SB 201: "An Act relating to the oil and gas corporate income tax; relating to the credits against the oil and gas corporate income tax; making conforming amendments; and providing for an effective date."
00 SENATE BILL NO. 201 01 "An Act relating to the oil and gas corporate income tax; relating to the credits against 02 the oil and gas corporate income tax; making conforming amendments; and providing 03 for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 29.60.599(1) is amended to read: 06 (1) "barrel," when used with reference to oil, means the quantity of 07 oil contained in 42 United States gallons of 231 cubic inches each, measured at a 08 temperature of 60 degrees Fahrenheit and an absolute pressure of 14.65 pounds a 09 square inch [HAS THE MEANING GIVEN IN AS 43.20.072]; 10 * Sec. 2. AS 41.09.010(b) is amended to read: 11 (b) An exploration incentive credit extended under (a) of this section may be 12 applied against 13 (1) a payment or obligation against which a credit authorized by 14 AS 38.05.180(i) may be claimed;
01 (2) taxes payable under AS 43.20 or AS 43.21, as applicable; and 02 (3) oil and gas bonus payments due the state under AS 38.05.180(f). 03 * Sec. 3. AS 43.20.011 is amended by adding a new subsection to read: 04 (g) For purposes of calculating the tax under (e) of this section, the taxable 05 income of a corporation engaged in the production or transportation of crude oil or 06 natural gas shall be determined in accordance with AS 43.21. 07 * Sec. 4. AS 43.20.073(f) is amended to read: 08 (f) This section does not apply to taxpayers subject to AS 43.21 09 [AS 43.20.072 ENGAGED IN 10 (1) THE PRODUCTION OF OIL OR GAS FROM A LEASE OR 11 PROPERTY IN THE STATE; OR 12 (2) THE TRANSPORTATION OF OIL OR GAS BY REGULATED 13 PIPELINE IN THE STATE]. 14 * Sec. 5. AS 43.21 is amended by adding new sections to read: 15 Article 1. Determination of Taxable Income. 16 Sec. 43.21.200. Application. This chapter applies to every corporation doing 17 business in the state that derives income from the production of oil or gas from a lease 18 or property in the state or from the pipeline transportation of oil or gas in the state. The 19 tax calculated under this chapter is measured by the total taxable income of the 20 corporation during the tax period as defined by AS 43.21.210 - 43.21.240 and is 21 calculated at the rates established under AS 43.20.011(e). 22 Sec. 43.21.210. Determination of taxable income from oil and gas 23 production. (a) The taxable income of a corporation from the production of oil and 24 gas from a lease or property in the state is the corporation's net income as calculated 25 by the department in accordance with this section. 26 (b) Gross income of a corporation from oil and gas production is the gross 27 value at the point of production of oil or gas produced from a lease or property in the 28 state. The department shall by regulation determine a uniform method of establishing 29 the gross value at the point of production. For the purpose of determining the gross 30 value at the point of production under this subsection, the department shall use 31 AS 43.55.150 for the determination of transportation costs.
01 (c) Net income from oil and gas production shall be determined by the 02 department by deducting from gross income the following: 03 (1) royalties paid in kind or in value; 04 (2) taxes imposed under AS 43.55 that are actually paid or incurred by 05 the corporation on the production from a lease or property in the state; 06 (3) taxes imposed under AS 29.45.080 - 29.45.090 and AS 43.56 that 07 are actually paid or incurred by the corporation on property used directly in the 08 production of oil or gas from a lease or property in the state, including property used 09 in production, gathering, treatment, or preparation of the oil or gas for pipeline 10 transportation, but only if those property tax payments were due and payable only 11 after the date of commercial production from the lease or property with which the 12 property was associated; 13 (4) the direct costs incurred by or for the corporation in operating the 14 lease or property, including the direct costs of producing, gathering, treating, or 15 preparing the oil or gas for pipeline transportation, but net of any payments received 16 for those activities and not including any indirect cost or overhead expense; 17 (5) depreciation, using the percentage depletion basis under 26 U.S.C. 18 613 (Internal Revenue Code) or another reasonable method as the department may by 19 regulation establish, on property used directly in the production, gathering, treatment, 20 or preparation of the oil or gas for pipeline transportation, including amortization of 21 capitalized interest for investments in that property at a rate not to exceed the average 22 cost to the taxpayer of borrowed capital during the year in which the interest is 23 capitalized; 24 (6) the amortization of lease acquisition payments and taxes paid or 25 incurred under AS 29.45.080, 29.45.090, or AS 43.56, including capitalized interest, 26 for or on producing properties before the commencement of commercial production 27 from the lease or property for which the property is being used; 28 (7) interest expense of the corporation, not capitalized during 29 construction, that was paid or incurred in connection with property in the state; 30 however, unless (f) of this section applies, the interest expense may not exceed that 31 portion of the total interest paid by the consolidated business of which the corporation
