Legislature(2021 - 2022)ANCH LIO DENALI Rm

09/03/2021 01:00 PM House WAYS & MEANS

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Audio Topic
01:03:28 PM Start
01:04:26 PM HB3006
01:55:26 PM Overview: Revenue Options
03:11:44 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Location Change --
-- Testimony <Invitation Only> --
*+ HB3006 STATE SALES AND USE TAX TELECONFERENCED
Heard & Held
+ Overview: Revenue Options TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
                         ALASKA STATE LEGISLATURE                                                                             
                HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS                                                                     
                            Anchorage, Alaska                                                                                   
                            September 3, 2021                                                                                   
                                1:03 p.m.                                                                                       
                                                                                                                                
                                  DRAFT                                                                                       
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Ivy Spohnholz, Chair                                                                                             
Representative Adam Wool (via teleconference)                                                                                   
Representative Andy Josephson                                                                                                   
Representative Calvin Schrage                                                                                                   
Representative Andi Story                                                                                                       
Representative Mike Prax                                                                                                        
Representative David Eastman (via teleconference)                                                                               
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 3006                                                                                                             
"An   Act   relating      to   a  state    sales     and   use   tax;    relating      to  sales                                
and     use      taxes      levied       by    municipalities;            authorizing         the                               
Department       of    Revenue     to    enter    into     the    Streamlined       Sales     and                               
Use Tax Agreement; and providing for an effective date."                                                                        
                                                                                                                                
        - HEARD & HELD                                                                                                          
                                                                                                                                
OVERVIEW:  REVENUE OPTIONS                                                                                                      
                                                                                                                                
        - HEARD                                                                                                                 
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB3006                                                                                                                  
SHORT TITLE: STATE SALES AND USE TAX                                                                                            
SPONSOR(s): REPRESENTATIVE(s) TARR                                                                                              
                                                                                                                                
08/30/21               (H)            READ THE FIRST TIME - REFERRALS                                                           
08/30/21               (H)            W&M, STA, FIN                                                                             
09/03/21               (H)            W&M AT 1:00 PM ANCH LIO DENALI Rm                                                         
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE GERAN TARR                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  As prime sponsor, presented HB 3006.                                                                     
                                                                                                                                
DAVID SONG, Staff                                                                                                               
Representative Geran Tarr                                                                                                       
Juneau, Alaska                                                                                                                  
POSITION      STATEMENT:          During      the   hearing      on    HB   3006,     read    the                             
sectional        analysis       on    behalf      of    Representative           Tarr,     prime                                
sponsor.                                                                                                                        
                                                                                                                                
BRIAN FECHTER, Deputy Commissioner                                                                                              
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION       STATEMENT:           Co-provided         a    PowerPoint        presentation,                                  
titled "Revenue Options Discussion," dated 9/3/21.                                                                              
                                                                                                                                
NICOLE REYNOLDS, Deputy Director                                                                                                
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION       STATEMENT:           Co-provided         a    PowerPoint        presentation,                                  
titled "Revenue Options Discussion," dated 9/3/21.                                                                              
                                                                                                                                
DAN STICKEL, Chief Economist                                                                                                    
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION       STATEMENT:           Co-provided         a    PowerPoint        presentation,                                  
titled "Revenue Options Discussion," dated 9/3/21.                                                                              
                                                                                                                                
COLLEEN GLOVER, Director                                                                                                        
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION       STATEMENT:           Co-provided         a    PowerPoint        presentation,                                  
titled "Revenue Options Discussion," dated 9/3/21.                                                                              
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:03:28 PM                                                                                                                    
                                                                                                                                
CHAIR     IVY   SPOHNHOLZ       called     the    House    Special      Committee       on   Ways                             
and     Means     meeting       to    order      at    1:03     p.m.        Representatives                                     
Schrage,       Prax     (via     teleconference),           Josephson,        and    Spohnholz                                  
were    present      at   the    call    to   order.        Representatives          Wool    (via                               
teleconference),          Eastman      (via   teleconference),          and    Story    arrived                                 
as the meeting was in progress.                                                                                                 
                                                                                                                                
                     HB 3006-STATE SALES AND USE TAX                                                                        
                                                                                                                                
1:04:26 PM                                                                                                                    
                                                                                                                                
CHAIR    SPOHNHOLZ       announced      that    the   first    order     of  business      would                                
be   HOUSE     BILL    NO.   3006,     "An    Act   relating      to   a   state     sales    and                               
use      tax;      relating        to     sales       and     use      taxes       levied       by                              
municipalities;          authorizing        the    Department       of   Revenue      to   enter                                
into    the   Streamlined        Sales    and    Use   Tax    Agreement;       and   providing                                  
for an effective date."                                                                                                         
                                                                                                                                
1:04:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          GERAN     TARR,     Alaska     State     Legislature,         as   prime                                
sponsor,      presented       HB   3006    [hard     copy    of   presentation         included                                 
in    the    committee       packet].         She    gave    a   brief      history      of   the                               
bill's     inception,       emphasizing       her   willingness        to   see   it   modified                                 
and   the   importance       of   having     the   support     of   both    bodies,     as   well                               
as   the    governor.        She    talked     about    "spreading        the   burden     among                                
all     who     benefit        from     public       services"        and     indicated         an                              
acceptance       of   the   idea    to   establish      a   sales    tax.      She   noted    the                               
burden     on    Alaska's      small     population        to   pay    for    all   goods     and                               
services.        She    said    20  percent      of   the   state's     workforce       is   from                               
out    of   state,     and    2.26    million      visitors       come    to   Alaska.        She                               
said    Alaskans       who   travel     outside      the    state     pay   taxes     to   those                                
locales,      and    she    opined     that    visitors      to    Alaska     should     do   the                               
same.                                                                                                                           
                                                                                                                                
1:06:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          TARR    advised      that    in    coming     up   with     a  plan     to                              
raise     revenue,      two   questions       to   ask   are    how    much    revenue     could                                
be   raised    by   any   single     proposal      and   how   soon    that    revenue     could                                
come    to   the   state.       One    benefit     of   the    proposal      under    HB   3006,                                
she    said,      is   that     it    can    be    implemented         sooner.         With     an                              
effective       date    of   July    1,   2022,     for    Fiscal     Year    2022    (FY    22),                               
that    would    happen     faster     than   an   income     tax,   which     is  based     on  a                              
calendar       year.       Pointing       to   a   chart,      labeled      "Who    pays,     how                               
soon,"      she    listed      payers      as    Alaskans,        out-of-state         workers,                                 
tourists,        and    businesses/oil          companies,        and     she    said     it    is                              
likely     that    everyone     would     contribute       to  state     services      [through                                 
a  sales     tax].      She    said   that    is   not    likely     to   be  true    with    the                               
other     revenue     sources      [being     considered].           She   questioned        what                               
the     public's       reaction       would      be    to    multiple       revenue       source                                
proposals being introduced at one time.                                                                                         
                                                                                                                                
1:12:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE         TARR    turned     to  consideration         of   exemptions,       shown                                
on   the    next     two   pages     of    the   presentation.            Basic     essentials                                  
would     be   exempted      from    sales     tax,    including       groceries,       medical                                 
expenses,       child    care    services,      and    feminine      care    products.        She                               
mentioned       deductions       that     must    be   included,       and    she    indicated                                  
those     have    to   do   with     the   state     not    being     allowed     to    tax   the                               
federal     government       or   tribes.       Other    deductions       to   be   considered                                  
may include financial services and non-profit agencies.                                                                         
                                                                                                                                
