Legislature(1995 - 1996)

04/12/1996 01:30 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   SENATE JUDICIARY COMMITTEE                                  
                         April 12, 1996                                        
                           1:30 p.m.                                           
  MEMBERS PRESENT                                                              
 Senator Robin Taylor, Chairman                                                
 Senator Lyda Green, Vice-Chairman                                             
 Senator Mike Miller                                                           
 Senator Al Adams                                                              
  MEMBERS ABSENT                                                               
 Senator Johnny Ellis                                                          
  COMMITTEE CALENDAR                                                           
 SENATE BILL NO. 264                                                           
 "An Act limiting the authority of courts to suspend the imposition            
 of sentence in criminal cases."                                               
 SENATE JOINT RESOLUTION NO. 13                                                
 Ratifying an amendment to the Constitution of the United States               
 concerning the balancing of the federal budget.                               
 CS FOR HOUSE BILL NO. 341(FIN)                                                
 "An Act relating to administrative adjudication and judicial                  
 appeals and to the informal resolution of certain factual disputes            
 between taxpayers and the Department of Revenue; establishing the             
 office of tax appeals as a quasi-judicial agency in the Department            
 of Administration; revising the procedures for hearing certain tax            
 appeals, including appeals regarding seafood marketing assessments;           
 relating to consideration and determination by the superior court             
 of disputes involving certain taxes and penalties due, and amending           
 provisions relating to the assessment, levy, and collection of                
 taxes and penalties by the state and to the tax liability of                  
 taxpayers; providing for the release of agency records relating to            
 formal administrative tax appeals; relating to litigation                     
 disclosure of public records; clarifying administrative subpoena              
 power in certain tax matters; and providing for an effective date."           
 CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 387(JUD) am                      
 "An Act rearranging existing provisions of AS 47.10 into chapters             
 separately addressing the topics of children in need of aid,                  
 delinquent minors, and the institutions, facilities, and                      
 management, administration, and oversight of programs relating to             
 minors, and conforming references and making other conforming                 
 changes due to that rearrangement; amending the manner of                     
 determining support obligations for children in need of aid and               
 delinquent minors; amending the purpose of delinquency provisions;            
 amending hearing procedures used in delinquency proceedings;                  
 amending provisions relating to enforcement of a restitution order            
 entered against a minor; setting out the considerations to be given           
 by a court in making its dispositional orders for minors                      
 adjudicated delinquent; authorizing municipalities to establish               
 curfews for minors by ordinance; relating to enforcement of truancy           
 under the compulsory school attendance law; and amending Rule                 
 23(d), Alaska Delinquency Rules."                                             
  PREVIOUS SENATE COMMITTEE ACTION                                             
 SB 264 - No previous Senate committee action.                                 
 SJR 13 - No previous Senate committee action.                                 
 HB 341 - No previous Senate committee action.                                 
 HB 387 - No previous Senate committee action.                                 
  WITNESS REGISTER                                                             
 Kelly Huber                                                                   
 Legislative Aide to Senator Halford                                           
 Alaska State Capitol                                                          
 Juneau, Alaska  99801-1182                                                    
  POSITION STATEMENT:   Testified for sponsor of SB 264                        
 Barbara Brink                                                                 
 Public Defender Agency                                                        
 Department of Administration                                                  
 900 W 5th Ave Ste 200                                                         
 Anchorage, AK  99501-2090                                                     
  POSITION STATEMENT:   Commented on SB 264                                    
 Anne Carpeneti                                                                
 Assistant Attorney General                                                    
 Department of Law                                                             
 P.O. Box 110300                                                               
 Juneau, AK  99811-0300                                                        
  POSITION STATEMENT:   No position on SB 264                                  
 Jerry Burnett                                                                 
 Legislative Aide to Senator Phillips                                          
 Alaska State Capitol                                                          
 Juneau, AK  99801-1182                                                        
  POSITION STATEMENT:   Testified for sponsor of SJR 13                        
 Representative Joe Green                                                      
 Alaska State Capitol                                                          
 Juneau, AK  99801-1182                                                        
  POSITION STATEMENT:   Sponsor of HB 341                                      
 Deborah Vogt                                                                  
 Deputy Commissioner                                                           
 Department of Revenue                                                         
 P.O. Box 110405                                                               
 Juneau, AK  99811-0405                                                        
  POSITION STATEMENT:   Opposed to HB 341 in its present form                  
 Dan Seckers                                                                   
 Alaska Oil and Gas Assn.                                                      
 121 W. Fireweed Lane #207                                                     
 Anchorage, AK  99503                                                          
  POSITION STATEMENT:   Supports HB 341                                        
 Representative Pete Kelly                                                     
 Alaska State Capitol                                                          
 Juneau, AK  99801-1182                                                        
  POSITION STATEMENT:   Sponsor of HB 387                                      
  ACTION NARRATIVE                                                             
 TAPE 96-36, SIDE A                                                            
 Number 001                                                                    
  CHAIRMAN ROBIN TAYLOR  called the Judiciary Committee meeting to             
 order at 4:12 p.m.  The first order of business was SB 264.                   
