HB 9: "An Act relating to the taxation of income of individuals, partners, shareholders in S corporations, trusts, and estates; relating to a payment against the individual income tax from the permanent fund dividend disbursement; repealing tax credits applied against the tax on individuals under the Alaska Net Income Tax Act; and providing for an effective date."
00 HOUSE BILL NO. 9 01 "An Act relating to the taxation of income of individuals, partners, shareholders in S 02 corporations, trusts, and estates; relating to a payment against the individual income tax 03 from the permanent fund dividend disbursement; repealing tax credits applied against 04 the tax on individuals under the Alaska Net Income Tax Act; and providing for an 05 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 Education Funding Act. 10 * Sec. 2. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 LEGISLATIVE INTENT. It is the intent of the legislature that, under this Act, 13 (1) income up to $14,300 for an individual, plus income from permanent fund
01 dividends, will not be subject to income tax under AS 43.22; 02 (2) income up to $28,600 for two individuals filing jointly who do not have 03 dependents, plus income from permanent fund dividends, will not be subject to the income tax 04 under AS 43.22; 05 (3) an individual, or two individuals filing jointly, will receive an additional 06 $4,000 deduction for each dependent, resulting in an increase in the amounts stated in (1) and 07 (2) of this section of $4,000 for each dependent. 08 * Sec. 3. AS 43.05.045(a) is amended to read: 09 (a) Except as provided in AS 43.22.075(i), or unless [UNLESS] an 10 exemption is granted under (b) of this section, a taxpayer required to submit a return 11 or report for a tax levied under this title or for any other tax administered by the 12 department shall submit the return or report electronically in a format prescribed by 13 the department. Failure to comply with this section may result in a civil penalty under 14 AS 43.05.220(f). If a law under this title requires a report or return or a portion of a 15 report or return to be in writing, an electronically filed report or return satisfies this 16 section. A taxpayer shall submit attachments to a report or return required under this 17 title electronically. 18 * Sec. 4. AS 43 is amended by adding a new chapter to read: 19 Chapter 22. Individual Income Tax. 20 Sec. 43.22.010. Income tax on individuals. (a) Each calendar year or fraction 21 of a calendar year, an income tax is imposed on the income of a 22 (1) resident; 23 (2) nonresident that is derived from or connected with a source in the 24 state. 25 (b) The tax under this section for an individual is determined as follows: 26 If the taxable income is Then the tax is 27 Less than $10,300 $0 28 $10,300 but less than $50,000 2.5 percent of the amount in 29 excess of $10,300 30 $50,000 but less than $100,000 $992.50 plus 4 percent of the amount 31 in excess of $50,000
01 $100,000 but less than $200,000 $2,992.50 plus 5 percent of the 02 amount in excess of $100,000 03 $200,000 but less than $250,000 $7,992.50 plus 6 percent of the 04 amount in excess of $200,000 05 $250,000 or more $10,992.50 plus 7 percent of the 06 amount in excess of $250,000. 07 (c) Except as otherwise provided in this section, the tax under this section for 08 two individuals who file a joint federal income tax return is determined as follows: 09 If the taxable income is Then the tax is 10 Less than $20,600 $0 11 $20,600 but less than $100,000 2.5 percent of the amount in 12 excess of $20,600 13 $100,000 but less than $200,000 $1,985 plus 4 percent of the amount in 14 excess of $100,000 15 $200,000 but less than $400,000 $5,985 plus 5 percent of the amount in 16 excess of $200,000 17 $400,000 but less than $500,000 $15,985 plus 6 percent of the amount 18 in excess of $400,000 19 $500,000 or more $21,985 plus 7 percent of the amount 20 in excess of $500,000. 21 (d) An individual who is eligible to file a joint federal income tax return but 22 who files an individual federal income tax return shall determine the tax imposed by 23 this chapter under (b) of this section. 24 (e) Two resident individuals who are eligible to file a joint federal income tax 25 return but who do not, individually or jointly, file a federal income tax return may 26 elect to determine the tax imposed by this chapter either 27 (1) individually under (b) of this section; or 28 (2) jointly under (c) of this section. 29 (f) Two individuals who file a joint federal income tax return one or both of 30 whom is not a resident may elect to determine the tax imposed by this chapter either 31 (1) individually under (b) of this section; or
01 (2) jointly under (c) of this section, as if both individuals were 02 residents; the income of the individuals filing jointly under this paragraph is not 03 subject to the calculation under AS 43.22.015. 04 Sec. 43.22.015. Calculation of tax on a nonresident individual. (a) Except as 05 otherwise provided in AS 43.22.010(f)(2) or (b) of this section, the tax on a 06 nonresident individual is the product of 07 (1) the tax determined under AS 43.22.010(b) on the nonresident 08 individual's taxable income computed as if the nonresident individual were a resident 09 individual but taking a reduction under AS 43.22.030(b)(2); and 10 (2) a fraction, the 11 (A) numerator of which is the nonresident individual's income 12 taxable under AS 43.22.045; and 13 (B) denominator of which is the nonresident individual's 14 taxable income computed as if the nonresident individual were a resident 15 individual. 16 (b) If a nonresident individual's taxable income computed under (a)(2)(B) is 17 less than the nonresident individual's income taxable under (a)(2)(A), the tax imposed 18 by this chapter is on the nonresident individual's taxable income as computed under 19 AS 43.22.045. 20 Sec. 43.22.020. Tax on trusts and estates. (a) A tax is imposed for each 21 taxable year or portion of a taxable year on the taxable income of a resident or 22 nonresident trust or estate. Except as provided in (b) of this section, the tax under this 23 section for a trust or estate is determined as follows: 24 If the taxable income is Then the tax is 25 Less than $50,000 2.5 percent of the amount in excess of 26 $0 27 $50,000 but less than $100,000 $1,250 plus 4 percent of the amount in 28 excess of $50,000 29 $100,000 but less than $200,000 $3,250 plus 5 percent of the amount in 30 excess of $100,000 31 $200,000 but less than $250,000 $8,250 plus 6 percent of the amount in
