00 HOUSE CS FOR CS FOR SENATE BILL NO. 21(RES) 01 "An Act relating to the interest rate applicable to certain amounts due for fees, taxes, 02 and payments made and property delivered to the Department of Revenue; providing a 03 tax credit against the corporation income tax for qualified oil and gas service industry 04 expenditures; relating to the oil and gas production tax rate; relating to gas used in the 05 state; relating to monthly installment payments of the oil and gas production tax; 06 relating to oil and gas production tax credits for certain losses and expenditures; 07 relating to oil and gas production tax credit certificates; relating to nontransferable tax 08 credits based on production; relating to the oil and gas tax credit fund; relating to 09 annual statements by producers and explorers; relating to the determination of annual 10 oil and gas production tax value including adjustments based on a percentage of gross 11 value at the point of production from certain leases or properties; relating to the 12 calculation of lease expenditures; allowing the Alaska Industrial Development and 01 Export Authority to issue bonds for an oil processing facility; creating a fund to finance 02 construction or improvement of an oil or gas processing facility; and making 03 conforming amendments." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05  * Section 1. AS 05.15.095(c) is amended to read: 06 (c) Before January 1, 2014, a [A] delinquent fee bears interest at the rate set 07 by AS 43.05.225(a). On and after January 1, 2014, a delinquent fee bears interest  08 at the rate set by AS 43.05.225(b)(2) [AS 43.05.225]. 09  * Sec. 2. AS 29.60.850(b) is amended to read: 10 (b) Each fiscal year, the legislature may appropriate to the community revenue 11 sharing fund [AN AMOUNT EQUAL TO 20 PERCENT OF THE] money received by 12 the state during the previous calendar year under AS 43.20.030(c) [AS 43.55.011(g)]. 13 The amount may not exceed 14 (1) $60,000,000; or 15 (2) the amount that, when added to the fund balance on June 30 of the 16 previous fiscal year, equals $180,000,000. 17  * Sec. 3. AS 34.45.470(a) is amended to read: 18 (a) Before January 1, 2014, a [A] person who fails to pay or deliver property 19 within the time prescribed by this chapter may be required to pay to the department 20 interest at the annual rate calculated under AS 43.05.225(a) [AS 43.05.225] on the 21 property or the value of it from the date the property should have been paid or 22 delivered. On and after January 1, 2014, a person who fails to pay or deliver  23 property within the time prescribed by this chapter may be required to pay to the  24 department interest at the annual rate calculated under AS 43.05.225(b)(2) on the  25 property or the value of it from the date the property should have been paid or  26 delivered. 27  * Sec. 4. AS 43.05.225 is amended to read: 28 Sec. 43.05.225. Interest. Before January 1, 2014, unless [UNLESS] 29 otherwise provided, 30 (1) when a tax levied in this title becomes delinquent, it bears interest 01 in a calendar quarter at the rate of five percentage points above the annual rate charged 02 member banks for advances by the 12th Federal Reserve District as of the first day of 03 that calendar quarter, or at the annual rate of 11 percent, whichever is greater, 04 compounded quarterly as of the last day of that quarter; 05 (2) the interest rate is 12 percent a year for 06 (A) delinquent fees payable under AS 05.15.095(c); and 07 (B) unclaimed property that is not timely paid or delivered, as 08 allowed by AS 34.45.470(a). 09  * Sec. 5. AS 43.05.225 is amended by adding a new subsection to read: 10 (b) On and after January 1, 2014, unless otherwise provided, 11 (1) when a tax levied in this title becomes delinquent, it bears interest 12 in a calendar quarter at the rate of three percentage points above the annual rate 13 charged member banks for advances by the 12th Federal Reserve District as of the 14 first day of that calendar quarter compounded quarterly as of the last day of that 15 quarter; 16 (2) the interest rate is 12 percent a year for 17 (A) delinquent fees payable under AS 05.15.095(c); and 18 (B) unclaimed property that is not timely paid or delivered, as 19 allowed by AS 34.45.470(a). 20  * Sec. 6. AS 43.20.046(i) is amended to read: 21 (i) The issuance of a refund under this section does not limit the department's 22 ability to later audit or adjust the claim if the department determines, as a result of the 23 audit, that the person that claimed the credit was not entitled to the amount of the 24 credit. The tax liability of the person receiving the credit under this chapter is 25 increased by the amount of the credit that exceeds that to which the person was 26 entitled. If the tax liability is increased under this subsection, the increase bears 27 interest under AS 43.05.225(a) before January 1, 2014, or under  28 AS 43.05.225(b)(1) on and after January 1, 2014, [AS 43.05.225] from the date the 29 refund was issued. 30  * Sec. 7. AS 43.20.047(i) is amended to read: 31 (i) The issuance of a refund under this section does not limit the department's 01 ability to later audit or adjust the claim if the department determines, as a result of the 02 audit, that the person that claimed the credit was not entitled to the amount of the 03 credit. The tax liability of the person receiving the credit under this section is 04 increased by the amount of the credit that exceeds that to which the person was 05 entitled. If the tax liability is increased under this subsection, the increase bears 06 interest at the rate set by AS 43.05.225(a) before January 1, 2014, or under  07 AS 43.05.225(b)(1) on and after January 1, 2014, [AS 43.05.225] from the date the 08 refund was issued. 09  * Sec. 8. AS 43.20 is amended by adding a new section to read: 10 Sec. 43.20.049. Qualified oil and gas service industry expenditure credit. 11 (a) For a tax year beginning after December 31, 2013, a taxpayer may apply a credit 12 against the tax due under this chapter for a qualified oil and gas service industry 13 expenditure incurred in the state. The total amount of credit a taxpayer may receive in 14 a tax year may not exceed the lesser of 10 percent of qualified oil and gas service 15 industry expenditures incurred in the state during the tax year or $10,000,000. 16 (b) A taxpayer may not apply more than $10,000,000 in tax credits under this 17 section in a tax year. A tax credit or portion of a tax credit under this section may not 18 be used to reduce the taxpayer's tax liability under this chapter below zero. Any 19 unused tax credit or portion of a tax credit under this section may be applied in later 20 tax years, except that any unused tax credit or portion of a tax credit may not be 21 carried forward for more than five tax years immediately following the tax year in 22 which the qualified oil and gas service industry expenditures were incurred. 23 (c) An expenditure that is the basis of the credit under this section may not be 24 the basis for 25 (1) a deduction against the tax levied under this chapter; 26 (2) a credit or deduction under another provision of this title; or 27 (3) any federal credit claimed under this title. 28 (d) Notwithstanding any contrary provision of AS 40.25.100(a) or 29 AS 43.05.230(e), for a year that three or more taxpayers claim a tax credit under this 30 section, the department may publish the aggregated amount of tax credits claimed 31 under this section and a description of the qualified oil and gas service industry 01 expenditures that were the basis for a tax credit under this section. 02 (e) In this section, 03 (1) "manufacture" means to perform substantial industrial operations in 04 the state to transform raw material into tangible personal property with a useful life of 05 three years or more for use in the exploration for, development of, or production of oil 06 or gas deposits; 07 (2) "modification" means an adjustment, equipping, or other alteration 08 to existing tangible personal property that has a useful life of three years or more and 09 is for use in the exploration for, development of, or production of oil or gas deposits; 10 "modification" does not include minor product alterations or inventory activities; 11 (3) "qualified oil and gas service industry expenditure" means an 12 expenditure directly attributable to an in-state manufacture or in-state modification of 13 tangible personal property used in the exploration for, development of, or production 14 of oil or gas deposits, but does not include components or equipment used for or in the 15 process of that manufacturing or modification. 