Legislature(1997 - 1998)

04/07/1998 09:05 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
MINUTES                                                                        
SENATE FINANCE COMMITTEE                                                       
7 April 1998                                                                   
9:05 a.m.                                                                      
                                                                               
                                                                               
TAPES                                                                          
                                                                               
SFC-98, #116, Sides A and B                                                    
                                                                               
                                                                               
CALL TO ORDER                                                                  
                                                                               
Senator Bert Sharp, Co-chair, convened the meeting at                          
approximately 9:05 a.m.                                                        
                                                                               
                                                                               
PRESENT                                                                        
                                                                               
In addition to Co-chairman Sharp, Senators Pearce,                             
Torgerson, Parnell and Adams were present when the meeting                     
was convened.  Senator Donley arrived shortly thereafter.                      
Senator Phillips was excused.                                                  
                                                                               
                                                                               
Also Attending:  PETER EKLUND, staff to REPRESENTATIVE BILL                    
WILLIAMS (House Transportation); FRANK DILLON, Executive                       
Vice-President, Alaska Truckers Association; BARBARA HUFF-                     
TUTNESS, Director, Governmental and Legislative Affairs,                       
Teamsters Local 959; JUANITA HENSLEY, Division of Motor                        
Vehicles, Department of Administration; AVES THOMPSON,                         
Chief, Weights and Measures, Division of Measurement                           
Standards and Commercial Vehicle Enforcement, Department of                    
Transportation and Public Facilities; ANNETTE KREITZER,                        
Staff to SENATOR LOREN LEMAN (Senate Labor and Commerce);                      
DEBORAH VOGT, Deputy Commissioner, Department of Revenue;                      
BILL EILANDER, President, Anchorage Convention and Visitors                    
Bureau; PAM LABOLLE, President, Alaska State Chamber of                        
Commerce; GREG CHAMPION, General Manager, Sheraton Anchorage                   
Hotel;  BOB STILES; SUSAN BURKE, Esq., Law Firm of Gross &                     
Burke, Juneau; JEFF BUSH, Deputy Commissioner, Department of                   
Commerce and Economic Development; BOB BARTHOLOMEW; Deputy                     
Director, Division of Income and Excise Audit, Department of                   
Revenue; DENNIS POSHARD, Legislative Liaison, Office of the                    
Commissioner, Department of Transportation and Public                          
Facilities; ARBE VICK, Director, Division of Administrative                    
Services, Department of Labor; DWIGHT PERKINS, Legislative                     
Liaison, Office of the Commissioner, Department of Labor;                      
JANICE ADAIR, Director, Division of Environmental Health,                      
Department of Environmental Conservation;  DON ETHERIDGE,                      
Alaska State District Council of Laborers; and aides to                        
committee members and other members of the Legislature.                        
                                                                               
Via Teleconference: PETER BLANAS, Teamsters Local 959,                         
Anchorage.                                                                     
                                                                               
                                                                               
SUMMARY INFORMATION                                                            
                                                                               
                                                                               
 HOUSE BILL NO. 404                                                            
                                                                               
"An Act relating to the regulation of commercial                               
vehicles; relating to the temporary registration of                            
out-of-state commercial vehicles; relating to                                  
registration fees for commercial vehicles; and                                 
providing for an effective date."                                              
                                                                               
                                                                               
CS FOR HOUSE BILL NO. 404(TRA)                                                 
                                                                               
"An Act relating to the regulation of commercial                               
vehicles; relating to the temporary registration of                            
out-of-state commercial vehicles; relating to                                  
registration fees for commercial vehicles; and                                 
providing for an effective date."                                              
                                                                               
                                                                               
Co-chair Sharp reviewed the calendar for today.  He first                      
called HB 404.                                                                 
                                                                               
PETER ECKLND, staff to Representative Bill Williams was                        
invited to join the committee.  He read the sponsor                            
statement into the record.  He said the bill would promote                     
safer commercial vehicles.                                                     
                                                                               
