Legislature(2015 - 2016)BARNES 124
03/09/2016 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB188 | |
| HB337 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 188 | TELECONFERENCED | |
| *+ | HB 337 | TELECONFERENCED | |
| *+ | HB 314 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 9, 2016
3:32 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Shelley Hughes, Vice Chair
Representative Jim Colver
Representative Gabrielle LeDoux
Representative Cathy Tilton
Representative Andy Josephson
Representative Sam Kito
MEMBERS ABSENT
Representative Mike Chenault
COMMITTEE CALENDAR
HOUSE BILL NO. 188
"An Act relating to financial accounts for persons with
disabilities; relating to financial institutions; relating to
property exemptions; relating to securities; and providing for
an effective date."
- HEARD & HELD
HOUSE BILL NO. 337
"An Act relating to taxes on marijuana."
- HEARD & HELD
HOUSE BILL NO. 314
"An Act relating to the Alaska regional economic assistance
program; extending the termination date of the Alaska regional
economic assistance program; and providing for an effective
date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 188
SHORT TITLE: PERSON W/DISABILITY SAVINGS ACCOUNTS
SPONSOR(s): REPRESENTATIVE(s) SADDLER
04/11/15 (H) READ THE FIRST TIME - REFERRALS
04/11/15 (H) L&C, FIN
03/09/16 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 337
SHORT TITLE: MARIJUANA TAXES;EXCESS POSSESSION;BONDS
SPONSOR(s): REPRESENTATIVE(s) LEDOUX
02/24/16 (H) READ THE FIRST TIME - REFERRALS
02/24/16 (H) L&C, FIN
03/09/16 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
REPRESENTATIVE DAN SADDLER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking as the sponsor, introduced HB 188.
KIM SKIPPER, Staff
Representative Dan Saddler
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking on behalf of Representative
Saddler, sponsor, answered questions during the hearing on HB
188.
MILLIE RYAN, Executive Director
Key Coalition of Alaska
President, REACH, Inc.
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 188.
ROBERT FRICK
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 188.
MALLORY HAMILTON
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 188.
STUART SPIELMAN
Senior Policy Advisor and Counsel
Autism Speaks
Washington, District of Columbia
POSITION STATEMENT: Testified in support of HB 188.
RICK NELSON, Self-Advocate
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 188.
KALYSSA MAILE, Staff
Representative Gabrielle LeDoux
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking on behalf of Representative
LeDoux, sponsor, answered questions during the hearing on HB
337.
KEN ALPER, Director
Tax Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
337.
CYNTHIA FRANKLIN, Director
Alcohol & Marijuana Control Office
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
337.
BRIAN OLSON, Owner/Operator
Alaska Berries Winery
Soldotna, Alaska
POSITION STATEMENT: Testified in opposition to the cash bond
provision in HB 337.
DOLOYNDA PHELPS
Alaska Small Cultivators Association
Nikiski, Alaska
POSITION STATEMENT: Testified in opposition to the cash bond
provision in HB 337.
JAMES BARRETT, Owner/Operator
Rainforest Farms
Juneau, Alaska
POSITION STATEMENT: Testified during the hearing on HB 337.
ACTION NARRATIVE
3:32:45 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:32 p.m. Representatives Olsen,
Tilton, Kito, Josephson, Hughes, and LeDoux were present at the
call to order. Representative Colver arrived as the meeting was
in progress.
HB 188-PERSON W/DISABILITY SAVINGS ACCOUNTS
3:33:15 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 188, "An Act relating to financial accounts for
persons with disabilities; relating to financial institutions;
relating to property exemptions; relating to securities; and
providing for an effective date."
3:33:39 PM
REPRESENTATIVE DAN SADDLER, speaking as the sponsor, read from
the following sponsor statement [original punctuation provided]:
HB 188 seeks to help Alaskans cope with the challenges
of living with a disability by allowing individuals
and families to set up tax-free savings accounts,
called "ABLE accounts," to pay for education, housing,
transportation or other disability-related expenses.
