Enrolled SB 309: Amending and extending the exploration and development incentive tax credit under the Alaska Net Income Tax Act for operators and working interest owners directly engaged in the exploration for and development of gas from a lease or property in the state; relating to interest on certain underpayments or overpayments of the oil and gas production tax; providing a credit against the tax on the production of oil and gas for drilling certain exploration wells in the Cook Inlet sedimentary basin; relating to the use of the oil and gas tax credit fund to purchase certain tax credit certificates; providing for an effective date by amending the effective date for sec. 2, ch. 61, SLA 2003; and providing for an effective date.
00Enrolled SB 309 01 Amending and extending the exploration and development incentive tax credit under the 02 Alaska Net Income Tax Act for operators and working interest owners directly engaged in the 03 exploration for and development of gas from a lease or property in the state; relating to 04 interest on certain underpayments or overpayments of the oil and gas production tax; 05 providing a credit against the tax on the production of oil and gas for drilling certain 06 exploration wells in the Cook Inlet sedimentary basin; relating to the use of the oil and gas tax 07 credit fund to purchase certain tax credit certificates; providing for an effective date by 08 amending the effective date for sec. 2, ch. 61, SLA 2003; and providing for an effective date. 09 _______________ 10 * Section 1. AS 43.20.043(a) is amended to read: 11 (a) Subject to the terms and conditions of this section, and in addition to any
01 other credit authorized to the taxpayer by this chapter, a taxpayer that is an operator or 02 working interest owner directly engaging in the exploration for and development of 03 gas may apply as a credit against the state tax liability that may be imposed on the 04 taxpayer under this chapter, 05 (1) for a tax year beginning after December 31, 2002, and before 06 January 1, 2010, 07 (A) [(1)] 10 percent of the taxpayer's qualified capital 08 investment; and 09 (B) [(2)] 10 percent of the annual cost incurred by the taxpayer 10 for qualified services in the state during each tax year for which a credit is 11 allowable for a qualified capital investment for any gas reserve of the 12 taxpayer or for each year that qualified costs are incurred for a gas 13 reserve for which the taxpayer previously elected to claim a credit under 14 (A) of this paragraph; and 15 (2) for a tax year beginning after December 31, 2009, 16 (A) 25 percent of the taxpayer's qualified capital 17 investment; and 18 (B) 25 percent of the annual cost incurred by the taxpayer 19 for qualified services in the state during each tax year for which a credit is 20 allowable for a qualified capital investment for any gas reserve of the 21 taxpayer or for each year that qualified costs are incurred for a gas 22 reserve for which the taxpayer previously elected to claim a credit under 23 (A) of this paragraph [UNDER (1) OF THIS SUBSECTION]. 24 * Sec. 2. AS 43.20.043(b) is amended to read: 25 (b) Expenditures qualifying for the taxpayer's qualified investment credit 26 under (a)(1)(A) or (a)(2)(A) [(a)(1)] of this section must be 27 (1) cash expenditures or binding payment agreements entered into after 28 (A) June 30, 2003, and before January 1, 2010, if the claim 29 of the credit is made under (a)(1)(A) of this section; or 30 (B) December 31, 2009, if the claim of the credit is made 31 under (a)(2)(A) of this section; and
01 (2) made for assets first placed in service in the state in or before the 02 tax year in which the credit is claimed through the date 03 (A) the wells [RESERVES] produce gas for sale and delivery; 04 for purposes of this subparagraph [PARAGRAPH], "placed in service in the 05 state" means that the first use of the qualified investment is in this state; if the 06 property on which the claim of the credit is based has been used elsewhere in 07 the tax year of acquisition and is brought to this state during that year or a 08 subsequent year, the property does not qualify for the investment credit; or 09 (B) a gas well is determined not to be capable of production 10 in commercial quantities. 