Legislature(2013 - 2014)HOUSE FINANCE 519
04/11/2013 09:00 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB21 | |
| SB85 | |
| SB83 | |
| SB22 | |
| SB88 | |
| SB47 | |
| SB21 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 21 | TELECONFERENCED | |
| + | SB 47 | TELECONFERENCED | |
| + | SB 83 | TELECONFERENCED | |
| + | SB 85 | TELECONFERENCED | |
| + | SB 62 | TELECONFERENCED | |
| += | SB 18 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 22 | TELECONFERENCED | |
| += | SB 7 | TELECONFERENCED | |
| += | SB 88 | TELECONFERENCED | |
| + | SB 65 | TELECONFERENCED | |
| += | SB 27 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 83(FIN)
"An Act relating to the corporation income tax;
relating to the computation of interest under the
look-back method applicable to long-term contracts in
the Internal Revenue Code; and providing for an
effective date."
Representative Costello moved the bill before the
committee.
10:27:28 AM
SENATOR PETER MICCICHE, SPONSOR, communicated that in
addition to its focus on corporate income tax, the bill was
about fairness and simplicity. He detailed that currently
for state and federal corporate income tax purposes
contractors undertaking large multi-year projects such as
highways, schools, and university buildings were required
to estimate their total profit on a project and to pay
income tax on the portion of the project completed in a
given tax year. He stated that it was impossible to predict
in the first year of the project what the actual cost or
profit would be. He furthered that upon completion of the
project and once the profit amount had been determined, the
contractor filed look-back taxes (an amended return). He
expounded that a contractor either owed additional taxes or
received a refund based on whether the profit had been over
or under estimated; interest was owed on the additional
taxes due or the refund to be paid.
Senator Micciche relayed that although the Internal Revenue
Service (IRS) code had a specific provision for over and
under payments of estimated taxes for the multi-year
projects, existing state laws considered the payments to be
delinquent and applied an 11 percent interest rate. The
state made no distinction between its system of estimating
taxes based on a contractor's best knowledge and a tax
payer who did not make a timely filing. He believed there
should be a distinction. He stated that the bill would tie
the interest rate to a recognized index as opposed to the
11 percent interest currently paid by the state and
contractors. He noted that the current interest rates
charged by the state were outdated.
Senator Micciche expounded that the bill would correct the
interest issue, simplify the process for contractors, and
adopt the IRS bulletin rates for look-back taxes on long-
term projects allowing contractors and the state to use the
same interest pay schedules for state taxes as the federal
system. Currently the interest rate was 2 percent for under
payments when the profit had been underestimated and over
payments when the state owed money in the amount of $10,000
or less; interest was currently levied at 0.5 percent on
amounts greater than $10,000. He relayed that the rate
fluctuated and was published quarterly. The CS specified
the tax policy would be in effect for the entire 2013
calendar tax year.
10:30:10 AM
Co-Chair Stoltze stated that there were two potential
amendments. He expressed desire for a more thorough
discussion on the legislation and how the amendments would
impact it. He thought the second amendment related to
helping commercial seiners in Southeast.
Senator Micciche noted that the second potential amendment
related to hatcheries. He reiterated the bill focused on a
fairness issue. He pointed to multiple letters of support
from general contractors, the Association of General
Contractors, bankers, public accountants, surety and
bonding brokers, and others. He emphasized the bill would
be good for the state. He relayed that he would review the
amendments. He stated that he had worked on the bill all
session and would prefer to not include items that may
prevent the bill from moving forward in the current year.
Co-Chair Stoltze communicated his desire for a deliberative
discussion.
JOHN MACKINNON, EXECUTIVE DIRECTOR, ASSOCIATED GENERAL
CONTRACTORS OF ALASKA, was available for questions.
Representative Costello asked for Mr. Mackinnon to comment
on the bill.
Mr. Mackinnon testified in support of the bill. He stated
that an 11 percent interest rate had been in place since
the early 1980s. He remarked that his first home loan had
been over 10 percent in 1981. The bill brought the rate in
line with the current federal rate and made a clear
distinction that the returns were amended. He opined that
referring to an amended return as a delinquent tax unfairly
characterized contractors' and C corporations' efforts to
be honest. He furthered that the current system unfairly
penalized C corporations, given that they were the only
businesses paying taxes to the state. He explained that
most contractors were limited partnerships, sole
proprietorships or S corporations that paid no taxes.
Co-Chair Stoltze recalled that the state had opposed the
imposition of the interest rate when it had been litigated
against by out-of-state commercial fishermen in the Carlson
case. He communicated that the state had gone to the
supreme court on the unfairness of the rates. He believed
the state was on the record related to its position on the
interest rates.
10:35:45 AM
IDONNA PIPER NELSON, PARTNER, DAVIS CONSTRUCTORS AND
ENGINEERS, ANCHORAGE (via teleconference), spoke in favor
of the bill. She relayed that the company had chosen to be
a C corporation; it was not objecting to paying the look-
back taxes, but wanted to be treated the same way by the
state as it was by the federal government. She had begun
work on the issue with legislators during the past several
years. She thanked the committee and urged the passage of
the legislation.
Co-Chair Stoltze CLOSED public testimony.
Co-Chair Stoltze discussed the amendments and asked
sponsors to provide them to his office.
SB 83 was HEARD and HELD in committee for further
consideration.
[Note: The meeting was recessed at 10:41 p.m. until 1:12
a.m. on April 12, 2013 and CSSB 83(FIN) was reported from
committee at that time. See April 12, 2013, 1:12 a.m.
minutes for detail.]
10:38:28 AM
RECESSED
1:53:19 PM
RECONVENED