Legislature(1997 - 1998)
03/06/1998 01:07 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE March 6, 1998 1:07 p.m. MEMBERS PRESENT Representative Joe Green, Chairman Representative Brian Porter Representative Norman Rokeberg Representative Jeannette James Representative Eric Croft Representative Ethan Berkowitz MEMBERS ABSENT Representative Con Bunde, Vice Chairman COMMITTEE CALENDAR HOUSE BILL NO. 452 "An Act relating to registration, disclosures, and reports by certain nonprofit corporations." - HEARD AND HELD HOUSE BILL NO. 395 "An Act relating to civil liability resulting from the use of a defibrillator in providing emergency aid." - MOVED CSHB 395(JUD) OUT OF COMMITTEE * HOUSE BILL NO. 196 "An Act relating to wills, intestacy, nonprobate transfers, and trusts; and amending Rule 24, Alaska Rules of Civil Procedure." - HEARD AND HELD HOUSE BILL NO. 406 "An Act relating to subsistence uses of fish and game." - BILL HEARING CANCELLED (* First public hearing) PREVIOUS ACTION BILL: HB 452 SHORT TITLE: NONPROFIT CORPORATIONS DISCLOSURES SPONSOR(S): REPRESENTATIVES(S) GREEN Jrn-Date Jrn-Page Action 02/18/98 2362 (H) READ THE FIRST TIME - REFERRAL(S) 02/18/98 2362 (H) JUDICIARY 03/04/98 (H) JUD AT 1:00 PM CAPITOL 120 03/04/98 (H) MINUTE(JUD) 03/06/98 (H) JUD AT 1:00 PM CAPITOL 120 BILL: HB 395 SHORT TITLE: CIVIL LIABILITY FOR EMERGENCY AID SPONSOR(S): REPRESENTATIVES(S) BUNDE, Hudson Jrn-Date Jrn-Page Action 02/11/98 2283 (H) READ THE FIRST TIME - REFERRAL(S) 02/11/98 2283 (H) JUDICIARY 02/25/98 2438 (H) COSPONSOR(S): HUDSON 03/06/98 (H) JUD AT 1:00 PM CAPITOL 120 BILL: HB 196 SHORT TITLE: WILLS, TRUSTS, & OTHER TRANSFERS SPONSOR(S): REPRESENTATIVES(S) RYAN, Therriault Jrn-Date Jrn-Page Action 03/14/97 667 (H) READ THE FIRST TIME - REFERRAL(S) 03/14/97 667 (H) JUDICIARY, FINANCE 04/23/97 (H) JUD AT 1:00 PM CAPITOL 120 04/23/97 (H) MINUTE(JUD) 03/06/98 (H) JUD AT 1:00 PM CAPITOL 120 WITNESS REGISTER JEFFREY LOGAN, Legislative Assistant to Representative Joe Green Alaska State Legislature Capitol Building, Room 118 Juneau, Alaska 99801 Telephone: (907) 465-6841 POSITION STATEMENT: Presented HB 452 on behalf of sponsor. MANO FREY, Co-Chair Arctic Power 2501 Commercial Drive Anchorage, Alaska 99501 Telephone: (907) 272-4571 POSITION STATEMENT: Testified on HB 452. JOHN CONLEY Ketchikan Chamber of Commerce P.O. Box 8462 Ketchikan, Alaska 99901 Telephone: (907) 225-3519 POSITION STATEMENT: Testified in support of HB 452. DICK COOSE, Executive Director Concerned Alaskans for Resources and Environment P.O. Box 9266 Ketchikan, Alaska 99901 Telephone: (907) 247-9266 POSITION STATEMENT: Testified in support of concept of HB 452. STEVE BORELL, Executive Director Alaska Miners Association, Incorporated 501 West Northern Lights Boulevard, Suite 203 Anchorage, Alaska 99503 Telephone: (907) 276-0347 POSITION STATEMENT: Testified in support of HB 452. MICHAEL MONAGLE, Records and Licensing Supervisor Corporations Section Division of Banking, Securities and Corporations Department of Commerce and Economic Development P.O. Box 110807 Juneau, Alaska 99811 Telephone: (907) 465-2297 POSITION STATEMENT: Testified on HB 452. PATRICIA SWENSON, Legislative Assistant to Representative Con Bunde Alaska State Legislature Capitol Building, Room 106 Juneau, Alaska 99801 Telephone: (907) 465-6824 POSITION STATEMENT: Presented HB 395 and answered questions on behalf of sponsor. MARK JOHNSON, Chief Community Health and Emergency Medical Services Division of Public Health Department of Health and Social Services P.O. Box 110616 Juneau, Alaska 99811-0616 Telephone: (907) 465-3027 POSITION STATEMENT: Testified in support of HB 395. ROSE MARIE CITTI, Director of Training Respond Systems P.O. Box 220348 Anchorage, Alaska 99522-0348 Telephone: (907) 344-0302 POSITION STATEMENT: Testified on HB 395. CRAIG LEWIS, Director Interior Region Emergency Medical Services Council 3522 Industrial Avenue Fairbanks, Alaska 99709 Telephone: (907) 546-3978 POSITION STATEMENT: Testified in support of HB 395. KEVIN JARDELL, Legislative Administrative Assistant to Representative Joe Green Alaska State Legislature Capitol Building, Room 118 Juneau, Alaska 99801 Telephone: (907) 465-4990 POSITION STATEMENT: Answered questions regarding HB 395. REPRESENTATIVE JOE RYAN Alaska State Legislature Capitol Building, Room 420 Juneau, Alaska 99801 Telephone: (907) 465-3875 POSITION STATEMENT: Sponsor of HB 196. RICHARD THWAITES, Attorney 500 "L" Street, Suite 301 Anchorage, Alaska Telephone: (907) 277-1595 POSITION STATEMENT: Answered questions regarding HB 196. BOB MANLEY, Attorney 324 East Cook Avenue Anchorage, Alaska Telephone: (907) 263-8251 POSITION STATEMENT: Testified on HB 196. JOHNNY GRAMES 525 West Third Anchorage, Alaska 99501 Telephone: (907) 274-6348 POSITION STATEMENT: Testified on HB 196. RICHARD HOMPESCH, Attorney 119 North Cushman, Suite 400 Fairbanks, Alaska 99701 Telephone: (907) 452-1700 POSITION STATEMENT: Testified in support of HB 196. ACTION NARRATIVE TAPE 98-31, SIDE A Number 0001 CHAIRMAN JOE GREEN called the House Judiciary Standing Committee meeting to order at 1:07 p.m. Members present at the call to order were Representatives Green, Porter, James and Croft. Representatives Rokeberg and Berkowitz arrived at 1:11 p.m. and 1:13 p.m., respectively. HB 452 - NONPROFIT CORPORATIONS DISCLOSURES Number 0040 CHAIRMAN GREEN announced the first item of business would be HB 452, "An Act relating to registration, disclosures, and reports by certain nonprofit corporations," sponsored by Representative Green. Number 0052 JEFFREY LOGAN, Legislative Assistant to Representative Joe Green, Alaska State Legislature, came forward to explain HB 452. He told members, "In the body of American law, there is somewhat of a peculiarity known as the private nonprofit corporation. It finds its roots in liberal laissez faire economics, a branch of economics that posits that private associations can do things better than the government, and evolves from activities in the late 19th century, when private groups and associations began forming to meet public needs. Interestingly enough, this is a trend noted by De Tocqueville in his book, after his visit to the United States, when he noted that in America average people just organize themselves and take care of public needs, whereas in Europe we appoint kings and other accomplished men to accomplish the same tasks. So it is somewhat of an American thing." MR. LOGAN said in the 1920s and 1930s, a series of Supreme Court decisions defined "corporate giving" as a management prerogative. This was significant because corporations were beginning to amass great wealth, and the court decisions allowed for a wedding of philanthropy and corporate wealth. The offspring of this marriage has evolved into what we know today as the private nonprofit philanthropic foundation. Number 0192 MR. LOGAN stated, "Sometime later, a deal was struck, wherein the body politic, us, afforded these foundations certain advantages, namely, tax advantages, in exchange for certain behavior, namely, that they would give us part of the money they earned. So private nonprofits developed into a source of money for various groups, causes and activities, and they gave money based on a few rules. One rule, maybe the main rule, was that there was a prohibition on political activities. This agreement worked pretty well up until about ten years ago. For a number of reasons, on which I could expound later if asked, there began a transformation. First, the amount of money in private nonprofit foundations exploded. ... Some economists believe that today 10 percent of the total U.S. economy is the nonprofit economy. Secondly, the number of private nonprofit organizations exploded." MR. LOGAN said today there are about a million nonprofit organizations in the country. There are about 600,000 are 501(c)(3) corporations, which is the Internal Revenue Service (IRS) classification we commonly understand to be nonprofit, including churches, universities, think tanks, local service clubs, homeless shelters, and so forth. In addition, there are about 40,000 private nonprofit foundations, and that number is growing steadily. Mr. Logan said the third element of the transformation is that these foundations became political. The transformation resulted in an altered relationship. Whereas in the past local groups would apply to a foundation for money, today there is evidence that foundations target the groups, causes and activities that they want to support. Number 0374 MR. LOGAN referred to bill packets, first pointing out an article quoted from The Washington Post, with a headline of "Foundations, Growth May Mean More Grants." He noted that along with the Alaska permanent fund, private nonprofit foundations have enjoyed the boom in the stock market. In the third paragraph of the article, it says these increases drive the total endowments of the top foundations to more than $126 billion dollars, or more than 12 times as much as the U.S. government spent last year on welfare aid to the poor. "This is big business," Mr. Logan commented. MR. LOGAN referred to the following in committee packets: A series of articles from Boston Globe Online, titled "The Greening of a Movement", with a subtitle of "Big Money is Bankrolling Select Environmental Causes"; a piece titled, "Recent Foundation Grants for Green Groups Active in Alaska"; and a list titled, "Alaska Conservation Foundation," from a book by Jonathan Adler, which shows some financial information about one group operating in Alaska that receives foundation funding and is active in the environmental movement. Number 0494 MR. LOGAN pointed out that environmental groups are not the only groups to receive money from foundations, and that foundations which give money to environmental groups are not the only foundations that donate to what could be considered political activities. He said these examples appear in the packet because they were the easiest to get a hold of in the time he had to put the packet together. He expressed the hope that if the committee addresses the bill again, he will be able to provide additional information to show that there are foundation activities in all phases of the political spectrum. Number 0541 MR. LOGAN noted that packets contain a proposed committee substitute, Version E [0-LS1324\E, Bannister, 3/4/98]. He said the changes from the original bill are mostly superficial. However, Version E changes