SB 120-EXTEND EDUCATION TAX CREDITS  4:08:43 PM CHAIR TOBIN announced the consideration of SENATE BILL NO. 120 "An Act extending the education tax credits; providing for an effective date by amending the effective date of secs. 1, 2, and 21, ch. 61, SLA 2014; and providing for an effective date." 4:09:22 PM SENATOR BJORKMAN, District D, speaking as sponsor of SB 120, introduced the legislation paraphrasing the following sponsor statement: [Original punctuation provided.] Senate Bill 120 Extend Education Tax Credits  Sponsor Statement  Senate Bill 120 seeks to extend the very successful Alaska Education Tax Credit (AETC) Program through January 1, 2031. Currently the program will expire on January 1, 2024. Education tax credits allow businesses that pay certain state taxes to claim credit for charitable gifts made in support of education in Alaska. Eligible recipients include non-profit, publicly, or privately accredited Alaska two-year or four-year colleges; non- profit elementary or secondary schools and school districts; state operated vocational education and training schools; non-profit regional vocational training centers; apprenticeship programs; Alaska Native cultural programs; the Alaska Higher Education Investment Fund; and postsecondary institutions providing dual-credit courses. Education tax credits can be used to offset many state taxes including corporate income taxes, fisheries business and fisheries resource landing taxes, oil and gas production, and mining license taxes. In addition to extending the Alaska Education Tax Credit Program, Senate Bill 120 returns the program to the credit provision in place before the program was reduced in 2018. SB 120 allows education tax credits up to 50 percent of the annual contributions up to $100,000, 100 percent of the next $200,000, and 50 percent of annual contributions beyond $300,000. The bill also raises the cap on the total credit per taxpayer or group to $5,000,000. Currently, the cap is $1,000,000. 4:14:01 PM RAYMOND MATIASHOWSKI, Staff, Senator Jesse Bjorkman, Alaska State Legislature, Juneau, Alaska, presented the sectional analysis for SB 120: [Original punctuation provided.] Senate Bill 120 Extend Education Tax Credits  Version A Sectional Analysis  Section 1 Amends AS 21.96.070(b), which governs insurance tax education credits, to set the amount of the Alaska Education Tax Credit (ETC) at 50 percent of contributions up to $100,000, 100 percent of contributions from $100,001 through $300,000, and 50 percent of the amount of contributions that exceed $300,000. Currently the insurance tax education credit is limited to 50 percent of contributions. Section 2 Amends AS 21.96.070(d), with governs insurance tax education credits, to stipulate that contributions claimed as a credit may not be used to claim credit elsewhere under this title and may not be combined with other credits to exceed a total of $5,000,000. The current cap is $1,000,000. If the taxpayer is a member of an affiliated group, the total amount of credits for the group may not exceed $5,000,000. Currently the cap is $1,000,000. Section 3 Amends AS 43.20.014(b), which governs income tax education credits, to align with the tax credit amounts set forth in the Act. Section 4 Amends AS 43.20.014(d), which governs income tax education credits, to align with the total cap on education credits set forth in this Act. Section 5 Amends AS 43.55.019(b), which governs the oil or gas producer education credit, to align with the tax credit amounts set forth in this Act. Section 6 Amends AS 43.55.019(d), which governs the oil or gas producer education credit, to align with the total cap on education credits set forth in this Act. Section 7 Amends AS 43.56.018(b), which governs the property tax education credit, to align with the tax credit amounts set forth in this Act. Section 8 Amends AS 43.56.018(d), which governs the property tax education credit, to align with the total cap on education credits set forth in this Act. Section 9 Amends AS 43.65.018(b), which governs the mining business education credit, to align with the tax credit amounts set forth in this Act. Section 10 Amends AS 43.75.018(d), which governs the mining business education credit, to align with the total cap on education credits set forth in this Act. Section 11 Amends AS 43.75.018(b), which governs the fisheries business education credit, to align with the tax credit amounts set forth in this Act. Section 12 Amends AS 43.75.018(d), which governs fisheries business education credit, to align with the total cap on education credits set forth in this Act. Section 13 Amends AS 43.77.045(b), which governs the fisheries resource landing tax education credit, to align with the tax credit amounts set forth in this Act. Section 14 Amends AS 43.77.045(d), which governs the fisheries resource landing tax education credit, to align with the total cap on education credits set forth in this Act. Section 15 Provides for January 1, 2031, effective date for the expiration of the Education Tax Credit program. Section 16 Sets the effective date for this Act as January 1, 2024. 4:17:55 PM SENATOR KIEHL asked whether the tax credit is applied to both the municipal share and the state's share. MR. MATIASHOWSKI replied that he did not know and would get back to the committee. 4:18:36 PM SENATOR KIEHL stated that the tax cap increases by a factor of five, but the foregone revenue to the state doesn't increase by the same magnitude, as indicated in the fiscal note. He requested information on whether there was a historical basis for this difference, specifically regarding when the maximum amounts were reduced. He also inquired about the rationale behind the modeling used in SB 120. 4:19:03 PM MICHAEL MASON stated that Ms. Glover, the tax director, might be able to address the questions. 