03/30/2001 01:58 PM House RES

HB 154-COLLECTION OF FISHERY BUSINESS TAXES                                                                                   
                                                                                                                                
CO-CHAIR SCALZI  announced that  the next  order of  business was                                                               
HOUSE BILL NO. 154, "An Act  relating to security for the payment                                                               
of fishery business  taxes and to payment  of estimated fisheries                                                               
resource  landing taxes  and penalties."   [Before  the committee                                                               
was CSHB 154(FSH), version 22-LS0638\J.]                                                                                        
                                                                                                                                
[There was a motion to adopt  HB 154 for discussion purposes, but                                                               
it was already before the committee.]                                                                                           
                                                                                                                                
CO-CHAIR SCALZI, speaking as the  sponsor, gave an overview on HB
.  He indicated that since  statehood, the State of Alaska has                                                               
"offered  up" a  raw  fish  tax to  collect  money for  fisheries                                                               
resources.    He explained  that  currently  fish processors  are                                                               
allowed to hold  that money until April 1 of  the following year.                                                               
Furthermore, to  secure the state's  interest in this,  the state                                                               
and the Department  of Revenue allows the fish  processor to hold                                                               
that money, provided  the processor puts up a bond  in the amount                                                               
of money equal to the estimated  tax, based on the previous year,                                                               
or to  post a real  property bond three  times the amount  of the                                                               
raw fish tax from the previous year.                                                                                            
                                                                                                                                
CO-CHAIR SCALZI continued:                                                                                                      
                                                                                                                                
     When  we  went  to  [an]  IFQ  fishery  for  halibut  -                                                                    
     "individual  fishing quota"  - what  we ended  up doing                                                                    
     was creating  a new business,  and it was  a fresh-fish                                                                    
     business.   In moving fresh  fish, a buyer may  buy and                                                                    
     sell a  lot of product in  the year.  But  because they                                                                    
     do not  have a processing  facility, they do no  have a                                                                    
     lot  of assets.   So,  therefore, there  was a  problem                                                                    
     here with  these fresh-fish buyers  actually collecting                                                                    
     quite  a bit  of  fish  tax, say,  in  the hundreds  of                                                                    
     thousands of  dollars, and under  our current  law they                                                                    
     would be subject to having  to bond for the amount that                                                                    
     they collected  the previous  year, or  have "lienable"                                                                    
     property three times ... the amount.                                                                                       
                                                                                                                                
CO-CHAIR  SCALZI said  HB 154  was drafted  by the  Department of                                                               
Revenue to  make sure  that the State  of Alaska's  interests are                                                               
secure.  He  highlighted that the bill allows  a fresh-fish buyer                                                               
- not a processor  - to be able to pay the  raw-fish tax "as they                                                               
go."  Although Co-Chair Scalzi  used the term "monthly" payments,                                                               
he explained that they would actually  be made on a 45-day cycle.                                                               
He added  that, under  this plan, the  participant would  have to                                                               
post  a $50,000  bond,  or $100,000  in  "lienable" property,  to                                                               
secure the monthly collection of that tax.                                                                                      
                                                                                                                                
NEIL SLOTNIK, Deputy  Commissioner, Treasury Division, Department                                                               
of Revenue,  pointed out that  Section [3] of the  bill addresses                                                               
the landing tax,  which is different from  the fisheries business                                                               
tax that  is addressed in  Section 1 of  the bill.   He specified                                                               
that  the only  change  being  made to  the  landing  tax was  to                                                               
provide for  quarterly estimated  payments.  Mr.  Slotnik defined                                                               
the  landing tax  as the  tax that  "is incurred  by the  factory                                                               
trawlers  [who]  catch  and  process  fish  outside  of  Alaska's                                                               
jurisdiction, but  then bring it in  and actually land it  in our                                                               
waters."  He added that  unlike the situation under the fisheries                                                               
business tax  whereby a  license is issued,  there is  no license                                                               
and no security for the landing-tax taxpayers.  He continued:                                                                   
                                                                                                                                
     We  have always  provided by  regulation for  quarterly                                                                    
     estimated  payments,  but  there was  no  corresponding                                                                    
     provision in statute.   And ... we  thought since we're                                                                    
     making a  change here, in  the fisheries  business tax,                                                                    
     for  monthly payments  for  certain  taxpayers, ...  we                                                                    
     ought to  make sure  that our regulations  and statutes                                                                    
     are in line on the  fisheries landing-tax provision, as                                                                    
     well.                                                                                                                      
                                                                                                                                