16  * Sec. 9. AS 43.50.570 is amended to read: 17 Sec. 43.50.570. Interest. Before January 1, 2014, a [A] licensee who fails to 18 pay an amount due for the purchase of stamps within the time required 19 (1) is considered to have failed to pay the cigarette taxes due under this 20 chapter; and 21 (2) shall pay interest at the rate established under AS 43.05.225(a) 22 [AS 43.05.225] from the date on which the amount became due until the date of 23 payment. 24  * Sec. 10. AS 43.50.570 is amended by adding a new subsection to read: 25 (b) On and after January 1, 2014, a licensee who fails to pay an amount due 26 for the purchase of stamps within the time required 27 (1) is considered to have failed to pay the cigarette taxes due under this 28 chapter; and 29 (2) shall pay interest at the rate established under AS 43.05.225(b)(1) 30 from the date on which the amount became due until the date of payment. 31  * Sec. 11. AS 43.55.011(e) is amended to read: 01 (e) There is levied on the producer of oil or gas a tax for all oil and gas 02 produced each calendar year from each lease or property in the state, less any oil and 03 gas the ownership or right to which is exempt from taxation or constitutes a 04 landowner's royalty interest. Except as otherwise provided under (f), (j), (k), (o), and 05 (p) of this section, [THE TAX IS EQUAL TO] 06 (1) before January 1, 2014, the tax is equal to the sum of 07 (A) the annual production tax value of the taxable oil and gas 08 as calculated under AS 43.55.160(a)(1) multiplied by 25 percent; and 09 (B) [(2)] the sum, over all months of the calendar year, of the 10 tax amounts determined under (g) of this section;  11 (2) on and after January 1, 2014, the tax is equal to the annual  12 production tax value of the taxable oil and gas as calculated under  13 AS 43.55.160(a) multiplied by 33 percent. 14  * Sec. 12. AS 43.55.011(i) is amended to read: 15 (i) There is levied on the producer of oil or gas a tax for all oil and gas 16 produced each calendar year from each lease or property in the state the ownership or 17 right to which constitutes a landowner's royalty interest, except for oil and gas the 18 ownership or right to which is exempt from taxation. The provisions of this subsection 19 apply to a landowner's royalty interest as follows: 20 (1) the tax levied for oil is equal to five percent of the gross value at 21 the point of production of the oil; 22 (2) the tax levied for gas is equal to 1.667 percent of the gross value at 23 the point of production of the gas; 24 (3) if the department determines that, for purposes of reducing the 25 producer's tax liability under (1) or (2) of this subsection, the producer has received or 26 will receive consideration from the royalty owner offsetting all or a part of the 27 producer's royalty obligation, other than a deduction under AS 43.55.020 related to a  28 settlement with a royalty owner [AS 43.55.020(d)] of the amount of a tax paid, then, 29 notwithstanding (1) and (2) of this subsection, the tax is equal to 25 percent of the 30 gross value at the point of production of the oil and gas. 31  * Sec. 13. AS 43.55.011(o) is amended to read: 01 (o) Notwithstanding other provisions of this section, for a calendar year before 02 2022, the tax levied under (e) of this section for each 1,000 cubic feet of gas for gas 03 produced from a lease or property outside the Cook Inlet sedimentary basin and used 04 in the state, other than gas subject to (p) of this section, may not exceed the amount 05 of tax for each 1,000 cubic feet of gas that is determined under (j)(2) of this section. 06  * Sec. 14. AS 43.55.020(a) is amended to read: 07 (a) For a calendar year, a producer subject to tax under AS 43.55.011 08 [AS 43.55.011(e) - (i) OR (p)] shall pay the tax as follows: 09 (1) before January 1, 2014, an installment payment of the estimated 10 tax levied by AS 43.55.011(e), net of any tax credits applied as allowed by law, is due 11 for each month of the calendar year on the last day of the following month; except as 12 otherwise provided under (2) of this subsection, the amount of the installment payment 13 is the sum of the following amounts, less 1/12 of the tax credits that are allowed by 14 law to be applied against the tax levied by AS 43.55.011(e) for the calendar year, but 15 the amount of the installment payment may not be less than zero: 16 (A) for oil and gas not subject to AS 43.55.011(o) or (p)  17 produced from leases or properties in the state outside the Cook Inlet 18 sedimentary basin [BUT NOT SUBJECT TO AS 43.55.011(o) OR (p)], other 19 than leases or properties subject to AS 43.55.011(f), the greater of 20 (i) zero; or 21 (ii) the sum of 25 percent and the tax rate calculated for 22 the month under AS 43.55.011(g) multiplied by the remainder obtained 23 by subtracting 1/12 of the producer's adjusted lease expenditures for the 24 calendar year of production under AS 43.55.165 and 43.55.170 that are 25 deductible for the oil and gas [LEASES OR PROPERTIES] under 26 AS 43.55.160 from the gross value at the point of production of the oil 27 and gas produced from the leases or properties during the month for 28 which the installment payment is calculated; 29 (B) for oil and gas produced from leases or properties subject 30 to AS 43.55.011(f), the greatest of 31 (i) zero; 01 (ii) zero percent, one percent, two percent, three 02 percent, or four percent, as applicable, of the gross value at the point of 03 production of the oil and gas produced from the [ALL] leases or 04 properties during the month for which the installment payment is 05 calculated; or 06 (iii) the sum of 25 percent and the tax rate calculated for 07 the month under AS 43.55.011(g) multiplied by the remainder obtained 08 by subtracting 1/12 of the producer's adjusted lease expenditures for the 09 calendar year of production under AS 43.55.165 and 43.55.170 that are 10 deductible for the oil and gas [THOSE LEASES OR PROPERTIES] 11 under AS 43.55.160 from the gross value at the point of production of 12 the oil and gas produced from those leases or properties during the 13 month for which the installment payment is calculated; 14 (C) for oil or [AND] gas [PRODUCED FROM EACH LEASE 15 OR PROPERTY] subject to AS 43.55.011(j), (k), or (o) [, OR (p)], for each  16 lease or property, the greater of 17 (i) zero; or 18 (ii) the sum of 25 percent and the tax rate calculated for 19 the month under AS 43.55.011(g) multiplied by the remainder obtained 20 by subtracting 1/12 of the producer's adjusted lease expenditures for the 21 calendar year of production under AS 43.55.165 and 43.55.170 that are 22 deductible under AS 43.55.160 for the oil or gas, respectively, 23 produced from the lease or property from the gross value at the point of 24 production of the oil or gas, respectively, produced from the lease or 25 property during the month for which the installment payment is 26 calculated; 27 (D) for oil and gas subject to AS 43.55.011(p), the lesser of  28 (i) the sum of 25 percent and the tax rate calculated  29 for the month under AS 43.55.011(g) multiplied by the remainder  30 obtained by subtracting 1/12 of the producer's adjusted lease  31 expenditures for the calendar year of production under  01 AS 43.55.165 and 43.55.170 that are deductible for the oil and gas  02 under AS 43.55.160 from the gross value at the point of production  03 of the oil and gas produced from the leases or properties during the  04 month for which the installment payment is calculated, but not less  05 than zero; or  06 (ii) four percent of the gross value at the point of  07 production of the oil and gas produced from the leases or  08 properties during the month, but not less than zero;  09 (2) before January 1, 2014, an amount calculated under (1)(C) of this 10 subsection for oil or gas [PRODUCED FROM A LEASE OR PROPERTY 11 (A)] subject to AS 43.55.011(j), (k), or (o) may not exceed the 12 product obtained by carrying out the calculation set out in AS 43.55.011(j)(1) 13 or (2) or 43.55.011(o), as applicable, for gas or set out in AS 43.55.011(k)(1) 14 or (2), as applicable, for oil, but substituting in AS 43.55.011(j)(1)(A) or (2)(A) 15 or 43.55.011(o), as applicable, the amount of taxable gas produced during the 16 month for the amount of taxable gas produced during the calendar year and 17 substituting in AS 43.55.011(k)(1)(A) or (2)(A), as applicable, the amount of 18 taxable oil produced during the month for the amount of taxable oil produced 19 during the calendar