Legislature(2015 - 2016)BILL RAY CENTER 208
05/03/2016 10:30 AM House FINANCE
| 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 |
HOUSE FINANCE COMMITTEE
May 3, 2016
10:31 a.m.
10:31:50 AM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 10:31 a.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Jerry Burnett, Deputy Commissioner, Treasury Division,
Department of Revenue; Kevin Brooks, Deputy Commissioner,
Department of Fish and Game; Forrest Bowers, Division
Operations Manager, Department of Fish and Game; Bruce
Twomley, Chairman, Commercial Fisheries Entry Commission;
Representative Bob Herron; Representative Sam Kito III
Representative Craig Johnson; Representative Paul Seaton;
Representative Louise Stutes; Representative Lora Reinbold.
PRESENT VIA TELECONFERENCE
Benjamin Brown, Commissioner, Commercial Fisheries Entry
Commission.
SUMMARY
HB 251 ELECTRONIC TAX RETURNS & FISHERIES TAXES
CSHB 251 (FIN) was HEARD and HELD in committee
for further consideration.
Co-Chair Thompson reviewed the agenda for the day.
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."
10:32:35 AM
Co-Chair Neuman MOVED to ADOPT the proposed committee
substitute for HB 251 FIN, Work Draft 29-GH2921\E (Nauman,
4/28/16). There being NO OBJECTION, it was so ordered.
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, introduced himself.
KEVIN BROOKS, DEPUTY COMMISSIONER, DEPARTMENT OF FISH AND
GAME, introduced himself.
Mr. Burnett introduced the PowerPoint Presentation: "Fish
Tax HB 251" (copy on file). He began with slide 2: "Bill
Title":
"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."
Mr. Burnett advanced to slide 3: "Fish Business Tax
Overview":
· Paid by persons or business who process fish in Alaska
or export fish from Alaska
· Charged on price for raw resource or fair market value
Mr. Burnett advanced to slide 4: "Fish Business Tax
History":
· Territorial "salmon pack tax" in 1913
· Tax base expanded to include other fish between
1913 and 1949
· Fish business license required in 1951
· Municipal sharing began in 1962
· Increased from 10 percent to 50 percent over time
Mr. Burnett read from slide 5: "Fish Business Tax History
(Continued)":
· Current tax structure began in 2004
· Shore-based facility:
· 1 percent for developing species
· 3 percent for established species
· Floating facility:
· 3 percent for developing
· 5 percent for established
· Salmon cannery: 4.5 percent
· Direct Marketing License holders pay shore-based rates
Representative Wilson queried the difference between shore
based and floating processing facilities. She wondered if
one was on land and the other was not.
Mr. Brooks replied in the affirmative.
Representative Gara wondered if a direct marketer was a
fisherman who sold directly to consumers in the lower 48 or
restaurants.
Mr. Brooks replied in the affirmative.
10:38:11 AM
Mr. Burnett reviewed slide 6: "Fish Landing Tax Overview":
· Levied on unprocessed value of a fishery resource
first landed in Alaska, but processed outside
· Value calculated using Statewide Average Price
(SWAP)
· Mainly factory trawlers and floating processors
· 50 percent municipal sharing, like Business Tax
Co-Chair Neuman asked about the difference between
established and developing fisheries tax rates.
Mr. Burnett responded that, over the years, certain new
fisheries had not been identified as fisheries. He
explained that the Department of Fish and Game (DFG)
identifies fisheries as "developing fisheries" and reports
to the Department of Revenue (DOR) the fishery
distinctions. He stated that new fisheries were related to
a new species or new use of a species that may not have
been previously commercialized.
Co-Chair Neuman queried a time limit on the determination.
Mr. Brooks replied that there was established criteria in
Title 16.05.050.
Co-Chair Neuman queried a set rate or percentage of the
collected money that would go into the department for
commercial fisheries management.
Mr. Brooks responded that the funding he was speaking of
was UGF. He stated that there was no direct correlation
with the revenue
Mr. Burnett advanced to slide 7: "Fish Landing Tax
History":
· Effective 1994
· Initially 3.3 percent of the unprocessed value
· Exception: Pollock subject to Landing Tax even if
not landed in Alaska
· Due to 1999 American Fisheries Act
Representative Wilson wondered how much taxation that went
to DFG would meet the spending.