01 is a part, determined by multiplying the total interest by a fraction, the numerator of 02 which is the value of the corporation's real and tangible personal property used 03 directly in the production of oil or gas from a lease or property in the state and the 04 denominator of which is the value of all real and tangible personal property of the 05 consolidated business; in this paragraph, "total interest paid by the consolidated 06 business" does not include interest expense arising from intercompany obligations 07 within the consolidated business except to the extent that the interest expense reflects a 08 pass-through of interest on a third-party borrowing by the parent or other member of 09 the consolidated business with the purpose, expressed at the time of the third-party 10 borrowing, of financing Alaska business activity of the taxpayer corporation; 11 (8) expenses incurred by the corporation after December 31, 2012, of 12 unsuccessful exploration of oil or gas in the state, including the acquisition costs of 13 abandoned properties, dry hole costs, and the costs of geologic and geophysical 14 exploration related to those abandoned properties; 15 (9) general overhead or administrative expense incurred by the 16 corporation attributable to deriving income from the production of oil or gas from a 17 lease or property in the state to the extent, except as provided in (f) of this section, that 18 the general overhead or administrative expense does not exceed that portion of the 19 total general overhead or administrative expense incurred by the consolidated business 20 of which the corporation is a part, determined by multiplying the total general 21 overhead or administrative expense by a fraction, the numerator of which is the value 22 of the corporation's real and tangible personal property used directly in the production 23 of oil or gas from a lease or property in the state and the denominator of which is the 24 value of all real and tangible personal property of the consolidated business; 25 (10) the amount of income from the production of oil and gas from a 26 lease or property that is divided among the regional Native corporations under 43 27 U.S.C. 1606(i) (sec. 7(i), Alaska Native Claims Settlement Act, P.L. 92-203). 28 (d) Deductions from gross income under this section may not include 29 expenses previously deducted on a return filed under AS 43.20. 30 (e) If a corporation subject to this chapter shares the production or proceeds of 31 the production from a lease or property through a working interest, royalty interest,
01 overriding royalty interest, production payment, net profit interest, joint venture, or 02 other agreement, the department shall allocate the deductions from gross income 03 between the corporation and the persons with whom the corporation has the agreement 04 in accordance with the terms of the agreement. 05 (f) If a corporation demonstrates to the satisfaction of the department that the 06 corporation paid or incurred actual expenses for interest or for general overhead or 07 administration attributable to deriving income from the production of oil or gas from a 08 lease or property in the state in an amount greater than the amount determined under 09 (c)(7) or (9) of this section, the department may allow the corporation to deduct the 10 greater amount. 11 Sec. 43.21.220. Determination of income from oil and gas pipeline 12 transportation. (a) Except as provided in (c) of this section, taxable income 13 attributable to the transportation of oil in a pipeline engaged in interstate commerce in 14 this state shall be determined by the department and shall be the amount reported or 15 that would be required to be reported to the Federal Energy Regulatory Commission or 16 its successors as net operating income, less those portions of interest and general 17 overhead or administrative expense attributable to the pipeline transportation of oil in 18 the state, except that taxable income shall also include taxes on or measured by 19 income. The department shall establish regulations governing the determination of 20 interest and general overhead or administrative expense attributable to pipeline 21 transportation of oil in the state. 22 (b) Except as provided in (c) of this section, taxable income attributable to the 23 transportation of natural gas in a pipeline engaged in interstate commerce in this state 24 shall be determined by the department and shall be the amount reported or that would 25 be required to be reported to the Federal Energy Regulatory Commission as net 26 operating income, less that portion of interest and general overhead or administrative 27 expense attributable to pipeline transportation in the state, except that the taxable 28 income shall also include taxes on or measured by income. The department shall 29 establish regulations governing the determination of interest and general overhead or 30 administrative expense attributable to pipeline transportation of natural gas in the 31 state.
