Legislature(1993 - 1994)

04/20/1993 05:05 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                   SENATE JUDICIARY COMMITTEE                                  
                         April 20, 1993                                        
                           5:05 p.m.                                           
                                                                               
                                                                               
  MEMBERS PRESENT                                                              
                                                                               
 Senator Robin Taylor, Chairman                                                
 Senator Rick Halford, Vice-Chairman                                           
 Senator George Jacko                                                          
 Senator Suzanne Little                                                        
 Senator Dave Donley                                                           
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
 All Members Present                                                           
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
 SENATE BILL NO. 185                                                           
 "An Act relating to the limitations period for assessments for                
 certain state taxes, and for collection, after assessment, of                 
 taxes due the state; and providing for an effective date."                    
                                                                               
 HOUSE BILL NO. 225                                                            
 "An Act relating to notice of certain appropriations from the                 
 dividend fund."                                                               
                                                                               
 HOUSE BILL NO. 112                                                            
 "An Act relating to limited partnerships; and providing for                   
 an effective date."                                                           
                                                                               
 CS FOR HOUSE BILL NO. 69(FIN)                                                 
 "An Act relating to registration of and information about sex                 
 offenders and amending Alaska Rules of Criminal Procedure                     
 11(c) and 32(b)."                                                             
                                                                               
 SENATE BILL NO. 161                                                           
 "An Act relating to interest rates and calculation of interest                
 under certain judgments and decrees and on refunds of certain                 
 taxes, royalties, or net profit shares; and providing for an                  
 effective date."                                                              
                                                                               
 PREVIOUS SENATE COMMITTEE ACTION                                              
                                                                               
 SB 185 - No previous action to record.                                        
                                                                               
 HB 225 - No previous action to record.                                        
                                                                               
 HB 112 - See Judiciary minutes dated 4/14/93.                                 
                                                                               
 HB 69 -  See Judiciary minutes dated 4/14/93.                                 
                                                                               
 SB 161 - See State Affairs minutes dated 4/2/93 & 4/7/93.                     
          See Judiciary minutes dated 4/14/93.                                 
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 Attorney General Charles Cole                                                 
 Department of Law                                                             
 P.O. Box 110300                                                               
 Juneau, AK 99811-0300                                                         
  POSITION STATEMENT:   Offered information in support                         
                      of SB 185                                                
                                                                               
 Richard Fineberg                                                              
 P.O. Box 278                                                                  
 Talkeetna, AK 99676                                                           
  POSITION STATEMENT:   Supports thrust of SB 185                              
                                                                               
 Michael Morter, Staff to Representative Sean                                  
   Parnell                                                                     
 State Capitol                                                                 
 Juneau, AK 99801-1182                                                         
  POSITION STATEMENT:   Offered information on HB 225                          
                                                                               
 Tom Williams, Director                                                        
 Permanent Fund Dividend Division                                              
 Department of Revenue                                                         
 P.O. Box 110460                                                               
 Juneau, AK 99811-0460                                                         
  POSITION STATEMENT:   Offered information on HB 225                          
                                                                               
 Joe Geldhof, Assistant Attorney General                                       
 Department of Law                                                             
 P.O. Box 110300                                                               
 Juneau, AK 99811-0300                                                         
  POSITION STATEMENT:   Offered information on SB 161                          
                                                                               
 Larry Meyers, Director                                                        
 Income & Excise Audit Division                                                
 Department of Revenue                                                         
 P.O. Box 110420                                                               
 Juneau, AK 99811-0420                                                         
  POSITION STATEMENT:   Offered information on SB 161                          
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
 TAPE 93-46, SIDE A                                                            
 Number 001                                                                    
                                                                               
  Chairman Robin Taylor  called the Judiciary Committee meeting                
 to order at 5:05 p.m.                                                         
 SENATOR TAYLOR introduced  SB 185  (LIMITATIONS PERIOD FOR TAX                
 ASSESSMENTS) as the first order of business.                                  
                                                                               
 ATTORNEY GENERAL CHARLES COLE explained the purpose of SB 185                 
 is to clarify ambiguities which presently exist in Alaska                     
 Statutes relating to the period during which amended                          
 assessments may be made for certain taxes owing to the State                  
 of Alaska.                                                                    
                                                                               