         SB 264 LIMIT SUSPENDED IMPOSITION OF SENTENCE                        
 KELLY HUBER, legislative aide to Senator Halford, sponsor of the              
 measure, explained the bill limits the authority of the courts to             
 suspend the imposition of sentences in criminal cases by adding to            
 the list of offenses a person cannot receive a suspended sentence             
 for.  Those offenses are crimes against a person (AS 11.41) or                
 arson in the first degree.  It also prevents a person convicted of            
 a second felony, from receiving a suspended sentence.                         
 CHAIRMAN TAYLOR asked if SB 264 only pertains to felonies.  MS.               
 HUBER answered it does not; AS 11.41 includes misdemeanors.                   
 Number 044                                                                    
 BARBARA BRINK, Public Defender Agency, expressed concern about the            
 broad range of the bill.   The Public Defender Agency believes the            
 committee should consider modifying the bill so that it only deals            
 with felony offenses.  The ability to suspend sentences provides an           
 opportunity for deserving first offenders to try to get their                 
 records clean, and is used sparingly by judges, usually only for              
 first offenders or older people who have become productive members            
 of society but experience a lapse in judgment.  The misdemeanors              
 encompassed in AS 11.41 include assault in the fourth degree,                 
 reckless endangerment, and custodial interference.  A person can be           
 convicted of fourth degree assault or reckless endangerment simply            
 for placing another person in fear, such as for setting off                   
 fireworks.  Communities benefit if judges are allowed to exercise             
 discretion by giving offenders an opportunity to wipe their records           
 clean.  A suspended sentence often provides great incentive to work           
 at one's rehabilitation, and may require probation, restitution,              
 and community work.                                                           
 MS. BRINK explained assault in the third degree occurs when one               
 places another in fear by means of a dangerous instrument.  She               
 recounted a case of a defendant (an 18 year old) who was convicted            
 of assault in the third degree for driving over the speed limit.              
 The driver had no prior record but did cause harm to someone.                 
 There was no alcohol involved.  The SIS prevents someone from being           
 permanently branded who makes a mistake.  She suggested removing              
 all misdemeanors and assault in the third degree from the bill.               
 Number 118                                                                    
 ANNE CARPENETI, Assistant Attorney General, stated no position on             
 the bill, but suggested adding a reference to AS 11.41 on line 6,             
 page 1.                                                                       
 CHAIRMAN TAYLOR announced there was a pending amendment that would            
 be offered by Senator Adams.                                                  
 SENATOR ADAMS explained the amendment provides the judge an                   
 opportunity to impose a suspended sentence for first time offenders           
 for the list of crimes discussed by Ms. Brink.                                
 SENATOR ADAMS moved and asked unanimous consent that amendment #1             
 be adopted.  CHAIRMAN TAYLOR objected for the purpose of discussion           
 and noted SB 264 will be heard in the Senate Finance Committee,               
 where the sponsor is a co-chair.  He asked Senator Adams if the               
 amendment removes only misdemeanor offenses.  SENATOR ADAMS                   
 clarified all three offenses removed by the amendment are                     
 misdemeanors and there will be no possibility of a suspended                  
 sentence for a second offense.  There being no further objection to           
 the amendment, the motion carried.                                            
 SENATOR GREEN moved SB 264 as amended out of committee with                   
 individual recommendations.  There being no objection, the motion             
        SJR 13 RATIFYING FED BALANCED-BUDGET AMENDMENT                       
 JERRY BURNETT, staff to Senator Randy Phillips, explained SJR 13              
 ratifies a balanced budget amendment, as proposed in HJR 1, which             
 passed the U.S. House of Representatives on January 26, 1995.  The            
 proposed amendment would require the U.S. President and Congress to           
 adopt a budget for each fiscal year in which total outlays do not             
 exceed total receipts.  SJR 13 also requires a supermajority vote             
 consisting of three-fifths of each house of Congress to adopt a               
 budget in which outlays exceed receipts, or to increase the limit             
 on debt.  An exception to the balanced budget requirement is                  
 allowed in times of war or declared military emergency.  The                  
 current national debt is in excess of $5 trillion, which represents           
 about $20,000 per person in the U.S.                                          
 SENATOR GREEN moved SJR 13 out of committee with individual                   
 recommendations.  There being no objection, the motion carried.               
         HB 341 TAX APPEALS/ASSESSMENT/LEVY/COLLECTION                        
 REPRESENTATIVE GREEN, sponsor of HB 341, gave the following                   
 overview of the legislation.  HB 341 was introduced last year as a            
 tax court bill but during interim hearings the parties involved               
 determined a tax court would not be the best approach to streamline           
 and create a more fair method of appeals.  In January the                     
 Administration submitted a tax bill and the two bills were merged.            
