HB 407: "An Act authorizing a rebate of the production tax on oil and gas based on the employment of resident workers; imposing a penalty under the production tax on oil and gas on persons that fail to employ a certain percentage of resident workers; relating to the tax rate applicable to oil and gas production; relating to employee records required to be kept by an employer that provides labor the cost of which is a lease expenditure for purposes of the production tax on oil and gas; and providing for an effective date."
00 HOUSE BILL NO. 407 01 "An Act authorizing a rebate of the production tax on oil and gas based on the 02 employment of resident workers; imposing a penalty under the production tax on oil 03 and gas on persons that fail to employ a certain percentage of resident workers; relating 04 to the tax rate applicable to oil and gas production; relating to employee records 05 required to be kept by an employer that provides labor the cost of which is a lease 06 expenditure for purposes of the production tax on oil and gas; and providing for an 07 effective date." 08 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 09 * Section 1. AS 23.05.080 is amended by adding a new subsection to read: 10 (b) In addition to the records that must be kept under (a) of this section, an 11 employer that provides labor, the cost of which is a lease expenditure under 12 AS 43.55.165(a), shall keep the records required under this subsection. For each 13 employee, an employer subject to this subsection shall keep an accurate record of the
01 name, address, and occupation of the person, the daily and weekly hours worked by 02 the person, and whether the person is a resident worker. The employer shall keep an 03 accurate record of the total numbers of hours during a calendar year worked by 04 resident workers, the total number of hours during a calendar year worked by persons 05 that are not resident workers, and the wages paid each pay period to each person. A 06 record required under this subsection shall be kept on file for at least three years and 07 may be provided to the Department of Revenue by request. In this subsection, 08 (1) "hours" means the hours of labor the cost of which is included in an 09 allowable lease expenditure under AS 43.55.165; and 10 (2) "resident worker" has the meaning given in AS 43.55.900. 11 * Sec. 2. AS 23.05.100 is amended to read: 12 Sec. 23.05.100. Inspections and examination of records. The department 13 may 14 (1) enter a place of employment during regular hours of employment 15 and, in cooperation with the employer, or someone designated by the employer, collect 16 (A) facts and statistics relating to the employment of workers; 17 and 18 (B) information required to be kept under AS 23.05.080(b) 19 for the purpose of verifying whether a person subject to tax under 20 AS 43.55.011(e) is eligible for a rebate under AS 43.55.022 or is subject to 21 the penalty in AS 43.55.026; 22 (2) make inspections for the proper enforcement of all state labor laws; 23 (3) for the purpose of examination, have access to and copy from any 24 book, account, record, payroll, paper, or document relating to the employment of 25 workers. 26 * Sec. 3. AS 43.55.011(e) is amended to read: 27 (e) There is levied on the producer of oil or gas a tax for all oil and gas 28 produced each calendar year from each lease or property in the state, less any oil and 29 gas the ownership or right to which is exempt from taxation or constitutes a 30 landowner's royalty interest. Except as otherwise provided under (f), (j), (k), and (o) of 31 this section, the tax is equal to the sum of
01 (1) the annual production tax value of the taxable oil and gas as 02 calculated under AS 43.55.160(a)(1) multiplied by 27 [25] percent; and 03 (2) the sum, over all months of the calendar year, of the tax amounts 04 determined under (g) of this section. 05 * Sec. 4. AS 43.55.011(i) is amended to read: 06 (i) There is levied on the producer of oil or gas a tax for all oil and gas 07 produced each calendar year from each lease or property in the state the ownership or 08 right to which constitutes a landowner's royalty interest, except for oil and gas the 09 ownership or right to which is exempt from taxation. The provisions of this subsection 10 apply to a landowner's royalty interest as follows: 11 (1) the tax levied for oil is equal to five percent of the gross value at 12 the point of production of the oil; 13 (2) the tax levied for gas is equal to 1.667 percent of the gross value at 14 the point of production of the gas; 15 (3) if the department determines that, for purposes of reducing the 16 producer's tax liability under (1) or (2) of this subsection, the producer has received or 17 will receive consideration from the royalty owner offsetting all or a part of the 18 producer's royalty obligation, other than a deduction under AS 43.55.020(d) of the 19 amount of a tax paid, then, notwithstanding (1) and (2) of this subsection, the tax is 20 equal to 27 [25] percent of the gross value at the point of production of the oil and gas. 21 * Sec. 5. AS 43.55.020(a) is amended to read: 22 (a) For a calendar year, a producer subject to tax under AS 43.55.011(e) - (i) 23 shall pay the tax as follows: 24 (1) an installment payment of the estimated tax levied by 25 AS 43.55.011(e), net of any tax credits applied as allowed by law, is due for each 26 month of the calendar year on the last day of the following month; except as otherwise 27 provided under (2) of this subsection, the amount of the installment payment is the 28 sum of the following amounts, less 1/12 of the tax credits that are allowed by law to be 29 applied against the tax levied by AS 43.55.011(e) for the calendar year, but the amount 30 of the installment payment may not be less than zero: 31 (A) for oil and gas produced from leases or properties in the
