HOUSE BILL NO. 306 "An Act relating to tax credits and administration of tax credit programs; requiring the Department of Revenue to report indirect expenditures; relating to the duties of state agencies; requiring the legislative finance division to analyze certain indirect expenditures; relating to lapse dates for appropriations for capital projects; repealing certain statutes authorizing indirect expenditures; and providing for an effective date." 8:37:47 AM Vice-Chair Neuman MOVED to ADOPT the proposed committee substitute for HB 306, Work Draft 28-LS1396\H (Nauman, 3/20/14). Co-Chair Stoltze OBJECTED for discussion. DANIEL GEORGE, STAFF, REPRESENTATIVE BILL STOLTZE, explained the changes in the CS. He stated that the technical changes in the bill related to a staggered repeal of some of the tax credits. Co-Chair Stoltze asked that the word "sunset" be used rather than the word "repeal." Mr. George looked at page 1, and noted that Representative Reinbold was added as a sponsor. He looked at page 5, and remarked that the previous Section 6 was removed, which was a lapsing of appropriations or allocations for grants to unincorporated communities, if substantial work was not started within five years. He looked at page 6, lines 15 through 30, which were new Sections 8, 9, and 10. He looked at page 7, and the new Section 7. He stated that Section 14 was newly inserted. He remarked that on lines 29 through 31, new contingency language was added. He looked and page 8, and noted the new Sections 19, 20, 21, and 22. Representative Holmes asked for detail on how the changes in the CS impacted the bill. BRODIE ANDERSON, STAFF, REPRESENTATIVE STEVE THOMPSON, stated that Section 6 was removed, and Sections 8,9,10, 11, and 12 related to the staggered sunset dates. He explained that Sections 13, 14, 15, and 16 were related to sunset dates for the Wind brindle Scholarship Tax Credit, the Film Tax Credit, the Veteran Employment Tax Credit, the Salmon Utilization Tax Credit, the Education Tax Credit, the Salmon Production Development Tax Credit, and the CDQ Tax Credit. The transition language remained the same. The contingency language was in Section 18. He announced that Sections 19, 19, 20, 21, and 22 were the dates in which the previous sections would go into effect which were 2016, 2018, and 2020. 8:42:45 AM Co-Chair Stoltze WITHDREW his OBJECTION. There being NO OBJECTION, the proposed committee substitute was adopted. Representative Thompson spoke to the bill. The tax credits had been put in many years earlier with good intentions, but the legislature needed to take a hard look at the credits to determine whether the original intent was still effective. Representative Wilson understood that the part that had been removed related to unorganized areas and grants. She queried the reason behind that removal. Co-Chair Stoltze replied that the section drew attention away from the larger focus of the tax credit issues. Representative Wilson wanted to make sure the bill didn't do something she did not know. Representative Thompson relayed that the process was currently well established in the department. He asked about the CDQ tax credit. Mr. Anderson replied that the credit would be extended. Representative Munoz spoke to the two year cycles in the bill. She wondered if it was a one-time occurrence, once the cycles were achieved. Mr. Anderson replied that there was the actual true sunset date, the extension, and the review cycle set up through Department of Revenue (DOR) and the Legislative Finance Division (LFD). The review cycle schedule would be every two years and the sunsets would be the specific dates for the tax credits in Title 43. Future legislatures would have to offer legislation to extend the credits. He stated that the tax credits that were specified in the legislation were easily definable with plenty of information. Representative Munoz asked if the items came up for review under the two year cycle after their initial review. Mr. Anderson replied that those items would be reviewed by DOR and LFD. 8:48:02 AM Representative Munoz queried the repeal date of the education tax credit. Mr. Anderson replied that the credit would be reviewed in 2018. Vice-Chair Neuman pointed to Section 6 and asked if it dealt with reappropriations. Mr. Anderson answered that the section was related to the unexpended balances for the department. It referred to the Capital Appropriations Status Report, which allowed for the ability of the legislature to reappropriate funds. Co-Chair Stoltze noted that the section allowed the legislature to reappropriate funds or to extend the credits. Mr. Anderson agreed. Vice-Chair Neuman surmised that Section 6 related to capital appropriations to the departments. Mr. Anderson agreed. Vice-Chair Neuman asked if the bill contained a definition for "substantial." Mr. Anderson responded that the municipalities had criteria for what was considered substantial. Vice-Chair Neuman suspected it was the case. He stated that he would work with the sponsor on the item. Representative Gara asked about the film tax credits in Section 13. He wondered when the credit would repeal. Mr. Anderson replied that the sunset was in 2016. Representative Costello discussed the bill's 6 fiscal notes. Co-Chair Stoltze remarked that the fiscal notes would be updated to reflect the CS. Co-Chair Austerman believed the bill was excellent. He spoke to his initial reservations, but once it was understood and the bill was broken into a timely basis, he was confident in the legislation. Representative Thompson MOVED to REPORT CSHB 306(FIN) out of committee with individual recommendations and the accompanying fiscal notes. Representative Gara OBJECTED for discussion. Representative Munoz asked a question about the DOR fiscal note. 8:56:08 AM Mr. George relayed that the office had been in contact with the governor's office requesting updated fiscal notes. Representative Holmes supported the bill. She was curious about 10 positions in the fiscal notes. MR. FONDER, DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE (Via Teleconference), anticipated that the number of positions would decrease substantially in FY 15. He stressed expenditures would not be occurring in FY 15. Representative Munoz wondered if there would be an increase in the number of positions beyond the years outlined in the fiscal notes. Mr. Fonder replied that it would probably be similar to the out years in the fiscal note that was a total of 3 positions. Co-Chair Stoltze stressed that the department would not get more money than it needed. 9:00:13 AM Representative Gara was working to determine the current sunset date for the film credit program. He was uncomfortable speeding up the sunset date of the film tax credit. Co-Chair Austerman spoke to his backing of the commercial fishing industry and the need to treat it equally to other industries in the state. He only supported items that worked. He believed that credits would justify themselves when they came up for review in the future. He believed the credits should all be treated equally. He stated it was necessary to review the credits. He did not believe it was right to pick out specific credits. Representative Costello was uncomfortable reporting the bill out of committee without the updated fiscal notes. Co-Chair Stoltze would hold the bill. HB 306 was HEARD and HELD in committee for further consideration. 9:04:33 AM AT EASE 9:08:45 AM RECONVENED Co-Chair Stoltze discussed that HB 306 would be heard later with the updated fiscal notes.