Senator Donley asked the about the changes to the bill this                    
year as compared to last year.  Mr. Eckland said he would                      
have to check with the sponsor.  He will also ask if the                       
sponsor has any objection to adding to the bill the                            
requirement for truckers to know the insurance telephone                       
number.  Mr. Eckland said there were representatives present                   
from the Department of Transportation and Public Facilities,                   
Division of Motor Vehicles and the industry present to                         
answer any specific questions.                                                 
                                                                               
                                                                               
In response to questions from Senator Adams, Mr. Eckland                       
said he did not think there would be any impact on the                         
fiscal note.  The increase of permit fees for out-of-state                     
trucks would generate revenue for the State.  However, he                      
said that the fees were still less than what Alaska trucks                     
were charged for out-of-state and the provinces.                               
                                                                               
                                                                               
Senator Parnell noted  sections 18 and 19 and asked about                      
the changes to the annual registration fees.  Mr. Eckland                      
explained these sections for the committee.  He said the                       
increases as outlined were offset by a decrease in the one-                    
time registration of commercial trailers of $10.                               
                                                                               
FRANK DILLON, Executive Vice-President, Alaska Truckers                        
Association was invited to join the committee.  He said the                    
Alaska Truckers Association supported HB 404 because it                        
would level the playing field amongst competitors.  He has                     
worked extensively with Division of Motor Vehicles and the                     
Department of Transportation and Public Facilities.  In                        
response to an earlier question by Senator Donley he said                      
section 1 of the bill answered that.  He agreed that all                       
commercial vehicles should be inspected twice yearly                           
according to the Federal Motor Vehicle Safety Standards,                       
insuring all mechanical operations be up to standard.  The                     
Alaska State Troopers carry out random safety checks.  The                     
bill would also raise fees for out-of-state trucks and the                     
$300 - $350 cost for a temporary permit did not seem out of                    
line.  He noted that Alaska trucks were paying approximately                   
$1000/trip into the Yukon Territory.  He referred to the new                   
money the State would collect and said it would be used to                     
keep the weigh station in Tok open twenty-four hours a day.                    
This will help to insure trucks have proper insurance,                         
qualified drivers and are safe.  The bill also eliminates                      
the requirement for the annual registration of commercial                      
trailers with the Division of Motor Vehicles.  The money                       
currently collected will be added to the registration costs                    
of commercial power units in the corresponding weight                          
classes.  This would maintain a revenue neutrality as far as                   
the amount of money that was collected by the State.  A                        
built-in $10 fee for a one-time tag would basically show a                     
permanent registration of that trailer in the State of                         
Alaska.  Another important feature of this bill, as far as                     
the trucking industry and the economy of Alaska was that                       
there is a program adopted by about forty-five states and                      
soon to be adopted by all outside states, with the exception                   
of Hawaii, along with six Canadian provinces and territories                   
called the International Registration Plan.  It would allow                    
for truck equipment to move between various jurisdictions                      
whether they be Canadian or other states, and only pay based                   
on the amount of mileage used in other states, your base                       
state.  Presently it is not unusual for a tractor that                         
operated for instance from the Lynden fleet in the western                     
states to have more than one hundred different pieces of                       
paper they had to carry with them to be legal in the                           
jurisdictions it operated in.  This was very inefficient and                   
costly.  By eliminating the annual registration requirements                   
the State would become eligible to participate in this                         
International Registration Plan.  This would allow for                         
"transparency of the trailing equipment" between                               
jurisdictions because all fees would be shifted to the power                   
units.  He said the bill would do nothing to diminish the                      
number or types of inspections that are taking place.  The                     
Association felt it was a good, comprehensive piece of                         
legislation.  It has wide support and they urged passage of                    
the bill.                                                                      
                                                                               
