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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.