Fishing companies ask for state help with taxes

Companies represent Alaska villages from Nome to Naknek

Posted: Friday, February 06, 2009

ANCHORAGE - Executives from six fishing companies want help from the state's congressional delegation to block income taxes from Bering Sea operations.

The companies that harvest seafood on behalf of numerous Western Alaska villages could owe millions in back taxes from business outside the scope of their non-profit status.

The money is crucial for village economic development and for the companies' growth in the state's massive fishing industry.

The six companies operate under a 17-year-old federal program that led to the formation of the Community Development Quota.

This benefits 65 coastal villages who gets vested with as much as 10 percent of the Bering Sea's fish and crab harvests.

The six companies represent groups of villages that line a region from Nome to Naknek and out the Aleutian chain. The arrange to catch the fish and convert it to cash.

Catch proceeds get reinvested, create jobs, help build processing plants, and provide scholarships and other benefits for villagers, executives said.

The tax debate has circulated throughout the development program, questioning whether company profits should be taxed.

Concerns grew as the six firms have boosted investments into some of the largest fishing ships and fish-processing plants in Alaska. Since then, the development quota companies have been tremendous wealth-builders.

The companies generated nearly $170 million in revenue and collectively had assets of more than $543 million in 2007, according to a report from the Western Alaska Community Development Association.

The tax issue gained momentum when one of the companies entered into a major tax settlement with the federal and state governments.

Norton Sound Economic Development Corp., which represents Nome and surrounding villages, paid $8.1 million in back taxes, interest and penalties to the Internal Revenue Service, covering a three-year period starting 2005; it also paid $2.4 million to the state, said company chief executive Janis Ivanoff.

Additionally, the company pay undetermined taxes for 2008. It has since registered a for-profit subsidiary with the state called the Siu Alaska Corp..

This subsidiary will hold Norton Sound assets such as the company's large stake in Glacier Fish Co., a Seattle-based operator of top Bering Sea pollock fishing ships.

In an e-mail, Ivanoff said the company did so after consulting with "our outside legal advisers; this is as much information as I can give you at this point."

Reaction on the tax issue from other companies is mixed.

Larry Cotter, chief executive of the Aleutian Pribilof Island Community Development Association, supported Norton Sound's tax settlement

Other company executives, however, disagree. They said nonprofit social improvement organizations under the Internal Revenue Code shouldn't have to pay taxes.

Philip Lestenkof, president of the Central Bering Sea Fishermen's Association, said his company pours money back into development such as upgrading the port on remote St. Paul Island, and buying halibut from local fishermen.

Robin Samuelsen, head of the Dillingham-based Bristol Bay Economic Development Corp., said Norton Sound's settlement troubled him.

"Maybe they felt like good Samaritans, I don't know," said Samuelsen, who chairs the CDQ umbrella association. "It would be devastating for us to pay taxes as a nonprofit on the social programs we're delivering to the people in our region."

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