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.