Senate Ends Oil Tax Credit Program
JUNEAU – The state will stop offering cash tax credits to oil companies at the end of this year, following a Senate vote today.
“This legislation ending our tax credit program is critical, now, to reduce our cash exposure and protect the state’s treasury,” said Sen. Anna MacKinnon, R-Eagle River. “Without this bill, the state would be on the hook to make cash payments of $150 to $200 million per year, indefinitely, to the eligible small and new companies. We cannot afford to continue this practice.”
House Bill 111 eliminates the state’s cash exposure by ending the program of refundable oil and gas tax credits while protecting the basic components of the tax regime in place today. The current tax regime has boosted production and investment, drawing royalties and tax revenues to Alaska’s treasury and supplying thousands of good jobs to Alaska workers.
“Ending cash credits is a necessary step for the state, but will have serious impacts on smaller companies investing in Alaska’s oil fields,” said Sen. Cathy Giessel, R-Anchorage. “It is more important than ever we maintain a competitive tax system so we can attract the necessary investment for our future oil production, which provides critical dollars we’re counting on to the state treasury.”
With the end of the net operating loss credit statewide, the Senate and House versions of HB 111 transition to a system of carrying forward lease expenditures that result in a loss for use against future tax liability. Companies with a loss will not be able to use the loss to reduce taxes below the 4 percent gross minimum tax.
The legislation also seeks to provide new opportunities for companies holding refundable tax credits issued before Jan. 1, 2018, to offset prior year tax liabilities related to audits.
“Money due the state in these instances is not forecasted revenue planned on by state financial planners,” said Sen. MacKinnon. “We hope this will help companies monetize their existing credits as we seek to pay off the significant backlog of refundable credits following two years of vetoes.”
Senate leaders are optimistic the House will respond favorably to the bill ending refundable oil and gas tax credits. Legislators of both bodies, across party lines, and Gov. Bill Walker have supported transitioning away from refundable oil tax credits.