Legislature(1997 - 1998)
02/18/1998 03:22 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 392 - REPORTS: FISH TAX & SALMON PRODUCTS Number 0533 CHAIRMAN ROKEBERG stated the committee's next item of business was HB 392, "An Act relating to access by the Department of Environmental Conservation and the Department of Fish and Game to confidential tax records for fisheries resources prepared or kept by the Department of Revenue under AS 43.75; relating to certain salmon products reports; and providing for an effective date." Number 0543 AMY DAUGHERTY, Legislative Administrative Assistant to Representative Alan Austerman, came forward to present HB 392 noting Representative Austerman would be in attendance shortly. She stated that HB 392, as set forth in the sponsor statement, spoke to several of the reporting requirements. MS. DAUGHERTY stated HB 392 addresses exvessel value reporting and wholesale price reporting to the state. The first part of the bill allows the Department of Revenue (DOR) to share, in confidence, exvessel value information with the Department of Fish and Game (ADF&G) and the Department of Environmental Conservation (DEC); and the second part of the bill updates wholesale price reporting by requiring better and more timely information from processors. She said she could go through the original bill, but noted she brought forward a proposed CS. She explained that there had been a lot of adjustments based on feedback, and the decision had been made to incorporate the suggested changes into a proposed CS since there was consensus from all parties, the agencies as well as processors and fisherman. Ms. Daugherty noted there was one outstanding amendment. Number 0645 CHAIRMAN ROKEBERG stated the committee had before it Version H of HB 392, labeled 0-LS1423\H, Bannister, dated 2/18/98, and would entertain a motion to adopt Version H. Number 0661 REPRESENTATIVE BILL HUDSON made a motion to adopt Version H. Number 0645 CHAIRMAN ROKEBERG indicated Version H was adopted. He also noted the amendments the committee had before it, asking Ms. Daugherty if she wished to speak about the substance of the bill or have the committee move the amendments first. Number 0683 MS. DAUGHERTY stated the proposed CS incorporated most of the amendments and the outstanding amendment, which she called Amendment 8, could be discussed after they had talked about the body of the bill. Number 0704 MS. DAUGHERTY stated the first three sections of HB 392 concerned the exvessel value reporting and allow the departments to share some of this information. She said she believed currently ADF&G and DEC do not have access to DOR's exvessel value reporting, but DOR has access to numbers from ADF&G. The agencies have deemed this access a real need in order for the reporting to work for the state and the industry. Ms. Daugherty stated that from Section 4 on the bill is concerned with wholesale reporting, and she noted the original bill version read across the House floor spoke to canned salmon. She said they have been informed that the term used by DEC in its regulations, as well as within the federal regulations, is "thermally processed." For consistency, that term is now in the proposed CS. She said Section 4 also sets out three reporting periods a year in which the processors need to give this information to DOR. Ms. Daugherty noted this wholesale value is currently reported semi-annually. She said Section 5 is concerned with the size of the containers, since the intention was to include not just canned product, but the pouched salmon which is newly on the market. She stated they wanted that type of information in the wholesale reporting as well. Number 0842 MS. DAUGHERTY referred to use of the term "thermally processed," noting there were many adjustments with that change in language; those are the changes contained in Section 6. She stated the deleted language in Section 7 is essentially the language currently in statute referring to specific can sizes often no longer in use. In order to receive accurate marketplace information, Ms. Daugherty said the generic reference is now: "In the size of the container which the salmon is sold," so that no matter how it is sold the wholesale value is reported. She said Sections 8 and 9 are adjustments for the use of the term "thermally processed" instead of "canned." Ms. Daugherty commented that Section 9 is already in statute and does not require any new reporting to the legislature. She noted the audit section begins with Section 10, "At the expense and the request of a collective price bargainer," and she states it goes on to define that "'collective price bargainer' means a person who represents 50 or more persons who are engaged in the business of fishing for salmon in the state and who negotiate with fish processors." She stated, "An audit ... will be selected by the department to evaluate the sales records of fish processors who submit the reports of the wholesale value. ... The department will be selecting the auditor, they are required also in