11 * Sec. 3. AS 43.20.043(c) is amended to read: 12 (c) The credit each [PER] tax year allowed by (a) of this section may not 13 exceed 75 [50] percent of the taxpayer's total tax liability under this chapter, but shall 14 be calculated before the application of any other credits allowed under this chapter. An 15 unused portion of the credit for the tax year 16 (1) may be carried forward into one or more of the following tax years, 17 except that the unused credit from one tax year may not be carried forward for more 18 than five following tax years; 19 (2) shall be applied to the taxpayer's tax liability under this chapter 20 during the following tax year before allowance of a credit allowed by (a) of this 21 section for that following tax year. 22 * Sec. 4. AS 43.20.043(e) is amended to read: 23 (e) A taxpayer entitled to a credit under this section 24 (1) may not convey, assign, or transfer the credit to another taxpayer or 25 business entity unless the conveyance, assignment, or transfer of the credit is part of 26 the conveyance, assignment, or transfer of the taxpayer's business; 27 (2) forfeits the credit to which the taxpayer is entitled during the tax 28 year and any carryover of it under (c) of this section, but does not forfeit the portion of 29 the credit that accrued in a previous taxable year that may be carried over under (c) of 30 this section, if the taxpayer 31 (A) disposes of the qualified capital investment;
01 (B) takes the qualified investment out of service; or 02 (C) transfers the qualified investment out of this state; 03 (3) may not include in any rate base for a regulated facility 04 submitted to a regulatory agency charged with determining an appropriate tariff 05 the cost of any qualified capital investment or qualified service that has been 06 offset by receipt of a credit under this chapter. 07 * Sec. 5. AS 43.20.043(g) is amended to read: 08 (g) A taxpayer that [WHO] obtains a credit for a qualified capital 09 investment or cost incurred for qualified services under this section may not also 10 claim a tax credit or royalty modification for the same qualified capital investment 11 or cost incurred for qualified services under AS 38.05.180(i), AS 41.09.010, 12 AS 43.55.023, or 43.55.025 [PROVIDED FOR UNDER ANY OTHER TITLE]. 13 However, a taxpayer may elect not to obtain [, AT THE TAXPAYER'S ELECTION, 14 FORGO] a credit under this section in order [TO CONTINUE] to qualify for a credit 15 provided under AS 38.05.180(i), AS 41.09.010, AS 43.55.023, or 43.55.025 [FOR IN 16 ANOTHER TITLE]. 17 * Sec. 6. AS 43.20.043(i)(1) is amended to read: 18 (1) "qualified capital investment" means a cash expenditure or binding 19 payment agreement, as described in (b)(1) of this section, for real property or tangible 20 personal property used in this state in the exploration and development of any gas 21 reserve regardless of whether there has been commercial production in the area 22 or whether the exploration and development activity results in the production of 23 gas or a well not capable of production in commercial quantities [RESERVES IN 24 A GAS RESERVOIR FOR WHICH THERE HAS NOT BEEN COMMERCIAL 25 PRODUCTION IF THE RESERVES PRODUCE GAS FOR SALE AND 26 DELIVERY]; in this paragraph, "property" includes 27 (A) property used in the operation or maintenance of facilities 28 for exploration or development of gas; 29 (B) property that is placed in use under a capitalized lease or an 30 operating lease; and 31 (C) the following property used for the exploration and
01 development of gas: 02 (i) machinery, appliances, supplies, and equipment; 03 (ii) drilling rigs, wells, gathering lines and transmission 04 lines, pumping stations, compressor stations, power plants designed 05 for field operations, gas processing plants, and gas treatment 06 plants, but not including liquefied natural gas or manufacturing 07 plants [, TOPPING PLANTS, AND PROCESSING UNITS]; 08 (iii) roads, docks and other port facilities, and helicopter 09 pads; 10 (iv) maintenance equipment and facilities, and 11 maintenance camps and other related facilities; and 12 (v) communications facilities owned by a person whose 13 principal business in the state is the exploration for or development of 14 gas and whose operation of the communications facilities directly 15 relates to the conduct of that business; 16 * Sec. 7. AS 43.20.043 is amended by adding a new subsection to read: 17 (j) A taxpayer shall claim the credit authorized in (a) of this section on a 18 timely filed tax return for the year in which the qualified capital investment is made, 19 on a timely filed amended tax return, or on a timely filed tax return for the year 20 immediately following the year in which the qualified capital investment is made. The 21 election to apply the credit authorized in (a) of this section may not be an irrevocable 22 election. 