Legislature(2015 - 2016)BILL RAY CENTER 208
05/27/2016 03:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4003 | |
| HB4005 | |
| HB4006 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB4005 | TELECONFERENCED | |
| *+ | HB4003 | TELECONFERENCED | |
| *+ | HB4006 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 4006
"An Act relating to the fisheries business tax and
fishery resource landing tax; removing the minimum and
maximum restrictions on the annual base fee for the
reissuance or renewal of an entry permit or an
interim-use permit; relating to refunds of the
fisheries business tax and the fishery resource
landing tax to local governments; and providing for an
effective date."
Mr. Burnett detailed the bill would increase the tax rates
by 1 percentage point. The entire tax increase was exempted
from municipal revenue sharing. He explained the current
tax was still shared 50/50 between the state and local
governments. The bill would remove the $3,000 cap on annual
Commercial Fisheries Entry Commission (CFEC) entry permit
fees and would exempt developing fisheries from the
increase. He clarified that developing fisheries taxes
would not change under the legislation. He read the
sectional analysis (copy on file):
· Section 1: Eliminates the cap of $3,000 on the base
fee for Commercial Fisheries Limited Entry Permits and
Interim permits.
· Section 2: Changes the tax rates for the fisheries
business tax from four and one-half to five percent
for salmon canned in a shore based business, from
three to four percent for other fish processed in a
shore based business and from five percent to six
percent for fish processed by a floating business.
· Section 3: Changes the tax on fish for a direct
marketing business from three to four percent.
· Section 4: Is a technical change eliminating the
requirement to submit tax returns to Juneau.
· Section 5: Provides that one percent of the value of
each fishery under the fisheries business tax will be
deposited in the general fund and not be subject to
sharing with local governments.
· Section 6: Changes the landing tax from three to four
percent.
· Section 7: Provides that one percent of the value of
each fishery under the fisheries landing tax will be
deposited in the general fund and not be subject to
sharing with local governments.
· Section 8: Provides that one percent of the value of
each fishery under the fisheries tax will be deposited
in the general fund and not be subject to sharing with
local governments.
· Section 9: Provides that the tax changes in sections
2, 3 and 6 are applicable after the effective dates of
those sections.
· Section 10: Allows for the Department of Revenue to
adopt regulations to administer this act.
· Section 11: Provides for an effective date for section
1 (CFEC) of January 1, 2017.
· Section 12: Provides and immediate effective date for
section 10.
· Section 13: Provides that the rest of the bill is
effective July 1, 2016.
4:29:56 PM
Co-Chair Neuman was unfamiliar with the governor's version
of the bill. He requested a sectional analysis showing the
changes from the governor's original bill, the House
Resources Committee version, and the current version of the
bill.
Mr. Burnett was happy to provide the document and offered
to speak to the changes. He explained that Section 1, which
eliminated the cap on CFEC permits had been added in the
current bill.
Co-Chair Neuman asked for an estimate on the economic
impact. He wondered if there was an economic impact of $2
million plus or minus state revenue.
Mr. Burnett answered the projection related to the change
in Section 1 of the legislation was plus or minus $2
million. The remaining tax changes in the bill equated to
about $18 million. He addressed the other change from the
original bill and explained the original bill had increased
the rate for one of the developing fisheries from 3 percent
to 4 percent; however, the current bill did not make any
changes to the tax rate for developing fisheries. He added
that the previous year the total tax on developing
fisheries had brought in less than $50,000. He estimated
the amount may have been around $17,000. He concluded the
dollar amount was not huge; therefore, the change made very
little difference to the bill. He summarized that the
changes to the bill were the additional $2 million and a
few thousand in taxes related to a developing fishery.
4:32:04 PM
Representative Edgmon asked how DOR would characterize the
fishery taxes. He referred to previous discussion about
mining taxes and net income based.
Mr. Burnett responded that the fisheries business and
landing taxes were both gross taxes on the value of the
fishery. He detailed the taxes were modeled after a
severance-type tax where people were taxed based on a
common property resource owned by the people of the State
of Alaska, which could be harvested by a few people. The
individuals were paying something to Alaska residents for
the privilege of harvesting the fish and to represent a
value for the fish that were being harvested. He reiterated
the tax was based on the value of the fish and not the
profitability of the industry.
Representative Edgmon asked how much of the annual $18
million in revenue generated by the taxes came from shore-
side activities.
FORREST BOWERS, DEPUTY DIRECTOR, DIVISION OF COMMERCIAL
FISHERIES, DEPARTMENT OF FISH AND GAME (DFG), replied the
$18 million was the increase in tax revenue that would
result from the legislation. He believed the shore-side
component of the current tax revenue was roughly 75
percent.
Co-Chair Thompson requested the information from DFG for
the following day. Mr. Bowers answered in the affirmative.