this section to sign a confidentiality agreement supplied by the department which they have on hand anyway because often they contract out some of their audits." Number 0975 REPRESENTATIVE RYAN asked what the brief rationale was for having the department come up with the auditor, rather than the person hiring the CPA (certified public accountant). He said it was going to be a lot more expensive. Number 0999 MS. DAUGHERTY responded that they were trying to avoid stressing the DOR with another duty. She stated that currently the DOR doesn't audit this wholesale price information because it doesn't really affect the department's income, which is based on the exvessel value mentioned in the first three parts of HB 392. So, she said, even though the DOR receives this information, the department doesn't audit it because it doesn't apply to taxes. She said that in order to enable this information to be audited, they wanted to provide a mechanism for it to be audited by someone other than DOR but with the DOR's oversight, to avoid stressing the department's resources. Ms. Daugherty commented she thinks the processors feel more comfortable having DOR appoint the auditor, with the department's confidentiality statements, et cetera, rather than having "some guy ... off the street who has (indisc.) documentation." Number 1065 CHAIRMAN ROKEBERG noted, on that point, Section 10 refers to "the department," and he asked if that meant DOR set the auditor. MS. DAUGHERTY answered in the affirmative. Number 1075 CHAIRMAN ROKEBERG also asked for an explanation of the zero fiscal note, wondering how that could be if DOR was (indisc.) an auditor. Number 1079 MS. DAUGHERTY said they were hoping to receive a zero fiscal note because, and that was part of the reason the industry or the collective price bargainer was willing to pay for this, essentially the only stress on DOR would be the appointment of the auditor and showing him or her the records to be audited. Number 1098 CHAIRMAN ROKEBERG commented then, that if the Chairman had thoroughly understood the bill, he would have figured that out already. Number 1106 MS. DAUGHERTY stated that this is the part that has had the most amendments since the initial House version because they have been working with processors and fisherman, trying to get as much consensus as possible. The confidentiality section was changed regarding the "boilerplate" language with DOR, and the appointment of the auditor by DOR was also incorporated into the proposed CS. She noted there were also some class A misdemeanor provisions. Ms. Daugherty stated the rest of the bill was mainly definitions. She said the transition was "a little tricky," noting that was another change from the original version. Because of the change from two to three [reporting] periods per year, and the desire to get all of the information, there was a small transition overlap and one small change from the original bill. She noted they were also trying to get this information on-line as soon possible so it could be utilized. Number 1170 CHAIRMAN ROKEBERG asked if she had stated that Section 13 requires 3 reporting periods. Number 1178 MS. DAUGHERTY explained the reporting was actually set out in Section 4, and the transition simply makes the switch from the 2 to 3 periods. Number 1194 REPRESENTATIVE RYAN moved Amendment 1, labeled 0-LS1423\H.1, Bannister, dated 2/18/98, to the proposed CS. Amendment 1 read: Page 2, line 30, following "wholesale": Insert "and whose business sells more than 240,000 pounds of thermally processed salmon products at wholesale during a calendar year" Page 2, line 30, following "department": Insert "during the following calendar year" Page 3, line 2, following "each": Insert "reporting" Page 3, line 3, following "April 30": Insert "of the reporting year" Page 3, line 4, following "each": Insert "reporting" Page 3, line 5, following "August 31": Insert "of the reporting year" Page 3, line 6, following "each": Insert "reporting" Page 3, line 7, following "December 31": Insert "of the reporting year" Page 3, line 12: Delete "If a processor does not sell thermally processed [SELLS NO CANNED] salmon products during a reporting period, the report for that period must [SHALL] include only a statement of that fact." Insert "[IF A PROCESSOR SELLS NO CANNED SALMON PRODUCTS DURING A REPORTING PERIOD THE REPORT FOR THAT PERIOD SHALL INCLUDE ONLY A STATEMENT OF THAT FACT.]" Page 3, line 18, following "However,": Delete "a" Insert "the" Page 5, following line 23: Insert a new paragraph to read: "(7) "reporting year" means the calendar year after the calendar year in which a fish processor's business sells more than 240,000 pounds of thermally processed salmon products;" Renumber the following paragraphs accordingly. Page 5, line 28: Delete "and" Page 5, line 29, following "1998": Insert ", and must be filed by a fish processor whose business sold more than 240,000 pounds of thermally processed salmon products at wholesale during the 12- month period ending August 31, 1998. In this