Legislature(2003 - 2004)

03/08/2004 01:12 PM House RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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 [2006]  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                                                               
Number 2745                                                                                                                     
REPRESENTATIVE GATTO  asked about  the definition  of unprocessed                                                               
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                                                               
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                                                               
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                                                               
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.                                                                                                   

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