HB 4001: "An Act imposing a tax on wages and net earnings from self-employment; relating to the administration and enforcement of the wages and net earnings from self-employment tax; and providing for an effective date."
00 HOUSE BILL NO. 4001 01 "An Act imposing a tax on wages and net earnings from self-employment; relating to the 02 administration and enforcement of the wages and net earnings from self-employment 03 tax; and providing for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 43.05.045(a) is amended to read: 06 (a) Except as provided in AS 43.45.051(f), or unless [UNLESS] an 07 exemption is granted under (b) of this section, a taxpayer required to submit a return 08 or report for a tax levied under this title or for any other tax administered by the 09 department shall submit the return or report electronically in a format prescribed by 10 the department. Failure to comply with this section may result in a civil penalty under 11 AS 43.05.220(f). If a law under this title requires a report or return or a portion of a 12 report or return to be in writing, an electronically filed report or return satisfies this 13 section. A taxpayer shall submit attachments to a report or return required under this 14 title electronically.
01 * Sec. 2. AS 43.45 is amended by adding new sections to read: 02 Chapter 45. Wages and Net Earnings Tax. 03 Sec. 43.45.011. Tax imposed. (a) A tax is imposed on an individual with 04 wages from a source in the state or net earnings from self-employment from a source 05 in the state. The tax is 1.5 percent of 06 (1) wages from a source in the state; and 07 (2) net earnings from self-employment from a source in the state. 08 (b) When calculating earnings from self-employment, a taxpayer may not 09 make the deduction for net operating losses provided under 26 U.S.C. 172(b)(1)(A) 10 (Internal Revenue Code). 11 (c) Notwithstanding any other provision of this section, for a taxable year, the 12 tax imposed on an individual may not exceed the greater of twice the value of the 13 permanent fund dividend determined under AS 43.23.025 for the calendar year 14 preceding a taxpayer’s taxable year, or $2,200 multiplied by the percentage increase in 15 the Consumer Price Index for all urban consumers, all items, for the Anchorage 16 metropolitan area from July 1, 2017 using the base period 1982-84=100, compiled by 17 the Bureau of Labor Statistics, United States Department of Labor. 18 Sec. 43.45.021. Net earnings from self-employment and wages from a 19 source in the state. (a) Net earnings from self-employment from a source in the state 20 subject to tax under AS 43.45.011 include net earnings from self-employment that are 21 (1) a taxpayer's distributive share of an item of income, gain, loss, or 22 deduction of a partnership, as determined under AS 43.45.031; 23 (2) income or loss of a business conducted by a taxpayer, other than 24 income or loss from a partnership, as determined under AS 43.45.031; 25 (3) income derived from a business, trade, profession, occupation, or 26 employment carried on in the state, including income derived from a business, trade, 27 profession, occupation, or employment carried on in the state by an individual who 28 maintains or operates an office, shop, store, warehouse, boat, plane, factory, agency, 29 or other place where the individual's affairs are systematically and regularly carried 30 on, regardless of other transactions carried on outside the state; this paragraph does not 31 include income from an activity of an individual whose presence in the state is casual,
01 isolated, inconsequential, or ancillary to out-of-state activities, except that, if a 02 business, trade, profession, occupation, or employment is carried on partly in and 03 partly outside the state, other than for the rendering of purely personal services by the 04 individual, the taxable income derived from or connected with a source in the state is 05 determined under AS 43.19 (Multistate Tax Compact); 06 (4) income or a gain from the disposition of an asset if the acquisition, 07 management, or disposition of the asset constitutes an integral part of the taxpayer's 08 regular trade or business operation; 09 (5) income from the transmission, broadcast, distribution, or 10 dissemination of a service directly or indirectly attributable to the performance in the 11 state of an athlete, entertainer, singer, musician, dancer, comedian, magician, 12 performing artist, actor, actress, or similar person, including syndication fees. 13 (b) A deduction included in a taxpayer's net earnings from self-employment 14 must be based solely on income or a gain, loss, or deduction derived from or 15 connected with a source in the state. A taxpayer shall treat a deduction under this 16 subsection in the same manner as the corresponding federal deduction, unless the 17 department requires otherwise in regulation. 18 (c) Wages from a source in the state subject to tax under AS 43.45.011 include 19 wages that are earned while an individual is physically present in the state. The 20 department shall adopt regulations to implement and interpret this subsection. 21 Sec. 43.45.031. Business conducted by a taxpayer; income derived from or 22 connected with a source in the state. (a) The department shall adopt regulations 23 governing the amount of income or a gain, loss, or deduction from a business 24 conducted by a taxpayer that is derived from or connected with a source in the state 25 for purposes of determining a taxpayer's net earnings from self-employment. 26 Regulations adopted under this subsection must be consistent with AS 43.19 27 (Multistate Tax Compact) and AS 43.45.021. 28 (b) The department shall adopt regulations governing the amount of income or 29 a gain, loss, or deduction that is derived from or connected with a source in the state 30 and is included in a taxpayer's distributive share of a partnership for purposes of 31 taxation under this chapter.
