Legislature(1995 - 1996)

02/19/1996 01:40 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  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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