BARBARA HUFF-TUTNESS, Director of Governmental and                             
Legislative Affairs, Teamsters Local 959 and on behalf of                      
the Teamsters supported HB 404.  They supported the adoption                   
of the Federal Motor Carrier Safety Program, which from the                    
Teamsters' perspective is a very important issue.  This                        
would be a great asset to the State of Alaska and for all                      
those who do drive or utilize the roads.  The temporary                        
increase for registration would level the playing field.                       
They also supported keeping the weigh stations open extra                      
hours.  This would insure trucks on the road are legal                         
weight and also insure public safety.  They also agree with                    
the transfer of the registration of the trailers to the                        
power units.                                                                   
                                                                               
PETER BLANAS, Teamster Local 959, testified via                                
teleconference from Anchorage.  He said because weigh                          
stations were not open twenty-four hours and drivers did not                   
have to keep up their logbooks they were able to make many                     
multiple trips, and he felt this was the greatest                              
contributing factor to fatigue related accidents.  Scale                       
operators also warn drivers of pending weather conditions,                     
but also can summons help in an emergency, or maintenance                      
crews.  Monies collected from outside operators may also be                    
available for funding State Department of Transportation                       
inspection programs.  He noted for the committee that as a                     
truck driver he had received on inspection in the last four                    
years and that was because he found the inspector and                          
requested it.  He supported passage of HB 404.                                 
                                                                               
Senator Adams said it was only necessary to call the                           
Department of Transportation and Public Facilities to                          
testify regarding amendment #1.                                                
                                                                               
Senator Torgerson MOVED amendment #1.  Senator Adams                           
OBJECTED.  Senator Torgerson said the intent of the                            
amendment was to clarify that a vehicle or motor home that                     
was not primarily used as a commercial entity would be                         
exempt.  It would also include a pick-up that did not exceed                   
six thousand pounds.  The definition section further                           
clarified "not to exceed six months".                                          
                                                                               
JUANITA HENSLEY, Division of Motor Vehicles was invited to                     
join the committee.  Senator Adams asked Ms. Hensley to                        
explain what effect this amendment would have on the agency.                   
Ms. Hensley said she read the amendment that a passenger                       
vehicle or motor home not primarily used for or maintained                     
for transportation along with a pick-up truck or van not                       
exceeding six thousand pounds would be exempt.  She did not                    
have any numbers at this time as to how many individuals                       
would be affected.  The division had this restriction in                       
statute several years ago however it was not enforceable.                      
She wanted to know how to enforce whether someone was using                    
the vehicle six months of the year or not and what portion                     
of the registration fees would they collect.  She objected                     
to going back to the way it was when it was unenforceable.                     
                                                                               
Senator Donley asked what the difference in costs were                         
regarding a small van or pick-up.  Ms. Hensley said                            
registration fees for a pick-up truck or van not exceeding                     
six thousand pounds was currently $78.  Senator Donley asked                   
what the cost was if they were commercial.  Ms. Hensley                        
indicated that for a vehicle more than five thousand pounds                    
but less than twelve thousand and one pound was $170.                          
Senator Donley said it seemed that if a commercial fee had                     
to be paid it would be deductible from the costs of running                    
the business.  Ms. Hensley concurred.                                          
                                                                               
Senator Torgerson asked if commercial vehicles were required                   
to stop at weigh scales.  Ms. Hensley deferred to the                          
Department of Transportation.                                                  
                                                                               
AVES THOMPSON, Chief, Weights and Measures, Division of                        
Measurement Standards and Commercial Vehicle Enforcement,                      
Department of Transportation and Public Facilities was                         
invited to join the committee.  He said commercial vehicles                    
required to stop at weigh scales were those of ten thousand                    
pounds or more unladen weight.  A small trailer would not be                   
required to stop.                                                              
                                                                               
Senator Torgerson said the vehicles were not being                             
inspected, rather just monies being collected.  He asked                       
what was the benefit of making these individuals come under                    
commercial regulations.  Ms. Hensley said the intent was                       
because they use the roads.  She said some of the vehicles                     
in combination with a boat may exceed the ten to twelve                        
thousand pounds weight limit.  She further noted that any                      
vehicle being used in furtherance of business must be                          
registered.                                                                    
                                                                               
