SENATOR TAYLOR introduced SB 225 (INSURANCE TAX CREDIT:GIFTS TO COLLEGES) sponsored by SENATOR JAY KERTTULA and noted there was a HESS committee substitute. He called on CAROL CARROLL to testify on behalf of SENATOR KERTTULA. MS. CARROLL explained the bill, SB 225, would allow authorized insurance and title insurance companies to credit their state tax liability with an amount equal to donations they make to qualified higher educational institutions now available to other corporations within the State of Alaska. She offered to answer questions. SENATOR JACKO referenced page 2 and asked if she was speaking about two or four year institutions. MS. CARROLL read lines 1 through 3 to answer his question which gave acceptance to two-year or four- year colleges or universities. SENATOR DONLEY clarified the credit was 50% up to $100 thousand and then 100% for the next $100 thousand. MS. CARROLL said he was correct, and SENATOR DONLEY disagreed with the 100% credit language because it would allow private citizens to allocate money instead of the legislature. Number 409 SENATOR LITTLE gave an example of a credit union owing $100 thousand in taxes, and instead, giving the $100 thousand to the University of Alaska as a donation. She asked for an explanation. MS. CARROLL explained if a company has a tax liability to the state and wanted to donate the whole $100 thousand, the company would only be able to take a tax credit of 50% of the amount. SENATOR DONLEY also explained the company could give $150 thousand and receive a credit for the $100 thousand. MS. CARROLL noted in Section 2 stating "or 50% of the tax payers liability, whichever is less," which, she said, would not allow a 100% in the case described by SENATOR DONLEY. SENATOR TAYLOR explained the most such a company could receive would be 50% of their total tax liability. MS. CARROLL added, "as long as it is not over $150 thousand." SENATOR JACKO asked if was open to use by the scholarships managed by the Postsecondary Education Commission, but MS. CARROLL said the provisions only apply to the three universities. SENATOR JACKO questioned the retroactive effective date. MS. CARROLL explained it would give insurance companies the opportunity to donate this year. SENATOR LITTLE asked why the bill was limited to certain insurance taxes, and were there provisions for individuals to contribute to the university under the legislation. MS. CARROLL explained in statute this credit is already available to anyone who pays a corporate income tax, oil production tax, fishing taxes or mining taxes. SENATOR TAYLOR opened the teleconference network and invited SHERIE STEELE from Sitka to testify. Number 450 MS. STEELE identified herself as the Director of Development for Sheldon Jackson College, and acknowledged MS. CARROLL had testified to most of their points. She reviewed a letter from KENNETH CAMERON D.M.D. acting president of Sheldon Jackson College in support of SB 225, in which he wrote, "The Alaska Income Tax Education Credit is an extremely useful tool for Alaskans because it encourages mutually beneficial partnerships between industry and higher education. This tool allows colleges in the state to enhance and improve academic programs by having access to the funding necessary to implement quality education for Alaskans. An omission in the original legislation, namely the omission of including the insurance industry as a taxpayer group eligible to participate in this most essential partnering incentive, can be rectified by SB 225." SENATOR TAYLOR next called on WENDY REDMAN, Vice-President for University Relations for the University of Alaska to testify. MS REDMAN explained the tax credit legislation passed several years ago has proved very helpful to the University of Alaska, APU and Sheldon Jackson in seeking private funds as one more tool to broaden the base of support, especially for the University of Alaska. She said their campus raised close to $12 million over the past two years, with the majority of the funds placed in endowments that will provide benefits to students far into the future. MS. REDMAN said the tax credit legislation was responsible for about $1 million of the donations, but she claimed this was not lost revenue to the state. She urged the passage of the legislation and offered to answer questions. SENATOR DONLEY asked if the fundamental law being amended has ever been challenged? MS. REDMAN said it has not. SENATOR TAYLOR asked if challenge had been anticipated, and MS. REDMAN said there was some anticipation when it was first past. SENATOR JACKO asked for details, and SENATOR DONLEY explained Article 7, Section 1 of the State Constitution says, "... no money shall be paid from public funds for direct benefit to any religious or any other private educational institution." He claimed the original bill denies the State income to the benefit of a private educational institution and is unconstitutional. Number 505 MS. REDMAN told SENATOR TAYLOR it has never been challenged, and she reviewed the discussion when the bill was first passed. She said REPRESENTATIVE GRUENBERG had a ruling based on information from another state that "... when you're capturing revenue before it hits the general fund, as apposed to after, therefore, it is not general funds." She said there were rulings on both sides of the issues. SENATOR TAYLOR acknowledged a letter from Dr. F. Thomas Trotter, President of Alaska Pacific University in support of SB 225. SENATOR JACKO moved to pass CS FOR SENATE BILL NO. 225(HES) (INSURANCE TAX CREDIT:GIFTS TO COLLEGES) from committee with individual recommendations. Without objections, so ordered.