HB 197: "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."
00HOUSE BILL NO. 197 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) The commissioner shall grant to a qualified applicant an exploration incentive 09 credit for each of the following activities performed on or for the benefit of land in the 10 state for the purpose of determining the existence, location, extent, feasibility of 11 development, 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; 02 (4) surface trenching and bulk sampling; or 03 (5) performing other exploratory work, including aerial photographs, 04 geological and geophysical logging, sample analysis, and metallurgical testing. 05 (b) An exploration incentive credit granted under (a) of this section may be 06 (1) applied, at the discretion of the qualified applicant, against 07 (A) taxes payable under AS 43.20 and AS 43.65 that are related 08 to production from the site on which the exploration activities occur; 09 (B) mineral production royalty payments due the state under 10 AS 38.05.135 - 38.05.175 for production from the site on which the exploration 11 activities occur; and 12 (C) annual rent payable under AS 38.05.211 for the site on 13 which the exploration activities occur; and 14 (2) carried forward to a subsequent tax year or payment period, except 15 as limited by AS 27.30.030. 16 (c) An exploration incentive credit shall be granted under (a) of this section 17 to a qualified applicant if the qualified applicant provides the commissioner satisfactory 18 documentation of exploration activity conducted and of the eligible costs. For 19 purposes of this subsection, "satisfactory documentation of exploration activity" 20 includes, where applicable, 21 (1) a representative skeleton core for each hole cored or a 22 representative set of cuttings for each hole rotary drilled; 23 (2) chemical analytical data and noninterpretive geophysical data; 24 (3) aerial photographs or a topographic or geologic map showing the 25 location of the drill holes, sample locations, or the other exploration activities 26 undertaken; if the locations are shown on a map, the map must have a scale of not less 27 than one inch to the mile showing reference to a recognized coordinate system; and 28 (4) a cost breakdown showing amounts claimed by the applicant as an 29 exploration incentive under this subsection. 30 (d) Data provided to the commissioner under this section shall be kept 31 confidential for 36 months after receipt by the commissioner.
01 Sec. 27.30.020. LIMIT ON CREDITS. (a) The amount of the exploration 02 incentive credit for each site that may be taken during a tax year or royalty or rental 03 payment period may not exceed 50 percent of the combined amount payable by the 04 applicant as 05 (1) taxes payable under AS 43.20 and AS 43.65 that are related to 06 production from the site on which the exploration activities occur; 07 (2) mineral production royalty payments due the state under 08 AS 38.05.135 - 38.05.175 for production from the site on which the exploration 09 activities occur; and 10 (3) annual rent payable under AS 38.05.211 for the site on which the 11 exploration activities occur. 12 (b) Except as its use is limited by AS 27.30.030, a portion of a credit that is 13 not applied or used under (a) of this section may be carried forward to and applied 14 during a subsequent tax year or royalty payment period. 15 Sec. 27.30.030. USE OF CREDIT. An exploration incentive credit 16 (1) must be used within 15 years after it is granted 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 shall be calculated before the application of a 23 credit extended under AS 27.30.010. 24 Sec. 27.30.050. REGULATIONS. The commissioner may adopt regulations 25 necessary to implement this chapter. 26 Sec. 27.30.090. DEFINITIONS. In this chapter, 27 (1) "eligible costs" mean the costs incurred for activities in direct 28 support of exploration activity conducted for the purpose of determining the existence, 29 location, extent, feasibility of development, or quality of a mineral or coal deposit; the 30 term 31 (A) includes