section, "fish processor" and "thermally processed" have the meanings given in AS 43.80.100" Number 1206 CHAIRMAN ROKEBERG asked if there were any objections. Hearing none, he stated Amendment 1 was adopted. He asked Ms. Daugherty to describe the amendment. Number 1221 MS. DAUGHERTY stated that the amendment started out as a threshold. She said they had been contacted very recently by DOR, who said the intention was not to encumber the "mom-and-pop" operations, so they were looking for a threshold to exempt small organizations from reporting requirements. In working with industry and DOR, in this amendment they have exempted businesses that sell less than 240,000 pounds of thermally processed salmon products a year. Ms. Daugherty said the rest of the amendment looked like it was just adjustments to the statutes. She referred to lines 4 and 5, "during the following calendar year", noting that, in other words, if an operation sold less than 240,000 pounds in the preceding year, it would be exempted in the next year. She referred to wording on page 2 of the amendment, "that report shall include only a statement of that fact", and she noted, upon review, they realized reporting would be an unnecessary duty on those processors. Number 1326 CHAIRMAN ROKEBERG questioned if that deletion was intended to absolve the processor from reporting duty if the processor was under the threshold. Number 1336 MS. DAUGHERTY replied that was correct, and she stated it also meant the people who didn't sell any thermally processed salmon didn't have to write a letter to that effect. Number 1349 CHAIRMAN ROKEBERG commented that there were witnesses who wished to testify on HB 392, noting the presence of Janice Adair on teleconference. Number 1380 JANICE ADAIR, Director, Division of Environmental Health, Department of Environmental Conservation, stated via teleconference from Anchorage that she had no testimony, but was available to answer questions from the committee. Number 1389 CHAIRMAN ROKEBERG noted the committee had no questions for Ms. Adair. Number 1424 BRUCE SCHACTLER, United Salmon Association, came forward to testify. He stated the United Salmon Association is a marketing cooperative incorporated in the state of Washington and licensed to do business in Alaska, with approximately 1,000 members in Alaska. In the past year the association has attempted to somewhat change the way business has been done in the seafood industry for the last 100 years, and they feel there have been some great changes for the industry. He said they found, during that process, that some changes needed to be made in this particular regulation to address the way business is being done nowadays in the salmon industry. Mr. Schactler noted he thinks the relationship among all aspects of the industry during this process has been one more of cooperation from the harvesting side and the processing side, and he noted they haven't had a common source of information that they can use to do business together. He sees this as providing that source in a timely and accountable way, and thinks it will be a great benefit, not only to the industry, but also to the state of Alaska. Number 1511 MR. SCHACTLER stated, for products sold presently, it may be as long as 18 months before the state of Alaska knows what its resource is worth, and he thinks that is unacceptable in this "age of information." He said the legislature, as stewards of the state's resources dealing with the tax base, should be able to know what these products are worth, as should they, the harvesters and salespeople of this resource. He noted they ought "to be all on the same page of music," understanding the value of this product on the world market in a much more timely manner. Mr. Schactler said he saw much of this as housekeeping, bringing them into the way modern business is being conducted, noting the industry has changed over the last forty years. He said he would certainly hope this was being brought forward in the spirit of cooperation. He stated they have been trying to do that over the last several weeks as this legislation has been developed, and even five minutes ago with the adoption of the latest amendment into the proposed CS. He stated his organization has no problems with making this compatible for everyone. Number 1587 CHAIRMAN ROKEBERG called on Kris Norosz in Petersburg to testify. Number 1598 KRIS NOROSZ, Government Relations, Icicle Seafoods, Incorporated, speaking from Petersburg via teleconference, asked to delay her testimony until she was able to look over the proposed CS. Number 1634 VIRGINIA ADAMS, United Fishermen of Alaska (UFA), came forward next to testify. She stated, "As you know we're here for our semi- annual board meetings, we would like to qualify our endorsement by saying that we have not brought this bill with its present language before our full board for approval, but that we fully endorse the intent of this bill. We discussed in our full board meetings that we were looking for this type of legislation to come before you