01 state outside the Cook Inlet sedimentary basin but not subject to 02 AS 43.55.011(o), other than leases or properties subject to AS 43.55.011(f), the 03 greater of 04 (i) zero; or 05 (ii) the sum of 27 [25] percent and the tax rate 06 calculated for the month under AS 43.55.011(g) multiplied by the 07 remainder obtained by subtracting 1/12 of the producer's adjusted lease 08 expenditures for the calendar year of production under AS 43.55.165 09 and 43.55.170 that are deductible for the leases or properties under 10 AS 43.55.160 from the gross value at the point of production of the oil 11 and gas produced from the leases or properties during the month for 12 which the installment payment is calculated; 13 (B) for oil and gas produced from leases or properties subject 14 to AS 43.55.011(f), the greatest of 15 (i) zero; 16 (ii) zero percent, one percent, two percent, three 17 percent, or four percent, as applicable, of the gross value at the point of 18 production of the oil and gas produced from all leases or properties 19 during the month for which the installment payment is calculated; or 20 (iii) the sum of 27 [25] percent and the tax rate 21 calculated for the month under AS 43.55.011(g) multiplied by the 22 remainder obtained by subtracting 1/12 of the producer's adjusted lease 23 expenditures for the calendar year of production under AS 43.55.165 24 and 43.55.170 that are deductible for those leases or properties under 25 AS 43.55.160 from the gross value at the point of production of the oil 26 and gas produced from those leases or properties during the month for 27 which the installment payment is calculated; 28 (C) for oil and gas produced from each lease or property 29 subject to AS 43.55.011(j), (k), or (o), the greater of 30 (i) zero; or 31 (ii) the sum of 27 [25] percent and the tax rate
01 calculated for the month under AS 43.55.011(g) multiplied by the 02 remainder obtained by subtracting 1/12 of the producer's adjusted lease 03 expenditures for the calendar year of production under AS 43.55.165 04 and 43.55.170 that are deductible under AS 43.55.160 for oil or gas, 05 respectively, produced from the lease or property from the gross value 06 at the point of production of the oil or gas, respectively, produced from 07 the lease or property during the month for which the installment 08 payment is calculated; 09 (2) an amount calculated under (1)(C) of this subsection for oil or gas 10 produced from a lease or property subject to AS 43.55.011(j), (k), or (o) may not 11 exceed the product obtained by carrying out the calculation set out in 12 AS 43.55.011(j)(1) or (2) or 43.55.011(o), as applicable, for gas or set out in 13 AS 43.55.011(k)(1) or (2), as applicable, for oil, but substituting in 14 AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the amount of taxable 15 gas produced during the month for the amount of taxable gas produced during the 16 calendar year and substituting in AS 43.55.011(k)(1)(A) or (2)(A), as applicable, the 17 amount of taxable oil produced during the month for the amount of taxable oil 18 produced during the calendar year; 19 (3) an installment payment of the estimated tax levied by 20 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 21 on the last day of the following month; the amount of the installment payment is the 22 sum of 23 (A) the applicable tax rate for oil provided under 24 AS 43.55.011(i), multiplied by the gross value at the point of production of the 25 oil taxable under AS 43.55.011(i) and produced from the lease or property 26 during the month; and 27 (B) the applicable tax rate for gas provided under 28 AS 43.55.011(i), multiplied by the gross value at the point of production of the 29 gas taxable under AS 43.55.011(i) and produced from the lease or property 30 during the month; 31 (4) any amount of tax levied by AS 43.55.011(e) or (i), net of any
