CSHB 247(RES): "An Act relating to interest applicable to delinquent tax; relating to the oil and gas production tax, tax payments, and credits; relating to refunds for the gas storage facility tax credit, the liquefied natural gas storage facility tax credit, and the qualified in-state oil refinery infrastructure expenditures tax credit; relating to oil and gas lease expenditures and production tax credits for municipal entities; relating to a business license for an oil or gas business; establishing a legislative working group to study the tax structure for oil and gas produced south of 68 degrees North latitude; and providing for an effective date."
00 CS FOR HOUSE BILL NO. 247(RES) 01 "An Act relating to interest applicable to delinquent tax; relating to the oil and gas 02 production tax, tax payments, and credits; relating to refunds for the gas storage facility 03 tax credit, the liquefied natural gas storage facility tax credit, and the qualified in-state 04 oil refinery infrastructure expenditures tax credit; relating to oil and gas lease 05 expenditures and production tax credits for municipal entities; relating to a business 06 license for an oil or gas business; establishing a legislative working group to study the 07 tax structure for oil and gas produced south of 68 degrees North latitude; and providing 08 for an effective date." 09 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 10 * Section 1. AS 38.05.036(a) is amended to read: 11 (a) The department may conduct audits regarding royalty and net profits under 12 oil and gas contracts, agreements, or leases under this chapter and regarding costs
01 related to exploration licenses entered into under AS 38.05.131 - 38.05.134 and 02 exploration incentive credits under this chapter [OR UNDER AS 41.09]. For purposes 03 of an audit under this section, 04 (1) the department may examine the books, papers, records, or 05 memoranda of a person regarding matters related to the audit; and 06 (2) the records and premises where a business is conducted shall be 07 open at all reasonable times for inspection by the department. 08 * Sec. 2. AS 38.05.036(b) is amended to read: 09 (b) The Department of Revenue may obtain from the department information 10 relating to royalty and net profits payments and to exploration incentive credits under 11 this chapter [OR UNDER AS 41.09], whether or not that information is confidential. 12 The Department of Revenue may use the information in carrying out its functions and 13 responsibilities under AS 43, and shall hold that information confidential to the extent 14 required by an agreement with the department or by AS 38.05.035(a)(8) [, 15 AS 41.09.010(d),] or AS 43.05.230. 16 * Sec. 3. AS 38.05.036(c) is amended to read: 17 (c) The department may obtain from the Department of Revenue all 18 information obtained under AS 43 relating to royalty and net profits and to exploration 19 incentive credits. The department may use the information for purposes of carrying out 20 its responsibilities and functions under this chapter [AND AS 41.09]. Information 21 made available to the department that was obtained under AS 43 is confidential and 22 subject to the provisions of AS 43.05.230. 23 * Sec. 4. AS 38.05.036(f) is amended to read: 24 (f) Except as otherwise provided in this section or in connection with official 25 investigations or proceedings of the department, it is unlawful for a current or former 26 officer, employee, or agent of the state to divulge information obtained by the 27 department as a result of an audit under this section that is required by an agreement 28 with the department or by AS 38.05.035(a)(8) [OR AS 41.09.010(d)] to be kept 29 confidential. 30 * Sec. 5. AS 38.05.036(g) is amended to read: 31 (g) Nothing in this section prohibits the publication of statistics in a manner
01 that maintains the confidentiality of information to the extent required by an 02 agreement with the department or by AS 38.05.035(a)(8) [OR AS 41.09.010(d)]. 03 * Sec. 6. AS 43.05.225 is amended to read: 04 Sec. 43.05.225. Interest. Unless otherwise provided, 05 (1) a delinquent tax under this title, 06 (A) before January 1, 2014, bears interest in each calendar 07 quarter at the rate of five percentage points above the annual rate charged 08 member banks for advances by the 12th Federal Reserve District as of the first 09 day of that calendar quarter, or at the annual rate of 11 percent, whichever is 10 greater, compounded quarterly as of the last day of that quarter; [OR] 11 (B) on and after January 1, 2014, and before January 1, 2017, 12 bears interest in each calendar quarter at the rate of three percentage points 13 above the annual rate charged member banks for advances by the 12th Federal 14 Reserve District as of the first day of that calendar quarter; 15 (C) on and after January 1, 2017, bears interest in each 16 calendar quarter at the rate of three percentage points above the annual 17 rate charged member banks for advances by the 12th Federal Reserve 18 District as of the first day of that calendar quarter, compounded quarterly 19 as of the last day of that quarter; 20 (2) the interest rate is 12 percent a year for 21 (A) delinquent fees payable under AS 05.15.095(c); and 22 (B) unclaimed property that is not timely paid or delivered, as 23 allowed by AS 34.45.470(a). 24 * Sec. 7. AS 43.20.046(e) is amended to read: 25 (e) Subject to the requirements in AS 43.55.028(j), the [THE] department 26 may use available money in the oil and gas tax credit fund established in AS 43.55.028 27 to make the refund applied for under (d) of this section in whole or in part if the 28 department finds that, [(1) THE CLAIMANT DOES NOT HAVE AN 29 OUTSTANDING LIABILITY TO THE STATE FOR UNPAID DELINQUENT 30 TAXES UNDER THIS TITLE; AND (2)] after application of all available tax credits, 31 the claimant's total tax liability under this chapter for the calendar year in which the