01 (c) The department may by regulation require a taxpayer to allocate rather 02 than apportion income or a gain, loss, or deduction under this section. 03 Sec. 43.45.041. Tax withholding on wages of individuals. Every employer 04 making payment of wages 05 (1) shall deduct and withhold an amount of tax computed in a manner 06 to approximate the amount of tax due on those wages under this chapter for that 07 taxable year; 08 (2) shall remit the tax withheld to the department accompanied by a 09 return on a form prescribed by the department at the times required by the department 10 by regulation; 11 (3) is liable for the payment of the tax required to be deducted and 12 withheld under this section but is not liable to any individual for the amount of the 13 payment; and 14 (4) shall furnish to the employee on or before January 31 of the 15 succeeding year, or within 30 days after a request by the employee after the 16 employee's or individual's termination if the 30-day period ends before January 31, a 17 written statement on a form prescribed by the department showing 18 (A) the name and taxpayer identification number of the 19 employer; 20 (B) the name and social security number of the employee; 21 (C) the total amount of wages for the taxable year; and 22 (D) the total amount deducted and withheld as tax under this 23 chapter for the taxable year. 24 Sec. 43.45.051. Returns and payment of taxes. (a) A person required to file a 25 return under this chapter shall file the return on a form or in a format prescribed by the 26 department. The return is due to the department at the same time and in the same 27 manner, including extensions, as the taxpayer's federal income tax return to the United 28 States Internal Revenue Service. A return filed under this chapter must be made under 29 oath and on penalty of perjury. 30 (b) A self-employed taxpayer shall file with the department a return setting out 31 (1) the amount of tax due under this chapter; and
01 (2) other information necessary to carry out this chapter, as required by 02 the department in regulation. 03 (c) The total amount of tax imposed under this chapter is due and payable to 04 the department at the same time and in the same manner as the federal individual 05 income tax payable to the United States Internal Revenue Service. 06 (d) A taxpayer, upon request by the department, shall furnish to the 07 department a true and correct copy of a return that the taxpayer has filed with the 08 United States Internal Revenue Service. 09 (e) A taxpayer shall notify the department in writing of an alteration in, or 10 modification of, the taxpayer's federal income tax return and of a recomputation of tax 11 or determination of deficiency, whether with or without assessment. A full statement 12 of the facts must accompany the notice. A taxpayer shall file the notice not later than 13 60 days after the final determination of the alteration, modification, recomputation, or 14 deficiency and shall pay any additional tax due under this chapter at that time. In this 15 subsection, "final determination" means the time that an amended federal return is 16 filed, a notice of deficiency or an assessment is mailed to the taxpayer by the Internal 17 Revenue Service, and the taxpayer has exhausted rights of appeal under federal law. 18 (f) An individual is not required to file a return under this section 19 electronically, but a person employed to prepare and file income tax returns shall file 20 the returns for those individuals electronically. 21 (g) The department shall adopt regulations to allow a partnership to withhold a 22 partner's income subject to tax under this chapter. A partnership that elects to withhold 23 income under regulations adopted under this subsection may file a composite return. 24 Sec. 43.45.061. Determination of taxable year and method of accounting. 25 (a) For purposes of the tax imposed under this chapter, a taxpayer's 26 (1) taxable year is the same as the taxpayer's taxable year for federal 27 income tax purposes; and 28 (2) method of accounting is the same as the taxpayer's method of 29 accounting for federal income tax purposes. 30 (b) The department shall adopt regulations to determine the taxable income of 31 a taxpayer whose method of accounting changes during a taxable year or between
