House panel advances tax credit bill rewrite

JUNEAU — Gov. Bill Walker’s proposal to reduce spending on oil and gas tax credits has been scaled by a state House committee, which also rejected Walker’s plan to raise taxes on the oil industry.

The action by the House Resources Committee comes as Walker and lawmakers spar over what steps need to be taken to address a multibillion-dollar state deficit exacerbated by low oil prices.

The committee rewrite advanced late Tuesday. It next goes to House Finance.

Legislative leaders have identified tax credits as an area of interest as they look to cut state costs, along with proposals to curb costs in the state Medicaid program and the criminal justice system. Legislative consultants have said that credits that go to companies with no tax liability, which are typically smaller companies developing and exploring on the North Slope and Cook Inlet, reached their highest point during the last fiscal year, $628 million.

Under current law, those credits could total $825 million next fiscal year, including newly earned credits and those not covered this year due to the cap that had been placed on them by Walker, according to a preliminary spring revenue forecast.

Walker last summer capped at $500 million the amount that could be paid for the credits during this fiscal year. The state Department of Revenue said total demand for the year is expected to be about $700 million.

In analyzing the tax credit bill, lawmakers have been asked to balance addressing a major state cost with concerns from an industry also hit by low prices. The head of the Alaska Oil and Gas Association, Kara Moriarty, told House Resources last month that increasing taxes now would mean fewer jobs and a reduction in oil and gas production.

In a release, House Resources co-chair Benjamin Nageak said these are tough times for the state and industries operating here. “We worked hard to maintain a balanced resource policy between exploration and production,” he said.

Minority Democrats on the committee said the rewrite doesn’t go far enough in making changes to a system they see as unsustainable.

“Alaska can’t afford the current oil tax credit system and the House Resources Committee has made the issue worse, not better,” Rep. Andy Josephson, D-Anchorage, said in a release.

As initially proposed, the department estimated $400 million in savings next year under Walker’s bill from repealing certain credits, closing loopholes and having companies wait to use credit certificates until they have a tax liability. It also estimated $100 million in additional revenue from raising the minimum tax on North Slope producers from 4 percent to 5 percent and hardening it so that credits could not be used to lower tax payments. The tax provisions are not in the rewrite.

In a preliminary analysis of the rewritten bill, the department said it would reduce spending by $45 million next year. The numbers were based on a revenue forecast that has since been updated.

The rewrite, among other things, reduces certain Cook Inlet credits and calls for a working group to recommend changes to the Cook Inlet tax regime to the next Legislature. It includes provisions sought by the administration that the department says would prevent artificially inflated net operating losses.

More in News

Shrubs grow outside of the Kenai Courthouse on Monday, July 3, 2023 in Kenai, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Former Soldotna police officer acquitted of 2023 assault allegations

He was found not guilty following a five-day trial in late June

A parade of cars and trucks flying flags in support of former President Donald Trump proceed down the Kenai Spur Highway in Kenai, Alaska, on Sunday, July 14, 2024. (Jake Dye/Peninsula Clarion)
Residents caravan across central peninsula in support of Trump

The parade came a day after an attempted assassination of the former president

Drummers perform during a celebration of the 10th anniversary of the Dena’ina Wellness Center in Kenai, Alaska, on Friday, July 12, 2024. (Jake Dye/Peninsula Clarion)
Kenaitze tribe celebrates 10 years of ‘far-fetched dream’ at wellness center

Community members recognized the work done at the Dena’ina Wellness Center over the past decade

The Kenai Safeway is seen on Wednesday, July 20, 2022. (Camille Botello/Peninsula Clarion)
Kenai and Soldotna Safeways may be sold under proposed Kroger-Albertsons merger

The local stores will be sold to CS Wholesale Grocers only if the merger overcomes suit from the FTC

Sockeye salmon caught in a set gillnet are dragged up onto the beach at a test site for selective harvest setnet gear in Kenai, Alaska, on Tuesday, July 25, 2023. (Jake Dye/Peninsula Clarion)
Draft plan published for disbursement of $11.5 million in 2021 and 2022 ESSN disasters

Public comment will be accepted for the draft spend plan until July 24

The Kasilof River is seen from the Kasilof River Recreation Area, July 30, 2019, in Kasilof, Alaska. (Photo by Erin Thompson/Peninsula Clarion)
King salmon fishing closed on Kasilof starting Monday

The emergency order is being issued to protect returning king salmon, citing weak returns

Soldotna City Hall is seen on Wednesday, June 23, 2021, in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Soldotna’s city council appropriates funds for FY 2025 capital projects

Improvements are described for streets, police facility, Soldotna Creek Park and Soldotna Community Memorial Park

Gina Plank processes sockeye salmon caught on the first day of Kenai River dipnetting with her table set up on the bank of the Kenai River in Kenai, Alaska, on Wednesday, July 10, 2024. (Jake Dye/Peninsula Clarion)
Kenai River open for dipnetting

As of Tuesday, a total of 226,000 sockeye had been counted in the Kenai River’s late run

Assembly Vice President Tyson Cox speaks during a meeting of the Kenai Peninsula Borough Assembly in Soldotna, Alaska, on Tuesday, June 18, 2024. (Jake Dye/Peninsula Clarion)
Assembly won’t pursue further discussion on tabled bed tax resolution

Members say they’re going to work on a new version of the idea this winter

Most Read