00                   2d CS FOR HOUSE BILL NO. 303(RLS)(fld S)                                                             
01 "An Act relating to taxation of individual income; and providing for an effective date."                                
02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
03    * Section 1.  AS 43.05 is amended by adding a new section to article 3 to read:                                    
04            Sec. 43.05.300.  Definition.  In AS 43.05.220 - 43.05.300, unless the context                              
05       otherwise requires, "taxpayer"                                                                                    
06                 (1)  means a person required to pay a tax under this title; and                                         
07                 (2)  includes an employer that is required to withhold taxes under                                      
08       AS 43.20.041.                                                                                                     
09    * Sec. 2.  AS 43.20 is amended by adding a new section to read:                                                    
10            Sec. 43.20.009.  Tax on individuals.  (a)  For each year after December 31,                                
11       2002, there is imposed an income tax on the adjusted gross income of every                                        
12                 (1)  resident individual; and                                                                           
13                 (2)  nonresident and part-year resident individual with income from                                     
14       sources in the state.                                                                                             
15            (b)  The applicable tax rates for a calendar year are as follows:                                            

01                 (1)  if, on September 30 of the previous year, the unaudited balance in                                 
02       the budget reserve fund created by art. IX, sec. 17, Constitution of the State of Alaska,                         
03       was equal to or less than $2,000,000,000,                                                                         
04                      (A)  for an individual whose federal filing status for the year is                                 
05            single, married filing separately, or head of household,                                                     
06            if the adjusted gross income is: then the tax is:                                                            
07            not over $10,000                 1.35 percent                                                                
08            over $10,000 but not over $20,000 $135 plus 2.03 percent of the                                              
09                                              amount over $10,000                                                        
10            over $20,000 but not over $30,000 $338 plus 2.70 percent of the                                              
11                                              amount over $20,000                                                        
12            over $30,000 but not over $50,000 $608 plus 2.70 percent of the                                              
13                                              amount over $30,000                                                        
14            over $50,000 but not over $75,000 $1,148 plus 1.76 percent of                                                
15                                              the amount over $50,000                                                    
16            over $75,000 but not over $100,000 $1,588 plus 1.76 percent of                                               
17                                              the amount over $75,000                                                    
18            over $100,000 but not over $150,000 $2,028 plus 1.69 percent of                                              
19                                              the amount over $100,000                                                   
20            over $150,000 but not over $200,000 $2,873 plus 1.49 percent of                                              
21                                              the amount over $150,000                                                   
22            over $200,000 but not over $500,000 $3,618 plus .41 percent of the                                           
23                                              amount over $200,000                                                       
24            over $500,000 but not over $1,000,000 $4,848 plus .07 percent of the                                         
25                                              amount over $500,000                                                       
26            over $1,000,000                  $5,198 plus .05 percent of the                                              
27                                              amount over $1,000,000                                                     
28                      (B)  for two individuals whose federal filing status is married                                    
29            filing jointly or an individual whose federal filing status is as a qualifying                               
30            widow or widower with dependent child,                                                                       
31            if adjusted gross income is:     then the tax is:                                                            