year; 20 [(B) SUBJECT TO AS 43.55.011(p) MAY NOT EXCEED 21 FOUR PERCENT OF THE GROSS VALUE AT THE POINT OF 22 PRODUCTION OF THE OIL OR GAS;] 23 (3) an installment payment of the estimated tax levied by 24 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 25 on the last day of the following month; the amount of the installment payment is the 26 sum of 27 (A) the applicable tax rate for oil provided under 28 AS 43.55.011(i), multiplied by the gross value at the point of production of the 29 oil taxable under AS 43.55.011(i) and produced from the lease or property 30 during the month; and 31 (B) the applicable tax rate for gas provided under 01 AS 43.55.011(i), multiplied by the gross value at the point of production of the 02 gas taxable under AS 43.55.011(i) and produced from the lease or property 03 during the month; 04 (4) any amount of tax levied by AS 43.55.011 [AS 43.55.011(e) OR 05 (i)], net of any credits applied as allowed by law, that exceeds the total of the amounts 06 due as installment payments of estimated tax is due on March 31 of the year following 07 the calendar year of production; 08 (5) on and after January 1, 2014, an installment payment of the  09 estimated tax levied by AS 43.55.011(e), net of any tax credits applied as allowed  10 by law, is due for each month of the calendar year on the last day of the following  11 month; except as otherwise provided under (6) of this subsection, the amount of  12 the installment payment is the sum of the following amounts, less 1/12 of the tax  13 credits that are allowed by law to be applied against the tax levied by  14 AS 43.55.011(e) for the calendar year, but the amount of the installment payment  15 may not be less than zero:  16 (A) for oil and gas not subject to AS 43.55.011(o) or (p)  17 produced from leases or properties in the state outside the Cook Inlet  18 sedimentary basin, other than leases or properties subject to  19 AS 43.55.011(f), the greater of  20 (i) zero; or  21 (ii) 33 percent multiplied by the remainder obtained  22 by subtracting 1/12 of the producer's adjusted lease expenditures  23 for the calendar year of production under AS 43.55.165 and  24 43.55.170 that are deductible for the oil and gas under  25 AS 43.55.160 from the gross value at the point of production of the  26 oil and gas produced from the leases or properties during the  27 month for which the installment payment is calculated;  28 (B) for oil and gas produced from leases or properties  29 subject to AS 43.55.011(f), the greatest of  30 (i) zero;  31 (ii) zero percent, one percent, two percent, three  01 percent, or four percent, as applicable, of the gross value at the  02 point of production of the oil and gas produced from the leases or  03 properties during the month for which the installment payment is  04 calculated; or  05 (iii) 33 percent multiplied by the remainder obtained  06 by subtracting 1/12 of the producer's adjusted lease expenditures  07 for the calendar year of production under AS 43.55.165 and  08 43.55.170 that are deductible for the oil and gas under  09 AS 43.55.160 from the gross value at the point of production of the  10 oil and gas produced from those leases or properties during the  11 month for which the installment payment is calculated, except that,  12 for the purposes of this calculation, a 20 percent exclusion from the  13 gross value at the point of production may apply for oil and gas  14 subject to AS 43.55.160(f);  15 (C) for oil or gas subject to AS 43.55.011(j), (k), or (o), for  16 each lease or property, the greater of  17 (i) zero; or  18 (ii) 33 percent multiplied by the remainder obtained  19 by subtracting 1/12 of the producer's adjusted lease expenditures  20 for the calendar year of production under AS 43.55.165 and  21 43.55.170 that are deductible under AS 43.55.160 for the oil or gas,  22 respectively, produced from the lease or property from the gross  23 value at the point of production of the oil or gas, respectively,  24 produced from the lease or property during the month for which  25 the installment payment is calculated;  26 (D) for oil and gas subject to AS 43.55.011(p), the lesser of  27 (i) 33 percent multiplied by the remainder obtained  28 by subtracting 1/12 of the producer's adjusted lease expenditures  29 for the calendar year of production under AS 43.55.165 and  30 43.55.170 that are deductible for the oil and gas under  31 AS 43.55.160 from the gross value at the point of production of the  01 oil and gas produced from the leases or properties during the  02 month for which the installment payment is calculated, but not less  03 than zero; or  04 (ii) four percent of the gross value at the point of  05 production of the oil and gas produced from the leases or  06 properties during the month, but not less than zero;  07 (6) on and after January 1, 2014, an amount calculated under  08 (5)(C) of this subsection for oil or gas subject to AS 43.55.011(j), (k), or (o) may  09 not exceed the product obtained by carrying out the calculation set out in  10 AS 43.55.011(j)(1) or (2) or 43.55.011(o), as applicable, for gas or set out in  11 AS 43.55.011(k)(1) or (2), as applicable, for oil, but substituting in  12 AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the amount of  13 taxable gas produced during the month for the amount of taxable gas produced  14 during the calendar year and substituting in AS 43.55.011(k)(1)(A) or (2)(A), as  15 applicable, the amount of taxable oil produced during the month for the amount  16 of taxable oil produced during the calendar year. 17  * Sec. 15. AS 43.55.020(d) is amended to read: 18 (d) Before January 1, 2014, in [IN] making settlement with the royalty owner 19 for oil and gas that is taxable under AS 43.55.011, the producer may deduct the 20 amount of the tax paid on taxable royalty oil and gas, or may deduct taxable royalty oil 21 or gas equivalent in value at the time the tax becomes due to the amount of the tax 22 paid. If the total deductions of installment payments of estimated tax for a calendar 23 year exceed the actual tax for that calendar year, the producer shall, before April 1 of 24 the following year, refund the excess to the royalty owner. Unless otherwise agreed 25 between the producer and the royalty owner, the amount of the tax paid under 26 AS 43.55.011(e) - (g) on taxable royalty oil and gas for a calendar year, other than oil 27 and gas the ownership or right to which constitutes a landowner's royalty interest, is 28 considered to be the gross value at the point of production of the taxable royalty oil 29 and gas produced during the calendar year multiplied by a figure that is a quotient, in 30 which 31 (1) the numerator is the producer's total tax liability under 01 AS 43.55.011(e) - (g) for the calendar year of production; and 02 (2) the denominator is the total gross value at the point of production 03 of the oil and gas taxable under AS 43.55.011(e) - (g) produced by the producer from 04 all leases and properties in the state during the calendar year. 05  * Sec. 16. AS 43.55.020(g) is amended to read: 06 (g) Notwithstanding any contrary provision of AS 43.05.225, 07 (1) before January 1, 2014, an unpaid amount of an installment 08 payment required under (a)(1) - (3) of this section that is not paid when due bears 09 interest (A) [(1)] at the rate provided for an underpayment under 26 U.S.C. 6621 10 (Internal Revenue Code), as amended, compounded daily, from the date the 11 installment payment is due until March 31 following the calendar year of production, 12 and (B) [(2)] as provided for a delinquent tax under AS 43.05.225(a) [AS 43.05.225] 13 after that March 31; interest [. INTEREST] accrued under (A) [(1)] of this 14 paragraph [SUBSECTION] that remains unpaid after that March 31 is treated as an 15 addition to tax that bears interest under (B) [(2)] of this paragraph; an 16 [SUBSECTION. AN] unpaid amount of tax due under (a)(4) of this section that is not 17 paid when due bears interest as provided for a delinquent tax under AS 43.05.225(a); 18 (2) on and after January 1, 2014, an unpaid amount of an  19 installment payment required under (a)(3), (5), or (6) of this section that is not  20 paid when due bears interest (A) at the rate provided for an underpayment  21 under 26 U.S.C. 6621 (Internal Revenue Code), as amended, compounded daily,  22 from the date the installment payment is due until March 31 following the  23 calendar year of production, and (B) as provided for a delinquent tax under  24 AS 43.05.225(b)(1) after that March 31; interest accrued under (A) of this  25 paragraph that remains unpaid after that March 31 is treated as an addition to  26 tax that bears interest under (B) of this paragraph; an unpaid amount of tax due  27 under (a)(4) of this section that is not paid when due bears interest as provided  28 for a delinquent tax under AS 43.05.225(b)(1) [AS 43.05.225]. 