Legislature(2021 - 2022)GRUENBERG 120

05/13/2021 10:00 AM House FISHERIES

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Audio Topic
10:05:25 AM Start
10:06:02 AM HB188
10:29:53 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 5/15/21 at 12:15 pm --
-- Testimony <Invitation Only> --
<Bill Hearing Canceled>
-- Testimony <Invitation Only> --
+ Presentation: Dept. of Natural Resources Water TELECONFERENCED
Regulation Changes
-- Testimony <Invitation Only> --
<Above Item Removed from Agenda>
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE SPECIAL COMMITTEE ON FISHERIES                                                                            
                          May 13, 2021                                                                                          
                           10:05 a.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Geran Tarr, Chair                                                                                                
Representative Louise Stutes, Vice Chair                                                                                        
Representative Jonathan Kreiss-Tomkins                                                                                          
Representative Andi Story                                                                                                       
Representative Dan Ortiz                                                                                                        
MEMBERS ABSENT                                                                                                                
Representative Sarah Vance                                                                                                      
Representative Kevin McCabe                                                                                                     
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 188                                                                                                              
"An Act relating to a seafood product development tax credit;                                                                   
providing for an effective date by repealing secs. 32 and 35,                                                                   
ch. 61, SLA 2014; and providing for an effective date."                                                                         
     - HEARD AND HELD; MEETING RECESSED TO 5/15/21                                                                              
HOUSE BILL NO. 82                                                                                                               
"An  Act relating  to surface  use restrictions  for oil  and gas                                                               
leases; relating to  gas leases in Kachemak Bay;  relating to the                                                               
renewable  energy  grant fund;  and  providing  for an  effective                                                               
     - BILL HEARING CANCELED                                                                                                    
PRESENTATION(S):   Department   of    Natural   Resources   Water                                                               
Regulation Changes                                                                                                              
     - SCHEDULED BUT NOT HEARD                                                                                                  
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 188                                                                                                                  
SHORT TITLE: SEAFOOD PRODUCT DEVELOPMENT TAX CREDIT                                                                             
SPONSOR(s): REPRESENTATIVE(s) STUTES                                                                                            
04/26/21       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/26/21       (H)       FSH, FIN                                                                                               
05/06/21       (H)       FSH AT 10:00 AM GRUENBERG 120                                                                          
05/06/21       (H)       Heard & Held                                                                                           
05/06/21       (H)       MINUTE(FSH)                                                                                            
05/11/21       (H)       FSH AT 10:00 AM GRUENBERG 120                                                                          
05/11/21       (H)       -- Delayed to 5/12/21 --                                                                               
05/12/21       (H)       FSH AT 0:00 AM GRUENBERG 120                                                                           
05/12/21       (H)       -- MEETING CANCELED --                                                                                 
05/13/21       (H)       FSH AT 10:00 AM GRUENBERG 120                                                                          
WITNESS REGISTER                                                                                                              
SARA PERMAN, Staff                                                                                                              
Representative Louise Stutes                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Offered a  recap of and  answered questions                                                             
pertaining to  HB 188 on  behalf of Representative  Stutes, prime                                                               
NICOLE REYNOLDS, Deputy Director                                                                                                
Tax Division                                                                                                                    
Alaska Department of Revenue                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered questions  during the hearing on HB
MARK PALMER, President/CEO                                                                                                      
OBI Seafoods                                                                                                                    
Seattle, Washington                                                                                                             
POSITION STATEMENT:   Responded  to questions during  the hearing                                                             
on HB 188.                                                                                                                      
CHRIS BARROWS, President                                                                                                        
Pacific Seafood Processors Association                                                                                          
Seattle, Washington                                                                                                             
POSITION STATEMENT:   Offered feedback  during the hearing  on HB