the time within which donations may be given from a from a fiscal year to a calendar year, deletes the requirement for some information by the corporation, and on page 2 requires information about where the money ends up. MR. LOGAN concluded, "Overall, the bill simply says that if you are a private nonprofit corporation, and you give more than $5,000 in a calendar year to an organization in Alaska, you have to tell the public where the money goes. And if you don't, the commissioner can revoke your certificate of authority to do business. It's a right-to-know bill. The information we are requesting pales ... in comparison to what the federal government asks for." Number 0639 REPRESENTATIVE ERIC CROFT said he had just received the materials, except for the original version of the bill. He asked whether it was heard at another time. CHAIRMAN GREEN said this is the original hearing. [It had been brought up briefly on March 4, 1998.] Number 0698 REPRESENTATIVE CROFT asked how much of a burden the biennial report would be. MR. LOGAN replied that he had not seen the form of the biennial report, but someone from the Division of Banking, Securities and Corporations was present. Number 0745 CHAIRMAN GREEN asked for confirmation that this isn't nearly as much information as is required by the federal government, including delineation of contributors on the IRS form. MR. LOGAN said that is true, adding that he could provide copies of the IRS form and the rules for filling that out. Number 0765 REPRESENTATIVE ETHAN BERKOWITZ asked whether a for-profit corporation that is in aggregate and does more than $5,000 worth of business in Alaska has filing requirements with the state. He said it seems that certain equal protection considerations might arise. MR. LOGAN said he doesn't know, but the drafter had brought that issue and a potential commerce clause issue to his attention, "both of which she agreed could be issues but that we meet the tests for those." Number 0874 REPRESENTATIVE JEANNETTE JAMES commented that certainly if a foreign corporation comes into the state to do any business, it must first file with the Division of Banking, Securities and Corporations as a foreign corporation, and get a permit. Number 0908 REPRESENTATIVE BERKOWITZ asked whether there is a reporting requirement if a foreign corporation purchases $5,000 worth of goods from an Alaska corporation, for example. CHAIRMAN GREEN said he doesn't know. Number 0927 REPRESENTATIVE CROFT suggested that goes to the definition of doing business. He provided an example, "If Corrections Corporation of America, a for-profit company who is not yet doing business in the state of Alaska, wanted to give donations to various groups, as I read it, ... it just covers nonprofits. So for-profit corporations sending in money to influence or for whatever purpose - not doing business but simply sending in the ... type of donations we're talking about here - wouldn't be covered, would they?" MR. LOGAN replied, "That's not the intent, and as I read it, it is not covered in this language." Number 0979 REPRESENTATIVE JAMES suggested putting the reporting requirement on the current in-state nonprofits, and making them report where they got all of their money. She noted that those could include health providers, treatment centers or special interest groups. Number 1029 REPRESENTATIVE CROFT said he doesn't understand why for-profits giving money wouldn't have the same reporting requirements. He asked whether the federal reporting mentioned by Mr. Logan is public information. Number 1077 MR. LOGAN replied that the form he had mentioned, the 990, is available in some form but is stale by the time it is available to the public. It takes several months after it is reported to get from the IRS to the public. The Council on Foundations, the voluntary trade organization of big nonprofit foundations, has a membership service and a library in Washington, D.C., with a few branches around the country; they acquire these 990 forms and have them available on microfiche. However, Mr. Logan had asked that very day, and the most recent forms they have are two years old. For people in Alaska to get this information, even if they know about it, would be difficult, and by the time the information was available, the effect of the money could long have passed. Mr. Logan said the intent here is to make the information available to Alaskans, in Alaska. Number 1164 REPRESENTATIVE NORMAN ROKEBERG commented that given the giving power of the Alaska Conservation Foundation, according to the exhibit in the file, they would presumably have had to file a 990 form. He asked whether Mr. Logan had requested information from the IRS about them, to see how the system works. MR. LOGAN said he had tried. He restated that this information is in the packet because it was obtainable, adding that he had tried for other groups as well, but unsuccessfully. He noted that some of this information is published by foundations on the Internet. Number 1256 MR. LOGAN advised members that the IRS requires a public inspection period, but does not require the notice to be in a newspaper where the file is to be inspected. Therefore, a Washington-based foundation could put a notice in a newspaper in Macon, Georgia, wait for the 180-day period to elapse, and then say they had met all the legal requirements. He told Representative Rokeberg that is one of the problems, noting that there is legislation now in Congress relating to some of these loopholes. CHAIRMAN GREEN added, "But the fact is the information is public. It's just difficult to find, and this makes it easier to find." Number 1317 REPRESENTATIVE BERKOWITZ asked how Mr. Logan had obtained the information that is listed. MR. LOGAN answered that some is available on the Internet, some is available in part in other publications, and some was due to luck. REPRESENTATIVE BERKOWITZ asked whether those were government publications. MR. LOGAN said no. He added that some of the information in Mr. Adler's book is no longer current, as it is a few years old. Number 1378 REPRESENTATIVE BERKOWITZ expressed concern about unintended consequences, noting that the focus appears to be solely on environmental groups. He asked whether there were any other groups that might have contributed that Mr. Logan knows about. MR. LOGAN said he believes there are, and has been told that, but he cannot show that there are. For example, certain employment organizations in the transportation industry have foundations, and there is some evidence of this in the education field. Furthermore, someone in Pennsylvania had told him there was a problem there with the Robert Wood Johnson (ph) Foundation, which had issued a grant to the health and social services department to train people in the department in how to apply for grants from the state government; he noted that a legislator there is trying to close that loophole. Mr. Logan restated that it is not only in the environmental area. Number 1434 REPRESENTATIVE BERKOWITZ said it would seem that groups like the NAACP [National Association for the Advancement of Colored People] or the Anti-Defamation League would somehow get involved in this reporting requirement. AN UNIDENTIFIED SPEAKER mentioned the NRA. Number 1443 REPRESENTATIVE JAMES referred to a book titled, "Trashing the Economy." She noted that oil companies also have foundations. She told members that several years before, when there had been controversy over some geothermal energy where she was living, including lobbying against that project, it turned out that oil companies were behind it. She suggested that it is important that whoever hears something knows from whom they are hearing it. Number 1489 REPRESENTATIVE CROFT noted that major American oil companies operate in Alaska, suggesting that if they didn't, however, and if their sole operation was to influence that geothermal project through donations, it wouldn't be covered here, as he sees it. That would be a for-profit company trying to influence public opinion, not generally doing business here but trying to influence it by giving in the aggregate over $5,000. CHAIRMAN GREEN noted that if it gave to a nonprofit, that would be disclosed. Number 1525 REPRESENTATIVE CROFT pointed out that it says a foreign nonprofit corporation is considered to be transacting business if it gives over $5,000 to a nonprofit. He said he still doesn't understand that distinction on the giving end, although he may understand it somewhat on the receiving end. REPRESENTATIVE BRIAN PORTER said he believes the example was that these companies have foundations. REPRESENTATIVE CROFT replied, "That was that example: If they wanted to directly influence it, they wouldn't have to report; if they wanted to do it through a foundation, they would. I don't understand that." Number 1559 REPRESENTATIVE JAMES said that point is well-taken. She said it seems the purpose of the reporting is to know who is funding the nonprofit corporations in the state, in order to determine whether the behavior follows the donations. She again suggested requiring local nonprofit corporations to report where they get their money, as opposed to making those that give money do the reporting. Number 1601 MR. LOGAN agreed Representative Croft's point is well-taken. He added that the point of the bill is to compel foundations, which were originally organized to have certain tax advantages and which are becoming more political, to disclose what they are doing in Alaska. He noted that a representative from the Department of Commerce and Economic Development had information about the nonprofit corporations code and what is going on in that area. CHAIRMAN GREEN asked whether there were questions before hearing testimony. He announced that those waiting on teleconference could testify first. Number 1652 MANO FREY, Co-Chair, Arctic Power, testified via teleconference from Anchorage, specifying that he is one of two co-chairs of Arctic Power, a nonprofit group with the single goal of "seeing the safe and efficient development, exploration and use of a small little piece of land in Alaska, the coastal plain on the Arctic coast." Noting that he is also involved in several other nonprofit groups, he expressed great interest in hearing the answers to some of the questions being brought up. MR. FREY stated his understanding that this only applies to 501(c)(3)s, which have limited purposes, and for which it is