Bill Summary – FastDemocracy

State of Alaska
                                                        Fiscal Note
                                                                                        Bill Version:                    SCS CSHB 233(FIN)
 2018 Legislative Session
                                                                                        Fiscal Note Number:              2
                                                                                        (S) Publish Date:                5/8/2018
 Identifier:       DOR-TAX-5-07-18                                        Department:       Department of Revenue
 Title:            EXTEND EDUCATION TAX CREDITS                           Appropriation: Taxation and Treasury
 Sponsor:          TUCK                                                   Allocation:       Tax Division
 Requester: Senate Finance Committee                                      OMB Component Number:              2476
 Expenditures/Revenues
 Note: Amounts do not include inflation unless otherwise noted below.                                                          (Thousands of Dollars)
                                                 Included in
                                    FY2019       Governor's
                                Appropriation      FY2019                                      Out-Year Cost Estimates
                                  Requested       Request
 OPERATING EXPENDITURES               FY 2019        FY 2019       FY 2020                FY 2021           FY 2022            FY 2023        FY 2024
 Personal Services
 Travel
 Services
 Commodities
 Capital Outlay
 Grants & Benefits
 Miscellaneous
 Total Operating                            0.0           0.0          0.0                      0.0                0.0              0.0              0.0
 Fund Source (Operating Only)
 None
 Total                                            0.0        0.0             0.0                0.0                0.0              0.0              0.0
 Positions
 Full-time
 Part-time
 Temporary
 Change in Revenues
 1250 UGF Rev (UGF)                      (3,175.0)                     (6,350.0)         (5,885.0)          (5,420.0)         (5,420.0)       (5,420.0)
 Total                                   (3,175.0)           0.0       (6,350.0)         (5,885.0)          (5,420.0)         (5,420.0)       (5,420.0)
 Estimated SUPPLEMENTAL (FY2018) cost:            0.0               (separate supplemental appropriation required)
 (discuss reasons and fund source(s) in analysis section)
 Estimated CAPITAL (FY2019) cost:                 0.0               (separate capital appropriation required)
 (discuss reasons and fund source(s) in analysis section)
 ASSOCIATED REGULATIONS
 Does the bill direct, or will the bill result in, regulation changes adopted by your agency?           yes
 If yes, by what date are the regulations to be adopted, amended or repealed?                           01/01/19
 Why this fiscal note differs from previous version/comments:
 Prepared By:             Ken Alper, Director                                                                 Phone:         (907)465-8221
 Division:                Tax Division
                                                              REPORT                                          Date:          05/07/2018 11:00 AM
                                                                            ED
                                                               SFC 05/0 OUT OF
 Approved By:             Mike Barnhill                                                                       Date:          05/07/18
 Agency:                  Department of Revenue
                                                                             7/2018
Printed 5/7/2018                                                Page 1 of 2                                                           Control Code: xNEFL
                                                                                                    SCS CSHB 233(FIN) - Fiscal Note 2
                                                 FISCAL NOTE ANALYSIS
STATE OF ALASKA                                                                   BILL NO. SCS CSHB233(FIN)
2018 LEGISLATIVE SESSION
Analysis
   The Education Tax Credit has been in existence since 1987, and has been extended multiple times. The credit is based on a
   percentage of donations to eligible organizations, and can be used to reduce tax liability against any one of seven different
   taxes: insurance premium tax, corporate income tax, mining license tax, fisheries business tax, fisheries resource landing
   tax, oil and gas production tax, and oil and gas property tax. Eligible organizations include schools as well as vocational
   education and certain cultural and preschool programs. The credit is claimed by a taxpayer when they file their tax return;
   there is no preapproval process.
   HB233 makes multiple changes to uncodified law. First, it extends the overall program from the current statutory sunset of
   January 1, 2019, to January 1, 2025. Additionally, a number of eligible recipient categories are scheduled to sunset on
   January 1, 2021. These sunsets are also extended to January 1, 2025. Because the credit exists in seven different statutes,
   these require multiple concurrent changes.
