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 Alaska Administrative Code (Last Updated: January 12, 2017)
 Title 15. Revenue.
 Chapter 15.21. Oil and Gas Corporate Income Tax.
 Article 15.21.1. Application of Tax.

  Section 15.21.130. Calculation of reasonable costs of transportation.  

Latest version. 
  • 	(a)  Reasonable costs of transportation are calculated from the point of production to the sales delivery point.  
	(b)  Actual costs of transportation for purposes of 15 AAC 21.128 are  
		(1) if the transportation of oil or gas is by a regulated carrier, the tariff on file with FERC or other regulatory agency having jurisdiction that applies to that transportation of the oil or gas by the carrier, from the point that oil or gas is tendered into the facilities of the carrier to the point that it is delivered from the facilities of the carrier;  
		(2) if transportation of oil is by a tanker or other vessel that is not owned or effectively owned by the taxpayer  
			(A) for a single voyage charter, the charter fee for that vessel, plus any voyage and port costs not included in that fee which are incurred with respect to that transportation during the term of the charter and which are borne by the taxpayer, plus the positioning cost, if any, borne by the taxpayer for that vessel;  
			(B) for a consecutive voyage charter or a time charter, the charter fee for that vessel, plus any voyage and port costs not included in that fee which are incurred with respect to that transportation during the term of the charter and which are borne by the taxpayer, plus the positioning cost (amortized over the lesser of 36 months or the term of the charter in the case of a time charter, and amortized on the basis of the number of voyages in the case of a consecutive voyage charter), if any, borne by the taxpayer for that vessel; or  
			(C) for a contract of affreightment, the affreightment fee specified in that contract, plus any voyage and port costs and any positioning costs not included in that fee which are incurred with respect to that transportation during the term of the contract of affreightment which are borne by the taxpayer;  
		(3) if transportation of oil is by a tanker or other vessel that is owned or effectively owned by the taxpayer, the taxpayer's actual cost for that transportation, which is the sum of  
			(A) voyage and port costs incurred with respect to that transportation;  
			(B) the positioning cost, amortized over 36 months, for that vessel;  
			(C) depreciation of the vessel; if the vessel is actually owned by the taxpayer, depreciation must be calculated in accordance with the applicable FASB Financial Accounting Standards for this asset; if the vessel is effectively owned by the taxpayer, depreciation must be calculated in accordance with FASB-13 from the standpoint of a lessee under a capital lease; and  
			(D) an amount which, when added to the amount of depreciation included under (C) of this paragraph, will provide a reasonable return on the acquisition cost of the vessel over its expected life; for purposes of this subparagraph  
				(i) "acquisition cost" means the cost of the vessel which may be capitalized by its actual owner in accordance with generally accepted accounting principles, including costs of improvements made after the date the vessel is placed in service by or on behalf of the taxpayer; and  
				(ii) "expected life" means the period of time used to calculate depreciation under (C) of this paragraph;  
		(4) in the case of transportation of gas as LNG  
			(A) if only a part of the LNG transportation facilities are subject to tariff regulations by FERC or other agencies of the United States, state or territory or a possession of the United States or a foreign nation and if the taxpayer does not have or effectively have any ownership interest in the LNG transportation facility, the amount charged to the taxpayer for that LNG transportation;  
			(B) if the taxpayer has or effectively has an ownership interest in the LNG transportation facility, the taxpayer's actual cost for that transportation which is the sum of  
				(i) the direct operating costs of the LNG transportation facility (in the case of an LNG tanker, its respective voyage and port costs) incurred with respect to the taxpayer's gas;  
				(ii) the positioning cost, amortized over 36 months, for that vessel;  
				(iii) depreciation of the LNG transportation facility, if the facility is actually owned by the taxpayer, depreciation must be calculated in accordance with the applicable FASB Financial Accounting Standards for the owner of these assets; if the LNG transportation facility is effectively owned by the taxpayer, depreciation must be calculated in accordance with FASB-13 from the standpoint of a lessee under a capital lease; and  
				(iv) an amount which, when added to the amount of depreciation allowed under (iii) of this subparagraph, provides a reasonable return on the acquisition cost of the LNG transportation facility over its expected life, for purposes of this sub-subparagraph, "acquisition cost" means the cost of the LNG transportation facility which may be capitalized by its actual owner in accordance with generally accepted accounting principles, including the cost of improvements made after the date the LNG transportation facility is placed in service by or on behalf of the taxpayer, and "expected life" means the period of time used to calculate depreciation under (iii) of this subparagraph;  
		(5) if the transportation of oil or gas is by a nonregulated pipeline facility that is not owned or effectively owned by the producer of that oil or gas, the transportation fee specified in the contract plus any other costs not included in the fee with respect to that transportation which are borne by the producer;  
		(6) if the transportation of oil or gas is by a nonregulated pipeline facility that is owned or effectively owned by the producer of that oil or gas, the amount which would have been reported to the FERC or other regulatory agency having jurisdiction applicable to the transportation of oil or gas under (1) of this subsection if the transportation had been under the jurisdiction of FERC or other regulatory agency for the tax reporting period.  
	(c)  The fair market value of transportation for the purpose of determining the reasonable cost of transportation under 15 AAC 21.128 is determined  
		(1) for shipments of oil, on the basis of third-party charters (that is, time charters in which the taxpayer does not own or effectively own the vessel) of like vessels of one year or more, plus regulated transportation costs determined under (b)(1) of this section; two vessels will be considered like vessels for purposes of comparing like transportation under this chapter if the difference between them in tonnage is less than 10,000 deadweight tons and if they are both Jones Act vessels, or are both CDS vessels, or are both ODS vessels or are both CDS/ODS vessels; or  
