THE LINK: JULY 2023 10 Tax on Hilcorp included in changes in Senate Bill 114 There was a flurry of interest in oil and gas taxes in the Legislature this spring, but interest quickly dissipated when there was strong pushback from oil producers and support companies, and opposition voiced in the state House, which is led by Republicans. The issue will resurface in the 2024 session, however. One bill, targeted at Hilcorp Energy, one of the most active companies in the state, has moved to the Senate Rules Committee, an advanced stage of passage in the state Senate. Sen. Bill Wielechowski, D-Anch., chairs that committee and is also sponsor of the tax legislation. There are two major tax changes in Senate Bill 114, the original bill sponsored by the Senate Rules Committee. One is the “Hilcorp” tax, which requires Hilcorp, which is organized as an S Corporation, to pay the state corporate income tax of 9.4 percent that is paid by other oil producers who are organized as ordinary C Corporations. This is a form of business organization used by Hilcorp, which is privately owned, in all states where it does business and the exempt status from the state corporate income tax has been known since Hilcorp began investing in the state in 2012 and 2013. In S corporation the state income tax liability passes through to the shareholders. However, because Alaska has no personal income tax there is no tax paid, which has long bothered Sen. Wielechowski. SB 114 leaves the S Corporation exemption intact except that oil producers organized that way, Hilcorp being the only one, must pay the same amount as if they were organized as C Corporations. This would apply only to S Corporations earning more than $4 million in profits, so it does not affect smaller companies, and explorers, organized that way. The other change in SB 114 is a reduction in per-barrel oil production tax credits that are allowed producers as incentives to develop more oil. The credits are graduated from $8 per barrel down as oil prices drop so Oil and gas taxes likely to come up again in ‘24 Photo by Judy Patrick Hilcorp Energy has continued to invest heavily in its infrastructure in the state of Alaska.
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