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HB 115: "An Act relating to the permanent fund dividend; relating to the appropriation of certain amounts of the earnings reserve account; relating to the taxation of income of individuals; relating to a payment against the individual income tax from the permanent fund dividend disbursement; repealing tax credits applied against the tax on individuals under the Alaska Net Income Tax Act; and providing for an effective date."

00                             HOUSE BILL NO. 115                                                                          
01 "An Act relating to the permanent fund dividend; relating to the appropriation of                                       
02 certain amounts of the earnings reserve account; relating to the taxation of income of                                  
03 individuals; relating to a payment against the individual income tax from the permanent                                 
04 fund dividend disbursement; repealing tax credits applied against the tax on individuals                                
05 under the Alaska Net Income Tax Act; and providing for an effective date."                                              
06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
07    * Section 1. The uncodified law of the State of Alaska is amended by adding a new section                          
08 to read:                                                                                                                
09       SHORT TITLE. This Act may be known as the State Revenue Restructuring Act.                                        
10    * Sec. 2. AS 37.13.140 is amended to read:                                                                         
11 Sec. 37.13.140.  Income and market value.  Net income of the fund includes                                          
12 income of the earnings reserve account established under AS 37.13.145. The                                          
13 corporation shall determine the net [NET] income of the fund [SHALL BE                                              
01 COMPUTED ANNUALLY AS OF THE LAST DAY OF THE FISCAL YEAR] in                                                             
02 accordance with generally accepted accounting principles, excluding any unrealized                                      
03 gains or losses. [INCOME AVAILABLE FOR DISTRIBUTION EQUALS 21                                                           
04 PERCENT OF THE NET INCOME OF THE FUND FOR THE LAST FIVE FISCAL                                                          
05 YEARS, INCLUDING THE FISCAL YEAR JUST ENDED, BUT MAY NOT                                                                
06 EXCEED NET INCOME OF THE FUND FOR THE FISCAL YEAR JUST ENDED                                                            
07 PLUS THE BALANCE IN THE EARNINGS RESERVE ACCOUNT DESCRIBED                                                              
08       IN AS 37.13.145.]                                                                                                 
09    * Sec. 3. AS 37.13.140 is amended by adding a new subsection to read:                                              
10 (b)  The corporation shall determine the amount available for distribution each                                         
11 year. The amount available for distribution is 4.75 percent of the average market value                                 
12 of the fund for the first five of the preceding six fiscal years, excluding the fiscal year                             
13 just ended, computed annually for each fiscal year in accordance with generally                                         
14 accepted accounting principles. In this subsection, "the average market value of the                                    
15 fund" includes the balance of the earnings reserve account established under                                            
16 AS 37.13.145, but does not include that portion of the principal attributed to the                                      
17 settlement of State v. Amerada Hess, et al., 1JU-77-847 Civ. (Superior Court, First                                     
18       Judicial District).                                                                                               
19    * Sec. 4. AS 37.13.145(b) is amended to read:                                                                      
20 (b)  Each [AT THE END OF EACH] fiscal year, the legislature may                                                 
21 appropriate [CORPORATION SHALL TRANSFER] from the earnings reserve                                                  
22       account to the                                                                                                    
23 (1)  dividend fund established under AS 43.23.045, 33 [50] percent of                                           
24       the income available for distribution under AS 37.13.140(b); and                                              
25 (2)  general fund, 67 percent of the income available for                                                           
26       distribution under AS 37.13.140(b) [AS 37.13.140].                                                            
27    * Sec. 5. AS 37.13.145(d) is amended to read:                                                                      
28 (d)  Income [NOTWITHSTANDING (b) OF THIS SECTION, INCOME]                                                           
29 earned on money awarded in or received as a result of State v. Amerada Hess, et al.,                                    
30 1JU-77-847 Civ. (Superior Court, First Judicial District), including settlement,                                        
31 summary judgment, or adjustment to a royalty-in-kind contract that is tied to the                                       
01 outcome of this case, or interest earned on the money, or on the earnings of the money                                  
02 shall be treated in the same manner as other income of the Alaska permanent fund,                                       
03 except that it is not available for distribution [TO THE DIVIDEND FUND OR FOR                                           
04 TRANSFERS TO THE PRINCIPAL] under (b) [(c)] of this section, and shall be                                           
05       annually deposited into the Alaska capital income fund (AS 37.05.565).                                            
06    * Sec. 6. AS 37.13.145 is amended by adding a new subsection to read:                                              
07 (e)  Each year, after the appropriations under (b) of this section, the legislature                                     
08 may appropriate from the earnings reserve account to the principal of the permanent                                     
09 fund the amount by which the balance of the earnings reserve account exceeds four                                       
10       times the amount calculated for appropriation under (b) of this section.                                          
11    * Sec. 7. AS 37.13.150 is amended to read:                                                                         
12 Sec. 37.13.150. Corporation budget. The revenue generated by the fund's                                               
13 investments must be identified as the source of the operating budget of the corporation                                 
14 in the state's operating budget under AS 37.07 (Executive Budget Act). The                                              
15 unexpended balance of the corporation's annual operating budget does not lapse at the                                   
16 end of the fiscal year but shall be treated as income and part of the market value of                               
17       the fund under AS 37.13.140.                                                                                  
