Legislature(2015 - 2016)BILL RAY CENTER 208
06/01/2016 03:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4003 || HB4003 | |
| HB4005 | |
| HB4006 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB4003 | TELECONFERENCED | |
| += | HB4005 | TELECONFERENCED | |
| += | HB4006 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
FOURTH SPECIAL SESSION
June 1, 2016
3:08 p.m.
3:08:24 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 3:08 p.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; Ken Alper, Director, Tax Division,
Department of Revenue; Randall Hoffbeck, Commissioner,
Department of Revenue; Benjamin Brown, Commissioner, Alaska
Commercial Fisheries Entry Commission, Department of Fish
and Game; Bruce Twomley, Chairman, Alaska Commercial
Fisheries Entry Commission, Department of Fish and Game;
Brandon S. Spanos, Deputy Director, Tax Division,
Department of Revenue; Representative Louise Stutes;
Representative Sam Kito III, Representative Liz Vasquez;
Representative Andy Josephson; Representative Paul Seaton;
Representative Gabriele LeDoux.
SUMMARY
HB 4003 MOTOR FUEL TAX
HB 4003 was HEARD and HELD in committee for
further consideration.
HB 4005 MINING: LICENSE,TAX, FEES; EXPLOR. CREDIT
HB 4005 was HEARD and HELD in committee for
further consideration.
HB 4006 FISHERIES: TAXES; PERMITS
HB 4006 was HEARD and HELD in committee for
further consideration.
Co-Chair Thompson indicated that amendments would be taken
up in the current meeting. If it was the will of the
committee he intended to move the bills out. He stated//
3:09:26 PM
HOUSE BILL NO. 4003
"An Act relating to the motor fuel tax; and providing
for an effective date."
Representative Wilson MOVED to ADOPT Amendment 1, 29-
GH2458\A.1 (Shutts/Nauman, 5/28/16) (copy on file):
Page 1, lines 11 - 12:
Delete all material and insert:
"(3) the tax on all aviation fuel other than gasoline
sold or otherwise transferred
(A) on the premises of an airport within the Alaska
international airport system, as that term is defined
in AS 44.42.290, is 3.2 cents a gallon;
(B) outside the premises of an airport within the
Alaska international airport system, as that term is
defined in AS 44.42.290, is 6.5 [IS THREE AND TWO-
TENTHS] cents a gallon; and"
Co-Chair Thompson OBJECTED for discussion.
Representative Wilson explained the amendment would exempt
international airports [from the motor fuel tax]. She
detailed international airports were currently self-
sustainable and actually gave more money than necessary.
She furthered that with the 6.5 cent tax, there would be 31
states lower than Alaska when it came to jet fuel tax. She
continued the airports paid leases and landing fees. She
explained there had been other increases at the airports as
well. She stressed the airports paid for more than just jet
fuel. She noted the administration had not provided
information on the impact of a 1 cent or 2 cent tax. She
reasoned the state could continue to raise the tax all it
wanted, but she wondered what would have been accomplished
if companies and jobs left. The amendment would help
smaller airports to be a bit more self-sustainable - she
believed they would never be completely self-sustainable.
She reminded committee members a meeting had been held the
prior summer regarding landing fees for smaller airports
where it was decided to increase taxes on fuel instead.
Unfortunately, the method taxed larger airports, which were
already paying much more. She expressed concern about the
negative impacts the tax could have on international
airports, which included Fairbanks and Anchorage (the
Juneau airport was municipal and was therefore not
included).
3:11:18 PM
Co-Chair Thompson relayed that Representative Gara had
joined the meeting. He asked if the governor's original
bill had proposed a 10 cent jet fuel tax.
Representative Wilson replied in the affirmative.
Co-Chair Thompson stated the current bill included a 6.5
cent tax. Representative Wilson affirmed.
Representative Gattis relayed she had not participated in
the committee meeting when landing fees in smaller airports
had been decided against. She recognized a fuel tax was
probably more advantageous than trying to monitor runway
landings. She believed it was not reasonable to hire a
person to collect landing fees at every airport. She shared
that she was a private pilot and was not certain how the
fee was paid with the exception of a box used to monitor
landings.
3:12:23 PM
Vice-Chair Saddler shared that he was a private pilot and
nationally the decision had been made to pay for many of
the services provided to the aviating public through fuel
because all planes required fuel.
Representative Kawasaki shared that his mom drove from one
side of town to the other to purchase gasoline that was 1
cent cheaper. He understood it did not logically make sense
to drive that far. He reasoned it was sort of an
international market and individuals gas up where they felt
they could get the "best bang for their buck." He continued
that sometimes planes had to gas up in Alaska before flying
internationally. He wondered about gas prices compared to
other nearby airport jurisdictions.
Co-Chair Thompson shared he had done a tour of the
Anchorage International Airport with its airport manager.
He relayed that no one knew how much each of the airlines
paid for their fuel. He elaborated fuel arrived at the port
and was delivered via pipe to large fuel tanks. The
information was proprietary - each of the air carriers had
made a deal with different companies to purchase fuel.
Co-Chair Neuman indicate he had also spoken with the
airport manager. He detailed the airlines had an
association where they bought their fuel. He furthered the
C-plan [contingency plan] had to be redone for Cook Inlet a
couple of years back when tanks had been expanded. He
believed the governor had an equitably crafted plan. He had
heard from industry on all three proposed taxes that it was
necessary to tax all three industries instead of one or
two. It was his understanding the governor had spoken with
the airline industry and had addressed landing taxes. He
shared that he had brought up landing tax as an issue when
he chaired the House Transportation Committee due to the
cost to airports. He mentioned people did not believe it
was appropriate to have extra landing fees for bypass mail.
He referred to the state-owned airport in Prudhoe Bay that
had no landing fees and costs were completely covered by
the state. He asked whether that was appropriate. He
relayed that money collected by the Anchorage and Fairbanks
International Airports stayed within their own units;
however, the two airports still had some large expenses. He
believed there were probably still state matches on federal
funding received by the airports for improvements. He
believed the governor had tried his best to craft a plan on
the taxes. He would not be supporting the amendment because
he did not know how it would affect the whole budget
proposal. He did have some issues with the motor fuel tax
related to how it would impact drivers.
3:17:04 PM
Vice-Chair Saddler clarified that motor fuel referred to
gasoline and diesel used on the road for cars and trucks.
Alternatively, aviation gasoline was used in aviation
aircrafts other than jets (i.e. 80 leaded or 100 low-lead).
Aviation fuel other than gasoline was kerosene jet fuel
(i.e. JP-6 and JP-4). He assumed motor fuel used in and on
water crafts was gasoline and diesel.
Representative Gara remarked on the long distance between
places like Alaska and New York, New York and California,
and Hawaii and Florida. He did not believe the change in
jet fuel taxes would have an effect on the industry - when
the state had the lowest fuel taxes in the country. He
continued that jets flew long distances to places with much
higher fuel taxes. He commented on the state's $4 billion
budget deficit. He did not believe the tax would impact
business and had not heard any evidence to the contrary. He
remarked that no one liked taxes, but he challenged others
to come up with an alternative plan to fill the budget
deficit.
Representative Guttenberg understood that international
flights did not pay taxes at airports.
Co-Chair Thompson replied in the affirmative.
Representative Guttenberg wondered if an analysis had been
done breaking out the detail on cost burden to various
types of aircrafts at different airports.
Co-Chair Thompson answered there had been discussions on
the topic throughout the committee process.
Representative Guttenberg surmised the burden fell on
aircrafts besides those on international flights in regards
to how much fuel was used.
3:19:56 PM
Representative Pruitt spoke in favor of the amendment. He
relayed he also had amendments in case the committee felt
the tax was higher than it should be. He discussed that
one-eighth of the Anchorage population was employed at its
international airport. He referred to a recent report
listing Providence Hospital as the state's largest
employer, but it had been the airport the previous year. He
disclosed he had previously worked for FedEx and was a
shareholder. He received the company's reports and relayed
it was buying 777 aircrafts, which would overfly Anchorage.
He provided a scenario of a flight plan with a departure
from Memphis where the air carrier paid the domestic tax.
When the carrier filled up in Anchorage it did not pay a
tax on its way to an international destination.
Alternatively, when the carrier flew from an international
location to Anchorage it would pay the tax on its way to
another domestic city. He was concerned about the company
buying 777 aircrafts intentionally to fly from a location
like China directly to Memphis. He reasoned at that point
it would impact jobs in Anchorage. He asked if the state
was more concerned about making a bit more money in taxes
over the potential job opportunities available in
Anchorage. He was concerned about increasing taxes too
much, too quickly. He continued Anchorage was constantly in
competition with other airports such as Vancouver,
Portland, and Seattle. He had spoken with the commissioner
of the Department of Administration under a previous
administration and they had agreed it was necessary to
market the Anchorage airport appropriately to maintain the
job opportunities. He believed it was important to be
cautious about the effect the tax would have on jobs at one
of the state's largest employers.
Vice-Chair Saddler commented that it would be helpful to
have better analysis about the potential effects of the
taxes. He stated the committee had only heard from the
administration that there was a big deficit and the
proposed taxes were the needed amount. He did not believe
the information provided by the administration was
compelling enough when considering the points made by
Representative Pruitt. He stressed that taxes did influence
corporations and business decisions. He could have
considered the proposal more with additional information
about the "sweet spot" that would not cause damage to the
private sector.
3:23:58 PM
Co-Chair Thompson asked the Department of Revenue (DOR) to
address the committee. He asked for clarification on
Representative Pruitt's points. He wondered if air carriers
were charged tax when coming from a foreign country on
their way through Anchorage to another U.S. city.
3:24:18 PM
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE (DOR), relayed intent to provide the
statutory language.
KEN ALPER, DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE,
stated the topic was awkwardly within the definition of
motor fuel as it was an older law. He read from statute:
Fuel sold in a jet propulsion aircraft, either A) two
foreign countries or that continue from foreign
countries.
Mr. Alper detailed if the same flight was traveling from
China through Anchorage to Memphis it would not be taxable
fuel. He expected for the most part the fuel would not be
taxable in the scenario. He elaborated that roughly 80
percent of the jet fuel sold in Alaska was not taxable. He
specified that roughly 400 million gallons per year of non-
taxed jet fuel was sold in Alaska versus slightly over 100
million gallons of tax-on fuel.
3:25:32 PM
Vice-Chair Saddler asked if the same exemptions from
foreign flights applied to federal fuel taxes.
Mr. Alper responded that he did not know the nature of the
federal taxation. The state government had certain
restrictions (federal constitutional issues) from taxing
international trade. He did not know if the U.S. government
had a similar restriction.
Vice-Chair Saddler added that the issue was moot at the
current point.
3:26:16 PM
Representative Gattis shared that her husband was a retired
FedEx captain. She remarked on knowing how much fuel a
FedEx flight used on trips from Asia through Anchorage and
other locations. She thought the issue may play into the
reason FedEx had not been involved. She surmised that maybe
the company knew it was not paying - she had not been able
to get the company involved and had not received any
response. She added that it was not the first time the
conversation had occurred. She had not received contact
from anyone with FedEx. She had been a proponent of the
amendment, but thought it may be moot after learning more.
Representative Pruitt remarked that the committee had heard
concerns from UPS. He surmised the bill would adversely
impact the company in some capacity. He discussed in the
past there had been a flight from Taiwan to Anchorage to
New York. He detailed that when UPS and FedEx flights
landed in Anchorage there was a complete turnover that
occurred. He continued that UPS and FedEx were under
totally separate rules in certain instances. He elaborated
that UPS was under the Railroad Act, but it did not apply
to FedEx, which was largely a union issue.
Co-Chair Thompson added that UPS flew partial plane loads
from Seattle to Fairbanks to Seattle. He surmised the
company would pay the tax under that situation because the
flights were not international.
Representative Gattis suspected that FedEx and UPS had
flights from Seattle to Anchorage and back. She thought it
may be the 20 percent or smaller portion.
Representative Wilson stated the amendment related to that
two airports [Fairbanks and Anchorage international
airports] that already paid their way. She did not support
doubling the fuel tax on the specific airports. She read
from a prepared statement.
It is reported by several air carriers that jet fuel
at Anchorage is already five to ten cents more
expensive on average than our West Coast competitors.
Other airports compete for Alaska's business but they
have only been successful when offering strong
incentive packages. These incentives have a limited
duration and have had a relatively minor effect on
drawing business away from Alaska.
Representative Wilson referred to a question about taxes in
other locations. She shared that the tax in the State of
Washington was 0.04 - the proposed tax would exceed the tax
in Washington. She stressed they were not talking about
California or New York and noted Washington was not far
away. She referenced the state's deficit. She emphasized
the two airports were paying their way. She did not support
asking them for more money when the increase did not focus
on looking at the fact that other airports were not paying
their way. She was fine the airports were not paying
landing fees and she thought it was great they wanted
higher jet fuel. However, the bill would hit the state's
international airports with an increase to 6.5 cents. She
detailed to fill a 747 in Anchorage would cost $1,584 [in
taxes], which was twice the current amount. She stressed
the bill would double the costs for airports that were
paying their way. She remarked she may be off on her math
and noted shaking heads in the room. She had verified that
no state funding was provided to the international
airports. She remarked on fees, leases, and taxes on
airports. She did not support increasing costs for the two
airports to pick up the slack for other airports.
