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% 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 (all areas other than 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.
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, and 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 will allow a deduction of 75% of the contribution, not 100% as in prior years. 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 as in prior years.
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.
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.
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. 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 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 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 (all areas not included in Cook Inlet or the North Slope).
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.