00 HOUSE BILL NO. 418 01 "An Act relating to a mining production tax; relating to the mining license tax; relating 02 to production royalties on minerals; relating to exploration incentive credits; and 03 providing for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05  * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 06 to read: 07 LEGISLATIVE INTENT. It is the intent of the legislature to recapture a portion of the 08 wealth lost to the state when nonrenewable resources are removed by imposing a production 09 tax on mineral extraction. 10  * Sec. 2. AS 21.89.070(c) is amended to read: 11 (c) A contribution claimed as a credit under this section may not 12 (1) be claimed as a credit under more than one provision of this title; 13 and 14 (2) when combined with credits taken during the taxpayer's tax year 01 under AS 21.89.075, AS 43.20.014, AS 43.55.019, AS 43.56.018, [AS 43.65.018,] 02 AS 43.75.018, or AS 43.77.045, exceed $150,000. 03  * Sec. 3. AS 21.89.075(c) is amended to read: 04 (c) A contribution claimed by a taxpayer as a credit under this section may not 05 (1) be claimed as a credit under more than one provision of this title; 06 (2) when combined with credits taken during the taxpayer's tax year 07 under AS 21.89.070, AS 43.20.014, AS 43.55.019, AS 43.56.018, [AS 43.65.018,] 08 AS 43.75.018, or AS 43.77.045, exceed $150,000; or 09 (3) be claimed as a credit unless the contribution qualifies for the credit 10 under (d) of this section. 11  * Sec. 4. AS 27.30.030(a) is amended to read: 12 (a) In a tax year or royalty payment period, subject to (c) of this section and 13 the respective limitations of this subsection, the person may apply the credit, the 14 taking of which was approved under AS 27.30.020(2), against 15 (1) [TAXES PAYABLE BY THE PERSON 16 (A) UNDER AS 43.65; APPLICATION OF THE CREDIT 17 UNDER THIS SUBPARAGRAPH MAY NOT EXCEED THE LESSER OF 18 (i) 50 PERCENT OF THE PERSON'S TAX 19 LIABILITY UNDER AS 43.65 FOR THE TAX YEAR THAT IS 20 RELATED TO PRODUCTION FROM THE MINING OPERATION 21 AT WHICH THE EXPLORATION ACTIVITIES OCCURRED, AS 22 SHOWN UNDER (b) OF THIS SECTION; OR 23 (ii) 50 PERCENT OF THE PERSON'S TOTAL TAX 24 LIABILITY UNDER AS 43.65 FOR THE TAX YEAR; 25 (B) UNDER AS 43.20; APPLICATION OF THE CREDIT 26 UNDER THIS SUBPARAGRAPH MAY NOT EXCEED THE LESSER OF 27 (i) AN AMOUNT EQUAL TO THE AMOUNT 28 DETERMINED UNDER (A)(i) OF THIS PARAGRAPH; OR 29 (ii)] 50 percent of the person's total tax liability under 30 AS 43.20 for the tax year; and 31 (2) mineral production royalty payments payable by the person under 01 AS 38.05.135 - 38.05.175 and 38.05.212 for production from the mining operation at 02 which the exploration activities occurred; application of the credit under this 03 paragraph may not exceed 50 percent of the person's mineral production royalty 04 payment liability from the mining operation at which the exploration activities 05 occurred. 06  * Sec. 5. AS 38.05.212(b) is amended to read: 07 (b) The production royalty 08 (1) is three percent of gross value at the point of production [NET 09 INCOME] as determined under AS 43.66.030 [AS 43.65]; and 10 (2) is subject to the exploration incentive credit authorized by 11 AS 27.30. 12  * Sec. 6. AS 43.05.230(g) is amended to read: 13 (g) The information contained in a license issued by the commissioner of 14 revenue or the commissioner of commerce, community, and economic development 15 under AS 43.50, AS 43.60, former AS 43.65, AS 43.70, and AS 43.75 is public 16 information. 17  * Sec. 7. AS 43.05.230(h) is amended to read: 18 (h) The commissioner shall, upon request, furnish to the Department of 19 Natural Resources copies of tax returns, reports, documents filed under former 20 AS 43.65 and AS 43.66, and the Department of Revenue's determinations and 21 workpapers. The Department of Natural Resources shall maintain the confidentiality 22 that the Department of Revenue is required to extend to the returns, reports, 23 documents, determinations, and workpapers furnished to the Department of Natural 24 Resources under this subsection. 25  * Sec. 8. AS 43.20.014(d) is amended to read: 26 (d) A contribution claimed as a credit under this section may not 27 (1) be claimed as a credit under another provision of this title; 28 (2) also be allowed as a deduction under 26 U.S.C. 170 against the tax 29 imposed by this chapter; and 30 (3) when combined with credits taken during the taxpayer's tax year 31 under AS 21.89.070, 21.89.075, AS 43.55.019, AS 43.56.018, [AS 43.65.018,] 01 AS 43.75.018, or AS 43.77.045, exceed $150,000. 02  * Sec. 9. AS 43.20.042(h) is amended to read: 03 (h) In this section, "eligible taxes" means the total tax liability of a taxpayer 04 for the annual taxes due under the provisions of this chapter [AND AS 43.65]. 05  * Sec. 10. AS 43.55.019(d) is amended to read: 06 (d) A contribution claimed as a credit under this section may not 07 (1) be claimed as a credit under another provision of this title; and 08 (2) when combined with credits taken during the taxpayer's tax year 09 under AS 21.89.070, 21.89.075, AS 43.20.014, AS 43.56.018, [AS 43.65.018,] 10 AS 43.75.018, or AS 43.77.045, exceed $150,000. 