Legislature(1997 - 1998)

03/22/1997 10:05 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HB 84 - PULL-TABS LIMITED TO 501(C)(3) OR (19)                              
                                                                               
 The next order of business to come before the House State Affairs             
 Standing Committee was HB 84, "An Act limiting the authority to               
 conduct pull-tab charitable gaming to qualified organizations that            
 are exempt from taxation under 26 U.S.C. 501(c)(3) or (19); and               
 providing for an effective date."                                             
                                                                               
 Number 0793                                                                   
                                                                               
 ARNOLD BROWER, JR., President, Native Village of Barrow, was the              
 first person to testify via the telephone in Barrow.  He explained            
 from time to time the Native Village of Barrow requested a permit             
 from the state for pull-tabs.  It was required to disband the                 
 permit, however, because it could not exceed a $1 million payout.             
 The Native Village of Barrow had worked with the Charitable Gaming            
 Division to increase the payout.  In addition, there were groups,             
 such as, dance groups that had to create their own things to get a            
 permit.  Therefore, he saw the bill as restrictive.  The tribal               
 governments that operated under a 638 Contract had been gutted and            
 the appropriations had been cut so badly that it only paid for                
 staff and oversight.  He asked for a higher payout rate to provide            
 better service.                                                               
                                                                               
 Number 1046                                                                   
                                                                               
 CHAIR JAMES stated that some of the concerns of Mr. Brower, Jr.               
 were not affected by HB 84.  The only entity that would be affected           
 by the bill currently was Barrow Search and Rescue, Inc.  However,            
 if the bill was to pass any other entity in Barrow would not be               
 able to have a permit to sell pull-tabs.                                      
                                                                               
 Number 1092                                                                   
                                                                               
 MR. BROWER, JR. replied he was not speaking for the Barrow Search             
 and Rescue, Inc.  He was speaking for the Native Village of Barrow.           
                                                                               
 CHAIR JAMES replied she understood and suggested that Mr. Brower,             
 Jr. contact Mr. Dennis Poshard from the Charitable Gaming Division            
 to discuss his concerns further.                                              
                                                                               
 Number 1135                                                                   
                                                                               
 REPRESENTATIVE TERRY MARTIN, Alaska State Legislature, stated there           
 were six permits in Barrow that pooled together.  If they could               
 prove to the committee what they did was charitable then they                 
 should be added to the bill.  The concern of Mr. Brower, Jr. was of           
 gross receipts and net receipts.  His second bill addressed gross             
 receipts.  He wondered if the payoff mentioned was to increase                
 gambling or to raise money for charitable purposes, however.                  
                                                                               
 CHAIR JAMES replied Mr. Brower, Jr. needed to talk to Mr. Poshard             
 or to testify again when the other bill was before the committee.             
 She did not want to muddy the water today.  She was also not                  
 interested in adding any people to the bill; it would be too                  
 complicated.                                                                  
                                                                               
 Number 1215                                                                   
                                                                               
 MR. BROWER, JR. stated he appreciated the comments of                         
 Representative Martin and he would be in contact with Mr. Poshard.            
                                                                               
 Number 1255                                                                   
                                                                               
 ALFREDA LORD was the next person to testify via the telephone in              
 Barrow.  She just wanted to track the bill so that no other changes           
 were made to affect the 501(c)(3)'s.                                          
                                                                               
 CHAIR JAMES asked Ms. Lord if she had a 501(c)(3) that she wanted             
 to protect?                                                                   
                                                                               
 MS. LORD replied, "Yes."  She reiterated that she wanted to make              
 sure that if there were any changes in the wording, such as,                  
 "and/or", it would not throw the whole thing out.                             
                                                                               
 Number 1370                                                                   
                                                                               
 DENNIS POSHARD, Director, Charitable Gaming Division, Department of           
 Revenue, was the next person to testify in Juneau.  He distributed            
 to the committee members three lists titled:  "Pull-Tab Permittees            
 that were 501(c)(3) or (19)", "Pull-Tab Permittees that were not              
 501(c)(3) or (19)", and "501(c)(19) and (3) Organizations Without             
 Pull-Tab Permits".  They were not easy to compile because they were           
 prepared by hand.  There was no compatibility between the data base           
 from the IRS and the data base from the division.  The list of                
 "Pull-tab Permittees that are 501(c)(3) or (19)" was five pages of            
 organizations that currently had pull-tab permits and would qualify           
 because of their status with the IRS.  The list of "Pull-tab                  
 permittees that are not 501(c)(3) or (19)" was 11 pages of                    
 organizations that currently had pull-tab permits that were not               
 listed with the IRS as 501(c)(3) or (19).  Their current IRS status           
 was also included.  The list of "501(c)(19) and (3) Organizations             
 Without Pull-Tab Permits" was substantial compared to the other two           
 lists.  The financial data was not included.                                  
                                                                               
 CHAIR JAMES replied the lists were very helpful.  She wondered how            
 many exactly would be excluded if the bill was to pass.                       
                                                                               