01 (c) Taxable income attributable to the transportation of oil or natural gas in 02 this state of a corporation not under the jurisdiction of the Federal Energy Regulatory 03 Commission, or of a corporation under the jurisdiction of the Federal Energy 04 Regulatory Commission but not reporting the operation of pipelines in the state 05 separately from the operation of pipelines elsewhere, shall be determined by the 06 department and shall be based on an amount equal to the amount that would have been 07 reported to the Federal Energy Regulatory Commission under (a) of this section in the 08 case of oil pipelines, or under (b) of this section, in the case of natural gas pipelines, 09 had the corporation been, in fact, under the jurisdiction of the Federal Energy 10 Regulatory Commission for the taxable year and required to report on the operation of 11 pipelines in the state separately from the operation of pipelines elsewhere. 12 Sec. 43.21.230. Determination of income from activities other than oil and 13 gas production or pipeline transportation. (a) Taxable income of a corporation 14 subject to this chapter from activities in this state other than the production of oil or 15 gas from a lease or property in the state or the pipeline transportation of oil or gas in 16 the state shall be determined in accordance with the method established in art. IV of 17 AS 43.19.010 and in AS 43.20.071, as modified by (b) - (d) of this section. 18 (b) The total taxable income of a consolidated business is its entire income 19 less the portion of that entire income attributable to worldwide production and pipeline 20 transportation of oil and gas. In this subsection, for a member of a consolidated 21 business who is 22 (1) required to file under the Internal Revenue Code, "entire income" 23 means the taxpayer's taxable income as the term is used in AS 43.20.011 - 43.20.065; 24 (2) not required to file under the Internal Revenue Code, "entire 25 income" means an income determination prepared in accordance with generally 26 accepted accounting principles, except that a taxpayer may elect to report income as 27 the income would be determined under (1) of this subsection. 28 (c) The numerator and denominator of the property factor, of the payroll 29 factor, and of the sales factor shall be calculated without reference to that portion of 30 property, payroll, or sales directly related to the production of oil or gas from a lease 31 of property in the state or the pipeline transportation of oil or gas in the state.
01 (d) The value attributed to vessels transporting Alaska oil or gas of a 02 consolidated business that are not owned or effectively owned by the consolidated 03 business shall be excluded from the property factor. 04 Sec. 43.21.240. Applicability of tax to a consolidated business. The 05 provisions of this chapter apply to a consolidated business whether or not the taxpayer 06 is the parent or controlling corporation. 07 Article 2. Calculation of Tax; Returns. 08 Sec. 43.21.300. Assessment of income and tax. (a) The department shall 09 assess taxable income and the amount of tax payable on that taxable income. The 10 amount of the tax payable shall be determined using the tax rates in AS 43.20.011(e). 11 (b) On or before August 15 of each year, the department shall send to every 12 corporation taxable under this chapter a notice of assessment showing the amount of 13 income taxable under this chapter for the previous year and the amount of tax payable 14 on that taxable income. 15 (c) For purposes of this chapter, the department may combine taxable income 16 of corporations subject to tax under this chapter who are part of the same consolidated 17 business. 18 (d) If the methods of allocation and apportionment provided in this chapter do 19 not fairly represent the extent of a corporation's business activity in the state, the 20 corporation may petition for or the department may require, in respect to all or any 21 part of the corporation's business activity, if reasonable, the employment of any 22 method authorized under art. IV, sec. 18, AS 43.19.010 (Multistate Tax Compact), to 23 carry out an equitable allocation and apportionment of the corporation's income. The 24 commissioner shall include in the annual report required in AS 43.21.410 a report on 25 all relief granted under this subsection, including, for each case, a statement of the 26 changes in tax liability resulting from the granting of relief, the tax years involved, and 27 a description of the method of determining taxable income that was substituted for the 28 methods provided in this chapter. 29 Sec. 43.21.320. Credits. A credit under AS 43.20.043, 43.20.044, or 43.20.046 30 may also be applied against the tax levied under this chapter, unless a credit for the 31 same expenditure has been taken against a tax levied under AS 43.20 or AS 43.55.
