Alaska Tax Credits
Alternative Credit for Exploration – AS 43.55.025 – Taxpayers that incur qualified exploration expenditures are eligible for this credit, which 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 and submit certain data to the Alaska Department of Natural Resources 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 set to expire for the North Slope and Cook Inlet areas on July 1, 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 that incur lease expenditures that are not deductible in calculating production tax values generate a "loss carry-forward" and they may apply for a tax credit. The credit rate is 25% for non-North Slope losses and North Slope losses prior to Jan. 1, 2014. The carried-forward annual loss for North Slope is 45% in 2014-2015 and 35% for 2016 forward. These credits are transferable.
CDQ – AS 43.77.040 – Taxpayers that harvest a fishery resource under a community development quota (CDQ) may claim a credit of up to 45.45% of fishery resource landing taxes for contributions to Alaska nonprofit corporations that are dedicated to fisheries industry-related expenditures.
Cook Inlet Jack-Up Rig Credit – AS 43.55.025(a) (5) was passed by the Alaska Legislature in 2010 to incentivize investment in a jack-up rig for use in Cook Inlet. The credit is available to the first three unaffiliated persons that drill an offshore exploration well for oil or gas in Cook Inlet. Credit under this program will be granted for the lesser of 100% of exploration expenditures or $25 million to the first person who drills a qualifying well under the program. Credit for the lesser of 90% of exploration expenditures or $22.5 million is available to the second person, and credit for the lesser of 80% of exploration expenditures or $20 million is available to the third person who drills a qualifying well under the program.
Credit under this program may be granted in the form of a cash reimbursement from the state or it may be applied against tax liabilities. If the drilling under this program results in sustained production of oil or gas, 50% of the amount of the credit received shall be repaid to the state over a 10-year period.
Credit for the In-State Manufacture of Urea, Ammonia, or Gas-to-Liquid Products – Effective July 1, 2017, a taxpayer may claim a credit equal to the percentage of royalty paid under AS 38.05.135 on certain deliveries of gas, the percentage equal to the percentage of the ownership interest held by the taxpayer in the in-state processing facility. The credit is not refundable and may not be carried forward to the other tax years.
Education – AS 43.20.014, 43.55.019, 43.56.018, 43.65.018, 43.75.018, 43.77.045 – Taxpayers are allowed a non-transferrable, non-refundable credit for cash 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. The credit is 50% of the first $100,000, 100% of the contribution over $100,000 and up to $300,000, and 50% of the remaining amount over $300,000. The total allowable credit per year for all affiliated taxpayers may not exceed $5 million.
Qualifying Education Tax Credits to include cash 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 cash contributions accepted for a facility by a public or private nonprofit elementary or secondary school in the state, funding 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 cash 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 (Assignable) – AS 41.09.010 – This is a distinct incentive program administered by the Alaska Department of Natural Resources. The credit is available to be claimed against royalty obligations, corporate income tax and production tax. Taxpayers may take 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 exceed $5 million per project and is limited to $30 million per taxpayer.
Exploration Incentive – AS 38.05.180(i) – Lessees of state land drilling an exploratory well or conducting certain seismic exploration on that land are eligible for this credit. The credit is 50% of the cost of the exploration expenditures and may not exceed 50% of the production tax or state royalty against which it is applied. This credit is administered by the Alaska Department of Natural Resources, but may be applied to oil and gas production tax.
Film Production – A taxpayer may take a credit for certain expenses incurred in producing films in Alaska. The credit is administered by the Department of Revenue. This credit may be transferred.
Frontier Basin Credits – AS 43.55.025(a)(6) and (a)(7) was effective Jan. 1, 2013 to provide tax credits for exploration wells and seismic projects performed after June 30, 2012, and before July 1, 2016, in certain “Frontier Basins” described in AS 43.55.025(p). These sections added credits of 80% of qualifying exploration expenditures up to $25 million for the first two wells in any single basin and 75% of qualifying seismic exploration expenditures up to $7.5 million for the first seismic project in each basin. Many requirements must be met with the Alaska Department of Natural Resources to qualify for the credits, including pre-qualifications. The credit itself may be applied against a producer’s tax liability in the year in which it was incurred and also before the certificate is issued. The credit certificate may 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 – A person may claim a credit for costs incurred to establish a LNG (Liquefied Natural Gas) storage facility in Alaska. The available credit is equal to 50% of the costs incurred, not to exceed $15 million. This is a refundable tax credit, subject to AS 43.55.028.