Co-Chair Thompson recognized Representatives Liz Vazquez,
Sam Kito, and Louise Stutes in the committee room.
Representative Wilson clarified the $1,584 she had
mentioned was how much the tax on fuel [for a 747] would be
under the legislation.
Co-Chair Thompson MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gattis, Munoz, Pruitt, Saddler, Wilson, Neuman
OPPOSED: Edgmon, Gara, Guttenberg, Kawasaki, Thompson
The MOTION to Adopt Amendment 1 PASSED (6/5). There being
NO further OBJECTION, Amendment 1 was ADOPTED.
Representative Pruitt WITHDREW Amendments 2 and Amendment 3
(copy on file).
3:34:23 PM
AT EASE
3:37:41 PM
RECONVENED
Representative Guttenberg WITHDREW Amendment 4 (copy on
file).
3:38:14 PM
Representative Gara MOVED to ADOPT Amendment 5 (copy on
file). [Note: due to the length of the amendment it is not
included in the minutes. See copy on file for detail.]
Co-Chair Thompson OBJECTED for discussion.
Representative Gara explained that the amendment was similar
to amendments discussed in other committees. Under the
amendment when the price of oil was low the price of fuel
would be lower; when the price of oil was high the price of
fuel would be higher. He elaborated that the fuel tax
addition in the bill started to disappear when oil prices
were high and the price of fuel was high for consumers and
the state no longer needed the revenue as much. The fuel tax
would remain the same up to $100 per barrel (a price that
high was not included in any near-term forecasts). He
continued that when the state started receiving real oil
revenue, but when consumers started paying very high prices
at the pump, the fuel tax increase of 8 cents would be cut
in half to 4 cents. When the price was above $120 per
barrel, the additional 8 cents would disappear. The
amendment reflected what the state needed in revenue and
what the costs of consumers would be at high prices.
Co-Chair Thompson asked DOR about how it would handle making
adjustments whenever the oil price changed. He did not
believe prices would be as high as those the amendment
addressed for a long time. He remarked that the current
legislators may not have to deal with the issue, but he
surmised someone would have to deal with it in the future.
He asked if the amendment would be workable for the state's
IRIS [Integrated Resource Information System].
Representative Gara stated what he tried to make the issue
workable. The amendment provided a two-month lag for the
department to adjust the tax. For example, if the price of
fuel hit $121 in January the tax could not be changed
because it had already happened; therefore, the fuel
appropriate fuel tax would occur in March.
3:41:50 PM
RANDALL HOFFBECK, COMMISSIONER, DEPARTMENT OF REVENUE,
agreed the amendment was doable, but it would not be easy.
The practicality of having to do the programming necessary
to coordinate two different taxes with a lag of about one
month in which to flip the fuel price on or off when the
price points was possible, but it was outside the scope of
the department's current work.
Co-Chair Thompson spoke to the practicality of the
amendment.
Commissioner Hoffbeck remarked the changes under the
amendment were not practical.
Mr. Alper elaborated that both taxes would have to be
programmed into the system. The calculation would have to be
done by a certain date. He stated that all the motor fuel
tax payers would receive a month-to-month notice showing the
rate; it would be a new system DOR would need to establish.
He stated the work would not be impossible, but it added a
complexity to the current system.
Commissioner Hoffbeck added the department would also have
to notify entities collecting motor fuel tax to flip the
rate back and forth.
Co-Chair Thompson asked if the gasoline stations would have
to send several different returns to the department for
different amounts.
Mr. Alper answered that the distributors filling tanks at
gas stations were generally the taxpayers (not gas stations
directly). When a load was delivered the tax was built in.
Part of the problem was the tax was paid at the end of the
following month after delivery of the gas; therefore, it may
be hard for them to keep their information straight. For
example, a distributor did not know what the price would be
when they delivered a load at the beginning of March and the
tax was paid at the end of April.
Co-Chair Thompson was worried about potential confusion.
3:43:57 PM
Representative Munoz asked if the tax would be remitted
monthly. Mr. Alper replied in the affirmative. The tax was
generally paid at the end of the month for the prior
month's sales. He referred to his previous example.
Representative Gara stated the tax was paid at the end of
the month and the amendment gave the department an extra 30
days to let taxpayers know what the tax would be. He
provided a hypothetical scenario - if the average price of
oil was determined in January, the department had until the
end of February to let payers know what the tax would be.
He wondered why it would be difficult.
Mr. Alper explained the department would have to determine
the actual average price for the month of January and let
taxpayers know by the end of February so that any
deliveries on March 1 would be recalibrated for the higher
or lower tax. Additionally, it would require time to
communicate with the tax payers. With the new system,
communications with the taxpayers were mostly electronic
and could be instantaneous. He stated anything could be
done, but anything that added wrinkles or complexity gave
the department a bit of anxiety.
3:45:35 PM
Representative Gattis relayed that she had many commuters
in her district. She believed the issue was important and
she understood what Representative Gara was trying to do.
She spoke to supporting making the price of fuel less
expensive [for consumers]. She wondered how the department
would suggest setting the structure up. She appreciated the
amendment, but she wondered how the goal could be
accomplished without adding complexity to the system. She
asked if the department would look at the issue quarterly,
every six months, or other. She asked for the department's
recommendation.
Mr. Alper suggested that quarterly taxes would be more
manageable. The department currently adjusted the interest
rate on taxes every quarter and sent out notices. The
department did not forget there was no legal requirement
for the price of fuel to move up and down with the tax
rate. He furthered just because someone may get 8 cents cut
off the tax rate did not mean they would immediately pass
it on to their consumers. He surmised the tendency may be
to leave the rate higher, which would mean a windfall for
the distributor in the months the rates went down. The
customer would not know whether the tax went up or down and
would therefore not be looking for the price of fuel to
increase or decrease.
3:47:23 PM
Representative Gattis believed in the free market. She
remarked some companies would not reduce the price of fuel;
however, she recognized the ones that did reduce the prices
would probably have more customers. She stated every penny
added up after a while. She surmised making a change
quarterly would be more workable than monthly.
Co-Chair Thompson noted Representatives Andy Josephson,
Paul Seaton, and Gabriele LeDoux were in the audience.
Representative Gara disagreed that if the consumers did not
know the price that it did not matter. He explained there
would be competition between suppliers. He asked if a
three-month lag would be better.
Mr. Alper stated that it was not the lag that was the
issue. He explained the amendment could still mean the
potential for 12 adjustments over the course of a year,
which was where a significant portion of the workload would
come from. He deferred the question to a colleague for
further detail.
3:49:23 PM
BRANDON S. SPANOS, DEPUTY DIRECTOR, TAX DIVISION,
DEPARTMENT OF REVENUE, restated his understanding of the
question. He stated that the first concern was about making
changes to the form, system, and online system. He
discussed changes that would be necessary to the form if
there were two different rates. He explained the department
would need to time to notify the public [Note: audio
quality poor]. He stated that quarterly adjustments would
be easier from an administrative standpoint; it would
provide more time to notify the public. He commented on the
ability for people to fill out the forms correctly.
Representative Gara would be happy to work with the
administration to get the amendment language right.
Co-Chair Thompson asked if Representative Gara wanted to
make a conceptual amendment.
Representative Gara was not sure how to make changes to the
amendment to adjust taxes quarterly because it would mean
bulking four months together. He did understand providing a
longer lag-time.
Mr. Alper referred to page 4, lines 3 and 20 of Amendment
5. He suggested the changing the language "the second month
following a month" to "following a quarter." He believed
the change would be sufficient.
Co-Chair Thompson believed the change would apply on page
2, line 4 as well.
Representative Gara agreed.
Mr. Alper reiterated the change would need to be applied to
page 2, lines 4 and 21; and page 4, lines 3 and 20.
Representative Gara MOVED to AMEND proposed Amendment 5.
The conceptual amendment would change the language "the
second month following a month" to "the second month
following a quarter." The change would be applied to page
2, lines 4 and 21; and page 4, lines 3 and 20. The
amendment to Amendment 5 would include any conforming
language necessary.
Representative Wilson OBJECTED.
3:53:36 PM
AT EASE
3:54:08 PM
RECONVENED
Representative Wilson wanted to know how the amendment
would affect the taxpayer. She relayed she had just filed
her sales tax online for her small business. She noted she
collected the tax all month; therefore, the calculations
were not that difficult. She wondered how the change would
work for a gas station with automated systems. She asked if
the change would impact the quarter after it occurred. She
remarked that some places had sophisticated systems and
others did not.
Mr. Alper stated that the taxpayer was the distributor that
brought gas to stations. He provided a scenario of how the
system would work: for the first quarter the calculation
would be done sometime during the month of April. The
second month meant that on May 1 the gas station would
receive a delivery at the new tax rate (the distributor was
responsible for paying the tax). He furthered the new tax
would be built into the price the gas station was paying.
He understood the gas station business adjusted its rates
whenever receiving a new delivery. The change in the market
price and tax for the fuel would be baked into the delivery
price.
Co-Chair Thompson asked for verification the gas station
did not pay the tax to the state and that the distributor
was responsible for paying the tax. Mr. Alper agreed.
Representative Wilson WITHREW her OBJECTION.
Vice-Chair Saddler OBJECTED for discussion. He referred to
page 2, line 21. He wondered if the proposed amendment to
Amendment 5 would properly indicate the tax would proceed
indefinitely after the conditions were met or only for the
one 30 or 31-day period after the quarter.
Mr. Alper stated that it was an awkwardness that would
hopefully be resolved through conforming amendments. He
detailed the intent that the tax rate would change
quarterly and remain in effect until the next change was
triggered, was on the record. The department would make
adjustments in the regulatory process if the actual bill
language did not properly clarify the issue.
3:57:43 PM
Vice-Chair Saddler added that the amendment sponsor had
indicated any necessary conforming language could be made
at a later time. He WITHDREW his OBJECTION.
There being NO OBJECTION, conceptual amendment to Amendment
5 was ADOPTED.
Co-Chair Neuman referred to lines 14 through 20 on page 2
of Amendment 5 related to alcohol and blended fuels. He
asked if the language was included in the original bill.
Co-Chair Thompson believed it was page 3, line 4.
Representative Gara relayed he had asked Legislative Legal
Services to change only the motor fuel tax and not the
aviation, marine, or fuel blended with alcohol tax.
Co-Chair Neuman asked for verification that all the other
taxes would remain the same.
Representative Gara answered the amendment did not intend
to effect any of the other forms of fuel.
Co-Chair Thompson WITHDREW his OBJECTION to the amended
Amendment 5. There being NO further OBJECTION, Amendment 5
as amended was ADOPTED.
Representative Gara remarked that the motor fuel tax issue
had been addressed the last time a major fiscal crisis
occurred (before he was in the legislature). He had
conceived the idea for the amendment at that time. He
appreciated members' support.
Co-Chair Thompson planned to bring the bills before the
committee the following day to try to report them out of
committee.
HB 4003 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 4005
"An Act relating to the mining license tax; relating
to the exploration incentive credit; relating to
mining license application, renewal, and fees; and
providing for an effective date."
4:00:27 PM
Co-Chair Thompson noted there had initially been an
Amendment 1, but he had determined it to be out of order
due to ongoing litigation.
Representative Wilson MOVED to ADOPT Amendment 2, 29-
GH2457\A.5 (Glover/Nauman, 5/28/16) (copy on file):
Page 4, line 1:
Delete "2"
Insert "8"
Co-Chair Thompson OBJECTED for discussion.
4:01:16 PM
AT EASE
4:01:51 PM
RECONVENED
Representative Wilson explained Amendment 2. She discussed
the committee had heard plenty of testimony from the mining
community, which was willing to do its part, but felt a 29
percent increase in taxes was too high. The amendment would
decrease the 9 percent back to the 8 percent multiple
committees had discussed. She remarked the increase would
still not be a good thing and its impact was unknown. She
hoped reducing the number to 8 percent would have a reduced
impact on the community. She believed everyone needed to
take part in making sure they were paying for what was going
forward.
Co-Chair Thompson remarked that "dueling amendments" had
been submitted - one would increase the tax and the other
would reduce it.
Vice-Chair Saddler relayed that he had previously chaired
the House Resources Committee. He knew mining provided
numerous benefits to rural Alaska including jobs,
infrastructure, income, tax-base, a way to keep people
anchored to their lands, and other. He was concerned he had
not seen analysis of what the governor's proposed 9 percent
tax would do to the benefits of mining in rural Alaska. In
absence of the analysis he could not help but be cautious,
which meant supporting the amendment.
Representative Gara spoke in opposition to the amendment. He
stated that at some none of the bills under discussion would
be worth passing. Currently there was a profits-based mining
tax that had not been changed in approximately 60 years.
