Conferees Reach Accord on Tax Forgiveness for Seafood Firms

Legislative negotiators Tuesday approved a bill to forgive decades of never-collected taxes that total millions of dollars owed by the California seafood industry.

The legislation by Assemblyman Gerald N. Felando (R-San Pedro) came in response to an attorney general’s opinion last month that state Fish and Game Department officials did not have the authority to forgive the back taxes, even if the delinquencies resulted from an honest misinterpretation of law.

The bill, which cleared a conference committee and went back to the Senate and Assembly for concurrence, was supported by the state’s economically distressed, $2-billion-a-year seafood-processing industry. Representatives maintained that paying the back taxes would further injure the industry.

At issue is the longstanding practice of collecting taxes on fish products only once--from the commercial fishermen at dockside, based on the weight of the catch.

Questions about the 51-year-old law establishing the tax were first raised in 1984 by Assemblywoman Doris Allen (R-Cypress), a frequent critic of the Fish and Game Dept. Later inquiries determined that the law, as written, called for a multitiered tax that should be paid every time seafood changes hands among wholesalers, canners and processors.

The Fish and Game Department then sought the attorney general’s advice, asking, among other things, if the uncollected taxes could simply be forgiven.

If the law is not changed and the attorney general’s ruling stands, the state would start collecting the additional taxes next month, a department spokesman said. Fish and Game officials have not yet determined how or when they would collect the back taxes.

Fish and Game and industry officials said it would be virtually impossible to determine how much was at stake in delinquent tax revenue, because no one has ever kept accurate records on the weight of seafood as it was passed from one wholesaler to another.

“You can take a guess and I can take a guess, and if we are $10 million apart, we might still be in the ballpark,” said Peter Bontadelli, special assistant to Fish and Game Director Jack C. Parnell.

Estimate Made

But Allen estimated that the seafood-processing industry would be spared $13 million in taxes for the past 10 years alone if Felando’s bill is approved by the Legislature and signed by Gov. George Deukmejian.

“It could be a lot more than that,” Felando said. “It’s impossible to say how much it is. But it’s enough to bankrupt people.”

The levy--formally called a privilege tax--is one of several issues Allen began raising in 1984, when she started calling attention to what she termed sloppy administrative practices by Fish and Game officials and questionable interpretation of tax laws. Last year, she carried legislation that forced the department officials to collect more promptly from delinquent vendors who sell hunting and fishing licenses.