Legislature(2015 - 2016)CAPITOL 120
02/18/2016 10:00 AM House FISHERIES
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| Audio | Topic |
|---|---|
| Start | |
| HB251 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 251 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 251-ELECTRONIC TAX RETURNS & FISHERIES TAXES
10:04:59 AM
CHAIR STUTES announced that the only order of business would be
HOUSE BILL NO. 251 "An Act requiring the electronic submission
of a tax return or report with the Department of Revenue;
relating to fisheries business tax and fishery resource landing
tax; relating to refunds to local governments; and providing for
an effective date."
10:05:30 AM
CHAIR STUTES directed attention to the committee packet and a
letter from the North Pacific Fisheries Association (NPFA),
dated 2/11/16. She said the comments expressed, appear to be
representative of the responses that are being received by the
committee, and she paraphrased the content, which read [original
punctuation provided]:
The North Pacific Fisheries Association (NPFA) is
commercial fishing industry group based out of Homer,
Alaska. NPFA was founded in 1955 and today we have
over fifty members, mainly owners of family oriented
fishing operations that participate in a variety of
fisheries throughout the State Of Alaska.
NPFA is keenly aware of the dire fiscal situation that
the State of Alaska is facing. At our February 11,
2016 Board of Directors meeting our group recognized
that all sectors of the Alaskan economy are going to
have to be part of a solution. First and foremost we
believe that all attempts to curtail budgets and find
efficiencies within operations is imperative. As
small business owners we understand first-hand the
measures necessary when times get tough.
NPFA appreciates the fact that a plan has been put
forward. While we do not oppose an increase to the
fisheries landing tax we do oppose the piecemeal
legislative approach that appears to be occurring.
HB251 and SB135 are good starting points but we would
much prefer a comprehensive bill that includes all
resource industries excluding Oil and Gas which is its
own animal. We want to contribute as an industry
along with the other sectors of the economy.
Additionally we would like to see analysis of all the
contributions commercial fishing makes to the economy
including the community revenue sharing program and
programs that go directly to management. We are the
beneficiaries of the management and see efficient
management as a priority for the revenue we create.
Finally, NPFA recognizes this is a process and as more
analysis and information becomes available our
position may evolve.
10:07:18 AM
CHAIR STUTES summarized her understanding of public opinion on
HB 251 thus far: the fishermen and fishing industry don't
object unequivocally to the bill, they are willing to pay their
fair share, and they would like to have assurance that all
resource entities are united in the effort to balance the state
budget.
CHAIR STUTES opened public testimony.
10:08:07 AM
VINCE O'SHEA, Vice President, Pacific Seafood Processors
Association, stated opposition to HB 251, paraphrasing from a
prepared statement, which read [original punctuation provided]:
The Pacific Seafood Processors Association is a trade
association formed in 1914. Our nine member companies
own and operate more than 26 shore side plants
throughout Alaska and three motherships that operate
in the Bering Sea. Collectively our members
participate in all of Alaska's fisheries. As such
they will be directly impacted by HB251.
We are reviewing and discussing HB251 and do not
support it in its current form at this time.
Deciding how and where to implement increased taxes on
the Seafood Industry is a complicated issue. HB251
approach is over-simplified. Some have said it is a
1% tax increase; in fact it increases our taxes on
different fisheries from 20% to 33%. For example it
raises the costs on value added products (including
canned and frozen salmon) when there is significant
unsold inventory due to market conditions raises the
question of should products with value added in Alaska
be taxed at the same rate as products without value
added here?
Alaskan seafood processors sell into global markets
where our customers have many choices of products and
suppliers. As such, we are price takers, with little
or no ability to pass on additional costs.
New costs from HB251 are being contemplated while the
Alaska seafood industry faces significant production
and marketing challenges, including:
26% increase in the Alaska minimum wage over the
past two years
20-30% U.S. currency disadvantage for us selling
to our major foreign markets;
20%+ currency advantage to foreign suppliers
(e.g., farmed salmon) selling into the U.S.
