03/25/1996 03:38 PM Senate RES

  CSSSHB 397(FIN) FISH LANDING TAX/SEAFOOD MARKETING ASSMT.                  
                                                                               
  CHAIRMAN LEMAN  brought CSSSHB 397(FIN) before the committee as the          
 next order of business.                                                       
                                                                               
  AMY DAUGHERTY , staff to Representative Austerman who is prime               
 sponsor of HB 397, explained that two years ago the Legislature               
 passed the fishery resources landing tax, which established a 3.3             
 percent tax on fishery resources.  However, that legislation has              
 had some legal challenges which have left some loopholes open and             
 are addressed in HB 397.                                                      
                                                                               
 Ms. Daugherty pointed out the 3.3 percent tax is the same as the              
 fisheries business tax as it applies to shore-based processors,               
 plus the ASMI .3 assessment; it is just the way it's applied.  The            
 legislation essentially repeals the 3.3 percent tax and puts it               
 back on as a 3 percent tax and a separate .3 assessment so that it            
 mirrors identically the fisheries business tax and the ASMI                   
 assessment, and, therefore, will not have further legal challenges.           
                                                                               
                                                                               
  NEIL SLOTNICK , Assistant Attorney General, Department of Law,               
 stated he has been handling the litigation concerning the fisheries           
 landing tax.  He explained that the American Factory Trollers                 
 Association filed suit in Superior Court soon after that                      
 legislation was passed.  The state moved to dismiss the suit,                 
 arguing that they need to go through the administrative tax appeal            
 structure.  The Superior Court agreed and dismissed the suit.  It             
 was then appealed to the Supreme Court which upheld the Superior              
 Court's ruling.                                                               
                                                                               
 The suit challenged the tax as discriminatory under the Interstate            
 Commerce Clause of the U.S. Constitution, arguing that it                     
 discriminated against interstate commerce.  The landing tax, by its           
 own terms, exempts any entity that already pays the fisheries                 
 business tax, so on its face, it is in a sense discriminatory                 
 because only certain tax payers are going to have to pay it.  It is           
 the state's argument that the two taxes are meant to be comparable.           
 Anytime there are two taxes that are meant to be comparable, they             
 must be essentially equal.                                                    
                                                                               
 Mr. Slotnick said one of the arguments that the factory trollers              
 raised in Superior Court was that there were more credits available           
 to the payers of the fisheries business tax than there were                   
 available to the payers of the fisheries landing tax.  He said the            
 department thought that perhaps this was an oversight in the                  
 original legislation, that because the two taxes are meant to be              
 comparable, it might be that the Legislature would want to                    
 reconsider this and make the two comparable by extending the same             
 credits over that are available to the fisheries business tax                 
 payers to the landing tax tax payers.  HB 397 balances the playing            
 field between the two businesses.                                             
                                                                               
  BOB BARTHOLOMEW , Deputy Director, Income & Excise Audit Division,           
 Department of Revenue, said the department has been working with              
 the sponsor of the legislation to basically try and rectify where             
 there may be potential weaknesses in the statute.  He noted in FY             
 95 the fisheries business tax collected $7 million, portions of               
 which will get shared back to the local governments, but is being             
 held in escrow by the local governments pending the challenges to             
 the tax.                                                                      
                                                                               
  SENATOR HALFORD  asked why the bill contains numerous sections               
 dealing with the ASMI tax at .2 percent, .3 percent, etc.   MR.               
 BARTHOLOMEW  responded that throughout the ASMI statute there was a           
 potential loophole with the word "purchase" because some people do            
 not purchase seafood; they catch it themselves and either export it           
 out of state or do their own processing.  In order to close that              
 potential loophole, the word "purchase" was replaced with                     
 "produce."  He added that the mechanism for self-assessment and the           
 rate of self-assessment will be exactly the same as it is in                  
 current statute.                                                              
                                                                               
 There being no further testimony on HB 397,  CHAIRMAN LEMAN  said the         
 bill would be held over for final action at the next meeting.