01 claim is made is zero. [IN THIS SUBSECTION, "UNPAID DELINQUENT TAX" 02 MEANS AN AMOUNT OF TAX FOR WHICH THE DEPARTMENT HAS ISSUED 03 AN ASSESSMENT THAT HAS NOT BEEN PAID AND, IF CONTESTED, HAS 04 NOT BEEN FINALLY RESOLVED IN THE TAXPAYER'S FAVOR.] 05 * Sec. 8. AS 43.20.047(e) is amended to read: 06 (e) Subject to the requirements in AS 43.55.028(j), the [THE] department 07 may use money available in the oil and gas tax credit fund established in AS 43.55.028 08 to make a refund or payment under (d) of this section in whole or in part if the 09 department finds that, [(1) THE CLAIMANT DOES NOT HAVE AN 10 OUTSTANDING LIABILITY TO THE STATE FOR UNPAID DELINQUENT 11 TAXES UNDER THIS TITLE; AND (2)] after application of all available tax credits, 12 the claimant's total tax liability under this chapter for the calendar year in which the 13 claim is made is zero. [IN THIS SUBSECTION, "UNPAID DELINQUENT TAX" 14 MEANS AN AMOUNT OF TAX FOR WHICH THE DEPARTMENT HAS ISSUED 15 AN ASSESSMENT THAT HAS NOT BEEN PAID AND, IF CONTESTED, HAS 16 NOT BEEN FINALLY RESOLVED IN THE TAXPAYER'S FAVOR.] 17 * Sec. 9. AS 43.20.053(e) is amended to read: 18 (e) Subject to the requirements in AS 43.55.028(j), the [THE] department 19 may use money available in the oil and gas tax credit fund established in AS 43.55.028 20 to make a refund or payment under (d) of this section in whole or in part if the 21 department finds that, 22 [(1) THE CLAIMANT DOES NOT HAVE AN OUTSTANDING 23 LIABILITY TO THE STATE FOR UNPAID DELINQUENT TAXES UNDER THIS 24 TITLE; AND 25 (2)] after application of all available tax credits, the claimant's total tax 26 liability under this chapter for the calendar year in which the claim is made is zero. 27 * Sec. 10. AS 43.55.011(m) is amended to read: 28 (m) Notwithstanding any contrary provision of [AS 38.05.180(i), 29 AS 41.09.010,] AS 43.55.024 [,] or 43.55.025, the department shall provide by 30 regulation a method to ensure that, for a calendar year for which a producer's tax 31 liability is limited by (j), (k), or (o) of this section, tax credits based on a lease
01 expenditure incurred before January 1, 2011, that are otherwise available under 02 [AS 38.05.180(i), AS 41.09.010,] AS 43.55.024 [,] or 43.55.025 and allocated to gas 03 subject to the limitations in (j), (k), and (o) of this section are accounted for as though 04 the credits had been applied first against a tax liability calculated without regard to the 05 limitations under (j), (k), and (o) of this section so as to reduce the tax liability to the 06 maximum amount provided for under (j) or (o) of this section for the production of gas 07 or (k) of this section for the production of oil. The regulation must provide for a 08 reasonable method to allocate tax credits to gas subject to (j) and (o) of this section. 09 Only the amount of a tax credit remaining after the accounting provided for under this 10 subsection may be used for a later calendar year, transferred to another person, or 11 applied against a tax levied on the production of oil or gas not subject to (j), (k), or (o) 12 of this section to the extent otherwise allowed. 13 * Sec. 11. AS 43.55.023(a) is amended to read: 14 (a) A producer or explorer may take a tax credit for a qualified capital 15 expenditure as follows: 16 (1) notwithstanding that a qualified capital expenditure may be a 17 deductible lease expenditure for purposes of calculating the production tax value of oil 18 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 19 [AS 38.05.180(i), AS 41.09.010,] AS 43.20.043 [,] or AS 43.55.025, a producer or 20 explorer that incurs a qualified capital expenditure may also elect to apply a tax credit 21 against a tax levied by AS 43.55.011(e) in the amount of 20 percent of that 22 expenditure; 23 (2) a producer or explorer may take a credit for a qualified capital 24 expenditure incurred in connection with geological or geophysical exploration or in 25 connection with an exploration well only if the producer or explorer 26 (A) agrees, in writing, to the applicable provisions of 27 AS 43.55.025(f)(2); and 28 (B) submits to the Department of Natural Resources all data 29 that would be required to be submitted under AS 43.55.025(f)(2); 30 (3) a credit for a qualified capital expenditure incurred to explore for, 31 develop, or produce oil or gas deposits located north of 68 degrees North latitude may
01 be taken only if the expenditure is incurred before January 1, 2014. 02 * Sec. 12. AS 43.55.023(b) is amended to read: 03 (b) Before January 1, 2014, a producer or explorer may elect to take a tax 04 credit in the amount of 25 percent of a carried-forward annual loss. For lease 05 expenditures incurred on and after January 1, 2014, and before January 1, 2016, to 06 explore for, develop, or produce oil or gas deposits located north of 68 degrees North 07 latitude, a producer or explorer may elect to take a tax credit in the amount of 45 08 percent of a carried-forward annual loss. For lease expenditures incurred on and after 09 January 1, 2016, to explore for, develop, or produce oil or gas deposits located north 10 of 68 degrees North latitude, a producer or explorer may elect to take a tax credit in 11 the amount of 35 percent of a carried-forward annual loss. For lease expenditures 12 incurred on or after January 1, 2014, and before January 1, 2017, to explore for, 13 develop, or produce oil or gas deposits located south of 68 degrees North latitude, a 14 producer or explorer may elect to take a tax credit in the amount of 25 percent of a 15 carried-forward annual loss. For lease expenditures incurred on or