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STATE CREDITS AVAILABLE AGAINST THE CORPORATE INCOME TAX
Education Credit (AS 43.20.014): See below under “State Credits Available Against Both Tax Types.”
Gas Exploration and Development Tax Credit (AS 43.20.043): A taxpayer may claim a non-transferable 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 is capped at 75% of tax liability as calculated before applying other credits. Investments in existing units are eligible.
Gas Storage Facility Tax Credit (AS 43.20.046): This was a refundable credit for establishing a gas storage facility in the amount of $1.50 per thousand cubic feet of “working gas” storage capacity. The credit was capped at the lesser of $15 million or 25% of costs to establish the facility. The law was effective for facilities placed into service between January 1, 2011 and December 31, 2015, was limited to one company, and was taken in FY 14.
In-State Refinery Tax Credit (AS 43.20.053): This is a credit for qualified expenditures for in-state oil refineries. The credit may not exceed the lesser of 40% of total qualifying expenditures or $10 million per tax year per refinery. The credit can be applied against corporate income tax liability and carried forward for up to five years, or refunded by the state. The authorizing statute will sunset on December 31, 2019.
Internal Revenue Code (IRC) Credits Adopted by Reference (AS 43.20.021): Under Alaska’s adoption of the IRC, a taxpayer can claim all federal incentive credits. Federal credits that refund other federal taxes are not allowed. Multistate taxpayers apportion their total federal incentive credits. For most credits, credit is limited to 18% of the amount of the credit determined for federal income tax purposes which is attributable to Alaska.
LNG Storage Facility Tax Credit (AS 43.20.047): This is a non-transferrable, refundable credit for establishing an LNG storage facility. The credit is capped at the lesser of $15 million or 50% of costs to establish the facility. The law is effective for facilities placed into service between January 1, 2011 and December 31, 2019 and is limited to one facility
Minerals Exploration Incentive Credit (AS 27.30.030, AS 43.20.044): A taxpayer may claim a non-transferable, non-refundable credit for 100% of 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 mining license tax liability or 50% of the corporate tax liability.
Oil and Gas Service Industry Expenditure Credit (AS 43.20.049): This is a non-transferable credit of 10% of qualified oil and gas industry service expenditures, up to $10 million per taxpayer per year. The credit applies to qualified oil and gas service expenditures that are for in-state manufacture or in-state modification of oil and gas tangible personal property with a service life of three years or more. The law is effective for tax years beginning after December 31, 2013.
Veteran Employment Tax Credit (AS 43.20.048): This is 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. For seasonal employment, the credit is $1,000. The law became effective on July 1, 2012.
STATE CREDITS AVAILABLE AGAINST THE OIL AND GAS PRODUCTION TAX
Alternative Credit for Exploration (AS 43.55.025(a)(1)-(4)): A transferable and refundable credit of 30% or 40% of eligible exploration expenditures. Specific criteria include requirements related to location of work, distance from other wells, etc. The credit is applicable to work performed before July 1, 2016 for the North Slope and Cook Inlet; for areas outside the North Slope and Cook inlet the credit is applicable to work performed before January 1, 2022.
Carried-Forward Annual Loss Credit (AS 43.55.023(b)): A taxpayer may receive a transferable and refundable credit of 25% of a carried-forward annual loss. Certificates for these credits may be taken in a single calendar year. For the North Slope, this credit increased to 45% on January 1, 2014, and the credit will decrease to 35% beginning January 1, 2016.
Cook Inlet Jack-Up Rig Credit (AS 43.55.025(a)(5), (m)): A transferable and refundable credit for exploration expenses for first three pre-tertiary wells drilled by unaffiliated parties using the first jack-up rig brought in to Cook Inlet under this program. Credit is 100% of costs up to $25 million for first well, 90% of costs up to $22.5 million for second well, and 80% of costs up to $20 million for third well. If the exploration well is brought into production, the operator repays 50% of the credit over 10 years following production start-up. The authorizing statute is scheduled to sunset on July 1, 2016.