29  * Sec. 17. AS 43.55.020 is amended by adding a new subsection to read: 30 (l) On and after January 1, 2014, in making settlement with the royalty owner 31 for oil and gas that is taxable under AS 43.55.011, the producer may deduct the 01 amount of the tax paid on taxable royalty oil and gas, or may deduct taxable royalty oil 02 or gas equivalent in value at the time the tax becomes due to the amount of the tax 03 paid. If the total deductions of installment payments of estimated tax for a calendar 04 year exceed the actual tax for that calendar year, the producer shall, before April 1 of 05 the following year, refund the excess to the royalty owner. Unless otherwise agreed 06 between the producer and the royalty owner, the amount of the tax paid under 07 AS 43.55.011(e) on taxable royalty oil and gas for a calendar year, other than oil and 08 gas the ownership or right to which constitutes a landowner's royalty interest, is 09 considered to be the gross value at the point of production of the taxable royalty oil 10 and gas produced during the calendar year multiplied by a figure that is a quotient, in 11 which 12 (1) the numerator is the producer's total tax liability under 13 AS 43.55.011(e) for the calendar year of production; and 14 (2) the denominator is the total gross value at the point of production 15 of the oil and gas taxable under AS 43.55.011(e) produced by the producer from all 16 leases and properties in the state during the calendar year. 17  * Sec. 18. AS 43.55.023(a) is amended to read: 18 (a) A producer or explorer may take a tax credit for a qualified capital 19 expenditure as follows: 20 (1) notwithstanding that a qualified capital expenditure may be a 21 deductible lease expenditure for purposes of calculating the production tax value of oil 22 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 23 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025, a producer or 24 explorer that incurs a qualified capital expenditure may also elect to apply a tax credit 25 against a tax levied by AS 43.55.011(e) in the amount of 20 percent of that 26 expenditure; [HOWEVER, NOT MORE THAN HALF OF THE TAX CREDIT MAY 27 BE APPLIED FOR A SINGLE CALENDAR YEAR;] 28 (2) a producer or explorer may take a credit for a qualified capital 29 expenditure incurred in connection with geological or geophysical exploration or in 30 connection with an exploration well only if the producer or explorer 31 (A) agrees, in writing, to the applicable provisions of 01 AS 43.55.025(f)(2); and 02 (B) submits to the Department of Natural Resources all data 03 that would be required to be submitted under AS 43.55.025(f)(2);  04 (3) a credit for a qualified capital expenditure incurred to explore  05 for, develop, or produce oil or gas deposits located north of 68 degrees North  06 latitude may be taken only if the expenditure is incurred before January 1, 2014. 07  * Sec. 19. AS 43.55.023(b) is amended to read: 08 (b) For lease expenditures incurred to explore for, develop, or produce oil  09 or gas deposits located south of 68 degrees North latitude, a [A] producer or 10 explorer may elect to take a tax credit in the amount of 25 percent of a carried-forward 11 annual loss. For lease expenditures incurred on and after January 1, 2014, to  12 explore for, develop, or produce oil or gas deposits located north of 68 degrees  13 North latitude, a producer or explorer may elect to take a tax credit in the  14 amount of 33 percent of a carried-forward annual loss. A credit under this 15 subsection may be applied against a tax levied by AS 43.55.011(e). For purposes of 16 this subsection, a carried-forward annual loss is the amount of a producer's or 17 explorer's adjusted lease expenditures under AS 43.55.165 and 43.55.170 for a 18 previous calendar year that was not deductible in calculating production tax values for 19 that calendar year under AS 43.55.160. 20  * Sec. 20. AS 43.55.023(d) is amended to read: 21 (d) A [EXCEPT AS LIMITED BY (i) OF THIS SECTION, A] person that is 22 entitled to take a tax credit under this section that wishes to transfer the unused credit 23 to another person or obtain a cash payment under AS 43.55.028 may apply to the 24 department for a transferable tax credit certificate [CERTIFICATES]. An application 25 under this subsection must be in a form prescribed by the department and must include 26 supporting information and documentation that the department reasonably requires. 27 The department shall grant or deny an application, or grant an application as to a lesser 28 amount than that claimed and deny it as to the excess, not later than 120 days after the 29 latest of (1) March 31 of the year following the calendar year in which the qualified 30 capital expenditure or carried-forward annual loss for which the credit is claimed was 31 incurred; (2) the date the statement required under AS 43.55.030(a) or (e) was filed for 01 the calendar year in which the qualified capital expenditure or carried-forward annual 02 loss for which the credit is claimed was incurred; or (3) the date the application was 03 received by the department. If, based on the information then available to it, the 04 department is reasonably satisfied that the applicant is entitled to a credit, the 05 department shall issue the applicant a [TWO] transferable tax credit certificate for 06 [CERTIFICATES, EACH FOR HALF OF] the amount of the credit. [THE CREDIT 07 SHOWN ON ONE OF THE TWO CERTIFICATES IS AVAILABLE FOR 08 IMMEDIATE USE. THE CREDIT SHOWN ON THE SECOND OF THE TWO 09 CERTIFICATES MAY NOT BE APPLIED AGAINST A TAX FOR A CALENDAR 10 YEAR EARLIER THAN THE CALENDAR YEAR FOLLOWING THE 11 CALENDAR YEAR IN WHICH THE CERTIFICATE IS ISSUED, AND THE 12 CERTIFICATE MUST CONTAIN A CONSPICUOUS STATEMENT TO THAT 13 EFFECT.] A certificate issued under this subsection does not expire. 14  * Sec. 21. AS 43.55.023(g) is amended to read: 15 (g) The issuance of a transferable tax credit certificate under (d) of this  16 section or former (m) of this section or the purchase of a certificate under 17 AS 43.55.028 does not limit the department's ability to later audit a tax credit claim to 18 which the certificate relates or to adjust the claim if the department determines, as a 19 result of the audit, that the applicant was not entitled to the amount of the credit for 20 which the certificate was issued. The tax liability of the applicant under 21 AS 43.55.011(e) and 43.55.017 - 43.55.180 is increased by the amount of the credit 22 that exceeds that to which the applicant was entitled, or the applicant's available valid 23 outstanding credits applicable against the tax levied by AS 43.55.011(e) are reduced 24 by that amount. If the applicant's tax liability is increased under this subsection, the 25 increase bears interest under AS 43.05.225(a) before January 1, 2014, or under  26 AS 43.05.225(b)(1) on and after January 1, 2014, [AS 43.05.225] from the date the 27 transferable tax credit certificate was issued. For purposes of this subsection, an 28 applicant that is an explorer is considered a producer subject to the tax levied by 29 AS 43.55.011(e). 30  * Sec. 22. AS 43.55.023(n) is amended to read: 31 (n) For the purposes of (l) [AND (m)] of this section, a well lease expenditure 01 incurred in the state south of 68 degrees North latitude is a lease expenditure that is 02 (1) directly related to an exploration well, a stratigraphic test well, a 03 producing well, or an injection well other than a disposal well, located in the state 04 south of 68 degrees North latitude, if the expenditure is a qualified capital expenditure 05 and an intangible drilling and development cost authorized under 26 U.S.C. (Internal 06 Revenue Code), as amended, and 26 C.F.R. 1.612-4, regardless of the elections made 07 under 26 U.S.C. 263(c); in this paragraph, an expenditure directly related to a well 08 includes an expenditure for well sidetracking, well deepening, well completion or 09 recompletion, or well workover, regardless of whether the well is or has been a 10 producing well; or 11 (2) an expense for seismic work conducted within the boundaries of a 12 production or exploration unit. 13  * Sec. 23. AS 43.55.023 is amended by adding a new subsection to read: 14 (p) Before January 1, 2014, the provisions of (d) of this section may be limited 15 by (i) of this section. 