after January 1, 16 2017, to explore for, develop, or produce oil or gas deposits located south of 68 17 degrees North latitude, a producer or explorer may elect to take a tax credit in 18 the amount of 10 percent of a carried-forward annual loss. A credit under this 19 subsection may be applied against a tax levied by AS 43.55.011(e). For purposes of 20 this subsection, 21 (1) a carried-forward annual loss is the amount of a producer's or 22 explorer's adjusted lease expenditures under AS 43.55.165 and 43.55.170 for a 23 previous calendar year that was not deductible in calculating production tax values for 24 that calendar year under AS 43.55.160; 25 (2) for lease expenditures incurred on or after January 1, 2017, 26 any reduction under AS 43.55.160(f) or (g) is added back to the calculation of 27 production tax values for that calendar year under AS 43.55.160 for the 28 determination of a carried-forward annual loss. 29 * Sec. 13. AS 43.55.023(d) is amended to read: 30 (d) A person that is entitled to take a tax credit under this section that wishes 31 to transfer the unused credit to another person or obtain a cash payment under
01 AS 43.55.028 may apply to the department for a transferable tax credit certificate. An 02 application under this subsection must be in a form prescribed by the department and 03 must include supporting information and documentation that the department 04 reasonably requires. The department shall grant or deny an application, or grant an 05 application as to a lesser amount than that claimed and deny it as to the excess, not 06 later than 120 days after the latest of (1) March 31 of the year following the calendar 07 year in which the [QUALIFIED CAPITAL EXPENDITURE OR] carried-forward 08 annual loss for which the credit is claimed was incurred; (2) the date the statement 09 required under AS 43.55.030(a) or (e) was filed for the calendar year in which the 10 [QUALIFIED CAPITAL EXPENDITURE OR] carried-forward annual loss for which 11 the credit is claimed was incurred; or (3) the date the application was received by the 12 department. If, based on the information then available to it, the department is 13 reasonably satisfied that the applicant is entitled to a credit, the department shall issue 14 the applicant a transferable tax credit certificate for the amount of the credit. A 15 certificate issued under this subsection does not expire. 16 * Sec. 14. AS 43.55.023(e) is amended to read: 17 (e) A person to which a transferable tax credit certificate is issued under (d) of 18 this section may transfer the certificate to another person, and a transferee may further 19 transfer the certificate. Subject to the limitations set out in former (a) of this section 20 and (b) - (d) [(a) - (d)] of this section, and notwithstanding any action the department 21 may take with respect to the applicant under (g) of this section, the owner of a 22 certificate may apply the credit or a portion of the credit shown on the certificate only 23 against a tax levied by AS 43.55.011(e). However, a credit shown on a transferable tax 24 credit certificate may not be applied to reduce a transferee's total tax liability under 25 AS 43.55.011(e) for oil and gas produced during a calendar year to less than 80 26 percent of the tax that would otherwise be due without applying that credit. Any 27 portion of a credit not used under this subsection may be applied in a later period. 28 * Sec. 15. AS 43.55.023(l) is amended to read: 29 (l) A producer or explorer may apply for a tax credit for a well lease 30 expenditure incurred in the state south of 68 degrees North latitude after June 30, 31 2010, as follows:
01 (1) notwithstanding that a well lease expenditure incurred in the state 02 south of 68 degrees North latitude may be a deductible lease expenditure for purposes 03 of calculating the production tax value of oil and gas under AS 43.55.160(a), unless a 04 credit for that expenditure is taken under (a) of this section, [AS 38.05.180(i), 05 AS 41.09.010,] AS 43.20.043, or AS 43.55.025, a producer or explorer that incurs a 06 well lease expenditure in the state south of 68 degrees North latitude may elect to 07 apply a tax credit against a tax levied by AS 43.55.011(e) in the amount of 08 (A) 40 percent of that expenditure incurred before January 1, 09 2017; 10 (B) 30 percent of that expenditure incurred on or after 11 January 1, 2017, and before January 1, 2018; 12 (C) 20 percent of that expenditure incurred on or after 13 January 1, 2018 [; A TAX CREDIT UNDER THIS PARAGRAPH MAY BE 14 APPLIED FOR A SINGLE CALENDAR YEAR]; 15 (2) a producer or explorer may take a credit for a well lease 16 expenditure incurred in the state south of 68 degrees North latitude in connection with 17 geological or geophysical exploration or in connection with an exploration well only if 18 the producer or explorer 19 (A) agrees, in writing, to the applicable provisions of 20 AS 43.55.025(f)(2); and 21 (B) submits to the Department of Natural Resources all data 22 that would be required to be submitted under AS 43.55.025(f)(2). 23 * Sec. 16. AS 43.55.028(e) is amended to read: 24 (e) The department, on the written application of a person to whom a 25 transferable tax credit certificate has been issued under AS 43.55.023(d) or former 26 AS 43.55.023(m) or to whom a production tax credit certificate has been issued under 27 AS 43.55.025(f), may use available money in the oil and gas tax credit fund to 28 purchase, in whole or in part, the certificate. The department may not purchase a 29 total of more than $200,000,000 in tax credit certificates from a person in a 30 calendar year. Before purchasing a certificate or part of a certificate, [IF] the 31 department shall find [FINDS] that
