Legislature(2017 - 2018)SENATE FINANCE 532

05/11/2017 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 79 OPIOIDS;PRESCRIPTIONS;DATABASE;LICENSES TELECONFERENCED
Heard & Held
+= HB 111 OIL & GAS PRODUCTION TAX;PAYMENTS;CREDITS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled: TELECONFERENCED
+= SB 34 DRIVER'S LICENSE & ID CARDS & REAL ID ACT TELECONFERENCED
Heard & Held
CS FOR HOUSE BILL NO. 111(FIN)(efd fld)                                                                                       
                                                                                                                                
     "An Act  relating to  the oil  and gas  production tax,                                                                    
     tax  payments,   and  credits;  relating   to  interest                                                                    
     applicable to  delinquent oil  and gas  production tax;                                                                    
     relating  to carried-forward  lease expenditures  based                                                                    
     on losses  and limiting those lease  expenditures to an                                                                    
     amount  equal  to  the  gross value  at  the  point  of                                                                    
     production of  oil and gas  produced from the  lease or                                                                    
     property  where  the  lease expenditure  was  incurred;                                                                    
     relating to  information concerning tax  credits, lease                                                                    
     expenditures, and oi  l and gas taxes;  relating to the                                                                    
     disclosure of that information  to the public; relating                                                                    
     to an  adjustment in  the gross value  at the  point of                                                                    
     production;  and  relating  to  a  legislative  working                                                                    
     group."                                                                                                                    
                                                                                                                                
2:18:49 PM                                                                                                                    
                                                                                                                                
Vice-Chair Bishop  MOVED to  ADOPT the  committee substitute                                                                    
for  CS  SBHB  111(FIN)(efd  fld),  Work  Draft  30-LS0450\B                                                                    
(Nauman, 5/10/17).                                                                                                              
                                                                                                                                
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
                                                                                                                                
Co-Chair  MacKinnon  stated  that   the  CS  eliminated  the                                                                    
state's cash  exposure by ending  the program  of refundable                                                                    
oil  and gas  tax credits  to  small or  new companies.  She                                                                    
stated that work after 2017  would no longer be eligible for                                                                    
cash credits. The only credits  remaining statewide would be                                                                    
those  in Middle  Earth, and  those would  be nonrefundable.                                                                    
She stated that it would  conclude a multiple year effort to                                                                    
phase out the credits that  began in 2013. The bill provided                                                                    
opportunities to reduce the  credit backlog, which following                                                                    
two years of vetoes by the current administration.                                                                              
                                                                                                                                
2:23:35 PM                                                                                                                    
                                                                                                                                
LAURA CRAMER,  STAFF, SENATOR ANNA MACKINNON,  explained the                                                                    
committee substitute  with the  Sectional Analysis  (copy on                                                                    
file):                                                                                                                          
                                                                                                                                
     Section 1  Amends AS 31.05.030(n),  Alaska Oil  and Gas                                                                    
    Conservation Act, Powers and duties of commission.                                                                          
     Conforming to  the Sec. 28 requirement  that the Alaska                                                                    
     Oil  and  Gas  Conservation  Commission  determine  the                                                                    
     start of regular production for  purposes of applying a                                                                    
     carry-forward annual loss.                                                                                                 
                                                                                                                                
     Section  2  Amends   AS  43.05.225,  Administration  of                                                                    
     Revenue Laws, Interest.                                                                                                    
     For  all  delinquent  taxes  under  the  Department  of                                                                    
     Revenue,  interest is  three  points  above the  annual                                                                    
     rate  set   by  the  12th  Federal   Reserve  District,                                                                    
     compounded quarterly, and is  applied the entire time a                                                                    
     tax is delinquent.                                                                                                         
                                                                                                                                
     Section  3 Amends  AS 43.20.044(a),  Alaska Net  Income                                                                    
     Tax Act, Exploration incentive credit                                                                                      
     A taxpayer  that earns an  exploration credit  under AS                                                                    
     43.55.025 for work  done after July 1,  2016, may apply                                                                    
     the credit against the  taxpayer's own corporate income                                                                    
     tax. Effective immediately.                                                                                                
                                                                                                                                
     Section  4 Amends  AS 43.20.047(h),  Alaska Net  Income                                                                    
     Tax  Act, Liquefied  natural gas  storage facility  tax                                                                    
     credit.                                                                                                                    
     Conforming to the future repeal  of the Oil and Gas Tax                                                                    
     Credit  Fund  and  conforming  repeals.  Effective  the                                                                    
     later  of   Jan.  1,  2022,   or  when  there   are  no                                                                    
     outstanding applications for credit refunds.                                                                               
                                                                                                                                
