Legislature(2019 - 2020)BUTROVICH 205
03/13/2020 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| SB184 | |
| SB130 | |
| SB232 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SJR 15 | TELECONFERENCED | |
| *+ | SB 184 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 130 | TELECONFERENCED | |
| += | SB 232 | TELECONFERENCED | |
SB 130-SEAFOOD PRODUCT DEVELOPMENT TAX CREDIT
3:46:54 PM
CHAIR MICCICHE announced that the next order of business would
be SENATE BILL NO. 130, "An Act relating to a seafood product
development tax credit; providing for an effective date by
repealing secs. 32 and 35, ch. 61, SLA 2014; and providing for
an effective date."
3:47:11 PM
TIM LAMKIN, Staff, Senator Gary Stevens, Alaska State
Legislature, Juneau, Alaska, explained that SB 130 is truly a
direct economic policy that the State has used for some time.
The intent is to support the long-term development of Alaska's
value-added seafood processing industry, specifically targeting
both salmon and herring fisheries.
He said the historical incentive has been processor tax credits
for salmon and herring fisheries to provide infrastructure and
research and development investment for added-value product
improvements or discoveries.
MR. LAMKIN detailed that the bill would extend the sunset for
the tax credit and broaden its scope to include pollock and cod.
The change will grow market demand for Alaska's quality
byproducts rendered from salmon, herring, pollock, and cod.
He said there may be amendments to the bill to include tax
credits for other fisheries such as perch, flounder, and others.
Extending the tax credits and incentives to find added-value
technology for all of Alaska's seafood is a topic for future
conversations.
MR. LAMKIN noted that United Fishermen of Alaska (UFA) submitted
a letter of support for SB 130.
CHAIR MICCICHE asked him to proceed with the sectional analysis.
3:49:36 PM
MR. LAMKIN provided the following sectional analysis of SB 130:
Sec. 1: AS 43.75.035(b)(1) and (2), relating to tax
credits applied to value-added activity for the
processing of salmon and herring products, (1)
adds the fisheries of pollock and cod as
applicable for the tax credit; and (2) extends
the sunset of the applicable tax credits through
year 2025.
Sec. 2: AS 43.75.035(c), conforming amendment, relating
to applying a tax credit for investment equipment
used to process salmon or herring, to include
equipment used for processing pollock and cod.
Sec. 3: AS 43.75.035(d), conforming amendment, relating
to a 3-year carry-forward of unused tax credits
for the processing of salmon and herring, adds
the same carry-forward of tax credits to be
applicable for pollock and cod processing.
Sec. 4: AS 43.75.035(e), relating to the 50 percent of
liability cap on applicable tax credits, is legal
drafting statutory clean-up, deleting a
duplicative and redundant clause already
contained in Section 1 of the bill.
Sec. 5: AS 43.75.035(g), conforming amendment, relating
to state claw-back of a carry-forward tax credit,
in the event an asset used for the processing of
salmon or herring to which a carry-forward
applies, if the asset is removed from the state,
adds pollock and cod in determining qualified
investment of processing within the state.
Sec. 6: AS 43.75.035(j)(3), conforming amendment,
relating to the definition of "qualified
investment" under this tax credit program, adds
investment in assets used for processing pollock
and cod products.
Sec. 7: AS 43.75.035(j)(6), conforming amendment,
relating to the definition of "value-added"
products under this tax credit program, adds
processing of pollock and cod byproducts.
Sec. 8-11: Are historical sunset dates and repealers of
this tax credit program, consolidating all of the
various sunset provisions of the program into a
single sunset, occurring now in section 8, and
set for Jan. 1, 2026.
Sec. 12: Sets an effective date for the bill of Jan. 1,
2021.
3:53:31 PM
SENATOR KAWASAKI asked if there is any metric to prove that the
tax credit has the intended result of increased investment in
value-added products for those fisheries.
MR. LAMKIN directed attention to the analysis section of the
fiscal note that describes the economic activity that has
resulted from the program. He deferred any discussion of the
specifics to the industry.
3:54:23 PM
SENATOR GARY STEVENS, Alaska State Legislature, Juneau, Alaska,
sponsor of SB 130, explained that the legislation to address out
of state competition that was affecting the salmon and herring
fisheries passed in 2002 or 2003. He said that program has been
very successful and he believes the tax credit will be similarly
beneficial to the pollock and cod fisheries.
CHAIR MICCICHE asked Mr. Spanos about the timing if there is no
fiscal note for FY2021 but the sunset splits that fiscal year.
3:55:40 PM
BRANDON SPANOS, Deputy Director, Tax Division, Alaska Department
of Revenue, Anchorage, Alaska, explained that the tax return is
filed the year following the catch so there would not be a
reduction as a result of the credit until the following year.
CHAIR MICCICHE said he assumes that there would not be an
interruption in the tax credit because of the previous sunset
date.
MR. SPANOS answered that's correct. If the tax credit sunsets,
the processors can still claim their credit in FY2021.
