Legislature(2019 - 2020)BUTROVICH 205

03/13/2020 03:30 PM RESOURCES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SJR 15 STATE FULL SHARE OF PROFITS IN ANWR TELECONFERENCED
<Bill Hearing Canceled>
-- Testimony <Invitation Only> --
*+ SB 184 EXTEND FISHERY RESOURCE LAND. TAX CREDIT TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
**Streamed live on AKL.tv**
+ Bills Previously Heard/Scheduled: TELECONFERENCED
+= SB 130 SEAFOOD PRODUCT DEVELOPMENT TAX CREDIT TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+= SB 232 PERSONAL USE FISHING PERMIT FEES TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
         SB 130-SEAFOOD PRODUCT DEVELOPMENT TAX CREDIT                                                                      
                                                                                                                                
3:46:54 PM                                                                                                                    
CHAIR MICCICHE  announced that the  next order of  business would                                                               
be SENATE  BILL NO. 130,  "An Act  relating to a  seafood product                                                               
development  tax  credit;  providing  for an  effective  date  by                                                               
repealing secs.  32 and 35, ch.  61, SLA 2014; and  providing for                                                               
an effective date."                                                                                                             
                                                                                                                                
3:47:11 PM                                                                                                                    
TIM   LAMKIN,  Staff,   Senator   Gary   Stevens,  Alaska   State                                                               
Legislature, Juneau,  Alaska, explained  that SB  130 is  truly a                                                               
direct economic  policy that  the State has  used for  some time.                                                               
The intent  is to support  the long-term development  of Alaska's                                                               
value-added seafood  processing industry,  specifically targeting                                                               
both salmon and herring fisheries.                                                                                              
                                                                                                                                
He said the  historical incentive has been  processor tax credits                                                               
for salmon  and herring fisheries  to provide  infrastructure and                                                               
research  and  development  investment  for  added-value  product                                                               
improvements or discoveries.                                                                                                    
                                                                                                                                
MR. LAMKIN  detailed that  the bill would  extend the  sunset for                                                               
the tax credit and broaden its  scope to include pollock and cod.                                                               
The  change   will  grow  market  demand   for  Alaska's  quality                                                               
byproducts rendered from salmon, herring, pollock, and cod.                                                                     
                                                                                                                                
He  said there  may  be amendments  to the  bill  to include  tax                                                               
credits for other fisheries such  as perch, flounder, and others.                                                               
Extending  the tax  credits and  incentives  to find  added-value                                                               
technology  for all  of Alaska's  seafood is  a topic  for future                                                               
conversations.                                                                                                                  
                                                                                                                                
MR. LAMKIN noted that United Fishermen of Alaska (UFA) submitted                                                                
a letter of support for SB 130.                                                                                                 
                                                                                                                                
CHAIR MICCICHE asked him to proceed with the sectional analysis.                                                                
                                                                                                                                
3:49:36 PM                                                                                                                    
MR. LAMKIN provided the following sectional analysis of SB 130:                                                                 
                                                                                                                                
   Sec. 1: AS 43.75.035(b)(1) and (2), relating to tax                                                                        
          credits  applied to  value-added activity  for the                                                                    
          processing  of salmon  and  herring products,  (1)                                                                    
          adds  the   fisheries  of   pollock  and   cod  as                                                                    
          applicable  for the  tax credit;  and (2)  extends                                                                    
          the sunset  of the applicable tax  credits through                                                                    
          year 2025.                                                                                                            
                                                                                                                                
   Sec. 2: AS 43.75.035(c), conforming amendment, relating                                                                    
          to applying a tax  credit for investment equipment                                                                    
          used  to process  salmon  or  herring, to  include                                                                    
         equipment used for processing pollock and cod.                                                                         
                                                                                                                                
   Sec. 3: AS 43.75.035(d), conforming amendment, relating                                                                    
          to a  3-year carry-forward  of unused  tax credits                                                                    
          for  the processing  of salmon  and herring,  adds                                                                    
          the  same  carry-forward  of  tax  credits  to  be                                                                    
          applicable for pollock and cod processing.                                                                            
   Sec. 4: AS 43.75.035(e), relating to the 50 percent of                                                                     
          liability cap on applicable  tax credits, is legal                                                                    
          drafting    statutory    clean-up,   deleting    a                                                                    
          duplicative    and   redundant    clause   already                                                                    
          contained in Section 1 of the bill.                                                                                   
                                                                                                                                