Mr. Brooks stated that the amount of tax revenue generated
from development fisheries was minimal. He explained that
it was only approximately $200,000 of $50 million.
Representative Wilson asked whether he had a document that
showed sustainable fisheries, or possible adjustments.
Mr. Brooks referred to a couple of different approaches
where the commercial fishing industry would pay for
management programs within the department. He stated that
there were test fish activities that generate revenues.
10:42:47 AM
Representative Wilson was looking for other activities that
did not generate revenue, and whether the state was paying
for activities that did not generate revenue.
Mr. Brooks responded that there agreement was based on
dollar for dollar, so there was no extra profit. He
explained that the reason for the 1 percent increase on the
tax was targeting an $18 million revenue generation,
because the current tax rates generated $50 million shared
with municipalities. He stated that there was a community
fish budget of approximately $35 million in UGF. He
explained that part of the proposal was a recognition of
the commercial fishing industry paying an additional tax
rate to cover the cost of management related to commercial
fishing in the state.
Representative Gara wondered what would occur when a
developing fishery was profitable. He noted that they were
charged one-third the rate on shore-based processors; and
one-half the rate on floating processors.
Mr. Brooks replied that the criteria was in statute, and
stated that once the fishery was contributing a significant
portion of catch into revenue they would become an
"established fishery" and pay the higher rate.
Representative Gara queried the standard of an "established
fishery."
Mr. Brooks read the definition in statute.
Mr. Burnett shared that the committee substitute showed
that the tax rates for the developing fisheries were
exactly the same as developed fisheries.
Representative Gara remarked that the state had,
historically, had a problem with dedicated taxes, because
many services needed money. He stressed that the fishery
tax stated that all the money to the state would go to fund
the commercial fisheries division. He recalled that the
commercial fisheries division required $35 million, and the
state portion of the tax was $25 million.
Mr. Brooks replied that all tax revenue generated from the
existing taxes and proposed taxes were put into UGF for
appropriation by the legislature. He stressed that the tax
was not designated.
Representative Gara asserted that it should be considered a
dedicated tax. He remarked that there was $25 million in
state fisheries taxes for a commercial fisheries department
that cost the state $35 million.
Mr. Brooks agreed, but reiterated that it was not a
dedicated fund.
Representative Gara felt that it was essentially a
dedicated fund.
10:47:30 AM
Vice-Chair Saddler asked about any other examples of
developing fisheries.
Mr. Brooks responded that there might be developing fishery
in one part of the state and not another. He gave examples
of developing fisheries.
Representative Kawasaki remarked that the committee was
well versed in how taxes were levied. He did not know if
3.3 percent was the appropriate level. He wondered why
there was not a higher percentage on a specific stock of
species, if the species was unique to the area.
Mr. Burnett replied that most states did not have a fish
tax for commercial fishing. He stated that Washington had
rates that varied from 1 percent to 5 percent. He shared
that California had taxes that were species-specific. He
remarked that Alaska had a gross tax system. He stated that
there could be rates on a species-specific or profit-
specific basis. He restated that the current system was a
gross tax system. He explained that the economics of each
fisherman was probably different. The fish tax was
collected by the state at the processor level. The
processor deduct the value of the tax from the fish when
the fish is purchased from the fisherman. He felt that
constructing a tax that would be economically specific to
each fisherman would be a difficult proposition.
10:51:19 AM
Representative Edgmon asserted that the purpose of the bill
was to create a process for the fishing industry to assist
in closing the state's fiscal gap.
Mr. Burnett replied in the affirmative.
Representative Edgmon thought the discussion would morph
into a discussion about commercial fishing industry, and
whether it paid its way in Alaska. He wanted to ensure that
the money would be directed toward narrowing the gap of
general fund dollars that were used for paying for DFG. He
wanted to discuss the formulation of the number. He
remarked that, in its "hay day", the oil industry paid 90
percent of the state's UGF. He remarked that the fishing
and mining industry had much smaller contributions to the
state's treasury. He remarked that there had been third
party expert analysts assist the state to better understand
the cost and benefit of the oil, gas, and mining tax
structure. He queried any expertise that DFG had hired to
analyze the fish industry in the state.
Mr. Burnett stated that the oil industry was a much greater
portion of the state's revenue than the fishing industry.
