SB 85: "An Act providing for a tax credit applicable to the oil and gas production tax based on the cost of developing new oil and gas production; and providing for an effective date."
00 SENATE BILL NO. 85 01 "An Act providing for a tax credit applicable to the oil and gas production tax based on 02 the cost of developing new oil and gas production; and providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 43.20.043(g) is amended to read: 05 (g) A taxpayer that obtains a credit for a qualified capital investment or cost 06 incurred for qualified services under this section may not also claim a tax credit or 07 royalty modification for the same qualified capital investment or cost incurred for 08 qualified services under AS 38.05.180(i), AS 41.09.010, AS 43.55.023, [OR] 09 43.55.025, or 43.55.026. However, a taxpayer may elect not to obtain a credit under 10 this section in order to qualify for a credit provided under AS 38.05.180(i), 11 AS 41.09.010, AS 43.55.023, [OR] 43.55.025, or 43.55.026. 12 * Sec. 2. AS 43.55.023(a) is amended to read: 13 (a) A producer or explorer may take a tax credit for a qualified capital 14 expenditure as follows:
01 (1) notwithstanding that a qualified capital expenditure may be a 02 deductible lease expenditure for purposes of calculating the production tax value of oil 03 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 04 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, [OR] AS 43.55.025, or 43.55.026, a 05 producer or explorer that incurs a qualified capital expenditure may also elect to apply 06 a tax credit against a tax levied by AS 43.55.011(e) in the amount of 20 percent of that 07 expenditure; however, not more than half of the tax credit may be applied for a single 08 calendar year; 09 (2) a producer or explorer may take a credit for a qualified capital 10 expenditure incurred in connection with geological or geophysical exploration or in 11 connection with an exploration well only if the producer or explorer 12 (A) agrees, in writing, to the applicable provisions of 13 AS 43.55.025(f)(2); 14 (B) submits to the Department of Natural Resources all data 15 that would be required to be submitted under AS 43.55.025(f)(2). 16 * Sec. 3. AS 43.55 is amended by adding a new section to read: 17 Sec. 43.55.026. Development cost credit. (a) This section applies to a credit 18 for a qualified expenditure incurred before the date of production of oil or gas in 19 paying quantities for a lease or property that is taxable under AS 43.55.011(e) and that 20 contains land that, as of December 31, 2010, is not or previously had not been within a 21 unit or produced oil or gas in paying quantities. 22 (b) The amount of the credit under this section is equal to 100 percent of the 23 qualified development expenditures that are incurred after the completion of the first 24 well drilled that discovers a pool capable of commercial production from the lease or 25 property and before the commencement of production in paying quantities. The 26 department, in consultation with the 27 (1) Alaska Oil and Gas Conservation Commission, shall determine the 28 date on which the first well drilled discovered a pool capable of production from a 29 lease or property for which the credit is taken; and 30 (2) Department of Natural Resources, shall determine the date of the 31 commencement of production in paying quantities from the lease or property for
01 which the credit is taken. 02 (c) The credit under this section may be applied against the tax due under 03 AS 43.55.011(e) during the five-year period immediately following the date of the 04 commencement of production in paying quantities, or, if the credit is fully applied 05 before the end of the five-year period, until the date the credits for qualified 06 development expenditures have been fully applied against the tax due under 07 AS 43.55.011(e), whichever occurs first. A credit for a qualified expenditure expires if 08 not taken within five years after the date of the commencement of production in 09 paying quantities and may not be applied to the tax due under AS 43.55.011(e) for the 10 production of oil or gas from a lease or property not eligible for the credit under this 11 section. 12 (d) A qualified development expenditure that is taken as a credit under this 13 section may not be used as an expenditure for which a credit may be taken under 14 AS 43.20.043 or AS 43.55.023. A credit under AS 43.55.023 may not be taken against 15 the tax due under AS 43.55.011(e) during the same month in which a credit is taken 16 under this section. 17 (e) A credit or portion of a credit under this section is not transferable and may 18 not be used to reduce a person's tax liability under AS 43.55.011(e) to below zero for 19 any calendar year. 20 (f) The department shall adopt regulations describing the procedures for 21 determining the amount of the credit, record keeping, verification of the accuracy of 22 the credit claimed, and other regulations necessary to administer this section. 23 (g) If a lease or property for which a credit may be taken under this section 24 subsequently becomes a part of a unit under AS 38.05.180(p), the credit may be 25 applied only against the tax due under AS 43.55.011(e) for the production of oil and 26 gas attributable to the lease or property that qualified for the credit. 27 (h) In this section, 28 (1) "production in paying quantities" means production of oil and gas 29 in quantities sufficient to recover the cost of operating and marketing, although the 30 quantity may be insufficient to recover the cost of drilling; 31 (2) "qualified development expenditure" means an expenditure, other
01 than an expenditure for exploring for new oil or gas reserves, that may be recognized 02 as a 03 (A) qualified capital expenditure as defined in AS 43.55.023; 04 or 05 (B) lease expenditure under AS 43.55.165 if oil or gas had been 06 produced from the lease or property at the time the qualified development 07 expenditure was incurred. 08 * Sec. 4. AS 43.55.180(a) is amended to read: 09 (a) The department shall study 10 (1) the effects of the provisions of this chapter on oil and gas 11 exploration, development, and production in the state, on investment expenditures for 12 oil and gas exploration, development, and production in the state, on the entry of new 13 producers into the oil and gas industry in the state, on state revenue, and on tax 14 administration and compliance, giving particular attention to the tax rates provided 15 under AS 43.55.011, the tax credits provided under AS 43.55.023 - 43.55.026 16 [AS 43.55.023 - 43.55.025], and the deductions for and adjustments to lease 17 expenditures provided under AS 43.55.160 - 43.55.170; and 18 (2) the effects of the tax rates under AS 43.55.011(i) on state revenue 19 and on oil and gas exploration, development, and production on private land, and the 20 fairness of those tax rates for private landowners. 21 * Sec. 5. This Act takes effect immediately under AS 01.10.070(c).