CSHB 115(FIN): "An Act bearing the short title of the 'Education Funding Act'; relating to the taxation of income of individuals, partners, shareholders in S corporations, trusts, and estates; 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 CS FOR HOUSE BILL NO. 115(FIN) 01 "An Act bearing the short title of the 'Education Funding Act'; relating to the taxation 02 of income of individuals, partners, shareholders in S corporations, trusts, and estates; 03 relating to a payment against the individual income tax from the permanent fund 04 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 Education Funding Act. 10 * Sec. 2. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 LEGISLATIVE INTENT. It is the intent of the legislature that, under this Act, 13 (1) income up to $14,300 for an individual, plus income from permanent fund
01 dividends, will not be subject to income tax under AS 43.22; 02 (2) income up to $28,600 for two individuals filing jointly who do not have 03 dependents, plus income from permanent fund dividends, will not be subject to the income tax 04 under AS 43.22; 05 (3) an individual, or two individuals filing jointly, will receive an additional 06 $4,000 deduction for each dependent, resulting in an increase in the amounts stated in (1) and 07 (2) of this section of $4,000 for each dependent. 08 * Sec. 3. AS 43.05.045(a) is amended to read: 09 (a) Except as provided in AS 43.22.075(i), or unless [UNLESS] an 10 exemption is granted under (b) of this section, a taxpayer required to submit a return 11 or report for a tax levied under this title or for any other tax administered by the 12 department shall submit the return or report electronically in a format prescribed by 13 the department. Failure to comply with this section may result in a civil penalty under 14 AS 43.05.220(f). If a law under this title requires a report or return or a portion of a 15 report or return to be in writing, an electronically filed report or return satisfies this 16 section. A taxpayer shall submit attachments to a report or return required under this 17 title electronically. 18 * Sec. 4. AS 43 is amended by adding a new chapter to read: 19 Chapter 22. Individual Income Tax. 20 Sec. 43.22.010. Income tax on individuals. (a) Each calendar year or fraction 21 of a calendar year, an income tax is imposed on the income of a 22 (1) resident; 23 (2) nonresident that is derived from or connected with a source in the 24 state. 25 (b) The tax under this section for an individual is determined as follows: 26 If the taxable income is Then the tax is 27 Less than $10,300 $0 28 $10,300 but less than $50,000 2.5 percent of the amount in 29 excess of $10,300 30 $50,000 but less than $100,000 $992.50 plus 4 percent of the amount 31 in excess of $50,000
01 $100,000 but less than $200,000 $2,992.50 plus 5 percent of the 02 amount in excess of $100,000 03 $200,000 but less than $250,000 $7,992.50 plus 6 percent of the 04 amount in excess of $200,000 05 $250,000 or more $10,992.50 plus 7 percent of the 06 amount in excess of $250,000. 07 (c) Except as otherwise provided in this section, the tax under this section for 08 two individuals who file a joint federal income tax return is determined as follows: 09 If the taxable income is Then the tax is 10 Less than $20,600 $0 11 $20,600 but less than $100,000 2.5 percent of the amount in 12 excess of $20,600 13 $100,000 but less than $200,000 $1,985 plus 4 percent of the amount in 14 excess of $100,000 15 $200,000 but less than $400,000 $5,985 plus 5 percent of the amount in 16 excess of $200,000 17 $400,000 but less than $500,000 $15,985 plus 6 percent of the amount 18 in excess of $400,000 19 $500,000 or more $21,985 plus 7 percent of the amount 20 in excess of $500,000. 21 (d) An individual who is eligible to file a joint federal income tax return but 22 who files an individual federal income tax return shall determine the tax imposed by 23 this chapter under (b) of this section. 24 (e) Two resident individuals who are eligible to file a joint federal income tax 25 return but who do not, individually or jointly, file a federal income tax return may 26 elect to determine the tax imposed by this chapter either 27 (1) individually under (b) of this section; or 28 (2) jointly under (c) of this section. 29 (f) Two individuals who file a joint federal income tax return one or both of 30 whom is not a resident may elect to determine the tax imposed by this chapter either 31 (1) individually under (b) of this section; or
01 (2) jointly under (c) of this section, as if both individuals were 02 residents; the income of the individuals filing jointly under this paragraph is not 03 subject to the calculation under AS 43.22.015. 04 Sec. 43.22.015. Calculation of tax on a nonresident individual. Except as 05 otherwise provided in this chapter, the tax on a nonresident individual is the product of 06 the tax determined under AS 43.22.010(b) on the nonresident individual's taxable 07 income computed as if the nonresident individual were a resident individual, 08 multiplied by a fraction, the numerator of which is the nonresident individual's income 09 taxable under AS 43.22.045 and the denominator of which is the nonresident 10 individual's taxable income computed as if the nonresident individual were a resident 11 individual. However, if a nonresident individual's taxable income computed as if the 12 nonresident individual were a resident individual is less than the nonresident 13 individual's income taxable under AS 43.22.045, the tax imposed by this chapter is on 14 the nonresident individual's taxable income. 15 Sec. 43.22.020. Tax on trusts and estates. (a) A tax is imposed for each 16 taxable year or portion of a taxable year on the taxable income of a resident or 17 nonresident trust or estate. Except as provided in (b) of this section, the tax under this 18 section for a trust or estate is determined as follows: 19 If the taxable income is Then the tax is 20 Less than $50,000 2.5 percent of the amount in excess of 21 $0 22 $50,000 but less than $100,000 $1,250 plus 4 percent of the amount in 23 excess of $50,000 24 $100,000 but less than $200,000 $3,250 plus 5 percent of the amount in 25 excess of $100,000 26 $200,000 but less than $250,000 $8,250 plus 6 percent of the amount in 27 excess of $200,000 28 $250,000 or more $11,250 plus 7 percent of the amount 29 in excess of $250,000. 30 (b) A tax of 2.5 percent is imposed on the taxable income of a resident or 31 nonresident Alaska Native Settlement Trust that has elected for alternative federal tax
