Tax dispute could have far-reaching implications

A tax dispute between a single fishing company and the state of Alaska could have far-reaching consequences for fishing towns across the state, according to a story by KTOO Juneau public broadcasting.

Each year, fleets of factory trawlers and offshore processors catch millions of tons of fish in the North Pacific and Bering Sea. It is not practical to offload fish caught outside the 3-mile limit in open ocean, so it is almost always done in an Alaskan port or onto a transport ship anchored in state waters.

That is where the State takes a cut. The state levies a 3 percent landing tax on the value of the catch; half goes to state coffers, half is shared with local governments.

“It is very important to most all fishery-dependent communities in this area,” said Unalaska Mayor Frank Kelty.

His city is by far the largest recipient of the landing tax. It’s about 15 percent of the city’s revenue.

“If this tax went away, it would be a major hit to the community and would have repercussions on a lot of things that we do,” Kelty said. “But also, it’s the hit to the state of Alaska.”

The landing tax brought in $9,968,676 to the State in fiscal year 2017. A tax dispute between a Washington state-based catcher-processor recently went before an administrative law judge and is the latest effort to dismantle the 24-year-old landing tax.

Fishermen’s Finest Inc. operates two catcher-processors in Dutch Harbor. In a legal brief obtained by KTOO, it argued that the tax violates at least two provisions of the U.S. Constitution. Company representatives, citing the confidentiality of tax appeals, declined to comment.

The Alaska Attorney General’s office is defending the tax. In its own filing, it argues that throwing out the landing tax would reopen a giant tax loophole that would allow the Alaska fleet to catch fish in international waters, bring the catch into Alaska and export it abroad while stiffing the state.

Legal observers say it is an interesting and important case.

Other fishing companies will try to also avoid the tax, said Joe Geldhof, a commercial attorney in Juneau, who upon KTOO’s request reviewed the legal briefs.

“That’s the real fight here.”

He agrees that if the company prevails in the hearing, it would likely be appealed.

It’s not clear when the administrative judge will rule.

Cristy Fry can be reached at realist468@gmail.com.

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