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HOUSE BILL NO. 156
IN THE LEGISLATURE OF THE STATE OF ALASKA
THIRTY-THIRD LEGISLATURE - FIRST SESSION
BY REPRESENTATIVES GALVIN, Groh
Introduced: 4/10/23
Referred: House Special Committee on Ways and Means, Finance
A BILL
FOR AN ACT ENTITLED
"An Act relating to the taxation of income of individuals, partners, shareholders in S 1
corporations, trusts, and estates; repealing tax credits applied against the tax on 2
individuals under the Alaska Net Income Tax Act; and providing for an effective date." 3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 4
* Section 1. AS 43.05.045(a) is amended to read: 5
(a) Except as provided in AS 43.22.075(h), or unless [UNLESS] an
6
exemption is granted under (b) of this section, a taxpayer required to submit a return 7
or report for a tax levied under this title or for any other tax administered by the 8
department shall submit the return or report electronically in a format prescribed by 9
the department. Failure to comply with this section may result in a civil penalty under 10
AS 43.05.220(f). If a law under this title requires a report or return or a portion of a 11
report or return to be in writing, an electronically filed report or return satisfies this 12
section. A taxpayer shall submit attachments to a report or return required under this 13
title electronically. 14 33-LS0699\A
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* Sec. 2. AS 43 is amended by adding a new chapter to read: 1
Chapter 22. Income Tax. 2
Sec. 43.22.010. Income tax on individuals. (a) Each calendar year or fraction 3
of a calendar year, an income tax is imposed on the income of a 4
(1) resident individual, trust, or estate; 5
(2) nonresident individual, trust, or estate that is derived from or 6
connected with a source in the state. 7
(b) The tax under this section for an individual or individuals filing jointly is 8
two percent of taxable income over $200,000. 9
(c) Two resident individuals who file a joint federal income tax return may 10
determine the tax imposed by this chapter jointly under this section. 11
(d) Two individuals who file a joint federal income tax return both or one of 12
whom is not a resident may elect to determine the tax imposed by this chapter either 13
(1) individually; or 14
(2) jointly as if both individuals were residents; the income of the 15
individuals filing jointly under this paragraph is not subject to the calculation under 16
AS 43.22.015. 17
(e) In addition to the tax under (a) - (d) of this section, each individual who 18
has wages, net earnings from self-employment, or combined wages and net earnings 19
from self-employment in the state shall pay an annual tax of $20. In this subsection, 20
"net earnings from self-employment" has the meaning given in 26 U.S.C. 1402. 21
Sec. 43.22.015. Calculation of tax on a nonresident individual. (a) Except as 22
otherwise provided in (b) of this section, the tax on a nonresident individual is the 23
product of 24
(1) the tax determined under AS 43.22.010(b) on the nonresident 25
individual's taxable income computed as if the nonresident individual were a resident 26
individual but taking a deduction under AS 43.22.030(b)(2); and 27
(2) a fraction, the 28
(A) numerator of which is the nonresident individual's income 29
taxable under AS 43.22.045; and 30
(B) denominator of which is the nonresident individual's 31 33-LS0699\A
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taxable income computed as if the nonresident individual were a resident 1
individual. 2
(b) If a nonresident individual's taxable income computed under (a)(2)(B) of 3
this section is less than the nonresident individual's income taxable under (a)(2)(A) of 4
this section, the tax imposed by this chapter is on the nonresident individual's taxable 5
income as computed under AS 43.22.045. 6
Sec. 43.22.020. Tax on trusts and estates. (a) A tax is imposed for each 7
taxable year or portion of a taxable year on the taxable income of a resident or 8
nonresident trust or estate. The tax under this section for a trust or estate is $20 plus 9
two percent of taxable income over $200,000. 10
(b) In this section, the taxable income of a nonresident trust or estate is the 11
income of the trust or estate that is derived from or connected with a source in the 12
state. 13
(c) A trust is not subject to tax under this chapter if 14
(1) all of the trustees of the trust are nonresidents; 15
(2) the entire corpus of the trust, including real, tangible, and 16
intangible property, is located outside the state; and 17
(3) no income or gains of the trust are derived from or connected with 18
a source in the state. 19
(d) For purposes of (c)(1) of this section, a trustee that is a nonresident 20
banking corporation at the time the banking corporation becomes a trustee is a 21
nonresident trustee even if the banking corporation later becomes a resident trustee 22
because it is acquired by or becomes an office or branch of a resident trustee. 23
(e) A trust that is exempt from federal income tax because of its purpose or 24
activities is not subject to tax under this chapter. 25
(f) A special needs trust or other trust established to provide solely for the 26
housing, living expenses, or medical care of a disabled beneficiary is not subject to tax 27
under this chapter. In this subsection, 28
(1) "disabled beneficiary" means an individual who has 29
(A) a physical or mental impairment that substantially limits 30
one or more major life activities; or 31 33-LS0699\A
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(B) a condition that may require the use of a prosthesis, special 1
equipment for mobility, or a service animal; 2
(2) "special needs trust" has the meaning given in AS 13.36.215(b). 3
Sec. 43.22.025. Credit for income taxes imposed by other jurisdictions. (a) 4
A resident individual, trust, or estate or part-year resident individual, trust, or estate is 5
allowed a credit against the tax due under this chapter for an income tax that was 6
imposed on the resident or part-year resident for the taxable year by another state or 7
the political subdivision of another state on income derived from or connected with 8
that state or political subdivision. 9
(b) A credit allowed under (a) of this section 10
(1) for a resident individual, trust, or estate may not exceed the 11
individual's, trust's, or estate's tax due under this chapter before credits are applied, 12
multiplied by a fraction, the numerator of which is the portion of the individual's, 13
trust's, or estate's taxable income that is derived from or connected with a source in 14
another state or the political subdivision of another state and the denominator of which 15