He remarked that the analysis was internal, and announced
that there was expertise within DFG related to the
different types of fisheries. There were economists in DOR
who had examined the various parts of the proposal. He
announced that there were no external consultants to
analyze the proposal.
Representative Edgmon announced that he wanted to ensure
that all industry and groups would contribute to helping to
fix the fiscal crisis in a fair manner. He stressed that
the commercial fishing industry impacted the health and
wellbeing of coastal Alaska and how it interacted with the
transportation system in the state.
10:56:49 AM
Vice-Chair Saddler found it difficult to assume that the
current tax structure was the appropriate tax structure,
especially when contemplating an increase by only 1
percent. He wondered if there was a royalty that the state
collected on the value of the fish as the landholder of the
sea holder's share.
Mr. Burnett responded in the negative. He explained that
the tax was a flat tax.
Vice-Chair Saddler observed that the fisheries provided
jobs and tax bases for rural economies. He stressed that
the industry provided benefits to the state other than
money to the general funds.
Co-Chair Thompson asked members to focus their questions on
the slides.
Mr. Burnett continued to slide 8: "Distribution of Fish Tax
Revenue." He stated that 50 percent of the tax went to
communities and boroughs; and 50 percent went to the
general fund and any costs or credits associated with the
tax. He stated that the total collections of fish revenue
was $44.4 million; the municipal share was $23.1 million;
and the state retained $21.3 percent. He remarked that the
revenue had varied year to year because of the price and
amount of fish.
Co-Chair Thompson queried more information about the
municipal share.
Mr. Brooks replied that the municipal share was one-half of
what was owed on the tax returns before credits.
Co-Chair Thompson wondered how the municipal share was
divided among the communities.
Mr. Brooks replied that an incorporated city in an
organized borough received an equal contribution between
the city and the organized borough. He stated that the tax
was distributed through an allocation program to
unincorporated boroughs or cities established by the
Department of Commerce, Community and Economic Development
(DCCED).
11:00:56 AM
Representative Guttenberg pointed to the municipal share
listed on the slide. He wondered whether there was
compensation to the communities who were inland and
effected by fishing.
Mr. Burnett responded that under the current statutes, the
sharing did not go outside the direct communities. The
inland communities did not receive compensation.
Representative Guttenberg asked if there was a balance of
revenue to the other communities.
Mr. Burnett replied in the negative, and felt that the
legislature would need to reappropriate those funds.
Representative Guttenberg asked for more information.
Vice-Chair Saddler asked for a detail of the credits.
Mr. Burnett stated that there would be credits issued to
businesses that would add value to the produce.
Vice-Chair Saddler queried the history of the credits and
their cost-benefit analysis.
Mr. Burnett agreed to provide that information.
Co-Chair Thompson noted that the fish business tax revenue
had municipal share. He wondered whether those communities
receiving money from the community revenue sharing program.
Mr. Burnett replied that the distribution did not change
the other revenue sharing calculation.
11:05:51 AM
Mr. Burnett introduced slide 9: "Fish Business Tax
Revenue":
FY 2015
Total collections: $44.4 million
Municipal share: $23.1 million
Retained by state: $21.3 million
FY 2014
Total collections: $53.0 million
Municipal share: $26.5 million
Retained by state: $26.5 million
FY 2013
Total collections: $45.1 million
Municipal share: $25.0 million
Retained by state: $20.0 million
-State share normally smaller than municipal share
because of credits
Mr. Burnett moved on to slide 10: "Fish Landing Tax
Revenue":
FY 2015
Total collections: $8.4 million
Municipal share: $3.2 million
Retained by state: $5.1 million
FY 2014
Total collections: $12.6 million
Municipal share: $5.4 million
Retained by state: $7.1 million
FY 2013
Total collections: $13.4 million
Municipal share: $7.8 million
Retained by state: $5.5 million
Representative Edgmon felt that all industries should be
required to pay a little more in the current economic
climate. He wondered how the numbers were derived, and
noted that an internal process and deliberative process
could yield different results. He also asked for more
information regarding the relationship of cost and benefit.
Mr. Burnett replied that the discussion took place within a
working group, and the numbers were a result of the work in
those discussions. He stated that the exact numbers were
even numbers, which were easy for tax payers and
administration.
