Legislature(2015 - 2016)HOUSE FINANCE 519

04/03/2015 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 80 REPEAL COLLEGE/CAREER READINESS ASSESS. TELECONFERENCED
<Bill Hearing Canceled>
+ HB 15 CREDITS FOR TIME SERVED/GOOD TIME TELECONFERENCED
<Bill Hearing Canceled>
+ Bills Previously Heard/Scheduled TELECONFERENCED
*+ HB 155 FEES; WAIVERS; CREDITS; DEDUCTIONS;TAXES TELECONFERENCED
<Bill Hearing Canceled>
*+ HB 100 UREA/AMMONIA FACILITY TAX CREDIT TELECONFERENCED
Heard & Held
+= HB 41 SPORT FISHING SERVICES TELECONFERENCED
Moved CSHB 41(FIN) Out of Committee
+= HB 49 BENEFIT CORPORATIONS TELECONFERENCED
Moved CSHB 49(L&C) Out of Committee
HOUSE BILL NO. 49                                                                                                             
                                                                                                                                
     "An Act relating to corporations, including benefit                                                                        
     corporations, and other entities; and providing for an                                                                     
     effective date."                                                                                                           
                                                                                                                                
2:57:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PAUL SEATON, SPONSOR,  explained the bill. He                                                                    
stated  that   HB  49  expands   the  options   for  Alaskan                                                                    
entrepreneurs  and  investors  by  placing  a  new  type  of                                                                    
corporate  entity,  the   benefit  corporation,  in  Alaskan                                                                    
statute. A  benefit corporation is a  for-profit corporation                                                                    
which   incorporates    public   benefits    and   community                                                                    
improvement  into  its  business practices,  no  matter  the                                                                    
principal   service  or   product  provided.   Allowing  the                                                                    
creation of  benefit corporations will give  business owners                                                                    
more choice in  how to run their business and  will bring to                                                                    
Alaska  a  slice  of  the $6.6  trillion  that  is  invested                                                                    
nationally in similar  corporations. Corporate law generally                                                                    
requires a  corporation to consider the  financial impact to                                                                    
their  shareholders   as  the   top  priority   when  making                                                                    
decisions.  Under the  benefit  corporate structure,  owners                                                                    
and  boards   have  the  freedom   to  take   actions  which                                                                    
positively   impact  their   communities  without   fear  of                                                                    
violating a fiduciary duty.  Benefit corporations are formed                                                                    
voluntarily and have  the same tax status of  any other for-                                                                    
profit  corporation.  By  electing   in  their  articles  of                                                                    
incorporation to  become a  benefit corporation,  a business                                                                    
simply gains  the flexibility to include  mission and social                                                                    
impact  in  their  business  practices.  Twenty-seven  other                                                                    
states have passed benefit  corporation legislation and many                                                                    
more  have  benefit  bills in  process.  Over  1400  benefit                                                                    
corporations  have incorporated  in those  states, including                                                                    
Ben &  Jerry's, Patagonia,  Rasmussen College,  Epic Coffee,                                                                    
and  King  Arthur  Flour  Company  (America's  oldest  flour                                                                    
company).  Each  of these  companies  works  to benefit  the                                                                    
public and  their communities in  the way that  matters most                                                                    
to   them.  HB   49   also  includes   measures  to   ensure                                                                    
accountability  and  transparency.  Just  as  a  traditional                                                                    
corporation  provides  their   shareholders  with  financial                                                                    
reports, a benefit corporation  will additionally create and                                                                    
publish  a  biennial  benefit   report  describing  how  the                                                                    
company  has  pursued  the   general  public  benefit.  This                                                                    
report,  which  is  held against  a  third  party  standard,                                                                    
allows   shareholders,   investors,   and  the   public   to                                                                    
confidently invest in benefit  corporations that share their                                                                    
values.                                                                                                                         
                                                                                                                                
3:00:36 PM                                                                                                                    
                                                                                                                                
Representative  Wilson  wondered  why  the  legislation  was                                                                    
needed. Co-Chair Thompson provided  his understanding of the                                                                    
current system  related to corporations. He  stated that the                                                                    
shareholders  currently   had  a  sizeable  profit   in  the                                                                    
corporation,  but the  corporation  gave 80  percent of  its                                                                    
earning to  charity. The bill would  protect the corporation                                                                    
from being sued by a shareholder.                                                                                               
                                                                                                                                
