SENATE BILL NO. 345 "An Act relating to apportionment of business income." Co-Chair Sharp announced a representative from the Department of Law, NEIL SLOTNICK, was available to comment on this bill if the committee so desired. He noted at the last hearing, there was no representation from DOL and the bill was held in part for that reason. Senator Parnell said he did have a question for the department. He referred to a letter dated April 7, 1998 from Deborah Vogt, Deputy Director of Department of Revenue, which said both the DOL and the DOR agreed that the retroactive repeal of the tax on foreign carriers would have no affect on closed cases. He wanted Mr. Slotnick to comment on whether he agreed with the statement of the letter, and if so, his reasons for agreement. Mr. Slotnick, via teleconference, responded. He did agree, but he qualified his agreement by saying that he had not read any cases that addressed the issue. He explained that a closed tax year was generally closed through agreement of the parties and as a consequence, was generally a binding contract. He did not believe that a retroactive application of a tax exemption would be grounds for reopening a closed year, which would essentially be reopening a closed contract. Unless the legislation specifically provided that it was for the purpose of reopening these contracts, he added. Senator Adams had a question on the same letter. He quoted part of Ms. Voght's statement in the letter: "As I testified this morning, we can't calculate the amount of taxes that have been paid on Section 883." The senator then referred to another letter dated April 6, 1998, which said, "We conclude that the retroactive application of this exemption probably violates the public purpose clause of the Alaska Constitution." He continued reading from further into the same letter, " A retroactive tax exemption that forgives a liability owed to the state is equivalent to a direct appropriation and cannot be made unless it serves a purpose." His question of Mr. Slotnick then was if the department therefore was stating that the bill was unconstitutional. Mr. Slotnick's response was that in his view, as expressed in the aforementioned memorandum to Ms. Vogt, that the retroactive tax exemption was likely unconstitutional. This was because it appeared to be an appropriation for the benefit of individual and not to the general public, he expressed. Senator Adams asked if the assistant attorney general was deriving his argument from Article 9 Section 6 of the State Of Alaska Constitution. Mr. Slotnick affirmed as much. Senator Parnell shared for the recently arrived Senator Donley his earlier question to Mr. Slotnick and Mr. Slotnick's confirmation that the legislation would not affect closed cases. Senator Donley expressed that was good news. Senator Adams then repeated the questions and answers regarding the bill's constitutionality for Senator Donley's benefit. Senator Phillips challenged Senator Adams interpretation of Mr. Slotnick's comments as saying the bill was unconstitutional. Senator Adams asked the assistant attorney general to restate for the record his opinion on the matter. Mr. Slotnick's response was as follows: "In my view, Senator Adams through the chair, that the retroactive - is the retroactivity clause in SB 345 would be likely to be found unconstitutional if challenged." Co-Chair Sharp asked about the retroactivity on collecting taxes on ELF, which was found to be constitutional. He spoke of the passage of ELF in 1989 by the Legislature and its retroactive date for collecting taxes prior to the effective date of the bill. Mr. Slotnick was not familiar with the specific case but judged that collecting taxes would serve a public purpose. He mentioned other problems associated with retroactively imposing taxes having to do with notice and due process. Co-Chair Sharp announced that the House of Representatives passed a companion bill earlier in the day, which would be read across the Senate floor tomorrow. Therefore, this bill would not be moved out of committee at this meeting, but would wait until the other bill arrived in the Senate Finance Committee. The reason for hearing the bill today, he explained was to allow members to hear from the DOL. To Senator Donley's understanding, Mr. Slotnick agreed with the statements of DOR's memorandum dated April 7. Mr. Slotnick voiced his agreement with the legal analysis, but said he was not up to date with the factual analysis and wouldn't offer an opinion on that portion. This concluded discussion on the legislation and Co-Chair Sharp ordered SB 345 set aside.