Legislature(1993 - 1994)

04/07/1994 01:50 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
              SENATE LABOR AND COMMERCE COMMITTEE                              
                         April 7, 1994                                         
                           1:50 p.m.                                           
  MEMBERS PRESENT                                                              
 Senator Tim Kelly, Chairman                                                   
 Senator Steve Rieger, Vice-Chairman                                           
 Senator Bert Sharp                                                            
 Senator Georgianna Lincoln                                                    
  MEMBERS ABSENT                                                               
 Senator Judy Salo                                                             
  COMMITTEE CALENDAR                                                           
 SENATE BILL NO. 305                                                           
 "An Act relating to licensure of landscape architects."                       
 SENATE BILL NO. 347                                                           
 "An Act relating to limited liability companies; amending Alaska              
 Rules of Civil Procedure 20 and 24; and providing for an effective            
 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."                          
  PREVIOUS SENATE COMMITTEE ACTION                                             
 SB 305 - See Labor & Commerce minutes dated 3/31/94.                          
 SB 347 - See Labor & Commerce minutes dated 3/24/94                           
 SB 185 - See Judiciary minutes dated 4/20/93, 4/21/93                         
          and 4/23/93.  See Labor & Commerce minutes dated                     
  WITNESS REGISTER                                                             
 Senator Suzanne Little                                                        
 State Capitol                                                                 
 Juneau, AK 99801-1182                                                         
  POSITION STATEMENT:   Outlined changes in CSSB 305(L&C)                      
 George Davidson                                                               
 16305 Lena Loop Road                                                          
 Juneau, AK 99801                                                              
  POSITION STATEMENT:   Testified on CSSB 305(L&C)                             
 Larry Meyers, Director                                                        
 Division of Income & Excise Audit                                             
 Department of Revenue                                                         
 P.O. Box 110420                                                               
 Juneau, AK 99811-0420                                                         
  POSITION STATEMENT:   Department supports SB 347 in theory                   
 Brian Durrell                                                                 
 6300 Andover                                                                  
 Anchorage, AK 99501                                                           
  POSITION STATEMENT:   Supports SB 347                                        
 John Hoffer                                                                   
 2550 Denali, Suite 604                                                        
 Anchorage, AK 99503                                                           
  POSITION STATEMENT:   Supports SB 347                                        
 Bob Manley                                                                    
 324 East Cook                                                                 
 Anchorage, AK 99501                                                           
  POSITION STATEMENT:   Supports SB 347                                        
 Attorney General Bruce Botelho                                                
 Department of Law                                                             
 P.O. Box 110300                                                               
 Juneau, AK 99811-0300                                                         
  POSITION STATEMENT:   Offered information in support of                      
                      SB 185                                                   
 Walt Furnace, General Manager                                                 
 Alaska Support Industry Alliance                                              
 Anchorage, AK                                                                 
  POSITION STATEMENT:   Opposes SB 185                                         
 Paul Wessells, Vice Chairman                                                  
 Alaska Oil & Gas Association Tax Committee                                    
 121 W. Fireweed                                                               
 Anchorage, AK 99503                                                           
  POSITION STATEMENT:   Opposes SB 185                                         
 Hugh Malone                                                                   
 Juneau, AK                                                                    
  POSITION STATEMENT:   Supports SB 185                                        
 John Sackett                                                                  
 Juneau, AK                                                                    
  POSITION STATEMENT:   Supports SB 185                                        
 George Findling                                                               
 ARCO Alaska                                                                   
 Anchorage, AK                                                                 
  POSITION STATEMENT:   Opposes SB 185                                         
 Norma Calvert                                                                 
 Marathon Oil Co.                                                              
 Anchorage, AK                                                                 
  POSITION STATEMENT:   Opposes SB 185                                         
 Val Molyneaux                                                                 
 VECO Inc.                                                                     
 813 W. Northern Lights Blvd.                                                  
 Anchorage, AK                                                                 
  POSITION STATEMENT:   Opposes SB 185                                         
 Beck Gay, Executive Director                                                  
 Resource Development Council                                                  
 121 W. Fireweed                                                               
 Anchorage, AK 99503                                                           
  POSITION STATEMENT:   Opposes SB 185                                         
 John Ringstad                                                                 
 British Petroleum Exploration (Alaska) Inc.                                   
