02/23/1994 01:40 PM Senate JUD

 SENATOR TAYLOR introduced SB 225 (INSURANCE TAX CREDIT:GIFTS TO               
 COLLEGES) sponsored by SENATOR JAY KERTTULA and noted there was a             
 HESS committee substitute.  He called on CAROL CARROLL to testify             
 on behalf of SENATOR KERTTULA.                                                
                                                                               
 MS. CARROLL explained the bill, SB 225, would allow authorized                
 insurance and title insurance companies to credit their state tax             
 liability with an amount equal to donations they make to qualified            
 higher educational institutions now available to other corporations           
 within the State of Alaska.  She offered to answer questions.                 
                                                                               
 SENATOR JACKO referenced page 2 and asked if she was speaking about           
 two or four year institutions.  MS. CARROLL read lines 1 through 3            
 to answer his question which gave acceptance to two-year or four-             
 year colleges or universities.                                                
                                                                               
 SENATOR DONLEY clarified the credit was 50% up to $100 thousand and           
 then 100% for the next $100 thousand.  MS. CARROLL said he was                
 correct, and SENATOR DONLEY disagreed with the 100% credit language           
 because it would allow private citizens to allocate money instead             
 of the legislature.                                                           
                                                                               
 Number 409                                                                    
                                                                               
 SENATOR LITTLE gave an example of a credit union owing $100                   
 thousand in taxes, and instead, giving the $100 thousand to the               
 University of Alaska as a donation.  She asked for an explanation.            
                                                                               
 MS. CARROLL explained if a company has a tax liability to the state           
 and wanted to donate the whole $100 thousand, the company would               
 only be able to take a tax credit of 50% of the amount.  SENATOR              
 DONLEY also explained the company could give $150 thousand and                
 receive a credit for the $100 thousand.                                       
                                                                               
 MS. CARROLL noted in Section 2 stating "or 50% of the tax payers              
 liability, whichever is less," which, she said, would not allow a             
 100% in the case described by SENATOR DONLEY.  SENATOR TAYLOR                 
 explained the most such a company could receive would be 50% of               
 their total tax liability.  MS. CARROLL added, "as long as it is              
 not over $150 thousand."                                                      
                                                                               
 SENATOR JACKO asked if was open to use by the scholarships managed            
 by the Postsecondary Education Commission, but MS. CARROLL said the           
 provisions only apply to the three universities.                              
                                                                               
 SENATOR JACKO questioned the retroactive effective date.  MS.                 
 CARROLL explained it would give insurance companies the opportunity           
 to donate this year.                                                          
                                                                               
 SENATOR LITTLE asked why the bill was limited to certain insurance            
 taxes, and were there provisions for individuals to contribute to             
 the university under the legislation.                                         
                                                                               
 MS. CARROLL explained in statute this credit is already available             
 to anyone who pays a corporate income tax, oil production tax,                
 fishing taxes or mining taxes.                                                
                                                                               
 SENATOR TAYLOR opened the teleconference network and invited SHERIE           
 STEELE from Sitka to testify.                                                 
                                                                               
 Number 450                                                                    
                                                                               
 MS. STEELE identified herself as the Director of Development for              
 Sheldon Jackson College, and acknowledged MS. CARROLL had testified           
 to most of their points.  She reviewed a letter from KENNETH                  
 CAMERON D.M.D. acting president of Sheldon Jackson College in                 
 support of SB 225, in which he wrote, "The Alaska Income Tax                  
 Education Credit is an extremely useful tool for Alaskans because             
 it encourages mutually beneficial partnerships between industry and           
 higher education.  This tool allows colleges in the state to                  
 enhance and improve academic programs by having access to the                 
 funding necessary to implement quality education for Alaskans.  An            
 omission in the original legislation, namely the omission of                  
 including the insurance industry as a taxpayer group eligible to              
 participate in this most essential partnering incentive, can be               
 rectified by SB 225."                                                         
                                                                               
 SENATOR TAYLOR next called on WENDY REDMAN, Vice-President for                
 University Relations for the University of Alaska to testify.                 
                                                                               
 MS REDMAN explained the tax credit legislation passed several years           
 ago has proved very helpful to the University of Alaska, APU and              
 Sheldon Jackson in seeking private funds as one more tool to                  
 broaden the base of support, especially for the University of                 
 Alaska.  She said their campus raised close to $12 million over the           
 past two years, with the majority of the funds placed in endowments           
 that will provide benefits to students far into the future.  MS.              
 REDMAN said the tax credit legislation was responsible for about $1           
 million of the donations, but she claimed this was not lost revenue           
 to the state.  She urged the passage of the legislation and offered           
 to answer questions.                                                          
                                                                               
 SENATOR DONLEY asked if the fundamental law being amended has ever            
 been challenged?  MS. REDMAN said it has not.  SENATOR TAYLOR asked           
 if challenge had been anticipated, and MS. REDMAN said there was              
 some anticipation when it was first past.                                     
                                                                               
 SENATOR JACKO asked for details, and SENATOR DONLEY explained                 
 Article 7, Section 1 of the State Constitution says, "... no money            
 shall be paid from public funds for direct benefit to any religious           
 or any other private educational institution."  He claimed the                
 original bill denies the State income to the benefit of a private             
 educational institution and is unconstitutional.                              
                                                                               
 Number 505                                                                    
 MS. REDMAN told SENATOR TAYLOR it has never been challenged, and              
 she reviewed the discussion when the bill was first passed.  She              
 said REPRESENTATIVE GRUENBERG had a ruling based on information               
 from another state that "... when you're capturing revenue before             
 it hits the general fund, as apposed to after, therefore, it is not           
 general funds."  She said there were rulings on both sides of the             
 issues.                                                                       
                                                                               
 SENATOR TAYLOR acknowledged a letter from Dr. F. Thomas Trotter,              
 President of Alaska Pacific University in support of SB 225.                  
                                                                               
 SENATOR JACKO moved to pass CS FOR SENATE BILL NO. 225(HES)                   
 (INSURANCE TAX CREDIT:GIFTS TO COLLEGES) from committee with                  
 individual recommendations.  Without objections, so ordered.