01 treatment under 26 U.S.C. 646 (Internal Revenue Code). 02 (c) In this section, the taxable income of a nonresident trust or estate is the 03 income of the trust or estate that is derived from or connected with a source in the 04 state. 05 (d) A trust is not subject to tax under this chapter if 06 (1) all of the trustees of the trust are nonresidents; 07 (2) the entire corpus of the trust, including real, tangible, and 08 intangible property, is located outside the state; and 09 (3) no income or gains of the trust are derived from or connected with 10 a source in the state. 11 (e) For purposes of (d)(1) of this section, a trustee that is a nonresident 12 banking corporation at the time the banking corporation becomes a trustee is a 13 nonresident trustee even if the banking corporation later becomes a resident trustee 14 because it is acquired by or becomes an office or branch of a resident trustee. 15 (f) A trust that is exempt from federal income tax because of its purpose or 16 activities is not subject to tax under this chapter. 17 (g) A special needs trust or other trust established to provide solely for the 18 housing, living expenses, or medical care of a disabled beneficiary is not subject to tax 19 under this chapter. In this subsection, 20 (1) "disabled beneficiary" means an individual who has 21 (A) a physical or mental impairment that substantially limits 22 one or more major life activities; or 23 (B) a condition that may require the use of a prosthesis, special 24 equipment for mobility, or a service animal; 25 (2) "special needs trust" has the meaning given in AS 13.36.215(b). 26 Sec. 43.22.025. Credit for income taxes imposed by other jurisdictions. (a) 27 A resident individual, trust, or estate or part-year resident individual, trust, or estate of 28 the state is allowed a credit against the tax due under this chapter for an income tax 29 that was imposed on the resident or part-year resident for the taxable year by another 30 state or the political subdivision of another state on income derived from or connected 31 with that state or political subdivision.
01 (b) A credit allowed under (a) of this section 02 (1) for a resident individual, trust, or estate may not exceed the 03 individual's, trust's, or estate's tax due under this chapter before credits are applied, 04 multiplied by a ratio, the numerator of which is the portion of the individual's, trust's, 05 or estate's taxable income that is derived from or connected with a source in another 06 state or the political subdivision of another state and the denominator of which is the 07 resident individual's, trust's, or estate's taxable income; 08 (2) for a part-year resident individual, trust, or estate may not exceed 09 the individual's, trust's, or estate's tax due for the period of state residency before 10 credits are applied, multiplied by a ratio, the numerator of which is the individual's, 11 trust's, or estate's taxable income derived from or connected with a source in another 12 state or the political subdivision of another state during the period of state residency 13 and the denominator of which is the part-year resident individual's, trust's, or estate's 14 taxable income during the period of state residency; 15 (3) may not reduce the tax due under this chapter to less than the tax 16 that would have been due if the income derived from or connected with a source in 17 another state or the political subdivision of another state and subject to taxation by the 18 other state or political subdivision had been excluded from the resident or part-year 19 resident individual's, trust's, or estate's taxable income during the calculation of tax 20 under this chapter before the application of credits. 21 (c) If the tax administration of another state or a political subdivision of 22 another state determines that a taxpayer has overpaid tax, affecting the computation of 23 the credit allowed under this section for any taxable year, the taxpayer shall file an 24 amended return with the department not later than 90 days after the final determination 25 by the state or political subdivision that the tax was overpaid. The department may 26 assess a taxpayer additional tax, proportional to the amount overpaid in the other state 27 or political subdivision. 28 (d) A taxpayer is not allowed a credit under this section for taxes paid to 29 another jurisdiction if the taxpayer has or will claim a credit against the income tax 30 imposed by the other jurisdiction for the tax paid or payable under this chapter. 31 (e) Income tax imposed on a partner or the shareholder of an S corporation on
01 the income of the partnership or S corporation, including tax paid by the partnership or 02 S corporation to satisfy the tax liability of the partner or shareholder, may be included 03 in the calculation of a credit under this section. Tax imposed on the partnership or S 04 corporation that is the direct liability of the partnership or S corporation and not that of 05 the partner or shareholder may not be included in the calculation of a credit under this 06 section. 07 Sec. 43.22.030. Taxable income; general rule. (a) In this chapter, taxable 08 income is the taxpayer's federal adjusted gross income for the taxable year 09 (1) plus, if not already included in federal adjusted gross income, 10 (A) interest on obligations of another state, a political 11 subdivision of another state, the public instrumentality of another state, or the 12 local authority of another state; 13 (B) a loss on the sale or exchange of an obligation issued by or 14 on behalf of 15 (i) the state; 16 (ii) a municipality of the state; or 17 (iii) a public instrumentality, public authority, or public 18 corporation created under state law; 19 (C) a loss from the sale or exchange of shares in a unit 20 investment trust if the loss is attributable to an obligation issued by or on 21 behalf of 22 (i) the state; 23 (ii) a municipality of the state; or 24 (iii) a public instrumentality, public authority, or public 25 corporation created under state law; 26 (D) interest or dividends on obligations or securities issued by 27 the United States, or an authority, commission, or instrumentality of the United 28 States, that the Internal Revenue Code exempts from federal income tax but 29 does not prevent from including; 30 (E) income taxes under this chapter; 31 (F) a gain realized but not recognized under 26 U.S.C. 1031
