Legislature(2021 - 2022)ADAMS 519
03/29/2022 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB33 | |
| HB265 | |
| HB296 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 265 | TELECONFERENCED | |
| + | HB 296 | TELECONFERENCED | |
| + | HB 291 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 33 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 33(FIN)
"An Act relating to a fisheries product development
tax credit; and providing for an effective date."
1:33:53 PM
SENATOR GARY STEVENS, SPONSOR, thanked the committee for
hearing the bill. He explained that the bill was a value-
added bill which would allow seafood processors to use a
tax credit to purchase new equipment for their business. He
relayed that the process had worked well in the past and
there had been a similar program for salmon and herring
processing that started in 2003. However, the program came
to an end in 2020 because it was not extended. The bill
restored the salmon and herring tax credit that had become
obsolete and would also make pollock, pacific, and sable
fish products eligible for the credit. He reiterated that
the program had worked well in the past and suggested that
it would also work well in the future.
Co-Chair Merrick noted that Representative Rasmussen had
joined the meeting.
1:35:20 PM
MARK PALMER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, OBI
SEAFOODS (via teleconference), wanted to discuss the
benefits of the tax credits. He indicated that the erosion
of the trade market in China due to hostile trade policies
had dramatically impacted the amount of raw material that
the United States could export. He shared that the Chinese
market had been the largest market for seafood products
from Alaska. As this changed, his business had become more
reliant on the domestic market and the European market. He
perceived these markets to be higher value, and thought it
was important to market Alaskan seafood products to them.
He thought there was more reason to target domestic markets
rather than exporting Alaskan fish. He explained that
Russian seafood products could no longer be imported into
the United States due to the war in Ukraine. This gave
Alaska an opportunity to replace Russian seafood in the
domestic and European markets. The tax credit proposed by
the bill would allow new infrastructure to be built in
Alaska. However, much of the money that OBI Seafoods
invested into projects was the company's own money, which
benefited the local communities and the fishermen. He
echoed Senator Stevens' comments that the program had
worked well in the past.
1:39:11 PM
ABBY FREDRICK, DIRECTOR OF COMMUNICATIONS, SILVER BAY
SEAFOODS (via teleconference), had submitted a letter of
support for the bill and did not need to make an additional
statement.
1:40:05 PM
Co-Chair Merrick OPENED public testimony.
1:40:19 PM
Co-Chair Merrick CLOSED public testimony.
1:40:26 PM
AT EASE
1:42:59 PM
RECONVENNNED
Co-Chair Merrick indicated the committee would be hearing
amendments for SB 33.
1:43:10 PM
Representative Wool MOVED to ADOPT Amendment 1, 32-
LS0308\N.6, Nauman, 3/14/22 (copy on file):
Page 3, line 14, following "section":
Insert "(I)"
Page 3, line 16:
Delete". For"
Insert "; for"
Page 3, line 17:
Delete "subsection"
Insert "paragraph"
Page 3, line 18, following "appeal":
Insert "; or
(2) for property that is the same type of
property as, or that is comparable to, property
(A) on which a tax credit has been
claimed under this section;
(B) that has been removed from the
state; and
(C) that was purchased in the previous
10 years"
Co-Chair Merrick OBJECTED for discussion.
Representative Wool explained that Amendment 1 was a back-
stop amendment. He drew attention to Section 1 on page 3 of
the bill, which discussed recapture percentage. His
amendment stated that if an entity purchased a piece of
equipment, the entity would get a full 50 percent tax
credit after four years for the purchased equipment.
However, the entity could not buy a replacement for the
piece of equipment for 10 years. This would prevent
companies from buying equipment in Alaska and receiving a
tax credit after four years, shipping the equipment to a
different state, and buying a new piece of equipment and
repeating the process.
Representative Wool MOVED to ADOPT conceptual Amendment 1
to Amendment 1.
Co-Chair Merrick OBJECTED for discussion.
Representative Wool explained conceptual Amendment 1 to
Amendment 1. He referenced line 14 through line 15 [of
Amendment 1] and proposed removing language to ensure that
if an entity purchased the same type of equipment for which
it had already received a tax credit, it could not receive
an additional tax credit for another 10 years. Starting on
line 14 of Amendment 1, he proposed deleting: "as, or that
is comparable to, property".
Representative LeBon asked a clarifying question.
1:46:03 PM
AT EASE
1:46:43 PM
RECONVENED
Representative Wool reiterated that conceptual Amendment 1
to Amendment 1 proposed the deletion of language beginning
on line 14 of Amendment 1.
Co-Chair Merrick WITHDREW her OBJECTION.
There being NO further OBJECTION, it was so ordered.
conceptual Amendment 1 to Amendment 1 was ADOPTED.
1:47:31 PM
Representative LeBon asked if a business would be entitled
to receiving another tax credit if it shipped a piece of
equipment out of state and replaced the equipment four
years after receiving a tax credit for the equipment.
