Legislature(2013 - 2014)
04/12/2013 01:12 AM House FIN
| Audio | Topic |
|---|---|
| Start | |
| SB83 | |
| SB65 | |
| SB27 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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."
1:14:04 AM
Representative Holmes MOVED to adopt Amendment 1. Co-Chair
Stoltze OBJECTED for discussion.
Page 1, line 3, following "Code;":
Insert "relating to the assignment of certain tax
credits;"
Page 1, following line 8:
Insert a new bill section to read:
"* Sec. 2. AS 43.55 is amended by adding a new
section to read:
Sec. 43.55.029. Assignment of tax credit certificate.
(a) An explorer or producer that has applied for a
production tax credit under AS 43.55.023(a), (b), or
(l) or 43.55.025(a) may make a present assignment of
the production tax credit certificate expected to be
issued by the department to a third-party assignee.
The assignment may be made either at the time the
application is filed with the department or not later
than 30 days after the date of filing with the
department. Once a notice of assignment in compliance
with this section is filed with the department, the
assignment is irrevocable and cannot be modified by
the explorer or producer without the written consent
of the assignee named in the assignment. If a
production tax credit certificate is issued to the
explorer or producer, the notice of assignment remains
effective and shall be filed with the department by
the explorer or producer together with any application
for the department to purchase the certificate under
AS 43.55.028(e).
(b) To be effective, the assignment does not require
the approval or consent of the department. The
assignment must, at a minimum,
(1) be made in writing and signed by an officer or
legally qualified agent of the explorer or producer
making the assignment and the assignee, respectively;
(2) identify the explorer or producer making the
assignment, the assignee in whose favor the assignment
is being made, and the production tax credit
application that is the subject of the assignment;
(3) define the interest in the production tax credit
being assigned, expressed as either an amount in
dollars, which may not exceed 90 percent of the credit
applied for, or a percentage of the credit to be
issued by the department;
(4) specify an account with a bank located in the
state, with sufficient information for the electronic
transfer of funds, to receive any future proceeds from
the purchase of the tax credit certificate under AS
43.55.028(e);
(5) cite this section and acknowledge that, once
filed with the department, the assignment is
irrevocable and cannot be modified without the written
consent of the assignee.
(c) An assignment complying with this section creates
a property interest owned by the assignee in the
application and any production tax credit certificates
issued by the department to the explorer or producer
and any future proceeds resulting from the
application, in the amount or to the extent set out in
the assignment. An assignee may create a valid and
enforceable security interest in that property as
otherwise provided by law.
(d) Notwithstanding any other provision of law, and
to the maximum extent permitted under federal laws, an
assignment complying with this section shall give the
assignee a first priority claim, not dischargeable in
bankruptcy, against the proceeds received by the
explorer or producer, including its estate, trustee or
other representative, resulting from the production
tax credit application that is the subject of the
assignment under this section, if the assignee has
taken the steps necessary under state and federal law
to perfect a security interest in the assignment.
(e) Nothing in this section affects the terms and
conditions otherwise required for an explorer or
producer to qualify for a production tax credit or the
determination by the department of the amount of
credit the explorer or producer is qualified to
receive.
(f) Neither the state nor the department, or any
other agency, officer, or employee of the state, shall
be subject to suit or any claim arising out of or in
connection with an assignment made under this section,
whether by act or omission.
(g) The department may adopt regulations to carry out
the purposes of this section."
Representative Holmes explained that the amendment would
allow gas producers the ability to receive credits, which
could be pledged as collateral on loans to facilitate
additional drilling. The language was vetted through
Department of Revenue (DOR) and Department of Law (DOL).
The amendment specified hold harmless language for the
state. Requirements for credit qualification were not
affected for the explorer/producer.
1:16:32 AM
BRUCE TANGEMAN, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
stated that the department viewed the amendment as "solid."
The amendment would help further the goal of opening
private equity markets to the smaller investors in the
state.
Representative Wilson asked if the amendment would allow
similar advantages to producers on the North Slope.
Representative Holmes believed that the amendment applied
only to Cook Inlet and Middle Earth.
1:18:27 AM
Representative Gara asked for an estimate of the bill's
potential revenue cost for the state. Mr. Tangeman replied
that the amendment would not cost the state in revenue
because of the existing estimates and projections for tax
credits. The projections for tax credits would remain the
same with the introduction of a third party.
Representative Gara asked if the bill would result in less
oil revenue from the exchange of tax credits. Mr. Tangeman
replied no and stated that a company must continue to
qualify and apply for the tax credit. The change was the
inclusion of a third party in the transaction.
Senator Micciche added that the tax credits would remain
the same. The ability to assign credits for collateral was
different with the amendment. The goal was to bring
additional gas to Cook Inlet consumers. The fiscal note was
zero, but the benefit to smaller producers would be great.
1:20:36 AM
Representative Kawasaki asked about the introduction of the
third party. He asked if the certificate could be used
against a tax liability. Mr. Tangeman replied that the
third party was a lender who would work with the small
company. The credit would flow to the third party lender
and either remain with the lender as collateral or transfer
to the small company.
Senator Micciche stated that the tax credit was a real
asset that would be used as collateral to reduce the cost
of the loan.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 1 was ADOPTED.
1:22:42 AM
Representative Munoz MOVED Amendment 2. Co-Chair Stoltze
OBJECTED for discussion.
