HB 449: "An Act relating to the taxation of income."

00HOUSE BILL NO. 449 01 "An Act relating to the taxation of income." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 43.20.011 is amended by adding new subsections to read: 04  (g) For each taxable year or fractional part of a taxable year after 05 December 31, 1996, there is imposed a tax upon the taxable income of every resident, 06 nonresident, and part-year resident individual and fiduciary of the state. The tax 07 imposed by this subsection is determined as a percentage of the taxpayer's entire 08 federal income tax liability, except that the tax on a nonresident or part-year resident 09 individual or fiduciary is the tax determined as a percentage of the taxpayer's entire 10 federal income tax liability multiplied by a fraction the numerator of which is the 11 taxpayer's taxable income from sources in the state and the denominator of which is 12 the taxpayer's taxable income from all sources. The tax is determined as follows: 13  (1) for the taxable year after December 31, 1996, and through 14 December 31, 1997,

01 if the taxpayer's entire federal then the tax, as a percentage 02 income tax liability is: of the taxpayer's entire federal 03 income tax liability, is: 04 not more than $20,000 5 percent 05 over $20,000 10 percent; 06  (2) for the taxable year after December 31, 1997, and through 07 December 31, 1998, 08 if the taxpayer's entire federal then the tax, as a percentage 09 income tax liability is: of the taxpayer's entire federal 10 income tax liability, is: 11 not more than $20,000 10 percent 12 over $20,000 15 percent; and 13  (3) for each taxable year beginning after December 31, 1998, 14 if the taxpayer's entire federal then the tax, as a percentage 15 income tax liability is: of the taxpayer's entire federal 16 income tax liability, is: 17 not more than $20,000 15 percent 18 over $20,000 20 percent. 19  (h) An individual shall determine the tax under this section using the same 20 filing status as used on the individual's federal return. 21 * Sec. 2. AS 43.20.030(a) is amended to read: 22  (a) An individual, fiduciary, [IF A] corporation, or [A] partnership that has 23 a corporation as a partner that is required to make a return under the provisions of the 24 Internal Revenue Code [, IT] shall file with the department [, WITHIN 30 DAYS 25 AFTER THE FEDERAL RETURN IS REQUIRED TO BE FILED,] a return setting 26 out 27  (1) the amount of tax due under this chapter, less allowable credits and 28 payments claimed against the tax; and 29  (2) other information for the purpose of carrying out the provisions of 30 this chapter that the department requires. 31 * Sec. 3. AS 43.20.030(c) is amended to read:

01  (c) The [NOTWITHSTANDING (a) OF THIS SECTION, THE] total amount 02 of tax imposed by this chapter is due and payable to the department at the same time 03 and in the same manner as the tax payable to the United States Internal Revenue 04 Service. 05 * Sec. 4. AS 43.20.030(d) is amended to read: 06  (d) A taxpayer [, UPON REQUEST BY THE DEPARTMENT,] shall file with 07 the return [FURNISH TO THE DEPARTMENT] a [TRUE AND] correct copy of the 08 taxpayer's tax return [WHICH THE TAXPAYER HAS] filed with the United States 09 Internal Revenue Service for the taxable year. Every taxpayer shall file an amended 10 return with the department, and remit any additional tax and interest due 11 [NOTIFY THE DEPARTMENT IN WRITING OF ANY ALTERATION IN, OR 12 MODIFICATION OF, THE TAXPAYER'S FEDERAL INCOME TAX RETURN 13 AND OF A RECOMPUTATION OF TAX OR DETERMINATION OF DEFICIENCY 14 (WHETHER WITH OR WITHOUT ASSESSMENT). A FULL STATEMENT OF 15 THE FACTS SHALL ACCOMPANY THIS NOTICE. THE NOTICE SHALL BE 16 FILED] within 60 days after the final determination of the taxpayer's federal tax 17 liability [MODIFICATION, RECOMPUTATION OR DEFICIENCY, AND THE 18 TAXPAYER SHALL PAY THE ADDITIONAL TAX OR PENALTY UNDER THIS 19 CHAPTER]. For purposes of this section, a final determination means [SHALL 20 MEAN] the time that an amended federal return is filed or the date a federal [A 21 NOTICE OF DEFICIENCY OR AN] assessment is made [MAILED TO THE 22 TAXPAYER BY THE INTERNAL REVENUE SERVICE, EXCEPT THAT IN NO 23 EVENT WILL THERE BE A FINAL DETERMINATION FOR PURPOSES OF THIS 24 SECTION UNTIL THE TAXPAYER HAS EXHAUSTED RIGHTS OF APPEAL 25 UNDER FEDERAL LAW]. 26 * Sec. 5. AS 43.20 is amended by adding a new section to read: 27  Sec. 43.20.032. TAX CALCULATION FOR NONRESIDENTS AND PART- 28 YEAR RESIDENTS AND FIDUCIARIES. (a) In computing the tax under AS 43.20.011(g) 29 of a nonresident or a part-year resident individual, or a fiduciary, the part of the taxpayer's 30 taxable income attributable to sources in the state is determined under AS 43.20.040. 31  (b) In computing the taxpayer's taxable income attributable to sources in the

