SB 134: "An Act relating to the taxation of income of individuals; repealing tax credits applied against the tax on individuals under the Alaska Net Income Tax Act; and providing for an effective date."

00                             SENATE BILL NO. 134                                                                         
01 "An Act relating to the taxation of income of individuals; repealing tax credits applied                                
02 against the tax on individuals under the Alaska Net Income Tax Act; and providing for                                   
03 an effective date."                                                                                                     
04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
05    * Section 1. AS 43 is amended by adding a new chapter to read:                                                     
06                     Chapter 22. Individual Income Tax.                                                                
07            Sec. 43.22.010. Tax on individuals. (a) A tax is imposed for each calendar                                 
08       year or fraction of a calendar year on every                                                                      
09                 (1)  resident individual; and                                                                           
10                 (2)  nonresident individual with income from a source in the state.                                     
11            (b)  The tax under this section is equal to                                                                  
12                 (1)  for a resident individual, six percent of the taxpayer's total federal                             
13       income tax;                                                                                                       
14                 (2)  for a nonresident individual, six percent of the taxpayer's total                                  
01       federal income tax payable on the amount of the taxpayer's income that is from a                                  
02       source in the state.                                                                                              
03            (c)  In this section, "federal income tax" means the total tax payable to the                                
04       federal government, as reported by the taxpayer on a federal individual income tax                                
05       return, including alternate minimum tax and other taxes imposed by the Internal                                   
06       Revenue Code, net of nonrefundable credits allowed against a liability.                                           
07            Sec. 43.22.020. Credit for taxes paid. (a) A resident is entitled to a credit                              
08       against the tax liability under this chapter for the amount of tax paid to other states,                          
09       territories, or possessions of the United States on income derived from sources in                                
10       those jurisdictions that is also subject to tax in this chapter.                                                  
11            (b)  The claim for credit under (a) of this section may include tax paid by an S                             
12       corporation or partnership on behalf of the individual, based on that individual's share                          
13       of income derived in the other jurisdiction; in this subsection, "S corporation" has the                          
14       meaning given in 26 U.S.C. 1361.                                                                                  
15            (c)  The credit allowed under this section may not exceed an amount equal to                                 
16       the tax imposed under this chapter multiplied by a ratio equal to federal adjusted gross                          
17       income derived from sources in the other jurisdiction divided by total federal adjusted                           
18       gross income.                                                                                                     
19            (d)  The application of the tax credit provided under this section may not                                   
20       operate to reduce the tax payable under this chapter to an amount less than would have                            
21       been payable if the income from the other state was disregarded.                                                
22            Sec. 43.22.030. Returns and payment of taxes. (a) An individual required to                                
23       make a return under the provisions of the Internal Revenue Code shall file with the                               
24       department a return setting out                                                                                   
25                 (1)  the amount of tax due under this chapter; and                                                      
26                 (2)  other information for the purpose of carrying out the provisions of                                
27       this chapter that the department requires.                                                                        
28            (b)  The return must either be on oath or contain a written declaration that it is                           
29       made under penalty of perjury, and the department shall prescribe forms accordingly.                              
30            (c)  The total amount of tax imposed by this chapter is due and payable to the                               
31       department at the same time and in the same manner as the tax payable to the United                               
01       States Internal Revenue Service.                                                                                  
02            (d)  A taxpayer, upon request by the department, shall furnish to the                                        
03       department a true and correct copy of the tax return that the taxpayer has filed with the                         
04       United States Internal Revenue Service. Every taxpayer shall notify the department in                             
05       writing of an alteration in, or modification of, the taxpayer's federal income tax return                         
06       and of a recomputation of tax or determination of deficiency, whether with or without                             
07       assessment. A full statement of the facts must accompany this notice. The taxpayer                                
08       shall file the notice within 60 days after the final determination of the alteration,                             
09       modification, recomputation, or deficiency, and the taxpayer shall pay any additional                             
10       tax due under this chapter at that time. For purposes of this subsection, a final                                 
11       determination means the time that an amended federal return is filed or a notice of                               
12       deficiency or an assessment is mailed to the taxpayer by the Internal Revenue Service,                            
13       and the taxpayer has exhausted rights of appeal under federal law.                                                
14            (e)  The department may credit or refund overpayments of taxes, taxes                                        
15       erroneously or illegally assessed or collected, penalties collected without authority,                            
16       and taxes that are found unjustly assessed or excessive in amount, or otherwise                                   
17       wrongfully collected. The department shall set limitations, specify the manner in                                 
18       which claims for credits or refunds are made, and give notice of allowance or                                     
19       disallowance. When a refund is allowed to a taxpayer, it may be paid out of the                                   
20       general fund on a warrant issued under a voucher approved by the department.                                      
