HB 397: "An Act relating to a surcharge on oil produced in the state; establishing the Arctic transportation and resource access fund; and providing for an effective date."
00 HOUSE BILL NO. 397 01 "An Act relating to a surcharge on oil produced in the state; establishing the Arctic 02 transportation and resource access fund; and providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 43.55.023(c) is amended to read: 05 (c) A credit or portion of a credit under this section 06 (1) may not be used to reduce a person's tax liability under 07 AS 43.55.011(e) for any calendar year below zero; 08 (2) may, if not used under this subsection, be applied in a later 09 calendar year; 10 (3) may, regardless of when the credit was earned, be used to satisfy a 11 tax, interest, penalty, fee, or other charge that 12 (A) is related to the tax due under this chapter for a prior year, 13 except for a surcharge under AS 43.55.201, [AS 43.55.201 - 43.55.299 OR] 14 43.55.300, or 43.55.350 or the tax levied by AS 43.55.011(i) or 43.55.014; and
01 (B) has not, for the purpose of art. IX, sec. 17(a), Constitution 02 of the State of Alaska, been subject to an administrative proceeding or 03 litigation. 04 * Sec. 2. AS 43.55.023(e) is amended to read: 05 (e) A person to which a transferable tax credit certificate is issued under (d) of 06 this section may transfer the certificate to another person, and a transferee may further 07 transfer the certificate. Subject to the limitations set out in (a) - (d) of this section, and 08 notwithstanding any action the department may take with respect to the applicant 09 under (g) of this section, the owner of a certificate may apply the credit or a portion of 10 the credit shown on the certificate 11 (1) against a tax levied by AS 43.55.011(e); however, a credit shown 12 on a transferable tax credit certificate may not be applied under this paragraph to 13 reduce a transferee's total tax liability under AS 43.55.011(e) for oil and gas produced 14 during a calendar year to less than 80 percent of the tax that would otherwise be due 15 without applying that credit; any portion of a credit not used under this paragraph may 16 be applied in a later period; or 17 (2) regardless of when the credit was earned, to satisfy a tax, interest, 18 penalty, fee, or other charge that 19 (A) is related to the tax due under this chapter, except for a 20 surcharge under AS 43.55.201, [AS 43.55.201 - 43.55.299 OR] 43.55.300, or 21 43.55.350 or the tax levied by AS 43.55.011(i) or 43.55.014; 22 (B) is for a calendar year before the year in which the 23 certificate is applied; and 24 (C) has not, for the purpose of art. IX, sec. 17(a), Constitution 25 of the State of Alaska, been subject to an administrative proceeding or 26 litigation. 27 * Sec. 3. AS 43.55.025(h) is amended to read: 28 (h) A producer that purchases a production tax credit certificate may apply the 29 credits against its production tax levied by AS 43.55.011(e). Regardless of the price 30 the producer paid for the certificate, the producer may receive a credit against its 31 production tax liability for the full amount of the credit, but for not more than the
01 amount for which the certificate is issued. A production tax credit or a portion of a 02 production tax credit or a production tax credit certificate or a portion of a production 03 tax credit certificate allowed under this section 04 (1) may not be applied more than once; 05 (2) may be applied in a later calendar year; 06 (3) may, regardless of when the credit was earned, be applied to satisfy 07 a tax, interest, penalty, fee, or other charge that 08 (A) is related to the tax due under this chapter for a prior year, 09 except for a surcharge under AS 43.55.201, [AS 43.55.201 - 43.55.299 OR] 10 43.55.300, or 43.55.350 or the tax levied by AS 43.55.011(i) or 43.55.014; and 11 (B) has not, for the purpose of art. IX, sec. 17(a), Constitution 12 of the State of Alaska, been subject to an administrative proceeding or 13 litigation. 