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Alaska Tax Credits



Alternative Credit for Exploration – AS 43.55.025(a)(1)-(4) – Taxpayers who incur qualified exploration expenditures are eligible for this credit against oil and gas production tax. Credits earned for certain work performed on or after July 1, 2016, may be taken against corporate income tax.

The credit is 30% (20% for work performed prior to July 1, 2008) or 40%, depending on the qualifications of the exploration project. Taxpayers must obtain pre-approval from the Alaska Department of Natural Resources and submit certain data as part of the application process for exploration well projects. Credit applications under AS 43.55.025 are audited prior to issuance of the credit certificates. Certificates must be eventually issued, but the credit may also be applied to tax prior to the issuance of a certificate. The credit is transferable and eligible for state repurchase.

The credit is set to expire for Middle Earth Wells on Dec. 31, 2021. It expired for Middle Earth Seismic on Dec. 31, 2017, and the North Slope and Cook Inlet areas on June 30, 2016. This credit has been available since 2003 – pre-dating the oil and gas tax law revisions of 2006 and 2007. The scope of this credit is more specific than that provided for under AS 43.55.023.



Carried-Forward Annual Loss – AS 43.55.023(b) – Taxpayers who incurred lease expenditures that were not deductible in calculating production tax values generated a "loss carry forward" and they may have applied for a tax credit. The credit, which was transferable and applicable to oil and gas production tax, expired Dec. 31, 2017.

For the North Slope, the credit rate was 35% in 2016-2017, and 45% in 2014-2015. For Cook Inlet, and Middle Earth (outside Cook Inlet and the North Slope), it was 15% in 2017, and 25% in 2014-2016.

Only half of the 2017 loss was eligible for purchase under AS 43.55.028.



CDQ – AS 43.77.040 – The CDQ Credit is a nontransferable credit for contributions to an Alaska nonprofit corporation that is dedicated to fisheries industry-related expenditures. The credit is available only for fishery resources harvested under a CDQ. The credit is 100% of a taxpayer’s contribution amount, up to the 45.45% of the taxpayer’s tax liability on fishery resources harvested under a Community Development Quota. The authorizing statute is scheduled to sunset Jan. 1, 2021.



Cook Inlet Jack-Up Rig Credit – AS 43.55.025(a)(5) – This credit was a transferable and state repurchase-eligible credit applicable to oil and gas production tax for exploration expenses for the first three wells drilled by the first jack-up rig brought into Cook Inlet. The credit expired on June 30, 2016; all work must have occurred before that date.

The credit was only for expenses incurred in drilling wells that evaluate prospects in the pre-tertiary zone; all three wells had to be drilled by unaffiliated parties using the same rig. The credit was 100% of costs for the first well up to $25 million, 90% of costs for the second well up to $22.5 million, and 80% of costs for the third well up to $20 million. If the exploration well was brought into production, the operator was to repay 50% of the credit over 10 years following production start-up.



Education – AS 43.20.014, 43.75.018, 43.77.045, 43.55.019, 43.56.018 and 43.65.018 – The Education Credit is a nontransferable and nonrefundable credit applicable to the corporate income tax, fisheries business tax, fishery resource landing tax, oil and gas production tax, oil and gas property tax, and mining license tax.

Taxpayers can claim a credit for contributions to Alaska universities and accredited nonprofit Alaska two- or four-year colleges for facilities, direct instruction, research and educational support purposes.

The tax credit can also be taken for donations to a school district or state-operated vocational technical education and training school for vocational education courses, programs and facilities. Donations for Alaska Native cultural or heritage programs for public school staff and students, and a facility in the state that qualifies as a coastal ecosystem learning center under the Coastal American Partnership also qualify. Contributions to the Alaska Higher Education Investment Fund established in 2012 qualify as well.

The credit was set to end Dec. 31, 2018, but the Alaska Legislature in 2018 made changes to the law, and extended the credit to Dec. 31, 2024.

Before Jan. 1, 2019, the credit is only for cash contributions. As of Jan. 1, 2019, the credit will be for contributions of cash or equipment.