pretty well defined under law what they can or cannot do. He told members his initial reaction to the bill is that he doesn't have a problem with it, as he understands its purpose. However, he also understands from the discussion that it may be a little more focused in another draft; he expressed interest in seeing any future changes. Number 1753 JOHN CONLEY, Ketchikan Chamber of Commerce, testified via teleconference from Ketchikan. He told members this bill kind of excites him, because if he makes a large contribution to a political candidate, he and the candidate are required to disclose that to the Alaska Public Offices Commission (APOC) and it becomes public information immediately, available on the Internet. He said he likes this because in Ketchikan he has discovered that a lot of East Coast foundations have sought to change the public image, or to affect the public process, by giving to organizations within Alaska. He stated, "You know, when we were fighting for the timber industry here, we kept bumping into these so-called community-based groups claiming to represent a section of their community. And it's always been my belief that they were actually funded by an East Coast corporation, through grants, and ... their sole purpose was to affect public policy, basically, to abort the legislative process and to act as a lobbying group." He said he didn't want to name names, then cited specific examples. Number 1894 REPRESENTATIVE BERKOWITZ agreed there needs to be a level playing field, but said if he recalls correctly, there were also organizations in the Lower 48, including land use groups, that were supportive of the timber industry. He asked Mr. Conley if that would affect his decision on this bill in any way. MR. CONLEY replied, "No, sir, it wouldn't. In fact, I'm president of a local grassroots organization called CARE. And we have nothing to hide. I mean, our membership is made up of local Ketchikan folks and folks from around the nation with similar interests. I believe what this legislation would do is it would show the amount of money being funneled into Alaska to affect public policy in Alaska. I think there's a big difference there. The people on my side have no fear. I mean, what more can we lose? But we can only pick up a paper daily and see that public policy is being established on the East Coast for Alaskans. It is my belief that these East Coast foundations, through these limited environmental groups, are specifically trying to affect public policy." Number 1979 DICK COOSE, Executive Director, Concerned Alaskans for Resources and Environment (CARE), testified next via teleconference from Ketchikan, expressing support for the concept of this bill and agreeing the playing field needs to be leveled out. He suggested the committee consider not only (c)(3) organizations but (c)(4) and (c)(6) organizations as well. "And we are a (c)(4), and we do not have anything to hide," he added. Mr. Coose spoke about people on the East Coast telling Alaskans how to live their lives, manage their companies and manage their lands. MR. COOSE said the Alaska Rainforest Campaign, along with other groups, spent $70,000 the previous month to put a full-page ad in the New York Times saying how bad the Tongass is. He stated, "And each and every one of you sitting in that room, I know, understand the Tongass is a well-managed forest, and it's being caused to have economic output that's [considerably] below its sustainable level. And I'd just encourage you to go ahead and pass something similar to what you have. We really need it, so that the public realizes that these groups, be they environmental or others, are not really funded locally, as they would have you perceive they are." Number 2045 STEVE BORELL, Executive Director, Alaska Miners Association, Incorporated (Anchorage), testified via teleconference from Fairbanks on behalf of the association, stating support for the bill, and saying he believes the concepts that are changes in the proposed committee substitute are appropriate. Mr. Borell told members that for years or possibly decades, outside money has been coming into Alaska to influence public policy, development of regulations, and who knows what else. He agreed with testimony about the difficulty of getting information except through the Internet. He said it was not until these web sites were developed that they began to understand the incredible magnitude of the money and the "widespread tentacles" of what is being done. MR. BORELL said they feel that these donors translate into opposition for projects not due to real environmental issues but using the environment to block projects, lock up more land into conservation system units, block access, and so forth. He stated, "These outside dollars have been disastrous for the communities, especially the Southeast, and not so much in the mining but in the logging, and in the opposition of ANWR [Arctic National Wildlife Refuge]." Mr. Borell concluded by encouraging passage of HB 452, saying he believes it is a necessary step that will not hamper foundations' contributing but will put state residents, and the legislature, on notice as to what monies are being brought in to affect public policy. Number 2163 MICHAEL MONAGLE, Records and Licensing Supervisor, Corporations Section, Division of Banking, Securities and Corporations, Department of Commerce and Economic Development, came forward to testify. He first commented on the bill itself, mentioning its fiscal impact. Mr. Monagle advised members that right now there are 23,000 active corporations, of which 4,600 are nonprofit. Using Mr. Logan's statistics, with 600,000 501(c)(3) corporations and 40,000 private nonprofit foundations, if they saw an increase of 400 filings the next year, they could probably handle that. However, 4,000 more would require additional staff, and 40,000 would require them to double their staff. "And if we saw 600,000, Juneau would get its new state office building," he added. Number 2204 MR. MONAGLE said the point is that nobody knows how much money is coming in, the number of filings, or the impact on his agency, but there would be an impact. Each filing would have to be handled and processed. If the state captured this information that is not available elsewhere easily, then newspapers, magazines and people from all over the country would seek that information from his office, where it would be easy to obtain as a public record. Therefore, the numbers of requests for copies of reports would rise. The bottom line is that it could potentially have a dramatic impact on the agency. MR. MONAGLE pointed out that right now the bill doesn't specify the nature of the $5,000 being given to a nonprofit corporation. He stated, "So, if I have a mission in a village in Alaska, and I have a church outside the state that gives $5,000 to that mission, I have to register, which I would not have had to have done before. That prompts two questions. One, is that $5,000 gift from that foundation worth the hassle to that foundation of having to register? And would that take away that gift from taking place? And that $5,000 gift to that mission might be very important to that particular mission. So, what impact would it have ... on the receivers of these funds and monies who are churches? If I have a church, and I want to build a new church, and I have an extension society, again, under the current statute I'm not registered. But if I make a loan to that church so they can put up a building, am I then required to register? So, there's a scope of how broad this bill is." Number 2283 MR. MONAGLE referred to enforceability and noted that if the corporation fails to turn in this report, the corporation's authority to do business in this state will be revoked. He asked what prompts them to have to comply in the first place, or causes them to be aware of the requirement. MR. MONAGLE mentioned a point raised by Representative James. He said in 1991, the Alaska Code Review Commission submitted a bill for consideration, although it never went anywhere. There was a revision of the Nonprofit Mofrl Corporation Act by the American Bar Association. Quite a few states have adopted this revision, although Mr. Monagle said he didn't have statistics on it. He said Alaska's existing statute is virtually unchanged since statehood, and all kinds of organizations are included such as sewing clubs, booster groups for athletic events, churches and environmental groups. The revised model Act would break out nonprofits into essentially religious corporations; mutual benefit corporations, which would be homeowner associations, booster clubs, and so forth; and public benefit corporations. MR. MONAGLE said it seems if they want disclosure on funding sources, passage of a revision of the revised model Act, creating a public benefit type of nonprofit corporation, could put a requirement in the statute that says, "Tell us who your funding sources are." Administratively, for the department, it would not increase the number of corporations coming into the state. It would simply separate out and identify the public benefit nonprofits, and make some filing requirements necessary for them. Number 2383 REPRESENTATIVE CROFT asked whether each donor would be charged a filing fee under this bill. MR. MONAGLE replied that right now under the regulations, each registration would be charged $50; therefore, each corporation would pay $50. He explained, "Once registered, they would also fall under the other provisions as a foreign corporation doing business here, which would mean any amendments that they have in their domicile they'd have to file here, mergers would have to be filed here, notification changes of their officers and directors would have to file here. So it goes beyond just the initial registration as well. Once you're registered, you're subject to other requirements that you have to file changes with the state." REPRESENTATIVE CROFT asked, "We would keep on file their board of directors and their current articles?" MR. MONAGLE affirmed that. Number 2419 CHAIRMAN GREEN said the increase in workload appears to be offset by the filing fee. He asked what is so onerous about filing this. MR. MONAGLE explained that each corporation would have to submit an application for registration, which needs to be reviewed to make sure they have complied with what is in statute; typically, that is handled by a person who would then issue some