American Samoa’s Economic Development Credit benefits only StarKist, says COS
Washington, D.C. — Chicken of the Sea International (COSI), producer of Chicken of the Sea canned tuna, is recommending that the federal American Samoa Economic Development Credit (ASEDC) “should be left to expire permanently”, as it benefits only StarKist Inc., COSI’s major competitor.
At the same time, US Rep. Rick W. Allen of Georgia has called for the elimination of the ASEDC, which he argues, benefits only StarKist, competing with COSI, which has a plant in Lyons, Georgia.
Letters from COSI and Allen voicing their comments are included in the US Senate Employment and Community Development Taskforce’s 216-page report released Tuesday, following a review of federal temporary tax policy — referred to as temporary tax extenders — including the ASEDC.
The bipartisan task force, established by the US Senate Committee on Finance, was charged with examining the temporary tax policies designed to encourage increased participation in the workforce, and to expand economic opportunity in low-income communities that expire between Dec. 31, 2017 and Dec. 31, 2019.
The task force had sought — and received — comments before the release of its report.
COSI business affairs director Craig P. Rexroad in a Jun 28th letter provided the company’s response, which recalled the Senate Finance Committee chairman’s statement that, “if there’s little or no case for continuing the temporary policy, the task force should consider whether the provision should be eliminated.”
“COSI feels strongly” that the ASEDC “belongs in this category, and should be left to expire permanently,” Rexroad wrote.
As a “direct shelf competitor with the principal beneficiary” of the ASEDC “identified by the Congressional Research Service as Starkist”, Rexroad said COSI “strongly opposes efforts to resurrect the expired and functionally obsolete credit, which would serve only to distort a highly competitive canned seafood market.”
He also shared with the task force the original intent of ASEDC as well as other federal tax credits, including newly enacted ones — which benefit the territories.
“While the condition of American Samoa — among other U.S. territories — deserves Congress’ serious consideration, a tax provision substantially benefitting a single taxpayer — an earmark according to Senate Rule XLIV — is the worst imaginable approach helping the island and its workers,” Rexroad wrote. “The structure of the credit, available exclusively to historical claimants of a since-repealed code section that expired nearly two decades ago, precludes any argument for its economic efficacy.”
“It is time for Congress to let go of the American Samoa Economic Development Credit once and for all, as it has already done with similar tax breaks for every other U.S. territory,” he said.
“Too often Congress is unable or unwilling to scrutinize these provisions individually and make decisions based on their respective merits,” he continued, noting that COSI looks “forward to working with you to resolve the tax treatment of American Samoa in a way that treats companies fairly whether they are investing on the U.S. mainland or specific territories.”
COSI made no mention that it shut down cannery operations in American Samoa on Sept. 30, 2019 and relocated operations to Lyons, Georgia — leaving more than 1,500 workers unemployed and causing a major economic blow to American Samoa.
REP. ALLEN RESPONSE
In his June 28th letter, Allen shared with the task force his “opposition to the extension” of the ASEDC or federal tax credit Section 30A. Allen claims that the ASEDC “distorted the market in favor of one company in the canned tuna industry - StarKist”.
He noted that his Congressional District in Georgia is home to COSI’s manufacturing plant in Lyons, which currently employs more than 200 people. And the plant is one of the largest employers in the area.
Allen said he is “worried that an extension” of the ASEDC “could negatively affect job creation of the expansion of the existing plant” at Lyons. “Recently, StarKist cited the uncertainty of Section 30A’s extension as a reason they have delayed the transition of jobs and facilities in California to American Samoa,” he pointed out.
As previously reported by Samoa News, StarKist last December issued a statement saying it “continues to evaluate all options to find satisfactory solutions to the current regulatory challenges we face in doing business in American Samoa, as well as uncertainty of whether the [federal] 30(A) tax extension is secured.”
“As a result, StarKist will delay the transition from its Mira Loma facility in California to the StarKist Samoa facility in American Samoa at this time,” StarKist announced then.
In his letter, Allen points out that on the heels tax reform, “we must look forward to continue to grow the economy … not look backward to revive narrow, off-code tax breaks that have since been repealed.”
According to the report, four comments were received regarding the ASEDC. Additionally, individual stakeholders and groups that requested and came in for meetings with the task force included staff for Congresswoman Aumua Amata, who “advocated for permanence” of ASEDC, while Rep. Allen and US Sen. Johnny Isakson of Georgia “expressed opposition” to the ASEDC extension.
The report states that representatives of the American Samoa Governor’s Office met with task force members to discuss their views on federal Empowerment Zone Tax Incentives. No other information was provided about that meeting.
According to the report summary, the task force received comments “arguing for permanence” of the ASEDC as well as comments arguing that tax credit “has allowed companies within American Samoa’s tuna cannery industry to remain on the island rather than relocating their business.” The comments note that the tuna cannery industry employs roughly 2,300 individuals in American Samoa, the largest private sector employer in the territory.
Overall, according to the report, the task force received comments arguing that tax credit “should remain permanently expired. These comments argue that the benefits of the credit largely go to one company in the tuna cannery industry and that this distorts the industry.”
“To the extent that Congress chooses to retroactively extend or to reinstate the American Samoa economic development credit on a prospective basis, the current language for the credit should be moved into the Internal Revenue Code rather than existing through amendments to Code provisions that have since been repealed,” the task force recommended.