The U.S. Congress passed the "Achieving a Better Life
Experience (ABLE) Act" in 2014, authorizing states to
create special savings accounts for disability-related
expenses modeled after the successful "529 college
savings programs," named after the relevant section of
IRS code. ABLE accounts, also known as "529A"
accounts, allow individuals with disabilities to
improve their financial security by using private
investments to supplement their benefits from
insurance, employment, Supplemental Security Income
(SSI), Medicaid, and other sources. Assets held in an
ABLE account would not be counted under means tests
required for Medicaid or SSI, although SSI cash
benefits would be suspended if the ABLE balance
exceeded $100,000. ABLE accounts could be spent for
education, transportation, job training and support,
assistive technology, health and wellness, legal and
other qualified services. Contributions would be
limited to $14,000 per year, and capped at $400,000. A
person could have only one account. To be eligible for
an ABLE account, a person must have become blind or
disabled before the age of 26. The Governor's Council
on Disabilities and Special Education estimates that
about 13,770 Alaskans - 10 percent of those with a
disability - might qualify for ABLE accounts. By
empowering Alaskans with disabilities and their
families to build their financial independence, HB 188
will help them meet more of their life challenges by
relying on private resources, without eroding the
value of public benefits to which they are entitled.
ABLE accounts will be important tools for helping them
live full, productive lives in their communities.
REPRESENTATIVE SADDLER noted that the current version of the
bill places administration of the [Stephen Beck, Jr., Achieving
a Better Life Experience (ABLE) Act of 2014], accounts with the
Department of Commerce, Community & Economic Development
(DCCED), but a forthcoming proposed committee substitute would
place administration with the Department of Revenue (DOR).
3:37:49 PM
CHAIR OLSON asked whether the $400,000 cap on ABLE accounts
would only be contributions, or could include interest.
REPRESENTATIVE SADDLER was unsure.
REPRESENTATIVE LEDOUX expressed her understanding that the bill
allows a disabled person with $400,000 in assets to continue to
benefit from various state and federal entitlement programs.
REPRESENTATIVE SADDLER said yes.
REPRESENTATIVE HUGHES asked what mechanism is used to determine
eligibility for account holders.
REPRESENTATIVE SADDLER stated there is a federal certification
to establish one's disability. In further response to
Representative Hughes, he said an account can be held by someone
who is older than 26 years of age.
REPRESENTATIVE KITO asked how DOR would administer the program
differently than would DCCED.
3:40:10 PM
KIM SKIPPER, Staff to Representative Saddler, answered that
DCCED has a conflict of interest because they audit and regulate
the affected industry; however, DOR can manage ABLE accounts.
In further response to Representative Kito, she said she was
unsure whether DOR manages similar accounts, and deferred his
question to DOR.
REPRESENTATIVE SADDLER observed that the current Alaska 529
savings plan for college education is currently housed in the
University of Alaska (UA).
REPRESENTATIVE COLVER questioned whether there was a way for
individuals to open 529 plans through brokerage houses instead
of having the state administer accounts.
REPRESENTATIVE SADDLER said yes. He advised that the 529(A)
federal enabling legislation does allow individuals to set up
private investment accounts with brokerage houses.
REPRESENTATIVE TILTON requested a review of the monetary
guidelines.
REPRESENTATIVE SADDLER restated that the annual cap on
contributions to one account is $14,000, and the lifetime
maximum is $400,000. In further response to Representative
Tilton, he said if the balance in the account exceeds a
threshold of $100,000, SSI cash benefits to the account holder
would be suspended.
REPRESENTATIVE TILTON inquired as to the maker of the monetary
guidelines.
REPRESENTATIVE SADDLER said the $400,000 maximum was established
by the state for 529 savings accounts, and the $100,000
threshold is a federal requirement.
REPRESENTATIVE LEDOUX questioned why there is an age limit for
eligible disabilities.
