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HOUSE BILL NO. 152
IN THE LEGISLATURE OF THE STATE OF ALASKA
THIRTY-FOURTH LEGISLATURE - FIRST SESSION
BY REPRESENTATIVE GALVIN
Introduced: 3/24/25
Referred: State Affairs, Finance
A BILL
FOR AN ACT ENTITLED
"An Act establishing an education tax on the income of individuals, partners, 1
shareholders in S corporations, trusts, and estates; repealing tax credits applied against 2
the tax on individuals under the Alaska Net Income Tax Act; and providing for an 3
effective date." 4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 5
* Section 1. AS 43.05.045(a) is amended to read: 6
(a) Except as provided in AS 43.22.075(h), unless [UNLESS] an exemption
7
is granted under (b) of this section, a taxpayer required to submit a return or report for 8
a tax levied under this title or for any other tax administered by the department shall 9
submit the return or report electronically in a format prescribed by the department. 10
Failure to comply with this section may result in a civil penalty under 11
AS 43.05.220(f). If a law under this title requires a report or return or a portion of a 12
report or return to be in writing, an electronically filed report or return satisfies this 13
section. A taxpayer shall submit attachments to a report or return required under this 14 34-LS0674\A
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title electronically. 1
* Sec. 2. AS 43 is amended by adding a new chapter to read: 2
Chapter 22. Education Tax. 3
Sec. 43.22.010. Education tax on individuals. (a) Each calendar year or 4
fraction of a calendar year, a tax is imposed on the income of a 5
(1) resident individual, trust, or estate; 6
(2) nonresident individual, trust, or estate that is derived from or 7
connected with a source in the state. 8
(b) The tax under this section is four percent of taxable income over $150,000 9
for an individual who files a separate federal income tax return or four percent of 10
taxable income over $300,000 for individuals who file a joint federal income tax 11
return. 12
(c) Two individuals who file a joint federal income tax return when both or 13
one of whom is not a resident may elect to determine the tax imposed by this chapter 14
either 15
(1) individually; or 16
(2) jointly as if both individuals were residents; the income of the 17
individuals filing jointly under this paragraph is not subject to the calculation under 18
AS 43.22.015. 19
(d) In addition to the tax under (a) - (c) of this section, each individual who 20
has wages, net earnings from self-employment, or combined wages and net earnings 21
from self-employment in the state shall pay an annual tax of $150. In this subsection, 22
"net earnings from self-employment" has the meaning given in 26 U.S.C. 1402. 23
Sec. 43.22.015. Calculation of tax on a nonresident individual. (a) Except as 24
otherwise provided in (b) of this section, the tax on a nonresident individual is the 25
product of 26
(1) the tax determined under AS 43.22.010(b) on the nonresident 27
individual's taxable income computed as if the nonresident individual were a resident 28
individual but taking a deduction under AS 43.22.030(b)(2); and 29
(2) a fraction, the 30
(A) numerator of which is the nonresident individual's income 31 34-LS0674\A
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taxable under AS 43.22.045; and 1
(B) denominator of which is the nonresident individual's 2
taxable income computed as if the nonresident individual were a resident 3
individual. 4
(b) If a nonresident individual's taxable income computed under (a)(2)(B) of 5
this section is less than the nonresident individual's income taxable under (a)(2)(A) of 6
this section, the tax imposed by this chapter is on the nonresident individual's taxable 7
income as computed under AS 43.22.045. 8
Sec. 43.22.020. Tax on trusts and estates. (a) A tax is imposed for each 9
taxable year or portion of a taxable year on the taxable income of a resident or 10
nonresident trust or estate. The tax under this section for a trust or estate is $150 plus 11
four percent of taxable income over $150,000. 12
(b) In this section, the taxable income of a nonresident trust or estate is the 13
income of the trust or estate that is derived from or connected with a source in the 14
state. 15
(c) A trust is not subject to tax under this chapter if 16
(1) all of the trustees of the trust are nonresidents; 17
(2) the entire corpus of the trust, including real, tangible, and 18
intangible property, is located outside the state; and 19
(3) no income or gains of the trust are derived from or connected with 20
a source in the state. 21
(d) For purposes of (c)(1) of this section, a trustee that is a nonresident 22
banking corporation at the time the banking corporation becomes a trustee is a 23
nonresident trustee even if the banking corporation later becomes a resident trustee 24
because it is acquired by or becomes an office or branch of a resident trustee. 25
(e) A trust that is exempt from federal income tax because of its purpose or 26
activities is not subject to tax under this chapter. 27
(f) A special needs trust or other trust established to provide solely for the 28
housing, living expenses, or medical care of a disabled beneficiary is not subject to tax 29
under this chapter. In this subsection, 30
(1) "disabled beneficiary" means an individual who has 31 34-LS0674\A
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(A) a physical or mental impairment that substantially limits 1
one or more major life activities; or 2
(B) a condition that may require the use of a prosthesis, special 3
equipment for mobility, or a service animal; 4
(2) "special needs trust" has the meaning given in AS 13.36.215(b). 5
Sec. 43.22.025. Credit for taxes imposed by other jurisdictions. (a) A 6
resident individual, trust, or estate or part-year resident individual, trust, or estate is 7
allowed a credit against the tax due under this chapter for an income tax that was 8
imposed on the resident or part-year resident for the taxable year by another state or 9
the political subdivision of another state on income derived from or connected with 10
that state or political subdivision. 11
(b) A credit allowed under (a) of this section 12
(1) for a resident individual, trust, or estate may not exceed the 13
individual's, trust's, or estate's tax due under this chapter before credits are applied, 14
multiplied by a fraction, the numerator of which is the portion of the individual's, 15
trust's, or estate's taxable income that is derived from or connected with a source in 16
another state or the political subdivision of another state and the denominator of which 17
is the resident individual's, trust's, or estate's taxable income; 18
(2) for a part-year resident individual, trust, or estate may not exceed 19
