Legislature(1997 - 1998)

02/24/1997 05:00 PM FSH

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
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.              

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