 900 E. Benson Blvd.                                                           
 Anchorage, AK                                                                 
  POSITION STATEMENT:   Opposes SB 185                                         
  ACTION NARRATIVE                                                             
 TAPE 94-25, SIDE A                                                            
 Number 001                                                                    
  CHAIRMAN TIM KELLY  called the Labor and Commerce Committee meeting     g    
 to order at 1:50 p.m.                                                         
 The first order of business to come before the committee was  SB 305     5    
 (LICENSING OF LANDSCAPE ARCHITECTS).                                          
 SENATOR SUZANNE LITTLE, prime sponsor of SB 305, outlined the                 
 following changes in the draft committee substitute:                          
  (1)  The original draft of the bill added two members to the                 
 State Board of Registration for Architects, Engineers and Land                
 Surveyors.  That has been removed in the committee substitute and             
 it will remain at nine voting members on the board.  The committee            
 substitute provides that there will be additional nonvoting                   
 landscape architect on the board for one year, and that nonvoting             
 member will not be reimbursed for per diem and travel expenses.               
  (2)  The requirement that the board administer a written                     
 examination at least twice a year has been changed to at least once           
 a year.                                                                       
  (3)  A new definition for "landscape architect" has been                     
 included in the committee substitute.                                         
  (4)  Sections 33 & 34 in the original bill were deleted in the               
 committee substitute.                                                         
 Number 055                                                                    
 SENATOR KELLY asked George Davidson the position of the Board of              
 Architects, Engineers and Land Surveyors on the committee                     
 substitute.  GEEORGE DAVIDSON responded that there were five                  
 members on the teleconference in the morning, and three of the five           
 endorse the changes and two were undecided.                                   
 Number 065                                                                    
 SENATOR RIEGER asked if with the committee substitute, people who             
 just do ordinary landscaping are still able to do that.  SENATOR              
 LITTLE answered that was correct.  There is a specific definition             
 in statute for "landscape contractors," however, it is not in this            
 legislation.  She added there is a big separation between a                   
 landscape contractor and landscape architect and that is clearly              
 Number 075                                                                    
 SENATOR RIEGER moved that CSSB 305(L&C) be adopted.  Hearing no               
 objection, the motion carried.                                                
 SENATOR RIEGER moved that CSSB 305(L&C) be passed out of committee            
 with individual recommendations.  Hearing no objection, it was so             
 Number 110                                                                    
 SENATOR KELLY brought  SB 347  (LIMITED LIABILITY COMPANIES) before           
 the committee as the next order of business.                                  
 LARRY MEYERS, Director, Division of Income & Excise Audit,                    
 Department of Revenue, presenting a brief overview on limited                 
 liability companies, said they are hybrid, possessing both                    
 characteristics of corporate and partnership attributes.  Under               
 existing laws the State of Alaska does not tax partnerships, only             
 corporations.  SB 347 does not address the taxation method under              
 limited liability companies.   Of the 36 states that currently have           
 this type of legislation enacted, the vast majority follow what the           
 Internal Revenue Service has determined to be the taxable                     
 structure, which is partnerships.  Absent any clarification from              
 the Legislature, Alaska will adopt what the IRS determines as far             
 as a taxable nature, which, in this instance, if it is a                      
 partnership it will be another entity that is not subject to being            
 Mr. Meyers said because LLC's are relatively new there isn't a lot            
 of history behind the tax impact.  Several states have shown that             
 it is revenue neutral.  Most of the states that have adopted                  
 limited liability corporations also have individual income tax, and           
 while these entities would not taxed at the LLC level, they would             
 pick up the income at the individual level.  Two states, like                 
 Alaska, do not have individual income tax, but the two states have            
 treated LLC's as corporations, thereby subjecting them to being               
 taxed at a corporate rate.                                                    
 Mr. Meyers related that the Department of Revenue has based its               
 fiscal note on the assumption that over the last three years the              
 Department of Commerce has registered 1,100 new corporations on an            
 annual basis.  However, the Department of Revenue has not addressed           
 the conversion of existing C corporations into the LLC's; they have           
 focused only on new corporations that would enter into the stream.            