ACTION NARRATIVE                                                                                                              
10:05:25 AM                                                                                                                   
CHAIR GERAN TARR called the  House Special Committee on Fisheries                                                             
meeting to  order at  10:05 a.m.   Representatives  Tarr, Stutes,                                                               
Kreiss-Tomkins,  Story, and  Ortiz were  present at  the call  to                                                               
         HB 188-SEAFOOD PRODUCT DEVELOPMENT TAX CREDIT                                                                      
10:06:02 AM                                                                                                                   
CHAIR TARR  announced that  the only order  of business  would be                                                               
HOUSE  BILL  NO. 188,  "An  Act  relating  to a  seafood  product                                                               
development  tax  credit;  providing  for an  effective  date  by                                                               
repealing secs.  32 and 35, ch.  61, SLA 2014; and  providing for                                                               
an effective date."                                                                                                             
CHAIR  TARR reviewed  that the  committee had  heard invited  and                                                               
public testimony at its previous hearing of the bill on 5/6/21.                                                                 
10:06:55 AM                                                                                                                   
SARA PERMAN,  Staff, Representative  Louise Stutes,  Alaska State                                                               
Legislature,  offered a  recap of  HB 188,  which she  said would                                                               
[extend the  sunset on] a  tax credit  established in 2003.   The                                                               
credit initially applied  to salmon and allowed  processors a tax                                                               
credit on any  equipment used toward value-added  production.  In                                                               
2014, the credit was expanded to  include herring.  Under HB 188,                                                               
pollock  and cod  would also  qualify.   She  explained that  the                                                               
sunset date  would be extended  retroactively back to  January 1,                                                               
CHAIR TARR invited questions from the committee.                                                                                
10:08:07 AM                                                                                                                   
REPRESENTATIVE  KREISS-TOMKINS noted  that  Section 4  of HB  188                                                               
would  delete language  that would  prevent the  tax credit  from                                                               
exceeding 50  percent of  the total tax  liability, and  he asked                                                               
why that was included in the proposed legislation.                                                                              
MS.  PERMAN offered  her  understanding that  the  purpose is  to                                                               
delete  duplicative language,  and she  said she  would find  the                                                               
language elsewhere  in the  bill and  get back  to Representative                                                               
Kreiss-Tomkins on that issue.                                                                                                   
REPRESENTATIVE   KREISS-TOMKINS  shared   that  he   spotted  the                                                               
language in Section  1.  He then mentioned the  issue of on-shore                                                               
and  off-shore pollock  processing and  the federal  government's                                                               
mandate that  at least 50  percent of  the pollock caught  in the                                                               
shores  off  Alaska  must be  processed  in  on-shore  processing                                                               
facilities, which he said provides  jobs for Alaskans.  Regarding                                                               
that which was processed at  sea, he asked whether the processing                                                               
vessels would  be able to  qualify for  the tax credits  under HB
MS. PERMAN directed attention to  language in Section [2], and in                                                               
response to  a follow-up question,  confirmed that the  answer to                                                               
Representative Kreiss-Tomkins' question was yes.                                                                                
10:11:24 AM                                                                                                                   
REPRESENTATIVE KREISS-TOMKINS  observed that Section  2 addresses                                                               
[off-shore]  facilities qualifying  for the  tax credits,  and he                                                               
questioned  how  frequently   vessel-based  facilities  currently                                                               
qualify for the tax credit for herring and salmon.                                                                              
10:12:19 AM                                                                                                                   
NICOLE   REYNOLDS,   Deputy   Director,  Tax   Division,   Alaska                                                               
Department of  Revenue, said she would  need to look at  data and                                                               
get back to Representative Kriess-Tomkins.                                                                                      
10:12:57 AM                                                                                                                   
MARK PALMER,  President/CEO, OBI Seafoods, to  the same question,                                                               
said OBI Seafoods [name derived  from the merging of Ocean Beauty                                                               
Seafoods and  Icicle Seafoods]  has only  shore-based facilities;                                                               
therefore, it  has not deployed  any new equipment on  a floating                                                               