01 (Internal Revenue Code); 02 (G) a deduction allowed in the determination of federal 03 adjusted gross income that is directly or indirectly related to income that is not 04 taxable under this chapter; and 05 (H) income of an incomplete gift nongrantor trust to which a 06 taxpayer transferred property, less deductions of the trust, if 07 (i) the income and deductions of the trust would be 08 taken into account in computing the taxpayer's federal taxable income 09 if the trust in its entirety was treated as a grantor trust under the Internal 10 Revenue Code; 11 (ii) the trust is a resident trust; 12 (iii) the trust does not qualify as a grantor trust under 26 13 U.S.C. 671 - 679 (Internal Revenue Code); and 14 (iv) the grantor's transfer of assets to the trust is treated 15 as an incomplete gift under 26 U.S.C. 2511 (Internal Revenue Code); 16 (2) minus, if included in federal adjusted gross income, 17 (A) interest income or a dividend from an obligation that is 18 exempt from taxation by a state under federal law; 19 (B) a refund or credit for the overpayment of an income tax; 20 (C) an ordinary and necessary expense, including an interest 21 expense, paid or incurred during the taxable year that is directly or indirectly 22 related to income exempt under the Internal Revenue Code but taxable by the 23 state; 24 (D) a gain recognized under 26 U.S.C. 1031 (Internal Revenue 25 Code) that was included in federal adjusted gross income under (1) of this 26 subsection; 27 (E) income exempt under 4 U.S.C. 114; 28 (F) compensation prohibited from state taxation by 50 U.S.C. 29 3901 - 4043 (Servicemembers Civil Relief Act); 30 (G) a gain from the sale or exchange of an obligation issued by 31 or on behalf of
01 (i) the state; 02 (ii) a municipality of the state; or 03 (iii) a public instrumentality, public authority, or public 04 corporation created under state law; and 05 (H) a permanent fund dividend received under AS 43.23; 06 (I) $4,000 for each exemption claimed on the taxpayer's federal 07 income tax return for the individual, an individual filing jointly with the 08 individual, or a dependent of the individual; a reduction under this 09 subparagraph may not 10 (i) be claimed by a trust; 11 (ii) reduce a taxpayer's tax liability under this chapter to 12 below zero. 13 (b) When calculating taxable income, a taxpayer 14 (1) may not carry back a net operating loss under 26 U.S.C. 15 172(b)(1)(A)(i) (Internal Revenue Code); 16 (2) may carry over a net operating loss under 26 U.S.C. 17 172(b)(1)(A)(ii) (Internal Revenue Code), except that a loss may not be carried over 18 for more than five years; for a taxpayer subject to AS 43.19 (Multistate Tax Compact), 19 the amount of a net operating loss allowed to be carried over is limited to the amount 20 apportioned to the state in the taxable year in which the loss was generated under 21 AS 43.19 (Multistate Tax Compact); 22 (3) shall include the modifications required by AS 43.20.144(b)(2), 23 concerning intangible drilling and development costs, AS 43.20.144(b)(3), concerning 24 percentage depletion, and AS 43.20.144(b)(3), concerning depreciation. 25 Sec. 43.22.035. Taxable income from partnerships and S corporations. (a) 26 A partner or shareholder shall make an adjustment described in AS 43.22.030 to an 27 item of income, gain, loss, or deduction from a partnership or S corporation in 28 proportion to a partner's distributive share of a partnership or a shareholder's pro rata 29 share of an S corporation. If a partner's distributive or a shareholder's pro rata share of 30 an adjustment is not required to be accounted for separately for federal income tax 31 purposes, the partner's or shareholder's share of the adjustment must be determined in
01 proportion to the partner's or shareholder's share of partnership or S corporation 02 income or losses for federal income tax purposes. 03 (b) In determining taxable income, a partner or shareholder shall treat an item 04 of income, gain, loss, or deduction from a partnership or S corporation as if it has the 05 same character as it does for federal income tax purposes. If an item of income, gain, 06 loss, or deduction from a partnership or S corporation is not accounted for separately 07 for federal income tax purposes, a partner or shareholder shall treat it as if the item of 08 income, gain, loss, or deduction was realized directly from the source from which it 09 was realized by the partnership or S corporation or incurred in the same manner in 10 which it was incurred by the partnership or S corporation. 11 (c) If the principal purpose of a special allocation of an item of partnership 12 income, gain, loss, or deduction is the avoidance or evasion of tax under this chapter, 13 the partner's distributive share is determined as if the partnership agreement did not 14 contain the special allocation. In this subsection, "special allocation" means an 15 allocation of the distributive share of an item of partnership income, gain, loss, 16 expense, or deduction made under the partnership agreement to a partner in a 17 proportion different than the partner's partnership interest. 18 Sec. 43.22.040. Taxable income of an estate, trust, or beneficiary. (a) The 19 taxable income of an estate or trust is determined as if the estate or trust were an 20 individual and is subject to adjustments under AS 43.22.030 and reduction under 21 section 26 U.S.C. 661 (Internal Revenue Code). The department may establish in 22 regulation the method for determining the taxable income of an estate or trust, 23 including the manner in which the adjustments under AS 43.22.030 will be allocated 24 between the estate's or trust's taxable share and a beneficiary's distributive share. 25 Unless otherwise provided by the department in regulation, an allocation must be 26 made in proportion to the estate's or trust's taxable share or the beneficiary's 27 distributive share of the trust or estate for federal income tax purposes. 28 (b) If the principal purpose for a provision of an instrument directing the 29 distribution of an item of income, gain, loss, or deduction of an estate or trust is the 30 avoidance or evasion of tax under this chapter, the taxable income of the estate, trust, 31 or beneficiary shall be determined as if the instrument did not contain that provision.