01            not over $20,000                 1.35 percent                                                                
02            over $20,000 but not over $40,000 $270 plus 2.03 percent of the                                              
03                                              amount over $20,000                                                        
04            over $40,000 but not over $60,000 $676 plus 2.70 percent of the                                              
05                                              amount over $40,000                                                        
06            over $60,000 but not over $100,000 $1,216 plus 2.70 percent of                                               
07                                              the amount over $60,000                                                    
08            over $100,000 but not over $150,000 $2,296 plus 1.76 percent of                                              
09                                              the amount over $100,000                                                   
10            over $150,000 but not over $200,000 $3,176 plus 1.76 percent of                                              
11                                              the amount over $150,000                                                   
12            over $200,000 but not over $300,000 $4,056 plus 1.69 percent of                                              
13                                              the amount over $200,000                                                   
14            over $300,000 but not over $400,000 $5,746 plus 1.49 percent of                                              
15                                              the amount over $300,000                                                   
16            over $400,000 but not over $1,000,000 $7,236 plus .41 percent of                                             
17                                              the amount over $400,000                                                   
18            over $1,000,000 but not over $2,000,000 $9,696 plus .07 percent of                                           
19                                              the amount over $1,000,000                                                 
20            over $2,000,000                  $10,396 plus .05 percent of                                                 
21                                              the amount over $2,000,000                                                 
22                 (2)  if, on September 30 of the previous year, the unaudited balance in                                 
23       the budget reserve fund created by art. IX, sec. 17, Constitution of the State of Alaska,                         
24       was more than $2,000,000,000 but not more than $3,000,000,000,                                                    
25                      (A)  for an individual whose federal filing status for the year is                                 
26            single, married filing separately, or head of household,                                                     
27            if the adjusted gross income is: then the tax is:                                                            
28            not over $10,000                 .95 percent                                                                 
29            over $10,000 but not over $20,000 $95 plus 1.42 percent of the                                               
30                                              amount over $10,000                                                        
31            over $20,000 but not over $30,000 $237 plus 1.89 percent of the                                              

01                                              amount over $20,000                                                        
02            over $30,000 but not over $50,000 $426 plus 1.89 percent of the                                              
03                                              amount over $30,000                                                        
04            over $50,000 but not over $75,000 $804 plus 1.23 percent of                                                  
05                                              the amount over $50,000                                                    
06            over $75,000 but not over $100,000 $1,112 plus 1.23 percent of                                               
07                                              the amount over $75,000                                                    
08            over $100,000 but not over $150,000 $1,419 plus 1.18 percent of                                              
09                                              the amount over $100,000                                                   
10            over $150,000 but not over $200,000 $2,009 plus 1.04 percent of                                              
11                                              the amount over $150,000                                                   
12            over $200,000 but not over $500,000 $2,529 plus .28 percent of                                               
13                                              the amount over $200,000                                                   
14            over $500,000 but not over $1,000,000 $3,369 plus .05 percent of                                             
15                                              the amount over $500,000                                                   
16            over $1,000,000                  $3,619 plus .04 percent of                                                  
17                                              the amount over $1,000,000                                                 
18                      (B)  for two individuals whose federal filing status is married                                    
19            filing jointly or an individual whose federal filing status is as a qualifying                               
20            widow or widower with dependent child,                                                                       
21            if adjusted gross income is:     then the tax is:                                                            
22            not over $20,000                 .95 percent                                                                 
23            over $20,000 but not over $40,000 $190 plus 1.42 percent of the                                              
24                                              amount over $20,000                                                        
25            over $40,000 but not over $60,000 $474 plus 1.89 percent of the                                              
26                                              amount over $40,000                                                        
27            over $60,000 but not over $100,000 $852 plus 1.89 percent of                                                 
28                                              the amount over $60,000                                                    
29            over $100,000 but not over $150,000 $1,608 plus 1.23 percent of                                              
30                                              the amount over $100,000                                                   
31            over $150,000 but not over $200,000 $2,223 plus 1.23 percent of                                              

