SB 154: "An Act relating to the taxation of income of individuals, partners, shareholders in S corporations, trusts, and estates; relating to a credit against the individual income tax; repealing tax credits applied against the tax on individuals under the Alaska Net Income Tax Act; and providing for an effective date."
00 SENATE BILL NO. 154 01 "An Act relating to the taxation of income of individuals, partners, shareholders in S 02 corporations, trusts, and estates; relating to a credit against the individual income tax; 03 repealing tax credits applied against the tax on individuals under the Alaska Net Income 04 Tax Act; and providing for an effective date." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. AS 43.05.045(a) is amended to read: 07 (a) Except as provided in AS 43.22.075(h), or unless [UNLESS] an 08 exemption is granted under (b) of this section, a taxpayer required to submit a return 09 or report for a tax levied under this title or for any other tax administered by the 10 department shall submit the return or report electronically in a format prescribed by 11 the department. Failure to comply with this section may result in a civil penalty under 12 AS 43.05.220(f). If a law under this title requires a report or return or a portion of a 13 report or return to be in writing, an electronically filed report or return satisfies this 14 section. A taxpayer shall submit attachments to a report or return required under this
01 title electronically. 02 * Sec. 2. AS 43 is amended by adding a new chapter to read: 03 Chapter 22. Income Tax. 04 Sec. 43.22.010. Income tax on individuals. (a) Each calendar year or fraction 05 of a calendar year, an income tax is imposed on the income of a 06 (1) resident individual, trust, or estate; 07 (2) nonresident individual, trust, or estate that is derived from or 08 connected with a source in the state. 09 (b) The tax under this section for an individual or individuals filing jointly is 10 (1) 2.75 percent of taxable income for calendar year 2023; 11 (2) three percent of taxable income for calendar year 2024; 12 (3) 3.25 percent of taxable income for calendar year 2025; 13 (4) 3.75 percent of taxable income for calendar years after 2025. 14 (c) Two resident individuals who file a joint federal income tax return may 15 determine the tax imposed by this chapter jointly under this section. 16 (d) Two individuals who file a joint federal income tax return both or one of 17 whom is not a resident may elect to determine the tax imposed by this chapter either 18 (1) individually; or 19 (2) jointly as if both individuals were residents; the income of the 20 individuals filing jointly under this paragraph is not subject to the calculation under 21 AS 43.22.015. 22 Sec. 43.22.015. Calculation of tax on a nonresident individual. (a) Except as 23 otherwise provided in (b) of this section, the tax on a nonresident individual is the 24 product of 25 (1) the tax determined under AS 43.22.010(b) on the nonresident 26 individual's taxable income computed as if the nonresident individual were a resident 27 individual; and 28 (2) a fraction, the 29 (A) numerator of which is the nonresident individual's income 30 taxable under AS 43.22.045; and 31 (B) denominator of which is the nonresident individual's
01 taxable income computed as if the nonresident individual were a resident 02 individual. 03 (b) If a nonresident individual's taxable income computed under (a)(2)(B) of 04 this section is less than the nonresident individual's income taxable under (a)(2)(A) of 05 this section, the tax imposed by this chapter is on the nonresident individual's taxable 06 income as computed under AS 43.22.045. 07 Sec. 43.22.020. Tax on trusts and estates. (a) A tax is imposed for each 08 taxable year or portion of a taxable year on the taxable income of a resident or 09 nonresident trust or estate. The tax under this section for a trust or estate is 10 (1) 2.75 percent of taxable income for calendar year 2023; 11 (2) three percent of taxable income for calendar year 2024; 12 (3) 3.25 percent of taxable income for calendar year 2025; 13 (4) 3.75 percent of taxable income for calendar years after 2025. 14 (b) In this section, the taxable income of a nonresident trust or estate is the 15 income of the trust or estate that is derived from or connected with a source in the 16 state. 17 (c) A trust is not subject to tax under this chapter if 18 (1) all of the trustees of the trust are nonresidents; 19 (2) the entire corpus of the trust, including real, tangible, and 20 intangible property, is located outside the state; and 21 (3) no income or gains of the trust are derived from or connected with 22 a source in the state. 23 (d) For purposes of (c)(1) of this section, a trustee that is a nonresident 24 banking corporation at the time the banking corporation becomes a trustee is a 25 nonresident trustee even if the banking corporation later becomes a resident trustee 26 because it is acquired by or becomes an office or branch of a resident trustee. 27 (e) A trust that is exempt from federal income tax because of its purpose or 28 activities is not subject to tax under this chapter. 29 (f) A special needs trust or other trust established to provide solely for the 30 housing, living expenses, or medical care of a disabled beneficiary is not subject to tax 31 under this chapter. In this subsection,