01 credits applied as allowed by law, that exceeds the total of the amounts due as 02 installment payments of estimated tax is due on March 31 of the year following the 03 calendar year of production. 04 * Sec. 6. AS 43.55 is amended by adding a new section to read: 05 Sec. 43.55.022. Tax rebate for employing resident workers. (a) Subject to 06 appropriation and the requirements of this section, a taxpayer subject to tax under 07 AS 43.55.011(e)(1) that incurs labor costs that are allowable lease expenditures under 08 AS 43.55.165 is entitled to a rebate if 80 percent or more of the labor is done by 09 resident workers. 10 (b) The amount of the rebate is equal to a percentage of the tax paid under 11 AS 43.55.011(e)(1) based on the percentage of labor done by resident workers the cost 12 of which is included in an allowable lease expenditure under AS 43.55.165. The 13 amount of the rebate is equal to the following percentage of the tax paid under 14 AS 43.55.011(e)(1): 15 (1) two percent if the percentage of labor done by resident workers is 16 80 percent; 17 (2) the difference by which the percentage of labor done by resident 18 workers exceeds 80 percent, except the percentage of the tax paid under 19 AS 43.55.011(e) determined under this paragraph may not be less than two percent. 20 (c) The percentage of labor done by resident workers is 21 (1) determined on a calendar year basis using the number of hours of 22 labor the cost of which is a lease expenditure, and includes all hours of labor, 23 regardless of whether a worker is paid on an hourly or some other basis; and 24 (2) a fraction the numerator of which is the number of hours of labor 25 done by resident workers the cost of which is a lease expenditure, and the denominator 26 of which is the number of hours of labor by all workers the cost of which is a lease 27 expenditure, expressed as a percentage. 28 (d) A person subject to tax under AS 43.55.011(e) shall report employment 29 information at the time a statement must be filed under AS 43.55.030(a) for each 30 calendar year. The report must include the following for the calendar year for which a 31 statement is required under AS 43.55.030(a):
01 (1) the number of hours of labor, the cost of which is a lease 02 expenditure; 03 (2) the number of hours of labor done by resident workers that are 04 included in (1) of this subsection; 05 (3) the total cost of labor that is a lease expenditure; 06 (4) the name of each employee providing labor the cost of which is the 07 basis for a rebate claimed under this section; 08 (5) other information required by the department in a regulation 09 adopted to administer this section, including the names of the resident workers whose 10 hours of labor are included in (1) of this subsection. 11 (e) At the same time the report is filed with the department under (d) of this 12 section, the person shall file a copy of the report with the commissioner of labor and 13 workforce development. The report must include the information in (d)(1), (2), and (4) 14 of this section and other information required by the commissioner of labor and 15 workforce development by regulation. Any amendment to the report in (d) of this 16 section that changes the information in (d)(1) and (2) of this section must also be filed 17 with the commissioner of labor and workforce development. At the request of the 18 commissioner, the Department of Labor and Workforce Development shall audit the 19 information reported in (d)(1), (2), and (4) of this section and notify the commissioner 20 of the results of the audit. 21 (f) A person claiming a rebate under this section has the burden of proving 22 eligibility for the rebate, including a claim that an individual is a resident worker. 23 (g) The department shall report to the legislature the amount of rebates paid 24 under this section and statistical information relating to the percentage of labor done 25 by resident workers based on hours worked. 26 * Sec. 7. AS 43.55 is amended by adding a new section to read: 27 Sec. 43.55.026. Penalty for underemployment of resident workers. (a) A 28 taxpayer subject to tax under AS 43.55.011(e)(1) that incurs labor costs that are 29 allowable lease expenditures under AS 43.55.165 is subject to the penalty described in 30 this section if less than 80 percent of the labor is done by resident workers. 31 (b) The amount of the penalty is equal to the amount of tax paid under
01 AS 43.55.011(e)(1) multiplied by the percentage determined by subtracting the 02 percentage of labor done by resident workers, the cost of which is included in an 03 allowable lease expenditure under AS 43.55.165, from 80 percent. 04 (c) For the purposes of this section, the percentage of labor done by resident 05 workers is determined under AS 43.55.022(c). 06 * Sec. 8. AS 43.55.040 is amended to read: 07 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in 08 AS 43.05.405 - 43.05.499, the department may 09 (1) require a person engaged in production and the agent or employee 10 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil 11 or gas to furnish, whether by the filing of regular statements or reports or otherwise, 12 additional information that is considered by the department as necessary to compute 13 the amount of the tax, the rebate under AS 43.55.022, or the penalty under 14 AS 43.55.026; notwithstanding any contrary provision of law, the disclosure of 15 additional information under this paragraph to the producer obligated to pay the tax 16 does not violate AS 40.25.100(a) or AS 43.05.230(a); before disclosing information 17 under