Legislature(2015 - 2016)BARNES 124
03/30/2016 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| SB125 | |
| HB282 | |
| HB253 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 253 | TELECONFERENCED | |
| *+ | HB 282 | TELECONFERENCED | |
| + | SB 125 | TELECONFERENCED | |
| += | HB 286 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 253-ELCTRNC TAX RETURN;MINING LIC. TAX & FEES
1:29:08 PM
CO-CHAIR TALERICO announced that the next order of business is
HOUSE BILL NO. 253, "An Act requiring the electronic filing of a
tax return or report with the Department of Revenue;
establishing a civil penalty for failure to electronically file
a return or report; relating to exemptions from the mining
license tax; relating to the mining license tax rate; relating
to mining license application, renewal, and fees; and providing
for an effective date." [Before the committee was the proposed
committee substitute (CS) for HB 253, Version 29-GH2924\N,
Nauman, 3/17/16, adopted as the working document on 3/28/16.]
[During this hearing, amendments to Version N of HB 253 were
discussed or adopted. Because of their length, the longer
amendments are found at the end of the minutes for this bill.
The shorter amendments are included in the main text.]
1:30:10 PM
REPRESENTATIVE SEATON moved to adopt the corrected version of
Amendment 1, labeled 29-GH2924\N.15, Nauman, 3/30/16. [The text
of Amendment 1 is provided at the end of the minutes for
HB 253.]
REPRESENTATIVE HERRON objected for discussion purposes.
REPRESENTATIVE SEATON explained that Amendment 1 relates to
production royalties on mining. On page 1, line 2, following
"fees" the amendment would insert "relating to production
royalties on mining;" within the title. He said the meat of the
amendment goes to Section 5. Under Amendment 1 the royalty
would be recalculated from 3 percent of net profits to 3 percent
of either net smelter return or the gross value at the point of
production. The reason for two different definitions is because
the minerals coming out of mines are handled in two different
ways and this would establish how that is done. Section 6
establishes what the net smelter return is, which is when the
mineral goes into a smelter and comes out as a finished product;
an amount is subtracted for the processing fees and what comes
out is the value at that point of production. Section 7 defines
gross value at the point of reduction. Those calculations are
different because many times mines shift concentrates; a product
that hasn't gone through a smelter may be sold at that point, so
when it comes off of the mine and is shipped the gross value at
the point of production is established there.
REPRESENTATIVE SEATON further explained that the additional
verbiage in the sections on net smelter returns and gross value
at the point of production would require that this must be an
arm's length transaction similar to a transaction between two
different parties, people, or companies. In the event a person
sells it to themselves, the person could not declare all of the
loss in an inappropriate place or declare inappropriate
expenses. Representative Seaton pointed out that Sections 1-4
are also included in Amendment 1. He said royalty is the
state's ownership value in the minerals that are there and it as
inappropriate to have a tax credit applied against the state's
ownership value. Exploration tax credits could be applied
against taxes, whether that's the mining license tax or against
corporation income tax, but it shouldn't reduce the value of the
state's portion of the minerals.
1:34:07 PM
CO-CHAIR TALERICO asked how the gross value at the point of
production is determined, given there is a lot of processing
from pit to transportation system.
ED FOGELS, Deputy Commissioner, Office of the Commissioner,
Department of Natural Resources (DNR), responded that DNR does
not track these costs and does not have the expertise to figure
it out. The department does not know how it would determine
these values at this point, so it is something that would have
to be determined going forward.
CO-CHAIR TALERICO asked whether DNR would be reliant, to some
degree, upon the producer. He said he can think of a particular
product that, although it may seem to be wildly profitable, it
is after it is crushed, screened, smelted, transported, and
sold, so there are all of those costs. Potentially, there is an
argument that that it is not the point of production, the point
of production is actually pulling it out of the ground.
Everything, beyond all of the things he just mentioned are value
added to the product. He asked whether there is an argument
that could be poised that "this is point of production" and
"this is processed product or value-added product."
MR. FOGELS replied is not in a position to answer the question,
but he does know that if this were to go forward DNR would have
to rely on the operator to tell the department what those costs
are on either side. As to how the department verifies the costs
or audits the operator somewhere down the road, he does not
know. The department would be able to give the committee a
clear picture of the fiscal benefits to the state from these
changes, or the impact to the operator at this point.
1:36:50 PM
REPRESENTATIVE SEATON directed attention to Amendment 1, page 4,
lines 7-10, [subsection (b)], and said they address exactly what
Co-Chair Talerico is talking about. The language states:
(b) Except as provided in (c) of this
section, the value of a resource immediately after its
removal from the mine is the price received by the
person engaged in the mining of the resource adjusted
for value added after the resource was produced.
REPRESENTATIVE SEATON then referred to page 4, lines 11-13,
subsection (c), of the amendment, which state:
(c) The price received by the person engaged in
the mining of the resources may be rejected by the
department as the gross value at the point of
production when the
(1) price received is less than the fair
market value;
(2) price received does not reflect the
total value received by the seller in the transaction;
(3) parties to the transaction are
affiliated; or
(4) price received was not negotiated in an
arm's length transaction between the buyer and seller.
REPRESENTATIVE SEATON said this language is exactly as outlined
by Co-Chair Talerico. In all these tax cases, including oil
taxes, the producers will tell the state what the costs are.
Those are then audited and would only be rejected if considered
unreasonable or unfair. The state has an audit procedure and
not a valuation determining feature under the way this bill is
crafted. Subsection (c) provides the parameters of how the
state could not accept a price that is given by the producer.
REPRESENTATIVE SEATON next referred to page 4, lines 20-23,
subsection (d), of the amendment, which state:
(d) If the department rejects the price
reported by the person engaged in the mining of the
resource, the department shall substitute the fair
market value of the resource on the date and at the
place of production for purposes of determining the
production royalty liability under this chapter.
REPRESENTATIVE SEATON pointed out that under this language if
the department substitutes fair market value it will have to
have reasoning for doing that, such as substantiation that the
value is less than fair market value or any of the conditions
[listed under subsection (c)]. He explained that that is what
is being considered in the bill for determining the value of the
material in order to calculate the state's royalty.
1:39:20 PM
REPRESENTATIVE JOSEPHSON surmised that, while the accounting
called for under Amendment 1 is different than what the
department is doing now, the department already has to look at
varying types of information in documents to inspect a net
profit value. While, Amendment 1 would be a different approach
for that sort of analysis, he presumed it is something that DNR
or the Department of Revenue (DOR) would have to do now.
MR. FOGELS answered he has not reviewed this with staff as far
as all of the things that would have to be done by DNR.
Clearly, as he reads the bill, there is a lot more involved here
that DNR would have to be looking at in order to determine
whether the amounts declared by the operator were true or not.
The department is already collecting some of that information,
but probably not all of it.
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue (DOR), added that currently DOR's Tax Division does
review those records because it is just a percentage of the net
tax calculated in the division. Through a Memorandum of
Understanding (MOU) the division shares that information; DNR
provides DOR with a list of royalty recipients that it wants to
have that information for, DOR gives DNR the net income, and DNR
takes three percent of that. Someone would have to do a lot
more work under the provisions of Amendment 1, because as he
reads the amendment it only applies to the royalty and therefore
tax wouldn't.
1:41:38 PM
REPRESENTATIVE JOSEPHSON stated that even if there is additional
work, the testimony on 2/19/16, was that royalty on private
land, using net smelter returns in Alaska was 4.5 percent, and
that royalty on mental health trust land using net smelter
return was 5 percent. Although, this bill began by the
administration as a 28 percent increase, or numerical percent
point increase of 2, it was identified and echoed by
Representative Hawker on 2/15/16, "that royalty was this pure
thing and we need to get it right." Representative Josephson
noted he is paraphrasing and not directly quoting Representative
Hawker's comment. He asked whether Amendment 1 would help the
state do that.
MR. SPANOS replied he is unsure he is qualified to answer the
question, but certainly it is a different calculation that on
its face would appear fair.
1:43:02 PM
CO-CHAIR TALERICO understood Mr. Spanos to be saying that DOR is
currently structured to do exactly what is being done with these
mines as far as tax collection in the Tax Division, but it is
the opinion of Mr. Spanos there more expense would be involved
[under Amendment 1].
