Legislators can’t help but play oil and gas tax politics before HB 111 conference committee

It'd be entertaining if the situation weren't so dire.As the administration tried its best to explain the differences between the House and Senate versions of House Bill 111, Gara and Pruitt returned to age-old bickering.

The conference committee on the oil and gas tax credit bill, House Bill 111, is set to maybe hold its first meeting on Thursday, but members of the House Finance Committee couldn’t resist trading some political digs during a presentation today on the differences between the two bills.

The meeting let the administration explain the differences between the House and Senate versions of the bill. Tax Division Director Ken Alper and Department of Revenue Commissioner Randy Hoffbeck testified, clearly wanting to stay above the policy and politics as Gov. Bill Walker holds out hope on a budget compromise.

“To make it clear, we really don’t want to get into the policy discussions and advocacy discussions. We really just want to deal with what’s in the bills and why particular things were put into the bill,” Hoffbeck said about 40 minutes into the three-hour hearing. “At this point in time, what were asked to do is compare the two bills.”

The comment was aimed at curtailing the political bickering that was derailing the presentation.

Rep. Tammie Wilson, R-North Pole, helpfully told Hoffbeck that she disagreed.

Also, the administration already weighed in on the bills in its budget compromise proposal. Walker picked the Senate version of the bill and included the House policy of ring-fencing, which essentially bars companies from using carry forward losses from one field against the tax bill of another.

Still, Hoffbeck was careful to not explicitly declare a winner or loser on the bill.

“I firmly believe that both the House and Senate did what was in the best interest long-term for the industry and the state,” he said. “That’s why we need to find a compromise.”

The political sniping that went on throughout the course of the meeting were peak House Finance Committee.

Rep. Les Gara, D-Anchorage, made some generally true, but over-broad statements that easily got under the skin of the pro-industry Rep. Lance Pruitt, R-Anchorage. And Rep. Tammie Wilson, R-North Pole, disagreed with the basic facts presented by the administration.

One of the most contentious moments came during a discussion of lagging tax audits. Alper said the audits are finally catching up and it’s showing that some companies overpaid, resulting in repayments. Gara, who has battled Republicans over the audits (usually with the suggestion that tax companies were dodging taxes), couldn’t help but take a dig.

“This idea that the oil companies might be victims because tax audits have taken a long time. There has been a battle in this Legislature for year. Many of us have said there have not been enough auditors, which I think has pushed you guys to the statute of limitations, and some people have lobbied for fewer auditors,” he said. “It’s hard for me to listen to any complaints that audits aren’t being done quick enough, especially by folks who have lobbied for fewer auditors.”

“I don’t think I need to comment on that,” Alper said, while Pruitt and Wilson nearly lept from their chairs.

“No one even said that!” both Pruitt and Wilson yelled out multiple times out as Foster called an at-ease.

Later in the meeting, Gara found himself apologizing, noting that he didn’t mean to direct his comments toward anyone who’s currently on the committee.

Even with a few weeks until the government shutdown, some things just don’t change.

That said, kudos to co-chairs Neal Foster and Paul Seaton for asking questions that were actually enlightening, as well as the odd question or two asked by Rep. Dan Ortiz.

Key takeaways

Audits of oil and gas production taxes are catching up with the six-year statutory deadline. These audits are a popular attraction if you’re getting into the weeds on oil and gas tax policy. Alper said the state caught up with the 2011 tax year a few weeks before the deadline. He said the state is making progress and will be about a year and a half ahead by next summer.

Boiled down, both the House and Senate versions of the bill do away with the costly cashable tax credits. They each turn them into tax offsets for future tax bills, with Senate’s a little more generous to the industry.

The House bill delves into reworking production taxes by changing the “hardness” of the minimum floor and raises hundreds of millions of dollars more in revenue for doing so. The Senate version mostly leaves production taxes the same as in Senate Bill 21.

The 10-year difference in state revenue amounts to about $2 billion more with the House bill, according to Alper. For that you need to trust revenue forecast, which Alper said “has never been historically correct for two years, let alone 10 years.”

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