23 * Sec. 8. AS 43.55.020 is amended by adding a new subsection to read: 24 (i) Notwithstanding any contrary provision of AS 43.05.225 or (g) or (h) of 25 this section, if the amount of a tax payment, including an installment payment, due 26 under (a)(1) - (4) of this section is affected by the retroactive application of a 27 regulation adopted under this chapter, the department shall determine whether the 28 retroactive application of the regulation caused an underpayment or an overpayment of 29 the amount due and adjust the interest due on the affected payment as follows: 30 (1) if an underpayment of the amount due occurred, the department 31 shall waive interest that would otherwise accrue for the underpayment before the first
01 day of the second month following the month in which the regulation became 02 effective, if 03 (A) the department determines that the producer's 04 underpayment resulted because the regulation was not in effect when the 05 payment was due; and 06 (B) the producer demonstrates that it made a good faith 07 estimate of its tax obligation in light of the regulations then in effect when the 08 payment was due and paid the estimated tax; 09 (2) if an overpayment of the amount due occurred and the department 10 determines that the producer's overpayment resulted because the regulation was not in 11 effect when the payment was due, the obligation for a refund for the overpayment does 12 not begin to accrue interest earlier than the following, as applicable: 13 (A) except as otherwise provided under (B) of this paragraph, 14 the first day of the second month following the month in which the regulation 15 became effective; 16 (B) 90 days after an amended statement under AS 43.55.030(a) 17 and an application to request a refund of production tax paid is filed, if the 18 overpayment was for a period for which an amended statement under 19 AS 43.55.030(a) was required to be filed before the regulation became 20 effective. 21 * Sec. 9. AS 43.55.025(a) is amended to read: 22 (a) Subject to the terms and conditions of this section, a credit against the 23 production tax levied by AS 43.55.011(e) is allowed for exploration expenditures that 24 qualify under (b) of this section in an amount equal to one of the following: 25 (1) 30 percent of the total exploration expenditures that qualify only 26 under (b) and (c) of this section; 27 (2) 30 percent of the total exploration expenditures that qualify only 28 under (b) and (d) of this section; 29 (3) 40 percent of the total exploration expenditures that qualify under 30 (b), (c), and (d) of this section; [OR] 31 (4) 40 percent of the total exploration expenditures that qualify only
01 under (b) and (e) of this section; or 02 (5) 80, 90, or 100 percent, or a lesser amount described in (m) of 03 this section, of the total exploration expenditures described in (b)(1) and (2) of 04 this section and not excluded by (b)(3) and (4) of this section that qualify only 05 under (m) of this section. 06 * Sec. 10. AS 43.55.025 is amended by adding a new subsection to read: 07 (m) The first three unaffiliated persons that drill an offshore exploration well 08 for the purpose of discovering oil or gas in Cook Inlet that penetrates and evaluates a 09 prospect in the pre-Tertiary zone using a jack-up rig are eligible for the credit under 10 this subsection. The person that drills the first exploration well is entitled to a credit in 11 the amount of 100 percent of its exploration expenditures or $25,000,000, whichever 12 is less; the person that drills the second exploration well using the same jack-up rig is 13 entitled to a credit in the amount of 90 percent of its exploration expenditures or 14 $22,500,000, whichever is less; and the person that drills the third exploration well 15 using the same jack-up rig is entitled to a credit in the amount of 80 percent of its 16 exploration expenditures or $20,000,000, whichever is less. A person or an affiliate of 17 a person drilling an exploration well is not entitled to a credit for more than one 18 exploration well under this subsection. The department shall make