Legislature(2003 - 2004)
04/23/2003 01:05 PM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 105-COMMERCIAL FISHING LOANS Number 0591 CHAIR FATE announced that the next order of business would be HOUSE BILL NO. 105, "An Act relating to loans to satisfy past due federal tax obligations of commercial fishermen and to the commercial fishing loan program." [The bill was sponsored by then-Representative Gary Stevens. However, the written sponsor statement was prepared by the Joint Legislative Salmon Industry Task Force, on which then- Representative Gary Stevens served as vice chair and Senator Ben Stevens served as chair.] Number 0726 JOSEPH LANHAM testified on his own behalf, informing members that he had four concerns. First, if this is constructed so that the permit cannot be seized, in most cases it will just delay the inevitable. The only reason a person needs to pay taxes is because of making profits; if the person made money, then the taxes should have come out of those profits first and then been saved [until the tax was paid]. Thus he suggested it was the person's choice to get into that situation, in many cases, because the person had misallocated his or her funds. Mr. Lanham added: This being said, there is no policy in the bill that says that the state loan officers for the Division of Investments have to show any kind of debt-service ratios that show that the fishermen can pay the estimated taxes for next year, as well as the new, current portion of long-term debt. Number 0808 MR. LANHAM addressed his second concern, what the loan-loss reserve is. He explained: It says that the program was highly used, but does not say how much these loans cost the fund in delinquencies or cost the fund in constant deferrals. And where are ... some of these loans that were booked back then, when the program was highly used, still receiving deferrals and still only receiving interest payments? I may be wrong, but I have heard from several fishermen that they receive deferrals from the state constantly. MR. LANHAM noted that his third concern relates to the waiver of the 0.5 percent loan fee: he disagrees with it because the Division of Investments competes with commercial banks; lowering the fee will make companies that lend to the commercial fishing industry less competitive with the program. Although the original intent of the [state] program wasn't to compete with banks, he said the state has become the lender of first choice, instead of the lender of last resort. The state can refinance up to $300,000, which has resulted in the loss of profitable customers who never have missed a payment or been late with their payments, but who now are in jeopardy of doing so. He explained: They do this by subverting the requirement to have a "decline letter" from the bank and having the customer qualify for bank financing through the bank by refinancing it back to the state. And the state loan officers instruct fishermen to come to the bank to set interim or "bridge" financing. What this is, is the customer actually comes in, qualifies for conventional financing, and does not need the state. But the state, under the [refinancing] program, pays off a good-performing loan and then takes it over from us and uses us, in a way, to get around the $100,000 limit. This is a deceptive practice because it just disguises the fact that they are initiating loans over $100,000, which is ... the new money limit that they have. The state loan officers will go as far as to send commitment letters to the borrower assuring them that if they qualify for bank financing, they will refinance and do the deal. Number 0946 MR. LANHAM addressed his fourth concern: the only entities that can foreclose on permits are the Internal Revenue Service (IRS), the State of Alaska, or the state's authorized financing companies such as the Commercial Fishing and Agriculture Bank (CFAB) or the Division of Investments. By contrast, banks are prohibited by the state from financing limited entry permits. He continued: The phrase in HB 105 that talks about stopping creditors is really ... referring to the IRS, the state, and CFAB. The state and CFAB can make their own decision whether or not to foreclose on the permit in the interest of the state, as they are in the interest of the fisherman in the first place, and if it is good for the fishing community. If the IRS forecloses on the permit, their only interest is to turn it into cash to pay a tax bill. To do that, it would have to be resold, ... and the only people that would buy a limited entry permit are fishermen who would fish it. So ... if the permits are to be foreclosed on and then sold, there wouldn't [be] the dire consequences referenced in the bill, because the permits would be fished. CHAIR FATE requested that Mr. Lanham stay on