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Credits on special session call after House rejects Senate bill
Changes to Alaska’s oil tax credit system are still in play.
Gov. Bill Walker’s oil tax credit proposal, House Bill 247, failed to pass the Legislature on the last day of its extended regular session, May 18, and the governor included “HB 247 or a similar act” on his May 19 call for a special session, slated to begin May 23.
The House of Representatives rejected the Senate’s version of HB 247, a substitute crafted in Senate Finance.
The House vote against concurrence with the Senate bill, 14 yea, 24 nay, was similar to the 25 yea, 12 nay vote May 13 when the House passed an amended version of the bill sponsored by Reps. Paul Seaton, R-Homer, and Tammie Wilson, R-North Pole.
The bill was a long time reaching that first House vote.
After numerous hearings in House Resources, a Finance Committee substitute was on the House floor April 9-12; it was returned to House Rules. What came to the House floor May 12 was a committee substitute prepared by the Rules Committee.
That bill was replaced on the floor by the Seaton-Wilson amendment, which was replaced by a Senate Finance Committee substitute. The Senate CS for HB 247 bill passed the Senate by a 14-6 vote May 18. The House failed to concur and Speaker Mike Chenault appointed a House conference committee.
But House members also failed to agree to a 10-day extension of the session, and by midnight the session had ended, with first the Senate and then the House gaveling out sine die, leaving work incomplete on the oil tax credit bill, and also on the capital and operating budgets and the governor’s proposals for use of the permanent fund and other taxes to create a sustained revenue stream for the state, which faces a multibillion-dollar deficit because of the dramatic drop in oil prices.
House bill There are substantial differences in the bills.
For the North Slope, the bill which passed the House eliminated net operating loss credits for companies producing more than 15,000 barrels per day, leaving smaller producers eligible for refunded NOLs capped at $70 million per company per year. The 35 percent NOL rate ramps down to 32 percent next year, 29 percent in 2019, 26 percent in 2021 and 25 percent in 2023.
For Cook Inlet, the House kept the NOL at 25 percent in 2017 but only for companies producing by the end of this year; the Cook Inlet NOL went to zero in 2018. Qualified capital expenditure credits were repealed effective Jan. 1, 2017, and well lease expenditure credits were reduced to 20 percent for 2017 and repealed in 2018.
The house bill moved the Cook Inlet tax cap sunset from 2022 to 2019, imposing the state’s underlying 35 percent rate in 2019, but with the expectation that a new tax system would be in place by them.
The governor had proposed hardening the minimum tax floor and raising it from 4 percent to 5 percent; the House bill had a 5 percent floor but only at a yearly oil price above $70 per barrel, effectively hardening the floor because NOLs could no longer be carried forward by large producers.
The governor’s bill made no changes to the gross value reduction for new oil, but the House imposed a 7-year limit for GVR and also sunset the GVR early if the average price of oil exceeds $70 for any three of those 7 years.
For Cook Inlet, the Senate Finance CS had a slower ramp down for credits, with the NOL reduced to 15 percent in 2017 and zero in 2018; the QCE reduced to 10 percent in 2017 and zero in 2018; and the WLE reduced to 20 percent in 2017 and zero in 2018.
On Cook Inlet taxes, the Senate CS extends indefinitely the Cook Inlet gas tax at an average of 17.5 cents per thousand cubic feet and adds a new Cook Inlet oil tax cap of $1 per barrel. There are no sunsets and no working group in the Senate CS, with the tax changes intended to be long-term.
For the North Slope, the Senate CS limit for cashing credits remains at 50,000 bpd with a cap of refunds of $70 million per company per year.
The North Slope NOL remains at 35 percent, but in the case of a company with $70 million in certificates they would receive $61.25 million in payment, an effective NOL of 30.6 percent.
There is no increase in the minimum tax for the North Slope in the Senate CS, and no hardening of the floor.
The Senate CS has the same 7-year graduation of GVR oil to legacy oil, and the same immediate “graduation” if the average price of oil exceeds $70 for any 3 years.
- KRISTEN NELSON
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