MR. SPANOS clarified that the Tax Division would no longer be of
assistance to DNR in order to provide information to assist DNR
get to its final number, whether there is additional expense or
not, it is up to DNR to determine. Currently, the way DNR gets
to its 3 percent is that the Tax Division does the work and
provides DNR with those numbers.
1:43:59 PM
REPRESENTATIVE HERRON requested that an example of real dollars
be provided to show what the state would get from the
amendment's provisions.
REPRESENTATIVE SEATON responded that in 2014 the Pogo Mine,
located on state land, produced 342,147 ounces of gold, which at
approximately 3 percent of net smelter return would be
$13,000,942. Therefore, this tax would generate in a range
somewhat equal to the amount that the fish tax increase is
generating. These two industries are both large and expansive
across the state, with the fishing industry employing the most
amount of people and the mining industry having the highest
wages in the state. He reminded the committee that the royalty
only applies to those mines on state land, but it is the state's
ownership value on that that that would relate to. One of the
problems is that the state has not been receiving an ownership
share, but rather a net profit share. The question is, if
someone is inefficient or has high expenses and doesn't control
their expenses, should the state receive less value for its
ownership of the minerals extracted or should it be on a value
of the minerals? That is a policy call, and it is generally a
policy call that the legislature has made on oil and gas, and it
is 12.5 percent minimum royalty, that's the value that is
extracted. It is not dissimilar to oil and gas because there
are certain things taken in production tax, there is a point of
production, and those upstream costs can be subtracted. For
corporate income tax, all of the expenses can be taken off.
This is done all the time with well lease credits - there has to
be a computation of well lease expenditures, those that are
qualified, and this is no different than that. There has been
no reason to collect the numbers because it has been based on
total profit so only the total profit number has been collected,
not the intermediate number and not allowing all of the other
extraneous expenses to be considered. He said Representative
Hawker's point was that tax credits should not be allowed to be
taken off against the state's oil royalty because that is the
state's ownership value and the state shouldn't be reducing it.
If the state's ownership value is just a profit-based value then
that is not based on ownership, it is based on a company's
efficiency of production.
1:48:01 PM
REPRESENTATIVE HERRON inquired as to the administration's
position on Amendment 1.
MR. FOGELS responded that, at this point, there have been
discussions on this concept, but since this amendment was just
floated today he is not prepared to offer the administration's
support or opposition to this. The amendment needs to be looked
at in more detail.
REPRESENTATIVE HERRON asked why the state hasn't done this
before.
MR. FOGELS answered that the 3 percent royalty was enacted by
statute in 1989, and DNR's staff during that time did some
economic modeling to determine that royalty rate. There has
never been any cause to have DNR, DOR, or other agency relook at
the royalty structure. He said he cannot answer as to why, but
added that DNR has not been asked to take another look at it in
those intervening years.
1:49:35 PM
REPRESENTATIVE OLSON requested that in the event DNR performs
modeling in the next couple of weeks to forward it to the
committee.
MR. FOGELS agreed.
1:49:44 PM
REPRESENTATIVE SEATON requested the Tax Division be able to
comment.
JERRY BURNETT, Deputy Director, Office of the Commissioner,
Department of Revenue (DOR), commented that this is an issue
that this commissioner and previous commissioners have looked at
and talked to Representative Seaton about. It is something the
department has committed to looking at in the future and noted
that there is a short period of time between today and the end
of the session. The concept is correct in terms of an ownership
percentage similar to other things, so structurally DOR would
think this is a rational way to go, but there is information the
department does not have at this point. Representative Seaton's
estimate of $13 million is not an exact number and it could be
more or less than that. This is not a time when the department
has the resources to commit to doing that further analysis.
CO-CHAIR TALERICO noted that time is not on the bill's side and
Amendment 1 is substantially different from the administration's
original bill.
1:51:48 PM
REPRESENTATIVE SEATON withdrew Amendment 1, but noted that this
is a very important concept to be worked on and that should be
addressed at a future time. It is an important part of the
conversation because the state's ownership share is not being
realized through a net profit.
1:52:41 PM
REPRESENTATIVE SEATON moved to adopt Amendment 2, labeled 29-
GH2924\N.7, Nauman, 3/29/16. [The text of Amendment 2 is
provided at the end of the minutes for HB 253.]
1:53:43 PM
REPRESENTATIVE SEATON withdrew Amendment 2, stating that it
involves the same problem as the royalty and would replace the
royalty with a 3 percent severance tax, which is an easier
calculation than either net smelter return or gross value at the
point of production. He opined it is a valuable consideration
to have and it would still get the state to basically the same
amount, except the way the amendment is crafted it is all mines
across the state and so doesn't really hit the royalty. Thus,
for the technical reasons that this amendment is removing
royalty and the state is required by law to have royalty, he is
withdrawing Amendment 2. He said he would put it on the table
for future conversations. Structuring a royalty upon a
severance tax is something that could be considered if people
are thinking that a net smelter return or value at point of
production would be too difficult.
1:54:12 PM
REPRESENTATIVE SEATON moved to adopt Amendment 3, labeled 29-
GH2924\N.8, Shutts/Nauman, 3/29/16, which read:
Page 1, line 2, following "fees;":
Insert "establishing a legislative working group
to study the tax structure for mining;"
Page 2, following line 14:
Insert a new bill section to read:
"* Sec. 5. The uncodified law of the State of
Alaska is amended by adding a new section to read:
LEGISLATIVE WORKING GROUP. (a) A legislative
working group is established to
(1) review the state's fiscal regime for
mining taxation, including state mining license taxes,
royalties, rents, and corporate income tax with
consideration of federal and municipal taxation;
(2) develop terms for a comprehensive
reform of the mining tax regime; and
(3) recommend changes to the legislature
for consideration during the First Regular Session of
the Thirtieth Alaska State Legislature.
(b) The working group consists of
(1) two co-chairs, one of whom is a member
of the house appointed by the speaker of the house of
representatives, and one of whom is a member of the
senate appointed by the president of the senate; and
(2) members appointed by the co-chairs;
members must be legislators and must include members
of the majority and minority caucuses.
(c) The co-chairs of the working group may form
an advisory group to the working group, composed of
members who are not legislators and who have expertise
and skills to assist in the review and development of
a new plan for the tax structure and rates on mining
licenses. The members of an advisory group may include
commissioners or employees of state departments,
members of the mining industry or trade associations,
and economists.
(d) The working group is to be supported by
legislative consultants under contract through the
Legislative Budget and Audit Committee."
Renumber the following bill sections accordingly.
Page 2, line 28:
Delete "Section 6 of this Act takes"
Insert "Sections 5 and 7 of this Act take"
Page 2, line 29:
Delete "sec. 7"
Insert "sec. 8"
REPRESENTATIVE HERRON objected for discussion purposes.
1:54:31 PM
REPRESENTATIVE SEATON explained that Amendment 3 would establish
a legislative working group. The committee has found that the
mining taxes, whether royalty, rents, or mining license fees,
are quite confusing and a longer dive needs to be taken to get
it right. In parallel with the Cook Inlet Legislative Working
Group established under consideration of oil taxes [HB 247],
Amendment 3 would establish a legislative working group to study
the tax structure of mining. He posited that this would be the
way to come back and have the industry and both bodies of the
legislature be involved to bring the administration to the table
in other than a quick reactive way, but to craft something that
would be good for the legislature.
1:56:06 PM
REPRESENTATIVE HERRON withdrew his objection. There being no
further objection, Amendment 3 was adopted.
1:56:22 PM
REPRESENTATIVE SEATON moved to adopt the corrected version of
Amendment 4, labeled 29-GH2924\N.16, Nauman, 3/30/16. [The text
of Amendment 4 is provided at the end of the minutes for
HB 253.]
REPRESENTATIVE SEATON explained Amendment 4 would not change the
royalty, it would still be the 3 percent net royalty, but the
amendment provides that the tax credits cannot be taken against
the royalty. The royalty is the state's ownership value and
therefore the tax credit cannot be taken to reduce the state's
ownership value. He said he does not like the way the ownership
value is created, but once it is created the legislature
shouldn't be reducing that ownership value through a tax credit.
REPRESENTATIVE HERRON objected for discussion purposes.