01 (1) "disabled beneficiary" means an individual who has 02 (A) a physical or mental impairment that substantially limits 03 one or more major life activities; or 04 (B) a condition that may require the use of a prosthesis, special 05 equipment for mobility, or a service animal; 06 (2) "special needs trust" has the meaning given in AS 13.36.215(b). 07 Sec. 43.22.025. Credit for income taxes imposed by other jurisdictions. (a) 08 A resident individual, trust, or estate or part-year resident individual, trust, or estate is 09 allowed a credit against the tax due under this chapter for an income tax that was 10 imposed on the resident or part-year resident for the taxable year by another state or 11 the political subdivision of another state on income derived from or connected with 12 that state or political subdivision. 13 (b) A credit allowed under (a) of this section 14 (1) for a resident individual, trust, or estate may not exceed the 15 individual's, trust's, or estate's tax due under this chapter before credits are applied, 16 multiplied by a fraction, the numerator of which is the portion of the individual's, 17 trust's, or estate's taxable income that is derived from or connected with a source in 18 another state or the political subdivision of another state and the denominator of which 19 is the resident individual's, trust's, or estate's taxable income; 20 (2) for a part-year resident individual, trust, or estate may not exceed 21 the individual's, trust's, or estate's tax due for the period of state residency before 22 credits are applied, multiplied by a fraction, the numerator of which is the individual's, 23 trust's, or estate's taxable income derived from or connected with a source in another 24 state or the political subdivision of another state during the period of state residency 25 and the denominator of which is the part-year resident individual's, trust's, or estate's 26 taxable income during the period of state residency; 27 (3) may not reduce the tax due under this chapter to less than the tax 28 that would have been due if the income derived from or connected with a source in 29 another state or the political subdivision of another state and subject to taxation by the 30 other state or political subdivision had been excluded from the resident or part-year 31 resident individual's, trust's, or estate's taxable income during the calculation of tax
01 under this chapter before the application of credits. 02 (c) If the tax administration of another state or a political subdivision of 03 another state determines that a taxpayer has overpaid tax, affecting the computation of 04 the credit allowed under this section for any taxable year, the taxpayer shall file an 05 amended return with the department not later than 90 days after the final determination 06 by the state or political subdivision that the tax was overpaid. The department may 07 assess a taxpayer additional tax, proportional to the amount overpaid in the other state 08 or political subdivision. 09 (d) A taxpayer is not allowed a credit under this section for taxes paid to 10 another jurisdiction if the taxpayer claims a credit against the income tax imposed by 11 the other jurisdiction for the tax payable under this chapter. 12 (e) Income tax imposed on a partner or the shareholder of an S corporation on 13 the income of the partnership or S corporation, including tax paid by the partnership or 14 S corporation to satisfy the tax liability of the partner or shareholder, may be included 15 in the calculation of a credit under this section. Tax imposed on the partnership or S 16 corporation that is the direct liability of the partnership or S corporation and not that of 17 the partner or shareholder may not be included in the calculation of a credit under this 18 section. 19 Sec. 43.22.030. Taxable income; general rule. (a) In this chapter, taxable 20 income is the taxpayer's federal adjusted gross income for the taxable year 21 (1) plus, if not already included in federal adjusted gross income, 22 (A) interest on obligations of another state, a political 23 subdivision of another state, the public instrumentality of another state, or the 24 local authority of another state; 25 (B) a loss on the sale or exchange of an obligation issued by or 26 on behalf of 27 (i) the state; 28 (ii) a municipality of the state; or 29 (iii) a public instrumentality, public authority, or public 30 corporation created under state law; 31 (C) a loss from the sale or exchange of shares in a unit
01 investment trust if the loss is attributable to an obligation issued by or on 02 behalf of 03 (i) the state; 04 (ii) a municipality of the state; or 05 (iii) a public instrumentality, public authority, or public 06 corporation created under state law; 07 (D) interest or dividends on obligations or securities issued by 08 the United States, or an authority, commission, or instrumentality of the United 09 States, that the Internal Revenue Code exempts from federal income tax; 10 (E) income taxes under this chapter; 11 (F) a gain realized but not recognized under 26 U.S.C. 1031 12 (Internal Revenue Code); 13 (G) a deduction allowed in the determination of federal 14 adjusted gross income that is directly or indirectly related to income that is not 15 taxable under this chapter; and 16 (H) income of an incomplete gift nongrantor trust to which a 17 taxpayer transferred property, less deductions of the trust, if 18 (i) the income and deductions of the trust would be 19 taken into account in computing the taxpayer's federal taxable income 20 if the trust in its entirety was treated as a grantor trust under the Internal 21 Revenue Code; 22 (ii) the trust is a resident trust; 23 (iii) the trust does not qualify as a grantor trust under 26 24 U.S.C. 671 - 679 (Internal Revenue Code); and 25 (iv) the grantor's transfer of assets to the trust is treated 26 as an incomplete gift under 26 U.S.C. 2511 (Internal Revenue Code); 27 (2) minus, if included in federal adjusted gross income, 28 (A) interest income or a dividend from an obligation that is 29 exempt from taxation by a state under federal law; 30 (B) a refund or credit for the overpayment of an income tax; 31 (C) an ordinary and necessary expense, including an interest
