05/04/1993 03:10 PM Senate FIN

                                                                               
  CS FOR HOUSE BILL NO. 264(FIN):                                              
                                                                               
       An Act levying and providing  for the collection of and                 
       disposition  of  the  proceeds of  a  fishery  resource                 
       landing tax; and providing for an effective date.                       
                                                                               
  CO-CHAIR DRUE PEARCE announced that CSHB 264(FIN) was before                 
  the committee.  She invited  Charles Cole, Attorney General,                 
  Department of Law, to speak to the bill.                                     
                                                                               
  CHARLES COLE said  that he had  been reading advance  sheets                 
  for  the Supreme Court.  He described one case that he hoped                 
  would enable the committee to evaluate the constitutionality                 
  of the tax as set forth in CSHB 264(FIN).  The case was ITEL                 
  Containers   International   Corp.   petitioner    vs.   Joe                 
  Huddleston, Commissioner of Revenue, State of Tennessee.  He                 
  felt  the  case was  interesting because  it involved  a tax                 
  imposed  by the state of Tennessee  on containers which were                 
  delivered  by  lessees  or  their  agents  in  many  states,                 
  including  Tennessee.  In the  course of the Supreme Court's                 
  opinion it  said that the  state rejected the  argument that                 
  the tax created a substantial risk of international multiple                 
  taxation  because  the  taxes  were  imposed on  a  discreet                 
  transaction, the transferred possession of cargo  containers                 
  within Tennessee.  So  it did not risk multiple  taxation or                 
  impede  federal  regulation  or  foreign  trade.    In  CSHB
(FIN)  the  proposed   tax  is   also  upon  a   discreet                 
  transaction  which  takes  place entirely  in  the  state of                 
  Alaska, the first landing of fish products.  This Alaska tax                 
  is  similar  to the  tax  in  the aforementioned  case.   In                 
  further describing the case, he  said the Supreme Court,  in                 
  the course  of its  opinion,  said the  state tax  satisfied                 
  complete  domestic  commerce  law  tests  "when the  tax  is                 
  applied to an  activity and when a  substantial nexus within                 
  the   taxing   state   is  fairly   apportioned,   does  not                 
  discriminate  against  interstate  commerce  and  is  fairly                 
  related to the services provided by the state."  The Supreme                 
  Court  had no trouble in  its opinion finding this Tennessee                 
  tax satisfied  those four tests.   It said,  therefore, that                 
  there  was  a   substantial  nexus,   the  tax  was   fairly                 
  apportioned, that it did not discriminate against interstate                 
  commerce, and was fairly related to the services provided by                 
  the state.   The Court went on to say that the tax is a fair                 
  measure of the  state's contact within the  given commercial                 
  transaction in all  four aspects.   This complete  auto-test                 
  confirmed both the state's legitimate interest in taxing the                 
                                                                               
                                                                               
  transaction and the  absence of an attempt to interfere with                 
  the free  flow of commerce  be it foreign or  domestic.  The                 
  Court  went on to  discuss international aspects  of the tax                 
  and had no problem  with those.  He said that  based on this                 
  case in the United States Supreme Court dated February 1993,                 
  and the lines  of authority cited in it, that  the tax found                 
  in  this  bill, while  not  entirely  free from  the  tax on                 
  domestic and foreign  commerce clauses of the  United States                 
  Constitution, in his view, withstood these tests.                            
                                                                               
  SENATOR STEVE RIEGER  asked if there was  a distinction made                 
  whether the tax  is imposed on the  landing or on the  fish.                 
  Mr. Cole said that the tax is a landing tax not on the fish.                 
  It is  an event  with substantial  nexus with  the state  of                 
  Alaska.                                                                      
                                                                               
  SENATOR TIM KELLY MOVED amendment 1 (copy on file).  Senator                 
  Kelly spoke in  support of  the amendment which  gave a  tax                 
  credit for  those  who  have been  funding  the  Bering  Sea                 
  Foundation.   SENATOR JACKO  OBJECTED.   Senator Jacko  said                 
  that this  amendment  was not  necessary for  this piece  of                 
  legislation and that he had drafted another bill that  would                 
  address this issue.   Co-chair Pearce  called for a show  of                 
  hands and the amendment FAILED to be adopted on a vote  of 4                 
  to 3.  Senators  Kelly, Pearce and Kerttula were  in support                 
  of the amendment.  Senators Frank, Rieger, Jacko,  and Sharp                 
  were opposed.                                                                
                                                                               
  Senator  Jacko  MOVED  for  passage  of CSHB  264(FIN)  from                 
  committee  with individual  recommendations.   No objections                 
  being heard,  CSHB 264(FIN)  was REPORTED  OUT of  committee                 
  with a "do  pass," and with a fiscal note for the Department                 
  of Revenue for $94.0,  and a fiscal note for  the Department                 
  of Commerce  & Economic  Development for  $860.0.   Co-chair                 
  Frank, Senators Jacko,  Rieger, and  Sharp voted "do  pass."                 
  Co-chair  Pearce, Senators  Kerttula  and  Kelly  voted  "no                 
  recommendation."