REPRESENTATIVE SEATON further stated that Amendment 4 is a
section of the royalty bill that doesn't change royalties,
royalties are still calculated exactly the same. The amendment
would prohibit applying an exploration incentive tax credit to
reduce the state's ownership value in the minerals that are
extracted. He reiterated that he does not like the way the
calculation of ownership value is made, but at least the state
should not allow that to be reduced by 50 percent by applying a
tax credit against it. It is a royalty and even though it is on
a net royalty it is a royalty and the state should not reduce
its ownership value.
1:58:25 PM
REPRESENTATIVE JOSEPHSON recalled that at the bill's first
hearing on 2/15/16, Fred Parady, Deputy Commissioner, Department
of Commerce, Community & Economic Development, advised that he
spent approximately 30-plus years working for and with the
mining industry. Mr. Parady noted that royalty is uniquely an
ownership share and should not be considered as part of
government take. The point made in that committee hearing was
that royalty should be unaffected by other things, such as
discounts and credits, because the state does not treat the oil
and gas industry in that manner and it should not be done here.
He said he therefore supports Amendment 4.
1:59:34 PM
REPRESENTATIVE HERRON withdrew his objection. There being no
further objection, Amendment 4 was adopted.
1:59:55 PM
REPRESENTATIVE CHENAULT returned to Amendment 3 and drew
attention to page 2, lines 5-6, of the amendment, which read:
(d) The working group is to be supported by
legislative consultants under contract through the
Legislative Budget and Audit Committee.
REPRESENTATIVE CHENAULT pointed out that currently there are no
consultants on mining taxes, which is an issue if this bill
passes and Amendment 3 stays in the bill. A discussion with the
Legislative Budget and Audit Committee chair is necessary to
ascertain that if this working group is formed whether the
legislature has those folks available to consult with.
CO-CHAIR TALERICO said the aforementioned is so noted.
2:00:46 PM
REPRESENTATIVE SEATON moved to adopt Amendment 5, labeled 29-
GH2924\N.14, Nauman, 3/30/16, which read:
Page 2, line 3, following "$100,000":
Insert "and not over $1,000,000"
Page 2, line 4:
Delete "."
Page 2, following line 4:
Insert new material to read:
"over $1,000,000.......................$76,000 plus
9 percent of the excess over 1,000,000."
REPRESENTATIVE HERRON objected.
2:00:58 PM
REPRESENTATIVE SEATON explained Amendment 5 by first noting
that, basically, the purpose of HB 253 is to raise money and
Version N took that amount from 9 percent down to 8 percent at
the lower tax bracket. Amendment 5 would look at a new tax
bracket at $1 million, significantly higher than the current
structure of 8 percent in excess of $100,000, and at these
higher values the amendment would add one more additional
percent. That would gain the state back some of the revenue
that Version N has lost, but would impact fewer players because
there are quite a few players in the over $100,000 range that
would not be above the $1 million range. The amendment would
not return back all of the money to the original amount, but it
would be somewhat more. This amendment would affect just the
most profitable taxpayers at an additional one percent, wherein
it starts at $1 million which is 10 times the value of where it
started at 8 percent.
2:03:04 PM
The committee took an at-ease from 2:03 p.m. to 2:07 p.m.
2:07:42 PM
REPRESENTATIVE HERRON noted that Mr. Burnett previously
estimated what the governor's bill would generate in revenue.
He asked Mr. Burnett to ballpark an estimate of the difference
between the governor's bill, Version N, and this amendment, and
the new revenues. He noted that this information would probably
be appropriate for Amendments 6 and 7.
MR. BURNETT replied that for next year the difference between
the governor's original bill and Version N is that the estimated
revenue would be reduced by about $3.2 million, from about $6
million under the original bill down to about $3 million under
Version N. The department does not have a new fiscal note for
it because DOR thought there may be some amendments offered
today. Based on the last year of tax filings there are fourteen
taxpayers over $100,000, nine of which were between $100,000 and
$1 million, and the others were over $1 million. The taxpayers
between $100,000 and $1 million are primarily large placer
miners and part landowners that own part of the property under
one of the larger mines. The total revenue from those nine
taxpayers would be in the lower hundreds of thousands of
dollars, so this would restore most of the revenue from the
governor's bill but would reduce the tax rate for those people
between $100,000 and $1 million to 8 percent rather than the 9
percent in the original bill. Those nine taxpayers earn
significantly less revenue than the five largest taxpayers that
are over $1 million.
2:10:19 PM
REPRESENTATIVE HERRON surmised that Amendment 5 would basically
restore the co-chair's committee substitute amount.
MR. BURNETT responded that it would restore the majority of the
money that was taken out because the nine taxpayers that earn
between $100,000 and $1 million would have much less impact than
the five taxpayers over $1 million in revenue.
2:11:03 PM
REPRESENTATIVE SEATON noted that the purpose of HB 253 is to
generate revenue, and the structure of Amendment 5 is to remove
any additional burden on the majority of smaller players that
would have to pay that tax. The 9 percent in the original bill
would be moved up to those taxpayers earning $1 million and
above, instead of at $100,000. Thus, more than one-half of the
taxpayers would not be impacted by Amendment 5.
REPRESENTATIVE HERRON noted the five big mines would have 9
percent and asked what the amount of money is that would be
generated by the smaller miners between $100,000 and $1 million.
MR. BURNETT answered that he does not have the exact amount as
DOR has not had an opportunity to calculate that, but he
estimated it would be in the lower hundreds of thousands of
dollars total between all of them.
REPRESENTATIVE CHENAULT asked whether Mr. Burnett's earlier said
that Amendment 5 would bring in an additional $3 million.
MR. BURNETT replied it would be approximately $3 million.
REPRESENTATIVE CHENAULT surmised it would be from the large
mines and not the small mines.
MR. BURNETT agreed, and said DOR estimated $3.2 million from
each 1 percent at this level.
2:13:33 PM
CO-CHAIR TALERICO understood that every percentage point talked
about is a 14.25 percent tax increase.
MR. BURNETT responded that at 7 percent every [1 percent] is a
little over 14.2857 percent, but next time in moving from 8
percent to 9 percent it is not so much, it is only 12.5 percent.
CO-CHAIR TALERICO agreed.
2:14:19 PM
REPRESENTATIVE HERRON maintained his objection to Amendment 5.
A roll call vote was taken. Representatives Seaton, Josephson,
and Tarr voted in favor of the adoption of Amendment 5.
Representatives Olson, Herron, Chenault, Talerico, and Nageak
voted against it. Therefore, Amendment 5 failed to be adopted
by a vote of 3-5.
2:15:17 PM
REPRESENTATIVE JOSEPHSON moved to adopt Amendment 6, labeled 29-
GH2924\N.1, Nauman, 3/29/16, which read:
Page 1, line 10, through page 2, line 4:
Delete all material and insert:
"* Sec. 2. AS 43.65.010(c) is repealed and
reenacted to read:
(c) The license tax on mining is imposed on the
net income of the taxpayer from the property in the
state, computed with allowable depletion, plus royalty
received in connection with mining property in the
state. The tax rates applicable to the amount of a
taxpayer's net income are as follows:
over $100,000 and not over $250,000 ........five percent
over $250,000 and not over $500,000 ..............$7,500
plus seven percent of the excess over $250,000
over $500,000 and not over $1,000,000 ...........$25,000
plus nine percent of the excess over $500,000
over $1,000,000 .................................$70,000
plus 11 percent of the excess over $1,000,000."
Page 2, line 19:
Delete "amended"
Insert "repealed and reenacted"
REPRESENTATIVE HERRON objected.
2:15:29 PM
REPRESENTATIVE JOSEPHSON explained that Amendment 6 would
decrease some of the rates for small mines making under $100,000
just on the margins. The state is receiving just $51,000 from
approximately 29 mines. He said he is okay with exempting those
folks who he assumes may be hobbyists. However, Amendment 6
would raise the rate higher than was recommended by the
governor. He outlined the applicable tax rates proposed in the
amendment. He then reviewed the thinking behind the amendment.
He recalled testimony that South Dakota has a net profit system
and taxes at 14 percent, and he believed that Wisconsin taxes at
9 or 11 percent. Amendment 6 would provide a tax break for the
smaller mining operations and encourage development of small
mines while increasing taxes on larger mines. In tax years 2013
and 2014, the state generated $51,000 and $42,000 from mines
with incomes under $100,000, but generated most of its revenue
from mines over $100,000, respectively $471 million and $571
million. The effective rate, according to his calculations,
works out to 6.6-7 percent. When all revenue from all sources
is considered, such as the mining license tax, corporate income
tax, and royalty rent, the industry contributes approximately
3.24 percent of total state revenue. Alternatively, the oil
industry contributes approximately 54 percent at today's prices.