18    * Sec. 8. AS 37.13.300(c) is amended to read:                                                                      
19 (c)  Net income from the mental health trust fund may not be included in the                                            
20 computation of net income or market value available for distribution under                                          
21       AS 37.13.140.                                                                                                   
22    * Sec. 9. AS 37.14.031(c) is amended to read:                                                                      
23 (c)  The net income of the fund shall be determined by the Alaska Permanent                                             
24 Fund Corporation, computed annually as of the last day of the fiscal year, in                                       
25 accordance with generally accepted accounting principles, excluding any                                             
26 unrealized gains or losses [IN THE SAME MANNER THE CORPORATION                                                      
27 DETERMINES THE NET INCOME OF THE ALASKA PERMANENT FUND                                                                  
28       UNDER AS 37.13.140].                                                                                              
29    * Sec. 10. AS 43.05.045(a) is amended to read:                                                                     
30 (a)  Except as provided in AS 43.22.020(f), or unless [UNLESS] an                                                   
31 exemption is granted under (b) of this section, a taxpayer required to submit a return                                  
01 or report for a tax levied under this title or for any other tax administered by the                                    
02 department shall submit the return or report electronically in a format prescribed by                                   
03 the department. Failure to comply with this section may result in a civil penalty under                                 
04 AS 43.05.220(f). If a law under this title requires a report or return or a portion of a                                
05 report or return to be in writing, an electronically filed report or return satisfies this                              
06 section. A taxpayer shall submit attachments to a report or return required under this                                  
07       title electronically.                                                                                             
08    * Sec. 11. AS 43 is amended by adding a new chapter to read:                                                       
09                     Chapter 22. Individual Income Tax.                                                                
10 Sec. 43.22.010. Tax on individuals. (a) Except as provided in (c) of this                                             
11       section, a tax is imposed for each calendar year or fraction of a calendar year on every                          
12                 (1)  resident individual; and                                                                           
13                 (2)  nonresident individual with income from a source in the state.                                     
14            (b)  The tax under this section for a                                                                        
15                 (1)  resident individual is equal to the sum of                                                         
16 (A)  15 percent of the individual's total federal income tax due                                                        
17            or $25, whichever is greater; and                                                                            
18 (B)  the product of the individual's long-term capital gains for                                                        
19            the calendar year and the lesser of                                                                          
20                           (i)  10 percent; or                                                                           
21 (ii)  the difference between the individual's incremental                                                               
22 federal income tax rate on ordinary income and the individual's federal                                                 
23                 tax rate on long-term capital gains; or                                                                 
24                 (2)  nonresident individual is equal to the sum of                                                      
25 (A)  15 percent of the nonresident individual's total federal                                                           
26 income tax due on the amount of the individual's income from a source in the                                            
27            state or $25, whichever is greater; and                                                                      
28 (B)  the product of the taxpayer's long-term capital gains from a                                                       
29            source in the state for the calendar year and the lesser of                                                  
30                           (i)  10 percent; or                                                                           
31 (ii)  the difference between the taxpayer's incremental                                                                 
01                 federal income tax rate on ordinary income and the taxpayer's federal                                   
02                 tax rate on long-term capital gains.                                                                    
03            (c)  An individual who, under federal law, is not required to file a federal                                 
04       individual income tax return is exempt from the tax due under this chapter.                                       
05            (d)  In this section,                                                                                        
06 (1)  "federal income tax due" means the total tax payable to the federal                                                
07 government as reported by the taxpayer on a federal individual income tax return,                                       
08 including alternative minimum tax, net of nonrefundable credits allowed against a                                       
09 liability and net of federal tax attributable to income from stocks and obligations of the                              
10       United States government exempt from taxation under 31 U.S.C. 3124;                                               
11 (2)  "long-term capital gains" means the total long-term capital gains                                                  
12 required to be reported on the federal individual income tax form related to capital                                    
13       gains attached to a federal individual income tax return.                                                         
14 Sec. 43.22.020. Returns and payment of taxes. (a) An individual required to                                           
15 make a return under the provisions of the Internal Revenue Code shall file with the                                     
16       department a return setting out                                                                                   
17                 (1)  the amount of tax due under this chapter; and                                                      
18 (2)  other information for the purpose of carrying out the provisions of                                                
19       this chapter that the department requires.                                                                        
20 (b)  The return shall either be on oath or contain a written declaration that it is                                     
21       made under penalty of perjury, and the department shall prescribe forms accordingly.                              