4:19:17 PM COLLEEN GLOVER, Director, Tax Division, Department of Revenue (DOR), Anchorage, Alaska, stated that department personnel had examined historical data. As Senator Bjorkman mentioned, SB 120 essentially reinstated higher thresholds that existed in the past. Her department considered the average contributions during that period, which averaged around $6.6 million, as the basis for their projections. This historical data served as the foundation for the fiscal note. She also mentioned that the bill extended the timeframe and increased the thresholds, drawing from historical data, even though there is no certainty that the same patterns will occur in the future. She pointed out that the department provides an annual report to the legislature that is available on their website. She said it is challenging to predict with certainty whether the same trends observed in the past with similar thresholds would continue. 4:20:35 PM SENATOR GRAY-JACKSON requested that an answer be provided to Senator Kiehl's question, regarding SB 120 and municipal taxes. MR. MATIASHOWSKI replied he would follow up with an answer. SENATOR GRAY-JACKSON asked if Ms. Glover could answer since she is from the tax agency. MS. GLOVER stated her belief that SB 120 only applies to the state portion, but she would double check. 4:21:34 PM SENATOR GRAY-JACKSON stated she too thought it only applied to the state portion. 4:21:43 PM CHAIR TOBIN asked for an overview of the fiscal note for SB 120. 4:21:58 PM MS. GLOVER said that SB 120 impacted seven different tax programs, with six falling under the Department of Revenue Tax Division, and one in commerce. She noted that the fiscal note only forecasted the effect on the programs specific to the Department of Revenue. She explained that for all the tax programs affected, the funding contributed to the general fund, so any tax credit represented a reduction in the general fund. She mentioned that the current statute was set to sunset at the end of the year, and by extending it, an additional half fiscal year of credits would be provided, resulting in a $1.7 million credit for FY 2024. In future years the impact of extending the repeal time and increasing the percentage would generate an estimated $6.6 million in annual credit usage. MS. GLOVER noted that historically, the usage of the credit had been higher, with more participation from taxpayers or donors when there were higher credit thresholds. However, there has been a reduction in participation over the last three years, which could be attributed to various factors, such as changes in credit provisions and economic conditions. 4:24:20 PM CHAIR TOBIN announced invited testimony on SB 120. 4:24:49 PM CHAD HUTCHINSON, Director, State Relations, University of Alaska System, Fairbanks, Alaska, said that the university had reviewed SB 120 and expressed strong support for the sunset provisions, indicating there were no objections to the provisions that would revert to the statute's pre-2018 state. MR. HUTCHINSON turned to slide 1 and said he would provide a general overview, primarily focused on respecting the taxpayers contributing to the University of Alaska. He characterized the presentation as a broad generalization of how the university viewed its role as a beneficiary and how it was addressing Alaska's workforce needs through contributions from third-party entities. 4:26:03 PM MR. HUTCHINSON turned to slide 2 and highlighted examples of contributions, including a million-dollar donation from Kinross to the Troth Yeddha' Indigenous Studies Center in Fairbanks. He noted the university's collaboration with private sector third- party entities to address educational needs in Alaska, particularly in terms of workforce development. These contributions could be in the form of cash or equipment, reflecting the interest of many companies in ensuring a well- prepared future workforce by providing necessary funding and equipment for university programs. 4:26:47 PM MR. HUTCHINSON turned to slide 3 and shared a document borrowed from the Department of Revenue. The document outlined the value of credits, contributions made, and the specific benefits to the University of Alaska in the calendar year 2022. The total contributions listed in the second column amounted to $2.1 million. For most of the tax programs, approximately 50 percent of the credits were claimed. An example was the fishery resource landing tax, where a 50 percent credit was claimed. The contributions made directly impacted academic programs, equipment provision, and research efforts. In cases like commercial fisheries, contributors showed interest in specific fisheries populations and made direct contributions to the university, benefiting both the university and the contributors. He also noted that the oil and gas property tax total contribution was $40,000, and the entire amount was given to the University of Alaska. 4:28:18 PM MR. HUTCHINSON turned to slide 4 and provided historical examples of donors to the university, illustrating the program's broad range of contributors, including mining interests, commercial fishing, Alaska Airlines, and Holland America. He highlighted that many major industries in Alaska had participated in the program, and it had been highly successful: [Original punctuation provided.] A Few Tax Paying Entities that Historically Contribute  to the University of Alaska  1. Glacier Fish Company, LLC 2. American Seafoods Company 3. Hecla Greens Creek Mining Company 4. Fairbanks Gold Mining, Inc. 5. ConocoPhillips Alaska, Inc. 6. Alaska Airlines Inc. 7. Holland America Princess - Alaska 8. Ravn Alaska 9. Aurora Animal Clinic 10. Bristol Bay Native Corporation 11. Northrim Bank 12. Teck Alaska, Inc. MR. HUTCHINSON acknowledged that contributions had declined since the statutory change in 2018. He expressed gratitude for the legislative debate aimed at revising the contribution amounts, and stated his belief that the university would be pleased with a positive outcome. 4:29:11 PM SENATOR GRAY-JACKSON asked whether a corporation's contribution also qualifies for a federal tax write off. 4:29:23 PM MR. HUTCHISON deferred the question to DOR. 4:29:38 PM MS. GLOVER replied she could not speak to federal income tax laws for corporations. 