 Section 2 of SB 185 provides that at any time an                              
 administrative consideration is being given to a taxpayer                     
 grievance, the Department of Revenue may increase or decrease                 
 the amount owing under its assessment.  The same provision                    
 would apply to instances in which a claim for credit or refund                
 is filed by the taxpayer.                                                     
                                                                               
 Section 3 of SB 185 provides that the period for collection                   
 of a tax is essentially tolled, and the proceeding must be                    
 begun within six years after the latest of: (a) the assessment                
 of the tax; (b) the final administrative determination of the                 
 grievance if the taxpayer files a grievance, or the final                     
 judicial resolution of an appeal if the taxpayer appeals from                 
 a final adjudicative determination of a grievance.                            
                                                                               
 Speaking to Section 3, Attorney General Cole said at the                      
 present time, the law provides that the tax may be collected                  
 by levy or by a proceeding in court within six years of the                   
 assessment of the tax.  Presently, pending before the Alaska                  
 Supreme Court in appeal is the issue of whether the period                    
 for determining finally a grievance filed by the taxpayer                     
 takes more than six years from the date the return is filed.                  
 Tesoro claims that even though it filed the grievance, and                    
 even though during this entire six-year period of time its                    
 grievance was being adjudicated, the statute was running.                     
 Tesoro claims that when the final determination was made on                   
 the grievance, the six-year period had run and, therefore, it                 
 was too late to collect the tax.                                              
                                                                               
 Attorney General Cole then presented a chronology of the                      
 Tesoro Case.  He said Tesoro claims that the six-year period                  
 had expired following the assessment of the tax, however, the                 
 delay resulted from administrative procedures initiated and                   
 pursued by the taxpayer.  He said there is no reason under                    
 those circumstances that the state should be prejudiced by its                
 statutory resolution of the taxpayer's grievance.                             
                                                                               
 Attorney General Cole questioned what purpose would be served                 
 by the state issuing a levy within five years after the return                
 is filed, because the amount of tax owing by the taxpayer has                 
 not yet been finally determined.  He said in the future this                  
 will not be a problem to the State of Alaska, because if this                 
 amendment which is sought in SB 185 is not passed, the state,                 
 after five years, is going to issues levies and it is going                   
 to levy upon taxpayer property owing assessments, regardless                  
 of whether the amount of the tax has been finally determined.                 
                                                                               
                                                                               
 Attorney General Cole said it is the department's position                    
 that because it is fundamentally fair, because it would be a                  
 needless expenditure of administrative and judicial effort to                 
 seek to collect taxes before the final amount is owing, SB 185                
 should be passed into law.                                                    
                                                                               
 Turning to Section 2, subsection (a), Attorney General Cole                   
 said it is the position of the Department of Law that this is                 
 simply a statement of existing law and that it makes no change                
 in existing law.  However, in a proceeding pending before the                 
 Alaska Supreme Court, Exxon and certain affiliated companies                  
 claim that if it files a grievance asking for an informal or                  
 formal conference during the period that proceeding is taking                 
 place, the department may not issue an amended assessment if                  
 the three years have elapsed.  The department feels that a                    
 clarification is desirable.                                                   
                                                                               
 Attorney General Cole commented that the state is not asking                  
 for anything that is unique in tax law, and he noted that                     
 Texas, the nation's leading oil producer, has a statute very                  
 similar to the proposed legislation.  He questioned why Exxon                 
 is vigorously opposing this proposed legislation when it is                   
 consistent with and similar to the tax laws of Texas where                    
 Exxon recently set up their major headquarters.                               
                                                                               
 Attorney General Cole also pointed out that the three-year                    
 period of time is a limited period of time.  There are many                   
 states which have substantially longer periods of times in                    
 which these assessments must be completed.                                    
                                                                               
 Number 335                                                                    
                                                                               
 RICHARD FINEBERG of Talkeetna said that as a former member of                 
 the administration's litigation team and as a public frequent                 
 critic of the settlement process, that we are dealing with                    
 literally billion of dollars in an area in which we have a                    
 lack of information on the issues.  He said in these areas                    
 where we have heard complexities before, it has been                          
 abundantly clear that one side has a vested interest and that                 
 is not necessarily the public's interest in the stewardship                   
 of the resource.                                                              
                                                                               
