15 Alaska Admin. Code § 55.341

Current through September 25, 2024

Section 15 AAC 55.341 - Credit provisions after June 30, 2007, and before January 1, 2011, for Cook Inlet and for gas used in the state

(a) For purposes of AS 43.55.011(m) and this section, the portion of a tax credit for the calendar year of production that is allocated to gas produced by a producer during a calendar year from leases or properties

(1) in the Cook Inlet sedimentary basin is, for a credit under

(A)AS 43.55.024(c), a fraction whose numerator is the amount of gas taxable under AS 43.55.011(e) in BTU equivalent barrels produced by the producer during the calendar year from all leases or properties in the Cook Inlet sedimentary basin and whose denominator is the total amount of oil and gas taxable under AS 43.55.011(e) in BTU equivalent barrels produced by the producer during the calendar year from all leases or properties in the state;

(B)AS 38.05.180(i), AS 41.09.010, or AS 43.55.025 for an expenditure incurred for exploration in the Cook Inlet sedimentary basin and that is available to be applied for the calendar year of production, a fraction whose numerator is the amount of gas taxable under AS 43.55.011(e) in BTU equivalent barrels produced by the producer during the calendar year from all leases or properties in the Cook Inlet sedimentary basin and whose denominator is the amount of oil and gas taxable under AS 43.55.011(e) in BTU equivalent barrels produced by the producer during the calendar year from all leases or properties in the Cook Inlet sedimentary basin;

(C)AS 38.05.180(i), AS 41.09.010, or AS 43.55.025 for an expenditure incurred for exploration outside the Cook Inlet sedimentary basin, zero;

(D)AS 43.55.024(a), zero;

(2) outside the Cook Inlet sedimentary basin and used in the state is, for a credit under

(A)AS 43.55.024(c), a fraction whose numerator is the amount of gas subject to AS 43.55.011(o) in BTU equivalent barrels produced by the producer during the calendar year, and whose denominator is the total amount of oil and gas taxable under AS 43.55.011(e) in BTU equivalent barrels produced by the producer during the calendar year from all leases or properties in the state;

(B)AS 38.05.180(i), AS 41.09.010, or AS 43.55.025 for an expenditure incurred for exploration outside the Cook Inlet sedimentary basin and that is available to be applied for the calendar year of production, a fraction whose numerator is the amount of gas subject to AS 43.55.011(o) in BTU equivalent barrels produced by the producer during the calendar year, and whose denominator is the amount of oil and gas taxable under AS 43.55.011(e) in BTU equivalent barrels produced by the producer during the calendar year from all leases or properties outside the Cook Inlet sedimentary basin;

(C)AS 38.05.180(i), AS 41.09.010, or AS 43.55.025 for an expenditure incurred for exploration in the Cook Inlet sedimentary basin, zero;

(D)AS 43.55.024(a), a fraction whose numerator is the amount of gas subject to AS 43.55.011(o) in BTU equivalent barrels produced by the producer during the calendar year from leases or properties no part of which is north of 68 degrees North latitude, and whose denominator is the amount of oil and gas taxable under AS 43.55.011(e) in BTU equivalent barrels produced by the producer during the calendar year from all leases or properties outside the Cook Inlet sedimentary basin, no part of which is north of 68 degrees North latitude.

(b) Except for excess tax credits remaining after the accounting required under (c) of this section, a tax credit allocated under (a) of this section to gas produced from leases or properties

(1) in the Cook Inlet sedimentary basin

(A) may be applied, if at all, only against the tax levied by AS 43.55.011(e) for that gas;

(B) to the extent not applied as described in (A) of this paragraph, is not available to be used as a tax credit in any manner and is considered lost;

(2) outside the Cook Inlet sedimentary basin and used in the state

(A) may be applied, if at all, only against the tax levied by AS 43.55.011(e) for that gas;

(B) to the extent not applied as described in (A) of this paragraph, is not available to be used as a tax credit in any manner and is considered lost.

(c) For a calendar year for which a limitation under AS 43.55.011(j), (k), or (o) on the tax levied by AS 43.55.011(e) has the effect of reducing the producer's tax for oil or gas produced from one or more leases or properties below the amount of the tax that would be levied in the absence of that limitation, the producer shall account under (d) and (e) of this section for the tax credits that are allocated under (a) of this section to gas produced from leases or properties in the Cook Inlet sedimentary basin or to gas produced from leases or properties outside the Cook Inlet sedimentary basin and used in the state.