01 Sec. 43.22.045. Nonresident individuals; income derived from or 02 connected with a source in the state. (a) The taxable income of a nonresident 03 individual is the nonresident individual's income that is derived from or connected 04 with a source in the state, as adjusted under AS 43.22.030. Taxable income of a 05 nonresident individual includes 06 (1) a partner's distributive share of an item of income, gain, loss, or 07 deduction of a partnership as determined under AS 43.22.050; 08 (2) a shareholder's pro rata share of an S corporation's income or loss, 09 increased by the reductions for taxes described in 26 U.S.C. 1366(f)(2) and (3) 10 (Internal Revenue Code), as determined under AS 43.22.050; 11 (3) income or loss of a business conducted by a nonresident individual, 12 nonresident estate, or nonresident trust, other than income or loss from a partnership or 13 S corporation, as determined under AS 43.22.050; 14 (4) the share of estate or trust income, gain, loss, or deduction 15 determined under AS 43.22.055; 16 (5) an item of income, gain, loss, or deduction from the sale or 17 assignment of a beneficial interest, or other disposition of an interest in tangible 18 personal property in the state, or rental income or loss from the use of tangible 19 personal property in the state; if the item of income, gain, loss, or deduction is from 20 tangible personal property used or employed both in and outside the state, the amount 21 included in taxable income is determined by multiplying the item of income, gain, 22 loss, or deduction by a fraction, the denominator of which is the total number of days 23 during the taxable year that the property was used or employed to earn, accrue, or 24 incur the item of income, gain, loss, or deduction and the numerator of which is the 25 number of the days during which the property was used or employed to earn, accrue, 26 or incur the item of income, gain, loss, or deduction in the state; 27 (6) an item of income, gain, loss, or deduction from the sale or 28 assignment of a beneficial interest, or other disposition of an interest in real property 29 in the state, or rental income or loss from the use of real property in the state, 30 including the percentage of ordinary and capital gains received from a real estate 31 investment trust, as defined in 26 U.S.C. 856 (Internal Revenue Code), that is
01 attributable to rents from or sale or other disposition of real property located in the 02 state; in this paragraph, an item of income, gain, loss, or deduction from the sale, 03 assignment of a beneficial interest, or other disposition of real property in the state 04 includes an item of income, gain, loss, or deduction derived from the sale or 05 assignment of a beneficial interest in a partnership, S corporation, nonpublicly traded 06 C corporation with 100 or fewer shareholders, estate, or trust, if the entity owns real 07 property in the state that has a fair market value equal to or exceeding 50 percent of all 08 assets of the entity on the date of sale, assignment, or other disposition of the 09 taxpayer's interest in the entity; for purposes of this paragraph, 10 (A) only assets owned for at least two years before the date of 11 the sale, assignment, or other disposition of an interest in the entity shall be 12 used to determine the fair market value of all of the assets of the entity on the 13 date of sale, assignment, or other disposition; and 14 (B) the amount of an item of income, gain, loss, or deduction 15 derived from or connected with a source in the state from the sale, assignment, 16 or other disposition of an interest in an entity that is subject to the provisions of 17 this paragraph is the amount recognized for federal income tax purposes 18 related to the sale, assignment, or disposition, multiplied by a fraction, the 19 numerator of which is the fair market value of the real property located in the 20 state on the date of sale, assignment, or disposition and the denominator of 21 which is the fair market value of all of the assets of the entity on the date of the 22 sale, assignment, or disposition; 23 (7) compensation, salary, or wages for personal services rendered or 24 performed in the state that are derived from a business, trade, profession, occupation, 25 or employment carried on in the state; for purposes of this paragraph, personal 26 services 27 (A) except as otherwise provided in (B) of this paragraph, 28 include services performed 29 (i) in connection with presenting or receiving 30 employment-related training or education in the state; 31 (ii) in connection with a site inspection, review,
01 analysis, or management or any other supervision of a facility located 02 in the state; 03 (iii) in connection with research and development at a 04 facility located in the state or in connection with the installation of new 05 or upgraded equipment or systems at that facility; 06 (iv) as part of a project team working on the attraction 07 or implementation of new investment in a facility located or planned to 08 be located in the state; 09 (v) in connection with fishing, farming, or agriculture in 10 the state; or 11 (vi) for the federal government; 12 (B) do not include services that are causal, isolated, 13 inconsequential, or ancillary to out-of-state services; 14 (8) income derived from a business, trade, profession, occupation, or 15 employment carried on in the state, including income 16 (A) received under a covenant not to compete, a severance 17 agreement, a termination agreement, or unemployment compensation 18 insurance attributable to a business, trade, profession, occupation, or 19 employment previously carried on in the state, regardless of when received; 20 (B) derived from a business, trade, profession, occupation, or 21 employment carried on in the state by an individual who maintains or operates 22 an office, shop, store, warehouse, boat, plane, factory, agency, or other place 23 where the individual's affairs are systematically and regularly carried on, 24 regardless of other transactions carried on outside the state; this subparagraph 25 does not include income from an activity of an individual whose presence in 26 the state is casual, isolated, inconsequential, or ancillary to out-of-state 27 activities, except that, if a business, trade, profession, occupation, or 28 employment is carried on partly in and partly outside the state, other than for 29 the rendering of purely personal services by the individual, the taxable income 30 derived from or connected with a source in the state is determined under 31 AS 43.19 (Multistate Tax Compact) and AS 43.22.030;