01 taxable years. 02 Sec. 43.45.071. Refund of overpayments. (a) If an individual pays to the 03 department, directly or through withholding by an employer, an amount exceeding the 04 total tax imposed under this chapter during a calendar year and the individual applies 05 for a refund in accordance with regulations adopted by the department, the department 06 shall refund the overpayment to the individual. 07 (b) Interest on an overpayment may not be allowed under AS 43.05.280 if the 08 department refunds the overpayment within 90 days after the date the individual 09 correctly files the refund claim. 10 (c) The department may adopt regulations to coordinate refunds of 11 overpayments under this section with refunds of employment security contributions 12 under AS 23.20.165. 13 (d) An individual may apply for a refund under this section only during the 14 calendar year immediately following the calendar year in which the excess was paid. 15 Sec. 43.45.081. Report of payments to self-employed individuals. A person 16 required to report a payment to a self-employed individual to the federal government 17 under 26 U.S.C. shall also report that payment to the department in accordance with 18 regulations adopted by the department. 19 Sec. 43.45.091. Administration. (a) The department shall adopt regulations 20 and forms necessary to implement and interpret this chapter, including regulations and 21 forms for the electronic filing and payment of tax due under this chapter. Federal 22 regulations issued under the Internal Revenue Code shall be considered persuasive 23 authority in interpreting any provision of the Internal Revenue Code on which the tax 24 imposed under this chapter relies, whether or not a federal regulation has been 25 specifically incorporated into a department regulation, unless the federal regulation 26 (1) conflicts with a provision of this chapter; 27 (2) conflicts with a regulation adopted by the department; or 28 (3) is inconsistent with the purposes of this chapter. 29 (b) The tax collected by the department under this chapter shall be deposited 30 into the general fund and accounted for separately. Nothing in this section creates a 31 dedicated fund.
01 (c) The department shall, if it will result in cost savings for the state in the 02 administration of the tax, for employers in the administration of the tax, or both, 03 coordinate collection and reporting of the tax imposed under this chapter with the 04 collection and reporting of employment security contributions by the Department of 05 Labor and Workforce Development, including permitting the Department of Labor 06 and Workforce Development to collect the tax payments and remit them to the 07 department. 08 Sec. 43.45.101. References to Internal Revenue Code. (a) Unless the 09 provision is inconsistent with this chapter or a regulation adopted under this chapter, 10 the provisions of the Internal Revenue Code as now in effect or hereafter amended that 11 are mentioned in this chapter are incorporated in this chapter by reference and have 12 effect as though fully set out in this chapter. 13 (b) Sections 26 U.S.C. 6654, 6656, 6662, 6664, 6694, 6695, 6700 - 6702, 14 6707, 6713, 7201, 7202, 7206, 7207, 7216, 7407, and 7408 (Internal Revenue Code), 15 as those sections read on January 1, 2017, are adopted by reference as a part of this 16 chapter. 17 (c) When provisions of the Internal Revenue Code incorporated by reference 18 as provided in (a) and (b) of this section refer to rules and regulations adopted by the 19 United States Commissioner of Internal Revenue, or hereafter adopted, they are 20 regarded as regulations adopted by the department under and in accordance with the 21 provisions of this chapter, unless and until the department adopts specific regulations 22 in their place conformable with this chapter. 23 Sec. 43.45.111. Information released to a banking institution. 24 Notwithstanding AS 43.05.230, information on an individual tax return may be 25 released to a banking institution to verify the direct deposit of a tax refund or correct 26 an error in that deposit. 27 Sec. 43.45.151. Definitions. In this chapter, 28 (1) "employee" has the meaning given in 26 U.S.C. 3401; 29 (2) "employer" has the meaning given in 26 U.S.C. 3401; 30 (3) "Internal Revenue Code" means the Internal Revenue Code of 1986 31 (26 U.S.C. 1 et seq.), as amended, and regulations issued thereunder, if the regulations
01 are consistent with this chapter; 02 (4) "net earnings from self-employment" has the meaning given in 26 03 U.S.C. 1402; 04 (5) "partnership" means an entity as defined in 26 U.S.C. 7701(a) 05 (Internal Revenue Code) and includes a limited liability company and a similar entity 06 treated as a partnership for federal income tax purposes; 07 (6) "taxable year" means the calendar year or a fiscal year ending 08 during the calendar year; 09 (7) "taxpayer" means an individual subject to the tax imposed under 10 this chapter; 11 (8) "wages" has the meaning given in 26 U.S.C. 3401. 12 * Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to 13 read: 14 REGULATIONS. The Department of Revenue may adopt regulations to implement 15 sec. 2 of this Act. The regulations take effect under AS 44.62 (Administrative Procedure Act), 16 but not before the effective date of sec. 2 of this Act. 17 * Sec. 4. Section 3 of this Act takes effect immediately under AS 01.10.070(c). 18 * Sec. 5. Except as provided in sec. 4 of this Act, this Act takes effect January 1, 2019.