HOUSE BILL NO. 32 "An Act providing for the issuance of one business license for multiple lines of business; and providing for reissuance of a business license to correct a mistake on the license." 1:37:33 PM Vice-Chair Neuman explained that version Y of the CS was before the committee for discussion. Representative Costello introduced her legislation. She noted that the bill would allow individuals who apply for a business license to list several lines of business through the Department of Commerce, Community and Economic Development. The current practice dictated that if a license fell into several categories, several business licenses were required. The CS proposed a common-sense approach to licensing by allowing applicants to receive one business license while listing the activities or categories. Representative Costello mentioned another aspect of the bill allowing a change to an application to be made during a 30 day time period. Co-Chair Stoltze stated that most questions would be directed to the fiscal notes. He OPENED public testimony. 1:40:59 PM PEGGY ANN MCCONOCHIE, SELF, JUNEAU testified in support of the bill. She stated that she obtained a business license as a real estate broker and was required to have a separate business license for real estate education. She encouraged the committee to pass the legislation, as it allowed business owners to obtain reasonable fees. Co-Chair Stoltze asked if Ms. McConochie represented the National Federation of Independent Business (NFIB). Ms. McConochie replied that she was a member of NFIB, but spoke for herself in favor of the legislation. Co-Chair Stoltze CLOSED public testimony. He requested that Don Habeger testify with special attention to the bill's fiscal notes. 1:42:33 PM DON HABEGER, DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT testified on section 3, which opened a change for the business license within the first 30 days after the issuance. Occasionally business partners failed to agree about requested changes. He noted the potential that requests in those situations might be submitted repeatedly throughout the 30-day period. 1:45:00 PM Representative Wilson asked if the name of the company must be the same for both activities. She asked if a new license would be indicated if she wanted to change the business name. Mr. Habeger replied that if a business owner had identical owners and name, then the legislation allowed for multiple lines of business. He added that business partners could apply jointly. 1:47:01 PM Representative Wilson asked about the potential for two different businesses with different names. She wondered if she would have two different business licenses. Mr. Habeger concurred. Vice-Chair Neuman recalled that a brewery in Talkeetna wanted to open a restaurant. The statute stated that you could not own a brewery and then a restaurant. Mr. Habeger responded that if the brewery wished to change the license, there were licensing requirements from other agencies and organizations unrelated to business licensing. He noted that the professional licensing statute required that a professional license be secured prior to administration of another business license. The legislation addressed those businesses with the same name, interested in multiple lines of business. 1:49:31 PM Co-Chair Stoltze joked that the regulation of the alcohol industry would remain as complicated and convoluted as it always had been. Mr. Habeger laughed. 1:49:51 PM Co-Chair Austerman asked if the goal was to help small businesses in Alaska. He asked if the legislation defined small business. Mr. Habeger responded no. Co-Chair Austerman provided an example of a native corporation under the regional corporation and its subsidiaries and business licenses could become lumped under one name. He asked how many licenses could be wrapped under one business name. He expressed discomfort about the lack of parameters in the bill. 1:51:28 PM Representative Costello responded to Co-Chair Austerman's second question. If business name remained the same, the lines of business would involve approximately 20 different categories. She deferred the question about higher levels of categories to Mr. Habeger. Mr. Habeger stated that a current requirement in regulation was for businesses to operate their activities and advertise with their licensed business names. He believed that a large organization might choose to consolidate under the corporate name, which would not be prohibited by the proposed legislation. Co-Chair Austerman saw many businesses advertising under the Doing Business As (DBA) category. He discussed the need for legislative parameters. 