01                                              the amount over $150,000                                                   
02            over $200,000 but not over $300,000 $2,838 plus 1.18 percent of                                              
03                                              the amount over $200,000                                                   
04            over $300,000 but not over $400,000 $4,018 plus 1.04 percent of                                              
05                                              the amount over $300,000                                                   
06            over $400,000 but not over $1,000,000 $5,058 plus .28 percent of                                             
07                                              the amount over $400,000                                                   
08            over $1,000,000 but not over $2,000,000 $6,738 plus .05 percent of                                           
09                                              the amount over $1,000,000                                                 
10            over $2,000,000                  $7,238 plus .04 percent of                                                  
11                                              the amount over $2,000,000                                                 
12                 (3)  if, on September 30 of the previous year, the unaudited balance in                                 
13       the budget reserve fund created by art. IX, sec. 17, Constitution of the State of Alaska,                         
14       was more than $3,000,000,000,                                                                                     
15                      (A)  for an individual whose federal filing status for the year is                                 
16            single, married filing separately, or head of household,                                                     
17            if the adjusted gross income is: then the tax is:                                                            
18            not over $10,000                 .54 percent                                                                 
19            over $10,000 but not over $20,000 $54 plus .81 percent of the                                                
20                                              amount over $10,000                                                        
21            over $20,000 but not over $30,000 $135 plus 1.08 percent of the                                              
22                                              amount over $20,000                                                        
23            over $30,000 but not over $50,000 $243 plus 1.08 percent of the                                              
24                                              amount over $30,000                                                        
25            over $50,000 but not over $75,000 $459 plus .70 percent of                                                   
26                                              the amount over $50,000                                                    
27            over $75,000 but not over $100,000 $634 plus .70 percent of                                                  
28                                              the amount over $75,000                                                    
29            over $100,000 but not over $150,000 $809 plus .68 percent of                                                 
30                                              the amount over $100,000                                                   
31            over $150,000 but not over $200,000 $1,149 plus .59 percent of                                               

01                                              the amount over $150,000                                                   
02            over $200,000 but not over $500,000 $1,444 plus .16 percent of                                               
03                                              the amount over $200,000                                                   
04            over $500,000 but not over $1,000,000 $1,924 plus .03 percent of                                             
05                                              the amount over $500,000                                                   
06            over $1,000,000                  $2,074 plus .02 percent of                                                  
07                                              the amount over $1,000,000                                                 
08                      (B)  for two individuals whose federal filing status is married                                    
09            filing jointly or an individual whose federal filing status is as a qualifying                               
10            widow or widower with dependent child,                                                                       
11            if adjusted gross income is:     then the tax is:                                                            
12            not over $20,000                 .54 percent                                                                 
13            over $20,000 but not over $40,000 $108 plus .81 percent of the                                               
14                                              amount over $20,000                                                        
15            over $40,000 but not over $60,000 $270 plus 1.08 percent of the                                              
16                                              amount over $40,000                                                        
17            over $60,000 but not over $100,000 $486 plus 1.08 percent of                                                 
18                                              the amount over $60,000                                                    
19            over $100,000 but not over $150,000 $918 plus .70 percent of                                                 
20                                              the amount over $100,000                                                   
21            over $150,000 but not over $200,000 $1,268 plus .70 percent of                                               
22                                              the amount over $150,000                                                   
23            over $200,000 but not over $300,000 $1,618 plus .68 percent of                                               
24                                              the amount over $200,000                                                   
25            over $300,000 but not over $400,000 $2,298 plus .59 percent of                                               
26                                              the amount over $300,000                                                   
27            over $400,000 but not over $1,000,000 $2,888 plus .16 percent of                                             
28                                              the amount over $400,000                                                   
29            over $1,000,000 but not over $2,000,000 $3,848 plus .03 percent of                                           
30                                              the amount over $1,000,000                                                 
31            over $2,000,000                  $4,148 plus .02 percent of                                                  