01 excess of $200,000 02 $250,000 or more $11,250 plus 7 percent of the amount 03 in excess of $250,000. 04 (b) A tax of 2.5 percent is imposed on the taxable income of a resident or 05 nonresident Alaska Native Settlement Trust that has elected for alternative federal tax 06 treatment under 26 U.S.C. 646 (Internal Revenue Code). 07 (c) In this section, the taxable income of a nonresident trust or estate is the 08 income of the trust or estate that is derived from or connected with a source in the 09 state. 10 (d) A trust is not subject to tax under this chapter if 11 (1) all of the trustees of the trust are nonresidents; 12 (2) the entire corpus of the trust, including real, tangible, and 13 intangible property, is located outside the state; and 14 (3) no income or gains of the trust are derived from or connected with 15 a source in the state. 16 (e) For purposes of (d)(1) of this section, a trustee that is a nonresident 17 banking corporation at the time the banking corporation becomes a trustee is a 18 nonresident trustee even if the banking corporation later becomes a resident trustee 19 because it is acquired by or becomes an office or branch of a resident trustee. 20 (f) A trust that is exempt from federal income tax because of its purpose or 21 activities is not subject to tax under this chapter. 22 (g) A special needs trust or other trust established to provide solely for the 23 housing, living expenses, or medical care of a disabled beneficiary is not subject to tax 24 under this chapter. In this subsection, 25 (1) "disabled beneficiary" means an individual who has 26 (A) a physical or mental impairment that substantially limits 27 one or more major life activities; or 28 (B) a condition that may require the use of a prosthesis, special 29 equipment for mobility, or a service animal; 30 (2) "special needs trust" has the meaning given in AS 13.36.215(b). 31 Sec. 43.22.025. Credit for income taxes imposed by other jurisdictions. (a)
01 A resident individual, trust, or estate or part-year resident individual, trust, or estate of 02 the state is allowed a credit against the tax due under this chapter for an income tax 03 that was imposed on the resident or part-year resident for the taxable year by another 04 state or the political subdivision of another state on income derived from or connected 05 with that state or political subdivision. 06 (b) A credit allowed under (a) of this section 07 (1) for a resident individual, trust, or estate may not exceed the 08 individual's, trust's, or estate's tax due under this chapter before credits are applied, 09 multiplied by a ratio, the numerator of which is the portion of the individual's, trust's, 10 or estate's taxable income that is derived from or connected with a source in another 11 state or the political subdivision of another state and the denominator of which is the 12 resident individual's, trust's, or estate's taxable income; 13 (2) for a part-year resident individual, trust, or estate may not exceed 14 the individual's, trust's, or estate's tax due for the period of state residency before 15 credits are applied, multiplied by a ratio, the numerator of which is the individual's, 16 trust's, or estate's taxable income derived from or connected with a source in another 17 state or the political subdivision of another state during the period of state residency 18 and the denominator of which is the part-year resident individual's, trust's, or estate's 19 taxable income during the period of state residency; 20 (3) may not reduce the tax due under this chapter to less than the tax 21 that would have been due if the income derived from or connected with a source in 22 another state or the political subdivision of another state and subject to taxation by the 23 other state or political subdivision had been excluded from the resident or part-year 24 resident individual's, trust's, or estate's taxable income during the calculation of tax 25 under this chapter before the application of credits. 26 (c) If the tax administration of another state or a political subdivision of 27 another state determines that a taxpayer has overpaid tax, affecting the computation of 28 the credit allowed under this section for any taxable year, the taxpayer shall file an 29 amended return with the department not later than 90 days after the final determination 30 by the state or political subdivision that the tax was overpaid. The department may 31 assess a taxpayer additional tax, proportional to the amount overpaid in the other state
01 or political subdivision. 02 (d) A taxpayer is not allowed a credit under this section for taxes paid to 03 another jurisdiction if the taxpayer claims a credit against the income tax imposed by 04 the other jurisdiction for the tax payable under this chapter. 05 (e) Income tax imposed on a partner or the shareholder of an S corporation on 06 the income of the partnership or S corporation, including tax paid by the partnership or 07 S corporation to satisfy the tax liability of the partner or shareholder, may be included 08 in the calculation of a credit under this section. Tax imposed on the partnership or S 09 corporation that is the direct liability of the partnership or S corporation and not that of 10 the partner or shareholder may not be included in the calculation of a credit under this 11 section. 12 Sec. 43.22.030. Taxable income; general rule. (a) In this chapter, taxable 13 income is the taxpayer's federal adjusted gross income for the taxable year 14 (1) plus, if not already included in federal adjusted gross income, 15 (A) interest on obligations of another state, a political 16 subdivision of another state, the public instrumentality of another state, or the 17 local authority of another state; 18 (B) a loss on the sale or exchange of an obligation issued by or 19 on behalf of 20 (i) the state; 21 (ii) a municipality of the state; or 22 (iii) a public instrumentality, public authority, or public 23 corporation created under state law; 24 (C) a loss from the sale or exchange of shares in a unit 25 investment trust if the loss is attributable to an obligation issued by or on 26 behalf of 27 (i) the state; 28 (ii) a municipality of the state; or 29 (iii) a public instrumentality, public authority, or public 30 corporation created under state law; 31 (D) interest or dividends on obligations or securities issued by