 Number 1524                                                                   
                                                                               
 MR. POSHARD further stated that he had talked to Mr. Brower, Jr.              
 already regarding his concerns.  He explained that the Native                 
 Village of Barrow did not have a permit and conducted illegal                 
 gambling activities by bringing in pull-tabs from out of the state            
 and from non-licensed distributors.  The division had encouraged              
 him to get a permit.  But, he did not want to do it because he                
 would be limited to awarding $1 million in prizes annually.  The              
 Native Village of Barrow typically reached that limit within four             
 to five months so a permit would significantly reduce the amount of           
 money it made.  He was able to get around this because it claimed             
 sovereignty and no one had challenged the claim.  The Department of           
 Public Safety had chosen not to place illegal gambling as a                   
 priority.  He reiterated Mr. Brower, Jr. was concerned about the              
 limit on the amount of activity raised.  He would gladly come under           
 state jurisdiction if the limit was raised.                                   
                                                                               
 Number 1655                                                                   
                                                                               
 REPRESENTATIVE VEZEY thanked Mr. Poshard for providing the lists              
 and pointing out the size of the businesses involved.  "Sometimes             
 we think of these as nickel and dime operations."                             
                                                                               
 Number 1671                                                                   
                                                                               
 REPRESENTATIVE BERKOWITZ referred to AS Sec. 05.15.150, "Limitation           
 on use of proceeds", and asked Mr. Poshard how the section would be           
 impacted by the bill?                                                         
                                                                               
 Number 1687                                                                   
                                                                               
 MR. POSHARD replied the bill did not make any statutory change to             
 the section.  It affected it, however, in that 501(c)(3) and (19)             
 organizations were limited by the IRS as to how they spent their              
 funds and that the IRS could narrow the section and then the state            
 would have to enforce it.                                                     
                                                                               
 Number 1737                                                                   
                                                                               
 REPRESENTATIVE BERKOWITZ asked Mr. Poshard if 501(c)(3)                       
 organizations were the only ones authorized for pull-tabs?                    
                                                                               
 MR. POSHARD replied, "No."  A 501(c) status had nothing to do with            
 who was or who was not qualified for a permit - currently.  Alaska            
 Statute Sec. 05.15.690 defined a qualifying organization; it did              
 not have to be incorporated, however.                                         
                                                                               
 REPRESENTATIVE BERKOWITZ asked Mr. Poshard if an organization did             
 not go through its 501(c) paperwork it would be precluded from                
 running a charitable game.                                                    
                                                                               
 MR. POSHARD replied, "Correct."                                               
                                                                               
 REPRESENTATIVE BERKOWITZ asked Mr. Poshard if the bill required               
 that the federal government dictate who would be allowed to do                
 charitable gaming in Alaska?                                                  
                                                                               
 MR. POSHARD replied essentially that was correct because nobody               
 could make a 501(c)(3) or (19) designation except the IRS.                    
                                                                               
 Number 1846                                                                   
                                                                               
 REPRESENTATIVE ELTON explained a Juneau Montessori and a Fairbanks            
 Montessori schools were on different lists.  He asked Mr. Poshard             
 if the Juneau Montessori, for example, would have to apply for a              
 501(c)(3) status if the bill passed?                                          
                                                                               
 MR. POSHARD replied it could apply and receive a 501(c)(3) status.            
 He declared a conflict of interest in answering the question,                 
 however, because his daughter attended the Juneau Montessori                  
 school.                                                                       
                                                                               
 REPRESENTATIVE ELTON declared a conflict of interest because he was           
 a members of the House Democratic Campaign Committee that had a               
 pull-tab permit which would be disallowed if the bill passed.                 
                                                                               
 REPRESENTATIVE BERKOWITZ declared a conflict because he had                   
 received funds from the House Democratic Campaign Committee.                  
                                                                               
 REPRESENTATIVE ELTON replied that he had not receive any funds but            
 he did help determine who received them.                                      
                                                                               
 CHAIR JAMES stated that she did know if she had a conflict of                 
 interest.                                                                     
                                                                               
 Number 1973                                                                   
                                                                               
 REPRESENTATIVE IVAN IVAN declared a huge conflict of interest                 
 because most of his communities that he represented were on the               
 lists.  The bill would impact a lot of good work that was being               
 done in his communities.  The city of Akiak operated with a permit            
 and it was three years behind in its accounting.  He did not                  
 support the bill.                                                             
                                                                               
 Number 2073                                                                   
                                                                               
 REPRESENTATIVE ELTON stated the testimony indicated that charitable           
 organizations should be allowed access to a gaming permit and non-            
 charitable organizations should not be allowed access to a gaming             
 permit.  There were 11 pages of organizations that would not be               
 allowed, and 5 pages of organizations that would be allowed.  He              
 suggested changing AS Sec. 05.15.150 to ensure that charities would           
 get the money.  That would allow for 16 pages of organizations that           
 could benefit charities.  It appeared that the bill almost hurt               
 charities by limiting the number of groups.  If the goal was to               
 help charities, "Don't say who could sell, just say who could get."           
                                                                               
