HB 182-EXTEND FISHERY RESOURCE LAND. TAX CREDIT  10:03:55 AM CHAIR TARR announced that the first order of business would be HOUSE BILL NO. 182, "An Act extending the fishery resource landing tax credit for certain taxpayers that harvest fishery resources under the provisions of a community development quota; providing for an effective date by amending the effective date of secs. 16 and 23, ch. 61, SLA 2014; and providing for an effective date." 10:04:02 AM REPRESENTATIVE BRYCE EDGMON, Alaska State Legislature, as prime sponsor, introduced HB 182. He explained HB 182 would extend the fishery resource landing tax credit. The tax credit originated in 2014 and expired in 2020 [as scheduled] because the legislature had a shortened session [due to the COVID-19 pandemic and was unable to act on extending it]. This bill would extend the tax credit from today until 2030. REPRESENTATIVE EDGMON recounted that in 1993 the legislature saw that the ground fish industry that was fishing outside of Alaska waters in Three-Mile Zone was getting more prominent. Adopted in 1993 and implemented in 1994, the fishery landing tax was instituted because those vessels would come in and use shoreside facilities. In 2014 a tax credit program was established for the [Western Alaska] Community Development Quota (CDQ) Program, which is comprised of six regional organizations that represent about 65 communities in Western Alaska. This tax credit program allows many of those harvesters and others that fish outside the state's waters to contribute to the local CDQ organizations to help provide for funding for education, employment, research, and other nonprofit endeavors. It comes to the state with no unrestricted general fund (UGF) dollars attached to it, and the bill has a zero fiscal note. This legislation would extend this successful program that benefits Western Alaska communities to 2030. 10:06:59 AM REPRESENTATIVE KREISS-TOMKINS said it is great to see all six CDQ groups speaking with a common voice in the supporting materials. He asked whether litigation is currently ongoing regarding the constitutionality of the fishery landing tax. 10:07:33 AM SETH WHITTEN, Staff, Representative Bryce Edgmon, Alaska State Legislature, on behalf of Representative Edgmon, prime sponsor of HB 182, confirmed a case is currently before the Alaska Supreme Court pertaining to the landing tax. He said he is unsure on when a decision is anticipated. REPRESENTATIVE KREISS-TOMKINS offered his understanding that if the plaintiffs were to prevail it would strike down the entirety of the landing tax and then that would render moot this tax credit program. MR. WITTEN confirmed that that is correct. If that were to happen, he said, legislative action might be seen to try to figure out how to make that tax work within whatever parameters were established. 10:08:29 AM CHAIR TARR opened invited testimony on HB 182. 10:09:21 AM NORMAN VAN VACTOR, President & CEO, Bristol Bay Economic Development Corporation (BBEDC), provided invited testimony in support of HB 182. He stated that BBEDC is one of the six CDQ entities and represents 17 coastal communities in its region. He related that the Community Development Program was established under the Hickel Administration in 1992 and codified in the Magnuson-Stevens Fishery Conservation and Management Act in 1996. This remarkable program provides Alaska's coastal communities along the Bering Sea specific harvest quotas in the federal water fisheries of the Exclusive Economic Zone (EEZ). The benefits of harvesting this quota are invested and reinvested in fisheries development, regional development programs, and provide employment and educational opportunities to BBEDC's community residents. MR. VAN VACTOR specified that the Alaska State Legislature enacted the fishery resource landing tax in 1993 and the CDQ tax credit provision was enacted in 2014. The for-profit fishing partners that harvest BBEDC's CDQ quota are eligible to participate in the tax credit program and, in return, redistribute those funds to BBEDC. The [Thirty-First Alaska State Legislature] considered extending the sunset provision in Senate Bill 184, but the bill failed to advance due to the chaos created by the [COVID-19] virus. Presently, BBEDC relies upon the fishery resource landing tax credit program to supplement the funds that BBEDC provides to the Bristol Bay Science and Research Institute (BBSRI), which does critical and collaborative research work with the Alaska Department of Fish and Game (ADF&G) under a memorandum of understanding (MOU). Extending this program through 2030 would provide stability for BBEDC's long-term planning in the region and would further solidify BBEDC's collaborative work with ADF&G. 