 Number 370                                                                    
                                                                               
 SENATOR DONLEY asked if Mr. Fineberg supports the bill.                       
 RICHARD FINEBERG answered that he supports the thrust of the                  
 bill with regard to the particulars, but that he wanted to                    
 point out that we are dealing with very scant information.                    
                                                                               
 Number 390                                                                    
                                                                               
 SENATOR TAYLOR stated SB 185 would held until the following                   
 day in order to give Exxon Corporation an opportunity to                      
 present their testimony to the committee.                                     
 Number 396                                                                    
 SENATOR TAYLOR introduced  HB 225  (NOTICE OF APPROPRIATIONS ON               
 PFD'S) as the next order of business.                                         
                                                                               
 MICHAEL MORTER, staff to Representative Sean Parnell,                         
 explained the HB 225 was developed as a vehicle to provide the                
 Council on Domestic Violence and Sexual Assault with partial                  
 funding outside the general revenue stream.  It was felt that                 
 a felon's permanent fund dividends are a pertinent source for                 
 the Council's work.                                                           
                                                                               
 Mr. Morter noted that the conference committee is working on                  
 the capital budget, and it has been proposed that $750,000 be                 
 shifted from what would be considered the "felon's permanent                  
 fund pool" to the Department of Public Safety and into the                    
 Councils' budget.                                                             
                                                                               
 Number 435                                                                    
                                                                               
 TOM WILLIAMS, Director, Permanent Fund Dividend Division,                     
 Department of Revenue, clarified for the committee that the                   
 legislation does not deal with attachments of individual                      
 dividends.  There is an amount equivalent that would have been                
 paid to incarcerated felons had they been ineligible, and                     
 those funds are being appropriated to agencies that deal with                 
 incarcerated felons.  Incarcerated felons are denied                          
 eligibility for dividends and the amount that would have been                 
 paid to them is used to fund other government programs.                       
                                                                               
 SENATOR DONLEY asked if it was correct that these groups are                  
 eligible, but it is up to the legislature to write into the                   
 budget how much of that money goes to each of these groups.                   
 TOM WILLIAMS acknowledged that was correct.                                   
                                                                               
 Number 450                                                                    
                                                                               
 There being no further testimony on HB 225, SENATOR TAYLOR                    
 asked for the pleasure of the committee.                                      
                                                                               
 SENATOR DONLEY moved that HB 225 be passed out of committee                   
 with individual recommendations.  Hearing no objection, it was                
 so ordered.                                                                   
 Number 460                                                                    
 SENATOR TAYLOR stated the Chair would entertain a motion on                   
  HB 112  (UNIFORM LIMITED PARTNERSHIP ACT UPDATE).                            
                                                                               
 SENATOR HALFORD moved that HB 112 be passed out of committee                  
 with individual recommendations.  Hearing no objection, it was                
 so ordered.                                                                   
 Number 480                                                                    
 SENATOR TAYLOR brought  CSHB 69(FIN)  (SEX OFFENDER                           
 REGISTRATION) before the committee as the next order of                       
 business and asked for the pleasure of the committee.                         
                                                                               
 SENATOR DONLEY moved that CSHB 69(FIN) be passed out of                       
 committee with individual recommendations.  Hearing no                        
 objection, it was so ordered.                                                 
 Number 500                                                                    
 SENATOR TAYLOR brought  SB 161  (INTEREST RATES: JUDGMENTS,                   
 TAXES, ROYALTIES) before the committee as the final order of                  
 business.  He noted there was a proposed amendment for the                    
 committee's consideration.                                                    
                                                                               
 JOE GELDHOF, Assistant Attorney General, Department of Law,                   
 speaking to Section 1, explained that it requires that                        
 interest rates on judgments and prejudgment interest be set                   
 at the market rate, which reflects the administration's belief                
 that market rates are superior to an arbitrary rate in                        
 statute.                                                                      
                                                                               