teleconference. Number 1058 SENATOR GARY STEVENS, Alaska State Legislature, sponsor, explained that HB 105 stemmed from the Joint Legislative Salmon Industry Task Force, appointed by the House and Senate the previous year, which met during the summer and fall of 2002. Out of that task force came half a dozen bills that are moving through the legislature. The intent is to help the salmon industry, which is in crisis, face enormous problems including competition from farmed salmon and low prices. He said a lot of fishermen are in jeopardy of going out of business. SENATOR GARY STEVENS brought up concerns voiced by Mr. Lanham. With regard to foreclosure, he said it isn't in the state's best interest for fishermen to go out of business and lose their permits, among other things. Hence the purpose of HB 105 is to try to forestall that and help fishermen with federal taxes when they are in a position of jeopardy. Noting that the state had this program from 1995-1997 and 2001-2003, he said it was widely used and very successful. With respect to delinquency, Senator Stevens said he didn't have those figures and suggested the Division of Investments could respond. He added that the 0.5 percent waiver is to help fishermen even more. He urged members to give serious consideration to the legislation. In response to a question from Representative Guttenberg, he said it isn't inevitable that all of these fishermen who are having trouble paying their taxes will go out of business and lose their permits; he cited the previous two time periods during which the program existed as evidence of that. Number 1364 REPRESENTATIVE MASEK referred to the fiscal note analysis [prepared by Greg Winegar of the Division of Investments, Department of Community and Economic Development (DCED)], which read [original punctuation provided]: This legislation allows Alaska harvesters to refinance existing Commercial Fishing Revolving Loan Fund (CFRLF) loans. Current law requires the Division to charge a one-half percent fee to refinance. Section 1 of HB 105 removes the one-half percent refinancing fee and that will result in a reduction of income to the CFRLF. Interest rates are currently at record lows and as a result, the Division anticipates that the majority of borrowers eligible to refinance will do so prior to the effective date of this legislation. We expect approximately 180 refinancing applications in FY 04 and then approximately 80 applications per year thereafter. This will result in a reduction to the fund in FY 04 of $30,150 and a reduction of $13,400 each year thereafter through FY 09. These reductions were calculated as follows: 180 loans x $33,500 (average loan size) = $6,030,000 x .005 = $30,150 80 loans x $33,500 = $2,680,000 x .005 = $13,400 These calculations are based on interest rates remaining relatively flat or increasing gradually through FY 09. REPRESENTATIVE MASEK asked why language was put in the bill to remove that [0.5 percent]. Number 1397 SENATOR GARY STEVENS replied that at this point he doesn't think it's necessary [to include the 0.5 percent]. He said the program has been successful in the past, and that this is just a further encouragement to fishermen to use this program and to make it less expensive. REPRESENTATIVE MASEK responded that she is really troubled by the legislation because many Alaskans have to pay federal taxes and are delinquent on them, and yet the state doesn't help them out. Calling it self-serving in this time of a state fiscal crisis, she said she isn't happy to see that Section 1 of the bill removes the 0.5 percent. Representative Masek questioned the long-term viability of fishing for many people as a way to earn a living, and remarked that when Canada had trouble with its fishing industry, it looked at helping fishermen get training in other occupations. Number 1513 REPRESENTATIVE HEINZE recalled hearing this bill in the House Special Committee on Fisheries and said she supports it. She asked whether the IRS has seized limited entry permits in the past. SENATOR GARY STEVENS deferred to Cheryl Sutton, who'd been working on this bill [as staff to the Joint Legislative Salmon Industry Task Force, which Senator Ben Stevens chairs]. Number 1540 CHERYL SUTTON, Staff to the Joint Legislative Salmon Industry Task Force, responded: No. Thus far, we have been successful in not having the IRS seize any permits, largely due to the fact that Bruce Twomley with CFEC [Commercial Fisheries Entry Commission] has been very successful in this area. And a large portion of this bill has to deal with that subject. We are trying to protect the state's interests in this, and clearly it's in the state's interest not to lose permits. MS. SUTTON, in response to Representative Masek's earlier question, said the task force had recommended removing the 0.5 percent