11  * Sec. 11. AS 43.56.018(d) is amended to read: 12 (d) A contribution claimed as a credit under this section may not 13 (1) be claimed as a credit under another provision of this title; and 14 (2) when combined with credits taken during the taxpayer's tax year 15 under AS 21.89.070, 21.89.075, AS 43.20.014, AS 43.55.019, [AS 43.65.018,] 16 AS 43.75.018, or AS 43.77.045, exceed $150,000. 17  * Sec. 12. AS 43 is amended by adding a new chapter to read: 18 Chapter 43.66. Mining Production Tax.  19 Sec. 43.66.010. Mining production tax. (a) Except as provided in (d) of this 20 section, there is levied on a person engaged in mining after December 31, 2006, a tax 21 equal to a percentage of the gross value at the point of production of resources 22 determined under (b) of this section. 23 (b) The percentage of the gross value at the point of production of resources 24 produced by mining during the following periods is as follows: 25 (1) after December 31, 2006, but before January 1, 2008, 0.6 percent; 26 (2) after December 31, 2007, but before January 1, 2009, 1.2 percent; 27 (3) after December 31, 2008, but before January 1, 2010, 1.8 percent; 28 (4) after December 31, 2009, but before January 1, 2011, 2.4 percent; 29 (5) after December 31, 2010, three percent. 30 (c) The tax imposed under this section is applicable to the total taxable 31 resources produced by mining by a person engaged in mining in the state during the 01 period for which the tax is imposed. 02 (d) The tax under (a) of this section does not apply to 03 (1) resources the ownership or right to which is exempt from taxation; 04 and 05 (2) the first $50,000 of the gross value at the point of production of 06 resources produced by a person not part of an affiliated group or by an affiliated group 07 filing a combined statement under AS 43.66.070 in each calendar year. 08 Sec. 43.66.020. Deferment for new mining production. (a) The tax on 09 production from a lease or property from which a resource has not been previously 10 produced is deferred for the first three years following the date production begins. The 11 deferment under this subsection does not apply to the production of sand and gravel, 12 coal, or rock. 13 (b) The commissioner of natural resources shall 14 (1) adopt regulations defining the date production begins for the 15 purposes of this section; and 16 (2) report to the commissioner of revenue the date production began 17 for each lease or property to which this section applies. 18 (c) The tax deferred under (a) of this section shall be paid in equal annual 19 payments during the 10-year period following the end of the three-year deferment 20 period, without interest. 21 Sec. 43.66.030. Gross value at the point of production. (a) The gross value 22 at the point of production 23 (1) is the value of a resource immediately after its removal from the 24 mine; 25 (2) does not include 26 (A) value added subsequent to mining by treatment processes, 27 such as crushing, grinding, or concentration, by transportation from the mine, 28 or by marketing of the resource or products derived from the resource; 29 (B) income from the extraction or processing of resources from 30 mine waste or residue of previously processed resources previously subject to 31 tax under this chapter or former AS 43.65. 01 (b) Except as provided in (c) of this section, the value of a resource 02 immediately after its removal from the mine is the price received by the person 03 engaged in the mining of the resource adjusted for value added after the resource was 04 produced. 05 (c) The price received by the person engaged in the mining of the resource 06 may be rejected by the department as the gross value at the point of production when 07 (1) the price received is less than the fair market value; 08 (2) the price received does not reflect the total value received by the 09 seller in the transaction; 10 (3) the parties to the transaction are affiliated; or 11 (4) the price received was not negotiated in an arm's length transaction 12 between the buyer and seller. 13 (d) If the department rejects the price reported by the person engaged in the 14 mining of the resource, the department shall substitute the fair market value of the 15 resource on the date and at the place of production for purposes of determining the tax 16 liability under this chapter. 17 Sec. 43.66.040. Transportation costs. (a) The gross value at the point of 18 production shall be calculated using the reasonable costs of transportation if the 19 destination value is used to determine the value at the point of production. The 20 reasonable costs of transportation shall be the actual costs, except when 21 (1) the parties to the transportation are affiliated; 22 (2) the contract for the transportation is not an arm's length transaction 23 or is not representative of the market value of that transportation; 24 (3) the method of transportation is not reasonable in view of existing 25 alternative methods of transportation. 