so that we could have more accurate reporting data for the industry, so that we could move forward in establishing prices with ... real- time data. So without going any further, without having brought this before our full board, I would like to say that UFA does stand firmly behind this type of legislation and we encourage you to pass this." Number 1674 CHAIRMAN ROKEBERG asked Ms. Adams if she had examined the latest amendment regarding the threshold, and if she thought it was a good thing. Number 1679 MS. ADAMS answered that she thought it was, noting she would not want to burden small processing facilities with unnecessary work. She stated the intent of the bill is really to enable industry to work with real-time data, and that is on a much larger scale for them than a small processing facility in, for example, Cook Inlet or Prince William Sound. She said this was aimed much more at bringing the industry into conformity with most other industries, noting very few industries have only an annual wholesale report for their producers to work with. She said it is very difficult for producers to determine adequate pricing for their product with data that can sometimes be a year old. Number 1727 RICK LAUBER, Lobbyist for Pacific Seafood Processors Association, came forward next to testify. He said he "hated to rain on the parade" of the previous witnesses, but the members of his association did not think much of this legislation. Mr. Lauber stated, "Let me just go back a few years. Canned salmon was taxed by the state of Alaska based upon the average wholesale price of the salmon (indisc.) period of time over an average years and that's the way the tax was collected until about 1979 or 1980, when the canned salmon was taxed the same way as other seafood, and that was based upon the exvessel price." Mr. Lauber said the tax used to be 3 percent of the average wholesale price of the canned product and then it went to 4.5 percent. At the time this happened, there was one seafood harvester group using a small sliding scale; about 85 or 90 percent of their price was paid up front and there was a small part of it that was held back, and this was based upon the average price. He noted most of the state did not do that, and has not over the years. Mr. Lauber said they needed some method to continue that, and although it was a relatively small group, the state decided it was necessary, so there is the existing law. He noted not very many years later things changed, and that group stopped using the sliding scale, but no one thought to come to the legislature and say, "Gosh, we don't need this anymore. All you processors don't need to issue all those reports." Number 1833 MR. LAUBER stated they have been reporting this and nobody has been using it, noting, "As you know it hasn't been audited, and so it's not a -- until this situation came along and now somebody wants to amend it. Well I have a good amendment and that is repeal the - the old law." He stated he appreciated the efforts of the sponsors, staff and others who have attempted to make some amendments to the bill, which he thinks by and large are an improvement. However, he referred to the analogy of making a silk purse out of a sow's ear, saying it was not going to work. Mr. Lauber said all the change in reporting status does is require the processors to report more frequently. This would require them to report at probably their busiest time, when they're doing things like paying fisherman and suppliers, settling up with people, et cetera. He said he doesn't know how many thousands and thousands of these reports they have issued that nobody has paid any attention to, and now they are being asked for three more. He said that if any reports were to be required, he thought two were adequate, but one would probably be sufficient. Number 1909 MR. LAUBER said, however, they probably save their most serious concern for the auditing provision. He said the provision has been changed so that DOR would select the auditor, but he wanted the members of the committee to look at just exactly what they were doing. He stated, "Is this really something that the state government should be involved with? ... At the direction and request of somebody as putting auditors in various places. I submit that that's really not a function of government." Mr. Lauber said they have no problem with any fishermen's organization negotiating an agreement with a processor that contains a provision giving the fishermen's organization the right to audit the buyer's books. He said that is fine, it is collective bargaining, and they are entitled to do that. However, he said what the committee was being asked to do was authorize the audit of the books of somebody a 1000 miles away, to whom the fishermen had never sold a pound of fish, and to whom the fishermen might never sell fish. Mr. Lauber noted one of his big objections also was that an individual company could be selected for audit, and although it was said the company's identity would be kept confidential, if the [audit] information was released, "you'll know darn good and well ... who you audited." He said, "Certainly (indisc.) the state requires that, I think, no less than three or four people to release any information. We don't release fishermen's information - where they caught their fish - unless there are at least three or four reports issued, so you - you can't determine the information from one person. For instance, in this thermally processed thing they're talking about pouches. Now pouches are an excellent new product but I don't know that they're widespread use. You would audit -- if you report all the pouches, there may be only a couple of producers of pouches so they're going to know what the other person's prices are and so forth." Number 2031 MR. LAUBER noted he wanted to make the distinction that they did not object to an audit. They objected, in this case, to the fishermen demanding the audit and the state directing them to audit. He stated, "If ... any organization wants to have an audit of a fish processor, then negotiate with that fish processor and have the audit. Let's not have the state mandating that type of collective price bargaining." Mr. Lauber noted the proposed CS was also new to him, and he asked for some clean-up language on the collective price bargainer. He commented that it mentioned 50 harvesters; he thought they must mean 50 permit holders, but that needed to be made clear, giving the example that 10 seine boats with crews of 5 could demand an audit for someplace 1000 miles away in Bristol Bay. In another suggestion, Mr. Lauber noted the fish processors are taxpayers and the DOR audits its taxpayers; they have the DOR's auditors in and out of their businesses frequently. He said if the people wanted the information, he thought it would be a simple matter for one of the DOR's tax auditors to merely check on the processor's reports given under the current law to see if the processor's books corresponded to the information given. He noted if this was important, they had state auditors onsite who could do this with very little additional time and money. Mr. Lauber stated he thought the bill would need a lot work before it moved, and he hoped the committee would take the concerns he mentioned into consideration because, he said, "I think this is walking you down the wrong path ... in the state requiring something forced upon industry that is not the business of the state but is left with the individual." Number 2139 REPRESENTATIVE RYAN asked if Mr. Lauber had served on the bench at one time, and if he still had some friends left there. Number 2144 MR. LAUBER replied he had served, and, in answer to Representative Ryan's question about friends, he said he thought so, but none who were there when he was there. He added that if he had stayed on the bench, he wouldn't be there any longer either, because retirement at 70 was mandatory, and there was no such requirement for lobbyists. Number 2161 REPRESENTATIVE RYAN referred to the changes Mr. Lauber had suggested and asked if he had anything in writing he thought would be applicable. Number 2165 MR. LAUBER answered in the negative, noting he had just seen the committee substitute a few moments ago. Number 2168 REPRESENTATIVE BRICE added that they had just received it that day. Number 2172 CHAIRMAN ROKEBERG agreed, and stated for that reason and the testimony just heard, the Chairman did not want to move the bill at this time. Number 2184 REPRESENTATIVE JERRY SANDERS questioned if he had understood Mr. Lauber correctly, asking if this bill required three additional reports. Number 2189 MR. LAUBER answered in the negative, indicating there would be one additional report per year. He said the current law requires them to make two reports, which, he added, have not been used in recent years. He stated three reports are now wanted, and presumably these reports are going to be used for a short period of time. Mr. Lauber stated, "Had I had the presence of mind at the time that this bill originally passed, maybe I could have negotiated a sunset clause, 'If you don't use it, lose it, renew it,' ... because we've been going with this for years and nobody's been paying much attention to it -- and I believe even the contract to find out what the price is has other sources for that information." He said he believed there were several other, more current, sources for this information besides the state of Alaska. Number 2229 REPRESENTATIVE GENE KUBINA requested, for the committee, a response from the sponsor's representative to questions raised by Mr. Lauber's negative testimony. Number 2239 CHAIRMAN ROKEBERG noted there certainly would be an opportunity for the sponsor's representative to respond, but there was another witness waiting to testify via teleconference. Number 2250 CHRIS BERNS, commercial fisherman, testified via teleconference from Kodiak. He stated he had been a fisherman since 1970, and when they were doing sliding scale back then and different contracts things came in, they used the wholesale price