Lack of access to Russian and Ukrainian markets,
especially for salmon roe.
It has been said the revenue goal for HB251 is to
close the gap between the revenue collected from
commercial fisheries and the costs of managing those
fisheries. However with the proposed new revenue from
increased fisheries taxes there is no assurance that
continued cuts to ADF&G would not result in
diminishment of its fisheries science and management
capacity. The resultant precautionary guideline
harvests would pose significant opportunity costs
(decreased revenue) to harvesters, processors, and
coastal communities.
We recognize Alaska's fiscal situation means we all
will have to pay more. But new or increased taxes
must be balanced and equitable to all of Alaska's
industries, and must consider the total contribution
they make including taxes paid, total employment,
sustainability, and economic opportunity. Moreover
they must consider the impacts on the economic
viability of the industries being taxed.
We would like to continue to work with you, the
Legislature, and the Governor to find a path forward
on proposed increases in revenue from the seafood
industry.
10:12:24 AM
REPRESENTATIVE FOSTER asked what other options the association
would like to see considered.
MR. O'SHEA said understanding the impacts of any tax is
important, and taxing a commodity producer versus a consumer
paying tax means different things. Corporate income tax comes
from top profits, raw fish tax begins at the bottom. He
declined to make a specific suggestion, at this time, but
cautioned the committee to scrutinize proposals and ensure the
result does not produce more harm than good.
10:15:53 AM
BOB THORSTENSON, JR., Executive Director, Southeast Alaska
Seiners Associations (SEAS), stated opposition to HB 251 and
pointed out that an Institute of Social and Economic Research
(ISER) study has not yet been completed. Being well acquainted
with tax structures, he said a 1 percent increase on the
processors would actually result in a 10 percent tax on the
entire sector; representing a large burden. He offered a number
of scenarios, conjecturing on what the future may look like for
the state. A tax scheme must be appropriately vetted, he said.
Unintended consequences may be far reaching, he opined, and
offered further predictions of the possible ramifications. A
major consideration from association members has been the
municipal share structure. Many communities in Alaska do not
benefit from the tax that the fishing grounds they support
produce, he pointed out. A local fisherman, such as himself,
may participate in fishery openings in Angoon, Juneau, or
Hoonah, but land the catch in Petersburg or Ketchikan, which
become the municipalities receiving the share benefit.
10:24:22 AM
REPRESENTATIVE ORTIZ noted that there could be an issue
regarding foregone harvest. He asked for comment on the surplus
fish that can exist following fishery openings and escapement
goal targets.
MR. THORSTENSON concurred that there is no doubt a percentage,
perhaps seven percent, of any catch are left in the water.
Adequate management is sometimes lacking in capturing all
harvestable fish, but in general ADF&G does a laudable job of
ensuring maximum harvests.
10:26:12 AM
REPRESENTATIVE HERRON referred to the bill, Sec. 2, and asked
for comment regarding the electronic reporting requirement.
MR. THORSTENSON deferred.
REPRESENTATIVE HERRON referred to the bill, Sec. 3 and Sec. 4,
which delineates the new tax rates, and asked if it is clear to
SEAS how the rates were chosen, and what rationale was applied
in the decision process.
MR. THORSTENSON said he was not present at the meetings when
determinations were made, but attended a presentation luncheon.
Certainly the fishermen are willing to pay a fair share to
support the state coffers, along with the other industries, he
said.
10:30:36 AM
MALCOLM MILNE, President, North Pacific Fisheries Association
(NPFA), stated opposition to HB 251, and thanked the chair for
reading the NPFA letter. He reiterated that the commercial
fishermen expect to contribute to the budget shortfall. Items,
such as the fuel tax, multiply the fishing industries burden. A
comprehensive bill, that incorporates all fishing resource
industries, could be supported.
10:32:35 AM
REPRESENTATIVE FOSTER offered that the aviation industry may
only have effects from the proposed fuel tax, the bar owners
association will be effected by the liquor tax, but the
fishermen will be effected by compounded taxes.
