1. (a) For purposes of the calculations required under (d), (e), or (f) of this section, in calculating an annual production tax value for a segment described in 15 AAC 55.206(c)(1)(C), (D), (E), or (F), a producer shall deduct applicable adjusted lease expenditures for the calendar year to the maximum extent that deductibility is allowed under applicable law, including (d), (e), or (f), as applicable of this section.
2. (b) Repealed 1/1/2022.
3. (c) This section applies to lease expenditures incurred after June 30, 2007.

4. (d) For a calendar year after 2013 and before 2017 for which a limitation under AS 43.55.011(j), (k), (o), or (p) on the tax levied by AS 43.55.011(e) has the effect of reducing the producer's tax on oil or gas produced from one or more leases or properties below the amount of the tax that would be levied in the absence of that limitation, the producer shall account under this subsection for adjusted lease expenditures that are excess adjusted lease expenditures, if any, under 15 AAC 55.206(b) in the calculation of annual production tax values for segments described in 15 AAC 55.206(c)(1)(C), (D), (E), or (F). Only the amount, if any, of those excess adjusted lease expenditures that is calculated under (7) of this subsection may be used to establish a carried-forward annual loss under AS 43.55.023(b), as the provisions of that subsection read before January 1, 2018. The fraction of the amount calculated under (7) of this subsection that is subject to a 25 percent tax credit under AS 43.55.023(b), as the provisions of that subsection read before January 1, 2018, is equal to the amount calculated under (1) of this subsection divided by the sum of the amounts calculated under (1) and (2) of this subsection. The fraction of the amount calculated under (7) of this subsection that is subject to a 45 percent tax credit under AS 43.55.023(b), as the provisions of that subsection read before January 1, 2018, in the case of lease expenditures incurred after December 31, 2013, and before January 1, 2016, or a 35 percent tax credit under AS 43.55.023(b), as the provisions of that subsection read before January 1, 2018, in the case of lease expenditures incurred after December 31, 2015 and before January 1, 2017, is equal to the amount calculated under (2) of this subsection divided by the sum of the amounts calculated under (1) and (2) of this subsection. The calculations to be performed for the accounting under this subsection are as follows:

   1. (1) calculate the total amount of excess adjusted lease expenditures subject to this subsection for segments described in 15 AAC 55.206(c)(1)(C), (D), and (F) and for segments described in 15 AAC 55.206(c)(1)(E) for gas produced from leases or properties no part of which is north of 68 degrees North latitude;
   2. (2) calculate the total amount of excess adjusted lease expenditures subject to this subsection for segments described in 15 AAC 55.206(c)(1)(E) for gas produced from leases or properties that include land north of 68 degrees North latitude;
   3. (3) sum the amounts calculated under (1) and (2) of this subsection and multiply that sum by 35 percent;
   4. (4) calculate for each segment the amount by which a limitation under AS 43.55.011(j), (k), (o), or (p) reduces the amount of the producer's tax otherwise levied by AS 43.55.011(e);
   5. (5) sum the total of the reductions calculated under (4) of this subsection for all affected segments;

   6. (6) if the amount calculated under (3) of this subsection is

      1. (A) greater than the amount calculated under (5) of this subsection, subtract the latter amount from the former amount;
      2. (B) equal to or less than the amount calculated under (5) of this subsection, consider the amount calculated under this paragraph to be zero;
   7. (7) divide the amount calculated under (6) of this subsection by 0.35.

5. (e) For calendar year 2017 for which a limitation under AS 43.55.011(j), (k), (o), or (p) on the tax levied by AS 43.55.011(e) has the effect of reducing the producer's tax on oil or gas produced from one or more leases or properties below the amount of the tax that would be levied in the absence of that limitation, the producer shall account under this subsection for adjusted lease expenditures that are excess adjusted lease expenditures, if any, under 15 AAC 55.206(b) in the calculation of annual production tax values for segments described in 15 AAC 55.206(c)(1)(C), (D), (E), or (F). Only the amount, if any, of those excess adjusted lease expenditures that is calculated under (7) of this subsection may be used to establish a carried-forward annual loss under AS 43.55.023(b), as the provisions of that subsection read before January 1, 2018. The fraction of the amount calculated under (7) of this subsection that is subject to a 15 percent tax credit under AS 43.55.023(b), as the provisions of that subsection read before January 1, 2018, is equal to the amount calculated under (1) of this subsection divided by the sum of the amounts calculated under (1) and (2) of this subsection. The fraction of the amount calculated under (7) of this subsection that is subject to a 35 percent tax credit under AS 43.55.023(b), as the provisions of that subsection read before January 1, 2018, is equal to the amount calculated under (2) of this subsection divided by the sum of the amounts calculated under (1) and (2) of this subsection. The calculations to be performed for the accounting under this subsection are as follows:

