Legislature(2003 - 2004)
2004-05-09 Senate Journal
Full Journal pdf2004-05-09 Senate Journal Page 3524 SB 366 Senator Ben Stevens requested that the reconsideration on CS FOR SENATE BILL NO. 366(FIN)(fld S) "An Act relating to the levy and collection of sales and use taxes, and to the levy, collection, and expenditure of municipal taxes; and providing for an effective date" be taken up. The bill was before the Senate on reconsideration. Senator Ben Stevens moved that the bill be returned to second reading for the purpose of a specific amendment, that being Amendment No. 1. Without objection, the bill was returned to second reading. Senator Ben Stevens offered Amendment No. 1 : Page 1, line 1, through page 26, line 15: Delete all material and insert: ""An Act relating to taxation, including taxation of income of individuals, estates, and trusts; and providing for an effective date." 2004-05-09 Senate Journal Page 3525 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: * Section 1. The uncodified law of the State of Alaska is amended by adding a new section to read: PURPOSE. The purpose of this Act is to create a sustainable source of revenue to help balance the state budget. Although the majority of the state's funding will be provided from other revenue sources, these sources do not provide sufficient revenue to balance the budget. A tax on income earned in the state, coupled with a credit based on taxes paid on the permanent fund dividend, is a fair and sustainable source of revenue. * Sec. 2. AS 43.05.240 is amended by adding a new subsection to read: (c) A taxpayer who seeks redress from a tax imposed under this title on the grounds that a tax statute or regulation violates the Constitution of the United States, the Constitution of the State of Alaska, or is preempted by federal statute, regulation, or treaty shall file the return with a notice of protest and pay the tax. The notice of protest initiates the informal conference process described in (a) of this section; however, if the taxpayer timely files an action in superior court under AS 43.05.275(c), the informal conference process is terminated. A taxpayer who fails to file a notice of protest with the return is not entitled to a refund if the tax statute or regulation is determined to be unconstitutional. * Sec. 3. AS 43.05.275(a) is amended to read: (a) Except as provided in AS 43.20.021 an in (c) of this section, a claim for credit or refund of a tax under this title for which a taxpayer is required to file a return or pay a tax may be filed by the taxpayer (1) before the later of (A) three years from the time the return was filed; or (B) two years from the time the tax was paid; or (2) within two years from the time the tax was paid, if no return was filed. * Sec. 4. AS 43.05.275(c) is amended to read: 2004-05-09 Senate Journal Page 3526 (c) A taxpayer who has filed a notice of protest with a return and has [,] paid the full amount due on the return as provided in AS 43.05.240(c) is considered to have [, AND] made a claim for a credit or refund of a tax under this title and [SECTION] may, without exhausting administrative remedies, within 60 days after the date the protest and return were filed under AS 43.05.240(c), file an action in superior court to recover on the claim if the sole ground for appeal is that a tax statute is (1) violative of the United States Constitution; (2) violative of the state constitution; or (3) preempted by federal statute, regulation, or treaty. * Sec. 5. AS 43.20 is amended by adding a new section to read: Sec. 43.20.009. Tax on individuals, estates, and trusts. (a) There is imposed for each taxable year an income tax, computed as provided in this section, on every (1) resident individual; and (2) nonresident and part-year resident individual, estate, and trust, with income from sources in the state. (b) For a resident individual, the tax under this section is 31 percent of the federal income tax after federal credits and before other taxes. (c) For a nonresident or part-year resident individual, or for an estate or a trust, the tax under this section is 31 percent of the federal income tax after federal credits and before other taxes, multiplied by a fraction, the numerator of which is income from sources in the state and the denominator of which is income from all sources. (d) In (c) of this section, "income" means total income before adjusted gross income, as required to be shown on the federal return. * Sec. 6. AS 