01                                              the amount over $2,000,000                                                 
02            (c)  For a part-year resident individual or a nonresident individual, the tax                                
03       under this section shall be computed by multiplying the tax described in (b) of this                              
04       section, depending on the taxpayer's federal filing status, by a fraction, the numerator                          
05       of which is income from all sources in the state and the denominator of which is                                  
06       income from all sources.                                                                                          
07            (d)  In this section,                                                                                        
08                 (1)  "adjusted gross income" has the meaning given in 26 U.S.C. 62                                      
09       (Internal Revenue Code), except that it                                                                           
10                      (A)  includes a cost-of-living allowance that is exempt from the                                   
11            federal income tax;                                                                                          
12                      (B)  does not include income exempted from state income                                            
13            taxation under another provision of state or federal law, such as, by way of                                 
14            example, interest on United States government securities and longevity bonus                                 
15            payments;                                                                                                    
16                 (2)  "unaudited balance in the budget reserve fund created by art. IX,                                  
17       sec. 17, Constitution of the State of Alaska" means the balance in the fund on deposit                            
18       with the state's custodian bank as certified by the commissioner, without regard to                               
19       liabilities to the general fund under art. IX, sec. 17(d), Constitution of the State of                           
20       Alaska.                                                                                                           
21    * Sec. 3.  AS 43.20 is amended by adding a new section to read:                                                    
22            Sec. 43.20.029.  Electronic filing incentive.  The commissioner may by                                     
23       regulation provide for an incentive to taxpayers for electronically filing tax returns and                        
24       making tax payments.  An incentive under this section may not exceed $25 for each                                 
25       taxpayer a year and is contingent on the accurate and timely filing of the tax return and                         
26       timely payment of the tax due.                                                                                    
27    * Sec. 4.  AS 43.20.030(a) is amended to read:                                                                     
28            (a)  Every individual, partnership, and  [IF A] corporation [, OR A                                      
29       PARTNERSHIP THAT HAS A CORPORATION AS A PARTNER, IS] required to                                                  
30       make a return under the provisions of the Internal Revenue Code [, IT] shall file with                            
31       the department [, WITHIN 30 DAYS AFTER THE FEDERAL RETURN IS                                                      

01       REQUIRED TO BE FILED,] a return setting out                                                                       
02                 (1)  the amount of tax due under this chapter, less allowable credits                               
03       and payments claimed against the tax; and                                                                     
04                 (2)  other information that the department requires for the purpose of                              
05       carrying out the provisions of this chapter [THAT THE DEPARTMENT                                                  
06       REQUIRES].                                                                                                        
07    * Sec. 5.  AS 43.20.030(d) is amended to read:                                                                     
08            (d)  A taxpayer, upon request by the department, shall file with the taxpayer's                          
09       state return [FURNISH TO THE DEPARTMENT] a true [AND CORRECT] copy of                                         
10       the tax return [WHICH THE TAXPAYER HAS] filed with the United States Internal                                     
11       Revenue Service.  Every taxpayer shall file an amended return with [NOTIFY] the                               
12       department, and remit any additional tax and interest due, within [IN WRITING                                 
13       OF ANY ALTERATION IN, OR MODIFICATION OF, THE TAXPAYER'S                                                          
14       FEDERAL INCOME TAX RETURN AND OF A RECOMPUTATION OF TAX OR                                                        
15       DETERMINATION OF DEFICIENCY, WHETHER WITH OR WITHOUT                                                              
16       ASSESSMENT.  A FULL STATEMENT OF THE FACTS MUST ACCOMPANY                                                         
17       THIS NOTICE.  THE NOTICE SHALL BE FILED WITHIN] 60 days after a [THE]                                         
18       final determination of the taxpayer's federal tax liability [MODIFICATION,                                    
19       RECOMPUTATION OR DEFICIENCY, AND THE TAXPAYER SHALL PAY THE                                                       
20       ADDITIONAL TAX OR PENALTY UNDER THIS CHAPTER].  For purposes of                                                   
21       this subsection [SECTION], a final determination means [SHALL MEAN] the date                          
22       [TIME]  that an amended federal return is filed, the date a federal [OR A NOTICE                              
23       OF DEFICIENCY OR AN] assessment is made, or the date the restrictions on                                      
24       assessment are waived by [MAILED TO] the taxpayer [BY THE INTERNAL                                            
25       REVENUE SERVICE, EXCEPT THAT IN NO EVENT WILL THERE BE A FINAL                                                    
26       DETERMINATION FOR PURPOSES OF THIS SECTION UNTIL THE                                                              
27       TAXPAYER HAS EXHAUSTED RIGHTS OF APPEAL UNDER FEDERAL                                                             
28       LAW].                                                                                                             
29    * Sec. 6.  AS 43.20.030 is amended by adding a new subsection to read:                                             
30            (h)  The return for a corporation is due within 30 days after the federal return is                          
31       required to be filed.  The return for other taxpayers is due on the date the federal return                       

