Legislature(2003 - 2004)
03/08/2004 01:12 PM House RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 444-DIRECT MARKETING FISHERIES BUSINESS [Contains discussion of SB 286, the companion bill.] CO-CHAIR DAHLSTROM announced that the next order of business would be HOUSE BILL NO. 444, "An Act relating to direct marketing fisheries businesses, to the fisheries business tax, and to liability for payment of taxes and assessments on the sale or transfer of fishery resources; and providing for an effective date." [Before the committee was CSHB 444(FSH).] Number 2890 REPRESENTATIVE PEGGY WILSON, Alaska State Legislature, speaking as sponsor, explained that HB 444 is about a fisheries business tax (FBT) and how that tax relates to a sector of the commercial fishing industry known as direct marketing fisheries businesses. She said in 1913, when the territory of Alaska decided to gain revenue for the fishing industry, this tax was put into place. It is the oldest tax in Alaska and was levied on processing companies. The percentage was 3 percent on shore-based processors and 5 percent on floating-fisheries processors. She said the floating businesses are primarily large mobile processing facilities, and are assessed at a higher rate to compensate for the fact that they do not operate like a shore- based plant does. This bill focuses on a group of fishing businesses that do not fit the old definition of the FBT. She explained that this bill is a companion bill to SB 286, and is a bill that took years of negotiations between the industry and government. She said the Joint Legislative Salmon Industry Task Force endorses this bill unanimously. She said the bill is about fairness and "leveling the playing field." CO-CHAIR MASEK asked for a brief overview of the changes made to CSHB 444(FSH). TAPE 04-13, SIDE B Number 2990 IAN FISK, Staff to Senator Bert Stedman, Alaska State Legislature, testified. [Senator Stedman was sponsor of the SB 286, the companion bill.] Speaking to changes made in CSHB 444(FSH), he turned attention to page 4, line 5, and he said the word "unprocessed" was added into the language as a clarification to ensure that the [tax] is on the unprocessed value [of the catch]. He explained that one of the things this bill does is it clarifies the value of fish that direct marketing fisheries are supposed to pay tax on. Mr. Fisk said the bill changes the tax rate for direct marketers from 5 percent to 3 percent because in existing law many of the direct market fisheries businesses who do processing on board are basically considered to be the same as floating fisheries business. He clarified that these are small vessels. Number 2912 MR. FISK explained that this is the oldest tax in the state and as it has evolved over the years, it hasn't really made a distinction between small boat vessels, which do some processing on board, and large floating processors, which are basically floating canning lines. He said this is a fair distinction to make for small boats that are operating out of Alaskan towns. He said the bill changes the point of taxation; the "raw fish tax" - the nickname for fisheries business tax - is applied to the raw fishery resource as it's delivered to a processor, which is the way a vast majority of fish are delivered, and is kind of the first point of sale. Mr. Fisk said the point that one is taxed on in the direct market business is often a retail point of sale, so [the bill] rectifies that problem, and provides fairness and a level playing field. He said [the bill] rectifies the due dates for all taxes that a direct market business would pay to April 1. There are a few other taxes that the businesses have to pay if handling salmon such as a hatchery and marketing tax. He said instead of paying the taxes monthly, it would be paid once a year, which makes it easier for small businesses to do the bookkeeping. MR. FISK said [the bill] is a tightly woven compromise [that resulted] from the Joint Legislative Salmon Industry Task Force process. He said the definition of a "direct market vessel" is [a vessel] that is 65 feet or under, which made some of the larger processors more comfortable with the bill, and it applies only to the product that is caught and marketed by the fisherman. He said a direct market vessel can't buy product from other vessels. Mr. Fisk explained that the Department of Revenue (DOR) will be revenue neutral to the state because there are some provisions of the bill that bring in better compliance with the FBT and close a few loopholes on certain types of direct market vessels. MR. FISK said this bill is helping out small Alaskan businesses and because of current market conditions fishermen are losing their markets and don't have any other options but to try to sell their own product. He