Companies were given exploration credits to help develop a
mine. Additionally, taxes only came in when profits were
made. Lastly, the tax only applied to income levels above
$100,000 per year. He discussed that at profits above
$100,000 to roll back $3.5 million in tax revenue that was
needed in a state with a $3.2 billion to $3.7 billion
deficit. He continued that every time someone said no to a
tax on a profitable industry the money would have to come
from somewhere else. He reasoned if it was in the budget the
money had to come from somewhere - at times it had come from
schools, the university, municipal revenue sharing, seniors,
or other. He stated the money would have to come from
somewhere if it they did not determine a way to raise it.
Alternatively, there were other revenue raising options,
which would need to be increased (e.g. a larger Permanent
Fund Dividend cut or a larger income tax). At higher profits
he believed it was fair to adjust the tax. He furthered that
companies were coming to Alaska for its valuable ore. He
reiterated the tax only applied if a business was making
over $100,000 in profits.
4:06:45 PM
Co-Chair Neuman did not believe the state paid mining
companies. He detailed there was a "tax holiday" for the
first two or three years on new mines.
Vice-Chair Saddler stated that in the mining industry he did
not believe $100,000 in profits was substantial relative to
the investment. He referenced various types of capital
investment mining companies made in order to operate. He
referred to much discussion about the need to diversify the
state's economy away from mining and gas. He reasoned mining
was a way to increase diversification. He believed the state
needed to do what it could to support the mining industry in
Alaska and not use it as a "cash cow." He elaborated mining
already provided benefits to the state well in excess of the
amount the state spent to regulate it. He did not believe it
was the proper place to try to get revenue.
4:08:07 PM
Representative Edgmon spoke against the amendment. He stated
that if there was ad hoc feel to all of the taxes, all of
the criticism the legislature directed at the administration
for bringing them forward with not enough analysis, he could
equally say there was an ad hoc feel to the amendments being
offered. He discussed the net taxable income in 2014 for the
six major mines paying 95 percent of the mining taxes was
$570 million in total. He reasoned the proposed 9 percent
tax would be $7 million - when divided amongst 6 major
multi-national companies was not a significant amount of
money. Additionally, the companies were able to deduct the
state taxes from federal taxes; therefore, they were able to
further reduce the $7 million. He addressed the amendment
which would reduce the tax from 9 percent to 8 percent,
which left him questioning why the committee was "messing
around with the tax in the first place." He stated if every
tax the state levied was going to be counter to industry
investing in Alaska, it should not be levying any increases
on the resource-based companies. He reiterated many of the
companies were very large. He furthered that as much as his
enthusiasm for the previous version of taxes had been
dampened (if it ever had been called enthusiasm), he was
uncertain he could support the measures if the committee
kept chipping away at all of the proposed taxes. He
explained the impact of the proposed taxes would go from
marginal to negligible. He wondered what the committee was
doing messing around with the taxes for the amount of
political dust the issues were kicking up. He referred to
discussion about the cause and effect relationship between
the original taxes the governor had proposed. When the
committee decided whether it would report the bills out of
committee he would have to look at the issue from an equity
standpoint. He currently did not see it. He did not believe
there was an analysis to support the amendment, which he
believed undermined the whole intentions in the first place.
4:11:20 PM
Representative Munoz supported the amendment for a number
of reasons. One of her concerns that during the
administration's presentation on the bill comparisons had
been made with other states, but the states did not have
similar hard rock mining operations. She detailed Arizona,
Nevada, and Alaska, had similar operations and Alaska was
the highest taxing jurisdiction. She discussed that Juneau
had two of Alaska's large mines - the Kensington Mine had
taken over 20 years to begin operation. She continued that
mining was a capital intensive industry and added hundreds
of jobs to the state's economy. She believed additional
analysis was necessary on what a tax increase from 7 percent
to 9 percent would do.
4:12:43 PM
Representative Guttenberg spoke in opposition to the
amendment. He reported that based on information in the
committee packet, the tax had not changed since 1955. He
stated it was possible to say it was a 25 percent increase,
but it was also a 2 percent increase. In 2014 there were
only 14 taxpayers in the bracket (5 of which were the very
large mines and the remaining 9 were small and very
profitable). He reasoned the tax was profit-based, which
companies only paid when profitable. He furthered "mom and
pop" companies would only pay an annual license fee if their
company earned less than $100,000. He thought increasing the
tax by 1 percent after 55 years would do nothing at all. He
reasoned that some of the mines were very profitable and he
believed it was completely appropriate to implement a 2
percent increase.
Representative Wilson countered that it was not a 2 percent
tax, but a 29 percent increase. She addressed the state cut.
She had asked the Fort Knox mine (in her district) what it
paid; the mine had paid $7.6 million to the borough and over
$47 million in revenue over the past 10 years - it was the
largest property tax payer in the borough. Additionally, the
mine had paid $17.1 million in taxes and fees to the state
in 2014; $7.3 million in mining license taxes (which
accounted for 31 percent of the mining license tax revenue
collected by the state); $9.8 million in payments to Alaska
Mental Health Trust Authority, the Department of
Environmental Conservation, and others; and in 2016 it would
pay $8.4 million to the borough. She stressed the amounts
were not even part of the discussion.
Co-Chair Thompson asked how much the increase would be if
the bill was implemented.
Representative Wilson answered there would be a 29 percent
increase in taxes if the tax was increased from 7 percent to
9 percent. She read from a prepared statement:
We've heard from the mining industry this increase
would result in deterring new investment in Alaska and
will shorten the lives of existing mines.
Representative Wilson continued that the 8 percent tax
proposal had been vetted in another committee with all the
mines participating. She discussed the legislation would
impact the industry, but the impact was not known because
the legislature had not received a complete analysis. She
stressed that any tax increase would have a detrimental
impact on the mining industry and would place future
investment, jobs, and significant local economic impacts at
risk. She emphasized the issue was about more than the
state, it was about the state's communities. She was
frustrated the committee had not received information about
how much state resources were put in. She believed they were
merely trying to fill the state's coffers with profits made
by the various industries.
Co-Chair Thompson WITHDREW his OBJECTION.
Vice-Chair Saddler asked to be a cosponsor of Amendment 2
and Amendment 3.
4:17:16 PM
AT EASE
4:17:38 PM
RECONVENED
Representative Guttenberg OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Gattis, Munoz, Pruitt, Saddler, Wilson
OPPOSED: Gara, Guttenberg, Kawasaki, Edgmon, Thompson,
Neuman
The MOTION to adopt Amendment 2 FAILED (5/6).
4:18:30 PM
Representative Wilson MOVED to ADOPT Amendment 3, 29-
GH2457\A.6 (Glover/Nauman, 5/28/16) (copy on file):
Page 3, lines 19 - 23:
Delete all material.
Renumber the following bill sections accordingly.
Page 4, lines 13 - 14:
Delete all material.
Reletter the following subsection accordingly.
Page 4, line 15:
Delete "sec. 6"
Insert "sec. 5"
Page 4, line 17:
Delete "sec. 6"
Insert "sec. 5"
Page 4, line 30:
Delete "Section 10"
Insert "Section 9"
Page 4, line 31:
Delete "sec. 11"
Insert "sec. 10"
Co-Chair Thompson OBJECTED for discussion.
Representative Wilson addressed the amendment. She noted a
significant amount had been heard related to the issue. She
read from a prepared statement:
The exemption for new mines is critical as projects
look to recoup their investments as quickly as possible
and work towards positive cash flow. The more mines
that we have open, the faster it will fill our deficit.
Representative Gara asked if the amendment gave companies a
3.5-year tax holiday as opposed to the 2-year tax holiday in
the bill.
Co-Chair Thompson and Representative Wilson answered in the
affirmative.
Representative Gara opposed the amendment. He stressed the
mining tax only applied when profits were made.
Additionally, the state offered tax credits to help
companies pay for exploration and development (operating and
capital costs). Companies received the benefit of state help
during development. He added it was not one of the more
outrageous tax credits the state had on its books.
Co-Chair Thompson asked Representative Gara to clarify what
he meant by state help. He explained it had taken Kensington
Mine 20 years [to begin operations]. He asked if the state
had funded the mine during the entire 20-year period.
Representative Gara answered the state paid an exploration
credit up to $20 million companies could deduct after they
became profitable. The credits could be deducted as long as
it took to earn enough profits to the deductions (companies
could deduct up to half their profits). After the mine began
operations companies were allowed to deduct the costs.
4:21:08 PM
Co-Chair Neuman requested to hear from DOR.
Mr. Burnett deferred the question to Mr. Spanos.
Mr. Spanos asked Co-Chair Neuman to repeat his question.
Co-Chair Neuman asked Mr. Spanos to explain the mining tax
credits. Mr. Spanos answered that mines were given
exploration tax credits of up to $20 million. He detailed
that expenses incurred during exploration could be taken
over a 15 year-period after a mine began production.
Co-Chair Neuman provided a hypothetical situation in which a
mine took 10 years to become operational. He asked for
verification the mine could deduct up to $20 million over
the first 15 years.
Mr. Spanos answered that no matter how long a company took
to incur the costs (such as 20 years) it had 15 years after
production began to take the credit.
Co-Chair Thompson asked how the 2-year or 3.5-year tax
holiday fit into the 15-year credit deduction process.
Mr. Spanos explained that the 3.5-year exemption was
currently in statute. He asked if the question pertained to
how the tax holiday fit with the 15-year credit deduction
period as well.
Co-Chair Thompson replied in the affirmative.
Mr. Spanos believed companies had 15 years of taxes due. He
would have to follow up on the question.
Co-Chair Thompson surmised companies would receive a 3-year
tax holiday followed by a 15-year period during which they
could use their credit deductions. He asked for verification
it was a total of 18 years.
Mr. Spanos replied that he believed it was how the system
worked. He would have to double check, but he believed it
included the first 3.5 years.
Representative Gara asked for verification that currently
larger mines received a 3.5-year tax holiday even if they
were making profits. The amendment would maintain the 3.5-
year tax holiday, whereas the bill would decrease the tax
holiday to a 2-year period. He observed it would not be
possible for a company to deduct credits when it was not
asked to pay a profits tax. He provided an example where a
company started paying for profits in its fourth year of
operation and made $40 million. He asked for verification
the company could take all $20 million in credits in the
first year.
Mr. Spanos replied that the credit was limited to one half
of a company's net income. He referred to the gross profits
tax [Note: audio quality poor].
4:25:57 PM
Representative Gara asked for verification that a company
could use the entire $20 million in deductions during its
first taxable year if it made $40 million in profits. Mr.
Spanos answered in the affirmative.
Representative Gara spoke to his opposition to the
amendment. He stressed that the tax was profits-based;
companies that were not making profits were not taxed.
Additionally, under the legislation the state gave companies
a 2-year tax holiday even when profitable. He believed it
made sense to not tax companies when they were not
profitable. He did not support extending the tax holiday to
3.5 years, which he believed was excessive. He wished he
received the tax holiday on his income taxes. He thought the
2-year period seemed fair to generous. He stated that the
bill raised $7 million and he did not support continuing to
whittle away at the amount. He believed the public would
have a hard time swallowing that individual Alaskans had to
pay for the deficit, while companies received tax holidays.
Vice-Chair Saddler spoke in support of the amendment. He
reasoned that in order to become profitable, it sometimes
took a mineral development company 20 to 30 years. He stated
the presumption a company could open up a mine and begin
making profits within a year was false. He stated it took
many years and significant expense for a company to reach
profitability. He stressed that Alaska was built on mining
and he believed the land underneath the building may be
built on mine tailings [Bill Ray Center, Juneau, Alaska]. He
underscored a mine could last for decades when properly
built with infrastructure investment. He referred to mines
that triggered infrastructure like airports, mills, and
other facilities. He believed it was cost-effective to make
the investment to find more ore (e.g. Red Dog Mine and
others). He opined that shortening the tax holiday was
nonsensical. He furthered that shortening the tax holiday to
a 2-year period would be like penalizing "a child for not
being able to do the work of a grown man." He believed
restoring the tax holiday to the 3.5-year period was
appropriate.
4:30:20 PM
Representative Wilson provided closing remarks on Amendment
3. She read from a prepared statement:
The State of Alaska has very few incentives to track
mining investment to the state and doing away with this
one would tell the industry that we are not open for
business. Investment capital is globally in short
supply and retaining this exemption will help us remain
competitive. If we kill our industry or we have
investors go somewhere else, what truly have we gained?
Representative Wilson wondered what would happen with every
investor who chose to invest in another location besides
Alaska. She referred to questions about why the state did
not lower some costs because investors were going other
places. She stressed the state was rich in resources. She
reasoned that it was necessary to ask why investors were not
coming. She believed the state should be incentivizing
investment. She underscored that the issue was about the
state's long-term future. She believed the discussion should
be about what the state would look like if industry decided
to invest elsewhere. She concluded the state would still
receive profits by maintaining the current 3.5-year tax
holiday. She hoped the state would stay open for business
and would not discourage industry from investing in Alaska.
