Legislature(2015 - 2016)BILL RAY CENTER 230
06/06/2016 08:00 AM Senate CONFERENCE COMMITTEE ON HB247
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| Audio | Topic |
|---|---|
| Start | |
| HB247 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| HB 247 | |||
HB 247-TAX;CREDITS;INTEREST;REFUNDS;O & G
8:12:32 AM
CHAIR TALERICO announced that the only order of business before
the Conference Committee on HB 247 would be 2d CS FOR HOUSE BILL
NO. 247(RLS) am, "An Act amending the powers of the board of
trustees of the Alaska Retirement Management Board to authorize
purchase and sale of transferable tax credit certificates issued
in conjunction with the production tax on oil and gas; relating
to interest applicable to delinquent tax; relating to the oil
and gas production tax, tax payments, and credits; relating to
exploration incentive credits; relating to refunds for the gas
storage facility tax credit, the liquefied natural gas storage
facility tax credit, and the qualified in-state oil refinery
infrastructure expenditures tax credit; relating to the
confidential information status and public record status of
information in the possession of the Department of Revenue;
relating to oil and gas lease expenditures and production tax
credits for municipal entities; requiring a bond or cash deposit
with a business license application for an oil or gas business;
establishing a legislative working group to study the fiscal
regime and tax structure and rates for oil and gas produced
south of 68 degrees North latitude; and providing for an
effective date." and SENATE CS FOR 2d CS FOR HOUSE BILL NO.
247(FIN) am S, "An Act relating to the exploration incentive
credits; relating to the powers and duties of the Alaska Oil and
Gas Conservation Commission; relating to interest applicable to
delinquent tax; relating to the oil and gas production tax, tax
payments, and credits; relating to tax credit certificates;
relating to refunds for the gas storage facility tax credit, the
liquefied natural gas storage facility tax credit, and the
qualified in-state oil refinery infrastructure expenditures tax
credit; relating to oil and gas lease expenditures and
production tax credits for municipal entities; requiring a bond
or cash deposit with a business license application for an oil
or gas business; and providing for an effective date."
CHAIR TALERICO stated that the conference committee was
operating under Uniform Rule 42 and public testimony would not
be taken. Furthermore, the adoption of a conference committee
report would require an affirmative vote by the majority of the
membership from each house.
8:13:07 AM
REPRESENTATIVE OLSON moved to adopt 2d CSHB 247(RLS) am, labeled
29-GH2609\C.A, as the working document.
SENATOR GIESSEL objected.
SENATOR MICCICHE stated for the record that when the version of
the bill is ultimately moved out of the Conference Committee on
HB 247 and arrives on the Senate floor, he will ask to be
recused from voting due to a perceived conflict, as he is
employed in the [oil and gas] industry.
8:13:52 AM
A roll call vote was taken. Representatives Olson and Tarr
voted in favor of the motion to adopt 2d CSHB 247(RLS) am, and
Representative Talerico voted against it. Senators Coghill,
Micciche, and Giessel voted against the motion to adopt 2d CSHB
247(RLS) am. Therefore, the motion failed by a vote of 2:1
(House) and 0:3 (Senate).
8:14:43 AM
SENATOR GIESSEL moved to adopt SCS 2d CSHB 247(FIN) am S,
labeled 29-GH2609\AA.A, as the working document.
REPRESENTATIVE TARR objected.
8:15:06 AM
A roll call vote was taken. Representative Olson voted in favor
of the motion to adopt SCS 2d CSHB 247(FIN) am S, and
Representatives Tarr and Talerico voted against it. Senators
Coghill and Giessel voted in favor of the motion for the
committee to adopt SCS 2d CSHB 247(FIN) am S, and Senator
Micciche voted against it. Therefore, the motion failed by a
vote of 1:2 (House) and 2:1 (Senate).
8:15:50 AM
[Due to technical difficulties, this portion of the meeting is
not captured completely on the audio recording.]
8:17:08 AM
The committee took a brief at ease at 8:17 a.m.
8:17:29 AM
SENATOR GIESSEL moved to rescind the committee's action in
failing to adopt SCS 2d CSHB 247(FIN) am S. There being no
objection, SCS 2d CSHB 247(FIN) am S was before the committee.
8:17:52 AM
SENATOR GIESSEL moved to adopt SCS 2d CSHB 247(FIN) am S,
labeled 29-GH2609\AA.A, as the working document.
