Section 43.55.023. Tax credits for certain losses and expenditures.

   (a) [See delayed amendment note]. =ro A producer or explorer may take a tax credit for a qualified capital expenditure as follows:
        (1) notwithstanding that a qualified capital expenditure may be a deductible lease expenditure for purposes of calculating the production tax value of oil and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under AS 43.20.043 or AS 43.55.025, a producer or explorer that incurs a qualified capital expenditure may also elect to apply a tax credit against a tax levied by AS 43.55.011(e) in the amount of 10 percent of that expenditure;
        (2) a producer or explorer may take a credit for a qualified capital expenditure incurred in connection with geological or geophysical exploration or in connection with an exploration well only if the producer or explorer
             (A) agrees, in writing, to the applicable provisions of AS 43.55.025(f)(2); and
             (B) submits to the Department of Natural Resources all data that would be required to be submitted under AS 43.55.025(f)(2);
        (3) a credit for a qualified capital expenditure incurred to explore for, develop, or produce oil or gas deposits located
             (A) north of 68 degrees North latitude may be taken only if the expenditure is incurred before January 1, 2014;
             (B) in the Cook Inlet sedimentary basin may be taken only if the expenditure is incurred before January 1, 2018.
   (b) [See delayed amendment note]. =ro Before January 1, 2014, a producer or explorer may elect to take a tax credit in the amount of 25 percent of a carried-forward annual loss. For lease expenditures incurred on and after January 1, 2014, and before January 1, 2016, to explore for, develop, or produce oil or gas deposits located north of 68 degrees North latitude, a producer or explorer may elect to take a tax credit in the amount of 45 percent of a carried-forward annual loss. For lease expenditures incurred on and after January 1, 2016, to explore for, develop, or produce oil or gas deposits located north of 68 degrees North latitude, a producer or explorer may elect to take a tax credit in the amount of 35 percent of a carried-forward annual loss. For lease expenditures incurred on or after January 1, 2014, and before January 1, 2017, to explore for, develop, or produce oil or gas deposits located south of 68 degrees North latitude, a producer or explorer may elect to take a tax credit in the amount of 25 percent of a carried-forward annual loss. For lease expenditures incurred on or after January 1, 2017, to explore for, develop, or produce oil or gas deposits located south of 68 degrees North latitude, a producer or explorer may elect to take a tax credit in the amount of 15 percent of a carried-forward annual loss, except that a credit for lease expenditures incurred to explore for, develop, or produce oil or gas deposits located in the Cook Inlet sedimentary basin may only be taken if the expenditure is incurred before January 1, 2018. A credit under this subsection may be applied against a tax levied by AS 43.55.011(e). For purposes of this subsection,
        (1) a carried-forward annual loss is the amount of a producer's or explorer's adjusted lease expenditures under AS 43.55.165 and 43.55.170 for a previous calendar year that was not deductible in calculating production tax values for that calendar year under AS 43.55.160;
        (2) for lease expenditures incurred on or after January 1, 2017, any reduction under AS 43.55.160(f) or (g) is added back to the calculation of production tax values for that calendar year under AS 43.55.160 for the determination of a carried-forward annual loss.
   (c) A credit or portion of a credit under this section may not be used to reduce a person's tax liability under AS 43.55.011(e) for any calendar year below zero, and any unused credit or portion of a credit not used under this subsection may be applied in a later calendar year.
   (d) A person that is entitled to take a tax credit under this section that wishes to transfer the unused credit to another person or obtain a cash payment under AS 43.55.028 may apply to the department for a transferable tax credit certificate. An application under this subsection must be in a form prescribed by the department and must include supporting information and documentation that the department reasonably requires. The department shall grant or deny an application, or grant an application as to a lesser amount than that claimed and deny it as to the excess, not later than 120 days after the latest of (1) March 31 of the year following the calendar year in which the qualified capital expenditure or carried-forward annual loss for which the credit is claimed was incurred; (2) the date the statement required under AS 43.55.030(a) or (e) was filed for the calendar year in which the qualified capital expenditure or carried-forward annual loss for which the credit is claimed was incurred; or (3) the date the application was received by the department. If, based on the information then available to it, the department is reasonably satisfied that the applicant is entitled to a credit, the department shall issue the applicant a transferable tax credit certificate for the amount of the credit. A certificate issued under this subsection does not expire.
   (e) A person to which a transferable tax credit certificate is issued under (d) of this section may transfer the certificate to another person, and a transferee may further transfer the certificate. Subject to the limitations set out in (a) - (d) of this section, and notwithstanding any action the department may take with respect to the applicant under (g) of this section, the owner of a certificate may apply the credit or a portion of the credit shown on the certificate only against a tax levied by AS 43.55.011(e). However, a credit shown on a transferable tax credit certificate may not be applied to reduce a transferee's total tax liability under AS 43.55.011(e) for oil and gas produced during a calendar year to less than 80 percent of the tax that would otherwise be due without applying that credit. Any portion of a credit not used under this subsection may be applied in a later period.