Co-Chair Thompson MAINTAINED his OBJECTION.
A roll call vote was taken on the motion to adopt Amendment
3.
IN FAVOR: Munoz, Saddler, Wilson
OPPOSED: Gara, Guttenberg, Kawasaki, Edgmon, Thompson,
Neuman, Pruitt
Representative Gattis was absent from the vote.
The MOTION to adopt Amendment 3 FAILED (3/7). [Note: The
committee later rescinded action on Amendment 3 and re-
voted; the amendment passed at that time. See approximately
5:14 p.m. for detail.]
4:33:17 PM
AT EASE
4:46:05 PM
RECONVENED
Representative Gara MOVED to ADOPT Amendment 4, 29-
GH2457\A.l (Martin/Nauman, 5/27/16) (copy on file):
Page 3, lines 21 - 23:
Delete "All new mining operations are exempt from the
tax levied by this chapter for two [THREE AND ONE-HALF]
years after production begins"
Insert "A new mining operation with a net income under
(c) of this section of
(1) not more than $100,000 is exempt from the tax
levied by this chapter for two years after
production begins;
(2) more than $100,000 shall pay half of the
license tax on mining provided in (c) of this
section for two [ALL NEW MINING OPERATIONS ARE
EXEMPT FROM THE TAX LEVIED BY THIS CHAPTER FOR
THREE and ONE-HALF] years after production begins"
Co-Chair Thompson OBJECTED for discussion.
Representative Gara explained the amendment. He addressed
that the mining tax was profits-based. He did not believe
anyone wanted to increase taxes on small "mom and pop"
mining operations. The amendment would maintain the 2-year
tax holiday for businesses making less than $100,000 in
profits per year. While businesses making over $100,000
would only pay half the tax rate during the first two years.
He thought the state should receive some revenue when
companies were profitable. He believed the proposed tax rate
in the bill was around 9 percent; the amendment would reduce
the tax to around 4.5 percent for profitable companies
earning over $100,000 per year.
4:49:02 PM
Co-Chair Thompson MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Guttenberg, Kawasaki, Gara
OPPOSED: Munoz, Pruitt, Saddler, Wilson, Edgmon, Gattis,
Neuman, Thompson
The MOTION to adopt Amendment 4 FAILED (3/8).
4:49:52 PM
Representative Kawasaki MOVED to ADOPT Amendment 5, 29-
GH2457\A.3 (Martin/Nauman, 5/27/16) (copy on file):
Page 3, line 24, through page 4, line 1:
Delete all material and insert:
"*Sec. 6. AS 43.65.0lO(c) is repealed and reenacted to
read:
(c) The license tax on mining is imposed on the net
income of the taxpayer from the property in the state,
computed with allowable depletion, plus royalty
received in connection with mining property in the
state. The tax rates applicable to the amount of a
taxpayer's net income are as follows:
· over $100,000 and not over $250,000: five percent
· over $250,000 and not over $500,000: $7,500 plus
seven percent of the excess over $250,000
· over $500,000 and not over $1,000,000: $25,000
plus nine percent of the excess over $500,000
· over $1,000,000: $70,000 plus 11 percent of the
excess over $1,000,000."
Page 4, line 15:
Delete "amended"
Insert "repealed and reenacted"
Co-Chair Thompson OBJECTED for discussion.
Representative Kawasaki explained that the amendment sought
to change the brackets [related to the tax rates applicable
to the amount of a taxpayer's net income]. He detailed the
brackets had been established during territorial days (prior
to statehood) in 1955 as a way to fairly distribute the
burden on mining operations within Alaska. He referenced
Section 6, page 3 of the legislation, which showed the
original brackets still in statute. He specified that mining
companies earning less than $40,000 in profits did not pay a
license tax. Mines making between $50,000 and $100,000 paid
an assessment of 5 percent and $1,500. He noted the next
bracket was for companies earning over $100,000. He
reiterated that the brackets had been in place for 60 years.
Representative Kawasaki furthered amendment was an attempt
to make the brackets fair by adjusting for inflation. The
amendment would exempt small mining companies earning below
$100,000. The first bracket would apply to companies earning
between $100,000 and $250,000; the second bracket applied to
companies earning over $250,000 to $500,000; the third
bracket applied to companies earning over $500,000 to
$1,000,000; and the fourth bracket applied to companies
earning $1,000,000 and above. There were roughly two or
three mines within each of the first three brackets (the
exact number was unknown due to taxpayer confidentiality)
and there were 5 mines making over $1,000,000. He believed
the amendment was very fair; it removed the unfair burden
off small miners and addressed the issue of inflation.
4:52:42 PM
Co-Chair Thompson MAINTAINED his OBJECTION to Amendment 5.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki
OPPOSED: Munoz, Pruitt, Saddler, Wilson, Edgmon, Gattis,
Thompson, Neuman
The MOTION to adopt Amendment 5 FAILED (3/8).
Representative Gara MOVED to ADOPT Amendment 6, 29-
GH2457\A.2 (Martin/Nauman, 5/27/16) (copy on file):
Page 3, line 31, following "$100,000":
Insert "and not over $250,000"
Page 4, line 1, following "$100,000":
Insert new material to read:
· over $250,000: $6,000 plus 11 percent of the
excess over $250,000
Co-Chair Thompson OBJECTED for discussion.
Representative Gara explained the amendment that applied to
companies earning over $250,000 per year. He stated it was
the kind of money most Alaskans would never see in any year
of their lives. The amendment would increase the profits tax
rate from 9 percent to 11 percent for companies earning over
$250,000. He detailed that the $7 million in projected
revenue in DOR's fiscal note primarily came from the large
mines making above $250,000 per year. The amendment was
likely to raise around $7 million. He noted his business tax
for the restaurant he owned appeared in his income tax; he
paid a 25 percent tax. He continued a company coming to
Alaska to explore for minerals would do so with the
exploration credit provided by the state. He did not believe
increasing the number to 11 percent would change a company's
decision to invest in Alaska if they were profitable. He
reasoned the company would get to keep the remaining 89 to
91 percent of their profits. He understood the companies
would pay other taxes. He believed the amendment was fair in
the time of a fiscal crisis and also when companies paid
taxes based on profits. He added he would not propose the
amendment on a mining tax if the tax was not profits-based
and was imposed on companies losing money.
4:56:42 PM
Co-Chair Thompson had heard significant discussion during
the current meeting that the mining tax was profits-based.
He had heard statements that it was a gross tax and other
statements that it was a net tax. He asked for
clarification.
Mr. Burnett answered that the mining tax was a tax on the
margin created by a mining operation, which contributed to
the profits of a company. The companies may have other
operations; therefore, the tax was not based on the net
income of the company, but on the net margin remaining after
deducting the costs of mining operation. The tax was based
on the margin because it was not profit until other items
such as corporate overhead were included.
Co-Chair Thompson expressed confusion about the issue. He
elaborated that his business of 35 years paid tax on the net
profit, which deducted his expenses.
Mr. Burnett clarified that the mining tax was based on
profit from mining operations after deducting costs of the
mining operation. He detailed it was different than the
total business profit because a company may have other
businesses; it was a subset of a company's business. He
explained oil and gas taxes were based on cash flow (money
going into and out of a company on an annual basis).
Co-Chair Thompson asked what the tax would be called if a
company had only one mine. Mr. Burnett answered that it
would be a net profits tax. He added the company would pay
other local and corporate income taxes.
Mr. Alper elaborated that if the company that owned the mine
was a corporate tax payer, the state's mining license tax
was a deduction from the formula that went into the state
corporate income tax. He specified the mining license tax
was considered an expense.
4:59:42 PM
Representative Gara asked for clarification on the
department's testimony. He asked for verification the
profits were the profits of an operation, but if parts of
the company related to other business aspects (e.g. a second
mine in Utah) those pieces of the business were not included
in the tax. He surmised the tax aimed to contain the
profitability at the specific mine site in Alaska.
Mr. Burnett answered in the affirmative.
Vice-Chair Saddler asked if the amendment sponsor had any
analysis showing the higher tax bracket would not harm the
mines in that bracket.
Representative Gara replied that logic was the answer. The
amendment only applied to companies making profits exceeding
$250,000 per year. He did not believe a company would leave
Alaska when making over $250,000 because of a 2 percent
change in a profits tax. He believed a company would not go
to the expense of investing in Alaska unless it found the
ore valuable.
Vice-Chair Saddler wondered if there was an analysis on the
percentage of the net proceeds would amount to. He asked if
the logic was based on the idea that it was appropriate to
begin taxing a company when it earned profits slightly over
the breakeven point. He asked whether $250,000 was a large
or small profit for a mining company.
Representative Gara answered that he was trying to avoid
impacting small mining operations on the margins that may go
out of business if taxes were increased. He believed profits
of $250,000 or more represented a significant amount of
money. He thought if a company was making over $250,000 per
year it had the means to contribute to the state's budget
deficit with a slight increase in the tax. Otherwise, the
revenue would have to come from people with less money,
which he was not in favor of.
Vice-Chair Saddler remarked that the scale of costs and
investments required for a large mine in Alaska was
significantly larger than costs for a restaurant in
Anchorage.
5:04:03 PM
AT EASE
5:04:28 PM
RECONVENED
Representative Gara countered that restaurants required a
significant amount of money to run.
Co-Chair Thompson MAINTAINED his OBJECTION to Amendment 6.
A roll call vote was taken on the motion.
IN FAVOR: Kawasaki, Guttenberg, Gara
OPPOSED: Munoz, Pruitt, Saddler, Wilson, Edgmon, Gattis,
Neuman, Thompson
The MOTION to adopt Amendment 6 FAILED (3/8).
5:05:25 PM
Co-Chair Thompson MOVED to ADOPT Amendment 7 29-GH2457\A.4
(Martin/Nauman, 5/28/16) (copy on file):
Page 1, line 1, following "credit":
Insert "and royalty payments"
Page 3, following line 18:
Insert a new bill section to read:
"*Sec. 5. AS 38.05.150(d) is amended to read:
(d) For the privilege of mining or extracting the coal
in the land covered by the lease, the lessee
(1) shall pay to the state the royalties specified
in the lease; the royalties shall be fixed before
offering the lease, and shall be effective for a
period of not more than 20 years; the royalties
shall be not less than five cents a ton of 2,000
pounds; [THE ROYALTY PAYMENT IS SUBJECT TO THE
EXPLORATION INCENTIVE CREDIT AUTHORIZED BY AS
27.30;]
(2) shall also pay an annual rental, payable at
the date of the lease and annually thereafter, on
the land or coal deposits covered by the lease, at
a rate fixed by the commissioner before offering
the lease; the annual rental shall be effective
for a period of not more than 20 years; the annual
rental shall be not less than 25 cents an acre for
the first year of the lease, not less than 50
cents an acre for the second year, third year,
fourth year and fifth year, and not less than $1
an acre for each year thereafter during the
continuance of the lease; the rental for each year
shall be credited against the royalties as they
accrue for that year; each lease shall provide
that the annual rental payment is subject to
adjustment at intervals of not [NO] more than 20
years and adjustments shall be based on the
current rates for properties similarly situated."
Renumber the following bill sections accordingly.
Page 4, following line 5:
Insert a new bill section to read:
"*Sec. 9. AS 27.30.080 and AS 38.05.212(b)(2) are
repealed."
Renumber the following bill sections accordingly.
Page 4, line 10:
Delete "and"
Page 4, line 11, following "Act,":
Insert "AS 38.05.150(d), as amended by sec. 5 of this
Act, and the repeal of AS 27.30.080 and AS
28.05.212(b)(2) by sec. 9 of this Act,"
Page 4, line 13:
Delete "sec. 5"
Insert "sec. 6"
Page 4, line 14:
Delete "sec. 5"
Insert "sec. 6"
Page 4, line 15:
Delete "sec. 6"
Insert "sec. 7"
Page 4, line 17:
Delete "sec. 6"
Insert "sec. 7"
Page 4, line 30:
Delete "Section 10"
Insert "Section 12"
Page 4, line 31:
Delete "sec. 11"
Insert "sec. 13"
Representative Gara OBJECTED.
Co-Chair Thompson explained that the amendment included
necessary conforming changes identified by the Department
of Labor and Workforce Development. He detailed that AS
27.30.080 should have been repealed because the statute
provided that the amount due to the Permanent Fund was to
be calculated prior to the application of the credit. The
changes in the committee substitute (CS) provided that the
credit was no longer applicable against royalty payments.
He continued the statute was now inapplicable that the
credit could only be applied to tax since only royalty
payments went to the Permanent Fund. He continued that the
royalty payment subject to the exploration incentive credit
authorized under AS 27.30 needed to be deleted from AS
38.05.150(d)(1). Lastly, AS 38.05.212(b)(2) needed to be
repealed. He asked members if they wanted to hear from the
administration.
Representative Gara requested to hear from the
administration.