REPRESENTATIVE          TARR     talked     about      management       and     said    HB
3006    envisions      a  streamlined        approach      for   general     sales     and                                      
use    tax;    the    bill    has    provisions        to   allow     municipalities                                            
and    boroughs      the   ability      to   levy    tax,    and    the   state     would                                       
collect      the     tax    and    distribute        it    back     to   those      local                                       
governments.          She    indicated      that    the    exemptions       previously                                          
mentioned       would    also    become     exemptions       at   the    local    level.                                        
She    said    her   staff     would    offer     a  sectional       analysis      of   HB
3006.      She    said    it  would     include     Title     28,   regarding       motor                                       
vehicles;       Title      29,    regarding        municipal       government;         and                                      
Title 43, regarding revenue and taxation.                                                                                       
                                                                                                                                
1:17:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          TARR    spoke     about     the    beginnings       of   her    efforts                                 
toward     HB    3006    and    other     legislation        addressing        the    issue     of                              
revenue.         She    spoke     of   issues      that    effect     the    economy.         She                               
addressed      the    impact    of   the   proposed      legislation,        which     would    be                              
a  2   percent      general     sales     and   use    tax.      She    said    those    in   the                               
lower    economic      income     brackets      would     "come    out    ahead"     under    the                               
proposed      legislation,        while    those    on   the   higher     end,    who   may   not                               
consider       their      permanent        fund      dividend       (PFD)      as    necessary                                  
income,      could    view    their     PFD    as   a  way    to   pay   the    higher     sales                                
tax   on   expensive       purchases,       such    as   a   new   vehicle.        She    called                                
this a "win-win" situation.                                                                                                     
                                                                                                                                
1:22:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          TARR     offered      ideas      for    further       consideration,                                    
such    as   including      exemptions       for    diapers     and    other    supplies      for                               
children,       which      she    noted     could      be   included       under     the     food                               
definition       if    it   were    amended.        She    said    some    have     questioned                                  
the   necessity       of  state     management.         She   explained      that    [HB   3006]                                
was   based    off    a  draft    former     Governor      Bill   Walker     had   created      in                              
2015.      Since     then   an   online     sales     tax   has   been    implemented,        and                               
municipalities          have     had     to   track      the    online      sales      tax,     in                              
addition      to  their     own   local    taxes.       She   pointed     out   that    because                                 
there     is    software      "that     helps     delineate       all    of    that,"     so    it                              
could     be   that     state    management        is   not    necessary.          She    talked                                
about     splitting       the   collection        of   taxes     between      municipalities                                    
and    the    state    so    that    municipalities         can    maintain      their     sales                                
tax   and    not   lose    revenue.        She   related      another     conversation        has                               
been     held      regarding        501(c)      organizations          and     the    idea      of                              
allowing          exemptions           for       volunteer           fire        departments,                                   
organizations          for     veterans,        and     chambers       of    commerce,        for                               
example.         In   conclusion,        Representative         Tarr    acknowledged         that                               
HB 3006 may require numerous hearings to hone.                                                                                  
                                                                                                                                
1:27:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE         TARR,     in   response      to   Representative         Prax,     stated                                
that     the     Department        of     Revenue       has    figured       that     a    fully                                
implemented        sales    tax    would    garner     the    state    approximately         $300                               
million per year.                                                                                                               
                                                                                                                                
REPRESENTATIVE          PRAX    asked     if    the    bill    sponsor       had    considered                                  
that    people     might     buy   more     expensive      items     from    states     without                                 
sales tax.                                                                                                                      
                                                                                                                                
REPRESENTATIVE         TARR    talked     about    the   proximity      of   states     with    no                              
sales     tax   to   Alaska.       Oregon     has    income     tax,    but   no   sales     tax;                               
the   other     states     [with    no   sales    tax]    are    Delaware,      Montana,      and                               
New    Hampshire.         She    suggested      it    may   end    up   being     more    costly                                
for    someone      to    buy    a   vehicle,      for    example,       in    one    of   those                                
states      and     then     have     to   pay     to    ship     it    to    Alaska.         She                               
acknowledged         that     Alaskans      used     to    buy    items     in    Washington;                                   
however,      the    policy     that    allowed      non-residents         to   forgo     paying                                
the     State     of    Washington's          sales     tax     was    eliminated.            She                               
suggested the proposed sales tax for Alaska could include a cap.                                                                
                                                                                                                                
1:31:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE           PRAX     opined      that     those      factors       need     to     be                              
considered when addressing HB 3006.                                                                                             
                                                                                                                                
1:32:11 PM                                                                                                                    
                                                                                                                                
CHAIR    SPOHNHOLZ       asked    David     Song    to   give    the   sectional       analysis                                 
for HB 3006.                                                                                                                    
                                                                                                                                
1:32:16 PM                                                                                                                    
                                                                                                                                
DAVID     SONG,      Staff,      Representative          Geran     Tarr,      on    behalf      of                              
Representative         Tarr,    prime     sponsor     of   HB  3006,     read   the    six-page                                 
sectional       analysis      for    the    record     [hard     copy    available       in   the                               
committee packet].                                                                                                              
                                                                                                                                
1:54:50 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ announced that HB 3006 was held over.                                                                           
                                                                                                                                
^OVERVIEW:  Revenue Options                                                                                                     
                        OVERVIEW:  Revenue Options                                                                          
                                                                                                                                
1:55:26 PM                                                                                                                    
                                                                                                                                
CHAIR    SPOHNHOLZ       announced      that    the   final    order     of  business      would                                
be an overview of Revenue Options.                                                                                              
                                                                                                                                
1:56:14 PM                                                                                                                    
                                                                                                                                
BRIAN     FECHTER,      Deputy     Commissioner,         Department        of   Revenue,      co-                               
provided       a    PowerPoint        presentation,          titled      "Revenue       Options                                 
Discussion,"         dated     9/3/21.        As   shown     on    slide     2,   he   said     he                              
would      define      the    problem,        mention      revenue       options       proposed                                 
through      legislation,         and    discuss       other     revenue      options.          As                              
shown     on    slide     3,   he    said    that     with    a   50/50      permanent       fund                               
dividend      (PFD),     there    will    be   a  deficit      of  $1   billion.        He   said                               
he   has    heard     that    any   sort     of   robust     PFD    will    result     in   a   $1                              
billion     deficit      "forever     into    the   future,"      which     he  said    is   "not                               
quite    true."       He   pointed     to   an   additional       $3   million     dollars      in                              
fiscal     year    2023    (FY   23).      He   said,     "The    real    target     is   really                                
in the order of $5 million  revenues or reductions."                                                                            
                                                                                                                                
1:57:23 PM                                                                                                                    
                                                                                                                                
NICOLE      REYNOLDS,       Deputy     Director,       Tax    Division,       Department        of                              
Revenue,      continued       with    the   PowerPoint,        bringing      focus    to   slide                                
4,      entitled          "Revenue         Options         In       Brief:        Legislature                                   
Consideration,"           which      shows      a   breakdown        of     each     piece      of                              
legislation discussed in more detail in upcoming slides.                                                                        
                                                                                                                                
1:57:46 PM                                                                                                                    
                                                                                                                                
CHAIR     SPOHNHOLZ       noted    that     the   department        had    not   included       an                              
analysis      of   any    of   the    income     taxes     that    were    introduced        this                               
year, and she asked that the presenters address that point.                                                                     
                                                                                                                                
1:58:01 PM                                                                                                                    
                                                                                                                                
MR.    FECHTER       said    the     governor       had    set    "borders"       related       to                              
fiscal     solutions:        no   income     tax;   no   less    than    a  50  percent      PFD;                               
and   contemplation         of  a  spending      cap.      In  response      to   a  follow-up                                  
question,       he   said    the    department       could     return     at   a   later     date                               
[to address questions about income tax proposals].                                                                              
                                                                                                                                
1:58:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE            JOSEPHSON         asked      for      confirmation           of     his                               
understanding         that    the   governor      would    support      a  sales     tax,    with                               
a vote of the people, but he would veto an income tax.                                                                          
                                                                                                                                