this paragraph that is otherwise required to be held confidential under 18 AS 40.25.100(a) or AS 43.05.230(a), the department shall 19 (A) provide the person that furnished the information a 20 reasonable opportunity to be heard regarding the proposed disclosure and the 21 conditions to be imposed under (B) of this paragraph; and 22 (B) impose appropriate conditions limiting 23 (i) access to the information to those legal counsel, 24 consultants, employees, officers, and agents of the producer who have a 25 need to know that information for the purpose of determining or 26 contesting the producer's tax obligation; and 27 (ii) the use of the information to use for that purpose; 28 (2) examine the books, records, and files of the person; 29 (3) conduct hearings and compel the attendance of witnesses and the 30 production of books, records, and papers of any person; 31 (4) make an investigation or hold an inquiry that is considered
01 necessary to a disclosure of the facts as to 02 (A) the amount of production from any oil or gas location, or of 03 a company or other producer of oil or gas; and 04 (B) the rendition of the oil and gas for taxing purposes; 05 (5) require a producer, an explorer, or an operator of a lease or 06 property to file reports and copies of records that the department considers necessary 07 to forecast state revenue under this chapter; in the case of reports and copies of records 08 relating to proposed, expected, or approved unit expenditures for a unit for which one 09 or more working interest owners other than the operator have authority to approve unit 10 expenditures, the required reports and copies of records are limited to those reports or 11 copies of records that constitute or disclose communications between the operator and 12 the working interest owners relating to unit budget matters; 13 (6) require a producer that has an average total production in the state 14 of more than 100,000 barrels a day for a calendar year to report the gross value at the 15 point of production of the producer's taxable oil and gas in the state for a calendar year 16 and the total amount of lease expenditures in the state for that calendar year; and 17 (7) assess against a person required under this section to file a report, 18 statement, or other document a penalty, as determined by the department under 19 standards adopted in regulation by the department, of not more than $1,000 for each 20 day the person fails to file the report, statement, or other document after notice by the 21 department; the penalty is in addition to any penalties under AS 43.05.220 and 22 43.05.290 and is assessed, collected, and paid in the same manner as a tax deficiency 23 under this title; the penalty shall bear interest at the rate specified under 24 AS 43.05.225(1). 25 * Sec. 9. AS 43.55.900 is amended by adding new paragraphs to read: 26 (25) "lease expenditure" means an expenditure allowed as a lease 27 expenditure under AS 43.55.165; 28 (26) "resident worker" means an individual who 29 (A) is physically present in the state with the intent to remain in 30 the state indefinitely and has a home in the state; 31 (B) demonstrates that intent by maintaining a residence in the
01 state; 02 (C) possesses a resident fishing, trapping, or hunting license, or 03 receives a permanent fund dividend; and 04 (D) may be required to state under oath that the individual is 05 not claiming residency outside of the state or obtaining benefits under a claim 06 of residency outside of the state. 07 * Sec. 10. AS 44.31.020 is amended to read: 08 Sec. 44.31.020. Duties of department. The Department of Labor and 09 Workforce Development shall 10 (1) enforce the laws and adopt regulations under them concerning 11 employer-employee relationships, including the safety, hours of work, wages, and 12 conditions of workers, including children; 13 (2) accumulate, analyze, and report labor statistics; 14 (3) operate systems of workers' compensation and unemployment 15 insurance; 16 (4) gather data reflecting the cost of living in the various election 17 districts of the state upon request of the director of personnel under AS 39.27.030; in 18 this paragraph, "election district" has the meaning given in AS 39.27.020(b); 19 (5) operate the federally funded employment and training programs 20 under 29 U.S.C. 2801 - 2945 (Workforce Investment Act of 1998); 21 (6) administer the state's program of adult basic education and adopt 22 regulations to administer the program; [AND] 23 (7) administer the programs of the Alaska Vocational Technical Center 24 and adopt regulations to administer the programs, including regulations that set rates 25 for student tuition and room and board and fees for the programs and services 26 provided by the department regarding the Alaska Vocational Technical Center; and 27 (8) at the request of the commissioner of revenue, audit 28 information described in AS 43.55.022(d)(1), (2), and (4) that is submitted to the 29 Department of Revenue by a person subject to tax under AS 43.55.011(e). 30 * Sec. 11. This Act takes effect immediately under AS 01.10.070(c).