16  * Sec. 24. AS 43.55.024(d) is amended to read: 17 (d) A producer may not take a tax credit under (c) of this section for any 18 calendar year after the later of 19 (1) 2022 [2016]; or 20 (2) if the producer did not have commercial oil or gas production from 21 a lease or property in the state before April 1, 2006, the ninth calendar year after the 22 calendar year during which the producer first has commercial oil or gas production 23 before May 1, 2016, from at least one lease or property in the state. 24  * Sec. 25. AS 43.55.024(e) is amended to read: 25 (e) On written application by a producer that includes any information the 26 department may require, the department shall determine whether the producer 27 qualifies for a calendar year under (a) and (c) of this section. To qualify under (a) and  28 (c) of this section, a producer must demonstrate that its operation in the state or its 29 ownership of an interest in a lease or property in the state as a distinct producer would 30 not result in the division among multiple producer entities of any production tax 31 liability under AS 43.55.011(e) that reasonably would be expected to be attributed to a 01 single producer if the tax credit provisions of (a) or (c) of this section did not exist. 02  * Sec. 26. AS 43.55.024 is amended by adding new subsections to read: 03 (i) A producer may apply against the producer's tax liability for the calendar 04 year under AS 43.55.011(e) a tax credit of $5 for each barrel of oil taxable under 05 AS 43.55.011(e) that meets one or more of the criteria in AS 43.55.160(f) and that is 06 produced during a calendar year after December 31, 2013. A tax credit authorized by 07 this subsection may not reduce a producer's tax liability for a calendar year under 08 AS 43.55.011(e) to below zero. 09 (j) A producer may apply against the producer's tax liability for the calendar 10 year under AS 43.55.011(e) a tax credit in the amount specified in this subsection for 11 each barrel of taxable oil under AS 43.55.011(e) that does not meet any of the criteria 12 in AS 43.55.160(f) and that is produced during a calendar year after December 31, 13 2013, from leases or properties north of 68 degrees North latitude. A tax credit under 14 this subsection may not reduce a producer's tax liability for a calendar year under 15 AS 43.55.011(e) to below the amount calculated under AS 43.55.011(f). The amount 16 of the tax credit for a barrel of taxable oil subject to this subsection is 17 (1) $8 for each barrel of taxable oil if the average gross value at the 18 point of production for the month is less than $80 a barrel; 19 (2) $7 for each barrel of taxable oil if the average gross value at the 20 point of production for the month is greater than or equal to $80 a barrel, but less than 21 $90 a barrel; 22 (3) $6 for each barrel of taxable oil if the average gross value at the 23 point of production for the month is greater than or equal to $90 a barrel, but less than 24 $100 a barrel; 25 (4) $5 for each barrel of taxable oil if the average gross value at the 26 point of production for the month is greater than or equal to $100 a barrel, but less 27 than $110 a barrel; 28 (5) $4 for each barrel of taxable oil if the average gross value at the 29 point of production for the month is greater than or equal to $110 a barrel, but less 30 than $120 a barrel; 31 (6) $3 for each barrel of taxable oil if the average gross value at the 01 point of production for the month is greater than or equal to $120 a barrel, but less 02 than $130 a barrel; 03 (7) $2 for each barrel of taxable oil if the average gross value at the 04 point of production for the month is greater than or equal to $130 a barrel, but less 05 than $140 a barrel; 06 (8) $1 for each barrel of taxable oil if the average gross value at the 07 point of production for the month is greater than or equal to $140 a barrel, but less 08 than $150 a barrel; 09 (9) zero if the average gross value at the point of production for the 10 month is greater than or equal to $150 a barrel. 11  * Sec. 27. AS 43.55.025(a) is amended to read: 12 (a) Subject to the terms and conditions of this section, a credit against the 13 production tax levied by AS 43.55.011(e) is allowed for exploration expenditures that 14 qualify under (b) of this section in an amount equal to one of the following: 15 (1) 30 percent of the total exploration expenditures that qualify only 16 under (b) and (c) of this section; 17 (2) 30 percent of the total exploration expenditures that qualify only 18 under (b) and (d) of this section; 19 (3) 40 percent of the total exploration expenditures that qualify under 20 (b), (c), and (d) of this section; 21 (4) 40 percent of the total exploration expenditures that qualify only 22 under (b) and (e) of this section; 23 (5) 80, 90, or 100 percent, or a lesser amount described in (l) of this 24 section, of the total exploration expenditures described in (b)(1) and (2) of this section 25 and not excluded by (b)(3) and (4) of this section that qualify only under (l) of this 26 section; 27 (6) the lesser of $25,000,000 or 80 percent of the total exploration 28 drilling expenditures described in (m) of this section and that qualify under (b) and 29 (c)(1), (c)(2)(A), and (c)(2)(C) [(c)] of this section; or 30 (7) the lesser of $7,500,000 or 75 percent of the total seismic 31 exploration expenditures described in (n) of this section and that qualify under (b) of 01 this section. 02  * Sec. 28. AS 43.55.025(m) is amended to read: 03 (m) The persons that drill the first four exploration wells in the state and 04 within the areas described in (o) of this section on state lands, private lands, or federal 05 onshore lands for the purpose of discovering oil or gas that penetrate and evaluate a 06 prospect in a basin described in (o) of this section are eligible for a credit under (a)(6) 07 of this section. A credit under this subsection may not be taken for more than two 08 exploration wells in a single area described in (o)(1) - (6) of this section. Exploration 09 expenditures eligible for the credit in this subsection must be incurred for work 10 performed after June 1, 2012, and before July 1, 2016. A person planning to drill an 11 exploration well on private land and to apply for a credit under this subsection shall 12 obtain written consent from the owner of the oil and gas interest for the full public 13 release of all well data after the expiration of the confidentiality period applicable to 14 information collected under (f) of this section. The written consent of the owner of the 15 oil and gas interest must be submitted to the commissioner of natural resources before 16 approval of the proposed exploration well. In addition to the requirements in (c)(1),  17 (c)(2)(A), and (c)(2)(C) [(c)] of this section and submission of the written consent of 18 the owner of the oil and gas interest, a person planning to drill an exploration well 19 shall obtain approval from the commissioner of natural resources before the well is 20 spudded. The commissioner of natural resources shall make a written determination 21 approving or rejecting an exploration well within 60 days after receiving the request 22 for approval or as soon as is practicable thereafter. Before approving the exploration 23 well, the commissioner of natural resources shall consider the following: the location 24 of the well; the proximity to a community in need of a local energy source; the 25 proximity of existing infrastructure; the experience and safety record of the explorer in 26 conducting operations in remote or roadless areas; the projected cost schedule; 27 whether seismic mapping and seismic data sufficiently identify a particular trap for 28 exploration; whether the targeted and planned depth and range are designed to 29 penetrate and fully evaluate the hydrocarbon potential of the proposed prospect and 30 reach the level below which economic hydrocarbon reservoirs are likely to be found, 31 or reach 12,000 feet or more true vertical depth; and whether the exploration plan 01 provides for a full evaluation of the wellbore below surface casing to the depth of the 02 well. Whether the exploration well for which a credit is requested under this 03 subsection is located within an area and a basin described under (o) of this section 04 shall be determined by the commissioner of natural resources and reported to the 05 commissioner. A taxpayer that obtains a credit under this subsection may not claim a 06 tax credit under AS 43.55.023 or another provision in this section for the same 07 exploration expenditure. 