10:12:42 AM ANGEL DROBNICA, Director of Fisheries and Government Affairs, Aleutian-Pribilof Island Community Development Association (APICDA), provided invited testimony in support of HB 182. She stated that APICDA represents six remote coastal communities in Southwest Alaska and is one of the six CDQ organizations with a mission to increase direct participation in Bering Sea and Aleutian Island fisheries and to help develop sustainable fisheries-based economies. The revenue generated from APICDA's quota holdings and fisheries investments is utilized to create jobs, build infrastructure, provide scholarships and workforce training, and help support a wide range of local priority initiatives and projects through grant programs to eligible community entities. MS. DROBNICA said she agrees with Mr. Van Vactor regarding this remarkable program and its crafters on the state and federal levels. She offered APICDA's strong support for HB 182 and the continuation of the fishery resource landing tax credit program through which APICDA's harvest partners are provided an opportunity to attribute a portion of their landing tax liability from the harvest of APICDA's CDQ quota for specific fisheries investments identified in statute. This meaningful program has been used by APICDA to advance its mission through supporting training opportunities, direct employment in the seafood industry, and to help with shoreside facility improvements. MS. DROBNICA related the Central Bering Sea Fishermen's Association's (CBSFA's) support for HB 182, the CDQ group for St. Paul Island, whose representatives were unable to make the hearing due to a conflict. Responding to Chair Tarr, she confirmed she is speaking on behalf of the CBSFA as well as APICDA, and further noted that a letter [included in the committee packet] was submitted to the committee on behalf of all six CDQ organizations. 10:15:17 AM REPRESENTATIVE MCCABE referred to the fiscal note and offered his understanding that a portion of this is not designated general fund (DGF) and a portion is. He further asked whether the municipalities' part of this or the CDQ's part of this is sweepable. 10:16:00 AM CONNOR BELL, Analyst, Legislative Finance Division (LFD), Alaska State Legislature, noted it is not a standard role for the Legislative Finance Division to provide recommendations. However, he continued, this is required by statute, so the division does recommend continuation of this provision given it does not affect state revenues; those revenues are separate and are a municipal share based on AS 43.77.050. The division's recommendation is based on only the municipal share portion of the revenue being affected. He deferred to the Tax Division to speak to what aspect is sweepable. CHAIR TARR offered her understanding that Mr. Bell is saying the Legislative Finance Division can give a positive recommendation for this because the tax credit is used against the municipal revenue portion of the revenue. MR. BELL confirmed that is correct. CHAIR TARR invited the Tax Division to respond. 10:18:11 AM NICOLE REYNOLDS, Deputy Director, Tax Division, Department of Revenue (DOR), responded that the CDQ credit can only be used against the municipal share of the fishery resource landing tax revenue. The state's share of the proceeds is recorded in the unrestricted general fund (UGF) and those revenues would remain the same. The municipal share of the proceeds is reported in the designated general fund (DGF), which would be reduced by the CDQ credit, and those amounts are reflected in the Department of Revenue's fiscal note. CHAIR TARR offered her understanding that this would not be in the category of funds that are considered sweepable if the state portion of the revenue comes in as unrestricted general fund. MS. REYNOLDS answered she believes that's correct, but she is not entirely familiar with the term "sweepable" or not. She explained that these funds in the DGF are what are shared with the municipalities. So, in the Tax Division's annual report, those numbers would be reduced but the UGF's numbers would not be reduced. REPRESENTATIVE EDGMON offered his understanding that these monies would not be sweepable, while Alaska Marine Highway funds and the 30 or 40 separate statutory driven entities are sweepable. He said this is different because the money flows through the Department of Revenue and not through a board that does something in statute. 