Representative Edgmon asked what kind of influence the
fishing industry and the municipalities on the discussions.
Mr. Brooks responded that the conversations did not include
the fishing industry about specific tax rates. He remarked
that there had been discussions about increased taxes, but
not specific rates.
11:10:44 AM
Representative Gara asked if the costs varied from
different remarked that the cost of a crab fishery would be
different than other types of fisheries. He wondered why
there was not a profits-based tax. He felt that the numbers
were arbitrary, because there was no difference in costs
for the various types of fisheries.
Mr. Burnett stated that the department was trying to
maintain a certain level of simplicity for administration
and tax paying purposes. He agreed that a proper economic
impact on each business would be to have a profit-based
tax.
Representative Gara understood there was a balance in
imposing taxes. He remarked that the state currently lost
money on commercial fisheries, because it cost more to
manage than the revenue. He stated that he wondered why the
state did not close the loopholes in the corporate tax.
Representative Munoz wondered if both taxes were required
on a facility that was both cold-storage shore-based, and
canning facility. She also asked whether that tax would be
assessed on the individual operations.
Mr. Burnett replied that he believed that if the facility
purchased the fish for purpose of using it in their cannery
business, it would be taxed at the cannery rate. He
furthered that if the fish were purchased and selling as a
frozen product, it would be taxed at the appropriate rate
for that activity.
Representative Munoz surmised that there were facilities
that paid both types of taxes.
Mr. Burnett responded in the affirmative.
Representative Munoz wanted to ensure that the tax was not
paying both taxes on one resource.
Mr. Burnett replied that the tax would be applied to the
activity not the fish.
11:14:40 AM
Mr. Burnett scrolled through slide 11: "Fish Tax Proposal":
· Increases Fisheries Business Tax and Fishery Resource
Landing Tax by 1 percent for established species
Mr. Burnett advanced to slide 12: "Fish Tax Proposal
(Continued)":
· 1 percent tax increase would be entirely state
revenue, not shared with municipalities
· New proposal establishes the Alaska Seafood
Marketing Fund (ASMF) within the General Fund.
DOR will separately account for .5 percent of the
revenue and deposit into the fund. The ASMF would
be subject to legislative appropriation to the
Alaska Seafood Marketing Institute, and the funds
would not lapse.
· Raises from 1 percent to 4 percent developing
species processed at a shore-based facility under
fisheries business and developing species under
fishery resource landing.
· Municipal sharing would continue for remaining revenue
· Requires electronic filing
Mr. Burnett looked at slide 13: "Distribution Under New
Fish Tax Proposal":
Fish Tax Revenue
Additional 1 percent of value directly to the
General Fund
50 percent to communities and boroughs
50 percent to General Fund and credits
11:15:40 AM
Representative Edgmon noted that many fishing districts
were small industrial hubs located hundreds of miles from
anywhere else, requiring a higher cost to conduct business.
He remarked that those communities required additional
services such as police and landfill. He felt that the
capital budget could not meet the cost requirements for
those services. He queried analysis on sharing the
additional 1 percent at the same rate with the smaller
communities. He felt that effort would lessen the demand on
the capital budget; and would create viable local entities
that could capture more revenue for the state.
Mr. Burnett agreed that it was a good point. The
administration had been looking to increase additional
money to the general fund. He stressed that the legislature
had the authority to appropriate money.
Representative Edgmon announced that he would continue to
raise his concern.
Co-Chair Neuman stated the local communities also had the
jobs in the communities, and extra economic activity that
spurred other activities to support surrounding businesses.
He stated that the municipalities had the ability to tax
locally in organized areas.
Mr. Burnett responded that the local governments had the
ability to tax.
Mr. Burnett looked at slide 14:"Distribution Under House
Fisheries Tax Proposal":
Fish Tax Revenue
Additional 0.5 percent of value directly to the
General Fund and 0.5 percent value directly to
Alaska Seafood Marketing fund
50 percent to communities and boroughs
50 percent to general fund and credits
Mr. Burnett discussed slide 15: "Relative Fish Tax Rate":
· Washington is a state with a tax specific to fish
· 0.09 percent to 5.62 percent of value at point of
landing
· Rate depends on species
Representative Guttenberg asked if anything else to raise
additional monies such as imposing dock fees
Mr. Burnett wondered if he was talking about Washington.
