Legislature(1993 - 1994)
04/05/1993 08:30 AM House FSH
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON FISHERIES
APRIL 5, 1993
8:30 a.m.
MEMBERS PRESENT
Representative Carl E. Moses, Chairman
Representative Harley Olberg, Vice-Chairman
Representative Gail Phillips
MEMBERS ABSENT
Representative Irene Nicholia
Representative Cliff Davidson
COMMITTEE CALENDAR
* HB 264 "An Act providing for a fishery resource landing
tax; and providing for an effective date."
HELD IN COMMITTEE FOR FURTHER CONSIDERATION
(* first public hearing)
WITNESS REGISTER
Carl A. Meyer, Chief of Appeals
Income and Excise Audit Division
Alaska Department of Revenue
P.O. Box 110420
Juneau, AK 99811-0420
Phone: 465-2343
Position Statement: Gave an overview of HB 264
Vince Usera, Assistant Attorney General
Alaska Department of Law
P. O. Box 110300
Juneau, AK 99811-0300
Phone: 465-2398
Position Statement: Believed HB 264 is constitutional
Carl L. Rosier, Commissioner
Alaska Department of Fish and Game
P.O. Box 25526
Juneau, AK 99802-5526
Phone: 465-4100
Position Statement: Supported HB 264
Kim Elton, Executive Director
Alaska Seafood Marketing Institute
1111 W. 8th St., Ste 100
Juneau, AK 99801-1895
Phone: 465-5560
Position Statement: Supported HB 264
PREVIOUS ACTION
BILL: HB 264
SHORT TITLE: FISHERY RESOURCE LANDING TAX
BILL VERSION:
SPONSOR(S): RULES
TITLE: "An Act providing for a fishery resource landing tax;
and providing for an effective date."
JRN-DATE JRN-PG ACTION
03/30/93 854 (H) READ THE FIRST TIME/REFERRAL(S)
03/30/93 854 (H) FISHERIES, FINANCE
04/05/93 (H) FSH AT 08:30 AM CAPITOL 17
ACTION NARRATIVE
TAPE 93- 20, SIDE A
Number 000
CHAIRMAN CARL MOSES called the meeting to order at 8:40 a.m.
He noted Representatives Moses, Olberg and Phillips in
attendance and said the committee would hear for the first
time HB 264.
Number 030
HB 264: FISHERY RESOURCE LANDING TAX
CARL MEYER, CHIEF OF APPEALS, INCOME AND EXCISE AUDIT
DIVISION, ALASKA DEPARTMENT OF REVENUE, gave a brief
overview of HB 264 and described the goals of the
legislation. He began by saying Section 1 of HB 264 adds
state authority to implement a landing tax, which would
apply to processed fishery resources that are not already
subject to the Fisheries Business Tax (FBT) provisions. A
fishery resource can only be subject to one of the taxes, he
said.
MR. MEYER explained that the FBT applies to fishery
resources that are either caught or processed in Alaska,
including within the state's three mile jurisdiction. The
landing tax provision would only apply to fishery resources
that were both caught and processed outside the jurisdiction
of Alaska and brought into the state and first landed in
Alaska, he advised.
Number 060
As described by MR. MEYER, the landing tax would apply to
processed resources that are first landed in the state of
Alaska, rather than in another state or foreign country.
Some fishery resources are transferred between ships in
international waters, but not within another state or
foreign country, so when that resource comes into Alaska
waters, that will be a first landing and subject to the
landing tax. A first landing outside the jurisdiction of a
state or foreign country, such as in United States
jurisdictional waters, is not a landing in a state or
foreign country and does not prevent the Alaska tax from
applying.
MR. MEYER disclosed the tax rate is 3.3% of the value of the
processed fishery resources at the place of the landing.
Section 20 of HB 264 provides that a person subject to the
tax must file a return reporting the value of the resources
landed and the point of landing. MR. MEYER explained the
details of the filing requirements.
MR. MEYER pointed out Section 30 of HB 264 allows a credit
against the landing tax for processing and salmon
enhancement type taxes paid to a state in which the fishery
resource was caught or processed prior to landing in Alaska.
In this provision, according to MR. MEYER, "state" is
interpreted to include foreign countries. This credit
provision is intended to avoid certain constitutional
challenges that might be made to the tax and in reality, it
is thought to be unlikely that any resource will be subject
to any other state or foreign tax first, he alleged.