processor.    He  proffered  that the  types  of  equipment  used                                                               
onshore  are  not  practical  for   use  on  offshore  processing                                                               
facilities; therefore, that would not affect the fiscal note.                                                                   
10:13:55 AM                                                                                                                   
CHRIS    BARROWS,   President,    Pacific   Seafood    Processors                                                               
Association, noted  only that he  could not expound more  on what                                                               
Mr. Palmer had already said.                                                                                                    
10:14:08 AM                                                                                                                   
REPRESENTATIVE  KREISS-TOMKINS,  based  on  the  answers  he  had                                                               
received, questioned why  that language was even  necessary in HB
10:14:27 AM                                                                                                                   
MS. PERMAN, in  response to Chair Tarr, said she  could not offer                                                               
more of an explanation without doing some research.                                                                             
10:14:35 AM                                                                                                                   
CHAIR TARR asked  whether research could be completed  by the end                                                               
of the day or next day.                                                                                                         
10:14:55 AM                                                                                                                   
MS.  REYNOLDS  said  she  could  try to  get  an  answer  to  the                                                               
committee as quickly as possible.                                                                                               
10:15:11 AM                                                                                                                   
REPRESENTATIVE  KREISS-TOMKINS, in  terms of  the fiscal  note or                                                               
forgone state  revenue, asked Ms. Reynolds  what proportion would                                                               
be  attributable  to  tax  credits  associated  with  cod  versus                                                               
10:15:38 AM                                                                                                                   
MS.  REYNOLDS  answered  that  regarding  the  fiscal  note,  the                                                               
department does not have a  specific estimate for cod or pollock.                                                               
She  mentioned  there  being  a forecast  based  on  Spring  2021                                                               
combined with  historic credit utilization  rates for  salmon and                                                               
10:16:30 AM                                                                                                                   
REPRESENTATIVE   KREISS-TOMKINS  noted   that  the   fiscal  note                                                               
reflects $2.8  million in fiscal year  2022 (FY 22) up  to a peak                                                               
in  FY  26   of  $5  million.    He  asked   how  the  department                                                               
approximates "how  much forgone revenue would  be attributable to                                                               
expansion of the credit to pollock and cod."                                                                                    
MS. REYNOLDS  answered that the  starting point was  the historic                                                               
range  in value  from 2017  to 2020,  from $2.3  million to  $4.4                                                               
million.   She said,  "This value represents  the credit  for the                                                               
qualified investments  in property  and equipment that  were used                                                               
to  create the  value-added  salmon and  herring products  only."                                                               
She said DOR  anticipates the value will increase in  future as a                                                               
result of  the addition of cod  and pollock, but it  is difficult                                                               
to estimate the impact "because  the cod and pollock property and                                                               
equipment  has  never  been  eligible  for  this  credit."    Ms.                                                               
Reynolds elaborated on her previous answer, as follows:                                                                         
     And so, what Department of Revenue did to forecast the                                                                     
     impact is we used the Spring 2021 revenue forecast for                                                                     
     total  value   of  cod  and  pollock   subject  to  the                                                                    
     fisheries'  business tax  and  combined  that with  the                                                                    
     historic  utilization  rates  for ...  the  salmon  and                                                                    
     herring  equipment.    And  so,  we  came  up  with  an                                                                    
     estimated value  of the credit  for fiscal  years 2022-                                                                    
     2026 that ranges between $2.8 million and $5 million.                                                                      
10:19:08 AM                                                                                                                   
REPRESENTATIVE  KREISS-TOMKINS said  it is  hard to  imagine that                                                               
adding  the largest  fishery  in Alaska  by  total capital  would                                                               
result in the  same tax credit.  He emphasized  the importance of                                                               
receiving  more information  when considering  such an  impact to                                                               
the budget.                                                                                                                     
