Legislature(2015 - 2016)HOUSE FINANCE 519

04/05/2016 05:00 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time --
+ HB 319 SNOWMOBILE REGISTRATION FEES TELECONFERENCED
Moved CSHB 319(FIN) Out of Committee
*+ HB 250 INDIV. INCOME TAX: CREDITS; RETURNS TELECONFERENCED
Heard & Held
+ HB 249 ELECTRONIC TAX RETURNS & MOTOR FUEL TAX TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 249                                                                                                            
                                                                                                                                
     "An Act  requiring the electronic  submission of  a tax                                                                    
     return  or  report  with  the  Department  of  Revenue;                                                                    
     relating to  the motor fuel  tax; and providing  for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
6:19:32 PM                                                                                                                    
                                                                                                                                
JERRY  BURNETT,  DEPUTY   COMMISSIONER,  TREASURY  DIVISION,                                                                    
DEPARTMENT OF  REVENUE, would run through  the presentation.                                                                    
It  was  a  simple  presentation  which  he  introduced  the                                                                    
PowerPoint Presentation: "Motor Fuel Tax: HB 249."                                                                              
                                                                                                                                
Mr. Burnett looked at slide 2: "Motor Fuel Tax Increase."                                                                       
                                                                                                                                
     "An Act  relating to  the motor  fuel tax;  relating to                                                                    
     the duties of the  commissioner of revenue; relating to                                                                    
     the  disposition of  revenue from  the motor  fuel tax;                                                                    
     and providing for an effective date."                                                                                      
                                                                                                                                
Mr. Burnett slide 3: "Motor Fuel Tax History."                                                                                  
                                                                                                                                
     Began in 1945                                                                                                              
                                                                                                                                
     Tax rates have increased over time, but structure                                                                          
     unchanged                                                                                                                  
                                                                                                                                
          Last increase: highway 1970, marine 1977,                                                                             
          aviation fuel 1994                                                                                                    
                                                                                                                                
Mr. Burnett  advanced to  slide 4:  "Motor Fuel  Tax History                                                                    
(Continued)."                                                                                                                   
                                                                                                                                
     Tax was suspended from Sept. 1, 2008, to Aug. 31, 2009                                                                     
                                                                                                                                
     In 2015, HB 158 added $0.0095 surcharge on motor fuels                                                                     
     and some other refined fuels                                                                                               
                                                                                                                                
          Intended for spill prevention and response fund                                                                       
                                                                                                                                
Mr. Burnett  turned to slide  5: "Motor Fuel  Tax Proposal."                                                                    
He explained  that the proposal  was to increase  the taxes,                                                                    
but to  change the off-road use  credit of 6 cents  of the 8                                                                    
cents.  He stressed that  it required electronic filing; and                                                                    
provided an exemption process.                                                                                                  
                                                                                                                                
Representative  Guttenberg  referred  to the  jet  fuel.  He                                                                    
wondered if an analysis of the international travel.                                                                            
                                                                                                                                
Mr. Burnett  responded that  most of the  jet fuel  used for                                                                    
international  travel was  exempt  from  state taxation.  He                                                                    
stated that the  genesis of the large increase  was from the                                                                    
Aviation  Advisory Committee.  There were  proposals in  the                                                                    
previous  year   to  add  landing  fees   at  certain  state                                                                    
certificated airports.  The committee  advised the  state to                                                                    
raise the  jet fuel  tax, rather  than increase  the landing                                                                    
fees.                                                                                                                           
                                                                                                                                
Co-Chair Thompson  assumed the  federal government  would be                                                                    
exempt.                                                                                                                         
                                                                                                                                
Representative Guttenberg asked who would be paying for jet                                                                     
fuel.                                                                                                                           
                                                                                                                                
Mr. Burnett responded that it would be regional and                                                                             
domestic carriers.                                                                                                              
                                                                                                                                
6:24:58 PM                                                                                                                    
                                                                                                                                
Mr. Burnett discussed slide 6: "Relative Motor Fuel Tax                                                                         
Rate."                                                                                                                          
                                                                                                                                
     Alaska's fuel taxes are among lowest in U.S.1                                                                              
          Highway fuel: lowest                                                                                                  
          Jet fuel: 35th out of 50                                                                                              
          Aviation gas: 24th out of 50                                                                                          
     Under this bill, Alaska taxes would be:                                                                                    
          Below national average (20.17 cents)                                                                                  
          for highway fuel                                                                                                      
          Above national average for jet/aviation fuel                                                                          
                                                                                                                                
Mr. Burnett moved to slide 7: "Impacts of Tax Proposal."                                                                        
                                                                                                                                
