Legislature(1999 - 2000)
05/14/1999 03:24 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 130 - ARCHITECTS/ENGINEERS/LAND SURVEYORS Number 1506 CHAIRMAN ROKEBERG announced the committee's next order of business is HB 130, "An Act adding limited liability companies and limited liability partnerships to the organizations that can be authorized to practice architecture, engineering, land surveying, and landscape architecture; and relating to state and municipal contracts for architectural, engineering, land surveying, and landscape architectural services." He invited Ms. Seitz forward to explain the legislation. Number 1524 JANET SEITZ, Legislative Assistant to Representative Norman Rokeberg, Alaska State Legislature, came forward to present HB 130 as aide to the House Labor and Commerce Standing Committee, the bill sponsor. Ms. Seitz explained HB 130 adds the business entities of limited liability companies (LLCs) and limited liability partnerships (LLPs) to the architects, engineers, and land surveyors licensing statutes. She noted that the Department of Commerce and Economic Development has been advised by the Department of Law that these new entities are not covered under the current licensing statutes. House Bill 130 would allow the State Board of Registration for Architects, Engineers, and Land Surveyors to register LLCs and LLPs in a manner similar to corporations, where an Alaskan licensee is designated as the responsible licensee in charge of each entity. [The sponsor statement read: The State Board of Registration for Architects, Engineers and Land Surveyors (AELS) has the duty of licensing architects, engineers, land surveyors or landscape architects under the provisions of AS 08.48.011. In addition to individual licenses, the Board has requirements for certain business entities (corporations) to register with the AELS and these entities must receive a license to practice. During the last several years, the Legislature has authorized limited liability companies and limited liability partnerships. The Department of Law has advised the Department of Commerce and Economic Development that these new entities are not covered under the AELS licensing laws. Limited liability companies (LLCs) are covered in AS 10.50. Alaska's law was adopted in 1994. The entity is a hybrid form of business structure that combines the tax advantages of a partnership and the liability safeguards of a corporation. Limited liability partnerships (LLPs) are covered in AS 32.05 and were adopted in Alaska in 1996. LLPs are a type of general partnership and provide a flexible form of organization for small businesses. HB 130 would allow the Board to register LLCs or LLPs in a similar manner as corporations with the designation of an Alaskan licensee as the responsible licensee in charge of such an entity. Such registration would continue to provide consumer protection and licensee accountability for the people of Alaska using the services of these professionals. We would appreciate your support of this legislation.] CHAIRMAN ROKEBERG indicated the legislation simply adds LLCs and LLPs to the architects, engineers, and land surveyors. REPRESENTATIVE CISSNA referred to a piece of written material, noting it had been found that LLPs and LLCs were not authorized for some reason to do this and that is why this legislation is required. She would like to understand the reason these entities are not already included. Number 1627 MS. SEITZ said that according to the letter from the Department of Commerce and Economic Development, the Department of Law has determined that LLC entities are prohibited from practice under current authorities of AS 08.48. There is currently no ability, as a corporation does have, for an LLC to obtain authorization from the board for a license. Limited liability companies would have an impossibility defense, as it is currently impossible for them to become registered with the board. CHAIRMAN ROKEBERG confirmed from Ms. Seitz the reason is that LLCs and LLPs were never incorporated into the statute, and this is the only problem. The chairman indicated HB 130 corrects this omission, adding these forms of business organization to that chapter. REPRESENTATIVE CISSNA questioned if there is anyone to testify from the department, division, or anything like that. CHAIRMAN ROKEBERG answered in the negative, but stated that, even better, there is a consumer online. MS. SEITZ added the committee does have a letter [dated March 1, 1999] from Ms. Reardon [Director, Division of Occupational Licensing, Department of Commerce and Economic Development]. Ms. Reardon's letter notes that the board met February 11 through 12 of this year, voicing support for this legislation and for one other requested change, adding landscape architecture to a part of the statute which had been overlooked before. Ms. Seitz indicated the legislation contains this additional housekeeping change. REPRESENTATIVE HALCRO asked about the practice of "lightscaping" which is huge now in