01       is required to be filed.                                                                                          
02    * Sec. 7.  AS 43.20.031(c) is amended to read:                                                                     
03            (c)  In computing the tax under this chapter, a corporation [THE                                         
04       TAXPAYER] is not entitled to deduct any taxes based on or measured by net income.                                 
05    * Sec. 8.  AS 43.20.040 is repealed and reenacted to read:                                                         
06            Sec. 43.20.040.  Income from sources in the state.  (a)  In this chapter,                                  
07       income from sources in the state includes                                                                         
08                 (1)  compensation for personal services rendered in the state;                                          
09                 (2)  working in the state for salary or wages;                                                          
10                 (3)  income from real or tangible personal property located in the state;                               
11                 (4)  income from stocks, bonds, notes, bank deposits, and other                                         
12       intangible personal property having a taxable or business situs in the state; however,                            
13       the receipt of interest income from intangible property in the state does not alone                               
14       establish a taxable or business situs in the state;                                                               
15                 (5)  rentals and royalties for the use of or for the privilege of using, in                             
16       the state, patents, copyrights, secret processes and formulas, good will, marks, trade                            
17       brands, franchises, and other property having a taxable or business situs in the state;                           
18                 (6)  income distributed from a trust established under or governed by                                   
19       the laws of the state;                                                                                            
20                 (7)  income of whatever nature from a source with a taxable or business                                 
21       situs in the state.                                                                                               
22            (b)  Except as provided in (a)(4) of this section, in this section, income is from                           
23       a source with a taxable or business situs in the state if it is attributed to or derived from                     
24                 (1)  business facilities or property in the state;                                                      
25                 (2)  business, farming, or fishing activities in the state;                                             
26                 (3)  conducting in the state the management or investment function for                                  
27       intangible property;                                                                                              
28                 (4)  a partnership or limited liability company conducting business                                     
29       activities in the state;                                                                                          
30                 (5)  a corporation transacting business activities in the state that has                                
31       elected to file federal returns under subchapter S of the Internal Revenue Code;                                  

01                 (6)  any other activity from which income is received, realized, or                                     
02       derived in the state.                                                                                             
03            (c)  If a business, trade, or profession is carried on partly inside and partly                              
04       outside the state, other than the rendering of purely personal services by an individual,                         
05       the income from sources in the state shall be determined as provided in AS 43.19.                                 
06    * Sec. 9.  AS 43.20 is amended by adding a new section to article 1 to read:                                       
07            Sec. 43.20.046.  Individual income tax credit.  (a)  For a resident, the income                            
08       tax imposed on that resident by another state or territory of the United States for the                           
09       taxable year, on income derived from sources in that state or territory, is allowed as a                          
10       credit against the tax under this chapter.                                                                        
11            (b)  The credit under (a) of this section is determined by multiplying the tax                               
12       computed under this chapter by a fraction, the numerator of which is the income                                   
13       derived from sources in the other state or territory and the denominator of which is                              
14       income derived from all sources.  The credit under (a) of this section may not exceed                             
15       the actual tax paid to the other state or territory.                                                              
16            (c)  An individual is allowed only the state credit provided in this section.  The                           
17       total state credit allowed under this section may not exceed the tax liability for the                            
18       taxable year for the individual.  A credit may not be carried, in whole or in part, to a                          
19       different taxable year.                                                                                           
20    * Sec. 10.  AS 43.20 is amended by adding a new section to read:                                                   
21            Sec. 43.20.171.  Tax withholding on wages of individuals.  (a)  Every                                      
22       employer  making payment of wages or salaries                                                                     
23                 (1)  shall deduct and withhold an amount of tax computed in a manner                                    
24       to  approximate the amount of tax due on those wages or salaries under this chapter for                           
25       that taxable year;                                                                                                
26                 (2)  shall remit the tax withheld to the department accompanied by a                                    
27       return on a form prescribed by the department at the times required by the department                             
28       by regulation;                                                                                                    
29                 (3)  is liable for the payment of the tax required to be deducted and                                   
30       withheld under this section but is not liable to any individual for the amount of the                             
31       payment; and                                                                                                      