 The Department of Revenue has spent many hours working with                   
 Representative Green's staff on this legislation however two areas            
 of dispute remain.                                                            
 The first point of contention is the establishment of a tax appeal            
 board that would be nominated by the Governor and confirmed by the            
 legislature.  The second point of contention is the ability of the            
 tax applicant to go directly to Superior Court and seek a de novo             
 review after the first informal review by the Department of                   
 Revenue.  Under current law the Department of Revenue holds both an           
 informal review and formal review.  After the formal review, the              
 case can be appealed to Superior Court but the Court generally                
 reviews the record and does not have a de novo review.  Taxpayers             
 want a complete review, starting from scratch.  The Department of             
 Revenue has agreed the formal review should be conducted elsewhere.           
 In the House Finance Committee review of HB 341, Paul Frankel, a              
 national tax expert, testified that the final appeal should be                
 removed as far as possible from the Department of Revenue.  One               
 additional minor problem is the transition for people who have                
 appealed under existing law, but may fall under the new law.                  
 Number 274                                                                    
 SENATOR ADAMS commented he planned to offer an amendment for the              
 Department of Revenue to delete AS 43.05.242, which allows the                
 direct appeal to the Superior Court, and to change the appointments           
 section.  He asked Representative Green his opinion of the                    
 particular amendment.                                                         
 REPRESENTATIVE GREEN stated the goal was to try to establish, in              
 fact and perception, a review process that was removed from any               
 bias.  He hoped as an Alaskan citizen, the department would have a            
 bias, since they issue what they believe to be a fair tax statement           
 however, when a taxpayer disputes the amount owed, independent                
 people need to review the case, hence the reason for legislative              
 confirmation of the appointments of administrative law judges.                
 REPRESENTATIVE GREEN noted the ability to go directly to court                
 after the information review is not an uncommon situation.  When it           
 is obvious the issues of contention remain after an informal                  
 review, it is both expensive and time consuming to go through a               
 second review with the same people to get the same result, and then           
 go to a Superior Court judge who can only review the hearing                  
 SENATOR ADAMS asked Representative Green if his strongest objection           
 is to the appointment of the administrative law judges by the                 
 Administration.  REPRESENTATIVE GREEN responded of the two issues,            
 his strongest objection is to the fact the Department of Revenue              
 does not support a direct avenue for taxpayer appeal to the                   
 Superior Court.  He stated he was willing to modify the method of             
 selecting the administrative law judges.                                      
 Number 315                                                                    
 DAN SECKERS, Chairman of the Tax Committee for the Alaska Oil and             
 Gas Association (AOGA), gave the following testimony on HB 341.               
 AOGA is a trade association whose 19 members comprise the majority            
 of the oil and gas exploration, production, transportation,                   
 refining, and marketing activities in the State of Alaska.  The               
 present tax appeal process is seriously flawed in practice and                
 denies the taxpayers the opportunity to have their tax appeals                
 heard and decided by a truly independent and impartial tribunal.              
 HB 341 would significantly reform this process by establishing a              
 form outside the Department of Revenue and independent of it, where           
 tax appeals would be heard, tried, and decided.  The bill would               
 also clarify the standards to be used when reviewing claims and               
 positions asserted by the department against the taxpayers.  The              
 bill would promote greater efficiency and speed, and provide for              
 greater control over the discovery process, an area of abuse in the           
 past.  The great majority of the provisions of the CSHB 341(FIN)              
 reflects consensus not only within industry, but also between the             
 industry and the Department of Revenue.  There are two significant            
 areas in the bill the department opposes and AOGA supports:                   
 legislative confirmation of the administrative law judges; and the            
 option for taxpayers to go directly to Superior Court instead of to           
 the administrative law judges.                                                
 MR. SECKERS stated AOGA supports legislative confirmation of the              
 administrative law judges. They may decide cases involving tens, or           
 even hundreds of millions of dollars in tax claims and their                  
 decisions could affect all Alaska taxpayers.  It is essential they            
 be qualified, capable, and fair.  To achieve this, AOGA believes              
 there need to be three essential elements in the process of                   
 appointment.  First, there must be an opportunity for taxpayer                
 comment on the qualifications of potential appointees before                  
 confirmation.  Second, the process must be public and open.  Third,           
 there must be some independent body or entity in the process to act           
 as a check on the executive branch's otherwise unlimited discretion           
 in making these appointments to prevent any improper influence the            
 executive branch might otherwise have in the appointment or                   
 reappointment of judges.  Legislative confirmation provides all               
 three of these essential elements in the appointment process.                 
 The Department of Revenue proposed, in the House Finance Committee,           
 to run the appointments through the Alaska Judicial Council in a              
 manner similar to that used in appointing judges to the state                 
 courts.  At that time the AOGA Tax Committee had not had sufficient           
 time to consider the proposal.  AOGA believes that properly framed,           
 the judicial council approach can be a reasonable alternative to              
 legislative confirmation, and has developed an amendment to do so.            
 The amendment closely follows the one offered by Rep. Brown on                
 behalf of the Department of Revenue in the House Finance Committee,           
 with two changes.  The first change is a technical amendment on               
 page 1, lines 9-12, which clarifies there is no requirement to                
 create additional administrative law judge positions besides the              
 chief, but if an additional judge is appointed, the Governor must             
 choose each from a slate of nominees presented by the Judicial                
 Council.  The second difference is also technical: it clarifies a             
 judge cannot be reappointed if the Judicial Council recommends                
 against the appointment.  This proposed amendment does not mean               
 AOGA is withdrawing its support of legislative confirmation, rather           
 it finds the judicial council approach equally acceptable.                    