01 state for a nonresident or a part-year resident individual, or a fiduciary, deductions and 02 adjustments are allowed only to the extent that they are connected with income that 03 arises from sources in the state or property having a situs for taxation in the state. 04 * Sec. 6. AS 43.20.040(b) is amended to read: 05  (b) In this section, income is from a source having a taxable or business situs 06 in the state if it is derived from 07  (1) owning or operating business facilities or property in the state; 08  (2) conducting business, farming, or fishing operations in the state; 09  (3) [REPEALED 10  (4)] a partnership that [WHICH] transacts business in the state; 11  (4) [(5)] a corporation that [WHICH] transacts business in the state 12 and that [WHICH] has elected to file federal returns under 26 U.S.C. 1361 - 1379 13 (Subtitle A, Ch. 1S, Internal Revenue Code) [SUBCHAPTER S OF THE 14 INTERNAL REVENUE CODE]; 15  (5) [(6) REPEALED 16  (7)] engaging in any other activity from which income is received, 17 realized, or derived in the state; 18  (6) working for salary or wages in the state; 19  (7) an estate or trust deriving income from sources in the state. 20 * Sec. 7. AS 43.20.040 is amended by adding a new subsection to read: 21  (d) With regard to the tax under AS 43.20.011(g), if a business, trade, or 22 profession, other than the rendering of purely personal services, is carried on partly 23 inside and partly outside the state, the income from sources in the state is determined 24 under AS 43.19 (Multistate Tax Compact). 25 * Sec. 8. AS 43.20 is amended by adding a new section to read: 26  Sec. 43.20.062. CREDITS AGAINST TAX. (a) The amounts deducted and 27 withheld as taxes under this chapter during a calendar year are allowed as credits to 28 the taxpayer against the tax imposed by this chapter. 29  (b) A resident or part-year resident is allowed as a credit against the tax 30 otherwise due under this chapter the amount of income tax imposed on the taxpayer 31 for the taxable year by another state or territory of the United States on income derived

01 from sources in the other state or territory that is also subject to tax under this chapter. 02 However, the credit allowed in this subsection is limited to that proportion of the tax 03 computed under this chapter that the taxable income from the other state or territory 04 bears to total taxable income, and the credit may not exceed the actual tax paid to the 05 other state or territory. 06  (c) An individual or fiduciary is allowed as a credit against the tax otherwise 07 due under this chapter the amount of any real and personal property taxes paid by the 08 individual or the fiduciary to a municipality in this state under AS 29.45. 09 * Sec. 9. AS 43.20.065 is amended to read: 10  Sec. 43.20.065. ALLOCATION AND APPORTIONMENT. A corporate 11 taxpayer who has income from business activity that [WHICH] is taxable both inside 12 and outside the state or income from other sources both inside and outside the state 13 shall allocate and apportion net income under AS 43.19 (Multistate Tax Compact), or 14 as provided by this chapter. 15 * Sec. 10. AS 43.20 is amended by adding a new section to read: 16  Sec. 43.20.171. COLLECTION OF INCOME AT SOURCE. (a) Every 17 employer making payment of wages or salaries after December 31, 1996, shall deduct 18 and withhold an amount of tax computed in a manner to approximate the amount of 19 tax due on those wages under this chapter for that year. The employer shall remit 20 withheld taxes to the department, together with a return or report prescribed by the 21 department, at the time or times required by the department by regulation. The 22 department shall publish the rate of withholding required by this section. Every 23 employer making a deduction and a withholding shall furnish to the employee no later 24 than January 31 of the succeeding year, or within 30 days after termination of 25 employment, whichever is earlier, a written statement on a form prescribed by the 26 department showing 27  (1) the name and taxpayer identification number of the employer; 28  (2) the name and social security number of the employee; 29  (3) the total amount of wages and other compensation; and 30  (4) the total amount deducted and withheld as tax. 31  (b) Every employer making payments of wages or salaries earned in the state,

