HB 416-BUSINESS LICENSE FEE 6:14:56 PM CO-CHAIR NEUMAN announced that the next order of business would be HOUSE BILL NO. 416, "An Act relating to the amount of the state business license fee." 6:15:10 PM JIM POUND, Staff to Representative Jay Ramras, Alaska State Legislature, explained that HB 416 will [repeal] the [increase in the business license fee] made by [House Bill 162] in 2003, which was at a time when [the State of Alaska] was seeking additional sources of revenue due to low oil prices. He opined that [HB 416] sends a message that Alaska is open for business, especially for small business. He further opined that by reducing [the State of Alaska's] business license fee from $100 back to $25 per year, Alaskans will be more willing to pursue business ideas. 6:15:41 PM MR. POUND remarked that HB 416 removes the burden placed on small business by the [State of Alaska]. With [the cost of] oil currently at an all-time high and not expected to ever drop to record lows and with natural gas "on the horizon," HB 416 is good for the Alaska economy by supporting "Mom and Pop" businesses in Alaska. CO-CHAIR NEUMAN commented that as a small business owner, he appreciates the intent of [HB 416]. He opined that reducing [the business license fee] would encourage more people to obtain a business license. 6:16:46 PM CO-CHAIR RAMRAS noted that the accompanying fiscal note is significant - $4.25 million per year. He further noted that 90 percent of Alaska's revenue is a result of the oil and gas industry and that one of the primary reasons Alaska doesn't have a sales tax is because it's still growing. He remarked that some Alaskans maintain multiple businesses and [the business license fee of $100 per year] hinders non oil- and gas-related growth in [Alaska's] economy. 6:19:23 PM REPRESENTATIVE LYNN moved [to adopt] CSHB 416, Version 24- LS1555\F, Bannister, 2/10/06, as the working document. There being no objection, Version F was before the committee. 6:19:59 PM REPRESENTATIVE CRAWFORD recalled his opposition to [increasing] the business tax [in 2003]. He said, "I thought it was the wrong idea at the time and I think it's a good thing that we're repealing it today." REPRESENTATIVE LYNN commented that [a bill is a good] when the government can lower taxes. He added that [CSHB 416] sends a good message that when a tax is no longer needed, [the legislature] will reduce it. 6:20:58 PM REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, informed the committee that he voted for the [business license fee] increase in [2003]. He commented that due to the circumstances with which [the legislature] was faced at that time, it was a "close call" whether it was the right thing to do. [House Bill 162] was a revenue measure to fill a significant gap. He added that [the business license fee] effects commerce and business in Alaska. 6:23:08 PM CO-CHAIR RAMRAS remarked that he hadn't been able to determine how many business licenses have been sold in Alaska. REPRESENTATIVE STOLTZE relayed that dealing with the Department of Revenue (DOR) has been a frustrating [process]. He added that for something that was a significant state policy enacted just three years ago, it should be very clearly delineated in the revenue sourcebooks. REPRESENTATIVE COGHILL inquired as to whether 74,000 business licenses is as close as Representative Stoltze has been able to [approximate]. REPRESENTATIVE STOLTZE responded that there's no clear delineation in the revenue sourcebooks. 6:26:32 PM RICK URION, Director, Division of Occupational Licensing, Department of Commerce, Community, & Economic Development (DCCED0, assured the committee that the division is able to inform the committee as to the number of business licenses it has sold this year, last year, and every year. 6:27:26 PM MR. URION informed the committee that [CSHB 416] is going to cost money. With the Murkowski Administration, DCCED was charged with trying to generate more revenue to pay for the services it provides. The DCCED has very few sources of revenue, although one of them is the business license fee. He explained that [the business license fee] is a tax - it is a source of revenue. [The business license fee] was increased from $25 to $100 per year. It was the first and only time [the business license fee] has been increased since 1949, "when the license law went on the books." He noted that there has never been a person in the history of the state or territory that's been fined for not having a business license. 6:28:28 PM MR. URION, in response to Co-Chair Ramras, clarified that the business license fee was increased by 400 percent [in 2003]. He informed the committee that [with the business license fee increase], the number of business licenses [sold] essentially remained the same. He added that if [the business license fee] is decreased to $25, the Division of Occupational Licensing will not be effected. The biggest recipient of the funds from [the business license fee] is the Alaska Travel Industry Association (ATIA), which receives $2.5 million. Other recipients include: the Office of Economic Development, the Division of Community Advocacy, the Division of Occupational Licensing, legislative grants, the Office of the Governor, and the Tax Division within the DOR. 6:30:27 PM REPRESENTATIVE LYNN inquired as to the point of having a [business] license if a noncompliance fine is never collected. MR. URION explained that the Division of Occupational Licensing doesn't want to punish those who aren't in compliance, but would rather have them be in compliance. In further response to Representative Lynn, he informed the committee that the division doesn't have the means to "go after" those who aren't in compliance. Therefore, he asked the legislature to change that. The fine for noncompliance is $2,000. If [the business license fee is decreased] to $25, he asked that the legislature make [not having a business license] a misdemeanor. He opined that if the division was able to collect a [noncompliance] fine, [business license fees] would be a lot easier to enforce. 6:31:56 PM MR. URION added that another thing the legislature would be able to do if it decided not to [decrease the business license fee] to $25, is allow [Alaskans] with multiple lines of business to [conduct business with] one business license. Currently, the law reads that the Division of Occupational Licensing has to sell business licenses for every line of business. 6:32:35 PM CO-CHAIR RAMRAS referred to Section 1, lines 5-7, which read: "If a person knowingly engages in a business in the state without having a current license issued under (a) of this section, the person is guilty of an infraction and may be fined up to $50." He asked, "Is that severe enough, in your estimation?" MR. URION replied yes. CO-CHAIR RAMRAS related his understanding that Mr. Urion would recommend that a member make a conceptual amendment to further consolidate business licenses. 6:33:26 PM MR. URION answered that it depends on whether the committee is going to [decrease the business license fee] to $25, in which case [consolidating business licenses] "probably won't make that much of a difference." He added that he would be able to bring the committee the amendment that would allow one business license for multiple lines of business, as long as he/she operates under the same business name. 6:34:29 PM CO-CHAIR RAMRAS, in regard to when the business license fee was increased and the funds were [allocated] to ATIA and other agencies, inquired as to from where ATIA and other agencies [previously received] funding. MR. URION answered that it was a new funding source. 6:35:33 PM REPRESENTATIVE COGHILL opined that when [the legislature] voted for [House Bill 162 in 2003] it was a "pretty good sized jump." He expressed his reluctance to "rapid change" with the justification based on inflation, for example. He added, "I don't think we're probably going to have the money to reimburse them." 6:38:19 PM REPRESENTATIVE CRAWFORD discussed the difference between a fee and a tax. A fee is supposed to be the amount of money the government charges to run a program or department. A tax is a revenue measure that's designed to [generate] money and run the general fund. He expressed his belief that [the business license fee] isn't truly a fee. He said, "It's a tax - a revenue measure - and we just didn't call it that." 6:39:58 PM CO-CHAIR NEUMAN, upon determining that no one else wished to testify, announced the closure of public testimony. 6:40:19 PM REPRESENTATIVE LYNN moved to report CSHB 416, Version 24- LS1555\F, Bannister, 2/10/06, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 416(EDT) was reported out of the House Special Committee on Economic Development, International Trade and Tourism.