the individual's, trust's, or estate's tax due for the period of state residency before 20
credits are applied, multiplied by a fraction, the numerator of which is the individual's, 21
trust's, or estate's taxable income derived from or connected with a source in another 22
state or the political subdivision of another state during the period of state residency 23
and the denominator of which is the part-year resident individual's, trust's, or estate's 24
taxable income during the period of state residency; 25
(3) may not reduce the tax due under this chapter to less than the tax 26
that would have been due if the income derived from or connected with a source in 27
another state or the political subdivision of another state and subject to taxation by the 28
other state or political subdivision had been excluded from the resident or part-year 29
resident individual's, trust's, or estate's taxable income during the calculation of tax 30
under this chapter before the application of credits. 31 34-LS0674\A
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(c) If the tax administration of another state or a political subdivision of 1
another state determines that a taxpayer has overpaid tax, affecting the computation of 2
the credit allowed under this section for any taxable year, the taxpayer shall file an 3
amended return with the department not later than 90 days after the final determination 4
by the state or political subdivision that the tax was overpaid. The department may 5
assess a taxpayer additional tax, proportional to the amount overpaid in the other state 6
or political subdivision. 7
(d) A taxpayer is not allowed a credit under this section for taxes paid to 8
another jurisdiction if the taxpayer claims a credit against the income tax imposed by 9
the other jurisdiction for the tax payable under this chapter. 10
(e) Income tax imposed on a partner or the shareholder of an S corporation on 11
the income of the partnership or S corporation, including tax paid by the partnership or 12
S corporation to satisfy the tax liability of the partner or shareholder, may be included 13
in the calculation of a credit under this section. Tax imposed on the partnership or S 14
corporation that is the direct liability of the partnership or S corporation and not that of 15
the partner or shareholder may not be included in the calculation of a credit under this 16
section. 17
Sec. 43.22.030. Taxable income; general rule. (a) In this chapter, taxable 18
income is the taxpayer's federal adjusted gross income for the taxable year 19
(1) plus, if not already included in federal adjusted gross income, 20
(A) interest on obligations of another state, a political 21
subdivision of another state, the public instrumentality of another state, or the 22
local authority of another state; 23
(B) a loss on the sale or exchange of an obligation issued by or 24
on behalf of 25
(i) the state; 26
(ii) a municipality of the state; or 27
(iii) a public instrumentality, public authority, or public 28
corporation created under state law; 29
(C) a loss from the sale or exchange of shares in a unit 30
investment trust if the loss is attributable to an obligation issued by or on 31 34-LS0674\A
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behalf of 1
(i) the state; 2
(ii) a municipality of the state; or 3
(iii) a public instrumentality, public authority, or public 4
corporation created under state law; 5
(D) interest or dividends on obligations or securities issued by 6
the United States, or an authority, commission, or instrumentality of the United 7
States, that the Internal Revenue Code exempts from federal income tax; 8
(E) taxes under this chapter; 9
(F) a gain realized but not recognized under 26 U.S.C. 1031 10
(Internal Revenue Code); 11
(G) a deduction allowed in the determination of federal 12
adjusted gross income that is directly or indirectly related to income that is not 13
taxable under this chapter; and 14
(H) income of an incomplete gift nongrantor trust to which a 15
taxpayer transferred property, less deductions of the trust, if 16
(i) the income and deductions of the trust would be 17
taken into account in computing the taxpayer's federal taxable income 18
if the trust in its entirety was treated as a grantor trust under the Internal 19
Revenue Code; 20
(ii) the trust is a resident trust; 21
(iii) the trust does not qualify as a grantor trust under 26 22
U.S.C. 671 - 679 (Internal Revenue Code); and 23
(iv) the grantor's transfer of assets to the trust is treated 24
as an incomplete gift under 26 U.S.C. 2511 (Internal Revenue Code); 25
(2) minus, if included in federal adjusted gross income, 26
(A) interest income or a dividend from an obligation that is 27
exempt from taxation by a state under federal law; 28
(B) a refund or credit for the overpayment of an income tax; 29
(C) an ordinary and necessary expense, including an interest 30
expense, paid or incurred during the taxable year, that is directly or indirectly 31 34-LS0674\A
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related to income exempt under the Internal Revenue Code but taxable by the 1
state; 2
(D) a gain recognized under 26 U.S.C. 1031 (Internal Revenue 3
Code) that was included in federal adjusted gross income under (1) of this 4
subsection; 5
(E) income exempt under 4 U.S.C. 114; 6
(F) compensation prohibited from state taxation by 50 U.S.C. 7
3901 - 4043 (Servicemembers Civil Relief Act); 8
(G) a gain from the sale or exchange of an obligation issued by 9
or on behalf of 10
(i) the state; 11
(ii) a municipality of the state; or 12
(iii) a public instrumentality, public authority, or public 13
corporation created under state law; 14
(H) a permanent fund dividend received by the taxpayer or the 15
taxpayer's dependent under AS 43.23. 16
(b) In addition to the adjustments made to taxable income under (a) of this 17
section, a taxpayer may receive a standard deduction. Subject to adjustment under (d) 18
of this section, the deduction under this subsection for 19
(1) an individual resident taxpayer is $12,950; 20
(2) an individual resident who files federal income taxes as a head of 21
household is $19,400; 22
(3) two resident taxpayers filing jointly is $25,900; 23
(4) an individual nonresident is the product of $12,950 and a fraction, 24
the numerator of which is the nonresident individual's income taxable under 25
AS 43.22.045, computed without the deduction under this subsection, and the 26
denominator of which is the nonresident individual's taxable income computed as if 27
the nonresident individual were a resident individual and without the deduction under 28
this subsection; the deduction under this paragraph may not exceed $12,950 for each 29
exemption claimed; 30
(5) an individual nonresident who files federal income taxes as a head 31 34-LS0674\A