Representative Edgmon commented that the issue demonstrated
the "throwing of the dart process we're engaged in with
these taxes." He clarified he did not intend his remarks to
be disparaging towards the efforts of the departments and
administration for bringing the bill forward. He could not
recall when the fisheries tax had last been analyzed or
revised (he mentioned the 1960s as a potential timeframe),
but he surmised it had been a long time. He asked if the
taxes had been revisited in the 1960s or 1970s.
Mr. Burnett answered he did not recall the last time the
fisheries tax changed, but it had been a number of years
back. He noted there had been some changes to the
methodology of sharing taxes and developing fisheries taxes
over time. He clarified he was not referring to changes to
the tax amounts.
Representative Edgmon relayed many smaller fisheries (e.g.
salmon fisheries in Bristol Bay) received bonuses in a good
year. He furthered in a perfect world the bonuses were
distributed amongst the owners, skippers, crew members, and
everyone who took part in operations. He asked if any of
the proposed taxes would reduce some of those extra
earnings.
Mr. Burnett responded that to the extent the fish were
taxed by the legislation, if payment was due to the value
of the fish, it should be taxed. He detailed it was not
unusual for fish to be purchased at a specific price during
season and for a price adjustment to be made later. The
price adjustment was subject to the tax just the same as
the original price paid.
Co-Chair Thompson asked if that meant up and down. Mr.
Burnett answered in the affirmative.
4:37:07 PM
Representative Edgmon asked for verification DOR's annual
assessment period occurred in the spring. He surmised the
spring of 2015 reached back into calendar year 2014. Mr.
Burnett responded in the affirmative.
Representative Wilson asked whether the bill addressed
bycatch. She remarked on bigger boats taking in a
significant amount of fish.
Mr. Burnett answered in the negative. To the extent that
the fish were sold, they were taxed; if they were not sold
there was nothing to tax.
Mr. Bowers added there were certain bycatch species that
may be legally retained and sold, which had a value and
were taxed. There were other bycatch species discarded at
sea, which were not taxed because there was no associated
value.
4:38:35 PM
Representative Wilson disputed the statement that discarded
bycatch had no value. She reasoned that just because the
fish went back overboard did mean the fish had no value.
She understood that the industry also gave a significant
amount to Seattle, Washington. She detailed that something
had also been worked out with the Food Bank in Fairbanks.
However, a large portion of the bycatch was thrown away.
She stressed it was a resource that was being discarded.
She referred to the legislation and believed the
opportunity should be taken to penalize the boats. She
understood there were ways to substantially reduce bycatch.
She conceded it was more expensive for the boats, but she
wondered why the legislation would not deal with the
overall issue.
Mr. Bowers responded that many of the fisheries
Representative Wilson was referring to occurred in federal
waters and were federally managed. He was unsure what
authority the legislature would have to regulate the
activities in federal waters.
Representative Wilson asked for verification that none of
the bycatch was caught in state waters and that everything
caught in state waters were counted and brought in money.
Mr. Bowers responded in the negative. He elaborated that
bycatch was brought in by fisheries in state waters. The
tax was assessed when the fish were caught or brought into
state waters. He believed many of the larger fisheries
mentioned by Representative Wilson occurred in federal
waters. He elucidated that the legislature could implement
something related to bycatch caught by small boat fisheries
in state waters. However, he did not know what could be
done for larger offshore vessels fishing in federal waters.
Representative Wilson remarked that Alaska fishermen made
sure to operate cleanly. She stated there were people doing
the right thing and people doing the wrong thing. She
stressed the fish were an Alaskan resource. She did not
understand why the administration and legislature would not
take the opportunity to stop some of the bycatch problem,
whether it was related to bigger or smaller boats. She
underscored the resources were all valuable. She hoped the
department could provide an estimate related to the value
the discarded fish.
4:41:25 PM
Representative Gara shared Representative Wilson's
concerns. He discussed fish caught inside and outside of
state waters. He noted there were fish caught outside state
waters that were processed in the state. He asked how to
divide between the fish the state was allowed to tax and
those it was not allowed to tax.
Mr. Bowers replied the tax was assessed when the fish were
brought into state waters. There was a commercial
operators' annual report that every licensed processor had
to complete. He detailed the annual report described a
processor's production and purchasing history, which was
the basis for calculating the price used to determine the
value of the fish. He believed the processors indicated on
their tax forms where the fish were purchased.
Mr. Burnett elaborated there was one exception. He detailed
that under the Magnuson Stevens Act, the state was allowed
to tax pollock, which was landed outside state waters.
Mr. Bowers corrected it was the American Fisheries Act.
Mr. Burnett agreed. He expounded the state was allowed to
tax pollock that landed in Seattle, but it was not able to
tax other fish that were not either caught, processed in,
or brought into state waters.
