Fishing Industry Tries to Revive Tax Exemption : Legislation: Assemblyman Gerald N. Felando’s bill would exempt commercial deep-sea and charter fishing boats from the sales and use tax for diesel fuel.


California’s commercial fishing industry, reeling from hard times, is attempting to resurrect a tax break worth at least $1.1 million a year.

With fishing industry support, Assemblyman Gerald N. Felando (R-San Pedro) is seeking passage of legislation to exempt commercial deep-sea and charter fishing operations from the sales and use tax for diesel fuel.

Twice in the past six years, the Legislature has approved temporary diesel fuel tax breaks for the state’s commercial fishing vessels. The most recent tax break lapsed on Jan. 1, 1989, but Felando now is pushing for a permanent exemption.

“We’re just trying to save an industry,” said Felando, 55, who as a youth worked aboard his father’s fishing boat. “Every little bit helps.”


Fishermen also say they should be treated the same as farmers, who since the 1930s have enjoyed a similar diesel tax exemption for farm vehicles. Felando’s bill is opposed by the state Department of Finance, which says the measure singles out one business class for special treatment.

Lenny Goldberg, lobbyist for the California Tax Reform Assn., a public interest tax group, has criticized the proposal as “the tax exemption that won’t die.” Goldberg complained that there has never been a determination of who benefits from the tax break. “There are no hard numbers that it makes a difference.”

But fisherman John Vilicich estimated that when the exemption was in place he saved from $7,000 to $14,000 a year on diesel fuel for a large tuna boat. He said owners of smaller boats could save several thousand dollars a year.

“Regardless of whether you catch the fish or not, you still burn fuel,” Vilicich said. The San Pedro fisherman said he used the savings for boat maintenance.

Officials of several commercial fishing groups said they have been persistent about reviving the legislation because their members are facing economic rough seas. The fishermen complain they are plagued by increasing foreign competition, rising costs and dwindling numbers of fish.

Fishermen trace their troubles to 1984, when they experienced serious drops in income because of El Nino, a warm ocean current that disrupted worldwide weather patterns.

Mindful of those adverse conditions, the Legislature approved a two-year diesel fuel tax exemption. But in 1986, Gov. George Deukmejian vetoed an extension of the exemption, saying: “Other industries experiencing similar hardships are not afforded similar tax exemptions.”

Later, the industry persuaded the governor to sign a one-year exemption for 1988. It was designed to cushion commercial fishing boat operators from economic disruptions caused by the closure of canneries, increased insurance costs and rising ship-repair costs, according to an Assembly analysis of the latest Felando proposal. Two other efforts to revive the exemption died in the Legislature. The latest legislative initiative--the Felando bill--is pending in the Assembly Ways and Means Committee.

Supporters say Felando’s bill should be enacted, in part, because boat operators continue to face tough times.

Looking back to 1980, 800 million pounds of fish, valued at $316 million, were brought into California’s ports, according to the state Department of Fish and Game.

In 1985, with fishermen feeling the brunt of El Nino, the figures dropped to 357 million pounds caught off California, valued at almost $127 million. But, by 1988--the latest year for which figures are available--the picture brightened with 496 million pounds of fish worth $201 million coming into the ports. Still, the amount was below the 1980 level.

Tom Crehan, general manager of the San Pedro-based Fishermen’s Cooperative Assn., said low catches are continuing, describing April as a poor month for his members. In the past five years, he said, the membership of his fish marketing cooperative has dropped by a third--from 24 to 16.

But even without the bad times for the fishing industry, the tax exemption should be reinstated, say other supporters of the bill. They note that farm equipment and off-road logging trucks that use diesel fuel are already exempted from the sales tax.

Crehan argued that marine fishermen should get the same break as farmers “because both of them are producing food.”

Robert Fletcher, president of the San Diego-based Sportfishing Assn. of California, voiced a similar argument, saying that fishing enthusiasts aboard his group’s party boats are fishing for food. “We believe that most of our passengers are from lower-income levels and supplement their protein by eating fish,” Fletcher said.

The opponents, however, regard the legislation as unfair.

If the fishing industry requires help, said Goldberg of the Tax Reform Assn., the state should target the economic aid to those fishing boat owners who need it the most. Goldberg added that the state has failed to study the impact of previous exemptions. “It’s unclear whether (they have) made much difference,” he said.

In its review of the bill, the Finance Department noted that the fishing industry already receives preferential treatment because, under existing law, ships and their component parts are exempt from sales tax.

Moreover, according to the department’s analysis, the original exemption was “intended to provide temporary, not permanent” relief.