Before the year 2019, the credit allows the deduction of 50% of a business’s annual contributions up to $100,000, 100% of the next $200,000 in donations, then 50% of donations above $300,000. A business, for example, is able to have $250,000 deducted from its taxes by paying $300,000 in donations. A business is allowed to claim up to $5 million in Education Credits per year across all eligible tax types.

As of Jan. 1, 2019, the deduction amounts and cap will be reduced. The credit, including the contribution categories eligible for the credit, will remain the same as before 2019, with two exceptions. First, the contributions between $100,000 and $300,000 – those contributions will allow a deduction of 75% of the contribution, not 100% like before 2019. Second, a business will be allowed to claim up to $1 million in education credits per year across eligible tax types, not up to $5 million like before 2019.

On Jan. 1, 2021, the credit will be further reduced to 50% of all contributions. A business will still be allowed to claim up to $1 million in education credits per year across eligible tax types.

Qualifying Education Tax Credits include contributions by taxpayers to a public or private nonprofit elementary or secondary school in the state, a nonprofit regional training center recognized by the Alaska Department of Labor and Workforce Development, or an apprenticeship program in the state that is registered with the U.S. Department of Labor under 29 U.S.C. 50-50b for direct instruction, research and educational support purposes.

In addition, tax credits for certain taxpayers are available for contributions accepted for a facility by a public or private nonprofit elementary or secondary school in the state, for a scholarship awarded by a nonprofit organization to a dual-credit student for certain educational expenses, for a residential school in the state approved by the Alaska Department of Education and Early Development, or certain qualified childhood early learning and development programs.

Tax credits are also available for contributions by certain taxpayers for science, technology, engineering and math (STEM) programs by a nonprofit agency or school district for school staff and for students in grades kindergarten through 12 in the state and for the operation of a nonprofit organization dedicated to providing educational opportunities that foster public service leadership for future generations of residents of the state.





Exploration Incentive – AS 38.05.180(i) – Lessees of state land drilling an exploratory well or conducting certain seismic exploration on that land were eligible for this credit. The credit was repealed, effective Dec. 31, 2016. The credit was 50% of the cost of the exploration expenditures, and it could not have exceeded 50% of the production tax or state royalty against which it was applied. This credit was administered by the Alaska Department of Natural Resources, but it was also applicable to oil and gas production tax.



Exploration Incentive (Assignable) – AS 41.09.010 – This is a distinct incentive program administered by the Alaska Department of Natural Resources. The credit was repealed, effective Dec. 31, 2016.

The credit was available to be claimed against royalty obligations, corporate income tax and production tax. Taxpayers may have taken a credit up to 50% on state land (or 25% on non-state lands) of eligible oil and gas exploration expenditures. An approved incentive credit under this statute may not have exceeded $5 million per project and was limited to $30 million per taxpayer.



Film Production Credit – AS 43.98.030, AS 21.09.210, AS 21.66.110, AS 43.20, AS 43.55, AS 43.56, AS 43.65, AS 43.75 and AS 43.77 – The Film Production Tax Credit under the Department of Revenue was effective July 1, 2013, and the Alaska Legislature repealed it July 1, 2015. The department stopped accepting new projects on the date it was repealed. It was a transferable credit for expenditures on eligible film production activities in Alaska. The film credits have six-year expiration dates to be used against Alaska tax liabilities; therefore, the department could see credits being taken until 2023 since credits were still being awarded in 2016.



Frontier Basin Credit – AS 43.55.025(a)(6) and (7) – The Frontier Basin Credit provides a tax credit for exploration wells and seismic projects within six specific areas designated in AS 43.55.025(o), also called the “Frontier Basins.”

The credit for exploration wells expired on July 1, 2016, and expenses incurred prior to that time were eligible for the credit so long as the exploration well was spudded by June 30, 2017; the credit for seismic exploration projects expired June 30, 2016.

The first two exploration wells drilled inside each of the six frontier basins were eligible for an 80% credit for up to $25 million of qualified expenditures. For seismic projects, the first project performed inside each of the six frontier basins was eligible to receive a 75% credit for up to $7.5 million of qualified expenditures.

