HB 1-SPECIE AS LEGAL TENDER  4:41:41 PM CHAIR CARRICK announced that the next order of business would be HOUSE BILL NO. 1, "An Act relating to specie as legal tender in the state; and relating to borough and city sales and use taxes on specie." CHAIR CARRICK opened public testimony on HB 1. 4:42:22 PM DANIEL DIAZ, Executive Director, Citizens for Sound Money, testified in support of HB 1. He said that Citizens for Sound Money promotes the use of sound money and protects people's rights to do so. He said that the organization has been active throughout the country, including Florida and Missouri. He remarked that these states had recently passed legislation supporting gold and silver as legal tender. He said that a reason for this is because since 1971 the United States Dollar (USD) has lost approximately 98 percent of purchasing power. He said that given a study from the previous year, about 78 percent of Americans are living "paycheck to paycheck." He said that he has come across individuals who were struggling and gave an example of an Uber driver he met in Missouri who was struggling with retirement. He discussed a similar story in New Hampshire regarding an individual's difficulty in making ends meet. He said that given the loss of the purchasing power of the USD, people are struggling to get by. He remarked that by bringing gold and silver back as tender, it would give people the option to save some "economic energy." He said that these precious metals have consistently stored value that fights inflation. By removing the sales tax on gold and silver, it would remove penalties from people who are trying to preserve their wealth and purchasing power. He commended Representative McCabe for pushing the bill and others who have testified in support of this legislation. 4:46:27 PM NILLS ANDREASSEN, Executive Director, Alaska Municipal League (AML), explained that he would seek answers to questions to better understand the proposed legislation and its impact. He said that to his understanding silver coins of the United States that are legal tender already would include nickels, dimes, and quarters and inquired what else would be included under the bill. He said that the Coinage Act of 1965 already states that these are legal tender for public debt and how exactly this proposed legislation would intersect with pre-existing federal legislation he did not know. He said that the legislation states that people do not need to accept gold or silver specie and asked about state and local governments since they are not people. He asked whether this would apply to government and whether there was a fiscal note for it. He opined that local governments were not equipped to accommodate specie. He said that Alaska Statute (AS) 01.10.060 definitions suggest that a person could include corporations, company partnerships, firms, associations, organizations, business trusts or society, and a natural person. He explained definitions associated with "persons." He asked whether the state would hire an assayer to authenticate the weight and purity of the new tender and whether local governments should do the same and, furthermore, whether the state should start gathering a list of approved assayers. He said that assayers in other states have received a fiscal note of between $61,000 and $193,000 and asked whether this should be expected and the department to which they would belong. He asked if there would be a licensing process for this and a board to oversee this. He also asked what regulations would be necessary to determine precious metal pricing. He discussed complications with spot prices and the challenges with market fluctuations. He said that the legislation does not specify how the state would manage these fluctuations. He also asked whether the Department of Revenue would be involved as well, how local governments should account for gold specie, cash, or assets, and what accounting standards should be used. He talked about minted coins being already in circulation. MR. ANDREASSEN said that the remaining questions pertain to foreign coins, non-circulating legal tender, and coins in the world catalog. Furthermore, he asked how the legislation would intersect with other legal codes and there was a litany of other questions that would need to be answered. CHAIR CARRICK noted that she appreciated the questions and asked for them to be forwarded to the committee members. 4:51:47 PM LAWRENCE HILTON, General Counsel, United Precious Metals Association, testified in support of HB 1. He remarked that United Precious Metals is dedicated to helping people. He discussed the Gold and Silver Coin Act of 1985, [a combination of the Gold Bullion Coin Act of 1985 and the Liberty Coin Act], which was adopted at the federal level during the Reagan Administration. He said that the proposed legislation has some important levels of consumer protection. Furthermore, he described the issue of capital gains tax relative to gold and silver. He said that when using gold and silver that is not classified as legal tender, under Internal Revenue Code (IRC) Section 1001(b) there would be a requirement to calculate the capital gains. He said that by making gold and silver legal tender, it becomes money and gets excluded from the laborious and difficult capital gains calculation when transacting in gold and silver. He pointed out that Alaska is the number two producer of refined gold in the United States. He said that Alaska has a large measure of gold in the economy, and the bill would promote the use of gold and promote Alaska's economy. MR. HILTON noted that there was some suggestion that municipalities would be required to accept gold or silver as payment. However, the bill