 Although the Governor is not opposed to legislative confirmation,             
 the Department of Revenue is, therefore the possibility of a veto             
 exists.  AOGA wants tax reform this year and can accept either                
 alternative; it defers to the legislature's judgment to decide                
 which approach should be included in the bill.                                
 MR. SECKERS discussed the provision allowing taxpayers to appeal              
 directly to Superior Court instead of to the administrative law               
 judges.  AOGA did not propose this option but finds merit in the              
 proposal and endorses it.  AOGA agrees with the Administration that           
 most taxpayers will prefer to use the tax expertise and procedural            
 rules of the new system of administrative law judges, but there may           
 be times when it may be more efficient and expedient to proceed               
 directly to court.  A dispute may involve constitutional issues               
 which an administrative law judge cannot rule on.  As Mr. Frankel             
 testified before the House Finance Committee, even the federal                
 system offers taxpayers a choice.  Additionally, over one-half of             
 the states allow such an option.  Superior Court judges are                   
 competent professionals who have responsibility for hearing very              
 complex cases, such as royalty and commercial litigation.  Under              
 current law, Superior Court judges review the formal hearing                  
 decisions of the Department of Revenue.  The option would not cost            
 the state additional money and may result in reduced expenditures.            
 This bill also requires that the standards of review used by the              
 Superior Court judges under this option be the same as under the              
 administrative law judge system.  By making this option available,            
 the state will ensure taxpayers it is committed to a fair tax                 
 appeal process.                                                               
 MR. SECKERS noted while confirmation and the "go directly to court"           
 option are the only two major unresolved issues in the bill, AOGA             
 has some concerns over the transitional provision.  Both AOGA and             
 the Department agree in principle that taxpayers who are still in             
 the first stages of the existing formal hearing process should be             
 allowed to use the new procedures.  Though AOGA and the department            
 have not come to agreement on the precise wording of such a rule,             
 AOGA will continue to work on options for an appropriate transition           
 MR. SECKERS concluded CSHB 341 (FIN) is an excellent bill.  AOGA's            
 testimony on the few remaining areas of disagreement must not                 
 detract from the fact that there is great deal more consensus and             
 compromise in the bill than controversy.                                      
 Number 456                                                                    
 SENATOR ADAMS asked Mr. Seckers to review his proposed amendment to           
 see if it is compatible with AOGA's amendment.                                
 DEBORAH VOGT, Deputy Commissioner of the Department of Revenue,               
 discussed the department's position on CSHB 341(FIN).  The                    
 department opposes HB 341 in its present form.  It has worked hard            
 on the legislation with a variety of people for several months,               
 however has reached an impasse over at least one major provision.             
 The Department of Revenue's current procedures for resolving tax              
 appeals involves the following.  A dissatisfied taxpayer has the              
 option of going to an informal conference.  No depositions are                
 taken, no witnesses are heard, and the proceedings are not                    
 recorded: the proceeding is not adversarial.  The taxpayer gets an            
 opportunity to present arguments and missing information.  The                
 informal conferee issues a written decision.  A taxpayer can skip             
 the informal conference and instead have a formal hearing in the              
 Commissioner's Office held by a specialized hearing officer or the            
 Commissioner.  Because the Commissioner can sit in a judicial                 
 capacity, when the case enters the formal hearing process, the                
 Commissioner must distance him/herself from the management of that            
 case on a day-to-day basis.  That dual role presents difficulties             
 for every Commissioner of the Department of Revenue which is one of           
 the reasons the department supported moving the hearing process out           
 of the department.  The formal hearing is a requirement before                
 going to court.  This model is similar to many other administrative           
 agencies, both state and federal, and has been litigated and upheld           
 many times.  There is a perception by taxpayers that this tax                 
 system is stacked against the taxpayer which is the second reason             
 the department agreed to consider moving the tax dispute resolution           
 program out of the department.                                                
 MS. VOGT explained the provisions of the bill.  HB 341 sets up an             
 independent office of tax appeals within the Department of                    
 Administration.  It sets criteria for selection of administrative             
 law judges who must have tax expertise.  The administrative law               
 judge would serve for a term certain and would be dismissible only            
 for cause.  Those two provisions were included to give taxpayers              
 the assurance that appointments of administrative law judges would            
 not be arbitrary.  The administrative law judge would issue                   
 decisions that would not be adopted by any Commissioner.                      
 Currently, decisions made by the hearing officer must be adopted by           
 the Commissioner of the Department of Revenue.  Moving the program            
 to the Department of Administration empowers the administrative law           
 judge to issue a final administrative decision: it does not have to           
 be adopted by anyone before it can be appealed to Superior Court.             
