Legislature(1995 - 1996)
04/24/1996 09:25 AM Senate FIN
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* first hearing in first committee of referral
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CS FOR HOUSE BILL NO. 269(FIN)
"An Act relating to credits against certain taxes for
contributions to certain public educational radio and
television networks and stations and to endowments for
public educational radio and television networks and
stations, increasing the amounts that may be claimed as
credits against certain state taxes, and precluding
claims of the contributions as both credits and deductions
against the taxes; amending the manner of computing
refunds to local governments of the fisheries business
tax and the fishery resource landing tax; establishing
credits against the fishery resource landing tax; and
terminating the public educational radio and television
credits authorized by this Act at the end of five years;
and providing for an effective date."
Mr. Tom Wright, staff aide to Representative Ivan was
invited to join the committee. He explained the new CS and
said they would be working from the "J" version. The main
change was to lower the contribution rate to 50% of $300,000
and would separate the Public Broadcasting contributions
from the University. Another change would be the
establishment of a Public Broadcast Trust fund.
Contributions go to the trust fund and said the department
would explain the mechanics of the fund. An endowment would
be set up for broadcast stations around the state. The
sunset date would remain 31 December 2001. Senator Frank
asked if there was a limit on the overall amount that could
be credited and Mr. Wright advised that the overall credit
would be $300,000. There would be $150,000 to the
University and $150,000 to Public Broadcasting. Senator
Frank asked if there was an updated fiscal note to the new
CS and Mr. Wright said at this time there was not a new
fiscal note but the Department of Revenue could explain the
fiscal impact. He said there was an analysis of various tax
credit scenarios and under scenario (b) that would be the
estimation of what the contribution amount would be and the
credit. The contribution amount would be about $2.6
million.
Bob Bartholomew, Department of Revenue was invited to join
the committee and said in calculating the amount of the
credit there had been some changes in the bill that it would
be hard to determine what the impact of the contributions
would be. The current bill allowed contributions to the
trust and previous calculations included a look at the
history of donations to Public Broadcasting, which included
contributions directly to stations. The amount of $2.6
million of total contributions would assume that the
incentive of the tax credit would double the contributions
received last year. If that assumption is high that the
contributions coming to the trust would double, in redoing
the fiscal note a range of between $800,000 and $1.3 million
of loss revenue would be used. Senator Frank asked if one
would get a credit for a sponsorship they made and Mr.
Bartholomew said under this legislation in order to get the
credit one would have to give to the trust fund that is set
up. The Public Broadcasting Commission would decide how the
money would be spent. Senator Sharp referred to Title 43
and said there was a cluster of taxes including oil & gas
productions, etc. He wanted to know if oil and gas
properties were different from those listed in Title 43.
Mr. Bartholomew said the taxes listed under Title 43 were
based on net income and therefore expenditures were allowed
as a deduction. One could not calculate a deduction and
credit at the same time. This would prevent double dip.
Senator Sharp referred to page 2, section 2, line 9 about
taxpayer cash contribution and said it was only listed under
the University portions but not under Public Broadcasting.
Mr. Bartholomew referred to page 5, section 5 and Senator
Sharp said it did not say cash contributions in (a) above
under section 5, but rather taxpayers contributions. Mr.
Bartholomew said it was always the intent to keep it at cash
and said it could be corrected by adding the word "cash" in
front of "contributions". Senator Sharp said it would have
to be made in every other sections in order to conform. Mr.
Bartholomew concurred. Mr. Wright said it was the sponsor's
understanding that it was cash contributions and there was
no objection. Senator Sharp asked how many corporations
were in a position to take advantage under the five areas of
taxation in the State of Alaska. Mr. Bartholomew said there
were approximately ten to fifteen corporations that have a
tax liability in excess of $500,000. Senator Sharp said he
did not agree with taxpayers being able to target where
their taxes go without going through the appropriation
process and smaller taxpayers not having that opportunity.
He felt that education was a better cause. Mr. Bartholomew
said the Department of Revenue had been working with the
sponsor and the Department of Administration and felt the
administration would like to show support for Public
Broadcasting and the concept of having a five-year sunset
puts a time certain on that support.
Senator Frank said he was concerned about tax credits and if
a corporation is already doing a sponsorship and getting
institutional advertising for it that there should be no
credit allowed for a contribution. It seems that it is not
the intention because the money would be going to the trust
fund, however he would like to see language making a clearer
distinction that one could not get free advertising. Mr.
Wright said the advertising was limited to the statement
that the program was brought through contributions from "x"
company. Senator Sharp said a disclaimer should be
mandatory informing the public the company was getting a tax
credit.
Bob Jenkins, Executive Director, APBC and Jon Newstrom,
Coordinator Coastalaska were invited to join the committee.
Mr. Jenkins said the Public Broadcasting Commission
supported the bill. He explained financial restructuring,
strategic planning process and the satellite interconnection
process. He said under the trust formation individual
broadcasting stations were restricted from direct benefits.
Donations must go to a central trust fund in order to get
tax credit. The principal donation must be held in the
trust and only the earnings could be distributed. The
stations are licensed as non-commercial educational
broadcasters and therefore do not advertise. The money
going to a central trust inhibits the on-air acknowledgement
of the contribution because it did not go to an individual
station. Mr. Newstrom said the only way a sponsorship
announcement would come up is that federal law requires the
public be informed that a contribution was received.
Senator Zharoff asked if money were given to a specific
station does the station acknowledge that donation and Mr.
Newstrom said that was correct but there was no tax credit
given in that case. Mr. Jenkins said the kind of donation
that generates the underwriting announcement does not get
the tax credit.
Senator Phillips moved CS CSHB 269 work draft "J" version
and without objection it was adopted. Senator Rieger
referred to page 4, lines 22 and 23 and said there was
concern that the management of the fund could be invested
primarily in interest earning securities or fixed income
bonds. Traditionally, those would be lower yielding than
stocks. He said he had a proposed amendment that would have
an inflation proofing like feature to the trust fund.
Alison Elgee, Department of Administration was invited to
join the committee. She said the intent behind this trust
set up was to allow for a long term investment strategy
because it was an endowment trust. It recognizes that part
of the growth of the trust corpus itself will accrue through
the investment in an equity portfolio where capital gains
and losses would be realized. An opportunity has been
included for the trustees to inflation-proof the fund,
recognizing that may not be sufficient in and of itself each
year to keep the principal of the fund up, however, the
thought is that the two would work together. The Department
of Revenue has indicated that before there is an equity
portfolio there must be a fund in excess of $2 million.
Initially one would be looking at a fixed income investment
portfolio where there would be a need to inflation proof.
Senator Rieger asked if the bill as drafted allowed for
inflation proofing until equities are gotten into. Ms.
Elgee referred to page 4, line 29 as one of the uses of the
fund would be effective inflation on the fund's principal.
Mr. Bartholomew said the Department of Revenue realizes that
this is a trust being set up for Public Broadcasting and it
may not need to be set up like other trusts. Therefore, the
languages here have not been tailored specifically, but
rather similar to other trusts. The only concern was the
ability to inflation proof and he felt it was available
under the current bill language. Senator Sharp moved a
conceptual amendment adding the word "cash" in front of the
word "contribution" in sections 5, 7, 9 and 11 and without
objection it was adopted.
Following further discussion between committee members
Senator Rieger moved SCS CSHB 269(FIN) and with the
objection of Senator Sharp being duly noted the bill was
reported out of committee with individual recommendations
and an up-dated zero fiscal note from the Department of
Revenue.
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