     Section  5   Amends  AS   43.55.023(c),  Oil   and  Gas                                                                    
     Production  Tax, Tax  credits  for  certain losses  and                                                                    
     expenditures.                                                                                                              
     Credits  earned  under  this  section  may  be  applied                                                                    
     against prior-year  taxes, interest, penalties  or fees                                                                    
     related to  the oil  and gas production  tax, providing                                                                    
     those  liabilities   have  not   been  subject   to  an                                                                    
     administrative  proceeding or  litigation. Credits  may                                                                    
     not  be used  against  conservation  surcharges or  the                                                                    
     private royalty tax. Effective immediately.                                                                                
                                                                                                                                
     Section  6   Amends  AS   43.55.023(d),  Oil   and  Gas                                                                    
     Production  Tax, Tax  credits  for  certain losses  and                                                                    
     expenditures.                                                                                                              
     Cash  payments  for  credits  under  this  section  are                                                                    
     available only for work performed before Jan. 1, 2018.                                                                     
                                                                                                                                
     Section  7   Amends  AS   43.55.023(d),  Oil   and  Gas                                                                    
     Production  Tax, Tax  credits  for  certain losses  and                                                                    
     expenditures, as amended by Sec. 6.                                                                                        
     Conforming to the  future repeal in Sec. 31  of the Oil                                                                    
     and Gas  Tax Credit Fund.  Effective the later  of Jan.                                                                    
     1, 2022, or when  there are no outstanding applications                                                                    
     for credit refunds.                                                                                                        
                                                                                                                                
     Section  8   Amends  AS   43.55.023(e),  Oil   and  Gas                                                                    
     Production  Tax, Tax  credits  for  certain losses  and                                                                    
     expenditures.                                                                                                              
     Transferrable  tax  credit  certificates  issued  under                                                                    
     this section  may be applied against  prior-year taxes,                                                                    
     interest, penalties or fees related  to the oil and gas                                                                    
     production  tax, providing  those liabilities  have not                                                                    
     been  subject   to  an  administrative   proceeding  or                                                                    
     litigation.   Credits   may   not   be   used   against                                                                    
     conservation  surcharges or  the  private royalty  tax.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section  9   Amends  AS   43.55.023(g),  Oil   and  Gas                                                                    
     Production  Tax, Tax  credits  for  certain losses  and                                                                    
     expenditures.                                                                                                              
     Conforming to the  future repeal in Sec. 31  of the Oil                                                                    
     and Gas  Tax Credit Fund.  Effective the later  of Jan.                                                                    
     1, 2022, or when  there are no outstanding applications                                                                    
     for credit refunds.                                                                                                        
                                                                                                                                
     Section  10   Amends  AS  43.55.025(a),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Credits under  this section for  work done on  or after                                                                    
     July 1,  2016, may be applied  against corporate income                                                                    
     taxes. Effective immediately.                                                                                              
                                                                                                                                
     Section  11   Amends  AS  43.55.025(a),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration, as amended by Sec. 10.                                                                                        
     Conforming  to the  sunset  of  the AS  43.55.025(a)(4)                                                                    
     credit after Jan. 1, 2018, in Sec. 12.                                                                                     
                                                                                                                                
     Section  12   Amends  AS  43.55.025(b),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     The   40%   credit   for    seismic   work   under   AS                                                                    
     43.55.025(a)(4)  will not  be available  for work  done                                                                    
     after Jan. 1, 2018.                                                                                                        
                                                                                                                                
     Section  13   Amends  AS  43.55.025(f),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Exploration credits  under AS  43.55.025 for  work done                                                                    
     after  July 1,  2016, against  corporate income  taxes.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section  14   Amends  AS  43.55.025(g),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Exploration  tax credits  under this  section that  are                                                                    
     transferred  to another  taxpayer  may  not be  applied                                                                    
     against   the  purchaser's   corporate  income   taxes.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section  15   Amends  AS  43.55.025(h),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Tax  credit certificates  and  tax  credits under  this                                                                    
     section  may  be   applied  against  prior-year  taxes,                                                                    
     interest, penalties or fees related  to the oil and gas                                                                    
     production  tax, providing  those liabilities  have not                                                                    
     been  subject   to  an  administrative   proceeding  or                                                                    
     litigation.   Credits   may   not   be   used   against                                                                    
     conservation  surcharges or  the  private royalty  tax.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section  16   Amends  AS  43.55.025(i),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Exploration credits issued under  this section for work                                                                    
     done after July 1, 2016,  may be used against corporate                                                                    
     income tax,  but may  not be  used to  reduce corporate                                                                    
     income taxes below zero. Effective immediately.                                                                            
                                                                                                                                