 The administrative law judge could adopt regulations governing                
 procedures in tax cases.  The legislation establishes a standard of           
 review for tax cases.  Actual determinations would be decided upon            
 the preponderance of the evidence unless a different standard is              
 set by law.  Legal determinations would be made on a substitution             
 of judgment basis.  Issues that are committed to the agency's                 
 discretion, whether they be factual or legal, would remain within             
 the department.  HB 341 makes some provisions for curbing the                 
 rampant discovery that has characterized the large oil and gas                
 cases in the past.                                                            
 Number 530                                                                    
 CHAIRMAN TAYLOR asked how the bill takes care of abusive discovery            
 practices.  MS. VOGT replied the bill makes substantial steps but             
 does not go quite as far as the Department of Revenue would like.             
 It requires the parties to come before the administrative law judge           
 with a discovery plan.  The plan has to be consistent with the                
 efficient, speedy, and just resolution of the case.  Mr. Frankel              
 testified that he does not believe there should be any discovery in           
 tax cases.                                                                    
 MS. VOGT continued.  The legislation also requires the parties to             
 make fact stipulations wherever they can.  It establishes a system            
 for publicizing and compiling tax decisions so that taxpayers and             
 the state will know what the precedent is.  The rules would be                
 available for all to see, auditors would know how to audit, and               
 other taxpayers would know how to fill out their tax returns.                 
 The department agrees with these provisions but has two major                 
 problems with the bill, the first being the appointment of                    
 administrative law judges.  The original draft of HB 341, and the             
 Governor's bill, simply moved the hearing officer to the Department           
 of Administration.  The change to legislative confirmation is                 
 unconstitutional according to Hammond v. Bradner.  The response to            
 the constitutional issue was to create a board of tax appeals                 
 rather than a single judicial officer however this approach more              
 than doubles the fiscal note and makes for a hybrid, cumbersome               
 agency.  Usually boards and commissions operate like a committee,             
 with a quorum and majority votes.  Normally when a board or                   
 commission has judicial powers, it hires a hearing officer to make            
 recommendations.  The commissioners of a board of tax appeals would           
 be the judges.  The Department of Revenue proposed the judicial               
 council alternative which would provide the assurance to taxpayers            
 that they will receive independent review, and will allow the                 
 fiscal note to reflect the need for only one administrative law               
 judge and one half-time clerk.  The Administration stongly prefers            
 the judicial council approach.                                                
 TAPE 96-36, SIDE B                                                            
 MS. VOGT emphasized the more difficult problem is the provision               
 that allows taxpayers to go directly to court and is the reason the           
 department cannot support the legislation.  The provision on page             
 16 negates everything in the bill prior to it because it allows the           
 taxpayer to go from informal conference straight to court.  The               
 consequences of this provision are that there would be no                     
 limitations on discovery as discovery would follow Superior Court             
 rules, there would be no fact stipulations, and the judge deciding            
 the case would not be required to have any tax expertise.  It is              
 incumbent on the Department of Revenue and the legislature to think           
 carefully about the administration of its tax provisions because              
 the most important aspect of sovereignty is the power to tax.  Tax            
 laws must provide for expertise, uniformity, balance, and                     
 certainty.  A judge without tax expertise would decide a case and             
 set a precedent for tax law.  Tax laws can be arcane, complex and             
 confusing and very controversial.  The precedents these cases can             
 set for other cases can be very important.  One of the consequences           
 of the direct to court rule is that Superior Court decisions are              
 not published and they are not binding on one another.  HB 341                
 provides that the decisions of the tax appeals office be published.           
 Cases should go from an administrative law judge to the Superior              
 Court because the trial court decision would be made public.                  
 MS. VOGT provided tables describing how other states handle this              
 issue.  Every state has some sort of body of experts who have been            
 empaneled to decide tax cases.  In some states that body is in-               
 house, others have created independent boards or tribunals.  The              
 tables divide the jurisdictions into three categories.  Table 1               
 applies to states where tax authorities conduct tax appeals.                  