MR.     FECHTER        spoke       of    constitutional            amendments         and     the                               
requirement         of    any     future      broad-based         taxes      to    get     voter                                
approval.         He   indicated      a   sales    tax    would     pass    the   legislature                                   
prior    to   getting      to  the    ballot.       He   said,    "As   long    as   it's    part                               
of   a  full    fiscal    solution      that    includes      the   three    borders      that   I                              
mentioned       earlier,      ...    it   is   likely     that    he   would     let    that    go                              
through."                                                                                                                       
                                                                                                                                
CHAIR     SPOHNHOLZ      reminded       committee      members      that    they     had   heard                                
from     Alexei     Painter,       Director      of    the    Division       of   Legislative                                   
Finance,       regarding       the    PFD   and    the    governor's        proposal      for    a                              
50/50     formula,      and    she    related      it   to    the   $500     million      number                                
referenced by Mr. Fechter.                                                                                                      
                                                                                                                                
2:01:28 PM                                                                                                                    
                                                                                                                                
MS.   REYNOLDS      returned      to   the   presentation        and   noted    that    slide    5                              
shows     other     revenue      options.          Slide     6,   "Revenue       Options      for                               
Consideration,"           shows     the     current       legislative         proposals       for                               
revenue     sources,      which     are:     SB   106,    HB   130,   HB   104,    HB   110,    HB
3006,     HB    3007,     and    SB   13.       [The    ensuing       slides     detail      each                               
proposal.]          She   covered      Slides      7  and    8,   options      "A"    and    "B,"                               
regarding      SB   106   and    HB  130,    respectively,        which     read   as   follows                                 
[original punctuation provided, with some formatting changes]:                                                                  
                                                                                                                                
            A: Pass-Through Oil and Gas Tax Revisions (SB 106                                                                 
        Sen Wielechowski)                                                                                                     
                                                                                                                                
        Description:         This      bill      extends       Alaska's        existing                                     
        corporate      income      tax   for    oil    and   gas    corporations        to                                      
        apply    to   pass-through         entities      with    qualified       taxable                                        
        income    over    $4   million     that    are   engaged     in   oil   and    gas                                      
        exploration        or   production       in   Alaska.      For    purposes      of                                      
        this      bill,       a     passthrough           entity       is      a     sole                                       
        proprietorship,          partnership,          and    S-Corporation,           but                                      
        the    definition       does     not    include      LLCs     with    a   single                                        
        owner    that    are   treated     for    federal     income     tax   purposes                                         
        as   disregarded        entities.       The    bill    defines      "qualified                                          
        taxable     income"      to   mean    income     from    the   production       of                                      
        oil   or   gas    from    a   lease    or    property      in   the    state    or                                      
        from    the   transportation          of   oil   or   gas    by   pipeline      in                                      
        the state.                                                                                                              
                                                                                                                                
        First    Full    Year    Impact:     $46.0     million     in   FY   2023    This                                   
        estimate     does    not   account      for   changes     in   behavior      as   a                                     
        result of a tax rate change.                                                                                            
        Costs:     There     are    one-time       programming        costs     of   $0.8                                   
        million.                                                                                                                
                                                                                                                                
        B: Corporate Income Tax Revisions (HB 130  Rep Wool)                                                                  
                                                                                                                                
        Description:        This    bill    makes    several      revisions       to   the                                  
        State's current corporate income tax (CIT):                                                                             
        1.  It   expands     the    existing      corporate      income     tax   to   all                                      
        oil   and    gas   producers       doing    business      here.     Currently,                                          
        only   "C"    corporations        pay   this    tax   on   their    Alaska     net                                      
        income.                                                                                                                 
        2.    As    part     of     the     CARES     Act,      corporations         were                                       
        permitted      to    carryback       any   2018-2020       tax    year    losses                                        
        to   a  prior     tax    year    via    an   amended      tax   return.      This                                       
        bill     decouples        the     state      CIT     from      that      federal                                        
        provision.                                                                                                              
        3.   The   bill    also    includes      several      other    modifications                                            
        to   the    CIT   provisions:        modifies       federal     tax    credits,                                         
        eliminates       the   80%   deduction,       and   repeals      stranded      gas                                      
        development provisions.                                                                                                 
        First Full Year Impact: $141.7 million in FY 2022                                                                   
        The   first-year       impact     is   primarily       from    the   CARES     Act                                      
        change.     The    FY   2023    revenue      impact     is   $32.6     million.                                         
        This   estimate      does    not   account      for   changes     in   behavior                                         
        as a result of a tax rate change.                                                                                       
        Costs:     There     are    one-time       programming        costs     of   $0.9                                   
        million.                                                                                                                
                                                                                                                                
2:06:11 PM                                                                                                                    
                                                                                                                                
MS. REYNOLDS, in response to Representative Josephson, offered                                                                  
her understanding of the distinction between "worldwide"                                                                        
reporting and "water's edge combined reporting."                                                                                
                                                                                                                                
2:07:05 PM                                                                                                                    
                                                                                                                                
MS. REYNOLDS next covered slides 9 and 10, options "C" and "D,"                                                                 
regarding HB 104 and HB 110, respectively, which read as follows                                                                
[original punctuation provided, with some formatting changes]:                                                                  
                                                                                                                                
        C: Motor Fuel Tax (HB 104  Rep Josephson)                                                                             
                                                                                                                                
        Description:        A   tax   is   levied      on   purchases      of    highway                                    
        and   marine     diesel     and    gasoline,      aviation      gas,    and    jet                                      
        fuel.    Tax    rates     are   as   follows:       Highway     =   $0.08/gal,                                          
        Marine     =  $0.05/gal,       Aviation      =   $0.047/gal,       Jet    Fuel    =                                     
        $0.032/gal.         Certain       refined       fuel      sales      are     also                                       
        subject to a $0.0095/gal Surcharge.                                                                                     
        This   bill    doubles     the    tax   rates    for    highway     and   marine                                        
        fuel   only.     It  does    not   increase      the    rates    for   aviation                                         
        or   jet     fuel.     This     option      also     increases        the    fuel                                       
        surcharge to $0.015/gal.                                                                                                
        First    Full    Year    Impact:     $35.8     million     in   FY   2023    This                                   
        estimate     does    not   account      for   changes     in   behavior      as   a                                     
        result of a tax rate change.                                                                                            
        Costs:     There      are    no   incremental         costs     to    implement                                     
        this change.                                                                                                            
                                                                                                                                
        D: E-Cigarette Tax (HB 110  Rep Hannan)                                                                               
                                                                                                                                
        Description:         This    is    a   parity      tax    bill     making      any                                  
        vapor      product,        component,          or     solution        used      in                                      
        electronic       cigarettes        subject      to    the    excise      tax    on                                      
        tobacco      products.        This    change      would      only     apply     to                                      
        solutions         containing          nicotine.         Currently,          these                                       
        products      do   not    fall    under    the    definition       of    tobacco                                        
        products      and     are    not    subject       to   tax     at   the     state                                       
        level.                                                                                                                  
        First    Full    Year    Impact:      $2.4    million      in   FY   2023    This                                   
        estimate     does    not   account      for   changes     in   behavior      as   a                                     
        result of a tax rate change.                                                                                            
        Costs:     There      are    no   incremental         costs     to    implement                                     
        this change.                                                                                                            
                                                                                                                                
2:10:09 PM                                                                                                                    
                                                                                                                                
DAN     STICKEL,       Chief      Economist,         Tax    Division,        Department         of                              
Revenue,      showed     slide     11,    option     "E,"    regarding       HB   3006,    which                                
read     as     follows       [original       punctuation         provided,        with      some                               
formatting changes]:                                                                                                            
                                                                                                                                
        E: Sales Tax (HB 3006  Rep Tarr)                                                                                      
                                                                                                                                