1:53:29 PM Representative Munoz asked if a professional and business license could be consolidated. Mr. Habeger replied that the department had considered consolidating the two licensing fees, but the state faced an issue regarding the rewrite of the professional licensing database. The upgrade was necessary prior to matching the professional and business licensing databases. Representative Munoz asked if an opportunity for consolidation existed with the upcoming rewrite of the system. Mr. Habeger replied yes. 1:55:07 PM Representative Thompson noticed the $37,500 drop in revenue resulting from the legislation. He asked if an increase in business licenses was projected. Mr. Habeger replied that the department combined corporations and business license activity. He believed that the proposed changes would bring in more revenue than expenses. Representative Edgmon added that the benefit sometimes outweighed the cost. He stated that $37 thousand was a small price to pay to allow conveniences to small businesses. He commented that the native corporations and subsidiary companies were careful to set up a corporate liability for the separate businesses. He supposed that additional licenses would not be indicated. 1:57:23 PM Representative Gara asked about businesses that sold hand- made items once a year at a craft fair. He opined that operating once a year was not a "regular business" as stated in the statute. The division considered a onetime event a regular license. He asked if the division continued to interpret the statute in the same way. Mr. Habeger stated no. He agreed that one time a year was not considered a regular business. 1:59:33 PM Representative Gara stated that he liked the bill. He knew that larger businesses combined multiple services. He spoke about the size of a company. He wondered if a small business could potentially be identified by the number of employees. Representative Costello stated that the bill's fiscal note utilized data from 750 business license holders. She thought that the question might be better directed to the company. She understood that an elaborate business structure or higher type license for a corporation or Limited Liability Corporation (LLC) might not be served well by the legislation. The intent was to target Alaskans that applied for a business license with the intention of providing two or more of the specified service categories. She requested a response from the department regarding the 750 people affected by the passage of the proposed legislation. 2:02:15 PM Co-Chair Stoltze pointed out that many of the state's craft fairs lasted longer than one day. He added that municipal jurisdictions often established permitting requirements for such events. He wished to omit the idea that the state would exempt state fair or the Alaska Federation of Natives (AFN) vendors for their multi-day fairs. 2:03:13 PM Representative Thompson asked if there was a projected reduction in the price of Alaskan business licenses. Mr. Habeger stated that the business licensing fee was set in statute and regulated by the legislature. The current licensing fee was $50 per year and a biannual license for two years was also an option. Representative Thompson asked about vendors that sell homemade items out of their cars. Mr. Habeger replied that the privilege of doing business required a business license. He stated that additional definitions defined business as one that yielded a financial benefit to the business person. He appreciated Co-Chair Stoltze's comments regarding financial gain for any level of business. Representative Wilson asked about the determination of 750 affected businesses. 2:05:45 PM Mr. Habeger replied that a business license had certain elements required by statute. A business was not required to report their size to the department. Duplicate business names were researched in the department's database to arrive at the number. The line of business was also considered in the approximate determination of 750 businesses affected. He clarified that the figure was an estimate. 2:07:13 PM Co-Chair Austerman pointed out the change of wording from line of businesses to trade, service, protection or activities. He asked if the words trade, service, protection and activities were defined in statute. Mr. Habeger replied yes. Co-Chair Austerman asked if the definitions were a component of the research leading to the 750 affected business licenses. Mr. Habeger replied that the department searched the database and the terms trade, service, profession or activity provided a definition in statute. Co-Chair Austerman stated that he would look up the statute. Vice-Chair Neuman asked if the department offered fines or penalties for Alaskans doing business without a business license. Mr. Habeger replied that a fine limit of $300 was established in statute for a business operating without a business license. He noted that an investigation to determine the standard was expensive for the state. A letter citing the statute was delivered to business owners alerting them of the licensing requirement. Vice-Chair Neuman stated that the combined licenses might prove advantageous to the department. 2:10:08 PM Representative Edgmon asked about potential federal tax complications that might arise from the establishment of multiple businesses. Mr. Habeger stated that he was not familiar with the federal tax statutes. Co-Chair Stoltze stated that each individual business could decide how to address their tax issues. Representative Edgmon noted his support of the bill. He offered to research the tax issue. Co-Chair Stoltze recalled an amendment he submitted for a business license fee reduction for seniors during his first legislative term. He opined that the bill would prove advantageous to seniors. He appreciated the industrial nature of Alaskans. 