MR. MEYER noted Section 40 of HB 264 provides that the tax
collected on .3% of the value of the fishery resource be
deposited into the general fund for use by the Alaska
Seafood Marketing Institute (ASMI). The tax collected on 3%
of the value would be deposited into the general fund and is
available for appropriation by the legislature for revenue
sharing purposes, he added.
MR. MEYER advised Section 50 of HB 264 contains the revenue
sharing provisions, and mirror those that apply to the FBT.
Section 60 gives the Department of Revenue the authority to
adopt regulations to interpret and implement the landing tax
provisions. Section 200 contains definitions. A "fishery
resource" for purposes of this chapter is a processed
resource. An unprocessed fishery resource in the state
would be subject to the FBT. "Landing" is defined as the
act of unloading or transferring a fishery resource and can
take place over water or on land.
According to MR. MEYER, most of the resources that would be
subject to the landing tax never make it to land. As an
example, a catcher-processor on the high seas outside the
Alaska three-mile limit catches fish and then transfers the
processed resource to a second vessel on the high seas -
that transfer has no application under HB 264; but once the
second vessel enters Alaska waters and transfers the product
to a third vessel, the FBT would not apply because the fish
was both caught and processed outside the state of Alaska.
However, the landing tax would apply at the point the second
vessel transferred the product to the third vessel. The
owner of that resource aboard the second vessel at the
moment of transfer would be subject to the tax, he stated.
MR. MEYER explained that the valuation of the resources for
purposes of computing the tax differs from that under the
FBT provision. The value is the lesser of the actual market
value of the resource at the point of landing in the state
or the statewide average price paid for the resource in that
tax year as reported by the Alaska Department of Fish and
Game (ADF&G).
MR. MEYER said the use of the statewide average price paid
is intended to accomplish two results. First, it would
simplify the determination of the tax value since the market
value for the processed product may otherwise be difficult
to determine. Second, it would roughly approximate the
value that would otherwise have been applicable under the
FBT provisions.
MR. MEYER acknowledged that the statewide average price paid
in most cases will be the value used for the landing tax and
will be determined by the ADF&G based on fish tickets. That
value is based on the unprocessed product, even though when
the resource is subject to tax it is in a processed form.
This valuation is equivalent to what in-state processors pay
on equivalent product. He added Section 2 of HB 264
provides that the legislation take effect on January 1,
1994.
MR. MEYER admitted that one of the biggest questions people
might have concerns who is impacted by HB 264. He explained
that this legislation is geared to the operators who both
catch and process outside Alaska in the Exclusive Economic
Zone (EEZ). These are large catcher-processors that have
the capability to both catch and process the resources
almost simultaneously, outside the jurisdiction of the state
and pay no fisheries business taxes.
According to MR. MEYER, even though these catcher-processors
pay no taxes, the state of Alaska provides significant
benefits and services, incurs quite a bit of management
responsibilities with respect to the resources caught on the
high seas, and the state's local communities are impacted by
those operations. The landing tax would be one way to
compensate the state for these impacts, and through the
revenue sharing provisions, compensate the communities for
some of those local impacts, he declared.
MR. MEYER told the committee there would not be a situation
where the FBT and the landing tax would both apply. There
would not be double taxation. If the FBT applies, the
landing tax would never apply. The landing tax would also
not apply to fishery resources that are first landed in some
other state or foreign country and again landed in Alaska.
This would prevent a situation from occurring where grocery
stores could bring in processed products and be subject to
this tax. This tax would capture the resources that are
caught in the EEZ and brought into the state of Alaska and
transferred to the Lower 48, he believed.
With regard to the determination of value, MR. MEYER
explained that the "value" is the lesser of the fair market
value at the time and place of the transfer, or the average
statewide price paid for the unprocessed resource as
determined by the ADF&G. In the event that some resource
subject to this provision does not have a statewide average
price, the value would not be zero, but the Department of
Revenue through regulations would substitute some other
method for the statewide average price in determining the
value of the product, he said.
MR. MEYER said in looking at the landing tax rate overall in
comparison to the FBT, the tax rate imposed on the
catcher-processors is equivalent to the rate a shore-based
processor would pay. The 3.3% is equivalent to the 3.3%
paid by a shore-based fisheries business. On balance, he
called it a very favorable taxing scheme for an EEZ
catcher-processor when compared to the FBT provisions,
because it puts them on a par with the shore-based
processors.
It was MR. MEYER'S understanding that if this type of tax
was proposed, the offshore industry would not have any
opposition if they were treated fairly and equivalent to the
shore-based processors. MR. MEYER called the tax fair and
more favorable than what a floating processor would pay
under the FBT provisions.