        Description:        This   bill    implements       a  2%   statewide       sales                                   
        tax.    Notable      exemptions       include:      Groceries,        financial                                         
        services,       goods     for    resale,      real     property,       aviation                                         
        fuel,       healthcare          services,         pharmaceuticals,             and                                      
        childcare.          The      bill       envisions          the      Department                                          
        collecting       both    the   state    sales     tax   and    the   sales     tax                                      
        for   the    140+    sales    taxes     levied     locally     and    remitting                                         
        the   funds     back    to   those     municipalities.          The   tax    base                                       
        in   this     bill    is    considered       to    be   a   "mid     base"     tax                                      
        base.                                                                                                                   
        First    Full    Year    Impact:      $300    million      in   FY   2023    This                                   
        estimate     does    not   account      for   changes     in   behavior      as   a                                     
        result of a tax rate change.                                                                                            
        Costs:      There     are    one-time       programming         costs     of    $6                                  
        million.     The    Department       would    need    74  new    positions      at                                      
        a cost about $8.5 million per year.                                                                                     
                                                                                                                                
MR.   STICKEL,      referring      to   the   prior     question      about    people     buying                                
expensive       items    outside      of   Alaska     [to    avoid    paying      sales    tax],                                
pointed     out   that    HB   3006    proposes     a   sales    and   use   tax.      A  person                                
buying     a  car   out    of   state    and   bringing      it   to   Alaska     would    pay   a                              
use tax.                                                                                                                        
                                                                                                                                
2:12:08 PM                                                                                                                    
                                                                                                                                
COLLEEN      GLOVER,      Director,      Tax    Division,       Department       of    Revenue,                                 
addressed      slide     12,   option     "F,"   regarding       HB  3007,     which    read    as                              
follows      [original        punctuation        provided,        with     some     formatting                                  
changes]:                                                                                                                       
                                                                                                                                
        F:   Reduce     Sliding      Scale    per    Barrel     Credit     from     $8.00                                     
        to $4.00 (HB 3007  Ways and Means)                                                                                    
                                                                                                                                
        Description:        This   bill    changes      the   maximum     the    sliding                                    
        scale    per    barrel     credit      in   AS   43.55.024(j)         depending                                         
        on   Alaska      North      Slope     (ANS)      oil    prices.       This     tax                                      
        credit     is   available       for   "legacy"       oil   produced       on   the                                      
        North    Slope.     This    bill     reduces     the    amount     of   the    tax                                      
        credit     for    each    taxable      barrel     of   oil    from    $8   to   $4                                      
        when     the     average        gross      value      at     the     point      of                                      
        production       for    the    month    is    less    than    $80    a   barrel.                                        
        The   bill     scales     down    the    tax    credit     amount     when     the                                      
        average     gross     value     at   the   point     of   production       for    a                                     
        month    is    $80   or   more.     Under     the    bill,    the    amount     of                                      
        the   tax    credit     for    a   taxable     barrel      of   oil   would     be                                      
        zero     if   the     average      gross      value     at    the     point     of                                      
        production for the month is $110 or more.                                                                               
        First Full Year Impact: $174.0 million in FY 2023                                                                   
        Costs:     There      are    no   incremental         costs     to    implement                                     
        this change.                                                                                                            
                                                                                                                                
MS. GLOVER noted that HB 3007 would not change the flat per                                                                     
barrel credit.                                                                                                                  
                                                                                                                                
MS. GLOVER next addressed Slide 13, option "G," regarding SB 13,                                                                
which read as follows [original punctuation provided, with some                                                                 
formatting changes]:                                                                                                            
                                                                                                                                
        G: Petroleum Property Tax (SB 13  BEGICH)                                                                             
                                                                                                                                
        Description:        The    state    levies      a  tax    at   a   rate    of   20                                  
        mills    (2%)     of   the   assessed       value.     The    tax   paid     to   a                                     
        municipality        on   oil   and   gas    property      acts    as   a  credit                                        
        toward      the     payment       to    the     state,      reducing        state                                       
        revenue      by    the    tax    levied      in   those     municipalities.                                             
        This    bill   increases       the   tax    by   10  mills     (1%)    but   does                                       
        not   allow     the    additional       tax    to   be   used    as   a   credit                                        
        for    municipalities.          This     tax    would     reduce      Corporate                                         
        Income     tax     as   well     as    Oil    and    Gas     Production        Tax                                      
        because       property        tax     payments        are      a    deductible                                          
        expenditure for those tax types.                                                                                        
        First     Full     Year    Impact:       $272.1     million       in   FY    2022                                   
        (Designated       to   specific      purposes)      Using    the    Spring     ANS                                      
        price     forecast,        the     estimate        is    that     this      could                                       
        increase      production       [sic]    tax    revenue     by   $228    to   $272                                       
        million     per   year    from    FY  2022    to   FY  2027.     The   range    is                                      
        due   to    forecasted       changes      in   production,        oil    prices,                                        
        and anticipated company spending during this period.                                                                    
        Costs:     There      are    no   incremental         costs     to    implement                                     
        this change.                                                                                                            
                                                                                                                                
2:15:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON suggested that in the second paragraph,                                                                
the word "production" was a typographical error and should read                                                                 
"property."                                                                                                                     
                                                                                                                                
MS.    GLOVER     confirmed      the    word    should     be   "property."          She   added                                
that    property      tax   is   "a  deduction       against     oil   and   gas    production                                  
tax,"     a   lease     expenditure,        and    a   deductible       against      corporate                                  
income tax, and it can impact the royalty revenue.                                                                              
                                                                                                                                
2:16:18 PM                                                                                                                    
                                                                                                                                
MS.    GLOVER,     in    response      to   Representative         Prax,     confirmed       that                               
the   $272    million      is   the   incremental       increase      to   the    state.      She                               
added     that     "it    shows     it's     designated,"         so   under     SB    13,    the                               
revenues       are   set    between      a   higher      education       fund,     the    Alaska                                
capital       fund,     and     shared      with     local      governments         to    offset                                
personal property tax exemptions required by the state.                                                                         
                                                                                                                                
2:17:41 PM                                                                                                                    
                                                                                                                                
CHAIR     SPOHNHOLZ       sought     to    confirm      that    Ms.    Glover      was    saying                                
that     the    petroleum       property      tax    is    deductible        from    corporate                                  
income      taxes      and    petroleum        production        taxes,       and    that     the                               
revenue estimate of $22.1 million "is net of those impacts."                                                                    
                                                                                                                                
MS.    GLOVER     answered       that's     correct.         She    added     that    they    are                               
designated funds, not undesignated general funds (UGF).                                                                         
                                                                                                                                
2:18:12 PM                                                                                                                    
                                                                                                                                
MS.     REYNOLDS        drew     attention        to     slide      14,     "Other      Revenue                                 
Options,"         which      lists       the     options        as     follows       [original                                  
punctuation provided]:                                                                                                          
                                                                                                                                
        Revenue Options                                                                                                         
          A. Modernize Corporation Income Tax (CIT) statutes to                                                                 
           better reflect business activity of highly digitized                                                                 
        businesses                                                                                                              
        B. Require Oil & Gas pass-through entities to pay CIT                                                                   
          C. Generate revenues/Reduce Expenses by monetizing our                                                                
        carbon offsets                                                                                                          
        D. Implement a 2% broad-based sales tax                                                                                 
          E. Modify maximum sliding scale per barrel credit from                                                                
        $8.00 to $5.00.                                                                                                         
          F. Establish legalized gambling in our State: Internet                                                                
        gaming, sports betting, lottery, and casinos                                                                            
        G. Use of Federal Funds for revenue replacement                                                                         
        H. Draw from the ERA as a Bridge/Transition fund                                                                        
                                                                                                                                
MS.    REYNOLDS      addressed      item    "A"    on   slide     14,   by   discussing       the                               
details     of   the    "Digital      Business      Corporate      Income     Tax"    on   slide                                
15,    which    read     as   follows     [original       punctuation        provided,       with                               
some formatting changes]:                                                                                                       
                                                                                                                                
