Legislature(1993 - 1994)
04/20/1993 05:05 PM Senate JUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
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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