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of household is the product of $19,400 and a fraction, the numerator of which is the 1
nonresident individual's income taxable under AS 43.22.045, computed without the 2
deduction under this subsection, and the denominator of which is the nonresident 3
individual's taxable income computed as if the nonresident individual were a resident 4
individual and without the deduction under this subsection; the deduction under this 5
paragraph may not exceed $19,400 for each exemption claimed; 6
(6) two nonresident individuals filing jointly is the product of $25,900 7
and a fraction, the numerator of which is the nonresident individuals' income taxable 8
under AS 43.22.045, computed without the deduction under this subsection, and the 9
denominator of which is the nonresident individuals' taxable income computed as if 10
the nonresident individuals were resident individuals and without the deduction under 11
this subsection; the deduction under this paragraph may not exceed $25,900 for each 12
exemption claimed. 13
(c) The deduction under (b) of this section may not 14
(1) be claimed by a trust; 15
(2) reduce a taxpayer's tax liability under this chapter to below zero. 16
(d) Each year, the department shall adjust the amounts of the standard 17
deduction under (b) of this section for inflation. The adjustment for inflation is equal 18
to the adjustment for inflation calculated for the standard deduction against the federal 19
income tax as set out in 26 U.S.C. 63. 20
(e) When calculating taxable income, a taxpayer 21
(1) may not carry back a net operating loss under 26 U.S.C. 22
172(b)(1)(A)(i) (Internal Revenue Code); 23
(2) may carry over a net operating loss under 26 U.S.C. 24
172(b)(1)(A)(ii) (Internal Revenue Code), except that a loss may not be carried over 25
for more than five years; for a taxpayer subject to AS 43.19 (Multistate Tax Compact), 26
the amount of a net operating loss allowed to be carried over is limited to the amount 27
apportioned to the state in the taxable year in which the loss was generated under 28
AS 43.19 (Multistate Tax Compact); 29
(3) shall include the modifications required by AS 43.20.144(b)(2), 30
concerning intangible drilling and development costs, AS 43.20.144(b)(3), concerning 31 34-LS0674\A
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percentage depletion, and AS 43.20.144(b)(4), concerning depreciation. 1
Sec. 43.22.035. Taxable income from partnerships and S corporations. (a) 2
A partner or shareholder shall make an adjustment described in AS 43.22.030 to 3
income or a gain, loss, or deduction from a partnership or S corporation in proportion 4
to a partner's distributive share of a partnership or a shareholder's pro rata share of an 5
S corporation. If a partner's distributive share or a shareholder's pro rata share of an 6
adjustment is not required to be accounted for separately for federal income tax 7
purposes, the partner's or shareholder's share of the adjustment must be determined in 8
proportion to the partner's or shareholder's share of partnership or S corporation 9
income or losses for federal income tax purposes. 10
(b) In determining taxable income, a partner or shareholder shall treat income 11
or a gain, loss, or deduction from a partnership or S corporation as if it has the same 12
character as it does for federal income tax purposes. If income or a gain, loss, or 13
deduction from a partnership or S corporation is not accounted for separately for 14
federal income tax purposes, a partner or shareholder shall treat the income, gain, loss, 15
or deduction as if it were realized directly from the source from which it was realized 16
by the partnership or S corporation or incurred in the same manner it was incurred by 17
the partnership or S corporation. 18
(c) If the principal purpose of a special allocation of partnership income or a 19
gain, loss, or deduction is the evasion of tax under this chapter, the partner's 20
distributive share is determined as if the partnership agreement did not have the 21
special allocation. In this subsection, "special allocation" means an allocation of the 22
distributive share of partnership income or a gain, loss, or deduction made under the 23
partnership agreement to a partner in a proportion different than the partner's 24
partnership interest. 25
Sec. 43.22.040. Taxable income of an estate, trust, or beneficiary. (a) The 26
taxable income of an estate or trust is determined as if the estate or trust were an 27
individual and is subject to adjustments under AS 43.22.030 and reduction under 26 28
U.S.C. 661 (Internal Revenue Code). The department may establis
h in regulation the 29
method for determining the taxable income of an estate or trust, including the manner 30
in which the adjustments under AS 43.22.030 will be allocated between the estate's or 31 34-LS0674\A
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trust's taxable share and a beneficiary's distributive share. Unless otherwise provided 1
by the department in regulation, an allocation must be made in proportion to the 2
estate's or trust's taxable share or the beneficiary's distributive share of the trust or 3
estate for federal income tax purposes. 4
(b) If the principal purpose of a provision of an instrument directing the 5
distribution of income or a gain, loss, or deduction of an estate or trust is the evasion 6
of tax under this chapter, the taxable income of the estate, trust, or beneficiary will be 7
determined as if the instrument did not contain the provision. 8
Sec. 43.22.045. Nonresident individuals; income derived from or 9
connected with a source in the state. (a) The taxable income of a nonresident 10
individual is the nonresident individual's income derived from or connected with a 11
source in the state, as adjusted under AS 43.22.030. The taxable income of a 12
nonresident individual includes 13
(1) a partner's distributive share of income or a gain, loss, or deduction 14
of the partnership, as determined under AS 43.22.050; 15
(2) a shareholder's pro rata share of an S corporation's income or loss, 16
increased by the reductions for taxes described in 26 U.S.C. 1366(f)(2) and (3) 17
(Internal Revenue Code), as determined under AS 43.22.050; 18
(3) income or loss of a business conducted by a nonresident individual, 19
nonresident estate, or nonresident trust, other than income or loss from a partnership or 20
S corporation, as determined under AS 43.22.050; 21
(4) estate or trust income or a gain, loss, or deduction of the estate or 22
trust, as determined under AS 43.22.055; 23
(5) income or a gain, loss, or deduction from the sale or assignment of 24
a beneficial interest, or other disposition of an interest in tangible personal property in 25