01 (9) income from the management or investment function or activities 02 conducted in the state from intangible property; 03 (10) dividends, interest, payments received under an annuity, gains, or 04 other intangible income received from, or attributable to, intangible personal property, 05 including stock, bonds, notes, bank deposits, or annuities, if the intangible personal 06 property is employed in a business, trade, profession, occupation, or employment 07 carried on in the state; 08 (11) a gain derived by a nonresident individual from a statutory stock 09 option, restricted stock, nonstatutory stock option, or stock appreciation right, who, at 10 the time the gain is received, performs services in the state for or is employed in the 11 state by the corporation granting the option, stock, or right, as determined in 12 regulations adopted by the department; 13 (12) income from nonqualified deferred compensation plans 14 attributable to services performed in the state, including compensation included in 15 federal gross income under 26 U.S.C. 457A (Internal Revenue Code); 16 (13) proceeds from a gambling activity conducted in the state or lottery 17 tickets purchased in the state, including payments received from a third party for the 18 transfer of the rights to future proceeds related to a gambling activity in the state or 19 lottery tickets purchased in the state; 20 (14) for an S corporation that terminates its taxable status in the state 21 during the tax year, income or a gain recognized on the receipt of payments from an 22 installment sale contract entered into at the time the S corporation was subject to tax in 23 the state, allocated consistent with the applicable methods and rules under this chapter; 24 (15) royalties or other compensation received for the use of a patent, 25 copyright, secret process or formula, good will, mark, trade brand, franchise, or other 26 property having a taxable or business situs in the state; 27 (16) royalties or other compensation received for the use of a patent if 28 the patent is employed in production, fabrication, manufacturing, or other process in 29 the state; 30 (17) income or a gain from the disposition of an asset if the 31 acquisition, management, or disposition of the asset constitutes an integral part of the
01 nonresident individual's regular trade or business operation; 02 (18) income from the transmission, broadcast, distribution, or 03 dissemination of a service directly or indirectly attributable to the performance in the 04 state of an athlete, entertainer, singer, musician, dancer, comedian, magician, 05 performing artist, actor, actress, or similar person, including syndication fees. 06 (b) A deduction included in taxable income that results from a capital loss, 07 passive activity loss, or net operating loss must be based solely on income, a gain, a 08 loss, or a deduction derived from or connected with a source in the state. A 09 nonresident individual shall treat a deduction under this subsection in the same manner 10 as the corresponding federal deduction, unless the department requires otherwise in 11 regulation. 12 Sec. 43.22.050. Business conducted by a nonresident individual, trust, or 13 estate; income derived from or connected with a source in the state. (a) The 14 department shall adopt regulations governing the amount of an item of income, gain, 15 loss, or deduction from a business conducted by a nonresident individual, trust, or 16 estate that is derived from or connected with a source in the state for purposes of 17 determining taxable income. Regulations adopted under this subsection must be 18 consistent with AS 43.19 (Multistate Tax Compact) and AS 43.22.045 and include 19 adjustments under AS 43.22.030. 20 (b) The department shall adopt regulations governing the amount of an item of 21 income, gain, loss, or deduction that is derived from or connected with a source in the 22 state and is included in a nonresident 23 (1) partner's distributive share for purposes of taxation under this 24 chapter; 25 (2) shareholder's pro-rata share of an S corporation for purposes of 26 taxation under this chapter. 27 (c) The department may by regulation require a taxpayer to allocate rather 28 than apportion an item of income, gain, loss, or deduction under this section. 29 Sec. 43.22.055. Nonresident trust, estate, or beneficiary; income derived 30 from or connected with a source in the state. (a) The department shall adopt 31 regulations governing whether an item of income, gain, loss, or deduction of a
01 nonresident estate or nonresident trust is included in taxable income derived from or 02 connected with a source in the state. Regulations adopted under this subsection must 03 be consistent with the remainder of this section and AS 43.22.045. 04 (b) A nonresident beneficiary shall include in taxable income derived from or 05 connected with a source in the state a distribution from an estate or trust as if the 06 nonresident beneficiary earned or incurred the item of income, gain, loss, or deduction 07 attributable to the distribution directly from the source. For purposes of this 08 subsection, the department may establish one or more methods for a nonresident 09 beneficiary to determine whether an item of income, gain, loss, or deduction is 10 attributable to a distribution. The department shall consistently apply a method from 11 year to year and apply the same method to other nonresident beneficiaries of the same 12 trust or estate. Nothing in this subsection requires the department to give effect to a 13 provision of an instrument creating an estate or trust if the department reasonably 14 believes that the principal purpose of the provision is to avoid or evade the tax 15 imposed under this chapter. 16 Sec. 43.22.060. Part-year resident individual, trust, or estate; residency 17 income; income derived from or connected with a source in the state. (a) Except as 18 otherwise provided in this section, the taxable income of a part-year resident 19 individual, trust, or estate is the sum of 20 (1) the taxable income of the part-year resident individual, trust, or 21 estate during the period of residency; and 22 (2) the taxable income derived from or connected with a source in the 23 state for the period of nonresidency of the individual, trust, or estate. 24 (b) The department shall adopt regulations to determine the taxable income of 25 a part-year resident taxpayer who is granted a statutory stock option, restricted stock, 26 nonstatutory stock option, or a stock appreciation right and who, during the grant 27 period, performs services in the state for, or is employed in the state by, the 28 corporation granting the option, stock, or right. 29 Sec. 43.22.065. Personal service and S corporations formed or used to 30 avoid or evade income tax. (a) The department may allocate all income, deductions, 31 credits, exclusions, and other allowances between a personal service or S corporation
01 and its employee-owners if the 02 (1) personal service or S corporation performs substantially all of its 03 services for or on behalf of another corporation, partnership, or other entity and the 04 effect is the avoidance or evasion of income tax; and 05 (2) allocation is necessary to reflect the source and amount of the 06 income, regardless of whether the corporation is otherwise taxable. 07 (b) For purposes of this section, avoidance or evasion of income tax occurs 08 when a personal service or S corporation is used to 09 (1) reduce the taxable income of a resident or the taxable income of a 10 nonresident derived from or connected with a source in the state; or 11 (2) secure the benefit of an expense, deduction, credit, exclusion, or 12 other allowance for any employee-owner that would not otherwise apply under this 13 chapter. 14 (c) The constructive ownership of stock rules under 26 U.S.C. 318 (Internal 15 Revenue Code) apply to this section, except that "5 percent" shall be substituted for 16 "50 percent" in 26 U.S.C. 318(a)(2)(C) (Internal Revenue Code). 17 (d) In this section, all persons specified in 26 U.S.C. 267(b) (Internal Revenue 18 Code) shall be treated as one entity. 19 (e) In this section, 20 (1) "employee-owner" means any employee who owns, on any day 21 during the taxable year, more than 10 percent of the outstanding stock of the personal 22 service or S corporation; 23 (2) "personal service" means a corporation whose principal activity is 24 the performance of personal services that are substantially performed by the 25 employee-owners of the corporation. 26 Sec. 43.22.070. Determination of taxable year and method of accounting. 27 (a) For purposes of the tax imposed under this chapter, a taxpayer's 28 (1) taxable year is the same as the taxpayer's taxable year for federal 29 income tax purposes; and 30 (2) method of accounting is the same as the taxpayer's method of 31 accounting for federal income tax purposes.