08  * Sec. 29. AS 43.55.028(e) is amended to read: 09 (e) The department, on the written application of a person to whom a 10 transferable tax credit certificate has been issued under AS 43.55.023(d) or former  11 AS 43.55.023(m) [(m)] or to whom a production tax credit certificate has been issued 12 under AS 43.55.025(f), may use available money in the oil and gas tax credit fund to 13 purchase, in whole or in part, the certificate if the department finds that 14 (1) the calendar year of the purchase is not earlier than the first 15 calendar year for which the credit shown on the certificate would otherwise be allowed 16 to be applied against a tax; 17 (2) the applicant does not have an outstanding liability to the state for 18 unpaid delinquent taxes under this title; 19 (3) the applicant's total tax liability under AS 43.55.011(e), after 20 application of all available tax credits, for the calendar year in which the application is 21 made is zero; 22 (4) the applicant's average daily production of oil and gas taxable 23 under AS 43.55.011(e) during the calendar year preceding the calendar year in which 24 the application is made was not more than 50,000 BTU equivalent barrels; and 25 (5) the purchase is consistent with this section and regulations adopted 26 under this section. 27  * Sec. 30. AS 43.55.028(g) is amended to read: 28 (g) The department may adopt regulations to carry out the purposes of this 29 section, including standards and procedures to allocate available money among 30 applications for purchases under this chapter and claims for refunds and payments 31 under AS 43.20.046 or 43.20.047 when the total amount of the applications for 01 purchase and claims for refund exceed the amount of available money in the fund. The 02 regulations adopted by the department may not, when allocating available money in 03 the fund under this section, distinguish an application for the purchase of a credit 04 certificate issued under former AS 43.55.023(m) or a claim for a refund or payment 05 under AS 43.20.046 or 43.20.047. 06  * Sec. 31. AS 43.55.030(e) is amended to read: 07 (e) An explorer or producer that incurs a lease expenditure under 08 AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar 09 year but does not produce oil or gas from a lease or property in the state during the 10 calendar year shall file with the department, on March 31 of the following year, a 11 statement, under oath, in a form prescribed by the department, giving, with other 12 information required, the following: 13 (1) the explorer's or producer's qualified capital expenditures, as 14 defined in AS 43.55.023, other lease expenditures under AS 43.55.165, and 15 adjustments or other payments or credits under AS 43.55.170; and 16 (2) if the explorer or producer receives a payment or credit under 17 AS 43.55.170, calculations showing whether the explorer or producer is liable for a 18 tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount. 19  * Sec. 32. AS 43.55.160(a) is amended to read: 20 (a) Except as provided in (b) and (f) of this section, for the purposes of 21 (1) AS 43.55.011(e), the annual production tax value of the taxable oil, 22 gas, or oil and gas subject to this paragraph produced during a calendar year is the 23 gross value at the point of production of the oil, gas, or oil and gas taxable under 24 AS 43.55.011(e), less the producer's lease expenditures under AS 43.55.165 for the 25 calendar year applicable to the oil, gas, or oil and gas, as applicable, produced by the 26 producer from leases or properties, as adjusted under AS 43.55.170; this paragraph 27 applies to 28 (A) oil and gas produced from leases or properties in the state 29 that include land north of 68 degrees North latitude, other than gas produced 30 before 2022 and used in the state; 31 (B) oil and gas produced from leases or properties in the state 01 outside the Cook Inlet sedimentary basin, no part of which is north of 68 02 degrees North latitude; this subparagraph does not apply to [GAS] 03 (i) gas produced before 2022 and used in the state; or 04 (ii) oil and gas subject to AS 43.55.011(p); 05 (C) oil produced before 2022 from each [A] lease or property 06 in the Cook Inlet sedimentary basin; 07 (D) gas produced before 2022 from each [A] lease or property 08 in the Cook Inlet sedimentary basin; 09 (E) gas produced before 2022 from each [A] lease or property 10 in the state outside the Cook Inlet sedimentary basin and used in the state,  11 other than gas subject to AS 43.55.011(p); 12 (F) oil and gas subject to AS 43.55.011(p) produced from 13 leases or properties in the state; 14 (G) oil and gas produced from leases or properties in the  15 state [A LEASE OR PROPERTY] no part of which is north of 68 degrees 16 North latitude, other than oil or gas described in (B), (C), (D), (E), or (F) of 17 this paragraph; 18 (2) AS 43.55.011(g), the monthly production tax value of the taxable 19 (A) oil and gas produced during a month from leases or 20 properties in the state that include land north of 68 degrees North latitude is the 21 gross value at the point of production of the oil and gas taxable under 22 AS 43.55.011(e) and produced by the producer from those leases or properties, 23 less 1/12 of the producer's lease expenditures under AS 43.55.165 for the 24 calendar year applicable to the oil and gas produced by the producer from 25 those leases or properties, as adjusted under AS 43.55.170; this subparagraph 26 does not apply to gas subject to AS 43.55.011(o); 27 (B) oil and gas produced during a month from leases or 28 properties in the state outside the Cook Inlet sedimentary basin, no part of 29 which is north of 68 degrees North latitude, is the gross value at the point of 30 production of the oil and gas taxable under AS 43.55.011(e) and produced by 31 the producer from those leases or properties, less 1/12 of the producer's lease 01 expenditures under AS 43.55.165 for the calendar year applicable to the oil and 02 gas produced by the producer from those leases or properties, as adjusted under 03 AS 43.55.170; this subparagraph does not apply to gas subject to 04 AS 43.55.011(o); 05 (C) oil produced during a month from a lease or property in the 06 Cook Inlet sedimentary basin is the gross value at the point of production of 07 the oil taxable under AS 43.55.011(e) and produced by the producer from that 08 lease or property, less 1/12 of the producer's lease expenditures under 09 AS 43.55.165 for the calendar year applicable to the oil produced by the 10 producer from that lease or property, as adjusted under AS 43.55.170; 11 (D) gas produced during a month from a lease or property in 12 the Cook Inlet sedimentary basin is the gross value at the point of production 13 of the gas taxable under AS 43.55.011(e) and produced by the producer from 14 that lease or property, less 1/12 of the producer's lease expenditures under 15 AS 43.55.165 for the calendar year applicable to the gas produced by the 16 producer from that lease or property, as adjusted under AS 43.55.170; 17 (E) gas produced during a month from a lease or property 18 outside the Cook Inlet sedimentary basin and used in the state is the gross 19 value at the point of production of that gas taxable under AS 43.55.011(e) and 20 produced by the producer from that lease or property, less 1/12 of the 21 producer's lease expenditures under AS 43.55.165 for the calendar year 22 applicable to that gas produced by the producer from that lease or property, as 23 adjusted under AS 43.55.170. 24 * Sec. 33. AS 43.55.160 is amended by adding new subsections to read: 25 (f) On and after January 1, 2014, in the calculation of an annual production tax 26 value of a producer under (a)(1) of this section, the gross value at the point of 27 production of oil or gas meeting one or more of the following criteria is reduced by 20 28 percent: (1) the oil or gas is produced from a lease or property that does not contain a 29 lease that was within a unit on January 1, 2003; (2) the oil or gas is produced from a 30 participating area established after December 31, 2011, that is within a unit formed 31 under AS 38.05.180(p) before January 1, 2003, if the participating area does not 01 contain a reservoir that had previously been in a participating area established before 02 December 31, 2011; (3) the oil or gas is produced from acreage that was added to an 03 existing participating area by the Department of Natural Resources on and after 04 January 1, 2014, and the producer demonstrates to the department that the volume of 05 oil or gas produced is from acreage added to an existing participating area. A 06 reduction under this subsection may not reduce the gross value at the point of 07 production below zero. In this subsection, "participating area" means a reservoir or 08 portion of a reservoir producing or contributing to production as approved by the 09 Department of Natural Resources. 