Legislature(2015 - 2016)CAPITOL 120
02/11/2016 10:00 AM House FISHERIES
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| Audio | Topic |
|---|---|
| Start | |
| HB251 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 251 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 251-ELECTRONIC TAX RETURNS & FISHERIES TAXES
10:03:18 AM
CHAIR STUTES announced that the only order of business would be
HOUSE BILL NO. 251, "An Act requiring the electronic submission
of a tax return or report with the Department of Revenue;
relating to fisheries business tax and fishery resource landing
tax; relating to refunds to local governments; and providing for
an effective date."
10:04:10 AM
KEN ALPER, Director, Tax Division, Department of Revenue (DOR),
directed attention to the committee packet and a three page
letter, from DOR to Representative Stutes, dated 2/10/16, with
enumerated questions from the committee, followed by
departmental response.
10:04:47 AM
CHAIR STUTES paraphrased the first question, which read
[original punctuation provided]:
1. Who is defined as a processor? Can we see a list
of taxpayers for the Fisheries Business Tax [(FBT)]
and Resource Landing Tax [(RLT)], and get a better
understanding of exactly who is paying the tax and who
isn't?
MR. ALPER responded that, due to federal regulations pertaining
to confidentiality, it is not possible to disclose the names of
the licensed processors; however, definitions exist for who pays
taxes under the statute which may provide the information being
sought. Anything beyond basic heading, gutting, and icing is
considered processing. He paraphrased from the prepared
response, which read [original punctuation provided]:
If a fish business operator has intentions to process
any fishery resource other than what they caught or
their activities are limited to roe recovery from
salmon caught from a vessel greater than 65 feet in
length, then the activities are defined as processing.
The following activities further define the
undertakings of a processor:
• Prepares, processes or stores a fishery resource;
• Recovers salmon roe;
• Custom processes fishery resources from others;
• A fish business that has a fishery resource custom
processed; or
• Exports an unprocessed fishery resource outside of
Alaska.
Processing is defined as any activity that modifies
the physical condition of the fishery resource. It
should also be noted what isn't considered processing:
heading, gutting, gilling or icing seafood products or
decapitating fish. Processors include traditional
shore-based facilities as well as at-sea processors
such as catcher-processors and floating processors.
Direct marketers are considered processors, but
catcher-sellers are not because they sell only their
own unprocessed fish. Businesses or individuals that
have fish custom processed, that recover salmon roe,
or that export unprocessed fish outside of Alaska are
considered processors.
Only processors pay the Fisheries Business Tax and
Resource Landing Tax. However, in cases where
processors buy their fish from independent commercial
fishermen, it is possible that some or all of the tax
burden to be passed on to the fishermen, since they
have little control over what price the processors
will pay.
Unfortunately, DOR cannot provide a full list of
taxpayers, as this would violate confidentiality.
MR. ALPER explained that the non-disclosure restriction is not
unique to the fishing industry.
10:06:54 AM
REPRESENTATIVE ORTIZ noted the five bullet points
defining/describing processor activities, and asked how many of
the points an operator would need to meet to be considered a
processor.
MR. ALPER answered one.
REPRESENTATIVE ORTIZ revisited the confidentiality consideration
for the taxpayers and ascertained that aggregated data can be
accessed, but not individual return information.
10:09:06 AM
CHAIR STUTES paraphrased the second question, which read
[original punctuation provided]:
2. What is the origin of the separate FBT rate for
salmon canneries?
MR. ALPER responded that there is a long history of fish taxes
for the varying aspects of the industry. He suggested checking
committee records to understand the rationale that resulted in
the different taxes. Pointing out the lengthy period, 1967-
2004, when the tax remained at 3 percent, and he speculated that
it may have been increased to 4.5 percent during another time of
budget shortfall. He paraphrased from the prepared response,
which read [original punctuation provided]:
According to a report from the Alaska History and
Cultural Studies organization, called Alaska's
Heritage, chapter 4-16: Fishing and Sea Hunting: "As
early as 1899, Alaska Natives appealed to the
government to protect the salmon for those who relied
on it for food. They also asked for the return of
some of their fishing sites that cannery operators had
occupied. In 1900, Congress responded to the appeals
by requiring that anyone engaged in commercial salmon
fishing in Alaska establish a hatchery for sockeye
salmon. Most cannery operators waited to see if the
regulation would be enforced before investing money in
a fish hatchery. Congress failed to provide adequate
funds for enforcement. In 1906, Congress tried a
different tactic to force fish conservation. It
levied a tax of four cents on each case of salmon
canned."