REPRESENTATIVE SADDLER stated the age limit is based in the
federal legislation, and suggested that in order to limit the
number of potential beneficiaries, those who become disabled
later in life are not eligible.
REPRESENTATIVE LEDOUX directed attention to the bill on page 6,
lines 24-26, which read:
SEC. 06.65.150. Program account contributions.
(a) A person may not make a contribution to open or
add to a program account unless the person makes the
contribution in cash.
REPRESENTATIVE LEDOUX asked why securities are not acceptable.
3:47:08 PM
MS. SKIPPER responded that this provision would be changed in
the forthcoming committee substitute.
REPRESENTATIVE LEDOUX asked how the meaning of "member of the
family" is described in the federal authorizing statute.
REPRESENTATIVE SADDLER said he would inquire and provide this
information.
REPRESENTATIVE COLVER expressed his reluctance to approve the
appropriation indicated in the attached fiscal note which adds
two employees to the Division of Banking and Securities, DCCED.
REPRESENTATIVE SADDLER remarked:
The intent of the legislation, the authorizing federal
legislation, does not envision the state doing
investment work, but contracting with an organization
like Ameritrade or ... T. Rowe Price which is, who
does the 529 for Alaska, and having them do the actual
investment and so forth, and providing the quarterly
or annual reports. There is some expense for the
state required to make sure reports are done for the
state to the [Internal Revenue Service, U.S.
Department of the Treasury] and so forth. I hope
there is a way to do that ... we're working on trying
to reduce the costs.
MS. SKIPPER added that the forthcoming committee substitute
allows DOR to contract out with other services instead of hiring
staff, resulting in a lower fiscal note. In addition, the state
may partner with other states to lower costs.
REPRESENTATIVE LEDOUX suggested imposing a charge on those who
are setting up an account.
MS. SKIPPER pointed out that the bill operates in a similar
manner to the college savings accounts, and fees would be
charged. In further response to Representative LeDoux, she said
she was unsure whether the fees would cover all of the state's
costs.
REPRESENTATIVE HUGHES asked whether the state incurs an annual
cost for the college savings accounts.
MS. SKIPPER said yes. However, UA has reduced the cost by
creating a large pool of account holders; in fact, the pool
creates sufficient income to pay for staffing.
REPRESENTATIVE HUGHES observed that if the legislature creates
an enabling statute, that would encompass the state's
obligation.
MS. SKIPPER advised that the state does not have to authorize
the accounts because disabled persons could establish accounts
in other states; however, establishing enabling legislation
benefits Alaska because residents could direct contributions to
the accounts from their permanent fund dividends, and a
provision in the forthcoming committee substitute allows
Medicaid services to be repaid to the state after the death of
an account holder.
3:54:04 PM
CHAIR OLSON opened public testimony on HB 188.
3:56:38 PM
MILLIE RYAN, Executive Director of REACH, Inc., said her
organization serves those with intellectual and developmental
disabilities who would benefit from HB 188. She is also the
president of Key Coalition of Alaska, which strongly endorses
the bill. Those with disabilities and their family members
would like the opportunity to save a down payment for a house or
for transportation, an opportunity that is taken for granted by
others. In fact, those with disabilities often live with
extraordinary expenses, and need services and support such as
Medicaid waivers and disability income; currently, however,
after saving more than $2,000, disability income and support are
taken away. Ms. Ryan advised that REACH would encourage its
beneficiaries to begin saving for their needs and to work for
things that are important.
3:58:18 PM
ROBERT FRICK said he lives in Juneau and has worked for Club
Demonstration Services (CDS) at Costco for 16 years
demonstrating food products. He is 62 years old and expressed
his support for HB 188. The bill would help him save for a
house or car and a service dog.