43.20.030(a) is amended to read: (a) Every individual, trust, estate, partnership, and [IF A] corporation subject to tax under this chapter [, OR A PARTNERSHIP THAT HAS A CORPORATION AS A PARTNER, IS] required to make a return of income under the provisions of the Internal Revenue Code [, IT] shall file 2004-05-09 Senate Journal Page 3527 with the department, within 30 days after the federal return is required to be filed, a return setting out (1) the amount of tax due under this chapter, less allowable credits and payments claimed against the tax; and (2) other information that the department requires for the purpose of carrying out the provisions of this chapter [THAT THE DEPARTMENT REQUIRES]. * Sec. 7. AS 43.20.030(d) is amended to read: (d) A taxpayer, upon request by the department, shall file with the taxpayer's state return [FURNISH TO THE DEPARTMENT] a true [AND CORRECT] copy of the tax return [WHICH THE TAXPAYER HAS] filed with the United States Internal Revenue Service. Every taxpayer shall file an amended return with [NOTIFY] the department, and remit any additional tax and interest due, within [IN WRITING OF ANY ALTERATION IN, OR MODIFICATION OF, THE TAXPAYER'S FEDERAL INCOME TAX RETURN AND OF A RECOMPUTATION OF TAX OR DETERMINATION OF DEFICIENCY, WHETHER WITH OR WITHOUT ASSESSMENT. A FULL STATEMENT OF THE FACTS MUST ACCOMPANY THIS NOTICE. THE NOTICE SHALL BE FILED WITHIN] 60 days after a [THE] final determination of the taxpayer's federal tax liability [MODIFICATION, RECOMPUTATION OR DEFICIENCY, AND THE TAXPAYER SHALL PAY THE ADDITIONAL TAX OR PENALTY UNDER THIS CHAPTER]. For purposes of this subsection [SECTION], a final determination means [SHALL MEAN] the date [TIME] that an amended federal return is filed, the date a federal [OR A NOTICE OF DEFICIENCY OR AN] assessment is made, or the date the restrictions on assessment are waived by [MAILED TO] the taxpayer [BY THE INTERNAL REVENUE SERVICE, EXCEPT THAT IN NO EVENT WILL THERE BE A FINAL DETERMINATION FOR PURPOSES OF THIS SECTION UNTIL THE TAXPAYER HAS EXHAUSTED RIGHTS OF APPEAL UNDER FEDERAL LAW]. * Sec. 8. AS 43.20.030 is amended by adding a new subsection to read: 2004-05-09 Senate Journal Page 3528 (h) In satisfaction of the requirements of (a) of this section, a family unit shall file a single consolidated state return for all individuals in the family unit. For purposes of this subsection, (1) "consolidated state return" means a return that reports and aggregates, for all individuals in a family unit, the sum of all (A) federal income taxes, after federal credits and before other taxes; and (B) state credits under AS 43.20.046; (2) "family unit" means all resident individuals for whom a personal exemption is claimed on a federal income tax return. * Sec. 9. AS 43.20.031(c) is amended to read: (c) In computing the tax under this chapter, a corporation [THE TAXPAYER] is not entitled to deduct any taxes based on or measured by net income. * Sec. 10. AS 43.20.040 is repealed and reenacted to read: Sec. 43.20.040. Income from sources in the state. (a) In this chapter, income from sources in the state includes (1) compensation for personal services rendered in the state; (2) working in the state for salary or wages; (3) income from real or tangible personal property located in the state; (4) income from stocks, bonds, notes, bank deposits, and other intangible personal property having a taxable or business situs in the state; however, the receipt of interest income from intangible property in the state does not alone establish a taxable or business situs in the state; (5) rentals and royalties for the use of or for the privilege of using, in the state, patents, copyrights, secret processes and formulas, good will, marks, trade brands, franchises, and other property having a taxable or business situs in the state; (6) income distributed from a trust established under or governed by the laws of the state; 2004-05-09 Senate Journal Page 3529 (7) income of a trust established under or governed by the laws of the state and income of the estate of a decedent who on the date of death was domiciled in the state; (8) income, from a source with a taxable or business situs in the state, of (A) a trust not established under or governed by the laws of the state; or (B) the estate of a decedent who on the date of death was not domiciled in the state; (9) income of whatever nature from a source with a taxable or business situs in the state. (b) In this section, income is from