Alaska is currently home to 35 communities that have been labeled as Qualified Opportunity Zones. This designation was created as an opportunistic way to bolster America’s underserved communities. U.S. census tracts identify these communities, which also extend to U.S. territories. Alaska features opportunity zones in the following locations:
There were 60 total census tracts were recognized in Alaska as being low-income communities. The state then nominated 25 of those tracts as Opportunity Zones. Alaska considered certain criteria for these tracts and they include economic hardship, project feasibility and community support. There was also consideration given to geographic representation and aligning with already existing initiatives.
The whole purpose for the creation of Opportunity Zones is to assist areas in economic distress by facilitating private investments. Each area is home to a large percentage of Alaskans who are categorized in the low-income bracket. Capital gains tax incentives fuel this endeavor although the zones mainly receive qualification becomes of the income stipulations.
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Alaska Tax Situation
Alaska is one of the few states in the country that does not collect a state tax on personal income. There is also no sales tax within the state of Alaska, although local taxes may apply according to each community. There is also a uniqueness involved in Alaska in regard to property taxes, which are not levied in all areas. There are currently only 24 municipalities within the state that have property taxes. The property taxes in those areas remain low and average $1,435 per year. There are even property tax special considerations for senior citizens.
Alaska is the largest state in terms of land mass, although there are some very sparsely populated areas, which has impacted the tax situation, particularly property taxes. The oil industry has played a primary role in the tax situation and that applies to the lack of personal income tax. There have also been discussions about changing that rule, depending upon the price and demand for oil in the coming future.
Industries with Tax Breaks
There are a number of different industries that are eligible for tax breaks in the state of Alaska. The state government features numerous incentive programs while local governments have a variety of options as well. Here is a look at some of the top industries that benefit from Alaska tax breaks.
- Oil Industry – This sector is highly supported in Alaska when it comes to tax breaks and leads all industries. The tax credits apply to a variety of tasks that includes well drilling, adding pipes and much more. The economy of Alaska thrives on the oil industry, which has prompted some generous tax breaks.
- Fisheries – The state of Alaska is known for its fishing industry and that has led to tax breaks across the board. Commercial fishing plays a big role in the Alaskan economy, thus opening up an array of tax breaks.
- Mining – Alaska is rich in minerals and the mining industry is filled with companies who have traditionally paid off much less in taxes.
- Alaska Native Corporations – These businesses get significant tax breaks and it applies to a variety of different industries.
There are other industries operating well within the state of Alaska, although the oil industry typically dictates the ebb and flow of the economic. For example, a 2017 down year in the oil industry translated into an economic downturn for the entire state. Alaska is also home to eight corporate income tax brackets, while the top bracket has the highest rates in the country. These discrepancies are evident of a lack of well-rounded industries supporting the state.
Alaska State Financial Facts
The cost of living is mostly determined by the type of housing in Alaska as there are some remote areas where cost of living is minimal.
- Median household income – $74,444
- Total household investments
Median value of Alaska home – $279,000
6.2 percent of jobs in Alaska are in high-wage sectors ($200K or more)
11.1% poverty rate
Current economic condition of Alaska
The state of Alaska has just come out of a recession that was influenced greatly by a dip in oil prices. The largest segment of Alaska’s economy is government. At the current time, federal spending supports more than 30% of the total jobs in the state. Tourism is trending downward because increasing numbers of tourists are entering the state via cruises.
In 2018, Alaska has been considered one of the worst states for businesses. That stems from the decrease in oil prices, which began in 2014 and that has led to one of the worst financial crises in state history. Since almost 85% of the state revenue comes from oil and gas, there was an expected decline that was felt throughout the state.
The housing situation in Alaska has also been impacted by the recession, with foreclosures spiking as much as 170 percent. Prices for basic food items in the state capital of Juneau have increased dramatically making Alaska one of the most expensive states to reside in among all 50 states. Juneau has also become the state’s most expensive city.
Alaska has taken measures to help its economy by using its wealth obtained from the oil industry to help with the state budget. That means taking money from its Alaska Permanent Fund. The economic impact has also hit the job market as the 72 percent unemployment rate marks the highest in the nation in 2018.
Primary Industries in Alaska
There is a lot of diversity when it comes to all the industries that are thriving in Alaska. The economy is larger than that of many small counties, which means it is rich with industry. However, there are a handful of industries that lead the way in Alaska and they are as follows:
- Oil and Gas
Opportunity Zones in Alaska
Alaska is the largest state, although a significant portion is undeveloped. Because of the harsh conditions, there remains only a handful of what could be considered major cities. The annual average wage per person in Alaska is higher than it is in any other state. However, there are a significant number of opportunity zones and they are as follows:
- Aleutians East
- Ship Creek
- Aleutians West & St. Paul Island
- Hoonah & Angoon
- West Meadow Lakes
- Upper Kuskokwim
- Haines Borough
- Muldoon (2 Zones)
- Midtown Spenard
- Northwest Arctic Borough
- Midtown Anchorage
- Downtown Fairbanks (2 Zones)
- Fort Wainwright/Chena
- Bering Strait/Seward Peninsula & St. Lawrence
- Tanana Flats
- North Slope Borough
- Prince of Wales
The unique makeup of Alaska along with its very different economy has truly made it different from all other states. Its remote location has forced residents to rely on a vast amount of imported products and that often results in high retail prices. This state is also heavily reliant upon the oil industry and economic downturns are unavoidable when oil prices drop. That kind of one-dimensional economy has provided a volatile environment in which hardship could run rampant through the state. The recent recession is a prime example of how dependent upon oil the Alaskan economy has become.