SB 15-LIFE INSURANCE POLICY PREMIUM TAX  1:31:53 PM CHAIR COSTELLO announced the consideration of SB 15. "An Act relating to the tax on policy year premiums for life insurance policies." SENATOR JOHN COGHILL, sponsor, SB 15, stated that this legislation is designed to keep Alaska competitive in the field of trusts. He deferred further introduction to his intern. 1:33:19 PM GERMAN BAQUERO, Intern, Senator John Coghill, introduced SB 15 speaking to the following sponsor statement: [Original punctuation provided.] SB 15 requires that taxes for single or group life insurance policies shall be set at 0.08 percent exceeding $100,000. In 2014, taxes on insurance premiums constituted 8.6 percent of non-petroleum unrestricted revenues, approximately 55 million dollars. In 2015 the forecast for life insurance revenue is projected to rise to 9.5 percent, approximately 57 million dollars, and in 2016 it is expected to remain at the same level but rise to approximately 59 million dollars. Back in 1998 because of virtually no collection of taxes on policies of over $100,000 the Commissioner of Insurance dropped taxes from 2.7 percent to 0.1 percent over $100,000 for insurance premiums. Yet already by 2006 the state of South Dakota had matched the state of Alaska and then some, dropping down to 0.08% over $100,000, thereby undercutting revenue for Alaska. This has resulted in a sizable reduction of the number of life insurance policies over $100,000 sold in this state. In order to remain competitive Alaska then must match South Dakota now, and a cut in the premium from 0.1 percent to 0.08 percent is the appropriate response to South Dakota's success and good solution for Alaska. 1:37:32 PM SENATOR STEVENS asked if this legislation puts Alaska on par with South Dakota and if other states would still be more advantageous. MR. BAQUERO confirmed that this legislation will put Alaska on par with South Dakota. He couldn't speak to the rates in other states. SENATOR COGHILL added that Alaska has been on the competitive edge for estate planning since 1998, which has attracted a lot of investment cash. This legislation attempts to bring Alaska policy in line with leading states such as New Jersey and South Dakota. CHAIR COSTELLO expressed appreciation for the legislation and offered her belief that it will benefit Alaska. SENATOR GIESSEL asked if the bill has a fiscal note. MR. BAQUERO deferred to the director of the Division of Insurance to explain the fiscal impact. SENATOR MEYER asked how many times the interest rate has been changed since 1998. MR. BAQUERO offered his understanding that it hasn't changed since 1998. 1:41:45 PM LORI WING-HEIER, Director, Division of Insurance, Department of Commerce, Community and Economic Development (DCCED), stated that the division submitted an indeterminate fiscal note because it seems that the industry could make up any difference by attracting more business with the reduced rate. She noted that in the last year, the difference between collecting 0.10 percent versus 0.08 percent would have resulted in $15,961 less to state coffers. Looking back to 2011, the largest difference, based on 105 policies, was $89,000. SENATOR MEYER asked if the legislation pertains to a particular type of life insurance policy. MS. WING-HEIER replied it could be any type of policy but she believes most would be whole life because those policies are used for estate planning. 1:44:13 PM SENATOR STEVENS asked to what extent Alaskans will benefit from this legislation. MS. WING-HEIER replied Alaskans as a consumer will benefit because they'll pay 0.02 percent lower on their premium; Alaskans as a whole will benefit from the anticipated increase in volume in premium tax, which will result in a larger contribution to the state coffers. CHAIR COSTELLO asked Mr. Blattmachr to discuss how this legislation fits in with Alaska's role in the insurance industry. MATHEW BLATTMACHR, Vice President and Trust Officer, Alaska Trust Company, explained that in 1998 Alaska adopted new age trust planning rules. Since then the legislature has added to those in an effort to stay at the forefront of trust planning. Fifteen states have passed laws similar to Alaska's and 11 others have some form of what Alaska has on the books. SB 15 seeks to keep Alaska on the competitive edge and levels the playing field with South Dakota. That state currently has the lowest tax rate on insurance policies, whereas Alaska is second. SENATOR MEYER asked if the legislation pertains to a particular type of life insurance policy. MR. BLATTMACHER replied it could apply to all policies with premiums greater than $100,000 per year, but it's likely to be used more for permanent types of insurance rather than term. 1:47:15 PM LINDA HULBERT, representing herself, said she's worked in the insurance industry for 25 years and has enjoyed watching it grow since the inception of the Alaska Trust Act. When the legislation first passed there were very few policies that had premiums that exceeded $100,000. Since then many people, Alaskans included, have been attracted to Alaska to do their estate planning. Changing the premium tax rapidly increased the amount of money that's come into the state for use in the general treasury. She said she supports the reduction in the tax rate to make Alaska competitive with South Dakota. She described the legislation as good public policy, which will attract additional revenue. 1:49:52 PM CHAIR COSTELLO announced she would hold SB 15 in committee for further consideration.