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EDITOR, Daily News:
There is a growing concern among Alaskans that oil and gas revenues to the state General Fund will be insufficient to satisfy programs such as education, law enforcement and transportation, as well as to continue to pay a reasonable dividend. The Alaska Department of Revenue Spring 2025 Forecast projects oil and gas revenues falling off over the next decade, dwindling from 37% of General Fund revenues for fiscal year 2024 to 25% by fiscal tear 2035.
The primary components of oil and gas revenues are royalties, production taxes and corporate income taxes. Unfortunately, the state statute governing corporate income taxes is flawed. Subchapter S corporations are exempt in Alaska from corporate income taxes. A Subchapter S corporation provides its stockholders liability protection, but rather than being taxed at the federal and state corporate income tax, statutory rates are taxed at the owner’s personal income tax rate. Since Alaska has no personal income tax, S corporations in the oil and gas business contribute no equivalent tax to the General Fund.
Among the primary producers generating revenues for the state General Fund are ConocoPhillips, Exxon and Hilcorp. Hilcorp replaced BP (formerly British Petroleum) when it purchased BP’s Alaska assets in 2020. Hilcorp is an S corporation, whereas the other primary producers are C corporations, and as such the latter pay corporate income taxes. This flaw must be corrected. Hilcorp should pay its fair share.
I would like to compliment Catherine Rocchi on her recent op-ed in the Anchorage Daily News dated March 28th (Opinion: Worried about Alaska’s budget crisis? Fix this obvious tax loophole) on the inequity associated with the current tax regime for S corps rather than regular corporations. I would encourage the Legislature and the governor to address this inequity as quickly as possible.