3:59:35 PM
MALLORY HAMILTON said she is the parent of a young woman who
experiences autism, Down syndrome, and a seizure disorder. She
is in support of the proposed legislation. Although she is
grateful that her daughter is on a waiver and receives SSI
benefits, her daughter must keep her income at well below
poverty level, which restricts her choices for items such as
eyeglasses. The bill would allow her daughter to save for a
home and to save any money she may receive from her relatives.
Ms. Hamilton pointed out that in the event of her daughter's
death, the state would have the option to claim any funds her
daughter has saved to pay for care she received during her
lifetime. The bill would allow her daughter to live a more
typical life and to have a job, which is important to her self-
worth. Speaking as a parent, Ms. Hamilton urged the committee
to pass the bill.
4:02:46 PM
STUART SPIELMAN, Senior Policy Advisor and Counsel, Autism
Speaks, informed the committee Autism Speaks is the nation's
largest autism science and advocacy organization. Mr. Spielman
said he is the parent of a son severely affected by autism. He
has been involved with ABLE Act legislation for over ten years
and because of his training as a tax lawyer, he was influenced
by the aspect that a person with autism is in a fundamentally
different position than a person who does not; for example, his
son without autism has a 529 college savings account, but his
son with autism must avoid putting assets in his own name. This
is one of the reasons the disability community and U.S. Congress
is supportive of this legislation. Beyond the technical aspects
of the bill, he stressed that the bill inspired overwhelming
support from Congress in December 2014, and every state is
considering legislation, or has authorized a program. Mr.
Spielman noted that people with disabilities are more than twice
as likely as others to live in poverty; the ABLE Act represents
one effort to improve the status of those with disabilities.
With the bill, parents of children with disabilities can provide
a little more help to ensure their children have more secure and
successful lives.
REPRESENTATIVE LEDOUX asked why the bill limits eligibility to
those with a disability that occurred prior to the age of 26
years.
MR. SPIELMAN explained that the provision represents a
compromise in the federal bill.
REPRESENTATIVE LEDOUX expressed her interest in knowing how much
the legislation would cost the federal government compared to
the cost with no age limit.
MR. SPIELMAN offered to provide information from the
Congressional Budget Office.
CHAIR OLSON asked whether other states have achieved a zero
budget impact.
MR. SPIELMAN said funding mechanisms vary between states, such
as intergovernmental loans and fees, and consortiums have the
potential for sharing costs.
REPRESENTATIVE LEDOUX asked for the effect on the state's
Medicaid bill.
4:10:44 PM
REPRESENTATIVE SADDLER opined that the bill would not affect the
state's Medicaid costs unless the state recovers Medicaid
expenses after a beneficiary's death.
REPRESENTATIVE LEDOUX surmised that if the bill does not affect
the state's Medicaid budget, there would not have been a
compromise needed to affect the cost of the federal legislation.
REPRESENTATIVE SADDLER said he was unsure of the explanation;
however, the forthcoming committee substitute will have a more
accurate fiscal note.
MR. SPIELMAN clarified that the age limit affects the total
number of people who could qualify for an ABLE account.
REPRESENTATIVE LEDOUX stated that there must be costs to the
federal government, other than additional staff, that led to a
compromise age limit. Her concern is that there will be a cost
to the state.
MR. SPIELMAN acknowledged that there is a federal tax cost
because the accounts are tax-preferred accounts and are not
subject to federal taxation.
CHAIR OLSON added that children are dropped off of their
parents' medical insurance at age 26.
REPRESENTATIVE SADDLER said another possible expense would be
tax reporting.
4:16:21 PM
RICK NELSON said he is a self-advocate speaking in support of
the ABLE Act, and currently works for the Governor's Council on
Disabilities and Special Education, Department of Health and
Social Services. Before the ABEL Act, he was only allowed to
save up to $2,000, and was unable to buy anything like a house
or a means of transportation, or assisted technology to help him
communicate with others. Mr. Nelson said the bill is a big
game-changer for people with severe disabilities, and will level
the playing field for people with disabilities. If a child
needs eyeglasses, and they are a preteenager, they don't want
the frames that are offered by Medicaid. The bill would allow a
teenager to buy eyeglasses that meet her needs, put her in her
peer group, and save the state money. Mr. Nelson urged the
committee to pass the ABLE Act.