2:13:55 PM Representative Gara revisited the idea of a business license exemption for those people doing a minimal amount of business. Mr. Habeger replied that he would get back to Representative Gara with an answer. Co-Chair Stoltze asked if the department refunded licensing fees for businesses that did not fit the established criteria. Mr. Habeger replied stated that refunds were sometimes offered. Co-Chair Stoltze shared a story. Mr. Habeger replied that businesses were offered refunds for business and professional licensing when required. Co-Chair Stoltze asked about a business license for solicitous or illegal activity. He recalled that that the Division of Motor Vehicles did not allow the use of profanity when creating a personalized license plate. Mr. Habeger replied that a business license application must include the line of business. The state adopted multiple lines of business. 2:18:10 PM Co-Chair Austerman supported the bill's intention and wished to help small businesses in Alaska. He asked for a definition of small business and wished for additional time to read and analyze the bill. Co-Chair Stoltze stated that he wished to discuss the fiscal note during the current hearing. 2:19:31 PM Representative Munoz asked about non-profit organizations with commercial lines of business. She wondered if the non- profits were required to have a business license. Mr. Habeger replied that a non-profit did not require a business license, but many chose to have them. The financial benefit was the deciding factor. A non-profit may or may not solicit funding through the state. Co-Chair Stoltze clarified that Mr. Habeger was discussing an intentional non-profit. Mr. Habeger replied that non-profits may do service work within Alaska while funding was derived from outside of the state. Co-Chair Stoltze stated that a business that did not earn a profit was required to purchase a business license. Mr. Habeger concurred. Representative Munoz asked about a retail store owned by the non-profit organization. She wondered if the store would require a business license. Mr. Habeger replied yes, because of the financial benefit offered to the non-profit organization through the retail store. 2:21:30 PM Vice-Chair Neuman stated that he appreciated the bill. He hoped that municipalities might adopt a similar concept. He wondered if Representative Costello had discussed the idea with municipalities. Representative Costello stated that she had an afternoon appointment with Mayor Dan Sullivan and offered to discuss the issue. Co-Chair Stoltze commented that Mayor Sullivan might not see a financial benefit in the proposal. He cautioned that some municipalities might attempt to benefit from the bill by charging more from businesses for municipal needs. Co-Chair Stoltze asked Mr. Habeger about potential complications with the fiscal note. He noted the anticipated reduction of $37.5 thousand. He asked how the estimations complicated the adjustments. Mr. Habeger explained the difficulty estimating the level of activity impacted by HB 32. He stated that the name search in connection with lines of business was the optimal way to discern the data required. He noted that each business paid $50 per year, so the 750 businesses impacted were spread across the years as an average. 2:25:47 PM Co-Chair Austerman asked how many business licenses were issued in the state. Mr. Habeger replied approximately 60 thousand. Co-Chair Austerman stated that the relatively small impact on the overall budget made him wonder why the savings was not spread among all business licenses. He wondered about opportunities to help all small businesses and not only those wishing to consolidate. Representative Gara noted that multiple lines of businesses existed on the business license application. He liked the idea of the bill, but wondered if the bill was limited to small businesses. 2:28:17 PM Vice-Chair Neuman asked about businesses that collected taxes for cigarettes or alcohol. He wondered about tax codes for federal or municipality needs. Mr. Habeger replied that business licensing had an endorsement for retail sales of tobacco products. The annual fee was $100 per establishment. He was unsure about the tax implications. Representative Guttenberg asked if business insurance requirements would be complicated by the proposed legislation. He wondered if multiple businesses appearing on one license might confuse insurers. Representative Costello clarified that the legislation would not require people to apply for multiple lines under one business name. If the business owner would receive greater benefit from using one name per business, the cost and benefit was best weighed. 2:31:43 PM Representative Guttenberg believed the recommendation would be made by the business's insurance company as well. Co-Chair Stoltze remarked that small businesses make daily decisions that change their risk assessment. Representative Costello thanked the committee for hearing the bill. She believed it was incumbent upon the committee to consider the value created in governmental efficiencies. HB 32 was HEARD and HELD in committee for further consideration. 2:35:12 PM AT EASE 2:35:42 PM RECONVENED