Legislature(2011 - 2012)
2011-03-31 House Journal
Full Journal pdf2011-03-31 House Journal Page 0688 HB 110 The following was before the House with Amendment No. 4 (page 683) moved and pending: CS FOR HOUSE BILL NO. 110(FIN) "An Act relating to the interest rate applicable to certain amounts due for fees, taxes, and payments made and property delivered to the Department of Revenue; relating to the oil and gas production tax rate; relating to monthly installment payments of the oil and gas production tax; relating to oil and gas production tax credits, including qualified capital credits for exploration, development, and production; relating to certain additional nontransferable oil and gas production tax credits; relating to the disclosure of certain tax information; making conforming amendments; and providing for an effective date." 2011-03-31 House Journal Page 0689 The question being: "Shall Amendment No. 4 be adopted?" The roll was taken with the following result: CSHB 110(FIN) Second Reading Amendment No. 4 YEAS: 11 NAYS: 27 EXCUSED: 2 ABSENT: 0 Yeas: Doogan, Gara, Gardner, Gruenberg, Guttenberg, Holmes, Kawasaki, Kerttula, Miller, Petersen, Tuck Nays: Austerman, Chenault, Costello, Dick, Edgmon, Fairclough, Feige, Foster, Gatto, Hawker, Herron, Johansen, Johnson, Joule, Keller, Lynn, Millett, Munoz, Olson, Pruitt, Saddler, Seaton, Stoltze, Thomas, Thompson, P.Wilson, T.Wilson Excused: Cissna, Neuman And so, Amendment No. 4 was not adopted. Amendment No. 5 was offered by Representative Gara: Page 1, lines 1 - 8 (title amendment): Delete all material and insert: ""An Act providing for a tax credit applicable to the oil and gas production tax based on capital expenditures for a production facility for new oil and gas production; and providing for an effective date."" Page 1, line 10, through page 20, line 26: Delete all material and insert: "* Section 1. AS 43.20.043(g) is amended to read: (g) A taxpayer that obtains a credit for a qualified capital investment or cost incurred for qualified services under this section may not also claim a tax credit or royalty modification for the same qualified capital investment or cost incurred for qualified services under AS 38.05.180(i), AS 41.09.010, AS 43.55.023, [OR] 43.55.025, or 43.55.026. However, a taxpayer may elect not to obtain a credit under this section in order to qualify for a credit provided under AS 38.05.180(i), AS 41.09.010, AS 43.55.023, [OR] 43.55.025, or 43.55.026. * Sec. 2. AS 43.55.023(a) is amended to read: 2011-03-31 House Journal Page 0690 (a) A producer or explorer may take a tax credit for a qualified capital expenditure as follows: (1) except as limited by (p) of this section, notwithstanding that a qualified capital expenditure may be a deductible lease expenditure for purposes of calculating the production tax value of oil and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under AS 38.05.180(i), AS 41.09.010, AS 43.20.043, [OR] AS 43.55.025, or 43.55.026, a producer or explorer that incurs a qualified capital expenditure may also elect to apply a tax credit against a tax levied by AS 43.55.011(e) in the amount of 20 percent of that expenditure; however, not more than half of the tax credit may be applied for a single calendar year; (2) a producer or explorer may take a credit for a qualified capital expenditure incurred in connection with geological or geophysical exploration or in connection with an exploration well only if the producer or explorer (A) agrees, in writing, to the applicable provisions of AS 43.55.025(f)(2); (B) submits to the Department of Natural Resources all data that would be required to be submitted under AS 43.55.025(f)(2). * Sec. 3. AS 43.55.023(d) is amended to read: (d) Except as limited by (i) and (p) of this section, a person that is entitled to take a tax credit under this section that wishes to transfer the unused credit to another person or obtain a cash payment under AS 43.55.028 may apply to the department for transferable tax credit certificates. An application under this subsection must be in a form prescribed by the department and must include supporting information and documentation that the department reasonably requires. The department shall grant or deny an application, or grant an application as to a lesser amount than that claimed and deny it as to the excess, not later than 120 days after the latest of (1) March 31 of the year following the calendar year in which the qualified capital expenditure or carried- forward annual loss for which the credit is claimed was incurred; (2) the date the statement required under AS 43.55.030(a) or (e) was filed for the calendar year in which the qualified capital expenditure or carried-forward annual loss for which the credit is claimed was incurred; or (3) the date the application was received 2011-03-31 House Journal Page 0691 by the department. If, based on the information then available