22 (c)  The total amount of tax imposed by this chapter is due and payable to the                                          
23 department at the same time and in the same manner as the tax payable to the United                                     
24       States Internal Revenue Service.                                                                                  
25 (d)  A taxpayer, upon request by the department, shall furnish to the                                                   
26 department a true and correct copy of the tax return that the taxpayer has filed with the                               
27 United States Internal Revenue Service. Every taxpayer shall notify the department in                                   
28 writing of an alteration in, or modification of, the taxpayer's federal income tax return                               
29 and of a recomputation of tax or determination of deficiency, whether with or without                                   
30 assessment. A full statement of the facts must accompany this notice. The taxpayer                                      
31 shall file the notice within 60 days after the final determination of the alteration,                                   
01 modification, recomputation, or deficiency, and the taxpayer shall pay the additional                                   
02 tax under this chapter at that time. For purposes of this subsection, a final                                           
03 determination means the time that an amended federal return is filed or a notice of                                     
04 deficiency or an assessment is mailed to the taxpayer by the Internal Revenue Service,                                  
05       and the taxpayer has exhausted rights of appeal under federal law.                                                
06 (e)  The department may credit or refund overpayments of taxes, taxes                                                   
07 erroneously or illegally assessed or collected, penalties collected without authority,                                  
08 and taxes that are found unjustly assessed or excessive in amount, or otherwise                                         
09 wrongfully collected. The department shall set limitations, specify the manner in                                       
10 which claims for credits or refunds are made, and give notice of allowance or                                           
11 disallowance. When a refund is allowed to a taxpayer, it shall be paid out of the                                       
12       general fund on a warrant issued under a voucher approved by the department.                                      
13 (f)  Except as otherwise required in this subsection, a taxpayer is not required                                        
14 to file a return under this section electronically. A person employed to prepare and file                               
15 income tax returns for 10 or more individuals shall file the returns for those                                          
16       individuals electronically.                                                                                       
17 Sec. 43.22.030. Income from sources in the state. (a) For purposes of                                                 
18       AS 43.22.010(a), income from a source in the state includes                                                       
19                 (1)  compensation for personal services rendered in the state;                                          
20                 (2)  salary or wages earned in the state;                                                               
21                 (3)  income from real or tangible personal property located in the state;                               
22 (4)  income from stocks, bonds, notes, bank deposits, and other                                                         
23       intangible personal property having a taxable or business situs in the state;                                     
24 (5)  rentals and royalties for the use of or for the privilege of using, in                                             
25 the state, patents, copyrights, secret processes and formulas, good will, marks, trade                                  
26       brands, franchises, and other property having a taxable or business situs in the state;                           
27 (6)  income of whatever nature from a source with a taxable or business                                                 
28       situs in the state, including income attributed to or derived from                                                
29                      (A)  business facilities or property in the state;                                                 
30                      (B)  business, farming, or fishing activities in the state;                                        
31 (C)  conducting in the state the management or investment                                                               
01            function for intangible property;                                                                            
02                      (D)  a partnership, limited liability company, estate, or trust                                    
03            conducting business activities in the state;                                                                 
04                      (E)  a corporation transacting business activities in the state that                               
05            has elected to file federal returns under 26 U.S.C. 1362 (Internal Revenue                                   
06            Code);                                                                                                       
07                      (F)  any other activity from which income is received, realized,                                   
08            or derived in the state.                                                                                     
09            (b)  In this section, if a business, trade, or profession is carried on partly inside                        
10 and partly outside the state, the income from sources in the state shall be determined                                  
11       under AS 43.19 or as otherwise provided under AS 43.20.141 - 43.20.145.                                           
12 Sec. 43.22.035. Credit for taxes paid. (a) A resident is entitled to a credit                                         
13 against the tax liability under this chapter for the amount of tax paid to other states,                                