     Section  17   Amends  AS  43.55.025(k),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Conforming to the sunset of  the seismic credit in Sec.                                                                    
     12.                                                                                                                        
                                                                                                                                
     Section 18 Adds  a new subsection to  AS 43.55.025, Oil                                                                    
     and Gas Production Tax, Alternative  tax credit for oil                                                                    
     and gas exploration.                                                                                                       
     Creates a  conditional tax credit certificate  that the                                                                    
     Department  of Revenue  must  issue  to explorers.  The                                                                    
     conditional  certificate enables  the holder  to submit                                                                    
     an  application  for a  refund  while  waiting for  the                                                                    
     state  to issue  a transferrable  certificate, but  the                                                                    
     conditional certificates  may not  be purchased  by the                                                                    
     state. Effective immediately.                                                                                              
                                                                                                                                
     Section  19   Amends  AS  43.55.028(a),  Oil   and  Gas                                                                    
     Production   Tax,  Oil   and   gas   tax  credit   fund                                                                    
     established; cash purchase of tax credit certificates.                                                                     
     As of  Jan. 1, 2018, the  tax credit fund is  only able                                                                    
     to purchase  oil and  gas tax  credits issued  for work                                                                    
     done  before  Jan. 1,  2018,  and  to purchase  instate                                                                    
     refinery and LNG storage facility income tax credits.                                                                      
                                                                                                                                
     Section  20   Amends  AS  43.55.028(e),  Oil   and  Gas                                                                    
     Production   Tax,  Oil   and   gas   tax  credit   fund                                                                    
     established; cash purchase of tax credit certificates.                                                                     
     Allows  the Department  of Revenue  to accept,  but not                                                                    
     purchase, a  conditional certificate from  an explorer.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section  21   Amends  AS  43.55.028(e),  Oil   and  Gas                                                                    
     Production   Tax,  Oil   and   gas   tax  credit   fund                                                                    
     established; cash purchase  of tax credit certificates,                                                                    
     as amended by Sec. 20.                                                                                                     
     Conforming to the Sec. 19  provision ending new entries                                                                    
     to the credit purchase program Jan. 1, 2018.                                                                               
                                                                                                                                
Co-Chair MacKinnon wondered whether Section 21 was                                                                              
conforming language to Section 19. Ms. Cramer replied in                                                                        
the affirmative.                                                                                                                
                                                                                                                                
     Section  22   Amends  AS  43.55.029(a),  Oil   and  Gas                                                                    
     Production Tax, Assignment of tax credit certificate.                                                                      
     Conforming to the  Sec. 30 repeal of  the net operating                                                                    
     loss credit.                                                                                                               
                                                                                                                                
2:34:03 PM                                                                                                                    
                                                                                                                                
Ms. Cramer continued to discuss the Sectional Analysis:                                                                         
                                                                                                                                
     Section  23   Amends  AS  43.55.160(d),  Oil   and  Gas                                                                    
     Production Tax,  Determination of production  tax value                                                                    
     of oil and gas.                                                                                                            
     Conforming to the  Sec. 30 repeal of  the net operating                                                                    
     loss credit.                                                                                                               
                                                                                                                                
     Section  24   Amends  AS  43.55.160(e),  Oil   and  Gas                                                                    
     Production Tax,  Determination of production  tax value                                                                    
     of oil and gas.                                                                                                            
     North Slope and Middle  Earth lease expenditures may be                                                                    
     used to establish a  carried-forward annual loss. Gross                                                                    
     value reductions for new oil  cannot make a loss larger                                                                    
     than  it would  otherwise  be.  Also, makes  conforming                                                                    
     changes  to the  Sec. 30  repeal of  the net  operating                                                                    
     loss   credit  and   the  Sec.   25  terms   for  lease                                                                    
     expenditures.                                                                                                              
                                                                                                                                
     Section  25   Amends  AS  43.55.165(a),  Oil   and  Gas                                                                    
     Production Tax, Lease expenditures.                                                                                        
     Lease expenditures  include those, for the  North Slope                                                                    
     and Middle  Earth, that were  unable to be  deducted in                                                                    
     the previous year.                                                                                                         
                                                                                                                                
     Section  26   Amends  AS  43.55.165(f),  Oil   and  Gas                                                                    
     Production Tax, Lease expenditures.                                                                                        
     Conforming to the  Sec. 30 repeal of  the net operating                                                                    
     loss credit.                                                                                                               
                                                                                                                                