(d) A producer subject to (c) of this section shall calculate its excess tax credits under this subsection as follows:

(1) first, if the producer has a tax credit under AS 43.55.024(a) whose portion allocated under (a)(2)(D) of this section is greater than zero, the producer shall compare that portion to the amount of tax levied by AS 43.55.011(e), after application of any limitation under AS 43.55.011(o), for gas produced from leases or properties outside the Cook Inlet sedimentary basin no part of which is north of 68 degrees North latitude and that is used in the state;

(2) second, if the producer has a tax credit under AS 43.55.024(c) whose portion allocated under (a)(2)(A) of this section is greater than zero, the producer shall compare that portion to the amount of tax levied by AS 43.55.011(e), after application of any limitation under AS 43.55.011(o), for gas produced from leases or properties outside the Cook Inlet sedimentary basin and that is used in the state, and after further reducing that amount of tax, but not below zero, by the lesser of the two amounts, if any, compared in (1) of this subsection;

(3) third, if the producer has a tax credit under AS 43.55.024(c) whose portion allocated under (a)(1)(A) of this section is greater than zero, the producer shall compare that portion to the amount of tax levied by AS 43.55.011(e), after application of any limitation under AS 43.55.011(j), for gas produced from leases or properties in the Cook Inlet sedimentary basin;

(4) fourth, if the producer has a tax credit under AS 43.55.025 whose portion allocated under (a)(2)(B) of this section is greater than zero, the producer shall compare that portion to the amount of tax levied by AS 43.55.011(e), after application of any limitation under AS 43.55.011(o), for gas produced from leases or properties outside the Cook Inlet sedimentary basin and that is used in the state, and after further reducing that amount of tax, but not below zero, by the sum of the lesser of the two amounts, if any, compared in (1) of this subsection and the lesser of the two amounts, if any, compared in (2) of this subsection;

(5) fifth, if the producer has a tax credit under AS 43.55.025 whose portion allocated under (a)(1)(B) of this section is greater than zero, the producer shall compare that portion to the amount of tax levied by AS 43.55.011(e), after application of any limitation under AS 43.55.011(j), for gas produced from leases or properties in the Cook Inlet sedimentary basin, and after further reducing that amount of tax, but not below zero, by the lesser of the two amounts, if any, compared in (3) of this subsection;

(6) sixth, if the producer has a tax credit under AS 41.09.010 whose portion allocated under (a)(2)(B) of this section is greater than zero, the producer shall compare that portion to the amount of tax levied by AS 43.55.011(e), after application of any limitation under AS 43.55.011(o), for gas produced from leases or properties outside the Cook Inlet sedimentary basin and that is used in the state, and after further reducing that amount of tax, but not below zero, by the sum of the lesser of the two amounts, if any, compared in (1) of this subsection, the lesser of the two amounts, if any, compared in (2) of this subsection, and the lesser of the two amounts, if any, compared in (4) of this subsection;

(7) seventh, if the producer has a tax credit under AS 41.09.010 whose portion allocated under (a)(1)(B) of this section is greater than zero, the producer shall compare that portion to the amount of tax levied by AS 43.55.011(e), after application of any limitation under AS 43.55.011(j), for gas produced from leases or properties in the Cook Inlet sedimentary basin, and after further reducing that amount of tax, but not below zero, by the sum of the lesser of the two amounts, if any, compared in (3) of this subsection and the lesser of the two amounts, if any, compared in (5) of this subsection;

(8) eighth, if the producer has a tax credit under AS 38.05.180(i) whose portion allocated under (a)(2)(B) of this section is greater than zero, the producer shall compare that portion to the amount of tax levied by AS 43.55.011(e), after application of any limitation under AS 43.55.011(o), for gas produced from leases or properties outside the Cook Inlet sedimentary basin and that is used in the state, and after further reducing that amount of tax, but not below zero, by the sum of the lesser of the two amounts, if any, compared in (1) of this subsection, the lesser of the two amounts, if any, compared in (2) of this subsection, the lesser of the two amounts, if any, compared in (4) of this subsection, and the lesser of the two amounts, if any, compared in (6) of this subsection;

(9) ninth, if the producer has a tax credit under AS 38.05.180(i) whose portion allocated under (a)(1)(B) of this section is greater than zero, the producer shall compare that portion to the amount of tax levied by AS 43.55.011(e), after application of any limitation under AS 43.55.011(j), for gas produced from leases or properties in the Cook Inlet sedimentary basin, and after further reducing that amount of tax, but not below zero, by the sum of the lesser of the two amounts, if any, compared in (3) of this subsection, the lesser of the two amounts, if any, compared in (5) of this subsection, and the lesser of the two amounts, if any, compared in (7) of this subsection;

(10) tenth, for each comparison made in (1) - (9) of this subsection, if the former amount exceeds the latter amount, the difference constitutes excess tax credits, and the producer's total amount of excess tax credits is the sum of the excess tax credits, if any, calculated for all comparisons.

