Tuesday, February 2, 2010

A touchy tax question

After a good deal of effort, Dockboss managed to land a copy of this fascinating letter to Alaska's senators, Lisa Murkowski and Mark Begich.

The letter, from the Joint Committee on Taxation, estimates how much tax revenue Uncle Sam would lose if Congress clarified the law to exempt certain income the state's six Community Development Quota companies generate through various business ventures.

The tax break would be a humdinger: $92 million to $124 million through the year 2019, the committee staff estimates.

Murkowski and Begich requested the estimate last spring.

Regular visitors know we touch on the subject of the CDQ program a good bit.

It's a unique federal initiative started in 1992 to vest western Alaska villages with shares of the lucrative Bering Sea commercial fish and crab harvests. Six nonprofit companies represent groups of villages and arrange to catch their "community quotas."

The CDQ companies have grown into strong contenders in Alaska's rich seafood industry.

Recently, some doubt has arisen as to whether the companies can continue to avoid paying taxes on parts of their expanding business portfolios.

Not long ago one CDQ company, Norton Sound Economic Development Corp., which represents villages in the Nome region, decided it does owe taxes. The company worked out an IRS settlement to pay taxes, penalties and interest of $10.2 million, an aide with Alaska’s congressional delegation said. It also paid $2.2 million in state tax.

Most other CDQ companies, however, don’t believe they owe taxes.

And why is that?

Also, why would Alaska's senators even think of sponsoring legislation to secure tax breaks for firms that, in 2008, tallied an impressive $139 million in combined revenue?

CDQ companies and congressional staffers argue that the CDQ companies aren't like regular corporations, which are driven mainly by a profit motive.

The CDQ companies have a much broader mission to supply the often disadvantaged villages they represent with jobs, scholarships, local construction and other benefits.

Taxing the CDQ companies, and potentially demanding many millions of dollars in back taxes, could hamstring a program that's done much good in bush Alaska, supporters say.

We'll have to wait and see whether the Alaska delegation can win the CDQ tax break.

This year, however, might be a difficult time to ask considering the enormous federal deficit the country is building to finance the economic stimulus, the war on terror and general budget needs.

One final note: Norton Sound has told the delegation it's "only fair" to receive a refund if the tax break passes.


Anonymous said...

So why aren't the CDQ groups helping out their people and communities with fuel, foods, etc.?? Why is Hugo Chavez providing winter fuel from Venezuela, instead of the CDQ groups helping their own? Their books are closed tighter than a clam at low tide.

Anonymous said...

Senators Lisa and Mark are so obviously pandering to the Native vote by requesting these big tax cuts for them. Nuff said.

Anonymous said...

Yet another Ted Stevens created monster created to keep him and his cronies in power

Anonymous said...

"to supply the often disadvantaged villages they represent with jobs, scholarships, local construction and other benefits" HA! What a sham, they have done little for their communities and instead have gotten FAT! This is all a sham so the industry can plod along with raping the bering and gulf. CDQ needs to be dismantled! (from an alaska native who lives in a cdq community)

Anonymous said...

When the CDQ program was put in place, it was limited to spending its revenues only on fishery related projects, infrastructure, etc. Several years ago that was expanded so the CDQs could spend/invest in anything they choose as long as it is of 'lasting benefit' to the communites. It's hard to find many CDQ village folks who have much good to say about the fat cats that run their programs, or how the money has directly benefited them.

Anonymous said...

It sure seems to supply some very high paying jobs in "urban" Alaska for some of the groups if I read their reports of highest paid employees correctly. Some groups show discipline, some do not....

Anonymous said...

I worked for a CDQ group from 1994 to 2006. In the beginning it was at once challenging and a great deal of fun. The first projects I worked on were modest in scope and (I think) actually helped solve problems that the 'owner' communities had, infrastructure wise, in expanding their economies. For me, the very best part of the work was getting to know a community; the individuals, the traditions and mores that make them up, along with the pleasure of working in a breathtaking physical environment. I'm grateful for that experience, it was truly a defining time in and of my life.

I haven't a clue as to the workings of all the CDQ groups, good or bad, but I can say that the one I worked for degraded over time. Degraded in the sense that the top management forgot what they were there for and became completely self-interested: they really were not working for the advancement of the communities but only their 'idea' of what that advancement should be like. On the one hand, you had the insanely expansive CEO who had no qualms about spending lots of money on projects that did not employ a single individual from any of the respective communities but, hey, they were sexy projects! On the other hand (literally) you had the COO-CFO who's, as best I could tell, only useful purpose was to supply occasional ground tackle for said CEO's blimp.

I will never forget he last board meeting I attended. It was after a great CDQ coup: Don Young's rub out of the State's oversight of the CDQ program and the setting of quota in stone. All eyes were glazed, the CEO wore an imperious caesarian air, the COO-CFO stared at some distant corner of the room, quacking on about how different it was all to be now. These meetings lasted days. During the all of it, I heard the Twilight Zone theme playing softly in the background.