averages "stuff," it came out of the candle (ph) formula. He said that formula came from a group of Cordova fisherman. Mr. Berns stated it gave them something to base what they were going to get paid for their salmon on. He said Mr. Lauber's testimony that the state didn't have any business messing around with this was kind of funny since it was a common property fishery owned by the state. Mr. Berns said it wouldn't matter if the fish were harvested by fish traps, trawlers or individual small businesses like salmon fishermen, because the state derives its taxes off the exvessel value of the fish, and if the state of Alaska, as the owner of the fish, can't raise that exvessel value, the state is never going to get any more taxes. He said he hopes all the committee members realize that they have lost $100 million in exvessel value in the previous two years, $100 million a year, noting that is total statewide exvessel value. Mr. Berns said that basically they've gone from an over $500 million exvessel value in Alaska for salmon in the late 1980s to currently about $230 or $240 million exvessel value for the state of Alaska's salmon harvest. He commented that everybody's fish is taxed, canned salmon at 4.5 percent raw fish tax, and 3 percent for frozen. He said it is an awfully big tax base they'll be losing, and all they need to do is get the price of salmon back up. Mr. Berns noted that the intention was not to put pressure on the processors; he said that hopefully the processors will make money, then the fishermen and harvesters make money, and the state, as the owner of the resource, makes money. Number 2353 MR. BERNS described the situation in Canada. He said there is one main buyer in Canada, and that buyer is vertically integrated into Lustin (ph) Foods, a big Canadian supermarket chain. Because of this vertical integration they can't trace what goes on with the books, and so in Canada they base their contracts on out-of-country export values. Mr. Berns explained that was because basically if the processor lied about its export taxes, it would be lying to the government and "there'd be some teeth there." He noted it was possible to mess around with the books inside a domestic market. He stated this bill basically came out of the frustration of trying to negotiate a contract with a number of different processors, different companies, who did not want to show their books. Number 2389 MR. BERNS stated, "Rick Lauber spoke to -- you know you negotiate individual companies into a third-party auditing deal, ... and none of them were willing to do that at all. Maybe one of 'em was (indisc.) but most of 'em said, 'No way, we'll just use this average wholesale case value.'" Mr. Berns commented that there were problems with that because, basically, as Mr. Lauber correctly said, the processors were out of compliance on these reporting requirements for years because nobody really cared about it. Mr. Berns stated, "When you lose such exvessel value that everybody wakes up ... in the harvesting center and all of a sudden wants to raise the exvessel values back ... up into some range where it's feasible to fish salmon, well, these reporting requirements are very important again." He said there were many things that were true in the picture Mr. Lauber painted, but the dire straits of the salmon fishery currently was that they had to raise their prices up. He said, "And you know when you're talking about this season for pink prices they went from a nickel to over 12 cents [a pound] and hopefully they'll be higher ... if the case price is higher because we've negotiated a sliding scale based on ... an average case price -- so (indisc.) this legislation, ... whether it gets amended, and hopefully ... the fishermen and Mr. Lauber and the processors can work together to come - to come - to some compromise that everyone'll be happy with. ... Nobody likes to do more paperwork, and nobody likes to get audited, but I'd like to say that it's the state who will win if we ... [TESTIMONY INTERRUPTED BY TAPE CHANGE] TAPE 98-15, SIDE B Number 0001 MR. BERNS continued "... basically driving the price of the cases down, you know, and the price of our exvessel value, so I just think that you need to really look into this bill and see that it does benefit the state of Alaska. It's just -- this isn't a private enterprise thing between processors and salmon fishermen, and I thank you for your time." Number 0018 CHAIRMAN ROKEBERG asked Mr. Berns if he could define exvessel value for the committee. Number 0027 MR. BERNS stated, "That's the price that you get paid at the dock when you deliver fish, and you know that's ... what the state derives its raw fish tax from, so if we get paid a dime a pound, the state takes their - their, either their three cents ... [BRIEF TAPE MALFUNCTION, SOME TESTIMONY LOST] ... (indisc.) of a dollar, however you want to look at it, so, you know -- and that's the only level that the fish are taxed at, ... they aren't taxed at a ... wholesale level or retail level. They're just