01 expense, paid or incurred during the taxable year, that is directly or indirectly 02 related to income exempt under the Internal Revenue Code but taxable by the 03 state; 04 (D) a gain recognized under 26 U.S.C. 1031 (Internal Revenue 05 Code) that was included in federal adjusted gross income under (1) of this 06 subsection; 07 (E) income exempt under 4 U.S.C. 114; 08 (F) compensation prohibited from state taxation by 50 U.S.C. 09 3901 - 4043 (Servicemembers Civil Relief Act); 10 (G) a gain from the sale or exchange of an obligation issued by 11 or on behalf of 12 (i) the state; 13 (ii) a municipality of the state; or 14 (iii) a public instrumentality, public authority, or public 15 corporation created under state law. 16 (b) When calculating taxable income, a taxpayer 17 (1) may not carry back a net operating loss under 26 U.S.C. 18 172(b)(1)(A)(i) (Internal Revenue Code); 19 (2) may carry over a net operating loss under 26 U.S.C. 20 172(b)(1)(A)(ii) (Internal Revenue Code), except that a loss may not be carried over 21 for more than five years; for a taxpayer subject to AS 43.19 (Multistate Tax Compact), 22 the amount of a net operating loss allowed to be carried over is limited to the amount 23 apportioned to the state in the taxable year in which the loss was generated under 24 AS 43.19 (Multistate Tax Compact); 25 (3) shall include the modifications required by AS 43.20.144(b)(2), 26 concerning intangible drilling and development costs, AS 43.20.144(b)(3), concerning 27 percentage depletion, and AS 43.20.144(b)(4), concerning depreciation. 28 Sec. 43.22.035. Taxable income from partnerships and S corporations. (a) 29 A partner or shareholder shall make an adjustment described in AS 43.22.030 to 30 income or a gain, loss, or deduction from a partnership or S corporation in proportion 31 to a partner's distributive share of a partnership or a shareholder's pro rata share of an
01 S corporation. If a partner's distributive share or a shareholder's pro rata share of an 02 adjustment is not required to be accounted for separately for federal income tax 03 purposes, the partner's or shareholder's share of the adjustment must be determined in 04 proportion to the partner's or shareholder's share of partnership or S corporation 05 income or losses for federal income tax purposes. 06 (b) In determining taxable income, a partner or shareholder shall treat income 07 or a gain, loss, or deduction from a partnership or S corporation as if it has the same 08 character as it does for federal income tax purposes. If income or a gain, loss, or 09 deduction from a partnership or S corporation is not accounted for separately for 10 federal income tax purposes, a partner or shareholder shall treat the income, gain, loss, 11 or deduction as if it were realized directly from the source from which it was realized 12 by the partnership or S corporation or incurred in the same manner it was incurred by 13 the partnership or S corporation. 14 (c) If the principal purpose of a special allocation of partnership income or a 15 gain, loss, or deduction is the evasion of tax under this chapter, the partner's 16 distributive share is determined as if the partnership agreement did not have the 17 special allocation. In this subsection, "special allocation" means an allocation of the 18 distributive share of partnership income or a gain, loss, or deduction made under the 19 partnership agreement to a partner in a proportion different than the partner's 20 partnership interest. 21 Sec. 43.22.040. Taxable income of an estate, trust, or beneficiary. (a) The 22 taxable income of an estate or trust is determined as if the estate or trust were an 23 individual and is subject to adjustments under AS 43.22.030 and reduction under 26 24 U.S.C. 661 (Internal Revenue Code). The department may establish in regulation the 25 method for determining the taxable income of an estate or trust, including the manner 26 in which the adjustments under AS 43.22.030 will be allocated between the estate's or 27 trust's taxable share and a beneficiary's distributive share. Unless otherwise provided 28 by the department in regulation, an allocation must be made in proportion to the 29 estate's or trust's taxable share or the beneficiary's distributive share of the trust or 30 estate for federal income tax purposes. 31 (b) If the principal purpose of a provision of an instrument directing the
01 distribution of income or a gain, loss, or deduction of an estate or trust is the evasion 02 of tax under this chapter, the taxable income of the estate, trust, or beneficiary will be 03 determined as if the instrument did not contain the provision. 04 Sec. 43.22.045. Nonresident individuals; income derived from or 05 connected with a source in the state. (a) The taxable income of a nonresident 06 individual is the nonresident individual's income derived from or connected with a 07 source in the state, as adjusted under AS 43.22.030. The taxable income of a 08 nonresident individual includes 09 (1) a partner's distributive share of income or a gain, loss, or deduction 10 of the partnership, as determined under AS 43.22.050; 11 (2) a shareholder's pro rata share of an S corporation's income or loss, 12 increased by the reductions for taxes described in 26 U.S.C. 1366(f)(2) and (3) 13 (Internal Revenue Code), as determined under AS 43.22.050; 14 (3) income or loss of a business conducted by a nonresident individual, 15 nonresident estate, or nonresident trust, other than income or loss from a partnership or 16 S corporation, as determined under AS 43.22.050; 17 (4) estate or trust income or a gain, loss, or deduction of the estate or 18 trust, as determined under AS 43.22.055; 19 (5) income or a gain, loss, or deduction from the sale or assignment of 20 a beneficial interest, or other disposition of an interest in tangible personal property in 21 the state, or rental income or loss from the use of tangible personal property in the 22 state; if the income, gain, loss, or deduction is from tangible personal property used or 23 employed both in and outside the state, the amount included in taxable income is 24 determined by multiplying the income, gain, loss, or deduction by a fraction, the 25 numerator of which is the number of days during which the property was used or 26 employed to earn, accrue, or incur the income, gain, loss, or deduction in the state and 27 the denominator of which is the total number of days during the taxable year that the 28 property was used or employed to earn, accrue, or incur the income, gain, loss, or 29 deduction; 30 (6) income or a gain, loss, or deduction from the sale, assignment, or 31 other disposition of an interest in real property in the state, or rental income or loss