A roll call vote was taken. Representatives Olson, Tarr, and
Talerico voted against the motion to adopt SCS 2d CSHB 247(FIN)
am S. Senators Coghill, Micciche, and Giessel voted in favor of
the motion to adopt SCS 2d CSHB 247(FIN) am S. Therefore, the
motion failed by a vote of 0:3 (House) and 3:0 (Senate).
8:18:47 AM
CHAIR TALERICO directed attention to a document entitled, "HB
247 - House/Senate Comparison," included in the committee
packet, which showed the differences in the bills that passed
the House and the Senate. Chair Talerico stated he "would like
to use the Senate version as our working document," and noted
there are four Legislative Legal and Research Services
amendments, and conceptual amendments offered by Representative
Tarr, for consideration. The four amendments from Legislative
Legal and Research Services deal with refinery tax credits,
local hire, confidentiality tax credit purchases, and a six-
month extension of the Frontier Basins exploration [tax]
credits, all of which will be discussed and acted upon. He
reminded members that the conference committee does not have
limited powers of free conference or powers of a Free Conference
Committee. Thus, everything acted on must be "mirrored"
language from one bill to the other.
REPRESENTATIVE TARR stated that she would like the chair to
affirm that she can offer conceptual amendments, because due to
timing constraints, Legislative Legal and Research Services were
unable to prepare [the amendments].
CHAIR TALERICO responded that the committee would hear the
[conceptual] amendments. He then advised that the committee
needs a working document and entertained a motion to adopt the
Senate version of the bill.
8:21:07 AM
SENATOR GIESSEL moved to adopt [SCS 2d CSHB 247(FIN) am S,
labeled 29-GH2609\AA.A], as the working document.
8:21:18 AM
REPRESENTATIVE TARR objected, and opined the House version moves
the conference committee closer to the compromise necessary for
a bill to pass. She expressed concern that the conference
committee would not reach a compromise using the Senate version,
but said she will offer amendments to various points.
Representative Tarr then removed her objection.
There being no further objection, Version AA.A was before the
committee.
8:22:14 AM
REPRESENTATIVE OLSON moved to adopt Amendment 1, labeled 29-
GH2609\AA.A.6, Nauman/Shutts, 6/6/16, which read:
Page 4, lines 18 - 23:
Delete all material and insert:
"* Sec. 9. AS 43.05.230 is amended by adding a new
subsection to read:
(l) For tax credit certificates purchased by the
department in the preceding calendar year under
AS 43.55.028, the department shall make the following
information public by April 30 of each year:
(1) the name of each person from whom the
department purchased a transferable tax credit
certificate; and
(2) the aggregate amount of the tax credit
certificates purchased from the person in the
preceding calendar year."
8:22:17 AM
SENATOR GIESSEL objected for discussion purposes.
REPRESENTATIVE OLSON informed the committee that Amendment 1
adopts the House version confidentially language regarding
purchase tax credits, and requires the Department of Revenue
(DOR) to make public the names of the companies that sold
credits to the state and the amount of credits purchased in the
previous calendar year; the Senate version only requires an
aggregate amount of all credits purchased in the previous
calendar year, without a breakdown by company, [to be made
public].
REPRESENTATIVE TARR stated the importance of the amendment in
"terms of transparency" and in order to provide the public
information on where state funds are going, without violating
tax confidentiality provisions. She expressed her support for
the amendment.
SENATOR GIESSEL, in response to Chair Talerico, maintained her
objection.
8:23:27 AM
A roll call vote was taken. Representatives Olson, Tarr, and
Talerico voted in favor of Amendment 1. Senators Coghill,
Micciche, and Giessel voted in favor of Amendment 1. Therefore,
Amendment 1 was adopted by a vote of 3:0 (House) and 3:0
(Senate).
8:24:07 AM
SENATOR COGHILL moved to adopt Amendment 2, labeled 29-
GH2609\AA.A.7, Nauman/Shutts, 6/6/16, which read:
Page 5, lines 17 - 30:
Delete all material.
Renumber the following bill sections accordingly.
