(a) Subject to the terms and conditions of this section, and in addition to any other credit authorized to the taxpayer by this chapter, a taxpayer that is an operator or working interest owner directly engaging in the exploration for and development of gas may apply as a credit against the state tax liability that may be imposed on the taxpayer under this chapter,
(1) for a tax year beginning after December 31, 2002, and before January 1, 2010,
(A) 10 percent of the taxpayer's qualified capital investment; and
(B) 10 percent of the annual cost incurred by the taxpayer for qualified services in the state during each tax year for which a credit is allowable for a qualified capital investment for any gas reserve of the taxpayer or for each year that qualified costs are incurred for a gas reserve for which the taxpayer previously elected to claim a credit under (A) of this paragraph; and
(2) for a tax year beginning after December 31, 2009,
(A) 25 percent of the taxpayer's qualified capital investment; and
(B) 25 percent of the annual cost incurred by the taxpayer for qualified services in the state during each tax year for which a credit is allowable for a qualified capital investment for any gas reserve of the taxpayer or for each year that qualified costs are incurred for a gas reserve for which the taxpayer previously elected to claim a credit under (A) of this paragraph.
(b) Expenditures qualifying for the taxpayer's qualified investment credit under (a)(1)(A) or (a)(2)(A) of this section must be
(1) cash expenditures or binding payment agreements entered into after
(A) June 30, 2003, and before January 1, 2010, if the claim of the credit is made under (a)(1)(A) of this section; or
(B) December 31, 2009, if the claim of the credit is made under (a)(2)(A) of this section; and
(2) made for assets first placed in service in the state in or before the tax year in which the credit is claimed through the date
(A) the wells produce gas for sale and delivery; for purposes of this subparagraph, "placed in service in the state" means that the first use of the qualified investment is in this state; if the property on which the claim of the credit is based has been used elsewhere in the tax year of acquisition and is brought to this state during that year or a subsequent year, the property does not qualify for the investment credit; or
(B) a gas well is determined not to be capable of production in commercial quantities.
(c) The credit each tax year allowed by (a) of this section may not exceed 75 percent of the taxpayer's total tax liability under this chapter, but shall be calculated before the application of any other credits allowed under this chapter. An unused portion of the credit for the tax year
(1) may be carried forward into one or more of the following tax years, except that the unused credit from one tax year may not be carried forward for more than five following tax years;
(2) shall be applied to the taxpayer's tax liability under this chapter during the following tax year before allowance of a credit allowed by (a) of this section for that following tax year.
(d) To obtain the credit allowed by this section, the taxpayer shall, with the taxpayer's tax return, submit, on a form prescribed by the department, information that demonstrates that the taxpayer is eligible for the credit and evidence of the expenses that are the basis of the claim of the credit. The taxpayer has the burden of demonstrating compliance with the requirements of this section to entitle the taxpayer to the claim of and the amount of the credit.
(e) A taxpayer entitled to a credit under this section
(1) may not convey, assign, or transfer the credit to another taxpayer or business entity unless the conveyance, assignment, or transfer of the credit is part of the conveyance, assignment, or transfer of the taxpayer's business;
(2) forfeits the credit to which the taxpayer is entitled during the tax year and any carryover of it under (c) of this section, but does not forfeit the portion of the credit that accrued in a previous taxable year that may be carried over under (c) of this section, if the taxpayer
(A) disposes of the qualified capital investment;
(B) takes the qualified investment out of service; or
(C) transfers the qualified investment out of this state;
(3) may not include in any rate base for a regulated facility submitted to a regulatory agency charged with determining an appropriate tariff the cost of any qualified capital investment or qualified service that has been offset by receipt of a credit under this chapter.
(f) A taxpayer is not entitled to a credit under this section for expenditures that are made or incurred for the qualified capital investment or for qualified services made for exploration and development of gas that occur in the area of Alaska lying north of 68 degrees North latitude or that are made or incurred to transport gas from reserves located in the area of Alaska lying north of 68 degrees North latitude.
(g) A taxpayer that obtains a credit for a qualified capital investment or cost incurred for qualified services under this section may not also claim a tax credit or royalty modification for the same qualified capital investment or cost incurred for qualified services under AS 38.05.180 (i), AS 41.09.010 , AS 43.55.023 , or 43.55.025. However, a taxpayer may elect not to obtain a credit under this section in order to qualify for a credit provided under AS 38.05.180 (i), AS 41.09.010, AS 43.55.023 , or 43.55.025.
(h) For purposes of determining allowable credits under this section, the department shall allow only expenditures and payments that are not inconsistent with the expenditures authorized under 26 U.S.C. (Internal Revenue Code) for exploration and development of natural resources.
(i) A taxpayer shall claim the credit authorized in (a) of this section on a timely filed tax return for the year in which the qualified capital investment is made, on a timely filed amended tax return, or on a timely filed tax return for the year immediately following the year in which the qualified capital investment is made. The election to apply the credit authorized in (a) of this section may not be an irrevocable election.
(j) In this section,
(1) "qualified capital investment" means a cash expenditure or binding payment agreement, as described in (b)(1) of this section, for real property or tangible personal property used in this state in the exploration and development of any gas reserve regardless of whether there has been commercial production in the area or whether the exploration and development activity results in the production of gas or a well not capable of production in commercial quantities; in this paragraph, "property" includes
(A) property used in the operation or maintenance of facilities for exploration or development of gas;
(B) property that is placed in use under a capitalized lease or an operating lease; and
(C) the following property used for the exploration and development of gas:
(i) machinery, appliances, supplies, and equipment;
(ii) drilling rigs, wells, gathering lines and transmission lines, pumping stations, compressor stations, power plants designed for field operations, gas processing plants, and gas treatment plants, but not including liquefied natural gas or manufacturing plants;
(iii) roads, docks and other port facilities, and helicopter pads;
(iv) maintenance equipment and facilities, and maintenance camps and other related facilities; and
(v) communications facilities owned by a person whose principal business in the state is the exploration for or development of gas and whose operation of the communications facilities directly relates to the conduct of that business;
(2) "qualified services"
(A) means expenditures for labor, seismic, and other services that are directly applicable to a qualified capital investment;
(B) does not include lease operating expenses.
Section: Previous 43.20.031 43.20.033 43.20.036 43.20.037 43.20.038 43.20.040 43.20.042 43.20.043 43.20.044 43.20.045 43.20.046 43.20.047 43.20.048 43.20.049 43.20.050 NextLast modified: November 15, 2016