Legislature(2009 - 2010)BARNES 124
02/18/2010 10:15 AM House FISHERIES
| Audio | Topic |
|---|---|
| Start | |
| HB344 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 344 | TELECONFERENCED | |
| += | HCR 15 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
February 18, 2010
10:18 a.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Chair
Representative Wes Keller, Vice Chair
Representative Cathy Engstrom Munoz
Representative Robert L. "Bob" Buch
Representative Scott Kawasaki
MEMBERS ABSENT
Representative Craig Johnson
Representative Charisse Millett
COMMITTEE CALENDAR
HOUSE BILL NO. 344
"An Act relating to the salmon product development tax credit;
and providing for an effective date by amending an effective
date in sec. 7, ch. 57, SLA 2003, as amended by sec. 4, ch. 3,
SLA 2006, and by sec. 4, ch. 8, SLA 2008."
- HEARD & HELD
HOUSE CONCURRENT RESOLUTION NO. 15
Directing the Legislative Council to contract for an assessment
of environmental and socioeconomic consequences of large-scale
mineral extraction in the Bristol Bay area watershed.
- HEARING POSTPONED
PREVIOUS COMMITTEE ACTION
BILL: HB 344
SHORT TITLE: SALMON PRODUCT DEVELOP. TAX CREDIT
SPONSOR(s): REPRESENTATIVE(s) THOMAS
02/12/10 (H) READ THE FIRST TIME - REFERRALS
02/12/10 (H) FSH, FIN
02/18/10 (H) FSH AT 10:15 AM BARNES 124
WITNESS REGISTER
PETER ECKLUND, Staff
Representative William "Bill" Thomas, Jr.
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 344, on behalf of
Representative Thomas, prime sponsor.
S. GREGORY FISK, Representative
Bristol Bay Economic Development Corporation (BBEDC)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 344.
TIM COTTONGIM, Fish Group Manager
Juneau Office
Tax Division
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Responded to questions, during the hearing
on HB 344.
MARK PALMER, President
Ocean Beauty Seafoods
(No address provided)
POSITION STATEMENT: Testified in support of HB 344.
MARY MCDOWELL, Vice President
Pacific Seafood Processors Association
(No address provided)
POSITION STATEMENT: Testified in support of HB 344.
BOB WALDROP, Executive Director
Bristol Bay Seafood Development Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 344.
ACTION NARRATIVE
10:18:08 AM
CHAIR BRYCE EDGMON called the House Special Committee on
Fisheries meeting to order at 10:18 a.m. Representatives
Edgmon, Keller, Munoz, and Buch were present at the call to
order. Representative Kawasaki arrived while the meeting was in
progress.
HB 344-SALMON PRODUCT DEVELOP. TAX CREDIT
10:19:18 AM
CHAIR EDGMON announced that the only order of business would be
HOUSE BILL NO. 344, "An Act relating to the salmon product
development tax credit; and providing for an effective date by
amending an effective date in sec. 7, ch. 57, SLA 2003, as
amended by sec. 4, ch. 3, SLA 2006, and by sec. 4, ch. 8, SLA
2008."
10:19:24 AM
PETER ECKLUND, Staff, Representative William "Bill" Thomas, Jr.,
Alaska State Legislature, presented HB 344, paraphrasing from
the sponsor statement, which read [original punctuation
provided]:
House Bill 344 extends the deadline for salmon
processors in Alaska to receive a salmon product
development tax credit. The program allows applicants
to claim a credit on their annual fisheries business
tax for 50% of the purchase costs of eligible
equipment. Credits received may not exceed 50% of a
taxpayer's annual tax liability. Under current law,
processors can claim the credit for the property first
placed into service by December 31, 2011. This bill
would extend the program's sunset date to December 31,
2015, allowing processors ample time to continue their
long-range investment planning.
The salmon product development tax credit was a key
recommendation of the Joint Legislative Salmon
Industry Task Force. First enacted in 2003, the
credit was part of an effort by Alaska's elected
leaders and the fishing industry to develop innovative
value-added salmon products. Since then it has
stimulated some important changes in Alaska's
commercial fishing industry. New processing equipment
eligible for the tax credit enables businesses to
offer a more diverse complement of Alaska salmon
products which helps increase overall customer
acceptance. Modern equipment also helps increase
efficiency of processing operations and improves
output, resulting in improved quality. Increased
investment in Alaskan equipment encourages in-state
processing of our salmon resource which is critical to
job creation and retention in fishing communities.