01 from the use of real property in the state, including the percentage of ordinary and 02 capital gains received from a real estate investment trust, as defined in 26 U.S.C. 856 03 (Internal Revenue Code), that is attributable to rents from or sale or other disposition 04 of real property located in the state; in this paragraph, income or a gain, loss, or 05 deduction from the sale, assignment of a beneficial interest, or other disposition of real 06 property in the state includes income or a gain, loss, or deduction derived from the sale 07 or assignment of a beneficial interest in a partnership, S corporation, nonpublicly 08 traded C corporation with 100 or fewer shareholders, estate, or trust, if the entity owns 09 real property in the state that has a fair market value equal to or exceeding 50 percent 10 of all assets of the entity on the date of sale, assignment, or other disposition of the 11 taxpayer's interest in the entity; for purposes of this paragraph, 12 (A) only assets owned for at least two years before the date of 13 the sale, assignment, or other disposition of an interest in the entity shall be 14 used to determine the fair market value of all of the assets of the entity on the 15 date of sale, assignment, or other disposition; and 16 (B) the amount of income or a gain, loss, or deduction derived 17 from or connected with a source in the state from the sale, assignment, or other 18 disposition of an interest in an entity that is subject to the provisions of this 19 paragraph is the amount recognized for federal income tax purposes related to 20 the sale, assignment, or disposition, multiplied by a fraction, the numerator of 21 which is the fair market value of the real property located in the state on the 22 date of sale, assignment, or disposition and the denominator of which is the fair 23 market value of all of the assets of the entity on the date of the sale, 24 assignment, or disposition; 25 (7) compensation, salary, or wages for personal services rendered or 26 performed in the state that are derived from a business, trade, profession, occupation, 27 or employment carried on in the state; for purposes of this paragraph, personal 28 services 29 (A) except as otherwise provided in (B) of this paragraph, 30 include services performed 31 (i) in connection with presenting or receiving
01 employment-related training or education in the state; 02 (ii) in connection with a site inspection, review, 03 analysis, or management or any other supervision of a facility located 04 in the state; 05 (iii) in connection with research and development at a 06 facility located in the state or in connection with the installation of new 07 or upgraded equipment or systems at that facility; 08 (iv) as part of a project team working on the attraction 09 or implementation of new investment in a facility located or planned to 10 be located in the state; 11 (v) in connection with fishing, farming, or agriculture in 12 the state; or 13 (vi) for the federal government; 14 (B) do not include services that are casual, isolated, 15 inconsequential, or ancillary to out-of-state services; 16 (8) income derived from a business, trade, profession, occupation, or 17 employment carried on in the state, including income 18 (A) received under a covenant not to compete, a severance 19 agreement, a termination agreement, or unemployment compensation 20 insurance attributable to a business, trade, profession, occupation, or 21 employment previously carried on in the state, regardless of when received; 22 (B) derived from a business, trade, profession, occupation, or 23 employment carried on in the state by an individual who maintains or operates 24 an office, shop, store, warehouse, boat, plane, factory, agency, or other place 25 where the individual's affairs are systematically and regularly carried on, 26 regardless of other transactions carried on outside the state; this subparagraph 27 does not include income from an activity of an individual whose presence in 28 the state is casual, isolated, inconsequential, or ancillary to out-of-state 29 activities, except that, if a business, trade, profession, occupation, or 30 employment is carried on partly in and partly outside the state, other than for 31 the rendering of purely personal services by the individual, the taxable income
01 derived from or connected with a source in the state is determined under 02 AS 43.19 (Multistate Tax Compact) and AS 43.22.030; 03 (9) income from the management or investment function or activities 04 conducted in the state from intangible property; 05 (10) dividends, interest, payments received under an annuity, gains, or 06 other intangible income received from, or attributable to, intangible personal property, 07 including stock, bonds, notes, bank deposits, or annuities, if the intangible personal 08 property is employed in a business, trade, profession, occupation, or employment 09 carried on in the state; 10 (11) a gain derived from a statutory stock option, restricted stock, 11 nonstatutory stock option, or stock appreciation right by a nonresident individual who, 12 at the time the gain is received, performs services in the state for or is employed in the 13 state by the corporation granting the option, stock, or right, as determined in 14 regulations adopted by the department; 15 (12) income from nonqualified deferred compensation plans 16 attributable to services performed in the state, including compensation included in 17 federal gross income under 26 U.S.C. 457A (Internal Revenue Code); 18 (13) proceeds from a gambling activity conducted in the state or lottery 19 tickets purchased in the state, including payments received from a third party for the 20 transfer of the rights to future proceeds related to a gambling activity in the state or 21 lottery tickets purchased in the state; 22 (14) for an S corporation that terminates its taxable status in the state 23 during the tax year, income or a gain recognized on the receipt of payments from an 24 installment sale contract entered into at the time the S corporation was subject to tax in 25 the state, allocated in a manner consistent with the applicable methods and rules under 26 this chapter; 27 (15) royalties or other compensation received for the use of a patent, 28 copyright, secret process or formula, good will, mark, trade brand, franchise, or other 29 property having a taxable or business situs in the state; 30 (16) royalties or other compensation received for the use of a patent if 31 the patent is employed in production, fabrication, manufacturing, or other process in
