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Contact Information:
Toll Free:(800) 665-2689
In the Homer Area:(907) 235-2921
Via Mail or in Person: 345 W. Sterling Hwy., Suite 102B
Homer, Alaska 99603
Fax:(907) 235-4008
Website:
Email:
Greetings from Juneau on this 50th day of the legislative session.
It has felt like an end-of-session crunch this last week. The Governor’s proposal to replace the current oil and gas production tax with a Percent of Profits Tax (with generous credits) has consumed many of us. Generally a bill will receive up to an hour of committee and public testimony during the normal two-hour committee hearings. This bill is so complex and important that we started our review with three-hour meetings on Wednesday, Thursday and Friday. Other committees were canceled so their members could also attend. We had a public hearing on Saturday and have at least 5 more meetings scheduled for the bill in the Resources Committee alone.
I’m sure we will be looking at changes in the “claw back” which allows deduction and credit for investments in the preceding 5 years; change in the tax rate up to about 25%; reduction in the $73 million profits before the tax applies; establishing an escalating scale at higher than current oil prices; and charging interest on the underpayment of tax during the year. There is a great deal of information available both online and at the LIOs for anyone interested in learning more about this proposal.
We had our first hearings on the rewrite of the mining production tax in Ways and Means. So far the entire focus has been on minerals, but I need constituent and industry feedback on the potential effects on sand, gravel, rock and coal.
I was pleased to meet with several constituents from Homer last week – Kevin Fraley, Marvin Super, Scott Wheat, and Jamie Ross.
Resources Committee
HB 488 Oil and Gas Production Tax
HB 488 repeals and replaces the current production tax on oil and gas in Alaska. The production tax is a major element of what is essentially a four-part taxation system that includes royalties, corporate income, property tax, and production tax. The production tax makes up about 25% of our state income for oil and gas and is computed by multiplying the gross value of the resource at the point of production by the appropriate tax rate and then multiplying by the Economic Limit Factor or ELF. The formula was originally designed to lower taxes on less productive fields and to promote exploration. The current production tax rate is generally 15% of gross production value for oil and 10% for gas. HB 488 would change the production tax by repealing the gross tax on both oil and gas, repealing ELF and basing the tax on 20% of a producer’s net income, allowing deductions for lease costs, capital investment and operating expenses and exempting the first $73 million made annually in Alaska.
HB 488 provides for an annual tax credit of 20% against the production tax for qualified capital investment. An additional credit is allowed for up to 20% of annual loss, although this credit cannot be used to reduce taxes below zero. Unused credits may be sold to other producers.
HB 488 allows producers to write off the cost of capital investments made after July 1, 2001 with the condition that they may not re-coup these costs unless the price of oil is over $40 a barrel. This provision is referred to as the “Capex Clawback” or the “Transitional Investment Expenditure”.
This bill also provides a “safe haven” against penalties if a taxpayer pays within 90% of their monthly tax burden. Accumulated, unpaid tax must be paid by March 31 of the following year.
You can find additional info on the proposal at
I encourage anyone interested to browse this web-site and get back to me with any questions you may have regarding this legislation.
State Affairs Committee
Three bills moved from committee last week. HB 375 creates a Retirement Benefit Liability account within the Department of Revenue and directs half of the earnings of the Amerada Hess fund, subject to appropriation, into the fund. SB 224 designates the second Wednesday in September as “Older Alaskans Day”. HB 403 allows DMV to permit low-speed neighborhood vehicles on roads with a maximum speed limit of 35 mph. This bill was amended to allow municipalities to impose further regulations on the use of these vehicles if they see fit, and to allow the federal definition of low-speed vehicle to be the operative definition.
This week we will hear a report generated at the Conference of Young Alaskans, an event sponsored by the University of Alaska in commemoration of the original Constitutional Convention. We will also hear HB 485 placing certain executive branch employees in the exempt service category, HB 475 making technical changes to the retirement system created under SB 141 last year, HB 344 allowing auto dealers to recoup costs associated with the processing of titles and registrations otherwise handled by the DMV, and HJR 25, a resolution asking congress to repeal the requirement that a veteran must have served in the armed forces prior to 1977 in order to qualify for a veterans housing loan.
Ways and Means Committee
The committee met twice this week for hearings on my mining tax bill, HB 418. The mining industry generally pays less than 1% of the total resource value to the state, while making a slightly larger contribution to municipalities. This bill replaces the current mining license tax with a 3% tax on the realized value of the resource. The tax base is established by taking the first point of sale, and deducting all costs incurred after the material is removed from the mine. This is called the “mine-mouth value” and is a structure utilized in many other areas around the world. The royalty imposed on mining activity occurring on state land is also revised under the bill.
More information on the bill is available on my website, including industry revenue comparisons, international and state tax comparisons, a legislative research analysis and mining industry survey. You can also read a recent write up on the bill in Mining News at
HB 418 was held in committee and will be heard again next week.
Health and Social Services Committee
HB 312 requires the Department of Health and Social Services (DHSS) to provide materials for distribution regarding the adverse effects of Fetal Alcohol Spectrum Disorders (FASD) to a variety of public facilities. It also establishes a screening and treatment program for infants diagnosed with FASD. I added an amendment requiring DHSS to provide long-duration birth control on a voluntary basis to women diagnosed with FASD or who have problems of alcohol abuse. Many women affected by Fetal Alcohol Syndrome have difficulties with alcohol and do not wish to become pregnant, yet they have a hard time remembering not to drink alcohol or take a daily contraceptive because of the brain impairment. The lifetime cost for treating an individual with FASD is roughly $3.1 million, which makes preventative measures fiscally prudent.
The committee also heard a presentation last week by Alaska Mental Health Advisory Board on Alcoholism and Drug Abuse. They reported on the tremendous social and financial costs of alcohol abuse. The combined costs in Alaska health care, lost productivity, traffic accidents and the legal system were approximately 639 million dollars in 2003.
HB 442 was also heard, making clarifications in Alaska Statute to ensure that the wishes of terminally ill patients are implemented. We will be revisiting HB 442 this week and I will be offering an amendment to make sure doctors abide by the expressed wishes.
Following Bills
All bills can be accessed through the state's Bill Action and Status Inquiry System (BASIS). You can see what committee a bill is in, when it will be heard, how committee members voted, and much more. You can view all bills relating to your specific areas of interest by selecting "Subject Summary" from the menu on the right. Access BASIS through the link below, or by doing a search for "BASIS Alaska".
Live on the Web
Most committee hearings can be seen and heard on Gavel-to-Gavel, which is broadcast on both local access TV and on the Internet. You can also access online archives from their website. .
Contact Us
If you would like to speak to me regarding a specific issue, it is helpful to first get in touch with the member of my staff handling related issues. You can click on their email addresses to send them a note, or just give us a call at the office. Please provide your full name, address and phone number on any correspondence with the office. Your time and effort are much appreciated.
Louie Flora
State Affairs, Resources, Fisheries, HB 328
(907) 465-4963
Ian Laing
Scheduling, Ways and Means, HB 415, HB 418
(907) 465-2689
Katie Shows
Health Education and Social Services, PERS/TRS, Budget, HCR 5, HCR 28, HB 238
(907) 465-2028
Rep. Paul Seaton
House District 35
(800) 665-2689
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