Senator Parnell asked if there was more reasonable language                    
to satisfy all?  Ms. Hensley responded "not so far".                           
                                                                               
Co-chair Sharp, with reference to the amendment, asked Ms.                     
Hensley if she could come up with an estimate on the loss of                   
revenue.  Senator Torgerson said since it was not being paid                   
now there was no loss of revenue.  Maybe it would be an                        
increase in revenue if they got all individuals to pay.  Ms.                   
Hensley said she could come up with some figures based on                      
the four truck classes they had under categories 41 and 42.                    
                                                                               
Co-chair Sharp noted that amendment #1 was still pending and                   
there had been objection.  By a roll call vote of 3 yeas                       
(Pearce, Torgerson, Parnell) and 3 nays (Sharp, Donley,                        
Adams) the amendment FAILED.                                                   
                                                                               
Senator Donley MOVED CSHB 404(TRA) and WITHOUT OBJECTION it                    
was REPORTED OUT with individual recommendations and                           
previous fiscal note from the Department of Transportation                     
and Public Facilities in the amount of $512.9 and an                           
indeterminate fiscal note from the Department of                               
Administration, Division of Motor Vehicles.                                    
                                                                               
Co-chair Sharp noted SB 295 had been removed from the agenda                   
and called SB 345.                                                             
                                                                               
                                                                               
 SENATE BILL NO. 345                                                           
                                                                               
"An Act relating to apportionment of business income."                         
                                                                               
                                                                               
ANNETTE KREITZER, staff to Senator Loren Leman, chair,                         
Senate Labor and Commerce committee was invited to join the                    
committee.  She said this bill was introduced after an                         
Alaska Supreme Court ruling in State of Alaska vs. OSG Bulk                    
Ships, Inc., Feb. 20, 1998 ruling, which effects a new tax                     
on foreign flagged ships and aircraft shipping goods to and                    
from Alaska.  In effect, the ruling would make Alaska the                      
only state taxing the net income of foreign flagged or owned                   
ships, aircraft, railroad rolling stock and communication                      
satellites.  SB 345 amended the section of the Alaska Net                      
Income Tax Act which adopted section 883 into Alaska law,                      
expressly stating that nothing in the Alaska tax statutes                      
may be construed as an exception to or modification of                         
section 883 of the IRS code.  The purpose of section 883 was                   
not only to prevent the double taxation of foreign income                      
but to insure income earned by U.S. companies was not taxed                    
in other nations.  Section 883 upholds a logical concept in                    
international trade.  Ms. Kreitzer indicated that the Senate                   
Labor and Commerce committee chair would have no opposition                    
to an immediate effective date clause on SB 345 if the                         
committee desired to make that amendment.  There had been                      
suggestion that a severability clause might be necessary.                      
She said further that there had been some questions raised                     
about the constitutionality of the legislation but there                       
were others available to testify regarding that matter.  She                   
did say that in going over the matter with the drafter it                      
was his opinion that the Court had never held that the State                   
could not use its money or income in the manner described in                   
the bill.  The State gives its own money away to private                       
individuals through the permanent fund dividend program.                       
                                                                               
Senator Adams asked about amendment #1 and the retroactive                     
clause.  He said they would have to go back to old records                     
and he maintains that it would make the bill                                   
unconstitutional if they did that.  Ms. Kreitzer said that                     
Senator Leman did not personally like retroactive clauses                      
but he was willing to leave the clause in this bill because                    
he believes it reaches as far back as the department would                     
conceivably go to collect those taxes.  She knows that there                   
have been issues raised as to the unconstitutionality and                      
she briefed the Senator before coming to the hearing this                      
morning.  In further response to Senator Adams regarding the                   
constitutionality of the bill she felt she had made Senator                    
Leman's petition clear on the bill.                                            
                                                                               
Senator Parnell also addressed some of Senator Adams'                          
concerns and referred to AS 01.10.090 Retrospective Statute,                   
which says no statute is retrospective unless expressly                        
declared therein.  Senator Adams felt that this section                        
should be eliminated from the bill because it violated the                     
public purpose of the Constitution.                                            
                                                                               