01 the state; 02 (17) income or a gain from the disposition of an asset if the 03 acquisition, management, or disposition of the asset constitutes an integral part of the 04 nonresident individual's regular trade or business operation; 05 (18) income from the transmission, broadcast, distribution, or 06 dissemination of a service directly or indirectly attributable to the performance in the 07 state of an athlete, entertainer, singer, musician, dancer, comedian, magician, 08 performing artist, actor, actress, or similar person, including syndication fees. 09 (b) A deduction included in taxable income that results from a capital loss, 10 passive activity loss, or net operating loss must be based solely on income or a gain, 11 loss, or deduction derived from or connected with a source in the state. A nonresident 12 individual shall treat a deduction under this subsection in the same manner as the 13 corresponding federal deduction, unless the department requires otherwise in 14 regulation. 15 Sec. 43.22.050. Business conducted by a nonresident individual, trust, or 16 estate; income derived from or connected with a source in the state. (a) The 17 department shall adopt regulations governing the amount of income or the amount of a 18 gain, loss, or deduction from a business conducted by a nonresident individual, trust, 19 or estate that is derived from or connected with a source in the state for purposes of 20 determining taxable income. Regulations adopted under this subsection must be 21 consistent with AS 43.19 (Multistate Tax Compact) and AS 43.22.045 and include 22 adjustments under AS 43.22.030. 23 (b) The department shall adopt regulations governing the amount of income or 24 the amount of a gain, loss, or deduction that is derived from or connected with a 25 source in the state and is included in a nonresident 26 (1) partner's distributive share for purposes of taxation under this 27 chapter; 28 (2) shareholder's pro-rata share of an S corporation for purposes of 29 taxation under this chapter. 30 (c) The department may by regulation require a taxpayer to allocate rather 31 than apportion income or a gain, loss, or deduction under this section.
01 Sec. 43.22.055. Nonresident trust, estate, or beneficiary; income derived 02 from or connected with a source in the state. (a) The department shall adopt 03 regulations governing whether income or a gain, loss, or deduction of a nonresident 04 estate or nonresident trust is included in taxable income derived from or connected 05 with a source in the state. Regulations adopted under this subsection must be 06 consistent with the remainder of this section and AS 43.22.045. 07 (b) A nonresident beneficiary shall include in taxable income derived from or 08 connected with a source in the state a distribution from an estate or trust as if the 09 nonresident beneficiary earned or incurred the income or a gain, loss, or deduction 10 attributable to the distribution directly from the source. For purposes of this 11 subsection, the department may establish one or more methods for a nonresident 12 beneficiary to determine whether income or a gain, loss, or deduction is attributable to 13 a distribution. The department shall consistently apply a method from year to year and 14 apply the same method to other nonresident beneficiaries of the same trust or estate. 15 Nothing in this subsection requires the department to give effect to a provision of an 16 instrument creating an estate or trust if the department reasonably believes that the 17 principal purpose of the provision is to evade the tax imposed under this chapter. 18 Sec. 43.22.060. Part-year resident individual, trust, or estate; residency 19 income; income derived from or connected with a source in the state. (a) Except as 20 otherwise provided in this section, the taxable income of a part-year resident 21 individual, trust, or estate is the sum of 22 (1) the taxable income of the part-year resident individual, trust, or 23 estate during the period of residency; and 24 (2) the taxable income derived from or connected with a source in the 25 state for the period of nonresidency of the individual, trust, or estate. 26 (b) The department shall adopt regulations to determine the taxable income of 27 a part-year resident taxpayer who is granted a statutory stock option, restricted stock, 28 nonstatutory stock option, or a stock appreciation right and who, during the grant 29 period, performs services in the state for, or is employed in the state by, the 30 corporation granting the option, stock, or right. 31 Sec. 43.22.065. Personal service corporations and S corporations formed
