Legislature(1997 - 1998)

03/06/1997 01:10 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HJR 23 - SALE OF LTD ENTRY PERMITS BY IRS                                   
 Number 073                                                                    
 CO-CHAIRMAN HUDSON announced the committee would hear HJR 23,                 
 Relating to the seizure and sale of Alaska commercial fishing entry           
 permits by the United States Internal Revenue Service.                        
 Number 0195                                                                   
 BRUCE TWOMLEY, Chairman/Commissioner, Commercial Fisheries Entry              
 Commission, Department of Fish and Game, came before the committee            
 to give testimony.  He informed the committee that for more than              
 ten years the Internal Revenue Service (IRS) had attempted to seize           
 and force the sale of limited entry permits.  Therefore, it might             
 be helpful to review what the legislature had in mind when it                 
 established limited entry permits.  He explained, they were a                 
 privilege and that the state reserved the right to take them away.            
 They were awarded initially to individual fishers, primarily                  
 Alaskan fishers, who most needed their fisheries.  They were                  
 awarded on the basis of need and the permits were the means by                
 which Alaska fishers protected their access to their traditional              
 fisheries-that was often the case in rural communities where                  
 commercial fisheries were the only source of cash income to many              
 residents.  Limited entry permits represented both the right to               
 work and a way of life.                                                       
 MR. TWOMLEY explained the permits were also important in terms of             
 the state's enforcement of its conservation laws.  The legislature            
 thought in establishing a permanent interest in a fishery that it             
 would give fishermen a stake in the fishery and an incentive to               
 conserve the resource over time.  "If you know your going to be               
 there next year, there's an incentive to make sure that the fish              
 are coming back."  At the same time, the state reserved the right             
 to take away limited entry permits from individual fishers who did            
 not obey conservation laws.  The state had a powerful enforcement             
 tool and this was one reason why it had not been eager to have                
 third parties, such as, the IRS, come in and take limited entry               
 permits away; it undermines the conservation incentive.                       
 MR. TWOMLEY informed the committee members, that during the ten               
 year period the IRS attempted to force the sale of entry permits,             
 there had been some changes in the federal law for the IRS too.               
 Congress attempted to make the IRS a somewhat kinder and gentler              
 collection agency.  It directed the IRS to not take items held by             
 taxpayers when doing so would cause hardship to the tax payers.  As           
 a consequence, the IRS came to the Commercial Fisheries Entry                 
 Commission in 1992, and asked for help in collecting taxes from               
 permit holders around the state.  The commission agreed to help the           
 IRS in any way it could without compromising state law.  As a                 
 starting point, the commission pressed the IRS to provide                     
 statistics on the extent of the problem and where, geographically,            
 in the state permit holders had this problem.  The IRS produced the           
 statistics which were both revealing and encouraging.  It was                 
 encouraging because the numbers were not as great as even the IRS             
 feared.  The IRS was talking about some 4,000 Alaskan permit                  
 holders who were not in compliance with federal taxes when in fact,           
 the number turned out to be something over 2,000.  The permit                 
 holders resided all over the state-in urban and rural communities.            
 In addition, the amount of taxes owed really wasn't terribly great.           
 It was a manageable number.  He cited 80 percent of the permit                
 holders owed $30,000 or less which made the problem look more                 
 manageable than what was feared.  Upon receiving the information              
 from the IRS, the commission came to the legislature in 1994 and              
 shared the statistics.  The legislature responded by creating a new           
 category of loans within the existing commercial fisheries loan               
 program-the tax obligation loan program.  These were secured loans.           
 The legislature put a limit at $30,000, and required that an                  
 individual could only apply for one of these loans one time in                
 their life.  The legislature called for the expiration of the                 
 program in May of 1997 giving it a life of three years.                       
 MR. TWOMLEY further stated that the loan program turned out to be             
 a very valuable tool because a number of people around the state              
 had already been alerted to the problem and were helping,                     
 particularly in the rural communities, to bring fishers into                  
 compliance.  He cited Jerry Liboff, from Dillingham and the                   
 community development quota (CDQ) outfit for the Bristol Bay                  
 Economic Development Corporation that started a local private                 
 agency in Dillingham, headed by Bernice Heyano.  In addition, the             
 Alaska Business Development Center, a quasi-public agency in                  
 Anchorage, had been tremendously helpful by working around the                
 state in virtually every community to help fishermen come into                
 compliance.  The loan program, he reiterated, had been a very                 
 valuable tool.  It had helped fishermen come forward with more hope           
 and with less fear of the IRS.  It also had generated a lot of                
 revenue for the IRS.  Mr. Twomley was trying to get current                   
 statistics from the IRS to measure the improvements from 1994.  The           
 statistics that he did have came from IRS summons.  The commission,           
 he explained, was hit with a summons that named individual permit             
 holders identified by the IRS as non-filers for the year 1992.  It            
 included more than 2,000 individuals from communities statewide.              
