CSSB 371(RES): "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."
00CS FOR SENATE BILL NO. 371(RES) 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 43.20 and 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. The amount of exploration incentive 31 credits for each parcel or site may not exceed the lesser of
01 (1) 50 percent of the combined amount payable by the qualified 02 applicant as taxes under AS 43.20 and AS 43.65 and as mineral production royalty 03 payments due under AS 38.05.135 - 38.05.175 for production from the parcel or site 04 on which the exploration activity occurred; or 05 (2) with reference to activities that qualify for an exploration incentive 06 credit that occur on the parcel or site on which the exploration activity occurred, 07 (A) 60 percent of direct labor costs, including the cost of 08 benefits, incurred by the applicant for employees directly associated with work 09 described in AS 27.30.010(a)(1) - (4) who are residents; and 10 (B) 50 percent of 11 (i) direct labor costs, including the cost of benefits, 12 incurred by the applicant for employees directly associated with work 13 described in AS 27.30.010(a)(1) - (4) who are not residents; and 14 (ii) other eligible costs. 15 Sec. 27.30.030. USE OF CREDIT. An exploration incentive credit 16 (1) must be used within 15 years after it is extended under 17 AS 27.30.010; and 18 (2) may, for the purposes described in AS 27.30.010(b), be assigned 19 by the qualified applicant to the applicant's successor in interest for the site at which 20 the exploration activities occur if the successor in interest is a qualified applicant. 21 Sec. 27.30.040. RELATIONSHIP TO OTHER FUNDS. Amounts due the 22 permanent fund under AS 37.13.010 and the public school trust fund under 23 AS 37.14.150 shall be calculated before the application of a credit extended under 24 AS 27.30.010. 25 Sec. 27.30.050. REGULATIONS. The commissioner may adopt regulations 26 necessary to implement this chapter. 27 Sec. 27.30.090. DEFINITIONS. In this chapter, 28 (1) "geochemical methods" means soil, rock, vegetation, and similar 29 samples collected and their chemical analyses; 30 (2) "geophysical methods" means all geophysical data gathering 31 methods used in minerals exploration, including seismic, gravity, magnetic, and
01 electromagnetic measurements; 02 (3) "other eligible costs" means the costs incurred for activities in direct 03 support of exploration activity conducted for the purpose of determining the existence, 04 location, extent, or quality of a mineral or coal deposit; the term 05 (A) includes the cost of renting or leasing equipment from 06 parties not affiliated with the applicant, the reasonable costs of maintaining and 07 operating equipment, payments to consultants and independent contractors not 08 affiliated with the applicant, and costs of materials and supplies; 09 (B) does not include noncash expenses such as depreciation and 10 reserves, interest or other costs of borrowed funds, return on investment, 11 overhead, insurance or bond premiums, or any other expense that is 12 unreasonable or that the applicant has not incurred to complete work described 13 in AS 27.30.010(a)(1) - (4); 14 (4) "qualified applicant" means 15 (A) a natural person who is at least 18 years of age; 16 (B) a partnership qualified to do business in the state; 17 (C) a corporation qualified to do business in the state; 18 (D) a limited liability company qualified to do business in the 19 state; 20 (E) a legal guardian or trustee of a qualified natural person 21 described in (A) of this paragraph; or 22 (F) any association of persons listed in (A) - (E) of this 23 paragraph; 24 (5) "resident" means a person who establishes residency under 25 AS 01.10.055. 26 * Sec. 2. AS 38.05.135(a) is amended to read: 27 (a) Except as otherwise provided, valuable mineral deposits in land belonging 28 to the state shall be open to exploration, development, and the extraction of minerals. 29 All land, together with tide, submerged, or shoreland, to which the state holds title to 30 or to which the state may become entitled, may be obtained by permit or lease for the 31 purpose of exploration, development, and the extraction of minerals. Except as
01 specifically limited by AS 38.05.135 - 38.05.181, land may be withheld from lease 02 application on a first-come, first-served basis, and offered only on a competitive bid 03 basis when determined by the commissioner to be in the best interests of the state. 04 When authorized by AS 27.30.010, the commissioner shall allow an exploration 05 incentive credit for activities undertaken to determine the existence, location, 06 extent, or quality of a locatable or leasable mineral or coal deposit and in [IN] 07 unproven areas the commissioner may offer additional incentives, including a reduction 08 of royalty to a minimum of five percent in the case of oil and gas, and other terms in 09 and granting permit or lease for exploration and development whenever it appears to 10 be in the best interests of the state to do so. 11 * Sec. 3. AS 38.05.212(b) is amended to read: 12 (b) The production royalty 13 (1) is three percent of net income as determined under AS 43.65; and 14 (2) is subject to the exploration incentive credit authorized by 15 AS 27.30. 16 * Sec. 4. AS 43.20 is amended by adding a new section to read: 17 Sec. 43.20.044. EXPLORATION INCENTIVE CREDIT. A taxpayer may 18 apply as a credit against the tax levied under this chapter the exploration incentive 19 credit authorized by AS 27.30. 20 * Sec. 5. AS 43.65.020(a) is amended to read: 21 (a) A person subject to tax under this chapter shall make a return stating 22 specifically the items of gross income from the property, including royalty received 23 and the deductions and credits allowed by this chapter and the exploration incentive 24 credit authorized by AS 27.30, and other information for carrying out this chapter 25 that the department prescribes. The return must show the mining license number and 26 must be signed by the taxpayer or an authorized agent of the taxpayer, under penalty 27 of unsworn falsification. If receivers, trustees, or assigns are operating the property 28 or business, they shall make returns for the person engaged in mining, or the recipient 29 of royalty in connection with mining property. The tax due on the basis of the returns 30 shall be collected in the same manner as if collected from the person of whose 31 business they have custody and control.
01 * Sec. 6. This Act is retroactive to January 1, 1994, and applies to activities that qualify 02 for the exploration incentive credit authorized by AS 27.30 that are undertaken after 03 December 31, 1993. 04 * Sec. 7. This Act takes effect immediately under AS 01.10.070(c).