14 * Sec. 4. AS 43.55.165(e) is amended to read: 15 (e) For purposes of this section, lease expenditures do not include 16 (1) depreciation, depletion, or amortization; 17 (2) oil or gas royalty payments, production payments, lease profit 18 shares, or other payments or distributions of a share of oil or gas production, profit, or 19 revenue, except that a producer's lease expenditures applicable to oil and gas produced 20 from a lease issued under AS 38.05.180(f)(3)(B), (D), or (E) include the share of net 21 profit paid to the state under that lease; 22 (3) taxes based on or measured by net income; 23 (4) interest or other financing charges or costs of raising equity or debt 24 capital; 25 (5) acquisition costs for a lease or property or exploration license; 26 (6) costs arising from fraud, wilful misconduct, gross negligence, 27 violation of law, or failure to comply with an obligation under a lease, permit, or 28 license issued by the state or federal government; 29 (7) fines or penalties imposed by law; 30 (8) costs of arbitration, litigation, or other dispute resolution activities 31 that involve the state or concern the rights or obligations among owners of interests in,
01 or rights to production from, one or more leases or properties or a unit; 02 (9) costs incurred in organizing a partnership, joint venture, or other 03 business entity or arrangement; 04 (10) amounts paid to indemnify the state; the exclusion provided by 05 this paragraph does not apply to the costs of obtaining insurance or a surety bond from 06 a third-party insurer or surety; 07 (11) surcharges levied under AS 43.55.201, [OR] 43.55.300, or 08 43.55.350; 09 (12) an expenditure otherwise deductible under (b) of this section that 10 is a result of an internal transfer, a transaction with an affiliate, or a transaction 11 between related parties, or is otherwise not an arm's length transaction, unless the 12 producer establishes to the satisfaction of the department that the amount of the 13 expenditure does not exceed the fair market value of the expenditure; 14 (13) an expenditure incurred to purchase an interest in any corporation, 15 partnership, limited liability company, business trust, or any other business entity, 16 whether or not the transaction is treated as an asset sale for federal income tax 17 purposes; 18 (14) a tax levied under AS 43.55.011 or 43.55.014; 19 (15) costs incurred for dismantlement, removal, surrender, or 20 abandonment of a facility, pipeline, well pad, platform, or other structure, or for the 21 restoration of a lease, field, unit, area, tract of land, body of water, or right-of-way in 22 conjunction with dismantlement, removal, surrender, or abandonment; a cost is not 23 excluded under this paragraph if the dismantlement, removal, surrender, or 24 abandonment for which the cost is incurred is undertaken for the purpose of replacing, 25 renovating, or improving the facility, pipeline, well pad, platform, or other structure; 26 (16) costs incurred for containment, control, cleanup, or removal in 27 connection with any unpermitted release of oil or a hazardous substance and any 28 liability for damages imposed on the producer or explorer for that unpermitted release; 29 this paragraph does not apply to the cost of developing and maintaining an oil 30 discharge prevention and contingency plan under AS 46.04.030; 31 (17) costs incurred to satisfy a work commitment under an exploration
01 license under AS 38.05.132; 02 (18) that portion of expenditures, that would otherwise be qualified 03 capital expenditures, as defined in AS 43.55.023, incurred during a calendar year that 04 are less than the product of $0.30 multiplied by the total taxable production from each 05 lease or property, in BTU equivalent barrels, during that calendar year, except that, 06 when a portion of a calendar year is subject to this provision, the expenditures and 07 volumes shall be prorated within that calendar year; 08 (19) costs incurred for repair, replacement, or deferred maintenance of 09 a facility, a pipeline, a structure, or equipment, other than a well, that results in or is 10 undertaken in response to a failure, problem, or event that results in an unscheduled 11 interruption of, or reduction in the rate of, oil or gas production; or costs incurred for 12 repair, replacement, or deferred maintenance of a facility, a pipeline, a structure, or 13 equipment, other than a well, that is undertaken in response to, or is otherwise 14 associated with, an unpermitted release of a hazardous substance or of gas; however, 15 costs under this paragraph that would otherwise constitute lease expenditures under (a) 16 and (b) of this section may be treated as lease expenditures