 The commission was recently hit with the same summons that applied            
 to non-filers for the years 1993 and 1994.  The numbers were down             
 from 2,000 to 684 over the two years.  There was something to show            
 for the cooperation that had gone on for both the IRS and for the             
 state.  The bad new, however, was that the IRS was no longer                  
 managed in Alaska.  The IRS Alaska district was rolled into other             
 districts to include Hawaii, Washington and other states.  It was             
 now managed out of Seattle, Washington.  Furthermore, the IRS gave            
 the commission a terrible surprise just before Christmas, despite             
 cooperative efforts and various commitments from the IRS.  It gave            
 the state two days notice and scheduled for sale two limited entry            
 permits from Cook Inlet.  The permits were held by individuals who            
 needed them as a primary source of income for their families and              
 themselves.  The IRS threatened to sell the permits, valued at                
 $30,000, for as little as $3,375.  The sale was also accompanied by           
 a written threat from the IRS Director to do more of the same.  In            
 addition, a revenue officer said that he would go to Dillingham and           
 see some seven limited entry permits.  Mr. Twomley personally                 
 received a call from an Anchorage widow who told him that a revenue           
 officer had threatened her with the sale of her and her deceased              
 husband's permits for as little as $3,000.  In addition, the people           
 who had been calling the revenue officers about the sales, began              
 calling the commission.  The commission had affidavits from them as           
 to what the revenue officers told them about the sales.  The                  
 affidavits said that the sales were known about at the highest                
 level in the IRS, the Commissioners Office in Washington D.C., and            
 that it was designed to help the IRS win its fight with the state.            
 Finally, the affidavits said, that if the IRS could just get one of           
 these permits transferred, it would open the flood gates to permit            
 seizures and transfers.  He was grateful to Representative Hudson             
 for introducing the resolution.  He was also grateful to                      
 Representative Ivan for introducing a bill to extend the loan                 
 program because it had been a valuable tool.                                  
 Number 0842                                                                   
 C0-CHAIRMAN HUDSON thanked Mr. Twomley for his testimony.  He                 
 summarized the contents of the bill to show justification for                 
 introducing it.                                                               
 C0-CHAIRMAN HUDSON explained there had been considerable action of            
 the IRS to take $30,000 permits and to sell them for $3,000.  And,            
 in that process, it took away the opportunity for the people who              
 owed money to earn any money to pay their obligations.  There were            
 significant changes in the tax laws at the federal level around               
 1989.  Was that correct, Mr. Twomley?                                         
 MR. TWOMLEY replied it was 1988.                                              
 Number 0906                                                                   
 C0-CHAIRMAN HUDSON further stated that the tax laws tried to level            
 the field on behalf of the tax payer.  The resolution compliments             
 the efforts of the Governor to try to get the congressional                   
 delegation to rein in on the IRS from actions that were not good              
 for the interest of the public.  If people owed a great deal of               
 money and the IRS seized property that was worth more than what it            
 could sell it for, and they took away their livelihood, the IRS               
 loses, and the American tax payer loses.  The resolution did not              
 try to eliminate the IRS from collecting taxes that were due and              
 payable; it just asked the congressional delegation to use any                
 means available to them to assure that the IRS collect past due               
 taxes from the income generated by the sale of fish and the                   
 voluntary sale of entry permits, as opposed to a seizure.  And, to            
 ensure that the IRS complied with federal law to avoid inflicting             
 economic hardship on the tax payer while, at the same time,                   
 protecting the fishing privileges and the right to work by Alaska             
 fishermen.  The limited entry permit was an effort to try to manage           
 the fisheries and to provide an opportunity for people who had                
 fished for a long period of time to continue that type of                     
 livelihood.  He reiterated the resolution was complimentary.  It              
 was a strong appeal on the part of the legislature and a strong               
 statement to the congressional delegation.  It would be useful to             
 the congressional delegation when they went to the IRS because they           
 could say that the people of Alaska, who had spoken through the               
 legislative process, were offended by the sale of permits that were           
 valued at $30,000 and sold for $3,000, and by taking away the                 
 livelihood that the people needed to pay their taxes.                         