Mr. Alper affirmed that Co-Chair Thompson's explanation was
accurate. He discussed that the exploration credits could
be used to offset the tax, but under current law the
credits could also be used to offset royalties. He
specified most mines did not pay royalties to the state -
mines only paid royalties to the state if they were
operating on state land (just like with oil and gas). Under
the specific circumstance a mine could use any of the
exploration credits to offset their royalties as well.
During the regular legislative session there had been an
amendment in the House Resources Committee that made the
change. He explained the change had been in a standalone
bill - the idea the tax credit could no longer be used
against royalties. He explained DOR's attorneys had
realized there were a couple of loose ends, which were
addressed in the amendment. The amendment cleaned up
statutory references to the credits and how they interacted
with royalties, which maintained the underlying idea that
it should not be possible to use the credits against
royalty.
Representative Wilson pointed to AS 27.30.080, which
addressed that amounts due to the Permanent Fund under AS
37.13.010 were to be calculated before the application of a
credit extended. She wondered what the amendment had to do
with the Permanent Fund.
Mr. Alper answered that the Permanent Fund received 25
percent of the royalties for all minerals. He provided a
scenario where the state received a royalty from a mine. He
explained that if the mine used a credit it needed to be
subtracted prior to the calculation of the share that would
go to the Permanent Fund. He clarified the section was no
longer necessary because the credit was being eliminated.
Representative Wilson asked how the amendment would impact
the Permanent Fund.
Mr. Alper replied with an example. He hypothesized if the
state was receiving $1,000 in royalties from a small mine
on state land, $250 would go to the Permanent Fund. If the
company used an exploration credit that was used to offset
its taxes and half its royalty (bringing the royalty down
to $500), under current statute the company could pay one-
quarter of the $500, which would mean only $125 would go to
the Permanent Fund [Note: Mr. Alper subsequently clarified
his explanation was incorrect]. The amendment would mean a
company would no longer have the ability to subtract a
credit from the royalty and would therefore have to pay the
percentage of the full $1,000; therefore, the Permanent
Fund would receive the full $250. He added if anything, the
change would slightly increase the money going into the
Permanent Fund principal, but in many circumstances there
would be no impact.
Co-Chair Neuman asked for verification the Permanent Fund
would receive payments before credits were taken off of any
taxes due.
Mr. Alper asked Representative Wilson to reread the
statutory reference she had provided.
Representative Wilson read from statute:
AS 27.30.080. Relationship to Other Funds.
Amounts due the permanent fund under AS 37.13.010
shall be calculated before the application of a credit
extended under this chapter.
Mr. Alper replied to the question by Co-Chair Neuman. He
explained the Permanent Fund received its money first. He
detailed that under current law, the Permanent Fund
received the 25 percent of the total regardless. He noted
his prior example was incorrect. The amendment made a
conforming change because there was no longer a
circumstance in which there would be a credit to subtract
from the royalty.
5:11:52 PM
Co-Chair Neuman recapped that the Permanent Fund received
its share of the royalty first under current statute. He
asked for verification that any credits were applied after
the Permanent Fund received its share.
Mr. Alper answered in the affirmative.
Representative Gara WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 7 was ADOPTED.
Representative Pruitt MOVED to RESCIND the committee's
action on Amendment 3. He requested a revote. He relayed he
had been absent for the discussion on the amendment and had
been confused about which amendment the committee was
addressing when he voted earlier.
Co-Chair Neuman asked members to be present during the
meeting. He stated that if a person missed the vote they
missed the vote.
Co-Chair Thompson addressed Amendment 3 that would remove
the governor's proposal to reduce the existing 3.5-year tax
holiday to 2 years.
A roll call vote was taken on the motion.
IN FAVOR: Munoz, Pruitt, Saddler, Wilson, Gattis, Thompson
OPPOSED: Edgmon, Gara, Guttenberg, Kawasaki, Neuman
The MOTION to adopt Amendment 3 PASSED (6/5). There being
NO further OBJECTION, Amendment 3 was ADOPTED.
Representative Wilson understood that Amendment 1 had not
been heard because it had been deemed out of place. She
understood there was currently a lawsuit related to
severance tax, but she hoped that the issue could be
considered at another time. She believed it was a major
issue that could impact mines throughout the state.
Co-Chair Thompson hoped the issue would be settled in the
coming year so the committee could address it during the
next session.
Representative Gara remarked that one committee member had
been missing and upon his return the vote had changed by
two votes. He was [somewhat facetiously] tempted to ask for
a revote on his amendments.
HB 4005 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 4006
"An Act relating to the fisheries business tax and
fishery resource landing tax; removing the minimum and
maximum restrictions on the annual base fee for the
reissuance or renewal of an entry permit or an
interim-use permit; relating to refunds of the
fisheries business tax and the fishery resource
landing tax to local governments; and providing for an
effective date."
5:16:30 PM
Representative Wilson MOVED to ADOPT Amendment 1, 29-
GH2460\A.3 (Glover/Nauman, 5/28/16) (copy on file):
Page l, lines 1 - 2:
Delete "removing the minimum and maximum restrictions
on"
Insert "relating to the calculation of'
Page 1, line 7, through page 2, line 3:
Delete all material and insert:
"*Section 1. AS 16.43.160(c) is amended to read:
(c) The annual base fee for issuance or renewal of an
entry permit or an interim-use permit shall be
established under this subsection [MAY NOT BE LESS
THAN $30 OR MORE THAN $3,000. THE ANNUAL BASE FEE MUST
REASONABLY REFLECT THE DIFFERENT RA TES OF ECONOMIC
RETURN FOR DIFFERENT FISHERIES]. In addition to the
annual base fee established by the commission under
this subsection, a nonresident shall pay an annual
nonresident surcharge for the issuance or renewal of
one or more entry permits or interim-use permits. The
commission shall annually determine the annual fee for
the issuance or renewal of an entry permit or interim-
use permit as follows:
(1) the annual base fee for the issuance or renewal of
an entry permit or interim-use permit in a limited
entry fishery is 0.4 percent of the estimated value of
the entry permit, subject to adjustment under (3) of
this subsection; if insufficient data is available to
determine the estimated value of an entry permit or if
no permit sale values have been recorded for the most
recent three years, the calculation of an annual fee
in a limited entry fishery may be calculated as if the
limited entry fishery were an unlimited entry fishery
under (2) of this subsection, subject to adjustments
under (3) of this subsection;
(2) the annual base fee for the issuance or renewal of
an interim-use permit in an unlimited entry fishery is
0.4 percent of the estimated average gross earnings
for each permit in the most recent three years for
which data are available;
(3) the commission may make an adjustment to an annual
base fee if
(A)more than one permit type allows the directed
harvest of the same species with the same gear in
the same area or if one permit allows the
directed harvest of the same species by a
combination of gear in the same area; or
(B) the amounts determined under (1) and (2) of
this subsection would result in an annual base
fee that is not proportional to the rate of
economic return for the fisheries covered by that
permit [THE COMMISSION SHALL ESTABLISH THE ANNUAL
NONRESIDENT SURCHARGE BY REGULATION AT AN AMOUNT
THAT IS AS CLOSE AS IS PRACTICABLE TO THE MAXIMUM
ALLOWED BYLAW]."
Co-Chair Thompson OBJECTED for discussion.
Representative Wilson read from a prepared statement:
The fisheries business tax is paid by Alaska's small
boat fleet -those who work and live in Alaska
communities. The fisheries landing tax is paid by the
Seattle-based trawl fleet.
Representative Wilson believed she was referring to the
incorrect talking points and requested an "at ease."
5:17:11 PM
AT EASE
5:17:29 PM
RECONVENED
Representative Wilson explained Amendment 1. She noted
there had been a $3,000 cap, which had been removed [in the
CS]. However, there was an existing regulation that would
maintain fairness. She asked to hear from the
administration about the difference between the regulation
and the cap. She believed the smaller boats were paying the
full amount because they were underneath the $3,000 cap
when the calculation was done. She furthered the larger
boats were capped at $3,000 and would be paying more. She
remarked it meant the possibility of "millions of dollars
currently not going." She wanted to ensure it was the right
move to make versus an overhaul of the regulations and the
particular section of the fishing tax.
Representative Edgmon asked if the department would address
the committee.
BENJAMIN BROWN, COMMISSIONER, ALASKA COMMERCIAL FISHERIES
ENTRY COMMISSION (CFEC), DEPARTMENT OF FISH AND GAME,
answered the item under discussion was not strictly
speaking a tax; it was a permit renewal fee collected by
CFEC. The fee amount was not set in statute. The statute
required the fee to proportionately reflect the economic
value of the fishery. A regulation adopted by CFEC set the
formula at four-tenths of one percent of either the average
value of a permit or in the case of all interim-use permits
not in limited entry fisheries, four-tenths of one percent
of the average gross earnings in the fishery for the three
years before the fee category was set. The fee cap had been
put into statute (with SB 93 sponsored by former legislator
Senator Ben Stevens) in 2005 when the cap was raised from
$300. At the time, there had been testimony by Cheryl
Sutton that the $300 cap was artificial because the statute
stated the base fee needed to reasonably reflect the
different rates of economic return for different fisheries.
He elaborated the cap resulted in fisheries with a very
high economic return being charged fees that were
disproportionately low. He believed it was fair to say the
statement would apply to the current circumstance related
to the $3,000 cap. He explained it resulted in some
fishermen not paying $7,000 they would otherwise pay.
Mr. Brown elucidated the other side of the argument. He
explained that merely looking at the gross earnings for
three years before did not paint a full picture of how the
fishermen were doing in whether or not they can easily
absorb a $7,000 increase in fees. The current bill dealt
with a permit increase and two different kinds of taxes.
The items were all pieces of a puzzle that inform whether
or not removing the cap would be the fair and equitable
thing to do. The commission would do whatever the wisdom of
the legislature designated. He furthered if the $3,000 cap
was removed the CFEC would charge fishermen more in
accordance with the four-tenths of one percent formula.
Alternatively, if the cap was not removed, CFEC could look
at some of the more nuanced elements of whether or not the
fees were fair and if there was a superior way to calculate
them so it did not unfairly benefit or hinder one category
of fishermen.
BRUCE TWOMLEY, CHAIRMAN, ALASKA COMMERCIAL FISHERIES ENTRY
COMMISSION, DEPARTMENT OF FISH AND GAME, added that there
was a formula for interim-use permits (IUP) in fisheries
not limited by the state. He elaborated they were the only
permits that would be impacted by the removal of the cap.
The function of Section 1 was to ensure all captains were
subject to the same formula.
5:22:16 PM
Representative Gara deduced if four-tenths of one percent
of the value of for a small fishing operation equaled
$3,000, the fisherman would be paying a higher percentage
than someone with a large factory trawler, which also paid
the $3,000 fee. He asked for verification that the factory
trawler would be paying a much smaller percentage of the
value of its vessel than a smaller vessel paying $2,800.
Mr. Twomley answered in the affirmative.
Representative Gara surmised in that instance a person with
a small vessel paid a higher percentage of the value of
their operation. Mr. Twomley replied in the affirmative.
Representative Gara asked for verification that the bill as
written was trying to make the situation equitable so
everyone paid the same percentage.
Mr. Twomley replied the bill would subject all captains in
fisheries not limited by the state to the same formula.
Representative Munoz asked for verification that within a
certain class of boat and fisheries (e.g. vessels between
60 and 90 feet), one vessel could catch significantly more
than another vessel but pay the same fee.
Mr. Twomley answered that the formula was only reflective
of average earnings by permit in the fishery; it did not
attempt to measure capacity. Representative Munoz's
scenario was a possibility, which would require an
analysis. He detailed it was possible some vessels with
lighter capacity paid more in fees than some vessels with
less capacity.
Representative Munoz provided an example of a 55-foot
vessel with a greater capacity than a larger boat in the 60
to 90-foot category. She asked if the change would make it
possible for the smaller boat to pay less than another boat
with a smaller catch.
Mr. Twomley answered that it was possible or the fees may
come out the same depending on the application of the
formula.
Representative Munoz stated that the fee was associated
with the captain. She reasoned some boats had more than one
skipper. She wondered if the fee would be assessed multiple
times for the same operation [if a boat had more than one
captain].
Mr. Twomley answered that the fee applied to captains;
therefore, each captain would pay for the needed IUP.
5:26:16 PM
Representative Edgmon was concerned that the proposed
change would put into statute what CFEC did by regulation.
He worried that it would hinder the commission's ability to
make changes to the regulatory process in the future.
Mr. Twomley replied that it was a fair assessment.
Vice-Chair Saddler summarized his understanding of the
amendment. He believed the amendment would eliminate the
$3,000 cap on the entry permit fee.
Representative Wilson interjected that the cap had already
been removed. The concern was the regulation could be
easily changed without going before the legislature because
the cap had been removed. She agreed the amendment would
tie the commission's hands, which was the purpose.
Co-Chair Thompson confirmed that the CS reflected the
elimination of the $3,000 cap. The amendment would put the
formula in statute.
Representative Edgmon stated that it captured his concern.
He believed the committee was doing things on an ad hoc
basis related to the bills. He had spoken with Mr. Twomley
and he wanted to ensure the committee was taking action
with the proper amount of analysis and foresight. He was
uncertain he could "get there" on the amendment.