26 (b) If the department finds that the conditions in (a)(1), (2), or (3) of this 27 section are present, the department shall determine the reasonable costs of 28 transportation, using the fair market value of like transportation, the fair market value 29 of equally efficient and available alternative modes of transportation, or another 30 reasonable method. Transportation costs fixed by tariff rates properly on file with the 31 Regulatory Commission of Alaska or another regulatory agency shall be considered 01 prima facie reasonable. 02 (c) In this section, "destination value" means the value of the resource at the 03 destination where production from the mine is delivered for treatment or processing. 04 Sec. 43.66.050. Payment of tax. (a) The mining production tax shall be paid to 05 the department before April 1 of the year following the calendar year of production. 06 (b) The tax shall be paid by or on behalf of the person engaged in mining. 07 Sec. 43.66.060. Filing of statements. (a) Except as provided in (c) of this 08 section, a person engaged in mining in the state shall file with the department a 09 statement, under oath on a form prescribed by the department, before April 1 of the 10 year following the calendar year of production. 11 (b) The department shall adopt regulations that prescribe the information to be 12 submitted on a form to the department. The information must include the following: 13 (1) a description of each mining lease or property from which the 14 resources were produced, by name, legal description, lease number, or accounting 15 code number assigned by the department; 16 (2) the names of the person engaged in mining and the person paying 17 the tax; 18 (3) a description of each type of resource produced and an estimate of 19 the quantity produced; 20 (4) the gross value at the point of production of the resources produced 21 from each lease or property and the total for all leases and property in the state; 22 (5) the name of the first purchaser and the price received for resources 23 produced during the calendar year; 24 (6) the fair market value at the point of production of the resources 25 produced from each lease or property in the state and the total for all leases and 26 properties in the state; and 27 (7) for a sale not occurring at the point of production, costs incurred by 28 the person liable for the tax after the resource is removed from the mine. 29 (c) An individual who is not required to file a single combined statement 30 under AS 43.66.070 and produces resources with a total gross value at the point of 31 production of less than $10,000 from all leases and properties in the state during a 01 calendar year is not required to file a statement under (a) of this section. 02 Sec. 43.66.070. Affiliated taxpayers. Two or more persons subject to the tax 03 under this chapter that are affiliated shall file a single combined statement under 04 AS 43.66.060. 05 Sec. 43.66.900. Definitions. In this chapter, 06 (1) "affiliated" means a person who directly, or indirectly through one 07 or more intermediaries, controls, is controlled by, or is under common control with the 08 persons specified; 09 (2) "mining" means an operation by which valuable metals, ores, 10 minerals, asbestos, gypsum, coal, marketable earth, or stone, or any of them are 11 extracted, mined, or taken from the earth; 12 (3) "resource" means the valuable metals, ores, minerals, asbestos, 13 gypsum, coal, marketable earth, or stone that are extracted, mined, or taken from the 14 earth by a person engaged in mining. 15  * Sec. 13. AS 43.75.018(d) is amended to read: 16 (d) A contribution claimed as a credit under this section may not 17 (1) be claimed as a credit under another provision of this title; and 18 (2) when combined with credits taken during the taxpayer's tax year 19 under AS 21.89.070, 21.89.075, AS 43.20.014, AS 43.55.019, AS 43.56.018, 20 [AS 43.65.018,] or AS 43.77.045, exceed $150,000. 21  * Sec. 14. AS 43.77.045(c) is amended to read: 22 (c) A contribution claimed as a credit under this section may not 23 (1) be claimed as a credit under another provision of this title; and 24 (2) when combined with credits taken during the taxpayer's tax year 25 under AS 21.89.070, 21.89.075, AS 43.20.014, AS 43.55.019, AS 43.56.018, 26 [AS 43.65.018,] or AS 43.75.018, exceed $150,000. 27  * Sec. 15. AS 27.30.030(b); AS 43.20.044(b); AS 43.65.010, 43.65.018, 43.65.020, 28 43.65.030, and 43.65.060 are repealed. 29  * Sec. 16. The uncodified law of the State of Alaska is amended by adding a new section to 30 read: 31 TRANSITION. (a) A person subject to the mining license tax under AS 43.65 shall 01 file a return and pay the tax under that chapter for the period ending on December 31, 2006. 02 (b) The Department of Revenue shall adopt regulations for the filing of returns and 03 the payment of tax under AS 43.65 by taxpayers filing a return on a basis other than a 04 calendar year. 05  * Sec. 17. Sections 2 - 11 and 13 - 15 of this Act take effect January 1, 2007. 06  * Sec. 18. Except as provided in sec. 17 of this Act, this Act takes effect immediately under 07 AS 01.10.070(c).