HB 220: "An Act establishing an exploration and development incentive tax credit for persons engaged in the exploration for and development of less than 150 barrels of oil or of gas for sale and delivery without reference to volume from a lease or property in the state; and providing for an effective date."
00 HOUSE BILL NO. 220 01 "An Act establishing an exploration and development incentive tax credit for persons 02 engaged in the exploration for and development of less than 150 barrels of oil or of gas 03 for sale and delivery without reference to volume from a lease or property in the state; 04 and providing for an effective date." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. AS 43.20 is amended by adding a new section to read: 07 Sec. 43.20.043. Oil and gas exploration and development tax credit. (a) 08 Subject to the terms and conditions of this section, and in addition to any other credit 09 authorized to the taxpayer by this chapter, a taxpayer engaging in the exploration for 10 and development of oil or gas may apply as a credit against the state tax liability that 11 may be imposed on the taxpayer under this chapter, for a tax year after December 31, 12 2001, 13 (1) 10 percent of the taxpayer's qualified capital investment; and 14 (2) 100 percent of the annual cost incurred by the taxpayer for
01 qualified services in the state during each tax year for which a credit is allowed for a 02 qualified capital investment under (1) of this subsection. 03 (b) Expenditures qualifying for the taxpayer's qualified investment credit 04 under (a)(1) of this section must be 05 (1) cash expenditures or binding payment agreements entered into after 06 December 31, 2001; and 07 (2) made for assets first placed in service in the state during the tax 08 year in which the credit is claimed; for purposes of this paragraph, "placed in service 09 in the state" means that the first use of the qualified investment is in this state; if the 10 property on which the claim of the credit is based has been used elsewhere in the tax 11 year of acquisition and is brought to this state during that year or a subsequent year, 12 the property does not qualify for the investment credit. 13 (c) The credit per tax year allowed by (a) of this section may not exceed 50 14 percent of the taxpayer's tax liability. An unused portion of the credit for the tax year 15 (1) may be carried forward into one or more of the following tax years, 16 except that the unused credit from one tax year may not be carried forward for more 17 than five following tax years; 18 (2) shall be applied to the taxpayer's tax liability under this chapter 19 during the following tax year before allowance of a credit allowed by (a) of this 20 section for that following tax year. 21 (d) To obtain the credit allowed by this section, the taxpayer shall, with the 22 taxpayer's tax return, submit, on a form prescribed and provided by the department, 23 information that demonstrates that the taxpayer is eligible for the credit and evidence 24 of the expenses that are the basis of the claim of the credit. The taxpayer has the 25 burden of demonstrating compliance with the requirements of this section to entitle the 26 taxpayer to the claim of and the amount of the credit. 27 (e) A taxpayer entitled to a credit under this section 28 (1) may not convey, assign, or transfer the credit to another taxpayer or 29 business entity unless the conveyance, assignment, or transfer of the credit is part of 30 the conveyance, assignment, or transfer of the taxpayer's business; 31 (2) forfeits the credit to which the taxpayer is entitled during the tax
01 year and any carryover of it under (c) of this section, but does not forfeit the portion of 02 the credit that accrued in a previous taxable year that may be carried over under (c) of 03 this section, if the taxpayer 04 (A) disposes of the qualified capital investment; 05 (B) takes the qualified investment out of service; or 06 (C) transfers the qualified investment out of this state. 07 (f) A taxpayer is not entitled to a credit under this section for expenditures 08 made or incurred for the qualified capital investment or for qualified services made for 09 exploration and development of oil or gas that occur in the area of Alaska lying north 10 of 68 degrees North latitude. 11 (g) In this section, 12 (1) "qualified capital investment" means a cash expenditure or binding 13 payment agreement, as described in (b)(1) of this section, for real property or tangible 14 personal property used in this state in the exploration and development of oil and gas 15 reserves if the reserves produce less than 150 barrels of oil a day or produce gas for 16 sale and delivery; in this paragraph "property" includes 17 (A) property used in the operation or maintenance of facilities 18 for exploration or development of oil or gas; 19 (B) property that is placed in use under a capitalized lease or an 20 operating lease; and 21 (C) the following: 22 (i) machinery, appliances, supplies, and equipment; 23 (ii) drilling rigs, wells, gathering lines and transmission 24 lines, pumping stations, compressor stations, power plants, topping 25 plants, and processing units; 26 (iii) roads, tank farms, tanker terminals, docks and other 27 port facilities, and air strips; 28 (iv) aircraft and motor vehicles owned by a person 29 whose principal business in the state is the exploration for or 30 development of gas or unrefined oil and whose operation of the aircraft 31 or motor vehicle directly relates to the conduct of that business;
01 (v) maintenance equipment and facilities, and 02 maintenance camps and other related facilities; and 03 (vi) communications facilities owned by a person 04 whose principal business in the state is the exploration for or 05 development of gas or unrefined oil and whose operation of the 06 communications facilities directly relates to the conduct of that 07 business; 08 (2) "qualified services" means expenditures for labor, seismic, and 09 associated services related to a qualified capital investment. 10 * Sec. 2. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 CLAIM OF OIL AND GAS EXPLORATION AND DEVELOPMENT TAX 13 CREDIT CONTINUED. A taxpayer who, on the effective date of repeal of AS 43.20.043 by 14 sec. 3 of this Act, may claim the balance of any unused portion of the oil and gas exploration 15 and development tax credit as a carry-forward under AS 43.20.043(c) may, notwithstanding 16 the repeal of that subsection, continue to claim the balance of the credit until the claim of the 17 credit is exhausted or until the tax year ending December 31, 2016, whichever occurs earlier. 18 The provisions of AS 43.20.043 as they read on the day immediately preceding the effective 19 date of the repeal of the section apply to the claim of the credit if carried forward under this 20 section. 21 * Sec. 3. AS 43.20.043 is repealed. 22 * Sec. 4. Section 3 of this Act takes effect January 1, 2012. 23 * Sec. 5. Except as provided in sec. 4 of this Act, this Act takes effect immediately under 24 AS 01.10.070(c).