Page 29, line 12:
Delete "sec. 13"
Insert "sec. 12"
Page 29, line 13:
Delete "sec. 24"
Insert "sec. 23"
Page 29, line 14:
Delete "sec. 26"
Insert "sec. 25"
Page 29, line 16:
Delete "sec. 25"
Insert "sec. 24"
Page 29, line 17:
Delete "13, and 24 - 26"
Insert "12, and 23 - 25"
Page 29, line 18:
Delete "sec. 15"
Insert "sec. 14"
Page 29, line 19:
Delete "sec. 15"
Insert "sec. 14"
Page 29, line 23:
Delete "sec. 30"
Insert "sec. 29"
Page 29, line 24:
Delete "sec. 35"
Insert "sec. 34"
Page 29, line 27:
Delete "sec. 35"
Insert "sec. 34"
Page 30, line 22:
Delete "Sections 23, 38, and 39"
Insert "Sections 22, 37, and 38"
Page 30, line 24:
Delete "Sections 30, 35, and 37"
Insert "Sections 29, 34, and 36"
Page 30, line 25:
Delete "secs. 40 and 41"
Insert "secs. 39 and 40"
8:24:13 AM
SENATOR GIESSEL objected for discussion purposes.
SENATOR COGHILL explained that the Senate version of the bill
added language "stepping down the refinery credits"; however,
Amendment 2 removes that language from the Senate version and
returns the bill to the "status quo." Senator Coghill added
that Alaska businesses, especially in his district, rely on tax
credits and opined it is not good timing for a change.
REPRESENTATIVE TARR expressed her support for Amendment 2. She
stated it is appropriate to remove this language as the related
provisions were never discussed by a House committee, thus
members of the House may not have a full understanding of the
impact of the provisions.
SENATOR GIESSEL recalled that the Senate considered the tax
credit reform bill in terms of all tax credits including
refinery credits, commercial fishing credits, education credits,
and others. However, refinery credits are the subject matter of
the bill, and some Alaska refineries are reconfiguring to
process and produce asphalt, which is a key commodity for the
state. She expressed her support for Amendment 2, which would
return refinery credits to their present level, and allow Alaska
refineries to become more productive.
8:27:19 AM
SENATOR GIESSEL, in response to Chair Talerico, removed her
objection to Amendment 2. There being no further objection,
Amendment 2 was adopted.
8:27:36 AM
REPRESENTATIVE OLSON moved to adopt Amendment 3, [labeled 29-
GH2609\AA.A.8, Nauman/Shutts, 6/6/16,] which read:
Page 22, line 18, following "department":
Insert ", when allocating available money in the
fund under this section,"
Page 22, lines 19 - 20:
Delete ", when allocating available money in the
fund under this section,"
Insert "[, WHEN ALLOCATING AVAILABLE MONEY IN THE
FUND UNDER THIS SECTION,]"
Page 22, lines 23 - 25:
Delete "must grant a preference to an applicant
if at least 75 percent of the applicant's workforce in
the state in the previous calendar year was composed
of resident workers"
Insert "must grant a preference, between two
applicants, to the applicant with a higher percentage
of resident workers in the applicant's workforce,
including workers employed by the applicant's direct
contractors, in the state in the previous calendar
year"
Page 22, line 26, through page 23, line 2:
Delete ";
(3) must provide for the purchase of the
amount equal to the first 50 percent of the credit
repurchase limit per person under (e) of this section
at a rate of 100 percent of the value of the
certificate or portion of the certificate requested to
be purchased and the amount equal to the next 50
percent of the credit repurchase limit per person
under (e) of this section at a rate of 75 percent of
the value of the certificate or portion of the
certificate requested to be purchased"
SENATOR GIESSEL objected for discussion purposes.
REPRESENTATIVE OLSON informed the committee that Amendment 3
adopts the House version of local hire language and requires DOR
to grant preference to the applicant with the higher percentage
of resident workforce including workers employed by the
applicants' direct contractors in the state in the previous
calendar year.
8:28:12 AM
SENATOR MICCICHE advised that the Senate Finance Committee
evaluated the cash outlays by the state and intended to
incentivize waiting to collect credits by putting the first $35
million at full value and the second $35 million - for companies
that wish to get paid for credits in the same year - at 75
percent. Therefore, if Amendment 3 is adopted, "the cash outlay
for the state is only $61 million, so it's a savings of $9
million per company for the repurchase caps and the credit as
well."
8:29:01 AM
SENATOR GIESSEL, in response to Chair Talerico, removed her
objection. There being no further objection, Amendment 3 was
adopted.
8:29:17 AM
CHAIR TALERICO moved to adopt Amendment 4, labeled 29-
GH2609\AA.A.9, Nauman/Shutts, 6/6/16, which read:
Page 20, line 18:
Delete "January"
Insert "July"
Page 20, line 19:
Delete "January"
Insert "July"
SENATOR GIESSEL objected for discussion purposes.