the state, or rental income or loss from the use of tangible personal property in the 26
state; if the income, gain, loss, or deduction is from tangible personal property used or 27
employed both in and outside the state, the amount included in taxable income is 28
determined by multiplying the income, gain, loss, or deduction by a fraction, the 29
numerator of which is the number of days during which the property was used or 30
employed to earn, accrue, or incur the income, gain, loss, or deduction in the state and
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the denominator of which is the total number of days during the taxable year that the 1
property was used or employed to earn, accrue, or incur the income, gain, loss, or 2
deduction; 3
(6) income or a gain, loss, or deduction from the sale, assignment, or 4
other disposition of an interest in real property in the state, or rental income or loss 5
from the use of real property in the state, including the percentage of ordinary and 6
capital gains received from a real estate investment trust, as defined in 26 U.S.C. 856 7
(Internal Revenue Code), that is attributable to rents from or sale or other disposition 8
of real property located in the state; in this paragraph, income or a gain, loss, or 9
deduction from the sale, assignment of a beneficial interest, or other disposition of real 10
property in the state includes income or a gain, loss, or deduction derived from the sale 11
or assignment of a beneficial interest in a partnership, S corporation, nonpublicly 12
traded C corporation with 100 or fewer shareholders, estate, or trust, if the entity owns 13
real property in the state that has a fair market value equal to or exceeding 50 percent 14
of all assets of the entity on the date of sale, assignment, or other disposition of the 15
taxpayer's interest in the entity; for purposes of this paragraph, 16
(A) only assets owned for at least two years before the date of 17
the sale, assignment, or other disposition of an interest in the entity shall be 18
used to determine the fair market value of all of the assets of the entity on the 19
date of sale, assignment, or other disposition; and 20
(B) the amount of income or a gain, loss, or deduction derived 21
from or connected with a source in the state from the sale, assignment, or other 22
disposition of an interest in an entity that is subject to the provisions of this 23
paragraph is the amount recognized for federal income tax purposes related to 24
the sale, assignment, or disposition, multiplied by a fraction, the numerator of 25
which is the fair market value of the real property located in the state on the 26
date of sale, assignment, or disposition and the denominator of which is the fair 27
market value of all of the assets of the entity on the date of the sale, 28
assignment, or disposition; 29
(7) compensation, salary, or wages for personal services rendered or 30
performed in the state that are derived from a business, trade,
profession, occupation, 31 34-LS0674\A
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or employment carried on in the state; for purposes of this paragraph, personal 1
services 2
(A) except as otherwise provided in (B) of this paragraph, 3
include services performed 4
(i) in connection with presenting or receiving 5
employment-related training or education in the state; 6
(ii) in connection with a site inspection, review, 7
analysis, or management or any other supervision of a facility located 8
in the state; 9
(iii) in connection with research and development at a 10
facility located in the state or in connection with the installation of new 11
or upgraded equipment or systems at that facility; 12
(iv) as part of a project team working on the attraction 13
or implementation of new investment in a facility located or planned to 14
be located in the state; 15
(v) in connection with fishing, farming, or agriculture in 16
the state; or 17
(vi) for the federal government; 18
(B) do not include services that are casual, isolated, 19
inconsequential, or ancillary to out-of-state services; 20
(8) income derived from a business, trade, profession, occupation, or 21
employment carried on in the state, including income 22
(A) received under a covenant not to compete, a severance 23
agreement, a termination agreement, or unemployment compensation 24
insurance attributable to a business, trade, profession, occupation, or 25
employment previously carried on in the state, regardless of when received; 26
(B) derived from a business, trade, profession, occupation, or 27
employment carried on in the state by an individual who maintains or operates 28
an office, shop, store, warehouse, boat, plane, factory, agency, or other place 29
where the individual's affairs are systematically and regularly carried on, 30
regardless of other transactions carried on outside the state; this subparagraph 31 34-LS0674\A
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does not include income from an activity of an individual whose presence in 1
the state is casual, isolated, inconsequential, or ancillary to out-of-state 2
activities, except that, if a business, trade, profession, occupation, or 3
employment is carried on partly in and partly outside the state, other than for 4
the rendering of purely personal services by the individual, the taxable income 5
derived from or connected with a source in the state is determined under 6
AS 43.19 (Multistate Tax Compact) and AS 43.22.030; 7
(9) income from the management or investment function or activities 8
conducted in the state from intangible property; 9
(10) dividends, interest, payments received under an annuity, gains, or 10
other intangible income received from, or attributable to, intangible personal property, 11
including stock, bonds, notes, bank deposits, or annuities, if the intangible personal 12
property is employed in a business, trade, profession, occupation, or employment 13
carried on in the state; 14
(11) a gain derived from a statutory stock option, restricted stock, 15
nonstatutory stock option, or stock appreciation right by a nonresident individual who, 16
at the time the gain is received, performs services in the state for or is employed in the 17
state by the corporation granting the option, stock, or right, as determined in 18
regulations adopted by the department; 19
(12) income from nonqualified deferred compensation plans 20
attributable to services performed in the state, including compensation included in 21
federal gross income under 26 U.S.C. 457A (Internal Revenue Code); 22
(13) proceeds from a gambling activity conducted in the state or lottery 23
tickets purchased in the state, including payments received from a third party for the 24
transfer of the rights to future proceeds related to a gambling activity in the state or 25
