CSHB 197(RES): "An Act providing for exploration incentive credits for activities involving locatable and leasable mineral and coal deposits on certain land in the state; and providing for an effective date."
00CS FOR HOUSE BILL NO. 197(RES) 01 "An Act providing for exploration incentive credits for activities involving locatable 02 and leasable mineral 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 credit 09 for the eligible costs of each of the following exploration activities that are 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; 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 may not be granted under (a) of this section 06 for exploration activity described in that subsection that occurs after the mine 07 construction commencement date. In this subsection, "mine construction commencement 08 date" means the date no later than which all of the following have occurred: 09 (1) there has been issued to the owner or an agent of the owner permits, 10 leases, and title and other rights in land, and other approvals, permits, licenses, and 11 certificates, by federal, state, and local agencies that a reasonable and prudent person 12 would consider adequate to commence construction of a mine in the expectation that all 13 other approvals, permits, licenses, and certificates necessary for the completion of the 14 facilities will be obtained; 15 (2) all approvals, permits, licenses, and certificates are in full force and 16 effect, unrevoked and without any modification that might jeopardize the completion or 17 continued construction of the mine; and 18 (3) an order, judgment, decree, determination, or award of a court or 19 administrative or regulatory agency enjoining, either temporarily or permanently, the 20 construction or the continuation of construction of the mine is not in effect. 21 Sec. 27.30.020. APPLICATION OF CREDIT. An exploration incentive credit 22 granted under AS 27.30.030 may be 23 (1) applied, at the discretion of the qualified applicant, against 24 (A) taxes payable under AS 43.20 and AS 43.65 that are related 25 to production from the site on which the exploration activities occur; 26 (B) mineral production royalty payments due the state under 27 AS 38.05.135 - 38.05.175 and 38.05.212 for production from the site on which 28 the exploration activities occur; and 29 (C) annual rent payable under AS 38.05.211 for the site on which 30 the exploration activities occur; 31 (2) carried forward to a subsequent tax year or royalty or rental payment
01 period, except as limited by AS 27.30.040. 02 Sec. 27.30.030. PROCEDURE FOR OBTAINING THE CREDIT. To obtain 03 the credit authorized by this chapter, 04 (1) the prospective credit applicant must certify annual expenditures and 05 obtain approval of an annual certification of expenditures as follows: 06 (A) the applicant must submit a certification of expenditures for 07 the previous calendar year not later than 60 days after the close of that calendar 08 year; 09 (B) the certification must describe the work accomplished during 10 the previous year, the number of employees, and the names and number of 11 consultants, and provide a detailed list or ledger of expenditures; 12 (C) the applicant is not required to transmit copies of receipts 13 with the certification, but the certification is subject to audit in the discretion of 14 the commissioner; 15 (D) if the commissioner determines to audit the applicant's 16 certificate, the commissioner may require the prospective credit applicant to 17 justify claims of expenditures with receipts and other reliable information; 18 (E) the commissioner shall respond to the prospective credit 19 applicant's certification of expenditures by September 30 by approving or 20 disapproving the certification; if the commissioner 21 (i) disapproves the applicant's certification, the 22 commissioner shall state the reasons for disapproval and give the 23 applicant an opportunity to correct any problems or to provide additional 24 information; 25 (ii) approves the applicant's certification, the 26 commissioner shall certify the applicant's expenditures and specify the 27 exploration activity data requirements for that year that must be presented 28 to the department at the time of application for the credit; 29 (F) if the commissioner neither approves nor disapproves the 30 certification of expenditures by September 30, the certified expenditures are 31 automatically approved;