01 (1) the calendar year of the purchase is not earlier than the first 02 calendar year for which the credit shown on the certificate would otherwise be allowed 03 to be applied against a tax; 04 (2) the application is not the result of the division of a single entity 05 into multiple entities that would reasonably be expected to apply as a single entity 06 if the $200,000,000 limitation in this subsection did not exist [APPLICANT DOES 07 NOT HAVE AN OUTSTANDING LIABILITY TO THE STATE FOR UNPAID 08 DELINQUENT TAXES UNDER THIS TITLE]; 09 (3) the applicant's total tax liability under AS 43.55.011(e), after 10 application of all available tax credits, for the calendar year in which the application is 11 made is zero; 12 (4) the applicant's average daily production of oil and gas taxable 13 under AS 43.55.011(e) during the calendar year preceding the calendar year in which 14 the application is made was not more than 50,000 BTU equivalent barrels; and 15 (5) the purchase is consistent with this section and regulations adopted 16 under this section. 17 * Sec. 17. AS 43.55.028 is amended by adding a new subsection to read: 18 (j) If an applicant or claimant has an outstanding liability to the state directly 19 related to the applicant's or claimant's oil or gas exploration, development, or 20 production and the department has not previously reduced the amount paid to that 21 applicant or claimant for a certificate or refund because of that outstanding liability, 22 the department may purchase only that portion of a certificate or pay only that portion 23 of a refund that exceeds the outstanding liability. With the applicant's or claimant's 24 consent, the department may apply the amount by which the department reduced its 25 purchase of a certificate or payment for a refund because of an outstanding liability to 26 satisfy the outstanding liability. Satisfaction of an outstanding liability under this 27 subsection does not affect the applicant's ability to contest that liability. The 28 department may enter into contracts or agreements with another department to which 29 the outstanding liability is owed. In this subsection, "outstanding liability" means an 30 amount of tax, interest, penalty, fee, rental, royalty, or other charge for which the state 31 has issued a demand for payment that has not been paid when due and, if contested,
01 has not been finally resolved against the state. 02 * Sec. 18. AS 43.55.029(a) is amended to read: 03 (a) An explorer or producer that has applied for a production tax credit under 04 former AS 43.55.023(a) [, (b),] or (l) or under AS 43.55.023(b) or 43.55.025(a) may 05 make a present assignment of the production tax credit certificate expected to be 06 issued by the department to a third-party assignee. The assignment may be made either 07 at the time the application is filed with the department or not later than 30 days after 08 the date of filing with the department. Once a notice of assignment in compliance with 09 this section is filed with the department, the assignment is irrevocable and cannot be 10 modified by the explorer or producer without the written consent of the assignee 11 named in the assignment. If a production tax credit certificate is issued to the explorer 12 or producer, the notice of assignment remains effective and shall be filed with the 13 department by the explorer or producer together with any application for the 14 department to purchase the certificate under AS 43.55.028(e). 15 * Sec. 19. AS 43.55.030(a) is amended to read: 16 (a) A producer that produces oil or gas from a lease or property in the state 17 during a calendar year, whether or not any tax payment is due under AS 43.55.020(a) 18 for that oil or gas, shall file with the department on March 31 of the following year a 19 statement, under oath, in a form prescribed by the department, giving, with other 20 information required, the following: 21 (1) a description of each lease or property from which oil or gas was 22 produced, by name, legal description, lease number, or accounting codes assigned by 23 the department; 24 (2) the names of the producer and, if different, the person paying the 25 tax, if any; 26 (3) the gross amount of oil and the gross amount of gas produced from 27 each lease or property, separately identifying the gross amount of gas produced from 28 each oil and gas lease to which an effective election under AS 43.55.014(a) applies, 29 the amount of gas delivered to the state under AS 43.55.014(b), and the percentage of 30 the gross amount of oil and gas owned by the producer; 31 (4) the gross value at the point of production of the oil and of the gas
01 produced from each lease or property owned by the producer and the costs of 02 transportation of the oil and gas; 03 (5) the name of the first purchaser and the price received for the oil and 04 for the gas, unless relieved from this requirement in whole or in part by the 05 department; 06 (6) the producer's qualified capital expenditures, [AS DEFINED IN 07 AS 43.55.023,] other lease expenditures under AS 43.55.165, and adjustments or other 08 payments or credits under AS 43.55.170; 09 (7) the production tax values of the oil and gas under AS 43.55.160(a) 10 or of the oil under AS 43.55.160(h), as applicable; 11 (8) any claims for tax credits to be applied; and 12 (9) calculations showing the amounts, if any, that were or are due 13 under AS 43.55.020(a) and interest on any underpayment or overpayment. 