(e) If a producer's total amount of excess tax credits calculated under (d) of this section is greater than zero, the producer shall

(1) for each lease or property for which a limitation under AS 43.55.011(j), (k), or (o) on the tax levied by AS 43.55.011(e) has the effect of reducing the producer's tax below the amount of tax that would be levied in the absence of that limitation, calculate the amount of that reduction;

(2) calculate the total of the reductions calculated under (1) of this subsection for all affected leases or properties;

(3) reduce the amount of excess total tax credits by the total calculated under(2) of this subsection, but not to less than zero;

(f) Any amount of excess tax credits remaining after reduction under (e)(3) of this section may be used for a later calendar year, transferred to another person, or applied against a tax levied for oil or gas not subject to AS 43.55.011(j), (k), or (o), to the extent allowed under the law applicable to those tax credits. The remaining amount of excess tax credits is treated as a credit under AS 43.55.025 to the extent, if any, that the producer correctly included a credit under AS 43.55.025 in determining excess tax credits, and the balance of the remaining amount of excess tax credits, if any, is first treated as a credit under AS 38.05.180(i) or AS 41.09.010 to the extent, if any, that the producer correctly included a credit under AS 38.05.180(i) or AS 41.09.010 in determining excess tax credits, and next as a credit under AS 43.55.024(c) to the extent, if any, that the producer correctly included a credit under AS 43.55.024(c) in determining excess tax credits, and finally as a credit under AS 43.55.024(a) to the extent, if any, that the producer correctly included a credit under AS 43.55.024(a) in determining excess tax credits.

(g) A tax credit under AS 38.05.180(i), AS 41.09.010, or AS 43.55.025 is subject to AS 43.55.011(m) and (a) - (f) of this section if the person that originally qualified for the tax credit fails to transfer the tax credit to another person before or during the calendar year that the credit becomes available to be applied against a tax levied by AS 43.55.011(e) for gas produced from leases or properties in the Cook Inlet sedimentary basin or for gas produced from leases or properties outside the Cook Inlet sedimentary basin and used in the state, as applicable. If the tax credit is transferred to another person before or during that calendar year, the transferee's use of the tax credit is not subject to AS 43.55.011(m) or (a) - (f) of this section, irrespective of whether the transferee produces gas from a lease or property in the Cook Inlet sedimentary basin or gas from a lease or property outside the Cook Inlet sedimentary basin and that is used in the state. For purposes of this subsection, a tax credit under AS 43.55.025 is not available to be applied against a tax until the department has issued a production tax credit certificate for the credit under AS 43.55.025(f)(5).

(h) At the request of the person seeking a production tax credit certificate under AS 43.55.025(f), the department will defer issuing a certificate that is otherwise ready for issuance in December of a calendar year until January of the next calendar year.

(i) This section applies to oil and gas produced and expenditures incurred after June 30, 2007, except that for a tax credit under

(1)AS 38.05.180(i), AS 41.09.010, or AS 43.55.025, this section does not apply to expenditures incurred after December 31, 2010;

(2)AS 43.55.024, this section does not apply to oil or gas produced after December 31, 2010.

(j) The following example illustrates (a) - (f) of this section:

A producer produces oil or gas from three leases or properties, called Property A, Property B, and Property C. All three properties are located outside the Cook Inlet sedimentary basin; only Property A is located south of 68 degrees North latitude. In the calendar year in question, the producer's oil and gas production from the respective properties taxable under AS 43.55.011(e) is as follows:

Property A: 1,000,000 BTU equivalent barrels of gas used in the state, with a volume of 5,649,718 Mcf and a tax under AS 43.55.011(e) of $3,000,000, before application of the tax limitation under AS 43.55.011(o); and 4,000,000 barrels of oil;

Property B: 5,000,000 BTU equivalent barrels of gas used in the state, with a volume of 28,248,587 Mcf and a tax under AS 43.55.011(e) of $10,000,000, before application of the tax limitation under AS 43.55.011(o); and 5,000,000 BTU equivalent barrels of gas not used in the state;

Property C: 10,000,000 barrels of oil.

For the calendar year in question, the producer qualifies for a tax credit under AS 43.55.024(c) of up to $7,562,000, a tax credit under AS 43.55.025 of $50,000,000 for expenditures incurred outside the Cook Inlet sedimentary basin, and a tax credit under AS 43.55.024(a) of up to $6,000,000.

Step One: Allocate the tax credits to gas produced from leases or properties outside the Cook Inlet sedimentary basin and used in the state:

Under (a)(2)(A) of this section, the allocated fraction of the tax credit under AS 43.55.024(c) is 6,000,000 BTU equivalent barrels (the amount of gas subject to AS 43.55.011(o)), divided by 25,000,000 BTU equivalent barrels (the total amount of taxable oil and gas produced from all leases or properties in the state), or 6/25. 6/25 * $7,562,000 = $1,815,000.