4:21:09 PM
CHAIR OLSON announced that public testimony would remain open.
[HB 188 was held over.]
4:21:23 PM
The committee took a brief at ease.
HB 337-MARIJUANA TAXES;EXCESS POSSESSION;BONDS
4:23:05 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 337, "An Act relating to taxes on marijuana."
4:23:28 PM
REPRESENTATIVE LEDOUX, speaking as the sponsor, paraphrased from
the sectional analysis for HB 337 as follows [original
punctuation provided]:
Section 1 amends AS 17.38.200 by adding the bond
created in Section 3 to the marijuana establishment
requirements.
Section 2 amends AS 43.61.020(a) to require electronic
filing of marijuana tax returns.
Section 3 amends AS 43.61 adding two new sections:
Sec. 43.61.040 grants the tax division authority
to assess a tax on marijuana plants found in
excess of the possession limit for adults not
licensed under AS 17.38.
Sec. 43.61.050 requires a marijuana cultivation
facility to furnish a cash bond, to be forfeited
if taxes are not paid. It also makes marijuana
product manufacturing facilities and retail
marijuana stores secondarily liable for taxes on
their marijuana inventory and responsible for
providing proof that their marijuana inventory is
legitimate, upon request by the department.
REPRESENTATIVE KITO directed attention to proposed Section
43.61.040 [text previously provided]. He expressed his
understanding that plants found in excess of the legal amount
for possession would engage a criminal statute, which would
result in a criminal action, and asked if the state would tax
them as well.
4:27:16 PM
KALYSSA MAILE, Staff to Representative LeDoux, sponsor of HB
337, advised that the bill does not specify one action or the
other, the option is open that one could be charged criminally,
and also assessed penalties through the Tax Division, Department
of Revenue (DOR).
REPRESENTATIVE JOSEPHSON inquired as to whether the policy goal
was to deter black market competition with a lawful market, or
to raise revenue.
MS. MAILE acknowledged that deterrence is "pretty fundamental"
to support a legal industry, and DOR has been unable to
determine what the expected revenue from the industry will be.
REPRESENTATIVE JOSEPHSON referred to proposed Section 43.61.050
[text previously provided] and surmised "the primary
responsibility is the grower, and that person may be different
than the manufacturer and seller ...."
MS. MAILE said correct. The cultivator is responsible for
paying the tax, and the secondary liability goes to the retailer
or the product manufacturer, who must be able to prove that
their source of marijuana was from a legal cultivator. In
further response to Representative Josephson, she said there is
nothing in HB 337 inconsistent with [Alaska Marijuana
Legalization Ballot Measure 2 approved 11/4/14].
REPRESENTATIVE HUGHES asked how many ounces a plant weighs, its
value, and the annual value of "excess plants."
4:30:35 PM
MS. MAILE said AS 11.71.080 establishes that the aggregate
weight of a live marijuana plant is one-sixth of the plant
weight after the roots have been removed. She said she was
unsure how often excess plants are found.
4:31:47 PM
KEN ALPER, Director, Tax Division, DOR, in response to
Representative Hughes, based on information from a recent
arrest, estimated a weight of 5 ounces per plant; therefore, a
$50 per ounce excise tax would garner a $250,000 civil penalty
to the grower.
CHAIR OLSON suggested that taxes could be based on
tetrahydracannabinol (THC) content rather than weight.