a source with a taxable or business situs in the state if it is attributed to or derived from (1) business facilities or property in the state; (2) business, farming, or fishing activities in the state; (3) conducting in the state the management or investment function for intangible property; (4) a partnership, limited liability company, estate, or trust conducting business activities in the state; (5) a corporation transacting business activities in the state that has elected to file federal returns under subchapter S of the Internal Revenue Code; (6) any other activity from which income is received, realized, or derived in the state. (c) If a business, trade, or profession is carried on partly inside and partly outside the state, other than the rendering of purely personal services by an individual, the income from sources in the state shall be determined as provided in AS 43.19. * Sec. 11. AS 43.20 is amended by adding a new section to article 1 to read: Sec. 43.20.046. Individual, trust, and estate tax credits. (a) For a resident, a trust established under or governed by the laws of this state, or the estate of a decedent who on the date of death was domiciled in this state, the income tax imposed on that resident, trust, or estate by another state or territory of the United States for the taxable 2004-05-09 Senate Journal Page 3530 year, on income derived from sources in that state or territory, is allowed as a credit against the tax under this chapter. (b) The credit under (a) of this section is determined by multiplying the tax computed under this chapter by a fraction, the numerator of which is the income derived from sources in the other state or territory and the denominator of which is income derived from all sources. The credit under (a) of this section may not exceed the actual tax paid to the other state or territory. (c) For each personal exemption claimed on the federal return, 33 percent of the amount of the Alaska permanent fund dividend under AS 43.23.045 is allowed as a credit against the tax under this chapter if the individual for whom the personal exemption is claimed received the dividend in the taxable year. (d) To the extent required by federal law, an individual is allowed as a credit against the tax under this chapter 10.2 percent of interest received by the individual in the taxable year upon obligations unconditionally backed by the full faith and credit of the United States. (e) An individual, estate, or trust is allowed only the state credits provided in this section. The total state credit allowed under this section may not exceed the tax liability for the taxable year for the individual except that, for an individual in a family unit who files a consolidated state return under AS 43.20.030(h), the aggregate credit of all individuals in the family unit may not exceed the aggregate tax liability of all individuals in the family unit. A credit may not be carried, in whole or in part, to a different taxable year. * Sec. 12. AS 43.20.160(c) is amended to read: (c) The department shall prescribe and furnish all necessary forms, and adopt and publish all necessary regulations in plain and concise language conformable with this chapter for the assessment and collection of the taxes imposed by this chapter. [THE DEPARTMENT SHALL APPLY AS FAR AS PRACTICABLE THE ADMINISTRATIVE AND JUDICIAL INTERPRETATIONS OF THE FEDERAL INCOME TAX LAW. THE DEPARTMENT SHALL ALSO PREPARE A CONCISE STATEMENT OF THE CONTENTS OF THE CODE 2004-05-09 Senate Journal Page 3531 SECTIONS REFERRED TO IN THIS CHAPTER FOR THE INFORMATION OF THE TAXPAYER AND MAKE THEM AVAILABLE TO THE TAXPAYER MAKING A RETURN]. * Sec. 13. AS 43.20 is amended by adding a new section to read: Sec. 43.20.171. Tax withholding on wages of individuals. (a) Every employer making payment of wages, salaries, or crew shares (1) shall deduct and withhold an amount of tax computed in a manner to approximate the amount of tax due on those wages, salaries, or crew shares under this chapter for that taxable year; (2) shall remit the tax withheld to the department accompanied by a return on a form prescribed by the department at the times required by the department by regulation; (3) is liable for the payment of the tax required to be deducted and withheld under this section but is not liable to any individual for the amount of the payment; and (4) shall furnish to the employee on or before January 31 of the succeeding year, or within 30 days after a request