   Sec. 5: AS 43.75.035(g), conforming amendment, relating                                                                    
          to state claw-back of  a carry-forward tax credit,                                                                    
          in the event  an asset used for  the processing of                                                                    
          salmon  or   herring  to  which   a  carry-forward                                                                    
          applies, if  the asset is removed  from the state,                                                                    
          adds  pollock  and  cod in  determining  qualified                                                                    
          investment of processing within the state.                                                                            
                                                                                                                                
   Sec. 6: AS 43.75.035(j)(3), conforming amendment,                                                                          
          relating   to   the   definition   of   "qualified                                                                    
          investment"  under this  tax credit  program, adds                                                                    
          investment in  assets used for  processing pollock                                                                    
          and cod products.                                                                                                     
                                                                                                                                
   Sec. 7: AS 43.75.035(j)(6), conforming amendment,                                                                          
          relating to the definition of "value-added"                                                                           
          products under this tax credit program, adds                                                                          
          processing of pollock and cod byproducts.                                                                             
                                                                                                                                
   Sec. 8-11: Are historical sunset dates and repealers of                                                                      
          this tax credit program,  consolidating all of the                                                                    
          various sunset  provisions of  the program  into a                                                                    
          single  sunset, occurring  now in  section 8,  and                                                                    
          set for Jan. 1, 2026.                                                                                                 
                                                                                                                                
   Sec. 12: Sets an effective date for the bill of Jan. 1,                                                                      
          2021.                                                                                                                 
                                                                                                                                
3:53:31 PM                                                                                                                    
SENATOR KAWASAKI asked  if there is any metric to  prove that the                                                               
tax credit  has the  intended result  of increased  investment in                                                               
value-added products for those fisheries.                                                                                       
                                                                                                                                
MR.  LAMKIN directed  attention to  the analysis  section of  the                                                               
fiscal  note  that  describes  the  economic  activity  that  has                                                               
resulted  from the  program. He  deferred any  discussion of  the                                                               
specifics to the industry.                                                                                                      
                                                                                                                                
3:54:23 PM                                                                                                                    
SENATOR GARY  STEVENS, Alaska State Legislature,  Juneau, Alaska,                                                               
sponsor of SB 130, explained  that the legislation to address out                                                               
of state  competition that was  affecting the salmon  and herring                                                               
fisheries passed in  2002 or 2003. He said that  program has been                                                               
very successful and he believes  the tax credit will be similarly                                                               
beneficial to the pollock and cod fisheries.                                                                                    
                                                                                                                                
CHAIR MICCICHE asked  Mr. Spanos about the timing if  there is no                                                               
fiscal note for FY2021 but the sunset splits that fiscal year.                                                                  
                                                                                                                                
3:55:40 PM                                                                                                                    
BRANDON SPANOS, Deputy Director,  Tax Division, Alaska Department                                                               
of Revenue, Anchorage,  Alaska, explained that the  tax return is                                                               
filed  the year  following  the catch  so there  would  not be  a                                                               
reduction as a result of the credit until the following year.                                                                   
                                                                                                                                
CHAIR  MICCICHE  said he  assumes  that  there  would not  be  an                                                               
interruption in  the tax  credit because  of the  previous sunset                                                               
date.                                                                                                                           
                                                                                                                                
MR. SPANOS  answered that's correct.  If the tax  credit sunsets,                                                               
the processors can still claim their credit in FY2021.                                                                          
                                                                                                                                
CHAIR MICCICHE asked if he had testimony on the bill.                                                                           
                                                                                                                                
MR. SPANOS stated that the  writeup in the division's fiscal note                                                               
estimates  the  reduction  though the  indirect  expenditure  for                                                               
FY2022-FY2026. It takes into account  the historic credit amounts                                                               
for  salmon and  herring  as  well as  an  estimate  for the  new                                                               
species, pollock and cod.                                                                                                       
                                                                                                                                
CHAIR MICCICHE  noted that  the fiscal  note increases  from $3.6                                                               
million  up  to  $6.6  million  in  FY2026.  He  asked  what  the                                                               
division's methodology is to assume an investment increase.                                                                     
                                                                                                                                
MR.  SPANOS answered  that the  assumption is  that the  industry                                                               
will spend the  money immediately and increase  spending in later                                                               
years. The estimate ranges between $3.6 million to $6.6 million.                                                                
                                                                                                                                
3:58:34 PM                                                                                                                    
CHAIR  MICCICHE  asked Senator  Stevens  if  he had  any  closing                                                               
comments.                                                                                                                       
                                                                                                                                
