04/26/1996 02:00 PM Senate FIN

                                                                               
       CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 397(FIN)                   
       "An Act relating to the  fisheries resource landing tax                 
  and to    the  seafood  marketing assessment;  and providing                 
  for an    effective date."                                                   
                                                                               
  Representative  Alan  Austerman  was  invited  to  join  the                 
  committee and testified  on behalf of  the bill.  This  bill                 
  makes  the on-shore and  the off-shore processors  tax to be                 
  more identical.   The off-shore processors took the state to                 
  court over this  tax and  one of the  reasons they gave  was                 
  because they were different.   The court has sent  them back                 
  to   the   state   of   Alaska    to   handle   the   matter                 
  administratively.  Senator  Rieger asked the fiscal  note to                 
  be amended  noting the  money was  to be  directed to  ASMI.                 
  Representative Austerman  said the money being discussed was                 
  for salmon marketing and this money was collected on a white                 
  fish basis.   He is  not in  favour of  the intent  language                 
  because it created some problems  between the two fisheries.                 
  One problem is that  the white fisheries is paying  this tax                 
  now and if we are going to go in and rob that out to promote                 
  salmon then another  loophole has been  created if and  when                 
  this goes  to court for them  to use as justification.   The                 
  money that is  being collected on  this white fish is  being                 
  held in  escrow and  probably will  not be  available for  a                 
  couple  of years.  It is expected they will take this matter                 
  to  Court  after  the  administrative  processes  have  been                 
                                                                               
                                                                               
  exhausted.  The intent language does  not answer any kind of                 
  immediate problem for  the coming money they  were trying to                 
  get from the federal government to match the ASMI money that                 
  was taken out  of the budget.   Senator Rieger withdrew  his                 
  amendment  to  the fiscal  note as  he  did not  wish  to go                 
  against the wish of the  prime sponsor.  Co-chairman Halford                 
  said  it appeared there  was a loss on  the revenue side and                 
  then a gain on the ASMI side.                                                
                                                                               
  Mr. Bob Bartholomew,  Department of  Revenue was invited  to                 
  join the committee.  Sections 22 and 23 are allowing for the                 
  landing  tax to credit  programs that are  available for the                 
  on-shore fishery business  tax.  If  the taxpayers had  made                 
  contributions  to  either  the  scholarship  fund or  to  an                 
  eligible education  institution they  would be eligible  for                 
  the tax credit  they do not have  now.  It is  estimated the                 
  potential loss on that fiscal note to be $130,000 and it was                 
  just to  mirror the two tax programs.   The tax at risk with                 
  the  Court  challenge  is  $7  million  per  year,  what  is                 
  collected in  the landing  tax.   Two credits  are available                 
  that are retroactive.   Co-chairman  Halford said it  seemed                 
  that any kind of a retroactive tax credit is kind of hard to                 
  justify as an incentive for performance that otherwise would                 
  not  occur.   Mr.  Bartholomew  said  if an  individual  has                 
  already made the  contributions in those previous  tax years                 
  they would get a credit.  Part of all the provisions of this                 
  bill are retroactive  to try to say these  are complimentary                 
  taxes to each  other.  Co-chairman Halford said if  it was a                 
  legal thing that has  to be done for defensive  purposes for                 
  other reasons that can be understood.  However, any time one                 
  sees  a tax  credit incentive that  is retroactive  there is                 
  another  reason   rather   than   encouraging   the   action                 
  retroactively.  Mr. Bartholomew said the hope was that there                 
  had  not been eligible contributions to those organizations.                 
  If there has not been there  will be  no fiscal impact.   At                 
  this point,  however,  they have  looked  at what  would  be                 
  reasonable  compared  to  what  has  happened in  other  tax                 
  programs.  $130,000 is at the top end.                                       
                                                                               
  Senator  Sharp wanted  to  know  if  there were  any  credit                 
  applications on file at this time.  Mr. Bartholomew said the                 
  taxpayers have  filed their tax  returns and they  have paid                 
  taxes.  Since  the credits were not available it is not sure                 
  if they would have applied.                                                  
                                                                               
  Steven (Neil)  Slotnick, Department  of Law  was invited  to                 
  join the committee.  He explained why the credit portion was                 
  retroactive  in the area  the credit  did not  exist before.                 
  This  seemed  to   be  an  easy   cure  for  any   potential                 
  discrimination.  If contributions were made individuals will                 
  be  able  to receive  a  tax  credit same  as  the fisheries                 
  business taxpayers  will be  able to.   Co-chairman  Halford                 
  stressed  that he  was  only questioning  the  retroactivity                 
  provision and not the equality provision.  Mr. Slotnick said                 
                                                                               
                                                                               
  he could not  guarantee that but  possibly there would be  a                 
  legal  argument  that the  retroactivity  does not  cure the                 
  potential  discrimination  because  there was  no  incentive                 
  before.  Co-chairman Halford said the  only reason for a tax                 
  credit is to get something done that otherwise would not get                 
  done.                                                                        
                                                                               
  Senator Sharp  moved to  amend section  29, page  9, line  8                 
  after  the  word  "act"  inserting  "except section  22"  as                 
  retroactive.    Co-chairman  Halford  said  if  the  maximum                 
  exposure was only $130,000 and if it is clearly advantageous                 
  in a  legal case  in which we  stand to  lose $7  million he                 
  wanted to  know that  in  being retroactive  we were  really                 
  getting our money's worth.  Senator Sharp wanted to know how                 
  it  was  legally  advantageous to  make  a  contribution tax                 
  exemption retroactive.   Mr. Slotnick  explained why it  was                 
  advantageous in  that  they  had  been taken  to  Court  and                 
  presently has been moved back  to an administrative hearing.                 
  The  matter has been taken  retroactively from the first day                 
  of the tax.   The tax was paid under protest.  Senator Sharp                 
  asked  if  it  was  part  of the  Court  case  the  fact the                 
  individual did not get a contribution credit?  Mr.  Slotnick                 
  indicated that it  was.   Representative Austerman said  the                 
  reason the  matter was  taken to  Court was  because it  was                 
  discriminatory  and  was  not  the   same  as  the  on-shore                 
  processors  were  paying  or  that   they  were  allowed  to                 
  contribute.  That is  why the matter is  here now and  being                 
  retroactive is  a question  that must  be decided.   Senator                 
  Sharp withdrew his motion from further consideration.                        
                                                                               
  Senator  Zharoff  said   he  would   be  surprised  if   any                 
  contributions had been made.  There  is a deadline that must                 
  be met  to identify any  contributions that might  have been                 
  made.  He  further said  that when the  bill was  previously                 
  before the committee he had wanted to include at  the time a                 
  tax credit to entice the off-shore processors to develop on-                 
  shore.  It would  create economic stability and jobs  in the                 
  communities.                                                                 
                                                                               
  Senator Rieger  moved CSSSHB 397(FIN) and  without objection                 
  it was reported out with individual recommendations and zero                 
  fiscal note  from Department  of Revenue  and $1,300.0  from                 
  Department of Commerce and Economic Development.