Senate Resources Eliminates Oil & Gas Cash Credits Statewide
JUNEAU – Faced with multi-year budget shortfalls and the concern of significant financial exposure, the Senate Resources Committee moved today to finish the work of ending the state’s long-standing program offering cash credits to oil and gas companies.
The Senate Resources committee substitute for House Bill 111 eliminates all cash credits statewide beginning in 2018, a major point of consensus among members. The committee substitute concludes the multi-year effort to phase out tax credits used against liability by repealing the net operating loss credit. The only remaining credits against liability would be available in Middle Earth, where several Alaska-based companies are seeking natural gas to supply local communities.
“Our committee’s work product helps right the fiscal ship of the state, and affirms the Senate Majority’s key principles of protecting the private sector and supporting increased investment in our oil fields, which will drive the production we require to deliver royalties and taxes to our treasury, and oil through our pipeline,” said Sen. Cathy Giessel (R-Anchorage) chair of the Senate Resources Committee.
The committee substitute reduces the state backlog of credits by expanding opportunities for companies holding tax credits to use, or sell those for use, against prior years’ tax liabilities, such as assessments issued after audits and amended filings. Following two years of vetoes, companies are left holding more than $700 million in practically unusable credits, causing financial stress and uncertainty for small companies and their Alaska vendors waiting on reimbursement.
Finally, the committee’s version of HB 111 provides an opportunity for companies to fully recover losses, which is standard in a net profits tax system, by carrying forward eligible costs they were unable to deduct in a current year, due to the minimum tax required by the state. The minimum tax due is made solid against annual losses, increasing stability within the state’s finances. Companies with new developments will be eligible for non-cash state support for those new developments.
HB 111 will next be heard by the Senate Finance Committee.