The House Fisheries and Finance Committees added ice
machines to the list of investments that qualify for
the tax credit. Having a top quality base product
delivered to processors is a prerequisite to further
value adding processing of salmon.
Alaska's salmon industry is beginning to recover from
years of low values caused by competition from fish
farming, the recent economic depression, changes in
the marketplace, and increasing labor and energy
costs. Extending the tax credit beyond its current
sunset date of December 31, 2011 will allow the
industry to continue the progress that is being made
in developing and producing salmon products that will
keep Alaska's fisheries competitive in world markets.
The state should continue to support one of our most
important basic industries by extending the salmon
product development tax credit through passage of HB
344.
10:22:20 AM
MR. ECKLUND directed attention to the committee packet, and the
Department of Revenue (DOR) handout titled: Alaska Tax Division
2009 Annual Report, Figure 3 - Revenue Collections Detail. The
fiscal year (FY) 2009 total receipts, collected from fisheries
business tax, shows just over $42 million, up from $23 million
in 2003. He opined that a major reason for this increase is the
tax credit that the bill provides.
10:23:15 AM
CHAIR EDGMON acknowledged the intent to extend the sunset of the
tax credit, and noted that there may also be interest in adding
other components.
MR. ECKLUND said the addition of ice machines has been
requested, and is being considered by the sponsor.
10:24:11 AM
REPRESENTATIVE BUCH referred to the handout titled "Prepared by
Department of Revenue - Tax Division, Salmon Product Development
Credit Expenditures, Qualified Expenditures and Non-Qualified
Expenditures, dated 2/17/2010," and asked about the
differentiation of the items included, or excluded.
MR. ECKLUND indicated that the legislation was first drafted in
2003, but has been modified with two amendments, and extensions,
since enactment of the original bill. He surmised that the
parcels on the list were part of the initial committee debates.
10:25:44 AM
CHAIR EDGMON said the question is pertinent, and a full response
will be requested for the committees benefit.
10:26:18 AM
S. GREGORY FISK, Representative, Bristol Bay Economic
Development Corporation (BBEDC), stated support for HB 344,
paraphrasing from a prepared statement, which read [original
punctuation provided]:
Bristol Bay Economic Development Corporation (BBEDC)
supports passage of HB 344 and the renewal of the
Salmon Product Development Tax Credit.
The Tax Credit has helped stimulate investment in new
value added processing equipment across the State.
Probably most important are the many salmon fillet
lines now operating. In Bristol Bay increasing fillet
production is truly transforming the fishery.
Unfortunately, basic salmon quality issues continue to
limit the full positive economic impact of the
investments in value added equipment. This is
particularly acute in Bristol Bay, but is certainly
not limited to the Bay. It's an old problem - lack of
fish chilling capacity. This results in a high
incidence of No. 2 fish that are unacceptable for
filleting. The big problems are gaping and bruising.
Increasing the percentage of No. 1 grade fish is vital
to getting full benefit from other investments under
the Salmon Product Development Tax Credit. Proper
chilling in slush ice has been demonstrated to
increase the percentage of No. 1 fish from 45%-50%
range to 80%-85% in Bristol Bay.
Accordingly, BBEDC would like to suggest that, as HB
344 works its way through the process, you consider
adding ice production and delivery equipment to the
list of qualified investments eligible for the tax
credit. Doing so will directly contribute to
achieving the original intent of the Salmon Product
Development Tax Credit, by helping to ensure that we
have the quality salmon needed for effective value
added processing in Alaska.
Ice Production and Delivery Equipment should include:
the actual ice makers themselves, and the
refrigeration systems required; ice storage systems -
conventional insulated ice houses, tanks for slurry
systems, etc.; delivery systems - ice rakes, augers,
pneumatic systems, chutes, etc.
10:29:15 AM
REPRESENTATIVE BUCH pondered why the request for having specific
equipment included has come recently to the fore and late in the
session. He questioned whether it's a shift in needs.
MR. FISK responded that what has changed is the emphasis for
value-added processing.