01 or used to evade income tax. (a) The department may allocate all income, 02 deductions, credits, exclusions, and other allowances between a personal service 03 corporation or S corporation and its employee-owners if the 04 (1) personal service corporation or S corporation performs 05 substantially all of its services for or on behalf of another corporation, partnership, or 06 other entity and the effect is the evasion of income tax; and 07 (2) allocation is necessary to reflect the source and amount of the 08 income, regardless of whether the corporation is otherwise taxable. 09 (b) For purposes of this section, evasion of income tax occurs when a personal 10 service corporation or S corporation is used to 11 (1) reduce the taxable income of a resident or the taxable income of a 12 nonresident derived from or connected with a source in the state; or 13 (2) secure the benefit of an expense, deduction, credit, exclusion, or 14 other allowance for any employee-owner that would not otherwise apply under this 15 chapter. 16 (c) The constructive ownership of stock rules under 26 U.S.C. 318 (Internal 17 Revenue Code) apply to this section, except that "5 percent" shall be substituted for 18 "50 percent" in 26 U.S.C. 318(a)(2)(C) (Internal Revenue Code). 19 (d) In this section, all persons specified in 26 U.S.C. 267(b) (Internal Revenue 20 Code) shall be treated as one entity. 21 (e) In this section, 22 (1) "employee-owner" means any employee who owns, on any day 23 during the taxable year, more than 10 percent of the outstanding stock of a personal 24 service corporation or S corporation; 25 (2) "personal service corporation" means a corporation whose principal 26 activity is the performance of personal services that are substantially performed by the 27 employee-owners of the corporation. 28 Sec. 43.22.070. Determination of taxable year and method of accounting. 29 (a) For purposes of the tax imposed under this chapter, a taxpayer's 30 (1) taxable year is the same as the taxpayer's taxable year for federal 31 income tax purposes; and
01 (2) method of accounting is the same as the taxpayer's method of 02 accounting for federal income tax purposes. 03 (b) The department shall adopt regulations to determine the taxable income of 04 a taxpayer whose method of accounting changes during a taxable year or between 05 taxable years. 06 Sec. 43.22.075. Returns and payment of taxes. (a) A taxpayer shall file with 07 the department a return setting out 08 (1) the amount of tax due under this chapter; and 09 (2) other information necessary to carry out this chapter, as required by 10 the department in regulation. 11 (b) A person required to file a return under this chapter shall file the return on 12 a form or in a format prescribed by the department. The return is due to the department 13 at the same time and in the same manner, including extensions, as the taxpayer's 14 federal income tax return to the United States Internal Revenue Service. A return filed 15 under this chapter must be made under oath and on penalty of perjury. 16 (c) The total amount of tax imposed by this chapter is due and payable to the 17 department at the same time and in the same manner as the federal individual income 18 tax payable to the United States Internal Revenue Service. 19 (d) A taxpayer, upon request by the department, shall furnish to the 20 department a true and correct copy of a return that the taxpayer has filed with the 21 United States Internal Revenue Service. 22 (e) A taxpayer shall notify the department in writing of an alteration in, or 23 modification of, the taxpayer's federal income tax return and of a recomputation of tax 24 or determination of deficiency, whether with or without assessment. A full statement 25 of the facts must accompany the notice. A taxpayer shall file the notice not later than 26 60 days after the final determination of the alteration, modification, recomputation, or 27 deficiency and shall pay any additional tax due under this chapter at that time. In this 28 subsection, "final determination" means the time that an amended federal return is 29 filed, a notice of deficiency or an assessment is mailed to the taxpayer by the Internal 30 Revenue Service, and the taxpayer has exhausted rights of appeal under federal law. 31 (f) The department may credit or refund overpayments of taxes, taxes
01 erroneously or illegally assessed or collected, penalties collected without authority, 02 and taxes that are found unjustly assessed or excessive in amount, or otherwise 03 wrongfully collected. The department shall, in regulation, set limitations, specify the 04 manner in which claims for credits or refunds are made, and give notice of allowance 05 or disallowance. When a refund is allowed to a taxpayer, the refund may be paid out 06 of the general fund on a warrant issued under a voucher approved by the department. 07 (g) A partnership, S corporation, estate, or trust shall provide to its partners, 08 beneficiaries, or shareholders, and to the department, all information necessary for its 09 partners, beneficiaries, and shareholders to comply with this chapter. 10 (h) An individual is not required to file a return under this section 11 electronically, but a person employed to prepare and file an income tax return for an 12 individual shall file the return for that individual electronically. 13 (i) The department shall adopt regulations that set out requirements for a 14 spouse, upon request, to be partially or fully relieved from joint and several liability 15 resulting from the joint filing of a tax return. 16 Sec. 43.22.080. Tax withholding on wages of individuals. (a) Every 17 employer making payment of wages or salaries 18 (1) shall deduct and withhold an amount of tax computed in a manner 19 to approximate the amount of tax due on those wages and salaries under this chapter 20 for that taxable year; 21 (2) shall remit the tax withheld to the department accompanied by a 22 return on a form prescribed by the department at the times required by the department 23 by regulation; 24 (3) is liable for the payment of the tax required to be deducted and 25 withheld under this section but is not liable to any individual for the amount of the 26 payment; and 27 (4) shall furnish to an employee on or before January 31 of the 28 succeeding year, or within 30 days after a request by the employee after an employee's 29 or individual's termination if the 30-day period ends before January 31, a written 30 statement on a form prescribed by the department showing 31 (A) the name and taxpayer identification number of the
