Closing $100 million Hilcorp loophole will save jobs and the PFD
The Alaska Senate took a step toward eliminating a $100 million loophole in state tax law that allows Hilcorp to avoid an income tax paid by ConocoPhillips, ExxonMobil and others.
The Senate adopted an amendment to HB 194 on an 11-8 vote to extend the state corporate income tax to Hilcorp and other oil and gas companies that earn more than $1 million net profit.
The provision is a long way from becoming law. If it makes it through both houses of the Legislature, Gov. Mike Dunleavy will probably veto it. But the discussion will not be advanced without putting specifics on the table and forcing his hand.
Sen. Lyman Hoffman, a supporter of the amendment, gave notice of reconsideration because of potential questions about the underlying bill related to a royalty oil sale. In any case, this is progress on an old issue.
Nearly three months after Dunleavy was elected in 2018, Hilcorp owner Jeff Hildebrand donated $25,000 to the campaign group that had promoted Dunleavy and was largely funded by Dunleavy’s brother in Texas and Bob Penney.
As that year progressed, the Dunleavy administration mostly took a hands-off attitude to the BP sale of its North Slope assets to Hilcorp and never proposed a change in the corporate tax law to close the loophole.
Hilcorp is the largest business in Alaska not subject to a corporate income tax.
As I wrote here on August 28, 2019, “The sale of BP’s Alaska assets to Hilcorp, a privately held company controlled by Texas billionaire Jeff Hildebrand, is one reason why the Alaska Legislature needs to revise the state oil tax structure as soon as possible.”
In 2020, Hilcorp and the other oil companies spent many millions to scare Alaskans from voting for an oil tax initiative that would have raised taxes. They promoted the absurd claim that defeating the initiative was a way to increase the Permanent Fund Dividend.
The companies bankrolled a front group that said oil taxes should be decided upon by the Legislature out in the open and that defeating the ballot measure was a way to “save jobs and the PFD.”
The front group disappeared after the election and the oil industry made no effort to push the Legislature to look at oil taxes in the open or to “save jobs and the PFD.”
Since the oil companies are not using that slogan anymore, it could be used to promote closing the Hilcorp loophole, as in “Closing the Hilcorp loophole will save jobs and the PFD.”
Here was the vote on the key amendment:
Sen. Forrest Dunbar, who proposed the amendment, said it makes no sense that only some of the largest oil and gas companies have to pay the tax. It amounts to a subsidy to the companies that do not pay it.
“The truth is we can no longer afford this system of oil tax subsidy. We especially cannot afford to direct that money only to certain entities and hand hundreds of millions of dollars to a billionaire in Texas, while our younger generation loses that sense of opportunity that made Alaska a great place to live and raise a family,” said Dunbar.
“The question is can we afford this tax subsidy? Can we afford this loophole while we close schools? Can we afford this tax subsidy while we slash the Permanent Fund Dividend? Can be afford this tax subsidy while our infrastructure languishes, while we struggle to recruit and retain state troopers and firefighters and maintenance crews? The answer is no.”
“We need to be fiscally conservative, we need to balance our budget, we need to stop handing away funds that people of Alaska require to companies who, while they might now feel entitled to this tax break, did not think they were going to get it, did not plan their investments around it and continued to find it incredible that we elevate their bank accounts over our students, our public safety, and our working families.”
Here is the Anchorage Daily News coverage.
Here is the Alaska Beacon coverage.
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