Legislature(1995 - 1996)

01/17/1996 05:04 PM FSH

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HB 396 - FISHERIES RESOURCE LANDING TAX                                      
 HB 397 - SEAFOOD MARKETING ASSESSMENT                                         
 CHAIRMAN ALAN AUSTERMAN announced that the agenda was HB 396 and              
 HB 397.  He added that since the calendar was published, a                    
 sponsor substitute for HB 397 (SSHB 397) was introduced which                 
 combined HB 396 and HB 397 into one bill.                                     
 Number 090                                                                    
 REPRESENTATIVE KIM ELTON moved that the committee take up SSHB
 Number 109                                                                    
 Hearing no objections, CHAIRMAN AUSTERMAN announced that the                  
 committee would address SSHB 397 and introduced Amy Daugherty.                
 Number 150                                                                    
 AMY DAUGHERTY, Committee Aide, House Special Committee on                     
 Fisheries, Alaska State Legislature, provided information on SSHB
 397.  She said that SSHB 397 was designed to more precisely align             
 the current fisheries resource landing tax with the fisheries                 
 business tax and the Alaskan Seafood Marketing Institute (ASMI)               
 assessment.  She stated that SSHB does this by clarifying the                 
 landing tax as an occupational tax and equalizes tax rates and                
 credits with the fisheries business tax.                                      
 MS. DAUGHERTY said that the legislation came about through                    
 discussions with the Department of Revenue (DOR) about the legal              
 challenges affecting the landing tax and its revenues, and of the             
 need to clarify the intent of this tax by aligning the landing                
 tax with the fisheries business tax.  She provided some history               
 to SSHB 397 stating, prior to January 1, 1994 offshore fishery                
 resources were not subject to any Alaska fishery tax.  She added              
 that these revenues were important to the state and to the                    
 sharing communities who are impacted by the offshore fisheries.               
 Number 292                                                                    
 REPRESENTATIVE GARY DAVIS asked for a brief outline, of the two               
 taxes and revenues from those taxes, from the DOR.                            
 Number 335                                                                    
 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit                     
 Division, DOR, provided information about current taxes involving             
 the fishing industry.  He said the fisheries resource landing tax             
 was instituted in 1994 to establish a tax comparable to the tax               
 that was implemented and revised since the early 1900s for those              
 who fished within the three mile limit.  Until 1994, resources                
 that were caught outside the three mile limit and brought inside              
 the three mile limit, had not been subject to any tax despite the             
 fact that they used state and local resources.  The Alaskan state             
 legislature enacted the 1994 Fisheries Landing Tax, including an              
 assessment for ASMI within one statutory reference.  The                      
 industry, that was subject to the tax, took it Superior Court and             
 then to the Supreme Court.  The Supreme Court ruled that the                  
 industry needed to use the administrative appeal process within               
 the DOR.  He said the affected industry was currently in this                 
 Number 473                                                                    
 MR. BARTHOLOMEW said the affected industry challenged the                     
 fisheries resources landing tax by saying it was not a business               
 but a property tax whereas the DOR felt that it was similar to                
 the fisheries business tax already in place.  He said the intent              
 of SSHB 397 was to tax all businesses benefiting from Alaskan                 
 resources.  He said the DOR supports the legislation to improve               
 the statutes and added that the DOR had a zero fiscal note                    
 because it has a negligible impact on the taxpayer or on the DOR.             
 He said SSHB 397 clarifies how the tax works and it's intent.                 
 MR. BARTHOLOMEW said that SSHB 397 adds, under the fisheries                  
 landing resources tax, the ability to take an education credit.               
 The other fishery business tax allows tax credits for                         
 contributions to certain educational institutions.  He said it                
 makes sense for both taxes to have an education credit.  SSHB 397             
 allows for a lower rate on development of fisheries which amounts             
 to less than two-tenths of 1 percent of the resources that are                
 caught.  It does allow a lower rate for resources that are                    
 determined to be developed by the Department of Fish and Game.                
 SSHB 397 adjusts the sharing provisions to make sure that it                  
 aligns up with the other changes that are taking place so that it             
 doesn't reduce or change that amount of money shared with local               
 MR. BARTHOLOMEW said that currently the landing tax and an ASMI               
 assessment are combined into one rate of 3.3 percent.  The                    
 fisheries business tax,  which is a separate tax on resources                 
 caught within the three mile limit, has a 3 percent rate and then             
 under a separate statute the DOR accesses a ASMI assessment of .3             
 percent.  The legislature in the 1994 fisheries resources landing             
 tax combined those two rates into one statute for a total of 3.3              
 percent.  One of the contentions of the industry is that the DOR              
 is taxing resources caught outside the state boundary at a higher             
 rate because of this inclusion of the ASMI assessment rate.  SSHB
 397 reduces the fishery landing tax in the statute from 3.3                   
 percent to 3 percent.  The ASMI statute would then institute a .3             
 percent ASMI assessment.                                                      
 Number 731                                                                    
 REPRESENTATIVE G. DAVIS asked for more details on the Supreme                 
 Courts decision to refer the industries complaint back to the                 
 Number 743                                                                    
 MR. BARTHOLOMEW said that under the tax codes there is a process              
 put into the statutes and regulations for a taxpayer to appeal.               
 If the taxpayer feels he/she has been treated unfairly, there is              
 an informal level where it is reviewed by appeals officers, of                
 the Income and Excise Audit Division of the DOR, who issue a                  
 ruling.  After that process there is a second level called the                
 formal hearing level which is currently in the commissioners                  
 office.  At this point a hearing officer will take a second look              
 at their case and rule one way or the other.  The last avenue of              
 appeal, if he/she still feels the two reviews have been unfair,               
 is to go back to court.  Historically the courts have always                  
 ruled that when statutes authorize an administrative process a                
 taxpayer must first go through this process.  The fishing                     
 industry who opposes the fishery resources landing tax is at this             
 informal level.                                                               
 Number 817                                                                    
 REPRESENTATIVE G. DAVIS asked if the Supreme Court responded to               
 any constitutional issues.                                                    
 Number 829                                                                    
 MR. BARTHOLOMEW said that the court did not address                           
 constitutional issues, but wanted the specific issues defined in              
 the administrative appeals level.                                             
 Number 848                                                                    
 REPRESENTATIVE G. DAVIS addressed concern about skirting the                  
 dedicated tax issue in many areas and departments in the state.               
 He added that he does not have any problem with SSHB 397.                     
 CHAIRMAN AUSTERMAN asked what Representative Davis was referring              
 to as dedicated taxes.                                                        
 REPRESENTATIVE G. DAVIS said he was referring to the .3 percent               
 ASMI assessment.  He said that anything outside income received               
 to the states general fund would be deemed as a dedicated tax.                
 Number 901                                                                    
 REPRESENTATIVE ELTON addressed Representative Davis' concern by               
 saying that there is no dedication to ASMI.  In the last 15 years             
 money has been collected, especially from the volunteer processor             
 tax, and returned to the taxpayers in the form of seafood                     
 marketing.  He said there is a moral obligation to pay this tax               
 but not a dedication to that fund.  Representative Elton stated               
 that there is nothing allowing this committee to reappropriate                
 that money to ASMI.                                                           
 Number 999                                                                    
 There being no further discussion on SSHB 397, REPRESENTATIVE                 
 ELTON made a motion to move SSHB 397 out of the House Special                 
 Committee on Fisheries with individual recommendations.  Hearing              
 no objection, it was so ordered.                                              

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