 Number 205                                                                    
 SENATOR KELLY asked if the Department of Revenue supports SB 347.             
 LARRY MEYERS responded the department supports it in theory,                  
 however, their concern is the taxation method.                                
 SENATOR KELLY asked if in statute it could be treated as a                    
 corporation.  LARRY MEYERS acknowledged that it could be done with            
 a simple amendment in the definition of "corporation" that would              
 include limited liabilities companies.                                        
 Number 221                                                                    
 BRIAN DURRELL, a lawyer with the Anchorage law firm Bogle and                 
 Gates, testified from Anchorage in support of SB 347.  He said he             
 has been very active in the development of the LLC legislation                
 through a working group of lawyers and accountants in Anchorage.              
 Mr. Durrell said there are different business entities that                   
 organizers of businesses may select from in setting up Alaska                 
 businesses.  They could select a sole proprietorship, joint                   
 ventures, partnerships, limited partnerships, S corporations or C             
 corporations.  Of those entities, the State of Alaska only has                
 income tax against C corporations, and, consequently, if an                   
 organizer of a business chose an LLC form of business, there would            
 be no tax revenues lost to the State of Alaska.  He stated the only           
 entity that is at issue today is a C corporation, and it is                   
 unlikely that many of those C corporations would reorganize into              
 the form of an LLC.                                                           
 Mr. Durrell addressed several concerns he has with the fiscal note            
 developed by the Department of Revenue.                                       
 Number 315                                                                    
 SENATOR KELLY asked Mr. Durrell if he would continue to support the           
 bill if a tax provision were added to the bill that would include             
 an LLC under the definition of "corporation."  BRIAN DURRELLL                 
 replied that he thought doing so would have a detrimental effect on           
 the legislation because the purpose of the legislation is to have             
 the limited liability business entity that has the partnership                
 method of taxation and that would be a substantial impact on that.            
 Number 342                                                                    
 JOHN HOFFER, an attorney with the Anchorage law firm Fortier and              
 Mikko, voiced his support for SB 347, primarily because he sees a             
 lot of clients that would like to organize as an LLC, but they                
 cannot do so.  Many small businesses do not consider organizing as            
 C corporations primarily because of the risk of double taxation at            
 the federal level so they are faced with a choice of organizing               
 either as a general partnership, or a limited proprietorship, or an           
 S corporation.  In his view, the people who are going to be looking           
 at this legislation and deciding whether they want to organize as             
 an LLC, or a partnership, or an S corporation, are the kinds of               
 businesses that are not going to be subject to tax under current              
 Alaska law anyway, so there is really very little potential of                
 revenue loss with this LLC bill.                                              
 Mr. Hoffer pointed out that other states that subject LLC's to                
 income taxation do it because they also have a personal income                
 taxation and they don't want the LLC to be a loophole whereby a new           
 business entity can escape taxation.  He believes it would be                 
 inappropriate for Alaska to have an income tax for LLC's and to               
 leave the other ones untouched.                                               
 Number 398                                                                    
 BOB MANLEY, representing the working group of members of the tax              
 and business law sections of the Alaska Bar Association, as well as           
 members of the Alaska Society of CPA's, stated he favors the                  
 legislation and disagrees strongly with the fiscal note prepared by           
 the Department of Revenue.                                                    
 Mr. Manley believes that LLC's are going to replace S corporations            
 and partnerships, but they are not going to take away any corporate           
 income tax from the State of Alaska.                                          
 Number 460                                                                    
 SENATOR KELLY closed the public hearing on SB 347, and stated it              
 would be back before the committee at a later date.                           