Representative Guttenberg greed.
Mr. Burnett stated that the State of Washington heavily
relied on state sales tax.
Representative Guttenberg asked if there was a sales tax
imposed on the tax.
Mr. Burnett stated that people pay about a 10 percent sales
tax
11:21:08 AM
Co-Chair Neuman wondered whether the taxes paid to the
Alaska were deductible from federal tax returns.
Mr. Burnett responded in the affirmative.
Co-Chair Neuman asked if there was a tax imposed on the
fisheries industries would they be able to claim a write
off.
Mr. Burnett replied in the affirmative.
Representative Gara asked that for the shore-based or
floating based processor.
Mr. Burnett responded that it did not necessarily apply to
both processors.
11:26:38 AM
Representative Munoz remarked that she thought a floating
processor and the delivery were separate.
Mr. Brooks deferred to Mr. Bowers.
FORREST BOWERS, DIVISION OPERATIONS MANAGER, DEPARTMENT OF
FISH AND GAME, explained that in Bristol many of the
offshore floating processors are taking delivery and also
processing.
11:32:53 AM
Mr. Burnett read from slide 16: "Revenue Impact":
· Dept. of Revenue estimates proposed fish tax increases
would raise an additional $18 million per year
· New proposal would raise an additional $7 million
· Estimates are based on the fall 2015 revenue forecast
· New proposal is based on the Spring 2016 revenue
forecast
11:38:25 AM
Co-Chair Neuman wondered whether the only tax on fisheries
were on targeted species.
Mr. Burnett replied in the negative. He stated that all
commercial fish had a tax assessed at the point of sale.
Co-Chair Neuman wondered whether the tax included non-
targeted species such as shark.
Mr. Brooks replied that there would be a tax if the fish
was caught or sold, based on the value or actual price or
purchase.
Co-Chair Neuman remarked that he did not see a tax on a
non-targeted species, such as catch that was dumped
overboard.
Mr. Burnett moved to slide 17: "Implementation Cost":
· Would require the Department of Revenue to update its
Tax Revenue Management System (TRMS) and Revenue
Online (ROL) which allows a taxpayer to file a return
online and update the current tax return forms.
· One-time implementation cost of $100,000 to recreate
tax forms and reprogram and test the tax system
· Do not anticipate any additional costs to administer
the tax program.
11:40:45 AM
Mr. Burnett addressed slide 20 - 25: "Sectional Analysis":
Sec. 1. Adds a $25 or 1 percent tax penalty for
failure to file electronically unless an exemption is
received by the taxpayer
Sec. 2. Requires electronic submission of tax returns,
license applications, and other documents submitted to
the Department of Revenue. This changes the general
tax statutes, AS 43.05, and will apply to all tax
types administered by the department. Provides a
process to request an exemption if a taxpayer does not
have the technological capability to do so.
Sec. 3. Increases three different tax rates within the
Fisheries Business Tax by one percent. The current
rates range from three to five percent.
Sec. 4. Increases tax rate within the Fisheries
Business Tax for developing fish species processed by
a floating processor from 3 to 4 percent. Rate remains
at 1 percent for developing fish species processed by
a shore-based business.
Sec. 5. Increases tax rate within the Fisheries
Business Tax for direct marketers from 3 to 4 percent.
Rate remains at 1 percent for developing fish species
sold by direct marketers.
Sec. 6. Conforming language related to the requirement
to submit returns or reports electronically. This
section deletes the requirement for taxpayers to
submit their returns to the department in Juneau.
Sec. 7. Establishes that the revenue from the one
percent tax increase is deposited in the general fund.
The remaining revenue shall be shared with
municipalities per the currently existing formula.
New Section 7-Establishes the Alaska Seafood Marketing
fund in the general fund. DOR will account for and
deposit .5 percent of the value of a fishery taxed.
The fund is subject to legislative appropriation and
funds do not lapse.
Sec. 8. Increases tax rate within the Fisheries
Landing Tax for fish species other than developing
fish species from 3 to 4 percent. Rate remains at 1
percent for developing fish species.
· Current Sec. 8 becomes the new Sec 9. New section
8-Tax amount equal to .5 percent of the value of
fishery taxed will be deposited into the general
fund.
Sec. 9. Establishes that the revenue from the one
percent tax increase is deposited in the general fund.