4:43:11 PM
Co-Chair Neuman referred to floating processors that
operated outside Alaska's waters. He believed Mr. Bowers
had testified that the state did not tax fisheries until
they reached Alaskan waters. He asked about floating
processors.
Mr. Bowers replied that if the processors brought processed
fish into Alaska (e.g. to offload the fish for
transshipment, which was common practice) they were
responsible for the tax at that point.
Co-Chair Neuman asked for verification that floating
pollock processors operating outside of state waters and
selling the fish in Seattle, were not included in the
state's fish processing tax.
Mr. Bowers answered the American Fisheries Act regulated
the pollock fishery in the Bering Sea. He detailed that
because the state's late U.S. Senator Ted Stevens was aware
of the potential, he had included a provision in the act
requiring any pollock caught between 3 and 200 miles
offshore was subject to the state's taxes.
Co-Chair Neuman concluded there was a tax. Mr. Burnett
replied in the affirmative.
Representative Gara spoke about king salmon bycatch and
explained that many of the fish were not worth very much
because they were one to two-year-old fish that got crushed
and pulverized in the nets. He asked for the accuracy of
his statement.
Mr. Bowers responded that salmon were deemed prohibited
species on groundfish vessels; therefore, when they were
caught as bycatch they could not be legally sold. He
explained the fish were not retained for use as a food
product and were not handled the same as fish bound to
become food products.
Representative Gara remarked he had heard reports that when
some of the younger fish ended up in the huge nets were
pulverized by the time someone reached them. He noted the
issue was for another day. He asked which of the taxes
effected factory trawlers.
Mr. Burnett replied the landing tax [applied to factory
trawlers].
Representative Gara asked what type of operations were
subject to the landing tax (e.g. factory trawlers).
Mr. Burnett replied the tax applied to any fish that were
landed regardless of the type of fishing operation. He
deferred to Mr. Bowers for further detail.
Mr. Bowers expounded the tax applied to any fish processed
three miles offshore. He detailed it could include factory
trawlers, loading processors taking deliveries from catcher
vessels, freezer longliners (a number of large longliners
operated in the Gulf of Alaska and Bering Sea that catch
and process onboard), scallop catcher/processors, crab
catcher/processors, and any other vessel processing in
waters greater than three miles offshore.
Representative Gara surmised the vessels were large. Mr.
Bowers responded the smallest vessel in the category would
be around 58 feet. He expounded on his earlier answer and
relayed there were some salmon trollers that catch and
process. He detailed some of those boats were under 58
feet, but most of the boats impacted by the tax were larger
vessels due to space requirements for the processing
equipment, freezers, and crew size.
4:48:27 PM
Representative Gara asked why the state was allowed to tax
vessels if they processed their catch beyond the three-mile
offshore boundary. Mr. Bowers explained that the vessels
became subject to the tax when they moved into state waters
to offload fish. He detailed it was a common practice for
the vessels to offload fish to freighters or cold storage
facilities onshore because the boats were limited in their
freezer size.
Representative Gara asked about the current cost of running
the Division of Commercial Fisheries. He believed the cost
was between $25 million to $35 million. Additionally, he
asked for the current revenue and the bill's projected
revenue to the state for the combined fisheries taxes. He
was interested in revenue brought in compared to the cost
required to operate the Division of Commercial Fisheries.
Mr. Bowers responded that the current General Fund budget
for the Division of Commercial Fisheries was about $35
million to $36 million.
Mr. Burnett expounded that taxes generated by the
legislation would be fairly close to that amount [$35
million to $36 million] and potentially slightly higher. He
noted the revenue depended on the price of fish in the
current year and other things. The revenue coming to the
state was currently less than the amount required to
operate the division.
Co-Chair Thompson mentioned he had chaired the House
Fisheries Committee in previous years. He recalled that
vessels in the Bering Sea had to pay for observers to be
onboard the vessels. He detailed the vessels had been
allowed a certain amount of bycatch; once the vessels
reached the limit they were required to quit fishing. He
asked for comment.
Mr. Bowers agreed that most fisheries in Alaska had bycatch
caps. The most common tool to assess those caps, especially
for vessels processing at sea, were onboard observers. He
detailed observer costs were $300 to $400 per day, which
were typically borne by the vessels.
Vice-Chair Saddler encouraged committee members to give
some deference to the House Fisheries Committee, which had
some special expertise. He recommended against using the
bill as a way to fix any issues regarding allocation,
bycatch, or international issues. He reasoned the House
Finance Committee's responsibility was net profits and not
longline nets.
HB 4006 was HEARD and HELD in committee for further
consideration.
Co-Chair Thompson relayed the agenda for the following
meeting. He recessed the meeting to a call of the chair
[note: the meeting never reconvened].