CSHB 197(RES) MINERAL EXPLORATION INCENTIVE CREDITS  Number 140 SENATOR LEMAN brought CSHB 197(RES) before the committee as the next order of business. He noted there was a draft committee substitute and asked for a motion for its adoption as a working document. SENATOR HALFORD moved that SCS CSHB 197(RES) (version "Z") be adopted as a working document. Hearing no objection, the motion carried. JOHN WALSH, staff to Representative Richard Foster, said in the drafting of the committee substitute, they took into consideration the testimony of the Department of Revenue in the computation of the credit with respect to the Alaska Corporate Income Tax for mining activity, resolving their major concern. They will not have to compute the credit using AS 43.20, which was a problem with the Department of Revenue because of the apportionment (water's edge) income method of calculation. The computation comes from the mining license tax, which is sited specific. Another change made in the legislation was that the credit will not go against rents because of the fear of potential litigation, which is agreeable to industry, as well as the Department of Natural Resources, which gets program receipts off of that rent. There is a provision in the legislation that clarifies the procedure for abandoned mines that are now back into production and the credits that may exist to get that mine back into production. The wording of "application" for a tax credit was changed to "request" for a tax credit. It clarifies that an operation would request credits annually with the Department of Natural Resources, certify those expenses for that year, and accumulate those until shifting into a production mode, whereby they would then start to deduct those credits against the taxes due. Mr. Walsh noted that the legislation provides that a credit can be carried forward to and applied during a subsequent tax year or royalty payment period. An exploration incentive credit must be applied within 15 tax years or royalty payment periods after the taking of the credit is approved, but they need not be 15 consecutive years. After 15 years of usage, the credits on the table at that point would expire. The legislation also allows the credits of a mine being assigned to the new interest holder when the mine is sold. Some confusing language in a previous draft of that section of the bill was deleted to make the intent of the section clearer. The bill further provides that it is up to the applicant to keep track of how its credits were used in the past and be able to at any time verify how he has applied those in previous years. Concluding his comments, Mr. Walsh stated he believes the new committee substitute is an improvement and he encourages its passage. Number 260 DAVID ROGERS, representing the Council of Alaska Producers, pointed out that at the request of the Department of Natural Resources, the bill now contains a definition of "mining operation." Number 270 SENATOR HALFORD asked what kind of retroactive incentive is being created for investment that may or may not have occurred after December 31, 1994. MR. ROGERS responded that rather than having it take effect in June or July, the decision was made to have it take effect at the beginning of 1995. SENATOR HALFORD added that he would encourage that this not apply to investments made before the start of the legislature and that it be changed to a later date. SENATOR HALFORD moved to change "December 31, 1994" to "May 15, 1995." Hearing no objection, SENATOR LEMAN stated the amendment to the Resources SCS was adopted. Number 290 JULES TILESTON, Director, Division of Mining & Water Management, Department of Natural Resources, testified from Anchorage in support of the changes made in the Resources SCS. Number 297 DEBORAH VOGT, Deputy Commissioner, Department of Revenue, stated the Resources SCS is a technical improvement over the previous version, but the department still has some philosophical problems of a fiscal nature which might be more appropriately adjusted in the Senate Finance Committee. Number 300 SENATOR TAYLOR moved that SCS CSHB 197(RES), as amended, and the Letter of Intent be passed out of committee with individual recommendations. Hearing no objection, it was so ordered.