Legislature(2015 - 2016)HOUSE FINANCE 519

04/11/2016 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 118(FIN) Out of Committee
<Bill Hearing Canceled>
<Bill Hearing Canceled>
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved HB 290 Out of Committee
Moved CSHB 375(FIN) Out of Committee
HOUSE BILL NO. 375                                                                                                            
     "An Act requiring the electronic submission of a tax                                                                       
     return or report with the Department of Revenue; and                                                                       
     providing for an effective date."                                                                                          
2:48:30 PM                                                                                                                    
KONRAD   JACKSON,   STAFF,    REPRESENTATIVE   KURT   OLSON,                                                                    
introduced the bill that  required the electronic submission                                                                    
of a  tax return  or report with  the Department  of Revenue                                                                    
(DOR). He noted  that the governor introduced  six tax bills                                                                    
that all  included provisions for electronic  submissions of                                                                    
tax  returns   and  reports.   He  stated   that  electronic                                                                    
submission  of documents  had become  commonplace and  was a                                                                    
time saving and  cost cutting measure for  both the taxpayer                                                                    
and  the  state.  He  furthered that  there  were  only  two                                                                    
sections that  made substantive changes to  current statute;                                                                    
the  first  authorized  electronic  filing  and  the  second                                                                    
assessed   a    civil   penalty   for   failing    to   file                                                                    
Co-Chair  Thompson  observed  that  Section 1  of  the  bill                                                                    
allowed for  a waiver if a  taxpayer did not have  access to                                                                    
computers.  Mr.   Jackson  deferred  the  question   to  the                                                                    
department.  Co-Chair  Thompson  wondered how  the  taxpayer                                                                    
would apply for a waiver.  Mr. Jackson deferred the question                                                                    
to the department.                                                                                                              
Representative  Munoz asked  how  the  waiver process  would                                                                    
work. She favored the benefits  of electronic filing but was                                                                    
concerned  about  the segment  of  the  population that  was                                                                    
"disadvantaged" by the requirement.                                                                                             
Vice-Chair Saddler wondered what  electronic meant. He asked                                                                    
whether  the   method  included   a  fillable  form   or  an                                                                    
electronic PDF format. Mr. Jackson  responded that the basic                                                                    
language in  the bill referred  to a form prescribed  by the                                                                    
2:53:40 PM                                                                                                                    
JERRY  BURNETT,  DEPUTY   COMMISSIONER,  TREASURY  DIVISION,                                                                    
DEPARTMENT  OF   REVENUE,  responded  that   the  department                                                                    
envisioned the  waiver process to  include a paper  form the                                                                    
taxpayer filled  out to request  a waiver. He  reported that                                                                    
currently all  tax payers  were businesses  or corporations.                                                                    
The  department  expected  a very  small  number  of  waiver                                                                    
Representative  Munoz   asked  whether  the   bill  included                                                                    
employment  security  taxes.   Ms.  Burnett  responded  that                                                                    
employment security taxes were  filed through the Department                                                                    
of Labor  and Workforce Development  (DOLWD). Representative                                                                    
Munoz wondered  what percentage of  current tax  payers used                                                                    
paper filing.  Ms. Burnett replied that  the department only                                                                    
recently  introduced electronic  filing  for businesses  and                                                                    
corporate filing had already mandated electronic filing.                                                                        
Representative Kawasaki asked what  the percentage of filers                                                                    
that  filed by  paper was.  Mr. Burnett  responded that  the                                                                    
department  was transitioning  out of  paper filing.  He did                                                                    
not  have statistics  and expected  that very  few taxpayers                                                                    
would  choose  paper  filing  due   to  the  convenience  of                                                                    
electronic filing.  Representative Kawasaki asked  about the                                                                    
satisfactory evidence  requirement in  the bill in  order to                                                                    
receive a  waiver. Mr.  Burnett responded  that satisfactory                                                                    
evidence   would   entail   not  having   the   ability   or                                                                    
practicality to access the internet.                                                                                            
2:58:06 PM                                                                                                                    
Representative   Kawasaki  referred   to   Section  7   that                                                                    
contained  the transitional  provisions.  He recounted  that                                                                    
DOR will adopt regulations  for implementation of electronic                                                                    
filing.  He  wondered how  long  the  time was  between  the                                                                    
passage of  the bill  and when  electronic filling  would be                                                                    
implemented. Mr.  Burnett expected the regulations  would be                                                                    
quickly  implemented  but was  not  sure  of the  specifics.                                                                    
Representative   Kawasaki   wanted   to  ensure   that   the                                                                    
transition time was sufficient and  allowed tax payers' time                                                                    
to adjust and prepare for  the change. Mr. Burnett commented                                                                    
that the  regulation process would implement  a time period.                                                                    
He explained that  the state did not have a  large number of                                                                    
tax payers in  any area other than corporate  tax payers. He                                                                    
ensured the  committee that the  department would  engage in                                                                    
