SB 225 INSURANCE TAX CREDIT:GIFTS TO COLLEGES An Act relating to credits against certain insurance taxes for contributions to certain educational institutions; and providing for an effective date. Co-chair Pearce directed that SB 225 be brought on for discussion and referenced the Senate HESS Committee Substitute for the bill. Senator Kerttula, sponsor of the legislation, noted that private institutions statewide relieve a substantial taxpayer burden. He explained that the proposed bill would extend tax credits for contributions to private educational institutions to the insurance industry. CAROL CARROLL, aide to Senator Kerttula, reiterated that SB 225 would extend an existing tax credit to title companies and insurance companies. Those entities were left out of prior legislation providing for the credit because they do not pay corporate income tax. They do, however, pay a tax on their premiums. Since tax provisions relating to premiums were not amended when tax credit legislation was passed, insurance companies are unable to avail themselves of the credit. SB 225 would allow them to do so. It limits the credit to 50% of the first $100.0 and 100% of the second $100.0. Credit is further limited to 50% if the total tax liability is less than $150.0. In 1993, the Dept. of Revenue provided $533.0 in tax credits to qualifying corporations that donated to educational institutions. AL ALVAREZ, Vice President, University Relations, Alaska Pacific University, came before committee urging support for the bill. He reiterated that insurance companies were inadvertently not included in earlier legislation allowing for the tax credit because they pay taxes under a separate section of the tax code. The tax credit has provided a significant amount toward long-term financial health of Alaska Pacific. Added revenue from the insurance industry would be most beneficial. Senator Kelly asked how receipts from tax credits are budgeted by the University of Alaska. Co-chair Frank voiced his understanding they would be included in the budget under "other . . . receipts." Discussion of donations to the University of Alaska followed. Carol Carroll referenced a University position paper indicating that the University raised "close to $12 million over the past two years." Senator Kerttula attested to differences in the cost of course offerings between the University and Alaska Pacific, and spoke to need for continued private sector comparison as a means of measuring University of Alaska performance. In response to a question from Senator Kelly, Mr. Alvarez advised that Alaska Pacific received "close to $900.0" from existing tax credits. He further advised that momentum generated by the credit creates a springboard for other gifts. Senator Sharp asked how many non-profit, public/private two or four-year accredited schools in Alaska would qualify for the credit, besides the University and Alaska Pacific. Senator Kerttula noted Sheldon Jackson. The credit is presently limited to those three institutions. Co-chair Frank inquired concerning the number of corporations receiving the credit. Mr. Alvarez advised of five gifts--three from the oil industry and two from other sources. Alaska Pacific has twice that number of prospects in terms of companies that are "ready to give." LARRY MEYERS, Director, Income and Excise Tax Division, Dept. of Revenue, next came before committee. Co-chair Frank renewed questions concerning the number of taxpayers involved in the credit. Mr. Meyers explained that, for FY 93, the department received $142 million from oil and gas corporations and other potentially eligible corporations. When oil and gas tax payments are deducted, approximately $25 million remains. He said he would provide figures on corporate involvement. Senator Sharp voiced concern that should an individual income tax be reinstated in the future, individuals will be treated much differently than corporations in terms of tax credits for gifts to educational institutions. JOHN TALLY, Financial Examiner, Division of Insurance, Dept. of Commerce and Economic Development, briefly came before committee. He explained that 1,200 to 1,400 insurance companies pay premium taxes. Co-chair Frank pointed to the ($900.0) fiscal note from the department and voiced his understanding that if universities are aggressive in seeking contributions, the note could be substantially higher. Mr. Tally concurred. Co-chair Frank asked for a breakdown of premium tax payments made by insurance companies. He voiced support for Universities but noted need to understand the potential for draining the treasury. Mr. Tally agreed to provide the information. Senator Sharp inquired regarding expenditures from foundations. Co-chair Frank voiced his understanding that moneys expended by the University of Alaska would flow through the budget process. Senator Kelly stressed need for accountability of those moneys. Co-chair Frank attested to his understanding that the earlier mentioned $12 million went into a fund, and only the interest therefrom is expendable. Co-chair Pearce asked if contributions resulting in tax credits are required to accrue to the University of Alaska foundation. Both Senator Kerttula and Carol Carroll advised that they did not know. No representatives of the University were present to speak to the issue. Senator Kelly again stressed need to know how the money is accounted for by the University. Senator Kerttula MOVED that CSSB 225 (HESS) pass from committee with individual recommendations. He told members he would procure the information sought by Senator Kelly and provide it prior to floor action on the bill. Co-chair Frank pointed to the University position paper indicating that the majority of the funds would accrue to endowments to provide benefits to student "far into the future." No objection having been raised, CSSB 225 (HESS) was REPORTED OUT of committee with a zero fiscal note from the Dept. of Revenue and a note from the Dept. of Commerce and Economic Development showing revenue reductions of ($900.0). Co- chairs Pearce and Frank and Senators Kelly, Kerttula, and Rieger signed the committee report with a "do pass" recommendation. Senators Jacko and Sharp signed "no rec."