if the department 17 determines that the repair or replacement is solely necessitated by an act of war, by an 18 unanticipated grave natural disaster or other natural phenomenon of an exceptional, 19 inevitable, and irresistible character, the effects of which could not have been 20 prevented or avoided by the exercise of due care or foresight, or by an intentional or 21 negligent act or omission of a third party, other than a party or its agents in privity of 22 contract with, or employed by, the producer or an operator acting for the producer, but 23 only if the producer or operator, as applicable, exercised due care in operating and 24 maintaining the facility, pipeline, structure, or equipment, and took reasonable 25 precautions against the act or omission of the third party and against the consequences 26 of the act or omission; in this paragraph, 27 (A) "costs incurred for repair, replacement, or deferred 28 maintenance of a facility, a pipeline, a structure, or equipment" includes costs 29 to dismantle and remove the facility, pipeline, structure, or equipment that is 30 being replaced; 31 (B) "hazardous substance" has the meaning given in
01 AS 46.03.826; 02 (C) "replacement" includes renovation or improvement; 03 (20) costs incurred to construct, acquire, or operate a refinery or crude 04 oil topping plant, regardless of whether the products of the refinery or topping plant 05 are used in oil or gas exploration, development, or production operations; however, if 06 a producer owns a refinery or crude oil topping plant that is located on or near the 07 premises of the producer's lease or property in the state and that processes the 08 producer's oil produced from that lease or property into a product that the producer 09 uses in the operation of the lease or property in drilling for or producing oil or gas, the 10 producer's lease expenditures include the amount calculated by subtracting from the 11 fair market value of the product used the prevailing value, as determined under 12 AS 43.55.020(f), of the oil that is processed; 13 (21) costs of lobbying, public relations, public relations advertising, or 14 policy advocacy. 15 * Sec. 5. AS 43.55.201(b) is amended to read: 16 (b) The surcharge imposed by (a) of this section is in addition to the tax 17 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 18 from each lease or property during the preceding month. The surcharge is in addition 19 to the surcharges [SURCHARGE] imposed by AS 43.55.300 and 43.55.350 20 [AS 43.55.300 - 43.55.310]. 21 * Sec. 6. AS 43.55.300(b) is amended to read: 22 (b) The surcharge imposed by (a) of this section is in addition to the tax 23 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 24 from each lease or property during the preceding month. The surcharge is in addition 25 to the surcharges [SURCHARGE] imposed by AS 43.55.201 and 43.55.350 26 [AS 43.55.201 - 43.55.231]. 27 * Sec. 7. AS 43.55 is amended by adding new sections to read: 28 Article 3A. Alaska Additional Conditional Surcharge on Oil. 29 Sec. 43.55.350. Alaska additional conditional surcharge on oil. (a) Every 30 producer of oil shall pay a surcharge on oil produced from each lease or property in 31 the state, less any oil the ownership or right to which is exempt from taxation. The
01 surcharge is equal to $.09 per barrel of oil less the tax amount per barrel, if any, 02 imposed under 26 U.S.C. 4611(c)(2)(B). The surcharge under this section may not be 03 less than zero. 04 (b) The surcharge imposed by (a) of this section is in addition to the tax 05 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 06 from each lease or property during the preceding month. The surcharge is in addition 07 to the surcharge imposed by AS 43.55.201 and 43.55.300. 08 (c) A producer of oil shall make a report of production on March 31 of the 09 year following the calendar year of production and in the same manner and under the 10 same penalties as required under AS 43.55.011 - 43.55.180. 11 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 12 property is not considered to be produced from a lease or property for purposes of this 13 section. 