The last e-mail newsletter I sent you outlined my proposed oil tax system overhaul. Last week, the Governor revealed his take on the issue. As you assuredly have seen in the media, oil taxes have been the dominant topic in the building for the last several days.

I believe that for many of us in the Legislature, this issue will be the most important matter taken up during our tenures. Please know that I will be following this bill very closely, and will work to ensure Alaskans get the maximum benefit for their resources.

Below are some points outlining the Governor's Bill. If you'd like to make a comparison between the Governor's proposed plan and my own, please click on the link below to view an outline of the bill that Rep. Gara and I are sponsoring.

http://www.akdemocrats.org/french/021606_french_newsletter.htm

The Governor's bill SB 305: Petroleum Profits Tax:

• Repeals the current ELF and severance tax system.
   
• Proposes a new tax of 20% of net profits (not gross.)
   
• Allows lease expenses, operating costs, and capital costs to be deducted prior to figuring taxes.
   
• Provides every company with a $73 million deduction, in effect making the first $73 million in profits earned by every company every year tax-free.
   
• Lets companies deduct capital and development costs from as far back as the year 2001.
   
• Proposes tax credits for 20% of qualified capital costs and 20% of losses. These credits may only be applied to taxes due - but may be traded.  Tax credits have no expiration date and are 100% bankable (meaning the state will eventually honor 100% of the credits).
   
• Allows oil conservation surcharge payments to be used as credit against the production tax.
   
• Sets an effective date of July 1, 2006.  An earlier version had a January 1, 2006 effective date.  The difference means approximately $500 million to the oil industry.

As always, your thoughts and concerns are greatly appreciated. Please stay in touch; contact my Juneau office toll free at (866) 465-3892.