10:20:53 AM REPRESENTATIVE VANCE expressed her concern that this would reduce the money going to municipalities, but the money is still there, it is essentially a trade. She asked what the added benefit of that is because obviously the municipalities could use this funding but it's being utilized in a different way. REPRESENTATIVE EDGMON replied that the tax credit has been in place since 2014 with a one-year standdown because of the legislature's inability to finish its work last year. While researching the bill, he related, there was no opposition from municipalities saying they would like to have this money redirected back to them. Regarding the benefits to the CDQ program itself, he said the six regional organizations and their respective communities receive many benefits from the proceeds of this tax credit, some years more than $600,000. It is money that goes towards educational opportunities and research such as the Bristol Bay Science and Research Institute. There is a broader good attached to the tax credit that contributes to the wealth of the communities and the entire swath of Western Alaska that participates in the CDQ program. 10:22:47 AM CHAIR TARR invited Mr. Van Vactor to respond to the question. MR. VAN VACTOR specified that in BBEDC's case the number in any given year might be from $80,000-$130,000, but that BBEDC turns that money into $600,000 by contributing directly towards its science and research institute and by using share matching and fundraising. He said BBEDC's pollock partners contributed over $400,000 last year to education programs in the region. It is seed money that goes a very long way. CHAIR TARR asked whether it would be accurate to think of it as allowing BBEDC to leverage other funds and then be more strategic in those investments. MR. VAN VACTOR answered, "Exactly." 10:23:45 AM CHAIR TARR opened public testimony on HB 182. 10:23:59 AM JENNIFER WILLIAMS, Government Affairs, Yukon Delta Fisheries Development Association (YDFDA), testified in support of HB 182. She noted she is a lifelong Alaskan from Emmonak. She stated that YDFDA is the CDQ entity representing six communities on the Yukon River Delta and these member communities represent more than 3,400 residents who live in one of the most economically challenged regions of the US. The CDQ program allows YDFDA to provide fishery and economic benefits to the resident fishermen, their families, and the entire region. The YDFDA has participated in the fishery resource landing tax credit program since its inception. The YDFDA uses this program to partially offset the amounts that YDFDA spends annually to support fishery research and monitoring studies of the Yukon River. This research undertaking is developed in collaboration with the Alaska Department of Fish and Game (ADF&G). The credits greatly assisted YDFDA's test fishing monitoring activities on the lower Yukon River for chinook this summer and for fall chum, to conduct lamprey eel tagging and recovery studies, and to conduct chinook out-migration and smolt trawl survey studies sponsored in part by the National Oceanic and Atmospheric Administration (NOAA). Both subsistence and commercial openings are predicted on the test fishery results. Without this valuable information ADF&G would be hard-pressed in YDFDA's management efforts, which would likely result in a loss of economic opportunity in the region and/or a request for additional state dollars. None of the tax credits are used for YDFDA administration or management fee surcharge. The fishery resource landing tax credit program is a great benefit to the residents of Western Alaska and the state of Alaska. She urged the committee to support HB 182. 10:26:30 AM CHAIR TARR closed public testimony on HB 182 after ascertaining that no one else wished to testify. 10:26:43 AM REPRESENTATIVE EDGMON pointed out that the House Special Committee on Fisheries also serves as a budget subcommittee for the Alaska Department of Fish and Game. He pointed out that when the department's budget was considered a few weeks ago, the UGF portion, the state funding in the department, was at 52 percent and going lower and lower as additional funds are supplanting the need for state monies, and this tax credit program is one of those. The BBSRI program mentioned by Mr. Van Vactor is unique because it allows for some of the proceeds from this program to supplant what ADF&G would normally provide for or enhance what the department is able to do with existing money. So, the role of this program, the tax credit itself, is providing local benefits and in the larger context helping ADF&G get its work done. 10:27:51 AM The committee took a brief at-ease. 10:28:45 AM CHAIR TARR noted that all six CDQ groups strongly support HB 182 and that it sounds like all committee members are comfortable with moving the bill to its next committee of referral. 10:29:16 AM REPRESENTATIVE STUTES moved to report HB 182 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 182 was reported out of the House Special Committee on Fisheries.