refinancing fee just as an additional help for people who want to refinance their loans and take advantage of lower interest rates. She pointed out that this is a self- perpetuating revolving loan fund. It's the borrowers who are putting money back into the fund, and the last general fund (GF) appropriation was in fiscal year 1985 (FY 85). Number 1653 REPRESENTATIVE GATTO asked whether the 0.5 percent forgiveness would be absorbed easily by the fund. He suggested it is in the state's best interest to prevent defaults with the IRS, and that part of the loan capital therefore is being invested [under the bill] in trying to avoid that. He asked, when the IRS comes to collect from a person who is out of money, whether it can take the person's permit. MS. SUTTON suggested Mr. Twomley of CFEC could address that. She added, "Our whole objective is not to allow the IRS to seize a state asset, which is the limited entry permit." She clarified that the 0.5 percent refinancing fee has nothing to do with "the IRS loans." She also pointed out that people who are most at risk are those with no other "economy" apart from commercial fishing, mostly those in Western Alaska. She added, "I'm sorry that they're not on line to testify to this bill today, because we heard immense testimony through the task force." She emphasized that this is a state loan program that is only for state residents, and that the interest is in keeping these permits in rural areas where there is no other economy. She suggested it serves a dual purpose in that regard. Number 1812 REPRESENTATIVE MASEK referred to page 3, lines 7-12 [sub- subparagraphs (ii) and (iii)], which relate to lack of training, lack of employment opportunities in the area of residence, lack of other occupational opportunities besides commercial fishing, and economic dependence or a traditional way of life. Referring to passage of the Alaska Native Claims Settlement Act (ANCSA) as well as federal funding through the Bureau of Indian Affairs (BIA), she said there is a lot of federal and state money invested through nonprofit and for-profit organizations that have the ability to help folks who live out in these areas. She recalled growing up as an Alaska Native in a village of fewer than 100 people, relying on fishing. Now, however, her father's fishing permit is useless. She said: They do have other funding to retrain him, but the only jobs that are available are basically federal or state or municipal, or through tribal entities. So I just kind of take that into ... strong consideration, because I don't think that's a very fair statement to put into this bill here, because there are other opportunities available. It's just up to the individual person on ... if they want to [further] their training in other areas. REPRESENTATIVE MASEK asked why this language was added in the bill. Number 1933 SENATOR GARY STEVENS replied that he could speak for the six coastal villages on Kodiak Island that depend heavily on the salmon industry and traditionally have fished for salmon for years. He agreed that if fishing disappears, other programs can help, but said they're all "social programs, giveaway programs" to provide people with food and so forth. Speaking for fishermen he knows on Kodiak Island and in Old Harbor, specifically, he said they don't want those giveaway programs, but want to compete and want help to keep participating in a fishing industry they know well and have performed well in for years. He suggested Representative Masek's comments play into what he is saying. REPRESENTATIVE MASEK stated her preference for removing lines 7- 12 from [page 3 of] the bill, but left it to the committee's discretion. Number 2032 REPRESENTATIVE MORGAN responded that he tends to agree with lines 7-12 because he sees no difference in the timber industry in Southeast Alaska. He asked, when that collapsed, who stepped in to provide training and jobs. Noting that he represents a lot of villages in Bush Alaska, he voiced his belief that it is a fiduciary responsibility of the state and federal governments to deal with social issues. He said he sees nowhere that the state or federal government asks a private company to take over the social problems. Private companies exist to make a profit, he observed, whereas the state and federal governments are there to help socially, as much as they can, whether through education or food stamps or welfare. REPRESENTATIVE MORGAN agreed with Senator Gary Stevens about handouts, saying there is nothing better than working and receiving a paycheck to make a person feel good and independent. He offered his belief that training should exist, although he suggested looking into what kind of training it should be later. Number 2138 CHAIR FATE related his understanding that HB 105 allows people to borrow money