SENATE RULES COMMITTEE May 11, 1997 12:48 p.m. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Mike Miller Senator Jim Duncan MEMBERS ABSENT Senator Robin Taylor Senator John Torgerson COMMITTEE CALENDAR CS FOR HOUSE BILL NO. 63(RLS) "An Act amending the definition of `motor fuel' under the state's motor fuel tax to add, as a part of the tax exemption set out in that definition, exemption from the tax for fuel sold for use in jet propulsion aircraft operating in flights that continue from foreign countries, to add exemption from the tax for certain number 6 `residual fuel oil,' also known as bunker fuel, and to delete the exemption from the tax for fuel that is at least 10 percent alcohol by volume; and repealing ch. 42, SLA 1994, the Act providing for the imposition of a different tax levy on residual fuel oil used in and on certain watercraft until June 30, 1998; and providing for an effective date." CS FOR HOUSE BILL NO. 208(L&C) "An Act relating to the board of directors of the Alaska Aerospace Development Corporation." PREVIOUS SENATE COMMITTEE ACTION HB 63 - Finance report 5/8/97. HB 208 - Finance report 4/23/97. WITNESS REGISTER Bob Bartholomew, Deputy Director Income & Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, AK 99811-0420 POSITION STATEMENT: Offered information on SCS CSHB 63(RLS) ACTION NARRATIVE TAPE 97-7, SIDE A Before calling the May 11 meeting to order, CHAIRMAN LEMAN adjourned the May 10 meeting which had been in recess to a call of the chair. CHAIRMAN LEMAN called the Senate Rules Committee May 11 meeting to order at 12:49 p.m., and noted the presence of Senators Miller, Duncan and Leman. CHAIRMAN LEMAN introduced CSHB 63(RLS) (MOTOR FUEL TAX EXEMPTION) as the first order of business. He noted there was a proposed Rules SCS for the committee's consideration, which, in the non- attainment areas, puts a seasonal exemption of 4 cents on during the months that is required by the state and the EPA to meet quality standards. As incentives, there is also a full 8 cent exemption if the alcohol for the addition to the fuel is produced from lignocellulose or from seafood waste. BOB BARTHOLOMEW , Deputy Director, Income & Excise Audit Division, Department of Revenue, explained the Rules SCS makes one change to the previous bill. The previous bill repealed the exemption for gasohol that is currently in the statute. It will change that from completely being exempt from the tax to being subject to a 4 cent a gallon tax, which is one half of the current motor fuel tax rate that is paid throughout the state. Mr. Bartholomew related that a rough financial analysis by the division shows that the industry has testified that over the last years the cost of the additive to a gallon of gas has ranged from 13 cents to 20 cents a gallon. He said if you look at the federal tax credit, which is 5 cents a gallon, and the state tax credit under this proposal, which would be 4 cents a gallon, the actual cost increase for an additive ranges from 4 cents to 11 cents a gallon. However, he said information shows that the price of gas shouldn't have to vary whether ethanol is being sold or not. Addressing the fiscal impact from the change, Mr. Bartholomew said an additional $8 million in revenue would be collected, and this change would reduce the $8 million by $1.4 million, so the new revenue coming in from motor fuel would be $6.6 million. The current fiscal note shows a net of all of the provisions of the bill being $4.5 million in new revenue, after the aviation jet fuel change and the marine fuel change. The new fiscal note for the Rules SCS will show almost $2.2 million as the net increase in revenue. SENATOR LEMAN asked what the difference would be if the exemption in the non-attainment areas would be 8 cents seasonally. MR. BARTHOLOMEW replied that it would go down approximately another $1.5 million. SENATOR MILLER moved the adoption of SCS CSHB 63(RLS). Hearing no objection, it was so ordered. SENATOR MILLER moved SCS CSHB 63(RLS) be approved for calendaring at the discretion of the Chair. Hearing no objection, it was so ordered. CHAIRMAN LEMAN brought CSHB 208(L&C) (ALASKA AEROSPACE DEVELOPMENT CORP. BOARD) before the committee, and hearing no discussion, he requested a calendaring motion on the legislation. SENATOR MILLER moved CSHB 208(L&C) be approved for calendaring at the discretion of the Chair. Hearing no objection, it was so ordered. There being no further business to come before the committee, the meeting adjourned at 12:58 p.m.