is the resident individual's, trust's, or estate's taxable income; 16
(2) for a part-year resident individual, trust, or estate may not exceed 17
the individual's, trust's, or estate's tax due for the period of state residency before 18
credits are applied, multiplied by a fraction, the numerator of which is the individual's, 19
trust's, or estate's taxable income derived from or connected with a source in another 20
state or the political subdivision of another state during the period of state residency 21
and the denominator of which is the part-year resident individual's, trust's, or estate's 22
taxable income during the period of state residency; 23
(3) may not reduce the tax due under this chapter to less than the tax 24
that would have been due if the income derived from or connected with a source in 25
another state or the political subdivision of another state and subject to taxation by the 26
other state or political subdivision had been excluded from the resident or part-year 27
resident individual's, trust's, or estate's taxable income during the calculation of tax 28
under this chapter before the application of credits. 29
(c) If the tax administration of another state or a political subdivision of 30
another state determines that a taxpayer has overpaid tax, affecting the computation of 31 33-LS0699\A
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the credit allowed under this section for any taxable year, the taxpayer shall file an 1
amended return with the department not later than 90 days after the final determination 2
by the state or political subdivision that the tax was overpaid. The department may 3
assess a taxpayer additional tax, proportional to the amount overpaid in the other state 4
or political subdivision. 5
(d) A taxpayer is not allowed a credit under this section for taxes paid to 6
another jurisdiction if the taxpayer claims a credit against the income tax imposed by 7
the other jurisdiction for the tax payable under this chapter. 8
(e) Income tax imposed on a partner or the shareholder of an S corporation on 9
the income of the partnership or S corporation, including tax paid by the partnership or 10
S corporation to satisfy the tax liability of the partner or shareholder, may be included 11
in the calculation of a credit under this section. Tax imposed on the partnership or S 12
corporation that is the direct liability of the partnership or S corporation and not that of 13
the partner or shareholder may not be included in the calculation of a credit under this 14
section. 15
Sec. 43.22.030. Taxable income; general rule. (a) In this chapter, taxable 16
income is the taxpayer's federal adjusted gross income for the taxable year 17
(1) plus, if not already included in federal adjusted gross income, 18
(A) interest on obligations of another state, a political 19
subdivision of another state, the public instrumentality of another state, or the 20
local authority of another state; 21
(B) a loss on the sale or exchange of an obligation issued by or 22
on behalf of 23
(i) the state; 24
(ii) a municipality of the state; or 25
(iii) a public instrumentality, public authority, or public 26
corporation created under state law; 27
(C) a loss from the sale or exchange of shares in a unit 28
investment trust if the loss is attributable to an obligation issued by or on 29
behalf of 30
(i) the state; 31 33-LS0699\A
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(ii) a municipality of the state; or 1
(iii) a public instrumentality, public authority, or public 2
corporation created under state law; 3
(D) interest or dividends on obligations or securities issued by 4
the United States, or an authority, commission, or instrumentality of the United 5
States, that the Internal Revenue Code exempts from federal income tax; 6
(E) income taxes under this chapter; 7
(F) a gain realized but not recognized under 26 U.S.C. 1031 8
(Internal Revenue Code); 9
(G) a deduction allowed in the determination of federal 10
adjusted gross income that is directly or indirectly related to income that is not 11
taxable under this chapter; and 12
(H) income of an incomplete gift nongrantor trust to which a 13
taxpayer transferred property, less deductions of the trust, if 14
(i) the income and deductions of the trust would be 15
taken into account in computing the taxpayer's federal taxable income 16
if the trust in its entirety was treated as a grantor trust under the Internal 17
Revenue Code; 18
(ii) the trust is a resident trust; 19
(iii) the trust does not qualify as a grantor trust under 26 20
U.S.C. 671 - 679 (Internal Revenue Code); and 21
(iv) the grantor's transfer of assets to the trust is treated 22
as an incomplete gift under 26 U.S.C. 2511 (Internal Revenue Code); 23
(2) minus, if included in federal adjusted gross income, 24
(A) interest income or a dividend from an obligation that is 25
exempt from taxation by a state under federal law; 26
(B) a refund or credit for the overpayment of an income tax; 27
(C) an ordinary and necessary expense, including an interest 28
expense, paid or incurred during the taxable year, that is directly or indirectly 29
related to income exempt under the Internal Revenue Code but taxable by the 30
state; 31 33-LS0699\A
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(D) a gain recognized under 26 U.S.C. 1031 (Internal Revenue 1
Code) that was included in federal adjusted gross income under (1) of this 2
subsection; 3
(E) income exempt under 4 U.S.C. 114; 4
(F) compensation prohibited from state taxation by 50 U.S.C. 5
3901 - 4043 (Servicemembers Civil Relief Act); 6
(G) a gain from the sale or exchange of an obligation issued by 7
or on behalf of 8
(i) the state; 9
(ii) a municipality of the state; or 10
(iii) a public instrumentality, public authority, or public 11
corporation created under state law; 12
(H) a permanent fund dividend received by the taxpayer or the 13
taxpayer's dependent under AS 43.23. 14
(b) In addition to the adjustments made to taxable income under (a) of this 15
section, a taxpayer may receive a standard deduction. Subject to adjustment under (d) 16
of this section, the deduction under this subsection for 17
(1) an individual resident taxpayer is $12,950; 18
(2) an individual resident who files federal income taxes as a head of 19
household is $19,400; 20
(3) two resident taxpayers filing jointly is $25,900; 21
(4) an individual nonresident is the product of $12,950 and a fraction, 22
the numerator of which is the nonresident individual's income taxable under 23
AS 43.22.045, computed without the deduction under this subsection, and the 24
denominator of which is the nonresident individual's taxable income computed as if 25