DEBORAH VOGT, Deputy Commissioner, Department of Revenue was                   
invited to join the committee.  She further explained in                       
reference to the State Supreme Court decision issued in                        
February 1998.   It held that an exemption that is part of                     
Federal law is not incorporated into the State's corporate                     
income tax because it was found that the Federal system of                     
taxation was so different from the State's that their intent                   
in adopting an apportionment system of tax precluded the                       
automatic incorporation of a provision that the Court found                    
was in the Federal statutes for the purpose of avoiding                        
double taxation.  She explained that this dispute arose out                    
of an assessment in 1990 for tax years 1979 through 1988.                      
                                                                               
(Tape #116, Side A switched to Side B.)                                        
                                                                               
She said this was a good case for the State whether or not                     
this legislation passed for the reason that it indicated our                   
Courts had unanimously decided to respect what it construes                    
the legislative intent concerning Alaska's tax statutes.                       
She also called the committee's attention to a memo from                       
Department of Law regarding the retroactive issue.                             
Referencing comments by Senator Parnell she said it was                        
perfectly legal to make a law retroactive.  However, the                       
difficulty with the retroactive repeal of a tax is that it                     
raises public policy concerns.  She said the department's                      
fiscal note estimated a revenue loss of approximately $3                       
million and $8.5 million.  She said the range was so broad                     
because they did not have good information from which to                       
draw up a more accurate fiscal note.                                           
                                                                               
Senator Torgerson asked if there were any other states                         
taxing vessels.  Ms. Vogt said foreign boats and vessels                       
were not being taxed by other states.  Senator Torgerson                       
further asked if there was revenue coming in to the State                      
under this provision and Ms. Vogt said no.  Senator                            
Torgerson asked if the Anchorage International Airport was                     
classified as a foreign trade zone.  Ms. Vogt indicated the                    
tank farm at the airport has been activated as a foreign                       
trade center where foreign carriers are fueled.                                
                                                                               
Senator Adams asked if the revenue loss indicated on the                       
fiscal note was commencing in 1999.  Ms. Vogt said no                          
analysis of any retrospective effect had been done.                            
Assuming the legislation passed the Legislature has cut the                    
department's budget to the bare minimum and therefore there                    
was no administrative reason to dedicate any resources to a                    
tax the Legislature had repealed.  Therefore, she felt they                    
would not be going out after folks.                                            
                                                                               
JOE KYLE advised the co-chair that he was available to                         
respond to questions and did not want to testify.                              
                                                                               
BILL EILANDER, President, Anchorage Convention and Visitors                    
Bureau was invited to join the committee.  He said he was                      
representing his board of directors and 1379 businesses that                   
make up the membership of the organization.  He said they                      
unanimously supported the passage of this bill.  They had                      
been very active in marketing on the international level.                      
Personally he had travelled with the last four governors and                   
members of the Legislature to oversee destinations, i.e.                       
Korea, Japan and Europe in extending Alaska's hand in                          
business.  Failure to pass this bill and impose corporate                      
income tax would be severely damaging to Alaska's reputation                   
and of the Administration's.  He noted that Korean Airlines                    
had been a very strong ally of tourism and they were the                       
only scheduled foreign air carriers today flying passengers                    
direct from Seoul, Korea to Alaska.  He explained their                        
handicap under the Jones Act.  Korean Air willingly puts                       
passengers on the aircraft, knowing that when they get off                     
the flight in Anchorage they will have to fly with empty                       
seats to and from New York before they can put passengers on                   
again in Anchorage.  Currently they were working with China                    
Air and also other Japanese air carriers to create more                        
direct passenger flights.  Northwest Airlines has also                         
recently announced they would fly direct flights Tokoyo-                       
Anchorage which has helped stimulate competition with the                      
foreign carriers.  This was good for Alaska and the                            
industry.                                                                      
                                                                               