 Number 532                                                                    
 CHAIRMAN TAYLOR asked if the Department of Revenue has had any                
 taxpayers go to court on oil and gas tax cases.  MS. VOGT answered            
 Referring to Table 1, MS. VOGT indicated of the 25 jurisdictions              
 that have tax appeal boards within the taxing authority, 10 require           
 taxpayers to use it, 11 allow taxpayers to skip that forum if the             
 taxpayer pays all taxes due first.  Among the states that allow the           
 taxpayer to skip the forum, the taxpayer must pay the taxes and               
 then sue for a refund.  The court system is often used by taxpayers           
 when they challenge the validity of the law rather than the                   
 application of the law.                                                       
 Number 518                                                                    
 CHAIRMAN TAYLOR questioned whether that requirement was                       
 contemplated as an alternative in the legislation.  MS. VOGT                  
 replied in HB 341 the taxpayer has to post a bond before going to             
 Superior Court, but does not have to prepay taxes.  CHAIRMAN TAYLOR           
 asked if that alternative was part of the discussion.  MS. VOGT               
 stated that alternative was never raised to the department as an              
 CHAIRMAN TAYLOR asked if a prepayment requirement would act as a              
 significant constraint on people opting out of the administrative             
 law panel.  MS. VOGT believed it would be a significant constraint,           
 but she did not know whether the other parties would support that             
 MS. VOGT drew the committee's attention to Table 2 which describes            
 state appeal procedures in states with independent forums.  Seven             
 states that allow the taxpayer to skip the forum require prepayment           
 of taxes before going to court.  New Hampshire and Idaho permit a             
 taxpayer to go straight to court without prepayment.  Many states             
 that allow taxpayers to prepay before going to court do not allow             
 the taxpayer to go to court in defense of an assessment.  If the              
 taxpayer pays the tax and has not challenged the law, and owes more           
 taxes after a reassessment, the taxpayer cannot go to court at that           
 CHAIRMAN TAYLOR asked if that provision is in HB 341.  MS. VOGT               
 answered none of that is in the bill.                                         
 In conclusion, MS. VOGT repeated the bottom line is that taxes are            
 such an important component of the governmental function, they                
 should be reviewed by experts.  The Department of Revenue believes            
 if the tax function is going to be moved out, it needs to be done             
 in a way that everyone feels is fair, independent, unbiased, and is           
 protected from political influence.  Once that system is in place,            
 however, everyone should be required to use it so that we have a              
 consistent body of tax law that taxpayers and auditors can rely on            
 and understand.  Another aspect to this system is that the                    
 Department of Revenue will not have the option of going to court if           
 it is ruled against.                                                          
 CHAIRMAN TAYLOR indicated if the state is going to create the ball            
 field, it has to play on it.  He noted if one party will have the             
 option of going to court, it needs to have some parameters, such as           
 the prepayment requirement, and suggested either side have the                
 option of going to court.  He expressed concern that forum shopping           
 will occur.  When a court decision favors a taxpayer on one issue,            
 but not on a second issue, another taxpayer will know whether to go           
 to court, depending on the issue.  He believed the only                       
 justification for depriving people of the opportunity to go                   
 straight to court would be because of an inherent lack of                     
 competence within the judicial system being able to handle the                
 complexity of the litigation involved.                                        
 Number 447                                                                    
 MS. VOGT did not believe the problem to be a lack of confidence in            
 the judicial system, but rather a lack of tax expertise.  If the              
 judicial council approach is used, administrative law judges will             
 be chosen for their tax expertise.  Some of the cases take up to              
 one year to decide.  The judicial system has submitted a fiscal               
 note for the straight to court option of $149,000 in anticipation             
 of bringing in judges pro-tem to backfill behind Superior Court               
 judges assigned to major tax cases.  That cost could be saved if              
 the direct to court option is deleted.  The Department of Revenue             
 believes that option does more than even the playing field, it tips           
 the playing field in favor of the taxpayer.                                   
 Number 408                                                                    
 CHAIRMAN TAYLOR asked Ms. Vogt to discuss the issue of transition.            
 MS. VOGT explained the transition provision was originally drafted            
 to simply say whatever gets appealed after the effective date of              
 the act uses the new system, cases currently pending before the               
 Department of Revenue stay with the department.  There are a number           
 of reasons existing cases should stay within the department.  Many            
 of the cases are currently in progress, some have already been                
 heard and are awaiting a decision, but more importantly those cases           
 did not come up through the department in contemplation of new                
 provisions, and some cases may have skipped informal conference.              
 After this provision was crafted, one taxpayer approached the                 
 department because he/she had chosen not to have an informal                  
 hearing.  The department gave the taxpayer the option of having an            
 informal hearing, and tried to craft language to accommodate that             
 taxpayer.  That language appears on page 19 in Section 17 of the              
 bill and provides for trigger points based on whether there has               
 been material discovery by either party, or whether substantive               
 motions were filed.  Both of those terms are very vague, and leave            
 up in the air who will decide whether a motion that was filed is              
 substantive.  It also requires that consent to that stipulation not           
 be unreasonably withheld, but again it does not specify who will              
 determine "unreasonable."  Everyone recognizes that there are                 
 problems with that language that need to be addressed.  The                   
 Department of Revenue would prefer to go back to the original,                
 simple language requiring new cases to use the new system, and                
 existing cases to use the existing system, unless the parties agree           
 to change forum.                                                              
 Number 358                                                                    
 CHAIRMAN TAYLOR informed Ms. Vogt he had prepared a new transition            
 provision to take into account some of those concerns.  It reads as           
 Sec. 17.  TRANSITIONAL PROVISIONS.  The remedies and                         
 procedures provided by this act apply to all revenue tax                      
 appeals in which a request for formal hearing has been filed                  
 with the Department of Revenue on or before the effective date                
 of this Act.  A taxpayer who has filed a request for formal                   
 hearing on or before the effective date of this act may elect                 
 within 45 days from the enactment of this act to use the                      
 remedies and procedures existing prior to the enactment of                    
 this act.                                                                     
 He explained the amendment would allow the taxpayer to stay within            
 the system, or to opt out.                                                    
 MS. VOGT asked for more time to review the amendment.  CHAIRMAN               
 TAYLOR commented on the time constraints imposed on the committee,            
 and the several amendments proposed to this legislation.                      