Vice-Chair Saddler believed the primary purpose of the
amendment was to set the formula for the fee in statute. He
pointed to page 2, line 6, paragraph 3, which gave CFEC the
ability to adjust the fee under certain circumstances. He
asked for an explanation of the conditions.
Mr. Twomley provided an example related to Southeast crab
fisheries CFEC had limited (i.e. red king, brown king, and
tanner), more often than not in the recent past, the red
king crab fishery had not opened. Under the circumstances,
when a fishery did not open, the permit holder was entitled
to a refund if they had paid the fee. The authority
provided under the aforementioned section would allow the
commission to value the permit at zero during a year in
which the fishery would not open. The ability would avoid
the refund procedure and meant CFEC could yield a fairer
evaluation of the value of a permit combining king and
tanner crab fisheries.
Mr. Brown elaborated that in his 6 years of work with CFEC,
the research staff annually prepared and provided the gross
earnings and average permit values, provided commissioners
with detail on the fee class would be according to the
formula, and pointed out potential anomalies such as the
Southeast king crab fishery. Almost all of the fees were
decided according to the formula - CFEC only deviated from
the formula when there was clear evidence it was necessary.
Based on his experience, any deviation from the formula was
always in the interest of ensuring fishermen were not
unduly burdened by a fee they would not be able to pay.
Vice-Chair Saddler asked if the amendment would make it
more difficult, impossible, or have little impact on the
commission's ability to operate.
Mr. Twomley answered that the amendment accurately captured
the formula portion of CFEC's regulations. As long as the
remainder of the regulations remained in place CFEC could
function.
Mr. Brown referred to consultation with Representative
Wilson when she had prepared the amendment. He shared she
had been concerned about unduly tying the commission's
hands. He explained the commission was already generating
millions of dollars in excess of its operating costs.
Additionally, CFEC had taken a "sizeable hit" in the
current year and was also downsizing. He believed the
concern would come into play if a commission were in a
position to change a regulation and had an incentive to
dramatically increase the revenues. He did not believed
CFEC's structure gave incentive to do that, but he did not
know what the future would hold.
5:32:12 PM
Co-Chair Neuman disputed a statement that regulations could
be easily removed. He stated regulations were hard to
change and required 30 days of public comment. He furthered
that statutes were very difficult to change because it
required going through the legislature. He surmised the
legislature did not know how fees changed and did not know
what was coming in the future. He opposed the amendment
because of that issue. He reasoned every time something was
put in statute it made it much more difficult to make
adjustments. He referred to Mr. Brown's testimony that CFEC
did not expect to have to change regulations for quite some
time and the commission would try to ensure any change did
not unduly burden anyone within the fishing industry. He
asked what process the commission took to change
regulations.
Mr. Twomley answered that CFEC went through a fairly
rigorous process dictated by the Administrative Procedure
Act. The process required notification, public hearings
(some near the Board of Fish) and other. The commission
took the public comment period very seriously and reviewed
it prior to taking action.
Representative Gara thought the maker of the amendment was
trying to reestablish the $3,000 cap; however, he believed
the amendment removed the cap.
Co-Chair Thompson clarified that the cap had been removed
in the CS. The amendment addressed "how to do the brackets"
in statute.
Representative Gara thought the amendment simply removed
the cap, but it actually related to the brackets. He asked
the commission how the amendment would change the bill.
Mr. Brown answered that in addition to removing the $3,000
cap [the CS removed the cap], if the amendment were adopted
it would put the four-tenths of one percent formula into
statute (it was currently only in the department's
regulations); therefore, it would require a future
legislative action to change the formula. The formula could
currently be changed by CFEC at its own discretion in
compliance with the Administrative Procedures Act.
Representative Gara asked for verification the amendment in
no way implemented the cap. He asked for confirmation the
cap had been removed in the bill.
Mr. Brown answered in the affirmative.
Representative Gara asked for a recap of what the amendment
would do.
Representative Wilson explained that when the cap had been
removed there had been concern from fishermen who were fine
with the formula. The commission currently had regulations
in place. Although regulations were not easy to change,
they were easier to change than statute. The fishermen she
had heard from felt more comfortable uplifting the
regulations in place of the cap so the small and large
fishermen would be treated equitably because the formula
would be equal. Currently with the cap removed, it would
still be equal, but would take a different process to
change the formula.
5:37:05 PM
Representative Gara asked if the amendment had any fiscal
impact.
Mr. Brown answered in the negative. The commission would be
able to implement its fee structure with no additional
staff or fiscal impact.
Representative Gara wondered if the amendment would have
any impact on revenue to the state.
Mr. Brown answered that the removal of the fee cap could
yield approximately $2.1 million. Putting the formula in
statute would in theory mean revenue would remain the same
going forward if average gross earnings and permit values
remained the same. If those items changed dramatically and
it became necessary to change the four-tenths of one
percent formula it would have to be done legislatively and
not by regulation. The amendment would not have a big
fiscal impact. The removal of the cap was the item that
would result in a $2.1 million positive fiscal impact.
Representative Gara understood that the formula was based
on the average earnings of a vessel. He asked for detail.
Mr. Twomley answered that it was the average earnings of
the permit in the fishery, which was measured over the most
recent 3-year period. The formula applied to IUPs in
fisheries not limited by the state. The earnings were
averaged, which provided a figure to plug into fee classes.
Representative Gattis asked if the fishermen Representative
Wilson had heard from were from the Bristol Bay region. She
asked if it was a region-specific fishery issue or
encompassed all fisheries.
Representative Wilson replied the concern related to all
fishermen. The amendment was in response to a concern that
once the cap was removed, the amounts may be changed
arbitrarily. She believed some of the fishermen she had
spoken with probably did not know what it took to change a
regulation.
Representative Munoz asked for clarification on fees
associated with permit classes. She asked for verification
that the fee pertained to an entire population of fisherman
in a particular class. Alternatively, she wondered if the
fee was directed to a specific boat operation.
Mr. Twomley answered that the fee was derived from all of
the permits fishing in a given fishery. In some fisheries
the IUPs were sold based on vessel length (there was a
cutoff point). Fees could be different but it was still
traceable in the average.
Representative Munoz stated that her concern about removing
the cap was within the class of fishery a vessel was paying
the same fee, but may have a different total catch, which
varied a great deal in the fee class.
Mr. Twomley answered that the fee was traceable to the
average of all participants.
Mr. Brown elaborated that the way to solve Representative
Munoz's concern was to redefine the interim-use open access
fisheries where some of the vessel length designations that
were part of the gear definition may not reflect current
practices in the fishery. He stated it was a separate issue
from whether or not the fee cap should remain in place. He
understood from the perspective of a fisherman who believed
someone else's fee was going to increase but theirs would
not or vice versa. He reasoned some fishermen would be
happy while others would not be. He agreed the policy
question was important, but it was separate from the fee
cap.
5:42:00 PM
Representative Pruitt relayed he had spoken with several of
his colleagues from coastal communities who had different
thoughts about the issue. He was concerned the amendment
would potentially limit the ability of young people to
captain boats if every captain would have to pay the fee.
He asked if the amendment would prevent CFEC from being
able to address the concern if the bill removed the cap. He
asked what the department had the ability to do under the
current regulation that had not been done and potentially
needed to be done and how the amendment could potentially
CFEC's hands to be able to address the concerns.
Mr. Twomley pointed out that the vessels and IUPs impacted
by removing the fee cap were among some of the largest and
most productive vessels fishing in Alaska. He did not
foresee the issue coming up in those fisheries. He detailed
all of the other fisheries would remain in place as they
currently existed. The amendment only impacted IUPs in
place in fisheries within the $3,000 fee cap (i.e. larger
boats, high seas fisheries, factory trawlers, and
etcetera).
Representative Pruitt shared that one of his colleagues
from a coastal region had highlighted the potential for a
ship under the 60-foot limit to have a larger catch than a
larger vessel, but to not pay the same amount the larger
vessel had to pay. Whether the cap was removed or not, he
believed the issue needed to be addressed. He asked if the
amendment would bind CFEC's hands from fixing something he
believed needed to be addressed.
Mr. Twomley replied it had been said that fishermen were
slow to change, but quick to adapt. He believed
Representative Pruitt's example related to adaptations
where fishermen increased their capacity. He detailed the
phenomenon had existed in Bristol Bay for the life of the
fishery where a 32-foot limit existed, but fishermen found
ways to expand their capacity. It was an issue CFEC would
be happy to look at in any given fishery and could make an
effort to correct an inequity if there was a solution.
Representative Pruitt believed it addressed the concern his
colleague had brought to him about whether or not the cap
was removed or maintained. He addressed the amendment,
which would place the current regulation in statute. He
asked if the amendment limited the department's ability to
address the various aspects of how CFEC assessed the fees.
He wondered if the amendment would bind CFEC's hands to
address the fee structure.
Mr. Twomley replied the fee structure was based on the
average permit earnings in the fishery. Within particular
fisheries sometimes there were divisions between the vessel
lengths. Analyzing the problem presented by Representative
Pruitt would require an analysis of the fishery, which was
possible irrespective of the passage of the amendment.
5:47:23 PM
Representative Edgmon was opposed to the amendment. He
believed the discussion underscored the complexity of the
issue. He liked the direction the sponsor of the amendment
was going, but believed there should be an analysis before
making the change. He did not want to tie the commission's
hands if circumstances changed down the road.
Mr. Brown noted that his term ran through 2019, Mr.
Twomley's term ran through 2018, and the third commissioner
position was currently vacant. He relayed Governor Bill
Walker had recently solicited applications for the vacancy.
He stated "in an uncertain world, that's as much certainty
as we can tell you about what the commission might do if
there's not a statute mandating that there be a four-tenths
of one percent formula." He believed he and Mr. Twomley
were of the mind to address the concerns raised about the
potential for inequities based on fisheries that use vessel
length in their classifications. He stated the issue was
separate from the fee cap and whether or not the four-
tenths of one percent formula was in regulation or statute.
Co-Chair Thompson remarked that they appeared to be looking
for a problem with a solution, but the answer had not yet
been determined.
Representative Wilson provided a wrap up on the amendment.
She explained the amendment aimed to address the concern
that when the cap was removed it may become easier for the
department to increase fees. The amendment maintained
CFEC's current regulation and would put it into statute.
She summarized the amendment would put into statute CFEC's
current regulations for the calculation of the annual base
fee, a renewal and issuance of an entry permit or limited
use permit. With the removal of the statutory cap of a
maximum fee in the current bill, there was a concern that
fees could be raised arbitrarily in the future because the
calculation for the fee was in regulation. She acknowledged
there was a process to change the fee, which would have to
be followed. She detailed the amendment protected smaller
Alaskan fishing operations as well as larger operations and
retained the current fiscal impact of removing the cap,
while ensuring the calculation for the fees remained
consistent with the current regulation and calculation CFEC
approved of. She relayed she had spoken with CFEC about the
amendment. She observed there appeared to be many other
concerns that were unrelated to the regulation.
Co-Chair Thompson MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Wilson
OPPOSED: Pruitt, Saddler, Edgmon, Gara, Gattis, Guttenberg,
Kawasaki, Munoz, Neuman, Thompson
The MOTION to adopt Amendment 1 FAILED (1/10).
5:51:24 PM
Representative Munoz MOVED to ADOPT Amendment 2, 29-
GH2460\A.5 (Martin/Nauman, 5/28/16) (copy on file):
Page 1, lines 1 - 2:
Delete "removing the minimum and maximum restrictions
on the annual base fee for the reissuance"
Insert "relating to the nonresident surcharge for the
issuance"
Page 1, lines 9 - 10:
Delete "[MAY NOT BE LESS THAN $30 OR MORE THAN $3,000.
THE ANNUAL BASE FEE]" Insert "may not be less than $30
or more than $3,000. The annual base fee"
Co-Chair Thompson OBJECTED for discussion.
Representative Munoz explained that Mr. Brown had discussed
the inequities where vessel length was part of the criteria
in establishing permit fees. She detailed the fees followed
the captain or boat skipper. She furthered that many
vessels had multiple skippers; therefore, the removal of
the fee would significantly impact the operations. She
discussed that in a certain vessel length class where the
length was one of the criteria in establishing the fee
(e.g. 60 to 90 feet), there could be a great variation in
the actual catches on the various vessels. The current
formula used an average of the fishery permits within a
specific class; therefore, there was an inherent inequity
in the way the permits were currently calculated. She
believed it was necessary to maintain the cap until there
was a more thorough analysis of the issue and
recommendations on a comprehensive change.
Representative Edgmon mentioned that the House Fisheries
Committee chair was present in the room and had been very
active on the issue [Representative Louise Stutes]. He
asked if the cap was removed whether it would give the
commission the opportunity to begin working on points of
concern raised by House members. He thought it was a valid
point. Alternatively, he asked if the commission would
prefer to have the cap in place with a separate plan to
address the other issues in the following year. He noted
the removal of the cap would mean $2 million to the state
in a time it was looking everywhere for revenue.