 Number 465                                                                    
 SENATOR KELLY brought  SB 185  (LIMITATIONS PERIOD FOR TAX)                   
 ASSESSMENTS) before the committee as the next order of business.              
 BRUCE BOTELHO, Attorney General, Department of Law, reiterated that           
 what is at stake is not a dispute about how much tax an oil company           
 owes, and it is not a dispute about whether the Department of                 
 Revenue's assessments reflect a correct or incorrect application of           
 the production tax or the income tax laws.  What is at stake is               
 whether there can even be a determination of who is right and who             
 is wrong, and how much is actually owed under the state's revenue             
 SB 185 confirms the state's interpretation of two statutes of                 
 limitation.  The first is AS 43.05.260, which is the three-year               
 assessment limitation.  The interpretation which the state has held           
 and which this legislation will confirm is that so long as the                
 Department of Revenue issues an assessment within the three-year              
 period of time, it may later amend that assessment to reflect new             
 evidence that arise from discovery, as an example.  The second is             
 AS 43.05.270, which is the six-year limitation on collections.  The           
 statute, on its face, declares that the department must initiate a            
 collection action within six years of the assessments.  The state's           
 interpretation is that the period does not run while the taxpayer             
 continues to dispute the amount that is actually due.  The purpose            
 of statutes of limitation, and particularly in this context, is to            
 put a taxpayer on notice that a particular type and a taxed year is           
 in dispute in a timely fashion so that taxpayer may preserve the              
 documentation necessary to determine what the correct tax liability           
 Attorney General Botelho said that in May 1993, the State and Exxon           
 had agreed to a stay to the Exxon case currently under Appeal in              
 the Alaska Supreme Court to allow both parties to see if they could           
 resolve the outstanding differences.  Attorney General Botelho                
 lifted that stay in January and the Supreme Court has scheduled the           
 matter for oral argument in May.                                              
 The state and oil companies cannot and will not be able to settle             
 their differences so long as the companies assess their risk on               
 disputed taxes that are affected by the statute of limitations as             
 zero.  Meaningful negotiations cannot be concluded until there is             
 some fundamental thinking of that view.                                       
 While the Supreme Court will hear the argument in May, he does not            
 believe that it is likely that the court would issue its decision             
 for at least several months, perhaps for more than a year                     
 afterward.  These major tax disputes are accumulating horrendous              
 amounts of interest, well over a $1 million a day.  He said in his            
 view, passage of SB 185 will put the state back on track towards              
 early meaningful resolution of the disputed taxes.                            
 TAPE 94-25, SIDE B                                                            
 Number 020                                                                    
 In concluding his comments, Attorney General Botelho urged the                
 enactment of SB 185.                                                          
 Number 055                                                                    
 SENATOR KELLY asked why there were the retroactivity and                      
 prospective provisions in the bill.  ATTORNEY GENERAL BOTELHO                 
 answered the retroactive nature of it is to cover and basically say           
 that when the Legislature enacted the original AS 43.05.260 & 270             
 intended these features that are not embodied in the statute, but             
 which are virtually universal in the civil context the idea of                
 relation back and tolling.  The retroactivity is to make clear that           
 they are to cover those past tax years that are in dispute.  With             
 respect to its prospectivity, it is simply a reflection that this             
 has been a consistent view, not only of the Executive Branch, but             
 that of the Legislature as well.                                              
 Number 060                                                                    
 SENATOR LINCOLN thanked the Attorney General for his letter of                
 April 7 in response to several statements made by Joe Householder             
 on behalf of the Alaska Oil and Gas Association at the committee's            
 March 22 hearing on SB 185.  She then asked him how critical he               
 thinks it is that the Legislature take an action on SB 185 before             
 the Supreme Court hears the case in May.  ATTORNEY GENERAL BOTELHO            
 responded that SB 185 is a very important bill for two reasons:               
 (1) the risk to the state that the Supreme Court may conclude that            
 the state interpretation is incorrect; and (2) it is important to             
 see early resolution of what are the most difficult of all the tax            
 Number 105                                                                    
 SENATOR KELLY requested that Attorney General Botelho provide the             
 committee with a copy of his testimony so that it would not have to           
 be transcribed.  Also, he said he would direct staff to contact the           
 other oil producing states to find out if they have had long-                 
 ranging cases such as this, as well as to set up with the                     
 Department of Revenue a detailed briefing on the developments of              
 these cases and why they have taken so long.                                  