type of certificate of registration. That paper would have to be retained, currently either by converting those records to microfiche or microfilm, although they have a small pilot project for imaging; those become permanent archival records. Each application that comes in would have to be processed, and would have a $50 check with it, so there would be fiscal aspects of processing that. Once the information is stored, whether on microfilm, microfiche or electronically, people then request information that the department must provide. TAPE 98-31, SIDE B Number 0006 MR. MONAGLE continued, saying that if additional staffing is required, there would be additional equipment needs, as well as increased contractual costs for microfiche from the central microfilm lab and increased postage and telephone costs. He said it all is part of the filing process. CHAIRMAN GREEN asked how the $50 was established. MR. MONAGLE said it is set out in regulation as a filing fee, to cover the cost of filing and processing. Number 0029 REPRESENTATIVE JAMES said she didn't recall the bill Mr. Monagle had mentioned that would rewrite the nonprofit corporation designations. She asked, "So, you're saying that if that was done and then we required this from the receiver - not the payer but from the receiver - there would be no cost then, it would just be absorbed in what you are already doing?" MR. MONAGLE said that is correct. REPRESENTATIVE CROFT asked for a brief explanation of the differences between a (c)(3), a (c)(4) and a (c)(6) corporation. MR. MONAGLE said he didn't know, as they don't get involved in the tax issues. He explained, "They file with us, saying they are a nonprofit; we make no determination on whether they are tax-exempt. That is strictly an IRS requirement. Right now, in checking with Department of Revenue, they receive 1,100 filings a year, 990 forms from nonprofit corporations. Under their statute, that information is confidential; so you couldn't get a copy if you wanted to. If you filed these types of reports with the Department of Commerce, they're public record; anybody would have access." Number 0081 REPRESENTATIVE BERKOWITZ referred to questions he had asked Mr. Logan about filing requirements of for-profit corporations. He asked Mr. Monagle if he knows the answer to those questions. MR. MONAGLE replied, "I don't recall your specific questions. Generally, the nexus that we use for registration is fairly similar to what Department of Revenue uses, in that you have to have some type of presence in the state to be required to register. So, a nonprofit formed in Florida, before they register with us, generally open a chapter of their organization in Alaska, or they have an office in Alaska, or they have some type of, quote, 'presence' here. If they don't have a presence, right now they would not be required to register. The similar thing with for- profit corporations -- there's a section under the bill that revises, or it says excluding 10.24.60, Now, that's a section of the nonprofit act that says these activities do not constitute transacting business. And they're similar to the for-profit corporations. Things like holding title to real and personal property, by itself, does not mean you're transacting business in Alaska. Making loans or acquiring indebtedness in the state is exempt from the definition of doing business. So right now ... those activities would be exempt from registration. But under this bill, they would require registration anyway." CHAIRMAN GREEN noted that it would be if they met the $5,000 threshold. MR. MONAGLE concurred. Number 0149 REPRESENTATIVE ROKEBERG referred to AS 10.20.645, relating to a failure or refusal to file reports. He asked about the $5 fine. MR. MONAGLE explained that for a domestic corporation that has failed to file, currently the state has authority to involuntarily dissolve the corporation's charter. For an out-of-state corporation, the authority already resides with the commissioner to revoke its certificate of authority. He said he is not familiar with that $5 fine. Number 0182 REPRESENTATIVE ROKEBERG asked whether there are other provisions within that title, which the department enforces, and which provide for penalties for failure to file. MR. MONAGLE answered that the "stick" that the department has, in almost all cases, is the authority to dissolve a corporation. If the department dissolved a corporate charter because of failure to file reports, for example, the department can reinstate that corporation if it pays the fees assessable at the time the report was due. In the case of for-profit corporations, there is a provision in statute for a double-the-amount-due penalty to reinstate. Therefore, there is an additional penalty to reactivate a charter if the corporation fails to file in a timely manner. Number 0223 REPRESENTATIVE ROKEBERG asked what the fee is for a profit-making corporation to file. He further asked, "How could you dissolve a foreign corporation?" MR. MONAGLE replied that right now the initial fee is $350 for an out-of-state corporation to register; that breaks down to a $150 filing fee, plus the first two-year, biennial tax of $200. He pointed out that they cannot dissolve an out-of-state corporation but can simply revoke its authority to do business in Alaska, which means the certificate of authority no longer exists and the corporation would be prohibited from certain activities under the statute. REPRESENTATIVE ROKEBERG asked whether the $200 biennial tax is incurred against the corporation's taxable income or is another form of tax. MR. MONAGLE answered that it is a flat tax, called in some states a franchise tax. REPRESENTATIVE ROKEBERG asked whether a corporation also needs a business license. MR. MONAGLE said yes. Number 0279 REPRESENTATIVE PORTER recalled discussion of the nonprofit legislation, but asked whether Mr. Monagle remembered what happened to it. MR. MONAGLE said he believed it was in 1991 or thereabouts, and it was introduced late in the session. He suggested a major code revision like that would require a bill that runs 200 pages, and the committee did not feel up to tackling it at that point. He said unfortunately the Code Review Commission was disbanded in the interim, as it was not funded, and the issue went away. "The department certainly would support a revision of that code," he added. CHAIRMAN GREEN noted that everyone who had signed up had testified. He asked the wish of the committee. Number 0332 REPRESENTATIVE ROKEBERG expressed concern about the failure-to-file provision, mentioning the $5 penalty and noting Mr. Monagle's testimony that the "stick" is dissolving a corporation. He asked whether that would be enough enforcement to preclude the continued contributions of funds if corporations didn't file. Number 0370 REPRESENTATIVE PORTER said he thinks the idea of "sunshining" this information is laudatory, and he would like to do that. He questioned the ability to do that with this vehicle, however. For example, he said he doesn't believe that the Brainerd Foundation referenced in packets does business in Alaska and would therefore be required to file for anything. Consequently, there would be no enforceability there. CHAIRMAN GREEN replied that he may be right, but suggested it is a step in the right direction to gather those that don't skirt the law through loopholes. Number 0427 REPRESENTATIVE PORTER asked whether there had been consideration of the notion of reporting by those who receive the money. CHAIRMAN GREEN said there really wasn't. Number 0461 REPRESENTATIVE JAMES agreed that if they want to know where nonprofits in Alaska get their money, they ought to ask those nonprofits. She said she wished they had in front of them the rewrite of the nonprofit law, as it is unnecessary to get the information from missions and churches, for example. She also agreed with Representative Porter that probably many corporations, both for-profit and nonprofit, send money into Alaska without being registered to do business in the state. She offered to work on the bill. Number 0537 REPRESENTATIVE ROKEBERG told members that the House Labor and Commerce Committee, which he chairs, has been in communication with the Department of Commerce and Economic Development on a larger rewrite. He said if it was Chairman Green's desire, they would be happy to look further into that. He mentioned the alleged 200 pages, noting that Chapter 20 is only 35 pages long. CHAIRMAN GREEN asked if there were further comments, then thanked participants. [HB 452 was held over.] HB 395 - CIVIL LIABILITY FOR EMERGENCY AID Number 0591 CHAIRMAN GREEN announced the next item of business would be HB 395, "An Act relating to civil liability resulting from the use of a defibrillator in providing emergency aid." Number 0599 PATRICIA SWENSON, Legislative Assistant to Representative Con Bunde, Alaska State Legislature, read the sponsor statement into the record as follows: "Every day nearly 1,000 people in the United States die unnecessarily due to sudden cardiac arrest. Most people die before they reach the hospital, usually within two hours. Research shows that early defibrillation, delivering an electric current to the heart within minutes after sudden cardiac arrest, can raise survival rates to 30 percent of higher. That's 25 percent more lives than the current national survival rate of 5 percent. "The American Heart Association estimates that 20,000 or more unnecessary deaths could be prevented each year if automatic external defibrillators [AEDs] were more widely available. Implementation of a plan that allows both traditional and nontraditional targeted first responders to have access to and use of an AED in medical emergencies is needed. "House Bill 395 expands our state's Good Samaritan statute to provide protection from liability for people who are properly trained in the use of an AED. As a general rule, the American legal system does not require someone to rescue a victim. However, all states currently have Good Samaritan statutes that protect a volunteer who is aiding another in good faith. These statutes mainly apply to physicians and other health care providers who assist somebody voluntarily and do not expect any reimbursement for their services, but passersby who happen upon an accident and provide emergency assistance are also protected from liability. House Bill 395 clearly sets the standard for training and proper use of an