14 territories, or possessions of the United States on income derived from sources in                                      
15       those jurisdictions that is also subject to tax in this chapter.                                                  
16 (b)  The claim for credit under (a) of this section may include tax paid by an S                                        
17 corporation or partnership on behalf of the individual, based on that individual's share                                
18 of income derived in the other jurisdiction. In this subsection, "S corporation" has the                                
19       meaning given in 26 U.S.C. 1361.                                                                                  
20 (c)  The credit allowed under this section may not exceed an amount equal to                                            
21 the tax imposed under this chapter multiplied by a ratio equal to federal adjusted gross                                
22 income derived from sources in the other jurisdiction divided by total federal adjusted                                 
23       gross income.                                                                                                     
24 (d)  The application of the tax credit provided under this section may not                                              
25 operate to reduce the tax payable under this chapter to an amount less than would have                                  
26       been payable if the income from the other state was disregarded.                                                
27 Sec. 43.22.040. Permanent fund tax payment. The department shall adopt                                                
28 regulations establishing procedures for an individual eligible for a dividend under                                     
29 AS 43.23.005 to direct the department to hold all or a part of the amount of the                                        
30 dividend to pay the tax due under this chapter. The amount held under this section                                      
31 may not exceed the dividend amount after contributions, garnishments, levies, fees,                                     
01 attachments, assignments, or other reductions or donations allowed under AS 43.23.                                      
02 The department shall apply the amount held under this section to the tax period in                                      
03 which the taxpayer applies for the dividend. The department shall refund the amount                                     
04 of the dividend not applied against taxes under this section to the individual who                                      
05       appears on the application for the dividend.                                                                      
06 Sec. 43.22.050. Tax withholding on wages of individuals. (a) Every                                                    
07       employer making payment of wages or salaries or a person paying a crew share                                      
08 (1)  shall deduct and withhold an amount of tax computed in a manner                                                    
09 to approximate the amount of tax due on those wages, salaries, or crew shares under                                     
10       this chapter for that calendar year;                                                                              
11 (2)  shall remit the tax withheld to the department accompanied by a                                                    
12 return on a form prescribed by the department at the times required by the department                                   
13       by regulation;                                                                                                    
14 (3)  is liable for the payment of the tax required to be deducted and                                                   
15 withheld under this section but is not liable to any individual for the amount of the                                   
16       payment; and                                                                                                      
17 (4)  shall furnish to the employee or individual receiving a crew share                                                 
18 on or before January 31 of the succeeding year, or within 30 days after a request by                                    
19 the employee or individual receiving a crew share after the employee's or individual's                                  
20 termination if the 30-day period ends before January 31, a written statement on a form                                  
21       prescribed by the department showing                                                                              
22 (A)  the name and taxpayer identification number of the                                                                 
23            employer or person paying a crew share;                                                                      
24 (B)  the name and social security number of the employee or                                                             
25            individual receiving a crew share;                                                                           
26 (C)  the total amount of wages, salary, or crew shares for the                                                          
27            calendar year; and                                                                                           
28 (D)  the total amount deducted and withheld as tax under this                                                           
29            chapter for the calendar year.                                                                               
30 (b)  The department shall publish the rate of withholding required by this                                              
31       section.                                                                                                          
01            (c)  Nothing in this section shall be interpreted to preclude an individual                                  
02       receiving a crew share from being classified as an independent contractor for tax                                 
03       purposes.                                                                                                         
04            Sec. 43.22.055. Refunds. Notwithstanding AS 43.05.230, information on an                                 
05       individual income tax return may be released to a banking institution to verify the                               
06       direct deposit of an income tax refund or correct an error in that deposit.                                     