by the employee after the employee's termination if the 30-day period ends before January 31, a written statement on a form prescribed by the department showing (A) the name and taxpayer identification number of the employer; (B) the name and social security number of the employee; (C) the total amount of wages, salary, or crew shares for the taxable year; and (D) the total amount deducted and withheld as tax for the taxable year. (b) The department shall publish the rate of withholding required by this section. (c) In this section, (1) "employee" includes an individual who receives compensation on a crew share basis in connection with a commercial fishing activity; 2004-05-09 Senate Journal Page 3532 (2) "employer" includes a person who pays compensation to an individual on a crew share basis in connection with a commercial fishing activity. * Sec. 14. AS 43.20.200(b) is amended to read: (b) The same period of limitation upon the assessment and collection of taxes imposed under this chapter and the same exceptions to it shall apply as provided in 26 U.S.C. 6501 - 6503 (Internal Revenue Code). In the case of additional tax due by reason of a modification, recomputation, or determination of deficiency in a taxpayer's federal income tax return, the period of limitation on assessment commences from the date that the amended return [NOTICE] required in AS 43.20.030(d) is filed, and if no amended return [NOTICE] is filed the tax may be assessed at any time. * Sec. 15. AS 43.20.340 is amended by adding new paragraphs to read: (12) "domicile" means the place where an individual has established a true permanent home and principal establishment to which the individual has the intention of returning whenever absent; (13) "individual" means a natural person, married or unmarried, adult or minor, subject to payment of income tax under 26 U.S.C. (Internal Revenue Code); (14) "nonresident" means an individual who is not a resident or part-year resident; (15) "resident" means an individual who, for the entire taxable year, was domiciled in the state or resided in the state. * Sec. 16. AS 43.20.010, 43.20.013, 43.20.200(a), and 43.20.300 are repealed. * Sec. 17. TRANSITION: REGULATIONS. Notwithstanding sec. 20 of this Act, the Department of Revenue may proceed to adopt regulations necessary to implement the provisions of this Act. The regulations take effect under AS 44.62 (Administrative Procedure Act), but not before January 1, 2005. * Sec. 18. SEVERABILITY. Under AS 01.10.030, if any provision of this Act, or the application of a provision of this Act to any person or circumstance is held invalid, the remainder of this Act and the application to other persons is not affected. 2004-05-09 Senate Journal Page 3533 * Sec. 19. Section 17 of this Act takes effect immediately under AS 01.10.070(c). * Sec. 20. Except as provided in sec. 19 of this Act, this Act takes effect January 1, 2005." Senator Ben Stevens called the Senate. The call was satisfied. Senator Ben Stevens moved for the adoption of Amendment No. 1. Objections were heard. Senator Ellis rose to a point of order. President Therriault cautioned members to proceed in order. Senator Ben Stevens rose to a point of personal privilege. The question being: "Shall Amendment No. 1 be adopted?" The roll was taken with the following result: CSSB 366(FIN) Second Reading Amendment No. 1 YEAS: 4 NAYS: 15 EXCUSED: 1 ABSENT: 0 Yeas: Elton, Hoffman, Lincoln, Stevens B Nays: Bunde, Cowdery, Davis, Dyson, Ellis, French, Green, Guess, Ogan, Olson, Stedman, Stevens G, Therriault, Wagoner, Wilken Excused: Seekins and so, Amendment No. 1 failed. CS FOR SENATE BILL NO. 366(FIN) was automatically in third reading on reconsideration. The question to be reconsidered: "Shall CS FOR SENATE BILL NO. 366(FIN) "An Act relating to the levy and collection of sales and use taxes, and to the levy, collection, and expenditure of municipal taxes; and providing for an effective date" pass the Senate?" The roll was taken with the following result: 2004-05-09 Senate Journal Page 3534 CSSB 366(FIN) Third Reading - On Reconsideration YEAS: 4 NAYS: 15 EXCUSED: 1 ABSENT: 0 Yeas: Bunde, Cowdery, Stevens B, Wilken Nays: Davis, Dyson, Ellis, Elton, French, Green, Guess, Hoffman, Lincoln, Ogan, Olson, Stedman, Stevens G, Therriault, Wagoner Excused: Seekins and so, CS FOR SENATE BILL NO. 366(FIN) failed to pass the Senate on reconsideration. CS FOR SENATE BILL NO. 366(FIN)(fld S) was referred to the Secretary permanent filing.