suggested the bill would help small Alaskan businesses. Mr. Fisk noted that this is a compromised bill that a lot of work had been put into. He urged the committee to pass the bill. CO-CHAIR DAHLSTROM asked Mr. Fisk to comment on the $25,000 that is going to come out of the general fund. MR. FISK said the requested position for DOR is the only fiscal impact that this bill will have. He said the point is to give DOR the extra ability to check the compliance with the tax. CO-CHAIR DAHLSTROM asked Mr. Fisk if he anticipated one additional position in 2006 and two positions in 2007. She noted that the [amount of funding requested in the fiscal note] doubles in 2007. MR. FISK said he is not certain why there is a difference [in funding] between the two years. He said he thought it was because there won't really be any tax returns for the department to go over for the first part of the  fiscal year, and it wouldn't be until the middle or the end of the year. He said in the long run, [DOR] will end up with a $50,000 estimate every year. Number 2745 REPRESENTATIVE GATTO asked about the definition of unprocessed [fish]. MR. FISK said in some cases a troller can gut and gill a fish, which is kind of the industry standard for trollers, and the fish is not considered processed. REPRESENTATIVE GATTO said a fish can be finned, gutted, and it remains unprocessed because the flesh is not exposed to air. He said he wanted to ensure that was clear to the committee because it wasn't clear to him. Representative Gatto noted that the head of the fish has to stay on otherwise the flesh would be exposed. Number 2666 KATHY HANSEN, Executive Director, Southeast Alaska Fishermen's Alliance (SEAFA), testified. Ms. Hansen said [HB 444] is a compromised bill that's been worked through in a public process for over two years through the Joint Legislative Salmon Industry Task Force; it has agency support, processor support, and industry support. She noted that direct marketers had testified in other committees but it is the time of year when most of them have started to go back out fishing and aren't available. Ms. Hansen urged the committee to pass the bill. REPRESENTATIVE GATTO asked if a [fisherman] can buy fish from others. MS. HANSEN said a fisherman cannot buy fish from others and be a direct marketer. REPRESENTATIVE GATTO asked if a fisherman can carry another fisherman's fish into [town] to save that person a trip. MS. HANSEN said she would have to take a look at the Alaska Department of Fish & Game's [ADF&G] transporter bills to see if a fisherman can carry in another fisherman's unprocessed fish. She said she did not know the answer. Number 2597 REPRESENTATIVE GUTTENBERG asked if this bill allows fishermen to get together and form a co-op or a processing conglomeration. MS. HANSEN said "roundaboutly" that is permissible under current state law. She said those activities can still be done even with this legislation passing. Ms. Hansen remarked: They'll have to go back to the current laws that are in statute right now and meet those definitions of ... what requirements they'll have to meet for DEC [Department of Environmental Conservation] processing standards [and] what requirements they'll have to meet for Department of Revenue. MS. HANSEN said it can still be done, but not as a direct marketer dealing with one's own product. REPRESENTATIVE GATTO asked if fishermen will be paying 5 percent instead of 3 percent. MS. HANSEN answered in the affirmative. Number 2546 REPRESENTATIVE WOLF noted that the committee had heard a transporter bill last year. He asked if one boat can haul in several other fishermen's unprocessed fish. MS. HANSEN said without looking at the transporter bill she didn't remember if there were any restrictions on whether the fish had to be processed or unprocessed and she could not answer the question. REPRESENTATIVE GATTO said he specifically remembered hearing that bill in committee last year, which [allowed one boat to haul several fishermen's fish into town]. He said Representative Gatto [brought attention to the question] of at what point does it become a co-op, and he said he didn't know that the question was ever addressed. Number 2463 CHERYL SUTTON, Staff to the Joint Legislative Salmon Industry Task Force, Alaska State Legislature, testified. She said the transporter bill that was passed last year only created the opportunity for harvesters to offload unprocessed fish onto another vessel that acted as a transporting vessel to a processing plant or a point on land. Ms. Sutton remarked: This bill has nothing to do with transporting anyone's processed fish .... It does not increase any of that activity; it's a direct marketer, they're responsible for their own vessel. They fall under a set of rules that are very stringent