MR. ALPER responded that illegal marijuana is not normally
processed in a laboratory, and the division seeks to confiscate,
destroy, and penalize by an efficient procedure. In further
response to Co-Chair Olson, he said the division has not
considered processing illegal marijuana for the purposes of the
prosecution. In fact, the goals of the tax authorities are to
provide the tax division with the ability to charge the penalty
on illegal marijuana. He remarked:
If the committee would prefer to somehow find a means
of calculating THC we can do that. Let me be clear
though, that the legal marijuana industry is silent on
the robustness of the product. You know, it's a flat
$50 an ounce regardless of the quality of THC content
of what it is that's actually being grown. In some
ways, our marijuana tax favors the high quality
manufacturer because it's a, the more valuable your
product, the $50 an ounce becomes less burdensome as a
percentage of the value.
CHAIR OLSON observed that other states measure, label, and check
for herbicides.
MR. ALPER said Alaska has testing requirements as part of the
legal marijuana system; furthermore, the aforementioned states
have sales taxes based on the percentage of the value as their
primary revenue source, whereas Alaska chose a "by weight" tax
mechanism.
REPRESENTATIVE JOSEPHSON inquired whether a fine is consistent
with proposed SB 91; he characterized SB 91 as
"friendlier" and HB 337 as punitive for those who possess drugs
illegally, including a jail term.
4:35:27 PM
MR. ALPER advised that marijuana possession remains criminal in
Alaska beyond the six plants for personal use. In a certain
case a person was found possessing 1,000 plants with no evidence
of illegal dealing. If the criminal justice system does not
seek a felony indictment, there is no disincentive, but the bill
is a means of deterrent to encourage Alaska marijuana growers
into a legal system.
MS. MAILE added that other proposed legislation related to
marijuana deals primarily with the criminal code; HB 337 imposes
a civil penalty.
REPRESENTATIVE KITO directed attention to the bill on page 2,
lines 24-29, which read:
(c) A marijuana product manufacturing facility or
retail marijuana store is secondarily liable for the
taxes on marijuana that is sold by or to the marijuana
product manufacturing facility or retail marijuana
store. If requested by the department, the marijuana
product manufacturing facility or retail marijuana
store shall provide the department with proof that the
taxes have been paid on the marijuana inventory in the
possession of the marijuana product manufacturing
facility or retail marijuana store.
REPRESENTATIVE KITO recalled that the commerce of cigarettes is
facilitated by tax stamps, and alcohol is also marked when taxes
are paid. He surmised there is a regulatory process to inform
consumers that taxes have been paid on a marijuana product.
MS. MAILE said DCCED is in the process of setting up a seed-to-
sale system.
4:38:07 PM
CYNTHIA FRANKLIN, Director, Alcohol & Marijuana Control Office,
DCCED, informed the committee that a seed-to-sale tracking
system will involve radio-frequency identification (RFID) tags
attached to marijuana plants over eight inches; the tracking
number will stay with the plant as it is harvested, dried,
manufactured into a product, and sold by the retail store. The
tracking software is capable of generating the reports required
of licensees by DOR, thus by this system, cultivation facilities
will be tracking and filing monthly reports with DOR. Ms.
Franklin concluded that the seed-to-sale software will provide
back-up documentation for tax reporting to DOR, to ensure that
taxes have been paid. Labels and marijuana products will
indicate to consumers the tracking system. In response to
Chair Olson, she said the system is the same as used in Colorado
and Oregon, and information can be read with a handheld device
within ten feet of the tag on each plant.
REPRESENTATIVE KITO questioned the validity of tracking a RFID
tag that becomes part of a process which combines plants, or
separates plants into various components such as an extract, a
leaf, or a bud.
MS. FRANKLIN stated that the tags are robust and as the plant
evolves, the tag may change, but the tracking number stays. She
assured the committee the system works.
MR. ALPER returned attention to the concept of secondary
liability, which is a power currently held by the tax division
for alcohol and tobacco taxes. For example, if a retailer is
found in possession of alcohol or cigarettes that did not come
from a licensed distributor, the tax division can charge the
taxes to the retailer. The division seeks to extend this power
to the marijuana industry to create a deterrent against a black
market. The difference is that the marijuana will be grown and
sold in Alaska, and the software tracking system will ensure
that the marijuana came from a licensed grower.