lottery tickets purchased in the state; 26
(14) for an S corporation that terminates its taxable status in the state 27
during the tax year, income or a gain recognized on the receipt of payments from an 28
installment sale contract entered into at the time the S corporation was subject to tax in 29
the state, allocated in a manner consistent with the applicable methods and rules under
30
this chapter; 31 34-LS0674\A
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(15) royalties or other compensation received for the use of a patent, 1
copyright, secret process or formula, good will, mark, trade brand, franchise, or other 2
property having a taxable or business situs in the state; 3
(16) royalties or other compensation received for the use of a patent if 4
the patent is employed in production, fabrication, manufacturing, or other process in 5
the state; 6
(17) income or a gain from the disposition of an asset if the 7
acquisition, management, or disposition of the asset constitutes an integral part of the 8
nonresident individual's regular trade or business operation; 9
(18) income from the transmission, broadcast, distribution, or 10
dissemination of a service directly or indirectly attributable to the performance in the 11
state of an athlete, entertainer, singer, musician, dancer, comedian, magician, 12
performing artist, actor, actress, or similar person, including syndication fees. 13
(b) A deduction included in taxable income that results from a capital loss, 14
passive activity loss, or net operating loss must be based solely on income or a gain, 15
loss, or deduction derived from or connected with a source in the state. A nonresident 16
individual shall treat a deduction under this subsection in the same manner as the 17
corresponding federal deduction, unless the department requires otherwise in 18
regulation. 19
Sec. 43.22.050. Business conducted by a nonresident individual, trust, or 20
estate; income derived from or connected with a source in the state. (a) The 21
department shall adopt regulations governing the amount of income or the amount of a 22
gain, loss, or deduction from a business conducted by a nonresident individual, trust, 23
or estate that is derived from or connected with a source in the state for purposes of 24
determining taxable income. Regulations adopted under this subsection must be 25
consistent with AS 43.19 (Multistate Tax Compact) and AS 43.22.045 and include 26
adjustments under AS 43.22.030. 27
(b) The department shall adopt regulations governing the amount of income or 28
the amount of a gain, loss, or deduction that is derived from or connected with a 29
source in the state and is included in a nonresident 30
(1) partner's distributive share for purposes of taxation unde
r this 31 34-LS0674\A
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chapter; 1
(2) shareholder's pro-rata share of an S corporation for purposes of 2
taxation under this chapter. 3
(c) The department may by regulation require a taxpayer to allocate rather 4
than apportion income or a gain, loss, or deduction under this section. 5
Sec. 43.22.055. Nonresident trust, estate, or beneficiary; income derived 6
from or connected with a source in the state. (a) The department shall adopt 7
regulations governing whether income or a gain, loss, or deduction of a nonresident 8
estate or nonresident trust is included in taxable income derived from or connected 9
with a source in the state. Regulations adopted under this subsection must be 10
consistent with the remainder of this section and AS 43.22.045. 11
(b) A nonresident beneficiary shall include in taxable income derived from or 12
connected with a source in the state a distribution from an estate or trust as if the 13
nonresident beneficiary earned or incurred the income or a gain, loss, or deduction 14
attributable to the distribution directly from the source. For purposes of this 15
subsection, the department may establish one or more methods for a nonresident 16
beneficiary to determine whether income or a gain, loss, or deduction is attributable to 17
a distribution. The department shall consistently apply a method from year to year and 18
apply the same method to other nonresident beneficiaries of the same trust or estate. 19
Nothing in this subsection requires the department to give effect to a provision of an 20
instrument creating an estate or trust if the department reasonably believes that the 21
principal purpose of the provision is to evade the tax imposed under this chapter. 22
Sec. 43.22.060. Part-year resident individual, trust, or estate; residency 23
income; income derived from or connected with a source in the state. (a) Except as 24
otherwise provided in this section, the taxable income of a part-year resident 25
individual, trust, or estate is the sum of 26
(1) the taxable income of the part-year resident individual, trust, or 27
estate during the period of residency; and 28
(2) the taxable income derived from or connected with a source in the 29
state for the period of nonresidency of the individual, trust, or estate. 30
(b) The department shall adopt regulations to determine the taxable income of 31 34-LS0674\A
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a part-year resident taxpayer who is granted a statutory stock option, restricted stock, 1
nonstatutory stock option, or a stock appreciation right and who, during the grant 2
period, performs services in the state for, or is employed in the state by, the 3
corporation granting the option, stock, or right. 4
Sec. 43.22.065. Personal service corporations and S corporations formed 5
or used to evade tax. (a) The department may allocate all income, deductions, credits, 6
exclusions, and other allowances between a personal service corporation or S 7
corporation and its employee-owners if the 8
(1) personal service corporation or S corporation performs 9
substantially all of its services for or on behalf of another corporation, partnership, or 10
other entity and the effect is the evasion of the tax under this chapter; and 11
(2) allocation is necessary to reflect the source and amount of the 12
income, regardless of whether the corporation is otherwise taxable. 13
(b) For purposes of this section, evasion of the tax under this chapter occurs 14
when a personal service corporation or S corporation is used to 15
(1) reduce the taxable income of a resident or the taxable income of a 16
nonresident derived from or connected with a source in the state; or 17
(2) secure the benefit of an expense, deduction, credit, exclusion, or 18
other allowance for any employee-owner that would not otherwise apply under this 19
chapter. 20
(c) The constructive ownership of stock rules under 26 U.S.C. 318 (Internal 21