The credit became effective Jan. 1, 2013, and was amended in 2016. Many requirements had to be met with the Alaska Department of Natural Resources to qualify for the credit, including pre-qualifications. The credit itself was allowed to be applied against a producer’s tax liability in the year in which it was incurred and also before the certificate was issued. The credit certificate was allowed to be transferred, applied to tax liability, or cashed out with the state under AS 43.55.028 by the original applicant.



Gas Exploration and Development A taxpayer may take a corporate income tax credit for 25% of qualifying expenditures incurred in exploration and development of natural gas reserves in Alaska, except for the North Slope. The credit may be applied against 75% of the tax liability.



LNG Storage Facility Tax Credit – AS 43.20.047 – The LNG (Liquefied Natural Gas) Storage Facility Tax Credit is a nontransferable, refundable credit for the costs incurred to establish a storage facility for LNG. The credit is for 50% of the costs incurred, not to exceed $15 million. The credit applies to facilities with a minimum storage capacity of 25,000 gallons of LNG that are public utilities regulated by the Regulatory Commission of Alaska. A facility must have been placed into service after Jan. 1, 2011, and start commercial operations before Jan. 1, 2020. The credit is refundable, subject to AS 43.55.028.



Minerals Exploration Incentive – AS 27.30.030 – The credit is for 100% of eligible costs of mineral and coal exploration activities, and is applicable to the corporate income tax, mining license tax and mineral production royalty. The credit may not exceed $20 million and must be applied within 15 years after the credit is approved.

For corporate income tax, the credit is limited to the lesser of 50% of the mining license tax liability at the mining operation where the exploration occurred or 50% of the total corporate income tax liability.

For the mining license tax, the credit is limited to the lesser of 50% of the mining license tax liability at the mining operation where the exploration occurred or 50% of total mining license tax liability.

For the mineral royalty, the credit is limited to 50% of the royalty liability from the mining operation where the exploration activity occurred.



Municipal Property Taxes Paid – AS 43.56.010 – Taxpayers receive a credit against state oil and gas property tax for property taxes paid to municipalities on taxable property. The credit is limited to the amount of state tax otherwise due.



New Area Development – AS 43.55.024(a) – This credit is a tax credit of up to $6 million per company each year for oil and gas produced from Middle Earth (leases outside Cook Inlet and the North Slope). The credit sunsets the later of 2016 or the ninth calendar year after first year of production if the production started before May 1, 2016. The credit is not certificated and is not transferable.



Other Taxes – AS 43.77.030 – Taxpayers that paid taxes on fishery resources to another jurisdiction may claim a credit against the fishery resource landing tax. The credit, equal to the amount of taxes paid in the other jurisdiction, may not exceed the fishery resource landing tax.



Per Barrel Credit – AS 43.55.024(i) and (j) – The Per Barrel Credit is a production tax credit for each barrel of oil production on the North Slope. This credit is an integral part of the production tax calculation. It cannot be transferred or carried forward, and is not eligible for cash repurchase. The credit does not expire.

For “new areas” that qualify for a Gross Value Reduction (GVR), under AS 43.55.024(i), the credit is $5 per taxable barrel. Those areas are defined in AS 43.55.160(f) and (g). The $5 per barrel credit may not reduce the producer’s liability for that production below zero.

For areas that do not qualify for a GVR, under AS 43.55.024(j), the credit ranges from $0 to $8 per taxable barrel based on the average gross value at point of production (GVPP) per barrel produced in the tax year. The credit operates on a sliding scale ranging from $0 per barrel when the GVPP is more than $150 per barrel, to $8 per barrel when the GVPP is less than $80 per barrel. The sliding scale credit cannot be used to reduce tax liability to below the minimum tax under AS 43.55.011 (f).



Qualified Capital Expenditure Credit and Well Lease Expenditure Credit – AS 43.55.023(a) and 43.55.023(l) – These are transferable credits for qualified oil and gas capital expenditures in the state outside the North Slope. Credits that were earned for expenses incurred prior to July 1, 2017, were eligible for repurchase by the State of Alaska. The credits can be taken in lieu of Exploration Credits under as 43.55.025, but are in addition to any net-operating loss credits under AS 43.55.23(b).