 Number 2190                                                                   
                                                                               
 CHAIR JAMES replied the bill tried to define what was a charity -             
 a 501(c)(3) and (19).  Generally, an organization wanted to be a              
 501(c)(3) because of the tax deduction.  She disagreed that                   
 501(c)(3)'s and (19)'s were the only charities, however.                      
                                                                               
 Number 2319                                                                   
                                                                               
 REPRESENTATIVE ELTON replied that they would be able to sell pull-            
 tabs but then give the money to a politician, for example.                    
                                                                               
 CHAIR JAMES replied a 501(c)(3) could not be involved in political            
 activities or affect legislation.                                             
                                                                               
 Number 2361                                                                   
                                                                               
 REPRESENTATIVE BERKOWITZ explained that a charitable organization             
 was already defined in statute as "an organization, not for                   
 pecuniary profit, that is operated for the relief of poverty,                 
 distress, or other condition of public concern in the state;"                 
                                                                               
 CHAIR JAMES replied Representative Martin wanted a different                  
 definition.                                                                   
                                                                               
 Number 2401                                                                   
                                                                               
 MR. POSHARD replied a charitable organization was defined in                  
 statute.  But also look at who the division was allowed to issue              
 permits to under "qualified organizations" in the same section -              
 educational, religious and political organizations.                           
                                                                               
 TAPE 97-32, SIDE A                                                            
 Number 0001                                                                   
                                                                               
 MR. POSHARD stated there was confusion amongst the charities                  
 because of the unrelated business income tax provision in Alaska.             
 The money could be used for administrative expenses or for their              
 own organizations, while other states required that the money be              
 donated to a 501(c)(3) in order not be taxed.  In other words,                
 every penny that was made was donated to a non-profit 501(c)(3)               
 organization.  In Alaska, any pull-tab money was taxable under the            
 unrelated business income tax.                                                
                                                                               
 Number 0126                                                                   
                                                                               
 REPRESENTATIVE MARTIN stated there was no doubt that many, many               
 organizations were bringing in more money than a true charitable              
 organization.  He cited the Home Builders Association.  "Man that             
 group is slick as can be in raising money - the Anchorage Home                
 Builders Association, the Fairbanks Home Builders, the Kenai Home             
 Builders, and the statewide home builders association - they've all           
 got permits and a lot of money coming in.  And I think relatively             
 little is for charity."  Charity begins at home.                              
                                                                               
 Number 0192                                                                   
                                                                               
 CHAIR JAMES replied that was where charity was supposed to begin.             
                                                                               
 REPRESENTATIVE MARTIN replied if you want that concept then fine.             
 The organizations were doing very well.  Maybe, we should change              
 the bill so that all of the money went to a designated true                   
 charity.                                                                      
                                                                               
 Number 0286                                                                   
                                                                               
 REPRESENTATIVE BERKOWITZ stated that he would hate to give the IRS            
 any more power than it already had.  He was concerned about                   
 allowing it to define the designations because "once they get in              
 your business they never get out."                                            
                                                                               
 Number 0324                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied the IRS now realized how much money             
 Alaska was making on pull-tabs.  Therefore, it was going back to              
 the organizations and analyzing their accounts.  The state had                
 misled these organization into thinking that they would get away              
 with it.                                                                      
                                                                               
 Number 0356                                                                   
                                                                               
 CHAIR JAMES replied the state had not misled the organizations.               
                                                                               
 CHAIR JAMES asked the committee members if anybody was interested             
 in making a motion to move the bill forward.                                  
                                                                               
 REPRESENTATIVE VEZEY replied he would make a motion but he did not            
 want to waste the time of the committee members.                              
                                                                               
 Number 0380                                                                   
                                                                               
 REPRESENTATIVE ELTON replied the committee could put this to rest             
 by moving the bill and recommending a "no" vote.                              
                                                                               
 Number 0398                                                                   
                                                                               
 REPRESENTATIVE VEZEY moved that HB 84 move from the committee with            
 individual recommendations and the attached fiscal note(s).                   
                                                                               
 REPRESENTATIVE IVAN objected.  A roll call vote was taken.                    
 Representatives James, Dyson and Vezey voted in favor of the                  
 motion.  Representatives Berkowitz, Elton and Ivan voted against              
 the motion.  House Bill 84 failed to move from the House State                
 Affairs Standing Committee.                                                   
                                                                               
 Number 0483                                                                   
                                                                               
 CHAIR JAMES introduced from the audience, Michelle Jenkins from               
 North Pole.  She was a visiting Page in the House and the Senate.             
                                                                               
 REPRESENTATIVE ELTON stated that Ms. Jenkins was the most pleasant            
 person on the floor of the House of Representatives this week.                
                                                                               

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