Hands down, SB 92 wins the Bad Bill of the Week – “An Act establishing an income tax on certain entities producing or transporting oil or gas in the state; and providing for an effective date.”
Quote of the Day: “I don’t really care who it applies to – anyone who pulls oil out of the ground” Senator Rob Yundt, Bill Sponsor.
The basics: A bill that targets one S corporation, from one industry, out of the 11,900 Alaskan S corporations, to pay a tax that threatens dozens of Alaskan businesses, hundreds of Alaskan workers and investment in Cook Inlet, all under the guise of being “fair.”
The details:
- Establishes a tax on business entities making profits in state on petroleum production or pipeline transportation that are not established as C corporations (C-corps) for tax purposes under Internal Revenue Service (IRS) tax code. Sole proprietorships, partnerships
- They must pay a tax of 9.4% annually mirroring the percent tax that C-corps pay to the state, but only on profits over $5 million.
- The Commissioner of Revenue shall aggregate the taxable income of two or more entities when their income could be reasonably attributable to a single entity.
- Revenue from the tax is deposited into a fund for use on energy and electrical grid projects or upgrades.
- The bill would be retroactive to January 1, 2025.
- The fiscal note projects that the state would receive $185m in FY 2026 (combination of 6 months retroactive payments and the full year of FY26) and a DECREASE in income every year after that due to declining production non-C corporation producers.
- The fiscal note also provides the following disclaimer on any projected income:
“The revenue impact of the corporate income tax portion of this legislation is highly uncertain, as the Department does not have detailed financial information for the companies that would be impacted. Further, the revenue impact would likely be concentrated in a small number of companies “
The bill had its first hearing on Wednesday, February 19th in the Senate Resources Committee.
