Legislature(1995 - 1996)
02/19/1996 01:40 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HOUSE BILL 397
"An Act relating to the seafood marketing assessment;
and providing for an effective date."
AMY DAUGHERTY, AID, REPRESENTATIVE ALAN AUSTERMAN, testified
that HB 397 was designed to more precisely align the current
fisheries resource landing tax (AS 43.77) with the fisheries
business tax (AS 43.75) and the Alaska Seafood Marketing
Institute (ASMI) assessment provision (AS 16.51). The
legislation is needed to avoid future legal questions and
would add a measure of fairness to the tax. HB 397
clarifies that landing tax is an occupational tax and would
equalize tax rates and credits with the fisheries business
tax.
Ms. Daugherty commented that within HB 397, the 3.3% landing
tax would include .3% for ASMI and would established a 3%
landing tax. The separate .3% would provide for a seafood
marketing assessment application. This action would
separate the marketing assessment in the landing tax
statutes and would equalize the landing tax with the shore-
based fisheries business tax.
The legislation specifies that a person subject to the
landing tax would be liable for the .3% seafood marketing
assessment; all business which produces less than $50,000 in
seafood products per calendar year would be exempt from the
assessment. That would encourage the small operator, value
added processing.
Representative Brown asked if the tax would become eligible
for an education tax credit through this legislation and if
that action would create a greater loss of revenue for the
State.
NEIL SLOTNICK, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, said the policy reason for extending the tax credit
would be driven by the compensatory tax doctrine. The
interstate commerce laws originate in the U.S. Constitution.
A compensatory tax is legal when the two taxes balance out.
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He added that under the compensatory tax doctrine, the taxes
should be the same. The payers of the landing tax have
raised an argument, indicating that they are not eligible
for the same credits the fisheries business tax are eligible
for. Those business have stated that this is
"discrimination".
BOB BARTHOLOMEW, ASSISTANT DIRECTOR, INCOME & EXCISE TAX
DIVISION, DEPARTMENT OF REVENUE, explained the education
credit. The current fiscal note that the Department of
Revenue enclosed does not include an estimate of the revenue
potentially lost due to the education credit.
Representative Brown voiced her concern with the proposed
credits. She recommended that the revenue loss be indicated
on the fiscal note and requested further clarification on
either eliminating or expanding the credit. Mr. Bartholomew
noted that the Department does not have a strong position on
elimination or expansion, and will thus follow the lead of
the Legislature. He noted that the legislation does
indicate a specific position.
Mr. Slotnick explained that the legislation would create an
equalization process and thus make the work of the
Department of Law more simple. Representative Brown asked
the total amount of taxes which would be collected from the
education credit. Mr. Bartholomew replied that in FY95,
there were five taxes eligible for the credit totaling $1.2
million dollars corporate income tax credit.
Representative Martin echoed Representative Brown's
concerns. He asked if the legislation would be expanding
the authority. Mr. Bartholomew clarified how the tax would
work. A small portion of the tax is self assessed. The
landing tax is assessed by the Legislature. Currently, it
is a 3.3% which includes an assessment for ASMI. The
legislation will make it clearer, taking the .3% of the
current assessment, and moving it into the ASMI statutes.
The 3% State tax would stay in AS 43.77 Landing Tax
Statutes. The decision to allow or not, the education
credit will be a legislative policy call. Mr. Bartholomew
added that the fishermen or the processor will pay the ASMI
assessment to the Department of Revenue.
Co-Chair Hanley pointed out that it was a tax and would be
accounted for as general fund dollars. Representative
Martin questioned the specifics of the lawsuit. Mr.
Slotnick explained in Superior Court, that the point was
raised if the landing tax was discriminatory because it was
assessed at a rate of 3.3%, whereas, the fisheries business
tax was assessed at 3%. The extra .3% which was assessed
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against the landers was for ASMI, but was not part of the
ASMI assessment. This legislation would remedy that issue
and make them members of ASMI.
Representative Navarre questioned if the corporate income
taxes could be used to fund the fiscal impact. Mr.
Bartholomew explained that currently, the education credit
works by creating a cap which should not be exceeded, and
applying to all taxes. A corporation would not be able to
give under two different tax categories and would be subject
to the same cap. The total contribution under the education
credit that can be contributed would be $200 thousand
dollars, subject to $150 thousand dollar credit.
Co-Chair Hanley asked if it was possible to add a section
which could specify that if the case was lost in court, that
section would then be repealed. Mr. Slotnick noted that if
the Department of Law loses the current litigation, there
will be no tax. Mr. Bartholomew added, there has been one
tax year filed for 1994 and collected in FY95. Over $7
million dollars has been collected, of which 50% was shared
with the local governments. Mr. Slotnick noted that amount
would be retroactive to 1994.
Mr. Bartholomew responded to Representative Brown's question
regarding companies that are eligible under the landing tax
credit, who do not currently pay one of the other taxes. He
stated that the difference would be the type of business
organization paying the tax. The status selected by a
corporation for tax purposes is confidential information.
Representative Brown spoke to the expansion of the tax
credit within the legislation. She asked if in Section #21,
the tax was being lowered for developing commercial fish
species. Mr. Bartholomew explained that under the fishery
business tax, there exists a provision for developing
commercial fish species as defined by the Department of Fish
and Game and having a different tax rate. The fiscal note
reflects that .2 of 1% which would amount to $8 thousand
dollars, be used for developing species. Representative
Brown requested a current list of "developing species". Mr.
Bartholomew offered to provide that information.
Co-Chair Hanley inquired the amount of anticipated revenue.
Mr. Bartholomew informed members that the potential would be
$8 thousand dollars, which would switch the 3% to 1% for
classification and development purposes. Co-Chair Hanley
summarized the three items used:
1. To equalize, which would include the education
tax;
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2. The ASMI assessment;
3. Separating the rate from 3% to 1%.
Co-Chair Hanley noted the net impact would be zero.
HB 397 was HELD in Committee for further consideration.
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