HB 70-MUNICIPAL PROPERTY TAX EXEMPTIONS  8:03:50 AM CHAIR MCCORMICK announced that the first order of business would be HOUSE BILL NO. 70, "An Act relating to property exempt from municipal taxation." 8:04:18 AM REPRESENTATIVE FRANK TOMASZEWSKI, Alaska State Legislature, as prime sponsor, thanked the committee for hearing HB 70 and introduced his staff to give an overview of the bill. 8:04:43 AM MICHAELLA ANDERSON, Staff, Representative Frank Tomaszewski, Alaska State Legislature, gave a brief overview of HB 70 on behalf of Representative Tomaszewski, prime sponsor. She paraphrased the sponsor statement [included in the committee packet] which read as follows [original punctuation provided]: House Bill 70 adds new language exempting non- profits from municipal taxation on certain properties. This includes parking lots owned by non-profits and used for parking or other uses free of charge. This also includes property of a store operated by a non- profit that distributes food, shelter, clothes, or health care for below market value or free. Additionally, this maintains a non-profit's tax exemption if they rent out their property to another non-profit. The Fairbanks Community Food Bank was founded in 1982 in the midst of a recession. People were struggling to put food on their table, but stores had an excess and food was going to waste. While in the first year they collected and distributed a few thousand pounds of food to a couple hundred people, they now collect and distribute approximately five million pounds of food. Food banks and other charitable non-profits are a pillar of our communities. They help our communities' least fortunate when they need basic goods and services. Of course, many nonprofits turn to fundraising and facility rentals to keep their lights on and doors open so they can continue to provide their essential services. This bill aims to support our non-profits in a time of economic uncertainty in our state. With revenues being down and permanent fund dividends being cut creating a regressive tax on our least fortunate, we must help those who help those in need. MS. ANDERSON pointed out locations on a service map [included in the committee packet], showing all areas the Fairbanks Community Food Bank had assisted with "food through shipping." 8:06:38 AM REPRESENTATIVE HIMSCHOOT asked if Representative Tomaszewski's office had spoken with any local municipalities about the possible impact of HB 70 on local revenue. MS. ANDERSON replied that Representative Tomaszewski's staff have talked to the Fairbanks North Star Borough and are currently working with the borough on potential minor changes in the bill language that would work better. She noted she had not reached out to any other municipalities. REPRESENTATIVE HIMSCHOOT questioned what the potential impacts to education funding would be in terms of how the cap is related to property tax. MS. ANDERSON replied that she can provide the answer at a later date. REPRESENTATIVE HIMSCHOOT presumed that this would be a state statute governing what happens at the local level while removing some of the tax base at the local level, and she inquired about a tax reimbursement. MS. ANDERSON replied that staff can do research and provide the committee with clarification at a later date. 8:08:35 AM REPRESENTATIVE TOMASZEWSKI explained that the food bank traditionally has had no property taxes; this would be new revenue from the municipality. 8:09:16 AM REPRESENTATIVE HIMSCHOOT commented that she favored local control. She stated she will have to look into HB 70 more. 8:09:41 AM REPRESENTATIVE RUFFRIDGE, [regarding Section 1 of HB 70, which lists property exempt from taxation], referenced [subsection (3)], beginning on page 2, line 16, which read: (3) property used exclusively for nonprofit religious, charitable, cemetery, hospital, or educational purposes; REPRESENTATIVE RUFFRIDGE questioned why the additional language [proposed on page 3, line 19, through page 4, line 2] is necessary and not covered already by subsection (3). MS. ANDERSON replied that the intent of the added language is to make explicit in statute that the other instances would be exempt. 8:10:43 AM REPRESENTATIVE MCCABE asked Representative Tomaszewski to confirm that the City of Fairbanks is trying to tax the foodbank, which does not make money. REPRESENTATIVE TOMASZEWSKI responded that the food bank brings in food donated by many organizations and gives the food away for free. 8:12:04 AM MS. ANDERSON clarified to Representative McCabe it is the Fairbanks North Star Borough, not just the City of Fairbanks. 8:12:11 AM REPRESENTATIVE MCCABE asked for clarity that the food bank does not have any income to speak of other than what is donated to them, but under HB 70, it would have to find a source of revenue to pay taxes to the Fairbanks North Star Borough. REPRESENTATIVE TOMASZEWSKI replied he did not know about income sources; mostly [food banks] work on grants and do not generate a lot of money. 8:13:00 AM MS. ANDERSON gave the sectional analysis for HB 70 [included in committee packet] which read as follows [original punctuation provided]: Section 1: Amends AS 29.45.0303(a) to add new subsections (11) and (12) (11): Adds parking lots (A) owned by organizations incorporated under state law being exempt under 26 U.S.C. 501(c) (B) that is used for parking or other use free of charge (12): Adds real and personal property of a store operated by organizations incorporated under state law being exempt under 26 U.S.C. 501(c) if the store (A) deals with exclusively donated inventory of food, shelter, clothes, or health care distributed at no cost to needy individuals (B) sells merchandise below market value to support a literacy program or a program providing needy persons with food, shelter, clothes, or health care free of charge. Section 2: Amends AS 29.45.030 to add a new subsection (o) stating organizations exempt from (a)(11) or (a)(12) may lease property and still qualify if (1): the leasing organization is incorporated under state law being exempt under 26 U.S.C. 501(c) and that organization uses the property for an exempt activity under (a)(11) or (12) (2): the lease payments are not the product of the owner's main profit motive (3): The amount charged is incidental and reasonable for the exempt use of the property not exceeding operational requirements for the activity. 8:15:00 AM REPRESENTATIVE HIMSCHOOT asked for understanding on whether it is a local decision to tax a parking lot. MS. ANDERSON offered her understanding it is under the discretion of local control. [HB 70 was held over.]