01 (b) The department shall adopt regulations to determine the taxable income of 02 a taxpayer whose method of accounting changes during a taxable year or between 03 taxable years. 04 Sec. 43.22.075. Returns and payment of taxes. (a) A taxpayer shall file with 05 the department a return setting out 06 (1) the amount of tax due under this chapter; and 07 (2) other information necessary to carry out this chapter, as required by 08 the department in regulation. 09 (b) The department shall determine and publish the federal adjusted gross 10 income below which an individual is not required to file a tax return under this 11 section. 12 (c) A person required to file a return under this chapter shall file the return on 13 a form or in a format prescribed by the department. The return is due to the department 14 at the same time and in the same manner, including extensions, as the taxpayer's 15 federal income tax return to the United States Internal Revenue Service. A return filed 16 under this chapter must be made under oath and on penalty of perjury. 17 (d) The total amount of tax imposed by this chapter is due and payable to the 18 department at the same time and in the same manner as the federal individual income 19 tax payable to the United States Internal Revenue Service. 20 (e) A taxpayer, upon request by the department, shall furnish to the 21 department a true and correct copy of a return that the taxpayer has filed with the 22 United States Internal Revenue Service. 23 (f) A taxpayer shall notify the department in writing of an alteration in, or 24 modification of, the taxpayer's federal income tax return and of a recomputation of tax 25 or determination of deficiency, whether with or without assessment. A full statement 26 of the facts must accompany the notice. A taxpayer shall file the notice not later than 27 60 days after the final determination of the alteration, modification, recomputation, or 28 deficiency and shall pay any additional tax due under this chapter at that time. In this 29 subsection, "final determination" means the time that an amended federal return is 30 filed, a notice of deficiency or an assessment is mailed to the taxpayer by the Internal 31 Revenue Service, and the taxpayer has exhausted rights of appeal under federal law.
01 (g) The department may credit or refund overpayments of taxes, taxes 02 erroneously or illegally assessed or collected, penalties collected without authority, 03 and taxes that are found unjustly assessed or excessive in amount, or otherwise 04 wrongfully collected. The department shall, in regulation, set limitations, specify the 05 manner in which claims for credits or refunds are made, and give notice of allowance 06 or disallowance. When a refund is allowed to a taxpayer, the refund may be paid out 07 of the general fund on a warrant issued under a voucher approved by the department. 08 (h) A partnership, S corporation, estate, or trust shall provide to its partners, 09 beneficiaries, or shareholders, and to the department, all information necessary for its 10 partners, beneficiaries, and shareholders to comply with this chapter. 11 (i) An individual is not required to file a return under this section 12 electronically, but a person employed to prepare and file income tax returns shall file 13 the returns for those individuals electronically. 14 (j) The department shall adopt regulations that set out requirements for a 15 spouse, upon request, to be partially or fully relieved from joint and several liability 16 resulting from the joint filing of a tax return. 17 Sec. 43.22.080. Tax withholding on wages of individuals. (a) Every 18 employer making payment of wages or salaries 19 (1) shall deduct and withhold an amount of tax computed in a manner 20 to approximate the amount of tax due on those wages and salaries under this chapter 21 for that taxable year; 22 (2) shall remit the tax withheld to the department accompanied by a 23 return on a form prescribed by the department at the times required by the department 24 by regulation; 25 (3) is liable for the payment of the tax required to be deducted and 26 withheld under this section but is not liable to any individual for the amount of the 27 payment; and 28 (4) shall furnish to the employee on or before January 31 of the 29 succeeding year, or within 30 days after a request by the employee after the 30 employee's or individual's termination if the 30-day period ends before January 31, a 31 written statement on a form prescribed by the department showing
01 (A) the name and taxpayer identification number of the 02 employer; 03 (B) the name and social security number of the employee; 04 (C) the total amount of wages and salary for the taxable year; 05 and 06 (D) the total amount deducted and withheld as tax under this 07 chapter for the taxable year. 08 (b) The department shall publish the rate of withholding required by this 09 section. 10 Sec. 43.22.085. Withholding on nonresident partners; composite returns. 11 (a) Unless otherwise provided by this section, a partnership that is required to file an 12 annual information return under subchapter K of the Internal Revenue Code (26 13 U.S.C. 701 - 777) shall file a partnership return as prescribed by the department and 14 shall report any items of income, gain, loss, or deduction that are derived from or 15 connected with a source in the state, as determined under this chapter. 