He said his concern is that [the state] does not know the true
value of the concentrate. Documents reflect that the value of
the concentrate exceeds $2 billion, but then there is the cost
of processing the concentrate. Relative to the other net profit
states, he posited, the amendment is warranted because he is
concerned that something is being left on the table that the
legislature doesn't fully appreciate or understand. He added
that this industry provides fantastic jobs, [with wages] often
$90,000 and higher.
2:20:29 PM
REPRESENTATIVE HERRON turned to Mr. Burnett and asked the result
when comparing the columns in Version N and Amendment 6.
MR. BURNETT explained that the department would have to break
this out. It is based on estimated next-year numbers wherein
the 2 percent increase in the original bill was roughly $6-$7
million based on current prices, so this would be approximately
$12-$13 million because most of the income is at the highest
level. [The amendment] averages out the lower ones and
eliminates some taxpayers, but it is another $9-$10 million at
current prices over Version N.
CO-CHAIR NAGEAK pointed out that the costs of doing business are
higher in Alaska than they are in the states used as examples by
Representative Josephson. Therefore that comparison is not
useful in his opinion.
REPRESENTATIVE TARR noted that these taxes are net profits and
even though it could be more expensive, the mines are not paying
any taxes until they have a net profit and this is on the net
profit.
REPRESENTATIVE SEATON offered his appreciation for getting rid
of the burden on the smaller taxpayers and said the rationale
for a graduated rate makes more sense than leaving off all of
those under $100,000. He surmised it would take away burden
from the department as well, because the department is having to
do a lot of taxpayer information and taxpayer forms for not a
lot of money. But, he continued, it has to be compensated
somewhere and he is still looking at where to get income for the
state if the legislature doesn't raise the rate on the most
profitable companies to correspond with some reasonable returns
and therefore he supports this amendment.
REPRESENTATIVE HERRON disclosed he is a small miner and, like
other miners, he would like this proposal. But, unfortunately,
it goes back to when the legislature essentially abolished the
income tax and so he is averse to not requiring the little guys
to pay taxes as well. It's always easy to undo a tax, but more
difficult to create a tax and therefore he likes the status quo.
2:24:49 PM
REPRESENTATIVE OLSON suggested that Amendments 5, 6, and 7 may
be appropriate for the proposed working group.
REPRESENTATIVE SEATON commented that the state must obtain
revenue from somewhere and if members choose to not tax the most
profitable companies on their net profits it means the
legislature will have to take more out of the permanent fund
dividend allowances. Therefore, when discussing the state's
budget, there must be alternatives to not spending money the
state does not have. He pointed out that the committee does
have a process in considering [alternatives] to determine how to
obtain significant revenue, otherwise there will not be headway
in reducing the state's $4 billion budget deficit.
CO-CHAIR TALERICO noted his appreciation for the ideas and
concepts, but posited that a 56 percent tax increase in one fell
swoop is incredibly steep for that highest bracket when jumping
from 7 percent to 11 percent.
2:27:19 PM
REPRESENTATIVE JOSEPHSON clarified that South Dakota is 10
percent on profits, and Wisconsin is a 3-15 percent progressive
tax, which is what Amendment 6 is, on net mining proceeds, which
sounds like profits to him. Therefore he thinks Amendment 6 is
reasonable. He cited a 2/3/2011 memorandum from Legislative
Legal and Research Services, and paraphrased: "The resource
value is just one indicator, in 2009 of all mineral extraction
is approaching, it's just under $2.5 billion; the government
revenue was $67 million." He reiterated that he understands
concentrate [and processed product] are very different things.
2:28:30 PM
REPRESENTATIVE HERRON maintained his objection to Amendment 6.
A roll call vote was taken. Representatives Seaton, Josephson,
and Tarr voted in favor of Amendment 6. Representatives
Chenault, Olson, Herron, Talerico, and Nageak voted against it.
Therefore, Amendment 6 failed to be adopted by a vote of 3-5.
2:29:12 PM
REPRESENTATIVE TARR moved to adopt Amendment 7, labeled 29-
GH2924\N.12, Nauman, 3/30/16, which read:
Page 1, line 10, through page 2, line 4:
Delete all material and insert:
"* Sec. 2. AS 43.65.010(c) is repealed and
reenacted to read:
(c) The license tax on mining is imposed on the
net income of the taxpayer from the property in the
state, computed with allowable depletion, plus royalty
received in connection with mining property in the
state. The tax rates applicable to the amount of a
taxpayer's net income are as follows:
over $40,000 and not over $100,000 ........three percent
over $100,000 and not over $250,000 ..............$1,800
plus five percent of the excess over $100,000
over $250,000 and not over $500,000 ..............$9,300
plus seven percent of the excess over $250,000
over $500,000 and not over $1,000,000 ...........$26,800
plus nine percent of the excess over $500,000
over $1,000,000 .................................$71,800
plus 11 percent of the excess over $1,000,000."
Page 2, line 19:
Delete "amended"
Insert "repealed and reenacted"
REPRESENTATIVE HERRON objected for discussion purposes.
2:29:25 PM
REPRESENTATIVE TARR explained that Amendment 7 has a slightly
different approach than Amendments 5 and 6. Amendment 7 would
keep everything under $100,000 at 3 percent, whereas the
proposed legislation is that folks at $40,000-$50,000 would pay
3 percent and folks at $50,000-$100,000 would pay $1,500 plus 5
percent. Thus, the amendment shifts what might be considered a
small operator to $100,000 and under. She said she wants to
keep that in there because those individuals are currently
taxpayers and it gives the department some understanding of the
activity being done to assist in planning and ensuring there is
staff to help get those projects going. Referring to a chart
she passed out that compares current statute with what is
proposed in Amendment 7, Representative Tarr noted there would
not be a tax increase for anyone with annual net profit earnings
of under $800,000; rather those operators would see an annual
tax decrease ranging between $1,200 and $5,200. For net profits
of $800,000 there would be a tax increase of about $800 per
year. For net profits of $900,000 the tax increase would be
about $2,000 annually. An operator with net profits of $1.1
million would see a tax increase of about $8,800 annually and
operators with net profits of $1.5 million would see a tax
increase of about $24,000 annually.
REPRESENTATIVE TARR explained that Amendment 7 would spread out
the income brackets relative to the legislation and the current
statute, which could be helpful in understanding the relative
size of different projects and who is doing work. It has been
six decades since any significant changes have been made, and
this would be durable relative to the dollars that are spent in
2016 and going forward. The Council of Alaska Producers and
others have explained that these large-size projects are
expensive. Version N would still retain a three year tax
holiday, so all new mining operations, including the large
projects, are exempt from the tax levied by this chapter for
three years after production begins.
2:34:31 PM
REPRESENTATIVE HERRON asked Mr. Burnett the net difference in
the amounts between the current statute, governor's proposal,
and Version N.
MR. BURNETT replied that his "back of the napkin" calculation is
that the total on Amendment 7 would be much the same as with the
previous amendment because most of the revenue by far comes from
the highest tax bracket in any proposal. He reminded the
committee of DOR's previously distributed chart depicting the
various incomes between small mines and large mines and nearly
all the income is at the million-plus range.
2:35:57 PM
REPRESENTATIVE TARR concluded her explanation of Amendment 7 by
noting that even when the operations are in the $10 million
range of net profit there is an approximate $90,000 difference
in taxes. She said it is difficult to believe that $90,000 more
would be overly burdensome for the $10 million companies.
2:37:17 PM
REPRESENTATIVE HERRON maintained his objection.
A roll call vote was taken. Representatives Seaton, Josephson,
and Tarr voted in favor of Amendment 7. Representatives Herron,
Chenault, Olson, Talerico, and Nageak voted against it.
Therefore, Amendment failed to be adopted by a vote of 3-5.
2:38:09 PM
REPRESENTATIVE JOSEPHSON moved to adopt Amendment 8, labeled 29-
GH2924\N.2, Nauman, 3/29/16. [The text of Amendment 8 is
provided at the end of the minutes for HB 253.]
REPRESENTATIVE OLSON objected.