Minerals Exploration Incentive – A taxpayer may claim a credit for eligible costs of exploration activities related to determining existence, location, extent, or quality of a locatable mineral or coal deposit. An approved exploration incentive credit may not exceed $20 million and must be applied within 15 tax years after the credit is approved. Application of the credit is limited to the lesser of 50% of the taxpayer’s mining license tax liability or 50% of its corporate tax liability.
Municipal Property Taxes Paid – 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) – Taxpayers that produce in areas outside the Cook Inlet and south of 68 degrees north latitude are eligible for a tax credit of not more than $6 million per year. This credit sunsets the later of 2016 or the ninth calendar year after first year of production. 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 Credits – AS 43.55.024(i) and (j) – Under AS 43.55.024(i), a $5 per barrel credit is allowed for each barrel of taxable oil produced on the North Slope that qualifies for the Gross Value Reduction (GVR) under AS 43.55.160(f) and (g). Under AS 43.55.024(j), a sliding scale credit of $1 to $8 per barrel is based on the gross value of oil, when prices are below $150 per barrel, that does not qualify for the Gross Value Reduction (GVR) under AS 43.55.160(f) and (g). These credits may be applied against a tax levied by AS 43.55.011(e). The credits are NOT transferable and are NOT available to be issued as a certificate. An unused tax credit or portion of a tax credit under this section may not be carried forward for use in a later calendar year. The credit may not be used to reduce a tax liability for any calendar year below zero.
Qualified Capital Expenditure – AS 43.55.023(a) – Taxpayers that incur qualified capital expenditures for non-North Slope activity may apply for a 20% credit. This credit, when certificated, is transferable. Taxpayers may also apply the 20% credit to their annual oil and gas production tax filings without certification.
In 2010, the Alaska Legislature passed AS 43.55.023(l), which allows credit of 40% of qualified well lease expenditures incurred south of 68 degrees north latitude for oil or gas operations. These credits can be applied against production tax liabilities, transferred to another company, or purchased by the state.
Qualified In-State Oil Refinery Infrastructure Expenditures Tax Credit – A taxpayer that owns an in-state refinery may claim a credit, calculated as 40% of qualifed expenditures. The credit may not exceed $10 million for each refinery. The credit is refundable, subject to AS 43.55.028.
Qualified Oil and Gas Service Industry Expenditure Credit – A taxpayer may claim a credit for qualified oil and gas service industry expenditures incurred in the state. The credit is calculated ast 10% of qualifed expenditures, the credit not to exceed $10 million. An unused credit may be carried forward for five years.
Salmon and Herring Product Development – AS 43.75.035 – Taxpayers are allowed tax credits against the fisheries business tax on salmon and herring expenditures, which promote the development of salmon and herring products. The credit on salmon and herring expenditures for promoting salmon and herring products was extended to Dec. 31, 2020.
Scholarship Contributions – AS 43.75.032, 43.77.035 – Taxpayers are allowed a credit of not more than 5% of the business tax liability for contributions made during the tax year to the A.W. “Winn” Brindle memorial education loan account.
Small Producer – AS 43.55.024(c) – Taxpayers with Alaska oil and gas production less than 100,000 BTU equivalent barrels a day are eligible for a Small Producer Credit. When average oil and gas production is no more than 50,000 barrels per day, the credit is $12 million per year. When production exceeds 50,000 barrels per day, but is less than 100,000 barrels per day, the credit is allocated based on production volumes. This credit sunsets the later of 2016 or the ninth calendar year after the first year of production. The credit is not certificated and is not transferable.
Transitional Investment Expenditure – AS 43.55.023(i) – The TIE Credit is generated by qualified capital expenditures made during the period April 1, 2001, through March 31, 2006. The credit is 20% of those qualified capital expenditures, not to exceed one-tenth of qualified capital expenditures incurred after March 31, 2006, and before Jan. 1, 2008. Producers and explorers without commercial production in Alaska before Jan. 1, 2008, are eligible for this credit. The TIE Credit is not transferable and is available until 2013.
Veteran Employment Tax Credit – A taxpayer may take a credit for the employment of a veteran. The available credit is $3,000 for hiring a disabled veteran or $2,000 for a veteran who is not disabled.