CHAIR TALERICO explained that Amendment 4 conforms the bill to
the House version, related to the date of the Frontier Basins
exploration credits, and would change the date from January 1,
2017, to July 1, 2017. This is an extension of six months for
the Frontier Basins - also known as "middle earth" - tax
credits.
REPRESENTATIVE TARR recalled that the date set by the House
version reflected a recognition of opportunities currently
underway, and she expressed her support for Amendment 4.
8:30:22 AM
SENATOR GIESSEL spoke in support of Amendment 4, noting that the
Frontier Basins may not be "massive" resource discoveries, but
can provide energy for rural areas in Alaska. In this regard,
the Senate referred to the Interior Energy Plan (IEP) and
acknowledged that work underway near Nenana could provide a gas
supply to Fairbanks, in accordance with the intent of IEP, which
is to access the least expensive energy.
SENATOR GIESSEL, in response to Chair Talerico, removed her
objection. There being no further objection, Amendment 4 was
adopted.
8:32:32 AM
REPRESENTATIVE TARR moved to adopt [Conceptual] Amendment 5
which read [original punctuation provided]:
Restore Section 13 of House Bill 247, Version 29-
GH2609\C.A
Restore levies on oil and gas taxes in the Cook Inlet
Basin as outlined by Section 13 of the above-noted
version.
Restore Section 60 of House Bill 247, Version
29GH2609\C.A.
Restores creation of a bi-partisan Working Group to
explore proper rates to set in the Cook Inlet,
effective 2019.
Repeal Section 15 of the Senate Version, Version 29-
GH2609\AA.A (passed by the Senate on the Floor).
8:33:03 AM
SENATOR GIESSEL objected for discussion purposes.
REPRESENTATIVE TARR reminded the committee that the current
system for Cook Inlet oil and gas tax utilizes a "cap" that is
set to sunset in 2022; the House version of the bill moved the
sunset to 2019, and created a Cook Inlet working group that
would develop "the right oil and gas tax system for Cook Inlet"
to propose to both bodies of the legislature. She relayed that
she and other House members have not had an opportunity to
discuss Section 15 of the Senate version that "removes the 2022
tax cap and provides that the tax may not exceed $1 per barrel."
Further, the aforementioned provision "came in ... at the
eleventh hour in the Senate Finance Committee ... that's going
to be a really important change going forward to make sure we
can have stability for our Southcentral gas supply." Although
there are contracts in place for a ten-year supply of gas,
Representative Tarr stressed that she seeks a plan with
durability for her constituents; in addition, the focus of HB
247 was to address [tax] credits in Cook Inlet, middle earth,
and the North Slope, and not on tax policy. She opined that the
amendment is a compromise between the House and Senate by
ensuring some revenue in the near-term, and reinstating the
working group that would hear from all of the interested parties
and stakeholders.
8:36:20 AM
SENATOR MICCICHE said the oil that has not been taxed for some
time in Cook Inlet is about $5 million per year. He pointed out
that the legislature has removed several hundred million dollars
per year of credits out of Cook Inlet, which is "a pretty big
hit to the industry, [and] a pretty big hit to my district ...."
Senator Micciche said, "Do I think that the taxes are going to
be seventeen and a-half cents per M post-2022, or a dollar a
barrel for oil? Probably not." Further, the legislature can
impanel a working group at any time. He stated he would not
support the amendment, and said he had confidence that work will
be done before 2022 on "what Cook Inlet should look like."
SENATOR GIESSEL spoke in opposition to [Conceptual] Amendment 5.
She said the Senate version of the bill recognizes that in the
past few years, 50 percent or more of the tax credits have gone
to Cook Inlet. Although Cook Inlet basin provides energy
security for 50 percent of the state's population, in the next
eighteen months - the relevant time period - the basin will
become less constrained and open to more buyers for its gas. It
is the legislature's hope that demand will increase; for
example, new demand for natural gas may come from the [Donlin
Gold] mine, the [Agrium Inc. ammonia plant in Kenai], and the
Alaska LNG project (AKLNG). Lastly, she relayed that the
Regulatory Commission of Alaska (RCA) consent agreement in
effect in Cook Inlet, which constrains the price of gas, will be
gone within the next eighteen months. She remarked, "...
putting in place a working group communicates instability, it
communicates yet more deliberation on, on the tax-taking by
government. And so, as the Senate considered this,
understanding that there's been no tax on oil in Cook Inlet for
at least a decade, but there's been a very small tax on gas, we
felt it appropriate to ... put a tax in place on oil so that the
state can begin to regain some revenue from all of the tax
credits we've placed in Cook Inlet, and make it comparable to
the seventeen and a-half cents per MCF that has been on gas
...."