 SENATOR ADAMS asked whether the Governor will veto this legislation           
 if it passes as is.  MS. VOGT indicated the department will                   
 strongly ask the Governor to veto the bill.  She believed the                 
 Governor has discussed his concerns with oil and gas industry                 
 representatives. SENATOR ADAMS asked which concerns are most                  
 critical.  MS. VOGT responded all three provisions that have been             
 discussed today.                                                              
 Number 310                                                                    
 CHAIRMAN TAYLOR noted his concern with the selection of the hearing           
 officer is that the judicial council system works well for judges,            
 but due to the magnitude and complexity of tax cases, it may not              
 fit well within the current judiciary as it has not been trying               
 these cases.  He expressed frustration that this bill would                   
 continue to allow an Administration to continue to utilize a                  
 bureaucracy within it for an appeal process.  At some point in time           
 one has to leave that system and go into the court system anyhow,             
 although it may take years.  Over the last couple of years, he co-            
 sponsored legislation to ex-post facto rollback the statute of                
 limitations on tax cases because someone had forgotten to get an              
 oil company to sign off and waive rights, a bizarre piece of                  
 legislation at best.  He apologized for helping to sponsor it, but            
 it was an attempt to resolve some of these large tax issues.  If an           
 appointment process is established that is very much controlled by            
 the Administration, it is difficult to believe that politics would            
 not invade and infect that system.  In just the last year, this               
 Administration has dismissed the Babbitt case, forfeiting Alaska's            
 rights under its Constitution to the federal government on the                
 drafting of subsistence regulations.  The Administration has                  
 dismissed the Venetie case, creating 226 tribal entities that will            
 be devastating regarding custody cases, the Native child welfare              
 act, and commercial transactions.  The settlement of the Tyson case           
 has raised a lot of eyebrows.  In addition the Senate has been                
 contemplating hiring a special investigator to review a settlement            
 by this Administration with one of the labor unions.  Billions of             
 dollars of tax cases have been outstanding for years that various             
 governors have chosen to settle.  He asked Ms. Vogt whether she was           
 aware of any Governor dismissing or settling a tax case for 15                
 cents on the dollar.                                                          
 Number 255                                                                    
 SENATOR ADAMS noted the previous Republican Administration was                
 wrong in filing the Babbitt and Venetie cases which is why this               
 Governor had to dismiss them.                                                 
 CHAIRMAN TAYLOR responded he understood the Governor may have made            
 those decisions based on law, however the Attorney General informed           
 the legislature those decisions were not based on law, they were              
 based on other reasons.                                                       
 SENATOR ADAMS stated whoever has the gold makes the rules and the             
 Attorney General at that point was working for another governor.              
 CHAIRMAN TAYLOR agreed that is the problem, and pointed out it                
 often will depend upon who does have control.  Setting up a                   
 selection process that is dominated by the executive branch or the            
 legislative branch is cause for concern.   Merely utilizing the               
 judicial council to screen applicants may help, but requiring                 
 nomination by the Governor and confirmation by the legislature                
 seems burdensome.                                                             
 MS. VOGT believed there are provisions in HB 341 that address some            
 of those concerns.  The judicial council is a constitutional                  
 council made up of seven members and would solicit public comment             
 on pending applicants.  The names would then be submitted to the              
 Governor for selection.  The administrative law judge would then be           
 appointed for a two year term and after the two years would be                
 reviewed again by the judicial council with the same opportunity              
 for public input.  The second term would be for four years, and the           
 administrative law judge could not be fired for anything except               
 cause.  Those two conditions were included in the bill to address             
 the concerns articulated by Chairman Taylor.                                  
 CHAIRMAN TAYLOR stated while the administrative law judge has the             
 case on formal appeal, the process is closed.  MS. VOGT noted the             
 Department of Revenue would be delighted if the process was made              
 open to the public.  The bill originally had such language making             
 the appeal process open to the public, but that was removed after             
 taxpayers raised strong objection.                                            
 Number 191                                                                    
 CHAIRMAN TAYLOR commented that everyone would know what the amount            
 in question was if the case was filed in court and there is a                 
 prepayment provision.  Then if a governor decided to dismiss a                
 case, and the public was aware of the disputed amount, the                    
 Administration would be called upon to explain the settlement.                
 There is a lot of frustration about the lengthy amount of time                
 these cases take, and the bill should at least quicken the process.           
 SENATOR GREEN questioned whether the bill provides for the                    
 legislature to see the public input on nominees provided to the               
 judicial council.  MS. VOGT stated the fact that a candidate is up            
 for review would be published, but she did not know how much would            
 be disclosed to the public.  For judicial appointments, a bar poll            
 ranks judicial applicants and the results of the poll are                     
 published, but individual comments are kept confidential.                     