to it, the department is reasonably satisfied that the applicant is entitled to a credit, the department shall issue the applicant two transferable tax credit certificates, each for half of the amount of the credit. The credit shown on one of the two certificates is available for immediate use. The credit shown on the second of the two certificates may not be applied against a tax for a calendar year earlier than the calendar year following the calendar year in which the certificate is issued, and the certificate must contain a conspicuous statement to that effect. A certificate issued under this subsection does not expire. * Sec. 4. AS 43.55.023 is amended by adding a new subsection to read: (p) The amount of credit for a capital expenditure under (a) of this section for an expenditure that is also a lease expenditure under AS 43.55.165 is reduced by the amount necessary so that the tax benefit percentage is not more than 85 percent of the capital expenditure. The amount of credit for a capital expenditure under (a) of this section that may not be taken because of the limitation in this subsection may not be applied in a later calendar year under (c) of this section and may not be included in an application for a tax credit certificate under (d) of this section. In this subsection, "tax benefit percentage" means the sum of the average monthly tax rate under AS 43.55.011(e) for the calendar year in which the credit is taken and the percentage of the capital expenditure that may be taken as a credit under (a) of this section. * Sec. 5. AS 43.55 is amended by adding a new section to read: Sec. 43.55.026. Production facility cost credit. (a) This section applies to a credit for a qualified production facility expenditure incurred before the date of production of oil or gas in paying quantities for a lease or property that is taxable under AS 43.55.011(e) and that contains land that, as of December 31, 2010, is not or previously had not been within a unit or produced oil or gas in paying quantities. (b) Except as limited by (g) of this section, the amount of the credit under this section is equal to 50 percent of the qualified production facility expenditures that are incurred after the completion of the first well drilled that discovers a pool capable of commercial production from the lease or property and before the commencement of production in paying quantities. The 2011-03-31 House Journal Page 0692 department, in consultation with the (1) Alaska Oil and Gas Conservation Commission, shall determine the date on which the first well drilled discovered a pool capable of production from a lease or property for which the credit is taken; and (2) Department of Natural Resources, shall determine the date of the commencement of production in paying quantities from the lease or property for which the credit is taken. (c) The credit under this section may be applied against the tax due under AS 43.55.011(e) during the two-year period immediately following the date of the commencement of production in paying quantities. (d) A qualified production facility expenditure that is taken as a credit under this section may not be used as an expenditure for which a credit may be taken under AS 43.20.043 or AS 43.55.023. A credit under AS 43.55.023 for a qualified production facility expenditure may not be taken against the tax due under AS 43.55.011(e) during the same month in which a credit is taken or purchased by the department under this section. (e) A credit or portion of a credit under this section may not be used to reduce a taxpayer's tax liability under AS 43.55.011(e) below zero for any calendar month. A person eligible for the credit under this section that does not take the credit within the two-year period immediately following the date of the commencement of production in paying quantities may apply to the department for a cash payment under AS 43.55.028. An application under this subsection must be in a form prescribed by the department and must include supporting information and documentation that the department reasonably requires. The department shall grant or deny an application, or grant an application as to a lesser amount than that claimed and deny it as to the excess, not later than 120 days after the date the department receives the application. If, based on the information then available to it, the department is reasonably satisfied that the applicant is entitled to a payment, the department shall issue the cash payment or a lesser amount after applying all or a portion of the credit to any outstanding unpaid balance of a tax owed by the applicant under this title. (f) The department shall adopt regulations describing the procedures for determining the amount of the credit, record 2011-03-31 House Journal Page 0693 keeping, verification of the accuracy of the credit claimed, and other regulations necessary to administer this section. (g) The