Legislature(1997 - 1998)
02/24/1997 05:00 PM FSH
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 123 - TAX OBLIGATION LOAN PROGRAM Number 2263 CHAIRMAN AUSTERMAN announced the next order of business to be HB 123, "An Act relating to the repeal of the termination date of the Federal Tax Obligation Loan Program under the Commercial Fishing Loan Act; and providing for an effective date" and stated that Tom Wright will present the bill to the committee. Number 2272 TOM WRIGHT, Legislative Assistant to Representative Ivan Ivan, stated that Representative Ivan sent a letter to Senator Stevens, Senator Markowski and Representative Young, in December after the sale of the permit by the IRS, to protest the action. He stated that HB 123 repeals Sections 2, 9, 10 of SB 251. He stated that it repeals the termination date of the Tax Obligation Loan Program. Number 2386 REPRESENTATIVE OGAN asked it there were representatives from the Division of Investments and if they could come forward. Number 2394 GREG WINEGAR, Juneau Lending Branch Manager, Division of Investments, Department of Commerce and Economic Development, stated that the division administers the Tax Obligation Loan Program as a part of the commercial fishing revolving loan fund. He stated that the program came into existence because there were a lot of commercial fishermen having difficulties with the IRS. He stated that the program has helped 220 individuals get squared away with the IRS and resulted in $4.7 million being collected. He stated that there continues to be a need for the program although to a lesser extent. He stated that about one-third of the loans are delinquent at this time however, most of them have an extension and are secured loans. He stated that it is a revolving fund that loans out the money and the fund has not recently received any general fund money. He stated that there is a zero fiscal note. TAPE 97-6, SIDE B Number 010 REPRESENTATIVE OGAN asked what the ratio of collateral is. Number 022 MR. WINEGAR replied that it varies depending on the tax bill and the amount that is borrowed but in no case would it exceed 90 percent, so there is always a 10 percent cushion and in many cases it is much greater than that. Number 028 REPRESENTATIVE OGAN asked it he could clarify that, 90 percent of what to get a 10 percent cushion. Number 041 MR. WINEGAR replied if you had a $10,000 permit the most that we would be able to loan by law would be $9,000, so there would be a ten percent cushion. Number 044 REPRESENTATIVE OGAN stated that you are basically loaning by the value of the permit. He asked if the permits are holding their value. Number 056 MR. WINEGAR stated that most of them are holding their value while some of them are declining, but in many cases the amount of the taxes owed is far less then the value of the permit. Number 067 REPRESENTATIVE OGAN stated that 10 percent does not seem to be much of a cushion and wondered if this would undermine the value of the revolving fund. Number 090 MR. WINEGAR responded that in most of the cases there is plenty of collateral. Number 108 REPRESENTATIVE MARK HODGINS asked what the loan portfolio size is. Number 118 MR. WINEGAR responded that right now the total portfolio is about $75 million. He stated that through the life of the program they have loaned out about $300 million. Number 125 REPRESENTATIVE HODGINS asked if there was interest income that helps to turn money for that fund. Number 138 MR. WINEGAR stated that it is completely revolving and has been since 1985, so all of the funds that have been used to cover the program and to make loans have come out of those repayments to the fund. Number 143 REPRESENTATIVE HODGINS asked if they would take a fishing permit if a loan was not paid back. Number 152 MR. WINEGAR responded that it could happen through this program, however, it is a very last resort. He stated that there is a lot of latitude to work with individuals. Number 168 REPRESENTATIVE HODGINS stated that it seems that we would be transferring ownership, instead of the IRS getting the permits the state would be getting the permits. Number 173 MR. WINEGAR stated that there could be that situation but the division has a much different interest in how the program is run. Number 177 CHAIRMAN AUSTERMAN stated that the division has not had a default because they have always been able to work it out. He stated that if there is a default he would rather it be the state of Alaska that winds up with the permit rather than the IRS. Number 188 REPRESENTATIVE KUBINA stated that he would like to echo that. He stated that it is a program that is paying for itself, it has a zero fiscal note and the division would not loan money if they were going to lose it. He stated that he was astounded with the way the IRS has worked with the state and with the people. Number 227 REPRESENTATIVE KUBINA made a motion to move HB 123, with individual recommendations and zero fiscal notes. Number 230 CHAIRMAN AUSTERMAN asked if there was an objection. Number 234 REPRESENTATIVE OGAN stated that he did not have an objection but he wanted to state that he is worried that we are further enabling people to not take care to pay their taxes because the state will help them out. Number 264 REPRESENTATIVE HODGINS stated that there are a lot of people in the rural areas that do not realize there is an IRS so we need to help these people by continuing on with the program. Number 305 CHAIRMAN AUSTERMAN stated that this program has been around for quite some time and we are not trying to create something new and the default rate is not high. Number 330 REPRESENTATIVE OGAN stated that there could be a high default rate but since they have deferred loans they are not calling defaults. Number 348 CHAIRMAN AUSTERMAN asked if there was an objection. Hearing none HB 123 was moved out of the House Special Committee on Fisheries.