Bill to remove tax loopholes introduced
March 22, 2021
(SitNews) Juneau, Alaska – Legislature to close three major loopholes in Alaska’s corporate tax structure was introduced last week by Rep. Adam Wool (D-Fairbanks).
A key element of the Corporate Tax Fairness Act, House Bill 130, is to change the state’s corporate tax structure to apply equally to all oil and gas producers developing Alaska’s resources. Currently, 30 percent of Alaska’s oil production is operated by companies that are exempt from current tax structures because they are not registered as “C” corporations. This costs Alaska an estimated $ 25 to 30 million a year in lost tax revenue, a number that could rebound significantly if oil prices recover.
Second, HB130 is set to solve a new issue related to the coronavirus relief bill under the federal CARES law. A company experiencing a net operating loss can typically carry that loss forward into future tax years and recover some of the loss by reducing corporate taxes in future years. The CARES Act allowed companies to attribute losses from 2018 to 2020 to a previous tax year. Because Alaska accepts most of the IRS Tax Code provisions for reference, this policy has been automatically applied to Alaska’s corporate income tax, which means Alaska will be paying corporate taxpayers a retrospective tax refund estimated at up to $ 200 million over the next two years. Representative Wool’s bill would sever the link with federal tax legislation on this particular issue and prevent Alaska from paying large corporate refunds during our historic budget crisis.
Ultimately, the proposal aims to prevent companies from using federal tax credits earned on work outside of Alaska to reduce their taxable income here. Companies that exploit these loopholes cost the state $ 3.5 million to $ 5 million annually.
“My top priority this year is to identify every dollar the state of Alaska can save. These common sense changes would make a huge difference to our bottom line and address issues of fairness and equity in our corporate tax laws, ”said Representative Wool said. “It is always a big win when we can generate extra income and avoid writing a check for $ 200 million.”
Edited by Mary Kauffman, SitNews
House majority Coaliton
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