Legislature(1993 - 1994)
04/19/1994 05:40 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 498(FIN) An Act providing for exploration incentive credits for activities involving locatable and leasable minerals and coal deposits on certain land in the state; and providing for an effective date. Co-chair Pearce directed that CSHB 498 (Fin) be brought on for discussion and referenced the following amendments: Amendment No. 1, by Senator Kerttula Amendment No. 2, by Co-chair Frank Amendment No. 3, by Senator Kelly Amendment No. 4, by Senator Kelly Amendment No. 5, by Senator Kelly Senator Kerttula noted that Amendment No. 1 contains language that would "amend into" a subsequent amendment by Senator Kelly. He then MOVED for adoption of Amendment No. 1. In response to a question from Co-chair Frank, Senator Kerttula explained that the amendment responds to his belief that all hire should be local, and the tax credit should not apply to hire that is not local. No objection having been raised, Amendment No. 1 was ADOPTED. Co-chair Frank said that Amendment No. 2 involves technical amendments to the bill. He then asked that department staff speak to the change. JERRY GALLAGHER, Director, Division of Mining, Dept. of Natural Resources, advised of concern that the granting of tax credits on trust land would create legal complications. Insertion of "unless otherwise provided by law" allows the commissioner to withhold tax credits from such lands. Co-chair Pearce called for objections to adoption of Amendment No. 2. No objection having been raised, Amendment No. 2 was ADOPTED. Senator Kelly explained that Amendment No. 3 removes retroactive application of the credit to January 1, 1994. He said that supporters of the legislation have no objection to removal since the January date was arbitrarily selected. He then MOVED for adoption of Amendment No. 3. Senator Kerttula concurred in support. No objection having been raised, Amendment No. 3 was ADOPTED. Speaking to Amendment No. 4, Senator Kelly explained that research into legislation dealing with oil and gas exploration credits indicates a $5 million limit per site and a limit of $50 million total. In order to ensure that limitations are in place, he proposed addition of the following language: The amount of an exploration incentive credit extended under this chapter may not exceed an amount per parcel or site, as determined by the commissioner by regulation. The Senator reiterated need for oversight of totals associated with these types of credits. Co-chair Pearce referenced fiscal note information indicating that the maximum amount of credits that could have been claimed in 1993 totals approximately $17 million. End: SFC-94, #66, Side 1 Begin: SFC-94, #66, Side 2 Senator Kelly stressed that, in light of ongoing budget cuts, the legislature must protect existing revenues from erosion. Co-chair Frank inquired concerning the types of taxes to which credits would be applied. Mr. Gallagher said that the bill applies to three separate payments: 1. Royalty on state land. 2. The mining license tax that applies to all lands-- a form of severance tax. 3. Corporate income tax. Senator Kelly explained that the oil and gas lease credit bill contains the above-mentioned cap to fix a figure in statute. Rather than try to do that, he said he was proposing the language within Amendment No. 4. Co-chair Frank requested that he be allowed a day to review implications of the proposed amendment. Co-chair Pearce directed that Amendment No. 4 be held for subsequent consideration. Speaking to Amendment No. 5, Senator Kelly noted that the oil and gas tax credit bill was limited to 50% on state lands and 25% on lands not owned by the state. The proposed amendment attempts to duplicate that requirement in CSHB 498 (Fin). He said that he saw no reason for the Alaska public to subsidize the exploration tax credit on private property. Senator Kerttula concurred, saying that there should be no subsidy on non-state-owned properties. Co-chair Frank requested that Amendment No. 5 also be held for subsequent discussion. Senator Kelly referenced language within the amendment relating to "eligible costs." He explained that the language was added by the drafter to delineate costs that are eligible for tax from those that are not. It is intended to prevent an organization from padding the actual cost of exploration at the site with overhead and other types of costs that are not directly related. Amendment No. 1, by Senator Kerttula, relating to labor costs dovetails with these provisions. Senator Sharp voiced his understanding that the credit was limited to labor only. Senator Kelly advised that it covers other eligible costs. Co-chair Pearce directed that CSHB 498(Fin) be HELD in committee for additional review.
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