Legislature(2009 - 2010)

2010-02-10 Senate Journal

Full Journal pdf

2010-02-10                     Senate Journal                      Page 1475
SB 271                                                                                                                        
SENATE BILL NO. 271 BY THE SENATE RULES COMMITTEE                                                                               
BY REQUEST OF THE GOVERNOR, entitled:                                                                                           
     "An Act relating to interest on certain underpayments or                                                                   
     overpayments for the oil and gas production tax, to                                                                        
     certificates for certain oil and gas production tax credits for                                                            
     qualified capital expenditures, and to alternative tax credits                                                             
     for expenditures for certain oil and gas development and                                                                   
     exploration activities for the oil and gas production tax;                                                                 
     relating to the use of the oil and gas tax credit fund to                                                                  
     purchase certain tax credit certificates; and providing for an                                                             
     effective date."                                                                                                           
was read the first time and referred to the Resources and Finance                                                               

2010-02-10                     Senate Journal                      Page 1476
The following fiscal information was published today:                                                                           
 Fiscal Note No. 1, zero, Department of Natural Resources                                                                       
 Fiscal Note No. 2, zero, Department of Administration                                                                          
 Fiscal Note No. 3, Department of Revenue                                                                                       
Governor's transmittal letter dated February 9:                                                                                 
Dear President Stevens:                                                                                                         
Under the authority of Art. III, Sec. 18 of the Alaska Constitution, I                                                          
am transmitting a bill that proposes four discrete changes to Alaska's                                                          
oil and gas production tax. The bill will provide incentives for                                                                
explorers and producers to continue to invest in Alaska. The proposed                                                           
changes will encourage investment and employment within the state,                                                              
and ultimately, increase production of the state's oil and gas resources.                                                       
I remain committed to considering all proposals and ideas that will                                                             
result in increased exploration and drilling that produce more oil and                                                          
jobs for Alaskans.                                                                                                              
First, the bill will encourage investment by creating a new 30 percent                                                          
alternative tax credit for qualified costs closely related to well drilling                                                     
and work over operations designed to enhance current well operations.                                                           
The taxpayer will have to claim the 30 percent credit within six                                                                
months of completing the qualifying activity, and will have to submit                                                           
enough information for the Department of Revenue to determine that                                                              
the expenditures qualify for the credit.                                                                                        
Second, the bill will allow qualified applicants, regardless of their                                                           
future spending levels, to receive cash refunds for tax credits that the                                                        
applicants received for qualified capital expenditures. Under current                                                           
law, an applicant cannot qualify for a cash refund unless, within 24                                                            
months of receiving the tax credit certificate, the applicant incurred a                                                        
qualified capital expenditure or successfully bid on a lease on State                                                           
land. If the applicant is unable to meet either requirement, the                                                                
applicant cannot receive payment for the qualified capital expenditures                                                         
the applicant invested in the state. To solve this problem, the bill will                                                       
eliminate the requirement that the applicant make additional capital                                                            
expenditures or be the successful bidder for a lease on State land.                                                             

2010-02-10                     Senate Journal                      Page 1477
Third, the bill will allow producers and explorers who qualify for the                                                          
20 percent tax credit under AS 43.55.023 for capital expenditures to                                                            
use the credit in the year that the credit is earned. Currently, producers                                                      
and explorers are required to spread the benefit over two years.                                                                
Allowing producers and explorers the full value of their credits in one                                                         
year would increase the amount available for further exploration                                                                
activities and for work on currently producing wells.                                                                           
Finally, the bill will allow the Department of Revenue to waive                                                                 
interest for certain underpayments of taxes due before the effective                                                            
date of certain regulations implementing the production tax. This                                                               
provision will apply only if regulations to implement the production                                                            
tax are not yet in effect at the time the annual tax payments are due,                                                          
and only if the underpayment results from the producer's good faith                                                             
estimation of the tax due. Should it be determined that the taxpayer                                                            
overpaid the amount of tax due under the regulations in effect at the                                                           
time of payment and that a refund is due, no interest will be due on a                                                          
refund made within the time period specified in the bill.                                                                       
With these changes, we will continue to responsibly maximize and                                                                
invest in Alaska's oil and gas resources. I urge your prompt and                                                                
favorable action on this measure.                                                                                               
Sean Parnell