from the revolving loan fund in order to pay for their income tax. He posed a situation in which an individual files for a late tax return, which takes close to nine months; then the individual enters into litigation over the tax and that exceeds the date specified [when the delay was granted]. He asked if there are any remedies or allowance [for such a situation]. SENATOR GARY STEVENS deferred to the representative from the Division of Investments. Number 2260 CHAIR FATE asked how prudent businesspeople allow themselves to get behind to that extent. He asked, "How can they not pay their taxes and save the money out, because paying taxes implies that they've made a net income that's $30,000, which is the limit here, which we'll say ... is close to a net profit of about $100,000." SENATOR GARY STEVENS turned attention to factors beyond the control of commercial fishermen, such as the market and the production of farmed fish. The current situation is probably the worst situation commercial fishermen have found themselves in the last 50 years, he said. Due to the costs, even a good fishermen who does everything correctly can be in [debt] at the end of the season. CHAIR FATE suggested that if the season was bad, the fishermen wouldn't have much income tax to pay, especially when writing off expenses [for boats and equipment]. An income tax is predicated on one's net income. He remarked that whether the fishermen is using cash accounting or accrual accounting would make a difference. Number 2406 GREG WINEGAR, Director, Division of Investments, Department of Community & Economic Development (DCED), responded. In regard to the two-year requirement, Mr. Winegar said he believes Chair Fate is referring to the eligibility section. The two-year requirement essentially relates to residency. As far as what taxes can be covered, the division can go back several years if necessary. CHAIR FATE asked if most fishermen operate on a cash basis or an accrual basis. MR. WINEGAR answered that both are used - and for some, neither, which is part of the problem. Mr. Winegar said that much of it is an education problem. Since this program was introduced in 1995, the division has done what it can to educate people about necessary recordkeeping. For instance, the division created the volunteer tax and loan program; the division, in cooperation with the University of Alaska and the IRS, goes to areas and helps people prepare tax returns at no expense. Over the years there has been quite a change, and the situation is much better now, which is in part due to this cooperative effort. This legislation would provide another tool. He added that this would apply to about 15-20 loans a year and thus wouldn't be a costly program. This loan fund has done well, he added. MR. WINEGAR informed the committee that currently this program has a fairly high delinquency rate of about 43 percent. However, 79 loans have actually been paid in full. The program began with a total of 307 loans that have been made over the life of the program; most of the loans were made in the first two to three years of the program, when there was a substantial noncompliance problem. In the last three fiscal years, 20 loans have been made. Therefore, he characterized it as a small tool. A total of $5 million in payments has been obtained, in comparison with $6.4 million that was loaned. Mr. Winegar noted that the division will work with borrowers who have difficulties. CHAIR FATE asked if those [loans] are collateralized with assets other than the limited entry permit. MR. WINEGAR replied yes, in some cases. In most cases, the permit is the primary collateral for the loan. Number 2619 REPRESENTATIVE GATTO directed attention to page 3 and pointed out that in order to satisfy the loan, either sub-subparagraph (i), (ii), or (iii) is required. He said he sees it from the point of view of a loan's being refused because satisfying one of the three would make it easy for an individual not to satisfy any of the sub-subparagraphs. For instance, sub-subparagraph (i) says, "has had a crewmember or commercial fishing license under AS 16.05.480". MR. WINEGAR clarified that a lot of individuals qualify under [sub-subparagraph (i)] because in order to qualify, someone must have a limited entry permit that is in jeopardy of being taken by the IRS. REPRESENTATIVE GATTO suggested it would be difficult to satisfy sub-subparagraph (ii), and thus one would default to sub- subparagraph (iii). He said, "For me, it seems like for some people who might purposely not want to give a loan to for some reason, you could find somewhere ... in all of these three things where they might not qualify." However, he said he understood that almost everyone would qualify under sub- subparagraph (i). MR. WINEGAR agreed for this particular part of