Legislature(2007 - 2008)HOUSE FINANCE 519
02/06/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB273 | |
| HB321 | |
| HJR2 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 273 | TELECONFERENCED | |
| + | HB 321 | TELECONFERENCED | |
| + | HJR 2 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 321
An Act relating to the salmon product development tax
credit; providing for an effective date by amending an
effective date in sec. 7, ch. 57, SLA 2003, as amended
by sec. 4, ch. 3, SLA 2006; and providing for an
effective date.
REPRESENTATIVE BILL THOMAS, SPONSOR, noted that the Salmon
Product Development Tax Credit encourages and accelerates
the development and production of value added salmon
products in Alaska by providing an economic incentive to the
investments in new technology and equipment. He explained
that HB 321 provides a recommended sunset extension for an
additional 3 years. The original expiration date was
December 31, 2008. The tax credit applies to the fisheries
business tax paid by the processors. It allows processers
to claim up to 50% of the costs. The dollars must be
predominately used for salmon and value-added product. The
bill allows for innovative marketing of salmon products.
Representative Thomas pointed out that during the Salmon
Task Force meeting, the market condition and prices were
low, competing with farmed salmon. As a result of some
other efforts and the drafting of the bill that trend is
changing. He indicated strong support for the program,
which is of value for the communities and the statewide
economy. He urged passage of the tax extension.
IAN FISK, STAFF, REPRESENTATIVE BILL THOMAS, clarified the
changes made in the committee substitute and put forward by
the Fisheries Committee. He referenced Page 2, Lines 11-12,
language relating to conveyers:
"(iii) Conveyors used specifically in the act of
producing a value-added salmon product;"
A conveyer is equipment, which often is integral to value-
added salmon processing. The language should have been
included as intent, passing from the Task Force. Language
on Page 2, Lines 14-15, was requested by the Department of
Revenue, to prevent any misunderstanding regarding the use
of the equipment:
"(i) vehicles, forklifts, conveyors not used
specifically in the act of producing a value-added
salmon product,"
Mr. Fish commented that for small processors, conveyors can
be important equipment and should be included in the
program.
He referenced language on Page 2, Section 3, Line 24, taken
from the original bill:
"*Sec. 3. AS 43.75.035 is amended by adding a new
subsection to read:"
The language indicates a procedure for preliminary
determination for eligibility, suggesting it would be a
logical addition to the program.
Representative Hawker asked if the Representative Thomas was
in agreement with the amendments made during the committee
process. Representative Thomas replied yes.
MARY MCDOWELL, VICE PRESIDENT, PACIFIC SEAFOOD PROCESSORS
ASSOCIATION (PSPA), JUNEAU, stated that three of PSPA's
member companies are salmon processors - Peter Pan Seafoods,
Alaska General Seafoods and North Pacific Seafoods. All
three companies have made good use of the salmon product
development tax credit, working with the program goals
including development & expansion of new and value-added
salmon products while keeping Alaska fishery market
competitive in the world market.
Ms. McDowell noted letters of support in the Committee file
from the processors, outlining the benefit of the credit.
She pointed out that the Legislature had tightly constructed
the program so that it could achieve the goals set forth.
That has proven successful.
Ms. McDowell added there is more to do to continue the
momentum of the program to insure that the product stays
competitive. Currently, skyrocketing energy costs are
eating up profits. Processors for the most part operate in
rural communities where energy costs are the highest; the
profit margins could otherwise be invested in equipment.
The tax credit encourages processors to move ahead. The
value-added product keeps Alaska's fish competitive in the
world market, which in turn benefits fishermen and
communities. Ms. McDowell anticipated that the investment
will pay for itself.
Representative Gara asked how the tax is calculated and the
anticipated annual revenue generated. He also asked the
amount being credited. Co-Chair Meyer requested the
question be held until public testimony was closed.