01                 (4)  shall furnish to the employee on or before January 31 of the                                       
02       succeeding year, or within 30 days after a request by the employee after the                                      
03       employee's termination if the 30-day period ends before January 31, a written                                     
04       statement on a form prescribed by the department showing                                                          
05                      (A)  the name and taxpayer identification number of the                                            
06            employer;                                                                                                    
07                      (B)  the name and social security number of the employee;                                          
08                      (C)  the total amount of wages or salary for the taxable year;                                     
09            and                                                                                                          
10                      (D)  the total amount deducted and withheld as tax for the                                         
11            taxable year.                                                                                                
12            (b)  The department shall publish the rate of withholding required by this                                   
13       section.                                                                                                          
14            (c)  When an employer has deducted the tax from an employee's wages or                                       
15       salary, the employee is no longer liable to the state for the amount deducted,                                    
16       regardless of whether the employer actually remits the tax to the state.                                          
17    * Sec. 11.  AS 43.20 is amended by adding a new section to read:                                                   
18            Sec. 43.20.174.  Tax withholding from pass-through entities.  Every                                        
19       partnership, limited liability company, or corporation for which an election under 26                             
20       U.S.C. 1362(a) (Internal Revenue Code) is in effect, and any other entity taxed as a                              
21       partnership, shall withhold an amount of tax computed in a manner to approximate the                              
22       amount of tax due on dividends paid to a nonresident individual, undistributed taxable                            
23       income credited to a nonresident individual, or the distributive share credited to a                              
24       nonresident individual and remit the tax withheld to the department at the times                                  
25       required by the department by regulation.                                                                         
26    * Sec. 12.  AS 43.20.200(b) is amended to read:                                                                    
27            (b)  The same period of limitation upon the assessment and collection of taxes                               
28       imposed under this chapter and the same exceptions to it shall apply as provided in 26                            
29       U.S.C. 6501 - 6503 (Internal Revenue Code).  In the case of additional tax due by                                 
30       reason of a modification, recomputation, or determination of deficiency in a taxpayer's                           
31       federal income tax return, the period of limitation on assessment commences from the                              

01       date that the amended return [NOTICE] required in AS 43.20.030(d) is filed, and if                            
02       no amended return [NOTICE] is filed the tax may be assessed at any time.                                      
03    * Sec. 13.  AS 43.20.340 is amended by adding new paragraphs to read:                                              
04                 (12)  "individual" means a natural person, married or unmarried, adult                                  
05       or  minor, subject to payment of income tax under 26 U.S.C. (Internal Revenue Code);                              
06                 (13)  "nonresident" means an individual who is not a resident or part-                                  
07       year resident;                                                                                                    
08                 (14)  "resident" means an individual who, for the entire taxable year,                                  
09       was domiciled in the state or resided in the state.                                                               
10    * Sec. 14.  AS 43.05.085; AS 43.20.012, and 43.20.013 are repealed.                                                
11    * Sec. 15.  The uncodified law of the State of Alaska is amended by adding a new section to                        
12 read:                                                                                                                   
13       INDIVIDUAL INCOME TAX RATE FOR 2003.  The applicable tax rates for 2003                                           
14 are the rates in AS 43.20.009(b)(1)(A) and (B), added by sec. 2 of this Act, regardless of the                          
15 balance in the budget reserve fund created by art. IX, sec. 17, Constitution of the State of                            
16 Alaska.                                                                                                                 
17    * Sec. 16.  The uncodified law of the State of Alaska is amended by adding a new section to                        
18 read:                                                                                                                   
19       TRANSITION: REGULATIONS.  The Department of Revenue may proceed to adopt                                          
20 regulations necessary to implement the provisions of this Act.  The regulations take effect                             
21 under AS 44.62 (Administrative Procedure Act), but not before the effective date of the                                 
22 provision being implemented.                                                                                            
23    * Sec. 17.  Section 16 of this Act takes effect immediately under AS 01.10.070(c).                                 
24    * Sec. 18.  Except as provided in sec. 17 of this Act, this Act takes effect January 1, 2003.