There is growing concern among Alaskans that oil and gas revenues to the state general fund will be insufficient to satisfy programs such as education, law enforcement and transportation, as well as to continue to pay a reasonable Permanent Fund dividend.

The Alaska Department of Revenue Spring 2025 Forecast projects oil and gas revenues declining over the next decade, dwindling from 37% of general fund revenues for fiscal year 2024 to 25% by fiscal year 2035.

The primary components of oil and gas revenues are royalties, production taxes and corporate income taxes. Unfortunately, the state statute governing corporate income taxes is flawed.

Subchapter S (privately held) corporations are exempt in Alaska from corporate income taxes. Subchapter S corporations provide their stockholders with liability protection, but rather than being taxed at the federal and state corporate income tax level, their income is taxed at the owners’ personal income tax level. Since Alaska has no personal income tax, S corporations in the oil and gas business contribute no equivalent tax to the general fund.

Among the primary North Slope oil producers generating revenues for the state general fund are ConocoPhillips, ExxonMobil and Hilcorp. Hilcorp replaced BP when it purchased its Alaska assets in 2020. Hilcorp is a privately held S corporation, whereas the other primary North Slope producers operate as publicly traded C corporations, and as such they pay corporate income taxes.

This flaw must be corrected. Hilcorp should pay its fair share. I would like to compliment Catherine Rocchi on her opinion column in the Anchorage Daily News dated March 28 on the inequity associated with the current tax regime for S corporations.

I encourage the Legislature and the governor to address this inequity as quickly as possible.

Frank H. Murkowski

Governor of Alaska 2002-2006