8:40:38 AM
REPRESENTATIVE TARR pointed out that the timeline of the Senate
version sets an effective date of January 1, 2017; the House
version establishes a working group for the interim, so that the
legislature could adopt an oil and gas tax system during the
next session, between January and March or April, 2017. Thus,
the benefit of adopting this amendment is, "The House members
won't be asked to vote on something that they've actually never
seen before." Representative Tarr opined that House members
will have many questions, and the conceptual amendment allows
for vigorous review by members, and significant input by
stakeholders, to result in a workable system that could stay in
place for ten years, without changes. She suggested this would
avoid justifiable criticism from the industry about the state
"making changes all the time, and this is setting us up for
having to make more near-term changes ...."
8:42:45 AM
SENATOR GIESSEL, in response to Chair Talerico, maintained her
objection.
8:42:46 AM
A roll call vote was taken. Representative Tarr voted in favor
of Conceptual Amendment 5. Representatives Olson and Talerico
voted against it. Senators Coghill, Micciche, and Giessel voted
against Conceptual Amendment 5. Therefore, Conceptual Amendment
5 failed by a vote of 1:2 (House) and 0:3 (Senate).
8:43:20 AM
REPRESENTATIVE TARR moved to adopt [Conceptual] Amendment 6,
which read [original punctuation provided]:
Adopt House Version of language limiting state payment
of 35% for company losses to non-producing North Slope
companies and small producers with 15,000 barrels or
less of North Slope Production. Do not accept Senate
changes requiring state to pay losses incurred by
large North Slope producers
SENATOR COGHILL objected.
REPRESENTATIVE TARR observed that one of the perceived
deficiencies of the Senate version of the bill is the lack of
changes to the North Slope net operating loss credit
"situation." At the time the legislature crafted [Senate Bill
21, passed in the 28th Alaska State Legislature and signed into
law on 6/24/13] it did not anticipate that the three major
companies on the North Slope would have net operating losses,
and that the state would lose revenue "against their tax
liability." She continued to say, "The under 50,000 are the
people we're paying cash payments to, to the tune of $700
million ...." The House version of the bill limits which
companies qualify for net operating losses by lowering the
threshold from 50,000 barrels to 15,000 barrels, thereby
protecting the state during periods of low oil prices. In order
to limit the state's future liability, the conceptual amendment
directs that only companies producing 15,000 barrels or less
would qualify for net operating losses.
8:45:20 AM
SENATOR GIESSEL expressed her opposition to the conceptual
amendment, stating that multiple consultants and DOR have
pointed out that the state has a net tax system, and net
operating losses are a key element in the state's system. She
characterized the amendment as a progressive step away from the
state's net tax system that allows companies to deduct losses.
Furthermore, DOR has advised that when oil prices are above $45-
$46 per barrel, there are no net operating losses accrued by
companies on the North Slope, and she questioned why the state
would seek to modify a net tax system into a gross tax system
when, "the problem is, is going away, over time." She restated
her opposition to the amendment, and pointed out that the
credits that are under consideration for the next fiscal year
total $500 million, and the additional $200 million in credits
were vetoed by the governor for this fiscal year.
8:47:33 AM
REPRESENTATIVE TARR encouraged the committee to "deal with [the
problem] now." The legislative record shows that during the
debate of Senate Bill 21, models of oil prices under $60 per
barrel were not discussed and/or anticipated. She remarked, "So
now, we've learned, that at these low prices, this is a system
that does not work and, and means significant liability to the
state. And just, where the $700 million comes from, ... if
you're including the almost [$]300 million that we'll lose for
the net operating losses against tax liability, then you get
well over $700 million, [and] when you add last year's we get
closer to a billion." Representative Tarr concluded that tax
credits for corporations that make "record profits in Alaska"
are unnecessary. Predicting the price of oil is uncertain - the
legislature passed a budget based on approximately $105 per
barrel. Although oil is close to $49 [per barrel] today, the
price could return to $30 [per barrel] next week, which is why
choosing not to address this problem is fiscally irresponsible.