SENATOR STEVENS said the tax-credit  policy passed many years ago                                                               
and  it was  very effective  in  helping the  salmon and  herring                                                               
industry  move ahead.  SB 130  is  an extension  that would  also                                                               
apply to pollock and cod.  The tax-credit policy made an enormous                                                               
difference in  the industry by  allowing fishermen to put  in new                                                               
engines and processors  to put in new lines. He  said his hope is                                                               
that the bill will have a similar impact on pollock and cod.                                                                    
                                                                                                                                
CHAIR MICCICHE  said that  as a fisherman,  he has  witnessed the                                                               
industry  substantially increase  its value-added  products as  a                                                               
result of the  investment from the tax credit. He  noted that the                                                               
fishermen have received more value for the prices as well.                                                                      
                                                                                                                                
4:00:28 PM                                                                                                                    
CHAIR MICCICHE opened public testimony.                                                                                         
                                                                                                                                
4:00:43 PM                                                                                                                    
CHRIS    BARROWS,   President,    Pacific   Seafood    Processors                                                               
Association, Tacoma, Washington, testified  in support of SB 130.                                                               
He said SB  130 would provide Alaska seafood  processors with the                                                               
ability  to continue  to receive  some capital  cost recovery  in                                                               
exchange  for investing  in new  equipment  that produces  value-                                                               
added  products in  Alaska. The  bill  incentivizes getting  more                                                               
value out  of each fish,  which in turn provides  greater benefit                                                               
to the State  of Alaska, the coastal  communities, fishermen, and                                                               
processors.                                                                                                                     
                                                                                                                                
MR.  BARROWS  stated  that  expanding   the  list  of  tax-credit                                                               
eligible species  to include  Alaska pollock  and Pacific  cod is                                                               
important.  He  noted that  the  two  species comprise  about  69                                                               
percent  of  the  statewide  harvest by  volume,  based  on  2018                                                               
numbers.  Getting  more  value  long term  from  the  high  value                                                               
species is  a benefit to  all fishery participants and  the State                                                               
of Alaska.                                                                                                                      
                                                                                                                                
He shared that the Pacific  Seafood Processors Association (PSPA)                                                               
is comprised of eight major  seafood companies that purchase fish                                                               
from  harvesters from  Ketchikan  to Unalaska  and  St. Paul.  In                                                               
turn,  PSPA produces  value-added products  and provides  markets                                                               
for  Alaska fisheries  in a  global context.  The PSPA  companies                                                               
operate  25 facilities  in 15  coastal communities  across Alaska                                                               
and 3 floating processors that serve remote locations.                                                                          
                                                                                                                                
MR.  BARROWS  said  seafood processors  have  used  the  existing                                                               
salmon  tax credit  to make  critical  investments in  processing                                                               
technologies for salmon that would  otherwise be cost prohibitive                                                               
for  some processors.  The tax  credit  has changed  the face  of                                                               
salmon processing to an increase  in fillet and other value-added                                                               
salmon products  that have a  strong U.S. market. A  higher value                                                               
product means  a higher  return on investment  for the  State and                                                               
all participants,  including fish taxes  which are based  on fish                                                               
value.                                                                                                                          
                                                                                                                                
He stated that part of the  sustainability effort in Alaska is to                                                               
increase and improve  the utilization of each fish  which in turn                                                               
generates more value out of  the state's resources. He said there                                                               
is  no better  way to  increase the  value of  Alaska's resources                                                               
then to  increase the utilization  of harvested fish.  Some other                                                               
examples include  using milt, roe,  stomachs, bellies,  fish oil,                                                               
bones and skins that generated  new products and new consumers of                                                               
Alaska seafood.                                                                                                                 
                                                                                                                                
He summarized that  reauthorizing the value added  tax credit and                                                               
including  cod  and  pollock in  the  reauthorization  will  help                                                               
Alaska producers  continue progressing  and expanding  more fully                                                               
into other species.                                                                                                             
                                                                                                                                
4:04:24 PM                                                                                                                    
JERRY  MCCUNE,   Board  President,  Cordova   District  Fishermen                                                               
United,  Cordova, Alaska,  testified  in support  of  SB 130.  He                                                               
noted  that  when  the  legislation  first  passed,  farmed  fish                                                               
flooded the market  and Alaska was just putting  out frozen fish.                                                               
The industry's  use of  fillet machines  is a  result of  the tax                                                               
credit. It applies strictly to  value added, not something like a                                                               
new forklift.                                                                                                                   
                                                                                                                                
