Congressman Faleomavaega announced today that by a vote of 230 to 180 the House passed H.R. 5970, a bill which includes a two-year extension of possession tax credits for American Samoa’s canneries.  Faleomavaega was successful in getting the House and canneries to agree on replacing section 936 with 30A tax credits which offer the same benefits without the negative political connotation. 

“First and foremost, I want to thank Republican Chairman Bill Thomas of the House Ways and Means Committee who has supported us through thick and thin and has worked closely with us to protect the jobs of more than 5,000 cannery workers in American Samoa,” Faleomavaega said.  “Because of his support, our people have hope for a better future.”

“I also want to thank Congressman Charles Rangel, Ranking Democratic Member of the Ways and Means Committee, for his support.  While the Democrats did not vote in favor of the larger bill, behind the scenes they supported our small tax provision and let it move forward without objection.”

“In other words, as a result of our connections in both parties, we were once again able to achieve another victory in the House.  To ensure our victory and in an effort to protect our economy, I hand-delivered a letter dated January 31, 2006 to Chairman Thomas on the House Floor on February 1, 2006.  The purpose of the letter was to inform the Chairman that I met with the Executive Director of the Tuna Foundation and Senate Finance Committee staff on January 24, 2006.  The meeting, which was teleconferenced between my American Samoa and DC offices, was based on continued discussions with Chairman Thomas’ staff regarding the need for the tuna industry to be more forthcoming.”

“To put this in perspective, when we first began these discussions our canneries insisted that the extension of IRS section 936 was the only option for them or they would leave American Samoa.  For this reason, I asked for an extension of section 936 and Chairman Thomas kindly agreed to include this provision in the House version of the Tax Reconciliation Act which was passed on December 8, 2005.  Out of 440 Members of the US House of Representatives, our provision was only one of 27 provisions included.”

“However, the Senate version of last year’s Tax Reconciliation Act did not include a provision for American Samoa.  On the one hand, while the Senate Democrats could not support some of the provisions in the Tax Act, none were opposed to helping American Samoa.  On the other hand, Chairman Grassley and other Republican members of the Senate Finance Committee supported American Samoa and the Tax Act but could not specifically support section 936 because of the negative political connotation that has come about from its misuse in Puerto Rico.”

“Knowing that this would leave Chairman Thomas in an uncomfortable position when the bill was brought to conference, I brought Finance Committee staff and the Tuna Foundation together with the intent of finding a solution.  In our meeting, the Executive Director explained at length the financials associated with the tuna industry and the threat of the upcoming Thailand Free Trade agreement to American Samoa’s economy.  I explained the need for the tuna industry to consider 30A which provides the benefits of section 936 without the negative political connotation of section 936.  Finance Committee staff explained that the Senate wants to help American Samoa and would consider 30A as an option.”

“Two days after our January 24, 2006 meeting, the Executive Director of the Tuna Foundation informed my office that both canneries, StarKist and Chicken of the Sea, would agree to 30A.  30A and 936 are similar in nature.  In fact, 30A, previously known as the economic activity credit for Puerto Rico, is the sum of (1) 60% of wages and fringe benefits and (2) 15%/40%/65% of depreciation allowances for short-life/medium life/long-life tangible property.  This is in section 30A(d) which is the same as section 936(a)(4).”

“The only difference is how the claim is made,” Faleomavaega said.  “Section 936 allows our canneries to claim a tax credit based on either profits or wages.  Chicken of the Sea uses the profit credit and StarKist uses the wage credit.”

“Under section 30A, our canneries would be required to make their claims based on wage credits.  Since StarKist is already doing this, 30A is no change for them.  As for Chicken of the Sea, it determined that it is better for StarKist and COS to use the same methodology for determining possession income and therefore welcomed 30A as a perfect alternative that will give our canneries the same benefits as 936 without the negative political connation.”

“Upon learning that both canneries agreed to 30A, I made this information known to Chairman Thomas in my letter of January 31, 2006.  I also made this known to Chairman Charles Grassley and Ranking Member Max Baucus of the Senate Finance Committee.  I also updated Senator Daniel Inouye.  In a later meeting with the Governor and Deputy Assistant Secretary David Cohen, I also shared this news and they were supportive of the agreement.”

“Given the sensitivity of these negotiations, we agreed to move forward with caution.  In May of this year, rather than conference the Tax Reconciliation Act in its entirety, the House and Senate divided the Tax Reconciliation Act into two bills and passed only the major capital gains and dividend tax cut provisions.  However, today, the House took up the other half of the bill and passed H.R. 5970 which includes our 30A proposal.”

“Now our friends in the Senate must consider the bill and, as they do, I am hopeful that they will continue to support 30A.  Again, the American Samoa Economic Development credit is only a very small part of this bill and I am pleased that we are a part of it given that this provision is important to our canneries which are critical to our economy.  I am also pleased that, if supported by the Senate, this legislation will make our tax credits retroactive so that our canneries will not lose any money as a result of this on-going process.”

“While it was my initial understanding that this legislation would be taken up in September, I am pleased that we are ahead of schedule.  Next week, it is possible that the Senate may consider this legislation although there is some debate or concern that minimum wage increases which have been included in H.R. 5970 may delay or hamper the vote.”

“Whatever the case may be, I will continue to keep our people updated as this matter progresses.  I will also continue to work with our local leaders in developing a long-term economic policy that represents the interests of all vested stakeholders, especially our canneries, which are the backbone of our economy.  Finally, I thank the Governor for his support of 30A and I also thank our Fono for uniting with us to extend possession tax credits,” Congressman Faleomavaega concluded.