The remaining revenue shall be shared with
municipalities per the currently existing formula.
· Current Sec 9 becomes the new Sec 10
Sec.10. Establishes that the revenue from the one
percent tax increase is deposited in the general fund.
The remaining revenue shall be shared with boroughs
per the currently existing formula.
New Sec 10-tax collected under AS 43.77.055 paid into
separate account in the general fund, may be
appropriated by the legislature for revenue sharing
under AS 43.77.060.
Sec. 11. Transitional language allowing for
regulations.
New Sec. 11-Separately account for and deposit .5
percent of the value of fishery taxed under AS
43.77.010(2) (fish landing/established) into the
Alaska seafood marketing fund.
Sec. 12. Section 11 above takes effect immediately.
New Sec 12-Establishes that the revenue from the one
percent tax increase is deposited in the general fund.
The remaining revenue shall be shared with
municipalities per the currently existing formula.
11:43:21 AM
Co-Chair Neuman referred to Section 1, lines 10 through 13,
which addressed the additional base fee by the commission.
He noted that the subsection stated that a non-resident
would pay an annual resident surcharge. He wondered whether
there was a file for any of the Carlson versus State issues
related to charging different rates for residents and non-
residents.
Mr. Brooks replied that the section complied with the
Carlson Case. He explained that, every three years, OMB
calculated a differential, updates the differential, and
DOR assessed it against permits and licenses.
Co-Chair Neuman wondered why the words were removed on page
2, lines 2 and 3.
Mr. Brooks replied that it had not been an amendment put in
by the department.
Co-Chair Neuman asked about Section 7, he wondered how a
person could own a fisheries resource.
Mr. Brooks replied that it was existing language in
statute. He believed that it was fish once it's caught.
Co-Chair Neuman assumed that the captain of the boat owned
the caught fish.
Mr. Burnett noted that a fish that was caught outside of
Alaska waters, was not under the state's jurisdiction when
it was caught.
Co-Chair Neuman asked about Section 8 and requested a chart
showing the 50 percent municipal share was distributed.
Mr. Burnett was happy to provide information to the
committee.
Co-Chair Thompson asked the department to provide the
information to his office.
Vice-Chair Saddler looked at slide 20, and assumed that the
fisheries business tax under established fisheries.
Mr. Burnett answered in the affirmative.
Vice-Chair Saddler looked at Section 4, and wondered if
"tax rate on direct marking value" was missing; or was it a
proposed increase the actual marking value of the fish.
Mr. Burnett replied that it was a typo.
11:48:16 AM
Representative Pruitt asked if there were any ways to
legally avoid paying the tax.
Mr. Burnett responded that he did not know if any.
Representative Pruitt asked for explanation about the
attempt to hide taxes behind an LLC.
Mr. Burnett replied that it was not unusual for a processor
to pay commercial fisherman a set fee when fish were
purchased in season. The tax was paid on the full payment.
He remarked that there was a concern about the
Representative Pruitt asked if there was something the
legislature needed to do to "plug the hole?"
Mr. Burnett did not think there was anything that had to be
changed in the structure.
11:53:49 AM
Vice-Chair Saddler referred to slide 19, and noted the
assertion that the tax burden would not be passed down to
the buyers.
Mr. Burnett replied that the price was passed onto the
commercial fisheries.
Vice-Chair Saddler wondered whether "buyer" referred to the
last buyer or the first buyer.
Mr. Burnett replied that "buyer" referred to both the last
and first buyer.
Vice-Chair Saddler felt unsure about the assumption that
the cost would not be passed down to the purchaser. He
wondered why the buyer would not bear the cost of the tax
increase.
Mr. Burnett stated that in except for a few markets there
was very little power to sell beyond what the market
dictates.
Representative Gara stated that he would like to look at a
trawler tax.
Co-Chair Thompson indicated that there would be a
discussion regarding the portion of the bill that addressed
the lifting of the CFEC cap.
BENJAMIN BROWN, COMMISSIONER, COMMERCIAL FISHERIES ENTRY
COMMISSION (via teleconference), introduced himself.
11:58:13 AM
Representative Wilson asked why the cap would be removed
without inserting the current regulation to know exactly
the payment, and not be arbitrarily changed.
