‘These commonsense changes would make a big difference to our bottom line and address issues of fairness and equity in our corporate tax code’
JUNEAU – Rep. Adam Wool (D-Fairbanks) recently introduced legislation to close three major loopholes that exist in Alaska’s corporate income tax structure.
One key element of The Corporate Tax Fairness Act, House Bill 130, is that it changes the state’s corporate income tax structure to apply equally to all oil and gas producers that develop Alaska’s resources. Currently, 30 percent of Alaska’s oil production is conducted by companies that are exempt from current tax structures as they are not registered as “C” corporations. This costs Alaska an estimated $25 million to $30 million per year in lost tax revenue, a figure that could increase significantly if oil prices recover.
Second, HB130 would resolve a new issue related to the federal CARES Act coronavirus relief bill. A corporation which experiences a net operating loss can typically carry that loss into future tax years and recoup a portion of the loss by reducing corporate taxes in future years. The CARES Act allowed corporations to carry any 2018-2020 losses backwards to a prior tax year. Because Alaska accepts most provisions of the IRS tax code by reference, that policy was automatically applied to Alaska’s Corporate Income Tax, meaning Alaska is set to pay retroactive tax refunds to corporate taxpayers for an estimated total of up to $200 million in the next two years. Representative Wool’s bill would sever the link to the federal tax code for this specific issue, preventing Alaska from paying large corporate refunds during our historic budget crisis.
Finally, the proposal would make it so corporations cannot use federal tax credits earned for work outside Alaska to reduce their taxable income here. Companies using these loopholes cost the state $3.5 to $5 million annually.
“My top priority this year is to identify every dollar the State of Alaska can save. These commonsense changes would make a big difference to our bottom line and address issues of fairness and equity in our corporate tax code,” Representative Wool said. “It’s a big win any time we can bring in extra revenue and avoid writing a check for $200 million.”
Alaska House Coalition