Tuesday, November 13, 2007

Alaska State House Passes New 25 Percent Petroleum Profits Tax Bill; State Senate Next Stop

After a marathon session on Sunday, November 11th, 2007, the Alaska State House passed HB 2001 with amendments by a 27-13 margin, which will increase the petroleum profits tax (PPT) from 22.5 percent to 25 percent. Media stories published on KTUU Channel 2 HERE and HERE, as well as the Anchorage Daily News, HERE and HERE. Pictured at left, House Speaker John Harris (R-Valdez).

The revised tax is expected to double the state's revenue from $2 billion to $4 billion annually. Here are the primary features of the bill:

(1). PPT base rate increased from 22.5 percent to 25 percent.

(2). Progressivity rate, or surcharge, raised from 0.25 percent per dollar over $40 per barrel to 0.4 percent over $30 per barrel (Note: Both the progressivity rate AND the progressivity threshold changed).

(3). Eliminates transitional investment expenditure (TIE) credits for expenditures made under the former Economic Limiting Factor (ELF) system. Under the current PPT, the oil industry could take credits for investments made up to six years ago.

(4). Revises how the wellhead value of North Slope crude oil is determined by enacting a new definition of transportation costs.

(5). Requires whistleblowers to be financially responsible for costs of investigations if it turns out their charges were erroneous. [Ed. Note: Former State Senator Ralph Seekins of Fairbanks tried to pass this type of legislation in 2006 and got bitch-slapped at the ballot box as a result.]

(6). Drops a provision to move tax auditors out of the classified state service into the exempt service, but creates "audit masters" positions, who would be exempt.

Here's how the lawmakers voted. Note that a coalition of Democrats and mostly non-Anchorage Republicans made it happen. The "No" votes were dominated by Anchorage Republicans.

Yes: Buch(D), Cissna(D), Coghill(R), Dahlstrom(R), Doll(D), Doogan(D), Edgmon(D), Gara(D), Gardner(D), Gatto(R), Gruenberg(D), Guttenberg(D), Harris(R), Holmes(D), Joule, Kawasaki, Keller(R), Kelly(R), Kerttula(D), LeDoux(R), Lynn(R), Nelson(D), Neuman(R), Salmon(D), Seaton(R), Stoltze(R), Thomas(R)

No: Chenault(R), Crawford(D), Fairclough(R), Foster(D), Hawker(R), Johansen(R), Johnson(R), Meyer(R), Olson(D), Ramras(R), Roses(R), Samuels(R), Wilson(R)

Rep. Bob Lynn briefly discussed his "Yes" vote on his legislative blog. He views the increased tax as an opportunity to further pay down PERS/STRS, repay the Constitutional Budget Reserve, and to add to the Permanent Fund principal.

The bill now heads to the Alaska State Senate, where it must be reconciled with the Senate version, SB 2001, currently in the Senate Finance Committee. A quick scan of the Senate version revealed the following highlights:

(1) A 4 percent gross value tax when the price of oil is $25 per barrel or greater.

(2) A 3 percent gross value tax when the price is $20 to less than $25 per barrel.

(3) A 2 percent gross value tax when the price is $17.50 to less than $20.

(4) A 1 percent gross value tax when the price is $15.00 to less than $17.50.

(5) Zero percent when the price is less than $15.00.

In addition, a baseline production tax of 25 percent is called for, with additional progressivity modifications. The Senate version seems much more complicated. The present 30-day special session expires November 16th.

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