Representative Wool responded in the affirmative. An entity
would only be eligible to receive the tax credit for the
same type of equipment every 10 years, but there would be
no limit on the amount of equipment a company could
purchase. However, this was only applicable for
replacements. If an entity had an ice machine and purchased
an additional ice machine, it would still receive the tax
credit.
Representative LeBon wondered whether an entity could
purchase a new and improved ice machine and replace the
original and still qualify for the tax credit.
Representative Wool responded that if it was the same type
of property, it would not be eligible for the credit.
Representative LeBon wanted to not discourage the upgrading
of equipment.
Representative Wool agreed and did not think an upgrade in
technology would be the same. He thought it would still
qualify for the tax credit because the upgrades would make
the equipment a new type of machinery. That is why he chose
the language "same type" to ensure that different types of
equipment would remain eligible.
Co-Chair Merrick WITHDREW her OBJECTION to the original
Amendment 1 as amended.
There being NO further OBJECTION, it was so ordered.
Amendment 1 was ADOPTED as amended.
Co-Chair Merrick indicated Amendment 2 would not be
offered.
1:50:01 PM
Vice-Chair Ortiz MOVED to ADOPT Amendment 3, 32-LS0308\N.9,
Nauman, 3/23/22 (copy on file):
Page 2, line 23:
Delete "A"
Insert "Except as provided in (f) of this
section, a"
Page 3, line 9, following "service.":
Insert "In this subsection, "eligible fish" does
not include pollock, sablefish, or Pacific cod."
Page 3. line 14, following "section":
Insert "(1)"
Page 3, line 16:
Delete ". For"
Insert "; for"
Page 3, line 17:
Delete "subsection"
Insert "paragraph"
Page 3, line 18, following "appeal":
Insert "; or
(2) for property installed on a vessel used
primarily to process pollock, sablefish, or Pacific
cod"
Page 4, line 27, following "means":
Insert ", except as otherwise provided in (c) of
this section,"
Co-Chair Merrick OBJECTED for discussion.
Vice-Chair Ortiz asked Mr. Tim Lamkin to review the
amendment.
TIM LAMKIN, STAFF, SENATOR GARY STEVENS, reviewed the
amendment. He indicated that Amendment 3 addressed a
hypothetical loophole that a value-added tax credit could
be applied to processing activities in the facilities that
produced pollock, cod, or sablefish aboard vessels outside
of state waters. The amendment would ensure that processors
of the aforementioned fish would have to process the fish
at onshore processing facilities to qualify for the tax
credit.
1:51:44 PM
Representative Josephson shared his understanding that the
tax in question brought in around $50 million to the state.
He asked if this number was correct.
Senator Stevens deferred to Ms. Nicole Reynolds.
1:52:25 PM
NICOLE REYNOLDS, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE (via teleconference), responded that the tax
collections for the fisheries business tax over the past
four fiscal years (FY) ranged between $34.6 million and
$46.2 million.
Representative Josephson reported that historically the
credit had been in the low millions of dollars. He wondered
about the impact of the proposed reform on the growth of
the credit and the tax.
Senator Stevens deferred to Ms. Reynolds.
Ms. Reynolds replied that the historic value of the credit
between 2017 and 2020 ranged between $2.3 million and $4.4
million. She referred to the fiscal note submitted by the
Department of Revenue (control code slwkY) and explained
that the department used historical value and utilization
rates of the existing salmon and herring credits to
estimate the way in which the revenue would be impacted by
adding pollock, cod, and sablefish to the eligibility. For
FY 23, the department estimated a negative $1.6 million for
the credit. Between FY 24 through FY 27, the department
estimated between $3 million and $3.6 million.
1:54:54 PM
Representative Josephson suggested that the tax might
increase as value was added to the product.
Ms. Reynolds responded that the value reflected the value
of the raw resource. The tax was not applied to the value-
added portion.
Representative Josephson thought, "it is what it is."
Ms. Reynolds noted that the tax revenue was not expected to
increase due to the credit.
Representative Wool asked about the total for fish business
taxes.
Ms. Reynolds responded that the fisheries business tax
revenue ranged between $34.6 million and $46.2 million over
the last four fiscal years.
Representative Wool shared his understanding that half of
the taxes went to municipalities and half went to the
state. He asked whether the credit only applied to the
state's portion. He calculated that that $34.6 million to
$46.2 million would become roughly $17 million to $23
million for the state.
Ms. Reynolds replied, "that's correct."
1:57:42 PM
Co-Chair Merrick WITHDREW her OBJECTION.
There being NO further OBJECTION, it was so ordered.
Amendment 3 was ADOPTED.
Vice-Chair Ortiz MOVED to report HCS CSSB 33(FIN) out of
Committee with individual recommendations and the
accompanying fiscal note. There being NO further OBJECTION,
it was so ordered.
HCS CSSB 33(FIN) was REPORTED out of committee with seven
"do pass" recommendations and with one "no recommendation"
recommendation and with one previously published fiscal
impact note: FN2(REV).
1:58:10 PM
AT EASE
2:00:05 PM
RECONVENED