   (f)  [Repealed, Sec. 67 ch 1 SSSLA 2007]. 
   (g) The issuance of a transferable tax credit certificate under (d) of this section or former (m) of this section or the purchase of a certificate under AS 43.55.028 does not limit the department's ability to later audit a tax credit claim to which the certificate relates or to adjust the claim if the department determines, as a result of the audit, that the applicant was not entitled to the amount of the credit for which the certificate was issued. The tax liability of the applicant under AS 43.55.011(e) and 43.55.017 - 43.55.180 is increased by the amount of the credit that exceeds that to which the applicant was entitled, or the applicant's available valid outstanding credits applicable against the tax levied by AS 43.55.011(e) are reduced by that amount. If the applicant's tax liability is increased under this subsection, the increase bears interest under AS 43.05.225 from the date the transferable tax credit certificate was issued. For purposes of this subsection, an applicant that is an explorer is considered a producer subject to the tax levied by AS 43.55.011(e).
   (h) Regulations adopted to implement this section must include provisions prescribing reporting, record keeping, and certification procedures and requirements to verify the accuracy of credits claimed and to ensure that a credit is not used more than once.
   (i)  [Repealed, Sec. 33 ch 10 SLA 2013].  
   (j) As a condition of receiving a tax credit under this section, a producer or explorer that obtains the tax credit for or directly related to a pipeline, facility, or other asset that is or becomes subject to regulation by the Federal Energy Regulatory Commission, the Regulatory Commission of Alaska, or a successor regulatory body shall at all times support and in all rate proceedings file to flow through 100 percent of the tax credits to ratepayers as a reduction in the costs of service for the pipeline, facility, or other asset.
   (k) An entity that is exempt from taxation under this chapter may not apply for a transferable tax credit certificate.
   (l) [See delayed amendment note]. =ro A producer or explorer may apply for a tax credit for a well lease expenditure incurred in the state south of 68 degrees North latitude after June 30, 2010, as follows:
        (1) notwithstanding that a well lease expenditure incurred in the state south of 68 degrees North latitude may be a deductible lease expenditure for purposes of calculating the production tax value of oil and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under (a) of this section, AS 43.20.043, or AS 43.55.025, a producer or explorer that incurs a well lease expenditure in the state south of 68 degrees North latitude may elect to apply a tax credit against a tax levied by AS 43.55.011(e) in the amount of
             (A) 40 percent of that expenditure incurred before January 1, 2017;
             (B) 20 percent of that expenditure incurred on or after January 1, 2017;
        (2) a producer or explorer may take a credit for a well lease expenditure incurred in the state south of 68 degrees North latitude in connection with geological or geophysical exploration or in connection with an exploration well only if the producer or explorer
             (A) agrees, in writing, to the applicable provisions of AS 43.55.025(f)(2); and
             (B) submits to the Department of Natural Resources all data that would be required to be submitted under AS 43.55.025(f)(2);
        (3) a credit for a well lease expenditure incurred to explore for, develop, or produce oil or gas deposits located in the Cook Inlet sedimentary basin may be taken only if the expenditure is incurred before January 1, 2018.
   (m)  [Repealed, Sec. 32 ch 10 SLA 2013].  
   (n) For the purposes of (l) of this section, a well lease expenditure incurred in the state south of 68 degrees North latitude is a lease expenditure that is
        (1) directly related to an exploration well, a stratigraphic test well, a producing well, or an injection well other than a disposal well, located in the state south of 68 degrees North latitude, if the expenditure is a qualified capital expenditure and an intangible drilling and development cost authorized under 26 U.S.C. (Internal Revenue Code), as amended, and 26 C.F.R. 1.612-4, regardless of the elections made under 26 U.S.C. 263(c); in this paragraph, an expenditure directly related to a well includes an expenditure for well sidetracking, well deepening, well completion or recompletion, or well workover, regardless of whether the well is or has been a producing well; or
        (2) an expense for seismic work conducted within the boundaries of a production or exploration unit.
   (o) In this section, "qualified capital expenditure"
        (1) means, except as otherwise provided in (2) of this subsection, an expenditure that is a lease expenditure under AS 43.55.165 and is
             (A) incurred for geological or geophysical exploration; or
             (B) treated as a capitalized expenditure under 26 U.S.C. (Internal Revenue Code), as amended, regardless of elections made under 26 U.S.C. 263(c) (Internal Revenue Code), as amended, and is
                  (i) treated as a capitalized expenditure for federal income tax reporting purposes by the person incurring the expenditure; or
                  (ii) eligible to be deducted as an expense under 26 U.S.C. 263(c) (Internal Revenue Code), as amended;
        (2) does not include an expenditure incurred to acquire an asset (A) the cost of previously acquiring which was a lease expenditure under AS 43.55.165 or would have been a lease expenditure under AS 43.55.165 if it had been incurred after March 31, 2006; for purposes of this subparagraph, "asset" includes geological, geophysical, and well data and interpretations; or (B) that has previously been placed in service in the state; an expenditure to acquire an asset is not excluded under this paragraph if not more than an immaterial portion of the asset meets a description under this paragraph.
   (p)  [Repealed, Sec. 33 ch 10 SLA 2013].  