From the very beginning of Alaska's history there has
been a separate rate for salmon canneries. From the
beginning, non-residents have dominated the canning
industry in Alaska. The changing tax rates over the
years may have resulted from a shift from a mindset of
resentment of non-residents exploiting fishery
resources to a mindset of trying to help small Alaskan
fishing operators.
Examples of different state salmon cannery tax rates
in Alaska's history include:
1913: the First Territorial Legislature adopted the
initial "salmon pack tax" of $0.07 per case and a
separate "cold storage tax" for other fisheries
1951: the territorial legislature set the fisheries
business tax on floating processors to 4% of value and
salmon canneries to 6%
1967: the tax rate for salmon canneries was lowered to
3%
2004: the tax rate for salmon canneries rose to 4.5%
10:10:33 AM
CHAIR STUTES paraphrased the third question, which read
[original punctuation provided]:
3. How does the Department of Fish & Game determine
what is a developing or established fishery? Can we
get a list of them?
MR. ALPER paraphrased the governing statute providing
interdepartmental cooperation for taxing purposes, which read:
Sec. 16.05.050. Powers and duties of commissioner.
(10) not later than January 31 of each year, to
provide to the commissioner of revenue the names of
those fish and shellfish species that the commissioner
of fish and game designates as developing commercial
fish species for that calendar year; a fish or
shellfish species is a developing commercial fish
species if, within a specified geographical region,
(A) the optimum yield from the harvest of the
species has not been reached;
(B) a substantial portion of the allowable
harvest of the species has been allocated to fishing
vessels of a foreign nation; or
(C) a commercial harvest of the fish species has
recently developed;
MR. ALPER speculated that the list is compiled by ADF&G based on
scientific information and determinations. He directed
attention to the committee packet and the six page
interdepartmental memo, dated 1/27/16, to Commissioner Randall
Hoffbeck, from Commissioner Sam Cotten, containing the
developing fisheries list. He added that the developing
fisheries comprise a relatively small portion of the overall FBT
portfolio, perhaps $200,000 of the $25,000,000 received.
10:12:29 AM
CHAIR STUTES continued, with the fourth question, which read
[original punctuation provided]:
4. Why are charter boats not subject to the tax?
MR. ALPER responded that charter boat activities could be taxed,
but the precision of harvest would be lacking. The statute has
been written around the commercial industry and would require
amendment or new legislation to address charter activities. He
paraphrased from the prepared response, which read [original
punctuation provided]:
There is no reason that charter sport fishing
operations couldn't be taxed if the legislature chose
to tax them. Since sport fishery landings are not
accounted for in the same rigorous manner as
commercial catch there would need to be a new sport
charter catch accounting system developed for tax
assessment purposes. If the committee would like to
develop legislation that would tax charter boats and
similar commercial sport fish operators, DOR would be
happy to provide technical assistance as needed.
10:13:26 AM
REPRESENTATIVE ORTIZ asked why existing statute could not be
applied to tax the processing of charter caught fish.
MR. ALPER explained that the commercial fisheries represent an
excise tax on an item being sold. However, the charter industry
provides a service of access and prohibits the sale of the
catch.
CHAIR STUTES noted that a charter's catch is typically cleaned
and packaged for shipment, which seems to lend itself to a
processing tax.
MR. ALPER speculated that the product would need to be valued
for sale purposes to meet tax requirements. He deferred further
comment.
10:16:10 AM
CHAIR STUTES continued, with the fifth question, which read
[original punctuation provided]:
5. What is the distribution of the $18 million in new
fish tax revenue under HB 251?
MR. ALPER paraphrased from the prepared response, which read
[original punctuation provided]:
The fiscal note for HB 251 projects $18.4 million in
new revenue from the fish tax increases in FY 2017.
The Department of Revenue estimates this new revenue
will be broken down by species category as follows:
Category New revenue ($ millions)
Groundfish: Pollock 5.4
Groundfish: Non-Pollock 3.2
Black Cod 1.1
Halibut 1.1
Herring 0.1
Salmon 4.9
Shellfish 2.6
Total 18.4
This analysis is based on projections of the
distribution of taxable fish value by species, which
are used in DOR's annual fish tax forecasts. For more
information on the current distribution by species,
please see the attached Fish Values & Poundage Report.
10:17:07 AM
CHAIR STUTES continued, with the sixth question, which read
[original punctuation provided]:
6. What is the distribution of the $140 million in
budget cuts under the governor's proposal?
MR. ALPER deferred.
