Today the Alaska Supreme Court, in Forrer v. State of Alaska, struck down legislation enacted under the previous Walker administration in 2018 that authorized the issuance of “subject-to-appropriation” bonds to pay outstanding cashable oil and gas tax credits. According to the Department of Revenue, there is $743 million in outstanding tax credits that were eligible to participate in the tax credit bonding program. The tax credit program ended in 2017.
With the collapse of oil prices over the last six years, the State was no longer able to immediately pay such tax credits. As an alternative, the Walker administration introduced HB 331 which sought to issue “subject to appropriation” bonds to pay the tax credits. HB 331 permitted the State to pay the tax credit holders in 2018 with bond proceeds and the legislature would pay off these bonds over time. The legislation also provided that tax credit holders would have to accept a discounted payment in order to participate in the program.
The Alaska Supreme Court ruled HB 331 unconstitutional. The Court’s decision invalidates HB 331’s “subject-to-appropriation” debt..
The Departments of Revenue and Law have undertaken an in-depth review to understand the impacts of the Forrer decision. In accordance with the Court’s decision, the Department of Revenue will not proceed with an issuance of tax credit bonds.