REPRESENTATIVE JOSEPHSON explained Amendment 8 would defer the
tax exemption for a mine in its first 3 years of production.
Testimony heard in February was that these mines enjoy a tax
holiday for 3.5 years and he cannot think of anything analogous
to that in the oil and gas industry. There is the gross value
reduction of 20 percent, and there are the many credits that can
add up to 85 percent, and when prices went low the state saw it
go higher than that. The state had always enjoyed 15 percent,
and generally 35-40 percent or more. For example, if a mine
such as the Pebble Mine is worth the tens of billions of dollars
that its owner says it is, then it appears the state is waiving
revenue. He recalled a gentleman testifying in February 2016
that the state would enjoy $200 million per year just from the
Pebble Mine. Unless he incorrectly understands the statute that
creates the tax exemption, that is $6 million the state wouldn't
see for a mine the size of the Pebble Mine and at 3.5 years it
would be $700 million. Amendment 8 would transform the tax
exception for a mining operation's first 3 years after
production into a tax deferral with a 10 year payoff.
Hypothetically, if an operation owes $100 per year in taxes for
each of three years, that total of $300 would be divided by 10
for the decade after production, so the company would pay $30 a
year for those 10 years in addition to things such as the mining
license fee. Amendment 8 would work in conjunction with other
amendments by aiding a small producer without revenue and that
producer could defer its small taxes spread out over many years.
The amendment would also provide the same aid to companies
trying to recover their startup costs and have quicker cash
flow, and would generate revenue for the state. He recalled the
extensive discussion regarding the purpose of the tax credit.
The tax credit was useable over a 15 year span but was for
exploration and development. There is no revenue at exploration
and development and industry can argue that on the backend there
is the anticipatory benefit, but in terms of the frontend they
don't receive any tangible credit in the first years. So, he
posited, it is hard to argue that it would deter new exploration
in that it doesn't "pull the rug out" because the tax deferral
would be there and gradulize rather than a full exemption.
2:42:02 PM
REPRESENTATIVE SEATON recalled that in 2005 or so, the
Legislative Ways and Means Committee worked for a couple of
different sessions on mining tax bills and this was one of the
provisions from that committee. The committee looked at
deferral rather than an exemption in order to assist mines on
the frontend to recover their costs earlier. The state wouldn't
lose its tax money because after the mine became more profitable
and recovered its costs, the mine would still pay the tax but it
would be over time when the mine was in a more profitable state.
He offered his support for Amendment 8, saying the state needs
to move from giving away credits it cannot afford and instead
holding a tax expense that the mines will still need to pay at
some point in the future.
2:43:28 PM
CO-CHAIR TALERICO asked whether the exemption clock starts the
day a person receives his/her mining license.
MR. BURNETT responded that the 3.5 year exemption from tax
begins on the day production starts, when the Department of
Natural Resources certifies to the Department of Revenue that
production has started.
CO-CHAIR TALERICO pointed out that according to the bill, the
day a person receives a license the clock starts, but it
actually begins on the day of production.
MR. BURNETT answered correct, because the mining tax is the
mining license tax, so the mining license really has to do with
the payment of the first tax returns.
CO-CHAIR TALERICO asked whether most of these people are in
their wheelhouse of money in their first three years of
production or does it usually come later.
MR. FOGELS replied that typically a new mine will have to pay
back some of the initial capital costs, which are fairly
significant, and a lot of that is done in the early years. The
profits come later in the mine life.
2:45:32 PM
REPRESENTATIVE TARR referred to Version N, page 1, lines 7-9,
which state:
(a) ... All new mining operations are exempt from
the tax levied by this chapter for three [AND ONE-
HALF] years after production begins.
REPRESENTATIVE TARR asked whether that is the correct provision.
CO-CHAIR TALERICO agreed, and said he wants to be certain it is
clear because it could be read a couple of different ways.
2:46:04 PM
REPRESENTATIVE HERRON asked whether the administration has taken
a position on Amendment 8.
MR. BURNETT responded that the administration has not taken a
position on the amendment. The 3.5 year deferral, which is 3
years in Version N, is not likely to impact any major mine in
the next several years. The money from this is not within the
department's fiscal note or in the time period it is looking at,
although it is something that will be reviewed over time. He
referred to the discussion about the Pebble Mine and the $200
million a year, and advised that the $200 million a year
estimate would have included corporate income tax and royalties
because the mine is on state land. The figure wouldn't have
been a $600 million deferral or exemption because the company
still would have been paying corporate income tax.
REPRESENTATIVE HERRON asked whether the structure, or mechanics,
of Amendment 8 would be valuable to have for the future.
MR. BURNETT answered that the amendment is conceptually similar
to some of the proposals the department has made with tax
credits in the area of oil and gas where the discussion is
paying less than the full amount and which was in the governor's
bill and not necessarily in the committee substitute passed by
this committee. There was a cap on that and then deferring it
to production at some time in the future, so it might well be a
valuable structure to review.
2:48:30 PM
REPRESENTATIVE JOSEPHSON said Mr. Burnett is correct and
referred to page [17] of the committee's 2/19/16 hearing where
Jason Brune advised that the Pebble Mine might earn the state
and local government $200 million. He added he is hearing great
things about Donlin Creek Gold Mine and that it could be larger
than anticipated. Representative Josephson noted the state
doesn't do anything this generous for the oil and gas industry.
He urged there be a mining license tax that is spread out
because it is unknown whether an ore body might be at its best
in the first three years. With the exception of a few people in
the room, he does not believe the committee understands that and
the state cannot afford to just give a tax holiday for 3 or 3.5
years. Deferring the tax over a decade makes more sense.
2:49:52 PM
REPRESENTATIVE OLSON maintained his objection to Amendment 8 and
noted that he did not receive the amendments until he walked
into the committee room today. Given they are tax amendments,
he prefers to err on the side of caution when he hasn't had
adequate time to review the documents.
A roll call vote was taken. Representatives Tarr, Seaton, and
Josephson voted in favor of Amendment 8. Representatives
Herron, Chenault, Olson, Talerico, and Nageak voted against it.
Therefore, Amendment 8 failed to be adopted by a vote of 3-5.
2:51:22 PM
REPRESENTATIVE JOSEPHSON moved to adopt Amendment 9, labeled 29-
GH2924\N.3, Nauman, 3/29/16. [The text of Amendment 9 is
provided at the end of the minutes for HB 253.]
REPRESENTATIVE OLSON objected.
REPRESENTATIVE JOSEPHSON explained Amendment 9 would increase
the minimum rental rate, which hasn't been modified in 16 years,
and would increase the rate for mining rental rates, other than
coal. Currently, the statute requires money in rent to be not
less than 50 cents an acre for the first five years and $2.50 an
acre after that; the amount must be in that range but is
negotiable between the parties. Amendment 9 would increase the
rent to be not less than $1.65 for the first five years, and
$3.30 after that. This amount would establish parity between
the state and private landowners who charge higher rental rates.
He said he would like input from the department regarding the
amendment's fiscal impact, but suspects it is modest. Even if
the impact is modest it is justified as an opportunity cost
because, unlike with other activities, the land is occupied.
Therefore, he posited, Amendment 9 is reasonable.
2:53:20 PM
REPRESENTATIVE SEATON inquired about the current rental rates
that are being negotiated.
MR. FOGELS replied that page 2 of Amendment 9 is the current
rental rate that would be deleted. Pointing to the far right
column for the rental amount for each mining claim or leasehold
location including each quarter-quarter section, he noted that
the current rental rate is $20 for each mining claim for the
first 5 years, then $40 for 6-10 years, and then $100 for 11 or
more years. Under Amendment 9 with the new per-acreage amount,
the claim rentals for 0-5 years and 6-10 years would jump to $66
a year, and after 11 years it would jump from $100 to $132. He
qualified that these are rough calculations given he has just
seen this amendment.
REPRESENTATIVE SEATON surmised that, by regulation, the
department has not adjusted these rates for inflation over the
years and so the acreage rental rates are still the same as when
they were set.
MR. FOGELS believed they have not been adjusted, but said he
will get back to the committee on that.
CO-CHAIR TALERICO, regarding a "quarter-quarter section," asked
whether it is a straight-across fee for 40 acres.
MR. FOGELS confirmed it is 40 acres.
2:55:54 PM
REPRESENTATIVE HERRON inquired whether DNR is supposed to review
and follow inflation, or whether it is whenever.
