One of my fellow Senate Republican Caucus members, Senator Robert Yundt, introduced a bill he thinks is a good idea. I don’t think it’s a good idea. SB 92 targets the company that is supplying the bulk of the gas currently from Cook Inlet to heat and light our homes and that is contributing to the increased North Slope oil through TAPs. SB 92 would establish a new 9.2% income tax on S-Corps with an income of $5million or more. Only one company fits that criterion, and it is Hilcorp.
Senators Wielechowski and Giessel had amended a bill last year to include this policy along with other provisions to increase taxes on fossil fuel companies, but it was stripped out. Based on their remarks last week, along with comments by Senate President Stevens and Finance Co-Chair Hoffman to the media, it appears there are enough votes for the bill to pass the Senate.
Some argue that the S-Corporation business model is a loophole that should be fixed. I would argue that our model is why this company and others are here doing business, providing jobs for Alaskans, and in Hilcorp’s case, supplying needed energy and providing royalties to our coffers we otherwise would not be receiving.
Hilcorp is no Exxon Mobil or ConocoPhillips. It is not one of the “big dogs”; it is not one of these large publicly traded companies worth hundreds of billions of dollars that go after the prime oil. Hilcorp is a fraction of the size and goes in after the big dogs leave to pull up the remaining, harder-to-get oil.
We are better off because of our current S-corp law. If we target and impose taxes on an energy S-corp company, if we pull the rug out from under a fossil fuel company, especially when the new DC administration seeks to open doors and opportunities here in Alaska, are we deterring other companies from setting up shop in Alaska? Absolutely we are.
Expanding resource development is a far superior approach. It’s a win-win: the private sector grows stronger and the revenues to the state go up as a result.