 Number 514                                                                    
                                                                               
 SENATOR DONLEY asked how the rate of treasury bonds relate                    
 to what anybody can get in an ordinary savings account.  Mr.                  
 Geldhof answered that currently the interest rate for the sale                
 of 52-week treasury bonds is between three and four percent.                  
 The yearly average of those 52-week treasury bond sales                       
 establishes the prejudgment and judgment interest rates.                      
 Senator Donley voiced concern that it was not really an                       
 appropriate rate of interest.                                                 
                                                                               
 Number 528                                                                    
                                                                               
 SENATOR HALFORD commented that in one section of the bill,                    
 it's amending the rate that the state pays out, but not                       
 amending the rate that the state gets in.  SENATOR TAYLOR                     
 asked for an explanation on overpayments on taxes, etc.                       
                                                                               
 LARRY MEYERS, Director, Income & Excise Audit Division,                       
 Department of Revenue, said Section 4 of the bill relates to                  
 amending the current rate between overpayment and                             
 underpayment.  In 1991, the interest rate was amended to                      
 provide for a floating rate based on the discount rate.  At                   
 that time, the overpayment and underpayment were at the same                  
 rates.  SB 161 adjusts the rates so that in case the state                    
 has to pay back in an overpayment that it is at the prime plus                
 2 percent.  Currently it is prime plus 5 percent, so there is                 
 a 3 percent discount between the overpayment and underpayment                 
 rates, he explained.  He said making this change is something                 
 that is consistent with approximately 30 other states,                        
 including the Internal Revenue Service.                                       
                                                                               
 SENATOR HALFORD stated he was strongly opposed to having a                    
 differential in the way we treat people.  Mr. Meyers answered                 
 that there is an equity provision in the bill that provides                   
 that if the Department of Revenue over assesses and the                       
 taxpayer pays, the department will pay them back at the same                  
 rate that they charged them.                                                  
                                                                               
 Number 568                                                                    
                                                                               
 SENATOR LITTLE asked if there are other states that have an                   
 equity provision for judgment and prejudgment interest.  Mr.                  
 Meyers responded that there are some states that don't make                   
 the distinction, and a majority of the states are going to a                  
 spread.                                                                       
                                                                               
 TAPE 93-46, SIDE B                                                            
                                                                               
 Number 001                                                                    
                                                                               
 SENATOR DONLEY stated he was supportive of Section 2 and would                
 like to see it passed, but that other sections of the bill are                
 more complicated and need additional work.                                    
                                                                               
 JOE GELDHOF pointed out that the real savings that will accrue                
 by passage of the legislation is to the state agencies,                       
 particularly the Department of Transportation and Department                  
 of Administration that routinely pay judgments which accrue                   
 judgment and prejudgment interest that in some cases is                       
 significant.  Presently, instead of funding agency programs                   
 or projects that may be more desirable, money is being                        
 deflected into judgment and prejudgment interest rates that                   
 are way over market.                                                          
                                                                               
 Number 040                                                                    
                                                                               
 SENATOR LITTLE asked for an explanation of the proposed                       
 amendment.  SENATOR TAYLOR explained that currently,                          
 prejudgment interest on personal injury litigation is figured                 
 from the date of the occurrence of the injury.  The amendment                 
 would change that to the date a written demand for payment                    
 for an injury has been sent.                                                  
                                                                               
 Number 060                                                                    
                                                                               
 SENATOR LITTLE moved amendment #1.  SENATOR DONLEY objected.                  
 After brief discussion Senator Little withdrew her motion to                  
 adopt amendment #1.                                                           
                                                                               
 Number 120                                                                    
                                                                               
 SENATOR TAYLOR said the problem that Mr. Geldhof raised is a                  
 valid concern.  The Department of Transportation, the Division                
 of Risk Management, Department of Law, etc., are currently                    
 paying very high interest rates in situations where they                      
 should be paying much lower interest rates.  However, he                      
 doesn't think the legislation has much chance of passing this                 
 legislative session.                                                          
                                                                               
 SENATOR TAYLOR closed the public hearing on SB 161 and                        
 adjourned the meeting at 6:00 p.m.                                            
                                                                               

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