HB 214: "An Act relating to the taxation of income of individuals; 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. 214 01 "An Act relating to the taxation of income of individuals; repealing tax credits applied 02 against the tax on individuals under the Alaska Net Income Tax Act; and providing for 03 an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 43.05.045(a) is amended to read: 06 (a) Except as provided in AS 43.22.090(g), or unless [UNLESS] an 07 exemption is granted under (b) of this section, a taxpayer required to submit a return 08 or report for a tax levied under this title or for any other tax administered by the 09 department shall submit the return or report electronically in a format prescribed by 10 the department. Failure to comply with this section may result in a civil penalty under 11 AS 43.05.220(f). If a law under this title requires a report or return or a portion of a 12 report or return to be in writing, an electronically filed report or return satisfies this 13 section. A taxpayer shall submit attachments to a report or return required under this 14 title electronically.
01 * Sec. 2. AS 43 is amended by adding a new chapter to read: 02 Chapter 22. Income Tax. 03 Sec. 43.22.010. Income tax on individuals. (a) Each calendar year or fraction 04 of a calendar year, an income tax is imposed on the income of a 05 (1) resident individual; 06 (2) nonresident individual that is taxable under AS 43.22.050. 07 (b) The tax under this section for an individual or individuals filing jointly is 08 one percent of taxable income. 09 (c) Two resident individuals who file a joint federal income tax return may 10 determine the tax imposed by this chapter jointly under this section. 11 (d) Two individuals who file a joint federal income tax return both or one of 12 whom is not a resident may elect to determine the tax imposed by this chapter either 13 (1) individually; or 14 (2) jointly as if both individuals were residents; the income of the 15 individuals filing jointly under this paragraph is not subject to the calculation under 16 AS 43.22.020. 17 Sec. 43.22.020. Calculation of tax on a nonresident individual. (a) Except as 18 otherwise provided in (b) of this section, the tax on a nonresident individual is the 19 product of 20 (1) the tax determined under AS 43.22.010(b) on the nonresident 21 individual's taxable income computed as if the nonresident individual were a resident 22 individual; and 23 (2) a fraction, the 24 (A) numerator of which is the nonresident individual's income 25 taxable under AS 43.22.050; and 26 (B) denominator of which is the nonresident individual's 27 taxable income computed as if the nonresident individual were a resident 28 individual. 29 (b) If a nonresident individual's taxable income computed under (a)(2)(B) of 30 this section is less than the nonresident individual's income taxable under (a)(2)(A) of 31 this section, the tax imposed by this chapter is on the nonresident individual's taxable
01 income under AS 43.22.050. 02 Sec. 43.22.030. Credit for income taxes imposed by other jurisdictions. (a) 03 A resident individual or part-year resident individual is allowed a credit against the tax 04 due under this chapter for an income tax that was imposed on the resident or part-year 05 resident for the taxable year by another state or the political subdivision of another 06 state on income derived from or connected with that state or political subdivision. 07 (b) A credit allowed under (a) of this section 08 (1) for a resident individual may not exceed the individual's tax due 09 under this chapter before credits are applied, multiplied by a fraction, the numerator of 10 which is the portion of the individual's taxable income that is derived from or 11 connected with a source in another state or the political subdivision of another state 12 and the denominator of which is the resident individual's income; 13 (2) for a part-year resident individual may not exceed the individual's 14 tax due for the period of state residency before credits are applied, multiplied by a 15 fraction, the numerator of which is the individual's taxable income derived from or 16 connected with a source in another state or the political subdivision of another state 17 during the period of state residency and the denominator of which is the part-year 18 resident individual's taxable income during the period of state residency; 19 (3) may not reduce the tax due under this chapter to less than the tax 20 that would have been due if the income derived from or connected with a source in 21 another state or the political subdivision of another state and subject to taxation by the 22 other state or political subdivision had been excluded from the resident or part-year 23 resident individual's taxable income during the calculation of tax under this chapter 24 before the application of credits. 25 (c) If the tax administration of another state or a political subdivision of 26 another state determines that a taxpayer has overpaid tax, affecting the computation of 27 the credit allowed under this section for any taxable year, the taxpayer shall file an 28 amended return with the department not later than 90 days after the final determination 29 by the state or political subdivision that the tax was overpaid. The department may 30 assess a taxpayer additional tax, proportional to the amount overpaid in the other state 31 or political subdivision.