     Gas prices at the pump would rise                                                                                          
                                                                                                                                
     More aviation taxes to fund certificated urban and                                                                         
     rural airports                                                                                                             
                                                                                                                                
          Requested by aviation advisory committee as                                                                           
          preferable to landing fee increases                                                                                   
                                                                                                                                
Mr. Burnett advanced to slide 8: "Revenue Impact."                                                                              
                                                                                                                                
     Dept. of Revenue estimates increasing the tax rate                                                                         
     will more than double tax collections                                                                                      
                                                                                                                                
     Additional revenue about $49 million per year                                                                              
                                                                                                                                
          $0.2 million will be shared with municipal-owned                                                                      
          airports                                                                                                              
                                                                                                                                
          Remainder: general fund and special accounts for                                                                      
          road, water transport, and aviation facilities                                                                        
                                                                                                                                
Mr.   Burnett   turned   to   slide   9:   "Revenue   Impact                                                                    
(Continued)":                                                                                                                   
                                                                                                                                
     Estimates based on fall 2015 revenue forecast                                                                              
                                                                                                                                
     Does  not  account  for  changes   in  fuel  demand  or                                                                    
     stockpiling                                                                                                                
                                                                                                                                
                                                                                                                                
Mr. Burnett talked about slide 10: "Implementation Cost."                                                                       
                                                                                                                                
     Dept. of Revenue must update:                                                                                              
                                                                                                                                
          Tax Revenue Management System (TRMS)                                                                                  
          Revenue Online (ROL) which allows a taxpayer to                                                                       
          file a return and apply for a dealer license                                                                          
          online                                                                                                                
          Tax return forms                                                                                                      
                                                                                                                                
     One-time  implementation cost  of  $50,000 to  recreate                                                                    
     tax  forms and  reprogram and  test the  tax system  to                                                                    
     accommodate the rate changes                                                                                               
                                                                                                                                
     No additional costs to administer the tax program                                                                          
                                                                                                                                
Mr. Burnett moved to slide 11: "Motor Fuel Tax-Changes made                                                                     
in Committee Substitute":                                                                                                       
                                                                                                                                
     If average price of ANS crude  oil is more than $85 per                                                                    
     barrel during  the previous  year-no change  to current                                                                    
     tax rates                                                                                                                  
                                                                                                                                
     If average price of ANS crude  oil is less than $85 per                                                                    
    barrel during the previous year-tax rates increase                                                                          
     Motor  fuel used  for commercial  fishing remains  at 5                                                                    
     cents a gallon                                                                                                             
                                                                                                                                
     Tax increase sunsets after 2 years (July 1, 2018)                                                                          
                                                                                                                                
6:31:45 PM                                                                                                                    
                                                                                                                                
Vice-Chair Saddler asked what the commercial fishing                                                                            
exemption.                                                                                                                      
                                                                                                                                
Mr. Burnett responded that it was $4.2 million.                                                                                 
                                                                                                                                
Vice-Chair Saddler wondered whether the state could take                                                                        
advantage of more federal transportation funding with the                                                                       
increase in fuel taxes.                                                                                                         
                                                                                                                                
Mr. Burnett responded that the  highway taxes go towards the                                                                    
general  fund,  and the  general  fund  paid the  match  for                                                                    
federal  dollars.  He  stated   that  there  was  no  direct                                                                    
linkage,  but  the state  tax  and  number of  gallons  were                                                                    
reported.  He  assumed that  the  U.S.  Congress may  wee  a                                                                    
linkage  when  examining  the authorization  bills  for  the                                                                    
state.                                                                                                                          
                                                                                                                                
Co-Chair  Thompson   did  not   believe  that   the  federal                                                                    
government  turned away  any  money  collected from  highway                                                                    
dollars.                                                                                                                        
                                                                                                                                
Mr. Burnett  explained slide 12:  "Closing the  Budget Gap."                                                                    
He explained  that the motor  fuel tax was after  changes to                                                                    
oil and gas; and income tax.                                                                                                    
                                                                                                                                
Co-Chair  Thompson thought  the  state  had been  collecting                                                                    
about $80 million in fuel tax                                                                                                   
                                                                                                                                
Mr. Burnett  thought the number  was closer to  $40 million.                                                                    
He stated  that the proposal  would bring the  number closer                                                                    
to $90 million.                                                                                                                 
                                                                                                                                
6:34:53 PM                                                                                                                    
                                                                                                                                
Representative  Wilson   wondered  if  the   adjustment  had                                                                    
already occurred  with the change  from collected  land fees                                                                    
to collecting the fuel tax.                                                                                                     
                                                                                                                                