 Number 1040                                                                   
 REPRESENTATIVE JOE GREEN asked Co-Chairman Hudson if he was ready             
 for questions?                                                                
 C0-CHAIRMAN HUDSON replied he was ready for questions either way.             
 REPRESENTATIVE GREEN stated this seemed like a worthwhile endeavor.           
 He wondered if the state of Washington was doing something similar            
 to add to the movement, because Alaska was in constant competition            
 with fishermen from Washington.                                               
 Number 1063                                                                   
 MR. TWOMLEY replied he did not know if there was specific action in           
 Washington.  He did know that the actions by the IRS had been                 
 directed at Alaskan fishermen-exclusively-as far as he could see.             
 "And, so we have a problem here that largely resides in our                   
 Number 1085                                                                   
 C0-CHAIRMAN HUDSON stated that the permits were the province of the           
 state of Alaska so by taking this action it called for an even                
 playing field on behalf of the fishermen and women.  It also                  
 guaranteed that the use and the control of the limited entry permit           
 was maintained on Alaska's behalf.                                            
 Number 1106                                                                   
 REPRESENTATIVE GREEN stated there were several out-of-state permits           
 granted.  Mr. Twomley indicated that the IRS targeted only Alaskan            
 fishermen rather than all of the people who had an Alaskan permit.            
 MR. TWOMLEY replied, to date, the only enforcement action had been            
 directed towards Alaskan resident entry permit holders.                       
 Number 1127                                                                   
 REPRESENTATIVE GREEN asked, wouldn't that smack of prejudicial                
 treatment and wouldn't that be held unconstitutional by singling              
 out Alaskan residents rather than Alaskan permits?  If that was the           
 case, it would strengthen the resolution.  He suggested that the              
 legislature look into very serious actions against the IRS.                   
 Number 1151                                                                   
 C0-CHAIRMAN HUDSON said he was not an attorney, but that was a                
 valid point.                                                                  
 Number 1157                                                                   
 MR. TWOMLEY stated one of the requests from the resolution was that           
 the IRS simply observe federal law.  It was the restraining                   
 elements of the federal law that would keep the IRS from causing              
 hardship to the tax payer.  The resolution would help all tax                 
 payers, as a result, throughout the United States.  It served a               
 general purpose by keeping the IRS honest under those restraints.             
 Number 1198                                                                   
 REPRESENTATIVE GREEN stated he belonged to the Energy Council which           
 got its clout as a result of the union of several states; it spoke            
 in one accord.  Therefore, "We would get more bang for our buck, I            
 would think, if we could get through the Washington Legislature a             
 similar thing, since it affects-certainly should-affect some of               
 their citizens as well.  And, from that stand point, I think, we              
 would have a little more clout against the IRS than just this                 
 resource state that's way up in the North Pole that nobody really             
 cares much about back in Washington."                                         
 Number 1232                                                                   
 C0-CHAIRMAN HUDSON stated his intentions, as a representative of              
 the people of Alaska, were to try to protect the livelihoods and              
 the interests of the constituents; and at the same time, to try to            
 protect the limited entry permits.  He would like to see if there             
 was any overt discrimination against Alaskans.  He did not want to            
 slow down the resolution, however.  If there was discrimination,              
 then there should be additional proceedings through the court from            
 the attorney general.  It was a very good point.  He thanked                  
 Representative Green for bringing it up.                                      
 Number 1313                                                                   
 JERRY MCCUNE, Representative, United Fishermen of Alaska, was the             
 first person to testify in Juneau.  He stated that the United                 
 Fishermen of Alaska were being targeted unfairly as Representative            
 Green pointed out.  The IRS had many avenues to collect money.                
 And, one was to not take a person's livelihood away.  The IRS could           
 take boats, it could make arrangements while one was fishing to pay           
 the back-taxes, or one could voluntarily sell a permit and other              
 assets.  "I think it's just a thing that the IRS has been trying to           
 do for 10 years and they want to break the barrier to get their               
 hands on these permits because they know they sell them real cheap            
 and fast, and it might not be to state residents either."  The                
 United Fishermen of Alaska, he declared, did not support people not           
 filing or paying their taxes or not making arrangements with the              
 IRS to try to attempt to pay their taxes.                                     
 Number 1391                                                                   
 C0-CHAIRMAN HUDSON stated he would like to move the resolution out            
 of the committee.                                                             
 Number 1404                                                                   
 REPRESENTATIVE GREEN moved that HJR 23 move from the committee with           
 individual recommendations and the attached zero fiscal note.                 
 There was no objection, HJR 23 was so moved from the House                    
 Resources Standing Committee.                                                 

Document Name Date/Time Subjects