01 (d) A taxpayer is not allowed a credit under this section for taxes paid to 02 another jurisdiction if the taxpayer claims a credit against the income tax imposed by 03 the other jurisdiction for the tax payable under this chapter. 04 Sec. 43.22.040. Taxable income; general rule. (a) In this chapter, taxable 05 income is the taxpayer's federal adjusted gross income for the taxable year minus, if 06 included in federal adjusted gross income, 07 (1) income that is exempt from taxation by a state under federal law; 08 and 09 (2) a permanent fund dividend received by the taxpayer or the 10 taxpayer's dependent under AS 43.23. 11 (b) In addition to the adjustments made to taxable income under (a) of this 12 section, a taxpayer may receive a reduction from federal adjusted gross income. The 13 reduction under this subsection for 14 (1) an individual resident taxpayer is $15,000; 15 (2) two resident taxpayers filing jointly is $30,000; 16 (3) an individual nonresident is the product of $15,000 and a fraction, 17 the numerator of which is the nonresident individual's income taxable under 18 AS 43.22.050, 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 $15,000 for each 22 exemption claimed; 23 (4) two nonresident individuals filing jointly is the product of $30,000 24 and a fraction, the numerator of which is the nonresident individuals' income taxable 25 under AS 43.22.050, computed without the reduction under this subsection, and the 26 denominator of which is the nonresident individuals' taxable income computed as if 27 the nonresident individuals were resident individuals and without the reduction under 28 this subsection; the reduction under this paragraph may not exceed $30,000 for each 29 exemption claimed. 30 Sec. 43.22.050. Nonresident individuals; taxable income. The taxable 31 income of a nonresident individual is the nonresident individual's income derived from
01 or connected with a source in the state. 02 Sec. 43.22.060. Business conducted by a nonresident individual; taxable 03 income. (a) The department shall adopt regulations governing the amount of income 04 or the amount of a gain, loss, or deduction from a business conducted by a nonresident 05 individual that is derived from or connected with a source in the state for purposes of 06 determining taxable income. Regulations adopted under this subsection must be 07 consistent with AS 43.19 (Multistate Tax Compact). 08 (b) 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. 43.22.070. Part-year resident individual; taxable income. (a) Except as 11 otherwise provided in this section, the taxable income of a part-year resident 12 individual is the sum of 13 (1) the taxable income of the part-year resident individual during the 14 period of residency; and 15 (2) the taxable income derived from or connected with a source in the 16 state for the period of nonresidency of the individual. 17 (b) The department shall adopt regulations to determine the taxable income of 18 a part-year resident taxpayer. 19 Sec. 43.22.080. Determination of taxable year and method of accounting. 20 (a) For purposes of the tax imposed under this chapter, a taxpayer's 21 (1) taxable year is the same as the taxpayer's taxable year for federal 22 income tax purposes; and 23 (2) method of accounting is the same as the taxpayer's method of 24 accounting for federal income tax purposes. 25 (b) The department shall adopt regulations to determine the taxable income of 26 a taxpayer whose method of accounting changes during a taxable year or between 27 taxable years. 28 Sec. 43.22.090. Returns and payment of taxes. (a) A taxpayer shall file with 29 the department a return setting out 30 (1) the amount of tax due under this chapter; and 31 (2) other information necessary to carry out this chapter, as required by
01 the department in regulation. 02 (b) A person required to file a return under this chapter shall file the return on 03 a form or in a format prescribed by the department. The return is due to the department 04 at the same time and in the same manner, including extensions, as the taxpayer's 05 federal income tax return to the United States Internal Revenue Service. A return filed 06 under this chapter must be made under oath and on penalty of perjury. 07 (c) The total amount of tax imposed by this chapter is due and payable to the 08 department at the same time and in the same manner as the federal individual income 09 tax payable to the United States Internal Revenue Service. 