Legislature(2001 - 2002)
03/19/2001 05:08 PM House FSH
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 154-COLLECTION OF FISHERY BUSINESS TAXES CO-CHAIR WILSON announced the first order of business would be HOUSE BILL NO. 154, "An Act relating to security for the payment of fishery business taxes and to payment of estimated fisheries resource landing taxes and penalties." [Before the committee, adopted as a work draft on 3/12/01, was a proposed committee substitute (CS), version 22-LS0638\F, Utermohle, 3/9/01.] Number 0133 REPRESENTATIVE SCALZI, sponsor of the bill, referred to his testimony from the week before and said this bill is not on a "fast track," but that he wanted the House Special Committee on Fisheries to discuss it. He said he also wanted to hear input from constituents on any negative aspects of the bill. REPRESENTATIVE SCALZI went on to say that since the last meeting, he has spoken with the Department of Revenue, which suggested an amendment [later adopted as Amendment 1] that read: *Sec.2. AS 43.77.020 is amended to read as follows: (a) A person subject to the tax under this chapter shall file a return stating the value of fishery resources landed in the state that are subject to the tax, the point of landing of the fishery resource, and other information the department requires by regulation. (b) The return shall be made on the basis of the calendar year [TO THE DEPARTMENT AT JUNEAU] and is due before April 1 after the close of the calendar year, and [THE} any unpaid tax shall be paid with the return. (c) The department may, under regulations it adopts, grant a reasonable extension of time for the filing. A grant of an extension of time for filing does not extend the time for payment of the tax. (d) A person subject to tax under this chapter shall make quarterly payments of the tax estimated to be due for the year, as required under regulations adopted by the department. A taxpayer will be subject to an estimated tax penalty, determined by applying the interest rate specified in AS 43.05.225 to the underpayment for each quarter, unless the taxpayer makes estimated tax payments in equal installments that total either (1) at least 90 percent of the taxpayer's tax liability under this chapter for the tax year, or (2) at least 100 percent of the taxpayer's tax liability under this chapter for the prior tax year. REPRESENTATIVE SCALZI informed the committee that Chuck Harlamert from the Department of Revenue would explain the purpose of this amendment. It doesn't affect the original intent of the bill "that fresh-fish sales can operate under a different taxing structure than a processor for purposes of collection of taxation." Rather, it deals with statutory changes that are currently in regulation. Number 0296 CHUCK HARLAMERT, Juneau Section Chief, Tax Division, Department of Revenue, explained that Amendment 1 provides cleaner, more common language to reach the intent in the original bill, which is to require estimated tax payments for landing tax. This amendment also provides a "safe harbor" for how much estimated tax taxpayers must pay in order to avoid penalties. There are two safe harbors: pay the amount of tax paid in the prior year, or pay 90 percent of the current year's tax. In short, the amendment clearly labels the payments as an estimated tax and more clearly lays out the amount of tax one should be paying or estimating. REPRESENTATIVE SCALZI requested clarification on whether this currently applies to processors, and not fresh fish, in regulations. MR. HARLAMERT confirmed this statement. He clarified that this provision applies only to taxpayers under AS.43.77.020, which is the landing tax. These taxpayers are typically catcher- processors who catch and process fish outside of Alaska's territorial limits. However, they land their fish inside of Alaska and therefore pay a fishery resource landing tax, which is a complementary tax to the fishery business tax. The amendment simply improves the language of Section 2 of the original bill without changing the bill's intent. It clarifies for the taxpayer what the required payment is. CO-CHAIR WILSON wondered if this amendment had anything to do with the bill. REPRESENTATIVE SCALZI remarked that the amendment is a "rider" to the bill. Everyone knows the intent of the original bill, but since "we" were going into this section in statute, the department wanted to add clarifying language. He said he had no objection to the amendment since it is beneficial to the taxpayers for understanding their liability, and it is put into statute. MR. HARLAMERT said that regulations require estimated tax payments, and most taxpayers make them. However, the Department of Revenue would like these particular regulations to be put into statute as well. Number 0667 CO-CHAIR STEVENS remarked that he understood (d)(1) of Amendment 