State sued over changes in tax collection
Kristen Nelson Petroleum News
Exxon Mobil Corp., Hilcorp Alaska LLC and SAExploration Inc. have filed suit against the Alaska Department of Revenue seeking judgment based on DOR’s Advisory Bulletin 2017-01 which, plaintiffs said, “re-interprets Alaska’s tax code and regulations to increase the tax burden on taxpayers by approximately $110 million in 2018 and to retroactively impose back taxes of $50 million (plus an unspecified amount of interest) for tax years 2014-2017.”
Plaintiffs said in the June 7 filing that the 2017 bulletin reverses a 2011 advisory bulletin.
“This reversal in position, and retroactive application, was made without public comment, due process, or the requirements” of state statute, they said.
At issue is production tax paid by North Slope producers based on production tax liabilities which can be reduced by tax credits, including a sliding scale credit providing a credit per barrel adjusted based on oil prices and costs, a new oil credit which provides a flat $5 per barrel credit on oil from qualified leases and other credits.
Plaintiffs said the sliding scale and per-barrel credits were enacted in 2013 as part of Senate Bill 21.
Prior to publication of the 2017 bulletin, plaintiffs said the Department of Revenue “acknowledged in the 2011 Advisory Bulletin that North Slope Producers could reduce their tax liability below the Minimum Tax by using the New Oil Credit and the Other Credits,” and “stated that taxpayers could apply the Sliding Scale Credit first to reduce tax liability down to the Minimum Tax and then apply the New Oil Credit and the Other Credits to the portion below the Minimum Tax.”
The 2017 Advisory Bulletin, plaintiffs said, was adopted by the department “without seeking comments from, or providing notice to, affected taxpayers or the public.” Plaintiffs also said the department “failed to rescind the 2011 Advisory Bulletin that had opined that taxpayers could apply the New Oil Credit and Other Credits against the Minimum Tax.”
In the 2017 Advisory Bulletin the department asserted “that if a taxpayer uses the Sliding Scale Credit, the taxpayer cannot use any credits, including the New Oil Credit and the Other Credits, to reduce its tax liability below the Minimum Tax.”
The plaintiffs are seeking a court order voiding the 2017 Advisory Bulletin and an award of costs, including attorneys’ fees.
The state had not yet filed a response when this issue of Petroleum News went to press.
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