MR. FOGELS replied he has been thinking about it, and the
department probably has looked at this, but he cannot offer any
details as to whether the claim rentals have been adjusted. He
said he will get back to the committee.
REPRESENTATIVE HERRON commented that it appears the state would
want to have a mechanism to allow the department, by regulation,
to at least keep up with inflation rather than going to the
legislature in any given year and creating a law, and maybe the
legislature should be involved in the inflation amounts.
REPRESENTATIVE TARR pointed out that current statute doesn't
allow that opportunity and therefore asked how [a review] could
have happened.
MR. FOGELS reiterated he will get back to the committee with an
answer.
CO-CHAIR TALERICO asked the significance behind the increase
from 50 cents an acre to $1.65 an acre.
REPRESENTATIVE JOSEPHSON advised his assistant contacted
Legislative Legal and Services about this, and he does not know
the answer. He offered that the increase from $2.50 to $3.30
appears to be a reflection of inflation, but he does not know.
2:58:29 PM
REPRESENTATIVE OLSON maintained his objection.
A roll call vote was taken. Representatives Josephson and Tarr
voted in favor of Amendment 9. Representatives Herron,
Chenault, Olson, Seaton, Talerico, and Nageak voted against it.
Therefore, Amendment 9 failed to be adopted by a vote of 2-6.
Amendments to HB 253, Version 29-GH2924\N, Nauman, 3/17/16
Amendment 1, labeled 29-GH292\N.15, Nauman, 3/30/16:
Page 1, line 2, following "fees;":
Insert "relating to production royalties on
mining;"
Page 1, following line 4:
Insert new bill sections to read:
"* Section 1. AS 27.30.030(a) is amended to read:
(a) In a tax year [OR ROYALTY PAYMENT PERIOD],
subject to (c) of this section and the respective
limitations of this subsection, the person may apply
the credit, the taking of which was approved under AS
27.30.020(2), against [(1)] taxes payable by the
person
(1) [(A)] under AS 43.65; application of
the credit under this paragraph [SUBPARAGRAPH] may not
exceed the lesser of
(A) [(i)] 50 percent of the person's tax
liability under AS 43.65 for the tax year that is
related to production from the mining operation at
which the exploration activities occurred, as shown
under (b) of this section; or
(B) [(ii)] 50 percent of the person's total
tax liability under AS 43.65 for the tax year;
(2) [(B)] under AS 43.20; application of
the credit under this paragraph [SUBPARAGRAPH] may not
exceed the lesser of
(A) [(i)] an amount equal to the amount
determined under (1)(A) of this subsection [(A)(i) OF
THIS PARAGRAPH]; or
(B) [(ii)] 50 percent of the person's total
tax liability under AS 43.20 for the tax year [; AND
(2) MINERAL PRODUCTION ROYALTY PAYMENTS
PAYABLE BY THE PERSON UNDER AS 38.05.135 - 38.05.160
AND 38.05.212 FOR PRODUCTION FROM THE MINING OPERATION
AT WHICH THE EXPLORATION ACTIVITIES OCCURRED;
APPLICATION OF THE CREDIT UNDER THIS PARAGRAPH MAY NOT
EXCEED 50 PERCENT OF THE PERSON'S MINERAL PRODUCTION
ROYALTY PAYMENT LIABILITY FROM THE MINING OPERATION AT
WHICH THE EXPLORATION ACTIVITIES OCCURRED].
* Sec. 2. AS 27.30.030(b) is amended to read:
(b) If the person applies the credit against the
person's tax liability under (a)(1)(A) or (a)(2)(A)
[(a)(1)(A)(i) OR (a)(1)(B)(i)] of this section, the
commissioner of revenue shall disallow application of
the credit under that provision unless the person
files with the person's tax return an accounting of
the person's mining operation activities for each
mining operation that is included in the tax return
and as to which the credit is being applied. The
accounting of mining operation activities required by
this subsection shall be made
(1) on a form prescribed by the Department
of Revenue; on the form, the person shall
(A) identify the mining operations for
which the credit is claimed; and
(B) set out the gross income attributable
to the mining operations and other information about
the mining operations that the Department of Revenue
may require;
(2) without regard to an exemption to which
the person may be entitled under AS 43.65.010(a).
* Sec. 3. AS 27.30.040 is amended to read:
Sec. 27.30.040. Credit may be carried forward.
Except as its application is limited by AS 27.30.030
and 27.30.050, a portion of a credit that is not
applied under AS 27.30.030 during a tax year [OR
ROYALTY PAYMENT PERIOD] may be carried forward to and
applied during a subsequent tax year [OR ROYALTY
PAYMENT PERIOD].
* Sec. 4. AS 27.30.050 is amended to read:
Sec. 27.30.050. Limit on application of credit.
An exploration incentive credit for a mining operation
may not exceed $20,000,000 and must be applied within
15 tax years [OR ROYALTY PAYMENT PERIODS] after the
taking of the credit is approved under AS
27.30.020(2), but the tax years [OR ROYALTY PAYMENT
PERIODS] in which the credit is applied need not be
(1) the tax year [OR ROYALTY PAYMENT
PERIOD] in which the person first incurs liability for
payment of tax [OR ROYALTY] based on the person's
activity that is the basis of the claim of the
exploration incentive credit; or
(2) consecutive periods.
* Sec. 5. AS 38.05.212(b) is repealed and reenacted
to read:
(b) The production royalty is three percent of
(1) the net smelter return for mining
production that is further processed by a smelter or
refinery; or
(2) the gross value at the point of
production as determined under AS 38.05.213 for mining
production that is not further processed by a smelter
or refinery.
* Sec. 6. AS 38.05.212 is amended by adding new
subsections to read:
(d) A new mining operation is exempt from the
royalties under this section for three years after
production begins.
(e) In this section,
(1) "net smelter return" means the value
the person engaged in mining receives from the smelter
or refinery and may be based on
(A) the spot or current price of the
mineral minus deductions for the costs associated with
the processing by the smelter or refinery and
transportation between the smelter or refinery and the
location of the mine; or
(B) another method adopted by the
department by regulation;
(2) "new mining operation" has the meaning
given to "new mining operations" in AS 43.65.060.
* Sec. 7. AS 38.05 is amended by adding a new
section to read:
Sec. 38.05.213. Gross value at the point of
production. (a) The gross value at the point of
production
(1) is the value of a resource immediately
after its removal from the mine;
(2) does not include income from the
extraction or processing of resources from mine waste
or residue of previously processed resources
previously subject to tax under AS 43.65.
(b) Except as provided in (c) of this section,
the value of a resource immediately after its removal
from the mine is the price received by the person
engaged in the mining of the resource adjusted for
value added after the resource was produced.
(c) The price received by the person engaged in
the mining of the resource may be rejected by the
department as the gross value at the point of
production when the
(1) price received is less than the fair
market value;
(2) price received does not reflect the
total value received by the seller in the transaction;
(3) parties to the transaction are
affiliated; or
(4) price received was not negotiated in an
arm's length transaction between the buyer and seller.
(d) If the department rejects the price reported
by the person engaged in the mining of the resource,
the department shall substitute the fair market value
of the resource on the date and at the place of
production for purposes of determining the production
royalty liability under this chapter.
(e) The gross value at the point of production
shall be calculated using the reasonable costs of
transportation if the destination value is used to
determine the value at the point of production. The
reasonable costs of transportation shall be the actual
costs, except when the
(1) parties to the transportation are
affiliated;
(2) contract for the transportation is not
an arm's length transaction or is not representative
of the market value of that transportation;
(3) method of transportation is not
reasonable in view of existing alternative methods of
transportation.
(f) If the department finds that the conditions
in (e)(1), (2), or (3) of this section are present,
the department shall determine the reasonable costs of
transportation, using the fair market value of like
transportation, the fair market value of equally
efficient and available alternative modes of
transportation, or another reasonable method.
Transportation costs fixed by tariff rates properly on
file with the Regulatory Commission of Alaska or
another regulatory agency shall be considered prima
facie reasonable.
(g) In this section,
(1) "affiliated" means a person who
directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is
under common control with the persons specified;
(2) "destination value" means the value of
the resource at the destination where production from
the mine is delivered for treatment or processing."
Page 1, line 5:
Delete "Section 1"
Insert "Sec. 8"
Renumber the following bill sections accordingly.
