Legislature(1995 - 1996)
03/11/1996 01:12 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE March 11, 1996 1:12 p.m. MEMBERS PRESENT Representative Brian Porter, Chairman Representative Joe Green, Vice Chairman Representative Con Bunde Representative Al Vezey Representative Cynthia Toohey Representative David Finkelstein MEMBERS ABSENT Representative Bettye Davis COMMITTEE CALENDAR HOUSE BILL NO. 341 "An Act establishing a tax court to consider and determine certain taxes and penalties due and collateral matters, and amending provisions relating to taxpayer challenges to the assessment, levy, and collection of taxes by the state; and providing for an effective date." - PASSED CSHB 341(JUD) OUT OF COMMITTEE HOUSE BILL NO. 462 "An Act relating to the offenses of driving while intoxicated and refusal to submit to a chemical test of breath or blood; amending Rules 6 and 32.1, Alaska Rules of Criminal Procedure; and providing for an effective date." - PASSED OUT OF COMMITTEE HOUSE BILL NO. 311 "An Act repealing the limitation on the hours a person may be employed in a mine; and making a related technical amendment to avoid changing the penalties for failing to make payments into an employee benefit fund." - SCHEDULED BUT NOT HEARD HOUSE BILL NO. 517 "An Act relating to records and hearings of the Department of Public Safety; relating to a temporary permit to drive a motor vehicle; relating to regulation of motor vehicles and commercial motor vehicles; relating to renewal of a driver's license by mail; increasing the property damage amounts for proof of financial responsibility and proof of motor vehicle eligibility in order to lawfully operate a motor vehicle in the state; relating to certain notifications in accidents involving property damage; relating to motor vehicle registration procedures; and providing for an effective date." - SCHEDULED BUT NOT HEARD HOUSE BILL NO. 536 "An Act relating to charitable gaming." - SCHEDULED BUT NOT HEARD PREVIOUS ACTION BILL: HB 341 SHORT TITLE: TAX APPEALS/ASSESSMENT/LEVY/COLLECTION SPONSOR(S): REPRESENTATIVE(S) GREEN JRN-DATE JRN-DATE ACTION 05/09/95 2042 (H) READ THE FIRST TIME - REFERRAL(S) 05/09/95 2042 (H) RES, JUD, FINANCE 10/24/95 (H) RES AT 9:00 AM ANCHORAGE LIO 10/24/95 (H) MINUTE(RES) 01/19/96 (H) RES AT 9:00 AM CAPITOL 124 01/19/96 (H) MINUTE(RES) 01/24/96 (H) RES AT 8:00 AM CAPITOL 124 01/24/96 (H) MINUTE(RES) 01/26/96 2536 (H) RES RPT CS(RES) NT 1DP 4NR 3AM 01/26/96 2537 (H) DP: GREEN 01/26/96 2537 (H) NR: OGAN, AUSTERMAN, KOTT, WILLIAMS 01/26/96 2537 (H) AM: NICHOLIA, DAVIES, LONG 01/26/96 2537 (H) FISCAL NOTE (COURT) 01/26/96 2537 (H) ZERO FISCAL NOTE (REV) 01/26/96 (H) RES AT 8:00 AM CAPITOL 124 01/26/96 (H) JUD AT 1:00 PM CAPITOL 120 01/26/96 (H) MINUTE(RES) 01/26/96 (H) MINUTE(JUD) 01/29/96 (H) JUD AT 1:00 PM CAPITOL 120 01/29/96 (H) MINUTE(JUD) 02/28/96 (H) JUD AT 3:00 PM CAPITOL 124 (Sub.) 02/29/96 (H) JUD AT 4:00 PM HOUSE FINANCE 519 02/29/96 (H) MINUTE(JUD) 03/01/96 (H) JUD AT 8:00 AM CAPITOL 124 (Sub.) 03/06/96 (H) JUD AT 1:00 PM CAPITOL 120 03/06/96 (H) MINUTE(JUD) 03/08/96 (H) FIN AT 8:00 AM HOUSE FINANCE 519 03/08/96 (H) JUD AT 1:00 PM CAPITOL 120 03/08/96 (H) MINUTE(JUD) 03/08/96 (H) FIN AT 1:30 PM HOUSE FINANCE 519 03/11/96 (H) JUD AT 1:00 PM CAPITOL 120 BILL: HB 462 SHORT TITLE: DRUNK DRIVING: EVIDENCE & SENTENCING SPONSOR(S): REPRESENTATIVE(S) PORTER, Toohey JRN-DATE JRN-DATE ACTION 02/02/96 2606 (H) READ THE FIRST TIME - REFERRAL(S) 02/02/96 2606 (H) TRANSPORTATION, JUDICIARY 02/28/96 (H) TRA AT 1:00 PM CAPITOL 17 02/28/96 (H) MINUTE(TRA) 03/06/96 (H) TRA AT 1:00 PM CAPITOL 17 03/06/96 (H) MINUTE(TRA) 03/08/96 (H) JUD AT 1:00 PM CAPITOL 120 03/08/96 (H) MINUTE(JUD) 03/11/96 3057 (H) TRA RPT 1DP 4NR 2AM 03/11/96 3057 (H) DP: G.DAVIS 03/11/96 3057 (H) NR: WILLIAMS, SANDERS, LONG, MASEK 03/11/96 3057 (H) AM: BRICE, JAMES 03/11/96 3057 (H) FISCAL NOTE (COR) 03/11/96 3057 (H) ZERO FISCAL NOTE (2-DPS) 03/11/96 (H) JUD AT 1:00 PM CAPITOL 120 WITNESS REGISTER DEBORAH VOGT, Deputy Commissioner Department of Revenue P.O. Box 110400 Juneau, Alaska 99811-0400 Telephone: (907) 465-2300 POSITION STATEMENT: Provided department's and Administration's positions and answered questions on HB 341. DAN SECKERS, Chairman Tax Committee of the Alaska Oil & Gas Association (AOGA) Senior Tax Attorney for Exxon Co., USA P.O. Box 196601 Anchorage, Alaska 99519 Telephone: (907) 564-3776 POSITION STATEMENT: Testified on HB 341. THOMAS K. WILLIAMS Tax Committee of the Alaska Oil & Gas Association (AOGA) Alaska Tax Counsel for BP Exploration (Alaska) Inc. P.O. Box 196612 Anchorage, Alaska 99519-6612 Telephone: (907) 564-5955 POSITION STATEMENT: Testified on HB 341. STEVE MAHONEY Tax Committee of the Alaska Oil & Gas Association Managing Tax Counsel for ARCO Alaska, Inc. P.O. Box 100360 Anchorage, Alaska 99510-0360 Telephone: (907) 265-6527 POSITION STATEMENT: Testified on HB 341. ROBERT BRIGGS, Assistant Attorney General Oil, Gas and Mining Section Civil Division (Juneau) Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 Telephone: (907) 465-3600 POSITION STATEMENT: Testified on HB 341. ANNE D. CARPENETI, Assistant Attorney General Central Office Criminal Division Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 Telephone: (907) 465-3428 POSITION STATEMENT: Provided department's position and answered questions regarding HB 462. ACTION NARRATIVE TAPE 96-33, SIDE A Number 0001 CHAIRMAN BRIAN PORTER called the House Judiciary committee meeting to order at 1:12 p.m. Members present at the call to order were Representatives Porter, Green, Bunde, Vezey and Finkelstein; Representative Toohey joined the meeting at 1:13 p.m. Absent and excused was Representative Davis. HB 341 - TAX APPEALS/ASSESSMENT/LEVY/COLLECTION CHAIRMAN PORTER noted that discussions of the main three sticking points had been completed at the previous hearing on HB 341. He stated that amendments before him were numbered 1 through 4, dated March 11, 1996. Number 0230 REPRESENTATIVE JOE GREEN explained that Amendments 1-4 had been omitted in the version R rewrite. He believed these amendments were "consensus types" that should have been in the current version of the bill. He offered Amendment1, which inserted the words "disciplined or" in front of the words "removed from" on page 2, line 31. CHAIRMAN PORTER noted the motion to move Amendment 1. Number 0293 REPRESENTATIVE DAVID FINKELSTEIN asked if the Administration had problems with any of the four amendments. DEBORAH VOGT, Deputy Commissioner, Department of Revenue, said there was no problem with the first three; she had not yet reviewed the fourth. CHAIRMAN PORTER asked if there was an objection to Amendment 1. Hearing none, he noted that Amendment1 was adopted. Number 0365 REPRESENTATIVE GREEN referred to Amendment 2 on page 4, line 15, which deleted the wording "the findings of fact of the informal conference decision are presumed correct unless the taxpayer rebuts the findings;" after "of proof;". Representative Green believed that wording had been agreed to by both sides. CHAIRMAN PORTER noted the motion to move