the nonresident individual were a resident individual and without the deduction under 26
this subsection; the deduction under this paragraph may not exceed $12,950 for each 27
exemption claimed; 28
(5) an individual nonresident who files federal income taxes as a head 29
of household is the product of $19,400 and a fraction, the numerator of which is the 30
nonresident individual's income taxable under AS 43.22.045, computed without the 31 33-LS0699\A
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deduction under this subsection, and the denominator of which is the nonresident 1
individual's taxable income computed as if the nonresident individual were a resident 2
individual and without the deduction under this subsection; the deduction under this 3
paragraph may not exceed $19,400 for each exemption claimed; 4
(6) two nonresident individuals filing jointly is the product of $25,900 5
and a fraction, the numerator of which is the nonresident individuals' income taxable 6
under AS 43.22.045, computed without the deduction under this subsection, and the 7
denominator of which is the nonresident individuals' taxable income computed as if 8
the nonresident individuals were resident individuals and without the deduction under 9
this subsection; the deduction under this paragraph may not exceed $25,900 for each 10
exemption claimed. 11
(c) The deduction under (b) of this section may not 12
(1) be claimed by a trust; 13
(2) reduce a taxpayer's tax liability under this chapter to below zero. 14
(d) Each year, the department shall adjust the amounts of the standard 15
deduction under (b) of this section for inflation. The adjustment for inflation is equal 16
to the adjustment for inflation calculated for the standard deduction against the federal 17
income tax as set out in 26 U.S.C. 63. 18
(e) When calculating taxable income, a taxpayer 19
(1) may not carry back a net operating loss under 26 U.S.C. 20
172(b)(1)(A)(i) (Internal Revenue Code); 21
(2) may carry over a net operating loss under 26 U.S.C. 22
172(b)(1)(A)(ii) (Internal Revenue Code), except that a loss may not be carried over 23
for more than five years; for a taxpayer subject to AS 43.19 (Multistate Tax Compact), 24
the amount of a net operating loss allowed to be carried over is limited to the amount 25
apportioned to the state in the taxable year in which the loss was generated under 26
AS 43.19 (Multistate Tax Compact); 27
(3) shall include the modifications required by AS 43.20.144(b)(2), 28
concerning intangible drilling and development costs, AS 43.20.144(b)(3), concerning 29
percentage depletion, and AS 43.20.144(b)(4), concerning depreciation. 30
Sec. 43.22.035. Taxable income from partnerships and S corporations. (a) 31 33-LS0699\A
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A partner or shareholder shall make an adjustment described in AS 43.22.030 to 1
income or a gain, loss, or deduction from a partnership or S corporation in proportion 2
to a partner's distributive share of a partnership or a shareholder's pro rata share of an 3
S corporation. If a partner's distributive share or a shareholder's pro rata share of an 4
adjustment is not required to be accounted for separately for federal income tax 5
purposes, the partner's or shareholder's share of the adjustment must be determined in 6
proportion to the partner's or shareholder's share of partnership or S corporation 7
income or losses for federal income tax purposes. 8
(b) In determining taxable income, a partner or shareholder shall treat income 9
or a gain, loss, or deduction from a partnership or S corporation as if it has the same 10
character as it does for federal income tax purposes. If income or a gain, loss, or 11
deduction from a partnership or S corporation is not accounted for separately for 12
federal income tax purposes, a partner or shareholder shall treat the income, gain, loss, 13
or deduction as if it were realized directly from the source from which it was realized 14
by the partnership or S corporation or incurred in the same manner it was incurred by 15
the partnership or S corporation. 16
(c) If the principal purpose of a special allocation of partnership income or a 17
gain, loss, or deduction is the evasion of tax under this chapter, the partner's 18
distributive share is determined as if the partnership agreement did not have the 19
special allocation. In this subsection, "special allocation" means an allocation of the 20
distributive share of partnership income or a gain, loss, or deduction made under the 21
partnership agreement to a partner in a proportion different than the partner's 22
partnership interest. 23
Sec. 43.22.040. Taxable income of an estate, trust, or beneficiary. (a) The 24
taxable income of an estate or trust is determined as if the estate or trust were an 25
individual and is subject to adjustments under AS 43.22.030 and reduction under 26 26
U.S.C. 661 (Internal Revenue Code). The department may establish in regulation the 27
method for determining the taxable income of an estate or trust, including the manner 28
in which the adjustments under AS 43.22.030 will be allocated between the estate's or 29
trust's taxable share and a beneficiary's distributive share. U
nless otherwise provided 30
by the department in regulation, an allocation must be made in proportion to the 31 33-LS0699\A
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estate's or trust's taxable share or the beneficiary's distributive share of the trust or 1
estate for federal income tax purposes. 2
(b) If the principal purpose of a provision of an instrument directing the 3
distribution of income or a gain, loss, or deduction of an estate or trust is the evasion 4
of tax under this chapter, the taxable income of the estate, trust, or beneficiary will be 5
determined as if the instrument did not contain the provision. 6
Sec. 43.22.045. Nonresident individuals; income derived from or 7
connected with a source in the state. (a) The taxable income of a nonresident 8
individual is the nonresident individual's income derived from or connected with a 9
source in the state, as adjusted under AS 43.22.030. The taxable income of a 10
nonresident individual includes 11
(1) a partner's distributive share of income or a gain, loss, or deduction 12
of the partnership, as determined under AS 43.22.050; 13
(2) a shareholder's pro rata share of an S corporation's income or loss, 14
increased by the reductions for taxes described in 26 U.S.C. 1366(f)(2) and (3) 15
(Internal Revenue Code), as determined under AS 43.22.050; 16
(3) income or loss of a business conducted by a nonresident individual, 17
nonresident estate, or nonresident trust, other than income or loss from a partnership or 18
S corporation, as determined under AS 43.22.050; 19
