SENATE BILL NO. 114                                                                                                           
                                                                                                                                
     "An Act establishing an income  tax on certain entities                                                                    
     producing  or transporting  oil  or gas  in the  state;                                                                    
     relating  to  the  oil  and  gas  production  tax;  and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
2:50:22 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman MOVED to ADOPT proposed committee                                                                              
substitute for SB 114, Work Draft 33-LS0641\U (Nauman,                                                                          
4/3/23).                                                                                                                        
                                                                                                                                
Co-Chair Olson OBJECTED for discussion.                                                                                         
                                                                                                                                
2:51:04 PM                                                                                                                    
                                                                                                                                
KEN ALPER, STAFF, SENATOR DONNY OLSON, addressed a summary                                                                      
of changes documents (copy on file):                                                                                            
                                                                                                                                
                                                                                                                                
     CS for  Senate Bill  114: Oil  and Gas  Production Tax,                                                                    
     Income Tax                                                                                                                 
     Changes from initial version ("S" to "U")                                                                                  
   Original bill was 42 pages long and had 47 sections.                                                                         
   Current CS is five pages long and has nine sections.                                                                         
                                                                                                                                
     Four main changes:                                                                                                         
     1) Remove  the addition of  a "ringfence" on  the North                                                                    
     Slope, which  would have required  separate calculation                                                                    
     of  company  spending on  each  field  with a  separate                                                                    
     profit and thus tax calculation for each field.                                                                            
     2)  Remove substantial  conforming language  throughout                                                                    
     the  bill  that  referred  to  the  ringfence  and  the                                                                    
     various separate calculations required for it.                                                                             
     3)  Corrects  an  error  in  the  "per  barrel  credit"                                                                    
     change, so that the credit goes  all the way to zero at                                                                    
     high prices.                                                                                                               
     4) Removed the repeal of  AS 43.55.024(a) and (b). This                                                                    
     is an obsolete, sunsetted credit  having to do with new                                                                    
     field  development  outside  both Cook  Inlet  and  the                                                                    
     North Slope.                                                                                                               
     This was removed because it  is unnecessary and enabled                                                                    
     the   elimination  of   about  another   10  pages   of                                                                    
     conforming text.                                                                                                           
                                                                                                                                
     What the bill still does:                                                                                                  
     1) Expands  the current petroleum corporate  income tax                                                                    
     to  all   oil  and  gas  producers   and  transporters,                                                                    
     regardless  of  business  form.  The  tax  is  9.4%  of                                                                    
     taxable income greater than                                                                                                
     $4 million / year. (Section 1)                                                                                             
     2) Reduces the "per taxable  barrel credit" by $3, from                                                                    
     $8 to  $5 at  the highest  point (wellhead  value below                                                                    
     $80),  declining to  zero at  wellhead  value of  $120.                                                                    
     (Section 2-3)                                                                                                              
     3) Limits  use of  the per-barrel  credits earned  in a                                                                    
     year for production from a  particular field to no more                                                                    
     than the producer's qualified  capital spending on that                                                                    
     field. (Section 4)                                                                                                         
     4) Changes are retroactive to January 1, 2023                                                                              
                                                                                                                                
2:54:36 PM                                                                                                                    
                                                                                                                                
Co-Chair  Olson  WITHDREW  his  objection.  There  being  NO                                                                    
OBJECTION,  it  was  so  ordered.  The CS  for  SB  114  was                                                                    
ADOPTED.                                                                                                                        
                                                                                                                                
2:55:02 PM                                                                                                                    
                                                                                                                                
SENATOR  BILL WIELECHOWSKI,  SPONSOR,  thought ring  fencing                                                                    
was  a  concern  that  was compounded  by  the  complex  tax                                                                    
structure of  the state. He  supported the new  bill version                                                                    
and thanked the committee for their work.                                                                                       
                                                                                                                                
2:55:37 PM                                                                                                                    
                                                                                                                                
Co-Chair   Stedman   asked   for  help   understanding   the                                                                    
retroactive date.                                                                                                               
                                                                                                                                
2:55:59 PM                                                                                                                    
                                                                                                                                
Senator   Wielechowski  said   that  corporate   income  tax                                                                    
structure operated on  a calendar year rather  than a fiscal                                                                    
year. He  added that  there was precedent  for retroactivity                                                                    
in oil  tax structures.  He said  that the  committee should                                                                    
decide what was in the best interest of the state.                                                                              
                                                                                                                                
2:57:07 PM                                                                                                                    
                                                                                                                                
Co-Chair Olson set the bill aside.                                                                                              
                                                                                                                                
SB  114  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Olson discussed housekeeping.