Amendment 2 and asked if there was any objection. There being none, Amendment2 passed. Number 0396 REPRESENTATIVE GREEN referred to Amendment 3 on page 15, line 26, which inserted after the phrase "and prescribed." the following: "The scheduled may be subsequently modified by consent of the parties." He explained Amendment Number 3 was a house cleaning matter that got lost in the rewrite. CHAIRMAN PORTER noted there was a motion to move Amendment 3 and asked if there was an objection. There being none, Amendment3 passed. Number 0428 REPRESENTATIVE GREEN referred to Amendment 4, line 18, page 10, which deleted "and" and inserted "or" after "of Revenue". He explained it had to do with the definition of the word "party" and added, "It seems that that should be the Department of Revenue `or the taxpayer', not `and the taxpayer'." CHAIRMAN PORTER noted there was a motion to move Amendment 4. MS. VOGT stated she thought it was better. CHAIRMAN PORTER asked if there was an objection. There being none, Amendment 4 passed. Chairman Porter mentioned there was an additional amendment before him that was not identified. REPRESENTATIVE FINKELSTEIN informed the committee that amendments he would address were in the nine-page packet provided by the Administration; these amendments, dated March 8, 1996, had a Department of Revenue heading. Number 0700 REPRESENTATIVE FINKELSTEIN moved Amendment 5, which deleted provisions relating to the Board of Tax Appeals. Listed as Amendment No. 1 in the Department of Revenue packet, Amendment5 read: -In Section 1, page 2, lines 5-9, delete text beginning with the phrase "The office of tax appeals is a quasi-judicial agency ..." and ending with the phrase "... shall have at least two members." -In Section 1, page 2, delete lines 27-29 (proposed AS 43.05.410(c)). -In Section 1, page 7, line 17, delete the phrase "by the full board". -In Section 1, page 7, line 30, replace the word "board" with the phrase "administrative law judge." -In Section 1, page 8, at lines 1, 6, 8, 9 and 16, replace the word "board" in each line with the phrase "administrative law judge". REPRESENTATIVE FINKELSTEIN explained that Amendment 5 referred to legislative confirmation and suggested the set-up, as envisioned, was not analogous to a commission. These were hearing officers who were retained, disciplined or eliminated by the chief officer, who was retained or eliminated by the commissioner, he said. Representative Finkelstein stated it was much more analogous to hearing officers in other departments, who were not confirmed by the legislature. He said the constitution precluded that confirmation process. "Regardless of whether it's constitutional or not," he said, "I believe that we ought to be doing this in the form of what is really envisioned here. It's a judge. It's somebody who's making a decision as an administrative officer or a judge. And if we really wanted to go this route, we ought to have retention elections, if we feel there has to be some sort of review other than the appointing power of the Administration. I think the main reason is that I don't think adding the legislature insulates them from politics; I think it adds politics." He cited an example. "I think it's the last thing we want here," he concluded, "and I'd suggest that we return to the approach of administrative law judges." Number 0846 REPRESENTATIVE GREEN referred to earlier subcommittee discussion and said, "without this type of a board or this type of review, we're not really getting as far removed as Frankel had indicated, and that this would, then, come closer to assuring a fair and impartial review of a tax appeal .... Moving it over at least one department is a significant help. But if that administrative law judge in that department is not subject to any other authority other than the Department of Administration, then there's still a concept that they're both members of the Governor's cabinet, and as such, there would be a certain amount of bias that might attach to an appeal. And this is an attempt to make sure that ... there is impartiality." Number 0939 CHAIRMAN PORTER concurred, saying, "the idea of this whole endeavor is to try to set up a scenario that has the best impression of fairness and impartiality. And while I think that establishing the board, as is constitutionally required, presents some challenges to the board in terms of setting up regulations on their procedures, I think those are far more surmountable than the problems that would still exist if this remained an in-house executive function." He asked for a roll call vote. Voting against Amendment 5 were Representatives Bunde, Toohey, Vezey, Green and Porter. Voting for Amendment 5 was Representative Finkelstein. Chairman Porter noted that Amendment5 failed. Number 1000 REPRESENTATIVE FINKELSTEIN moved Amendment 6, listed as Amendment No. 2 in the Department of Revenue packet. Amendment 6, which deleted provisions relating to direct appeal to superior court, read: -Delete Section 4, at pages 11-12, lines 20-2. -Amend Section 5, page 12, line 19, by replacing the phrase "AS43.05.240, 43.05.241, or 43.05.242" with the phrase "AS43.05.240 or AS 43.05.241". -In Section 11, page 16, delete text beginning on line 5 and ending on line 18 (proposed AS 43.05.242). -In Section 11, page 16, line 21, delete the phrase ", whether". -In Section 11, page 16, line 22, delete the phrase "or under a judicial appeal authorized by AS 43.05.042". -In Section 12, page 17, line 9, delete the phrase "or 43.05.242". CHAIRMAN PORTER objected to Amendment 6 for purposes of discussion. REPRESENTATIVE FINKELSTEIN indicated they had discussed it previously. "The key issue here is whether you can go directly to superior court," he said. "The bottom line is that we're trying to figure out what's the best for the state of Alaska with this, and all we're doing here is we're giving an option to the company involved to skip it. The Administration doesn't have that opportunity." He cited a hypothetical situation, then pointed out that people were usually required to go through the administrative appeal process before going to court. He emphasized that this law would apply to every taxpayer in the state. Number 1165 REPRESENTATIVE GREEN referred to comments that the Administration did not have the option of going directly to court. He indicated that since the taxpayer was disputing an amount that would otherwise be owed, there was no reason for the department to initiate review by the court. Number 1230 REPRESENTATIVE AL VEZEY referred to Representative Finkelstein's assertion that the expertise lay in the superior court. Representative Vezey remarked that all the testimony received was to the contrary. REPRESENTATIVE FINKELSTEIN clarified, "I said it lies with the administrative judge." REPRESENTATIVE VEZEY believed the amendment was contrary to every working system with which he was familiar, particularly the U.S. tax court system. Furthermore, giving the tax collector the right to throw a case into court automatically gave them the right to make