   The bill also changes the rate at which credits are earned. The credit rate was increased in 2010, and is currently $250,000
   out of the first $300,000 of a donation (up to 83%) with a percompany cap of $5 million. The proposed committee
   substitute steps this down in two phases. For the years 20192020, the first $100,000 in donations from a company
   receives a 50% tax credit. Donations between $100,000 and $300,000 receive a 75% credit, and donations above $300,000
   receive 50%. Beginning in 2021, the credit is reduced to 50% of all donations. Additionally, in 2019 the annual per
   company credit cap is reduced from $5 million to $1 million. For 201920, this cap is met with $1.9 million in donations;
   beginning in 2021 the cap is met with $2 million in donations.
   The committee substitute incorporates two small changes to eligible categories that were made in the House: removing
   the eligibility for intercollegiate sports tournament, which had previously been removed from four of the seven taxes, and
   adding "national" accreditation to the previous "regional" accreditation requirement for universities and colleges. This
   later change expands eligibility to a handful of small Christian colleges in Alaska, and has an indeterminate impact on the
   overall cost of the program. This version also allows equipment donations in addition to direct cash. DOR will be expected
   to write regulations in order to properly confirm the value of such inkind contributions. The impact of this inkind change
   is indeterminate.
   The fiscal impact of this bill will be through reduced revenue, due to companies continuing to use the program past the
   current 1/1/19 sunset. Although the actual amount to be claimed cannot be predicted, for purposes of this analysis we
   used the average amount claimed for the past three calendar years. According to the DOR annual report to the legislature,
   the following amounts were claimed:
   2015: $7.43 million
   2016: $6.81 million
   2017: $6.29 million
   The average of these, $6.84 million, was used as the estimated impact for earlier versions of this bill which included a
   simple sunset extension. Based on late filings and additional information available to the Tax Division, this number has
   been revised to a baseline three year average of $7.57 million.
   Assuming an unchanged donation profile in future years, the reduction to the credit rates in 201920 would reduce the
   total credits claimed under this version of the bill to $6.35 million. Beginning in 2021 the impact is $5.42 million. Although
   the fiscal note shows "negative" revenue, this is compared to the status quo which would be a full sunset on 1/1/19.
   Alternatively, this could be viewed as a reduction in revenue impact of $1.22  $2.15 million. In other words, this bill
   represents additional revenue versus a socalled clean extension. For FY2019 and FY2021, the impacts are split due to
   changes occurring in the middle of fiscal years. Continuing this program is not expected to add administrative costs to the
   Department of Revenue.
(Revised 9/26/17 OMB/LFD)                                                                                            Page 2 of 2
DOR-TAX-5-07-18                                                 Page 2 of 2                                               Control Code: xNEFL
Statutes affected: 
HB0233B, AM CSHB 233(FIN), introduced 04/11/2018: 21.96.070, 21.09.210, 21.66.110, 43.55.019, 43.55.011, U.S.C, 37.14.750, 43.56.018
HB0233C, AM CSHB 233(FIN) am, introduced 04/12/2018, passed House 04/12/2018: 21.96.070, 21.09.210, 21.66.110, 43.20.014, 37.14.750, 14.16.200, 43.55.019, 43.55.011, U.S.C, 43.56.018, 43.65.018, 43.75.018, 43.77.045, 43.77.040
HB0233D, AM SCS CSHB 233(FIN), introduced 05/08/2018, passed House 05/12/2018, passed Senate 05/12/2018: 21.96.070, 21.09.210, 21.66.110, 21.96.075, 43.20.014, 43.55.019, 43.56.018, 43.65.018, 43.75.018, 43.77.045, 43.20.145, 37.14.750, 14.16.200, 43.55.011, U.S.C, 43.77.040, 21.06.110
HB0233Z, AM Enrolled HB 233, introduced 05/12/2018: 21.96.070, 21.09.210, 21.66.110, 21.96.075, 43.20.014, 43.55.019, 43.56.018, 43.65.018, 43.75.018, 43.77.045, 43.20.145, 37.14.750, 14.16.200, 43.55.011, U.S.C, 43.77.040, 21.06.110