01 (i) direct labor costs, including the cost of benefits, for 02 employees directly associated with work described in 03 AS 27.30.010(a)(1) - (5); 04 (ii) the cost of renting or leasing equipment from 05 parties not affiliated with the applicant; 06 (iii) the reasonable costs of maintaining and operating 07 equipment; 08 (iv) payments to consultants and independent contractors 09 not affiliated with the applicant; and 10 (v) the general expense of operating the taxpayer's 11 business, including the costs of materials and supplies, if those expenses 12 and costs are directly attributable to the work described in 13 AS 27.30.010(a)(1) - (5); 14 (B) does not include noncash expenses such as depreciation and 15 reserves, interest or other costs of borrowed funds, return on investment, 16 insurance or bond premiums, or any other expense that is unreasonable or that 17 the applicant has not incurred to complete work described in 18 AS 27.30.010(a)(1) - (5); 19 (2) "geochemical methods" means soil, rock, water, air, vegetation, and 20 similar samples collected and their chemical analyses; 21 (3) "geophysical methods" means all geophysical data gathering 22 methods used in minerals exploration, including seismic, gravity, magnetic, 23 radiometric, radar, and electromagnetic and other remote sensing measurements; 24 (4) "qualified applicant" means 25 (A) a natural person who is at least 18 years of age; 26 (B) a partnership qualified to do business in the state; 27 (C) a corporation qualified to do business in the state; 28 (D) a limited liability company qualified to do business in the 29 state; 30 (E) a legal guardian or trustee of a qualified natural person 31 described in (A) of this paragraph; or
01 (F) any association of persons listed in (A) - (E) of this 02 paragraph. 03 * Sec. 2. AS 38.05.135(a) is amended to read: 04 (a) Except as otherwise provided, valuable mineral deposits in land belonging 05 to the state shall be open to exploration, development, and the extraction of minerals. 06 All land, together with tide, submerged, or shoreland, to which the state holds title to 07 or to which the state may become entitled, may be obtained by permit or lease for the 08 purpose of exploration, development, and the extraction of minerals. Except as 09 specifically limited by AS 38.05.135 - 38.05.181, land may be withheld from lease 10 application on a first-come, first-served basis, and offered only on a competitive bid 11 basis when determined by the commissioner to be in the best interests of the state. 12 When authorized by AS 27.30.010, the commissioner shall allow an exploration 13 incentive credit for activities undertaken to determine the existence, location, 14 extent, feasibility of development, or quality of a locatable or leasable mineral or 15 coal deposit and in [IN] unproven areas the commissioner may offer additional 16 incentives, including a reduction of royalty to a minimum of five percent in the case 17 of oil and gas, and other terms in and granting permit or lease for exploration and 18 development whenever it appears to be in the best interests of the state to do so. 19 * Sec. 3. AS 38.05.211(c) is amended to read: 20 (c) The rental for each year 21 (1) is subject to the claim of the exploration incentive credit 22 authorized by AS 27.30; and 23 (2) after allowance of the credit claimed under (1) of this 24 subsection, shall be credited against the production royalty under AS 38.05.212 as it 25 accrues for that year. 26 * Sec. 4. AS 38.05.212(b) is amended to read: 27 (b) The production royalty 28 (1) is three percent of net income as determined under AS 43.65; and 29 (2) is subject to the exploration incentive credit authorized by 30 AS 27.30. 31 * Sec. 5. AS 43.20 is amended by adding a new section to read:
01 Sec. 43.20.044. EXPLORATION INCENTIVE CREDIT. A taxpayer may 02 apply as a credit against the tax levied under this chapter the exploration incentive 03 credit authorized by AS 27.30. 04 * Sec. 6. AS 43.65.020(a) is amended to read: 05 (a) A person subject to tax under this chapter shall make a return stating 06 specifically the items of gross income from the property, including royalty received 07 and the deductions and credits allowed by this chapter and the exploration incentive 08 credit authorized by AS 27.30, and other information for carrying out this chapter 09 that the department prescribes. The return must show the mining license number and 10 must be signed by the taxpayer or an authorized agent of the taxpayer, under penalty 11 of unsworn falsification. If receivers, trustees, or assigns are operating the property 12 or business, they shall make returns for the person engaged in mining, or the recipient 13 of royalty in connection with mining property. The tax due on the basis of the returns 14 shall be collected in the same manner as if collected from the person of whose 15 business they have custody and control. 16 * Sec. 7. This Act is retroactive to January 1, 1995, and applies to activities that qualify 17 for the exploration incentive credit authorized by AS 27.30 that are undertaken after 18 December 31, 1994. 19 * Sec. 8. This Act takes effect immediately under AS 01.10.070(c).