taxpayers' records public information, he stated. Currently, as HB341 was written, the appeal to the tax board would also be public information. "But I hope we change that before we're done," he added. Number 1300 REPRESENTATIVE FINKELSTEIN responded, "I must not have explained it properly. This amendment doesn't allow the Administration to force them to go to court. My point was of trying to show the inconsistency within the approach embodied right now within the bill. All this says is that the taxpayer shall follow the administrative ... appeal process, that's all. The issue is should the taxpayer be able to go directly to superior court and skip this new board of tax appeals." He believed it was in the interest of the particular company or entity involved, but not necessarily the state. REPRESENTATIVE VEZEY said he might have misunderstood. He had thought Representative Finkelstein was saying the purpose of the amendment would be to give the state the right to avoid the tax appeal board and go straight to court. Number 1362 REPRESENTATIVE FINKELSTEIN said, "I was just making an analogy that in order to make it fair, the existing bill, we ought to allow that to occur. That isn't allowed, and my suggestion to make it fair and equal treatment of the parties is to require, regardless of who it favors - the Administration, the state of Alaska or the taxpayer - in either case, require people to go through the administrative appeal process. That's all this amendment does." REPRESENTATIVE VEZEY stated that given his new understanding, he still opposed the amendment because it was contrary to other systems that were considered fair and equitable. "The taxpayer gives up a lot if they decide to bypass the appeals board process and go straight to court, including making all their records public," he said, adding that the taxpayer had to pay their tax before using that avenue. "And so the state wins," he said. "The king has the money. And then the king merely has to prove he's entitled to keep it." Number 1435 REPRESENTATIVE GREEN suggested the record include that a bill introduced by the Governor on teacher tenure allowed for bypassing the administrative process and going de novo to superior court. "So, this is not precedent-setting in any manner," he said. CHAIRMAN PORTER asked if there was further debate and then asked for a roll call vote on Amendment 6. Voting against the amendment were Representatives Toohey, Vezey, Green, Bunde and Porter. Voting for the amendment was Representative Finkelstein. Chairman Porter noted that Amendment 6 failed. Number 1471 REPRESENTATIVE FINKELSTEIN explained that Amendment 7, which was not in the packet, was a conceptual amendment that came out of testimony at the last hearing. The direct appeal to superior court included in the current bill version would apply only where the issues on appeal were constitutional questions. If they involved other determinations, the administrative appeal route would be required. Number 1560 CHAIRMAN PORTER expressed concern about making that a conceptual amendment. He asked what would happen if a taxpayer had both a constitutional issue and a normal regulation interpretation issue. REPRESENTATIVE FINKELSTEIN replied, "They'd have to go through the board." CHAIRMAN PORTER pointed out that the conceptual amendment did not say that. REPRESENTATIVE FINKELSTEIN responded, "It says that you can only bypass the board when your issues are only constitutional issues." Number 1593 REPRESENTATIVE VEZEY commented that the tax board could not rule on legality of regulations. A person would be denied the avenue of going to court where that legality could be ruled on. "Again, to me that defies a basic sense of justice and fairness," he added. REPRESENTATIVE FINKELSTEIN said that was a good question and suggested that Deborah Vogt be asked about it. Number 1629 REPRESENTATIVE CON BUNDE referred to testimony at the previous hearing about a separate accounting issue. He recalled someone saying, "Yeah, we decided this was clearly constitutional and we wanted to go directly to court and the Administration did not oppose that (indisc.)." Representative Bunde suggested that was the genesis of the current amendment. "And then, the amendment says, though, that only the issues that both sides agree are clearly constitutional takes the short cut to court," he said. Number 1688 REPRESENTATIVE FINKELSTEIN asked: "Considering that the previous amendment failed, do you think ... that this is a fertile area for compromise?" He asked what issues besides constitutional issues the board could not decide. Number 1688 MS. VOGT responded, "The issue of whether an independent ALJ, or in this case, an independent board, as you've now made it, could invalidate a regulation is one I don't really know the answer to. The theory why a hearing officer within a department cannot invalidate a regulation is that the hearing officer stands in the stead of the commissioner who has adopted the regulation, and the hearing officer basically is the commissioner for the purpose of the hearing." Ms. Vogt thought it presented an interesting question as to whether a person or board set up outside the department could invalidate a regulation. "I think it's pretty clear that whoever the administrative person is, the person could not invalidate a statute, as Representative Vezey has pointed out. And I would certainly be amenable to amend your amendment conceptually," she added. Number 1755 REPRESENTATIVE FINKELSTEIN withdrew the amendment and ask the department's help to work on it later. He offered instead, as Amendment 7, an amendment not included in the Department of Revenue packet, which had been submitted in written form as follows: Amend Section 11, page 16, proposed AS 43.05.242, Delete lines 5-8. Insert: "Sec. 43.05.242. JUDICIAL APPEAL. (a) Within 60 days after decision resulting from the informal conference, a person aggrieved by the action of the department under AS 43.05.240 in fixing the amount of a tax or in imposing a penalty may appeal to the superior court. (b) The superior court, sitting without a jury, shall hear all questions de novo. As used in this section, "de novo" has the same meaning as in AS 43.05.400 - AS 43.05.499. The court shall (1) resolve a question of fact by a preponderance of the evidence or, if a different standard of proof has been set by law for a particular question, by that standard of proof; (2) resolve a question of law in the exercise of the independent judgment of the superior court judge; (3) defer to the Department of Revenue as to a matter for which discretion is legally vested in the Department of Revenue, unless not supported by a reasonable basis. (c) When an appeal is taken under this section," [remainder of text as it appears on page 16, lines 9-18] REPRESENTATIVE FINKELSTEIN indicated there had been no previous discussion on Amendment 7. MS. VOGT explained, "This is language that I have typed up after discussions that we had, between Friday and this afternoon, with taxpayer representatives. The department is concerned, and I