Revenue Code) apply to this section, except that "5 percent" shall be substituted for 22
"50 percent" in 26 U.S.C. 318(a)(2)(C) (Internal Revenue Code). 23
(d) In this section, all persons specified in 26 U.S.C. 267(b) (Internal Revenue 24
Code) shall be treated as one entity. 25
(e) In this section, 26
(1) "employee-owner" means any employee who owns, on any day 27
during the taxable year, more than 10 percent of the outstanding stock of a personal 28
service corporation or S corporation; 29
(2) "personal service corporation" means a corporation whose principal
30
activity is the performance of personal services that are substantially performed by the 31 34-LS0674\A
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employee-owners of the corporation. 1
Sec. 43.22.070. Determination of taxable year and method of accounting. 2
(a) For purposes of the tax imposed under this chapter, a taxpayer's 3
(1) taxable year is the same as the taxpayer's taxable year for federal 4
income tax purposes; and 5
(2) method of accounting is the same as the taxpayer's method of 6
accounting for federal income tax purposes. 7
(b) The department shall adopt regulations to determine the taxable income of 8
a taxpayer whose method of accounting changes during a taxable year or between 9
taxable years. 10
Sec. 43.22.075. Returns and payment of taxes. (a) A taxpayer shall file with 11
the department a return setting out 12
(1) the amount of tax due under this chapter; and 13
(2) other information necessary to carry out this chapter, as required by 14
the department in regulation. 15
(b) A person required to file a return under this chapter shall file the return on 16
a form or in a format prescribed by the department. The return is due to the department 17
at the same time and in the same manner, including extensions, as the taxpayer's 18
federal income tax return to the United States Internal Revenue Service. A return filed 19
under this chapter must be made under oath and on penalty of perjury. 20
(c) The total amount of tax imposed by this chapter is due and payable to the 21
department at the same time and in the same manner as the federal individual income 22
tax payable to the United States Internal Revenue Service. 23
(d) A taxpayer, upon request by the department, shall furnish to the 24
department a true and correct copy of a return that the taxpayer has filed with the 25
United States Internal Revenue Service. 26
(e) A taxpayer shall notify the department in writing of an alteration in, or 27
modification of, the taxpayer's federal income tax return and of a recomputation of tax 28
or determination of deficiency, whether with or without assessment. A full statement 29
of the facts must accompany the notice. A taxpayer shall file the notice not later than 30
60 days after the final determination of the alteration, modification, recomputation, or 31 34-LS0674\A
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deficiency and shall pay any additional tax due under this chapter at that time. In this 1
subsection, "final determination" means the time that an amended federal return is 2
filed, a notice of deficiency or an assessment is mailed to the taxpayer by the Internal 3
Revenue Service, and the taxpayer has exhausted rights of appeal under federal law. 4
(f) The department may credit or refund overpayments of taxes, taxes 5
erroneously or illegally assessed or collected, penalties collected without authority, 6
and taxes that are found unjustly assessed or excessive in amount, or otherwise 7
wrongfully collected. The department shall, in regulation, set limitations, specify the 8
manner in which claims for credits or refunds are made, and give notice of allowance 9
or disallowance. When a refund is allowed to a taxpayer, the refund may be paid out 10
of the general fund on a warrant issued under a voucher approved by the department. 11
(g) A partnership, S corporation, estate, or trust shall provide to its partners, 12
beneficiaries, or shareholders, and to the department, all information necessary for its 13
partners, beneficiaries, and shareholders to comply with this chapter. 14
(h) An individual is not required to file a return under this section 15
electronically, but a person employed to prepare and file a tax return under this section 16
for an individual shall file the return for that individual electronically. 17
(i) The department shall adopt regulations that set out requirements for a 18
spouse, upon request, to be partially or fully relieved from joint and several liability 19
resulting from the joint filing of a tax return. 20
Sec. 43.22.080. Tax withholding on wages of individuals. (a) Every 21
employer making payment of wages or salaries 22
(1) shall, except as provided in (c) of this section, deduct and withhold 23
an amount of tax computed in a manner to approximate the amount of tax due on those 24
wages and salaries under this chapter for that taxable year; 25
(2) shall remit the tax withheld to the department accompanied by a 26
return on a form prescribed by the department at the times required by the department 27
by regulation; 28
(3) is liable for the payment of the tax required to be deducted and 29
withheld under this section but is not liable to any individual for the amount of the
30
payment; and 31 34-LS0674\A
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(4) shall furnish to an employee on or before January 31 of the 1
succeeding year, or within 30 days after a request by the employee after an employee's 2
or individual's termination if the 30-day period ends before January 31, a written 3
statement on a form prescribed by the department showing 4
(A) the name and taxpayer identification number of the 5
employer; 6
(B) the name and social security number of the employee; 7
(C) the total amount of wages and salary for the taxable year; 8
and 9
(D) the total amount deducted and withheld as tax under this 10
chapter for the taxable year. 11
(b) The department shall publish the rate of withholding required by this 12
section. 13
(c) An employer shall deduct and withhold the tax due under AS 43.22.010(d) 14
from an employee's wages subject to withholding from the first regular payroll of the 15
calendar year. If the employee's first payroll is insufficient to cover the estimated tax 16
due, the employer shall continue to deduct and withhold from subsequent payrolls 17
until the tax due under this subsection is fully withheld. A self-employed individual 18
shall remit to the department the tax due under this subsection in accordance with 19
regulations adopted by the department. 20
Sec. 43.22.085. Withholding on nonresident partners; composite returns. 21
(a) Unless otherwise provided by this section, a partnership that is required to file an 22
annual information return under subchapter K of the Internal Revenue Code (26 23
