Legislature(2003 - 2004)

05/05/2003 09:02 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     CS FOR HOUSE BILL NO. 90(FIN)                                                                                              
     "An Act relating to a salmon product development tax credit                                                                
     and a salmon utilization tax credit under the Alaska fisheries                                                             
     business tax; and providing for an effective date."                                                                        
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-chair  Wilken  stated  that  this  legislation  is  sponsored  by                                                            
Senator Gary Stevens,  and is endorsed by the Salmon  Task Force. He                                                            
continued  that  this bill  would  provide  tax credits  for  salmon                                                            
product  development  and salmon  utilization,  with  the intent  of                                                            
"encouraging industry  to invest in new value-added  salmon products                                                            
to improve marketability."                                                                                                      
                                                                                                                                
Co-Chair Green  moved for the adoption of SCS CS HB  90, Version 23-                                                            
LS0525\W as the working document.                                                                                               
                                                                                                                                
There being  no objection,  Version "W" was  adopted as the  working                                                            
document.                                                                                                                       
                                                                                                                                
Co-chair Wilken ordered  the bill SET ASIDE until the bill's sponsor                                                            
could present it.                                                                                                               
                                                                                                                                
[HB 90 was re-addressed later in the meeting.]                                                                                  
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 90(FIN)                                                                                              
     "An Act relating to a salmon product development tax credit                                                                
     and a salmon utilization tax credit under the Alaska fisheries                                                             
     business tax; and providing for an effective date."                                                                        
                                                                                                                                
                                                                                                                                
[Note: This bill was heard earlier in the meeting.]                                                                             
                                                                                                                                
SENATOR  GARY STEVENS,  the sponsor  of the bill,  stated that  this                                                            
legislation  would  allow tax  credits  to be  issued  to assist  an                                                            
industry that is "in crisis."  He stated that the Salmon Task Force,                                                            
which is chaired  by Senator Ben Stevens,  has identified  this bill                                                            
as one  of its highest  priorities  because it  would encourage  new                                                            
investments in  the salmon processing industry to  further diversify                                                            
salmon products.                                                                                                                
                                                                                                                                
Senator Bunde  asked how these tax  credits would generate  a return                                                            
on the investment.                                                                                                              
                                                                                                                                
Senator  G. Stevens  responded that  the intent  of the legislation                                                             
would be to raise  the viability of the entire industry  and provide                                                            
more jobs and "keep fishermen"  and "processors active." He reminded                                                            
the Committee  that similar tax credits  were awarded to  the bottom                                                            
fish industry  a few years prior and "proved to be  very effective."                                                            
                                                                                                                                
Senator Bunde  commented that  the goal is  "laudable;" however,  he                                                            
voiced that an  investment of State money should be  rewarded with a                                                            
monetary return to the general fund.                                                                                            
                                                                                                                                
Senator G. Stevens specified  that a vibrant industry would generate                                                            
"more  money going  into  State treasury"  by  means  of the  Salmon                                                            
Fisheries Tax.                                                                                                                  
                                                                                                                                
Senator  B.  Stevens  referred  the Committee  to  a  Department  of                                                            
Revenue Tax  Division spreadsheet  [copy on  file], dated April  24,                                                            
2003 that depicts  the Fisheries Business  Tax revenue generated  by                                                            
the  various fisheries.  He  pointed out  that the  Salmon  industry                                                            
generated $11.2  million in tax during calendar year  2000; however,                                                            
he noted  that  the 2002  calendar year  revenue  decreased to  $5.6                                                            
million.  Therefore, he  stated that  the goal  of this legislation                                                             
would  be to  attract and  encourage  additional  investment in  the                                                            
industry;  and thereby  "increase  the taxable  contribution to  the                                                            
general fund."                                                                                                                  
                                                                                                                                
Co-chair  Wilken   asked  regarding  the  Department   of  Revenue's                                                            
indeterminable fiscal note.                                                                                                     
                                                                                                                                
Senator  Stevens stated  that the  fiscal note  is indeterminate  at                                                            
this time because the number  of processors who might take advantage                                                            
of  the proposed  tax  credit is  unknown.  He estimated  that  this                                                            
legislation  would cost the State  $2.8 million in tax credits  were                                                            
the total amount  of the 2002 Salmon  Fisheries Tax revenue  of $5.6                                                            
million invested by the 84 processors paying that tax.                                                                          
                                                                                                                                
Co-Chair Wilken surmised  therefore that were half of the processors                                                            
to invest in projects, it would cost the State $1.4 million.                                                                    
                                                                                                                                
Senator B. Stevens  clarified that the credit would  depend on which                                                            
processors  invested, as large processors  account for the  majority                                                            
of the total Fisheries Business Tax.                                                                                            
                                                                                                                                
Co-Chair Wilken  asked the Department of Revenue to  further explain                                                            
the fiscal note.                                                                                                                
                                                                                                                                
CHUCK HARLAMERT,  Juneau Section Chief, Tax Division,  Department of                                                            
Revenue,  informed the Committee  "that the  majority of the  tax is                                                            
paid by  a relatively small  group of large  processors." He  stated                                                            
that  the overall  time frame  of the  credit program  would be  six                                                            
years as the  credit incentive would  accumulate based on  the total                                                            
of three  years of  paid taxes with  the amount  being applied  as a                                                            
credit for up to three years.                                                                                                   
                                                                                                                                
Co-Chair Wilken  asked whether the  State's maximum credit  exposure                                                            
would be $1.4  million provided that  42 of the total 84  processors                                                            
invested.                                                                                                                       
                                                                                                                                
Mr.  Harlamert responded  that  the credit  amount  would depend  on                                                            
which  half  invested,  as he  reiterated  that  a small  number  of                                                            
processors  pay the  majority  of the tax.  He explained  that  full                                                            
participation  by a dozen of the larger  processors would  affect up                                                            
to 90 percent of the tax.                                                                                                       
                                                                                                                                
Senator B.  Stevens expressed  that the tax  incentive would  not be                                                            
spread equally as it is  credited based on a participant's Fisheries                                                            
Business Tax  volume. He furthered  that the larger the volume,  the                                                            
higher  the  tax  a  processor  pays.  He  communicated  that  eight                                                            
processors account for up to 90 percent of the tax.                                                                             
                                                                                                                                
Co-Chair Wilken  asked for clarification  as to whether $100,000  is                                                            
the maximum credit allowed per processor, regardless of volume.                                                                 
                                                                                                                                
Senator  B. Stevens  responded  no, that  some processors  might  be                                                            
entitled to  more, some to less, as  the credit is dependent  on the                                                            
amount of tax each processor paid.                                                                                              
                                                                                                                                
Co-Chair Wilken acknowledged.                                                                                                   
                                                                                                                                
Senator  Taylor reminded  that the Fisheries  Business Tax's  income                                                            
stream is divided  with the State  receiving half and the  qualified                                                            
communities receiving half.  He voiced support for the tax incentive                                                            
concept, but he  reminded the Committee that the State  has used its                                                            
portion of the  tax to fund the Division of Commercial  Fisheries in                                                            
the Department of Fish  and Game. Therefore, he asserted, the impact                                                            
on the  funding of  that Division  would need  to be addressed  were                                                            
this legislation adopted.                                                                                                       
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                

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