01 the United States, or an authority, commission, or instrumentality of the United 02 States, that the Internal Revenue Code exempts from federal income tax; 03 (E) income taxes under this chapter; 04 (F) a gain realized but not recognized under 26 U.S.C. 1031 05 (Internal Revenue Code); 06 (G) a deduction allowed in the determination of federal 07 adjusted gross income that is directly or indirectly related to income that is not 08 taxable under this chapter; and 09 (H) income of an incomplete gift nongrantor trust to which a 10 taxpayer transferred property, less deductions of the trust, if 11 (i) the income and deductions of the trust would be 12 taken into account in computing the taxpayer's federal taxable income 13 if the trust in its entirety was treated as a grantor trust under the Internal 14 Revenue Code; 15 (ii) the trust is a resident trust; 16 (iii) the trust does not qualify as a grantor trust under 26 17 U.S.C. 671 - 679 (Internal Revenue Code); and 18 (iv) the grantor's transfer of assets to the trust is treated 19 as an incomplete gift under 26 U.S.C. 2511 (Internal Revenue Code); 20 (2) minus, if included in federal adjusted gross income, 21 (A) interest income or a dividend from an obligation that is 22 exempt from taxation by a state under federal law; 23 (B) a refund or credit for the overpayment of an income tax; 24 (C) an ordinary and necessary expense, including an interest 25 expense, paid or incurred during the taxable year, that is directly or indirectly 26 related to income exempt under the Internal Revenue Code but taxable by the 27 state; 28 (D) a gain recognized under 26 U.S.C. 1031 (Internal Revenue 29 Code) that was included in federal adjusted gross income under (1) of this 30 subsection; 31 (E) income exempt under 4 U.S.C. 114;
01 (F) compensation prohibited from state taxation by 50 U.S.C. 02 3901 - 4043 (Servicemembers Civil Relief Act); 03 (G) a gain from the sale or exchange of an obligation issued by 04 or on behalf of 05 (i) the state; 06 (ii) a municipality of the state; or 07 (iii) a public instrumentality, public authority, or public 08 corporation created under state law; and 09 (H) a permanent fund dividend received under AS 43.23; 10 (b) In addition to the adjustments made to taxable income under (a) of this 11 section, a taxpayer may receive a reduction from federal adjusted gross income for 12 each exemption claimed on a taxpayer's federal income tax return for the individual, 13 an individual filing jointly with the individual, or a dependent of the individual. The 14 reduction under this subsection for a 15 (1) resident taxpayer is $4,000 for each exemption claimed; 16 (2) nonresident is, for each exemption claimed, the product of $4,000 17 and a fraction, the numerator of which is the nonresident individual's income taxable 18 under AS 43.22.045, computed without the reduction under this subsection, and the 19 denominator of which is the nonresident individual's taxable income computed as if 20 the nonresident individual were a resident individual and without the reduction under 21 this subsection; the reduction under this paragraph may not exceed $4,000 for each 22 exemption claimed. 23 (c) The reduction under (b) of this section may not 24 (1) be claimed by a trust; 25 (2) reduce a taxpayer's tax liability under this chapter to below zero. 26 (d) When calculating taxable income, a taxpayer 27 (1) may not carry back a net operating loss under 26 U.S.C. 28 172(b)(1)(A)(i) (Internal Revenue Code); 29 (2) may carry over a net operating loss under 26 U.S.C. 30 172(b)(1)(A)(ii) (Internal Revenue Code), except that a loss may not be carried over 31 for more than five years; for a taxpayer subject to AS 43.19 (Multistate Tax Compact),
01 the amount of a net operating loss allowed to be carried over is limited to the amount 02 apportioned to the state in the taxable year in which the loss was generated under 03 AS 43.19 (Multistate Tax Compact); 04 (3) shall include the modifications required by AS 43.20.144(b)(2), 05 concerning intangible drilling and development costs, AS 43.20.144(b)(3), concerning 06 percentage depletion, and AS 43.20.144(b)(4), concerning depreciation. 07 Sec. 43.22.035. Taxable income from partnerships and S corporations. (a) 08 A partner or shareholder shall make an adjustment described in AS 43.22.030 to 09 income or a gain, loss, or deduction from a partnership or S corporation in proportion 10 to a partner's distributive share of a partnership or a shareholder's pro rata share of an 11 S corporation. If a partner's distributive share or a shareholder's pro rata share of an 12 adjustment is not required to be accounted for separately for federal income tax 13 purposes, the partner's or shareholder's share of the adjustment must be determined in 14 proportion to the partner's or shareholder's share of partnership or S corporation 15 income or losses for federal income tax purposes. 16 (b) In determining taxable income, a partner or shareholder shall treat income 17 or a gain, loss, or deduction from a partnership or S corporation as if it has the same 18 character as it does for federal income tax purposes. If income or a gain, loss, or 19 deduction from a partnership or S corporation is not accounted for separately for 20 federal income tax purposes, a partner or shareholder shall treat the income, gain, loss, 21 or deduction as if it were realized directly from the source from which it was realized 22 by the partnership or S corporation or incurred in the same manner it was incurred by 23 the partnership or S corporation. 24 (c) If the principal purpose of a special allocation of partnership income or a 25 gain, loss, or deduction is the evasion of tax under this chapter, the partner's 26 distributive share is determined as if the partnership agreement did not have the 27 special allocation. In this subsection, "special allocation" means an allocation of the 28 distributive share of partnership income or a gain, loss, or deduction made under the 29 partnership agreement to a partner in a proportion different than the partner's 30 partnership interest. 31 Sec. 43.22.040. Taxable income of an estate, trust, or beneficiary. (a) The
01 taxable income of an estate or trust is determined as if the estate or trust were an 02 individual and is subject to adjustments under AS 43.22.030 and reduction under 03 section 26 U.S.C. 661 (Internal Revenue Code). The department may establish in 04 regulation the method for determining the taxable income of an estate or trust, 05 including the manner in which the adjustments under AS 43.22.030 will be allocated 06 between the estate's or trust's taxable share and a beneficiary's distributive share. 07 Unless otherwise provided by the department in regulation, an allocation must be 08 made in proportion to the estate's or trust's taxable share or the beneficiary's 09 distributive share of the trust or estate for federal income tax purposes. 10 (b) If the principal purpose of a provision of an instrument directing the 11 distribution of income or a gain, loss, or deduction of an estate or trust is the evasion 12 of tax under this chapter, the taxable income of the estate, trust, or beneficiary will be 13 determined as if the instrument did not contain the provision. 14 Sec. 43.22.045. Nonresident individuals; income derived from or 15 connected with a source in the state. (a) The taxable income of a nonresident 16 individual is the nonresident individual's income derived from or connected with a 17 source in the state, as adjusted under AS 43.22.030. The taxable income of a 18 nonresident individual includes 19 (1) a partner's distributive share of income or a gain, loss, or deduction 20 of the partnership, as determined under AS 43.22.050; 21 (2) a shareholder's pro rata share of an S corporation's income or loss, 22 increased by the reductions for taxes described in 26 U.S.C. 1366(f)(2) and (3) 23 (Internal Revenue Code), as determined under AS 43.22.050; 24 (3) income or loss of a business conducted by a nonresident individual, 25 nonresident estate, or nonresident trust, other than income or loss from a partnership or 26 S corporation, as determined under AS 43.22.050; 27 (4) estate or trust income or a gain, loss, or deduction of the estate or 28 trust, as determined under AS 43.22.055; 29 (5) income or a gain, loss, or deduction from the sale or assignment of 30 a beneficial interest, or other disposition of an interest in tangible personal property in 31 the state, or rental income or loss from the use of tangible personal property in the
