SENATE BILL NO. 322 An Act relating to the rate of the salmon enhancement tax. CHERYL SUTTON, JOINT LEGISLATIVE SALMON INDUSTRIES TASK FORCE, SENATOR BEN STEVENS, stated that SB 322 would modify AS 43.76 by adding additional tax rates of 30, 20, 15, 10, 9, 8, 7, 6, 5, and 4 percent to the Salmon Enhancement Tax. Under current law, commercial salmon interim-use and entry permit holders organized under regional aquaculture associations (AS 16.10.380) may vote to tax themselves at the rate of one, two or three percent of the value of their harvest. Those monies are collected by the Department of Revenue and deposited into the general fund. The Legislature may make appropriations based on that deposit to the Department of Community and Economic Development for financing of qualified regional aquaculture associations. Ms. Sutton continued, the decline in the value of salmon due to changing market dynamics has led to increased costs for regional aquaculture associations. In order to meet their continuing costs, many have increased the amount of fish harvested for "cost-recovery." Fishermen would like the opportunity to raise their tax rate to avoid increased cost- recovery harvests. Qualified regional aquaculture associations are permitted in statute (AS 43.76.015) to conduct an election to approve or terminate a Salmon Enhancement Tax. The statute requires approval by a majority vote of the eligible interim-use permit and entry permit holders voting in an election. SB 322 provides some flexibility for regional aquaculture associations to organize their operations and respond to the changing conditions in the salmon industry. Representative Hawker understood that the aquaculture associations would give up cost recovery fishing and the funds that would be generated by that would be replaced with a self assessed tax on the members or the people benefiting from the enhancement activity. He inquired the advantage to the fishermen moving to a tax structure. Ms. Sutton responded that during interim testimony received from fishermen, it was perceived that they felt in competition with the regional aquaculture association in terms of fish harvested and cost recovery. She stated that it was a requested tool. Because it would not mandate any change, Senator Stevens obliged them. Representative Hawker asked if there might be a risk that the vote could eliminate cost recovery fishing at the potential expense of injuring the fishermen's own aquaculture association. Ms. Sutton did not believe there would be a risk. She noted that Senator Stevens had considered that question before he agreed to submit the legislation. She referenced the handout on the "Alaska Hatchery Commercial Common Property & Cost Recovery Return Data, 1993-2003". (Copy on File). If the program is eliminated, then ultimately, it would be coming from everyone's pocket and no one would be availed. Representative Hawker commented that with cost recovery fishing in a harvest area, there are many dynamics involved. He asked if the legislation would disadvantage any particular group. Ms. Sutton responded that it would not, and that everything else would remain in place. The language removes nothing from law or regulation. Representative Chenault asked about the fiscal note analysis on Page 2: "Individual regions can significantly increase compliance risk". He asked why that could potentially occur with a percentage change and how that would then increase costs to the Department. Ms. Sutton commented that the sponsor agrees with that point, not viewing the costs as something that should affect the Department's note. If the tax rate changes, Ms. Sutton stated it would be immaterial to the structure. Representative Chenault recommended that the note be zeroed out. Ms. Sutton commented that the note is a zero and is a non-issue for the bill. The structure exists and the compliance view remains the same. Representative Chenault stated that he did not want to negatively affect the bill, however, he did not want the Department to have the ability to gather more funds. Representative Fate identified the 30% enhancement tax contingent upon the commissioner designating a region. Ms. Sutton disagreed. The only thing that the bill does is add additional tax rates to a law and structure something that already exists. It does not change anything else. Representative Fate pointed out that there are areas not included in law. Ms. Sutton stated that the only people with the ability to vote to tax are those that are qualified regional aquaculture association members established by criteria in law. She added that there is nothing else pending that would broaden it. There are six qualified regional aquaculture associations. The other hatcheries do not qualify and do not have taxation powers. Representative Fate did not know what an Alaskan commercial common property hatchery was. Ms. Sutton pointed out that a table had been included in the files, which indicates commercial comp property and cost recovery return data. All fish are common property. The chart indicates the rates of harvest. (Copy on File). Representative Foster MOVED to report SB 322 out of Committee with individual recommendations and with the accompanying zero fiscal note. There being NO OBJECTION, it was so ordered. SB 322 was reported out of Committee with a "do pass" recommendation and with a new zero note by the Department of Revenue.