Mr.  Burnett  replied that  there  was  a recommendation  to                                                                    
increase the tax, but it had not yet been increased.                                                                            
                                                                                                                                
Representative  Wilson  wondered  if   the  taxes  would  be                                                                    
increased, should the bill fail to pass.                                                                                        
                                                                                                                                
Mr.  Burnett  replied  that it  would  probably  require  an                                                                    
increase in landing fees.                                                                                                       
                                                                                                                                
Representative Wilson  stressed that  there would not  be an                                                                    
increase to landing fees.                                                                                                       
                                                                                                                                
Mr. Burnett indicated she was  correct, and that it would be                                                                    
new landing fees.                                                                                                               
                                                                                                                                
Representative  Wilson queried  a way  to balance  to ensure                                                                    
that airports were not paying  more than what they were able                                                                    
to  utilize, and  not pay  for someone  else's airport.  She                                                                    
wondered  whether  Anchorage  and Fairbanks  should  have  a                                                                    
separate rate than other airports.                                                                                              
                                                                                                                                
Mr. Burnett deferred to Commissioner Luiken.                                                                                    
                                                                                                                                
MARK LUIKEN, COMMISSIONER,  DEPARTMENT OF TRANSPORTATION AND                                                                    
PUBLIC FACILITIES,  answered that the airports  were already                                                                    
covered by  the carriers through landing  fees, rates, fees,                                                                    
etc.  He  stated that  the  tax  would impact  the  carriers                                                                    
across  the  state.  He  stated  that  the  board  made  the                                                                    
recommendation, because they felt it  was the fairest way to                                                                    
impact all  of the  users of the  system and  distribute the                                                                    
cost  the most  fairly. He  stated  that the  board did  not                                                                    
believe the landing fees was  fair, because it would only be                                                                    
levied at certificated airports.                                                                                                
                                                                                                                                
Co-Chair Thompson asked how many  airports the Department of                                                                    
Transportation and Public Facilities (DOT/PF) maintained.                                                                       
                                                                                                                                
Commissioner  Luiken  replied  that  DOT/PF  maintained  249                                                                    
airports in the state.                                                                                                          
                                                                                                                                
Representative  Wilson felt  that  the  legislation was  not                                                                    
fair to the Fairbanks airport.                                                                                                  
                                                                                                                                
Commissioner   Luiken  stated   that  the   larger  airports                                                                    
supported the broader system in the state.                                                                                      
                                                                                                                                
Representative Wilson  mentioned that the air  carriers were                                                                    
not very happy with the legislation.                                                                                            
                                                                                                                                
Co-Chair  Thompson  remarked  that  he  had  hard  form  air                                                                    
carriers also.                                                                                                                  
                                                                                                                                
6:40:51 PM                                                                                                                    
                                                                                                                                
Representative Pruitt  wondered whether FedEx and  UPS would                                                                    
pay the tax.                                                                                                                    
                                                                                                                                
Commissioner   Luiken  understood   that  for   those  cargo                                                                    
carriers  flying a  domestic route  the jet  fuel tax  would                                                                    
apply.                                                                                                                          
                                                                                                                                
Representative Pruitt  thought Alaska was putting  itself in                                                                    
a  sticky position  by tripling  their  taxes, because  jobs                                                                    
were at stake.                                                                                                                  
                                                                                                                                
Co-Chair Thompson asked about a comparison.                                                                                     
                                                                                                                                
Commissioner  Luiken  would  be   happy  to  supply  a  cost                                                                    
comparison   between  Anchorage,   Seattle,  Portland,   and                                                                    
Anchorage. The fact was that  Alaska's jet fuel tax was only                                                                    
a portion of fees charged.                                                                                                      
                                                                                                                                
Mr.  Burnett added  that  he sat  on  the Alaska  Industrial                                                                    
Development and Export Authority (AIDEA) board.                                                                                 
                                                                                                                                
6:47:34 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki wondered  how the commercial fishing                                                                    
tax would be remitted.                                                                                                          
                                                                                                                                
Mr.  Burnett responded  that  as  a person  pulled  up to  a                                                                    
station,  the  state  would administer  the  tax  through  a                                                                    
rebate.                                                                                                                         
                                                                                                                                
Vice-Chair  Saddler supported  moving towards  a motor  fuel                                                                    
tax rather than an airport landing tax.                                                                                         
                                                                                                                                
HB  249  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair   Thompson  thanked   the   presenters  for   being                                                                    
available. He reviewed the agenda for the following day.