10:20:29 AM                                                                                                                   
MS.  REYNOLDS  responded that  the  forecast  for the  credit  is                                                               
approximately  half a  million to  .6 million  dollars more  than                                                               
historical  value to  the credit;  therefore, there  is a  slight                                                               
increase  to   the  historical  value.     She  reemphasized  the                                                               
difficult nature of making a prediction.                                                                                        
10:21:31 AM                                                                                                                   
MR. PALMER related that the  diversification of products balanced                                                               
out the  market and helped  drive tax  revenue.  He  talked about                                                               
cod, the food  service industry, and equipment,  and he indicated                                                               
that  a tax  credit would  encourage processors  to expand  their                                                               
equipment to get more value out of the resource.                                                                                
10:23:51 AM                                                                                                                   
REPRESENTATIVE KREISS-TOMKINS  said he appreciated the  input but                                                               
reemphasized  the  need  to  "know   the  numbers"  in  order  to                                                               
determine "what this expansion would mean."                                                                                     
10:24:10 AM                                                                                                                   
MR. BARROWS noted  there had been a regressive  analysis in terms                                                               
of [the  effect of a tax  credit] for salmon, which  has resulted                                                               
in the  generation of  an additional $114  million of  revenue to                                                               
the state's  general fund.   He  said that is  based on  over $37                                                               
million  in total  credit paid  from 2004  to 2019.   He  said he                                                               
thinks that  provides a foundation  for the  economics associated                                                               
with the  ability to increase  product form.  This  is forecasted                                                               
to  occur in  the pollock  and cod  sector.   He said  pollock is                                                               
about  23 percent  of the  total ex-vessel  revenue generated  in                                                               
Alaska fisheries, while cod is about  33 percent, and that is out                                                               
of the total  ex-vessel valuation of $2 billion.   He noted there                                                               
is still  return of  investment back to  the state  regardless of                                                               
whether it's on-shore  or off-shore production.   He reviewed the                                                               
aforementioned  information regarding  federal  law.   He  stated                                                               
there is significant gain and return on investment to be had.                                                                   
10:27:36 AM                                                                                                                   
REPRESENTATIVE  KREISS-TOMKINS  emphasized  he  was  seeking  the                                                               
estimate of foregone revenue with pollock and cod.                                                                              
10:27:57 AM                                                                                                                   
MR. BARROWS answered  that he does not have  the specific number,                                                               
which he said is hard to determine on a plan yet undeveloped.                                                                   
10:28:31 AM                                                                                                                   
REPRESENTATIVE KREISS-TOMKINS  asked for  clarification regarding                                                               
the effect of the tax credit on state and municipal revenues.                                                                   
MS. REYNOLDS answered  that there is one credit  that reduces the                                                               
municipal share,  but it is not  this one; this tax  credit would                                                               
be applied against the state share.                                                                                             
[HB 188 was held over.]                                                                                                         
10:29:53 AM                                                                                                                   
The House Special Committee on  Fisheries meeting was recessed to                                                               
Saturday, 5/15/21,  12:15 p.m.   [The meeting  reconvened 5/15/21                                                               
at 12:48 p.m.]                                                                                                                  

Document Name Date/Time Subjects
HB 188 Sponsor Statement 04.30.2021.pdf HFSH 5/6/2021 10:00:00 AM
HFSH 5/11/2021 10:00:00 AM
HFSH 5/13/2021 10:00:00 AM
HFSH 5/15/2021 12:15:00 PM
HB 188
HB 188 Version A 04.30.2021.PDF HFSH 5/6/2021 10:00:00 AM
HFSH 5/11/2021 10:00:00 AM
HFSH 5/13/2021 10:00:00 AM
HFSH 5/15/2021 12:15:00 PM
HB 188
HB 188 Sectional Analysis Version A 04.30.2021.pdf HFSH 5/6/2021 10:00:00 AM
HFSH 5/11/2021 10:00:00 AM
HFSH 5/13/2021 10:00:00 AM
HFSH 5/15/2021 12:15:00 PM
HB 188
HB 188 Fiscal Note - DOR-TAX 4.30.21.pdf HFSH 5/6/2021 10:00:00 AM
HFSH 5/11/2021 10:00:00 AM
HFSH 5/13/2021 10:00:00 AM
HFSH 5/15/2021 12:15:00 PM
HB 188
HB 188 Testimony Received by 5.5.21.pdf HFSH 5/6/2021 10:00:00 AM
HFSH 5/13/2021 10:00:00 AM
HB 188
HB 188 Research - Supporting Analysis - PSPA 5.6.21.pdf HFSH 5/6/2021 10:00:00 AM
HFSH 5/11/2021 10:00:00 AM
HFSH 5/13/2021 10:00:00 AM
HFSH 5/15/2021 12:15:00 PM
HB 188
HB 188 Testimony Received by 5.6.21.pdf HFSH 5/6/2021 10:00:00 AM
HFSH 5/11/2021 10:00:00 AM
HFSH 5/13/2021 10:00:00 AM
HFSH 5/15/2021 12:15:00 PM
HB 188