a determination of 19 the order in which the wells are drilled based on the date and time that the drill bit first 20 turns to the right against the seafloor for the purpose of drilling the well. Exploration 21 expenditures eligible for the credit in this subsection may include the necessary and 22 reasonable costs to modify an existing jack-up rig for use in Cook Inlet, may not 23 include the cost to construct or manufacture a jack-up rig, and, notwithstanding (b) of 24 this section, must be incurred for work performed after March 31, 2010. If the 25 exploration well for which a credit is received under this subsection results in 26 sustained production of oil or gas from a reservoir discovered by the exploration well, 27 and notwithstanding that the credit may have been transferred under (g) of this section, 28 50 percent of the amount of the credit received shall be repaid to the department by the 29 person that received the credit in equal monthly installments over a 10-year period 30 commencing 60 days after the start of sustained production of oil or gas. Whether the 31 exploration well for which a credit is requested under this subsection penetrated and
01 evaluated a prospect in the pre-Tertiary zone and the exploration well resulted in 02 sustained production of oil or gas from a reservoir discovered by the exploration well 03 shall be determined by the commissioner of natural resources and reported to the 04 commissioner. A taxpayer that obtains a credit under this subsection may not claim a 05 tax credit under AS 43.55.023 or another provision in this section for the same 06 exploration expenditure. In this subsection, 07 (1) "jack-up rig" means a mobile drilling platform with extendible legs 08 for support on the ocean floor; 09 (2) "reservoir" means an oil and gas accumulation, discovered and 10 evaluated by testing, that is separate from any other accumulation of oil and gas; 11 (3) "sustained production" means production of oil or gas from a 12 reservoir into a pipeline or other means of transportation to market, but does not 13 include testing, evaluation, or pilot production. 14 * Sec. 11. The uncodified law of the State of Alaska enacted by sec. 3, ch. 61, SLA 2003, is 15 amended to read: 16 Sec. 3. CLAIM OF GAS EXPLORATION AND DEVELOPMENT TAX 17 CREDIT CONTINUED. A taxpayer who, on the effective date of repeal of 18 AS 43.20.043 by secs. 2 and 5, ch. 61, SLA 2003, as amended by sec. 16 [SEC. 2] of 19 this 2010 Act, claims the balance of any unused portion of the gas exploration and 20 development tax credit as a carry-forward under AS 43.20.043(c), may, 21 notwithstanding the repeal of that subsection, continue to claim the balance of the 22 credit until the claim of the credit is exhausted or until the tax year ending 23 December 31, 2020 [2017], whichever occurs earlier. The provisions of AS 43.20.043 24 as they read on the day immediately preceding the effective date of the repeal of that 25 section apply to the claim of the credit if carried forward under this section. 26 * Sec. 12. AS 43.55.028(e)(2) and 43.55.028(e)(3) are repealed. 27 * Sec. 13. The uncodified law of the State of Alaska is amended by adding a new section to 28 read: 29 TRANSITION: APPLICABILITY OF SEC. 8 OF THIS ACT. Section 8 of this Act 30 applies to taxes, including installment payments of estimated tax, due after December 31, 31 2005.
01 * Sec. 14. The uncodified law of the State of Alaska is amended by adding a new section to 02 read: 03 RETROACTIVITY OF SEC. 8 OF THIS ACT. Section 8 of this Act is retroactive to 04 January 1, 2006. 05 * Sec. 15. The uncodified law of the State of Alaska is amended by adding a new section to 06 read: 07 RETROACTIVITY OF REGULATIONS. Notwithstanding any contrary provision of 08 AS 44.62.240, if the Department of Revenue expressly designates in the regulation that the 09 regulation applies retroactively to a specific date, a regulation adopted by the Department of 10 Revenue to implement, interpret, make specific, or otherwise carry out sec. 8 of this Act 11 applies retroactively to that date. 12 * Sec. 16. Section 5, ch. 61, SLA 2003, is amended to read: 13 Sec. 5. Section 2, ch. 61, SLA 2003, [OF THIS ACT] takes effect January 1, 14 2016 [2013]. 15 * Sec. 17. Section 12 of this Act takes effect July 1, 2010. 16 * Sec. 18. Except as provided in sec. 17 of this Act, this Act takes effect immediately under 17 AS 01.10.070(c).