HB 333-TAX CREDIT CHILD CARE/UTILITY/HOUSE/FOOD 5:15:45 PM CHAIR SUMNER announced that the final order of business would be HOUSE BILL NO. 333 "An Act establishing a corporate income tax credit for certain expenditures on child care services, utility rates, residential housing, and food security and availability; and providing for an effective date." 5:16:16 PM FADIL LIMANI, Deputy Commissioner, Department of Revenue, Office of the Commissioner, presented HB 333, on behalf of the House Rules Standing Committee, sponsor by request of the governor. He directed attention to a PowerPoint presentation, entitled "House Bill 333" [hard copy included in the committee packet and began on slide 2, "HB 333 Overview," which read as follows [original punctuation provided]: This proposed legislation focuses on four key areas: • Childcare • Housing • Energy • Food Security The idea behind this legislation is that it creates a tax incentive for Corporations and businesses to offset their corporate income tax liability for qualified expenditures in those key areas. The Department of Revenue will define the qualified expenditures through regulations. Further, the tax credits are limited to 50% of qualified expenditures and may not exceed 50% of the Corporation's tax liability for any year. MR. LIMANI continued to slide 3, which featured data demonstrating the annual general fund (GF) revenue from corporate income tax, totaling $436 million. He turned to slide 4, "HB 333 Estimated Revenue Impact," which read as follows [original punctuation provided]: At this time, we don't have clear visibility on the revenue impact as we can't predict taxpayer behavior and how much they may contribute to each of these areas; however, we have run an analysis and determined the maximum revenue impact to the State on Corporate Income Tax Revenue would range from ($238) million in FY25 to ($267) million in FY30. MR. LIMANI estimated that the maximum impact on tax revenue ranges from -$237.6 million in FY 25 to -$266.8 million in FY 30. CHAIR SUMNER asked how Mr. Limani would envision a credit of $239 million. MR. LIMANI said the modeling looks at the maximum amount based on the 50 percent threshold, which would include both petroleum and non-petroleum revenue. Returning to slide 4, he reported that the maximum impact on non-petroleum corporate income tax revenue would range from -$87.5 million in FY 25 to -$126.3 million in FY 30. Maximum impact on petroleum corporate income tax revenue ranges from -$150.1 million to $140.5 million. 5:20:16 PM MR. LIMANI proceeded to slide 5, "HB 333 Implementation Cost," which read as follows [original punctuation provided]: The department will need to make minor changes to its Tax Revenue Management System (TRMS) and tax forms to implement this bill. The Tax Division will use existing resources to absorb the costs to update tax forms, TRMS, and other miscellaneous implementation costs. 5:21:31 PM REPRESENTATIVE RUFFRIDGE referred to paragraph (3) on page 1, line 12, and asked whether there would be an application process for this tax credit. MICHAEL WILLIAMS, Director, Division of Tax, Department of Revenue (DOR), said a number of things could be developed through the regulatory process. He referenced a rebate program that was offered through [the Alaska Housing Finance Corporation (AHFC)] that was partially funded through state dollars and said he envisioned similar contributions qualifying for the credit in HB 333. Another qualifying expenditure could be on-site childcare provided by employers. MR. LIMANI said the obligations of corporate expenses would not change on the administrative front. From the regulation standpoint, he highlighted the need to define the qualified expenditures and who the recipients would be. 5:23:56 PM REPRESENTATIVE RUFFRIDGE asked whether organizations attempting to driving down the state's energy costs would be eligible for the tax credit. MR. WILLIAMS said that that is an example of what the regulatory process would contemplate. 5:24:59 PM REPRESENTATIVE SADDLER observed that the bill language is vague in terms of implementation. He asked how an organization would demonstrate its contribution to decreasing heating or mortgage rates or improving food security. MR. LIMANI said that the idea behind the legislation is to keep it vague for the intended purpose of meeting with stakeholders and refining regulation. REPRESENTATIVE SADDLER suggested doing that work first. 5:26:41 PM REPRESENTATIVE WRIGHT asked how many broad-based taxes exist in Alaska. MR. LIMANI said currently, there are none. REPRESENTATIVE WRIGHT asked whether corporate income tax in the only lever available to incentivize investments and whether that's the primary intent of the proposed legislation. MR. LIMANI answered yes, corporate income tax is the only way to incentivize investment and development within the state. 5:27:44 PM CHAIR SUMNER announced that HB 333 would be held over.