A rare floor fight took place today in the Senate on the long debated S corp tax provision. The Senate had House Bill 194 on the calendar. This is a bill from Governor Mike Dunleavy (R – Alaska) to allow the state to take royalty oil in-kind from Marathon Petroleum. It passed the House 38-0 last May.
The bill had two ordinary hearings in the Senate Finance Committee on February 24 and March 3, and then was sent to the rules committee. It appeared the bill would quickly and easily pass the Senate.Â
But Senator Forrest Dunbar (D – Anchorage) introduced a floor amendment that proposed a progressive income tax on oil and gas S corps and other pass through entities. The provision is aimed at Hilcorp. Here is a breakdown:
- $0 – $1,000,000: 0%
- $1 million – $2 million: 5% of the amount over $1 million
- $2 million – $3 million: $50,000 + 6% of the amount over $2 million
- $3 million – $4 million: $110,000 + 7% of the amount over $3 million
- $4 million – $5 million: $180,000 + 8% of the amount over $4 million
- $5 million and above: $260,000 + 9.4% of the amount over $5 million
Dunbar gave a long speech where he spoke about school funding and a “Texas billionaire,” referring to Jeff Hildebrand, the owner of Hilcorp. The Senate then took a 30-minute at ease. Most of the senators left the floor to talk about the matter behind closed doors.
When they returned, several senators spoke to the amendment. Senator Cathy Tilton (R – Wasilla) said the bill is a ratification to a contract and not a tax bill. Senator Cathy Giessel (R – Anchorage) said there was a title change resolution that accompanied the amendment, and then gave a long speech about the history of the income tax in Alaska.
Senators Bill Wielechowski (D – Anchorage) and Lyman Hoffman (D – Bethel) both spoke in favor of the amendment.Â
Senator Jesse Bjorkman (R – Nikiski), who is carrying the bill for Dunleavy, spoke against the amendment, saying that it could also tax Furie/HEX owner John Hendrix (who he seems to really love). He also said that it’s not good process to pass this kind of amendment on the floor instead of through the committee process. Â
The amendment narrowly passed 11-8. Senator Kelly Merrick (R – Eagle River) is in Juneau but did not vote on the amendment or bill. She voted on a different bill an hour prior.Â
The bill then passed 12-7. During final comments, Bjorkman had to uncomfortably defend a bill that now includes a major tax provision that he voted against. He wrapped up by saying, “That’s the bill in a nutshell. It’s a contract ratification and now a tax bill, so… have at it.” Bjorkman voted against the bill.Â
The effective date clause for the bill and the title change resolution both failed to pass.
Senator Hoffman gave notice of reconsideration, meaning the bill will be up again in the Senate on Friday, but could also be on Monday. There will likely be negotiations within the Senate, and also with the House on the bill now that the tax provision is part of the bill.Â
If the bill is sent to the House with the new provision, they can either accept or reject the Senate’s changes. If they reject, the bill would go to a conference committee.Â
If they accept, the bill will get sent to Dunleavy. It’s likely he would veto the bill with the tax provision. His office would not provide a comment, but he’s said multiple times he will only approve a comprehensive fiscal plan, not individual taxes.
If he were to veto the bill, it would require three-quarters of the Legislature (45 votes) for a a veto override as it’s now a tax bill. The votes for that are not there.Â
This is a developing story.Â