Representative  Seaton agreed,  but felt  it was  an extreme                                                                    
example.  The  legislation  was   intended  to  benefit  the                                                                    
community.                                                                                                                      
                                                                                                                                
Co-Chair Neuman  asked if corporations could  currently give                                                                    
a  percentage  of  their profits  to  other  entities,  even                                                                    
though there was  a risk of being sued  by the shareholders.                                                                    
Representative Seaton replied in the affirmative.                                                                               
                                                                                                                                
Co-Chair Neuman pointed out how  this legislation could be a                                                                    
"two-edged sword."  He felt that  there could be  a conflict                                                                    
of   interest.  He   furthered  that   the  bill   made  the                                                                    
corporation identify who receives  the benefit, and how much                                                                    
was   given.   Representative    Seaton   replied   in   the                                                                    
affirmative.  He stated  that  the corporation  must file  a                                                                    
benefit report.                                                                                                                 
                                                                                                                                
Co-Chair Neuman asked  if they had to pay  any taxes, before                                                                    
the benefits  were paid. Representative Seaton  replied that                                                                    
it was like a C corporation.                                                                                                    
                                                                                                                                
3:06:28 PM                                                                                                                    
                                                                                                                                
Representative   Pruitt   queried    the   rights   of   the                                                                    
shareholders. Representative  Seaton looked at page  14, and                                                                    
noted the stockholders dissent language.                                                                                        
                                                                                                                                
TANEEKA   HANSEN,   STAFF,   REPRESENTATIVE   PAUL   SEATON,                                                                    
responded that the shareholders  had the ability to dissent,                                                                    
at the  time a  corporation may decide  to become  a benefit                                                                    
corporation. Establishing  a benefit corporation  requires a                                                                    
two-thirds  vote  of  the  board   of  directors  to  become                                                                    
established.  She  looked  at a  section  that  allowed  the                                                                    
shareholders the  right to bring  action, as related  to the                                                                    
specific benefit purpose. If that  shareholder felt that the                                                                    
benefit  corporation was  not  perusing  its public  benefit                                                                    
purpose, they could bring corrective action.                                                                                    
                                                                                                                                
3:09:16 PM                                                                                                                    
                                                                                                                                
Representative  Pruitt surmised  that the  shareholder could                                                                    
sue,  if they  felt that  the corporation  had not  provided                                                                    
enough  benefit. Mr.  Hansen  replied  that the  shareholder                                                                    
could  bring  action, but  not  for  monetary damages.  They                                                                    
could only bring corrective action.                                                                                             
                                                                                                                                
3:10:26 PM                                                                                                                    
                                                                                                                                
ERIC TROJIAN, DIRECTOR OF POLICY,  B-LABS, explained that B-                                                                    
Labs worked to bring  investors and social entrepreneurs. He                                                                    
stated that  there was an  impediment in corporate  law that                                                                    
inhibited the stakeholders from  receiving the full revenue.                                                                    
He  stressed  that  the purpose  of  the  legislation  would                                                                    
protect  the legislature,  by  allowing  the shareholder  to                                                                    
sue, if the company was  not considering the social mission.                                                                    
He  stated  that  Idaho  had   recently  enacted  an  almost                                                                    
identical  bill. He  shared that  there were  currently 2200                                                                    
benefit  corporations  nationwide,  and there  were  several                                                                    
million dollar  deals within those  companies. He  felt that                                                                    
the bill  was a deregulation  of a purpose of  a corporation                                                                    
from a sole requirement  to maximize profits to deregulating                                                                    
by  allowing the  market direct  the  company's action.  The                                                                    
shareholder  will  then  understand  the  direction  of  the                                                                    
company,  via  the  specific style  of  the  corporation  as                                                                    
outlined in  the corporation  certificate. He  stressed that                                                                    
there were some benefit corporations that were thriving.                                                                        
                                                                                                                                
3:17:22 PM                                                                                                                    
                                                                                                                                
Co-Chair Thompson asked if the  federal government treated a                                                                    
B corporation  any differently than the  C corporations. Mr.                                                                    
Trojian responded in the negative,  because the bill did not                                                                    
address any tax issues.                                                                                                         
                                                                                                                                
