Corporate income tax change remains key sticking point for Alaska gas pipeline bill

Alaska legislators say they will resume public discussions next week, with a vote possible on July 16

The Alaska State Capitol is seen on May 18, 2026. (Claire Stremple/Alaska Beacon)

By James Brooks

Alaska Beacon

The Alaska state Capitol was quiet Monday, with halls empty and offices dark as legislators traveled and visited their home districts amid an ongoing special session.

Lawmakers reached by phone said they expect next week to be different, and a key vote that would decide the fate of the tax break for the proposed trans-Alaska natural gas pipeline could take place on July 16.

“This week I’m expecting members to be talking … and trying to figure out what the final package might look like, and then I’d expect members to probably return on the 11th or 12th for in-person conversations, and at some point a conference committee meeting to pass out a final product,” said Rep. Calvin Schrage, I-Anchorage and chair of the conference committee tasked with drafting a final version of the tax break.

In late June, the state House and Senate passed different versions of the bill containing the tax break. Now, six legislators — three from the state House and three from the state Senate — are attempting to negotiate a compromise. 

They’re under a deadline: The ongoing special session expires July 19. If they don’t reach a final decision on the tax break before then, Gov. Mike Dunleavy could call legislators into another 30-day special session, the third on the topic.

While legislators disagree on many parts of the bill, the biggest sticking point in negotiations is whether or not the tax break bill should also end a corporate income tax exemption in state law. Currently, oil and gas companies that are publicly traded on stock markets — big names like ExxonMobil and ConocoPhillips — are required to pay the state’s corporate income tax.

Companies that aren’t — like Hilcorp, which is privately owned by billionaire businessman Jeffery Hildebrand, or Glenfarne, the firm that is now the lead developer of the pipeline — don’t have to pay the corporate income tax.

Earlier this year, the Senate approved a bill eliminating the exemption for privately held companies. The House voted it down. 

When the Senate passed its version of the tax-break bill benefiting the pipeline, it voted 11-9 to include the “S-Corp provision” eliminating the exemption. The House’s version does not have that elimination. 

As of Thursday, when the six-member House-Senate committee released an update on its work toward a compromise, the S-Corp provision was still in the bill. 

“I think that’s it’s fair to say that’s the most controversial, the biggest decision still to be made,” Schrage said.

Limited information is available on the possible impact. The Alaska Department of Revenue has estimated that Hilcorp and similar companies would pay somewhere between $0 and $100 million per year if the exemption is eliminated.

If the gas pipeline is built as planned, its operators would pay nothing additional until 2036, the department estimates. That year, the operators would pay $29 million, the department estimates. That estimate rises to $65 million per year by 2041 and $358 million per year by 2051. 

In comparison, the tax break being considered by lawmakers would reduce the pipeline project’s property tax burden by an estimated $16 billion over 30 years.

The state treasury would still collect an estimated $800 million from production taxes and royalties at full production, according to the Department of Revenue. That’s without the S-Corp provision and it doesn’t include economic effects caused by pipeline construction and operation.

Sen. Forrest Dunbar, D-Anchorage, authored a prior version of the S-Corp provision and has been a consistent supporter.

Speaking on Monday, he said that eliminating the tax exemption is a way to prevent the gas pipeline project from inadvertently lowering state oil revenue. 

Because the cost of new infrastructure can be deducted from state taxes, it’s expected that oil revenue will drop as the gas pipeline begins to come online.

“I think it’s extremely important for protecting the finances of Alaska. It doesn’t burden the project,” he said, because the pipeline isn’t taxed until it starts making a profit.

Business groups and pro-industry legislators have attacked the provision as counterproductive, saying it works against the bill’s goal — lowering taxes in order to encourage investors to back what would be one of the world’s largest natural gas projects.

Last week, a coalition that includes the Alaska Chamber, Alaska Oil and Gas Association, and other trade groups wrote a letter urging lawmakers to drop the S-Corp provision.

“We encourage passage of a clean bill without the addition of unrelated targeted tax measures,” they wrote.

Glenfarne, on June 19, issued a statement opposing the provision.

“A poorly constructed pass-through entity tax change would be shortsighted when the state is on the verge of the largest capital raise initiative for energy infrastructure in U.S. history,” the company said.

Dunleavy has said he would veto a tax-break bill containing the S-Corp provision, and it isn’t clear whether the provision has the votes to pass the House.

In a written statement issued last week, the 19-member Republican House minority caucus issued a statement opposing the provision. Some members of the majority, including Rep. Chuck Kopp, R-Anchorage, have also said they oppose it.

Rep. Justin Ruffridge, R-Soldotna, is a member of the House minority caucus and a member of the conference committee negotiating the tax-break bill. He said he thinks there are too many uncertainties about the provision, including how much money it would raise, how it would be implemented and what effects it would have. 

He doesn’t understand why the Senate’s majority caucus is insisting upon it.

“I’m genuinely surprised that that’s many people in the Senate’s position,” he said.

Under the rules of the six-member conference committee, changing the tax-break bill or advancing it onward to a final vote would require two votes from the three senators on the committee and two votes from the three House members on the committee.

While Sen. Mike Cronk, R-Tok, has said he supports removing the S-Corp provision, Sen. Lyman Hoffman, D-Bethel and Sen. Bert Stedman, R-Sitka, have previously supported the provision.

Hoffman was traveling on Monday and did not respond to a text message seeking his position on the provision. Stedman did not return a voice message left seeking comment.

Dunbar said he believes the bill will not come to a vote in the Senate without the S-Corp provision.

“I do not think it has the votes to get to the Senate floor without it being included,” he said.

If the bill were somehow able to leave the committee without the provision, Dunbar said he doesn’t see the bill passing the Senate.

“It kills the bill if it comes out. I think we would probably head to a third special session in that case, and we’d start with a new bill,” he said.

• James Brooks Cascade is a longtime Alaska reporter who lives in Juneau. He previously worked at the Anchorage Daily News, Juneau Empire, Kodiak Mirror and Fairbanks Daily News-Miner. Alaska Beacon is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.