10:33:09 AM
REPRESENTATIVE HERRON asked whether the decision for setting the
tax at 1 percent, has been explained.
MR. MILNE responded, no.
10:34:17 AM
KEN ALPER, Director, Tax Division, Department of Revenue,
explained the process for arriving at the proposed 1 percent tax
raise. Formulas were considered and various fisheries were
scrutinized. The intent was to generate $18-20 million for the
state budget. On request from the Chair, he agreed to provide
the working documents, including the working model.
[A brief discussion regarding the availability of departmental
information ensued.]
10:40:39 AM
REPRESENTATIVE JOHNSON pointed out that the administration took
the right approach in not creating an omnibus bill, but breaking
it out to each department, which in turn allows the various
committees to hold open hearings and bring a deeper
understanding to bare.
MR. ALPER agreed, noting that the approach allows the
legislative committees to bring expertise and focus to the
different target areas.
10:42:38 AM
RHONDA HUBBARD, Kruzof Fisheries, LLC, testified in opposition
to HB 251, and said additional time is necessary to identify an
equitable way to tax the industry, due to its complexity. The
taxes do need to be updated, she agreed, but it should happen in
consultation with the stakeholders. She suggested several areas
that could be reformed to eliminate inconsistencies and provide
fiscal efficiencies including reporting processes for harvest
volume, federal fisheries, and landing information. Regarding
equal tax distribution, she said the charter catch has been
considered and in Sitka proven viable, generating about $500,000
in a box assessment. The charter and sport fishing fleets
benefits from the management data that is collected on, and paid
for by, the commercial fleet. She stressed the need to for
further consider taxing the charter catch industry.
10:46:15 AM
REPRESENTATIVE KREISS-TOMKINS asked whether there have been
deliberations in the department to raise revenue across all
sectors of the fishing industry.
MR. ALPER responded that informal discussions take place on an
on-going basis. However, it would be difficult to morph the
existing commercial fish tax statutes to include charter
fishing.
10:48:58 AM
REPRESENTATIVE KREISS-TOMKINS reasoned that raw fish represent a
taxable resource. The commercial fishermen are paying for the
privilege of extracting that resource, and charter operators are
also making a living from persecuting the same resource. An
equitability consideration appears to be within reason, he said.
MR. ALPER offered that fees could be built into the charter
licensing structure to apply to an operator's volume of catch.
The department would be open for discussion, he invited.
10:50:49 AM
REPRESENTATIVE JOHNSON offered that a bill has been introduced
which affects sport fish licensing, and big game guides. It's
being presented as an increase in fees, rather than a tax, he
said.
10:51:40 AM
BOB KRUGER, Executive Director, Alaska Whitefish Trawlers
Association, stated concern for HB 251, and said for the large,
trawl vessels, the suite of taxes being proposed invokes
trepidation. The profit margin inherent to the fleet is narrow,
and once imposed a tax may never be withdrawn. He said
including a date for annual review or possible sunset would be
helpful. The fishing industry is difficult to enter and this
may represent a disincentive to young fishermen, he opined.
10:55:07 AM
CHAIR STUTES closed public testimony after ascertaining no on
further wished to testify.
[HB 251 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB251 Backup 2015 fisheries business licenses.pdf |
HFSH 2/18/2016 10:00:00 AM |
HB 251 |
| HB251 Backup NPFA Milne.pdf |
HFSH 2/18/2016 10:00:00 AM |
HB 251 |
| HB251 Backup Moir.pdf |
HFSH 2/18/2016 10:00:00 AM |
HB 251 |
| HB251 Back up PVOA Oppose.pdf |
HFSH 2/18/2016 10:00:00 AM |
HB 251 |
| HB251 Backup At Sea Processors.pdf |
HFSH 2/18/2016 10:00:00 AM |
HB 251 |
| HB251 Backup Trident.pdf |
HFSH 2/18/2016 10:00:00 AM |
HB 251 |