The simple revenue solution of taxing private oil and gas companies has taken a twisting, torturous path through our legislature. Since Alaska repealed personal income tax in 1980, we’ve had a loophole that allows privately owned corporations – such as Hilcorp – to avoid paying corporate income tax entirely. And since at least 2021, legislators have considered closing it as a basic first step toward patching up the failing revenue system that leaves Alaska’s schools in sometimes literal decay. In this session, the Senate has put forward language to do so in two different bills, before suddenly passing it on March 25 as a last-minute amendment to an unrelated third bill.
Repealing personal income tax also eliminated income taxes for privately owned companies—known as “S-corporations” under US tax law. In contrast to “C-corporations,” whose ownership is traded in public markets, S-corporations are taxed via the personal income of their owners, which Alaska doesn’t do. This oversight contributes to the decline in oil revenue that Alaska has traditionally relied on, especially as privately owned Hilcorp has taken over fields in Cook Inlet and on the North Slope from BP and other publicly owned corporations that paid income tax.
Senate Bill 195 – originally a decision on selling the state’s royalty-in-kind oil to the Marathon refinery in Nikiski – suddenly became a tax bill when Senator Forest Dunbar (D-Anchorage) introduced an amendment on the House floor to add language from another bill, putting a 5% private oil and gas corporations with more than $1 million, with brackets ramping up to a 9.5% tax on private drillers making more than $5 million a year. This language originated from Senate Bill 227, another bill that the Senate had gutted and retrofitted into a S-corp tax bill. Gov. Mike Dunleavy introduced Senate Bill 227 as a bad fiscal plan that originally called for eliminating all corporate income tax after 2031. The Senate Resources Committee removed the Governor’s language and substituted an oil and gas S-corp tax similar to SB 92’s – an S-corp taxation bill it had passed last year, which has spent 2026 waiting on a Senate floor vote.
The Senate voted for Dunbar’s amendment 11-8, with Senator Ralph Stedman (R-Sitka) and Sen. Jesse Bjorkman (R-Nikiski) being the only members of the bipartisan majority to oppose it. Stedman voted to pass the bill once it was amended, though Bjorkman remained opposed. He said the amendment “is worthy of additional consideration and conversation,” but should be subject to additional study and modeling for its effects on S-corp drillers other than Hilcorp.
Notably, Senator Matt Claman (D-West Anchorage), a member of the bipartisan majority who has previously opposed S-corp taxation bills, voted both for the amendment and for passing the bill. Claman’s constituents and other Alaskans who’ve pushed him to reconsider his position can congratulate themselves on having a real and important effect on the decisions of elected leaders.
But the drama is not done yet. Sen. Hoffman (D-Southwest Alaska), who voted for both the bill and amendment and gave a speech supporting it, called for a reconsideration – meaning the Senate will vote on the bill again, likely at the end of this week or the beginning of next. A senator I spoke with afterward said it was because of an issue with the underlying bill to which the S-corp amendment had been attached, having to do with the Marathon refinery’s ability to take additional oil.
Before reconsideration, legislators should hear from their constituents about the need for this basic fix. Closing one tax loophole is not the comprehensive fiscal plan that Alaska needs. One version of the bill is estimated to bring in $100 million per year – significant, though not enough to balance the budget. Yet as long as the loophole remains open, our legislators can’t claim to have done even the minimum to sustain state services.
If the S-corp taxation language passes the Senate on reconsideration, members of the House will need to hear this message just as loudly. Then there’s the potential of the Governor’s veto. But closing this costly loophole is vital, whether under this administration or the next. The old saying is that law is like sausage – if you want to appreciate it, don’t watch it being made. But the messy sausage-making of closing this tax loophole hasn’t killed our appetite for budget policy that can support Alaskans with sustainable state services.