01 Sec. 43.21.330. Returns. On or before April 15 of each year, a corporation 02 subject to tax under this chapter shall submit a return in a form prescribed by the 03 department setting out information required by the department to determine taxable 04 income. For purposes of this chapter, the department may require corporations subject 05 to tax under this chapter that are part of the same consolidated business to file a single 06 return. 07 Sec. 43.21.340. Payment of tax. The tax levied under this chapter is payable 08 to the department on or before September 30 of each year or in installments, including 09 prepayments of estimated tax, at the times and under the conditions the department 10 may by regulation require. The tax is payable on the due date set out in this section 11 even though the assessment is under appeal or the validity, enforceability, or 12 application of this chapter or any provision of this chapter is challenged before the 13 department or in the courts. 14 Article 3. Administrative Matters. 15 Sec. 43.21.400. Regulations. The department shall adopt regulations in 16 accordance with AS 44.62 (Administrative Procedure Act) as appropriate to 17 administer and enforce this chapter. 18 Sec. 43.21.410. Public reporting. (a) The commissioner shall compile and 19 transmit to the legislature an annual report of state revenue and the implementation of 20 taxation policies under this chapter. The report must include total aggregate income 21 tax paid by corporations subject to this chapter and aggregate income and deductions 22 by category, classified so as to prevent the identification of particular returns or 23 reports. 24 (b) The legislative auditor shall notify the legislature on or before the first day 25 of each regular session that the annual report reviewing the actions of the department 26 in administering this chapter is available. 27 Sec. 43.21.420. Information disclosure. Notwithstanding AS 43.05.320, the 28 department shall disclose to a legislator, on request, information collected from a 29 taxpayer to the extent that 30 (1) the taxpayer is a publicly traded company; 31 (2) the information has been filed in a quarterly, annual, or other
01 periodic report to the United States Securities Exchange Commission; and 02 (3) the information has been made public by the United States 03 Securities Exchange Commission. 04 Sec. 43.21.499. Definitions. Unless the context requires otherwise, the 05 definitions contained in AS 43.55.900 are applicable to this chapter. In addition, in this 06 chapter, 07 (1) "consolidated business" means a corporation or group of 08 corporations having more than 50 percent common ownership, direct or indirect, or a 09 group of corporations in which there is common control, either direct or indirect, as 10 evidenced by an arrangement, contract, or agreement; 11 (2) "Internal Revenue Code" has the meaning given in AS 43.20.340. 12 * Sec. 6. AS 43.82.210(a) is amended to read: 13 (a) If the commissioner approves an application and proposed project plan 14 under AS 43.82.140, the commissioner may develop proposed terms for inclusion in a 15 contract under AS 43.82.020 for periodic payment in lieu of one or more of the 16 following taxes that otherwise would be imposed by the state or a municipality on the 17 qualified sponsor or member of a qualified sponsor group as a consequence of 18 participating in an approved qualified project: 19 (1) oil and gas production taxes and oil surcharges under AS 43.55; 20 (2) oil and gas exploration, production, and pipeline transportation 21 property taxes under AS 43.56; 22 (3) oil and gas corporate income tax under AS 43.21; [REPEALED] 23 (4) Alaska net income tax under AS 43.20; 24 (5) municipal sales and use tax under AS 29.45.650 - 29.45.710; 25 (6) municipal property tax under AS 29.45.010 - 29.45.250 or 26 29.45.550 - 29.45.600; 27 (7) municipal special assessments under AS 29.46; 28 (8) a comparable tax or levy imposed by the state or a municipality 29 after June 18, 1998; 30 (9) other state or municipal taxes or categories of taxes identified by 31 the commissioner.
01 * Sec. 7. AS 43.20.072 is repealed. 02 * Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to 03 read: 04 APPLICABILITY. AS 43.21, added by sec. 5 of this Act, applies to taxable income 05 earned or received after December 31, 2012. 06 * Sec. 9. The uncodified law of the State of Alaska is amended by adding a new section to 07 read: 08 REGULATIONS. (a) The Department of Revenue may adopt regulations necessary to 09 implement AS 43.21, added by sec. 5 of this Act. The regulations take effect under AS 44.62 10 (Administrative Procedure Act), but not before the effective date of the law implemented by 11 regulation. 12 (b) The Department of Revenue shall provide by regulation for a transition for a 13 corporation subject to tax under AS 43.20 before December 31, 2012, to avoid double 14 taxation of the same income or double deduction of the same expense of the corporation as a 15 result of becoming subject to tax under AS 43.21, added by sec. 5 of this Act. 16 * Sec. 10. Section 9 of this Act takes effect immediately under AS 01.10.070(c). 17 * Sec. 11. Except as provided in sec. 10 of this Act, this Act takes effect January 1, 2013.