REPRESENTATIVE JOSEPHSON asked whether the amount of the cash
bond is comparable to what is assessed to alcohol vendors.
MS. MAILE said the alcohol industry must post a surety bond to
ensure that alcohol taxes are paid. She characterized the
$5,000 cash bond as "significantly lower than that you would see
with alcohol." In further response to Representative Josephson,
she said the marijuana cash bond may be more burdensome than
that of a new liquor business; however, a surety bond requires a
premium to be paid, and over the long term a cash bond could
cost less.
REPRESENTATIVE LEDOUX advised that the bill sponsors set the
cash bond for marijuana lower than a $25,000 surety bond because
the marijuana industry won't be able to get a surety bond. This
amount will cover the tax liability, but is not overly onerous.
MR. ALPER stated that the bill offers the division similar
authorities as are established for alcohol, as directed by the
initiative.
4:48:14 PM
CHAIR OLSON opened public testimony on HB 337.
4:48:21 PM
BRIAN OLSON, Owner/Operator, Alaska Berries Winery, stated that
the $5,000 cash bond for a cultivation license is onerous to an
applicant. Previously the "MTF board" discussed the use of
surety bonds, which he used to obtain his federal license for a
winery business. However, a $5,000 cash bond for a limited
cultivation license, in addition to a nonrefundable $1,000
application fee and $1,000 license fee, would hamper a beginning
industry. He opined that those who are establishing a
legitimate business have a lot invested already, and although he
supports the proposed regulations, he said the cash bond should
be a surety bond which can be collected by the state from those
who renege on their taxes.
REPRESENTATIVE LEDOUX asked how marijuana growers or cultivators
would be able to obtain a surety bond and if not, for his
opinion on the amount of a more reasonable cash bond.
MR. OLSON said he got two surety bonds to satisfy state and
federal requirements for a winery and a liquor license. On the
state level, any insurance company will issue a bond based on
the individual's ability to pay. Even without a surety bond,
any legitimate business must submit its taxes, and a $5,000
surety bond would cost about $150 annually.
REPRESENTATIVE LEDOUX related that if the sponsors of the bill
thought marijuana growers could obtain a surety bond, they would
have made that choice. She restated her previous question.
MR. OLSON said there is recourse for the state to recoup lost
revenue due to nonpayment of taxes, and it is not necessary to
have a bond for taxes on any business.
4:55:45 PM
DOLOYNDA PHELPS stated her concern was related to proposed
Section 43.61.050 [text provided previously]. She said the
$5,000 cash bond is problematic, and asked for understanding
that potential business owners are aware of financial
commitments and have a lot at stake. The cash bond and
compounded fees are difficult for business owners who want to
pay their taxes so the industry ends up with a legal market.
Ms. Phelps said proposed Section 43.61.050 does not favor the
legal taxpayer, or encourage a transition into a "good, healthy,
regulated industry here in the state."
4:58:10 PM
JAMES BARRETT said he was applying for cultivation, processing,
and retail marijuana licenses. He brought up several points
related to the bill: tax based on weight includes the flower,
and "doesn't really line up"; if a person pays a tax after they
are found guilty, the cannabis would have to be preserved
because it can change in weight over time; whether cash would be
accepted for the bond; the importance of the effective date on
those who are presently starting a business; the tax should
really be called a fine, and he questioned the legality of the
tax.
5:00:10 PM
CHAIR OLSON, after ascertaining that no one further wished to
testify, held public testimony open.
MR. ALPER advised that DOR would accept a surety bond if that
option is in the legislation; however, many taxpayers will not
be able to open a bank account, and thus will not be able to
secure a bonding agent either.
CHAIR OLSON recalled at one time the state accepted certificates
of deposit (CDs) in lieu of cash.
[HB 337 was held over.]
5:01:42 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:01 p.m.