MR.  MCCUNE  concluded saying  that  adding  cod and  pollock  is                                                               
probably  a good  thing  for applying  tax  credits to  different                                                               
things.                                                                                                                         
                                                                                                                                
4:05:44 PM                                                                                                                    
FRANCIS LEACH,  Executive Director,  United Fishermen  of Alaska,                                                               
Juneau,  Alaska, stated  support for  SB 130.  She said  the bill                                                               
will  provide Alaska's  seafood  processors with  the ability  to                                                               
receive capital cost  recovery for investing in  new equipment to                                                               
produce value-added  products. New  and innovative  products will                                                               
benefit Alaska's processors, fishermen, and coastal communities.                                                                
                                                                                                                                
She  recalled that  the legislature  enacted the  seafood product                                                               
development  tax  credit  when  salmon and  herring  prices  were                                                               
extremely  low.  It  helped  the  processing  sector  to  upgrade                                                               
infrastructure  and  develop  new and  innovative  products.  She                                                               
added that UFA  appreciates the bill extending the  tax credit to                                                               
benefit pollock and cod during an industry downturn.                                                                            
                                                                                                                                
MS.  LEACH summarized  that the  seafood product  development tax                                                               
credit is helpful to processors. The  tax credit has shown in the                                                               
past, through  innovative and updated equipment,  to increase the                                                               
raw fish  taxes revenue. Fish taxes  are based on fish  value and                                                               
the  more money  derived  from  fish equates  to  more money  for                                                               
Alaska.                                                                                                                         
                                                                                                                                
4:07:30 PM                                                                                                                    
CHAIR MICCICHE announced that public testimony remains open.                                                                    
                                                                                                                                
4:07:41 PM                                                                                                                    
CHAIR MICCICHE held SB 130 in committee.                                                                                        

Document Name Date/Time Subjects
SB130 Research Bristol-Bay 2019.pdf SRES 3/13/2020 3:30:00 PM
SB 130
SB130 Sectional Analysis v. M.pdf SRES 3/13/2020 3:30:00 PM
SB 130
SB130 Sponsor Statement.pdf SRES 3/13/2020 3:30:00 PM
SB 130
SB130 v. M.pdf SRES 3/13/2020 3:30:00 PM
SB 130
SB130 Research PSPA 02.2019.pdf SRES 3/13/2020 3:30:00 PM
SB 130
SB 130 Fiscal Note DOR-TAX 02.28.2020.pdf SRES 3/13/2020 3:30:00 PM
SB 130
SB 184 Written Testimony APICDA 2.28.2020.pdf SRES 3/13/2020 3:30:00 PM
SB 184
SB 184 Supporting Documents 02.20.2020.pdf SRES 3/13/2020 3:30:00 PM
SB 184
SB 184 v. A.PDF SRES 3/13/2020 3:30:00 PM
SB 184
SB 184 Fiscal Note DCCED-DCRA 03.06.2020.pdf SRES 3/13/2020 3:30:00 PM
SB 184
SB 184 Sponsor Statement 02.18.2020.pdf SRES 3/13/2020 3:30:00 PM
SB 184
SB 184 Fiscal Note DOR-TAX 03.07.2020.pdf SRES 3/13/2020 3:30:00 PM
SB 184
SJR 15 v. K.pdf SRES 3/13/2020 3:30:00 PM
SJR 15
SJR 15 Sponsor Statement.pdf SRES 3/13/2020 3:30:00 PM
SJR 15
SJR 15 Fiscal Note-LEG-SESS-03-13-2020.pdf SRES 3/13/2020 3:30:00 PM
SJR 15
SJR 15 Supporting Document - Section 20001 of The Tax Cuts and Jobs Act 2.24.2020.pdf SRES 3/13/2020 3:30:00 PM
SJR 15
SJR 15 Supporting Document - State Share of Proceeds from ANWR Lease Sales 2.24.2020.pdf SRES 3/13/2020 3:30:00 PM
SJR 15
SJR 15 Supporting Document - 30 USCS § 191 of The Mineral Leasing Act 2.24.2020.pdf SRES 3/13/2020 3:30:00 PM
SJR 15
SJR 15 Supporting Document - Final EIS released for ANWR lease sale 2.24.2020.pdf SRES 3/13/2020 3:30:00 PM
SJR 15
SJR 15 Supporting Document - Excerpts of Statehood Act.pdf SRES 3/13/2020 3:30:00 PM
SJR 15
SB 130 Written Testimony UFA 03.13.2020.pdf SRES 3/13/2020 3:30:00 PM
SB 130