testified to this Friday, that the way the work draft is currently drafted, there is no standard of review articulated for the judge at superior court. As you know, we oppose the bifurcated process allowing the taxpayer to go straight to superior court. But if ... the taxpayer can go straight to superior court, we would propose that the same standards of review be articulated in the statute that are articulated for the administrative law judge under the other route. And although I believe you'll hear from the taxpayers that they haven't had a chance to get a quorum and an actual vote of AOGA, I think many of the taxpayers are in agreement with this language." Ms. Vogt indicated the language also made clear that the superior court would sit without a jury. She stated that had been discussed Friday without dispute. Number 1873 DAN SECKERS, Chairman and Alaska Tax Counsel for EXXON, Tax Committee of the Alaska Oil and Gas Association (AOGA), affirmed that at a meeting that morning, they had addressed the amendment but had no quorum. He said they had talked previously about not having a jury trial; AOGA had no problem with that. However, for the rest of the amendment, AOGA currently had no position. TOM WILLIAMS, Alaska Tax Counsel for BP, Tax Committee of the Alaska Oil and Gas Association (AOGA), indicated BP would vote for the amendment when it came before the AOGA tax committee; they supported it now. STEVE MAHONEY, Alaska Tax Counsel for ARCO, Tax Committee of the Alaska Oil and Gas Association (AOGA), said, "To the extent that this amendment would come before the AOGA committee, ARCO would vote for it." Number 1918 REPRESENTATIVE VEZEY said, "if I had to go to court in the state of Alaska over taxes, I'd like to have a jury." REPRESENTATIVE FINKELSTEIN expressed his preference to have an income tax sooner rather than later. When that happened, he believed the appeal process would be a top consideration. "For now, though, we do rarely have those kind of individuals involved in this process and I suggest that our focus be the current situation rather than the future, even though ... I wish that was the case," he said. CHAIRMAN PORTER noted there had been a motion and discussion on Amendment7. Number 1958 REPRESENTATIVE VEZEY said, "I really am curious if there isn't a constitutional issue here about denying somebody a right to a jury trial before you deprive them of their property. I readily admit that nine times out of ten, if not more, most taxpayers would prefer to go before a professional judge to decide a complicated set of facts, rather than go before a jury, which almost invariably would make the wrong decision, but I don't think we constitutionally can deny people the right to a jury trial if they're going to take their property." Number 1982 REPRESENTATIVE GREEN recalled discussion by the committee at the previous hearing and said, "In this particular case, now, the superior court is acting as an appeals court, in which case there isn't a denial of process because most appeals courts ... don't have jury trial." REPRESENTATIVE VEZEY responded, "It's my understanding of the law in the state of Alaska that the supreme court requires that a person exhaust their administrative remedies before they go to court. But at that point, you are entitled to a jury trial." Number 2025 ROBERT BRIGGS, Assistant Attorney General, Oil, Gas and Mining Section, Civil Division (Juneau), Department of Law, said, "I can tell you that there is a reported Alaska Supreme Court opinion in which it was decided that there was not a constitutional right to a jury trial to review a tax assessment. That's the Winegardner case that's already been cited to the committee." REPRESENTATIVE CYNTHIA TOOHEY asked why anyone in their right mind would pay their tax fine and then take the case to court without a jury trial. Number 2050 CHAIRMAN PORTER responded that these issues were so complex that if it involved him, he would not want a jury trial. "I would not want the jury to be influenced by pizzazz instead of substance, which juries often are," he said. REPRESENTATIVE VEZEY pointed out they were not creating a statute that only addressed royalty and severance tax payments. It would apply to any tax. Number 2120 REPRESENTATIVE FINKELSTEIN said previous testimony indicated it was not in the public interest to have jury trials in these cases. He added that royalties, which were not a tax, were not included. Although the bill might need amended in the future for other kinds of cases, in these cases, he believed there was no doubt about the public interest. CHAIRMAN PORTER asked if there was further discussion on Amendment7 and then asked for a roll call vote. Voting against the amendment were Representatives Vezey and Bunde; Representative Bunde indicated the discussion had not been completed. Voting for the amendment were Representatives Finkelstein, Green, Toohey and Porter. Chairman Porter noted that Amendment 7 had passed. Number 2182 REPRESENTATIVE FINKELSTEIN offered Amendment 8, listed as Amendment No. 4 in the Department of Revenue packet; he specified that Amendment No. 3 of that packet was not being offered. Amendment8 read: -In Section 1, page 6, delete text on lines 19-20 (proposed AS 43.05.455(f)). -In Section 1, page 6, line 11, insert a new subsection (e) to read as follows, and renumber remaining subsections accordingly: (e) Evidence on the following subjects is irrelevant and may not be admitted, unless the administrative law judge grants an exception in the interest of justice: (1) history of legislative provisions that have not been enacted; (2) history of a draft regulation that has not been adopted; (3) confidential information under AS 43 of a taxpayer other than the taxpayer whose tax is the subject of the appeal may unless the confidentiality has been waived by that other taxpayer. REPRESENTATIVE FINKELSTEIN explained that the experience of the Administration was that these kinds of requests contributed to the "tons and tons of material" involved in discovery. "I think we've got to do what we can to eliminate the paper wars," he said. Number 2235 CHAIRMAN PORTER said, "Basically, this amendment would limit discovery to the extent that proposed-but-not-adopted regulations and proposed-and-not-adopted statutes would be not admissible, in any form." REPRESENTATIVE FINKELSTEIN indicated that was incorrect. CHAIRMAN PORTER suggested it would be prima facie irrelevant. REPRESENTATIVE FINKELSTEIN asked for clarification. CHAIRMAN PORTER said, "They're irrelevant unless a showing can be made that they are relevant." He asked if that was what the amendment said. REPRESENTATIVE FINKELSTEIN replied that was exactly what it was. Number 2277 REPRESENTATIVE VEZEY said that, in light of the jury being eliminated from the system, the amendment was totally uncalled for. "Legislative intent, regulatory intent are concerns of the court," he said, "and that's the best way I know of to express it." CHAIRMAN PORTER clarified that the amendment dealt with regulations and statutes that were not