Committee reviews expansion of fisheries product development tax credit in HB 129

Juneau — The Alaska House Special Committee on Fisheries took up House Bill 129 on March 20, hearing presentations and invited testimony about expanding the Fisheries Product Development Tax Credit to all species of fish and shellfish, broadening eligible equipment and streamlining Department of Revenue eligibility determinations.

The bill, presented by Matt Greening, staff to the House Fisheries Committee, would expand the existing credit to continue incentivizing value-added seafood products and new processing technologies, extend the credit's sunset date by three years, and require quicker preliminary determinations from the Department of Revenue. "Before you today is House Bill 129, an act relating to the fisheries product development tax credit program," Greening told the committee.

Why it matters: Supporters said the change would help processors invest in capital equipment and technologies that improve product quality and increase utilization — steps they say are needed amid weak market conditions and rising costs. Julie Decker, president of the Pacific Seafood Processors Association, told the committee the industry generates about $6 billion in economic activity in Alaska and creates roughly 48,000 direct jobs, and that the credit encourages one-time private investments that raise long-term value. "HB 129 provides an incentive for Alaska processors to invest in new equipment that produces higher quality, value-added products within the state of Alaska," Decker said.

Testimony and specifics: Stephanie Moreland, executive vice president of Trident Seafoods, said processors have used the credit to convert waste streams into higher-value products for pet and specialty markets and asked the committee to adopt the task force recommendations included in the bill. "To survive and support a healthy seafood sector for the long run we have to cut our costs of our business ... while also increasing value," Moreland said.

Tony Marsh of EC Phillips and Son, a family-owned processor, said smaller processors rely on quality and value-adding to diversify markets and that the bill's provisions to expand eligible species and equipment and to streamline preliminary determinations would encourage investment. Marsh cited examples such as ice-making machines, freezers and dryers as equipment that can elevate quality and permit fuller utilization of product.

Department of Revenue data and program mechanics: Dan Stickel, chief economist for the Alaska Department of Revenue, told the committee the department reported five beneficiaries of the current fisheries product development tax credit in fiscal year 2013, citing the Department's Direct Expenditure Report. Greening explained that the credit currently allows a processor to deduct up to 50% of its Alaska fisheries business tax liability and that the bill would qualify equipment used "predominantly" in value-added processing — meaning at least 51% of the time — for the credit. "So as long as that piece of equipment was used predominantly in a value-added process, so 51% or more of the time it was used to preserve or dry, that equipment would qualify," Greening said.

Scope questions raised by committee members: Several representatives asked whether the bill could or should include mariculture products such as kelp and novel production systems like aquaponics. Greening and other committee members noted current limits: mariculture operations typically do not have a fisheries business tax liability in the same way wild-capture processors do, and the bill as drafted does not explicitly include mariculture or kelp. Committee members asked staff to verify whether and how mariculture or aquaponics could be made eligible if the committee wishes to consider that expansion.

Requests and suggested edits: Julie Decker asked that the committee consider extending the reauthorization period to Jan. 1, 2035 (she said the task force recommended that date). Supporters also pointed to prior research — cited in testimony as analysis by McKinney Research Group — showing substantial state return on investment from the original salmon product development tax credit; the testimony referenced a return on investment greater than 200% to the state general fund for the original credit relative to salmon.

Next steps: Chair Stutes said the committee will continue public testimony on related fisheries bills at its next meeting on Tuesday, March 25, and will readdress HB 129 if time allows. No motion or vote on HB 129 occurred during the March 20 meeting.

End matter: The invited testimony and committee discussion focused on expanding eligibility (species and equipment), accelerating Department of Revenue determinations, and whether to include mariculture or aquaponics in the credit. Committee staff committed to follow up on drafting clarifications and eligibility questions before the committee's next meeting.