14 * Sec. 20. AS 43.55.030(e) is amended to read: 15 (e) An explorer or producer that incurs a lease expenditure under 16 AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar 17 year but does not produce oil or gas from a lease or property in the state during the 18 calendar year shall file with the department, on March 31 of the following year, a 19 statement, under oath, in a form prescribed by the department, giving, with other 20 information required, the following: 21 (1) the explorer's or producer's qualified capital expenditures, [AS 22 DEFINED IN AS 43.55.023,] other lease expenditures under AS 43.55.165, and 23 adjustments or other payments or credits under AS 43.55.170; and 24 (2) if the explorer or producer receives a payment or credit under 25 AS 43.55.170, calculations showing whether the explorer or producer is liable for a 26 tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount. 27 * Sec. 21. AS 43.55.165(a) is amended to read: 28 (a) For [EXCEPT AS PROVIDED IN (j) AND (k) OF THIS SECTION, 29 FOR] purposes of this chapter, a producer's lease expenditures for a calendar year are 30 (1) costs, other than items listed in (e) of this section, that are 31 (A) incurred by the producer during the calendar year after
01 March 31, 2006, to explore for, develop, or produce oil or gas deposits located 02 within the producer's leases or properties in the state or, in the case of land in 03 which the producer does not own an operating right, operating interest, or 04 working interest, to explore for oil or gas deposits within other land in the 05 state; and 06 (B) allowed by the department by regulation, based on the 07 department's determination that the costs satisfy the following three 08 requirements: 09 (i) the costs must be incurred upstream of the point of 10 production of oil and gas; 11 (ii) the costs must be ordinary and necessary costs of 12 exploring for, developing, or producing, as applicable, oil or gas 13 deposits; and 14 (iii) the costs must be direct costs of exploring for, 15 developing, or producing, as applicable, oil or gas deposits; and 16 (2) a reasonable allowance for that calendar year, as determined under 17 regulations adopted by the department, for overhead expenses that are directly related 18 to exploring for, developing, or producing, as applicable, the oil or gas deposits. 19 * Sec. 22. AS 43.55.165(e) is amended to read: 20 (e) For purposes of this section, lease expenditures do not include 21 (1) depreciation, depletion, or amortization; 22 (2) oil or gas royalty payments, production payments, lease profit 23 shares, or other payments or distributions of a share of oil or gas production, profit, or 24 revenue, except that a producer's lease expenditures applicable to oil and gas produced 25 from a lease issued under AS 38.05.180(f)(3)(B), (D), or (E) include the share of net 26 profit paid to the state under that lease; 27 (3) taxes based on or measured by net income; 28 (4) interest or other financing charges or costs of raising equity or debt 29 capital; 30 (5) acquisition costs for a lease or property or exploration license; 31 (6) costs arising from fraud, wilful misconduct, gross negligence,
01 violation of law, or failure to comply with an obligation under a lease, permit, or 02 license issued by the state or federal government; 03 (7) fines or penalties imposed by law; 04 (8) costs of arbitration, litigation, or other dispute resolution activities 05 that involve the state or concern the rights or obligations among owners of interests in, 06 or rights to production from, one or more leases or properties or a unit; 07 (9) costs incurred in organizing a partnership, joint venture, or other 08 business entity or arrangement; 09 (10) amounts paid to indemnify the state; the exclusion provided by 10 this paragraph does not apply to the costs of obtaining insurance or a surety bond from 11 a third-party insurer or surety; 12 (11) surcharges levied under AS 43.55.201 or 43.55.300; 13 (12) an expenditure otherwise deductible under (b) of this section that 14 is a result of an internal transfer, a transaction with an affiliate, or a transaction 15 between related parties, or is otherwise not an arm's length transaction, unless the 16 producer establishes to the satisfaction of the department that the amount of the 17 expenditure does not exceed the fair market value of the expenditure; 18 (13) an expenditure incurred to purchase an interest in any corporation, 19 partnership, limited liability company, business trust, or any other business entity, 20 whether or not the transaction is treated as an asset sale for federal income tax 21 purposes; 22 (14) a tax levied under AS 43.55.011 or 43.55.014; 23 (15) costs incurred for dismantlement, removal, surrender, or 24 abandonment of a facility, pipeline, well pad, platform, or other structure, or for the 25 restoration of a lease, field, unit, area, tract of land, body of water, or right-of-way in 26 conjunction with dismantlement, removal, surrender, or abandonment; a cost is not 27 excluded under this paragraph if the dismantlement, removal, surrender, or 28 abandonment for which the cost is incurred is undertaken for the purpose of replacing, 29 renovating, or improving the facility, pipeline, well pad, platform, or other structure; 30 (16) costs incurred for containment, control, cleanup, or removal in 31 connection with any unpermitted release of oil or a hazardous substance and any