10 (d) A taxpayer, upon request by the department, shall furnish to the 11 department a true and correct copy of a return that the taxpayer has filed with the 12 United States Internal Revenue Service. 13 (e) A taxpayer shall notify the department in writing of an alteration in, or 14 modification of, the taxpayer's federal income tax return and of a recomputation of tax 15 or determination of deficiency, whether with or without assessment. A full statement 16 of the facts must accompany the notice. A taxpayer shall file the notice not later than 17 60 days after the final determination of the alteration, modification, recomputation, or 18 deficiency and shall pay any additional tax due under this chapter at that time. In this 19 subsection, "final determination" means the time that an amended federal return is 20 filed, a notice of deficiency or an assessment is mailed to the taxpayer by the United 21 States Internal Revenue Service, and the taxpayer has exhausted rights of appeal under 22 federal law. 23 (f) The department may credit or refund overpayments of taxes, taxes 24 erroneously or illegally assessed or collected, penalties collected without authority, 25 and taxes that are found unjustly assessed or excessive in amount, or otherwise 26 wrongfully collected. The department shall, in regulation, set limitations, specify the 27 manner in which claims for credits or refunds are made, and give notice of allowance 28 or disallowance. When a refund is allowed to a taxpayer, the refund may be paid out 29 of the general fund on a warrant issued under a voucher approved by the department. 30 (g) An individual is not required to file a return under this section 31 electronically, but a person employed to prepare and file an income tax return for an
01 individual shall file the return for that individual electronically. 02 Sec. 43.22.100. Tax withholding on wages of individuals. (a) Every 03 employer making payment of wages or salaries 04 (1) shall deduct and withhold an amount of tax computed in a manner 05 to approximate the amount of tax due on those wages and salaries under this chapter 06 for that taxable year; 07 (2) shall remit the tax withheld to the department accompanied by a 08 return on a form prescribed by the department at the times required by the department 09 by regulation; 10 (3) is liable for the payment of the tax required to be deducted and 11 withheld under this section but is not liable to any individual for the amount of the 12 payment; and 13 (4) shall furnish to an employee on or before January 31 of the 14 succeeding year, or within 30 days after a request by the employee after an employee's 15 or individual's termination if the 30-day period ends before January 31, a written 16 statement on a form prescribed by the department showing 17 (A) the name and taxpayer identification number of the 18 employer; 19 (B) the name and social security number of the employee; 20 (C) the total amount of wages and salary for the taxable year; 21 and 22 (D) the total amount deducted and withheld as tax under this 23 chapter for the taxable year. 24 (b) The department shall publish the rate of withholding required by this 25 section. 26 Sec. 43.22.110. Administration. (a) The department shall adopt necessary 27 regulations and forms to implement and interpret this chapter, including regulations 28 and forms for the electronic filing and payment of tax due under this chapter. Federal 29 regulations issued under the Internal Revenue Code shall be considered persuasive 30 authority in interpreting any provision of the Internal Revenue Code on which the tax 31 imposed by this chapter relies, whether or not a federal regulation has been
01 specifically incorporated into a department regulation, unless the federal regulation 02 (1) conflicts with a provision of this chapter; 03 (2) conflicts with a regulation adopted by the department; or 04 (3) is inconsistent with the purposes of this chapter. 05 (b) A transaction or payment between related persons must have economic 06 substance, must serve a bona fide business purpose, and must not have occurred for 07 the primary purpose of lowering the tax due under this chapter. The department, after 08 review or audit of a taxpayer's return, may determine whether there is sufficient 09 documentation or whether a transaction or payment meets the requirements of this 10 subsection. If the department determines that the documentation, transaction, or 11 payment fails to meet the requirements of this subsection, the department may adjust 12 the amount of a payment or transaction, disregard the payment or transaction, or make 13 another adjustment necessary for determining the tax under this chapter. If a payment 14 in an amount greater than $500,000 is made or required to be made from one person to 15 a related person, the related persons shall submit documentation substantiating that the 16 amount of the payment is consistent with 26 U.S.C. 482 (Internal Revenue Code). 