CS FOR HOUSE BILL NO. 306(FIN) "An Act relating to the review 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 the insurance tax education credit, the income tax education credit, the veteran employment tax credit, the oil or gas producer education credit, the property tax education credit, the mining business education credit, the fisheries business education credit, the fisheries business tax credit for scholarship contributions, the fisheries business salmon product development tax credit, the fisheries business salmon utilization tax credit, the fisheries business landing tax credit for scholarship contributions, the fisheries resource landing tax credit for the fisheries resource harvested under the community development quota, the fisheries resource landing tax education credit, and the film production tax credit; and providing for an effective date." 5:20:06 PM REPRESENTATIVE STEVE THOMPSON, presented HB 306: HB 306 is sound fiscal policy. HB 306 provides the legislature with an effective tool to identify and capture potential lost revenue. A Legislative Research report shows that over the past five years, the State has forgone almost half a billion dollars through identified indirect spending across all departments, inclusive of $20 million in Department of Revenue tax credits not related to oil and gas. HB 306 will provide a mechanism to help the legislature identify its spending by providing information on indirect expenditures, and capital grants to projects by bringing them back before the legislature for fiscal review. HB 306 lapses grants to capital projects that have not begun substantial, ongoing work within five years of the effective date of the appropriation or allocation. Thereby, each capital project without action within a five-year period will lapse, if its ongoing existence is not justified for re-appropriation. Secondly, HB 306 requires that before the start of the first regular session of each new Legislature, the Dept. of Revenue provide to the chairs of the Finance Committees, and the Legislative Finance Division, a report on indirect expenditures. An "indirect expenditure" is defined in HB 306 as a credit, exemption, deduction, deferral, discount, exclusion, or other differential allowance designed to encourage an activity to benefit the public by forgoing revenue to the state, an example being the credits used against corporate taxes. Then, the Legislative Finance Division will take Department of Revenue's report and analyze the indirect expenditures for each department, as scheduled in the bill, with subsequent reviews every six years. The Legislative Finance will then issue a report to the legislature providing an estimate of forgone revenue due to the indirect expenditure, an estimate of monetary benefits, whether the legislative intent of the statute is being met, and a recommendation as to continuance of the indirect expenditure, its economic effect, and an explanation of the methodology used in preparing the report. Lastly, the bill sunsets specific Department of Revenue Tax Credits, not related to gas or oil by the end of the Second Regular Session of the Twenty-Ninth Legislature. Bringing these credits back before future Legislatures for a review will continue to guarantee the effectiveness of the State's indirect spending. 5:27:07 PM Vice-Chair Fairclough wondered if the legislation repealed the film tax credit. She surmised that the legislation generally examines all tax credits. Representative Thompson replied that the legislation gave the film tax credit a sunset date for the end of 2016, at which time the legislature would review the tax credit. He explained that the film tax credit was developed with $300 million, and there were already commitments for over $100 million of that fund. He stated that the fund would need to recapitalize at the end of 2015. Vice-Chair Fairclough wondered if there was any additional information. BRODIE ANDERSON, STAFF REPRESENTATIVE STEVE THOMPSON, stated that Representative Thompson covered the major components of the legislation. 5:28:58 PM PATRICIA HULL, MEMBER, ALASKA FILM GROUP, JUNEAU, spoke against HB 306. She related that film tax credit had built the industry in Alaska. She thought that eliminating the film production tax credit would kill the industry in Alaska. Vice-Chair Fairclough noted that there was still confusion and requested an explanation of the inclusion of the film tax credit in the legislation. Mr. Anderson replied that legal aspect of the legislation dealt with a sunset and repeal the same way and that it was the legislature. He stated that the intent was to review the credits. 