TOM SUNDERLAND, MARKETING DIRECTOR, OCEAN BEAUTY SEAFOODS,
testified in support of HB 321. He pointed out that Ocean
Beauty is an Alaskan owned corporation, 50% owned by the
Bristol Bay Economic Development Corporation (BBEDC) and 50%
owned by fishermen. The corporation operates only as a
shore-based operation.
Mr. Sunderland continued, Ocean Beauty provides direct
incentive for value-added fish and how to improve the
quality of that product. He provided background on the
original bill. Companies only have a certain ability to
expand their plans. Ocean Beauty has taken advantage of the
tax credit. Ultimately, the plan is to improve the value-
added equipment. He acknowledged that many improvements are
necessary requiring the use of tax credits. He emphasized
that long-term economics for passage of the bill remain
strong, while outlined specific costs. He believed that the
credits have the benefit of rising the value of the fishery
and that raising taxes at the same time could create better
& higher paying jobs for the State of Alaska.
Representative Gara questioned if Ocean Beauty makes
investments because they know they can receive a tax credit.
Mr. Sunderland said they have. Representative Gara asked to
receive an estimate of projects that would not have been
done if the company had not received the tax credit. Mr.
Sunderland expected it would have been half of what was
accomplished.
Vice-Chair Stoltze stated that previously, he had not
supported the bill. He asked if a short season would impact
the tax credit. Mr. Sunderland asserted that a short season
impacts everything; it is difficult to amortize costs when
the season is short.
Representative Gara reiterated his request to get the
numbers of estimated projects pending receipt of the credit.
Mr. Sunderland said he did not know but imagined that the
rate of growth was 50% higher.
3:06:07 PM
Representative Kelly referenced the flow chart credit
indicator and asked about those numbers. [Attachment not
Available]. Mr. Sunderland pointed out that processors
using credit, don't always get their projects approved. He
understood that there have been disputes over syntax of the
language, which has resulted in the inclusion of
modifications for a binding predetermination.
PUBLIC TESTIMONY CLOSED.
Representative Gara requested a review by the Department of
Revenue for how the credit system works and the amount it
generates for the State.
TIM COTTONGIM, FISH GROUP MANAGER, TAX DIVISION, DEPARTMENT
OF REVENUE, provided members a chart, "Salmon Product
Development Tax Credits, Calendar years 2003-2006". (Copy
on File). The handout indicates the amount of credits
allowed. The tax is imposed on anyone that processes raw
resources in the State for purposes of resale. The
mentioned tax credit is specifically for salmon processed in
the State and can only be claimed for 50% of the tax on the
salmon processed in Alaska. The spreadsheet indicates that
approximately $2.8 million dollars in credits have been
claimed each year.
Representative Gara asked if the $2.8 million dollars in
FY06, was a reduction in the tax or dollars that would
qualify for the 50% tax credit. Mr. Cottongim replied it
had been generated and would qualify.
Representative Gara referenced the $1.4 million dollars
taken off the total tax, leaving the number for the Salmon
Processing Tax.
3:13:00 PM
DAN STICKEL, ECONOMIST, DEPARTMENT OF REVENUE, explained
that the total investment expenditures that qualified for
the tax in FY06 was $5.8 million dollars. That amount
resulted in $9 million dollars in credits claimed. A final
audit has not occurred; however, it is anticipated that the
total credits allowed will be around $2 million dollars.
Representative Gara asked the approximate amount of the
Salmon Processing Tax. Mr. Stickel replied that for FY06,
there was approximately $12.7 million dollars fisheries tax
received.
3:14:31 PM
Representative Kelly inquired if the credit was still
needed.
Representative Thomas understood that in order to continue
forward with product development, the legislation needs to
pass. He advised, when equipment is purchased, it becomes
taxed by local borough assemblies. The processors continue
to pay property tax on the equipment.
Co-Chair Meyer noted the new fiscal note.
Vice-Chair Stoltze MOVED to REPORT CS HB 321 (FSH) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
3:17:10 PM
CS HB 321(FSH) was reported out of Committee with a "do
pass" recommendation and with a new fiscal note by the
Department of Revenue.
3:17:52 PM
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