01 employer; 02 (B) the name and social security number of the employee; 03 (C) the total amount of wages and salary for the taxable year; 04 and 05 (D) the total amount deducted and withheld as tax under this 06 chapter for the taxable year. 07 (b) The department shall publish the rate of withholding required by this 08 section. 09 Sec. 43.22.085. Withholding on nonresident partners; composite returns. 10 (a) Unless otherwise provided by this section, a partnership that is required to file an 11 annual information return under subchapter K of the Internal Revenue Code (26 12 U.S.C. 701 - 761) shall file a partnership return as prescribed by the department and 13 shall report any income, gains, losses, or deductions that are derived from or 14 connected with a source in the state, as determined under this chapter. 15 (b) A partnership that is required to file a return under (a) of this section shall 16 withhold income tax from a nonresident partner's distributive share of the partnership's 17 income or a gain, loss, or deduction derived from or connected with a source in the 18 state at the highest marginal income tax rate applicable to individuals for the taxable 19 year. 20 (c) Withholding under this section is not required by a partnership that 21 (1) is a publicly traded partnership, as defined in 26 U.S.C. 7704(b) 22 (Internal Revenue Code); and 23 (2) files with the department an annual information return reporting the 24 name, address, taxpayer identification number, and other information requested by the 25 department concerning each unitholder whose distributive share of partnership 26 income, regardless of source, is more than $1,000. 27 (d) The department shall adopt regulations that allow a partnership subject to 28 withholding under this section to file a composite return. 29 Sec. 43.22.090. Dividend tax credit. An individual who receives a dividend 30 under AS 43.23.005 is entitled to a credit against the tax under this chapter equal to 31 the amount of the permanent fund dividend paid during the tax year. The dividend of a
01 dependent may only be used as a credit against the tax due on income of the 02 dependent. The credit under this section is not refundable and may not be carried 03 forward for a subsequent tax year. 04 Sec. 43.22.095. Administration. (a) The department shall adopt necessary 05 regulations and forms to implement and interpret this chapter, including regulations 06 and forms for the electronic filing and payment of tax due under this chapter. Federal 07 regulations issued under the Internal Revenue Code shall be considered persuasive 08 authority in interpreting any provision of the Internal Revenue Code on which the tax 09 imposed by this chapter relies, whether or not a federal regulation has been 10 specifically incorporated into a department regulation, unless the federal regulation 11 (1) conflicts with a provision of this chapter; 12 (2) conflicts with a regulation adopted by the department; or 13 (3) is inconsistent with the purposes of this chapter. 14 (b) A transaction or payment between related persons must have economic 15 substance, must serve a bona fide business purpose, and must not have occurred for 16 the primary purpose of lowering the tax due under this chapter. The department, after 17 review or audit of a taxpayer's return, may determine whether there is sufficient 18 documentation or whether a transaction or payment meets the requirements of this 19 subsection. If the department determines that the documentation, transaction, or 20 payment fails to meet the requirements of this subsection, the department may adjust 21 the amount of a payment or transaction, disregard the payment or transaction, or make 22 another adjustment necessary for determining the tax under this chapter. If a payment 23 in an amount greater than $500,000 is made or required to be made from one person to 24 a related person, the related persons shall submit documentation substantiating that the 25 amount of the payment is consistent with 26 U.S.C. 482 (Internal Revenue Code). 26 Payments subject to this subsection include payments for interest, royalties, 27 management fees, services, inventory, tangible personal property, intangible property, 28 and real property. In this subsection, "related person" means a person that satisfies the 29 definition of "related persons" in 26 U.S.C. 144 or 147 or a person in a relationship as 30 described in 26 U.S.C. 267(b) (Internal Revenue Code). 31 (c) A tax deficiency assessed by the department under this section is assumed
01 to be correct. A taxpayer has the burden of proving that the tax deficiency is 02 erroneous. 03 (d) The tax collected by the department under this chapter shall be deposited 04 into the general fund and accounted for separately. 05 Sec. 43.22.100. References to Internal Revenue Code. (a) Unless 06 inconsistent with this chapter, sections 26 U.S.C. 6654, 6662, 6664, 6694, 6695, 6700 07 - 6702, 6707, 6713, 7201, 7202, 7206, 7207, 7216, 7407, and 7408 (Internal Revenue 08 Code), as those sections read on January 1, 2020, are incorporated by reference as a 09 part of this chapter and supersede conflicting provisions in AS 43.05 and AS 43.10. 10 (b) When provisions of the Internal Revenue Code incorporated by reference 11 under (a) of this section refer to rules and regulations adopted by the United States 12 Commissioner of Internal Revenue, they are regarded as regulations adopted by the 13 department under this chapter, unless the department adopts specific regulations in 14 their place. 15 Sec. 43.22.105. Information released to a banking institution. 16 Notwithstanding AS 43.05.230, information on an individual income tax return may 17 be released to a banking institution to verify the direct deposit of an income tax refund 18 or correct an error in that deposit. 19 Sec. 43.22.150. Definitions. In this chapter, 20 (1) "domicile" means an individual's true, fixed, principal, and 21 permanent home, to which the individual intends to return even if currently living 22 elsewhere; if an individual has two or more homes, "domicile" means the home that 23 the individual regards and uses as the individual's more permanent home; once 24 established, a domicile remains the individual's domicile until the individual 25 demonstrates a real change of intent and moves to a new domicile; indications of 26 domicile include the 27 (A) location of the place of employment of the individual; 28 (B) location of real property owned by the individual; 29 (C) registration and physical location of motor vehicles, planes, 30 boats, and snow machines owned by the individual; 31 (D) location of a bank account or active checking account of