In response to Senator Adams,  Mr. Eilander said he had many                   
questions himself regarding the retroactive clause.  He                        
suggested more research needed to be done on how the                           
retroactive clause would work.  Other states feel it is a                      
threat.  He felt Alaska was making a statement that they                       
were not open for business.  He did not think the fiscal                       
note could be big enough to take the risk of any retaliation                   
on the other end if Alaska enforced the tax.                                   
                                                                               
PAM LABOLLE, President, Alaska State Chamber of Commerce was                   
invited to join the committee.  She said they supported SB
345.  The State Chamber did not support any new tax that was                   
not part of an overall long-range plan that had been                           
reviewed and supported by businesses.  This is a new tax and                   
is an ad hoc tax.  She said it was particularly ill-founded                    
at this time seeing the decrease in oil production and low                     
oil prices.  Urgent economic diversification was needed in                     
Alaska.  Otherwise there would be a chilling effect on                         
businesses.  Alaska's tax laws should be readable and                          
understandable by any citizen and not ambiguous so as to                       
contain implied applications as the Supreme Court maintains                    
exists.  The language in SB 345 is clear and precise and                       
removes any ambiguity on the issue.  She said the most                         
significant impact on all Alaskans will be the increase in                     
the cost of transportation.  She further noted that three                      
other states had tried this tax and it was repealed.  She                      
again urged the committee to move SB 345 forward.                              
                                                                               
GREG CHAMPION, General Manager, Sheraton Anchorage Hotel was                   
invited to join the committee.  He said their parent company                   
was Korean Air and they had been doing business in Alaska                      
for twenty years.  He reviewed some of the business dealings                   
and holdings, including real estate, apartment buildings,                      
catering facilities, laundry and linen companies, the                          
Sheraton Anchorage Hotel; also passenger and cargo flights                     
through Anchorage International Airport.  He noted that                        
Korean Air was the largest international carrier at the                        
Anchorage airport, having thirty-six flights per week.  He                     
said the total Alaskan employees were about three hundred                      
fifty.  He gave a brief history on their connection with the                   
Anchorage International airport.  Since 1988 they had only                     
been able to get twelve international carriers back into the                   
airport.  He said to impose a tax now would negate all                         
treaties with foreign countries and they in turn would tax                     
us.  It would be sad to see Alaska move backwards.                             
                                                                               
BOB STILES, President for Development and Marketing of                         
Beluga Coal Resources was invited to join the committee.  He                   
read a brief statement into the record.  He urged passage of                   
SB 345.                                                                        
                                                                               
Senator Donley reminded the committee and the testifier that                   
it was the Administration was the one who brought the                          
lawsuit and got the Court to rule on the matter.  Not all                      
the blame should be laid on the Court.                                         
                                                                               
Mr. Stiles indicated that it was his understanding the way                     
the matter progressed someone at the Department of Law had                     
written an opinion saying the State could tax under 883 and                    
the exemption did not apply.  He felt the State and                            
Administration had no choice but to attempt to enforce the                     
matter and if challenged to pursue it through the Courts.                      
                                                                               
Co-chair Sharp noted for the committee and public that there                   
was a 10:30 a.m. time limit on the bill.  He had                               
teleconference scheduled for that time on HB 51.                               
                                                                               
SUSAN BURKE, Esq., Law Firm of Gross and Burke was invited                     
to join the committee.  She said her services were retained                    
by Northwest Cruise Ship Association to provide legal                          
consultation and assistance on the bill as it was going                        
through the Legislature.  She said she did not believe there                   
was a constitutionality problem with the retroactive                           
section.  It would have no effect whatsoever on the validity                   
of the prospective provision of the bill.  Another section                     
in Title 1, Alaska Statutes, which provided for a                              
presumption of severability if a provision of the bill can                     
stand alone, even if one other section has been declared                       
unconstitutional, that provision stands.  She said it was                      
true that retroactive tax repeals and retroactive tax                          
exemptions always raise a question whether they are valid or                   
not.  However, if there was a public purpose the Courts will                   
defer to the legislative judgment that there is a public                       
purpose and will uphold the legislation.  She cited two                        
California cases in reference.  One was an exemption from                      
local sales taxes for sales of geothermal energy                               
(California).  The Court held there was a public purpose                       
both in the prospective and retroactive exemptions in                          
encouraging sales of geothermal energy.  Another California                    
case regarding assessment practices of oil fields was also                     
cited.                                                                         
                                                                               