adopted. REPRESENTATIVE VEZEY replied, "But it also expresses legislative intent." REPRESENTATIVE FINKELSTEIN indicated the court determination was that it did not express legislative intent. "That was the testimony at our previous hearing," he said. Number 2304 REPRESENTATIVE GREEN stated, "If we say that because there isn't any value in legislative intent as described in bills that are introduced, perhaps, and are making their way through, that don't make it clear through and become law, then I would direct your attention to line 8 where it says hearsay evidence is admissible if it's the kind of evidence which responsible persons are accustomed to rely on. And to me, there could well be some information included in legislation that didn't make it all the way through that would certainly be elevated above hearsay." He specified he was referring to line 8, page 6, of the work draft. Number 2345 REPRESENTATIVE FINKELSTEIN said, "We do know from being here, in our own experience, that the intent of the legislature is not expressed unless the legislature takes an action. Just because a bill is introduced, just because a bill makes it through a committee, legislative intent derives from the action of the body as a whole, not of one committee or subcommittee or individual legislator." Number 2388 REPRESENTATIVE GREEN replied, "I submit again, though, that if we're going to have the information that was submitted in a prior bill, that has been incorporated in this bill by the Administration, hearsay evidence is admissible, and then we can write down and say, however, that which is the history of legislative provisions, and, I would presume, including legislation that's vetoed by the Governor, passed both houses and then is vetoed, would also fit in this not-admissible category. I think we're really stretching the fact that hearsay is okay but legislative passage is not. I believe that's what you'd be saying." REPRESENTATIVE VEZEY added, "Certainly, an amendment to a bill or a proposed amendment that fails would be a very good expression of legislative intent." Number 2425 REPRESENTATIVE BUNDE applauded the limitation of paperwork and billing hours. "But I think we're confusing legislative and legislator," he said. CHAIRMAN PORTER mentioned that information had been provided to the committee the previous Friday on that point but that he could not recall it. "Right now, I'm tending to think that if a regulation weren't passed and a statute weren't passed, I can't see any relevance to the discussion that went on," he said. MS. VOGT indicated cases had repeatedly held that nothing could be concluded, as a matter of law, from the legislature's failure to act, in terms of legislative intent. TAPE 96-33, SIDE B Number 0001 MS. VOGT voiced that it would be difficult to describe the burdensomeness of the requests for documentary information from taxpayer after taxpayer. She stated, "These were simply two categories that we know, as a matter of law, can't be probative of anything, that it would simply help ... save the whole state money to foreclose those inquiries before they start." Number 0053 MR. WILLIAMS referred to page 5, lines 9 through 12, provisions for people to find legislative history on their own, and suggested the idea that taxpayers would ask the department to do their legal research for them would end. He believed there might be a case that said history of legislation that did not pass was not probative of legislative intent. However, he thought it was important to know whether the legislature was aware of something or not at a particular time. MR. WILLIAMS cited a case in point with respect to a regulation, saying "In 1981, when I was commissioner, legislation was passed repealing separate accounting, that said, specifically, the windfall profit tax for the feds was a deduction against separate accounting. And the question was raised whether it would still be a deduction under the new tax that was created. And we had discussion within the department and never adopted a regulation. But the decision was made at the commissioner's office that it was, in fact, going to be a deduction. Now, if a taxpayer can get the evidence to show that that was a policy decision made, rather than in the absence of a regulation, why shouldn't they be able to show it? If it's not relevant, it won't be admissible anyway." MR. WILLIAMS continued: "But if it's relevant to show that the legislature was aware of problems with the markers through Prince William Sound or something like that, that could become relevant in some context relating to tax and the deductions for spill response costs .... I'm not sure, also, that it's absolutely clear that it's always going to be irrelevant as a matter of law. The case simply hasn't come up right." He cited the example of SB 103, which failed in the 1972 Senate ten-to-ten. Ten weeks later, the exact same words in a different bill were determined okay to go forward. He again suggested it would be good to look at a bill for knowledge that the body had relevant information. Number 0177 CHAIRMAN PORTER said, "Considering the restrictions that already exist in the bill, and reading what this amendment says, I don't think there's a great deal of difference." Basically, he suggested, it came down to the difference between a judge ruling on whether information, which the taxpayer had to develop on his own, was relevant and the judge saying `I'll let it in in the interest of justice.' "And I'm not sure what the interest-of-justice standard is," he said. "I know what relevancy generally is." He added, "I don't know if I like the amendment in that context." REPRESENTATIVE FINKELSTEIN referred to previous mention of other bill history and said, "If that provision is the one provision that eventually was enacted into law, then it is relevant and it would be covered under this. It says history of legislative provisions, not bills that have not been enacted. So, if it's a provision that somehow came from one other place, went into another bill, then that legislative history is still relevant. In the cases where ... there's some unusual issue, such as who is aware of something, ... there is an exception in here, where it's in the interest of justice, they can allow it. So, it isn't a blanket prohibition." He agreed legislative intent could not be inferred from actions not taken. Number 0255 CHAIRMAN PORTER said, "I don't interpret either view of this as looking for that, really." He said it had to do with whether the legislature or perhaps the Administration, in presenting information on a bill, had a relevant fact or not. MS. VOGT agreed with Mr. Williams that the legislation went a long ways towards reducing burden in requiring a taxpayer to research legislative history. "But there still remain a lot of documents within ... the Department of Law and the Department of Revenue that we are repeatedly asked for," she said. "And that's not covered by the provisions requiring the taxpayer to go to the library when the information's available at the library. I certainly agree that if a