Legislature(1997 - 1998)
04/29/1997 03:12 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 194 - TAX CREDITS: CONTRIBUTIONS TO EDUCATION Number 2016 CHAIRMAN BUNDE announced the next item on the agenda was HB 194, "An Act relating to credits against certain taxes for contributions for educational purposes; and providing for an effective date." Number 2028 RICHARD S. CROSS, Deputy Commissioner, Office of the Commissioner, Department of Education, said this bill expands the opportunity for corporations in Alaska, who pay taxes, to get an additional tax credit for contributions to elementary and secondary schools. There is a current tax credit mechanism for contributions to the University of Alaska system. The Department of Education (DOE) feels that this opportunity will create relationships between corporations and school districts in the state, creating possibilities for students. The department hopes that the corporation's donation will be more than monetary, that it will create an opportunity to establish a working relationship. Educational possibilities ensue when people become involved in a child's education. He was here in support of this bill. Number 2089 CHAIRMAN BUNDE asked if the contributions have to be monetary or if they could be material with a monetary value. Number 2093 MR. CROSS answered that the contributions have to be monetary. Number 2096 REPRESENTATIVE VEZEY commented that this bill was similar to Representative Kott's bill regarding education technology. Number 2116 REPRESENTATIVE FRED DYSON referred to page 8, line 14, the mining business school district contribution tax credit. Number 2154 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division, Department of Revenue, said the state currently has a mining license tax. Mining operations pay on the income of their mining operations in Alaska. Section 21 allows a tax credit for contributions to school districts from anyone who is subject to the mine tax. This bill affects seven state taxes including; corporate income tax, fisheries, mining and oil severance. Number 2191 REPRESENTATIVE PORTER clarified that it was a fifty percent credit across the board. If you gave a dollar, then you would get a 50 cent credit. MR. BARTHOLOMEW explained that the current law for the education credit has two tiers in the education credit. Tier 1 is a 50 percent credit for the first $100,000. Tier 2 is a 100 percent credit for the next $100,000. This legislation proposes a tier 3 which is 50 percent of the next $150,000. The intent is to try to create a private/state match where new dollars other than state money are being put in the pie. MR. BARTHOLOMEW felt the fiscal note explained the DOR position. The advantage of HB 194 is that it brings in new dollars, even though the state will have to contribute. TAPE 97-37, SIDE B Number 0000 LARRY WIGET, Director of Government Relations, Anchorage School District, stated that the district supports extending the tax credit for cash contributions to public schools. He referred to a resolution by the Anchorage Chamber of Commerce. The chamber of commerce, in concept, supports building stronger school/business partnerships as does the Anchorage school district. Currently, there is a strong working relationship with the chamber of commerce in building additional school partnerships. There are approximately 200 school/business partnerships. The district hopes that this opportunity of providing cash contribution/tax credits would not only lead to cash contributions but a more formal engagement between businesses and the school district. MR. WIGET anticipated that no one would be making a cash contribution to be used anywhere the school district chose. He felt the money would be directed for a specific use. He commented that there was no history with this type of legislation and the school district was not sure how much money would ultimately be generated. He hoped other school districts within the state who have access to business, including schools in rural areas, will benefit from this bill. Number 0195 CHAIRMAN BUNDE mentioned that BP (Alaska) Inc. is donating truckloads of computers to school districts throughout Alaska. The first load leaves for Fairbanks tomorrow. This company has purchased $600,000 worth of software that will also be donated. He felt the business community was trying to provide support for the public schools. If the state could encourage and support businesses through some tax credits, then the state should do it. Number 0268 MR. WIGET said the Anchorage School District was appreciative of businesses within the Anchorage community who have stepped forward with their resources and made an investment. He mentioned that the Alaska Railroad takes the students on a train ride as well as having their personnel going into the schools to read to the students. He wanted the students to have a greater appreciation and understanding of what it is to be a member of the business community. Hopefully the students will aspire to careers and job opportunities which exist in fields other than those that they would normally be exposed to by their family or through the limited orientation that they would get in the classroom. Number 0332 REPRESENTATIVE GREEN referred to the fact that tier 1 and tier 2 encompass a lot of money and asked what currently happened with such donations. Number 0350 MR. WIGET believed that these donations only involved the university system. Number 0364 CHAIRMAN BUNDE explained that HB 194 would expand the program to kindergarten through twelfth grade. Number 0400 REPRESENTATIVE VEZEY referred to page 4, line 5, Section 7, and asked for an explanation of 26 U.S.C. 170. Number 0425 MR. BARTHOLOMEW answered that this language states that if you are going to make a contribution to a school and get a tax credit for it, you can't also take a business deduction. In tax language this is referred to as a double dip; taking both a deduction and a credit. The business would have to decide up front whether they wanted the tax credit, usually much more valuable, or a straight business deduction. The language in HB 194 would limit businesses to one or the other. Number 0460 REPRESENTATIVE VEZEY asked what authority was involved to tell anyone what their relationship with the IRS could be. Number 0467 MR. BARTHOLOMEW explained that this language would only be as it relates to the state tax. When the state sets up the corporate income tax, the state mirrors the federal IRS. It would still be a federal business deduction, but when the state calculates the tax, the state would make the business chose between the deduction or the credit. This language only affects the calculation of the state corporate income tax, not the federal tax. Number 0518 REPRESENTATIVE DYSON made a motion to move HB 194 with individual recommendations and attached fiscal notes. There being no objection, HB 194 was moved from the House Health, Education and Social Services Standing Committee.
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