U.S.C. 701 - 761) shall file a partnership return as prescribed by the department and 24
shall report any income, gains, losses, or deductions that are derived from or 25
connected with a source in the state, as determined under this chapter. 26
(b) A partnership that is required to file a return under (a) of this section shall 27
withhold tax from a nonresident partner's distributive share of the partnership's income 28
or a gain, loss, or deduction derived from or connected with a source in the state at the 29
highest marginal tax rate applicable under this chapter to individuals for the taxable 30
year. 31 34-LS0674\A
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(c) Withholding under this section is not required by a partnership that 1
(1) is a publicly traded partnership, as defined in 26 U.S.C. 7704(b) 2
(Internal Revenue Code); and 3
(2) files with the department an annual information return reporting the 4
name, address, taxpayer identification number, and other information requested by the 5
department concerning each unitholder whose distributive share of partnership 6
income, regardless of source, is more than $1,000. 7
(d) The department shall adopt regulations that allow a partnership subject to 8
withholding under this section to file a composite return. 9
Sec. 43.22.090. Permanent fund tax payment. The department shall adopt 10
regulations establishing procedures for an individual eligible for a dividend under 11
AS 43.23.005 to direct the department to hold all or a part of the amount of the 12
dividend to pay the tax due under this chapter. The amount held under this section 13
may not exceed the dividend amount after contributions, garnishments, levies, fees, 14
attachments, assignments, or other reductions or donations allowed under AS 43.23. 15
The department shall apply the amount held under this section to tax owed in the 16
taxable year in which the taxpayer applies for the dividend. The department shall 17
refund the amount of the dividend not applied against taxes under this section to the 18
individual who appears on the application for the dividend. 19
Sec. 43.22.095. Administration. (a) The department shall adopt necessary 20
regulations and forms to implement and interpret this chapter, including regulations 21
and forms for the electronic filing and payment of tax due under this chapter. Federal 22
regulations issued under the Internal Revenue Code shall be considered persuasive 23
authority in interpreting any provision of the Internal Revenue Code on which the tax 24
imposed by this chapter relies, whether or not a federal regulation has been 25
specifically incorporated into a department regulation, unless the federal regulation 26
(1) conflicts with a provision of this chapter; 27
(2) conflicts with a regulation adopted by the department; or 28
(3) is inconsistent with the purposes of this chapter. 29
(b) A transaction or payment between related persons must have
economic 30
substance, must serve a bona fide business purpose, and must not have occurred for 31 34-LS0674\A
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the primary purpose of lowering the tax due under this chapter. The department, after 1
review or audit of a taxpayer's return, may determine whether there is sufficient 2
documentation or whether a transaction or payment meets the requirements of this 3
subsection. If the department determines that the documentation, transaction, or 4
payment fails to meet the requirements of this subsection, the department may adjust 5
the amount of a payment or transaction, disregard the payment or transaction, or make 6
another adjustment necessary for determining the tax under this chapter. If a payment 7
in an amount greater than $500,000 is made or required to be made from one person to 8
a related person, the related persons shall submit documentation substantiating that the 9
amount of the payment is consistent with 26 U.S.C. 482 (Internal Revenue Code). 10
Payments subject to this subsection include payments for interest, royalties, 11
management fees, services, inventory, tangible personal property, intangible property, 12
and real property. 13
(c) A tax deficiency assessed by the department under this section is assumed 14
to be correct. A taxpayer has the burden of proving that the tax deficiency is 15
erroneous. 16
(d) The department shall adjust the amount of the exemption under 17
AS 43.22.030(b) annually for inflation. Adjustments must be consistent with inflation 18
adjustments made by the Internal Revenue Service to the federal individual income tax 19
standard deduction. The department shall round amounts under this subsection to the 20
nearest $100 and publish the adjusted amounts. 21
(e) The tax collected by the department under this chapter shall be deposited 22
into the general fund and accounted for separately. 23
Sec. 43.22.100. References to Internal Revenue Code. (a) Sections 26 U.S.C. 24
6654, 6662, 6664, 6694, 6695, 6700 - 6702, 6707, 6713, 7201, 7202, 7206, 7207, 25
7216, 7407, and 7408 (Internal Revenue Code), as those sections read on January 1, 26
2023, are incorporated by reference as a part of this chapter and, if conflicting, 27
supersede provisions in AS 43.05 and AS 43.10. 28
(b) When provisions of the Internal Revenue Code incorporated by reference 29
under (a) of this section refer to rules and regulations adopted by the United States 30
Commissioner of Internal Revenue, they are regarded as regulati
ons adopted by the 31 34-LS0674\A
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department under this chapter, unless the department adopts specific regulations in 1
their place. 2
Sec. 43.22.105. Information released to a banking institution. 3
Notwithstanding AS 43.05.230, information on an individual tax return filed under 4
this chapter may be released to a banking institution to verify the direct deposit of a 5
tax refund or correct an error in that deposit. 6
Sec. 43.22.110. Early education fund. (a) The early education fund is 7
established in the state treasury. The department shall separately account for the tax 8
collected under this chapter and deposit it into the early education fund. 9
(b) The legislature may use the annual estimated balance in the fund to make 10
appropriations for kindergarten through grade 12 education and early learning 11
programs, including the parents as teachers program established under AS 14.03.420. 12
(c) Nothing in this section creates a dedicated fund. 13
Sec. 43.22.150. Definitions. In this chapter, 14
(1) "domicile" means an individual's true, fixed, principal, and 15
permanent home, to which the individual intends to return even if currently living 16
elsewhere; if an individual has two or more homes, "domicile" means the home that 17
the individual regards and uses as the individual's more permanent home; once 18