        A: Digital Business Corporate Income Tax                                                                              
                                                                                                                                
        Description:        The    digital       revolution       has    changed       our                                  
        economic       reality.       This    option      is    to    modernize        the                                      
        Corporate       Income     Tax    (CIT)     statutes      by   adding      a   new                                      
        apportionment          methodology         that     is    specific        to    e-                                      
        commerce.         The     new      apportionment           methodology          is                                      
        intended      to    incorporate        all     types     of   e-commerce        to                                      
        include     revenues      generated       from    on-line      purchases,       TV                                      
        streaming,        online     advertising,         consumer       data     sales,                                        
        music,     video,      software      as    a   service,      app    purchases,                                          
        etc.    An   apportionment         methodology        that    is   based     on   a                                     
        single    factor:      US   sales    apportioned       to   Alaska     based    on                                      
        Alaska sales will capture these lost revenues.                                                                          
        New    Revenue      Estimation:        The    preliminary        estimate       is                                  
        that    this   could     generate      $70   to   $90    million     of   annual                                        
        revenues to the State.                                                                                                  
        Costs:     Implementation          costs     have     not    been     evaluated                                     
        yet   and   are   considered       TBD.    The   system     will    need   to   be                                      
        updated     and   will    likely     require     one    additional       auditor                                        
        to educate taxpayers.                                                                                                   
                                                                                                                                
MS.    REYNOLDS      noted     that    this    is   not    a   new   approach;       currently                                  
oil   and    gas   tax    payers    use    a  modified      apportionment         formula,      as                              
do   other      transportation         carriers,       such     as    water     carriers      and                               
airlines.        The    formula     reflects       a  company's       business      activities                                  
and   how   it   earns    income     in   a  state.      The    approach     creates      parity                                
between      brick    and    mortar     businesses       and   "those     businesses       doing                                
significant        economic      activity      in   Alaska     without     those     brick    and                               
mortar stores in Alaska."                                                                                                       
                                                                                                                                
2:20:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          JOSEPHSON       asked     whether      Alaska     was    lagging      "in                               
capturing this revenue" compared to other states.                                                                               
                                                                                                                                
MS.    REYNOLDS      answered       that    Alaska     is    in   need    of    updating      its                               
corporate       income     tax   statutes.         There     is   a  multi-state        compact                                 
Alaska     is  a   part   of,    and   it  has    been   suggested       to  Alaska     that    it                              
update     its   statutes.         This    option     would    provide      the   opportunity                                   
for    the   state     to   adopt     some    of   the    recommendations          and    update                                
statute.                                                                                                                        
                                                                                                                                
2:21:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          PRAX     sought      clarification          as   to    whether       this                               
option     was    in   the   proposal       stage    or   whether      the    administration                                    
had some legislation "close to being prepared."                                                                                 
                                                                                                                                
2:22:03 PM                                                                                                                    
                                                                                                                                
MR.     FECHTER       answered       that     research        and     legislation        is     in                              
development,        and    he  offered      to   meet    with    Representative         Prax    to                              
discuss this further.                                                                                                           
                                                                                                                                
CHAIR     SPOHNHOLZ      spoke     about    parity     between      local    businesses       and                               
large     conglomerates.            She    asked     whether       there     is   legislation                                   
recommended by the multi-state compact that could be referenced.                                                                
                                                                                                                                
MR.    FECHTER     answered      that    this    is   a   relatively       new    thing,     with                               
perhaps      "a   dozen    and    a  half    states"      that    are   "somewhere       in   the                               
legislative       process      contemplating        things."        He   said   Alaska     would                                
be   "at    least     a  little     bit    on   the    cutting      edge"    if   it    were    to                              
pass such a compact.                                                                                                            
                                                                                                                                
2:23:31 PM                                                                                                                    
                                                                                                                                
MS.    REYNOLDS,       in   response       to   a   follow-up       question       from    Chair                                
Spohnholz,       clarified       that    Alaska     already     has    a  corporate       income                                
tax;     this    option      being     discussed       would     modernize       the    state's                                 
existing tax rather than creating a new one.                                                                                    
                                                                                                                                
2:24:28 PM                                                                                                                    
                                                                                                                                
MS.   REYNOLDS      returned      to   the   PowerPoint,       to   slide    16,   which     read                               
as   follows      [original      punctuation        provided,       with    some    formatting                                  
changes]:                                                                                                                       
                                                                                                                                
        B:   Expand     Corporate       Income     Tax    to   Oil    and    Gas    Pass-                                     
        through Entities                                                                                                      
                                                                                                                                
        Description:        This    option     proposes       to   tax   oil    and    gas                                  
        pass-through        entities      at   the   same    rate    as   the    current                                        
        Corporate       Income     Tax     on   C-Corporations.          This     option                                        
        defines        "entities"           to      mean       partnerships,            S-                                      
        Corporations,        LLCs    with    a  single     owner    that    is   treated                                        
        as    a   disregarded         entity,       and    other      unincorporated                                            
        entities.      This    option     would     apply    to   any    business      who                                      
        files    a   return,      claim     for    credit     or   report     under     AS                                      
        43.55 (oil and gas production tax).                                                                                     
        First    Full    Year   Impact:      $43   million     in   FY   2022    (Spring                                    
        Forecast)      Using     our   July    2021    ANS   price     update     as   the                                      
        basis,      the     estimate       is     that     this     could      increase                                         
        corporate       income     revenue      by    $47    to    $61    million      per                                      
        year    from    FY    2022    to   FY    2030.     The   FY    2022    estimate                                         
        includes       retroactive         application         to     1/1/2021.        The                                      
        range    is   due    to  forecasted        changes     in   production,        oil                                      
        prices,      and     anticipated         company      profitability          this                                       
        period.                                                                                                                 
        Costs:     There     are    one-time       programming        costs     of   $0.8                                   
        million.                                                                                                                
                                                                                                                                
MS. REYNOLDS noted there are different ways to define "entity"                                                                  
and "oil and gas entity."                                                                                                       
                                                                                                                                
2:25:59 PM                                                                                                                    
                                                                                                                                
MR. STICKEL brought the committee's attention to slide 17, which                                                                
read as follows [original punctuation provided, with some                                                                       
formatting changes]:                                                                                                            
                                                                                                                                
        C: Carbon Offset Revenue Generation                                                                                   
                                                                                                                                
        Description:        A  newly    emerging      revenue     opportunity        is   a                                 
        Carbon    Offset     Program.      This    can   be   related     to   cap-and-                                         
        trade    systems     in   other    jurisdictions,         or   to   company     or                                      
        individual        voluntary        carbon      reductions.        Under      this                                       
        proposal,      Alaska      would     place    select      SOA   lands,      i.e.,                                       
        forest     land,    into    a   carbon     offset     program      in   lieu    of                                      
        development        and     receive       revenue      from     companies        or                                      
        individuals        in   exchange      for    associated        carbon     offset                                        
        credits.      Tax    credit     certificate        holders      will    have    an                                      
        option      to    exchange       the     value     of    certificates          for                                      
        carbon      offsets      and    can     manage      monetization         of    the                                      
        offsets anywhere in the world.                                                                                          
        New   Revenue      Estimation:        The   very    preliminary        estimate                                     
        is   that    this     could     generate      $1.3     to   $25    million      of                                      
        annual      revenues        to    the     State.       DOR     and     DNR     are                                      
        currently      evaluating        the    details     of    the   program      that                                       
        include      lands,     inventory       of    carbon     offset,      value     of                                      
        the   carbon     and   the   amount     of   Alaska     carbon    offsets      the                                      
        global market can absorb.                                                                                               
        Costs:     Implementation         and    annual     administration          costs                                   
        have not been evaluated yet and are considered TBD.                                                                     
                                                                                                                                
MR. STICKEL said an alternate plan would be for Alaska to do a                                                                  
one-time sale for a larger amount.                                                                                              
                                                                                                                                