Exploration Incentive Credit (AS 38.05.180(i)): A taxpayer may receive a non-transferable, non-refundable credit of up to 50% of the cost of drilling or seismic work performed under a limited time period established by the commissioner. The credit cannot exceed 50% of the tax liability for which it is being applied, is non-transferrable, and can also be applied against State royalty.
Frontier Basin Credit (AS 43.55.025 (a)(6)-(7)): A transferable and refundable credit for expenses for the first four persons to drill exploration wells and the first four persons to conduct seismic projects within designated “Frontier Basins.” Credit is for lesser of 80% of qualified exploration drilling expenses or $25 million; or for seismic projects, credit is for lesser of 75% of qualified seismic exploration expenditures or $7.5 million. It includes expenditures incurred for work performed after June 1, 2012 and before July 1, 2016.
New Area Development Credit (AS 43.55.024(a)): A non-transferable or refundable credit of up to $6 million per year for taxpayers incurring eligible oil and gas lease expenditures in areas of the state other than the North Slope and Cook Inlet. Credit is available until the later of 2016 or nine years after first eligible production.
Per Taxable Oil Barrel Credit (AS 43.55.024(i)-(j)): There are two per-taxable-barrel credits established for North Slope production, effective January 1, 2014. A credit of $5 per taxable oil barrel may be applied against a producer’s production tax liability for oil produced from Gross Value Reduction (GVR)-eligible areas; this credit can be used to reduce the producer’s liability below the minimum tax established under AS 43.55.011(f). For areas not subject to the GVR, a sliding scale credit ranging from zero to $8 per taxable barrel may be applied against a producer’s production tax liability. The sliding scale credit is a dollar-per-taxable-barrel credit ranging from zero to $8 per barrel depending on a producer’s Gross Value at Point of Production per barrel; this credit cannot be used to reduce the producer’s liability below the minimum tax established under AS 43.55.011(f). Both credits are non-transferable and non-refundable.
Qualified Capital Expenditure Credit (AS 43.55.023 (a)): A taxpayer may receive credit of 20% for qualified capital expenditures and/or a credit of 40% for qualified well-related lease expenditures outside the North Slope. This credit is transferable and refundable. As of January 1, 2014, this credit only applies to areas outside the North Slope.
Small Producer Credit (AS 43.55.024(c)): A non-transferable or refundable credit of up to $12 million per year for taxpayers incurring eligible oil and gas lease expenditures in North Slope operations. Full credit is given to companies producing less than 50,000 barrels of oil equivalent per day. Credit is available until the later of 2016 or nine years after first eligible production.
Well Lease Expenditure (AS 43.55.023 (l)): A transferable and refundable tax credit for qualified oil and gas capital expenditures in areas outside the North Slope. It can be taken in lieu of exploration incentive credits under AS 43.55.025 and gas exploration credits under AS 43.20.043. The credit is 20% of qualified well lease expenditures and can be taken in conjunction with the Qualified Capital Expenditure Credit, for a total credit of 40% for qualifying expenditures.
STATE CREDITS AVAILABLE AGAINST BOTH TAX TYPES
Education Credit (AS 43.20.014 and AS 43.55.019): It is a non-transferable credit for contributions to vocational educational programs, accredited Alaska universities or colleges, Alaska public or private non-profit elementary or secondary schools, annual intercollegiate sports tournaments, Alaska Native educational programs, facilities that qualify under the Coastal American Partnership, qualified apprenticeship programs, the Alaska higher education investment fund, a postsecondary institution in the state providing dual-credit courses, a residential school in the state, and the Department of Education and Early Development. A taxpayer may claim a tax credit for 50% of the first $100,000, 100% of the next $200,000, and 50% of contributions beyond $300,000. Through December 31, 2020, the maximum credit is $5,000,000 for each tax year. For tax years after December 31, 2020, the credit will be capped at $150,000.