taxpayer does that research at the library, finds something or knows something that came to the attention of the legislature, that the issue is, `did the legislature know this, were they aware of it,' that would be a perfect example for the administrative law judge to find that an exception to this provision [was] required." MS. VOGT concluded, "We are setting up a system whereby discovery, rather than going on out of sight of the judge, and the parties making up their own minds on what they'll do and what they won't do and only going to the judge if they get into a dispute, here, we've set up a system where the administrative law judge is supposed to take an affirmative role in discovery and approve a discovery plan at its inception." Number 0346 CHAIRMAN PORTER asked if that wouldn't limit a request for unnecessary research on the part of the department. MS. VOGT replied it was possible. REPRESENTATIVE VEZEY said legislative history may or may not be in the library somewhere. "We have a statute that says that these public records are public records unless you're involved in litigation with the state. Then, they're no longer public records. That would be a case where discovery was the only method available to a party to get this information. If that statute wasn't there, I think I might agree with you." MS. VOGT responded, "To the extent that those records are in the possession of the Department of Revenue, that's right that they are controlled by the statute that says ...." REPRESENTATIVE VEZEY interjected that it did not matter which department of the state. MS. VOGT said, "It they're in the Legislative Affairs library, the taxpayer can go down and look at them. If they're in legislators' files, they're not covered by that public disclosure provision that you've just cited." Number 0356 REPRESENTATIVE VEZEY said, "It goes beyond just the Department of Revenue. It goes to other state agencies. Now, if it's in the public domain, that's different; they've already been released. But I just know from experience that if you are involved in litigation with the state, you can't go down to state agencies and start going through their records without getting what amounts to a court order." REPRESENTATIVE FINKELSTEIN said, "This is just the legislative history here. And legislative history is available. I've researched plenty of things and they don't even ask where you're from." CHAIRMAN PORTER asked if there was further discussion on Amendment8 and then asked for a roll call vote. Voting for the amendment was Representative Finkelstein. Voting against the amendment were Representatives Green, Bunde, Toohey, Vezey and Porter. Chairman Porter noted that Amendment 8 failed. Number 0437 REPRESENTATIVE FINKELSTEIN mentioned that he was skipping Amendment No.5 of the Department of Revenue packet and going to Amendment No. 6, which would now be Amendment9. He said for the final three amendments, 9, 10 and 11, they had heard from neither the taxpayers nor the state. Nor had those been covered in previous hearings. REPRESENTATIVE FINKELSTEIN referred to Amendment 9 and said, "there's a procedural system set up that's way beyond my understanding when it comes to resolving these questions, which ones are a matter of law, which ones are a matter of fact, et cetera. The last thing we want to do is start over. There was some confusion as to exactly what this all meant. We ought to, as much as possible, try to keep that standard in place and this amendment would do just that." MS. VOGT said, "This Amendment No. 6 in our package should be replaced by what you passed as Amendment 7." CHAIRMAN PORTER said, "So, we should withdraw number 6, then, also." MS. VOGT replied, "Our numbering number 6." REPRESENTATIVE FINKELSTEIN withdrew the amendment and noted that Amendment 9 was now Amendment No. 7 from the Department of Revenue packet. Amendment 9 read: Amend Section 6, page 12, lines 24-27, to read as follows: * Sec. 6. AS 39.25.120(c) is amended by adding a paragraph to read: (25) the chief administrative law judge and any other administrative law judges appointed to the office of tax appeals of the Department of Administration under AS 43.05.410. REPRESENTATIVE FINKELSTEIN indicated there had been a slight amount of previous discussion on Amendment 9. "It's a rather thin line between the exempt service and the partially exempt service," he said. Number 0511 CHAIRMAN PORTER asked if the amendment would make ALJs partially exempt. REPRESENTATIVE FINKELSTEIN said, "Yes." REPRESENTATIVE VEZEY asked where they were now. REPRESENTATIVE FINKELSTEIN answered, "In the bill, they're exempt service." REPRESENTATIVE VEZEY said, "In light of the fact that, to the best of my knowledge, we have no statute defining what is partially exempt, it's a very gray area in the law. Lacking a statute that would define what partially exempt is, I would just have to oppose the amendment." REPRESENTATIVE FINKELSTEIN asked to hear briefly from the department and any taxpayers who wanted to comment. Number 0544 MS. VOGT explained, "Exempt normally is truly at-will. And one of the reasons we propose partially exempt is that we agree with the taxpayers on the concept of `dismissible only for cause.' I guess that's not entirely inconsistent with exempt service, but partially exempt seems more protected than exempt in terms of `dismissible for purely political reasons.'" Number 0583 CHAIRMAN PORTER asked: "Am I correct that the provisions of the bill that the requirements for dismissal only for cause and that sort of thing would be the criteria, regardless of whether we called them exempt, non-exempt or employee classification xyz?" MS. VOGT replied, "Up until the very last part of your sentence, I agree with you." She added, "As between exempt and partially exempt, the language in the statute's going to govern." CHAIRMAN PORTER asked: "So, the effect of this is, basically, trying to come up with a title that more fits our criteria, rather than changing the criteria." Number 0606 MS. VOGT replied, "Precisely. And we saw this amendment as part of the package. The Governor's bill proposes ALJs within the Department of Administration, appointed by the commissioners, in the partially exempt service. The legislation, in the work draft, has a board of exempt people confirmable by the legislature and, in a sense, they're part of a package." CHAIRMAN PORTER asked what the classification would be for a Alaska Public Utilities Commission (APUC) board member. MS. VOGT replied, "An APUC board member, I would be quite certain, would be exempt. But the hearing officer that works for the APUC would probably be partially exempt." Number 0650 REPRESENTATIVE GREEN said, "I think that while we do say, in the first part of the bill, that they would only be dismissed because of cause, there is still that tie of partially exempt to the other administrative officers within a department. But I think another criteria, at least, that was considered in this is that these ALJs are going to exercise a significant decision-making tribunal on major, major items, certainly the large tax issues. And it seems to me that while I'm all in favor of cutting state government, it might be that here is a case where we should try and attract those personnel, who are astute enough, in demand enough, marketable enough, to a salary that would be commensurate with the position and the responsibility (indisc.)