automatic external defibrillator. Increased availability of automatic external defibrillators along with proper training will save lives. House Bill 395 will help make Alaska a safer place." Number 0712 REPRESENTATIVE BERKOWITZ made a motion to adopt Version E [0- LS1560\E, Ford, 3/5/98] as a work draft. There being no objection, it was so ordered. MS. SWENSON explained that Version E adds the use of manual electric cardiac defibrillators to the so-called Good Samaritan statute, AS 09.65.090. REPRESENTATIVE BERKOWITZ asked what "manual electric" means, suggesting it sounds almost contradictory. MS. SWENSON answered that it is an automatic external defibrillator. Number 0755 REPRESENTATIVE CROFT asked, "Manual electric as opposed to what? " MS. SWENSON told members she hadn't anticipated that question and has been out of the field for a while. REPRESENTATIVE ROKEBERG suggested they could say "old-fashioned" instead of "manual." He said as he reads it, people using manual defibrillators in emergency rooms, such as on television shows, are not immune under subsection (b). Number 0934 REPRESENTATIVE JAMES suggested Representative Rokeberg's concern was because it says this immunity does not apply except to a person authorized by law to do it. A passerby who didn't know how to do it wouldn't be exempt, which she thinks is the intent. MS. SWENSON said further on, it sets out standards for training. "The training will say when people can use them and when they can't," she added. Number 0958 REPRESENTATIVE CROFT expressed his understanding that everybody is immune if they meet the criteria. For the more complicated kind, the criteria is that the person must be authorized by law; he suggested that would mainly be nurses or doctors in a hospital. For subsection (e), the criteria is that people must be trained. Representative Croft pointed out that subsection (d) had been retained, which says, "(d) This section does not preclude liability for civil damages as a result of gross negligence or reckless or intentional misconduct." MS. SWENSON offered to show members documentation of support. Number 1072 MARK JOHNSON, Chief, Community Health and Emergency Medical Services, Division of Public Health, Department of Health and Social Services, introduced paramedic Matt Anderson, who was with him to answer questions. Mr. Johnson said they were here to speak in favor of this legislation. MR. JOHNSON told members there are approximately 350,000 sudden cardiac arrests in the United States every year; in Alaska they estimate that translates to roughly 600 to 700. Numerous studies have been done over the last 15 or more years, many in Seattle, Washington. Mr. Johnson pointed out that HB 395 is quite similar to a bill working its way through the Washington State legislature now; he indicated they had worked with the sponsor of that bill to incorporate much of it here. Number 1115 MR. JOHNSON stated, "According to the American Heart Association, they've adopted what's called the emergency cardiac care systems concept, and they call it the chain of survival. And it has four elements. When someone collapses with cardiac arrest and it's witnessed, the first thing to do is notify the EMS [emergency medical services] system, usually by 911 or some other means. Second, initiate CPR [cardiopulmonary resuscitation]. Third, get early defibrillation, as quickly as possible. And fourth, get advanced cardiac life support via paramedics, hospital emergency department, whatever." MR. JOHNSON said some studies have shown that when the EMS system is notified within approximately one minute, CPR is initiated within about two minutes, defibrillation is provided within about four minutes, and advanced cardiac life support is provided within about eight minutes, the survival rate can be approximately 30 percent. By contrast, if there is no CPR and defibrillation is delayed for approximately ten minutes, the survival rate drops to roughly zero to 2 percent. Clearly, the key is to get the CPR and defibrillation as early as possible. Number 1217 MR. JOHNSON reported that the American Heart Association and other national groups have, over the last year or two, been advocating "public access defibrillation." The new automated external defibrillators (AEDs) are computerized; when the defibrillator is hooked up to the patient, the computer detects whether there is a life-threatening dysrhythmia of the heart and then determines whether to shock the patient. These new machines, available on the market today for $3,000, will only shock when there is a life- threatening dysrhythmia. Mr. Johnson pointed out that manual defibrillators can cost upwards of $10,000, adding that those are the types of machines paramedics and hospital emergency departments use, and those people currently are licensed under state law to perform those kinds of functions. Number 1273 MR. JOHNSON explained that this bill would affect people with approved CPR training and AED training, which is significantly less training than is currently required to become authorized to use defibrillators. Those people could become legally authorized under this statute, and they could include police officers, firefighters who are not EMS providers and perhaps security guards. The American Heart Association recommends placing these devices wherever there are both a likelihood of significant numbers of people and a likelihood of cardiac arrests. A recent study out of Seattle found that the number one public place was in the airport. "And, in fact, I just spoke with the Anchorage fire department today, and they're working to put defibrillators at the Anchorage airport," Mr. Johnson added. MR. JOHNSON said they had worked with the sponsor, and they believe the provisions to ensure that people have minimum training requirements could potentially lead to hundreds more authorized people in Alaska; there are about 1,200 in the state now, including emergency medical technicians (EMTs), paramedics or first responders currently certified by Mr. Johnson's department to legally provide defibrillation. Over the next few years, that increase could potentially translate into dozens of lives saved. Mr. Johnson noted that the bill also addresses protections for people who do the training and who own the devices. He offered to answer questions, noting that Matt Anderson could answer specific questions about the devices. He concluded by expressing strong support for the bill. Number 1380 REPRESENTATIVE ROKEBERG expressed concern about the requirement that a person be trained and carry a card. He asked what would happen if no one else was around, and a person either didn't have a card or had left it at home. MR. JOHNSON replied that as a Good Samaritan bill, the protection here is from liability. The state won't be asking someone for a card at the scene. The real issue is whether there is a protection from liability for these individuals. Although not trained in law, he said he would think that as long as someone had the appropriate training required under the bill, that person would be protected. Number 1474 ROSE MARIE CITTI, Director of Training, Respond Systems, testified via teleconference from Anchorage. She first indicated she had been sending material almost daily since February 1, and that Mr. Johnson had addressed some items in her prepared comments. Ms. Citti offered a quotation from Dr. Richard Cummins, professor of medicine at the University of Washington, who is a leader in treatment of sudden cardiac arrest. Dr. Cummins had said there is now both national and international acceptance of the "principle of early defibrillation," which contends that whoever arrives first at the scene of a cardiac arrest should have a defibrillator. He had gone on to say that anyone who can learn CPR can also learn to use an AED and should be allowed to use one and be protected from repercussions. MS. CITTI reminded members that 30 years ago, CPR was considered an advanced medical skill. "Now we teach school kids how to use it," she said, adding that there are numerous documented cases where people have been saved due to CPR performed by bystanders, buying the patients time until EMS personnel arrived. MS. CITTI indicated she was testifying out of frustration because although the technology exists that can save countless lives, laws prohibit the use. Her interest comes from eight years of being a CPR instructor; she teachers pre-EMS personnel from a wide variety of occupational settings who are designated by their employers and expected to respond to medical emergencies, or else they are willing bystanders. Ms. Citti said public access use of AEDs should target pre-EMS responders, who are trained individuals with a willingness, designation or responsibility to treat the public and to assist co-workers in medical emergencies. These people should be free to perform this potentially life-sustaining action without fear of violating the law. She said the Good Samaritan law must be extended beyond paramedics, firefighters, police officers, lifeguards and those with a duty to respond, to include those who are doing it on a willing basis or because of their employer's requirement. Number 1615 MS. CITTI cited examples of companies with trained personnel which should be able to use AEDs in an emergency without risk of breaking existing laws. She cited additional examples of people who should have use of this technology without repercussion, including trained motor coach or bus drivers, Alaska Railroad conductors, utility workers, pilots, charter boat operators, people who have remote lodges and in-town hotel or motel staff. MS. CITTI said Alaska has always been on the leading edge of making important changes to established medical procedures because of unique needs and remote locations. Alaska led the way with defibrillator-trained technicians when the equipment was manually operated, and AED technology has moved so fast that Alaska is no longer keeping pace with regulations or statutes. MS. CITTI concluded by saying she applauds the energy and thoughtfulness that have gone into preparing HB 395. She said she finds the approach taken in this bill addresses most of her main personal concerns. She encouraged the committee to move this issue forward. Number 1692 CRAIG LEWIS, Director, Interior Region Emergency Medical Services Council, testified via teleconference from Fairbanks in support of the proposed committee substitute for HB 395. He