explicitly states that no person shall be required to do so, and participation is entirely voluntary. He said it is important for the committee to understand this point clearly. Additionally, the bill references a Federal Criminal Statute, 18 U.S. Code 486, which imposes liability on individuals who "utter or pass" precious metal currency. There is, however, a critical qualifier: "unless otherwise authorized by law". This bill would create a legal safe harbor in which Alaskans can operate without fear of federal prosecution under 486. This concern was raised previously. During the Reagan Administration, there was a reintroduction or re-mintage of gold and silver coins in 1985. A little known provision from that time requires the Secretary of the Treasury to apply all proceeds from the sale of gold toward reducing national debt. When asked how this mechanism was intended to work, then-Treasury Secretary Donald Regan explained to one of the board members that the idea was to give Americans the ability to replace the current debt-based monetary system with a solid, sound money currency. As people adopted gold and silver coins, they would gradually retire from the old system. He talked about consumer protection and said that the proposed bill has many consumer protections. He then talked about capital gains tax, if using non legal gold and silver. He mentioned IRC code section 1001b and talked about calculating capital gains tax. 4:56:46 PM CHAIR CARRICK, after ascertaining there was no one else who wished to testify, closed public testimony on HB 1. 4:57:01 PM REPRESENTATIVE HOLLAND moved to adopt Amendment 1 to HB 1, labeled 34-LS0001\A.1, Nauman, 5/8/25, which read as follows: Page 2, line 3, following "the": Insert "value of the gold or silver contained within specie during the" Page 2, line 13, following "the": Insert "value of the gold or silver contained within specie during the" CHAIR CARRICK objected for the purpose of discussion. REPRESENTATIVE HOLLAND said that Amendment 1 would insert language regarding the value of gold and silver contained in the specie, into the language of the bill. He said that this was brought forward with his efforts and joint discussions with the prime sponsor, Representative McCabe. He said this was to clarify whether the sales tax would be on any sort of gold or silver that might meet the page 3 definition of legal tender. He said that it could be a Roman Coin from 2,000 years ago, in which case, the sales tax might be exempted on the collectible value of it, versus the intent of the bill which is to exempt the use of specie as a form of value based on actual precious metal content. He said that Amendment 1 is an attempt to provide some clarification of what the sales tax is being exempted on. He believed Amendment 1 would conform to the intent of the bill and sales tax differences could be clarified between monetary use based on precious metal value and collection value. He said if it was a Roman Coin made from gold that had a value beyond its precious metal price, then the remaining value would be subject to sales tax. He allowed that the proposed amendment may not be perfect, but it was an attempt to clarify and protect the intent of the bill and he welcomed any questions. 4:58:56 PM REPRESENTATIVE MCCABE responded that this was discussed with The Sound Money Group and Mr. Diaz. He said that Amendment 1 was not necessary because if a $10,000 gold Roman coin were used, it would be a barter as opposed to being used as a currency. He said the amendment would not impair the original intent of the bill and he was neither in opposition nor support of the amendment. 5:00:41 PM REPRESENTATIVE HIMSCHOOT said that she has continually been troubled by when the Federal Government issues USDs and it is counterfeit if anybody else issues it. She wondered that with HB 1, whether there could be multiple sources of specie. She said she may support the amendment because it pertains to the value or the amount of gold or silver in the tender. 5:01:41 PM REPRESENTATIVE MCCABE responded yes, when the government issues a bill that is not gold and it is counterfeit, it would be a crime. He told the committee to remember that when dealing with gold, it has nothing to do with bill currency. He said that it pertains to using metals under the U.S. Constitution as legal tender. He talked about consumer protections associated with counterfeiting gold and compared them to using a brown pen when authenticating 100-dollar bills. He talked about using serial numbers and other means of authentication for previous metals. He said that conflating this issue with dollar bills would mean that the legislation is not being thought of in the correct terms. 5:02:58 PM REPRESENTATIVE HIMSCHOOT commented on the specie example that was previously brought to the committee. She said that if someone had a different instrument and claimed there was a certain amount of gold in it, someone may not know how much was in it unless they had the appropriate equipment or tools. She was unsure whether the sentiment had to do with just counterfeiting but assuring consumer protection when trading in the new legal tender. REPRESENTATIVE MCCABE responded that Mr. Hilton could better address this. He said that someone could absolutely use a Loony or Krugerrand, and it would require stamping and weight. He opined that Goldback specie is less counterfeitable due to protections that Goldbacks have. 5:04:48 PM MR. HILTON explained gold and silver are valued based on form, weight, and purity, which means the monetary worth of a unit depends on its physical characteristics and associated premiums. For example, a 400-ounce gold bar used by central banks carries a