     Section  27 Adds  a new  paragraph to  AS 43.55.165(l),                                                                    
     Oil and Gas Production Tax, Lease expenditures.                                                                            
     Defines  "carried-forward   annual  loss"  as   a  loss                                                                    
     established per Sec. 25.                                                                                                   
                                                                                                                                
2:37:02 PM                                                                                                                    
                                                                                                                                
Ms. Cramer continued to discuss the Sectional Analysis:                                                                         
                                                                                                                                
     Section 28  Adds new subsections  to AS  43.55.165, Oil                                                                    
     and Gas Production Tax, Lease expenditures.                                                                                
     Implements new  terms for how a  carried-forward annual                                                                    
     loss is applied. A taxpayer  may choose to apply all or                                                                    
     some of its  loss, or to carry it  forward. In applying                                                                    
     carry-forward annual losses, a  producer subject to the                                                                    
     minimum  tax may  apply the  amount  that would  reduce                                                                    
     taxes to  the equal amount  under the minimum  tax, and                                                                    
     not to  zero. Carry-forward annual losses  in excess of                                                                    
     the amount applied to reduce  taxes to the equal of the                                                                    
     minimum tax are carried forward.                                                                                           
     Fifty percent  of carry-forward annual  losses incurred                                                                    
     from a lease  or property not yet in  production may be                                                                    
     used immediately;  the remaining  50% may be  used once                                                                    
     the  lease or  property enters  regular production,  as                                                                    
     determined  by  the  Alaska Oil  and  Gas  Conservation                                                                    
     Commission.                                                                                                                
                                                                                                                                
     Section  29   Amends  AS  43.55.170(c),  Oil   and  Gas                                                                    
    Production Tax, Adjustments to lease expenditures.                                                                          
     Conforming to the  Sec. 30 repeal of  the net operating                                                                    
     loss credit.                                                                                                               
                                                                                                                                
     Section 30 Repealer                                                                                                        
     Repeals   the    net   operating   loss    credit,   AS                                                                    
     43.55.023(b), on Jan. 1, 2018.                                                                                             
                                                                                                                                
     Section 31 Repealer                                                                                                        
     At the later  of Jan. 1, 2022, or  when all outstanding                                                                    
     applications  for   credit  refunds  have   been  paid,                                                                    
     repeals  the  Oil  and  Gas  Tax  Credit  Fund  and  AS                                                                    
     43.55.028; assignability  of credits to  third parties,                                                                    
     AS 43.55.029; and makes  conforming repeals in sections                                                                    
     of  statute  referencing  the  fund:  AS  43.05.230(l),                                                                    
     Administration  of  Revenue  Laws,  Disclosure  of  tax                                                                    
     returns    and    reports,   annual    disclosure    of                                                                    
     disbursements  from the  fund; AS  43.20.046(e), Alaska                                                                    
     Net Income  Tax Act,  Gas storage facility  tax credit,                                                                    
     use of fund to pay  the credit; AS 43.20.047(e), Alaska                                                                    
     Net  Income  Tax  Act, Liquefied  natural  gas  storage                                                                    
     facility tax  credit, use  of fund  to pay  the credit;                                                                    
     and  AS  43.20.053(e),  Alaska   Net  Income  Tax  Act,                                                                    
     Qualified   in-state    oil   refinery   infrastructure                                                                    
     expenditures  tax  credit,  use  of  fund  to  pay  the                                                                    
     credit.                                                                                                                    
                                                                                                                                
2:38:55 PM                                                                                                                    
                                                                                                                                
Ms. Cramer continued with the Sectional Analysis:                                                                               
                                                                                                                                
     Section 32 Applicability                                                                                                   
     Credits  under  AS  43.55.025 may  be  applied  against                                                                    
     corporate  income taxes  by the  company that  incurred                                                                    
     the  credits,  regardless  of  when  the  credits  were                                                                    
     earned. Effective immediately.                                                                                             
                                                                                                                                
     Section 33 Applicability                                                                                                   
     Credits may be  applied against prior year  oil and gas                                                                    
     tax liabilities,  regardless of  when the  credits were                                                                    
     earned. Effective immediately.                                                                                             
                                                                                                                                
     Section 34 Applicability                                                                                                   
     The new provisions related  to lease expenditures apply                                                                    
     to  lease expenditures  incurred  on or  after Jan.  1,                                                                    
     2018.                                                                                                                      
                                                                                                                                
     Section 35 Transition language                                                                                             
     Interest   rates  charged   on  delinquent   taxes  for                                                                    
     calendar year 2017 are the  rates in statute before the                                                                    
     changes in Sec. 2 take effect on Jan. 1, 2018.                                                                             
                                                                                                                                