(4) estate or trust income or a gain, loss, or deduction of the estate or 20
trust, as determined under AS 43.22.055; 21
(5) income or a gain, loss, or deduction from the sale or assignment of 22
a beneficial interest, or other disposition of an interest in tangible personal property in 23
the state, or rental income or loss from the use of tangible personal property in the 24
state; if the income, gain, loss, or deduction is from tangible personal property used or 25
employed both in and outside the state, the amount included in taxable income is 26
determined by multiplying the income, gain, loss, or deduction by a fraction, the 27
numerator of which is the number of days during which the property was used or 28
employed to earn, accrue, or incur the income, gain, loss, or deduction in the state and 29
the denominator of which is the total number of days during the taxable year that the 30
property was used or employed to earn, accrue, or incur the income, gain, loss, or 31 33-LS0699\A
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deduction; 1
(6) income or a gain, loss, or deduction from the sale, assignment, or 2
other disposition of an interest in real property in the state, or rental income or loss 3
from the use of real property in the state, including the percentage of ordinary and 4
capital gains received from a real estate investment trust, as defined in 26 U.S.C. 856 5
(Internal Revenue Code), that is attributable to rents from or sale or other disposition 6
of real property located in the state; in this paragraph, income or a gain, loss, or 7
deduction from the sale, assignment of a beneficial interest, or other disposition of real 8
property in the state includes income or a gain, loss, or deduction derived from the sale 9
or assignment of a beneficial interest in a partnership, S corporation, nonpublicly 10
traded C corporation with 100 or fewer shareholders, estate, or trust, if the entity owns 11
real property in the state that has a fair market value equal to or exceeding 50 percent 12
of all assets of the entity on the date of sale, assignment, or other disposition of the 13
taxpayer's interest in the entity; for purposes of this paragraph, 14
(A) only assets owned for at least two years before the date of 15
the sale, assignment, or other disposition of an interest in the entity shall be 16
used to determine the fair market value of all of the assets of the entity on the 17
date of sale, assignment, or other disposition; and 18
(B) the amount of income or a gain, loss, or deduction derived 19
from or connected with a source in the state from the sale, assignment, or other 20
disposition of an interest in an entity that is subject to the provisions of this 21
paragraph is the amount recognized for federal income tax purposes related to 22
the sale, assignment, or disposition, multiplied by a fraction, the numerator of 23
which is the fair market value of the real property located in the state on the 24
date of sale, assignment, or disposition and the denominator of which is the fair 25
market value of all of the assets of the entity on the date of the sale, 26
assignment, or disposition; 27
(7) compensation, salary, or wages for personal services rendered or 28
performed in the state that are derived from a business, trade, profession, occupation, 29
or employment carried on in the state; for purposes of this paragraph, personal 30
services
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(A) except as otherwise provided in (B) of this paragraph, 1
include services performed 2
(i) in connection with presenting or receiving 3
employment-related training or education in the state; 4
(ii) in connection with a site inspection, review, 5
analysis, or management or any other supervision of a facility located 6
in the state; 7
(iii) in connection with research and development at a 8
facility located in the state or in connection with the installation of new 9
or upgraded equipment or systems at that facility; 10
(iv) as part of a project team working on the attraction 11
or implementation of new investment in a facility located or planned to 12
be located in the state; 13
(v) in connection with fishing, farming, or agriculture in 14
the state; or 15
(vi) for the federal government; 16
(B) do not include services that are casual, isolated, 17
inconsequential, or ancillary to out-of-state services; 18
(8) income derived from a business, trade, profession, occupation, or 19
employment carried on in the state, including income 20
(A) received under a covenant not to compete, a severance 21
agreement, a termination agreement, or unemployment compensation 22
insurance attributable to a business, trade, profession, occupation, or 23
employment previously carried on in the state, regardless of when received; 24
(B) derived from a business, trade, profession, occupation, or 25
employment carried on in the state by an individual who maintains or operates 26
an office, shop, store, warehouse, boat, plane, factory, agency, or other place 27
where the individual's affairs are systematically and regularly carried on, 28
regardless of other transactions carried on outside the state; this subparagraph 29
does not include income from an activity of an individual whose presence in 30
the state is casual, isolated, inconsequential, or ancillary to out-of-state 31 33-LS0699\A
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activities, except that, if a business, trade, profession, occupation, or 1
employment is carried on partly in and partly outside the state, other than for 2
the rendering of purely personal services by the individual, the taxable income 3
derived from or connected with a source in the state is determined under 4
AS 43.19 (Multistate Tax Compact) and AS 43.22.030; 5
(9) income from the management or investment function or activities 6
conducted in the state from intangible property; 7
(10) dividends, interest, payments received under an annuity, gains, or 8
other intangible income received from, or attributable to, intangible personal property, 9
including stock, bonds, notes, bank deposits, or annuities, if the intangible personal 10
property is employed in a business, trade, profession, occupation, or employment 11
carried on in the state; 12
(11) a gain derived from a statutory stock option, restricted stock, 13
nonstatutory stock option, or stock appreciation right by a nonresident individual who, 14
at the time the gain is received, performs services in the state for or is employed in the 15
state by the corporation granting the option, stock, or right, as determined in 16
regulations adopted by the department; 17
(12) income from nonqualified deferred compensation plans 18