In fact, net operating losses can be carried forward and the
state will be losing money in fiscal years 2018-2020, and
beyond. Because the situation is known and can be prevented,
she urged the committee to discuss what happens when the price
of oil falls below $60 [per barrel], and complete the work that
has not been completed after months of study.
8:50:48 AM
SENATOR COGHILL, in response to Chair Talerico, maintained his
objection.
8:50:53 AM
A roll call vote was taken. Representative Tarr voted in favor
of Conceptual Amendment 6. Representatives Olson and Talerico
voted against it. Senators Coghill, Micciche, and Giessel voted
against Conceptual Amendment 6. Therefore, Conceptual Amendment
6 failed by a vote of 1:2 (House) and 0:3 (Senate).
8:51:23 AM
REPRESENTATIVE TARR moved to adopt [Conceptual] Amendment 7
which read [original punctuation provided]:
Adopt House Version to Reduce North Slope payment by
state to small producers for losses (Net Operating
Losses) from 35% of loss to 25% of loss.
SENATOR GIESSEL and Representative Olson objected.
REPRESENTATIVE TARR explained that [Conceptual Amendment 7] also
addresses net operating losses. She observed that both the
Senate and House versions of the bill included a "step down"
[related to a reduction in the percentage of payment for net
operating losses], and that the provision in the House version
of the bill is more appropriate and would cause less disruption.
SENATOR GIESSEL, in response to Chair Talerico, maintained her
objection.
8:52:29 AM
A roll call vote was taken. Representative Tarr voted in favor
of Conceptual Amendment 7. Representatives Olson and Talerico
voted against it. Senators Coghill, Micciche, and Giessel voted
against Conceptual Amendment 7. Therefore, Conceptual Amendment
7 failed by a vote of l:2 (House) and 0:3 (Senate).
8:53:05 AM
REPRESENTATIVE TARR moved to adopt [Conceptual] Amendment 8,
which read [original punctuation provided]:
Adopt House Version of language preventing companies
claiming state payment for company Net Operating
Losses so they may not be carried forward into future
years.
8:53:07 AM
SENATOR GIESSEL objected.
REPRESENTATIVE TARR characterized the provision addressed by
Conceptual Amendment 8 as one of the most important provisions,
which would limit the ability of companies to carry forward net
operating losses. The House version of the bill would eliminate
net operating losses from the budget by 2021; however, the
Senate version extends [payment] for net operating losses to
2023. During a time when essential state services are being
cut, she opined it is irresponsible to continue payments in the
amount of "hundreds of millions ... of Alaskan dollars."
Referring to a net profit system, she said, "You take the price,
you deduct the transportation costs, you also deduct capital
expenditures, you also deduct operating expenditures, all before
you even get to taxing the company at all, so it's a very
generous tax system ...." Again, this is a provision not fully
addressed in Senate Bill 21.
8:55:04 AM
SENATOR GIESSEL said the amendment is a "significant rewrite of
our state tax policy. This bill and the subjects being
addressed this session [are] reform of the tax credits, not a
complete rewrite of our tax system." She directed attention to
a document submitted by the Tax Division of DOR, dated 1/20/16,
[document not provided] that listed six major goals of HB 247,
and she read major goal 2.) as follows:
Protect net operating loss credit as essential playing
field leveler between incumbent producers and
newcomers.
Senator Giessel opined the foregoing summarizes the fact that [a
change to] net operating loss is not intended to be the subject
of the proposed legislation; in fact, the amendment would change
tax policy and affect companies, resulting in the loss of
"thousands of Alaskan jobs."
8:56:36 AM
SENATOR MICCICHIE recalled that during the change from previous
[state] tax policy to the existing policy, the legislature
sought to correct the "20 percent CAPEX credit." According to
[public] records the state paid out $918 million in credits in
2013. The legislature wanted to correct the 20 percent CAPEX
credit, but retain companies' ability to write-off expenses.
The state has a net tax, profit tax system, although in the
future changes could be made to the system. The administration
indicated in the spring forecast, with oil prices at $38 per
barrel, the state is not "in a net operating loss scenario, so
the hundreds of millions [of dollars] they're talking about
going in the 'out' years, is not an expected burden on the
state." Senator Micciche acknowledged that should oil prices
fall for an extended period of time, he would be interested in
evaluating "a better way." He said he was not in support of the
amendment, and reminded members that "our heaviest credit years"
are in the past, and under a prior tax policy.