01 state; if the income, gain, loss, or deduction is from tangible personal property used or 02 employed both in and outside the state, the amount included in taxable income is 03 determined by multiplying the income, gain, loss, or deduction by a fraction, the 04 denominator of which is the total number of days during the taxable year that the 05 property was used or employed to earn, accrue, or incur the income, gain, loss, or 06 deduction and the numerator of which is the number of days during which the property 07 was used or employed to earn, accrue, or incur the income, gain, loss, or deduction in 08 the state; 09 (6) income or a gain, loss, or deduction from the sale, assignment, or 10 other disposition of an interest in real property in the state, or rental income or loss 11 from the use of real property in the state, including the percentage of ordinary and 12 capital gains received from a real estate investment trust, as defined in 26 U.S.C. 856 13 (Internal Revenue Code), that is attributable to rents from or sale or other disposition 14 of real property located in the state; in this paragraph, income or a gain, loss, or 15 deduction from the sale, assignment of a beneficial interest, or other disposition of real 16 property in the state includes income or a gain, loss, or deduction derived from the sale 17 or assignment of a beneficial interest in a partnership, S corporation, nonpublicly 18 traded C corporation with 100 or fewer shareholders, estate, or trust, if the entity owns 19 real property in the state that has a fair market value equal to or exceeding 50 percent 20 of all assets of the entity on the date of sale, assignment, or other disposition of the 21 taxpayer's interest in the entity; for purposes of this paragraph, 22 (A) only assets owned for at least two years before the date of 23 the sale, assignment, or other disposition of an interest in the entity shall be 24 used to determine the fair market value of all of the assets of the entity on the 25 date of sale, assignment, or other disposition; and 26 (B) the amount of income or a gain, loss, or deduction derived 27 from or connected with a source in the state from the sale, assignment, or other 28 disposition of an interest in an entity that is subject to the provisions of this 29 paragraph is the amount recognized for federal income tax purposes related to 30 the sale, assignment, or disposition, multiplied by a fraction, the numerator of 31 which is the fair market value of the real property located in the state on the
01 date of sale, assignment, or disposition and the denominator of which is the fair 02 market value of all of the assets of the entity on the date of the sale, 03 assignment, or disposition; 04 (7) compensation, salary, or wages for personal services rendered or 05 performed in the state that are derived from a business, trade, profession, occupation, 06 or employment carried on in the state; for purposes of this paragraph, personal 07 services 08 (A) except as otherwise provided in (B) of this paragraph, 09 include services performed 10 (i) in connection with presenting or receiving 11 employment-related training or education in the state; 12 (ii) in connection with a site inspection, review, 13 analysis, or management or any other supervision of a facility located 14 in the state; 15 (iii) in connection with research and development at a 16 facility located in the state or in connection with the installation of new 17 or upgraded equipment or systems at that facility; 18 (iv) as part of a project team working on the attraction 19 or implementation of new investment in a facility located or planned to 20 be located in the state; 21 (v) in connection with fishing, farming, or agriculture in 22 the state; or 23 (vi) for the federal government; 24 (B) do not include services that are causal, isolated, 25 inconsequential, or ancillary to out-of-state services; 26 (8) income derived from a business, trade, profession, occupation, or 27 employment carried on in the state, including income 28 (A) received under a covenant not to compete, a severance 29 agreement, a termination agreement, or unemployment compensation 30 insurance attributable to a business, trade, profession, occupation, or 31 employment previously carried on in the state, regardless of when received;
01 (B) derived from a business, trade, profession, occupation, or 02 employment carried on in the state by an individual who maintains or operates 03 an office, shop, store, warehouse, boat, plane, factory, agency, or other place 04 where the individual's affairs are systematically and regularly carried on, 05 regardless of other transactions carried on outside the state; this subparagraph 06 does not include income from an activity of an individual whose presence in 07 the state is casual, isolated, inconsequential, or ancillary to out-of-state 08 activities, except that, if a business, trade, profession, occupation, or 09 employment is carried on partly in and partly outside the state, other than for 10 the rendering of purely personal services by the individual, the taxable income 11 derived from or connected with a source in the state is determined under 12 AS 43.19 (Multistate Tax Compact) and AS 43.22.030; 13 (9) income from the management or investment function or activities 14 conducted in the state from intangible property; 15 (10) dividends, interest, payments received under an annuity, gains, or 16 other intangible income received from, or attributable to, intangible personal property, 17 including stock, bonds, notes, bank deposits, or annuities, if the intangible personal 18 property is employed in a business, trade, profession, occupation, or employment 19 carried on in the state; 20 (11) a gain derived by a nonresident individual from a statutory stock 21 option, restricted stock, nonstatutory stock option, or stock appreciation right, who, at 22 the time the gain is received, performs services in the state for or is employed in the 23 state by the corporation granting the option, stock, or right, as determined in 24 regulations adopted by the department; 25 (12) income from nonqualified deferred compensation plans 26 attributable to services performed in the state, including compensation included in 27 federal gross income under 26 U.S.C. 457A (Internal Revenue Code); 28 (13) proceeds from a gambling activity conducted in the state or lottery 29 tickets purchased in the state, including payments received from a third party for the 30 transfer of the rights to future proceeds related to a gambling activity in the state or 31 lottery tickets purchased in the state;