01 (2) the prospective credit applicant whose annual certification of 02 expenditures has been approved under (1) of this subsection may thereafter request 03 approval of the credit for the certified expenditures as follows: 04 (A) the credit applicant shall deliver to the commissioner the 05 exploration activity data identified by the commissioner under (1)(E)(ii) of this 06 section, and shall request the commissioner's approval of the exploration 07 incentive credit; 08 (B) the commissioner shall approve or disapprove the credit 09 application within six months after receipt of the application for credit; if the 10 (i) exploration activity data complies with the 11 requirements identified by the commissioner under (1)(E)(ii) of this 12 section, the commissioner shall approve the credit; 13 (ii) credit application is disapproved, the commissioner 14 shall state the reasons for disapproval and offer the applicant an 15 opportunity to correct any problems or to provide additional exploration 16 activity data or other information; 17 (C) if the commissioner neither approves nor disapproves the 18 credit application within six months after submission of the credit application, the 19 credit is approved. 20 Sec. 27.30.040. LIMIT ON CREDITS. (a) The amount of the exploration 21 incentive credit for each site that may be taken during a tax year or royalty payment 22 period may not exceed 50 percent of the combined amount payable by the applicant as 23 (1) taxes payable under AS 43.20 and AS 43.65 that are related to 24 production from the site on which the exploration activities occur; 25 (2) mineral production royalty payments due the state under 26 AS 38.05.135 - 38.05.175 and 38.05.212 for production from the site on which the 27 exploration activities occur; and 28 (3) annual rent payable under AS 38.05.211 for the site on which the 29 exploration activities occur. 30 (b) Except as its application or use is limited by AS 27.30.020 and 27.30.050, 31 a portion of a credit that is not applied or used under (a) of this section may be carried
01 forward to and applied during a subsequent tax year or royalty or rental payment period. 02 Sec. 27.30.050. USE OF CREDIT. An exploration incentive credit 03 (1) must be used within 15 tax years or royalty or rental payment periods 04 after it is approved under AS 27.30.030(a)(2), but the tax years or royalty or rental 05 payment periods in which the credit is used need not be 06 (A) the tax year or royalty or rental payment period in which the 07 qualified applicant first incurs liability for payment of tax, royalty, or rent based 08 on the applicant's activity that is the basis of the claim of the exploration 09 incentive credit; or 10 (B) consecutive periods; and 11 (2) may, for the purposes described in AS 27.30.020, be assigned by the 12 qualified applicant to the applicant's successor in interest for the site at which the 13 exploration activities occur if the successor in interest is a qualified applicant; once the 14 applicant has assigned the credit to a successor in interest, the applicant may not use the 15 assigned credit. 16 Sec. 27.30.060. RELATIONSHIP TO OTHER FUNDS. Amounts due the 17 permanent fund under AS 37.13.010 shall be calculated before the application of a credit 18 extended under this chapter. 19 Sec. 27.30.070. CONFIDENTIALITY OF DATA. (a) The commissioner shall 20 keep the exploration activity data provided under AS 27.30.030 confidential for 36 21 months after receipt by the department. 22 (b) The department is liable in damages to a person who provided the 23 exploration activity data under AS 27.30.030 if the data is disclosed in violation of (a) 24 of this section. 25 Sec. 27.30.090. DEFINITIONS. In this chapter, 26 (1) "eligible costs" mean the costs incurred for activities in direct support 27 of exploration activity conducted at the site of the exploration activity for the purpose 28 of determining the existence, location, extent, or quality of a mineral or coal deposit; the 29 term 30 (A) includes 31 (i) the costs of obtaining the approvals, permits, licenses,
01 and certificates for an exploration activity set out in AS 27.30.010(a)(1) - 02 (5); 03 (ii) direct labor costs and the cost of benefits for 04 employees directly associated with work described in AS 27.30.010(a)(1) 05 - (5); 06 (iii) the cost of renting or leasing equipment from parties 07 not affiliated with the applicant; 08 (iv) the reasonable costs of maintaining and operating 09 equipment; 10 (v) insurance and bond premiums associated with the 11 activities set out in (i) - (iv) of this subparagraph; 12 (vi) payments to consultants and independent contractors; 13 and 14 (vii) the general expense of operating the taxpayer's 15 business, including the costs of materials and supplies, if those expenses 16 and costs are directly attributable to the work described in 17 AS 27.30.010(a)(1) - (5); 18 (B) does not include noncash expenses such as depreciation and 19 reserves, interest or other costs of borrowed funds, return on investment, 20 insurance or bond premiums not covered under (A)(v) of this paragraph, or any 21 other expense that is unreasonable or that the applicant has not incurred to 22 complete work described in AS 27.30.010(a)(1) - (5); 23 (2) "exploration activity data" includes, as applicable, 24 (A) a representative skeleton core for each hole cored or a 25 representative set of cuttings for each hole rotary drilled; 26 (B) chemical analytical data and noninterpretive geophysical data; 27 (C) aerial photographs or a topographic or geologic map showing 28 the location of the drill holes, sample locations, or the other exploration activities 29 undertaken; 30 (3) "geochemical methods" means soil, rock, water, air, vegetation, and 31 similar samples collected and their chemical analyses;