attributable to services performed in the state, including compensation included in 19
federal gross income under 26 U.S.C. 457A (Internal Revenue Code); 20
(13) proceeds from a gambling activity conducted in the state or lottery 21
tickets purchased in the state, including payments received from a third party for the 22
transfer of the rights to future proceeds related to a gambling activity in the state or 23
lottery tickets purchased in the state; 24
(14) for an S corporation that terminates its taxable status in the state 25
during the tax year, income or a gain recognized on the receipt of payments from an 26
installment sale contract entered into at the time the S corporation was subject to tax in 27
the state, allocated in a manner consistent with the applicable methods and rules under 28
this chapter; 29
(15) royalties or other compensation received for the use of a patent, 30
copyright, secret process or formula, good will, mark, trade brand, franchise, or other 31 33-LS0699\A
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property having a taxable or business situs in the state; 1
(16) royalties or other compensation received for the use of a patent if 2
the patent is employed in production, fabrication, manufacturing, or other process in 3
the state; 4
(17) income or a gain from the disposition of an asset if the 5
acquisition, management, or disposition of the asset constitutes an integral part of the 6
nonresident individual's regular trade or business operation; 7
(18) income from the transmission, broadcast, distribution, or 8
dissemination of a service directly or indirectly attributable to the performance in the 9
state of an athlete, entertainer, singer, musician, dancer, comedian, magician, 10
performing artist, actor, actress, or similar person, including syndication fees. 11
(b) A deduction included in taxable income that results from a capital loss, 12
passive activity loss, or net operating loss must be based solely on income or a gain, 13
loss, or deduction derived from or connected with a source in the state. A nonresident 14
individual shall treat a deduction under this subsection in the same manner as the 15
corresponding federal deduction, unless the department requires otherwise in 16
regulation. 17
Sec. 43.22.050. Business conducted by a nonresident individual, trust, or 18
estate; income derived from or connected with a source in the state. (a) The 19
department shall adopt regulations governing the amount of income or the amount of a 20
gain, loss, or deduction from a business conducted by a nonresident individual, trust, 21
or estate that is derived from or connected with a source in the state for purposes of 22
determining taxable income. Regulations adopted under this subsection must be 23
consistent with AS 43.19 (Multistate Tax Compact) and AS 43.22.045 and include 24
adjustments under AS 43.22.030. 25
(b) The department shall adopt regulations governing the amount of income or 26
the amount of a gain, loss, or deduction that is derived from or connected with a 27
source in the state and is included in a nonresident 28
(1) partner's distributive share for purposes of taxation under this 29
chapter; 30
(2) shareholder's pro-rata share of an S corporation for purposes of
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taxation under this chapter. 1
(c) The department may by regulation require a taxpayer to allocate rather 2
than apportion income or a gain, loss, or deduction under this section. 3
Sec. 43.22.055. Nonresident trust, estate, or beneficiary; income derived 4
from or connected with a source in the state. (a) The department shall adopt 5
regulations governing whether income or a gain, loss, or deduction of a nonresident 6
estate or nonresident trust is included in taxable income derived from or connected 7
with a source in the state. Regulations adopted under this subsection must be 8
consistent with the remainder of this section and AS 43.22.045. 9
(b) A nonresident beneficiary shall include in taxable income derived from or 10
connected with a source in the state a distribution from an estate or trust as if the 11
nonresident beneficiary earned or incurred the income or a gain, loss, or deduction 12
attributable to the distribution directly from the source. For purposes of this 13
subsection, the department may establish one or more methods for a nonresident 14
beneficiary to determine whether income or a gain, loss, or deduction is attributable to 15
a distribution. The department shall consistently apply a method from year to year and 16
apply the same method to other nonresident beneficiaries of the same trust or estate. 17
Nothing in this subsection requires the department to give effect to a provision of an 18
instrument creating an estate or trust if the department reasonably believes that the 19
principal purpose of the provision is to evade the tax imposed under this chapter. 20
Sec. 43.22.060. Part-year resident individual, trust, or estate; residency 21
income; income derived from or connected with a source in the state. (a) Except as 22
otherwise provided in this section, the taxable income of a part-year resident 23
individual, trust, or estate is the sum of 24
(1) the taxable income of the part-year resident individual, trust, or 25
estate during the period of residency; and 26
(2) the taxable income derived from or connected with a source in the 27
state for the period of nonresidency of the individual, trust, or estate. 28
(b) The department shall adopt regulations to determine the ta
xable income of 29
a part-year resident taxpayer who is granted a statutory stock option, restricted stock, 30
nonstatutory stock option, or a stock appreciation right and who, during the grant 31 33-LS0699\A
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period, performs services in the state for, or is employed in the state by, the 1
corporation granting the option, stock, or right. 2
Sec. 43.22.065. Personal service corporations and S corporations formed 3
or used to evade income tax. (a) The department may allocate all income, 4
deductions, credits, exclusions, and other allowances between a personal service 5
corporation or S corporation and its employee-owners if the 6
(1) personal service corporation or S corporation performs 7
substantially all of its services for or on behalf of another corporation, partnership, or 8
other entity and the effect is the evasion of income tax; and 9
(2) allocation is necessary to reflect the source and amount of the 10
income, regardless of whether the corporation is otherwise taxable. 11
(b) For purposes of this section, evasion of income tax occurs when a personal 12
service corporation or S corporation is used to 13
(1) reduce the taxable income of a resident or the taxable income of a 14
