HB 154-COLLECTION OF FISHERY BUSINESS TAXES CO-CHAIR SCALZI announced that the next order of business was HOUSE BILL NO. 154, "An Act relating to security for the payment of fishery business taxes and to payment of estimated fisheries resource landing taxes and penalties." [Before the committee was CSHB 154(FSH), version 22-LS0638\J.] [There was a motion to adopt HB 154 for discussion purposes, but it was already before the committee.] CO-CHAIR SCALZI, speaking as the sponsor, gave an overview on HB 154. He indicated that since statehood, the State of Alaska has "offered up" a raw fish tax to collect money for fisheries resources. He explained that currently fish processors are allowed to hold that money until April 1 of the following year. Furthermore, to secure the state's interest in this, the state and the Department of Revenue allows the fish processor to hold that money, provided the processor puts up a bond in the amount of money equal to the estimated tax, based on the previous year, or to post a real property bond three times the amount of the raw fish tax from the previous year. CO-CHAIR SCALZI continued: When we went to [an] IFQ fishery for halibut - "individual fishing quota" - what we ended up doing was creating a new business, and it was a fresh-fish business. In moving fresh fish, a buyer may buy and sell a lot of product in the year. But because they do not have a processing facility, they do no have a lot of assets. So, therefore, there was a problem here with these fresh-fish buyers actually collecting quite a bit of fish tax, say, in the hundreds of thousands of dollars, and under our current law they would be subject to having to bond for the amount that they collected the previous year, or have "lienable" property three times ... the amount. CO-CHAIR SCALZI said HB 154 was drafted by the Department of Revenue to make sure that the State of Alaska's interests are secure. He highlighted that the bill allows a fresh-fish buyer - not a processor - to be able to pay the raw-fish tax "as they go." Although Co-Chair Scalzi used the term "monthly" payments, he explained that they would actually be made on a 45-day cycle. He added that, under this plan, the participant would have to post a $50,000 bond, or $100,000 in "lienable" property, to secure the monthly collection of that tax. NEIL SLOTNIK, Deputy Commissioner, Treasury Division, Department of Revenue, pointed out that Section [3] of the bill addresses the landing tax, which is different from the fisheries business tax that is addressed in Section 1 of the bill. He specified that the only change being made to the landing tax was to provide for quarterly estimated payments. Mr. Slotnik defined the landing tax as the tax that "is incurred by the factory trawlers [who] catch and process fish outside of Alaska's jurisdiction, but then bring it in and actually land it in our waters." He added that unlike the situation under the fisheries business tax whereby a license is issued, there is no license and no security for the landing-tax taxpayers. He continued: We have always provided by regulation for quarterly estimated payments, but there was no corresponding provision in statute. And ... we thought since we're making a change here, in the fisheries business tax, for monthly payments for certain taxpayers, ... we ought to make sure that our regulations and statutes are in line on the fisheries landing-tax provision, as well. Number 1181 REPRESENTATIVE FATE referred to the $50,000 bonding and inquired how much it would cost the individual. MR. SLOTNIK said, as he understood it, the amount would be 10 percent, which equals $5,000. REPRESENTATIVE FATE commented that some fishermen on the Yukon River "don't make $200." MR. SLOTNIK answered that the change being made through the language of HB 154 actually lessens the security requirement, but will most likely only apply to brokers "who move fish out of state." He said he understood that the fish processors, to whom Representative Fate referred, usually post a CD [certificate of deposit] and keep the interest earned on that. He added, "They ... don't necessarily incur the cost of bonding that they have to pay to the bank if they post a CD instead, as security." In response to a follow-up question from Representative Fate, Mr. Slotnik stated that HB 154 would not change "our relationship with the small processors that are in the Yukon Flats area." He added, "They may be bonding - under current law I already require them to bond. If so, they are incurring that cost." REPRESENTATIVE FATE asked for clarification that this [bill] would not change whatever the current situation was. MR. SLOTNIK concurred. CO-CHAIR SCALZI interjected that the bill adds "one more tool" to the Department of Revenue and the benefit of "one more option for small buyers." Regarding the landing tax for the catcher/processors previously discussed, Co-Chair Scalzi asked Mr. Slotnik if he wanted to discuss the issue of date changes. Number 1301 MR. SLOTNIK replied that he understood the current draft did not change dates, but was the same as the current regulation. He said there was a "little bit of a mix-up in some of the earlier drafts that didn't conform dates with current payment. CO-CHAIR SCALZI mentioned that there have been requests for a lot of other changes in the processing fees and Alaska's present business tax [code]. He said that his response to those requests has been to tell people that the House Resources Standing Committee cannot address all those things in one bill, but would be willing to work with the Department of Revenue on a comprehensive plan for other changes in the course of the next year. He added that the Department of Revenue has indicated changes it would like to effect and has expressed willingness to work with the House Resources Standing Committee. Number 1397 KEVIN HOGAN, President, Auction Block Company (ABC), testified via teleconference to endorse [HB 154]. He explained that his company is an Internet fish auction company formed in 1997, which had become the largest buyer of halibut in Alaska in 1998- 99. Mr. Hogan said ABC's function is to elevate the (indisc.) prices statewide and, as a consequence of that, he thinks "we" have elevated the raw-fish tax that's been collected by the state. He pointed out that a problem for ABC is that it generates a large volume, but operates at a very small margin; consequently, all of its profits go to securing its fisheries business license. Mr. Hogan discussed methods other companies use to get around the system and keep their businesses alive, stating that ABC's preference would be to "pay as we go." He concluded, "Although this is a first step, there's more that can be done in the future, and I endorse that notion there." Number 1482 REPRESENTATIVE FATE moved to report CSHB 154(FSH) out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 154(FSH) was moved out of the House Resources Standing Committee.