Page 1, line 10, through page 2, line 4:
Delete all material.
Renumber the following bill sections accordingly.
Page 2, line 17:
Delete "sec. 1"
Insert "sec. 8"
Page 2, line 18:
Delete "sec. 1"
Insert "sec. 8"
Page 2, lines 19 - 21:
Delete all material and insert:
"(b) AS 38.05.212(d), added by sec. 6 of this
Act, applies to a mining operation that begins
production on or after the effective date of sec. 6 of
this Act.
(c) The changes to the applicability of the
exploration incentive credit made in AS 27.30.030(a)
and (b), as amended by secs. 1 and 2 of this Act, AS
27.30.040, as amended by sec. 3 of this Act, and AS
27.30.050, as amended by sec. 4 of this Act, apply to
a royalty payment period beginning on or after the
effective date of sec. 1 of this Act."
Page 3, line 28:
Delete "Section 6"
Insert "Section 12"
Page 3, line 29:
Delete "sec. 7"
Insert "sec. 13"
Amendment 2, labeled 29-GH2924\N.7, Nauman, 3/29/16:
Page 1, line 1, following "An Act":
Insert "repealing the mineral production royalty;
enacting a mineral severance tax;"
Page 1, following line 4:
Insert new bill sections to read:
"* Section 1. AS 27.30.030(a) is amended to read:
(a) In a tax year or royalty payment period,
subject to (c) of this section and the respective
limitations of this subsection, the person may apply
the credit, the taking of which was approved under AS
27.30.020(2), against
(1) taxes payable by the person
(A) under AS 43.65; application of the
credit under this subparagraph may not exceed the
lesser of
(i) 50 percent of the person's tax
liability under AS 43.65 for the tax year that is
related to production from the mining operation at
which the exploration activities occurred, as shown
under (b) of this section; or
(ii) 50 percent of the person's total tax
liability under AS 43.65 for the tax year;
(B) under AS 43.20; application of the
credit under this subparagraph may not exceed the
lesser of
(i) an amount equal to the amount
determined under (A)(i) of this paragraph; or
(ii) 50 percent of the person's total tax
liability under AS 43.20 for the tax year; and
(2) mineral production royalty payments
payable by the person under AS 38.05.135 - 38.05.160
[AND 38.05.212] for production from the mining
operation at which the exploration activities
occurred; application of the credit under this
paragraph may not exceed 50 percent of the person's
mineral production royalty payment liability from the
mining operation at which the exploration activities
occurred.
* Sec. 2. AS 38.05.205(c) is amended to read:
(c) A mining lease shall be for any period up to
55 years, and is renewable if requirements for the
lease remain satisfied. Annual rental [AND PRODUCTION
ROYALTIES] shall be paid as required under AS
38.05.211 [AND 38.05.212]. A valid mining claim
located and held under AS 38.05.195 may be converted
to a lease at any time upon application by the owner,
and issuance by the commissioner. Rights granted by a
mining lease may not be exercised until the lease has
been filed for record in the recording district where
the land is located."
Page 1, line 5:
Delete "Section 1"
Insert "Sec. 3"
Renumber the following bill sections accordingly.
Page 2, following line 14:
Insert new bill sections to read:
"* Sec. 7. AS 43 is amended by adding a new chapter
to read:
Chapter 68. Mining Severance Tax.
Sec. 43.68.010. Mining severance tax. (a) A
person engaging in the business of mining in the state
shall pay a mining severance tax in the amount of
three percent of the gross production value of
minerals produced.
(b) The tax under this section is due April 1 of
each year.
(c) The department shall adopt regulations to
implement this section.
* Sec. 8. AS 38.05.211(c) and 38.05.212 are
repealed."
Page 2, line 17:
Delete "sec. 1"
Insert "sec. 3"
Page 2, line 18:
Delete "sec. 1"
Insert "sec. 3"
Page 2, line 19:
Delete "sec. 2"
Insert "sec. 4"
Page 2, line 21:
Delete "sec. 2"
Insert "sec. 4"
Page 2, following line 21:
Insert new subsections to read:
"(c) The repeal of AS 38.05.212 by sec 8 of this
Act applies to minerals produced on or after the
effective date of sec. 8 of this Act.
(d) The mining severance tax under AS 43.68.010,
enacted by sec. 7 of this Act, applies to minerals
produced on or after the effective date of sec. 7 of
this Act."
Page 2, line 28:
Delete "Section 6"
Insert "Section 10"
Page 2, line 29:
Delete "sec. 7"
Insert "sec. 11"
Amendment 4, labeled 29-GH2924\N.16, Nauman, 3/30/16:
Page 1, line 2, following "fees;":
Insert "relating to the exploration incentive
credit;"
Page 1, following line 4:
Insert new bill sections to read:
"* Section 1. AS 27.30.030(a) is amended to read:
(a) In a tax year [OR ROYALTY PAYMENT PERIOD],
subject to (c) of this section and the respective
limitations of this subsection, the person may apply
the credit, the taking of which was approved under
AS 27.30.020(2), against [(1)] taxes payable by the
person
(1) [(A)] under AS 43.65; application of
the credit under this paragraph [SUBPARAGRAPH] may not
exceed the lesser of
(A) [(i)] 50 percent of the person's tax
liability under AS 43.65 for the tax year that is
related to production from the mining operation at
which the exploration activities occurred, as shown
under (b) of this section; or
(B) [(ii)] 50 percent of the person's total
tax liability under AS 43.65 for the tax year;
(2) [(B)] under AS 43.20; application of
the credit under this paragraph [SUBPARAGRAPH] may
not exceed the lesser of
(A) [(i)] an amount equal to the amount
determined under (1)(A) [(A)(i)] of this subsection
[PARAGRAPH]; or
(B) [(ii)] 50 percent of the person's total
tax liability under AS 43.20 for the tax year [; AND
(2) MINERAL PRODUCTION ROYALTY PAYMENTS
PAYABLE BY THE PERSON UNDER AS 38.05.135 - 38.05.160
AND 38.05.212 FOR PRODUCTION FROM THE MINING OPERATION
AT WHICH THE EXPLORATION ACTIVITIES OCCURRED;
APPLICATION OF THE CREDIT UNDER THIS PARAGRAPH MAY NOT
EXCEED 50 PERCENT OF THE PERSON'S MINERAL PRODUCTION
ROYALTY PAYMENT LIABILITY FROM THE MINING OPERATION AT
WHICH THE EXPLORATION ACTIVITIES OCCURRED].
* Sec. 2. AS 27.30.030(b) is amended to read:
(b) If the person applies the credit against the
person's tax liability under (a)(1)(A) or (a)(2)(A)
[(a)(1)(A)(i) OR (a)(1)(B)(i)] of this section, the
commissioner of revenue shall disallow application of
the credit under that provision unless the person
files with the person's tax return an accounting of
the person's mining operation activities for each
mining operation that is included in the tax return
and as to which the credit is being applied. The
accounting of mining operation activities required by
this subsection shall be made
(1) on a form prescribed by the Department
of Revenue; on the form, the person shall
(A) identify the mining operations for
which the credit is claimed; and
(B) set out the gross income attributable
to the mining operations and other information about
the mining operations that the Department of Revenue
may require;
(2) without regard to an exemption to which
the person may be entitled under AS 43.65.010(a).
* Sec. 3. AS 27.30.040 is amended to read:
Sec. 27.30.040. Credit may be carried forward.
Except as its application is limited by AS 27.30.030
and 27.30.050, a portion of a credit that is not
applied under AS 27.30.030 during a tax year [OR
ROYALTY PAYMENT PERIOD] may be carried forward to and
applied during a subsequent tax year [OR ROYALTY
PAYMENT PERIOD].
* Sec. 4. AS 27.30.050 is amended to read:
Sec. 27.30.050. Limit on application of credit.
An exploration incentive credit for a mining operation
may not exceed $20,000,000 and must be applied within
15 tax years [OR ROYALTY PAYMENT PERIODS] after the
taking of the credit is approved under
AS 27.30.020(2), but the tax years [OR ROYALTY PAYMENT
PERIODS] in which the credit is applied need not be
(1) the tax year [OR ROYALTY PAYMENT
PERIOD] in which the person first incurs liability for
payment of tax [OR ROYALTY] based on the person's
activity that is the basis of the claim of the
exploration incentive credit; or
(2) consecutive periods."