01 regardless of the place where the payment is made, 02  (1) is liable for the payment of the tax required to be deducted and 03 withheld under this section and is not liable to an individual for the amount of the 04 payment; and 05  (2) shall make return of and pay to the department the amount of tax 06 levied that the employer is required to deduct and withhold under this chapter. 07  (c) An employer who fails to comply with this section is subject to the 08 penalties set out in AS 43.05.220(d). 09  (d) If the employer is the United States or the state or a political subdivision 10 of the state, or an agency or instrumentality of one or more of those entities, the return 11 of the amount deducted and withheld on wages or salaries may be made by an officer 12 of the employer having control of the payment of the wages or salaries or who is 13 appropriately designated for that purpose. 14  (e) In this section, "employee," "employer," and "wages" have the meanings 15 given to them under 26 U.S.C. (Internal Revenue Code). 16 * Sec. 11. AS 43.20.340 is amended to read: 17  Sec. 43.20.340. DEFINITIONS. In this chapter, 18  (1) "bank" means a financial institution, including a national banking 19 association; 20  (2) "corporation" includes an association, joint-stock company, and an 21 insurance company; 22  (3) "fiduciary" means an estate, a trust, a guardian, trustee, 23 executor, administrator, receiver, conservator, or a person acting in a fiduciary 24 capacity for another or for the estate of a deceased person; [REPEALED,] 25  (4) "fiscal year" means an accounting period of 12 months ending on 26 the last day of a month other than December; 27  (5) "individual" means a natural person, married or unmarried, 28 adult or minor, who is subject to the obligation to pay an income tax under 26 29 U.S.C. (Internal Revenue Code) ["INCLUDES" AND "INCLUDING" WHEN USED 30 IN A DEFINITION DO NOT EXCLUDE OTHER THINGS OTHERWISE WITHIN 31 THE MEANING OF THE WORD DEFINED];

01  (6) "Internal Revenue Code" means the Internal Revenue Code of the 02 United States (26 U.S.C.) as the code exists now or as hereafter amended, as the code 03 and amendments apply to the normal taxes and surtax on net incomes, which 04 amendments are operative for the purposes of this chapter as of the time they became 05 operative or will become operative under federal law; 06  (7) "nonresident" means an individual who is not a resident or 07 part-year resident; 08  (8) "part-year resident" means an individual who becomes a resident 09 or loses the status of a resident [ENTERS OR LEAVES THE STATE] during the 10 taxable year [AND WHO HAS RESIDED OR WAS DOMICILED IN THE STATE 11 FOR A PERIOD OF LESS THAN 12 MONTHS DURING THE TAXABLE YEAR]; 12  (9) [(8)] "person" means an individual, a trust, an [OR] estate, a [OR] 13 partnership, or a corporation; 14  (10) "resident" has the meaning given to the term "state resident" 15 by AS 43.23.095; 16  (11) [(9)] "taxable year" means the calendar year or the fiscal year 17 ending during the calendar year upon the basis of which the net income is computed 18 under this chapter; "taxable year" includes, in the case of a return made for a fractional 19 part of a year under this chapter, the period for which the return is made; 20  (12) [(10)] "taxpayer" means a person subject to a tax imposed by this 21 chapter; 22  (13) [(11)] "trade or business" includes the engaging in or carrying on 23 of a trade, business, profession, vocation, employment, and rendition of services or 24 commercial activity and includes the performance of the function of a public office. 25 * Sec. 12. AS 43.05.085; AS 43.20.012, 43.20.013; and AS 47.45.120(a) are repealed.