Alaska Admin. Code tit. 15, § 55.525 – Cash purchases of tax credit certificates

(a) For applications to purchase tax credit certificates received by the department before January 1, 2017 the department will first determine if there is enough money in the oil and gas tax credit fund to purchase the outstanding certificates. If the total amount of applications for purchases of tax credit certificates received by the department before January 1, 2017 for which applicants qualify at any time under AS 43.55.028(e) exceeds the amount of available money in the oil and gas tax credit fund, the department will allocate funds proportionally between those applicants based on the balance of tax credit certificates requested for purchase on applications outstanding as of December 31, 2016. If the applicant or claimant has an outstanding liability to the state for unpaid delinquent taxes under this title, the department may reduce the cash purchase by the amount of the outstanding liability.
(b) For applications to purchase tax credit certificates received by the department on and after January 1, 2017 the department will first determine if there is enough money in the oil and gas tax credit fund to purchase the outstanding certificates. If the total amount applied for in applications for purchases of tax credit certificates received by the department on and after January 1, 2017, for which applicants qualify at any time under AS 43.55.028(e) exceeds the amount of available money in the oil and gas tax credit fund, the department will allocate funds on an annual basis by granting a preference between two or more applicants to the applicant with the higher percentage of resident workers as provided in subsection (f). Subject to the availability of funds in the oil and gas tax credit fund and the provisions of AS 43.55.028(e) and (g), and the limitations of this section, when allocating funds between applicants the department will
1. (1) first, process and determine the eligibility of applications for the purchase of tax credit certificates on an annual basis;
2. (2) second, determine the amount of tax credit certificates to be purchased as calculated under paragraph (c) of this section from the applicant with the highest percentage of resident workers before purchasing any amount of tax credit certificates from an applicant with a lower percentage of resident workers. If two or more applicants have the same percentage, rounded to the nearest whole percent, of resident workers, the department will pay available funds to those applicants on a pro-rata basis;
3. (3) third, after the department has made a final determination of the amount of funds to be allocated for the purchase of tax credit certificates the director of the tax division will send a notice to each applicant detailing the amount of the application that has been approved for purchase and also make the same information available to the public in accordance with AS 43.05.230(l) and 15 AAC 05.250;
(c) For applications to purchase tax credit certificates received by the department on and after January 1, 2017 the department will determine the amount of the credit purchase limit under AS 43.55.028(g)(3) by
1. (1) first, determining an amount which is equal to 100 percent of the lesser of the first 35 million dollars or the amount of the tax credit certificate or portion of the certificate requested to be purchased;
2. (2) second, subtracting the amount determined in paragraph (1) of this subsection from the amount of the certificate's original value to determine the amount, if any, of the remaining certificate value;
3. (3) third, determine an amount which is equal to 75 percent of the lesser of the next 35 million dollars of the credit purchase limit or the amount, if any, of the remaining certificate value. If no additional credit is applied for in the current period the amount is zero;
4. (4) fourth, add the amounts obtained in paragraphs (1) and (3) of this subsection to determine the amount of the tax credit certificate that is eligible for purchase in the current year;
5. (5) fifth,
  1. (A) 35 million dollars or the amount of the original certificate value for the first 50 percent of the credit purchase limit under AS 43.55.028(e); or
  2. (B) 70 million dollars or the amount of the original certificate value submitted for purchase for the next 50 percent of the credit purchase limit under AS 43.55.028(e), if the amount of the certificate value submitted for purchase is greater than 35 million dollars; the difference, if any, represents the amount of the tax credit certificate to be relinquished by the applicant, may not be carried-forward into a future period, and will not be eligible for purchase by the department in the current or any future period;
6. (6) sixth, determine the amount, if any, that may be carried forward into future periods by subtracting 70 million dollars from the amount of the original certificate value or portion of certificate applied for purchase in the current year; if the amount is less than or equal to zero then no amount may be carried forward.
(d) The calculations to be performed under paragraphs (c)(1) - (6) of this section are illustrated in the following example: Example of Calculation of Credit Purchase Limit Under 15 AAC 55.525(c) ParagraphOriginal Certificate Value$0 - $35,000,000$50,000,000$50,000,000$70,000,000$100,000,000 Amount of Application for Purchase$35,000,000$35,000,000$50,000,000$70,000,000$100,000,000 11st $35 million at lesser of 100% of $35 million or Original Certificate Value$35,000,000$35,000,000$35,000,000$35,000,000$35,000,000 2Remaining Certificate Value$0$15,000,000$15,000,000$35,000,000$65,000,000 32nd $35 million at lesser of 75% of $35 million or Remaining Certificate Value$0$0$11,250,000$26,250,000$26,250,000 4Amount of Tax Credit Certificate Eligible for Purchase in Current Year$35,000,000$35,000,000$46,250,000$61,250,000$61,250,000 5Lesser of Applicable Credit Purchase Limit or Amount of Purchase Application$35,000,000$35,000,000$50,000,000$70,000,000$70,000,000 5Amount of Tax Credit Certificate Relinquished and Not Eligible for Purchase$0$0($3,750,000)($8,750,000)($8,750,000) 6Amount Carried- Forward and Eligible for Purchase in Subsequent Period $0 $15,000,000 $0 $0 $30,000,000
1. (e) Subject to the limitations of AS 43.55 and this section,
  1. (1) an applicant may request the purchase of the full amount of a tax credit certificate, or a portion of a certificate; in making an application for purchase, and if the amount of the total cash purchase requests for the year is greater than 35 million dollars, the applicant must identify, by year, the amount of the certificate for which a purchase request is being made;
  2. (2) regardless of the amount of cash purchases for which an applicant might be eligible to receive in any calendar year, the amount of any cash payment, or sum of cash payments, may not exceed the credit purchase limit described in AS 43.55.028(e);
  3. (3) a tax credit certificate, or portion of a tax credit certificate for which an application for purchase has not been made may be carried-forward into future periods and available for purchase in a subsequent year.
