Claman's opposition to closing Hilcorp loophole could be critical

When the Senate Resources Committee advanced a bill to close the Hilcorp loophole, Anchorage Sen. Matt Claman said he had “no recommendation” on the bill, which is tantamount to saying he wants the loophole to remain.

Claman’s opposition could be crucial in blocking the bill. I have asked him to explain, but he has not responded so far. Alaska news organizations have yet to examine his opposition.

Closing the Hilcorp loophole, an idea that is understandably unpopular with billionaire Hilcorp Owner Jeff Hildebrand of Texas and his employees, would be a small step toward a sensible Alaska fiscal plan.

But it would be important because any progress would demonstrate to Alaskans that the Legislature is at least trying to preserve education, other state services and the Permanent Fund Dividend.

Hildebrand is worth $7.3 billion, according to the latest rankings of the ultrarich by Forbes, which puts him in 434th place worldwide.

Hildebrand’s money gives him inordinate political power in Alaska.

A year ago, Claman opposed a proposal to close the loophole in a resources committee vote, saying it was wrong to do so without extending the tax to all entities in a similar situation.

The oil income tax in question is one paid by ConocoPhillips, ExxonMobil and other large oil operators in Alaska. They are “C” corporations.

“We’re trying to close this loophole so that companies doing the same work or making similar profits are not treated differently because of the way they’re incorporated, which is fundamentally unfair,” Sen. Bill Wielechowski said in a hearing on May 3, 2024.

Republicans Click Bishop and James Kaufman and Democrat Claman objected to the idea.

“And I too am going to be a no vote on this amendment,” Claman said a year ago.

“Where I’m more troubled is that as an equity matter, if we should be taking away the S corp’s tax exemption. I tend to think we should be doing it for all S corps, and not just one. I understand we’re talking about one company that has a lot more tax liability, but we don’t have, our C corporations don’t have minimums. All the C corps pay corporate taxes and that we should be doing that with S corps. I think we should be looking at all S corps,” Claman said.

Claman’s claims are a distraction. The Legislature should address the bigger question of how many well-to-do Alaska businesses should be taxed.

But the real issue right now is that only one of the major North Slope companies is exempt from paying the oil corporate income tax. This bill would change that.

The state failed to enact this change when Hilcorp bought BP’s Alaska holdings. That failure by Dunleavy and past editions of the Alaska Legislature does not justify compounding the problem by refusing to act now.

As former Gov. Frank Murkowski says, this is a simple matter of fairness: “Hilcorp is an S corporation whereas the other primary producers are C corporations, and as such the latter pay corporate income taxes. This flaw must be corrected. Hilcorp should pay its fair share.”

Even Gov. Mike Dunleavy supported closing the Hilcorp loophole in 2021. His office now denies this, but Revenue Commissioner Lucinda Mahoney testified that Dunleavy would support the change if the Legislature led the way.

The 2025 attempt to close the loophole advanced from the resources committee to the finance committee on a 4-3 vote. The oil income tax would be extended to companies that have more than $5 million in taxable income.

Sens. Cathy Giessel, Forrest Dunbar, Bill Wielechowski, Scott Kawasaki and Matt Claman voted to move the bill out of the resources committee. Giessel, Dunbar and Wielechowski supported passage of the bill. Kawasaki said it should be amended and Claman said he had no recommendation.

Senate Bill 92 is up for a public hearing Tuesday at 9 a.m. in the Senate Finance Committee.

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Hilcorp owner Jeff Hildebrand of Texas is a dedicated polo player who owns and competes in a team now entered in the Triple Crown of Polo this week in Florida.