the program. He explained that sub-subparagraphs (ii)-(iii) come from language already in the statute for [subparagraph (B)] loans, which was put in place in the early to mid-1980s. He related his understanding that the legislature at the time felt that in order to qualify for this program, someone would need to have some sort of commercial fishing experience or the other specified conditions. Number 2754 REPRESENTATIVE WOLF referred to the high delinquency rate and recalled hearing about a loss of over $1 million. He called this proposal a handout. MR. WINEGAR responded that he wouldn't say $1 million has been lost because the [division] is working with those individuals, although these are collateralized loans and some of the money could be lost. With regard to the 0.5 percent fee, it relates to the refinancing program. In the last couple of years the rates have dropped dramatically, and thus the majority of the portfolio has already refinanced. MR. WINEGAR noted that during [Joint Legislative Salmon Industry Task Force] hearings a number of testifiers [requested] that they not have to pay the 0.5 percent to refinance. However, there would be some impact to the fund; because the rates have decreased so far, most people have already financed. If the rates drop further, the fiscal note could be adjusted. The fiscal note is something on the order of $30,000 in the first year and $13,000 for the next couple of years. There will be an impact, he said, although he didn't believe it would affect the financial integrity of this particular loan fund. Number 2854 REPRESENTATIVE WOLF pointed out that every time the interest rates decrease, people refinance, and that includes a loan origination fee. Representative Wolf said he has a problem when the legislature is cutting programs and that this is already capable of being done by CFAB. In 1987, when the economy hit bottom, the state didn't come in and bail out the contractors. Although Representative Wolf said he had no problems helping out industry in the state, he said he finds this 0.5 percent problematic. MR. WINEGAR said he wouldn't argue with Representative Wolf on the 0.5 percent, as it's a relatively small fee. He noted that the process has been streamlined as best as possible, but there are costs associated with a refinance. REPRESENTATIVE WOLF said it all adds up. Number 2963 REPRESENTATIVE GUTTENBERG inquired as to the impact of the 0.5 percent reduction on the revolving loan fund. MR. WINEGAR answered that the division forecast that the impact would be about $30,200 in 2004 and $13,400 each year thereafter. This is really a factor of what interest rates do, he said. TAPE 03-33, SIDE B MR. WINEGAR continued by saying if the rates don't decline further, it won't be substantial. If the federal government cuts the rate again and the rates drop, then the fiscal note would increase to some extent because there would be a larger group seeking refinancing. Therefore, it's related to what the market rates do. Number 2965 REPRESENTATIVE MORGAN inquired as to the impact to the state if these permits are lost to the IRS. MR. WINEGAR answered with his belief that it would be a fairly substantial impact. With this program and through working with the IRS, the intent has been to avoid [the IRS taking the state's permits]. Number 2920 REPRESENTATIVE PAUL SEATON, Alaska State Legislature, informed the committee that in the House Special Committee on Fisheries, which he chairs, it was discovered that [fishermen] have filed tax returns and have made arrangements with the IRS. He explained that some people in rural Alaska didn't realize that the IRS existed and had accumulated IRS debt without maintaining receipts to write off expenses. Therefore, this population is being aided by this program. With regard to the 0.5 percent, he said this program places no cost on the state general fund (GF). REPRESENTATIVE SEATON reported that the task force had related to [the House Special Committee on Fisheries] that one of the few ways fishermen could be helped is through refinancing of loans at the lower interest rates and not being charge 0.5 percent of the whole loan fee as an upfront fee. Therefore, [a fisherman's] ongoing expenses could be lowered at this time when the salmon prices are so low. REPRESENTATIVE GATTO asked whether any of this IRS obligation is allowed to be a result of some nonfishing obligation such as child support or whether it's restricted to IRS debt as a result of fishing. Number 2796 MR. WINEGAR answered that this particular language is restricted to IRS obligations. He noted that in the original legislation in 1995 a provision allowed this to be used for child support as well, which created a lot of concern. Therefore, the relating language was removed in one of the first hearings on the original