2:28:13 PM                                                                                                                    
                                                                                                                                
MR.     FECHTER       added      that      another       item     that      the     department                                  
contemplated         was    "to    use    these     carbon      offsets      to    redeem     the                               
outstanding        oil   and    gas   tax   credit     certificates";          the   producers                                  
would     exchange       the     right     to    receive      cash     for    the    right      to                              
receive      carbon      offsets,       which     they     could     then     use    in    other                                
jurisdictions to satisfy their tax.                                                                                             
                                                                                                                                
CHAIR     SPOHNHOLZ       remarked      on   the    creativeness        of    being    able     to                              
harmonize       the    state's      other      policy     objectives        with     a   way    to                              
"monetize those assets."                                                                                                        
                                                                                                                                
2:29:39 PM                                                                                                                    
                                                                                                                                
MR.   STICKEL      turned     attention      to   slide     18,   which    read    as   follows                                 
[original punctuation provided, with some formatting changes]:                                                                  
                                                                                                                                
        C: Carbon Offset Revenue Generation                                                                                   
                                                                                                                                
        Benefits of Carbon Offset Revenue Program                                                                           
        A.   Enables       select      Alaska      lands     to    be    placed      into                                       
        global     registry      programs       where    carbon      offsets     can    be                                      
        monetized and generate revenues                                                                                         
        B.   Establishes         a   program       that     enables      the     SOA    to                                      
        communicate       responsible        development        and    management       of                                      
        our    lands     to   public,      especially        banks     that    prohibit                                         
        investment in Alaska Arctic oil and gas projects.                                                                       
        C.   Provides      a   carbon     offset     valuation       of   oil/gas      tax                                      
        certificates        that    positions      holders      of   the    credits     to                                      
        obtain     the     offset     value      instead      of    payment      of    SOA                                      
        liability.       Holders     may    then    monetize      in   a  manner     that                                       
        meets    its    ESG   policies,       offsets     carbon     taxes     that    may                                      
        be   required      in   other     jurisdictions,         or   offsets      to   be                                      
        carbon neutral.                                                                                                         
                                                                                                                                
2:30:34 PM                                                                                                                    
                                                                                                                                
MR.    STICKEL     transitioned        back    to   sales     tax,    on   slide     19,   which                                
read     as     follows       [original       punctuation         provided,        with      some                               
formatting changes]:                                                                                                            
                                                                                                                                
        D:  State     Sales    Tax   (styled     on   South    Dakota     Sales    &   Use                                    
        Tax)                                                                                                                  
                                                                                                                                
        Description:        A  tax    on   purchase      price     on   the    sales    of                                  
        goods    and   services      to   consumers      and    businesses,       taxing                                        
        a  range     of    activities       similar      to    that    of    the    South                                       
        Dakota    Sales     &  Use   Tax.    This    is  a   very   broad-based        tax                                      
        that    extends     to   a  wide    range     of   services      and   business                                         
        inputs.       There     are     few     exemptions,         which      includes                                         
        prescriptions and medical equipment.                                                                                    
        First    Full    Year    Impact:     $320    million      per   1%   levied     in                                  
        FY 2023                                                                                                                 
        Costs:      There     are    one-time       programming         costs     of    $6                                  
        million.     The    Department       would    need    74  new    positions      at                                      
        a cost about $8.5 million per year.                                                                                     
                                                                                                                                
MR.    STICKEL      explained       that    a   benefit      of   having      a  broader      tax                               
base    is    having     more    revenue      with     a   lower    tax    rate.       He    said                               
South Dakota has one of the broadest tax bases.                                                                                 
                                                                                                                                
MR.    STICKEL,       in   response       to    Chair     Spohnholz,        said    he    thinks                                
South     Dakota     does    not    have     a  cap    on   its    tax,    but    he    said    he                              
would follow up with an answer.                                                                                                 
                                                                                                                                
2:32:49 PM                                                                                                                    
                                                                                                                                
MR.     STICKEL      moved      on    to    slide      20,    which      read     as    follows                                 
[original punctuation provided, with some formatting changes]:                                                                  
                                                                                                                                
        D: State Sales Tax (styled on Wyoming Sales & Use Tax)                                                                
                                                                                                                                
        Description:        A  tax    on  the    purchase      price    on   the    sales                                   
        of   goods     and     services      to    consumers       and     businesses,                                          
        taxing     a   range    of    activities       similar      to   that    of    the                                      
        Wyoming      Sales     &  Use    Tax.     This    is    a   broad-based        tax                                      
        that     extends      to    many,      but     not    all,     services        and                                      
        business        purchases.         Exemptions         include       groceries,                                          
        prescriptions, and medical equipment                                                                                    
        First    Full    Year    Impact:     $150    million      per   1%   Levied     in                                  
        FY 2023                                                                                                                 
        Costs:      There     are    one-time       programming         costs     of    $6                                  
        million.     The    Department       would    need    74  new    positions      at                                      
        a cost about $8.5 million per year.                                                                                     
                                                                                                                                
MR.     STICKEL      brought       attention        to    Slide     21,     which      compares                                 
exemptions       between      South     Dakota     and   Wyoming.        Both     states     have                               
broad-based        taxes    for    individual       purchases,       with    exemptions       for                               
prescription          drugs,       medical        equipment,         and      big      business                                 
purchases      for    resale.      He   noted    that    the   main    difference       is   that                               
Wyoming      exempts      groceries,        business      to    business      services,       and                               
some    oil   field     services,      such    as   drilling      costs     and   exploration                                   
services completed prior to setting up production.                                                                              
                                                                                                                                
2:35:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          STORY     expressed       concern      about     taxing      groceries                                  
due to increased prices.                                                                                                        
                                                                                                                                
2:37:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          SCHRAGE      talked      about     accountability          built     into                               
income     tax    and   the    higher     likelihood       of   tax    evasion     with    sales                                
tax reporting, and he asked for comments on the subject.                                                                        
                                                                                                                                
2:38:22 PM                                                                                                                    
                                                                                                                                
MR.    FECHTER       said     income      tax    is    on    anyone      who     makes     money                                
working,       while      sales      tax     is    only     on     businesses        that     are                               
collecting       the   tax   on   a  sale.      He   said   he   does    not   have   a   lot   of                              
information        on   how    sales     tax    structures       impact      [tax    evasion],                                  
but   admitted      that    sales    tax   is   frequently       evaded     to  some    extent,                                 
for   example,      when    someone     buys    an   appliance      in   another     state    and                               
does    not    fill    out    a  report      to   that    effect.        In   response      to   a                              
follow-up       response,       he   said    he   would     have    to   research       to   find                               
out which form of taxing has a higher evasion rate.                                                                             
                                                                                                                                
2:39:56 PM                                                                                                                    
                                                                                                                                
CHAIR     SPOHNHOLZ       talked     about     the    many     Alaskans      that     could     be                              
paying      sales     tax    while     that     money     gets    funneled       through      the                               
business      owners,      who    have    expressed       not    wanting      the   burden      of                              
becoming tax collectors.                                                                                                        
                                                                                                                                
2:41:40 PM                                                                                                                    
                                                                                                                                
MS.   GLOVER     directed      attention      to   slide    22,   which     read   as   follows                                 
[original punctuation provided, with some formatting changes]:                                                                  
                                                                                                                                
        E:   Reduce      Sliding      Scale     per    Barrel      Tax    Credit     from                                     
        $8.00 to $5.00                                                                                                        
                                                                                                                                