nonresident derived from or connected with a source in the state; or 15
(2) secure the benefit of an expense, deduction, credit, exclusion, or 16
other allowance for any employee-owner that would not otherwise apply under this 17
chapter. 18
(c) The constructive ownership of stock rules under 26 U.S.C. 318 (Internal 19
Revenue Code) apply to this section, except that "5 percent" shall be substituted for 20
"50 percent" in 26 U.S.C. 318(a)(2)(C) (Internal Revenue Code). 21
(d) In this section, all persons specified in 26 U.S.C. 267(b) (Internal Revenue 22
Code) shall be treated as one entity. 23
(e) In this section, 24
(1) "employee-owner" means any employee who owns, on any day 25
during the taxable year, more than 10 percent of the outstanding stock of a personal 26
service corporation or S corporation; 27
(2) "personal service corporation" means a corporation whose principal 28
activity is the performance of personal services that are substantially performed by the 29
employee-owners of the corporation. 30
Sec. 43.22.070. Determination of taxable year and method of acc
ounting. 31 33-LS0699\A
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(a) For purposes of the tax imposed under this chapter, a taxpayer's 1
(1) taxable year is the same as the taxpayer's taxable year for federal 2
income tax purposes; and 3
(2) method of accounting is the same as the taxpayer's method of 4
accounting for federal income tax purposes. 5
(b) The department shall adopt regulations to determine the taxable income of 6
a taxpayer whose method of accounting changes during a taxable year or between 7
taxable years. 8
Sec. 43.22.075. Returns and payment of taxes. (a) A taxpayer shall file with 9
the department a return setting out 10
(1) the amount of tax due under this chapter; and 11
(2) other information necessary to carry out this chapter, as required by 12
the department in regulation. 13
(b) A person required to file a return under this chapter shall file the return on 14
a form or in a format prescribed by the department. The return is due to the department 15
at the same time and in the same manner, including extensions, as the taxpayer's 16
federal income tax return to the United States Internal Revenue Service. A return filed 17
under this chapter must be made under oath and on penalty of perjury. 18
(c) The total amount of tax imposed by this chapter is due and payable to the 19
department at the same time and in the same manner as the federal individual income 20
tax payable to the United States Internal Revenue Service. 21
(d) A taxpayer, upon request by the department, shall furnish to the 22
department a true and correct copy of a return that the taxpayer has filed with the 23
United States Internal Revenue Service. 24
(e) A taxpayer shall notify the department in writing of an alteration in, or 25
modification of, the taxpayer's federal income tax return and of a recomputation of tax 26
or determination of deficiency, whether with or without assessment. A full statement 27
of the facts must accompany the notice. A taxpayer shall file the notice not later than 28
60 days after the final determination of the alteration, modification, recomputation, or 29
deficiency and shall pay any additional tax due under this chapter at that time. In this 30
subsection, "final determination" means the time that an amended federal return is 31 33-LS0699\A
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filed, a notice of deficiency or an assessment is mailed to the taxpayer by the Internal 1
Revenue Service, and the taxpayer has exhausted rights of appeal under federal law. 2
(f) The department may credit or refund overpayments of taxes, taxes 3
erroneously or illegally assessed or collected, penalties collected without authority, 4
and taxes that are found unjustly assessed or excessive in amount, or otherwise 5
wrongfully collected. The department shall, in regulation, set limitations, specify the 6
manner in which claims for credits or refunds are made, and give notice of allowance 7
or disallowance. When a refund is allowed to a taxpayer, the refund may be paid out 8
of the general fund on a warrant issued under a voucher approved by the department. 9
(g) A partnership, S corporation, estate, or trust shall provide to its partners, 10
beneficiaries, or shareholders, and to the department, all information necessary for its 11
partners, beneficiaries, and shareholders to comply with this chapter. 12
(h) An individual is not required to file a return under this section 13
electronically, but a person employed to prepare and file an income tax return for an 14
individual shall file the return for that individual electronically. 15
(i) The department shall adopt regulations that set out requirements for a 16
spouse, upon request, to be partially or fully relieved from joint and several liability 17
resulting from the joint filing of a tax return. 18
Sec. 43.22.080. Tax withholding on wages of individuals. (a) Every 19
employer making payment of wages or salaries 20
(1) shall, except as provided in (c) of this section, deduct and withhold 21
an amount of tax computed in a manner to approximate the amount of tax due on those 22
wages and salaries under this chapter for that taxable year; 23
(2) shall remit the tax withheld to the department accompanied by a 24
return on a form prescribed by the department at the times required by the department 25
by regulation; 26
(3) is liable for the payment of the tax required to be deducted and 27
withheld under this section but is not liable to any individual for the amount of the 28
payment; and 29
(4) shall furnish to an employee on or before January 31 of the 30
succeeding year, or within 30 days after a request by the employee after an employee's 31 33-LS0699\A
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or individual's termination if the 30-day period ends before January 31, a written 1
statement on a form prescribed by the department showing 2
(A) the name and taxpayer identification number of the 3
employer; 4
(B) the name and social security number of the employee; 5
(C) the total amount of wages and salary for the taxable year; 6
and 7
(D) the total amount deducted and withheld as tax under this 8
chapter for the taxable year. 9
(b) The department shall publish the rate of withholding required by this 10
section. 11
(c) An employer shall deduct and withhold the tax due under AS 43.22.010(e) 12
from an employee's wages subject to withholding from the first regular payroll of the 13
calendar year. If the employee's first payroll is insufficient to cover the estimated tax 14
due, the employer shall continue to deduct and withhold from subsequent payrolls 15