01 (14) for an S corporation that terminates its taxable status in the state 02 during the tax year, income or a gain recognized on the receipt of payments from an 03 installment sale contract entered into at the time the S corporation was subject to tax in 04 the state, allocated consistent with the applicable methods and rules under this chapter; 05 (15) royalties or other compensation received for the use of a patent, 06 copyright, secret process or formula, good will, mark, trade brand, franchise, or other 07 property having a taxable or business situs in the state; 08 (16) royalties or other compensation received for the use of a patent if 09 the patent is employed in production, fabrication, manufacturing, or other process in 10 the state; 11 (17) income or a gain from the disposition of an asset if the 12 acquisition, management, or disposition of the asset constitutes an integral part of the 13 nonresident individual's regular trade or business operation; 14 (18) income from the transmission, broadcast, distribution, or 15 dissemination of a service directly or indirectly attributable to the performance in the 16 state of an athlete, entertainer, singer, musician, dancer, comedian, magician, 17 performing artist, actor, actress, or similar person, including syndication fees. 18 (b) A deduction included in taxable income that results from a capital loss, 19 passive activity loss, or net operating loss must be based solely on income or a gain, 20 loss, or deduction derived from or connected with a source in the state. A nonresident 21 individual shall treat a deduction under this subsection in the same manner as the 22 corresponding federal deduction, unless the department requires otherwise in 23 regulation. 24 Sec. 43.22.050. Business conducted by a nonresident individual, trust, or 25 estate; income derived from or connected with a source in the state. (a) The 26 department shall adopt regulations governing the amount of income or the amount of a 27 gain, loss, or deduction from a business conducted by a nonresident individual, trust, 28 or estate that is derived from or connected with a source in the state for purposes of 29 determining taxable income. Regulations adopted under this subsection must be 30 consistent with AS 43.19 (Multistate Tax Compact) and AS 43.22.045 and include 31 adjustments under AS 43.22.030.
01 (b) The department shall adopt regulations governing the amount of income or 02 the amount of a gain, loss, or deduction that is derived from or connected with a 03 source in the state and is included in a nonresident 04 (1) partner's distributive share for purposes of taxation under this 05 chapter; 06 (2) shareholder's pro-rata share of an S corporation for purposes of 07 taxation under this chapter. 08 (c) The department may by regulation require a taxpayer to allocate rather 09 than apportion income or a gain, loss, or deduction under this section. 10 Sec. 43.22.055. Nonresident trust, estate, or beneficiary; income derived 11 from or connected with a source in the state. (a) The department shall adopt 12 regulations governing whether income or a gain, loss, or deduction of a nonresident 13 estate or nonresident trust is included in taxable income derived from or connected 14 with a source in the state. Regulations adopted under this subsection must be 15 consistent with the remainder of this section and AS 43.22.045. 16 (b) A nonresident beneficiary shall include in taxable income derived from or 17 connected with a source in the state a distribution from an estate or trust as if the 18 nonresident beneficiary earned or incurred the income or a gain, loss, or deduction 19 attributable to the distribution directly from the source. For purposes of this 20 subsection, the department may establish one or more methods for a nonresident 21 beneficiary to determine whether income or a gain, loss, or deduction is attributable to 22 a distribution. The department shall consistently apply a method from year to year and 23 apply the same method to other nonresident beneficiaries of the same trust or estate. 24 Nothing in this subsection requires the department to give effect to a provision of an 25 instrument creating an estate or trust if the department reasonably believes that the 26 principal purpose of the provision is to evade the tax imposed under this chapter. 27 Sec. 43.22.060. Part-year resident individual, trust, or estate; residency 28 income; income derived from or connected with a source in the state. (a) Except as 29 otherwise provided in this section, the taxable income of a part-year resident 30 individual, trust, or estate is the sum of 31 (1) the taxable income of the part-year resident individual, trust, or
01 estate during the period of residency; and 02 (2) the taxable income derived from or connected with a source in the 03 state for the period of nonresidency of the individual, trust, or estate. 04 (b) The department shall adopt regulations to determine the taxable income of 05 a part-year resident taxpayer who is granted a statutory stock option, restricted stock, 06 nonstatutory stock option, or a stock appreciation right and who, during the grant 07 period, performs services in the state for, or is employed in the state by, the 08 corporation granting the option, stock, or right. 09 Sec. 43.22.065. Personal service corporations and S corporations formed 10 or used to evade income tax. (a) The department may allocate all income, 11 deductions, credits, exclusions, and other allowances between a personal service 12 corporation or S corporation and its employee-owners if the 13 (1) personal service corporation or S corporation performs 14 substantially all of its services for or on behalf of another corporation, partnership, or 15 other entity and the effect is the evasion of income tax; and 16 (2) allocation is necessary to reflect the source and amount of the 17 income, regardless of whether the corporation is otherwise taxable. 18 (b) For purposes of this section, evasion of income tax occurs when a personal 19 service corporation or S corporation is used to 20 (1) reduce the taxable income of a resident or the taxable income of a 21 nonresident derived from or connected with a source in the state; or 22 (2) secure the benefit of an expense, deduction, credit, exclusion, or 23 other allowance for any employee-owner that would not otherwise apply under this 24 chapter. 25 (c) The constructive ownership of stock rules under 26 U.S.C. 318 (Internal 26 Revenue Code) apply to this section, except that "5 percent" shall be substituted for 27 "50 percent" in 26 U.S.C. 318(a)(2)(C) (Internal Revenue Code). 28 (d) In this section, all persons specified in 26 U.S.C. 267(b) (Internal Revenue 29 Code) shall be treated as one entity. 30 (e) In this section, 31 (1) "employee-owner" means any employee who owns, on any day