10:18:31 AM
KEVIN BROOKS, Deputy Commissioner, Alaska Department of Fish &
Game, directed attention to the committee packet and the
columned page titled, "FY2015-FY2017 Budget Review Summary by
Category, Unrestricted General Funds Only," and the fourth
numerical column headed as "1 Year Change F&2017 from FY16 $,"
and the line labeled, "Agency Operating Subtotal," showing a
reduction figure of $140,571.1. The fourth line entry of the
same column, he pointed out, labeled "Fish and Game," lists a
reduction of $7,454.9, as the cut to the department; among the
other agency totals. He directed attention to the following
page titled, "Department of Fish and Game, FY2015 Management
Plan to FY 2016 Management Plan to FY2017 Governor, General
Funds Only - UGF, January 20, 2016," listing where the cuts will
be made throughout the department. He indicated the fifth
numerical column total, $7,454.9, which coincides with the
agency figure on the previously mentioned chart. He pointed out
the third column total, headed "Difference FY15 to FY16 MP," to
report the total cuts already proposed, equaling $14,292.4.
REPRESENTATIVE ORTIZ surmised that the two figures, if the
governor's budget is adopted, would represent a departmental
budget cut of roughly $21,747,000, and noted from the totals
shown that the department will have an overall cut of about 25
percent.
MR. BROOKS said, that is correct.
10:21:31 AM
REPRESENTATIVE MILLETT inquired about the cost of test
fisheries, could the activity be privatized, and do these
fisheries generate money for the department. She expanded her
inquiry to include: how many boats are owned by ADF&G; the
number of test fisheries ADF&G boats participate in; and the
rationale for not using ADF&G boats in Bristol Bay test
fisheries.
MR. BROOKS answered that the department operates several test
fisheries using a combination of state boats and chartered
vessels. The stock assessment projects are used to make
determinations for fishery openings, such as herring roe. That
type of project results in dead fish, which are sold under a
fish ticket. The department also conducts revenue fisheries,
and tension with the fishing fleet can result. In Bristol Bay,
ADF&G operates a revenue fishery, which provides about $3.5
million for its budget. The department is proposing an increase
in test fishing in the FY 17 budget, with an expectation of
generating an additional $800,000; spread across all regions.
He offered to provide the committee with a list of the proposed
test fisheries. The revenue is used to pay for the management
of the commercial harvest, and the fishermen of each area are
consulted and worked with in order to maintain relations and
have minimal impact to the fleet.
10:24:29 AM
REPRESENTATIVE MILLETT asked for a breakdown of costs, including
capital outlay for gear, which the test fishery represents to
the department.
MR. BROOKS said ADF&G owns six research vessels, with a primary
purpose of fishery assessment and other work, and he agreed to
provide a list of vessel value and equipment.
CHAIR STUTES questioned if these are the only vessels owned by
the department or are there separate vessels that do the test
fishing for revenue purposes.
MR. BROOKS answered that these are the only boats owned by the
department, and the primary purpose is not test fishing. The
agency contracts with commercial fishing vessels to generate
revenue.
CHAIR STUTES asked when the test fishing occurs.
MR. BROOKS answered that the fishing occurs prior to opening an
area for fleet access; perhaps a few days or a week. He added
that a significant portion of the test fishery revenue is
derived from crab harvest. He offered to provide a list of the
test fisheries conducted.
CHAIR STUTES surmised that the revenue generated from the crab
represents less fishing effort and higher sale returns.
10:27:10 AM
REPRESENTATIVE MILLETT suggested that, rather than the state
owning and maintaining vessels, it may be cost effective to
lease boats as needed.
MR. BROOKS said the large, state owned, research vessels are
generally otherwise engaged and not available for revenue test
fishing purposes, often deployed to open sea for 120 days at a
time. The department charters boats and aircraft, when
necessary, at a cost of about $4 million per year. He said the
department has investigated using charter vessels only, but it
hasn't proven to be feasible.
REPRESENTATIVE MILLETT asked for cost and timeline comparisons
for use of state owned versus contract vessels.
10:29:02 AM
SAM COTTEN, Commissioner, Alaska Department of Fish & Game,
explained a typical, and harmonious, scenario of a test fishery
in Bristol Bay, where the fleet fished the designated open
areas, and the department fished in an otherwise closed locale.
The test fisheries for revenue also provide important management
information, along with the opportunity for receipts. These
actions allow the department to meet legislative mandates.
Further, revenue generated is used to manage fisheries in the
same area as the fishery tested, and he provided an example
regarding crab management. The department continually monitors
cost analysis of the state fleet, he assured members, and said
charter vessels would solely be used, if it were a less
expensive and feasible approach to the situation. The MV
Kestrel, which ADF&G operates out of Petersburg, is used to
monitor herring runs, dive fisheries, and other deployments,
making it a cost effective approach.