legislation. REPRESENTATIVE GATTO asked, "Is it obligations that are limited to a debt as a result of fishing deficiencies or losing years, or can it be any debt?" MR. WINEGAR answered that technically he believes it can be any debt, although he didn't recall any that fell into that category. CHAIR FATE said that's a good question because of the two-year timeframe. He related his understanding that the revolving loan fund was initially funded with GF funds. MR. WINEGAR replied yes. He explained that when the fund was created in 1972, approximately $60 million went into the fund. About $74 million has gone out of the fund since fiscal year 1985, when the last appropriation was made. CHAIR FATE asked if CFAB also lends money for the same type of indebtedness. MR. WINEGAR explained that CFAB is a bit different because it's a cooperative. Although the programs do overlap to a small extent, basically those qualifying for a CFAB loan don't qualify with the division. CHAIR FATE surmised, then, that there is no competition between CFAB and the state. Number 2654 MR. WINEGAR reiterated that there are a couple of areas in which the two program overlap. One is in the refinancing arena. Under current statute, the division has the ability to refinance existing vessel and gear loans. However, the division doesn't encourage someone to take out bank loans and immediately come to the division. In fact, the division is going to implement regulations to make it clear that someone would have to have a loan on the books for at least a year before being allowed to refinance. There is also overlap with regard to [subparagraph (A)] permit loans. By law, only two entities can take a permit as collateral: CFAB and the state program. However, there is language that specifies that the loans are intended for those who don't have other sources of financing. Number 2569 BRUCE TWOMLEY, Chairman/Commissioner, Commercial Fisheries Entry Commission (CFEC), Alaska Department of Fish & Game (ADF&G), recalled that fewer than 10 years ago there was an IRS official in Anchorage who'd attended a meeting of the Alaska Association of Village Council Presidents; afterward, the official had remarked that the IRS is trying to collect taxes from people who don't even know the IRS exists. He said those in rural villages who don't know of their tax obligations and don't file tax returns can end up having enormous tax debts because of the penalties. In these cases, IRS officials thought these individuals were evading taxes and thus went after limited entry permits in some of those cases. The IRS has seized a number of limited entry permits and forced the sale of those limited entry permits. Often, this has resulted in these permits' being taken out of villages and sold at bargain prices to people out of state. However, for one reason or another, those permits haven't actually transferred because the permits go through the [CFEC], and often there is a basis under state law to deny the transfer, which results in [CFEC's] negotiating with the IRS and resisting the forced sale of the limited entry permits. MR. TWOMLEY explained that the commission has resisted the forced sale of the limited entry permits because it is protecting state law in the matter; state law declares that limited entry permits are privileges not subject to the claims of creditors. The aforementioned is the case for two important reasons, he said. First and foremost, the legislature wants control over this privilege so that it can be changed. The other reason this is a privilege is to keep [Alaskan fishermen] in the water, especially those in rural areas who may depend on fisheries as their only source of cash income. MR. TWOMLEY emphasized his belief that it would be devastating to a number of communities to lose these particular privileges. With regard to compliance rates, Mr. Twomley indicated he'd recently reviewed statistics which illustrate that fishermen aren't less compliant than other small independent businessmen. The limited entry system and permits make fishermen especially vulnerable to tax enforcement. Therefore, the loan program has helped in that it allows the [commission] to intervene and negotiate with the IRS and help those facing enormous claims. MR. TWOMLEY noted that the state has also made it easy for the IRS to go after the earnings from the limited entry permits. Since this program has been in place, the IRS has realized that its patience can pay off and that fishermen and their families can retain the benefits of the local fisheries, he said, which is why [CFEC] supports HB 105. Number 2282 REPRESENTATIVE LYNN expressed shock that some people in the U.S. don't know that the IRS exists. He said he hoped something would be done to contact [the state's] educational system as a method of informing