        Description:        This    option     enables     an   adjustment        to   the                                  
        production       tax   value     for   the    sliding     scale     per   barrel                                        
        credit     in   AS   43.55.024(j).        This    credit     ranges     from    $0                                      
        to  $8   per   barrel     depending       on  Alaska     North    Slope     (ANS)                                       
        oil   prices.      This    tax   credit     is   available       for   "legacy"                                         
        oil   produced       on   the    North     Slope.     The    option      reduces                                        
        the   amount     of   the    tax    credit     for   each    taxable      barrel                                        
        of   oil   from    $8   to   $5   when    the    average     gross     value    at                                      
        the   point    of   production       for   the   month    is   less    than    $80                                      
        a  barrel.      The   bill     scales     down    the   tax    credit     amount                                        
        when     the     average        gross      value      at     the     point      of                                      
        production      for    a  month    is   $80   or   more.    Under    the    bill,                                       
        the   amount     of   the    tax   credit     for    a  taxable      barrel     of                                      
        oil   would     be   zero    if    the   average      gross     value    at    the                                      
        point of production for the month is $120 or more.                                                                      
        First    Full    Year   Impact:      $94   million     in   FY   2023    (Spring                                    
        Forecast)      Using     our   July    2021    ANS   price     update     as   the                                      
        basis,      the     estimate       is     that     this     could      increase                                         
        production       tax    revenue      by    $110    to    $440     million      per                                      
        year    from    FY    2022    to    FY   2030.     The    range     is   due    to                                      
        forecasted        changes       in    production,        oil     prices,       and                                      
        anticipated company spending during this period.                                                                        
        Costs:     There      are    no   incremental         costs     to    implement                                     
        this change.                                                                                                            
                                                                                                                                
CHAIR SPOHNHOLZ commented on the range in this option.                                                                          
                                                                                                                                
MS.    GLOVER      pointed       out    that     the    estimates       on    HB    3007     were                               
preliminary.                                                                                                                    
                                                                                                                                
2:43:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          WOOL    returned       to   slides      21   and    22.       He   asked                                
whether      the    department        has    an    estimate      on    the    services       that                               
would    be   taxed    and    whether     there     would    be   a  cap.      He  then    asked                                
what the estimate on slide 22 would be on $40 oil.                                                                              
                                                                                                                                
MR.   STICKEL      said    he   does    not   think     there    is   a  sales     tax   cap    in                              
either     of  the    states    shown     on  the    slide.      He   said   the    department                                  
could    break     out   the    revenue     from    services      and   provide      that   in   a                              
follow-up.                                                                                                                      
                                                                                                                                
2:45:25 PM                                                                                                                    
                                                                                                                                
MS.   GLOVER,      to   Representative         Wool's     question      on   slide    22,    said                               
the   department       has   looked     at   the   impact     of   different      oil   prices,                                 
and   at   $40   per   barrel     "it   basically       is  no   impact     at  that    price."                                 
She   noted     that    when    the    fiscal     note    is   completed,       it   will    show                               
multiple       price     points      and    their     impacts.         In    response       to   a                              
follow-up       question,      she   explained       that    the   $80    showing     on   slide                                
22   is    "the    maximum      per    credit."         She    said    the    barrel      credit                                
changes.           In    response       to     another      follow-up        question,        she                               
confirmed       that    slide    22   is   based     on   a  spring     forecast      which     is                              
$61 per barrel.                                                                                                                 
                                                                                                                                
CO-CHAIR SPOHNHOLZ remarked on the volatility of oil prices.                                                                    
                                                                                                                                
2:48:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE         PRAX     asked     whether     the    revenue      projections        were                               
based on current production or trends into the future.                                                                          
                                                                                                                                
MS.    GLOVER     answered      that    the   forecast       for   the    revenue     is   based                                
on   all   spring     forecast      components,       which    are:      price,     production                                  
forecast,        and     anticipated         spending       by    oil     companies.            In                              
response      to    a  follow-up       question,       she    said    the    department       did                               
look     at    the    possible       impact     of    the    proposed       legislation         on                              
government       take,     which    at   a   $67   price     range     is   currently      about                                
50   percent     and    with    the   proposed      change     would    be   54-55     percent.                                 
She   said    the    fiscal     note,    when    completed,       will    show    the   revenue                                 
impacts at varying oil price scenarios for eight years.                                                                         
                                                                                                                                
2:51:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          JOSEPHSON       questioned       whether       the    administration                                    
doesn't       think      an     increase       to     54-55      percent       would      damage                                
investment        decisions.            He    asked     whether       the     administration                                    
"supports this."                                                                                                                
                                                                                                                                
MR.      FECHTER        answered        that       these       are      items       that      the                               
administration          "would     be    agnostic      about"      and    would     accept      if                              
part     of   a   full     fiscal      plan    that     includes      the     aforementioned                                    
borders.                                                                                                                        
                                                                                                                                
2:53:33 PM                                                                                                                    
                                                                                                                                
MS.    GLOVER     returned      to   the   PowerPoint,        to   slide     23,   which     read                               
as   follows      [original      punctuation        provided,       with    some    formatting                                  
changes]:                                                                                                                       
                                                                                                                                
        F: Gaming: Casinos, Lotteries, Internet gaming                                                                        
                                                                                                                                
        Description:        Establish       the    Alaska      Gaming     Corporation                                       
        which     would     have     broad      authority       to    determine        the                                      
        structure,       management,        and    games     of   the    corporation.                                           
        Games     could     potentially         include      single-       and    multi-                                        
        jurisdiction         draw      games,       instant       tickets,        sports                                        
        betting,      keno,     video     lottery      terminals,       and    casinos.                                         
        First    Full    Year    Impact      in   FY   2023:    State     Lottery      and                                      
        Internet Gambling: $68.8 million                                                                                        
        First    Full    Year    Impact      in   FY   2025:    Casinos      and    Video                                   
        Gaming     Terminals:        $75.3     million      All    Gaming      Options:                                         
        $144.1 million                                                                                                          
        Costs:     There     are    one-time       programming        costs     of   $0.3                                   
        million.       The    Department        would     need     four     additional                                          
        positions      at   a  cost    about    $0.5    million     per   year.     These                                       
        are    for    Departmental         costs      only.     Additionally,          the                                      
        Alaska     Gaming     Corporation        would     require     approximately                                            
        $4.0    million       annually       with     $2    million      in    start-up                                         
        costs.                                                                                                                  
                                                                                                                                
MS.   GLOVER     said    there    would     be   a  10   percent     casino     tax   on   gross                                
revenues      and   a  40   percent     on   gross    revenues      on   Internet      gambling                                 
and   video    gaming     terminals.         The   tax   portion     would     be  managed      by                              
"the    tax    department."           The   report      is   in   final     review.        There                                
would    be   consideration         on  possible      impacts     to   charitable       gaming,                                 
as    well      as    contemplation          of    provisions         regarding        "problem                                 
gambling."                                                                                                                      
                                                                                                                                
2:55:55 PM                                                                                                                    
                                                                                                                                
MS.    GLOVER,     in   response       to   Chair    Spohnholz,       clarified       that    the                               
amounts      shown     do    not    cover     the    considerations          of    the    social                                
aspects of gaming.                                                                                                              
                                                                                                                                
2:56:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE         JOSEPHSON      said    it   strikes     him   that    there     would    be                              
an    impact       on    children,        as     well     as     on    "other       investment                                  
opportunity,"        and    he  asked     whether     the   report     would    consider      any                               
of that.                                                                                                                        
                                                                                                                                
MR.     FECHTER       answered        that      it    depends       on     how     gaming       is                              
implemented.           He   indicated       that    the    types     of   people      who    take                               
part    in   charitable       gaming     are   not    necessarily       the   same    as   those                                
who   sit   at   a  poker     table;    therefore,       it   is   possible     to   gauge    the                               
impact     depending      on   what    aspects      of   gaming     are   implemented.          He                              
spoke      about      reaching       out     to    stakeholders          and    the     varying                                 
opinions on gambling.                                                                                                           
                                                                                                                                
2:58:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE          SCHRAGE      inquired      about     fantasy      leagues      and    the                               
near-impossible          nature     of   regulating       gaming     when     cryptocurrency                                    
is involved.                                                                                                                    
                                                                                                                                
2:59:13 PM                                                                                                                    
                                                                                                                                
MR.    FECHTER      said     he    knows     people      fool    the    system,       but    said                               
Internet      technology       (IT)   can    be  used    to   perform     an   audit    to   find                               
"where the traffic is going."                                                                                                   
                                                                                                                                