10:31:16 AM
CHAIR STUTES asked about the agencies maintenance of fish
tickets for the test fisheries, and requested a five year
account be provided to the committee.
10:32:26 AM
REPRESENTATIVE MILLETT conjectured that the additional test
fisheries proposed to generate revenue for the department, may
take away opportunities for commercial fishermen.
MR. BROOKS responded that the FY 17 budget includes $800,000
comprised of receipts from test fisheries; in addition to the
existing receipts. These test fisheries are done because of
necessity to generate funding, he stressed.
10:33:38 AM
CHAIR STUTES asked where the $800,000 fits into the department's
budget, on the financial page previously reviewed.
MR. BROOKS answered that the $7.4 million cut would become a
$6.6 million reduction instead.
10:34:17 AM
REPRESENTATIVE ORTIZ said fishermen in his district tout the
world class reputation of the fisheries, as managed by ADF&G,
and cautioned that the proposed cuts will jeopardize the
agency's ability to maintain that standard. The test fisheries
are based on the department's need to gather data and to offset
the cuts being made to the general fund.
MR. BROOKS concurred.
10:35:47 AM
REPRESENTATIVE MILLETT inquired about the information that the
test fisheries provide, and expressed concern that conducting
the fisheries removes $800,000 from the pockets of commercial
fishermen.
COMMISSIONER COTTEN said the department will provide the
committee with an account of what is being done and the number
of fish/shellfish being caught. It is a combination of science
and revenue collection, conducted throughout all regions of the
state.
10:38:37 AM
REPRESENTATIVE ORTIZ conjectured that, due to lack of funding,
the agency may not be able to collect necessary data,
particularly on low priority systems, which would play out as
fewer opportunities for fisherman, due to ADF&G's policy for
conservative management practices.
COMMISSIONER COTTEN voiced that the mission statement requires
the department to protect fish and maintain a sustainable yield.
He agreed that lack of data does compromise the precision
required to manage a fishery for optimal harvest.
CHAIR STUTES opened public testimony.
10:40:51 AM
OLIVER HOLM, Commercial Fisherman, recapped the various taxes
that he is responsible for, as a commercial fisherman;
assessments which include: vessel registration, permit renewal,
borough landing taxes, enhancement taxes paid to the state,
individual fishery quota tax for halibut, vessel observer tax,
and state fuel taxes. The price received for salmon in 2015 was
less than what was being paid in 1974, the year he began
seining. If the tax were being directed to ADF&G for continued
management and fishing opportunities, he said he could possibly
support the governor's bill. However, he stressed, expecting
the commercial fishing industry to solve gapping budget deficits
is not feasible.
10:43:51 AM
RHONDA HUBBARD voiced her understanding of the incompatibility
for charter versus commercial catch taxation, pointing out that
each belongs in a different tax category. She recommended
consolidating, or co-locating, entities that collect fisheries
data, such as ADF&G, DOR, Commercial Fisheries Entry Commission
(CFEC), and the Alaska Seafood Marketing Institute (ASMI), to
facilitate information sharing and save costs. Further, the
business and landing taxes are in need of review, comparison,
and streamlining, she opined, and suggested that a taxation
floor could be helpful.
10:47:38 AM
CHAIR STUTES closed public testimony after ascertaining no one
further wished to testify.
[HB 251 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB251 Backup Fish tax report by rates.pdf |
HFSH 2/11/2016 10:00:00 AM |
HB 251 |
| HB251 Backup HBADFG General Fund Cuts FY16-17.pdf |
HFSH 2/11/2016 10:00:00 AM |
HB 251 |
| HB251 Backup 2016 Developing Fisheries Memo.pdf |
HFSH 2/11/2016 10:00:00 AM |
HB 251 |
| HB251 Backup DOR & DFG Response to House Fisheries.pdf |
HFSH 2/11/2016 10:00:00 AM |
HB 251 |
| HB251 Backup Fish Value by Species 2014-2015.pdf |
HFSH 2/11/2016 10:00:00 AM |
HB 251 |
| HB251 Backup ERG response to House Fisheries Questions.pdf |
HFSH 2/11/2016 10:00:00 AM |
HB 251 |
| HB251 Backup Test Fish Overview FY16-FY17.pdf |
HFSH 2/11/2016 10:00:00 AM |
HB 251 |
| HB251 Backup Schwantes.pdf |
HFSH 2/11/2016 10:00:00 AM |
HB 251 |