Authorities

43.55.025;43.55.028;43.55.029;43.55.030;43.55.075;43.55.160;43.55.165;43.55.170;43.55.180;43.55.890

Notes

Recent Bills that will modify this

HB 155 FEES; WAIVERS; CREDITS; DEDUCTIONS;TAXES
HB 247 TAX;CREDITS;INTEREST;REFUNDS;O & G
HB 326 OIL & GAS PRODUCTION TAX AND CREDITS
HB5005 TAX;CREDITS;PMTS;INTEREST;LEASE;O & G
SB 130 TAX;CREDITS;INTEREST;REFUNDS;O & G
SB5005 TAX;CREDITS;PMTS;INTEREST;LEASE;O & G

Implemented As

15 AAC 55.275
15 AAC 55.280
15 AAC 55.290
15 AAC 55.305
15 AAC 55.310
15 AAC 55.315
15 AAC 55.320
15 AAC 55.330
15 AAC 55.345
15 AAC 55.365
15 AAC 55.375
15 AAC 55.805
15 AAC 55.900

References

15 AAC 55.205
15 AAC 55.206
15 AAC 55.223
15 AAC 55.224
15 AAC 55.290
15 AAC 55.310
15 AAC 55.315
15 AAC 55.320
15 AAC 55.330
15 AAC 55.335
15 AAC 55.345
15 AAC 55.365
15 AAC 55.375
15 AAC 55.380
15 AAC 55.381
15 AAC 55.520
15 AAC 55.805
15 AAC 55.900
AS 43.55.025 Alternative tax credit for oil and gas exploration.
AS 43.55.028 Oil and gas tax credit fund established; cash purchases of tax credit certificates.
AS 43.55.029 Assignment of tax credit certificate.
AS 43.55.030 Filing of statements.
AS 43.55.075 Limitation on assessment and amended returns.
AS 43.55.160 Determination of production tax value of oil and gas.
AS 43.55.165 Lease expenditures.
AS 43.55.170 Adjustments to lease expenditures.
AS 43.55.180 Required report.
AS 43.55.890 Disclosure of tax information.

History

(Sec. 13 ch 2 TSSLA 2006; am Sec. 25 - 31, 67 ch 1 SSSLA 2007; am Sec. 16, 17 ch 16 SLA 2010; am Sec. 43 ch 8 SLA 2011; am Sec. 14 - 19, 32, 33 ch 10 SLA 2013; am Sec. 17 - 19 ch 4 4SSLA 2016)