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State fish landing tax challenged in Alaska Supreme Court with millions at stake

A factory trawler pulls into port in Seward, Alaska.
A factory trawler pulls into port in Seward, Alaska.(KTUU)
Published: Nov. 6, 2020 at 9:02 AM AKST
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ANCHORAGE, Alaska (KTUU) - Communities across Alaska are awaiting a ruling from the state Supreme Court on the constitutionality of a tax that provides a major chunk of revenue for coastal cities.

The Fishery Resource Landing Tax levies a tax on fishery resources first landed in and processed outside of Alaska. The Department of Revenue Tax Division says the tax is primarily from factory trawlers and offshore processors that process fish beyond the state waters, which generally extend three miles from shore, and come to Alaska to transfer the product to a different vessel before leaving the state.

The law was enacted in 1994 and was immediately met with legal challenges from the America Factory Trawler Association. However, the lawsuit was dismissed.

The most recent challenge, brought by North Pacific Fishing, Inc, and U.S. Fishing LLC was argued before the state Supreme Court last month.

If the justices rule in favor of the companies, coastal communities will be struck with a sizable blow.

In 2019, the tax generated nearly $12.5 million dollars. Half of the funds go to the state general fund, and the other half goes to the municipality where the products came into port.

For the City Unalaska, home to the country’s top fishing port by volume of landings, the fishery landing tax is the biggest revenue source of all taxes on the fishing industry, and trails only property tax and sales tax as the largest funding sources for the city’s FY21 budget.

“Our projected budgeted revenues for FY21 are just about $29 million for our general fund, and the Alaska Fishery Resource Landing Tax accounts for about 17% of that,” Unalaska City Manager Erin Reinders said.

Unalaska’s FY21 budget projects $5 million in revenue from the Fishery Resource Landing Tax, $4.2 million from a raw seafood tax and $3.4 million from the Alaska Fisheries Business Tax.

“That’s a very big chunk. It’s one of our largest revenue sources for our operation. So we use these funds to go straight into our general fund, and that helps to fund various capital projects that are certainly utilized by all community members and visitors and industry alike, as well as our general operation and any of the services that we provide, so it is significant,” Reinders said.

Reinders says part of the rationale for the tax is that the companies still use community facilities, clinics, roads and other services. She says the tax helps level the playing field with shore-based processors.

The case is ripe for decision, and while Reinders hopes the law will be upheld, the city is preparing for ways to make up the funding gap should it be struck down.

“Everything’s kind of on the table as we think through this,” Reinders said. “The Alaska Fishery Resource Landing Tax has been an effective tool that really benefits a lot of coastal communities, including Unalaska, and the State of Alaska itself. So yeah, we’re going to need to spend some time thinking through how I might respond. I’ve got various folks working on that right now.”

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