 Number 120                                                                    
 WALT FURNACE, General Manager of the Alaska Support Industry                  
 Alliance, testifying in opposition to SB 185, said it would give              
 the Department of Revenue multiple opportunities to change its mind           
 in tax assessments without regard to any time limitations.                    
 Mr. Furnace said it is no longer a foregone conclusion that the oil           
 industry will remain healthy here in Alaska.  There are a lot of              
 new investments that can be made here by industry, but the oil                
 companies themselves are competing against the businesses overseas            
 to get capital to keep going in Alaska.  The lack of clarity on the           
 basis of paying state taxes and royalties after 16 years of                   
 production on the North Slope continues to be a major obstacle in             
 Mr. Furnace said in terms of stability, SB 185 will be a major step           
 in the wrong direction. He questioned that if Alaska can do this              
 and get away with it, who in his right mind is going to want to               
 come here and invest a lot of money when there is no way of knowing           
 that today's tax system won't be changed retroactively sometime in            
 the future after he has made his investment.  The Alaska Supreme              
 Court has a case pending before it on the meaning of the three-year           
 statute of limitation.  SB 185 will take that decision, in this               
 case, away from the court by retroactively changing the law so that           
 the department will win.                                                      
 Mr. Furnace expressed his concern that SB 185 is being supported by           
 the present Administration, and he urged that the oil industry not            
 be driven out of Alaska by passage of such legislation.                       
 Number 245                                                                    
 PAUL WESSELLS, Vice Chairman of the Alaska Oil & Gas Association              
 Tax Committee, testified from Anchorage via the teleconference                
 network.  He stated AOGA's strong opposition to SB 185, which would           
 represent bad tax policy for the State of Alaska.  It would set a             
 terrible precedent, while provoking more litigation than it would             
 resolve.  It not only singles out the oil and gas industry, it                
 sends a very hostile message about Alaska, not only to the                    
 managements of the companies who are already here, but also to                
 those who might be thinking about investing in Alaska.                        
 Mr. Wessells noted that former Attorney General Cole has said that            
 what is being proposed in SB 185 is not unlike the statute of                 
 limitations found in many of the lower 48 states, and, in                     
 particular, Texas.  He said that is not true, and according to                
 their research, they found not a single state with specific                   
 language that parallels that of SB 185.  Also, it has been their              
 members' experience in the lower 48 that once a state has made a              
 determination of the taxpayer's tax liability, generally there is             
 no increase in the assessment; it is either sustained or amended in           
 favor of the taxpayer.  Not one of those states has ever                      
 retroactively amended their statute of limitation provisions, and             
 such a retroactive provision would likely be unconstitutional.                
 Mr. Wessells stated that if SB 185 passes, there will be no tax               
 certainty, there will be no tax stability and there will no tax               
 fairness.  There will be never ending tax administrative and                  
 judicial proceedings without resolution.  He urged rejection of SB
 Number 595                                                                    
 HUGH MALONE, a former commissioner of the Department of Revenue               
 representing himself, stated his support for SB 185.  It has been             
 the state's effort, to his knowledge, to try to determine the                 
 correct amount of tax that is owed for a severance tax or an income           
 tax for any particular year.  To assess that tax and to collect it,           
 sometimes, because of the availability of information and the                 
 research that's necessary to develop it, it takes awhile to make              
 that determination.  He said it is not in the best interest of the            
 people of the state to have any taxpayer pay a sum different from             
 what they owe the state, and it isn't in the interest of the state            
 when talking about its primary source of revenue to potentially               
 dismiss several billions of dollars based on what he believes is a            
 technical loophole or argument that can be made to avoid payment of           
 the correct amount of tax by a taxpayer.                                      