amount of credit for a qualified production facility expenditure under this section for an expenditure that is also a lease expenditure under AS 43.55.165 is reduced by the amount necessary so that the tax benefit percentage is not more than 85 percent of the qualified production facility expenditure. The amount of credit for a qualified production facility expenditure under this section that may not be taken because of the limitation in this subsection may not be included in an application for a cash payment under (e) of this section. In this subsection, "tax benefit percentage" means the sum of the average monthly tax rate under AS 43.55.011(e) for the calendar year in which the credit is taken and the percentage of the qualified production facility expenditure that may be taken as a credit under this section. (h) In this section, (1) "production facility" means a facility that is upstream from the point of production and is a flow station, a gathering center, a pump station, a storage tank, and a related appurtenance, or other facility that gathers, cleans, dehydrates, conditions, or stores crude oil, natural gas, or associated hydrocarbons and that is located on a lease or property leased from the state; (2) "production in paying quantities" means production of oil and gas in quantities sufficient to recover the cost of operating, although the quantity may be insufficient to recover the cost of drilling; (3) "qualified production facility expenditure" means an expenditure for a production facility that may be recognized as a qualified capital expenditure as defined in AS 43.55.023. * Sec. 6. AS 43.55.028(a) is amended to read: (a) The oil and gas tax credit fund is established as a separate fund of the state. The purpose of the fund is to purchase transferable tax credit certificates issued under AS 43.55.023 and production tax credit certificates issued under AS 43.55.025 and to pay for unused credits under AS 43.55.026 that qualify for a cash payment and refunds claimed under AS 43.20.046. * Sec. 7. AS 43.55.028(g) is amended to read: (g) The department may adopt regulations to carry out the purposes of this section, including standards and procedures to allocate available money among applications for purchases and 2011-03-31 House Journal Page 0694 payments for unused credits under this chapter and claims for refunds under AS 43.20.046 when the total amount of the applications for purchase and claims for refund exceed the amount of available money in the fund. The regulations adopted by the department may not, when allocating available money in the fund under this section, distinguish an application for the purchase of a credit certificate issued under AS 43.55.023(m), a payment for an unused credit that qualifies for a cash payment under AS 43.55.026, or a claim for refund under AS 43.20.046. * Sec. 8. AS 43.55.028 is amended by adding a new subsection to read: (j) The department, on the written application of a person for the payment of an unused credit that qualifies for a cash payment under AS 43.55.026 after the end of the two-year period immediately following the date of the commencement of production in paying quantities, may use available money in the oil and gas tax credit fund to purchase, in whole or in part, the certificate if the department finds that (1) the applicant does not have an outstanding liability to the state for unpaid delinquent taxes under this title; (2) the applicant's total tax liability under AS 43.55.011(e) for the calendar year in which the application is made, after application of all available tax credits, is zero; and (3) the purchase is consistent with this section and regulations adopted under this section. * Sec. 9. AS 43.55.180(a) is amended to read: (a) The department shall study (1) the effects of the provisions of this chapter on oil and gas exploration, development, and production in the state, on investment expenditures for oil and gas exploration, development, and production in the state, on the entry of new producers into the oil and gas industry in the state, on state revenue, and on tax administration and compliance, giving particular attention to the tax rates provided under AS 43.55.011, the tax credits provided under AS 43.55.023 - 43.55.026 [AS 43.55.023 - 43.55.025], and the deductions for and adjustments to lease expenditures provided under AS 43.55.160 - 43.55.170; and (2) the effects of the tax rates under AS 43.55.011(i) on state revenue and on oil and gas exploration, development, and production on private land, and the fairness of those tax rates for 2011-03-31 House Journal Page 0695 private landowners. * Sec. 10. This Act takes effect January 1, 2012." Representative Gara moved and asked unanimous consent that Amendment No. 5 be adopted. Representative Millett objected. The question being: "Shall Amendment No. 5 be adopted?" The roll was taken with the following result: CSHB 