noted that a number of his prepared comments had already been addressed by Mr. Johnson and Ms. Citti. MR. LEWIS told members the development and proliferation of automated external defibrillators across the nation and in Alaska warrant the amendment to Alaska's Good Samaritan Act. The American Heart Association, the American Red Cross and a number of corporate American companies recognize the value of AEDs, and states either have or are passing similar legislation. Major corporations across the nation and in Alaska are already purchasing and positioning AEDs in their places of business. Princess Tours has them on its buses, and Alaska Airlines has them on its planes. "It only makes sense that we adjust our legislative process to recognize the technology," Mr. Lewis said. MR. LEWIS advised members that the state of the art regarding defibrillation has changed significantly and will continue to change. The size, shape and capabilities of these machines will improve, "most likely to where the next time you see one, it will be a third the size of a briefcase and be next to the first-aid station on the wall." Mr. Lewis said the sophistication of the devices is incredibly fast-moving, and right now they do the analyses that used to be done by hand. MR. LEWIS explained that the difference between manual and automated has to do with the capability on a manual defibrillator to adjust the amount of electric flowage by hand, with a pre- approved protocol and standard, to the patient. Automated defibrillators adjust all of those things within the computer system of the machine, with a number of fail-safe mechanisms that have been tested over time. He urged passage of this legislation. Number 1854 CHAIRMAN GREEN asked that both Ms. Citti and Mr. Lewis submit any written testimony for the record. Number 1875 REPRESENTATIVE CROFT offered an amendment to page 2, line 15, to substitute "possess" for "carry". He explained, "I don't think we meant that you carry it around the whole time." REPRESENTATIVE BERKOWITZ suggested "maintain". REPRESENTATIVE CROFT mentioned then getting rid of "evidence." REPRESENTATIVE BERKOWITZ suggested "maintain current evidence". CHAIRMAN GREEN asked what the amendment is. REPRESENTATIVE stated, "My amendment is 'maintain'." Number 1982 REPRESENTATIVE ROKEBERG suggested they could delete the last part of the sentence, following the semicolon ["a user of a defibrillator shall carry current evidence of demonstrated proficiency in defibrillator use and cardiopulmonary resuscitation;"], unless the implication is to have not current training but recurrent training. He said all it means is the person is carrying a card around. CHAIRMAN GREEN said the problem may be people who don't have their cards with them. Number 2057 REPRESENTATIVE CROFT stated, "It couldn't be there to mean to be current. You take the course, 'shall receive reasonable instruction' - I did that ten years ago or whatever - 'and shall stay current.'" REPRESENTATIVE PORTER agreed. REPRESENTATIVE ROKEBERG said if that is the implication, it should be spelled out. Number 2074 MS. LEWIS told members that people have to redo their training every year or two. Number 2098 REPRESENTATIVE JAMES said it could stop after "proficiency". She explained, "I think you do need to have this bit about being current with it, because the first part doesn't say that you are." Number 2125 CHAIRMAN GREEN referred to the motion on the table and asked whether there was any objection to substituting "maintain" for "carry" on page 2, line 15. There being no objection, that amendment was adopted. REPRESENTATIVE ROKEBERG asked Ms. Swenson what is meant by "current," suggesting the need to stipulate that in the bill. Number 2150 MS. SWENSON answered that "current" means that the card must be kept up and the training must be there, through an approved course. People must redo their training every year or two and get an updated card. She explained that there are basic life support and advanced cardiac life support, which have changes over the years. As the changes occur, people have to update their training. In addition, a lot of nurses and other people use it for continuing education, so that they keep their cards current. Number 2204 REPRESENTATIVE ROKEBERG said he appreciates that and thinks it is laudable, but when they put in the statute that a person must have a current permit, they need to define what "current" is. CHAIRMAN GREEN asked whether "active" would satisfy it. REPRESENTATIVE ROKEBERG suggested that if there are different training forums, there may be differing standards. Number 2283 MS. SWENSON told members, "The cards all have an expiration date on them, when you renew your training, and it varies by program what that expiration date is and the length of time before they have to retrain. So 'current' would be before the expiration date." CHAIRMAN GREEN said it is like CPR, for which the card has an expiration date, and he asked again whether "active" would be appropriate. MS. SWENSON stated her belief that "current" is the standard. CHAIRMAN GREEN pointed out that the committee was having difficulty with it. Number 2298 REPRESENTATIVE PORTER suggested it isn't the evidence they want current, but the proficiency. He asked whether perhaps they should say, "shall maintain evidence of current demonstrated proficiency". CHAIRMAN GREEN suggested perhaps just "proficiency". Number 2366 REPRESENTATIVE CROFT said he would amend the amendment so the sentence will read, starting at line 15, "a user of a defibrillator shall maintain a current proficiency in defibrillator use and cardiopulmonary resuscitation". He specified that he was taking out "evidence of demonstrated" and making essentially the substitution made before. CHAIRMAN GREEN asked whether there was any objection to the modified amendment. There being no objection, it was adopted. Number 2395 REPRESENTATIVE CROFT advised members of one more legal problem, which he and Kevin Jardell had been working on. He said he would describe the problem and perhaps Mr. Jardell had a solution. Section 1 says "authorized by law," and testifiers have said, if he understands correctly, that this is limited to a certain class of people; it was illegal for other people to do this. What they are changing here is simply the Good Samaritan law, not the law that said it is illegal for someone to do it. Representative Croft stated, "So, we could have, 'you're not liable for it, as long as you don't use gross negligence,' but you're actually still technically violating the law ...." TAPE 98-32, SIDE A Number 0001 MR. JOHNSON said he is not sure exactly how it affects this bill, but the way to address the problem described is with a one-word insertion under AS 18.08.090(1). Previously in that statute, it says a person has to be certified or licensed in order to do advanced life support. Mr. Johnson read from subsection (1), which says, "'advanced life support' means emergency care techniques provided under the written or oral orders of a physician that include, but are not limited to, electric cardiac defibrillation ...." Number 0092 MR. JOHNSON suggested if they inserted "manual" there, it would simply say a person has to be appropriately licensed or certified to use a manual defibrillator. "But that would not require automated defibrillators to come under this requirement," he pointed out. Number 0128 REPRESENTATIVE PORTER asked Ms. Swenson whether she would accept a conceptual amendment to include that in the bill. MS. SWENSON said that would be fine. Number 0150 KEVIN JARDELL, Legislative Administrative Assistant to Representative Joe Green, spoke as the committee aide, noting that it may or may not require a title change. CHAIRMAN GREEN said they are still talking about civil liability for use of a defibrillator. Number 0210 REPRESENTATIVE CROFT suggested a conceptual amendment to make the same things they are talking about here partially immunized and not illegal. Number 0234 MR. JARDELL stated his understanding that the conceptual amendment includes that this is not an illegal act, that the liability is immunized and the actual activity is legal and allowable. CHAIRMAN GREEN noted that is under the statute cited in Title 18. Number 0279 REPRESENTATIVE PORTER said as he understood Mr. Johnson's reading of that statute, the only required amendment is to add "manual" in front of "electrical"," as they have here, but in the other statute [AS 18.08.090]. CHAIRMAN GREEN asked whether everyone understood the conceptual amendment and whether there was any objection. Hearing no objection, he announced that it was adopted. Number 0335 REPRESENTATIVE BERKOWITZ, noting that his grandmother is an English teacher, suggested that on page 2, line 20, it would be better to say "consistently" instead of "consistent." CHAIRMAN GREEN agreed it is an adverb. REPRESENTATIVE ROKEBERG said he believes adverbs are discouraged by the drafting manual. Number 0437 REPRESENTATIVE ROKEBERG made a motion to move HB 395, Version E [0- LS1560\E, Ford, 3/5/98], as amended, from committee with individual recommendations and with the attached zero fiscal note. CHAIRMAN GREEN asked whether there was any objection. There being none, CSHB 395(JUD) moved from the House Judiciary Standing Committee. HB 196 - WILLS, TRUSTS, & OTHER TRANSFERS Number 460 CHAIRMAN GREEN announced the committee would hear HB 196, "An Act relating to wills, intestacy, nonprobate transfers, and trusts; and amending Rule 24, Alaska Rules of Civil Procedure," sponsored by Representative Ryan. Number 545 REPRESENTATIVE JOE RYAN came before the committee to explain the legislation. He noted there is a proposed committee substitute, Version B. He read the following statement into the record: "The bill makes a number of important improvements to Alaska's estate and trust laws. Sections 1 to 8, 18 and 19 of the bill changes Alaska law to permit a person who is domiciled outside of Alaska to select Alaska as their jurisdiction for the probate of his or her estate. This provision should bring significant business to the state. In other jurisdictions they give the attorneys a percentage of the estate as fee. Alaska doesn't, you only get the time you spend and it will keep people from necessarily having to go to another state to probate the will. It can be probated here in Alaska. "Sections 9 and 10 of the bill allow a person to limit the liability of a trustee in his or her trust