taxed at by what the processors pay the fishermen, and that's where the state derives the taxes from." Number 0054 CHAIRMAN ROKEBERG commented, before the public testimony on HB 392 for this meeting was concluded, he wanted to return to Kris Norosz in Petersburg. Number 0065 KRIS NOROSZ, Government Affairs, Icicle Seafoods, Incorporated, testified via teleconference from Petersburg. She stated she had just been handed the proposed CS and would keep her comments brief. She was concerned with some of the aspects of this bill in that it increased the number of departments which could receive, not only the reports regarding wholesale fish value, but also income tax returns and any other information supplied to DOR. She noted that, while she understands the intent of confidentiality, it is her experience the more people who know a secret, the less likelihood it will remain a secret. She hopes the committee appreciates the company's concern about confidentiality, noting she shares Mr. Lauber's concern that this seems to be an unwarranted intrusion by the state into proprietary aspects of their business, and she is concerned with the whole idea and the extent that this audit would have. Ms. Norosz said she would like to make further comments after thoroughly reviewing the proposed CS and amendments, but stated, for the record, that Icicle Seafoods is opposed to this bill. Number 0140 MS. DAUGHERTY came forward to respond to the processors' point of view. She stated she was frankly a little surprised that Mr. Lauber was still opposed to the bill because they had discussed many of the changes incorporated in the proposed CS. Ms. Daugherty said she knew Mr. Lauber had still had one outstanding concern. She noted he had said he would prefer it if there were minimum number of processors of a stipulated size audited at a single time. In other words, the auditor couldn't audit just one processor, but would have to have a sampling of the minimum size, to avoid word getting out that a certain processor was being audited. Ms. Daugherty stated they had proceeded with that thought, running it by some of the fishermen, fishermen's organizations and DOR. She noted a representative from DOR was present and she was not sure she should speak for the department, but she indicated DOR's view was that this desire for a sampling size requirement was based the premise that the confidentiality was not going to work, and that was not the way DOR performed audits. She stated DOR takes every safeguard along the way to maintain confidentiality, and it standardly works. She noted, "If there was a problem, then ... it would be, perhaps, at the individual processor, as far as word getting out." Ms. Daugherty said DOR did not seem to think that requirement was necessary, and so that was the only thing not incorporated into the proposed CS from her last conversation with Mr. Lauber several days ago. She stated they are certainly willing to look at language modifying the collective bargainer definition, and she thought, "As far as exvessel audits - exvessel value audits currently - currently exercised by Revenue, this was the way that we found in talking to them, to -- in order to assure accuracy, just having this stuff in statute on that wholesale information, this was the way to do it, and not have a fiscal note - in other words, not have a fiscal impact on the agency. ... So that's why we are - why we're here." Number 0253 REPRESENTATIVE KUBINA referred to the language on page 4, lines 19 and 20, quoting, "In this subsection the term "collective price bargainer" means a person who represents 50 or more persons who are engaged in the ..." and he asked if it would be possible to change that to "50 or more permit holders, and who negotiate with fish processors". Number 0271 MS. DAUGHERTY stated that was up to the all the parties involved, noting it was a valid point. Number 0279 CHAIRMAN ROKEBERG stated, for everyone's information, it was his intention to send this bill back to the sponsor, as this was the only committee of referral in the House, and he wanted to make sure the bill had a modicum of consensus before the committee took it up again. Number 0298 REPRESENTATIVE RYAN commented to Ms. Daugherty, Benjamin Franklin had observed that three people can keep a secret if two of them were dead. He asked if DOR had given her a sequence of events showing how the department maintained confidentiality. Number 0308 MS. DAUGHERTY noted she had had extensive conversations with DOR, and would prefer it if a department representative spoke regarding the sequence of events. Number 0325 PAUL DICK, Revenue Audit Supervisor I, Income and Excise Audit Division, Department of Revenue, came forward to testify. He stated they collect fishery business taxes and also the wholesale reports currently based on canned salmon. Number 0337 CHAIRMAN ROKEBERG asked what the bill did, what was being reported, and why it was being done. Number 0344 MR. DICK responded that the substantive change made by HB 392 was to move away from the