16 (b) A partnership that is required to file a return under (a) of this section shall 17 withhold income tax from a nonresident partner's distributive share of the partnership's 18 items of income, gain, loss, or deduction derived from or connected with a source in 19 the state at the highest marginal income tax rate applicable to individuals for the 20 taxable year. 21 (c) Withholding under this section is not required by a partnership that 22 (1) is a publicly traded partnership, as defined in 26 U.S.C. 7704(b) 23 (Internal Revenue Code); and 24 (2) files with the department an annual information return reporting the 25 name, address, taxpayer identification number, and other information requested by the 26 department concerning each unitholder whose distributive share of partnership 27 income, regardless of source, is more than $1,000. 28 (d) The department shall adopt regulations that allow a partnership subject to 29 withholding under this section to file a composite return. 30 Sec. 43.22.090. Permanent fund tax payment. The department shall adopt 31 regulations establishing procedures for an individual eligible for a dividend under
01 AS 43.23.005 to direct the department to hold all or a part of the amount of the 02 dividend to pay the tax due under this chapter. The amount held under this section 03 may not exceed the dividend amount after contributions, garnishments, levies, fees, 04 attachments, assignments, or other reductions or donations allowed under AS 43.23. 05 The department shall apply the amount held under this section to tax owed in the 06 taxable year in which the taxpayer applies for the dividend. The department shall 07 refund the amount of the dividend not applied against taxes under this section to the 08 individual who appears on the application for the dividend. 09 Sec. 43.22.095. Administration. (a) The department shall adopt necessary 10 regulations and forms to implement and interpret this chapter, including regulations 11 and forms for the electronic filing and payment of tax due under this chapter. Federal 12 regulations issued under the Internal Revenue Code shall be considered persuasive 13 authority in interpreting any provision of the Internal Revenue Code on which the tax 14 imposed by this chapter relies, whether or not a federal regulation has been 15 specifically incorporated into a department regulation, unless the federal regulation 16 (1) conflicts with a provision of this chapter; 17 (2) conflicts with a regulation adopted by the department; or 18 (3) is inconsistent with the purposes of this chapter. 19 (b) A transaction or payment between related parties must have economic 20 substance, must serve a bona fide business purpose, and must not have occurred for 21 the primary purpose of lowering the tax due under this chapter. The department, upon 22 review or audit of a taxpayer's return, may determine whether there is sufficient 23 documentation or whether a transaction or payment meets the requirements of this 24 subsection. If the department determines that the documentation or the transaction or 25 payment fail to meet the requirements of this subsection, the department may adjust 26 the amount of a payment or transaction, disregard the payment or transaction, or make 27 another adjustment necessary for determining the tax under this chapter. If a payment 28 in an amount greater than $500,000 is made, or is required to be made, from one party 29 to a related party, the parties shall submit documentation substantiating that the 30 amount of the payment is consistent with 26 U.S.C. 482 (Internal Revenue Code). 31 Payments subject to this subsection include payments for interest, royalties,
01 management fees, services, inventory, tangible personal property, intangible property, 02 and real property. 03 (c) A tax deficiency assessed by the department under this section is assumed 04 to be correct, and a taxpayer has the burden of proving that the tax deficiency is 05 erroneous. 06 (d) The department shall adjust the income bracket amounts in 07 AS 43.22.010(b) and (c) and the amount of the exemption under AS 43.22.030(a)(2)(I) 08 biennially for inflation from calendar year 2018 using the Consumer Price Index for 09 all urban consumers for Anchorage prepared by the Bureau of Labor Statistics, United 10 States Department of Labor. The department shall round amounts under this 11 subsection to the nearest $100 and publish the adjusted amounts. 12 (e) The tax collected by the department under this chapter shall be deposited 13 into the general fund and accounted for separately. The legislature may appropriate the 14 estimated amounts separately accounted for under this subsection into the public 15 education fund established in AS 14.17.300. Nothing in this subsection creates a 16 dedicated fund. 17 Sec. 43.22.100. References to Internal Revenue Code. (a) Unless the 18 provision is inconsistent with this chapter or a regulation adopted under this chapter, 19 the provisions of the Internal Revenue Code as now in effect or hereafter amended that 20 are mentioned in this chapter are incorporated in this chapter by reference and have 21 effect as though fully set out in this chapter. 22 (b) Sections 26 U.S.C. 6654, 6662, 6664, 6694, 6695, 6700 - 6702, 6707, 23 6713, 7201, 7202, 7206, 7207, 7216, 7407, and 7408 (Internal Revenue Code), as 24 those sections read on January 1, 2017, are adopted by reference as a part of this 25 chapter. 26 (c) When provisions of the Internal Revenue Code incorporated by reference 27 as provided in (a) and (b) of this section refer to rules and regulations adopted by the 28 United States Commissioner of Internal Revenue, or hereafter adopted, they are 29 regarded as regulations adopted by the department under and in accordance with the 30 provisions of this chapter, unless and until the department adopts specific regulations 31 in their place conformable with this chapter.
