SCS CSHB 498(FIN): "An Act providing for exploration incentive credits for activities involving locatable and leasable minerals and coal deposits on certain land in the state; and providing for an effective date."
00SENATE CS FOR CS FOR HOUSE BILL NO. 498(FIN) 01 "An Act providing for exploration incentive credits for activities involving locatable 02 and leasable minerals and coal deposits on certain land in the state; and 03 providing for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 27 is amended by adding a new chapter to read: 06 CHAPTER 30. EXPLORATION INCENTIVE CREDITS. 07 Sec. 27.30.010. EXPLORATION INCENTIVE CREDITS AUTHORIZED. 08 (a) Unless otherwise provided by law, the commissioner shall grant to a qualified 09 applicant an exploration incentive credit for each of the following activities performed 10 on or for the benefit of land in the state for the purpose of determining the existence, 11 location, extent, or quality of a locatable or leasable mineral or coal deposit, regardless 12 of whether the land is state-owned land: 13 (1) surveying by geophysical or geochemical methods; 14 (2) drilling exploration holes;
01 (3) conducting underground exploration; or 02 (4) performing other exploratory work, including aerial photographs, 03 geological and geophysical logging, and sample analysis, for the purpose of 04 determining the existence, location, extent, or quality of the deposit. 05 (b) An exploration incentive credit granted under (a) of this section may be 06 (1) applied, at the discretion of the qualified applicant and subject to 07 the limit of AS 27.30.020, against 08 (A) taxes payable under AS 43.65; and 09 (B) mineral production royalty payments due the state under 10 AS 38.05.135 - 38.05.175; and 11 (2) carried forward to a subsequent tax year or payment period, except 12 as limited by AS 27.30.030. 13 (c) An exploration incentive credit shall be granted under (a) of this section 14 to a qualified applicant if the qualified applicant provides the commissioner satisfactory 15 documentation of exploration activity conducted and of the direct labor costs and other 16 eligible costs incurred to complete the work described in (a) of this section. For 17 purposes of this subsection, "satisfactory documentation of exploration activity" 18 includes, where applicable, 19 (1) a representative skeleton core for each hole cored or a 20 representative set of cuttings for each hole rotary drilled; 21 (2) chemical analytical data and noninterpretive geophysical data; 22 (3) aerial photographs or a topographic or geologic map showing the 23 location of the drill holes, sample locations, or the other exploration activities 24 undertaken; if the locations are shown on a map, the map must have a scale of not less 25 than one inch to the mile showing reference to a recognized coordinate system; and 26 (4) a cost breakdown showing amounts claimed by the applicant as an 27 exploration incentive under this subsection. 28 (d) Data provided to the commissioner under (c)(2) of this section shall be 29 kept confidential for 36 months after receipt by the commissioner. 30 Sec. 27.30.020. LIMIT ON CREDITS. (a) The amount of exploration 31 incentive credits for each parcel or site may not exceed the lesser of
01 (1) a percentage of the combined amount payable by the qualified 02 applicant as taxes under AS 43.65 and as mineral production royalty payments due 03 under AS 38.05.135 - 38.05.175 for production from the parcel or site on which the 04 exploration activity occurred; for purposes of this paragraph, the applicable percentage 05 is 06 (A) 50 percent of eligible costs relating to activities performed 07 on state-owned land; and 08 (B) 25 percent of eligible costs relating to activities performed 09 on land in the state not owned by the state; or 10 (2) with reference to activities that qualify for an exploration incentive 11 credit that occur on the parcel or site on which the exploration activity occurred, 12 (A) if the activity occurred on state-owned land, 50 percent of 13 (i) direct labor costs, including the cost of benefits, 14 incurred by the applicant for employees directly associated with work 15 described in AS 27.30.010(a)(1) - (4) who are state residents; and 16 (ii) other eligible costs; 17 (B) if the activity occurred on land in the state not owned by 18 the state, 25 percent of 19 (i) direct labor costs, including the cost of benefits, 20 incurred by the applicant for employees directly associated with work 21 described in AS 27.30.010(a)(1) - (4) who are state residents; and 22 (ii) other eligible costs. 23 (b) The amount of an exploration incentive credit extended under this chapter 24 may not exceed an amount per parcel or site, as determined by the commissioner by 25 regulation. 26 Sec. 27.30.030. USE OF CREDIT. An exploration incentive credit 27 (1) must be used within 15 years after it is extended under 28 AS 27.30.010; and 29 (2) may, for the purposes described in AS 27.30.010(b), be assigned 30 by the qualified applicant to the applicant's successor in interest for the site at which 31 the exploration activities occur if the successor in interest is a qualified applicant.