4:30:00 PM SENATOR GRAY-JACKSON said she was hopeful that DOR could answer her question but did not expect the department to speak for the Internal Revenue Service. 4:30:32 PM STEPHANIE MADSEN, Executive Director, At-Sea Processors Association, Juneau, Alaska, expressed her gratitude to Senator Tobin, Senator Bjorkman, and the committee for addressing the Pollock Conservation Cooperatives' involvement in the education tax credit program, emphasizing its importance to her fleet. She detailed the cooperative's history and mission to enhance the conservation and utilization of Alaska's marine resources. The Pollock Conservation Cooperative Research Center at the University of Alaska Fairbanks was created in 2000, funded through direct donations and education tax credit funds. Ms. Madsen noted that her members had been contributing since 2000, likely making them the largest private contributor, with a total contribution of about $16 million over the years. 4:31:48 PM MS. MADSEN highlighted the allocation of these funds, with a significant portion directed toward research aimed at promoting the conservation and management of marine resources in the Bering Sea. The contributions also supported graduate fellowships for students pursuing master's and graduate degrees, addressing a crucial funding gap for graduate students. She mentioned that many of the students funded by the Pollock Conservation Cooperative Research Center, had gone on to work in government agencies such as the State of Alaska and the National Marine Fisheries Service. She further discussed contributions to dual enrollment programs, specifically the UAS fisheries technology program in Sitka, which benefits high school students through remote learning using iPads. Additionally, they consistently supported the Northwest Alaska Career and Technical Center in Nome, contributing to workforce development. MS. MADSEN emphasized the program's vital role in preparing Alaska's workforce and sparking high school students' interest in fisheries. She expressed her extreme gratitude for the committee's consideration and reiterated strong support for all elements of the legislation. 4:35:01 PM CHAIR TOBIN opened public testimony on SB 120. 4:35:17 PM DOUG WALRATH, Director, Northwestern Alaska Career and Technical Center, Nome, Alaska, testified in support of SB 120, which aims to extend the education tax credits sunset and return the credit to its pre-2018 legislative session form. He noted that the Northwestern Alaska Career and Technical Center (NACTEC) had been a beneficiary of education tax credit contributions from the Pollock Conservation Cooperative for over a decade. He emphasized that the tax credit had allowed NACTEC to seek funding from business partners since 2009, which had significantly benefited their programs. Specifically, it had: 1. Led to the creation of a new Alaska Vocational Technical Center (AVTEC) transitions program. 2. Enabled the development of junior high residential career exploration programs. 3. Supported the purchase of advanced motion-based simulators for aviation and maritime training. He highlighted that from FY 2015 to FY 2019, NACTEC's industry partners contributed an average of $511,000 annually, equivalent to 30 percent of their budget. However, after the credit became less corporate-friendly from FY 2020 to FY 2022, contributions averaged $195,000 annually, representing 10 percent of their annual budget. This amounted to a 62 percent decrease in education tax credit contributions since 2018 when the legislation changed. He further pointed out that the education tax credit had a positive impact on NACTEC's programming, with higher graduation rates and career exploration outcomes for students attending their programs. He concluded that when business and industry collaborate with education providers like NACTEC, it benefits all parties involved. He urged the committee to recognize the effectiveness of the education tax credit program and extend its sunset. 4:38:35 PM SENATOR KIEHL expressed his support for the program and his desire to see it extended. He noted Mr. Walrath's comment regarding the decrease in corporate contributions starting in 2018 and inquired about the factors contributing to this decline. He specifically asked if it was due to the lower limits set by the program or the lower federal corporate tax rates and whether Mr. Walrath had been able to discern which of these factors was the primary driver of reduced corporate giving and eligibility. 4:39:13 PM MR. WALRATH responded that he had not specifically investigated whether the reduced corporate contributions were primarily driven by the lower limits or the lower federal corporate tax rates. He mentioned that he had been proactive in pursuing funding before the friendly nature of the previous provision began to phase down. However, he hadn't conducted a detailed analysis to determine the exact reasons behind the decline in corporate contributions. 4:40:24 PM TARA RIEMER, President, Alaska Sea Life Center, Seward, Alaska, testified in support of SB 120. She stated that the Alaska Sea Life Center served as a beneficiary of the Alaska Education Tax Credit due to its role as a coastal ecosystem learning center. She emphasized that SB 120 would extend the education tax credit program and potentially increase tax credits from corporations. She thanked the committee for sponsoring SB 120 and specifically for restoring the caps on tax credit ratios to their previous levels. She underscored the effectiveness of the education tax credit program in introducing philanthropy to Alaska corporations and noted that it played a crucial role in introducing potential corporate donors to the idea of supporting the Alaska Sea Life Center. However, she pointed out that the program had been more compelling in the past. 4:42:08 PM CHAIR TOBIN closed public testimony on SB 120. 4:42:12 PM CHAIR TOBIN held SB 120 in committee.