The formula is difficult to characterize in a simple way because it is not only non-linear but is three dimensional since there is a unique ELF for every combination of field size and well productivity. The ELF was originally designed in 1977 to differentiate the tax rate on the new supergiant Prudhoe Bay oilfield and the old declining fields in the Cook Inlet. Subsequent changes in 1981 and 1989 focused on keeping taxes higher on Prudhoe Bay while lowering taxes on the new and undeveloped smaller fields on the North Slope. Corporate Income Tax . The State of Alaska receives royalties from the production of oil and gas on State owned lands.
Some production is subject to a net profit share in addition to a fixed royalty.
There is no general differentiation for royalty purposes between onshore and offshore developments. Production Tax Surcharge for Hazardous Spill . All State taxes and royalties are deductible for Federal Income Tax purposes. The U.S. Federal Corporate Income Tax is assessed at a maximum marginal rate of 35 percent.