CDQ groups play the game with Monopoly money. Free money is the most corrosive and corrupting influence of all.

Anonymous said...

CDQ groups should have to pay the samne taxes that any non cdq activity of the same type pays. It creates a very uneven playing field when tax free CDQ earnings are used to compete with companies that have to use after tax dolars. Two CDQ groups (Norton Sound and APIDCA) have paid theor taxex and the other 4 should also. People should let the congressional delegation know that this will create unfair competition in the affected fishieries.


I second the above statements. This is NOT what the CITIZENS were PROMISED!! This looks NOTHING like the scenario WE were sold! dragging the PEOPLES FOOD as by-catch... Throwing FOOD OVERBOARD DEAD... STARVING OUR FISHERIES-DEPENDANT COASTAL and RIVER COMMUNITIES. These are mostly foriegn entities that are starving OUR AMERICAN PEOPLE!! buying politicians and council members, to lock in "History". History like OUR Gulf King and Tanner Crab... History like OUR Gulf Shrimp... History like OUR AMERICAN JOBS and DINNERS!! IT'S TIME FOR CHANGE!! If C.D.Q.'s aren't HELPING OUR CITIZENS then TAKE THEM BACK!! OR TAX THEM to HELP THE CITIZENS!! HUNDREDS of TONS of WASTED by-catch (FOOD) helps NO ONE!! WE MUST OUTLAW dragging!,.. starting in State Waters,.. Or STARVE OUR CHILDREN!! NOT -OVER-

Anonymous said...

One wonders how much time will pass before the CDQ groups are scrutinized as they were in the beginning. Remember, the ONLY reason CDQ's exist was to get IFQ's passed. The shenanigan's pulled to cloak the dealings of the CDQ groups is appalling. From the laughable findings of the so called 'Blue Ribbon Panel' to the Coast Guard bill, the credibility of the program is suffering. Soon, I'll bet, the groups won't even publish their financial statements. Despite all the hyperbole otherwise, much more needs be done to put cash in the pockets of the residents.

The first poster has it right. A couple years ago it was hard to discern who was the bigger bloviator, the CEO of APICDA, or Hugo Chavez! I wonder, is APICDA still helping the community of Nikolski with a fuel subsidy? I doubt it, otherwise there'd be press.

The scary thing is that for the most part they are 'all in' with Pollack. All the abundant financially unsound projects are funded by the sale of this one fish. Anyone who has ever fished for a living knows about crashes. A crash is not a matter of 'if' but 'when'. One CDQ group has actually managed to get some of their partners in debt! Imagine that.

Here how it works: once a year they go into a room with a tall ceiling. They place a coffer in the center of the room and after some incantations, a hole opens and it rains Krugerrand's, no real work required! Percentage wise, very few of those coins end up in the pockets for whom they were intended. I suggest that our Senators should focus on this travesty first, and leave the taxes to the IRS.

Anonymous said...

Yea, another Blue Ribbon Panal, to rain Red!

Just look at the East Coast's Blue Ribbon Panal, Barney Frank,

"don't touch, don't tell, and don't ask Barney!"

Until theres nothing left to catch!

Anonymous said...

CDQ's need scrutiny, they need oversight, they need their arses kicked!!! Yes it's true, they have all gotten on the pork wagon and love it, they love it so much they fight tooth and nail for it. They can spend on special projects in their respective communities but they really don't care if there is success or not just as long as they stay within their guidelines of "money spent in a community" as long as it looks good they really don't give a hoot one way or another. The Bering and Pacific get trawled to dust and the communities they supposedly support seemingly don't care because you don't hear even a whimper from them...why? it's because they are held hostage with what pennies go to them from their CDQ groups. In other words if you raise cain then there's no money for you, it's true! these communities are dirt poor and to complain your certain to have the door shut. It's what the CDQ groups want...it's oppression. CDQ groups have done nothing but pay for extravagant flights to distant locations for board meetings and have sent board members to watch pro bowl games, waste, fattening and more waste. Want to get rich quick? Find a job with a CDQ group and you'll be treated ENRON style.

Anonymous said...

Enron executives would be ashamed to behave the way CDQ program owners do.

Anonymous said...

CDQ's. I've been tracking them since the program was formed back in the early 90's. If you only knew the HOPE I felt when finally the rapers of the Bering Sea gave back to us what was being destroyed then wookada! gone in 17 years. Slip, slap, the crooks got involved. Slip, slap the crooks got involved. End of HOPE,

Anonymous said...

Thanks Deckboss for posting this blog. Hey, I know of a Board of Directors Chairman that gets paid nearly a $100,000.00 a year for a 25 hour work week! He slings the bull while his cronies steal the money. They rub each other's back. Crooks to the corner! It's time to DEFAME the guy who knows too much! That's the name of their game. And the poor cry for the salmon.