 Number 650                                                                    
 JOHN SACKETT, a former legislator elected to the Legislature in               
 1966, noted that in the entire 18-year period he served in the                
 Legislature he was on the Finance Committee, for eight of those               
 years he was chairman and co-chairman.                                        
 He said during the period of time that he was in the Legislature              
 was a period of time that the State of Alaska participated and                
 attempted to "arrive" at some "fair share" of the resource up on              
 the North Slope.   He then gave a historical prospective from a               
 legislative standpoint beginning in the year 1967 as to what that             
 is.  In 1967 the severance tax was at one percent.  During his 18             
 years in the Legislature 10 different changes were made to the                
 taxation laws going through all of the different methods.                     
 TAPE 94-26, SIDE A                                                            
 Number 001                                                                    
 Continuing his testimony, Mr. Sackett said it wasn't until about              
 1986 that he felt that the State of Alaska had finally reached                
 their fair share of the legislation.  When it was changed the last            
 time, the tax was lowered somewhat overall, but it was increased              
 for some other areas.  Since then, the Department of Law and the              
 Department of Revenue have been attempting to collect a variety of            
 different taxes from the oil industry.  At the same time that they            
 are collecting there have settlements with the oil industry of                
 approximately $1.3 billion on taxes that they have contested and              
 settled out of court.  During the process of settling these cases,            
 the State of Alaska realized that the amount of the valuation that            
 oil industry was saying that they had on the state's oil was a lot            
 more than they were telling the state.  As a result of this, there            
 were reassessments that had to occur during that period of time.              
 Based on a technicality, he believes the oil industry is attempting           
 to escape their liability.                                                    
 Mr. Sackett stated that as a former legislator he never felt that             
 any of the money, whether it was at one percent when he started or            
 at 33 percent when he left the Legislature, belonged to him as an             
 individual.  The taxes that were collected belong to the people of            
 state and, as a legislator, he had the responsibility to ensure               
 that to the maximum extent possible, the people of this state                 
 received their fair share.  He said the legislators have that                 
 responsibility now to make sure that the people of this state                 
 receive their fair share.                                                     
 Number 073                                                                    
 GEORGE FINDLING, Manager of Government & Public Relations for ARCO            
 Alaska, stated their opposition to SB 185.  He said the legislation           
 casts an ominous shadow over the future because it will introduce             
 further future tax uncertainty and drive even more investment                 
 dollars from Alaska.                                                          
 Most Alaskans agree that oil and gas development is and will be the           
 economic life blood of this state.  Therefore, ARCO thinks it is in           
 the state's interest to encourage this activity to attract                    
 investment back to Alaska.  ARCO has a long history of commitment             
 to the state, but they do have a broad range of investment                    
 opportunities, both in Alaska and other locations.                            
 Mr. Findling stated that SB 185 is not intended to collect the                
 correct amount of tax, rather it is designed to allow the                     
 Department of Revenue to have unlimited time to invent constantly             
 changing schemes to collect more tax than the Legislature ever                
 Concluding his comments, Mr. Findling said ARCO believes that the             
 state can choose a considered approach for the future in which the            
 value of tax certainty is seen and investment by the oil industry             
 is encouraged.                                                                
 Number 150                                                                    
 NORMA CALVERT, representing Marathon Oil Company, stated the                  
 company's opposition to SB 185 because they feel it is bad                    
 legislation, both for the State of Alaska and for the taxpayers.              