Before Jan. 1, 2017, companies could have qualified for a credit of 20% of eligible capital expenditures, or 40% of qualified well lease expenditures. As of Jan. 1, 2017, the Qualified Capital Expenditure Credit was reduced from 20% to 10% and the Well Lease Expenditure Credit was reduced from 40% to 20%.

On Jan. 1, 2018, both credits were repealed for Cook Inlet. There is no expiration date for Middle Earth (outside Cook Inlet and the North Slope).



Qualified In-State Oil Refinery Infrastructure Expenditures Tax Credit – AS 43.20.053 – The In-State Refinery Tax Credit began on Jan. 1, 2015, and is a credit for qualified infrastructure expenditures for in-state oil refineries incurred after Dec. 31, 2014, and before Jan. 1, 2020. The credit may not exceed 40% of total qualifying expenditures or $10 million per tax year per refinery, whichever amount is less. The credit can be applied against corporate income tax liability and carried forward for up to five years. It is also a refundable credit. The authorizing statute will sunset on Dec. 31, 2019.



Qualified Oil and Gas Service Industry Expenditure Credit – AS 43.20.049 – A taxpayer may claim a credit for 10% of qualified oil and gas service industry expenditures that are for in-state manufacture or in-state modification of oil and gas tangible personal property. The credit, which may be up to $10 million, is applied to corporate income tax liabilities. The credit is not transferable, but an unused credit may be carried forward for five years. If the taxpayer takes the credit, the taxpayer may not also deduct the expenditures.



Salmon and Herring Product Development – AS 43.75.035 – This credit is for eligible capital expenditures to expand value-added processing of Alaska salmon and herring. The credit is 50% of qualified investments up to 50% of the fisheries business tax liability incurred for processing salmon and herring during the tax year. The credit is not transferable, but it may be carried forward for three years. The statute is scheduled to sunset on Dec. 31, 2020. Herring products were added to the credit in 2014.



Small Producer – AS 43.55.024(c) – The Small-Producer Credit is a nontransferable credit for oil and gas produced by small producers, defined as having average taxable oil and gas production of less than 100,000 Btu-equivalent barrels per day.

For producers that had commercial production prior to April 1, 2006, the credit expired on Dec. 31, 2016. For producers that did not have commercial production prior to April 1, 2006, the credit is available until the ninth calendar year following the start of commercial production if the production started before May 1, 2016.

If the taxpayer produces less than 50,000 Btu-equivalent barrels per day, the taxpayer may take up to a $12 million credit per year.

For production between 50,000 and 100,000 Btu-equivalent barrels per day, the credit is prorated. The credit is zero for producers with 100,000 or more Btu-equivalent barrels per day.

The credit may not be carried forward or transferred. The credit may only be used against tax liability, and only if the producer has a positive tax liability before the application of credits.



Transitional Investment Expenditure – AS 43.55.023(i) – The Transitional Investment Expenditure Credit was a nontransferable credit for qualified oil and gas expenditures incurred between March 31, 2001, and April 1, 2006. It was available until Dec. 31, 2013.

The credit was for 20% of qualified oil and gas capital expenditures incurred during the above time period, not to exceed 10% of the capital expenditures incurred between March 31, 2006, and Jan. 1, 2008.



Urea/Ammonia/Gas-to-Liquid Facility Credit – AS 43.20.052 – This credit allows an in-state company that produces urea, ammonia, or gas-to-liquids products to apply a credit to its corporate income tax based on natural gas purchased from state leases. The credit is equal to the amount of state royalty paid on natural gas purchased for the qualifying project.

The credit is not transferable or eligible for state purchase, it cannot be carried forward to future years, and it cannot be used to reduce a tax liability below zero. The credit is scheduled to be repealed on Jan. 1, 2024.



Veteran Employment Tax Credit – AS 43.20.048 – This credit is for corporate income taxpayers who employ qualified veterans in the state. The credit is $3,000 for hiring a disabled veteran, and $2,000 for a veteran who is not disabled, for at least 1,560 hours during 12 consecutive months after the employment date. For seasonal employment, the credit is $1,000 for hiring a veteran for at least 500 hours during the three consecutive months after the employment date.