01 the individual; 02 (E) address where the individual receives mail; 03 (F) location of a school where the individual or a member of 04 the individual's immediate family 05 (i) attends; or 06 (ii) receives resident tuition; 07 (G) location of an organization of which the individual is a 08 member; 09 (H) location of a parent, child, grandchild, or great-grandchild; 10 (I) location of dental and medical personnel that provide 11 services to the individual on a regular or consistent basis; 12 (J) filing of a prior year tax return by the individual as a 13 resident or nonresident; 14 (K) location where an individual is registered to vote; 15 (L) location where an individual holds a resident fishing, 16 hunting, or trapping license; 17 (2) "federal adjusted gross income" has the meaning given to "adjusted 18 gross income" in 26 U.S.C. 62; 19 (3) "fiduciary" means a guardian, trustee, executor, administrator, 20 receiver, or conservator or a person, whether individual or corporate, acting in a 21 similar position of special confidence toward another; 22 (4) "Internal Revenue Code" means the Internal Revenue Code (26 23 U.S.C. 1 et seq.), as amended; 24 (5) "irrevocable trust" means a trust or portion of a trust that is not 25 subject to a power to revest title in a person whose property constitutes the trust or a 26 portion of the trust; 27 (6) "nonresident estate" means an estate other than a resident estate or 28 part-year resident estate; 29 (7) "nonresident individual" means an individual who is not a resident 30 of the state for any portion of the taxable year; 31 (8) "nonresident trust" means a trust other than a resident trust or part-
01 year resident trust; 02 (9) "partner" means a partner as defined in 26 U.S.C. 7701(a) (Internal 03 Revenue Code) and includes a member of a limited liability company or similar entity 04 that is treated as a partnership for federal income tax purposes; 05 (10) "partnership" means an entity as defined in 26 U.S.C. 7701(a) 06 (Internal Revenue Code) and includes a limited liability company and a similar entity 07 treated as a partnership for federal income tax purposes; 08 (11) "part-year resident estate" means an estate that is a resident of the 09 state for a portion of but not the entire taxable year; 10 (12) "part-year resident individual" means an individual who is a 11 resident of the state for a portion of but not the entire taxable year; 12 (13) "part-year resident trust" means a trust that is a resident of the 13 state for a portion of but not the entire taxable year; 14 (14) "resident estate" means the estate of a 15 (A) decedent who at the time of death was a resident of the 16 state, regardless of the residence of the fiduciary or beneficiary, if the 17 disposition or administration of the estate is subject to state law; or 18 (B) person who, at the time of commencement of a bankruptcy 19 proceeding under Title 11 of the United States Code, was a resident of the 20 state; 21 (15) "resident individual" means an individual who 22 (A) meets the eligibility requirements for a permanent fund 23 dividend under AS 43.23.005; 24 (B) receives a tax benefit available only to an individual 25 domiciled in the state; or 26 (C) is domiciled in the state for the entire taxable year unless 27 the individual maintains a permanent place of abode outside the state and 28 spends, in the aggregate, not more than 30 days during the taxable year in the 29 state; 30 (16) "resident trust" means a trust or a portion of a trust consisting of 31 property
01 (A) transferred by will of a decedent who at the time of death 02 was a resident of the state if the disposition or administration of the property is 03 subject to state law; or 04 (B) of a person who was a resident at the time the property was 05 transferred to the trust if, at the time of the transfer, the trust was 06 (i) an irrevocable trust; 07 (ii) a revocable trust and the trust has not become 08 irrevocable; or 09 (iii) a revocable trust and the trust later became 10 irrevocable at a time the person transferring property to the trust was a 11 resident; 12 (17) "revocable trust" means a trust or portion of a trust that is subject 13 to a power, exercisable immediately or at a future time, to revest title in a person 14 whose property constitutes the trust or portion of the trust; 15 (18) "S corporation" means a corporation that has elected to file a 16 federal income tax return under 26 U.S.C. 1361 - 1379 (Internal Revenue Code); 17 (19) "taxable income" means income taxable under this chapter; 18 (20) "taxable year" means the calendar year or a fiscal year ending 19 during the calendar year; 20 (21) "taxpayer" means a person subject to a tax imposed by this 21 chapter. 22 * Sec. 3. AS 43.05.085; AS 43.20.012(b), and 43.20.013 are repealed. 23 * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to 24 read: 25 APPLICABILITY. AS 43.22, added by sec. 2 of this Act, applies to income received 26 on or after the effective date of sec. 2 of this Act. 27 * Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 28 read: 29 TRANSITION: REGULATIONS. The Department of Revenue may adopt regulations 30 necessary to implement this Act. The regulations take effect under AS 44.62 (Administrative 31 Procedure Act), but not before the effective date of the law implemented by the regulation.
01 * Sec. 6. Section 5 of this Act takes effect immediately under AS 01.10.070(c). 02 * Sec. 7. Except as provided in sec. 6 of this Act, this Act takes effect January 1, 2023.