CHAIR MICCICHE asked if he had testimony on the bill.
MR. SPANOS stated that the writeup in the division's fiscal note
estimates the reduction though the indirect expenditure for
FY2022-FY2026. It takes into account the historic credit amounts
for salmon and herring as well as an estimate for the new
species, pollock and cod.
CHAIR MICCICHE noted that the fiscal note increases from $3.6
million up to $6.6 million in FY2026. He asked what the
division's methodology is to assume an investment increase.
MR. SPANOS answered that the assumption is that the industry
will spend the money immediately and increase spending in later
years. The estimate ranges between $3.6 million to $6.6 million.
3:58:34 PM
CHAIR MICCICHE asked Senator Stevens if he had any closing
comments.
SENATOR STEVENS said the tax-credit policy passed many years ago
and it was very effective in helping the salmon and herring
industry move ahead. SB 130 is an extension that would also
apply to pollock and cod. The tax-credit policy made an enormous
difference in the industry by allowing fishermen to put in new
engines and processors to put in new lines. He said his hope is
that the bill will have a similar impact on pollock and cod.
CHAIR MICCICHE said that as a fisherman, he has witnessed the
industry substantially increase its value-added products as a
result of the investment from the tax credit. He noted that the
fishermen have received more value for the prices as well.
4:00:28 PM
CHAIR MICCICHE opened public testimony.
4:00:43 PM
CHRIS BARROWS, President, Pacific Seafood Processors
Association, Tacoma, Washington, testified in support of SB 130.
He said SB 130 would provide Alaska seafood processors with the
ability to continue to receive some capital cost recovery in
exchange for investing in new equipment that produces value-
added products in Alaska. The bill incentivizes getting more
value out of each fish, which in turn provides greater benefit
to the State of Alaska, the coastal communities, fishermen, and
processors.
MR. BARROWS stated that expanding the list of tax-credit
eligible species to include Alaska pollock and Pacific cod is
important. He noted that the two species comprise about 69
percent of the statewide harvest by volume, based on 2018
numbers. Getting more value long term from the high value
species is a benefit to all fishery participants and the State
of Alaska.
He shared that the Pacific Seafood Processors Association (PSPA)
is comprised of eight major seafood companies that purchase fish
from harvesters from Ketchikan to Unalaska and St. Paul. In
turn, PSPA produces value-added products and provides markets
for Alaska fisheries in a global context. The PSPA companies
operate 25 facilities in 15 coastal communities across Alaska
and 3 floating processors that serve remote locations.
MR. BARROWS said seafood processors have used the existing
salmon tax credit to make critical investments in processing
technologies for salmon that would otherwise be cost prohibitive
for some processors. The tax credit has changed the face of
salmon processing to an increase in fillet and other value-added
salmon products that have a strong U.S. market. A higher value
product means a higher return on investment for the State and
all participants, including fish taxes which are based on fish
value.
He stated that part of the sustainability effort in Alaska is to
increase and improve the utilization of each fish which in turn
generates more value out of the state's resources. He said there
is no better way to increase the value of Alaska's resources
then to increase the utilization of harvested fish. Some other
examples include using milt, roe, stomachs, bellies, fish oil,
bones and skins that generated new products and new consumers of
Alaska seafood.
He summarized that reauthorizing the value added tax credit and
including cod and pollock in the reauthorization will help
Alaska producers continue progressing and expanding more fully
into other species.
4:04:24 PM
JERRY MCCUNE, Board President, Cordova District Fishermen
United, Cordova, Alaska, testified in support of SB 130. He
noted that when the legislation first passed, farmed fish
flooded the market and Alaska was just putting out frozen fish.
The industry's use of fillet machines is a result of the tax
credit. It applies strictly to value added, not something like a
new forklift.
MR. MCCUNE concluded saying that adding cod and pollock is
probably a good thing for applying tax credits to different
things.
4:05:44 PM
FRANCIS LEACH, Executive Director, United Fishermen of Alaska,
Juneau, Alaska, stated support for SB 130. She said the bill
will provide Alaska's seafood processors with the ability to
receive capital cost recovery for investing in new equipment to
produce value-added products. New and innovative products will
benefit Alaska's processors, fishermen, and coastal communities.
She recalled that the legislature enacted the seafood product
development tax credit when salmon and herring prices were
extremely low. It helped the processing sector to upgrade
infrastructure and develop new and innovative products. She
added that UFA appreciates the bill extending the tax credit to
benefit pollock and cod during an industry downturn.
MS. LEACH summarized that the seafood product development tax
credit is helpful to processors. The tax credit has shown in the
past, through innovative and updated equipment, to increase the
raw fish taxes revenue. Fish taxes are based on fish value and
the more money derived from fish equates to more money for
Alaska.
4:07:30 PM
CHAIR MICCICHE announced that public testimony remains open.
4:07:41 PM
CHAIR MICCICHE held SB 130 in committee.