Anchorage. CHAIRMAN ROKEBERG commented this question would be referred to Ms. Reardon to see if "lightscaping" is under landscape architecture. The chairman expressed that he does not think it is. Number 1746 JIM STEVENS, President, Kuskokwim Architects and Engineers, testified via teleconference from Anchorage in support of HB 130. Mr. Stevens said his company would like to provide A&E [architectural and engineering] services through a limited liability company in order to avoid paying taxes twice (indisc.) the owners. CHAIRMAN ROKEBERG commented that Mr. Stevens had brought this to his attention. The chairman requested that Mr. Stevens explain why he thinks this omission should be clarified. The chairman asked if it is correct that Mr. Stevens' firm wants to adopt this type of business. MR. STEVENS agreed. In the past A&E firms have been owned by the individuals providing architectural or engineering services. However, more and more companies are organizing these design firms and would rather not have to pay taxes twice on the firm's earnings. Mr. Stevens noted the margins are small enough in this business and they would like to retain more of the revenues they generate for their services. As the chairman mentioned earlier, it is simply an omission in the existing law which prevents LLCs and LLPs from providing these services. Mr. Stevens commented that in no way, shape, or form do they feel allowing LLPs or LLCs would compromise public safety or the safety of the public of (indisc.). CHAIRMAN ROKEBERG confirmed, then, it is Mr. Stevens' testimony that his business is presently incorporated and would change into an LLC if allowed statutorily. The chairman additionally confirmed from Mr. Stevens that this would save Mr. Stevens' firm money in taxes and limit liability. Number 1879 CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development, came forward to address Representative Halcro's question regarding "lightscaping." REPRESENTATIVE HALCRO noted he is aware of a growing industry in Anchorage, with the "City of Lights" promotion, called "lightscaping." He questioned, "Some landscaping - architecture landscaping firms do 'lightscaping' in the winter. Does this incorporate them?" MS. REARDON responded she does not believe the legislation expands those required to obtain licensure at all. The legislation provides more options for how a company can legally be organized. Ms. Reardon added that both the board and the department support the legislation. CHAIRMAN ROKEBERG said he believes the question was: Are "lightscapers" included under landscape architecture? REPRESENTATIVE HALCRO indicated the chairman is correct. MS. REARDON replied she does not believe so, considering the definition of "landscape architecture." She indicated the definition is fairly long and she would want to review it before providing a definite answer. CHAIRMAN ROKEBERG indicated this was not necessary. REPRESENTATIVE HALCRO agreed, noting he had simply been curious. Number 1923 REPRESENTATIVE MURKOWSKI referred to the last portion of the sponsor statement, noting the LLPs and LLCs would be registered in a manner similar to the corporations ["HB 130 would allow the Board to register LLCs or LLPs in a similar manner as corporations with the designation of an Alaskan licensee as the responsible licensee in charge of such entity."]. Representative Murkowski questioned if there would be any consequence to the State Board of Registration for Architects, Engineers, and Land Surveyors for just making this kind of corporate change. MS. REARDON responded the board might need to approve the licenses but she indicated any costs, like additional paperwork or correspondence, would be minimal and would be absorbed by the department. CHAIRMAN ROKEBERG noted, however, in this area the state licenses the companies, not just the individuals. The chairman asked, then, if there would be any impact because there is a change, indicating he thought this had been Representative Murkowski's question. MS. REARDON answered yes, in that the board will now be able to license businesses which are organized in this manner. Currently the board has to deny these businesses [licensure] if they are not regular corporations. This will provide more options for how the board licenses and will probably trigger a regulation change - including this in the regulations as well. However, Ms. Reardon communicated that the board is in favor of the legislation because it wants to allow these types of new tax organizations. She noted that yes, the law does require that the business actually be licensed, not just the individual engineer. Ms. Reardon indicated this is unique to a couple of the division's professions. CHAIRMAN ROKEBERG confirmed there were no further questions for Ms. Reardon. Number 1998 REPRESENTATIVE HALCRO made a motion to move HB 130 out of committee with individual recommendations and the attached zero fiscal note. There being no objection, HB 130 moved out of the House Labor and Commerce Standing Committee.