     Section 36 Transition language                                                                                             
     Ensures  the public  disclosure  of  tax credit  refund                                                                    
     recipients is  made on April  30 of the  year following                                                                    
     the year  in which the Oil  and Gas Tax Credit  Fund is                                                                    
     repealed, as the public disclosure  is also repealed to                                                                    
     conform. Effective the  later of Jan. 1,  2022, or when                                                                    
     there  are  no   outstanding  applications  for  credit                                                                    
     refunds.                                                                                                                   
                                                                                                                                
     Section 37 Transition language                                                                                             
     Taxpayers who incur a loss  before Jan. 1, 2018, remain                                                                    
     eligible for  the net operating loss  credit in current                                                                    
     statute that is repealed as of Jan. 1, 2018.                                                                               
                                                                                                                                
     Section 38 Transition language                                                                                             
     When the Oil and Gas  Tax Credit Fund is repealed after                                                                    
     outstanding  applications have  been paid,  any balance                                                                    
     of  the fund  lapses into  the general  fund. Effective                                                                    
     the  later  of Jan.  1,  2022,  or  when there  are  no                                                                    
     outstanding applications for refunds.                                                                                      
                                                                                                                                
     Section 39 Transition language                                                                                             
     Dept. of  Revenue may adopt  regulations retroactively.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section 40 Conditional effect, notification language                                                                       
     Sections related to  the repeal of the Oil  and Gas Tax                                                                    
     Credit Fund take effect only  after the Commissioner of                                                                    
     Revenue  notifies  the  revisors   when  there  are  no                                                                    
     outstanding  applications  for   the  purchase  of  tax                                                                    
     credits, and  it has  been at least  one year  since an                                                                    
     application has been received. Effective immediately.                                                                      
                                                                                                                                
     Section 41 Effective date                                                                                                  
     Sets an  immediate effective date for  sections related                                                                    
     to the ability to  use Middle Earth exploration credits                                                                    
     against   the  company's   own  corporate   income  tax                                                                    
     liability, and  to use credits  against prior  year tax                                                                    
     liabilities   that  have   not  been   subject  to   an                                                                    
     administrative proceeding or to litigation.                                                                                
                                                                                                                                
     Section 42 Effective date                                                                                                  
     Sets a  Jan. 1,  2018, effective  date for  Section 25,                                                                    
     which is  treated separately  because it  makes changes                                                                    
     to  a  section  of  statute that  is  undergoing  other                                                                    
    changes this year based on House Bill 247 of 2016.                                                                          
                                                                                                                                
     Section 43 Effective date                                                                                                  
     Sets an  effective date of  the later of Jan.  1, 2022,                                                                    
     or Jan. 1 of the year  in which notice is provided that                                                                    
     all  outstanding applicants  for credit  purchases have                                                                    
     been  paid, for  the  repeal  of the  Oil  and Gas  Tax                                                                    
     Credit Fund and conforming sections.                                                                                       
                                                                                                                                
     Section 44 Effective date                                                                                                  
     Sets  a  Jan. 1,  2018  effective  date for  all  other                                                                    
     sections.                                                                                                                  
                                                                                                                                
2:42:47 PM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon  WITHDREW her  OBJECTION. There  being NO                                                                    
further  OBJECTION, the  proposed  committee substitute  was                                                                    
adopted.                                                                                                                        
                                                                                                                                
2:43:05 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:44:01 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
2:44:09 PM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon  announced  that  amendments  should  be                                                                    
submitted by 8am the following  day, because she intended to                                                                    
move the bill  from committee the following  day. She stated                                                                    
that  there would  be  a fiscal  note  presentation at  that                                                                    
meeting.                                                                                                                        
                                                                                                                                
CSHB 111(FIN)(efd fld)  was HEARD and HELD  in committee for                                                                    
further consideration.                                                                                                          
                                                                                                                                
2:45:32 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:48:25 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects
HB 111 Work Draft version B.pdf SFIN 5/11/2017 9:00:00 AM
HB 111
HB 111 v B Sectional Analysis.pdf SFIN 5/11/2017 9:00:00 AM
HB 111
CS SB 34 v.T Explanation.pdf SFIN 5/11/2017 9:00:00 AM
SB 34
SB 34 CS SB 34 v.T.pdf SFIN 5/11/2017 9:00:00 AM
SB 34
SB 34 Air Force Letter - Real ID.pdf SFIN 5/11/2017 9:00:00 AM
SB 34
HB 111 Public Testimony Letters 4.pdf SFIN 5/11/2017 9:00:00 AM
HB 111