Mr. Twomley answered that he did not believe the removal of
the cap would enhance or hinder CFEC's chances to do
something. He detailed it would require analysis and review
of specific cases. He relayed CFEC was neutral on the bill.
Mr. Brown added that HB 4006 had an effective date of
January 1, 2017. He noted the original effective date was
July 1, 2016, which would have been a bad idea because CFEC
fees were assessed on a calendar year basis. He explained
that individuals who did not want to pay a higher fee would
not be happy about it when they received their notices in
the fall. The commission's research staff had been cut from
four positions to two - a hiring freeze had been
implemented and other there were other structural
existential issues affecting the agency; therefore, the
present was not the easiest time for the commission to
commit to doing a full-blown analysis of the issues raised
by November. The removal of the cap was a policy call for
the legislature. The commission would do its best to
address the inequities if the cap was removed or
maintained. He relayed CFEC would do whatever the
legislature directed it to do.
5:56:09 PM
Representative Edgmon asked for verification that CFEC
believed it would not have the ability to achieve the goal
of the amendment at least in the first year the additional
fees may be issued if the cap was removed. Alternatively,
Mr. Brown was telling the committee CFEC would do the best
it could and did not know what the outcome would be.
Mr. Brown answered that if the cap was removed it would not
be difficult for the commission's research staff to
calculate the fees - the exercise would be formulaic.
Alternatively, it would be difficult to do an analysis
quickly on whether or not some skippers paying dramatically
increased fees were being unfairly burdened because of the
removal of the cap. He reiterated implementing the cap
removal would not be difficult. He detailed that the more
challenging research project would be analyzing the effect
of the cap removal on a 6 skipper operation where varying
quotas impacted the ability to pay the increased fee.
Representative Edgmon surmised that CFCE would require a
statutory change in order to do the analysis properly. Mr.
Brown answered in the negative. He explained that the
commission would need certainty about its future and an
ability to hire one or two more researchers to look at each
permit issued in the entry permit fisheries where the fees
would be increasing by $75 to $7,000 in order to determine
how the removal of the cap was impacting the fishermen and
why it was or was not equitable.
Representative Edgmon asked for verification that the
commission could achieve the amendment's action without a
statutory change.
Mr. Brown believed the commission had submitted a fiscal
note for another bill (HB 241) showing there would be zero
cost to the commission if the cap were to be removed. He
stated a simple cap removal was absorbable by the
commission's existing staff resources. Whereas, an
exhaustive analysis on the effect of the cap removal on
fishermen was more of an unknown quantity of work.
Co-Chair Neuman surmised the answer was no.
Representative Edgmon understood that it was a complicated
issue, but he was not getting a clear "yes" or "no" he
needed in order to make a decision. He summarized the
amendment was not needed in order for CFEC to do its
analysis, but an additional research person would be needed
to get the analysis done due to the complexity of the work.
At the same time, there was a significant amount of money
attached to the amendment. He wanted to make sure he
understood what he was voting on. He surmised the issue was
not clear cut.
5:59:53 PM
Co-Chair Neuman saw some fairly simple changes in the tax
structure but now it appeared the community was taking the
opportunity to try to change other pieces of statute that
did not seem to have been vetted in the House Fisheries or
Resources Committees. He could not support something that
the committee did not know about and had not discussed. The
committee had heard CFEC needed to analyze the issue
further. Additionally, he believed CFEC could already take
action under regulation. He reasoned that when amendments
were not fully vetted, mistakes could be made. He was
uncomfortable with the amendment.
Representative Munoz replied that the biggest impact was on
individual fishermen. She thought it was necessary to be
careful in removing the cap due to any inadvertent impact
it could have on Alaskan fisheries operations, specifically
on individual captains. She believed in some cases the
permit fee could go from $3,000 to $6,000 overnight for an
individual skipper. She furthered that many operations
required six skippers over the course of a season. She
agreed with Co-Chair Neuman's comments, but she believed
the removal of the cap rose greater concerns and supported
his comments more than leaving the cap in place.
Co-Chair Neuman stated he did not believe CFEC was ready to
take the action because analysis was needed. Additionally,
he believed the agency could already take the action if it
chose to do so.
Representative Gara noted the CFEC commissioners had
already testified the formula was based on the earnings of
the vessel. He wondered what kind of vessels would pay
above the current $3,000 cap if it was removed.
Mr. Twomley answered that the applicable vessels were large
high sea factory trawlers and crab vessels, which had
substantial earnings.
Representative Gara asked for further explanation on high
sea vessels that were not factory trawlers. Mr. Twomley
answered that he was referring to substantial vessels
capable of functioning in high seas.
Representative Gara surmised captains were not the same on
every boat, but they shared the value of the catch in some
way. Mr. Twomley answered that captains were compensated in
some way by the venture.
Representative Gara stated the cap applied to the captain.
Mr. Twomley affirmed.
Representative Gara provided an example of a factory
trawler with three captains in one year and five captains
the next. He asked if each captain paid the same amount if
the boat had the same costs each year. Alternatively, he
wondered if the cost was proportional and divided among the
number of captains.
Mr. Twomley responded that each captain would pay the same
fee; the fee applied to the IUP, which was a captain's
ticket to operate the vessel. A number of vessels at sea
for long periods had numerous captains.
Representative Gara asked if a captain's share of the fee
decreased when the number of captains on a vessel
increased. Mr. Twomley answered in the negative; the fee
would remain the same for the IUP for each captain.
6:05:15 PM
Representative Munoz asked for verification the captains on
a high sea vessel of 80 feet or more would pay the same as
captains on a 60-foot vessel if it they fell into the same
vessel length category.
Mr. Twomley answered that it could be but was not
necessarily the case. He elaborated there would be an
average based on the vessel length within the vessel
category. He furthered the fee could come out the same, but
could vary; it would depend on the vessel earnings.
Representative Munoz stated there could be a category for
vessels between 60 to 90 feet and CFEC would average out
the earnings within the fishery in the specific vessel
category. Mr. Twomley answered in the affirmative.
Representative Munoz surmised a captain on a larger vessel
over 80 feet would pay the same as a captain on a 60-foot
vessel.
Mr. Twomley replied in the negative. He detailed IUPs were
issued based on vessel size; CFEC averaged per vessel size
category, which would yield a different fee from one vessel
category to another within the same fishery.
Representative Munoz asked for examples of vessel
categories.
Mr. Twomley answered there were vessels over 90 feet,
vessels under 90 feet. He stated there could be a variety.
The categories were based on data and where there were
cutoff points that made sense when categories were
established.
Representative Munoz asked if 60 feet was a cutoff point on
the low end. Mr. Twomley answered yes, in some fisheries.
Representative Munoz asked for verification 90 feet was the
cutoff on the high end within the same category. Mr.
Twomley answered yes, in some fisheries.
Representative Munoz believed captains on a 90-foot and 60-
foot vessels were paying the same fee because it was
averaged over the fishery within the category.
Mr. Twomley replied in the negative. He detailed that
within the vessel categories the fees were based on the
average earnings of the IUPs within the categories.
Mr. Brown clarified that every fishery was defined by a
geographical area that could be statewide and a species,
which could be miscellaneous finfish. He detailed all
skippers fishing statewide waters for miscellaneous finfish
on vessels that were 60 feet applied for the same kind of
IUP. He elaborated that if the next category was for
vessels between 60 to 90 feet, those vessels would all fall
into the same category. He explained the skippers in the
first group would not pay the same amount as the skippers
in the second group; however, people within the second
group may be earning different amounts of money. He
continued that skippers may not even pay their own fee,
which could be paid by whoever owned the boat; it was a
contractual arrangement CFEC was not aware of. The agency
only had visibility into was the average boat's earnings
landed on a specific permit category in the past three
years multiplied by 0.04; the fee was then charged and
capped at $3,000 at present. He expounded that it would be
a hardship for some people and not for others. The fee was
not arbitrary in the sense that someone on a very large
boat was paying the same fee as someone on a very small
boat; it only became an issue at the margins of where the
fishery was defined by vessel length that the disparities
were arising.
6:09:25 PM
Representative Gattis believed the issue should be vetted
through the House Fisheries Committee. She did not believe
the committee could do the necessary due diligence it
should. She was uncomfortable the committee may be breaking
open an issue that was bigger than the committee.
Representative Wilson stated that the governor was
responsible for bringing up the issue. She questioned
whether to keep or discard the cap. She referred to CFEC
testimony that it was easy to do the math if the cap was
removed, but the problem involved needing time and
personnel to do the research to understand the impact of
removing the cap. She noted the information was not
something the committee had received from the
administration. She stressed the topic was being discussed
because it is a tax issue. She stressed the removal of the
cap could mean a person currently paying the cap of $3,000
could pay upwards of $15,000. She observed the difference
was substantial. She surmised a boat may be big enough and
earn enough to pay the amount, but that was not known. The
bill would remove the cap and bring the state $2.1 million
in revenue, but she wondered how many boats could be put
out of business because of that decision. She did not know
the answer. She would vote to maintain the cap to give time
for CFEC to do the research and present the analysis. She
agreed the committee should know the answers prior to
voting on the bill, but she would be fine to set the bill
aside until the following session in order to make the
right decisions based on information that would help the
economy. She did not want to devastate the state's
fisheries. She would vote for the amendment because the
current cap was working. Although smaller vessels were
paying the full amount, she was nervous about what they
could be "doing on the outside" and she could wait one year
to find out.
Co-Chair Thompson MAINTAINED his OBJECTION.
Representative Pruitt expressed frustration with the issue
and believed the legislature had been given half of a
solution. He had heard from colleague who supported
maintaining the cap to fix it later and another colleague
who wanted to remove the cap in order to force the agency
to fix the problem sooner. He wondered if the
administration believed the legislature would be addressing
the issue again the following year. He believed the problem
needed to be fixed. He noted the situation was not a
failure on CFEC's part, but he wanted to know if the agency
could come back the following year with information to help
the legislature address the issue.
Mr. Twomley answered that CFCE could use its best efforts
to try to analyze the problems put forward by the committee
to determine if there was a practicable solution. He
communicated the agency would appreciate hearing from
fishermen experiencing a problem. The agency would hope to
come back with the best information it could generate.
Representative Pruitt stated that he would vote to keep the
cap. He was expecting to have a conversation the following
year where the entire issue was addressed. He reiterated
his frustration with the bill. He surmised it appeared to
be more of a money grab than addressing an equity scenario
within an industry. He wanted a whole picture instead of an
incomplete one.
A roll call vote was taken on the motion.
IN FAVOR: Wilson, Pruitt, Gattis, Munoz, Kawasaki
OPPOSED: Saddler, Edgmon, Gara, Guttenberg, Thompson,
Neuman
The MOTION to adopt Amendment 2 FAILED (5/6).
6:15:49 PM
AT EASE
6:25:42 PM
RECONVENED
Representative Wilson MOVED to ADOPT new Amendment 3, 29-
GH2460\A.4 (Glover/Nauman, 5/28/16) (copy on file):
Page 2, line 8:
Delete "five"
Insert "4.5"
Page 2, line 12:
Delete "four"
Insert "3.5"
Page 2, following line 14:
Insert a new bill section to read:
"*Sec. 3. AS 43.75.015(b) is amended to read:
(b) Instead of the taxes levied by (a) of this
section, a person who processes a developing
commercial fish species is liable for and shall pay a
tax equal to
(1) 3.5 [ONE] percent of the value of the developing
commercial fish species processed by a shore-based
fisheries business during the year; and
(2) six [THREE] percent of the value of the developing
commercial fish species processed by a floating
fisheries business during the year."
Renumber the following bill sections accordingly.
Page 2, line 19:
Delete "one"
Insert "3.5 [ONE]"
Page 2, line 21:
Delete "four"
Insert "3.5"
Page 2, lines 28 - 29:
Delete "The amount of tax revenue equal to one percent
of the value of each fishery taxed under this chapter
shall be deposited into the general fund."
Page 2, line 30, through page 3, line 1:
Delete "and not including the revenue equal to one
percent of the value of each fishery taxed under this
section deposited in the general fund"
Insert "and not including the revenue derived from the
value of each fishery taxed under this chapter
deposited in the general fund as provided in (h) of
this section"
Page 3, following line 11:
Insert a new bill section to read:
"*Sec. 7. AS 43.75.130 is amended by adding a new
subsection to read:
(h) Notwithstanding (a) of this section, the amount of
tax revenue from the following sources in the
following amounts shall be deposited in the general
fund:
(1) one-half percent of the tax revenue collected
under
AS 43.75.015(a)(l) and (2);
(2) one percent of the tax revenue collected under AS
43.75.015(a)(3);
(3) two and one-half percent of the tax revenue
collected under AS 43.75.015(d)(l); and
(4) one-half percent of the tax revenue collected
under
AS 43.75.015(d)(2)."
Renumber the following bill sections accordingly.