07            Sec. 43.22.060. Administration. (a) The department shall                                                 
08                 (1)  prescribe all forms necessary to implement this chapter, including a                               
09       form that requires a taxpayer to itemize deductions and credits taken against the tax                             
10       due under this chapter; and                                                                                       
11 (2)  adopt regulations to implement and interpret this chapter, including                                               
12 regulations for the online filing and payment of tax due under this chapter or the                                      
13       prepayment of an estimated tax due under this chapter.                                                            
14 (b)  The department may incorporate into the regulations provisions of the                                              
15 Internal Revenue Code that are necessary or useful to the administration of this                                        
16       chapter.                                                                                                          
17            Sec. 43.22.190. Definitions. In this chapter,                                                              
18 (1)  "domiciled" means established in a true principal permanent home                                                   
19       to which the individual has the intention of returning whenever absent;                                           
20 (2)  "individual" means a natural person, married or unmarried, adult or                                                
21       minor, subject to payment of income tax under 26 U.S.C. (Internal Revenue Code);                                  
22 (3)  "Internal Revenue Code" means the Internal Revenue Code of the                                                     
23 United States (26 U.S.C.) as the code exists now or as hereafter amended, as the code                                   
24 and amendments apply to the normal taxes and surtax on net incomes, which                                               
25 amendments are operative for the purposes of this chapter as of the time they became                                    
26       operative or will become operative under federal law;                                                             
27                 (4)  "nonresident" means an individual who is not a resident;                                           
28                 (5)  "resident" means an individual who                                                                 
29 (A)  was domiciled in the state or resided in the state for the                                                         
30            entire calendar year;                                                                                        
31 (B)  claims to be a resident of the state on the individual's                                                           
01            federal tax forms;                                                                                           
02                      (C)  receives a permanent dividend under AS 43.23;                                                 
03                      (D)  is registered to vote under AS 15;                                                            
04                      (E)  received a resident fishing, hunting, or trapping license                                     
05            during the calendar year under AS 16; or                                                                     
06                      (F)  receives a tax benefit available only to an individual                                        
07            domiciled in the state;                                                                                      
08                 (6)  "taxpayer" means a person subject to a tax imposed by this chapter.                                
09    * Sec. 12. AS 43.23 is amended by adding a new section to read:                                                    
10 Sec. 43.23.092. Permanent fund dividend individual income tax payment.                                                
11 In accordance with AS 43.22.040, the department shall prepare the Alaska permanent                                      
12 fund dividend application to allow an applicant to direct the department to hold all or                                 
13 part of the amount of the individual's permanent fund dividend for application against                                  
14       the individual income tax imposed under AS 43.22.                                                                 
15    * Sec. 13. AS 37.13.145(c); AS 43.05.085; AS 43.20.012(b), and 43.20.013 are repealed.                           
16    * Sec. 14. The uncodified law of the State of Alaska is amended by adding a new section to                         
17 read:                                                                                                                   
18 APPLICABILITY. AS 43.22, added by sec. 11 of this Act, applies to income received                                       
19 on or after the effective date of sec. 11 of this Act.                                                                  
20    * Sec. 15. The uncodified law of the State of Alaska is amended by adding a new section to                         
21 read:                                                                                                                   
22 TRANSITION: REGULATIONS. The Department of Revenue may adopt regulations                                                
23 necessary to implement this Act. The regulations take effect under AS 44.62 (Administrative                             
24 Procedure Act), but not before the effective date of the law implemented by the regulation.                             
25    * Sec. 16. The uncodified law of the State of Alaska is amended by adding a new section to                         
26 read:                                                                                                                   
27 RETROACTIVITY. If secs. 2 - 9 of this Act take effect after June 30, 2017, secs. 2 - 9                                  
28 of this Act are retroactive to June 30, 2017.                                                                           
29    * Sec. 17. Sections 1 - 9, 15, and 16 of this Act take effect immediately under                                    
30 AS 01.10.070(c).                                                                                                        
31    * Sec. 18. Except as provided in sec. 17 of this Act, this Act takes effect January 1, 2018.