October 13, 2004
Wednesday

Washington, D.C. - The United States Senate Tuesday followed the House and gave final passage to a new corporate tax bill that includes a provision to add fishermen to farmers as taxpayers who can average income over a three-year period to help offset high income years. The tax change, first proposed by the Alaska congressional delegation in 2000, will help fishermen recover from bad income years, by keeping a bit more of their income in good years, offsetting potentially high tax burdens in isolated windfall years.

"Fishermen brave bad weather, unpredictable stream conditions and cutthroat global pricing conditions. They shouldn't be penalized further by the nation's tax code. Income averaging is fair in that it will help offset the highs and lows in fishing and help fishermen plan for their financial futures," said U.S. Senator Lisa Murkowski, of the income averaging provision (Section 314) that was kept in the final bill, the House version of a Foreign Sales Corporation/Extraterritorial Income (FSC/ETI) bill (now H.R. 4520). It now heads to the President for signature.

Income averaging was allowed for all prior to passage of the 1986 tax reform act because under an income tax with progressive tax rates, the total tax assessment on income that fluctuates from year to year will be greater than the tax levied on an equal amount of income that is received in equal annual installments. In 1986, when tax brackets were cut to two from 11, averaging was eliminated. But with the changes in the tax code that have gradually restored five brackets, it became clear that individuals in occupations that face wildly varying incomes, need to be able to income average to equalize their tax burdens. In 1997, Congress again allowed farmers to income average, making the change permanent for farmers in 1998.

The change, according to the Congressional Joint Tax Committee, is estimated to potentially save fishermen up to $61 million over the next decade, fishermen saving between $3 and $10 million yearly in taxes, depending on runs and fish prices.

Murkowski said passage of the change is a good principle that she will attempt to expand in the future to help fishermen once they receive money from their Exxon Valdez oil spill settlements. The tax law will still need to be changed so that financial settlements based from fishery damages will be considered as fishing income for purposes of being applicable to income averaging.

But restoring income averaging for fishing was a major first step in eventually making sure that fishermen don't pay large percentages of their settlements in federal taxes in the year in which the payments are finally made by Exxon said Senator Murkowski.

Source of News:

Office of U.S. Senator Lisa Murkowski
Web Site

 

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