." Number 0698 REPRESENTATIVE BUNDE asked if there was a salary difference between exempt and partially exempt. MS. VOGT replied, "Not necessarily." CHAIRMAN PORTER indicated the limits were different. Number 0707 MS. WILLIAMS suggested there were two reasons for putting it in the exempt. First, it was consistent with legislative confirmation. And second, it was related to salary. "There are exempt petroleum geologists in the Department of Natural Resource, Division of Oil and Gas," he said. "And the reason they're in the exempt service, even though they're staff persons, not in a policy-making role, is so that their salaries can be competitive with the private sector." CHAIRMAN PORTER asked if there was further discussion on Amendment9. He then asked for a roll call vote. Voting for the amendment was Representative Finkelstein. Voting against the amendment were Representatives Green, Bunde, Toohey, Vezey and Porter. Chairman Porter noted that Amendment 9 failed. Number 0777 REPRESENTATIVE FINKELSTEIN indicated Amendment 10 was Amendment No.8 in the Department of Revenue packet. Amendment 10 read: -Amend Section 14, at page 17, lines 31-32, by deleting the phrase "meeting with representatives of the Department of Revenue [FORMAL HEARING UNDER AS 43.05.240]" and replacing with the phrase "a formal hearing under AS 43.05.241 or a judicial appeal under AS 43.05.242 [AS 43.05.240]". -Amend Section 14, at page 18, lines 1-2, by deleting the phrase "meeting [HEARING]" and replacing with the phrase "hearing". REPRESENTATIVE FINKELSTEIN explained, "Again, it's attempting to hang on to some of the standards we've built up in the past." As the amendment had not been discussed to any degree, he expressed interest in hearing from witnesses. MS. VOGT explained, "The section that it amends, [AS] 43.55.013(g), I believe, is a section in the severance tax statute dealing with ... contesting the presumption of production at the economic limit. And the language currently reads that a taxpayer who contests the statutory presumption may prove, at a formal hearing in front of the department, by clear and convincing evidence, that a different monthly production at the economic limit is appropriate." MS. VOGT did not believe participants intended to change the severance tax statute. "What happened was, the package went over to the legislative drafters and there was a reference to [AS]43.05.240, which is currently the taxpayer remedies section in the existing statute. Since the work draft changed .240 and made it into three sections, ... the drafter took a stab at what he thought might be the best way to handle the reference, [in] which it was not clear what we wanted to do, or what anybody wanted to do." MS. VOGT explained that in the new work draft, "informal conference" had been in the language, rather than "at a formal hearing in front of the department". There had been considerable discussion about how to fix it. "Finally, all agreed to simply leave out the location of any hearing," she stated. She did not approve of the way the drafter had solved the problem with the concept of "at a meeting with representatives of the department". She said, "We believe that eviscerates the protection that the department has at the trial de novo, that we should be able to rely on the presumption unless the clear and cogent evidence standard has been met. And I don't think there's really any disagreement. It's just a question of convincing the legislative drafter." Number 0954 MR. WILLIAMS said that was correct. He referred to page 17, line 30, and stated, "Beginning on line 30, it would say `the taxpayer may rebut this presumption', and strike the word `at', strike all the next line, strike `under AS 43.05.240' in the brackets line32. And I think we're in agreement on that change there. And then, in lines 1 and 2, go back to the word `hearing'." MS. VOGT said, "Right." MR. WILLIAMS clarified, "Use the word `hearing' again there, rather than `meeting'. CHAIRMAN PORTER asked if that was what the amendment did. MR. WILLIAMS replied, "No. But that's where, at our discussions with the department, we ended up agreeing how to do that." CHAIRMAN PORTER asked Representative Finkelstein if he would consider a friendly amendment to his amendment, striking everything in the body of Amendment 10 and just saying, "page 17, line 30, delete `at'; line 31, delete entire; line 32, delete `under AS 43.05.240'." Number 1049 REPRESENTATIVE FINKELSTEIN said, "I'll withdraw my amendment and offer that as the amendment." CHAIRMAN PORTER referred to page 18, line 1, and indicated `meeting' should be deleted, with `hearing' reinserted in its stead, for Amendment 10. The wording would read: "The hearing shall be held before February 15 of the year or within six months after commencement of gas production for a lease or property." He asked if there was an objection to the amendment. There being no objection, Amendment 10 passed. REPRESENTATIVE VEZEY indicated he had expected another amendment. He referred to page 8, line 17, which provided that the department may conduct hearings and compel the attendance of witnesses and the production of books, records, and papers of any person. He expressed concern that the records were public records. CHAIRMAN PORTER said, regardless of whether there was an appeal, the making public of records under the bill occurred after the final administrative decision. Number 1215 MS. VOGT pointed out that under current procedure at the Department of Revenue, the decisions of the hearing section become public at the close of a hearing. The taxpayer was generally given a copy of the decision with the admonition to redact it in any way that would preserve confidentiality. "And this is so that the law established by the hearing officers can be followed," she said, "so that the public can know what it is." CHAIRMAN PORTER asked if that procedure would remain under effect in this statute. MS. VOGT affirmed that. "This section, the way I read it, means that the proceedings are going to be closed," she said. "They're going to be confidential. But they become public at the end, to the extent that that process is gone through." She asked for clarification on Representative Vezey's proposed amendment. Number 1340 CHAIRMAN PORTER suggested the amendment would propose that records and the decision would remain confidential after the decision was rendered. REPRESENTATIVE VEZEY clarified his intent was not that the decision would remain confidential, just the taxpayer's records. CHAIRMAN PORTER thought that could be accomplished by removing records and proceedings. He said, "Then it would be `are confidential except that the decisions become public records and open to the public when the