some kind of  outreach. He did not anticipate  any issues in                                                                    
the transition.  Representative Kawasaki mentioned  that the                                                                    
waiver system included a civil  penalty and wondered whether                                                                    
the bill contained "typical language"  when dealing with tax                                                                    
filing. He preferred that penalties  would be deferred until                                                                    
after  the  first set  of  electronic  filing was  due.  Mr.                                                                    
Burnett relayed that "it was  typical for a taxing agency to                                                                    
have mandatory  language." Representative  Kawasaki wondered                                                                    
about  the zero  fiscal note.  He was  under the  impression                                                                    
that electronic filing saved time  and money and did not see                                                                    
savings reflected  in the fiscal note.  Mr. Burnett answered                                                                    
that most  taxpayers were already filing  electronically. He                                                                    
noted  that  over  the past  several  years  the  department                                                                    
"ramped down" staffing levels as  the electronic system came                                                                    
online. He  indicated that the  effect on  budgetary savings                                                                    
was  gradual  and were  currently  difficult  to define.  He                                                                    
offered  that when  the Permanent  Fund Division  instituted                                                                    
electronic filing  staffing decreased from over  100 to over                                                                    
70 employees.                                                                                                                   
Vice-Chair Saddler wondered whether  the bill was necessary.                                                                    
Mr.  Burnett   responded  that  legislation   was  necessary                                                                    
because  some  taxpayers  were  just  not  willing  to  file                                                                    
electronically.  He  voiced  that  "there  was  no  business                                                                    
reason" for  a taxpayer not  to file electronically  and the                                                                    
few  paper filers  affected  efficiency. Vice-Chair  Saddler                                                                    
asked  about the  digitization  of forms  and  asked if  the                                                                    
taxpayer's   information   was   sent  directly   into   the                                                                    
department's   database.   Mr.   Burnett  replied   in   the                                                                    
affirmative.  He expounded  that  the department  had a  web                                                                    
portal and information went directly into the system.                                                                           
3:05:03 PM                                                                                                                    
Representative Edgmon  related that  broad based  taxes were                                                                    
on the horizon and asked whether  there would be any need to                                                                    
provide  some  exceptions   for  rural  communities  without                                                                    
access to  reliable internet. Mr. Burnett  answered that how                                                                    
DOR  handled  individual  taxes   would  be  examined  as  a                                                                    
separate issue. Representative Edgmon  indicated that if the                                                                    
state  implemented an  income  tax  electronic filing  would                                                                    
certainly aid  the department especially  with non-residents                                                                    
filing.   He  thought   an  exemption   for  smaller   rural                                                                    
communities should  be an option.  Mr. Burnett  replied that                                                                    
the legislation allowed for a  regulatory process as a means                                                                    
for the department to deal with the issue of income taxes.                                                                      
Representative Guttenberg  was happy  to see the  state move                                                                    
forward  electronically.  However,  he  was  concerned  with                                                                    
internet accessibility.  He remarked  that if  he personally                                                                    
had to go  through a portal to complete his  filing he would                                                                    
unlikely not be able to complete  it. He felt that the state                                                                    
was  "not  up  to  speed"  in  terms  of  having  sufficient                                                                    
internet  service   in  Alaska;   much  of  the   state  had                                                                    
inadequate or dysfunctional internet service.                                                                                   
Representative Munoz  remarked that she was  old fashion and                                                                    
still filed paper federal tax  returns. She thought a longer                                                                    
exemption period  might be  better. She suggested  a 3  or 5                                                                    
year tome period for exemptions.                                                                                                
3:12:05 PM                                                                                                                    
Representative  Gara  thought an  option  to  file by  paper                                                                    
should  remain due  to  the  fact that  in  some places  the                                                                    
capability to file online did  not exist. Mr. Burnett agreed                                                                    
that  a  business  might  be  located  in  a  place  without                                                                    
adequate  internet service  and reported  that an  exemption                                                                    
provision existed in the legislation.                                                                                           
Representative Pruitt  asked whether business  licenses were                                                                    
required  to  be filed  online.  Mr.  Burnett was  uncertain                                                                    
whether  it was  mandated.  Representative Pruitt  supported                                                                    
the  legislation  as  a  step in  the  right  direction  and                                                                    
believed electronic  filing for many state  purposes was the                                                                    
preferred  method  that  increased  efficiency  and  lowered                                                                    
costs. He wondered whether any  of the state's online filing                                                                    
was required.                                                                                                                   
Representative Wilson asked whether  the Department of Labor                                                                    
and Workforce  Development could benefit from  the same kind                                                                    
of bill.                                                                                                                        