 Ms. Calvert said Section 2 of SB 185 has the potential to require             
 the taxpayer to stand ready forever and a day.  It permits the                
 Department of Revenue to increase or decrease the amount of tax by            
 amending an assessment at any time during the administrative                  
 consideration of the taxpayer's grievance on an assessment, or a              
 claim for credit, or a refund of a tax.  This rule, if adopted,               
 would differ from the rules of most other states' tax                         
 Referring to Section 3, which extends the period of limitations               
 during which the tax may be collected by levy or by proceedings in            
 court to six years after a final administrative or judicial                   
 resolution, Mr. Calvert said Marathon believes it is unreasonable             
 considering that other states and the federal government suspend a            
 statute in similar situations.  For example, in Texas, the statute            
 of limitations on a levy is suspended where the assessment is                 
 challenged in court, and the federal system is similar.  Alaska, in           
 extending the period for six years after the final administrative             
 or judicial proceeding, is going beyond what is considered                    
 reasonable in other jurisdictions.                                            
 Ms. Calvert stated the members of Marathon Oil respectfully request           
 that the members of the Senate Labor & Commerce Committee reject SB
 Number 244                                                                    
 VAL MOLYNEAUX, representing VECO International, Inc. and Norcon,              
 Inc, stated VECO's opposition to SB 185.                                      
 Mr. Molyneaux pointed out that since the economic Limit Factor Tax            
 (ELF) was introduced during 1989, various major oil industries have           
 left the State of Alaska.  They include Chevron, Amoco, Texaco and            
 Conoco.  These companies are now investing their time and money in            
 other locations.  The passage of SB 185 would probably result in              
 the remaining major oil companies, Exxon, BP and ARCO to invest               
 their exploration and development dollars in more favorable                   
 business environments around the world and not in Alaska.                     
 In conclusion, Mr. Molyneaux said passage of SB 185 would most                
 likely result in the loss of jobs for Alaskans and reduction in               
 revenues to the State of Alaska.                                              
 Number 300                                                                    
 BECKY GAY, Executive Director, Resource Development Council,                  
 testified from Anchorage in strong opposition to SB 185.                      
 The council believes SB 185 is bad policy for the following                   
 reasons:  it is a disincentive for timely assessments; it rewards             
 and it codifies bad behavior; it will discourage investment for               
 Alaska; it is unfair because it singles out one industry on which             
 to apply retroactive taxes; and it is a shortsighted attempt to               
 retroactively beef up the present while shortchanging the future of           
 resource investment in Alaska.                                                
 Ms. Gay stated the council's support for the testimony in                     
 opposition to SB 185 by the oil companies and AOGA.                           
 Number 351                                                                    
 JOHN RINGSTAD, representing BP Exploration (Alaska) Inc.,  stated             
 their endorsement of previous testimony on SB 185 by Paul Sullivan            
 of Exxon and of the Alaska Oil & Gas Association.                             
 Mr. Ringstad said passage of SB 185 will mean the only way a                  
 taxpayer can gain closure on a tax obligation will be to pay                  
 whatever the auditors determine in the first assessment, otherwise            
 there is prospect of a second or maybe eighth assessment.                     
 Also, SB 185 seriously interferes with the state's judicial                   
 process.  The state lost its argument before the Superior Court in            
 this issue, and the Supreme Court is scheduled to hear it next                
 month.  The Administration is asking the Legislature to pass a bill           
 clarifying the original legislation before the Supreme Court                  
 reviews a case.  In effect, the Legislature is being asked to tell            
 the Superior Court that the statute it interpreted was a phoney and           
 SB 185 is really the authentic legislation.                                   
 Mr. Ringstad cautioned that SB 185 means more litigation, not less,           
 and he suggested the committee take independent advice about the              
 constitutionality of it.                                                      
 Number 400                                                                    
 On conclusion of the public testimony, there was a question and               
 answer period between the members of the committee and Attorney               
 General Bothelo.  SENATOR KELLY then stated SB 185 would be back              
 before the committee at a later date.                                         
 There being no further business to come before the committee, the             
 meeting was adjourned at 4:20 p.m.                                            

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