8:58:50 AM
REPRESENTATIVE TARR opined that that the proposed bill violated
the governor's goal of not rewriting tax policy by the inclusion
of the Senate's change in tax policy for Cook Inlet, which is
inconsistent with the aforementioned point that the bill is not
intended to affect tax policy. In addition, predicting the
price of oil is fraught with difficulty, as demonstrated by last
year's budget that required $105 per barrel oil. She restated
her desire to correct problems now - and protect the state from
future losses - because companies will continue to earn losses
one year, taxes will be due the next year, and the impact will
be felt in the future.
9:00:42 AM
SENATOR GIESSEL, in response to Chair Talerico, maintained her
objection.
9:00:46 AM
A roll call vote was taken. Representative Tarr voted in favor
of Conceptual Amendment 8. Representatives Olson and Talerico
voted against it. Senators Coghill, Micciche, and Giessel voted
against Conceptual Amendment 8. Therefore, Conceptual Amendment
8 failed by a vote of l:2 (House) and 0:3 (Senate).
9:01:16 AM
REPRESENTATIVE TARR moved to adopt [Conceptual] Amendment 9
which read [original punctuation provided]:
Reinstate 5% minimum tax at $70/barrel per House
Version
9:01:20 AM
SENATOR GIESSEL objected.
REPRESENTATIVE TARR informed the committee that Senate Bill 21
did not address "the way the minimum tax could be pierced," even
though the legislature believed it had established a 4 percent
minimum tax. She recalled that a working group chaired by
Senator Giessel recommended "hardening the floor ... that
provision was in some ways adopted by not allowing the [gross
value reduction (GVR)] to interact with the net operating loss,
- the per barrel credit originally was made so that couldn't be
done - but we really didn't fully address the hardening of the
floor." The governor's original bill included a 5 percent
minimum tax increase at all prices; the House version
compromised by looking at the range at which companies are
comfortably profitable, and thus established a 5 percent minimum
tax, starting at $70 per barrel. She said Conceptual Amendment
9 is a compromise provision originally addressed by the
governor's bill.
9:02:56 AM
SENATOR GIESSEL advised that the amendment creates a
"significant tax increase; it is not merely 1 percent as some
have opined." She stressed that the legislature is tasked with
protecting Alaskans, which is what the Senate version has done
by maintaining the 4 percent minimum tax as currently exists.
As the law stands, opportunities for good-paying jobs in the oil
industry - and in directly-related or indirectly-related
industries - are protected. Government plays a powerful role in
the economy, and raising the tax, without thoroughly vetting an
increase, is not advisable.
REPRESENTATIVE TARR expressed her understanding that the
provision addressed by the amendment was included in the
original bill in response to recommendations from the working
group. Since the working group included stakeholders, she said
she was surprised that "we're moving away from that
recommendation." She restated several factors of a net tax
system, and concluded, "... they take away about $50 of the
value, before we ever tax any of it, so they're well within the
profit range, at $70 per barrel ...."
9:06:12 AM
SENATOR GIESSEL, in response to Chair Talerico, maintained her
objection.
9:06:17 AM
A roll call vote was taken. Representative Tarr voted in favor
of Conceptual Amendment 9. Representatives Olson and Talerico
voted against it. Senators Coghill, Micciche, and Giessel voted
against Conceptual Amendment 9. Therefore, Conceptual Amendment
9 failed by a vote of l:2 (House) and 0:3 (Senate).
CHAIR TALERICO opened discussion on the bill, as amended.
9:07:04 AM
REPRESENTATIVE TARR remarked:
... I was disappointed that here we are on day
fourteen - this is the first meeting of this
conference committee - I think it [has] been made
aware of everyone what an important piece of
legislation this is for many of us; that this is the
first step in any fiscal plan, moving forward. I
noticed the other five members around the table here
all have the same script, highlighted for different
things, so clearly, there was some coordination and
discussion that I was never privy to. Perhaps that's
the process, as everyone understands it, that's
certainly a disappointment to me.
REPRESENTATIVE TARR continued to note the lack of sufficient
discussion regarding the most important and contentious aspects
of the bill, and sufficient effort to resolve contentious
matters. She opined the public will view the passage of the
bill as a failure of this legislature. Although the bill may
pass with a slim margin, its passage may prevent the completion
of a fiscal plan [by the 29th Alaska State Legislature].
Representative Tarr restated her perception of a lack of
communication and stated, "We could have done a better job, and
I'm dissatisfied with the work product today."