MR. MEYER then described the revenue sharing provisions,
including those for boroughs incorporated after June 16,
1987. If a landing occurs outside a municipality or
borough, 50% of the tax is transmitted to the Department of
Community and Regional Affairs for sharing under AS
29.60.450. The Department of Revenue has submitted a fiscal
note for HB 264 showing that the 3% portion of the revenues
from this tax, net of the amount shared back to
municipalities, would be about $4.3 million. The .3% of the
tax is not subject to revenue sharing and would be $860,000.
MR. MEYER pointed out the Department of Revenue has
submitted a fiscal note for one position for a revenue
auditor and related travel, supplies and equipment. That
position would be required to perform the audits and ensure
compliance, he concluded.
REPRESENTATIVE GAIL PHILLIPS asked if there would be any
fishing groups left who would not be taxed once HB 264 was
passed.
MR. MEYER replied that with passage of HB 264, everyone
should be subject to one of the taxes.
REPRESENTATIVE PHILLIPS asked about the ASMI dedication and
was concerned about the phrase "for other public purposes"
that might lead to the money not being appropriated to ASMI.
MR. MEYER answered that all the funds would be subject to
appropriation by the legislature.
VICE-CHAIR HARLEY OLBERG speculated that the provision might
have been included to get around the dedicated funds
prohibition.
REPRESENTATIVE PHILLIPS also asked about the June, 1987
restrictions on the revenue sharing sections.
MR. MEYER replied that these revenue sharing provisions were
intended to track exactly those in the FBT.
Number 398
REPRESENTATIVE PHILLIPS asked for the Department of Law's
response to a memorandum prepared by Legislative Legal
Services' attorney, Jack Chenoweth, to House Speaker Ramona
Barnes, concerning the constitutional issues raised by HB
264.
VINCE USERA, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW,
replied that this particular tax has been the subject of
discussion for years, and while no one can say definitively
it is either constitutional or unconstitutional, it is the
feeling of the Department of Law that they are secure in its
defensibility. Until the Supreme Court was to bang its
gavel, nobody would know for sure, MR. USERA admitted, but
the Department of Law is prepared to defend the legislation.
Number 440
CARL ROSIER, COMMISSIONER, ALASKA DEPARTMENT OF FISH AND
GAME, was pleased to see HB 264 introduced. The offshore
factory trawl fleet off Alaska waters is a large fleet,
approximately 60 plus modern vessels, MR. ROSIER said,
mostly based in the state of Washington and operating in the
EEZ off the coast of Alaska.
Number 460
According to MR. ROSIER, this fishery has been extremely
profitable, with the fleet harvesting a by-catch of crab,
halibut, herring and salmon while targeting other species.
These species are important to Alaska's fishermen,
processors and coastal communities, he added. The
incidental harvest of these species by the factory trawlers
has an economic impact on Alaskans by the removal of
resources that would otherwise be harvested by Alaskans.
MR. ROSIER pointed out that the fleet avails itself of
Alaska docks, harbors, communication and transportation
systems, as well as medical services when needed. Yet, the
factory trawler fleet pays virtually no taxes to the state
for either the services it receives or the impacts on
coastal communities. According to MR. ROSIER, the revenue
from this tax could help pay for the services used by the
factory trawlers and mitigate some of the impacts they have
on Alaska coastal communities.
MR. ROSIER acknowledged management and enforcement in the
offshore fisheries is underfunded. He pointed out the
revenue from this landing tax would provide the necessary
addition to fund these functions.
MR. ROSIER concluded with some remarks about his concern for
current efforts, especially in the Alaska Senate, to reduce
funding for fish and game management.
REPRESENTATIVE PHILLIPS asked for a copy of Commissioner
Rosier's statement.
KIM ELTON, EXECUTIVE DIRECTOR OF THE ALASKA SEAFOOD
MARKETING INSTITUTE (ASMI), commented that the .3% of the
portion of the tax is identical to what shore-based
processors are paying. He also pointed out that the
offshore processors are presently deriving benefits from the
efforts of ASMI. Page 2 of HB 264, under the ASMI section,
should be sufficient to indicate the legislature has the
option to appropriate those funds to ASMI, he concluded.
HB 264 WAS HELD FOR FURTHER CONSIDERATION.
ADJOURNMENT
CHAIRMAN MOSES adjourned the meeting at 9:18 a.m.
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