01 (4) "geophysical methods" means all geophysical data gathering methods 02 used in mineral or coal exploration, including seismic, gravity, magnetic, radiometric, 03 radar, and electromagnetic and other remote sensing measurements; 04 (5) "qualified applicant" means 05 (A) a natural person who is at least 18 years of age; 06 (B) a partnership qualified to do business in the state; 07 (C) a corporation qualified to do business in the state; 08 (D) a limited liability company qualified to do business in the 09 state; 10 (E) a legal guardian or trustee of a qualified natural person 11 described in (A) of this paragraph; or 12 (F) any association of persons listed in (A) - (E) of this 13 paragraph. 14 * Sec. 2. AS 38.05.135(a) is amended to read: 15 (a) Except as otherwise provided, valuable mineral deposits in land belonging 16 to the state shall be open to exploration, development, and the extraction of minerals. 17 All land, together with tide, submerged, or shoreland, to which the state holds title to or 18 to which the state may become entitled, may be obtained by permit or lease for the 19 purpose of exploration, development, and the extraction of minerals. Except as 20 specifically limited by AS 38.05.135 - 38.05.181, land may be withheld from lease 21 application on a first-come, first-served basis, and offered only on a competitive bid basis 22 when determined by the commissioner to be in the best interests of the state. When 23 authorized by AS 27.30.030, the commissioner shall allow an exploration incentive 24 credit for activities undertaken to determine the existence, location, extent, or 25 quality of a locatable or leasable mineral or coal deposit and in [IN] unproven areas 26 the commissioner may offer additional incentives, including a reduction of royalty to a 27 minimum of five percent in the case of oil and gas, and other terms in and granting 28 permit or lease for exploration and development whenever it appears to be in the best 29 interests of the state to do so. 30 * Sec. 3. AS 38.05.211(c) is amended to read: 31 (c) The rental for each year
01 (1) is subject to the claim of the exploration incentive credit 02 authorized by AS 27.30; and 03 (2) after allowance of the credit claimed under (1) of this subsection, 04 shall be credited against the production royalty under AS 38.05.212 as it accrues for that 05 year. 06 * Sec. 4. AS 38.05.212(b) is amended to read: 07 (b) The production royalty 08 (1) is three percent of net income as determined under AS 43.65; and 09 (2) is subject to the exploration incentive credit authorized by 10 AS 27.30. 11 * Sec. 5. AS 43.20 is amended by adding a new section to read: 12 Sec. 43.20.044. EXPLORATION INCENTIVE CREDIT. A taxpayer may apply 13 as a credit against the tax levied under this chapter the exploration incentive credit 14 authorized by AS 27.30. 15 * Sec. 6. AS 43.65.020(a) is amended to read: 16 (a) A person subject to tax under this chapter shall make a return stating 17 specifically the items of gross income from the property, including royalty received and 18 the deductions and credits allowed by this chapter and the exploration incentive credit 19 authorized by AS 27.30, and other information for carrying out this chapter that the 20 department prescribes. The return must show the mining license number and must be 21 signed by the taxpayer or an authorized agent of the taxpayer, under penalty of unsworn 22 falsification. If receivers, trustees, or assigns are operating the property or business, they 23 shall make returns for the person engaged in mining, or the recipient of royalty in 24 connection with mining property. The tax due on the basis of the returns shall be 25 collected in the same manner as if collected from the person of whose business they have 26 custody and control. 27 * Sec. 7. This Act is retroactive to January 1, 1995, and applies to activities that qualify for 28 the exploration incentive credit authorized by AS 27.30 that are undertaken after December 31, 29 1994. 30 * Sec. 8. This Act takes effect immediately under AS 01.10.070(c).