until the tax due under this subsection is fully withheld. A self-employed individual 16
shall remit to the department the tax due under this subsection in accordance with 17
regulations adopted by the department. 18
Sec. 43.22.085. Withholding on nonresident partners; composite returns. 19
(a) Unless otherwise provided by this section, a partnership that is required to file an 20
annual information return under subchapter K of the Internal Revenue Code (26 21
U.S.C. 701 - 761) shall file a partnership return as prescribed by the department and 22
shall report any income, gains, losses, or deductions that are derived from or 23
connected with a source in the state, as determined under this chapter. 24
(b) A partnership that is required to file a return under (a) of this section shall 25
withhold income tax from a nonresident partner's distributive share of the partnership's 26
income or a gain, loss, or deduction derived from or connected with a source in the 27
state at the highest marginal income tax rate applicable to individuals for the taxable 28
year. 29
(c) Withholding under this section is not required by a partnership that 30
(1) is a publicly traded partnership, as defined in 26 U.S.C. 7704(b)
31 33-LS0699\A
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(Internal Revenue Code); and 1
(2) files with the department an annual information return reporting the 2
name, address, taxpayer identification number, and other information requested by the 3
department concerning each unitholder whose distributive share of partnership 4
income, regardless of source, is more than $1,000. 5
(d) The department shall adopt regulations that allow a partnership subject to 6
withholding under this section to file a composite return. 7
Sec. 43.22.090. Permanent fund tax payment. The department shall adopt 8
regulations establishing procedures for an individual eligible for a dividend under 9
AS 43.23.005 to direct the department to hold all or a part of the amount of the 10
dividend to pay the tax due under this chapter. The amount held under this section 11
may not exceed the dividend amount after contributions, garnishments, levies, fees, 12
attachments, assignments, or other reductions or donations allowed under AS 43.23. 13
The department shall apply the amount held under this section to tax owed in the 14
taxable year in which the taxpayer applies for the dividend. The department shall 15
refund the amount of the dividend not applied against taxes under this section to the 16
individual who appears on the application for the dividend. 17
Sec. 43.22.095. Administration. (a) The department shall adopt necessary 18
regulations and forms to implement and interpret this chapter, including regulations 19
and forms for the electronic filing and payment of tax due under this chapter. Federal 20
regulations issued under the Internal Revenue Code shall be considered persuasive 21
authority in interpreting any provision of the Internal Revenue Code on which the tax 22
imposed by this chapter relies, whether or not a federal regulation has been 23
specifically incorporated into a department regulation, unless the federal regulation 24
(1) conflicts with a provision of this chapter; 25
(2) conflicts with a regulation adopted by the department; or 26
(3) is inconsistent with the purposes of this chapter. 27
(b) A transaction or payment between related persons must have economic 28
substance, must serve a bona fide business purpose, and must not have occurred for 29
the primary purpose of lowering the tax due under this chapter. The department, after
30
review or audit of a taxpayer's return, may determine whether there is sufficient 31 33-LS0699\A
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documentation or whether a transaction or payment meets the requirements of this 1
subsection. If the department determines that the documentation, transaction, or 2
payment fails to meet the requirements of this subsection, the department may adjust 3
the amount of a payment or transaction, disregard the payment or transaction, or make 4
another adjustment necessary for determining the tax under this chapter. If a payment 5
in an amount greater than $500,000 is made or required to be made from one person to 6
a related person, the related persons shall submit documentation substantiating that the 7
amount of the payment is consistent with 26 U.S.C. 482 (Internal Revenue Code). 8
Payments subject to this subsection include payments for interest, royalties, 9
management fees, services, inventory, tangible personal property, intangible property, 10
and real property. 11
(c) A tax deficiency assessed by the department under this section is assumed 12
to be correct. A taxpayer has the burden of proving that the tax deficiency is 13
erroneous. 14
(d) The department shall adjust the amount of the exemption under 15
AS 43.22.030(b) annually for inflation. Adjustments must be consistent with inflation 16
adjustments made by the Internal Revenue Service to the federal individual income tax 17
standard deduction. The department shall round amounts under this subsection to the 18
nearest $100 and publish the adjusted amounts. 19
(e) The tax collected by the department under this chapter shall be deposited 20
into the general fund and accounted for separately. 21
Sec. 43.22.100. References to Internal Revenue Code. (a) Sections 26 U.S.C. 22
6654, 6662, 6664, 6694, 6695, 6700 - 6702, 6707, 6713, 7201, 7202, 7206, 7207, 23
7216, 7407, and 7408 (Internal Revenue Code), as those sections read on January 1, 24
2023, are incorporated by reference as a part of this chapter and, if conflicting, 25
supersede provisions in AS 43.05 and AS 43.10. 26
(b) When provisions of the Internal Revenue Code incorporated by reference 27
under (a) of this section refer to rules and regulations adopted by the United States 28
Commissioner of Internal Revenue, they are regarded as regulations adopted by the 29
department under this chapter, unless the department adopts specific regulations in 30
their place. 31 33-LS0699\A
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Sec. 43.22.105. Information released to a banking institution. 1
Notwithstanding AS 43.05.230, information on an individual income tax return may 2
be released to a banking institution to verify the direct deposit of an income tax refund 3
or correct an error in that deposit. 4
Sec. 43.22.150. Definitions. In this chapter, 5
(1) "domicile" means an individual's true, fixed, principal, and 6
permanent home, to which the individual intends to return even if currently living 7
elsewhere; if an individual has two or more homes, "domicile" means the home that 8
the individual regards and uses as the individual's more permanent home; once 9
