HOUSE BILL NO. 216 An Act relating to municipal taxation of refined fuel products. Co-Chair Harris MOVED to ADOPT work draft #23-LS0822\U, Cook, 5/4/03, as the version of the bill before the Committee. There being NO OBJECTION, it was adopted. JOSH APPLEBEE, STAFF, REPRESENTATIVE TOM ANDERSON, accompanied Randy Ruaro to the table. RANDY RUARO, STAFF, REPRESENTATIVE BILL WILLIAMS, noted that changes had been made to Section 3, which addresses the "scope" of the bill. The previous version was broad and the language needed to be narrowed so that the bill would prohibit tax on both sale transfers of fuel refined within the boundaries of the borough. He stated that the previous version created issues across the State within the municipalities. He claimed that the proposed version was acceptable. Representative Croft questioned the changes. Mr. Ruaro stated that the entire Section 3 had been rewritten to preclude taxes on wholesale transfer of fuel refined within the boundaries of a borough. Representative Croft noted that language from the "Q" version would be deleting fuel used in the aircraft and leaving in the wholesale transfer portion. Mr. Ruaro replied that the initial difference was in regard to what the prohibition actually could apply to. In the previous "Q" version, it would apply to any borough around the State, whereas, the current version allows it to be limited to boroughs where the prohibition applies. He added that in the previous version, fewer boroughs could apply. That language is listed on Page 1, Lines 11 & 12. Co-Chair Harris asked if the bill dealt with an increase to the fuel tax. Mr. Ruaro responded that the bill does not levy a fuel tax. Representative Joule inquired why would the Legislature want to remove a tool from the municipalities. He thought that section would "hurt" the municipalities. Mr. Ruaro clarified that it had been a policy decision. He noted that Mr. Cook had addressed the idea in a previous committee hearing. Representative Joule understood that the bill's language currently only affects a few areas in the State. Representative Croft advised that the policy was more logical than that. It currently states that the "only boroughs that can not access the tax, would be the ones that have the refinement in their district". He commented that it would be best to indicate only boroughs that actually refine it, could tax it. By passing the "U" version, Fairbanks could not tax but every other municipality could. Representative Croft warned that there will be problems within the multiple jurisdictions. Representative Whitaker agreed with Representative Croft's interpretation. In response to Representative Joule's concerns, he admitted that he too had concerns. He believed that it would be challenged and overturned. The conclusion is that the only tax that remains in place would be the ones imposed within the boundaries of the borough. He noted, a broader statewide concern is that by allowing a borough to tax, then the transfer of goods becomes essentially a "restraint of trade". He believed that would create problems for the State. He added that the legislation does have significant merit. Representative Whitaker agreed with the concerns voiced by Representative Croft. Mr. Ruaro referenced the May 29th, 2002, letter received from attorney, Mr. Avrum Gross, regarding the ability of successive jurisdictions to tax. The version of the bill does not give authority to the successive jurisdictions to impose a tax. (Letter in Packet). He reiterated that in the proposed bill, that question would be left unanswered. Representative Croft noted that it would remove the right that municipalities know they have and leave the right that we are not sure they have. He did not understand the "fix". Co-Chair Williams noted that he would like to hold the bill in Committee until some of the questions have been answered. Co-Chair Harris noted that the "Q" version deals with turban powered aircraft. He asked why that had not been in the proposed version. Mr. Ruaro replied that section of the "Q" version was part of a tax that would occur outside borough boundaries and have refineries in them. The committee substitute was changed to apply only to boroughs with refineries within their boundaries. Co-Chair Williams noted that HB 216 would be HELD in Committee for further consideration.