Anonymous said...

Seriously, who in their right minds thought that people with very minimal or no competent education what-so-ever can manage multi-million dollar corporations without the carpetbaggers coming in and taking over? It was a crazy idea to start with in the first. Paving the ground for crooks to manipulate the ignorant for darn sure. That's CDQs in the LIME LITE, loud and clear.

Anonymous said...

The CDQs were born from the bowels of the Corrupt Bastards Club seventeen years ago and they continue the farce and the fight to endown themselves with the right to continue to manipulate the igorant and the illiterate all for the price of a per diem check. Hold the crooks responsible please Uncle Sam. They are destroying a livelihood for thousands of poor peole in the Western Alaska Coastal area. Nuff said this time around!

Anonymous said...

"CDQ companies and congressional staffers argue that the CDQ companies aren't like regular corporations, which are driven mainly by a profit motive."

Here's a link to a great piece by Stephen Taufen – Groundswell Fisheries Movement - that dispels the nonsense about CDQ's not being like regular corporations: http://groundswellalaska.com/?p=26

"The CDQ companies have a much broader mission to supply the often disadvantaged villages they represent with jobs, scholarships, local construction and other benefits."

It's true, these things are their mission but as an example of 'lying with facts', at least with the group I worked in, the stated 'in-region' employment was a sham. In-region meant just that; anyone that got paid for construction work, harvesting quota, or anything else that drew a check was counted whether the payee lived in that community or not. This sort of trickery, making management look better than they are, must stop. A GAO audit would go a long way in realigning the goals of the program. The residents of the owner communities, and we, the taxpayers who gave up something in order to create the program, deserve real transparency.

Anonymous said...

It's ironic, very, very ironic, that NSEDC wants "only fair" treatment from the US Government on their tax payments when we the little man can't expect "only fair" treatment from NSEDC management. Double standards to the MAX here. Well, let me put it this way, the whole lot of them are Not Pro-Native because they don't give a hoot about destroying the Western Alaska Coastal area Natives cultural and traditional use of the Salmon. They are involved in the destruction out there in the Bering Sea. For some reason they refuse to see it that way. Dense or dumb, perhaps both!

Anonymous said...

NSEDC just had their quarterly meeting in Nome last week. Most of it was held in Executive Session to keep us little guys out. They also had their three Community Development Specialists hanging around on the clock with no obvious reports on how much community development has happened this past quarter. No report given to the Public/Stakeholders about the Tax Issue this article refers to. Keeping everything secret is wearing on us. Good way to stay sneaky. That's it. Executive sessions are a good way to stay sneaky.

Anonymous said...

Nome's local newspaper, "The Nome Nugget" reported that a group of Nomites got to get 'special hearing' on a private proposal three times in a row during NSEDC quarterly meeting earlier this month. Villages left out of the 'fisheries related economic development' are wondering how we too can get the red carpet rolled out for us as well! The rich get richer and the poor stay poor. That was not what Uncle Ted had in mind when he helped bring the CDQs into life seventeen years ago. No wonder they have a 'tax question' with the US Government. The standard is set with this latest scam; NSEDC needs to give equal time and equal consideration to all future proposals or get called upon for discrimination or favoritism or failing to follow their policies. All of the above.

Anonymous said...

Because the CDQ program has so much potential to vitalize the economies of coastal communities, it is a terrible tragedy that it has gone the way of the ANCSA corportions and most of the other attempts to help the impoverished people being warehoused in the villages.

A handful of people with the help of the always vigilant corps of blood-sucking carpetbaggers who parasitize programs serving Alaska natives, took control of the CDQS and have sequestered the money away from the communities. Now the industry is reeling it all back in with joint ventures that obligate rural Alaskans to providing political support for destructive groundfish fisheries and will ultimately leave us holding the bag when the bubble bursts.

NSEDC has taken on a prodigious debt burden which could result in their creditors owning the quota and Norton Sound communities holding the bag.

It will be very interesting to see where this tax issue ends up. What the CDQ groups are asking for is an incredible abuse of tax exempt status. If this passes, it will mean the rest of us will have to pay taxes to make up for the taxes that should have been paid by commercial fishing businesses that don't really do much for anybody but the few individuals in charge and those people don't live in CDQ eligible communities, they live in Anchorage, Juneau and Seattle.

Anonymous said...

I agree with the blogger's comment above, "NSEDC has taken on a prodigious debt burden which could result in their creditors owning the quota and Norton Sound communites holding the bag." Personally, I think that was the plan to start with. The smarter guys manipulated the dumber with promises of riches beyond their control. Now, they are out of control slinging CDQ monies every which way but for real "fisheries related economic development". It's clear as a bell.