different metal value than a Goldback, which contains just one-thousandth of an ounce. He commented that states often address this by exempting the value of gold or silver instruments from taxation up to a certain percentage above the spot price, typically based on the 400-ounce bar standard. He noted that collectibles or jewelry may be worth many times more than the raw metal value, so a capsuch as 100 percent over the spot priceis suggested to maintain fairness. He commented that the London Bullion Market Association (LBMA) publishes a daily fix based on the 400-ounce delivery bar, while the United Precious Metals Association (UPMA) provides a rate based on U.S. minted gold coins, each reflecting different premiums. Therefore, a reasonable approach is to define value as a percentage over the most recent LBMA daily fix. 5:07:25 PM CHAIR CARRICK removed her objection to Amendment 1. There being no further objection, Amendment 1 was adopted. 5:07:38 PM CHAIR CARRICK moved to adopt Amendment 2 to HB 1, labeled 34- LS0001\A.2, Nauman, 5/14/25, which read as follows: Page 3, line 11, following "state.": Insert "The committee shall also study consumer protections and consumer behavior related to the sale and use of specie." CHAIR CARRICK stated that she would object to Amendment 2 for the purpose of discussion. She said that Amendment 2 would simply add to the last section of the proposed legislation. She said that it would include a Joint Legislative Budget and Audit Committee study regarding consumer protection, consumer behavior related to sale and use of specie. It was to her understanding that this type of tender is already being used in Alaska, and a study could help illustrate circulation. Her intent is to have the scope of the study look at this type of information and help develop a better specie market in Alaska. CHAIR CARRICK responded to a previous concern from Representative Story regarding consumer protection. She said that when embarking on this legislative route, she wanted the scope of the study to also include what types of consumer protection issues may have arisen and what would be done to mitigate any outstanding issues. She deferred to Representative McCabe, bill sponsor, for any comments. 5:09:11 PM REPRESENTATIVE MCCABE said that he was fine with Amendment 2 and remarked that he thinks this type of study is what the Joint Legislative Budget and Audit Committee would typically conduct; the amendment would clarify what was being requested. 5:09:36 PM REPRESENTATIVE VANCE said that perhaps when conducting this study, cryptocurrencies such as Bitcoin could be evaluated as well. CHAIR CARRICK removed her objection to the motion to adopt Amendment 2. There being no further objection, Amendment 2 was adopted. 5:10:11 PM The committee took an at-ease from 5:10 p.m. to 5:13 p.m. 5:13:08 PM CHAIR CARRICK noted that HB 1, as amended, was before the committee. 5:13:28 PM REPRESENTATIVE STORY sought clarification regarding the timeline of the study. She explained that language on page 3, [subsection (c), beginning on line 9], led her to think the study would happen first; however, further review of the bill indicated that "something would be enacted and then they're studying it." Next, she inquired how much lost revenue due to tax changes would impact municipalities. Finally, she asked for feedback regarding the statements of previous testifiers: elaboration on the premium that would be added depending on daily pricing and any adverse impacts to municipalities there may be with a value percentage and exemptions in place. 5:15:15 PM REPRESENTATIVE MCCABE proffered that when running a previous version of the bill, AML suggested that there would be several million dollars in lost revenue to the state but did not provide any data to support that. He said as sponsor, when collecting data and speaking to several cities that had a sales tax, he found that many cities like Wasilla could not "parse it out." He said it is hard to distinguish the difference between a store that sells teddy bears and one that sells gold coins. The tax estimates were not that granular in detail and made impact assessments difficult. He said that estimations were based on other states that did have data and were of an equal population. He said the result of this study was that $27,000 in lost tax revenue across the state was estimated. He felt that this lost tax revenue would be mitigated by gaining resilience to any strong negative downturns of the USD. He said people would have stable stored value and this would be a more important benefit than the loss of $27,000 in tax revenue in a state of over 700,000 people. He said that he was happy to share these calculations with the committee. REPRESENTATIVE MCCABE, in response to previous comments from Mr. Andreassen, said that nickels, dimes, and quarters are not made from silver unless they were made prior to 1964. He urged caution in making this kind of misclassification. He offered his understanding that the State of Alaska would not be required to accept this type of new payment and, thus, there would be no assayer and need for additional staff. He said that the bill would not create a repository, and this was not part of the legislation. He said all that HB 1 would do is allow specie to be used as legal tender, which he said was allowed under the U.S. Constitution. He referred to legal codes previously mentioned in testimony. He said that any Internal Revenue Service (IRS) tax liability would be between the person and the IRS. CHAIR CARRICK said that she would like to see questions answered regarding this legislation at an upcoming committee meeting. CHAIR CARRICK announced that HB 1, as amended, was held over.