10 (g) On and after January 1, 2014, a separate annual production tax value must 11 be calculated under (a)(1) of this section for 12 (1) oil and gas produced from leases or properties in the state that 13 include land north of 68 degrees North latitude, other than gas produced before 2022 14 and used in the state; 15 (2) oil and gas produced from leases or properties in the state outside 16 the Cook Inlet sedimentary basin, no part of which is north of 68 degrees North 17 latitude, during a calendar year before or during the last calendar year under 18 AS 43.55.024(b) for which the producer could take a tax credit under 19 AS 43.55.024(a); this paragraph does not apply to 20 (A) gas produced before 2022 and used in the state; or 21 (B) oil and gas subject to AS 43.55.011(p); 22 (3) oil produced before 2022 from each lease or property in the Cook 23 Inlet sedimentary basin; 24 (4) gas produced before 2022 from each lease or property in the Cook 25 Inlet sedimentary basin; 26 (5) gas produced before 2022 from each lease or property in the state 27 outside the Cook Inlet sedimentary basin and used in the state, other than gas subject 28 to AS 43.55.011(p); 29 (6) oil and gas subject to AS 43.55.011(p) produced from leases or 30 properties in the state; 31 (7) oil and gas produced from leases or properties in the state no part 01 of which is north of 68 degrees North latitude, other than oil or gas described in (2), 02 (3), (4), (5), or (6) of this subsection. 03  * Sec. 34. AS 43.55.165(a) is repealed and reenacted to read: 04 (a) Except as provided under (e), (m), and (n) of this section, for the purposes 05 of AS 43.55.160, a producer's lease expenditures for a calendar year are the ordinary 06 and necessary costs upstream of the point of production of oil and gas that are incurred 07 during the calendar year by the producer on or after the effective date of this Act and 08 that are direct costs of exploring for, developing, or producing oil or gas deposits 09 located within the producer's leases or properties in the state or, in the case of land in 10 which the producer does not own a working interest, that are direct costs of exploring 11 for oil or gas deposits located within other land in the state. In determining whether 12 costs are lease expenditures, the department shall consider, among other factors, 13 (1) the typical industry practices and standards in the state that 14 determine the costs, other than items listed in (e) of this section, that an operator is 15 allowed to bill a working interest owner that is not the operator under unit operating 16 agreements or similar operating agreements that were in effect before December 2, 17 2005, and were subject to negotiation with at least one working interest owner with 18 substantial bargaining power, other than the operator; and 19 (2) the standards adopted by the Department of Natural Resources that 20 determine the costs, other than items listed in (e) of this section, that a lessee is 21 allowed to deduct from revenue in calculating net profits under a lease issued under 22 AS 38.05.180(f)(3)(B), (D), or (E). 23  * Sec. 35. AS 43.55.165(b) is repealed and reenacted to read: 24 (b) For purposes of (a) of this section, 25 (1) direct costs include 26 (A) an expenditure, when incurred, to acquire an item if the 27 acquisition cost is otherwise a direct cost, notwithstanding that the expenditure 28 may be required to be capitalized rather than treated as an expense for financial 29 accounting or federal income tax purposes; 30 (B) payments of or in lieu of property taxes, sales and use 31 taxes, motor fuel taxes, and excise taxes; 01 (C) a reasonable allowance, as determined under regulations 02 adopted by the department, for overhead expenses directly related to exploring 03 for, developing, and producing oil or gas deposits located within leases or 04 properties or other land in the state; 05 (2) an activity does not need to be physically located on, near, or 06 within the premises of the lease or property within which an oil or gas deposit being 07 explored for, developed, or produced is located in order for the cost of the activity to 08 be a cost upstream of the point of production of the oil or gas. 09  * Sec. 36. AS 43.55.165 is amended by adding new subsections to read: 10 (m) Subject to (g) and (h) of this section, if the department finds that the 11 pertinent provisions of a unit operating agreement or similar operating agreement are 12 substantially consistent with the department's determinations and standards under (a) 13 of this section concerning whether costs are lease expenditures, the department may 14 authorize or require a producer, subject to conditions prescribed under regulations 15 adopted by the department, to treat as that portion of its lease expenditures for a 16 calendar year applicable to oil and gas produced from a lease or property in the state 17 only 18 (1) the costs, other than items listed in (e) of this section, that are 19 incurred by the operator during the calendar year and that 20 (A) are billable to the producer by the operator in accordance 21 with the terms of the agreement to which that lease or property is subject; 22 (B) for a producer that is the operator, would be billable to the 23 producer by the operator in accordance with the terms of the agreement to 24 which that lease or property is subject if the producer were not the operator; 25 (C) would be billable to the producer by the operator in 26 accordance with the terms of the agreement if that lease or property were 27 subject to the agreement; or 28 (D) for a producer that is the operator, would be billable to the 29 producer by the operator in accordance with the terms of the agreement if that 30 lease or property were subject to the agreement and if the producer were not 31 the operator; and 01 (2) a reasonable percentage, as determined under regulations adopted 02 by the department, of the costs that are billable under (1) of this subsection as an 03 allowance for overhead expenses directly related to exploring for, developing, and 04 producing oil or gas deposits located within the lease or property, to the extent those 05 expenses are not billable under the agreement. 06 (n) Subject to (g) and (h) of this section, if the department makes the finding 07 described in (m) of this section with respect to a unit operating agreement or similar 08 operating agreement and, in addition, finds that at least one working interest owner 09 party to the agreement, other than the operator, with substantial incentive and ability to 10 effectively audit billings under the agreement in fact is effectively auditing billings 11 under the agreement, the department may authorize or require a producer, subject to 12 conditions prescribed under regulations adopted by the department, to treat as that 13 portion of its lease expenditures for a calendar year applicable to oil and gas produced 14 from a lease or property in the state only 15 (1) the costs, other than items listed in (e) of this section, that are 16 incurred by the operator during the calendar year and that 17 (A) are billed to the producer by the operator under the 18 agreement to which that lease or property is subject and are either not disputed 19 by a working interest owner party to the agreement or are finally determined to 20 be properly billable as a result of dispute resolution; or 21 (B) for a producer that is the operator, would be billable to the 22 producer by the operator in accordance with the terms of the agreement to 23 which that lease or property is subject if the producer were not the operator; 24 and 25 (2) a reasonable percentage, as determined under regulations adopted 26 by the department, of the costs that are billed under (1) of this subsection as an 27 allowance for overhead expenses directly related to exploring for, developing, and 28 producing oil or gas deposits located within the lease or property, to the extent those 29 expenses are not billable under the agreement. 