10:31:52 AM
TIM COTTONGIM, Fish Group Manager, Tax Division, Department of
Revenue (DOR), said that the list was generated by the language
in statute, which describes the qualifying functions of
equipment allowed for credit under the program. He referenced
AS 43.75.035(j)(3), used to generate the list, and paraphrased
the statute, which read [original punctuation provided]:
(3) "qualified investment" means the investment
cost in depreciable tangible personal property with a
useful life of three years or more to be used
predominantly to perform a processing, packaging, or
product finishing function that is a significant
component in producing value-added salmon products
beyond gutting of the salmon; in this paragraph,
"property"
(A) includes
(i) filleting, skinning, portioning, mincing,
forming, extruding, stuffing, injecting, mixing,
marinating, preserving, drying, smoking, brining,
packaging, blast freezing, or pin bone removal
equipment;
(ii) new parts to convert an existing can seamer
to pop-top can production; and
(iii) conveyors used specifically in the act of
producing a value-added salmon product;
(B) does not include
(i) vehicles, forklifts, conveyors not used
specifically in the act of producing a value-added
salmon product, cranes, pumps, or other equipment used
to transport salmon or salmon products, knives,
gloves, tools, supplies and materials, equipment that
is not processing, packaging, or product finishing
equipment, or other equipment the use of which is
incidental to the production, packaging, or finishing
of value-added salmon products; or
(ii) the overhaul, retooling, or modification of
new or existing property, except for new parts to
convert an existing can seamer to pop-top can
production;
10:32:51 AM
REPRESENTATIVE MUNOZ opined that the statute could be
interpreted to permit icing.
MR. COTTONGIM highlighted the statutory language "processing
function," and said that this term does not include icing.
Because icing is considered a task that a fisherman can manage,
it is not considered a processing function.
REPRESENTATIVE MUNOZ disagreed with that reasoning. She pointed
out that the inclusionary language names blast freezing and
preserving. Icing, she opined, is a method of preserving. The
exclusionary language identifies knives, tools, gloves, and
ancillary products. Although she opined that the language
allows for the ability to include ice machines, she acknowledged
the department's very narrow interpretation of the statute.
10:34:39 AM
CHAIR EDGMON opened public testimony.
10:34:50 AM
MARK PALMER, President, Ocean Beauty Seafoods, stated support
for HB 344, naming the Bristol Bay fishery as an example of why
this bill is important, and an indicator for how well it has
worked. He described the processing operations that have
increased the value-added product coming out of the Bristol Bay
area. If the freezing capacity is the limitation of a facility,
only a certain number of pounds can be handled, but filleting a
fish takes up less freezer space. The program has worked
exactly in the way that it was intended, he opined. Ocean
Beauty has invested in fillet and value-added capacity in four
of their seven Alaskan locations. This has allowed increased
market prices and promoted the addition of new product lines.
He stressed that the bill has worked very well and fostered
investment in many areas of the industry.
10:38:55 AM
MARY MCDOWELL, Vice President, Pacific Seafood Processors
Association, stated support for HB 344, and concurred with the
previous speakers statements, regarding the benefits and need
for the legislation. She added that investing in the equipment
up front, pays for itself many times over. The bill serves to
improve the situation for the seafood industry, the coastal
communities, and the state revenues; it is an excellent
investment.
10:41:19 AM
BOB WALDROP, Executive Director, Bristol Bay Seafood Development
Association (BBSDA), sated vigorous support for HB 344, and said
the bill represents a direct benefit to Bristol Bay fishermen.
He pointed out that in response to the tax credit, value-added
production in Bristol Bay is rising sharply: fillet production
continues to increase, and value-added products are in high
demand on the world market. The Bristol Bay fishery is fully
productive, while fish farms are in crisis. During the plight
of the farms, it is important for Alaska to fill the void and
maintain the leadership position, as the farms work to regain
production levels. Investments in equipment upgrades, made
possible by the tax credit, are investments that will pay big
dividends for the entire industry. Additionally, a higher tax
base will be gained and the state will recoup costs of the
program through the product and business tax structure.
10:43:49 AM
CHAIR EDGMON stated that HB 344 would be held for continued
public testimony and committee consideration.
10:44:15 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at 10:45
a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 344--Sponsor Statement.PDF |
HFSH 2/18/2010 10:15:00 AM |
HB 344 |
| HB 344--Qualified and Non-qualified Expenditures.PDF |
HFSH 2/18/2010 10:15:00 AM |
HB 344 |
| HB 344--Alaska Tax Division 2009 Detail.PDF |
HFSH 2/18/2010 10:15:00 AM |
HB 344 |
| HB 344--PSPA Support.PDF |
HFSH 2/18/2010 10:15:00 AM |
HB 344 |
| HB 344--Peter Pan Seafoods Support Ltr..pdf |
HFSH 2/18/2010 10:15:00 AM |
HB 344 |
| HB 344--North Pacific Seafoods Support.PDF |
HFSH 2/18/2010 10:15:00 AM |
HB 344 |
| HB344-REV-TAX-02-17-10 Fiscal Note.pdf |
HFSH 2/18/2010 10:15:00 AM |
HB 344 |