01 liability for damages imposed on the producer or explorer for that unpermitted release; 02 this paragraph does not apply to the cost of developing and maintaining an oil 03 discharge prevention and contingency plan under AS 46.04.030; 04 (17) costs incurred to satisfy a work commitment under an exploration 05 license under AS 38.05.132; 06 (18) that portion of expenditures, that would otherwise be qualified 07 capital expenditures, [AS DEFINED IN AS 43.55.023,] incurred during a calendar 08 year that are less than the product of $0.30 multiplied by the total taxable production 09 from each lease or property, in BTU equivalent barrels, during that calendar year, 10 except that, when a portion of a calendar year is subject to this provision, the 11 expenditures and volumes shall be prorated within that calendar year; 12 (19) costs incurred for repair, replacement, or deferred maintenance of 13 a facility, a pipeline, a structure, or equipment, other than a well, that results in or is 14 undertaken in response to a failure, problem, or event that results in an unscheduled 15 interruption of, or reduction in the rate of, oil or gas production; or costs incurred for 16 repair, replacement, or deferred maintenance of a facility, a pipeline, a structure, or 17 equipment, other than a well, that is undertaken in response to, or is otherwise 18 associated with, an unpermitted release of a hazardous substance or of gas; however, 19 costs under this paragraph that would otherwise constitute lease expenditures under (a) 20 and (b) of this section may be treated as lease expenditures if the department 21 determines that the repair or replacement is solely necessitated by an act of war, by an 22 unanticipated grave natural disaster or other natural phenomenon of an exceptional, 23 inevitable, and irresistible character, the effects of which could not have been 24 prevented or avoided by the exercise of due care or foresight, or by an intentional or 25 negligent act or omission of a third party, other than a party or its agents in privity of 26 contract with, or employed by, the producer or an operator acting for the producer, but 27 only if the producer or operator, as applicable, exercised due care in operating and 28 maintaining the facility, pipeline, structure, or equipment, and took reasonable 29 precautions against the act or omission of the third party and against the consequences 30 of the act or omission; in this paragraph, 31 (A) "costs incurred for repair, replacement, or deferred
01 maintenance of a facility, a pipeline, a structure, or equipment" includes costs 02 to dismantle and remove the facility, pipeline, structure, or equipment that is 03 being replaced; 04 (B) "hazardous substance" has the meaning given in 05 AS 46.03.826; 06 (C) "replacement" includes renovation or improvement; 07 (20) costs incurred to construct, acquire, or operate a refinery or crude 08 oil topping plant, regardless of whether the products of the refinery or topping plant 09 are used in oil or gas exploration, development, or production operations; however, if 10 a producer owns a refinery or crude oil topping plant that is located on or near the 11 premises of the producer's lease or property in the state and that processes the 12 producer's oil produced from that lease or property into a product that the producer 13 uses in the operation of the lease or property in drilling for or producing oil or gas, the 14 producer's lease expenditures include the amount calculated by subtracting from the 15 fair market value of the product used the prevailing value, as determined under 16 AS 43.55.020(f), of the oil that is processed; 17 (21) costs of lobbying, public relations, public relations advertising, or 18 policy advocacy. 19 * Sec. 23. AS 43.55.165(f) is amended to read: 20 (f) For purposes of AS 43.55.023(b) [AS 43.55.023(a) AND (b)] and only as 21 to expenditures incurred to explore for an oil or gas deposit located within land in 22 which an explorer does not own a working interest, the term "producer" in this section 23 includes "explorer." 24 * Sec. 24. AS 43.55.170(c) is amended to read: 25 (c) For purposes of AS 43.55.023(b) [AS 43.55.023(a) AND (b)] and only as 26 to expenditures incurred to explore for an oil or gas deposit located within land in 27 which an explorer does not own a working interest, the term "producer" in this section 28 includes "explorer." 29 * Sec. 25. AS 43.55.890 is amended to read: 30 Sec. 43.55.890. Disclosure of tax information. Notwithstanding any contrary 31 provision of AS 40.25.100, and regardless of whether the information is considered
01 under AS 43.05.230(e) to constitute statistics classified to prevent the identification of 02 particular returns or reports, the department may publish the following information 03 under this chapter, if aggregated among three or more producers or explorers, showing 04 by month or calendar year and by lease or property, unit, or area of the state: 05 (1) the amount of oil or gas production; 06 (2) the amount of taxes levied under this chapter or paid under this 07 chapter; 08 (3) the effective tax rates under this chapter; 09 (4) the gross value of oil or gas at the point of production; 10 (5) the transportation costs for oil or gas; 11 (6) qualified capital expenditures [, AS DEFINED IN AS 43.55.023]; 12 (7) exploration expenditures under AS 43.55.025; 13 (8) production tax values of oil or gas under AS 43.55.160; 14 (9) lease expenditures under AS 43.55.165; 15 (10) adjustments to lease expenditures under AS 43.55.170; 16 (11) tax credits applicable or potentially applicable against taxes levied 17 by this chapter. 18 * Sec. 26. AS 43.55.895(b) is amended to read: 19 (b) A municipal entity subject to taxation because of this section 20 (1) is eligible for [ALL] tax credits proportionate to its production 21 taxable under AS 43.55.011(e); and 22 (2) shall allocate its lease expenditures in proportion to its 23 production taxable under AS 43.55.011(e) [UNDER THIS CHAPTER TO THE 24 SAME EXTENT AS ANY OTHER PRODUCER]. 25 * Sec. 27. AS 43.55.900 is amended by adding a new paragraph to read: 26 (26) "qualified capital expenditure" 27 (A) means, except as otherwise provided in (B) of this 28 paragraph, an expenditure that is a lease expenditure under AS 43.55.165 and 29 is 30 (i) incurred for geological or geophysical exploration; 31 (ii) treated as a capitalized expenditure under 26 U.S.C.