Number 1181                                                                                                                     
                                                                                                                                
REPRESENTATIVE FATE referred to  the $50,000 bonding and inquired                                                               
how much it would cost the individual.                                                                                          
                                                                                                                                
MR. SLOTNIK  said, as he  understood it,  the amount would  be 10                                                               
percent, which equals $5,000.                                                                                                   
                                                                                                                                
REPRESENTATIVE FATE  commented that  some fishermen on  the Yukon                                                               
River "don't make $200."                                                                                                        
                                                                                                                                
MR.  SLOTNIK answered  that  the change  being  made through  the                                                               
language  of HB  154 actually  lessens the  security requirement,                                                               
but will most likely only apply  to brokers "who move fish out of                                                               
state."  He said he understood  that the fish processors, to whom                                                               
Representative Fate  referred, usually post a  CD [certificate of                                                               
deposit] and keep  the interest earned on that.   He added, "They                                                               
... don't  necessarily incur the  cost of bonding that  they have                                                               
to pay to the  bank if they post a CD instead,  as security."  In                                                               
response to  a follow-up question  from Representative  Fate, Mr.                                                               
Slotnik stated  that HB  154 would  not change  "our relationship                                                               
with the small processors that are  in the Yukon Flats area."  He                                                               
added,  "They  may be  bonding  -  under  current law  I  already                                                               
require them to bond.  If so, they are incurring that cost."                                                                    
                                                                                                                                
REPRESENTATIVE  FATE asked  for  clarification  that this  [bill]                                                               
would not change whatever the current situation was.                                                                            
                                                                                                                                
MR. SLOTNIK concurred.                                                                                                          
                                                                                                                                
CO-CHAIR SCALZI  interjected that the  bill adds "one  more tool"                                                               
to the Department of Revenue and  the benefit of "one more option                                                               
for  small   buyers."    Regarding   the  landing  tax   for  the                                                               
catcher/processors  previously discussed,  Co-Chair Scalzi  asked                                                               
Mr. Slotnik if he wanted to discuss the issue of date changes.                                                                  
                                                                                                                                
Number 1301                                                                                                                     
                                                                                                                                
MR. SLOTNIK replied that he  understood the current draft did not                                                               
change dates,  but was the  same as  the current regulation.   He                                                               
said there was a  "little bit of a mix-up in  some of the earlier                                                               
drafts that didn't conform dates with current payment.                                                                          
                                                                                                                                
CO-CHAIR SCALZI  mentioned that  there have  been requests  for a                                                               
lot of other changes in  the processing fees and Alaska's present                                                               
business  tax  [code].    He  said that  his  response  to  those                                                               
requests  has  been  to  tell people  that  the  House  Resources                                                               
Standing Committee cannot  address all those things  in one bill,                                                               
but would be willing to work  with the Department of Revenue on a                                                               
comprehensive plan  for other changes  in the course of  the next                                                               
year.   He  added that  the Department  of Revenue  has indicated                                                               
changes it would like to  effect and has expressed willingness to                                                               
work with the House Resources Standing Committee.                                                                               
                                                                                                                                
Number 1397                                                                                                                     
                                                                                                                                
KEVIN HOGAN,  President, Auction  Block Company  (ABC), testified                                                               
via teleconference  to endorse [HB  154].  He explained  that his                                                               
company  is an  Internet  fish auction  company  formed in  1997,                                                               
which had become the largest buyer  of halibut in Alaska in 1998-                                                               
99.   Mr. Hogan said ABC's  function is to elevate  the (indisc.)                                                               
prices statewide  and, as a  consequence of that, he  thinks "we"                                                               
have  elevated the  raw-fish  tax that's  been  collected by  the                                                               
state.    He pointed  out  that  a problem  for  ABC  is that  it                                                               
generates a  large volume, but  operates at a very  small margin;                                                               
consequently, all  of its  profits go  to securing  its fisheries                                                               
business license.   Mr. Hogan  discussed methods  other companies                                                               
use to  get around  the system and  keep their  businesses alive,                                                               
stating that  ABC's preference would  be to "pay  as we go."   He                                                               
concluded, "Although this is a  first step, there's more that can                                                               
be done in the future, and I endorse that notion there."                                                                        
                                                                                                                                
Number 1482                                                                                                                     
                                                                                                                                
REPRESENTATIVE  FATE  moved  to   report  CSHB  154(FSH)  out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal notes.  There being  no objection, CSHB 154(FSH) was moved                                                               
out of the House Resources Standing Committee.