30  * Sec. 37. AS 43.55.180(b) is amended to read: 31 (b) The department shall prepare a report on or before the first day of the 2016 01 [2011] regular session of the legislature on the results of the study made under (a) of 02 this section, including recommendations as to whether any changes should be made to 03 this chapter. The department shall notify the legislature that the report prepared under 04 this subsection is available. 05  * Sec. 38. AS 43.56.160 is amended to read: 06 Sec. 43.56.160. Interest and penalty. When the tax levied by AS 43.56.010(a) 07 becomes delinquent, a penalty of 10 percent shall be added. Before January 1, 2014,  08 interest [INTEREST] on the delinquent taxes, exclusive of penalty, shall be assessed 09 at a rate of eight percent a year. On and after January 1, 2014, interest on the  10 delinquent taxes, exclusive of penalty, shall be assessed at the rate specified in  11 AS 43.05.225(b)(1). 12  * Sec. 39. AS 43.77.020(d) is amended to read: 13 (d) A person subject to the tax under this chapter shall make quarterly 14 payments of the tax estimated to be due for the year, as required under regulations 15 adopted by the department. A taxpayer will be subject to an estimated tax penalty, 16 determined by applying the interest rate specified in AS 43.05.225(a) before  17 January 1, 2014, or under AS 43.05.225(b)(1) on and after January 1, 2014, 18 [AS 43.05.225] to the underpayment for each quarter, unless the taxpayer makes 19 estimated tax payments in equal installments that total either 20 (1) at least 90 percent of the taxpayer's tax liability under this chapter 21 for the tax year; or 22 (2) at least 100 percent of the taxpayer's tax liability under this chapter 23 for the prior tax year. 24  * Sec. 40. AS 43.90.430 is amended to read: 25 Sec. 43.90.430. Interest. Before January 1, 2014, when [WHEN] a payment 26 due to the state under this chapter becomes delinquent, the payment bears interest at 27 the rate applicable to a delinquent tax under AS 43.05.225(a). On and after  28 January 1, 2014, when a payment due to the state under this chapter becomes  29 delinquent, the payment bears interest at the rate applicable to a delinquent tax  30 under AS 43.05.225(b)(1) [AS 43.05.225]. 31  * Sec. 41. AS 44.88.140(a) is amended to read: 01 (a) Except as provided in AS 29.45.030(a)(1) and AS 44.88.168, the real and 02 personal property of the authority and its assets, income, and receipts are declared to 03 be the property of a political subdivision of the state and, together with any project or 04 development project financed under AS 44.88.155 - 44.88.159 or 44.88.172 - 05 44.88.177, and a leasehold interest created in a project or development project 06 financed under AS 44.88.155 - 44.88.159 or 44.88.172 - 44.88.177, devoted to an 07 essential public and governmental function and purpose, and the property, assets, 08 income, receipts, project, development project, and leasehold interests shall be exempt 09 from all taxes and special assessments of the state or a political subdivision of the 10 state, including, without limitation, all boroughs, cities, municipalities, school 11 districts, public utility districts, and other taxing units. All bonds of the authority are 12 declared to be issued by a political subdivision of the state and for an essential public 13 and governmental purpose and to be a public instrumentality, and the bonds, and the 14 interest on them, the income from them and the transfer of the bonds, and all assets, 15 income, and receipts pledged to pay or secure the payments of the bonds, or interest on 16 them, shall at all times be exempt from taxation by or under the authority of the state, 17 except for inheritance and estate taxes and taxes on transfers by or in contemplation of 18 death. Nothing in this section affects or limits an exemption from license fees, 19 property taxes, or excise, income, or any other taxes, provided under any other law, 20 nor does it create a tax exemption with respect to the interest of any business 21 enterprise or other person, other than the authority, in any property, assets, income, 22 receipts, project, development project, or lease whether or not financed under this 23 chapter. By January 10 of each year, the authority shall submit to the governor a report 24 describing the nature and extent of the tax exemption of the property, assets, income, 25 receipts, project, development project, and leasehold interests of the authority under 26 this section. The authority shall notify the legislature that the report is available. 27  * Sec. 42. AS 44.88 is amended by adding a new section to read: 28 Sec. 44.88.168. Oil and gas infrastructure fund. (a) The oil and gas 29 infrastructure fund is established in the authority. The oil and gas infrastructure fund 30 consists of money appropriated to the authority for deposit in the fund, and money 31 deposited in the fund by the authority. The fund is not an account in the revolving loan 01 fund established in AS 44.88.060, and the authority shall account for the fund 02 separately from the revolving fund. Money in the fund may be used to finance the 03 construction and improvement of an oil or gas processing facility on the North Slope 04 and flow lines and other surface infrastructure for the facility. 05 (b) Notwithstanding AS 44.88.140, the state or a political subdivision of the 06 state may levy a tax or special assessment on an oil or gas processing facility, flow 07 lines, and other surface infrastructure for the facility financed by the oil and gas 08 infrastructure fund. 09 (c) In this section, "North Slope" means that area of the state lying north of 68 10 degrees North latitude. 11 * Sec. 43. AS 43.55.023(m) is repealed. 12 * Sec. 44. AS 43.05.225(a); AS 43.50.570(a); AS 43.55.011(e)(1), 43.55.011(g) 13 AS 43.55.020(d), 43.55.023(i), 43.55.023(p), 43.55.160(a)(2), and 43.55.160(c) are repealed 14 January 1, 2014. 15  * Sec. 45. The uncodified law of the State of Alaska is amended by adding a new section to 16 read: 17 APPLICABILITY. (a) Section 13 of this Act and AS 43.55.160(a)(1)(E), as amended 18 by sec. 32 of this Act, apply to oil and gas produced on and after January 1, 2014. 19 (b) AS 43.55.023(a)(1), as amended by sec. 18 of this Act, and secs. 20 - 23 of this 20 Act apply to expenditures incurred on and after January 1, 2013. 21 (c) Section 19 of this Act applies to expenditures incurred on and after January 1, 22 2014. 23 * Sec. 46. The uncodified law of the State of Alaska is amending by adding a new section to 24 read: 25 TRANSITION: REGULATIONS. The Department of Revenue may adopt regulations 26 to implement this Act. The regulations take effect under AS 44.62 (Administrative Procedure 27 Act), but not before the effective date of the respective provision of this Act. 28  * Sec. 47. The uncodified law of the State of Alaska is amended by adding a new section to 29 read: 30 LEGISLATIVE APPROVAL; NORTH SLOPE OIL OR GAS PROCESSING 31 FACILITY. (a) The Alaska Industrial Development and Export Authority may issue bonds to 01 finance the construction and improvement of an oil or gas processing facility on the Alaska 02 North Slope and flow lines and other surface infrastructure for the facility. The processing 03 facility, flow lines, and other surface infrastructure for the facility shall be used to secure 04 bonds issued under this section. The principal amount of the bonds provided by the authority 05 for the facility, flow lines, and other surface infrastructure may not exceed $200,000,000 and 06 may include the costs of funding reserves and other costs of issuing the bonds that the 07 authority considers reasonable and appropriate. Notwithstanding AS 44.88.140, an oil or gas 08 processing facility, flow lines, and other surface infrastructure for the facility constructed or 09 financed by the oil and gas infrastructure fund are subject to taxes and special assessments of 10 the state or a political subdivision of the state. 11 (b) This section constitutes the legislative approval required by AS 44.88.095(g) and 12 44.88.690. 13 (c) The prohibition on the issuance of bonds in an amount exceeding $400,000,000 14 under AS 44.88.095 does not apply to bonds issued under this section, and the principal 15 amount of bonds issued under this section may not be considered in determining whether the 16 limit in AS 44.88.095 has been reached. 17  * Sec. 48. The uncodified law of the State of Alaska is amended by adding a new section to 18 read: 19 RETROACTIVITY. Sections 13, 20 - 23, 29, and 43 of this Act, AS 43.55.023(a)(1), 20 as amended by sec. 18 of this Act, and AS 43.55.160(a)(1)(E), as amended by sec. 32 of this 21 Act, are retroactive to January 1, 2013.