Senator Adams asked if she had worked on retroactive clauses                   
in the past that were unconstitutional?  Ms. Burke said she                    
basically had worked on both sides of the matter and in fact                   
cited an opinion that she drafted in 1980 that had to do                       
with a proposal to go back and refund past individual income                   
taxes.  She said that in her opinion at the time and still                     
today that there wouldn't be a valid public purpose in those                   
circumstances.                                                                 
                                                                               
Senator Adams asked what she would like to see for her                         
clients regarding this bill?  Ms. Burke said she would                         
rather the matter not be left up to the Department of                          
Revenue and said the Legislature should make the decision.                     
                                                                               
At this point Co-chair Sharp advised the committee and                         
public that HB 51 would be moved to tomorrow's calendar.                       
                                                                               
JEFF BUSH, Deputy Commissioner, Department of Commerce and                     
Economic Development was invited to join the committee.  He                    
said there may be some undue criticism around the table                        
regarding the Department of Revenue and the Supreme Court.                     
The Administration firmly believes the Department of Revenue                   
did the right thing in bringing the litigation and the                         
decision of the Court is a good one.  He felt the committee                    
should recognize the decision, also as being a good one.  It                   
would allow this body to enact tax provisions and tax laws.                    
He also felt it was important for the committee to pass SB
345 because from a policy point of view it was an important                    
piece of legislation.  It was up to the Legislature to make                    
the decision and not the Internal Revenue Service or anyone                    
else at the Federal level.  In reference to the fiscal note                    
submitted by the Department of Revenue, he said it was                         
admittedly difficult to analyze the amount of the impact.                      
However, he felt it was insignificant in relation to the                       
amount of potential loss of business to Alaska.  It was                        
important for Alaska to maintain a good perception in the                      
international trade arena.  He therefore urged passage of                      
the bill.                                                                      
                                                                               
Senator Donley said this was a valid justification for the                     
case, but it did not explain not taking action three years                     
ago to remove the big question of the back tax.  He felt the                   
Administration could have proposed this change at least                        
three years ago and the back tax exposure could have been                      
avoided.                                                                       
                                                                               
Senator Pearce said she felt the bill was the right thing to                   
do because of overriding interests of industries such as,                      
timber, natural gas pipeline, oil and mining, seafood                          
processors and the domestic airline carriers that do                           
business overseas.                                                             
                                                                               
(Tape #116, Side B switched to Tape #117, Side A.)                             
                                                                               
Senator Pearce continued saying the State had been a part of                   
upgrading the fuel facilities, runways, the aprons, the                        
taxiways and put together every single piece to have two                       
world-class cargo facilities and still Alaska had some of                      
the lowest landing fees in the Northwest United States and                     
Canada.  They provide excellent service, good fuel, and good                   
weather.  She did note for the record, however, that her                       
constituents, along with those of Senator Donley, Senator                      
Leman and Senator Wilken deal with a great more noise with                     
the arrival of the cargo flights.  She said she was also one                   
of the lead complainers especially when the carriers did not                   
follow the noise abatement rules set out by the FAA.  It was                   
the foreign carriers that were the "bad guys" in breaking                      
this rule rather than the domestic carriers.  She noted for                    
the committee that she found it interesting that the same                      
international carriers that were present today asking for                      
the tax break were the same ones that voted "no" on the                        
Anchorage Airport expansion.  She said if there was a way to                   
make an amendment that would tax one carrier and not the                       
other she would.                                                               
                                                                               
Senator Adams MOVED amendment #1.  Senator Sharp OBJECTION.                    
Senator Adams explained this would delete line ten on page                     
one.  He was afraid there would be a legal challenge.  He                      
agreed that Alaska should be open for business but not give                    
the State away.                                                                
                                                                               