01 (Internal Revenue Code), as amended, regardless of elections made 02 under 26 U.S.C. 263(c) (Internal Revenue Code), as amended, and is 03 treated as a capitalized expenditure for federal income tax reporting 04 purposes by the person incurring the expenditure; or 05 (iii) treated as a capitalized expenditure under 26 U.S.C. 06 (Internal Revenue Code), as amended, regardless of elections made 07 under 26 U.S.C. 263(c) (Internal Revenue Code), as amended, and is 08 eligible to be deducted as an expense under 26 U.S.C. 263(c) (Internal 09 Revenue Code), as amended; 10 (B) does not include an expenditure incurred to acquire an asset 11 the cost of previously acquiring which was a lease expenditure under 12 AS 43.55.165 or would have been a lease expenditure under AS 43.55.165 if it 13 had been incurred after March 31, 2006, or that has previously been placed in 14 service in the state; an expenditure to acquire an asset is not excluded under 15 this subparagraph if not more than an immaterial portion of the asset meets a 16 description under this subparagraph; for purposes of this subparagraph, "asset" 17 includes geological, geophysical, and well data and interpretations. 18 * Sec. 28. AS 43.70.020 is amended by adding a new subsection to read: 19 (g) A person whose business engages in oil or gas exploration or development 20 must, in addition to filing the regular application required by this section, file with the 21 commissioner a surety bond of $250,000 running to unsecured creditors licensed in the 22 state before being entitled to a license under this chapter. The commissioner shall 23 waive the surety bond requirement under this subsection if the business produces oil or 24 gas in commercial quantities. 25 * Sec. 29. AS 38.05.180(i); AS 41.09.010, 41.09.020, 41.09.030, 41.09.090; and 26 AS 43.20.053(j)(4) are repealed. 27 * Sec. 30. AS 43.55.023(a), 43.55.023(l), 43.55.023(n), 43.55.023(o), 43.55.028(i), 28 43.55.075(d)(1), 43.55.165(j), and 43.55.165(k) are repealed. 29 * Sec. 31. The uncodified law of the State of Alaska is amended by adding a new section to 30 read: 31 LEGISLATIVE WORKING GROUP. (a) A legislative working group is established
01 to analyze the Cook Inlet fiscal regime for oil and gas, review the state's tax structure and 02 rates on oil and gas produced south of 68 degrees North latitude, recommend changes to the 03 legislature for consideration during the First Regular Session of the Thirtieth Alaska State 04 Legislature, and develop terms for a comprehensive fiscal regime for the area south of 68 05 degrees North latitude including, 06 (1) a tax structure that accounts for the unique circumstances for each oil and 07 gas producing area south of 68 degrees North latitude; 08 (2) incentives for the exploration, development, and production of oil and gas 09 south of 68 degrees North latitude; 10 (3) consideration of the competitiveness of the area to attract new oil and gas 11 development; 12 (4) consideration of the unique market considerations of the Cook Inlet 13 sedimentary basin and the need to support energy supply security for communities in 14 Southcentral Alaska; 15 (5) alternative means of state support for the exploration, development, and 16 production of oil and gas in this area, including through the Alaska Industrial Export and 17 Development Authority; 18 (6) analysis of whether refundable state tax credits are still necessary for a 19 new regime; 20 (7) evaluation of the need for disclosure of some confidential information to 21 help legislators shape policy, including an evaluation of the associated state and federal 22 constitutional issues related to statutory waivers of taxpayer confidentiality. 23 (b) The working group consists of 24 (1) two co-chairs, one of whom is a member of the house appointed by the 25 speaker of the house of representatives, and one of whom is a member of the senate appointed 26 by the president of the senate; and 27 (2) members appointed by the co-chairs; members must be legislators and 28 must include members of the majority and minority caucuses. 29 (c) The co-chairs of the working group may form an advisory group to the working 30 group, composed of members who are not legislators and who have expertise and skills to 31 assist in the review and development of a new plan for the tax structure and rates on oil and