01 Sec. 43.22.110. Information released to a banking institution. 02 Notwithstanding AS 43.05.230, information on an individual income tax return may 03 be released to a banking institution to verify the direct deposit of an income tax refund 04 or correct an error in that deposit. 05 Sec. 43.22.150. Definitions. In this chapter, 06 (1) "domicile" means an individual's true, fixed, principal, and 07 permanent home, to which the individual intends to return even though currently 08 living elsewhere; if an individual has two or more homes, "domicile" means the one 09 that the individual regards and uses as the individual's more permanent home; once 10 established, a domicile remains as such until an individual demonstrates a real change 11 of intent and moves to a new domicile; indications of domicile include the 12 (A) location of the place of employment of the individual; 13 (B) location of real property owned by the individual; 14 (C) registration and physical location of motor vehicles, planes, 15 boats, and snow machines owned by the individual; 16 (D) location of a bank account or active checking account of 17 the individual; 18 (E) address where the individual receives mail; 19 (F) location of a school where the individual or a member of 20 the individual's immediate family 21 (i) attends; or 22 (ii) receives resident tuition; 23 (G) location of an organization of which the individual is a 24 member; 25 (H) location of a parent, child, grandchild, or great grandchild; 26 (I) location of dental and medical personnel that provide 27 services to the individual on a regular or consistent basis; 28 (J) filing of a prior year tax return by the individual as a 29 resident or nonresident; 30 (K) location where an individual is registered to vote; 31 (L) location where an individual holds a resident fishing,
01 hunting, or trapping license; 02 (2) "federal adjusted gross income" has the meaning given to "adjusted 03 gross income" in 26 U.S.C. 62; 04 (3) "fiduciary" means a guardian, trustee, executor, administrator, 05 receiver, conservator, or a person, whether individual or corporate, acting in a similar 06 position of special confidence toward another; 07 (4) "Internal Revenue Code" means the Internal Revenue Code of 1986 08 (26 U.S.C. 1 et seq.), as amended, and regulations issued thereunder, if the regulations 09 are consistent with this chapter; 10 (5) "irrevocable trust" means a trust or portion of a trust that is not 11 subject to a power to revest title in a person whose property constitutes the trust or a 12 portion of the trust; 13 (6) "nonresident estate" means an estate other than a resident estate or 14 part-year resident estate; 15 (7) "nonresident individual" means an individual who is not a resident 16 of the state for any portion of the taxable year; 17 (8) "nonresident S corporation" means an S corporation whose place of 18 management and control is outside the state; 19 (9) "nonresident trust" means a trust other than a resident trust or a 20 part-year resident trust; 21 (10) "partner" means a partner as defined in 26 U.S.C. 7701(a) 22 (Internal Revenue Code) and includes a member of a limited liability company or 23 similar entity that is treated as a partnership for federal income tax purposes; 24 (11) "partnership" means an entity as defined in 26 U.S.C. 7701(a) 25 (Internal Revenue Code) and includes a limited liability company and a similar entity 26 treated as a partnership for federal income tax purposes; 27 (12) "part-year resident estate" means an estate that is a resident of the 28 state for a portion of and not the entire taxable year; 29 (13) "part-year resident individual" means an individual who is a 30 resident of the state for a portion of and not the entire taxable year; 31 (14) "part-year resident trust" means a trust that is a resident of the
01 state for a portion of and not the entire taxable year; 02 (15) "related parties" means any parties that satisfy the definition of a 03 related party in 26 U.S.C. 144, 147, or 267 (Internal Revenue Code); 04 (16) "resident estate" means the estate of a 05 (A) decedent who at the time of death was a resident of the 06 state, regardless of the residence of the fiduciary or beneficiary, if the 07 disposition or administration of the estate is, or will be, subject to state law; or 08 (B) person who, at the time of commencement of a bankruptcy 09 proceeding under Title 11 of the United States Code, was a resident of the 10 state; 11 (17) "resident individual" means an individual who 12 (A) receives a permanent fund dividend under AS 43.23.005; 13 (B) receives a tax benefit available only to an individual 14 domiciled in the state; or 15 (C) is domiciled in the state for the entire taxable year unless 16 the individual maintains a permanent place of abode outside the state and 17 spends, in the aggregate, not more than 30 days during the taxable year in the 18 state; 19 (18) "resident S corporation" means an S corporation whose place of 20 management and control is in the state; 21 (19) "resident trust" means 22 (A) a trust, or a portion of a trust, consisting of property 23 transferred by will of a decedent who at the time of death was a resident of the 24 state if the disposition or administration of the property is, or will be, subject to 25 state law; or 26 (B) a trust consisting of the property of a person who was a 27 resident at the time the property was transferred to the trust and, at the time of 28 the transfer, the trust was 29 (i) an irrevocable trust; 30 (ii) a revocable trust and the trust has not later become 31 irrevocable;
01 (iii) a revocable trust and later became irrevocable at a 02 time the person transferring property to the trust was a resident; 03 (20) "revocable trust" means a trust or portion of a trust that is subject 04 to a power, exercisable immediately or at a future time, to revest title in a person 05 whose property constitutes the trust or portion of the trust; 06 (21) "S corporation" means a corporation that has elected to file a 07 federal income tax return under 26 U.S.C. 1361 - 1379 (Internal Revenue Code); 08 (22) "taxable income" means income taxable under this chapter; 09 (23) "taxable year" means the calendar year or a fiscal year ending 10 during the calendar year; 11 (24) "taxpayer" means an individual, trust, or estate subject to a tax 12 imposed by this chapter. 13 * Sec. 5. AS 43.23 is amended by adding a new section to read: 14 Sec. 43.23.092. Permanent fund dividend individual income tax payment. 15 In accordance with AS 43.22.090, the department shall prepare the Alaska permanent 16 fund dividend application to allow an applicant to direct the department to hold all or 17 part of the amount of the individual's permanent fund dividend for application against 18 the individual income tax imposed under AS 43.22. 19 * Sec. 6. AS 43.05.085; AS 43.20.012(b), and 43.20.013 are repealed January 1, 2019. 20 * Sec. 7. The uncodified law of the State of Alaska is amended by adding a new section to 21 read: 22 APPLICABILITY. AS 43.22, added by sec. 4 of this Act, applies to income received 23 on or after the effective date of sec. 4 of this Act. 24 * Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to 25 read: 26 TRANSITION: REGULATIONS. The Department of Revenue may adopt regulations 27 necessary to implement this Act. The regulations take effect under AS 44.62 (Administrative 28 Procedure Act), but not before the effective date of the law implemented by the regulation. 29 * Sec. 9. Section 8 of this Act takes effect immediately under AS 01.10.070(c). 30 * Sec. 10. Except as provided in sec. 9 of this Act, this Act takes effect January 1, 2019.