and very well defined, and if you get into any kind of a processing activity, and we dealt very closely with all the processors in the state on this issue, then you ... come under an entire set of different regulations, and these folks don't want to fall under those regulations, they want to do this activity, try to just expand their own businesses, and perhaps expand their own personal incomes by doing direct marketing, and that's the pure and simple of the bill. REPRESENTATIVE GATTO said he didn't want to pass legislation and somehow be in conflict [with legislation passed last year]. He said he thought it was great for a person to sell his or her own fish. Representative Gatto asked if [the bill] defeats what was passed last year. MS. SUTTON said no; the bill passed last year is a totally separate issue. She said she believed there are only 12 vessels in the entire state that applied for a transporter permit of which only 4 vessels were in salmon fisheries, so there wasn't a huge use of that piece of legislation to this point. She said the [two bills] do not cross boundaries in any section of the law. She remarked: The transporter bill simply would allow me as [a] fisherman - if I were out on the west side of Cook Inlet harvesting fish and I'd had no capacity to offload my fish to a processor, but there was a vessel that was transporting and he had a transporter license and I had the proper licensing - he could take my fish to the east side of the inlet and sell those fish under my authority, so that they're not mixing the issues at all. REPRESENTATIVE GATTO asked if the fishermen whose fish were being transported would still retain ownership of his or her fish. MS. SUTTON said correct. REPRESENTATIVE GATTO indicated that if the fish were kept separately, then there would really be no question that the transporter was simply helping by transporting fish for the other fishermen. He said if the fish were kept together, he would have a different question that has to do with whether "we're overstepping the intent here in saying this is a co-op now, rather than would you mind carrying my fish for me." MS. SUTTON said she was going to step back from the issue because that's a piece of legislation that was passed last year, is in law, and has absolutely nothing to do with this piece of legislation. She remarked: I guess that was the only point I really wanted to make clear was that ... you were very clear in the questions that you asked last year about how ... they would be accountable. They spent considerable time with the [Alaska] Department of Fish & Game ... ticketing, ... formatting, and making sure that the individual's fish were clearly accounted for, ... registered, and certified, but this is a totally separate issue. This is a direct marketing bill that deals with commercial fishing vessels that are under 65 feet, and their regulations are totally different from the transporter regulations. Number 2233 KENNETH DUCKETT, Executive Director, United Southeast Alaska Gillnetters (USAG), testified, and he stated that USAG strongly supports this legislation and has submitted a letter to the committee expressing its support. CO-CHAIR DAHLSTROM noted that the next committee of referral is the House Finance Committee, which will have the opportunity to view the fiscal note and make determinations [regarding the fiscal impact of the bill]. Number 2189 CO-CHAIR MASEK moved to report CSHB 444(FSH) out of committee with individual recommendations and the accompanying fiscal notes, and asked for unanimous consent. Number 2173 REPRESENTATIVE GUTTENBERG objected for purposes of discussion. He remarked: I think Representative Gatto and I have a similar concern that the salmon task force has come to us with a series of recommendations and we've passed most of them. But I think, ... and I don't know how real this is, but ... certainly a concern ... [of] mine is that we're changing situations and there are going to be ... new processes. And people are going to be taking advantage of things that are unseen at this point. ... I support this legislation and I think it does good things, but ... the more we do of these things, the more things that are changing and opportunities are changing and the whole shape of the business, so I am concerned about that in the long run. I am not a commercial fishermen but I think the dynamics of the industry is going to be changing. REPRESENTATIVE WOLF said he had some reservations about HB 444 as well. He indicated that he thought HB 444 ties directly to the transporter bill passed last year. Number 2101 REPRESENTATIVE GUTTENBERG removed his objection. CO-CHAIR DAHLSTROM asked if there was further objection. There being no objection, CSHB 444(FSH) was reported from the House Resources Standing Committee.