established, a domicile remains the individual's domicile until the individual 19
demonstrates a real change of intent and moves to a new domicile; indications of 20
domicile include the 21
(A) location of the place of employment of the individual; 22
(B) location of real property owned by the individual; 23
(C) registration and physical location of motor vehicles, planes, 24
boats, and snow machines owned by the individual; 25
(D) location of a bank account or active checking account of 26
the individual; 27
(E) address where the individual receives mail; 28
(F) location of a school where the individual or a member of 29
the individual's immediate family 30
(i) attends; or 31 34-LS0674\A
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(ii) receives resident tuition; 1
(G) location of an organization of which the individual is a 2
member; 3
(H) location of a parent, child, grandchild, or great-grandchild; 4
(I) location of dental and medical personnel that provide 5
services to the individual on a regular or consistent basis; 6
(J) filing of a prior year tax return by the individual as a 7
resident or nonresident; 8
(K) location where an individual is registered to vote; 9
(L) location where an individual holds a resident fishing, 10
hunting, or trapping license; 11
(2) "employee" has the meaning given in 26 U.S.C. 3401; 12
(3) "employer" has the meaning given in 26 U.S.C. 3401; 13
(4) "federal adjusted gross income" has the meaning given to "adjusted 14
gross income" in 26 U.S.C. 62; 15
(5) "fiduciary" means a guardian, trustee, executor, administrator, 16
receiver, or conservator or a person, whether individual or corporate, acting in a 17
similar position of special confidence toward another; 18
(6) "head of household" means a single taxpayer, or married taxpayer 19
where both spouses file separate returns, with a qualified dependent living in the same 20
home for more than half the taxable year; 21
(7) "Internal Revenue Code" means the Internal Revenue Code (26 22
U.S.C. 1 et seq.), as amended; 23
(8) "irrevocable trust" means a trust or portion of a trust that is not 24
subject to a power to revest title in a person whose property constitutes the trust or a 25
portion of the trust; 26
(9) "nonresident estate" means an estate other than a resident estate or 27
part-year resident estate; 28
(10) "nonresident individual" means an individual who is not a resident 29
of the state for any portion of the taxable year; 30
(11) "nonresident trust" means a trust other than a resident trust or 31 34-LS0674\A
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part-year resident trust; 1
(12) "partner" means a partner as defined in 26 U.S.C. 7701(a) 2
(Internal Revenue Code) and includes a member of a limited liability company or 3
similar entity that is treated as a partnership for federal income tax purposes; 4
(13) "partnership" means an entity as defined in 26 U.S.C. 7701(a) 5
(Internal Revenue Code) and includes a limited liability company and a similar entity 6
treated as a partnership for federal income tax purposes; 7
(14) "part-year resident estate" means an estate that is a resident of the 8
state for a portion of but not the entire taxable year; 9
(15) "part-year resident individual" means an individual who is a 10
resident of the state for a portion of but not the entire taxable year; 11
(16) "part-year resident trust" means a trust that is a resident of the 12
state for a portion of but not the entire taxable year; 13
(17) "related person" means a person that satisfies the definition of 14
"related persons" in 26 U.S.C. 144 or 147 or a person in a relationship as described in 15
26 U.S.C. 267(b) (Internal Revenue Code); 16
(18) "resident estate" means the estate of a 17
(A) decedent who at the time of death was a resident of the 18
state, regardless of the residence of the fiduciary or beneficiary, if the 19
disposition or administration of the estate is subject to state law; or 20
(B) person who, at the time of commencement of a bankruptcy 21
proceeding under Title 11 of the United States Code, was a resident of the 22
state; 23
(19) "resident individual" means an individual who 24
(A) receives a permanent fund dividend under AS 43.23.005; 25
(B) receives a tax benefit available only to an individual 26
domiciled in the state; or 27
(C) is domiciled in the state for the entire taxable year unless 28
the individual maintains a permanent place of abode outside the state and 29
spends, in the aggregate, not more than 30 days during the taxable year in the 30
state; 31 34-LS0674\A
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(20) "resident trust" means a trust or a portion of a trust consisting of 1
property 2
(A) transferred by will of a decedent who at the time of death 3
was a resident of the state if the disposition or administration of the property is 4
subject to state law; or 5
(B) of a person who was a resident at the time the property was 6
transferred to the trust if, at the time of the transfer, the trust was 7
(i) an irrevocable trust; 8
(ii) a revocable trust and the trust has not become 9
irrevocable; or 10
(iii) a revocable trust and the trust later became 11
irrevocable at a time the person transferring property to the trust was a 12
resident; 13
(21) "revocable trust" means a trust or portion of a trust that is subject 14
to a power, exercisable immediately or at a future time, to revest title in a person 15
whose property constitutes the trust or portion of the trust; 16
(22) "S corporation" means a corporation that has elected to file a 17
federal income tax return under 26 U.S.C. 1361 - 1379 (Internal Revenue Code); 18
(23) "taxable income" means income taxable under this chapter; 19
(24) "taxable year" means the calendar year or a fiscal year ending 20
during the calendar year; 21
(25) "taxpayer" means a person subject to a tax imposed by this 22
chapter; 23
(26) "wages" has the meaning given in 26 U.S.C. 3401. 24
* Sec. 3. AS 43.23 is amended by adding a new section to read: 25
Sec. 43.23.092. Permanent fund dividend individual tax payment. In 26
accordance with AS 43.22.090, the department shall prepare the Alaska permanent 27
fund dividend application to allow an applicant to direct the department to hold all or 28
part of the amount of the individual's permanent fund dividend for application against 29
the tax imposed under AS 43.22. 30
* Sec. 4. AS 43.05.085; AS 43.20.012(b), and 43.20.013 are repealed January 1, 2026. 31 34-LS0674\A
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* Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 1
read: 2
APPLICABILITY. AS 43.22, added by sec. 2 of this Act, applies to income received 3
on or after the effective date of sec. 2 of this Act. 4
* Sec. 6. This Act takes effect January 1, 2026. 5