01 gas produced south of 68 degrees North latitude. The members of an advisory group may 02 include commissioners or employees of state departments, members of the oil and gas 03 industry or trade associations, and economists. 04 (d) The working group is to be supported by legislative consultants under contract 05 through the Legislative Budget and Audit Committee. 06 * Sec. 32. The uncodified law of the State of Alaska is amended by adding a new section to 07 read: 08 APPLICABILITY. Sections 7 - 9, 16, and 17 of this Act apply to a refund or payment 09 applied for on or after January 1, 2017. 10 * Sec. 33. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 TRANSITION: QUALIFIED CAPITAL EXPENDITURES AND WELL LEASE 13 EXPENDITURES. (a) Notwithstanding the repeal of AS 43.55.023(a), (l), (n), and (o) by sec. 14 30 of this Act, and the amendments to AS 43.55.023(d) and (e), 43.55.029(a), 43.55.165(f), 15 and 43.55.170(c) by secs. 13, 14, 18, 23, and 24 of this Act, a taxpayer who incurs 16 (1) a qualified capital expenditure before the effective date of sec. 30 of this 17 Act that qualifies for a qualified capital expenditure credit under AS 43.55.023(a) may apply 18 for a credit or transferable tax credit certificate under AS 43.55.023 and assign the tax credit 19 under AS 43.55.029, as those sections read on the day before the effective date of sec. 30 of 20 this Act; 21 (2) a well lease expenditure before the effective date of sec. 30 of this Act that 22 qualifies for a well lease expenditure credit under AS 43.55.023(l) may apply for a credit or 23 transferable tax credit certificate under AS 43.55.023 and assign the tax credit under 24 AS 43.55.029, as those sections read on the day before the effective date of sec. 30 of this 25 Act. 26 (b) The Department of Revenue may continue to apply and enforce AS 43.55.023 and 27 43.55.029, as those sections read on the day before the effective date of sec. 30 of this Act, for 28 qualified capital expenditures and well lease expenditures incurred before the effective date of 29 sec. 30 of this Act. 30 * Sec. 34. The uncodified law of the State of Alaska is amended by adding a new section to 31 read:
01 TRANSITION: LEASE EXPENDITURES FOR A CALENDAR YEAR AFTER 02 2006 AND BEFORE 2010. Notwithstanding AS 43.55.165(a), as amended by sec. 21 of this 03 Act, and the repeal of AS 43.55.165(j) and (k) by sec. 30 of this Act, AS 43.55.165(j) and (k) 04 apply to a producer's total lease expenditures for a calendar year after 2006 and before 2010 05 under AS 43.55.165, as that section read on the day before the effective date of sec. 30 of this 06 Act. 07 * Sec. 35. The uncodified law of the State of Alaska is amended by adding a new section to 08 read: 09 TRANSITION: REGULATIONS. The Department of Revenue and the Department of 10 Natural Resources may adopt regulations necessary to implement the changes made by this 11 Act. The regulations take effect under AS 44.62 (Administrative Procedure Act), but not 12 before the effective date of the law implemented by the regulation. The Department of 13 Revenue shall adopt regulations governing the use of tax credits under AS 43.55 for a 14 calendar year for which the applicable tax credit provisions of AS 43.55 differ as between 15 parts of the year as a result of this Act. 16 * Sec. 36. The uncodified law of the State of Alaska is amended by adding a new section to 17 read: 18 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any 19 contrary provision of AS 44.62.240, 20 (1) if the Department of Revenue expressly designates in a regulation that the 21 regulation applies retroactively, a regulation adopted by the Department of Revenue to 22 implement, interpret, make specific, or otherwise carry out this Act may apply retroactively to 23 the effective date of the law implemented by the regulation; 24 (2) if the Department of Natural Resources expressly designates in the 25 regulation that the regulation applies retroactively, a regulation adopted by the Department of 26 Natural Resources to implement, interpret, make specific, or otherwise carry out the statutory 27 amendments in this Act affecting the administration of oil and gas leases issued under 28 AS 38.05.180(f)(3)(B), (D), or (E), to the extent the regulation relates to the treatment of oil 29 and gas production taxes in determining net profits under those leases, may apply 30 retroactively to the effective date of the law implemented by the regulation. 31 * Sec. 37. Sections 31 and 35 of this Act take effect immediately under AS 01.10.070(c).
01 * Sec. 38. Sections 13, 14, 18 - 25, 27, 30, 33, and 34 of this Act take effect January 1, 02 2022. 03 * Sec. 39. Except as provided in secs. 37 and 38 of this Act, this Act takes effect January 1, 04 2017.