established, a domicile remains the individual's domicile until the individual 10
demonstrates a real change of intent and moves to a new domicile; indications of 11
domicile include the 12
(A) location of the place of employment of the individual; 13
(B) location of real property owned by the individual; 14
(C) registration and physical location of motor vehicles, planes, 15
boats, and snow machines owned by the individual; 16
(D) location of a bank account or active checking account of 17
the individual; 18
(E) address where the individual receives mail; 19
(F) location of a school where the individual or a member of 20
the individual's immediate family 21
(i) attends; or 22
(ii) receives resident tuition; 23
(G) location of an organization of which the individual is a 24
member; 25
(H) location of a parent, child, grandchild, or great-grandchild; 26
(I) location of dental and medical personnel that provide 27
services to the individual on a regular or consistent basis; 28
(J) filing of a prior year tax return by the individual as a 29
resident or nonresident; 30
(K) location where an individual is registered to vote; 31 33-LS0699\A
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(L) location where an individual holds a resident fishing, 1
hunting, or trapping license; 2
(2) "employee" has the meaning given in 26 U.S.C. 3401; 3
(3) "employer" has the meaning given in 26 U.S.C. 3401; 4
(4) "federal adjusted gross income" has the meaning given to "adjusted 5
gross income" in 26 U.S.C. 62; 6
(5) "fiduciary" means a guardian, trustee, executor, administrator, 7
receiver, or conservator or a person, whether individual or corporate, acting in a 8
similar position of special confidence toward another; 9
(6) "head of household" means a single taxpayer, or married taxpayer 10
where both spouses file separate returns, with a qualified dependent living in the same 11
home for more than half the taxable year; 12
(7) "Internal Revenue Code" means the Internal Revenue Code (26 13
U.S.C. 1 et seq.), as amended; 14
(8) "irrevocable trust" means a trust or portion of a trust that is not 15
subject to a power to revest title in a person whose property constitutes the trust or a 16
portion of the trust; 17
(9) "nonresident estate" means an estate other than a resident estate or 18
part-year resident estate; 19
(10) "nonresident individual" means an individual who is not a resident 20
of the state for any portion of the taxable year; 21
(11) "nonresident trust" means a trust other than a resident trust or 22
part-year resident trust; 23
(12) "partner" means a partner as defined in 26 U.S.C. 7701(a) 24
(Internal Revenue Code) and includes a member of a limited liability company or 25
similar entity that is treated as a partnership for federal income tax purposes; 26
(13) "partnership" means an entity as defined in 26 U.S.C. 7701(a) 27
(Internal Revenue Code) and includes a limited liability company and a similar entity 28
treated as a partnership for federal income tax purposes; 29
(14) "part-year resident estate" means an estate that is a resident of the 30
state for a portion of but not the entire taxable year; 31 33-LS0699\A
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(15) "part-year resident individual" means an individual who is a 1
resident of the state for a portion of but not the entire taxable year; 2
(16) "part-year resident trust" means a trust that is a resident of the 3
state for a portion of but not the entire taxable year; 4
(17) "related person" means a person that satisfies the definition of 5
"related persons" in 26 U.S.C. 144 or 147 or a person in a relationship as described in 6
26 U.S.C. 267(b) (Internal Revenue Code); 7
(18) "resident estate" means the estate of a 8
(A) decedent who at the time of death was a resident of the 9
state, regardless of the residence of the fiduciary or beneficiary, if the 10
disposition or administration of the estate is subject to state law; or 11
(B) person who, at the time of commencement of a bankruptcy 12
proceeding under Title 11 of the United States Code, was a resident of the 13
state; 14
(19) "resident individual" means an individual who 15
(A) receives a permanent fund dividend under AS 43.23.005; 16
(B) receives a tax benefit available only to an individual 17
domiciled in the state; or 18
(C) is domiciled in the state for the entire taxable year unless 19
the individual maintains a permanent place of abode outside the state and 20
spends, in the aggregate, not more than 30 days during the taxable year in the 21
state; 22
(20) "resident trust" means a trust or a portion of a trust consisting of 23
property 24
(A) transferred by will of a decedent who at the time of death 25
was a resident of the state if the disposition or administration of the property is 26
subject to state law; or 27
(B) of a person who was a resident at the time the property was 28
transferred to the trust if, at the time of the transfer, the trust was 29
(i) an irrevocable trust; 30
(ii) a revocable trust and the trust has not become 31 33-LS0699\A
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irrevocable; or 1
(iii) a revocable trust and the trust later became 2
irrevocable at a time the person transferring property to the trust was a 3
resident; 4
(21) "revocable trust" means a trust or portion of a trust that is subject 5
to a power, exercisable immediately or at a future time, to revest title in a person 6
whose property constitutes the trust or portion of the trust; 7
(22) "S corporation" means a corporation that has elected to file a 8
federal income tax return under 26 U.S.C. 1361 - 1379 (Internal Revenue Code); 9
(23) "taxable income" means income taxable under this chapter; 10
(24) "taxable year" means the calendar year or a fiscal year ending 11
during the calendar year; 12
(25) "taxpayer" means a person subject to a tax imposed by this 13
chapter; 14
(26) "wages" has the meaning given in 26 U.S.C. 3401. 15
* Sec. 3. AS 43.23 is amended by adding a new section to read: 16
Sec. 43.23.092. Permanent fund dividend individual income tax payment. 17
In accordance with AS 43.22.090, the department shall prepare the Alaska permanent 18
fund dividend application to allow an applicant to direct the department to hold all or 19
part of the amount of the individual's permanent fund dividend for application against 20
the individual income tax imposed under AS 43.22. 21
* Sec. 4. AS 43.05.085; AS 43.20.012(b), and 43.20.013 are repealed January 1, 2025. 22
* Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 23
read: 24
APPLICABILITY. AS 43.22, added by sec. 2 of this Act, applies to income received 25
on or after the effective date of sec. 2 of this Act. 26
* Sec. 6. This Act takes effect January 1, 2025. 27