00 CS FOR HOUSE BILL NO. 187(L&C)                                                                                        
01 "An Act relating to a small business development tax credit under the Alaska                                            
02 Net Income Tax Act; and providing for an effective date."                                                               
03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                               
04    * Section 1.  PURPOSE.  (a)  The legislature finds that affiliated corporations with a                             
05 common corporate ownership, as well as large nonaffiliated corporations, possess advantages                             
06 not available to small business corporations that do not share a common corporate ownership                             
07 with other corporations.  These advantages include economies of scale and management, as                                
08 well as easier access to investment capital and favorable interest rates.  Therefore, affiliated                        
09 corporations and large corporations have a competitive advantage over these small business                              
10 corporations with respect to making investments.                                                                        
11  (b)  In order to allow small businesses to compete more effectively and to induce                                      
12 incremental investment from the small business sector that will have a multiplier effect on the                         
13 economy, producing more jobs and stimulating other businesses, a limited tax credit under the                           
14 Alaska Net Income Tax Act for investments in new property by eligible small business                                    
01 corporations is desirable.                                                                                              
02    * Sec. 2.  AS 43.20 is amended by adding a new section to article 1 to read:                                       
03  Sec. 43.20.047.  Small business development tax credit.  (a)  A taxpayer with                                       
04 a monthly average of fewer than 50 employees that is not a member of an affiliated                                      
05 group of two or more corporations as defined in AS 43.20.073(g)(2) may claim a small                                    
06 business development tax credit of 10 percent of the first $100,000 of qualified                                        
07 investment in new property first placed into service exclusively in the state in a tax                                  
08 year beginning after December 31, 1997, but before January 1, 2001.                                                     
09  (b)  The tax credit allowed under this section                                                                        
10   (1)  may not exceed 50 percent of the taxpayer's tax liability under this                                            
11 chapter; and                                                                                                            
12   (2)  shall be taken before all other credits allowed under this title.                                               
13  (c)  An unused tax credit under this section may be carried forward and applied                                       
14 first against the tax liability for the following two tax years.                                                        
15  (d)  If, before the close of three years after the last day of the tax year for                                       
16 which a credit was claimed, a taxpayer disposes of or removes from the state the                                        
17 property for which the taxpayer had claimed a credit under this section, the taxpayer's                                 
18 tax liability in the tax year of the disposal or removal of the property is increased by                                
19 a percentage of the credit claimed as follows:                                                                          
20   (1)  100 percent if the property is disposed of or removed                                                           
21   (A)  in the same tax year for which the credit is claimed; or                                                       
22   (B)  within the first six months of the following tax year;                                                         
23   (2)  75 percent if the property is disposed of or removed within six                                                 
24 months after the close of the period described in (1)(B) of this subsection;                                            
25   (3)  50 percent if the property is disposed of or removed within                                                     
26 12 months after the close of the period described in (2) of this subsection;                                            
27   (4)  25 percent if the property is disposed of or removed within                                                     
28 12 months after the close of the period described in (3) of this subsection.                                            
29  (e)  For purposes of (d) of this section, property is not considered disposed of                                      
30 or removed by reason of a change in the form of business of the taxpayer if the                                         
31 property is retained in the business of the taxpayer.                                                                   
01  (f)  A credit shall be allowed under this section regardless of whether the                                           
02 taxpayer has made an election to expense the qualified investment in the property for                                   
03 federal income tax purposes.  Nothing in this subsection affects the tax basis of the                                   
04 property under this chapter.  Except as otherwise provided in this chapter, the tax basis                               
05 of the property under this chapter shall follow the federal tax basis of the property.                                  
06  (g)  Qualified investment upon which a credit is claimed under this section may                                       
07 not be considered for any other tax credit under this title.                                                            
08  (h)  For the purposes of (a) of this section, a taxpayer's monthly average                                            
09 number of employees is determined based on the taxpayer's employment statistics as                                      
10 reported to the Department of Labor under AS 23.20 and regulations adopted under                                        
11 that chapter for                                                                                                        
12   (1)  the calendar year preceding the year in which the credit under this                                             
13 section is initially claimed; or                                                                                        
14   (2)  the first quarter of the calendar year in which the credit under this                                           
15 section is initially claimed if the taxpayer did not report employment statistics for the                               
16 calendar year described in (1) of this subsection.                                                                      
17  (i)  A taxpayer may not claim the tax credit allowed under this section if the                                        
18 taxpayer is in arrears in the payment of contributions under AS 23.20 or a tax under                                    
19 this title.  For purposes of this subsection, a taxpayer is not in arrears if the                                       
20 contribution or tax is under administrative or judicial appeal.                                                         
21  (j)  In this section,                                                                                                 
22   (1)  "employee" means an individual in employment as described in                                                    
23 AS 23.20.525 and 23.20.526;                                                                                             
24   (2)  "exclusively in the state" means all use of the property is in the                                              
25 state;                                                                                                                  
26   (3)  "first placed into service" means the moment when property is first                                             
27 used for its intended purpose;                                                                                          
28   (4)  "new property" means property whose original use commences with                                                 
29 the taxpayer and does not include property first used by another person;                                                
30   (5)  "qualified investment" means an investment cost in depreciable                                                  
31 tangible personal property for exclusive business use having a useful life of three years                               
01 or more but does not include an investment cost in motor vehicles, aircraft, watercraft,                                
02 leased property, or property to be permanently attached or incorporated into real                                       
03 property;                                                                                                               
04   (6)  "tax liability" means the liability for taxes under this chapter                                                
05 calculated before credits allowed under this chapter are taken;                                                         
06   (7)  "useful life" means the useful life of the personal property that is                                            
07 or would be applicable for the purposes of depreciation.                                                                
08    * Sec. 3.  AS 43.20.047 is repealed.                                                                               
09    * Sec. 4.  Sections 1 and 2 of this Act are retroactive to January 1, 1998.                                        
10    * Sec. 5.  Sections 1, 2, and 4 of this Act take effect immediately under AS 01.10.070(c).                         
11    * Sec. 6.  Section 3 of this Act takes effect December 1, 2003.