14 (e) The surcharge levied under this section and interest and penalties collected 15 with respect to the surcharge shall be deposited in the general fund. 16 (f) If the commissioner determines that the federal government is collecting a 17 tax from refineries on crude oil under 26 U.S.C. 4611(c)(2)(B) at a rate of $.09 per 18 barrel or greater, the commissioner shall suspend imposition and collection of the 19 surcharge levied and collected under this section. Suspension of the imposition and 20 collection of the surcharge begins on the day the tax under 26 U.S.C. 4611(c)(2)(B) at 21 a rate of $.09 per barrel or greater is imposed or the day the section of the Act 22 imposing the tax under 26 U.S.C. 4611(c)(2)(B) at a rate of $.09 per barrel or greater 23 is enacted, whichever occurs later. Before the first day of a suspension authorized by 24 this subsection, the commissioner shall make a reasonable effort to notify all persons 25 who are known to the department to be paying the surcharge under this section that the 26 surcharge will be suspended. If the commissioner determines that the federal 27 government is not collecting a tax from refineries on crude oil under 26 U.S.C. 28 4611(c)(2)(B) at a rate of $.09 per barrel or greater, and the state is not currently 29 collecting the surcharge imposed under (a) of this section, the commissioner shall 30 reimpose the surcharge levied under (a) of this section. Reimposition of the surcharge 31 begins on the day the tax under 26 U.S.C. 4611(c)(2)(B) is repealed or imposed at a
01 rate of less than $.09 per barrel or the day the Act repealing or imposing the tax is 02 enacted, whichever occurs later. Before the first day of a reimposition authorized by 03 this subsection, the commissioner shall make a reasonable effort to notify all persons 04 who the department knows are required to pay the surcharge under this section that the 05 surcharge will be reimposed. 06 (g) Failure of the commissioner to provide notice to persons under (f) of this 07 section does not waive the imposition of the surcharge under this section. 08 (h) If the surcharge under this section and a tax under 26 U.S.C. 4611(c)(2)(B) 09 are imposed simultaneously because of the retroactivity of the federal tax, the 10 surcharge under this section will not be refunded. 11 (i) The proceeds of the surcharge levied under this section shall be accounted 12 for separately and deposited into the Arctic transportation and resource access fund 13 established under AS 43.55.360. 14 Sec. 43.55.360. Arctic transportation and resource access fund. (a) The 15 Arctic transportation and resource access fund is established as a separate account in 16 the general fund. The fund consists of proceeds from 17 (1) the surcharge on oil imposed under AS 43.55.350; and 18 (2) tolls collected on infrastructure constructed with funds from the 19 Arctic transportation and resource access fund. 20 (b) The legislature may appropriate the actual balance of the Arctic 21 transportation and resource access fund for the construction of regional transportation 22 infrastructure north of 68 degrees North latitude. 23 (c) Nothing in this section creates a dedicated fund. 24 * Sec. 8. AS 43.55.900(24) is amended to read: 25 (24) "surcharge" means 26 (A) when used in AS 43.55.201 - 43.55.299, the surcharge 27 levied by AS 43.55.201; 28 (B) when used in AS 43.55.300 - 43.55.310, the surcharge 29 levied by AS 43.55.300; 30 (C) when used in AS 43.55.350 and 43.55.360, the surcharge 31 levied by AS 43.55.350;
01 * Sec. 9. The uncodified law of the State of Alaska is amended by adding a new section to 02 read: 03 TRANSITION. Notwithstanding AS 43.55.350(a), enacted by sec. 7 of this Act, 04 which subtracts from the surcharge any tax amount imposed under 26 U.S.C. 4611(c)(2)(B), 05 and AS 43.55.350(f), enacted by sec. 7 of this Act, which requires the commissioner of 06 revenue to determine whether a tax of greater than $.09 per barrel is imposed under 26 U.S.C. 07 4611(c)(2)(B) before imposing the surcharge under AS 43.55.350(a), enacted by sec. 7 of this 08 Act, the commissioner shall impose the surcharge under AS 43.55.350 retroactively under 09 sec. 10 of this Act for oil produced on and after January 1, 2018, except that the portion of the 10 tax imposed retroactively shall be imposed at a rate of $.09 per barrel. 11 * Sec. 10. The uncodified law of the State of Alaska is amended by adding a new section to 12 read: 13 RETROACTIVITY. This Act is retroactive to January 1, 2018. 14 * Sec. 11. This Act takes effect immediately under AS 01.10.070(c).