In my latest column for State Tax Notes, I outline several bills to increase taxes introduced during the 2021 sessions of the Legislature, and discuss the status of the government’s repayment of rebatable tax credits, two packets of regulations promulgated by the DOR, and a preliminary revenue forecast issued by the DOR for 2022.
The Alaska Legislature broke a record for days in session in 2021, with a 120-day regular session followed by four special sessions. Of the numerous tax bills considered, none passed, but bills that were introduced in the 2021 regular session carry over for consideration in the next regular session, which started in January 2022.
Rebatable tax credits were a key topic during the 2021 sessions. For two years, the state has not made any payment to companies for the credits, which were offered to them as an incentive to invest in Alaska oil and gas exploration, development, and production. H.B. 3003, introduced during the third session, included $114 million for repayment of rebatable tax credits. Though the bill passed the House, $60 million that was to be funded through the Constitutional Budget Reserve didn’t receive the three-fourths supermajority vote required for its approval, and the Senate passed the bill with $54 million appropriated for repayment of the credits.
Based on forecast increases in the price of North Slope crude oil, DOR is predicting that Alaska will take in an additional $1.2 billion revenue for 2022 and, if the forecast holds true, $1 billion per year of revenue into the future over the DOR’s spring 2021 forecast. I note: “The increase in oil prices and concomitant increase in oil and gas production taxes would also yield larger appropriations for payment of the pending rebatable tax credits if the governor and Legislature follow the statutory formula [that dictates amounts of the appropriations].”
In conclusion: “Although the increase in oil prices signals relief for Alaska’s budget dilemma, much is still at stake. Taxpayers have an uneasy respite while holders of Alaska tax credits anxiously hope for additional appropriations for them. It will be important to regroup and recharge through the rest of 2021 because 2022 will likely be another tumultuous year.”
Read “2021 Runs From Frenzy to Fizzle,” published on December 20, 2021, by State Tax Notes.