Representative Wilson  wondered what would occur  if only 60                                                                    
percent of the shareholders wanted  to contribute to a local                                                                    
nonprofit. She asked if the other  40 percent had a right to                                                                    
sue. Mr. Trojian responded that  the board of directors made                                                                    
those decisions.  The shareholders had  a right to  vote out                                                                    
the  board  of  directors.  He explained  that  the  benefit                                                                    
corporations  did  not  give   large  amounts  of  money  to                                                                    
nonprofits.  The benefit  corporations wanted  to instill  a                                                                    
certain moral  or mission  within the  company. He  used the                                                                    
example  of Patagonia  and King  Arthur Flour  using organic                                                                    
materials.  He stated  that  the  benefit corporations  made                                                                    
decisions with the community and shareholders in mind.                                                                          
                                                                                                                                
Representative  Wilson wondered  if the  same concept  could                                                                    
occur within  the shareholders, versus creating  an entirely                                                                    
new corporation. Mr. Trojian indicated  no. He reported that                                                                    
no because the  purpose of that corporation  was to maximize                                                                    
profits.                                                                                                                        
                                                                                                                                
Representative  Pruitt  queried  the  goal  of  B-Labs.  Mr.                                                                    
Trojian responded that  his entity's mission was  to use the                                                                    
power  of   business  to  solve  social   and  environmental                                                                    
problems.  His organization  felt that  there were  too many                                                                    
problems in the world for only government to solve.                                                                             
                                                                                                                                
Representative Pruitt asked for  examples of companies where                                                                    
shareholders  may have  sued, because  they did  not believe                                                                    
that the company  went far enough to  contribute to society.                                                                    
Mr. Trojian  responded that  there was not  any case  law at                                                                    
present related to the legislation.                                                                                             
                                                                                                                                
3:24:13 PM                                                                                                                    
                                                                                                                                
Representative Gara stressed that the  law did not require a                                                                    
specific  social   cause.  Mr.  Trojian  responded   in  the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Representative Gattis  surmised that the bill  allowed for a                                                                    
greater  participation by  the consumer  to contribute  to a                                                                    
greater  cause. Representative  Seaton agreed,  but stressed                                                                    
that  the  corporations  would pay  taxes  and  benefit  the                                                                    
community.                                                                                                                      
                                                                                                                                
Co-Chair Thompson CLOSED public testimony.                                                                                      
                                                                                                                                
Co-Chair  Neuman  MOVED  to  report   CSHB  49(L&C)  out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
                                                                                                                                
Representative  Pruitt OBJECTED.  He  felt as  if the  state                                                                    
would  be opening  up  the  doors to  a  problem to  greater                                                                    
environmental attacks on Alaska.  He focused his concerns on                                                                    
environmental taxes.                                                                                                            
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN  FAVOR:   Gara,  Guttenberg,  Kawasaki,   Munoz,  Neuman,                                                                    
Thompson                                                                                                                        
OPPOSED: Gattis, Pruitt, Wilson                                                                                                 
                                                                                                                                
The MOTION PASSED (6/3).                                                                                                        
                                                                                                                                
CSHB 49(L&C) was REPORTED out of committee with a "do pass"                                                                     
recommendation and with a new fiscal impact note from the                                                                       
Department of Commerce, Community and Economic Development.                                                                     
                                                                                                                                
Co-Chair Thompson discussed the agenda for the following                                                                        
meeting.                                                                                                                        
                                                                                                                                

Document Name Date/Time Subjects
CSHB 15 Sponsor Statement.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
CSHB 15 Ver. JUD Explanation of Changes.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
CSHB 15 Ver. JUD Sectional.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 1 - BITAD Alcohol monitoring technology utilized by Alaska DOC.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 2 - US Dept. of Justice Electronic monitoring and recidivism.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 3 - Electronic Monitoring Requirements.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 4 - Electronic Monitoring Terms and Conditions.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 5 - DOC House arrest and EM program indigent form.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 6 - Use of electronic monitoring in the Alaska.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB80_Sectional_Letterhead.docx HFIN 4/3/2015 1:30:00 PM
HB 80
HB80_Sponsor Statement.pdf HFIN 4/3/2015 1:30:00 PM
HB 80
HB80_Testing Requirement Briefing Memo.pdf HFIN 4/3/2015 1:30:00 PM
HB 80
HB 41 NEW FN DFG Sport Fisheries.pdf HFIN 4/3/2015 1:30:00 PM
HB 41
HB 100 Support additional.pdf HFIN 4/3/2015 1:30:00 PM
HB 100
HB 41 Letters.pdf HFIN 4/3/2015 1:30:00 PM
HB 41