Senator Parnell said from the testimony today companies had                    
reasonably read existing statutes.  It permitted them to be                    
exempt from taxation in a manner similar to other states.                      
They have made their investment, created jobs and provided                     
services based on a tax regime they reasonably thought                         
existed.  However, it is now understood does not exist                         
according to the Supreme Court.  He felt he had heard at                       
least three legitimate public purposes to retain the clause.                   
One, companies would have to pass the costs for back taxes                     
on to consumers; two, there is potential economic                              
retaliation by other sovereigns against our citizens; and                      
three, principals of equity and fair dealings are                              
implicated.                                                                    
                                                                               
Senator Adams said the problem was with not knowing what the                   
amount would be to reimburse companies since 1993.                             
                                                                               
Senator Donley said he thought the testimony was that no one                   
paid during this time.                                                         
                                                                               
Ms. Vogt rejoined the committee.  She said the 883 issue had                   
been raised with taxpayers who are before them for other tax                   
Issues.  They have then assessed according to their                            
policies.  In some cases the matters are resolved and taxes                    
actually paid.  More often the department has asked for a                      
waiver of the statute of limitations pending the outcome of                    
the OSG cases.                                                                 
                                                                               
Senator Donley asked if the department policy would be to                      
refund taxes to those individuals who had already paid?  Ms.                   
Vogt said she was not completely clear what would be done.                     
However, that seemed likely.                                                   
                                                                               
Senator Donley said he would like to know the amount and                       
what the department would do.  Ms. Vogt said it may not be                     
possible to identify an exact dollar amount between the                        
State and the taxpayer.                                                        
                                                                               
Senator Parnell asked about 883 exposure and what was                          
actually being settled with the Department of Revenue.  Ms.                    
Vogt said they were settling their tax liability overall.                      
Therefore it is impossible to attribute any particular                         
dollar to any particular issue.  The State makes its                           
assessment but it is not always clear there is a meeting of                    
the minds on those amounts.                                                    
                                                                               
Senator Donley asked if the Department of Law was available                    
but Ms. Vogt said they had a previous commitment.                              
                                                                               
Co-chair Sharp said he was not interested in making any                        
gigantic refunds if there is a possibility of refunds on                       
settlements.  He understood from Ms. Vogt that at this time                    
it would be very difficult to tell.  He noted amendment #1                     
was before the committee and there was pending objection.                      
He asked the Secretary to call the roll.  By a roll call                       
vote of 1 yea (Adams) and 5 nays (Sharp, Pearce, Donley,                       
Torgerson, Parnell, Phillips) amendment #1 FAILED.                             
                                                                               
Senator Adams MOVED amendment #2.  Senator Torgerson                           
OBJECTED.  He explained the amendment would provide a sunset                   
on the year 2001.  He felt all taxes should come under                         
review.                                                                        
                                                                               
By a roll call vote of 1 yea (Adams) and 5 nays (Sharp,                        
Pearce, Donley, Torgerson, Parnell, Phillips) amendment #2                     
FAILED.                                                                        
                                                                               
Senator Donley advised the co-chair that he would like to                      
hear from the Department of Law regarding settlement of back                   
taxes.  Senator Adams concurred.                                               
                                                                               
Co-chair Sharp said this was an important matter to resolve.                   
He HELD SB 345 over to tomorrow's calendar and asked the                       
Department of Law be present.  He also reminded the                            
committee HB 51 would be heard first on tomorrow's calendar.                   
                                                                               
SB 344 State Agency Telecommunication Systems was assigned                     
to Senator Parnell and asked that he work on that bill with                    
the sponsor and provide a report back to the full committee.                   
                                                                               
He further outlined the Wednesday morning and afternoon                        
calendars.                                                                     
                                                                               
                                                                               
ADJOURNMENT                                                                    
                                                                               
Co-chair Sharp recessed the meeting at approximately 11:00                     
a.m.                                                                           
SFC-98 -1- 4/07/98                                                             

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