Legislature(1995 - 1996)
02/19/1996 01:40 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= 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. 2 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 3 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; 4 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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