01 during the taxable year, more than 10 percent of the outstanding stock of a personal 02 service corporation or S corporation; 03 (2) "personal service corporation" means a corporation whose principal 04 activity is the performance of personal services that are substantially performed by the 05 employee-owners of the corporation. 06 Sec. 43.22.070. Determination of taxable year and method of accounting. 07 (a) For purposes of the tax imposed under this chapter, a taxpayer's 08 (1) taxable year is the same as the taxpayer's taxable year for federal 09 income tax purposes; and 10 (2) method of accounting is the same as the taxpayer's method of 11 accounting for federal income tax purposes. 12 (b) The department shall adopt regulations to determine the taxable income of 13 a taxpayer whose method of accounting changes during a taxable year or between 14 taxable years. 15 Sec. 43.22.075. Returns and payment of taxes. (a) A taxpayer shall file with 16 the department a return setting out 17 (1) the amount of tax due under this chapter; and 18 (2) other information necessary to carry out this chapter, as required by 19 the department in regulation. 20 (b) The department shall determine and publish the federal adjusted gross 21 income below which an individual is not required to file a tax return under this 22 section. 23 (c) A person required to file a return under this chapter shall file the return on 24 a form or in a format prescribed by the department. The return is due to the department 25 at the same time and in the same manner, including extensions, as the taxpayer's 26 federal income tax return to the United States Internal Revenue Service. A return filed 27 under this chapter must be made under oath and on penalty of perjury. 28 (d) The total amount of tax imposed by this chapter is due and payable to the 29 department at the same time and in the same manner as the federal individual income 30 tax payable to the United States Internal Revenue Service. 31 (e) A taxpayer, upon request by the department, shall furnish to the
01 department a true and correct copy of a return that the taxpayer has filed with the 02 United States Internal Revenue Service. 03 (f) A taxpayer shall notify the department in writing of an alteration in, or 04 modification of, the taxpayer's federal income tax return and of a recomputation of tax 05 or determination of deficiency, whether with or without assessment. A full statement 06 of the facts must accompany the notice. A taxpayer shall file the notice not later than 07 60 days after the final determination of the alteration, modification, recomputation, or 08 deficiency and shall pay any additional tax due under this chapter at that time. In this 09 subsection, "final determination" means the time that an amended federal return is 10 filed, a notice of deficiency or an assessment is mailed to the taxpayer by the Internal 11 Revenue Service, and the taxpayer has exhausted rights of appeal under federal law. 12 (g) The department may credit or refund overpayments of taxes, taxes 13 erroneously or illegally assessed or collected, penalties collected without authority, 14 and taxes that are found unjustly assessed or excessive in amount, or otherwise 15 wrongfully collected. The department shall, in regulation, set limitations, specify the 16 manner in which claims for credits or refunds are made, and give notice of allowance 17 or disallowance. When a refund is allowed to a taxpayer, the refund may be paid out 18 of the general fund on a warrant issued under a voucher approved by the department. 19 (h) A partnership, S corporation, estate, or trust shall provide to its partners, 20 beneficiaries, or shareholders, and to the department, all information necessary for its 21 partners, beneficiaries, and shareholders to comply with this chapter. 22 (i) An individual is not required to file a return under this section 23 electronically, but a person employed to prepare and file an income tax return for an 24 individual shall file the return for that individual electronically. 25 (j) The department shall adopt regulations that set out requirements for a 26 spouse, upon request, to be partially or fully relieved from joint and several liability 27 resulting from the joint filing of a tax return. 28 Sec. 43.22.080. Tax withholding on wages of individuals. (a) Every 29 employer making payment of wages or salaries 30 (1) shall deduct and withhold an amount of tax computed in a manner 31 to approximate the amount of tax due on those wages and salaries under this chapter
01 for that taxable year; 02 (2) shall remit the tax withheld to the department accompanied by a 03 return on a form prescribed by the department at the times required by the department 04 by regulation; 05 (3) is liable for the payment of the tax required to be deducted and 06 withheld under this section but is not liable to any individual for the amount of the 07 payment; and 08 (4) shall furnish to an employee on or before January 31 of the 09 succeeding year, or within 30 days after a request by the employee after an employee's 10 or individual's termination if the 30-day period ends before January 31, a written 11 statement on a form prescribed by the department showing 12 (A) the name and taxpayer identification number of the 13 employer; 14 (B) the name and social security number of the employee; 15 (C) the total amount of wages and salary for the taxable year; 16 and 17 (D) the total amount deducted and withheld as tax under this 18 chapter for the taxable year. 19 (b) The department shall publish the rate of withholding required by this 20 section. 21 Sec. 43.22.085. Withholding on nonresident partners; composite returns. 22 (a) Unless otherwise provided by this section, a partnership that is required to file an 23 annual information return under subchapter K of the Internal Revenue Code (26 24 U.S.C. 701 - 761) shall file a partnership return as prescribed by the department and 25 shall report any income, gains, losses, or deductions that are derived from or 26 connected with a source in the state, as determined under this chapter. 27 (b) A partnership that is required to file a return under (a) of this section shall 28 withhold income tax from a nonresident partner's distributive share of the partnership's 29 income or a gain, loss, or deduction derived from or connected with a source in the 30 state at the highest marginal income tax rate applicable to individuals for the taxable 31 year.
