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  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.