified the scenario to a maximum of
$25,000,000.
MS. WILSON clarified that the contribution of the hypothetical
taxpayers would be $50,000,000, so that the tax credit is
maximized, and the scenario addresses the maximum impact to
state revenues.
9:56:56 AM
REPRESENTATIVE MUNOZ spoke about the perception that 7,500
corporate taxpayers would take advantage of the proposed tax
credits and opined that is not realistic, given that only 11
participate now. She expressed her belief that the committee
should focus on whether the state should have a policy to
encourage private investment into the infrastructure of the
state. Representative Munoz said that although she was not
opposed to the committee's discussion on the financial impact of
the bill, she pointed out that the financial details of the bill
are the purview of the House Finance Committee.
9:57:58 AM
CHAIR SEATON stated that understanding the bill was necessary to
make informed policy.
9:58:14 AM
REPRESENTATIVE GARDNER requested a list of the participating
taxpayers, the amounts of their claimed donations, and the tax
impact to the state for the past three years.
MS. WILSON, in response to Chair Seaton, affirmed that the names
of the taxpayers cannot be disclosed and details of taxpayers'
returns may not be provided.
9:59:41 AM
REPRESENTATIVE GARDNER questioned whether someone could claim a
tax credit for a donation to a non-profit without disclosure.
9:59:58 AM
MS. WILSON confirmed that DOR cannot disclose that information,
but she was unsure whether the recipient organization may.
REPRESENTATIVE GARDNER limited her request to the total amount
of donations made and claimed, and the tax benefits thereof.
MS. WILSON agreed.
10:00:52 AM
CHAIR SEATON stated that HB 367 was held over.
10:01:01 AM
| Document Name | Date/Time | Subjects |
|---|---|---|
| FY02-11LocalEffortAssessed&educationWithMills-2Pager_10-22-09.xlsx |
HEDC 2/19/2010 8:00:00 AM HEDC 3/3/2010 8:00:00 AM HEDC 3/10/2010 8:00:00 AM HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM |
HB 350 |
| current program flow chart.docx |
HEDC 3/3/2010 8:00:00 AM HEDC 3/10/2010 8:00:00 AM HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM |
HB 350 |
| HB350 program flow chart.docx |
HEDC 3/10/2010 8:00:00 AM HEDC 3/12/2010 8:00:00 AM |
HB 350 |
| HB 367 Sponsor Statement.pdf |
HEDC 3/10/2010 8:00:00 AM HEDC 3/12/2010 8:00:00 AM HEDC 3/22/2010 8:00:00 AM HEDC 3/26/2010 8:00:00 AM |
HB 367 |
| Sponsor Statement HB 350.doc |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM |
HB 350 |
| HB 393 Sponsor Statement.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM HEDC 3/24/2010 8:00:00 AM HEDC 3/29/2010 8:00:00 AM HEDC 3/31/2010 8:00:00 AM |
HB 393 |
| HB 393 Charter School statutes.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM HEDC 3/24/2010 8:00:00 AM |
HB 393 |
| HB 393 Charter School Background.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM HEDC 3/24/2010 8:00:00 AM |
HB 393 |
| HB 297 Version E WorkDraft.pdf |
HEDC 3/12/2010 8:00:00 AM |
HB 297 |
| HB 297 Amendment Legal Memo.pdf |
HEDC 3/12/2010 8:00:00 AM |
HB 297 |
| HB 367 Workdraft version E.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/19/2010 8:00:00 AM |
HB 367 |
| sponsor statment HB 413.docx |
HEDC 3/12/2010 8:00:00 AM |
|
| Support public.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM HEDC 3/31/2010 8:00:00 AM |
HB 393 |
| AK Grade 10.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM HEDC 3/29/2010 8:00:00 AM |
HB 393 |
| Discret Grants.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM |
HB 393 |
| Support ltr fed dir.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM |
HB 393 |
| Per pupil fac aid.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM |
HB 393 |
| HB413-EED-ESS-3-10-10.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM |
HB 413 |
| back up AMYA.pdf |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM |
HB 413 |
| HB0413A.pdf |
HEDC 3/12/2010 8:00:00 AM |
HB 413 |
| Sponsor Statement HB 413 |
HEDC 3/12/2010 8:00:00 AM |
|
| sponsor statment HB413.docx |
HEDC 3/12/2010 8:00:00 AM HEDC 3/15/2010 8:00:00 AM |
HB 413 |