Page 1, line 1, following "Act":
Insert "making the income received by a regional
aquaculture association or a salmon hatchery permit
holder from the sale of salmon or salmon eggs under or
from a cost recovery fishery exempt from the
corporation income tax;"
Page 1, line 3, following "Code":
Insert "providing for an effective date by repealing
the effective date of sec. 8, ch. 51, SLA 2012;"
Page 1, following line 4:
Insert new bill sections to read:
"* Section 1. AS 43.20.012(a) is amended to read:
(a) The tax imposed by this chapter does not
(1) apply to an individual;
(2) apply to a fiduciary; [OR]
(3) for a tax year beginning after December 31, 2012,
apply to an Alaska corporation that is a qualified
small business and that meets the active business
requirement in 26 U.S.C. 1202(e) as that subsection
read on January 1, 2012; or
(4) for a tax year beginning after June 30, 2007,
apply to the income received by a regional association
qualified under AS 16.10.380 or nonprofit corporation
holding a hatchery permit under AS 16.10.400 from the
sale of salmon or salmon eggs under AS 16.10.450 or
from a cost recovery fishery under AS 16.10.455.
* Sec. 2. AS 43.20.012(a), as amended by sec. 1 of
this Act, is repealed and reenacted to read:
(a) The tax imposed by this chapter does not apply to
(1) an individual;
(2) a fiduciary; or
(3) the income received by a regional association
qualified under AS 16.10.380 or nonprofit corporation
holding a hatchery permit under AS 16.10.400 from the
sale of salmon or salmon eggs under AS 16.10.450 or
from a cost recovery fishery under AS 16.10.455."
Renumber the following bill sections accordingly.
Page 1, line 5:
Delete "Section 1"
Insert "Sec. 3"
Page 1, following line 8:
Insert new bill sections to read:
"* Sec. 4. AS 43.20.012(c) and 43.20.012(d) are
repealed July 1, 2023.
* Sec. 5. Section 8, ch. 51, SLA 2012, is repealed.
* Sec. 6. The uncodified law of the State of Alaska
is amended by adding a new section to read:
TRANSITION; CLAIM FOR CREDIT OR REFUND.
Notwithstanding the limitation on the period in which
a person may file a claim for credit or refund of a
tax paid under AS 43.20, a person that has paid a tax
under AS 43.20 on income that is exempt under AS
43.20.012(a)(4), as enacted by sec. 1 of this Act, may
file a claim for credit or refund on the tax paid on
the exempt income within two years after the effective
date of sec. 1 of this Act."
Renumber the following bill sections accordingly.
Page 1, line 11:
Delete "Section 1"
Insert "Section 3"
Page 1, line 12:
Delete all material and insert:
"* Sec. 8. Section 45, ch. 51, SLA 2012, is
repealed.
* Sec. 9. Section 2 of this Act takes effect July
1, 2023.
* Sec. 10. Except as provided in sec. 9 of this
Act, this Act takes effect immediately under AS
01.10.070(c)."
Representative Munoz explained the amendment clarified in
statute that regional aquiculture associations or salmon
hatcheries were exempt from state corporate income tax. The
provision allowed for the repayment of corporate taxes paid
due to a federal audit. The audit resulted in an automatic
imposition of the state income tax on the federal charge
levied against Southern Southeast Regional Aquiculture
Association. The hatcheries were always considered exempt
from state income tax and were initially established as
nonprofit associations with the cost recovery model, which
allowed them to derive revenue from the salmon sold. The
amendment would confirm the hatcheries' exemption in
statute.
1:24:24 AM
Co-Chair Stoltze asked what had triggered the hatchery's
scrutiny. Representative Munoz replied the IRS audited two
nonprofit hatcheries in 2010. Some cost recovery operations
were considered taxable by the IRS, which led to
arbitration and a settlement with a payment including back
payments to 2008 of $2.15 million. The state automatically
implemented the corporate income tax on the facility. Co-
Chair Stoltze asked if the corporate income tax was
triggered by the federal income tax. Representative Munoz
replied in the affirmative.
1:25:46 AM
Representative Wilson asked how the federal government was
involved. Representative Munoz replied that the state
continued to challenge the levy of federal taxes. The
impact of federal taxes could eventually affect all Alaskan
hatcheries, which would ultimately affect the number of
fish available for commercial harvest.
1:27:00 AM
Vice-Chair Neuman asked Representative Munoz if a bill in
another committee addressed a similar issue. Representative
Munoz responded that the amendment was proposed to her by
Representative Peggy Wilson.
SENATOR MICCICHE, stated that he initially declared a
conflict with the amendments since the bill originally
addressed C corporation look-back taxes. He had come to
believe that both amendments fit well into the legislation.
He noted that the companion bill was hosted by
Representative Costello.
1:29:11 AM
REPRESENTATIVE PEGGY WILSON, stated that nonprofit
hatcheries had never been taxed in Alaska and she
questioned the wisdom of the process. To recover the costs,
hatcheries would require more fish, which would affect
salmon numbers in Alaska.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 2 was ADOPTED.
Representative Costello discussed the fiscal note from DOR.
She stated that the fiscal note showed indeterminate change
in revenues.
Representative Munoz MOVED to REPORT HCS CSSB 83(FIN) as
amended out of committee with individual recommendations
and the accompanying fiscal note. There being NO OBJECTION,
it was so ordered.
HCS CSSB 83(FIN) was REPORTED out of committee with a "do
pass" recommendation and with one previously published
indeterminate fiscal note: FN1(REV).
1:33:56 AM
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