In my latest column for State Tax Notes, I discuss several tax-related bills that were introduced during the most recent Alaska legislative session, which ended on May 17. Of the session, I noted that “…after the Alaska Department of Revenue released its Spring 2023 Revenue Forecast in March, the level of activity around tax legislation

In my most recent column for State Tax Notes, I look at the numbers in the Alaska Department of Revenue’s (DOR) spring 2023 revenue forecast, which the governor and Legislature rely on for budget discussions during the legislative session. I also provide a summary of some of the bills legislators introduced during the last

In my most recent column for State Tax Notes, I look at the numbers in the Alaska Department of Revenue’s (DOR) 2022 Fall Revenue Sources Book, which tabulates historical revenues and provides the revenue forecast that the governor and Legislature will rely on for budget discussions during the legislative session. I also discuss the status of the refundable/rebatable tax credits that have been available for more than a decade in Alaska to companies that invested in oil and gas exploration and development and in refinery infrastructure in the state.

Unrestricted revenues in Alaska, which fund government operations, are driven by royalties for oil produced from state leases and by three categories of taxes—oil and gas production taxes, petroleum property taxes, and corporate income taxes. As a result of lower predicted oil prices and reduced production, DOR lowered its 2022 fall forecast for unrestricted general fund revenue from that of its official spring 2022 forecast to $3.9 billion ($1.1 billion decrease) for fiscal 2023 and $3.4 billion ($0.7 billion decrease) for fiscal 2024.Continue Reading Bracing for Another Budget Debate

In my most recent column for State Tax Notes, I look at several bills that did and didn’t pass in the latest session of the Alaska State Legislature, which adjourned in May, and at what may be on the horizon.

Legislators introduced several bills that would have increased taxes on individuals or businesses in Alaska

On Tuesday, May 5, 2015, the Internal Revenue Service (“IRS”) released proposed regulations defining qualifying income for Master Limited Partnerships (“MLPs”). MLPs are publicly traded partnerships that are taxed as a partnership rather than a corporation.

Being taxed as a MLP has many advantages. While shareholders in a corporation face double taxation  ̶  paying taxes first at the corporate level, and then at the personal level when those earnings are received as dividends  ̶  owners of a partnership are taxed only once, when they receive distributions. The absence of taxes at the company level gives MLPs a lower cost of capital than is typically available to corporations, allowing the MLPs to pursue projects that might not be feasible for corporations.

To qualify as a MLP, at least 90% of the entity’s gross income must be “qualifying income.” Previously, there had been no detailed list of what constitutes qualifying income.

These proposed regulations use the term “qualifying activities” to describe activities relating to minerals or natural resources that generate qualifying income. The IRS has now provided an exclusive list of operations that constitute qualifying activities. The activities addressed include exploration, development, mining or production, processing, refining, transportation, and marketing of any natural resource.
Continue Reading New Rules on MLPs & Qualifying Income: What Oil Services and Exploration Companies Need to Know

On January 16, 2013, Alaska Governor Sean Parnell introduced proposed legislation that would significantly alter Alaska’s Oil and Gas Production Tax regime. The current law, known as Alaska’s Clear and Equitable Share Act (“ACES”), was enacted in 2007 and is located in Alaska Statutes 43.55.011 et seq. This tax is levied on the net profits of oil and gas production from leases or properties in the state, except for the federal and state royalty share and oil and gas used in drilling or production operations. In this context, the term “net profits” is essentially the gross value at the point of production, also known as wellhead value (market price less transportation costs) less upstream operating and capital costs.

The tax that is levied on net profit per Btu equivalent barrel of oil and gas is the sum of (1) a base tax rate of 25% and (2) a progressive surcharge that is calculated on a monthly basis and starts at 0.4% for every $1 by which net profit per barrel exceeds $30, up to $92.50. For net profits over $92.50, the progressive surcharge equals the sum of 25% (0.4% times $62.50) plus 0.1% per every additional $1 of profit per barrel, up to a maximum progressive surcharge of 50%. Thus, the maximum total nominal tax rate is 75%. The tax rates under ACES, particularly the progressive surcharge, have been and will continue to be hotly debated.Continue Reading Proposed Alaska Oil and Gas Production Tax Bill Would Reduce Tax Rates, Alter Credits