1. He referred to (d)(2), which read: (2) at least 100 percent of the taxpayer's tax liability under this chapter for the prior tax year. CO-CHAIR STEVENS asked whether this could vary for catcher- processors. For example, if [fishermen] "made only part of the season or didn't have a good season," would they be required to pay the same amount they paid the prior year? He also asked when they would pay the remainder owed to the state. MR. HARLAMERT replied that the remainder is paid with the return, which by statute is before April 1; however, this sometimes gets delayed. CO-CHAIR STEVENS asked how this works regarding a time sequence. At what point would last year's tax liability be paid, and would the balance be paid on April 1? MR. HARLAMERT said he believed evenly spaced quarterly payments would be due March 15, June 15, September 15, and December 15. CO-CHAIR STEVENS asked, if someone was paying 100 percent of what was paid the prior year, whether he or she would pay by quarterly payments. MR. HARLAMERT said the person could make a choice: estimate the liability for the current year and pay up to 90 percent of that, or "play it safe and secure" by paying 100 percent of last year's taxes. The lesser of those amounts can be paid without incurring a penalty. He offered an example. He then said it is similar to an individual income tax, but corporate. Number 0850 REPRESENTATIVE SCALZI made a motion to adopt Amendment 1 [text provided previously]. There being no objection, Amendment 1 was adopted. Number 0963 REPRESENTATIVE COGHILL made a motion to move CSHB 154, version 22-LS0638\F, Utermohle, 3/9/01, as amended, from committee with individual recommendations and the attached zero fiscal note. There being no objection, CSHB 154(FSH) was moved from the House Special Committee on Fisheries. CO-CHAIR WILSON apologized, saying someone wanted to speak. KEVIN HOGAN, President, Auction Block Company, testified via teleconference: I'll give you a little history of what our company is about and how we tie into the fish business. The company was formed in 1997, and at that time we got a fisheries business license because we didn't have a prior track record. We had a very low estimated fish tax, which was very easy to bond, and that's how we obtained our fisheries business license. In 1998, we became the largest buyer of halibut in the state, and correspondingly we had a much larger fish tax debt. ... We've always paid our fish tax and intend to continue to do so. ... Our business is an Internet fish auction. The vessels come in and list their loads with us and we auction it off over the Internet. So it's been beneficial for the state by raising the ex-vessel prices, and thus the corresponding raw fish taxes is based on that ex- vessel price. Having become successful doing this, we encouraged a rather large raw fish tax, as we were taking possession of the fish under our own fish ticket and then sending it out to the winning bidders, wherever they might be. So last year we had an arrangement where we put up a bond and paid as we went on our fish tax. We estimated what we thought our liability was going to be and we, of course, overshot that by quite a bit. So the current year, in order to obtain our business license, the requirement was that we come up with over $350,000 prepaid fish tax. Our operation has absolutely very little, and we have no real property, which is the only thing accepted for collateral. ... We operate on a smaller margin than what the raw fish tax amounts to (indisc.) and whatever profits we might have. So for the last two years, virtually 100 percent of the profits of business that generated had been pledged to the state as collateral for obtaining the fisheries business license. Eventually, we would like to be able to continue to pay our tax and not have to commit 100 percent of what we make. It would be nice to be able to eat, too. So, I support this legislation. I think it's important that the state keep current with new developments in the industry and not get stuck in the rut of having our industry exist in the past. As new developments and technology and markets develop, we have to have the flexibility and mechanisms to be able to adjust and accommodate the changes in the market and industry. So, I think this helps. I think I'd like to see that it also be (indisc.) to the shoreside processors too. And I know that smaller businesses have a large difficulty in capitalizing their operations and being able to pay 100 percent of their tax liability upfront. If they're allowed to pay as they go, it just expands the world for our markets. So I appreciate your considering this bill, and I would hope that you support it and get it passed. Thank you. [CSHB 154(FSH) was moved out of the House Special Committee on Fisheries.]
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