 Number 154                                                                    
 SENATOR GREEN pointed out her concern that a candidate could be               
 deemed inappropriate for retention by a member of the public, and             
 the legislature would never know.  She questioned whether a judge             
 needs to be reconfirmed once seated, or reappointed.  MS. VOGT                
 replied that is correct, but that issue is addressed in the                   
 amendment being proposed by AOGA.  She added if the judicial                  
 council recommended a person not be reappointed, that fact would be           
 public.  CHAIRMAN TAYLOR commented it would be public but not                 
 CHAIRMAN TAYLOR indicated that Senator Adams has suggested the bill           
 be scheduled for Monday to give the interested parties an                     
 opportunity to present a compromise.  The matters will be brought             
 up for a vote by the committee at that time.  He suggested                    
 addressing the prepayment requirement, the transition provision,              
 and appointment provisions including a legislative role.                      
 MS. VOGT pointed out the fiscal impact of getting into the                    
 constitutional confirmation issue will be much larger.                        
 There being no other comments on HB 341, the committee held the               
 bill until Monday.                                                            
                 HB 387 JUVENILE CODE REVISION                                
 REPRESENTATIVE PETE KELLY, sponsor of HB 387, explained HB 387                
 creates a structural change that separates in statute the program             
 for children in need of aid and delinquent juveniles.  It includes            
 policy language allowing the state to consider sanctions for                  
 delinquent behavior, and gives judges more direction in how to deal           
 with juveniles in sentencing.  The bill also includes a provision             
 for truancy, and gives the responsibility for enforcing truancy to            
 the school districts themselves.  It establishes in Title 38 the              
 ability of municipalities to impose a curfew which are currently              
 imposed under general police powers.  Chapter 10 deals with                   
 children in need of aid, Chapter 12 deals with delinquent children,           
 and Chapter 14 gives DHSS purview over both of those programs.                
 Number 039                                                                    
 CHAIRMAN TAYLOR asked if separating the programs will solve the               
 problems of disclosure in regard to federal funding under Title 8,            
 should the legislature decide to pass legislation in the future               
 pertaining to the release of the names of juvenile offenders.                 
 REPRESENTATIVE KELLY responded HB 387 begins that process by                  
 separating the programs.  This structure will allow the legislature           
 to avoid some of the pitfalls of losing federal funds.                        
 CHAIRMAN TAYLOR questioned the permanency board provision.                    
 REPRESENTATIVE KELLY noted that board has been in statute for a               
 number of years, but was funded for the first time last year.                 
 TAPE 96-37, SIDE A                                                            
 Number 000                                                                    
 CHAIRMAN TAYLOR asked if the Duties of Local Panel section (page              
 55) is existing law.  REPRESENTATIVE KELLY answered in Chapter 14,            
 which is one of the new chapters, that is existing code.  He added            
 almost the entire bill is existing code.                                      
 CHAIRMAN TAYLOR questioned why, in reviewing three pages of the               
 bill, he could not find any changes in the language.                          
 REPRESENTATIVE KELLY explained it is not underlined or bracketed              
 because existing language was pulled out of Chapter 10 and written            
 in new Chapters 12 and 14.                                                    
 CHAIRMAN TAYLOR asked if the definition was amended to take a                 
 portion of the juvenile offenses out of the jurisdiction of DHSS              
 and place those within the Court System.  REPRESENTATIVE KELLY                
 replied that subject is addressed in HB 474.                                  
 Number 056                                                                    
 REPRESENTATIVE MILLER noted his concern with Section 3, regarding             
 truancy, because other states have used truancy laws to crackdown             
 on homeschooling.  He offered to work with Representative Kelly to            
 draft an amendment to ensure that truancy laws cannot be used                 
 against people who homeschool.  REPRESENTATIVE KELLY indicated                
 existing code is a cumbersome methodology for the school districts            
 to deal with truancy.                                                         
 BRUCE CAMPBELL, legislative aide to Representative Kelly, commented           
 a prior version of the bill allowed private school administrators             
 to establish their own truancy rules.  REPRESENTATIVE MILLER                  
 pointed out a home school is not defined in statute as a private              
 school.  The vast majority of homeschoolers are not affiliated with           
 the school district.  He repeated he wants to ensure that a school            
 district cannot adopt procedures to crackdown on homeschoolers                
 under HB 387.                                                                 
 REPRESENTATIVE KELLY asked Representative Miller his opinion of the           
 language in the original bill.  REPRESENTATIVE MILLER contended the           
 original language required the truant student to go before a                  
 governing body to validate the absence.  He expressed concern with            
 giving governing bodies the ability to establish procedures.                  
 CHAIRMAN TAYLOR added there is a major problem with truancy in                
 public schools that is not being addressed, but at the same time              
 society has the right to know whether there is integrity and                  
 quality to the homeschool process.  He thought there should at                
 least be some measurable standards every three years, such as a               
 competency exam, that the child submits to.  He acknowledged many             
 homeschooled children excel academically.                                     
 REPRESENTATIVE KELLY thought there was an affirmative defense                 
 provision addressing this issue in the code book.                             
 CHAIRMAN TAYLOR announced the bill would be brought up on Monday.             
 CHAIRMAN TAYLOR adjourned the meeting at 6:10 p.m.                            

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