Legislature(2003 - 2004)
05/05/2003 09:02 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ 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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