final administrative decision is issued'." He added, "I think you'd have to include proceedings, because the records are part of the proceedings." Number 1370 REPRESENTATIVE FINKELSTEIN said the provision was important and came from the appropriateness of some degree of public disclosure. He thought it was a reasonable compromise. "I did not offer the amendment that would have expanded this to a greater degree than the bill partially in deference to the compromise that's been reached," he explained. CHAIRMAN PORTER asked if providing confidentiality until the decision was made was current policy. MS. VOGT said, "Proceedings are currently confidential and decisions are published, pseudonymed. How that practice fits in with this precise language, I'm not entirely clear in terms of the records, proceedings and decisions." She indicated they had not generally published motions, oppositions to motions, rulings on motions, or other proceedings of the hearing, except for the final decision. Number 1424 REPRESENTATIVE TOOHEY expressed that she shared Representative Vezey's concern. CHAIRMAN PORTER asked if everyone would be comfortable with a conceptual amendment. He suggested drafters look at existing language and craft the bill so that the decision would become public, with the ability of the taxpayer to peruse it for confidential information, instead of the wording in work draft R. REPRESENTATIVE FINKELSTEIN said, "This is, I think, just a reasonable statement of what's appropriate public policy." He suggested there might be other standards implemented if and when there was an income tax. He thought it reflected the public interest in knowing what the state was doing in its decisions with billion dollar cases. REPRESENTATIVE VEZEY mentioned there was a corporate income tax in Alaska, which many citizens paid. Number 1584 REPRESENTATIVE BUNDE indicated he did not want to pass a law that would require readjustment. He shared Representative Finkelstein's concerns about billion dollar settlements. He said he wanted the language to reflect what was currently being done. REPRESENTATIVE FINKELSTEIN said, "I think people are missing something here. The section we're talking about allows the administrative law judge to issue a protective order requiring that specific parts of the record remain confidential. And when the decision is released, those items shall be removed from the materials made available. There's plenty of protection that exists right now." He clarified he was talking about page 8, lines 21-25. Number 1471 CHAIRMAN PORTER agreed it seemed to generally reflect current policy. REPRESENTATIVE VEZEY asked for a definition of "redacting." CHAIRMAN PORTER replied, "Blacking out sections that you want to remain confidential." REPRESENTATIVE BUNDE moved to adopt CSHB 341, version R, as amended, as a work draft. CHAIRMAN PORTER noted there was a motion to adopt working draft R, dated 3/7/96, of CSHB 341, as amended, as the working document and asked if there was an objection. Number 1794 REPRESENTATIVE FINKELSTEIN indicated he thought more work needed to be done. He suggested the Administration, which had to sign the bill, was the only real entity that played a role in these kinds of things. REPRESENTATIVE BUNDE made a motion that CSHB 341, as amended, be moved from committee with individual recommendations. CHAIRMAN PORTER noted there was a motion to move CSHB 341, versionR, as amended, with individual recommendations and any fiscal notes, as attached. There being no objection, it moved from committee. Number 1844 REPRESENTATIVE FINKELSTEIN mentioned there were two letters of intent, by Representative Green and the department. CHAIRMAN PORTER called a short recess to read the letters. The two letters of intent were withdrawn. HB 462 - DRUNK DRIVING: EVIDENCE AND SENTENCING Number 2055 CHAIRMAN PORTER noted that the next item of business was HB462. As sponsor of the bill, he explained that HB 462 did three things. "One, when we passed, as you remember, the DWI felony provisions, one thing that we put in and did not really mean was that we restricted the court ... to being required to institute the sum total of the suspended sentence if a defendant had failed to take any portion of his ... or her first treatment program," he said. He indicated that in those cases, usually some portion of the suspended sentence was put into effect to get the offender's attention, with continued attempts made at treatment. "This bill would restore the court's ability to invoke a portion of the suspended sentence in that situation but still have the opportunity to take another shot at treatment if it is indicated," he added. CHAIRMAN PORTER indicated the basis for getting into a felony-level prosecution was prior convictions. He said people frequently came to Alaska with prior convictions elsewhere. After being arrested here, they were required to go to grand jury in a felony case within ten days, and it was extremely difficult to get a certified copy of their record to the grand jury in time for that to be considered. "What this bill would allow would be to use the print- out, if you will, from the criminal history of that person's state for that evidence at grand jury, which, of course, doesn't find them guilty, it just binds them over for trial," he said, noting that the best evidence of the hard copy certification would still be required at trial. CHAIRMAN PORTER explained the bill would also disallow the requirement for a pre-sentence investigation in some cases. "This would require that if this were the second felony, that there would be a pre-sentence investigation, as is required under the other statutes now," he said. He noted that Jerry Shriner from the Department of Corrections was present to answer questions if needed. Number 2323 ANNE D. CARPENETI, Assistant Attorney General, Central Office, Criminal Division, Department of Law, testified that the department supported HB 462. REPRESENTATIVE GREEN referred to Section 7, page 3, and asked if a sentence had not already been given, whether this act would apply. MS. CARPENETI replied, "I think what this means is that for your third offense within five years, for the felony offense, it has to occur after the effective date of the act." However, prior convictions could have occurred before that, she indicated. Number 2395 REPRESENTATIVE TOOHEY pointed out there was an amendment in her packet. CHAIRMAN PORTER explained that amendments had been offered in other committees, which he, as sponsor, had been asked to entertain. He had declined. "I would speak against them when it gets to the floor, as a matter of fact," he said, "because there's been any number of second thoughts in this general area that have come about." REPRESENTATIVE TOOHEY made a motion that HB 462 move from committee with individual recommendations and attached fiscal notes. There being no objection, HB 462 moved from the House Judiciary Committee. ADJOURNMENT There being no further business to conduct, CHAIRMAN PORTER adjourned the House Judiciary Committee meeting at 2:45 p.m.