110(FIN) Second Reading Amendment No. 5 YEAS: 11 NAYS: 27 EXCUSED: 2 ABSENT: 0 Yeas: Doogan, Gara, Gardner, Gruenberg, Guttenberg, Holmes, Kawasaki, Kerttula, Miller, Petersen, Tuck Nays: Austerman, Chenault, Costello, Dick, Edgmon, Fairclough, Feige, Foster, Gatto, Hawker, Herron, Johansen, Johnson, Joule, Keller, Lynn, Millett, Munoz, Olson, Pruitt, Saddler, Seaton, Stoltze, Thomas, Thompson, P.Wilson, T.Wilson Excused: Cissna, Neuman Gardner changed from "Nay" to "Yea". And so, Amendment No. 5 was not adopted. Amendment No. 6 was offered by Representatives Herron, Edgmon, and Joule: Page 5, line 13, following "$92.50": Insert "but not more than $105" Page 5, following line 25: Insert new material to read: "(G) if the producer's average monthly production tax value of a BTU equivalent barrel of the taxable oil and gas for the month is more than $105 but not more than $117.50, the tax rates are 2011-03-31 House Journal Page 0696 (i) 2.5 percent on the first $12.50 of monthly production tax value for each BTU equivalent barrel that is greater than $30; (ii) 7.5 percent of the next higher $12.50 of monthly production tax value for each BTU equivalent barrel; (iii) 12.5 percent of the next higher $12.50 of monthly production tax value for each BTU equivalent barrel; (iv) 17.5 percent of the next higher $12.50 of monthly production tax value for each BTU equivalent barrel; (v) 22.5 percent of the next higher $12.50 of monthly production tax value for each BTU equivalent barrel; (vi) 25 percent of the next higher $12.50 of monthly production tax value for each BTU equivalent barrel; and (vii) 30 percent of the monthly production tax value for each BTU equivalent barrel that is greater than $105; (H) if the producer's average monthly production tax value of a BTU equivalent barrel of the taxable oil and gas for the month is more than $117.50, the tax rates are (i) 2.5 percent on the first $12.50 of monthly production tax value for each BTU equivalent barrel that is greater than $30; (ii) 7.5 percent of the next higher $12.50 of monthly production tax value for each BTU equivalent barrel; (iii) 12.5 percent of the next higher $12.50 of monthly production tax value for each BTU equivalent barrel; (iv) 17.5 percent of the next higher $12.50 of monthly production tax value for each BTU equivalent barrel; (v) 22.5 percent of the next higher $12.50 of monthly production tax value for each BTU equivalent barrel; (vi) 25 percent of the next higher $12.50 of 2011-03-31 House Journal Page 0697 monthly production tax value for each BTU equivalent barrel; (vii) 30 percent of the next higher $12.50 of monthly production tax value for each BTU equivalent barrel; and (viii) 35 percent of the monthly production tax value for each BTU equivalent barrel that is greater than $117.50;" Representative Herron moved and asked unanimous consent that Amendment No. 6 be adopted. Representative Kerttula objected. The question being: "Shall Amendment No. 6 be adopted?" The roll was taken with the following result: CSHB 110(FIN) Second Reading Amendment No. 6 YEAS: 14 NAYS: 24 EXCUSED: 2 ABSENT: 0 Yeas: Dick, Edgmon, Foster, Gara, Gatto, Herron, Holmes, Joule, Kawasaki, Munoz, Petersen, Seaton, Thomas, T.Wilson Nays: Austerman, Chenault, Costello, Doogan, Fairclough, Feige, Gardner, Gruenberg, Guttenberg, Hawker, Johansen, Johnson, Keller, Kerttula, Lynn, Miller, Millett, Olson, Pruitt, Saddler, Stoltze, Thompson, Tuck, P.Wilson Excused: Cissna, Neuman And so, Amendment No. 6 was not adopted. CSHB 110(FIN) was automatically in third reading. The question being: "Shall CSHB 110(FIN) pass the House?" The roll was taken with the following result: CSHB 110(FIN) Third Reading Final Passage YEAS: 22 NAYS: 16 EXCUSED: 2 ABSENT: 0 2011-03-31 House Journal Page 0698 Yeas: Chenault, Costello, Dick, Fairclough, Feige, Foster, Gatto, Hawker, Johansen, Johnson, Keller, Lynn, Millett, Munoz, Olson, Pruitt, Saddler, Stoltze, Thomas, Thompson, P.Wilson, T.Wilson Nays: Austerman, Doogan, Edgmon, Gara, Gardner, Gruenberg, Guttenberg, Herron, Holmes, Joule, Kawasaki, Kerttula, Miller, Petersen, Seaton, Tuck Excused: Cissna, Neuman And so, CSHB 110(FIN) passed the House. Representative Austerman moved the effective date clause. The question being: "Shall the effective date clause be adopted?" The roll was taken with the following result: CSHB 110(FIN) Third Reading Effective Date YEAS: 36 NAYS: 0 EXCUSED: 2 ABSENT: 2 Yeas: Austerman, Chenault, Costello, Dick, Doogan, Edgmon, Fairclough, Feige, Foster, Gara, Gardner, Gatto, Gruenberg, Guttenberg, Hawker, Herron, Holmes, Johansen, Johnson, Kawasaki, Keller, Kerttula, Lynn, Miller, Millett, Munoz, Olson, Petersen, Pruitt, Saddler, Seaton, Stoltze, Thomas, Thompson, Tuck, P.Wilson Excused: Cissna, Neuman Absent: Joule, T.Wilson And so, the effective date clause was adopted. Representative Kerttula gave notice of reconsideration of the vote on CSHB 110(FIN).