A federal tax credit “or tuna tax break” that has benefited only StarKist Co., has been criticized as another example of congressional meddling in the private sector by directing federal resources to specific industries and this tax credit should be eliminated, according to U.S. Sen. Tom Coburn’s new “Tax Decoder” report released yesterday in Washington D.C.

The 320 page report comes at a time when the U.S. Congress rushes to pass another end of the year bill extending billions of dollars in tax breaks for special interests, and the report highlights over $900 billion in giveaways throughout the US Tax Code, Coburn said in a news release. The senator is a Republican

Among those special interests highlighted in the news release is the “Tuna Tax Break" that "provides nearly $10 million to certain domestic corporations operating in American Samoa.”

“Ideally, Congress would throw out the entire [IRS] tax code and start over, but at the very least the code should be made simpler, fairer and flatter,” Coburn said. “While many of the tax breaks identified throughout this report should be phased out or eliminated, others could also be reformed to better achieve their intended purpose.”

The federal tax credit for the canneries is identified in Coburn’s report as the “American Samoa Economic Development Credit: Tax Breaks for Tuna.”

Routinely included in Congress’ “tax extenders” legislation is a multi-million dollar tax break for certain domestic corporations operating in American Samoa, according to the report, which also states that the tax credit was created with the purpose of offsetting the U.S. tax liability of these companies on income earned from active business operations.

The report also says that —outside of tourism and government employment— the primary economic activity on the island is canning tuna, as the territory is home to Chicken of the Sea (which closed in September 2009) and StarKist.

The report also wrongly states that more recently, “Bumble Bee Food has indicated plans to establish a base in American Samoa as well.”

Samoa News should point out that San Diego-based Bumble Bee will be setting up operations in neighboring Samoa, while Washington state based Tri Marine International is opening the Samoa Tuna Processors Inc. cannery plant in the territory in January 2015.

According to the report, “The tax break, however, was narrowly written as to only be available to certain companies that before January 1, 2006, and in respect to American Samoa, claimed the possession tax credit —which existed before this economic development credit and has since expired.”

“It is assumed Starkist has been the primary recipient of the credit,” the report states. But in a statement next to the photo of “Charlie-the-Tuna”, the report states “StarKist tuna company has been the primary recipient of a $10 million annual tax break directed to businesses in American Samoa."

Given these changes to the territory’s tuna companies, with other canneries wanting to set up operations here, the report says, American Samoa’s governor “recently asked Congress to change the requirements for recipients of the credit, which would likely allow other companies, such as Bumble Bee, to claim the credit.”

The existing credit has been extended by Congress twice and a third extension is included in the Senate’s 2014 extenders legislation, the EXPIRE Act of 2014— which also includes an expansion, to open up the credit to other companies, as requested by the American Samoa government, the report states.

(The U.S. House has its own version of the extender, which was approved last week. See information below for details)

The report went on to point out that this tax break is estimated to cost $10 million in FY 2014 and $82 million from FY 2014 through FY 2018.

“This tuna tax break is an example of congressional meddling in the private sector, directing federal resources to specific industries, instead of allowing the market to appropriately allocate capital and commerce,” according to Coburn’s report.

“Taxpayers should not be asked to subsidize particular businesses in states or territories in the name of ‘economic development’, which is not the role of Washington or the federal government. Congress should eliminate this special tax credit for the tuna industry,” it states.

Last week, the U.S. House passed a tax extender package that includes Congressman Faleomavaega Eni’s provision for an extension of IRS 30A benefits for another year, a measure critical to American Samoa’s tuna canneries and economy.

Faleomavaega said the federal 30A tax credit benefit helps protect the jobs of tuna cannery workers in American Samoa, and the extensions are also helpful to other businesses that may seek to qualify.

The measure is now with the U.S. Senate, and Faleomavaega said that he is “hopeful that once the tax extenders package is negotiated between the House and Senate, we will get the outcome we have worked so hard for.”

“Most likely the Senate will ultimately pass the House version of the bill which includes the one-year extender for American Samoa. As the matter progresses, I will keep our people updated,” he said.  (See Samoa News edition Dec. 4 for details.)

The federal tax credit extension has been the subject of several discussions during meetings between the canneries and Gov. Lolo Matalasi Moliga as well as Faleomavaega.