01 Sec. 27.30.040. RELATIONSHIP TO OTHER FUNDS. Amounts due the 02 permanent fund under AS 37.13.010 and the public school trust fund under 03 AS 37.14.150 shall be calculated before the application of a credit extended under 04 AS 27.30.010. 05 Sec. 27.30.050. REGULATIONS. The commissioner may adopt regulations 06 necessary to implement this chapter. 07 Sec. 27.30.090. DEFINITIONS. In this chapter, 08 (1) "eligible costs" means those costs incurred for activities in direct 09 support of an exploration activity conducted for the purpose of determining the 10 existence, location, extent, or quality of a mineral or coal deposit; the term 11 (A) includes 12 (i) direct labor costs, including the cost of benefits, 13 incurred by the applicant for employees directly associated with work 14 described in AS 27.30.010(a)(1) - (4); and 15 (ii) the cost of renting or leasing equipment from parties 16 not affiliated with the applicant, the reasonable costs of maintaining and 17 operating equipment, payments to consultants and independent 18 contractors not affiliated with the applicant, and costs of materials and 19 supplies; 20 (B) does not include 21 (i) direct labor costs, including the cost of benefits, 22 incurred by the applicant for employees directly associated with work 23 described in AS 27.30.010(a)(1) - (4) who are not residents; and 24 (ii) noncash expenses such as depreciation and reserves, 25 interest or other costs of borrowed funds, return on investment, 26 overhead, insurance or bond premiums, or any other expense that is 27 unreasonable or that the applicant has not incurred to complete work 28 described in AS 27.30.010(a)(1) - (4); 29 (2) "geochemical methods" means soil, rock, vegetation, and similar 30 samples collected and their chemical analyses; 31 (3) "geophysical methods" means all geophysical data gathering
01 methods used in minerals exploration, including seismic, gravity, magnetic, and 02 electromagnetic measurements; 03 (4) "qualified applicant" means 04 (A) a natural person who is at least 18 years of age; 05 (B) a partnership qualified to do business in the state; 06 (C) a corporation qualified to do business in the state; 07 (D) a limited liability company qualified to do business in the 08 state; 09 (E) a legal guardian or trustee of a qualified natural person 10 described in (A) of this paragraph; or 11 (F) any association of persons listed in (A) - (E) of this 12 paragraph; 13 (5) "resident" means a person who establishes residency under 14 AS 01.10.055. 15 * Sec. 2. AS 38.05.135(a) is amended to read: 16 (a) Except as otherwise provided, valuable mineral deposits in land belonging 17 to the state shall be open to exploration, development, and the extraction of minerals. 18 All land, together with tide, submerged, or shoreland, to which the state holds title to 19 or to which the state may become entitled, may be obtained by permit or lease for the 20 purpose of exploration, development, and the extraction of minerals. Except as 21 specifically limited by AS 38.05.135 - 38.05.181, land may be withheld from lease 22 application on a first-come, first-served basis, and offered only on a competitive bid 23 basis when determined by the commissioner to be in the best interests of the state. 24 When authorized by AS 27.30.010, the commissioner shall allow an exploration 25 incentive credit for activities undertaken to determine the existence, location, 26 extent, or quality of a locatable or leasable mineral or coal deposit and in [IN] 27 unproven areas the commissioner may offer additional incentives, including a reduction 28 of royalty to a minimum of five percent in the case of oil and gas, and other terms in 29 and granting permit or lease for exploration and development whenever it appears to 30 be in the best interests of the state to do so. 31 * Sec. 3. AS 38.05.212(b) is amended to read:
01 (b) The production royalty 02 (1) is three percent of net income as determined under AS 43.65; and 03 (2) is subject to the exploration incentive credit authorized by 04 AS 27.30. 05 * Sec. 4. AS 43.65.020(a) is amended to read: 06 (a) A person subject to tax under this chapter shall make a return stating 07 specifically the items of gross income from the property, including royalty received 08 and the deductions and credits allowed by this chapter and the exploration incentive 09 credit authorized by AS 27.30, and other information for carrying out this chapter 10 that the department prescribes. The return must show the mining license number and 11 must be signed by the taxpayer or an authorized agent of the taxpayer, under penalty 12 of unsworn falsification. If receivers, trustees, or assigns are operating the property 13 or business, they shall make returns for the person engaged in mining, or the recipient 14 of royalty in connection with mining property. The tax due on the basis of the returns 15 shall be collected in the same manner as if collected from the person of whose 16 business they have custody and control. 17 * Sec. 5. This Act takes effect immediately under AS 01.10.070(c).