when more than one trustee is serving. The person could provide only the trustee who exercises a power will be held liable for its actions and that the other trustees who did not participate in the exercise of the power would not be held liable for that (indisc.) other trustee. This provision will encourage trustees in Alaska to work with other trustees of the same trust. "The Uniform Trust Act included in Section 11 which clarifies many issues involving the administration of trusts in Alaska. "Section 12 protects an Alaska trustee who in good faith defends an Alaska trust from the claims of a creditor who seeks to set the trust aside. If the trustee acts in good faith, then the trustee gets a first lien on all trust assets for payment of its fees, costs and attorneys' fees. Delaware has adopted a similar provision to protect its trustees. "Section 14 clarifies that a trust created in another state or country can be moved to Alaska even though the trust was settled before the Alaska Trust Act was passed last year. "The Uniform Trustee's Powers Act is enacted in Section 16. Alaska does not have a statutory provision that sets out the powers of a trustee. These statutory powers would supplement the powers set forth in a trust agreement. "A number of miscellaneous provisions are included elsewhere in the bill. Section 15 allows a person to include a penalty clause in his or her trust. Section 17 clarifies the accounting of bond premiums and discounts. Section 20 amends AS 34.40.110(d) to be consistent with the Uniform Fraudulent Transfers Act. Section 21 precludes an action by creditors of the grantor of the trust against those who assist in the creation of the trust. "The bill will improve our estate and trust laws and will make Alaska's laws more favorable to our residents. In addition, the bill will make our laws more attractive to people outside of Alaska who are considering Alaska for the administration of their estates and trusts." REPRESENTATIVE RYAN noted that Richard Thwaites, a practicing attorney and the immediate past chairman of the state planning section of the Alaska Bar, would explain the technical aspects of the bill. Number 716 RICHARD THWAITES, Attorney, came before the committee to answer questions. REPRESENTATIVE ROKEBERG said he would like to know what the bill does. MR. THWAITES said, "We are looking at Alaska, because of this new trust act, as a destination jurisdiction for this. Basically, what has happened in many of the national meetings everybody is now very attentive to Alaska as being the location to go for estate planning. This takes that one step further in that let's say that one of your relatives died in Kansas or some other jurisdiction because a defibrillator didn't work. There was no other relative down there and no reason for you, as the person who is doing the administration of the estate, to go down there. This bill provides that you can actually do that administration here in Alaska in your home or residence. And you just need to apply the Kansas law to the Kansas real estate or whatever that might be. And so it permits the jurisdiction of the court to extend to those types of probates. And even in our probate code, it is discretionary on the person to bring the action here. So in all of the other states it's likewise discretionary and they don't have to have a probate in that state if no assets are required. This also defers to that other jurisdiction which means if there is somebody down there who says, 'No, we want to have the probate there,' then you're going to have to defer to that jurisdiction. So if the Kansas court did come up and say they would have a priority, so this is only in a situation where no one is objecting. Typically, that would be the younger generation here wanting to do it there." MR. THWAITES continued, "Further than that, it actually goes a little further and it allows perhaps someone setting up in an Alaska trust to also, as part of their state plan, suggest that Alaska would be the designated jurisdiction for the administration of their estate, say where there is a (indisc.) provision in their will that whatever assets are still in their estate pours over to their Alaska trust. (Indisc.) omit that administration." MR. THWAITES explained that California requires many hearings and a definitive process to go through the probate process. It also sets up statutory fees on a percentage basis of the estate. He said that as a result, many states have living trusts as the primary form of estate planning for the purpose of avoiding probate in those jurisdictions. He said Maine, Kentucky, Wisconsin, Alaska and Idaho are five states which do not have percentage fees. For that reason, it is often very convenient to go into the Alaska court where we have a nonintervention system. This means that no one ever has to attend a hearing or go to court, you merely hand the petition to the court. The court then authorizes a personal representative to act as long as the personal representative swears they will abide by all the probate rules. Mr. Thwaites said after distributions have occurred and after the minimum requirements have been met with the Department of Revenue, et cetera, there is a closing letter that they have to issue, when those things are done, the personal representative files a sworn statement closing the estate. That is called an informal administration of an estate which is fairly common to the 14 jurisdictions that have the uniform probate code. Mr. Thwaites said this, in essence, extends this option to all of the citizens of the United States which means that the lawyers, certified public accountants, trust officers, et cetera, might get additional business as a result of that. The state of Alaska would receive the additional fees for the filings, et cetera, that is also required. MR. THWAITES pointed out that as a result of the Alaska Trust Act, one slight bonus has happened. In many of the state jurisdictions, the professors and so forth in those states are now recommending to their perspective lawyers that when considering the Alaska as jurisdiction for either trusts or estates, if they really want to make it solid they won't transfer some of their assets to Alaska, they will transfer a majority of their assets to Alaska. From a conservative standpoint, that means that you are solidly within both the situs meaning you've designated Alaska as a jurisdiction and the minority opinion which is substantial contact. There are two opinions on how to determine whether Alaska is the appropriate jurisdiction or not. By placing a majority of your assets that are in trust with the Alaska administrators and so forth, you have met both tests. Mr. Thwaites noted that the Oregon Bar, in a January letter to their members, has given a description about how to set these up. In their recommendation they suggest you ought to really have substantial contacts with Alaska, as well as declaring a situs of the jurisdiction. This is a further enhancement of that permitting, in the probate code a portion of the statute, designation of Alaska as the jurisdiction in the will as well as in the trust. It doesn't override the other. Number 1095 CHAIRMAN GREEN said if you are going to transfer the assets of real property, that would be sold in the other state and be subject to any taxations. He referred money or jewelry and asked if there would be a taxation before they would be removed from that jurisdiction to Alaska jurisdiction. Number 1131 MR. THWAITES explained that under the current common law of the United States, the tangible personal property passes in the state of which the person is domiciled. If someone in Oregon had tangible personal property, Oregon would impose a tax on that tangible personal property. However, if they had placed that property in an Alaska trust, the domicile of that property is then Alaska. Then the portion of the estate tax return concerning the tangible personal property, even though it's a Florida resident, would be paid to the Alaska Department of Revenue under the trust. REPRESENTATIVE BERKOWITZ asked who is opposed to the bill and why. Number 1225 MR. THWAITES responded that it would be the other jurisdictions that want to impose or protect their right to tax and levy against those assets. There is a certain right of the citizens of the United States, under the U.S. Constitution, to be able to freely transfer these things back and forth. He explained that Delaware's reaction to our last trust bill was that within 19 days after Alaska had passed legislation, they introduced and passed a similar statute. They even cited the Alaska statute as what they were trying to copy. He said, "They kind of messed it up because there were some other things that were placed in there that didn't make it work for tax reasons and they're attempting to straighten those out this years. But I think that Delaware and South Dakota are likewise trying to capitalize on being a destination situs, if you will, for those kinds of assets and it only affects the personality, it doesn't affect the real estate." REPRESENTATIVE BERKOWITZ asked if there is any Alaskan opposition. MR. THWAITES responded that he isn't aware of any. Number 1259 CHAIRMAN GREEN asked if HB 196 is an addendum to the legislation passed last year. He asked if HB 196 covers intestation. MR. THWAITES explained the legislation last year covered the trust law. There are many parts to HB 196. The main part of the bill, as far as probate goes, is the probate portion. Mr. Thwaites referred to the section regarding the trustees that Representation Ryan spoke about does affect the corporate fiduciaries or individual fiduciaries that might be involved. He said, "For example, if your bother-in-law and sister-in-law acted as a trustee along with an Alaska bank or someone else, they wouldn't be liable for the bank's actions and the bank wouldn't be liable for their actions. So it makes it more acceptable for those corporate fiduciaries to accept that work. Presently, in most jurisdictions the corporate fiduciaries -- if they're going to have some liability, they're concern about, 'If I have a little bit of the liability, I'm going to have all the liability.' And they're less than willing to go ahead and co-administer a fund and this will limit that exposure and encourage co-administration so that you have a family member involved, perhaps with the corporate fiduciary and not having the liability