9:09:21 AM
REPRESENTATIVE OLSON expressed his belief that Alaskans
responded to this issue two years ago by defeating [the 2014
Alaska Oil Tax Cuts Veto Referendum, Ballot Measure 1]. He
said, "I don't think it's proper to change it [in] less than two
years."
SENATOR COGHILL stated that oil and gas companies in Alaska -
who support Alaska's economy - are under stress from the
international downturn of the market, and have made changes,
such as laying-off workers. In response, the state has provided
incentives, mostly in Cook Inlet, which have secured a gas
supply for the Cook Inlet area and thereby for a large part of
the population of Alaska. Although the "credit issue" is not
sustainable, and must be changed, the state is changing its
incentives because the downturn in the value and price of oil
has affected the whole world. Regarding communication [between
members of the conference committee], Senator Coghill said there
have been many House and Senate committee meetings dedicated to
the legislation, and there have been study and communications,
and acknowledged he had not talked with [Representative Tarr].
The legislation will affect Alaskans, and citizens need to know
that after any compromise "everybody is going to walk away
unhappy ...." He closed by saying, "So, I'm going to support
going forward with this, as unhappy as I am."
9:12:36 AM
SENATOR MICCICHE, referring to "the conspiracy theory," noted he
received [amendment] documents about 30 minutes before meeting,
which is common for a conference committee. He relayed his
experience as a member of the operating budget conference
committee. Turning to the subject of "floor hardening," he said
the Senate was concerned about making changes and then having
oil prices improve sometime in the future. It is known that net
operating losses are not likely to be an issue, and he cautioned
about "losing votes on [the Senate] side," as some senators are
unwilling to talk about any of the issues; however, the Senate
did address a ballot initiative, made changes to the GVR, and
worked on issues related to Senate Bill 21, including removing
hundreds of millions of dollars' worth of credits in Cook Inlet.
Senator Micciche said if the conference committee adopted the
House version, it would not pass the Senate and "we're trying to
compromise in the middle, we've adopted a lot of the (indisc.)
of the House version, it may not go as far as some of you wanted
it to go, but it goes further than some of the folks in the
Senate wanted to go. We're still trying to maintain a bill that
can pass both bodies, [and] I'm hopeful it does ...."
9:15:09 AM
SENATOR GIESSEL thanked the House for its work on the
legislation. Between the House and Senate, there have been over
70 committee meetings, extensive public testimony, and lots of
modeling. Although not a perfect bill, the bill is very good,
and [the bill's] passage by a slim margin would demonstrate the
level of difficulty in making decisions on an issue that affects
the state's economy. Senator Giessel said the bill protects
Alaskans today and in the future by reducing the state's tax
credit outlay, but retaining a stable tax structure to ensure a
major gas project in the future.
REPRESENTATIVE TARR said Senator Micciche's comments would have
been appreciated earlier in the special session, and would have
provided a better understanding of the views of members of the
Senate. She observed that there is limited time for resolving
differences if the bill does not pass, and understanding one and
another's viewpoint is helpful. Representative Tarr said she
did not agreed that the bill would provide stability, because
problem areas still exist and will need to be addressed.
Regarding the [defeat of the 2014 Alaska Oil Tax Cuts Veto
Referendum, Ballot Measure 1] referendum, the vote was close and
the issue remains contentious within the state.
CHAIR TALERICO expressed his appreciation to the members of the
committee for their service.
9:19:58 AM
SENATOR GIESSEL moved that the Conference Committee on HB 247
recommend that the House and Senate adopt the conference
committee substitute (CCS) for HB 247, Version 29-GH2609\AA.A,
as amended, with Senate fiscal notes.
9:20:20 AM
REPRESENTATIVE TARR objected.
9:20:23 AM
A roll call vote was taken. Representatives Olson and Talerico
voted in favor of the motion to recommend that the House and
Senate adopt CCS HB 247, Version 29-GH2609\AA.A, as amended,
with Senate fiscal notes. Representative Tarr voted against it.
Senators Coghill, Micciche, and Giessel voted in favor of the
motion to recommend that the House and Senate adopt CCS HB 247,
Version 29-GH2609\AA.A, as amended. Therefore, the motion
passed by a vote of 2:1 (House) and 3:0 (Senate).
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 247 Comparison House-Senate.pdf |
HRES 6/6/2016 8:00:00 AM JHB247 6/6/2016 8:00:00 AM |
HB 247 |
| CC HB 247 Amendment packet.pdf |
JHB247 6/6/2016 8:00:00 AM |
HB 247 |