3:00:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE         PRAX     asked    how    the    negative      impacts      of   gambling                                 
are assessed.                                                                                                                   
                                                                                                                                
MR.    FECHTER     mentioned       a   gaming     initiative        and   said    there     is   a                              
gaming       contractor,         Innovation         Group,       which       supplied        data                               
regarding        problem       gaming,       such      as    illegal       gaming.           This                               
information         was     just     supplied       to     his    office,       Mr.     Fechter                                 
imparted,      so   he   will   look    at   it   and   share    it   with   the    committee.                                  
That    said,     he   remarked      that     it   is   a   common     misperception         that                               
casinos      increase       crime     rates,     when    a   large     mall     complex,      for                               
example,      can    produce      the    same    crime     rates     and   911    calls     as   a                              
large casino.                                                                                                                   
                                                                                                                                
3:02:37 PM                                                                                                                    
                                                                                                                                
MR.   FECHTER      brought     attention      to   slide    24,   which     read   as   follows                                 
[original punctuation provided, with some formatting changes]:                                                                  
                                                                                                                                
        G: Use of Federal Offsets for Revenue Replacement                                                                     
                                                                                                                                
        The    American       Rescue       Plan     Act's     (ARPA)      Coronavirus                                           
        State    and   Local     Fiscal    Recovery      Fund    (CSLFRF)      provided                                         
        $350    billion      for    eligible      state,      local,     territorial,                                           
        and    Tribal      governments        to    respond       to    the    COVID-19                                         
        emergency      and   bring     back   jobs.     The   State    of   Alaska     was                                      
        allocated        $1.011       billion       from      this      source.        The                                      
        following is a list of allowable uses                                                                                   
               ? Support urgent COVID-19 response efforts to                                                                    
               continue to decrease spread of the virus and                                                                     
               bring the pandemic under control                                                                                 
               ? Replace lost revenue for eligible state                                                                        
               governments                                                                                                      
               ? Support immediate economic stabilization for                                                                   
               households and businesses                                                                                        
               ? Address systemic public health and economic                                                                    
               challenges that have contributed to the inequal                                                                  
               impact of the pandemic                                                                                           
        Currently,       the   legislature        has   allocated      approximately                                            
        half    (~$500M)       of    their      allotment,        electing       to    use                                      
        $250.0M for revenue replacement in FY2022.                                                                              
        A  portion      of   the    remaining       ~$500M     in    funds    could     be                                      
        used    to   offset     general     fund    spending      and    provide     one-                                       
        time fiscal relief                                                                                                      
                                                                                                                                
CHAIR     SPOHNHOLZ       indicated      there     is   universal       agreement       related                                 
to this plan in restructuring the budget.                                                                                       
                                                                                                                                
3:03:27 PM                                                                                                                    
                                                                                                                                
MR.     FECHTER      continued        to    slide      25,    which      read     as    follows                                 
[original punctuation provided, with some formatting changes]:                                                                  
                                                                                                                                
        H: Bridge Fund Usage                                                                                                  
                                                                                                                                
        ?  A   one    time    draw    from    the    Permanent       fund    to   ensure                                        
        the Fund is permanently protected in the Constitution.                                                                  
        ? Permanent Fund Earnings ~$18.6 billion                                                                                
        ? Buys valuable time for measures to be implemented                                                                     
        ?    Malan      Rietveld        -    Director        of     the     Investment                                          
        Institute:                                                                                                              
               ? Ensuring the long-term sustainability of an                                                                    
               endowment is far more important than an over-draw                                                                
               in any one particular year                                                                                       
        ?  Other     endowments       are    considering       one-time       increases                                         
        in     draws       to     capitalize          on     exceptional          market                                        
        performance:                                                                                                            
               ? Harvard's $42 billion endowment increased from                                                                 
               5% to 7.5% on one-time basis                                                                                     
               ? https://www.thecrimson.com/article/2021/5/3/draw-further-endowment-fy22/                                       
  ? https://www.nytimes.com/2020/06/02/arts/endowments-coronavirus.html                                                         
                                                                                                                                
3:04:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE         SCHRAGE      noted    that     at   one   point     the   state     had   a                              
robust      capital      budget     reserve      (CBR)     and    [the     state's      budget]                                 
"could     be   in    a  very    different       place     today"     had    the    discussion                                  
focused      on   revenue      rather      than    primarily       on   budget      cuts.       He                              
explained       that    whenever       he   sees    bridge     funding      suggested       as   a                              
means     for    "buying      us   some    time,"      it   concerns      him    because      the                               
state     had    some    time     and    "it    didn't     seem     to   get    us    where     we                              
needed to get to."                                                                                                              
                                                                                                                                
MR.   FECHTER      responded      that    while    that    is  true,     the   difference       in                              
the   proposed      contract      is   that    it   would    "lock     up"   the   percent      of                              
market      value     (POMV)     percentage        so   that     it   can    never     be    used                               
(indisc.) is sustainable.                                                                                                       
                                                                                                                                
REPRESENTATIVE         SCHRAGE     expressed       concern     regarding       the   timing     of                              
implementing         revenue      measures       and    a   constitutional          amendment,                                  
which     he   surmised       would     require      bridge     funding      prior     to    that                               
taking place, which could create risk.                                                                                          
                                                                                                                                
3:05:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE         JOSEPHSON       expressed       his   strong     opposition       to   the                               
bridge funding proposal.                                                                                                        
                                                                                                                                
3:06:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE            WOOL       remarked         that       it      seemed        slightly                                 
disingenuous         to   have     a   conversation        about      different       types     of                              
revenue if certain areas were off limits.                                                                                       
                                                                                                                                
3:06:58 PM                                                                                                                    
                                                                                                                                
MR.    FECHTER     noted     that    the    governor      had    moved     towards      a  50/50                                
solution for the POMV.                                                                                                          
                                                                                                                                
CHAIR     SPOHNHOLZ      acknowledged        and    expressed       appreciation        for   the                               
governor's        progress       in    recognizing        the     unaffordability          of    a                              
statutory       dividend;      however,      she   said    a   50/50    split    of   the    POMV                               
still    leaves     the   state    with    a  fiscal     gap   of   well    over   $1   billion                                 
that    would     diminish      over     time    "based     on    fairly     robust     revenue                                 
productions."           She   said    the    state    has    spent    $16    billion     out    of                              
savings      trying     to   avoid     adopting      new    taxes,     which     can    only    be                              
done    so   often.        She   mentioned       the    bridge     solution      and    said    it                              
does    not   seem    consistent        with    a  fiscally      conservative        position.                                  
At   some     point     in   time     there     will    need    to    be   compromise,        she                               
said,     and    she    wishes     "we    were     a  little      further      along     in   the                               
process."                                                                                                                       
                                                                                                                                
3:09:45 PM                                                                                                                    
                                                                                                                                
MR.    FECHTER,      in   conclusion       of   the    presentation,         noted    that    the                               
state    was    involved     in   a  complicated        math   problem      with   a   question                                 
lingering      as   to   where    the    funds    can    come   from    that    can   fill    the                               
deficit gap.                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ thanked the presenters.                                                                                         
                                                                                                                                
3:11:44 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Special Committee on Ways and Means meeting was adjourned at                                                                    
3:11 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB3006A.PDF HW&M 9/3/2021 1:00:00 PM
HB3006
HB 3006 Sponsor Statement.pdf HW&M 9/3/2021 1:00:00 PM
HB3006
HB 3006 Sectional Analysis.pdf HW&M 9/3/2021 1:00:00 PM
HB3006
HB 3006 Supporting Documents.pdf HW&M 9/3/2021 1:00:00 PM
HB3006
Revenue bills comaprison table.pdf HW&M 9/3/2021 1:00:00 PM
DOR Presentation 9.3.21.pdf HW&M 9/3/2021 1:00:00 PM
HB 3006 Statewide Sales and Use Tax UPDATED.pdf HW&M 9/3/2021 1:00:00 PM
HB3006