Page 3, line 19:
Delete "one"
Insert "five [ONE]"
Page 3, line 21:
Delete "four"
Insert "five"
Page 3, lines 23 - 24:
Delete "The amount of tax revenue equal to one percent
of the value of each fishery taxed under this chapter
shall be deposited into the general fund."
Page 3, lines 25 - 27:
Delete "and not including the revenue equal to one
percent of the value of each fishery taxed under this
section deposited in the general fund"
Insert "and not including the revenue derived from the
value of each fishery taxed under this chapter
deposited in the general fund as provided in m of this
section"
Page 4, lines 12 - 13:
Delete "The amount of tax revenue equal to one percent
of the value of each fishery taxed under this chapter
shall be deposited in the general fund."
Page 4, lines 15 - 16:
Delete "equal to one percent of the value of each
fishery taxed under this section deposited in the
general fund"
Insert "derived from the value of each fishery taxed
under this chapter deposited in the general fund as
provided in (g) of this section"
Page 5, following line 10:
Insert a new bill section to read:
"*Sec. 11. AS 43.77.060 is amended by adding new
subsections to read:
(f) Notwithstanding (a) of this section, the amount of
tax revenue from the following sources in the
following amounts shall be deposited in the general
fund:
(1) four percent of the tax revenue collected under AS
43.77.010(1); and
(2) two percent of the tax revenue collected under AS
43.77.010(2).
(g) Notwithstanding (b) of this section, the amount of
tax revenue from the following sources in the
following amounts shall be deposited in the general
fund:
(1) four percent of the tax revenue collected under AS
43.77.010(1); and
(2) two percent of the tax revenue collected under AS
43.77.010(2)."
Renumber the following bill sections accordingly.
Page 5, line 13, following "AS 43.75.015(a)":
Insert", AS 43.75.015(b),"
Page 5, lines 13 - 14:
Delete "secs. 2 and 3"
Insert "secs. 2 - 4"
Page 5, lines 14 - 15:
Delete "secs. 2 and 3"
Insert "secs. 2 - 4"
Page 5, line 16:
Delete "sec. 6"
Insert "sec. 8"
Page 5, line 17
Delete "sec. 6"
Insert "sec. 8"
Page 5, line 25:
Delete "Section 10"
Insert "Section 13"
Page 5, line 26:
Delete "secs. 11 and 12"
Insert "secs. 14 and 15"
Representative Gattis OBJECTED for discussion.
Representative Wilson read from prepared remarks:
The fisheries business tax is paid by Alaska's small
boat fleet - the gillnetters, trollers, and more, who
live and work in Alaska communities. The fisheries
landing tax is paid by the Seattle-based trawl fleet.
Our tax rates should be equitable to those fishermen
who invest in Alaska. The small boat fleet already
pays into Alaska's economy in more diverse ways than
through taxes. They home port in Alaska's harbors,
live in Alaska communities, hire local crews, and buy
local groceries. The revenue gets recirculated in
Alaska many times over and the economic impact on
Alaska is proportionately far greater. This orients
Alaska's fisheries tax structure in a way that doesn't
penalize small boat fishermen who generally fish clean
with very little Chinook salmon or halibut bycatch.
This is in contrast to the largely Seattle-based trawl
fleet, which has an unfortunate track record of vast
amounts of halibut and king salmon bycatch, which are
caught, killed, and discarded and never able to be
caught by Alaska-based sports and commercial
fishermen.
Co-Chair Thompson clarified that the committee was
addressing the new Amendment 3.
Representative Wilson responded in the affirmative.
Representative Gara supported the amendment. He
communicated he did not care who owned the trawl fleet and
relayed it would be unconstitutional for the state to tax
fishermen from Washington a different tax than fishermen
from Alaska. However, he cared that the trawl fleet had
cost the state significant money in terms of research on
king salmon bycatch and soon halibut bycatch. He detailed
those fisheries were being decimated. He reasoned if the
state had to keep researching the issue it would continue
to cost the state money. He surmised if the issue kept
costing the state money, it needed to have the means to pay
for the research. He wished he could solve the issue
related to bycatch of some of the state's most prized wild
fish and was very troubled by the situation. He reasoned
there was nothing to do about the issue in the current
bill, but the legislature could factor in the knowledge
that continued research was needed to determine how to
limit the bycatch. He referred to page 3, lines 4 through 6
of the amendment and referenced the high seas boats that
fished beyond Alaska's territorial limit and returned to
Alaska to process or transport their fish. He stressed the
boats were costing the state a huge amount of grief and
money. He suggested increasing the number from 4 to 5.5
percent. He stressed the boats were fishing the world's
greatest fishery. He reasoned the boats were not going to
leave because Alaska was one of the last great wild
fisheries in the world. He emphasized the factory trawlers
were contributing greatly to the bycatch problem and
damaging the fisheries. He believed the trawlers should
help contribute to the cost of the damage they were
causing.
6:30:42 PM
Representative Edgmon stated that the numbers in new
Amendment 3 were all over the place. He requested to hear
from DOR. He referred to Representative Gara's comments
related to bycatch. He mentioned federal fisheries bycatch,
the North Pacific Fisheries Management Council, and federal
funds. He was hearing remarks on taxation issues and
management issues, which did not seem to be linked
together.
Mr. Alper summarized Representative Edgmon's question about
the numbers listed in the amendment. He relayed the
administration's intent with the original bill was to
increase tax rates on the fisheries business and landing
taxes by 1 percent. Additionally, the 1 percent was not
subject to the existing 50/50 revenue sharing formula with
municipalities. The 1 percent was intended to go directly
to the state and the remaining amount (the original tax
prior to the proposed tax increase) would be split 50/50
holding municipalities harmless. Amendment 3 changed some
of the increases so the shore-based processers, which were
primarily buying from the small boat fleet in coastal
communities, would receive a smaller tax increase. Whereas,
the large floating processers and the landing tax in
particular received a larger tax increase. The intent was
to shift the tax burden towards those perceived as not
supporting the local economy to the same degree or having a
large amount of bycatch. He explained the changed numbers
in the amendment (some of the increases were 0.5 percent or
2 percent). He detailed if 1 percent went to the state and
the remainder was split, it created some distortion to the
revenue sharing formula. For example, if a 4 percent tax
increased to 5 percent the state would receive 1 percent
and remaining 4 percent was split, municipalities would
still receive the same 2 percent they received prior to the
increase. However, if the tax was raised from 4 percent to
4.5 percent, municipalities would only receive 1.75
percent. He elaborated that while benefiting the fishermen
with a smaller tax increase, it would actually harm the
community. Therefore, changes in new Amendment 3 equalized
the revenue sharing formula by specifying the state's piece
was limited to the amount of the increase (whether it was
0.5 percent, 1 percent, or 2 percent) and the municipality
received half of the remainder, thereby holding
municipalities harmless in the changes made by the
legislation.
Representative Edgmon was trying to assign the numbers to
the proper category. He had voted against all amendments
during the day because the theme had been consistent. He
felt the amendments could not be properly analyzed during
the meeting; therefore he would oppose the amendment.
Representative Gara recalled that several years earlier the
legislature had funded a king salmon study, which had been
in part based on bycatch (from boats outside the state's 3-
mile limit) that was damaging the returns of fish to the
state's streams. The study had been to determine how much
of the issue pertained to certain areas; it had also
included what the state could do to help enhance returns.
There had been some impact, but he did not want to
exaggerate it.
6:36:04 PM
Vice-Chair Saddler agreed with Representative Edgmon that
the question of bycatch was biological, scientific, and
financial and the North Pacific Fishery Management Council
was staffed and funded and scheduled to conduct the
complicated analysis, but the state was not. He did believe
not enough information was available to make an informed
decision; therefore, he was opposed to the amendment.
Co-Chair Thompson expressed confusion. He remarked that the
original Amendment 3 had a big impact on communities. He
discussed the governor's original bill designated 1 percent
of the value of each fishery tax to the General Fund and
increased the taxes by 1 percent on each fishery, which
meant many of the communities did not get the revenue
sharing back. He asked if that was still the case.
Mr. Alper replied that the administration's bill did not
affect the municipalities. For example, under existing law
a 4 percent tax was split 50/50 with municipalities. Under
the original legislation a 4 percent tax increased to 5
percent and the state received the additional 1 percent
increase, while the original 4 percent was split;
therefore, municipalities still received 2 percent, while
the state received 3 percent. The language had been
included in order to exempt the additional 1 percent from
the 50/50 split. The amendment increased taxes on shore-
based fisheries by 0.5 percent and increased floating
fishery taxes by 2 percent, which would go to directly to
the state. He explained the new Amendment 3 maintained the
idea that whatever the tax increase was, the municipalities
would be held harmless and would continue to receive their
current amount.
Representative Gattis WITHDREW her OBJECTION.
Co-Chair Thompson OBJECTED.
Representative Wilson explained that her intent had never
been to take any money away from municipalities - the
situation had been corrected in the new Amendment 3. She
explained there were fishermen who required more state
spending because it was necessary for the state to do
research studies on impacts. She relayed it was one way for
the state to recoup costs from people using state
resources. The amendment would also protect local fishermen
more and charged more to those from out-of-state who were
not investing the same amount into Alaska's economy. The
amendment tried to make the situation more equal. She
stressed the state was paying for the studies.
A roll call vote was taken on the motion.
IN FAVOR: Wilson, Gara, Gattis, Kawasaki, Munoz,
OPPOSED: Edgmon, Guttenberg, Pruitt, Saddler, Neuman,
Thompson
The MOTION to adopt new Amendment 3 FAILED (5/6).
6:41:08 PM
At EASE
6:41:25 PM
RECONVENED
Representative Gara MOVED to ADOPT Amendment 4, 29-
GH2460\A.2 (Glover/Nauman, 5/28/16)(copy on file):
Page 3, line 21:
Delete "four"
Insert "five"
Co-Chair Thompson OBJECTED for discussion. He asked for
verification the amendment was similar to the amendment the
committee had just voted against.
Representative Gara replied in the negative. He explained
that the amendment increased the tax rate from 4 percent to
5 percent.
Co-Chair Thompson noted new Amendment 3 would have done the
same thing.
Representative Gara replied that new Amendment 3 would have
done a number of things. He explained that Amendment 4
would increase the tax on high seas vessels fishing from 4
to 5 percent. He elaborated the large vessels fished beyond
the state's 3-mile limit and returned to Alaska for
processing or to deliver fish. He continued the vessels
(e.g. factory trawlers and other) had the privilege of
fishing some of the most pristine wild fish in the world.
He underscored the state owned the resource in common and
under the constitution it was supposed to receive the
maximum benefit for its commonly owned resources. He
thought that the percentage increase would be fair to
Alaska and reflected the value of the fisheries.
6:43:32 PM
Co-Chair Thompson MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki
OPPOSED: Edgmon, Gattis, Munoz, Pruitt, Saddler, Wilson,
Neuman, Thompson
The MOTION to adopt Amendment 4 FAILED (3/8).
6:44:14 PM
Co-Chair Thompson MOVED to ADOPT Amendment 5, 29-GH2460\A.1
(Martin/Nauman, 5/28/16) (copy on file):
Page 2, lines 1 - 3:
Delete "[AT AN AMOUNT THAT IS AS CLOSE AS IS
PRACTICABLE TO THE MAXIMUM ALLOWED BYLAW]"
Insert "at an amount that is as close as is
practicable to the maximum allowed by law"
Representative Guttenberg OBJECTED for discussion.
Co-Chair Thompson relayed the amendment was conforming
regarding the Carlson case [a class action case filed
against the state in 1984 related to commercial fishing
fees].
Mr. Brown relayed that CFEC strongly supported Amendment 5.
When the commission had seen the original bill, it had
communicated there was no reason to remove language calling
for a nonresident surcharge to be as close as practicable
as law to the maximum amount. He understood Legislative
Legal Services initially thought the language was
superfluous. He continued that Mr. Twomley could speak to
the long history of the Carlson case. He emphasized the
language was not superfluous. The state did not want to
return to undercharging nonresidents any more than it
wanted to be accused of unconstitutionally overcharging
them.
Co-Chair Neuman asked for clarification on the amendment.
He observed the language to be deleted was identical to the
language to be inserted.
Representative Gara had the same question.
Mr. Brown clarified that the current version of the bill
deleted the language. The amendment would reinstate the
language.
Representative Guttenberg WITHDREW his OBJECTION. There
being NO further OBJECTION, Amendment 5 was ADOPTED.
HB 4006 was HEARD and HELD in committee for further
consideration.
Co-Chair Thompson relayed the agenda for the following day.
The meeting was recessed to a call of the chair. [Note: the
meeting never reconvened.]
ADJOURNMENT
6:47:00 PM
The meeting was adjourned at 6:47 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4006 UFA letter.pdf |
HFIN 6/1/2016 3:00:00 PM |
HB4006 |
| HB 4006 New Amendment 4 Gara.pdf |
HFIN 6/1/2016 3:00:00 PM |
HB4006 |
| HB 4006 New Amendment 3 Wilson.pdf |
HFIN 6/1/2016 3:00:00 PM |
HB4006 |