specific can sized defined by law, noting different size cans are currently being produced, and the industry is also moving into different technologies including pouching for shelf-stable product. Mr. Dick stated that is what was substantively happening with the reporting requirements. He also stated the first part of the bill addressed some authorization for DOR to exchange information with ADF&G and DEC, and that was really a stepping stone toward consolidated reporting for the processors. He noted currently the processors report certain information to ADF&G and DOR; he commented a lot of the information is the same but because DOR's information is confidential under the tax statutes, there has to be this separation of reporting requirements. Number 0397 MR. DICK said DOR has taken the first step on the public process with the licensing of fishery businesses, and the department is in its second year of a consolidated license application. DOR has consolidated the licensing applications of ADF&G and DEC in with DOR's, noting it was a "one-stop shopping" for the fishery businesses. He said they were able to do that because licensing information is public. Mr. Dick said that allowing this exchange of information would be the next phase of their project, so that the fish processors could report to the DOR, probably, because DOR would strip off the tax information but the common information would be available to ADF&G. He stated DOR already has this type of arrangement with the Department of Natural Resources (DNR) in the statutes, noting a couple of years ago the legislature authorized DNR to exchange mining tax information with DOR. Mr. Dick noted DNR is under the same confidentiality requirements as DOR, and the two departments have been very successful in exchanging information. He referred to Representative Ryan's question about the sequences of confidentiality, and said that the processors file the tax returns with DOR and the department keeps that information confidential, stating the department has an excellent track record of not divulging information. Number 0467 REPRESENTATIVE RYAN stated, "There's this concern in the testimony that this information may leak by who you audit, or, say, there's only so many people that pouch the fish - the product, and then, and everybody knows who they are, and if that information got out it would be detrimental to business, et cetera, et cetera." Representative Ryan asked how those concerns could be addressed, and if Mr. Dick could assure them there would not be a problem. Number 0488 MR. DICK responded that he could absolutely assure them DOR wouldn't be doing that, and he said he thought it would probably be more from inference, or possibly from the processors making a request which resulted in an audit under the current structure. He said any information that would come out would be inferential, but the DOR certainly wouldn't divulge that information. Number 0515 REPRESENTATIVE KUBINA stated it sounded like the information DOR would share with ADF&G or DEC was only the information that ADG&G or DEC would need. He asked if that were accurate - if, in other words, DOR didn't give the other departments "the whole tax issue," and he asked how it worked with DNR, asking if it was the same situation, or would the whole report be given over to ADF&G. Number 0536 MR. DICK replied that was correct, the DOR gives copies of mining license tax returns to DNR. REPRESENTATIVE KUBINA questioned whether it had worked. Number 0541 MR. DICK responded that it had worked, and noted the DOR had taken safeguards; DNR is required to return the copy of the tax return within a 30-day period to DOR. Number 0558 REPRESENTATIVE KUBINA asked if DEC or ADF&G, who were now getting other reports, would cease receiving those reports because all the necessary information would be included in this, and would this bill mean a reduction in paperwork. Number 0576 MR. DICK indicated that was what would happen. He stated there would be one report, like what was currently being done with the license application. He said there is now one license application, which is much easier for the license processor, noting there had been past complaints about the multiple licenses required. He said it worked both ways: the applicants only make one stop, and the departments were coordinated to ensure all of the licensing and permits were in place on the state level. Number 0601 CHAIRMAN ROKEBERG said he wasn't sure he understood how reporting a third time reduced paperwork. Number 0607 MR. DICK stated the reference had been to the fish tax return at that level, noting currently much of the information on the fish tax return was also recorded on ADF&G's commercial operator annual report. Number 0620 CHAIRMAN ROKEBERG commented he wished to proceed to HB 49. He indicated HB 392 would be held over in the hopes that it would come back to the committee in a more understandable form, with more consensus, so the committee could move it.
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