Alaskans that the IRS exists. In the meantime, he asked if anything is being done to educate people about the IRS. MR. TWOMLEY pointed out that since [CFEC] has become aware of the problem, a number of forces such as the university, the Alaska Business Development Center, and the state loan program have brought a lot of resources to this matter. The situation has greatly improved. Mr. Twomley related that this situation isn't totally unique to Alaska. As a result of this work, he has been appointed to a national taxpayer advocacy panel from which he has learned that there are other groups of individuals who are equally unaware of the IRS tax obligations. The IRS joined the educational effort. Mr. Twomley said that a lot of resources have gone into education and a great deal of progress has been made and continues to be made. The situation that existed in 1995 doesn't continue now. REPRESENTATIVE LYNN clarified that he blames the system that allows this lack of knowledge about the IRS. Number 2150 REPRESENTATIVE GATTO made the following analogy. He pointed out that he uses an office provided by the government. If he were to be kicked out and the IRS said he owed a lot of money, the IRS couldn't take his office and rent it out, because the office belongs to the state. Similarly, the limited entry permit belongs to the state. Therefore, he questioned how the IRS could take a permit to use something and sell it. MR. TWOMLEY said Representative Gatto has put forth the state's theory. This permit is a privilege, and it's critically important to the state that it remains that way, because it's a means of enforcing conservation laws, among other things. However, he acknowledged that [the permit] generates property rights. REPRESENTATIVE GATTO inquired as to the resolution. MR. TWOMLEY answered that currently there is an agreement to disagree. He emphasized that there are discussions. Number 2020 GERALD McCUNE, Lobbyist for United Fishermen of Alaska (UFA), testified in support of HB 105. He informed the committee that UFA has worked with fishermen, and advocates that people pay and file taxes on time. Mr. McCune emphasized that UFA's interest in the tax loan obligation program is the desire to keep the IRS from taking these permits. For example, a permit was seized in Yakutat two days before Christmas; there was an attempt to sell the permit for $5,000, although it was worth $15,000. MR. McCUNE pointed out that other assets can be obtained to satisfy tax payments, such as a paid-off boat. The IRS seized a boat in Cordova to pay for an individual's taxes, but since the permit wasn't taken, the individual could continue to fish. Mr. McCune likened permits to a carpenter's tools. He agreed with earlier testimony that the education process has come a long way. Mr. McCune added that fishing this year, in certain arenas, isn't looking too bad. He related his belief that in the next two to three years there is a good chance that the industry will be turned around so that people can make a decent wage and many of these difficulties will be eliminated. Number 1835 REPRESENTATIVE GUTTENBERG acknowledged that the season would be one factor [when people don't pay their taxes]. However, he suggested that there are other liabilities that prevent people from being able to pay their taxes. MR. McCUNE reiterated that this problem has come a long way since 10 years ago. He acknowledged that there are a few problems because of low [fish] runs and low prices at the same time. REPRESENTATIVE GUTTENBERG pointed out that a good season doesn't necessarily mean that someone will make a profit or even [have money to] pay taxes. MR. McCUNE said people need to be responsible. He clarified that he wasn't advocating bailing out fishermen or anyone else who doesn't pay taxes. He reiterated that his main interest is to keep the IRS out of the state program. He noted that the program has been used less each year; he surmised that more education is happening and more people are aware of taxes. Still, it's the loan program's job to review an individual's portfolio [to determine the risk], he said. Number 1675 REPRESENTATIVE MORGAN asked about start-up costs. He noted that like farmers, fishermen must have the necessary equipment in order to make a profit. MR. McCUNE answered, depending upon the fishery, that someone can spend from $2,000 to $10,000 to gear up. If the fish don't return, the person will still owe some kind of tax such as self- employment tax at some point. CHAIR FATE closed public testimony. Number 1604 REPRESENTATIVE KERTTULA moved [to report HB 105 out of committee with individual recommendations and the accompanying fiscal notes]. There being no objection, HB 105 was reported from the House Resources Standing Committee.
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