   1. (1) calculate the total amount of excess adjusted lease expenditures subject to this subsection for segments described in 15 AAC 55.206(c)(1)(C), (D), and (F) for oil and gas produced from leases or properties no part of which is north of 68 degrees North latitude;
   2. (2) calculate the total amount of excess adjusted lease expenditures subject to this subsection for segments described in 15 AAC 55.206(c)(1)(E) for gas produced from leases or properties that include land north of 68 degrees North latitude;
   3. (3) sum the amounts calculated under (1) and (2) of this subsection and multiply that sum by 35 percent;
   4. (4) calculate for each segment the amount by which a limitation under AS 43.55.011(j), (k), (o), or (p) reduces the amount of the producer's tax otherwise levied by AS 43.55.011(e);
   5. (5) sum the total of the reductions calculated under (4) of this subsection for all affected segments;

   6. (6) if the amount calculated under (3) of this subsection is

      1. (A) greater than the amount calculated under (5) of this subsection, subtract the amount calculated under (5) of this subsection from the amount calculated under (3) of this subsection;
      2. (B) equal to or less than the amount calculated under (5) of this subsection, consider the amount calculated under this paragraph to be zero;
   7. (7) divide the amount calculated under (6) of this subsection by 0.35.

6. (f) For a calendar year after 2017 and before 2022 for which a limitation under AS 43.55.011(o) or (p) on the tax levied by AS 43.55.011(e) has the effect of reducing the producer's tax on oil or gas produced from one or more leases or properties below the amount of the tax that would be levied in the absence of that limitation, the producer shall account under this subsection for adjusted lease expenditures that are excess adjusted lease expenditures, if any, under 15 AAC 55.206(b) in the calculation of annual production tax values for segments described in 15 AAC 55.206(c)(1)(E) or (F). Only the fraction calculated under (7) of this subsection of those excess adjusted lease expenditures, if greater than zero, may be used to establish carried-forward annual losses under AS 43.55.160(e) and 43.55.165(a)(3) and (l) - (s)(1). The calculations to be performed for the accounting under this subsection are as follows:

   1. (1) calculate the total amount of excess adjusted lease expenditures subject to this subsection;
   2. (2) multiply that total amount by 35 percent;
   3. (3) calculate for each segment the amount by which a limitation under AS 43.55.011(o) or (p) reduces the amount of the producer's tax otherwise levied by AS 43.55.011(e);
   4. (4) sum the total of the reductions calculated under (3) of this subsection for all affected segments;

   5. (5) if the amount calculated under (2) of this subsection is

      1. (A) greater than the amount calculated under (4) of this subsection, subtract the amount calculated under (4) of this subsection from the amount calculated under (2) of this subsection;
      2. (B) equal to or less than the amount calculated under (4) of this subsection, consider the amount calculated under this paragraph to be zero;
   6. (6) divide the amount calculated under (5) of this subsection by 0.35;
   7. (7) divide the amount calculated under (6) of this subsection by the amount calculated under (1) of this subsection.

7. (g) For a calendar year after 2021 for which a limitation under AS 43.55.011(p) on the tax levied by AS 43.55.011(e) has the effect of reducing the producer's tax on oil produced from one or more leases or properties below the amount of the tax that would be levied in the absence of that limitation, the producer shall account under this subsection for adjusted lease expenditures that are excess adjusted lease expenditures, if any, under 15 AAC 55.206(c)(3) in the calculation of annual production tax values for segments described in 15 AAC 55.206(c)(3)(D). Only the fraction calculated under (7) of this subsection of those excess adjusted lease expenditures, if greater than zero, may be used to establish carried-forward annual losses under AS 43.55.160(e) and 43.55.165(a)(3) and (l) - (s)(1). The calculations to be performed for the accounting under this subsection are as follows:

   1. (1) calculate the total amount of excess adjusted lease expenditures subject to this subsection;
   2. (2) multiply that total amount by 35 percent;
   3. (3) calculate for each segment the amount by which a limitation under AS 43.55.011(p) reduces the amount of the producer's tax otherwise levied by AS 43.55.011(e);
   4. (4) sum the total of the reductions calculated under (3) of this subsection for all affected segments;

   5. (5) if the amount calculated under (2) of this subsection is

      1. (A) greater than the amount calculated under (4) of this subsection, subtract the amount calculated under (4) of this subsection from the amount calculated under (2) of this subsection;
      2. (B) equal to or less than the amount calculated under (4) of this subsection, consider the amount calculated under this paragraph to be zero;
   6. (6) divide the amount calculated under (5) of this subsection by 0.35;
   7. (7) divide the amount calculated under (6) of this subsection by the amount calculated under (1) of this subsection.

(Eff. 10/21/2009, Register 192; am 12/25/2013, Register 208; am 3/1/2017, Register 221; am 12/6/2018, Register 228; am 1/1/2022, Register 240)

Authority: AS 43.05.080, AS 43.55.024, AS 43.55.160, AS 43.55.011, AS 43.55.110, AS 43.55.165