01 (c) Withholding under this section is not required by a partnership that 02 (1) is a publicly traded partnership, as defined in 26 U.S.C. 7704(b) 03 (Internal Revenue Code); and 04 (2) files with the department an annual information return reporting the 05 name, address, taxpayer identification number, and other information requested by the 06 department concerning each unitholder whose distributive share of partnership 07 income, regardless of source, is more than $1,000. 08 (d) The department shall adopt regulations that allow a partnership subject to 09 withholding under this section to file a composite return. 10 Sec. 43.22.090. Permanent fund tax payment. The department shall adopt 11 regulations establishing procedures for an individual eligible for a dividend under 12 AS 43.23.005 to direct the department to hold all or a part of the amount of the 13 dividend to pay the tax due under this chapter. The amount held under this section 14 may not exceed the dividend amount after contributions, garnishments, levies, fees, 15 attachments, assignments, or other reductions or donations allowed under AS 43.23. 16 The department shall apply the amount held under this section to tax owed in the 17 taxable year in which the taxpayer applies for the dividend. The department shall 18 refund the amount of the dividend not applied against taxes under this section to the 19 taxpayer. 20 Sec. 43.22.095. Administration. (a) The department shall adopt necessary 21 regulations and forms to implement and interpret this chapter, including regulations 22 and forms for the electronic filing and payment of tax due under this chapter. Federal 23 regulations issued under the Internal Revenue Code shall be considered persuasive 24 authority in interpreting any provision of the Internal Revenue Code on which the tax 25 imposed by this chapter relies, whether or not a federal regulation has been 26 specifically incorporated into a department regulation, unless the federal regulation 27 (1) conflicts with a provision of this chapter; 28 (2) conflicts with a regulation adopted by the department; or 29 (3) is inconsistent with the purposes of this chapter. 30 (b) A transaction or payment between related persons must have economic 31 substance, must serve a bona fide business purpose, and must not have occurred for
01 the primary purpose of lowering the tax due under this chapter. The department, after 02 review or audit of a taxpayer's return, may determine whether there is sufficient 03 documentation or whether a transaction or payment meets the requirements of this 04 subsection. If the department determines that the documentation, transaction, or 05 payment fails to meet the requirements of this subsection, the department may adjust 06 the amount of a payment or transaction, disregard the payment or transaction, or make 07 another adjustment necessary for determining the tax under this chapter. If a payment 08 in an amount greater than $500,000 is made or required to be made from one person to 09 a related person, the related persons shall submit documentation substantiating that the 10 amount of the payment is consistent with 26 U.S.C. 482 (Internal Revenue Code). 11 Payments subject to this subsection include payments for interest, royalties, 12 management fees, services, inventory, tangible personal property, intangible property, 13 and real property. 14 (c) A tax deficiency assessed by the department under this section is assumed 15 to be correct. A taxpayer has the burden of proving that the tax deficiency is 16 erroneous. 17 (d) The department shall adjust the income bracket amounts in 18 AS 43.22.010(b) and (c) and the amount of the exemption under AS 43.22.030(b) 19 biennially for inflation from calendar year 2020 using the Consumer Price Index for 20 urban Alaska, prepared by the Bureau of Labor Statistics, United States Department of 21 Labor. The department shall round amounts under this subsection to the nearest $100 22 and publish the adjusted amounts. 23 (e) The tax collected by the department under this chapter shall be deposited 24 into the general fund and accounted for separately. The legislature may appropriate the 25 estimated amounts separately accounted for under this subsection into the public 26 education fund established in AS 14.17.300. Nothing in this subsection creates a 27 dedicated fund. 28 Sec. 43.22.100. References to Internal Revenue Code. (a) Unless the 29 provision is inconsistent with this chapter or a regulation adopted under this chapter, 30 the provisions of the Internal Revenue Code, amended, that are mentioned in this 31 chapter are incorporated in this chapter by reference and have effect as though fully
01 set out in this chapter. 02 (b) Sections 26 U.S.C. 6654, 6662, 6664, 6694, 6695, 6700 - 6702, 6707, 03 6713, 7201, 7202, 7206, 7207, 7216, 7407, and 7408 (Internal Revenue Code), as 04 those sections read on January 1, 2022, are incorporated by reference as a part of this 05 chapter and, if conflicting, supersede provisions in AS 43.05 and AS 43.10. 06 (c) When provisions of the Internal Revenue Code incorporated by reference 07 as provided in (a) and (b) of this section refer to rules and regulations adopted by the 08 United States Commissioner of Internal Revenue, they are regarded as regulations 09 adopted by the department under this chapter, unless the department adopts specific 10 regulations in their place under this chapter. 11 Sec. 43.22.110. Information released to a banking institution. 12 Notwithstanding AS 43.05.230, information on an individual income tax return may 13 be released to a banking institution to verify the direct deposit of an income tax refund 14 or correct an error in that deposit. 15 Sec. 43.22.150. Definitions. In this chapter, 16 (1) "domicile" means an individual's true, fixed, principal, and 17 permanent home, to which the individual intends to return even though currently 18 living elsewhere; if an individual has two or more homes, "domicile" means the one 19 that the individual regards and uses as the individual's more permanent home; once 20 established, a domicile remains the individual's domicile until the individual 21 demonstrates a real change of intent and moves to a new domicile; indications of 22 domicile include the 23 (A) location of the place of employment of the individual; 24 (B) location of real property owned by the individual; 25 (C) registration and physical location of motor vehicles, planes, 26 boats, and snow machines owned by the individual; 27 (D) location of a bank account or active checking account of 28 the individual; 29 (E) address where the individual receives mail; 30 (F) location of a school where the individual or a member of 31 the individual's immediate family
