When cost is incurred

# (a)

Unless otherwise provided under (c) of this section, for purposes of AS 43.55.165 and this chapter, a cost incurred by a producer or explorer is incurred during the calendar year

# (1)

for which the operator of a lease or property bills the producer for the cost, if

(A) the cost is a cost of exploring for, developing, or producing oil or gas deposits located within the lease or property;

(B) the operator operates the lease or property on behalf of the producer; and

(C) at least one producer, other than the operator, on behalf of which the operator operates the lease or property has a material interest in the lease or property;

# (2)

in which the cost is recorded on the producer's or explorer's financial accounting books or federal income tax books as incurred or, in the case of a cost that is treated as a capitalized expenditure under 26 U.S.C. (Internal Revenue Code), as amended, regardless of elections made under 26 U.S.C. 263(c) (Internal Revenue Code), as amended, as placed in the producer's or explorer's work-in-process, construction-in-process, or similar account, if

(A) a material portion of the cost is not billed to at least one non-operator producer by the operator of a lease or property with respect to whose oil or gas exploration, development, or production the cost is incurred; and

(B) the producer's or explorer's fiscal year for financial accounting purposes or federal income tax purposes, as applicable, is the calendar year;

# (3)

in which the cost is recorded on the producer's or explorer's financial accounting books as incurred after those books have been restated on a calendar year basis using a method approved or prescribed by the department, if the circumstances are other than those described in

(1) or (2) of this subsection.

# (b)

If a cost is subject to (a)(2) of this section, the producer or explorer may elect to rely on either its financial accounting books or its federal income tax books, but that election once made may not be changed without the department's approval. An election under this subsection

# (1)

is solely for the purpose of determining during which calendar year a cost is incurred;
and

# (2)

does not affect the categorization of a lease expenditure as a qualified capital expenditure or as not a qualified capital expenditure under AS 43.55.023(k).

# (c)

For purposes of AS 43.55.023(i), AS 43.55.165, and this chapter, whether a cost incurred by a producer or explorer was incurred before April 1, 2001, or after March 31, 2001, before April 1, 2006, or after March 31, 2006, before July 1, 2007, or after June 30, 2007, before July 1, 2008, or after June 30, 2008, before July 1, 2016, or after June 30, 2016, and before July 1, 2017, or after June 30, 2017 is determined by the month

# (1)

for which the operator of a lease or property contemporaneously billed the producer for the cost, if

(A) the cost is a cost of exploring for, developing, or producing oil or gas deposits located within the lease or property;

(B) the operator operated the lease or property on behalf of the producer; and

(C) at least one producer, other than the operator, on behalf of which the operator operated the lease or property had a material interest in the lease or property;

# (2)

in which the cost was contemporaneously recorded on the producer's or explorer's financial accounting books as incurred or, in the case of a cost that is treated as a capitalized expenditure under 26 U.S.C. (Internal Revenue Code), as amended, regardless of elections made under 26 U.S.C. 263(c) (Internal Revenue Code), as amended, as placed in the producer's or explorer's work-in-process, construction-in-process, or similar account, if the circumstances were other than those described in (1) of this subsection.
(Eff. 5/3/2007, Register 182; am 10/21/2009, Register 192; am 12/6/2018, Register 228) Statutory Authority:
Authority:
AS 43.05.080 AS 43.55.110 Sec. 72, ch. 1,
AS 43.55.023 AS 43.55.165 SSSLA 2007
AS 43.55.028