00 SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 309 01 "An Act bearing the short title of the 'Corporate Tax Loophole Elimination Act'; 02 establishing an individual income tax for the taxation of income from certain 03 corporations that are not C corporations; relating to exemptions from the tax on 04 corporations; repealing tax credits applied against the tax on individuals; and providing 05 for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07  * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 08 to read: 09 SHORT TITLE. This Act may be known as the Corporate Tax Loophole Elimination 10 Act.  11  * Sec. 2. AS 43.20.012(a) is amended to read: 12 (a) The tax imposed by this chapter does not 13 [(1)] apply to a public corporation, as defined in AS 45.77.020 [AN 01 INDIVIDUAL; 02 (2) APPLY TO A FIDUCIARY; 03 (3) FOR A TAX YEAR BEGINNING AFTER DECEMBER 31, 2012, 04 APPLY TO AN ALASKA CORPORATION THAT IS A QUALIFIED SMALL 05 BUSINESS AND THAT MEETS THE ACTIVE BUSINESS REQUIREMENT IN 26 06 U.S.C. 1202(e) AS THAT SUBSECTION READ ON JANUARY 1, 2012; OR 07 (4) FOR A TAX YEAR BEGINNING AFTER JUNE 30, 2007, 08 APPLY TO THE INCOME RECEIVED BY A REGIONAL ASSOCIATION 09 QUALIFIED UNDER AS 16.10.380 OR NONPROFIT CORPORATION HOLDING 10 A HATCHERY PERMIT UNDER AS 16.10.400 FROM THE SALE OF SALMON 11 OR SALMON EGGS UNDER AS 16.10.450 OR FROM A COST RECOVERY 12 FISHERY UNDER AS 16.10.455]. 13  * Sec. 3. AS 43.20 is amended by adding a new section to read: 14 Sec. 43.20.019. Tax on income of a qualified entity. (a) Except as provided 15 in (b) of this section, if a qualified entity has taxable net income over $200,000, a 16 shareholder or member of that qualified entity shall pay a tax of 6.5 percent on the 17 qualified entity's net income attributable to the shareholder or member. The net 18 income attributable to the shareholder or member is the shareholder's or member's pro 19 rata share of the qualified entity's taxable net income, as calculated for federal 20 individual income tax purposes, less the shareholder's or member's pro rata share of a 21 credit usable by a qualified entity under this chapter. 22 (b) The tax under (a) of this section is imposed in addition to an individual 23 income tax, if an individual income tax is imposed under state law. However, if the 24 individual income tax imposed under state law and the tax under (a) of this section 25 result in the income described in (a) of this section being taxed at a rate greater than 26 9.4 percent, the tax in (a) of this section shall be reduced so that the combined total of 27 the individual income tax and the tax under (a) of this section does not exceed 9.4 28 percent. Nothing in this section reduces 29 (1) an individual income tax rate imposed under another provision of 30 law; or 31 (2) the tax imposed under (a) of this section to less than zero. 01 (c) In addition to any other tax credit under this chapter, a shareholder or 02 member of a qualified entity may take as a credit against the taxes due under this 03 section state taxes paid by the shareholder or member and the shareholder or member's 04 pro rata share of state taxes paid by the qualified entity. A tax credit under this 05 subsection may not be the basis for a deduction against the tax levied under this 06 chapter. The tax credit under this subsection 07 (1) does not apply to taxes paid under AS 43.55; 08 (2) is not refundable or transferable; and 09 (3) may not be used to reduce a shareholder or member's tax liability 10 below zero. 11 (d) In this section, "qualified entity" means a limited liability company that 12 has elected to file federal returns under 26 U.S.C. 1361 - 1379 (Internal Revenue 13 Code) or any other corporation or other entity that has elected to file federal returns 14 under 26 U.S.C. 1361 - 1379 (Internal Revenue Code). 15  * Sec. 4. AS 43.05.085; AS 43.20.012(b), 43.20.012(c), 43.20.012(d), and 43.20.013 are 16 repealed. 17  * Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 18 read: 19 APPLICABILITY. AS 43.20.019, added by sec. 3 of this Act, applies to a shareholder 20 or member of a qualified entity with a taxable income over $200,000 filing a return for a 21 taxable year commencing after the effective date of this Act. In this section, "qualified entity" 22 has the meaning given in AS 43.20.019. 23  * Sec. 6. This Act takes effect December 31, 2016.