Representative Gara  thought that applying for  a waiver was                                                                    
a cumbersome process and thought  that the response might be                                                                    
slow and cause  late filing. He wondered  whether a taxpayer                                                                    
could just call and request  a paper file. Co-Chair Thompson                                                                    
ascertained  that the  waiver process  would  be handled  in                                                                    
Mr.  Burnett   indicated  that   the  bill   authorized  the                                                                    
department  to  design  the regulations  for  the  exemption                                                                    
process and could be handled  as suggested by Representative                                                                    
Gara.   Representative  Gara   interpreted   Section  1   as                                                                    
prohibiting sending  the form  upon request  without proving                                                                    
necessity. He believed  that the department's administrative                                                                    
costs would  be lowered  if a paper  copy would  be provided                                                                    
upon request  without employing staff time  reviewing waiver                                                                    
criteria. He thought the process was "cumbersome."                                                                              
Representative Gattis  agreed with Representative  Gara. She                                                                    
relayed  from  personal   experience  that  sometimes  paper                                                                    
filing was necessary or preferred.  She wanted to ensure the                                                                    
waiver process was much easier  until the online process was                                                                    
in more universal use in the state.                                                                                             
Co-Chair  Thompson  supported  the legislation.  He  offered                                                                    
that electronic  filing had  already resulted  in efficiency                                                                    
and cost savings  for the department and HB  375 contained a                                                                    
provision to obtain a waiver when necessary.                                                                                    
3:20:25 PM                                                                                                                    
Co-Chair Thompson OPENED public testimony.                                                                                      
3:20:34 PM                                                                                                                    
Co-Chair Thompson CLOSED public testimony.                                                                                      
Representative Munoz MOVED Conceptual Amendment 1.                                                                              
Representative  Munoz moved  conceptual amendment  1 related                                                                    
to page  2, line 4  extending the exemption period  from two                                                                    
years to five years.                                                                                                            
Representative Wilson OBJECTED for discussion.                                                                                  
Representative Munoz  thought 2  years was onerous  for some                                                                    
who needed to  file via paper and would have  to reapply for                                                                    
the waiver after only two years.                                                                                                
Representative Wilson WITHDREW her objection.                                                                                   
Representative   Kawasaki   shared  Representative   Munoz's                                                                    
concern. He  was unsure  whether the amendment  was up  to 5                                                                    
years or extended for a full five years.                                                                                        
Representative Munoz WITHDREW Conceptual Amendment 1                                                                            
Representative  Munoz  MOVED  Conceptual  Amendment  2  that                                                                    
applied  to page  2, line  4 of  the bill  removing "2"  and                                                                    
replacing  it with  "5". She  clarified  that the  amendment                                                                    
extended the exemption period to 5 years.                                                                                       
Representative Kawasaki OBJECTED for discussion.                                                                                
Representative  Kawasaki  related  that the  department  had                                                                    
already  experienced a  savings with  electronic filing  and                                                                    
that it would take time  for the exemption regulations to be                                                                    
written. He  recognized the need  to file paper  returns but                                                                    
felt that  5 years  was "too  long a  time period"  to allow                                                                    
compliance. He opposed the amendment.                                                                                           
Representative Gara did not believe  people were reading the                                                                    
statute correctly.  He deduced  that the exemption  was only                                                                    
granted if a taxpayer was  unable to file electronically and                                                                    
not  because   the  taxpayer  merely  resisted   change.  He                                                                    
supported conceptual amendment 2.                                                                                               
Representative Wilson supported the amendment.                                                                                  
Vice-Chair Saddler indicated he favored the amendment.                                                                          
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Guttenberg, Munoz, Saddler,  Wilson, Edgmon, Gara,                                                                    
OPPOSED: Kawasaki, Pruitt, Thompson                                                                                             
The MOTION PASSED (7/3).                                                                                                        
Representative Neuman was absent from voting.                                                                                   
3:26:40 PM                                                                                                                    
Vice-Chair  Saddler reviewed  the  zero  fiscal impact  note                                                                    
from DOR.                                                                                                                       
3:26:59 PM                                                                                                                    
Vice-Chair Saddler MOVED to REPORT  HB 375 as amended out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note(s). There  being NO  OBJECTION, it                                                                    
was so ordered.                                                                                                                 
CSHB  375 (FIN)  was REPORTED  out of  committee with  a "do                                                                    
pass"  recommendation  and  with  a  new  accompanying  zero                                                                    
fiscal impact note by the Department of Revenue.                                                                                
Co-Chair  Thompson reviewed  the  agenda  for the  following                                                                    

Document Name Date/Time Subjects
HB 118 AEA Graphic.pdf HFIN 4/11/2016 1:30:00 PM
HB 118