pass back and forth one to the other." Number 1330 REPRESENTATIVE CROFT said there are some portions of the bill that are uniform laws or come from uniform reforms. There are some that merely relate to transferability of trust properties. He said those seem to him to be acceptable because he tends to trust the uniform drafters. A transfer type of operation seems to him to be substantively neutral. It just allows them to bring the trust property to Alaska or it expedites the ways they can do that. Representative Croft stated he is more interested in the substantive changes. He said, "Aside from the ones that we've have adopted out of uniform laws and aside from things that simply relate to how someone would transfer their trust property up here, what are the major substantive changes to our trust law? And in particular, I'm concerned about the penalty clause in Section 15 -- an explanation of why that's good public policy." MR. THWAITES said he would defer the question to Richard Hompesch who has spent a considerable amount of time working on the statute. Number 1427 REPRESENTATIVE PORTER referred to Section 19 and said he doesn't understand the term "or otherwise." He read, "A cause of action or claim for relief with respect to a fraudulent transfer under (b)(1)," which describes a "fraudulent transfer" of this section "or otherwise is extinguished unless the action is brought." MR. THWAITES explained he thinks it is meant to broaden this limitation to correspond to the statute that was adopted under our trust act. He noted there is also a 4-year, 1-year statute. This makes it consistent and it expands that definition to cover the broader terminologies. Mr. Thwaites said he believes Mr. Hompesch can speak to that. He said basically, it brings the existing statute in compliance with trust statute. Mr. Thwaites referred to the Uniform Trust Act that is referred to in the bill and said there was a comment by the Attorney General's Office last year about that because the uniform commissioners are talking about modifying the Uniform Act. He said, "What we have here was the existing Uniform Act that was in existence and is currently the law for the state of Alaska, not the new revised version that they haven't adopted. We also adopted the 1993 version of the Uniform Probate Code, and so there are many versions of that and there are lots of variations. And while ours is called the 'Uniform Probate Code,' we did not adopt all the provisions out of it, and there are provisions for variations there." Mr. Thwaites said that whenever we have a uniform act, he believes the connotation is that we are substantially similar and our concept is the same as the Uniform Act, but every state has a little variation, one way or the other, from those acts. Number 1594 BOB MANLEY, Attorney, testified via teleconference from Anchorage. He noted he is primarily involved in estate planning. He urged the committee to adopt the proposed committee substitute language as it is an improvement of the Alaska Trust Act. It basically generates greater (indisc.) action for people disposing of their property. The Alaska Trust Act that was passed last year has received a lot of national commentary. Mr. Manley referred to the Heckerly (ph) Institute in Florida and said one of the (indisc.) involved "North to The Future, The Alaska Trust," which establishes Alaska as a situs for money management. He said it is important to keep current and modify with the current trends. MR. MANLEY referred to Representative Porter having a question about the Fraudulent Transfers Act and said, "What this provision regarding the 4-year and 1-year statute of limitations does is adopt exactly the language or almost exactly the language of the Uniform Fraudulent Transfers Act which is that the cause of action is extinguished after that 4-year or 1-year period run. And previously, we simply provided that the cause of action I believe expired or at least was no longer brought. So it was procedural rather than substance and the change, (1) the patterns that's closer to that - Uniform Fraudulent Transfer statute of limitation; and second, it makes it more likely that a court outside of Alaska will recognize the validity of our statute of limitations and that's Section 19." MR. MANLEY continued, "The other thing that I want to point out and urge you to consider favorably is the new Section 20 which provides that if a fraudulent conveyance action is brought and it's acceptable -- in other words, if somebody was trying to cheat their creditor and they knew who their creditors were and they hid the money in the Alaska trust, the Alaska court and any other courts are going to approve invasion of that. However, if because of the expiration of the statute of limitations are otherwise the Alaska courts do not view it as a fraudulent conveyance. If it's, as Mr. Thwaites mentioned, one of those future - future (indisc.) creditors in the future. What this does is it prevents the creditor from going in the back door and instead of getting to the trust assets, suing the trustee for conspiracy to commit a fraudulent conveyance or the equivalent which might have a different statute of limitations. So simply this makes it better or safer for individuals and institutions (indisc.) trustees. I think if you follow the local bank stocks you'll see that NBA (National Bank of Alaska) has had a tremendous runoff in the last year, North Rim has been shooting up. We've got a new Alaska trust company. There are some new financial institutions also that looking at Alaska seriously for establishing bases of operation and this kind of improvement in the law makes it more likely that we can continue this good clean new industry of money management for Alaska. Thank you." Number 1805 REPRESENTATIVE JAMES made a motion to adopt the proposed committee substitute for HB 196, Version B, Bannister, 3/4/98. There being no objection, the proposed committee substitute for HB 196 was before the committee. Number 1817 JOHNNY GRAMES testified via teleconference from Anchorage. He said, "I am not here to talk about my own case. But as a parent, I'm -- that you're setting up Alaskans (indisc.) to get policed by predators operating under these laws that are set up by the judiciary branch of government and lobbied by these lying lawyers. And I don't know how else to warn the people what's happening. And Mr. Thwaites is a crook and he sold out my sons who are beneficiary to my mother's estate - our family estate which -- my father came here in 1915 and built up and now the lawyers and bankers are going to be able to steel the estate for the next 22 years. Now the reason you don't hear about this is because the court system is totally politicized and corrupted and I'm not able to appeal -- not able to file a due process appeal so I (indisc.) block from access to the court to petition the government for (indisc.) which is a constitutional right so that nobody knows about this. And you will not hear it with the Alaska Commission on Judicial Conduct with the probate master and the judges...." CHAIRMAN GREEN interjected and asked Mr. Grames to conclude his testimony. MR. GRAMES continued, "Also, Mr. Thwaites appointed a guardian ad litem over my son and I am the father and the trustee and he lives with me. And the court system went along with it. So a trustee has power over my son and we have no privacy and we are unable to protect him from the guardian and from court control and that's Mr. Thwaites that you're depending on." Number 1954 RICHARD HOMPESCH, Attorney, testified via teleconference from Fairbanks. He said that Representative Croft asked about Section 15. Mr. Hompesch said, "The policy behind Section 15, which is the penalty provision, goes as follows: If I want to set up a trust, Section 15 clarifies that I can have a provision in the trust that says if any of my children who are beneficiaries of the trust sue the trustee, the trustee can deduct its attorneys fees from that child's share. And many times we have - estate planners have clients who have difficult children who are very prone to frivolous litigation. And as you know rule 82, which is our attorneys fee provision, rarely provides (indisc.) for a board of attorneys fees when litigation is filed that's frivolous. So this type of penalty provision would allow a person setting up a trust to charge their beneficiary, who filed the frivolous litigation, for the costs. Without such a provision, all the beneficiaries of the trust would have to share the legal fees for defending the frivolous litigation. And I figure it's good policy to allow such a clause under Alaska law because what the Community Property Act and other provisions of our new laws, this penalty provision is completely optional. If a person chooses to (indisc.) or include a penalty provision in their trust, they may. It's provided, it's allowed under Alaska law. Most people may choose not to. So as a matter of freedom of choice, I think it's a good policy for Alaska. Unless there are other questions, I'd like to thank you and urge you to pass House Bill 196. REPRESENTATIVE CROFT said that he didn't see in Section 15 that the lawsuit had to be frivolous. It said, "even if probably cause existed instituting the proceedings." He said these can valid but losing suits, not just frivolous suits. MR. HOMPESCH stated, "Yes, the penalty provision merely says that if you want to provide a penalty provision, it could say that even if the beneficiary claim is meritorious that the penalty provision could still apply. Now I'm not here to say that such a penalty provision should be included. I think most of my clients would probably say -- you know they would prefer a penalty provision that would apply if the litigation was frivolous. But it's important to remember that most of the trusts that I think Mr. Thwaites, Mr. Manley, myself and other attorneys in Alaska are doing today have trust protector clauses. A trust protector clause allows someone - some trusted advisor in the family to remove the trustee without cause. So It would seem to me that this penalty provision would encourage the resolution of disputes through the trust protector and not through our court system." CHAIRMAN GREEN thanked Mr. Hompesch for his testimony. He indicated the HB 196 would be held for further consideration. ADJOURNMENT Number 2126 CHAIRMAN GREEN adjourned the House Judiciary Standing Committee meeting at 3:20 p.m.