Page 1, line 5:
Delete "Section 1"
Insert "Sec. 5"
Renumber the following bill sections accordingly.
Page 2, line 17:
Delete "sec. 1"
Insert "sec. 5"
Page 2, line 18:
Delete "sec. 1"
Insert "sec. 5"
Page 2, line 19:
Delete "sec. 2"
Insert "sec. 6"
Page 2, line 21:
Delete "sec. 2"
Insert "sec. 6"
Page 2, following line 21:
Insert a new subsection to read:
"(c) The changes to the applicability of the
exploration incentive credit made in AS 27.30.030(a)
and (b), as amended by secs. 1 and 2 of this Act,
AS 27.30.040, as amended by sec. 3 of this Act, and
AS 27.30.050, as amended by sec. 4 of this Act, apply
to a royalty payment period beginning on or after the
effective date of sec. 1 of this Act."
Page 3, line 28:
Delete "Section 6"
Insert "Section 10"
Page 3, line 29:
Delete "sec. 7"
Insert "sec. 11"
Amendment 8, labeled 29-GH2924\N.2, Nauman, 3/29/16:
Page 1, line 1:
Delete "an exemption from"
Insert "a deferral of"
Page 1, lines 5 - 9:
Delete all material and insert:
"* Section 1. AS 7.30.030(b) is amended to read:
(b) If the person applies the credit against the
person's tax liability under (a)(1)(A)(i) or
(a)(1)(B)(i) of this section, the commissioner of
revenue shall disallow application of the credit under
that provision unless the person files with the
person's tax return an accounting of the person's
mining operation activities for each mining operation
that is included in the tax return and as to which the
credit is being applied. The accounting of mining
operation activities required by this subsection shall
be made
(1) on a form prescribed by the Department
of Revenue; on the form, the person shall
(A) identify the mining operations for
which the credit is claimed; and
(B) set out the gross income attributable
to the mining operations and other information about
the mining operations that the Department of Revenue
may require;
(2) without regard to a deferral [AN
EXEMPTION] to which the person may be entitled under
AS 43.65.010(a).
* Sec. 2. AS 43.65.010(a) is amended to read:
(a) A [PERSON PROSECUTING OR ATTEMPTING TO
PROSECUTE, OR ENGAGING IN THE BUSINESS OF MINING IN
THE STATE SHALL OBTAIN A LICENSE FROM THE DEPARTMENT.
ALL] new mining operation may defer the payment of tax
due under [OPERATIONS ARE EXEMPT FROM THE TAX LEVIED
BY] this chapter during the first [FOR] three and one-
half years after the date production begins. A
taxpayer that defers the payment of tax under this
subsection shall pay the amount of tax deferred in 10
equal installments, without interest, before May 1 of
each year, beginning with the first calendar year
following the date the deferral period ends.
* Sec. 3. AS 43.65.010(b) is amended to read:
(b) The Department of Natural Resources shall
certify to the department the date upon which
production begins, and the department shall issue a
certificate of deferral [EXEMPTION] to the producer
accordingly."
Renumber the following bill sections accordingly.
Page 2, following line 14:
Insert a new bill section to read:
"* Sec. 7. AS 43.65.060(4) is amended to read:
(4) "new mining operation [OPERATIONS]"
means the first mining operation on a property that
previously has not been subject to mining [OPERATIONS
WHICH BEGAN PRODUCTION AFTER JANUARY 1, 1953, OR WHICH
HAVE NOT BEEN LIABLE TO PAY A MINING LICENSE TAX UNDER
THIS CHAPTER ON NET INCOME SINCE JANUARY 1, 1948];"
Renumber the following bill sections accordingly.
Page 2, line 17:
Delete "sec. 1"
Insert "sec. 2"
Page 2, line 18:
Delete "sec. 1"
Insert "sec. 2"
Page 2, line 19:
Delete "sec. 2"
Insert "sec. 4"
Page 2, line 21:
Delete "sec. 2"
Insert "sec. 4"
Page 2, line 28:
Delete "Section 6"
Insert "Section 9"
Page 2, line 29:
Delete "sec. 7"
Insert "sec. 10"
Amendment 9, labeled 29-GH2924\N.3, Nauman, 3/29/16:
Page 1, line 1, following "An Act":
Insert "relating to rents for property involving
mining;"
Page 1, following line 4:
Insert a new bill section to read:
"* Section 1. AS 38.05.211(a) is amended to read:
(a) The holder of each mining claim, leasehold
location, prospecting site, and mining lease,
including a mining lease under AS 38.05.250, shall
pay, in advance, rental for the right to continue to
hold the mining claim, leasehold location, prospecting
site, and mining lease, including a mining lease under
AS 38.05.250. Rental is due and payable as follows:
(1) the rental amount for a prospecting
site is fixed at $200 for the two-year term of the
site;
(2) annual rental for a mining claim,
leasehold location, prospecting site, or mining lease
may not [SHALL] be less than
(A) $1.65 for each acre during the first
five years that the rental is due;
(B) $3.30 for each acre after the first five
years that the rental is due [BASED ON THE NUMBER OF
YEARS SINCE A MINING CLAIM, A LEASEHOLD LOCATION, OR A
MINING LEASE'S PREDECESSOR CLAIM OR LEASEHOLD LOCATION
WAS FIRST LOCATED; THE ANNUAL RENTAL AMOUNTS FOR A
MINING CLAIM, LEASEHOLD LOCATION, OR MINING LEASE ARE
AS FOLLOWS:
RENTAL AMOUNT
FOR EACH MINING
CLAIM OR LEASEHOLD
LOCATION INCLUDING
NUMBER OF RENTAL AMOUNT EACH QUARTER-QUARTER
YEARS SINCE PER ACRE FOR SECTION MTRSC
FIRST LOCATED MINING LEASES SYSTEM
0 - 5 $ .50 $ 20
6 - 10 $1.00 40
11- OR MORE $2.50 100;
(3) THE ANNUAL RENTAL IN ANY YEAR FOR EACH
QUARTER SECTION CLAIM, LEASEHOLD LOCATION, OR LEASE
BASED ON THE MTRSC SYSTEM IS FOUR TIMES THE RENTAL
AMOUNT FOR A QUARTER-QUARTER SECTION MINING CLAIM,
LEASEHOLD LOCATION, OR LEASE IN THAT YEAR]."
Page 1, line 5:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
Page 2, following line 14:
Insert a new bill section to read:
"* Sec. 6. AS 38.05.211(b) is repealed."
Renumber the following bill sections accordingly.
Page 2, line 17:
Delete "sec. 1"
Insert "sec. 2"
Page 2, line 18:
Delete "sec. 1"
Insert "sec. 2"
Page 2, line 19:
Delete "sec. 2"
Insert "sec. 3"
Page 2, line 21:
Delete "sec. 2"
Insert "sec. 3"
Page 2, line 28:
Delete "Section 6"
Insert "Section 8"
^
Page 2, line 29:
Delete "sec. 7"
Insert "sec. 9"
[HB 253 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| CSHB 253 Version N.pdf |
HRES 3/30/2016 1:00:00 PM |
HB 253 |
| HB 282 Ver. P.PDF |
HRES 3/30/2016 1:00:00 PM |
HB 282 |
| HB 282 Sponsor Statement.pdf |
HRES 3/30/2016 1:00:00 PM |
HB 282 |
| HB 282 Sectional Analysis.pdf |
HRES 3/30/2016 1:00:00 PM |
HB 282 |
| HB282-LEG-OP-02-04-16.pdf |
HRES 3/30/2016 1:00:00 PM |
HB 282 |
| AGDC Board Members.pdf |
HRES 3/30/2016 1:00:00 PM |
HB 282 |
| 2015 12 07 Legal Memo - Leg Members AGDC Board.pdf |
HRES 3/30/2016 1:00:00 PM |
HB 282 |
| SB 125 Sponsor Statement.pdf |
HRES 3/30/2016 1:00:00 PM |
SB 125 |
| SB 125 Fiscal Note.pdf |
HRES 3/30/2016 1:00:00 PM |
SB 125 |
| SB 125 (RES) Version P.pdf |
HRES 3/30/2016 1:00:00 PM |
SB 125 |
| CS HB 253 Amendments Ver. N Packet.PDF |
HRES 3/30/2016 1:00:00 PM |
HB 253 |