Under (a)(2)(B) of this section, the allocated fraction of the tax credit under AS 43.55.025 is 6,000,000 BTU equivalent barrels (the amount of gas subject to AS 43.55.011(o)), divided by 25,000,000 BTU equivalent barrels (the amount of taxable oil and gas produced from all leases or properties outside the Cook Inlet sedimentary basin), or 6/25. 6/25 * $50,000,000 = $12,000,000.

Under (a)(2)(D) of this section, the allocated fraction of the tax credit under AS 43.55.024(a) is 1,000,000 BTU equivalent barrels (the amount of gas subject to AS 43.55.011(o) produced only from leases or properties south of 68 degrees North latitude), divided by 5,000,000 BTU equivalent barrels (the amount of taxable oil and gas produced from all leases or properties outside the Cook Inlet sedimentary basin and south of 68 degrees North latitude), or 1/5. 1/5 * $6,000,000 = $1,200,000.

Step Two: Calculate excess tax credits:

Under (d) of this section, first the allocated portion of the tax credit under AS 43.55.024(a), $1,200,000, is compared to the tax for the gas used in the state and produced outside the Cook Inlet sedimentary basin and south of 68 degrees North latitude, after application of the tax limitation under AS 43.55.011(o). With that limitation applied as set out in 15 AAC 55.440(d), the tax is 5,649,718 Mcf multiplied by $.177 per Mcf, or $1,000,000, which is also the actual tax, since it is less than the tax would be without the limitation. The allocated portion of the tax credit exceeds the tax by $200,000, which is excess tax credits.

Second, the allocated portion of the tax credit under AS 43.55.024(c), $1,815,000, is compared to the tax for the gas used in the state and produced anywhere outside the Cook Inlet sedimentary basin, after application of the tax limitation under AS 43.55.011(o), and after further reduction by the $1,000,000 in tax credit assumed, in accordance with (b)(2) of this section, to be used in the first comparison. With that limitation applied as set out in 15 AAC 55.440(d), the tax is 33,898,305 Mcf multiplied by $.177 per Mcf, or $6,000,000, which is also the actual tax, since it is less than the tax would be without the limitation. After subtracting the $1,000,000 from the first comparison, the amount to be compared to the allocated portion of the tax credit is $5,000,000. Because the allocated portion of the tax credit is less than $5,000,000, no excess tax credits are associated with the tax credit under AS 43.55.024(c).

Third, the allocated portion of the tax credit under AS 43.55.025, $12,000,000, is compared to the tax after application of the tax limitation as used in the second comparison, after reduction as in the second comparison, and after further reduction by the $1,815,000 tax credit assumed to be used in the second comparison. Therefore, the amount to be compared to the allocated portion of the tax credit is $6,000,000 minus $1,000,000 minus $1,815,000, or $3,185,000. The allocated portion of the tax credit exceeds that amount by $8,815,000 which is excess tax credits.

The total excess tax credits are therefore $200,000 plus $8,815,000, or $9,015,000.

Step Three: Calculate tax reductions resulting from the tax limitation under AS 43.55.011(o):

Under (e)(1) of this section, the tax reduction for Property A is calculated by subtracting the tax after application of the tax limitation under AS 43.55.011(o), $1,000,000, from the tax as calculated without that limitation, $3,000,000, for a reduction of $2,000,000. The tax reduction for Property B is calculated by first calculating the tax with the limitation applied as set out in 15 AAC 55.440(d), $.177 per Mcf multiplied by 28,248,587 Mcf, or $5,000,000, and subtracting that amount from the tax as calculated without that limitation, $10,000,000, for a reduction of $5,000,000.

Under (e)(2) of this section, the total of the tax reductions is $2,000,000 plus $5,000,000, or $7,000,000.

Step Four: Reduce excess tax credits under (e)(3) of this section:

In this example the producer does not have any lease expenditures accounted for under 15 AAC 55.224(b). Therefore, the total excess tax credits calculated in Step Two, $9,015,000, are reduced by the total of the tax reductions calculated in Step Three, $7,000,000. The amount of remaining excess tax credits is $2,015,000.

Step Five: Classify remaining excess tax credits under (f) of this section:

The $2,015,000 in remaining excess tax credits is compared to the allocated portion of the tax credit under AS 43.55.025, $12,000,000. Since $2,015,000 is less than $12,000,000, the entire amount of remaining excess tax credits is treated as a tax credit under AS 43.55.025.

15 AAC 55.341

Eff. 10/21/2009, Register 192; am 9/14/2012, Register 203; am 1/1/2022, Register 240, January 2022

Authority:AS 43.05.080

AS 43.55.011

AS 43.55.024

AS 43.55.025

AS 43.55.110