5:35:07 PM STACEY BOLES, PROGRAM DIRECTOR, ALASKA NEW MEDIA, ANCHORAGE (via teleconference), testified against HB 306. She remarked that the film tax credits provided an increase to Alaska's economy. 5:38:13 PM AUDRA HENDERSON, SELF, UNIVERSITY OF ALASKA ANCHORAGE, ANCHORAGE (via teleconference), spoke against HB 306. She explained that she had a career in film in television, which started at the David Letterman Show. She hoped to continue her career in the state. She felt that the film tax credits encouraged and strengthened Alaska's economy, and it needed more time to fully develop. 5:39:50 PM LAWRENCE DAVID FOLDES, MEMBER, AWARDS EXECUTIVE COMMITTEE, ACADEMY MOTION PICTURE ARTS & SCIENCES IN LOS ANGELES, ANCHORAGE (via teleconference), testified against HB 306. He related that financing for the film industry was difficult, especially in Alaska. He remarked that the film tax credits helped to encourage the development of film and television in Alaska. He stressed that it was a new program, and needed much more time to be developed and become fully integrated and utilized. 5:44:04 PM DEBORAH SCHILDT, SELF, ANCHORAGE (via teleconference), spoke against HB 306. She stated that Alaskans across the state supported the film tax credits, and the film industry. She stressed that the program gave Alaskans unique career opportunities, and exposed the state to much needed marketing. 5:47:14 PM BOB CROCKET, GENERAL MANAGER, PIKSIK LLC, ANCHORAGE (via teleconference), testified against HB 306. He felt that there would be great ramifications of the film industry in Alaska. He felt that the jobs and businesses would have a great negative effect, and remarked that the film industry was growing in Alaska. 5:50:16 PM NATALIA LAMONT, SELF, ANCHORAGE (via teleconference), spoke against HB 306. She stated that she was a part of the Alaska New Media program, and hoped to develop a script in order to make a successful screenplay. She felt that the film tax credits would make it possible to develop her screenplay. 5:52:50 PM JOE MATHIS, VICE PRESIDENT, EXTERNAL AFFAIRS, NANA DEVELOPMENT CORPORATION, testified against HB 306. HE expressed concerns about the inclusion of the film tax credit in the bill. He stated that NANA had over $40 million invested in Alaska's film industry, and hoped that the industry would continue to flourish. He discouraged the sunset of the film tax credit program. 5:54:28 PM RON HOLMSTERON, SAG-AFTRA, ANCHORAGE (via teleconference), spoke against HB 306. He worked in the film industry, and knew many people working in the Alaska film industry. He felt that the legislation would have a great negative impact on his industry, his peers, and the state. 5:56:02 PM SARAH SAARLOOS, SELF, GIRDWOOD (via teleconference), testified against HB 306. She expressed concerns about the inclusion of the film tax credit in the legislation. She stated that the Alaska film industry supported her family. She witnessed the positive impacts of the film industry across the state. KENT SCHELER, MOUNTAIN SAFETY LOGISTICS, ANCHORAGE (via teleconference), testified against HB 306. He stated that the film tax credits had encouraged the production of ski films in Alaska. He felt that the film industry provided a great support and infrastructure in Alaska. 6:01:12 PM CEDAR CUSSINS, GECKO SERVICES LLC, ANCHORAGE (via teleconference), testified against the inclusion of the film tax credit in HB 306. She stated that her husband had worked on the production of the movie, "Big Miracle", which had a great positive impact on her company. She stated that his work on the film catapulted her company into a successful Alaskan business. 6:02:39 PM RICHARD GEIGER, SELF, ANCHORAGE (via teleconference), spoke against the inclusion of the film tax credit in HB 306. He felt that sun setting the film tax credit program would destroy Alaska's film industry. 6:04:03 PM TESS WEAVER, SELF, ANCHORAGE (via teleconference), testified against the inclusion of the film tax credit in HB 306. 6:05:07 PM KATHY ROBINSON, WHEEL GOOD FOOD, ANCHORAGE (via teleconference), supported the removal of the film tax credit from HB 306. 6:06:53 PM LAUREN TRAWYER, SELF, ANCHORAGE (via teleconference), testified in support of removing the film tax credit from HB 306. 6:09:51 PM DK JOHNSTON, TRI SEVEN PICTURES, ANCHORAGE (via teleconference), requested the removal of the film tax credit sunset form the legislation. 6:11:19 PM BETH SKABAR, SELF, ANCHORAGE (via teleconference), testified against the inclusion of the film tax credit in HB 306. Vice-Chair Fairclough CLOSED public testimony. CSHB 306(FIN) was HEARD and HELD in committee for further consideration.