01 (i) attends; or 02 (ii) receives resident tuition; 03 (G) location of an organization of which the individual is a 04 member; 05 (H) location of a parent, child, grandchild, or great grandchild; 06 (I) location of dental and medical personnel that provide 07 services to the individual on a regular or consistent basis; 08 (J) filing of a prior year tax return by the individual as a 09 resident or nonresident; 10 (K) location where an individual is registered to vote; 11 (L) location where an individual holds a resident fishing, 12 hunting, or trapping license; 13 (2) "federal adjusted gross income" has the meaning given to "adjusted 14 gross income" in 26 U.S.C. 62; 15 (3) "fiduciary" means a guardian, trustee, executor, administrator, 16 receiver, conservator, or a person, whether individual or corporate, acting in a similar 17 position of special confidence toward another; 18 (4) "Internal Revenue Code" means the Internal Revenue Code (26 19 U.S.C. 1 et seq.), as amended; 20 (5) "irrevocable trust" means a trust or portion of a trust that is not 21 subject to a power to vest title in a person whose property constitutes the trust or a 22 portion of the trust; 23 (6) "nonresident estate" means an estate other than a resident estate or 24 part-year resident estate; 25 (7) "nonresident individual" means an individual who is not a resident 26 of the state for any portion of the taxable year; 27 (8) "nonresident trust" means a trust other than a resident trust or a 28 part-year resident trust; 29 (9) "partner" means a partner as defined in 26 U.S.C. 7701(a) (Internal 30 Revenue Code) and includes a member of a limited liability company or similar entity 31 that is treated as a partnership for federal income tax purposes;
01 (10) "partnership" means an entity as defined in 26 U.S.C. 7701(a) 02 (Internal Revenue Code) and includes a limited liability company and a similar entity 03 treated as a partnership for federal income tax purposes; 04 (11) "part-year resident estate" means an estate that is a resident of the 05 state for a portion of but not the entire taxable year; 06 (12) "part-year resident individual" means an individual who is a 07 resident of the state for a portion of but not the entire taxable year; 08 (13) "part-year resident trust" means a trust that is a resident of the 09 state for a portion of but not the entire taxable year; 10 (14) "related persons" means any persons that satisfy the definition of 11 related persons in 26 U.S.C. 144 or 147 or persons in a relationship, as described in 26 12 U.S.C. 267(b) (Internal Revenue Code); 13 (15) "resident estate" means the estate of a 14 (A) decedent who at the time of death was a resident of the 15 state, regardless of the residence of the fiduciary or beneficiary, if the 16 disposition or administration of the estate is subject to state law; or 17 (B) person who, at the time of commencement of a bankruptcy 18 proceeding under Title 11 of the United States Code, was a resident of the 19 state; 20 (16) "resident individual" means an individual who 21 (A) receives a permanent fund dividend under AS 43.23.005; 22 (B) receives a tax benefit available only to an individual 23 domiciled in the state; or 24 (C) is domiciled in the state for the entire taxable year unless 25 the individual maintains a permanent place of abode outside the state and 26 spends, in the aggregate, not more than 30 days during the taxable year in the 27 state; 28 (17) "resident trust" means a trust or a portion of a trust consisting of 29 property 30 (A) transferred by will of a decedent who at the time of death 31 was a resident of the state if the disposition or administration of the property is
01 subject to state law; or 02 (B) of a person who was a resident at the time the property was 03 transferred to the trust if, at the time of the transfer, the trust was 04 (i) an irrevocable trust; 05 (ii) a revocable trust and the trust has not become 06 irrevocable; or 07 (iii) a revocable trust and the trust later became 08 irrevocable at a time the person transferring property to the trust was a 09 resident; 10 (18) "revocable trust" means a trust or portion of a trust that is subject 11 to a power, exercisable immediately or at a future time, to revest title in a person 12 whose property constitutes the trust or portion of the trust; 13 (19) "S corporation" means a corporation that has elected to file a 14 federal income tax return under 26 U.S.C. 1361 - 1379 (Internal Revenue Code); 15 (20) "taxable income" means income taxable under this chapter; 16 (21) "taxable year" means the calendar year or a fiscal year ending 17 during the calendar year; 18 (22) "taxpayer" means a person subject to a tax imposed by this 19 chapter. 20 * Sec. 5. AS 43.23 is amended by adding a new section to read: 21 Sec. 43.23.092. Permanent fund dividend individual income tax payment. 22 In accordance with AS 43.22.090, the department shall prepare the Alaska permanent 23 fund dividend application to allow an applicant to direct the department to hold all or 24 part of the amount of the individual's permanent fund dividend for application against 25 the individual income tax imposed under AS 43.22. 26 * Sec. 6. AS 43.05.085; AS 43.20.012(b), and 43.20.013 are repealed. 27 * Sec. 7. The uncodified law of the State of Alaska is amended by adding a new section to 28 read: 29 APPLICABILITY. AS 43.22, added by sec. 4 of this Act, applies to income received 30 on or after the effective date of sec. 4 of this Act. 31 * Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to
01 read: 02 TRANSITION: REGULATIONS. The Department of Revenue may adopt regulations 03 necessary to implement this Act. The regulations take effect under AS 44.62 (Administrative 04 Procedure Act), but not before the effective date of the law implemented by the regulation. 05 * Sec. 9. Section 8 of this Act takes effect immediately under AS 01.10.070(c). 06 * Sec. 10. Except as provided in sec. 9 of this Act, this Act takes effect January 1, 2022.