		(2) for shipments of gas as LNG, on the basis of third-party charters or leases (that is, charters or leases in which the taxpayer does not own or effectively own the LNG transportation facility in question) of three years or more which are reported to the department for like LNG transportation facilities, plus regulated transportation costs determined under (b)(1) of this section.  
	(d)  If a taxpayer sells its oil or gas to a third party in what would otherwise be a bona fide, arm's-length sale but at the time of the sale the taxpayer expects to repurchase that oil or gas at a later time and place, then that sale to the third party and the repurchase from the third party, when it occurs, will be disregarded and the oil or gas subject to that sale will be treated as if it has remained the taxpayer's own oil or gas throughout the time between that sale and repurchase. In determining the value at the point of production in this case, the reasonable cost of transportation between the point of sale for that sale and the point of repurchase must be determined as if the taxpayer were the shipper. This subsection does not apply if the taxpayer's expected repurchase does not occur.  
	(e)  For purposes of this section, "voyage and port costs" for a vessel are  
		(1) costs actually incurred for fuel for the vessel while in port and at sea, stores and provisions for the vessel and captain and crew, wages and benefits of the vessel's captain and crew, routine maintenance, port and dock fees, storage costs, demurrage, tug and pilotage fees, marine agents' fees in port, lightering, transshipment charges, customs fees and duties, regular and customary gratuities which are lawfully paid, insurance premiums paid to third-party insurers, minor cargo losses or measuring differentials, loading and unloading inspection fees, Panama Canal transit fees, a reasonable management fee (to be prorated equally among vessels) for coordinating arrivals and departures into and out of ports for vessels owned, effectively owned or chartered by the taxpayer, and other reasonable costs associated with the operation or maintenance (or both) of the vessel; and  
		(2) in addition to the costs set out in (1) of this subsection, in the case of catastrophic loss or damage of a vessel transporting oil or LNG from Alaska or en route to Alaska to take on oil or LNG, a part of the loss (for loss or damage to the ship, for injury or loss of the captain or crew and for damage and cleanup due to spillage of part or all of her cargo, but not for the loss of the cargo itself) which is borne by the shipper as the result of that catastrophic loss or damage and which is not reimbursed by insurance or by a third party; this part of the loss is determined by allocating the unreimbursed liability on the basis of deadweight tonnage among the vessels owned, effectively owned or chartered by the shipper to transport oil or LNG (whichever was lost) from Alaska.  
	(f)  A taxpayer "effectively owns," has "effective ownership" or "effectively has an ownership interest" in a vessel, LNG transportation facility, or nonregulated pipeline facility for purposes of this section, if  
		(1) the vessel, LNG transportation facility, or nonregulated pipeline facility is owned by another person comprising part of a consolidated business in which the taxpayer is also a part;  
		(2) the vessel, LNG transportation facility, or nonregulated pipeline facility is the subject of a capital lease in which the taxpayer (or another person comprising part of a consolidated business in which the taxpayer is also a part) is the lessee; or  
		(3) the vessel, LNG transportation facility, or nonregulated pipeline facility was built to the account of the taxpayer (or another person comprising part of the consolidated business in which the taxpayer is also a part), was sold and was chartered back by the taxpayer (or another person comprising part of a consolidated business in which the taxpayer is also a part) in a simultaneous transaction and the vessel or LNG transportation facility is on a term charter or lease to the taxpayer (or another person comprising part of a consolidated business in which the taxpayer is also a part) for 15 years or longer.  
	(g)  For purposes of this chapter, the "positioning cost" for a vessel includes the costs not included in the charter for that vessel which are borne by the taxpayer for placing that vessel into position before the first voyage under that charter or the estimated costs to be borne by the taxpayer for delivering it up at a specified location after the last voyage under that charter, or both if the taxpayer is obligated under the terms of the charter or contract of affreightment to pay both costs.  
	(h)  A reasonable rate of return under (b)(3)(D) or (b)(4)(B) of this section is presumed to be that amount which yields an internal rate of return (after federal income tax) on an investment which equals two percent plus the average annual national inflation rate (measured by the GNP deflator) during  
		(1) the period between the time the commitment is made to construct or acquire the vessel or LNG transportation facility and the time the vessel or LNG transportation facility has been received (or delivered) and is ready to be placed into service; or  
		(2) if the period in (1) of this subsection falls entirely within a calendar year, that entire calendar year.  
	(i)  At the request of a taxpayer or on its own motion, the department will, in its discretion, replace the return under (h) of this section with one based on the rate of return imputed to that investment or similar ones by the person owning or effectively owning the vessel or LNG transportation facility.  
	(j)  The third-party nature of an agreement between a taxpayer and a third-party carrier regarding transportation costs is not affected during the term of that agreement by a later consolidation of that taxpayer and carrier into a consolidated business, if, at the time they entered into that agreement, the taxpayer and the carrier did not exercise, directly or indirectly, any control over the business affairs of the other as the result of, or in anticipation of, their consolidation into the consolidated business.  
	(k)  For purposes of this section, a "pipeline facility" includes all facilities incident to the pipeline transportation of oil or gas downstream from the point of production as defined in 15 AAC 21.900.

Authorities

43.05.080;43.19.010;43.21.020;43.21.090;43.21.120

Notes


Authority
AS 43.05.080 AS 43.19.010 Art. IV, _ 18, Ak Const. AS 43.21.020 AS 43.21.090 AS 43.21.120
History
Eff. 2/22/79, Register 69; am 5/21/81, Register 78