Mr. Brown replied that currently, the statute provided that
the fees for permits would be set to reflect the reasonable
rate of return in the fishery. He remarked that the
regulation interpreted that statute as four-tenths of 1
percent of the average value of the permit for the three
years prior to the year in which fees were set; or the
average of growth earnings in a fishery with no permit
values.
Representative Wilson asked if the concerns of the
fishermen could be met through a regulation change.
Mr. Brown replied in the affirmative.
Representative Munoz queried the impact on the skipper with
the removal of the cap.
Mr. Brown conveyed that the permit cost was associated with
every skipper.
12:02:27 PM
BRUCE TWOMLEY, CHAIRMAN, COMMERCIAL FISHERIES ENTRY
COMMISSION, explained that the fees applied to all the
permits. He stated that the permit holders who would be
affected by removing the cap did not hold a limited entry
permit in Alaska. He stated that the fees would be set at
four-tenths of 1 percent of the average catch of a permit
in a particular fishery. He stressed that the figures were
applied to the fee structure, which had 40 categories of
fees.
Representative Wilson felt that it was not about generating
more capital, and felt that the smaller fishermen were
paying more based on their catch because of the cap. She
felt that it was an issue of fairness, rather than
increased revenue.
Mr. Twomley explained that fishermen operating below the
cap were subject to the formula. He noted that there were a
number of fishermen operating within the cap who would pay
higher fees in the event that the cap was removed.
12:05:03 PM
Representative Wilson wondered how many boats above the
3000 cap were Alaskan boats versus out of state boats.
Mr. Twomley referred to an analysis that provided figures
related to the question. He furthered that there was also a
spreadsheet (copy on file), which identified all of the
vessels identifying the effected permit holders.
Representative Munoz asked how many of the vessels used
Alaska stickers, who may be home ported in Alaska.
Mr. Twomley looked to the analysis.
Representative Munoz wondered how to read the percentage.
Mr. Twomley thought he had information readily available.
Representative Wilson wondered how the $3000 limit was
impacted by the percentages.
Mr. Twomley replied that it applied to the captains
operating on various vessels. He stressed that it was the
overall percentage distributed between Alaska and non-
Alaska captains. He did not believe that there was a
distribution by specific vessel available.
Representative Pruitt noted that 88 percent of the foregone
revenue was non-resident
Mr. Twomley responded that the non-resident captains in the
class represented 88 percent of the total captains. He
stated that resident captains represented 11.8 percent.
12:09:33 PM
Representative Wilson queried a way to see who was
benefitting the most from the resources, who may not be
paying back to the royalty. She wanted to know where the
fish was processed.
Mr. Twomley responded that the focus was on the captains.
He also noted that the particular affected fisheries were
also identified. He noted that the specific identified
vessels had permits; and showed particular fisheries. He
remarked that the value of the fisheries was reflected in
Table 2.
Representative Wilson queried the foregone revenue.
Mr. Twomley replied that the figure was $2.2 million.
Representative Wilson surmised that the $2.2 million was
from non-Alaskans.
Mr. Twomley replied that the larger percentage was from
non-Alaska based vessels and non-Alaskan captains.
Representative Gara requested a separate rate for factory
trawlers.
Co-Chair Thompson stated that the committee would try to
get an answer from the dept.
Representative Munoz felt that the fee cap issue related to
the permits to the factory.
Mr. Twomley noted that the overall effective date was
immediately effective. He stressed that changing a fee for
a fishery was difficult, and requested that the effective
date be moved to January 1. He remarked that the language
was adopted following the Carlson Case, and felt that it
was useful direction for the commission. He did not
understand why that language was deleted.
Vice-Chair Saddler wondered if the effective date should be
January 1, 2016.
Mr. Twomley replied in the negative. He stated that he
wanted the effective date to be January 1, 2017.
Vice-Chair Saddler queried the reason for the request to
change the effective date.
Mr. Twomley replied that the permits were sold on a
calendar year basis.
CSHB 251 (FIN) was HEARD and HELD in committee for further
consideration.
Co-Chair Thompson thanked the presenters. He reviewed the
agenda for the following day.
Co-Chair Thompson recessed the meeting to a call of the
chair [Note: the meeting never reconvened].
ADJOURNMENT
12:15:14 PM
The meeting was adjourned at 12:15 p.m.