(f) The provisions of (e) of this section are illustrated in the following example: Example: An explorer or producer is the holder of 105 million dollars of credit certificates and makes an application to the department for purchase of the certificates. In the application, the applicant designates that in year 1 the requested amount of purchase is 35 million dollars, in year 2 the requested amount of purchase is 35 million dollars, and in year 3 the requested amount of purchase is 35 million dollars. If, in years 1 and 2 there are not sufficient funds by which the department can purchase the certificates, but in year 3 there are funds available to purchase 100 million dollars of certificates, the payment to the applicant would be limited to 70 million dollars and the remaining 35 million dollars of certificates not purchased would carry-forward into the next calendar year and, if sufficient funds remain in the purchase account, the certificates may be purchased in the year into which the remaining balance was carried-forward.
(g) For the purposes of AS 43.55.028(g)(2), an applicant shall report the percentage of resident workers in its workforce, including direct contractors, to the department and shall retain information to substantiate that percentage for a period of three years following the purchase of the tax credit certificate. The applicant's report must include a narrative explanation and illustrative calculation describing how the reported percentage was quantified. Information that may be used to substantiate the reported percentage of resident workers may include documentation prepared or acquired in the ordinary course of business and compilations of employee data extracted from governmental tax, payroll, identity verification, or similar types of forms that are within the applicant's or its direct contractor's control or ability to acquire. The department may use all available data, including information from the Department of Labor and Workforce Development, to verify an applicant's claimed percentage of resident workers. A report under this subsection is subject to the following:
1. (1) for purposes of AS 43.55.028(g)(2) and this section, the percentage of resident workers in the "previous calendar year" means the percentage of resident workers as of December 31 of the year in which the work performed in connection with the applicant's expenditures allowed for the credit certificates claimed for the cash purchase under AS 43.55.028;
2. (2) if an applicant has more than 25 direct contractors, the applicant may contact the department to determine whether the applicant's expenditures for a particular direct contractor can be considered minor compared to expenditures for other direct contractors and excluded for purposes of determining the percentage of resident workers;
3. (3) if the department cannot verify an applicant's claimed percentage of resident workers, the department will notify the applicant and will assign the application a percentage consistent with information available to the department; the department will use the assigned percentage for prioritizing the applicant's request for payment; if an applicant files an appeal regarding the applicant's percentage of resident workers, the applicant's percentage for payment prior to an appeal decision will be the percentage as determined by the department; otherwise, the percentage will be the amount as determined by the appeal decision.
(h) Subject to the provisions and limitations of AS 43.55.028 and this section
1. (1) applications for purchase of tax credit certificates received before January 1, 2017 will be paid before considering applications for purchase received on and after January 1, 2017;
2. (2) for each subsequent calendar year, all applications for purchase received from a prior year will be paid in accordance with the applicable statutes and provisions of this section prior to considering applications in that subsequent calendar year; applications will be prioritized based upon
  1. (A) first, the year in which the application for purchase of the tax credit certificate, the conditional tax credit certificate, or portion of a certificate was received; and
  2. (B) second, the percentage of resident workers in the applicant's workforce;
3. (3) an application must include a certification that the explorer's or producer's operation in the state or its ownership of an interest in a lease or property in the state is not for the purpose of dividing a single entity into multiple explorer or producer entities for the purpose of increasing the amount of tax credits that might be eligible for purchase in any calendar year and that no entity, including affiliates may receive more than $70 million in cash purchases;
4. (4) to be valid, an application must meet the requirements of AS 43.55.028(e)(1) - (5).
(i) If an applicant has an outstanding liability to the state the department may purchase only that portion of a certificate or pay only that portion of a refund that exceeds the outstanding liability, regardless of when that liability may have been incurred, prior to the department purchasing the tax credit certificate or portion of the certificate requested for purchase. If the purchase of a tax credit certificate or portion of a certificate has been reduced under AS 43.55.028(j) by the department making payment to another department to which an outstanding liability is owed and an applicant is successful in their appeal with that other department, then the applicant must seek reimbursement from that other department.
(j) An applicant may withdraw an application for purchase of a tax credit certificate at any time up to the point at which an application for purchase has been approved by the director of the tax division. An applicant may reapply for the purchase of a tax credit certificate that has been withdrawn by the applicant and, subject to the terms of this section, the new application will be ranked based on the filing date of the new application.
(k) Interest does not accrue with respect to any purchase of a tax credit certificate under AS 43.55.028(e).
(l) Except as provided in (m) of this section, the department may purchase tax credit certificates issued under AS 43.55.023 or 43.55.025 only if the tax credit underlying the certificate was
1. (1) earned for activity occurring before July 1, 2017; and
2. (2) the expenditures for that activity were expenditures incurred before July 1, 2017.
(m) Notwithstanding the provisions of (l) of this section, in addition to the limitations in AS 43.55.028, as the provisions of that section read before July 28, 2017, and the regulations in this chapter implementing that statute, the department may purchase no more than one half of the amount of a tax credit certificate under AS 43.55.023(d) issued for a tax credit under AS 43.55.023(b), as the provisions of that subsection read before January 1, 2018, for lease expenditures incurred in 2017.

(Eff. 3/1/2017, Register 221; am 1/1/2018, Register 224)

Authority: AS 43.05.080, AS 43.55.028