21            Sec. 43.22.040. Income from sources in the state. (a) For purposes of                                      
22       AS 43.22.010(a), income from a source in the state includes                                                       
23                 (1)  compensation for personal services rendered in the state;                                          
24                 (2)  salary or wages earned in the state;                                                               
25                 (3)  income from real or tangible personal property located in the state;                               
26                 (4)  income from stocks, bonds, notes, bank deposits, and other                                         
27       intangible personal property having a taxable or business situs in the state; however,                            
28       the receipt of interest income from intangible property in the state does not alone                               
29       establish a taxable or business situs in the state;                                                               
30                 (5)  rentals and royalties for the use of or for the privilege of using, in                             
31       the state, patents, copyrights, secret processes and formulas, good will, marks, trade                            
01       brands, franchises, and other property having a taxable or business situs in the state;                           
02                 (6)  income distributed from a trust established under or governed by                                   
03       the laws of the state;                                                                                            
04                 (7)  income from a source with a taxable or business situs in the state of                              
05                      (A)  a trust not established under or governed by the laws of the                                  
06            state; or                                                                                                    
07                      (B)  the estate of a decedent who on the date of death was not                                     
08            domiciled in the state;                                                                                      
09                 (8)  income of whatever nature from a source with a taxable or business                                 
10       situs in the state.                                                                                               
11            (b)  In (a) of this section, income is from a source with a taxable or business                              
12       situs in the state if it is attributed to or derived from                                                         
13                 (1)  business facilities or property in the state;                                                      
14                 (2)  business, farming, or fishing activities in the state;                                             
15                 (3)  conducting in the state the management or investment function for                                  
16       intangible property;                                                                                              
17                 (4)  a partnership, limited liability company, estate, or trust conducting                              
18       business activities in the state;                                                                                 
19                 (5)  a corporation transacting business activities in the state that has                                
20       elected to file federal returns as a subchapter under 26 U.S.C. 1362 (Internal Revenue                            
21       Code);                                                                                                            
22                 (6)  any other activity from which income is received, realized, or                                     
23       derived in the state.                                                                                             
24            (c)  For purposes of (a) of this section, if a business, trade, or profession is                             
25       carried on partly inside and partly outside the state, other than the rendering of purely                         
26       personal services by an individual, the income from sources in the state shall be                                 
27       determined as provided in AS 43.19.                                                                               
28            Sec. 43.22.050. Tax withholding on wages of individuals. (a) Every                                         
29       employer making payment of wages, salaries, or crew shares                                                        
30                 (1)  shall deduct and withhold an amount of tax computed in a manner                                    
31       to approximate the amount of tax due on those wages, salaries, or crew shares under                               
01       this chapter for that calendar year;                                                                              
02                 (2)  shall remit the tax withheld to the department accompanied by a                                    
03       return on a form prescribed by the department at the times required by the department                             
04       by regulation;                                                                                                    
05                 (3)  is liable for the payment of the tax required to be deducted and                                   
06       withheld under this section but is not liable to any individual for the amount of the                             
07       payment; and                                                                                                      
08                 (4)  shall furnish to the employee on or before January 31 of the                                       
09       succeeding year, or not later than 30 days after a request by the employee after the                              
10       employee's termination if the 30-day period ends before January 31, a written                                     
11       statement on a form prescribed by the department showing the                                                      
12                      (A)  name and taxpayer identification number of the employer;                                      
13                      (B)  name and social security number of the employee;                                              
14                      (C)  total amount of wages, salary, or crew shares for the                                         
15            calendar year; and                                                                                           
16                      (D)  total amount deducted and withheld as tax under this                                          
17            chapter for the calendar year.                                                                               
18            (b)  The department shall publish the rate of withholding required by this                                   
19       section.                                                                                                          
20            (c)  In this section,                                                                                        
21                 (1)  "employee" includes an individual who receives compensation on a                                   
22       crew share basis in connection with a commercial fishing activity;                                                
23                 (2)  "employer" includes a person who pays compensation to an                                           
24       individual on a crew share basis in connection with a commercial fishing activity.                                
25            Sec. 43.22.060. Administration. The department shall prescribe all necessary                               
26       forms and adopt regulations to implement and interpret this chapter, including                                    
27       regulations for the online filing and payment of tax due under this chapter. The                                  
28       department may incorporate into the regulations provisions of the Internal Revenue                                
29       Code that are necessary or useful to the administration of this chapter.                                          
30            Sec. 43.22.190. Definitions. In this chapter,                                                              
31                 (1)  "domiciled" means established in a true principal permanent home                                   
01       to which the individual has the intention of returning whenever absent;                                           
02                 (2)  "individual" means a natural person, married or unmarried, adult or                                
03       minor, subject to payment of income tax under 26 U.S.C. (Internal Revenue Code);                                  
04                 (3)  "Internal Revenue Code" means the Internal Revenue Code of the                                     
05       United States (26 U.S.C.) as the code exists now or as hereafter amended, as the code                             
06       and amendments apply to the normal taxes and surtax on net incomes, which                                         
07       amendments are operative for the purposes of this chapter as of the time they became                              
08       operative or will become operative under federal law;                                                             
09                 (4)  "nonresident" means an individual who is not a resident;                                           
10                 (5)  "resident" means an individual who                                                                 
11                      (A)  was domiciled in the state or resided in the state for the                                    
12            entire calendar year;                                                                                        
13                      (B)  claims to be a resident of the state on the individual's                                      
14            federal tax forms;                                                                                           
15                      (C)  receives a permanent fund dividend under AS 43.23;                                            
16                      (D)  is registered to vote under AS 15; or                                                         
17                      (E)  received a resident fishing, hunting, or trapping license                                     
18            during the calendar year under AS 16;                                                                        
19                 (6)  "taxpayer" means a person subject to a tax imposed by this chapter.                                
20    * Sec. 2. AS 43.05.085; AS 43.20.012(b), and 43.20.013 are repealed.                                               
21    * Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to                          
22 read:                                                                                                                   
23       APPLICABILITY. This Act applies to income received on or after the effective date                                 
24 of this Act.                                                                                                            
25    * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to                          
26 read:                                                                                                                   
27       TRANSITIONAL PROVISION: REGULATIONS. The Department of Revenue may                                                
28 adopt regulations necessary to implement the changes made by this act. The regulations take                             
29 effect under AS 44.62 (Administrative Procedure Act), but not before January 1, 2017.                                   
30    * Sec. 5. Section 4 of this Act takes effect immediately under AS 01.10.070(c).                                    
31    * Sec. 6. Except as provided in sec. 5 of this Act, this Act takes effect January 1, 2017.