17 Payments subject to this subsection include payments for interest, royalties, 18 management fees, services, inventory, tangible personal property, intangible property, 19 and real property. 20 (c) A tax deficiency assessed by the department under this section is assumed 21 to be correct. A taxpayer has the burden of proving that the tax deficiency is 22 erroneous. 23 (d) The tax collected by the department under this chapter shall be deposited 24 into the general fund and accounted for separately. 25 Sec. 43.22.120. References to Internal Revenue Code. (a) Sections 26 U.S.C. 26 6654, 6662, 6664, 6694, 6695, 6700 - 6702, 6707, 6713, 7201, 7202, 7206, 7207, 27 7216, 7407, and 7408 (Internal Revenue Code), as those sections read on January 1, 28 2021, are incorporated by reference as a part of this chapter and, if conflicting, 29 supersede provisions in AS 43.05 and AS 43.10. 30 (b) When provisions of the Internal Revenue Code incorporated by reference 31 under (a) of this section refer to rules and regulations adopted by the United States
01 Commissioner of Internal Revenue, they are regarded as regulations adopted by the 02 department under this chapter, unless the department adopts specific regulations in 03 their place. 04 Sec. 43.22.130. Information released to a banking institution. 05 Notwithstanding AS 43.05.230, information on an individual income tax return may 06 be released to a banking institution to verify the direct deposit of an income tax refund 07 or correct an error in that deposit. 08 Sec. 43.22.200. Definitions. In this chapter, 09 (1) "domicile" means an individual's true, fixed, principal, and 10 permanent home, to which the individual intends to return even if currently living 11 elsewhere; if an individual has two or more homes, "domicile" means the home that 12 the individual regards and uses as the individual's more permanent home; once 13 established, a domicile remains the individual's domicile until the individual 14 demonstrates a real change of intent and moves to a new domicile; indications of 15 domicile include the 16 (A) location of the place of employment of the individual; 17 (B) location of real property owned by the individual; 18 (C) registration and physical location of motor vehicles, planes, 19 boats, and snow machines owned by the individual; 20 (D) location of a bank account or active checking account of 21 the individual; 22 (E) address where the individual receives mail; 23 (F) location of a school where the individual or a member of 24 the individual's immediate family 25 (i) attends; or 26 (ii) receives resident tuition; 27 (G) location of an organization of which the individual is a 28 member; 29 (H) location of a parent, child, grandchild, or great-grandchild; 30 (I) location of dental and medical personnel that provide 31 services to the individual on a regular or consistent basis;
01 (J) filing of a prior year tax return by the individual as a 02 resident or nonresident; 03 (K) location where an individual is registered to vote; 04 (L) location where an individual holds a resident fishing, 05 hunting, or trapping license; 06 (2) "federal adjusted gross income" has the meaning given to "adjusted 07 gross income" in 26 U.S.C. 62; 08 (3) "Internal Revenue Code" means the Internal Revenue Code (26 09 U.S.C. 1 et seq.), as amended; 10 (4) "nonresident individual" means an individual who is not a resident 11 of the state for any portion of the taxable year; 12 (5) "part-year resident individual" means an individual who is a 13 resident of the state for a portion of but not the entire taxable year; 14 (6) "related person" means a person that satisfies the definition of 15 "related persons" in 26 U.S.C. 144 or 147 or a person in a relationship, as described in 16 26 U.S.C. 267(b) (Internal Revenue Code); 17 (7) "resident individual" means an individual who 18 (A) receives a permanent fund dividend under AS 43.23.005; 19 (B) receives a tax benefit available only to an individual 20 domiciled in the state; or 21 (C) is domiciled in the state for the entire taxable year unless 22 the individual maintains a permanent place of abode outside the state and 23 spends, in the aggregate, not more than 30 days during the taxable year in the 24 state; 25 (8) "taxable income" means income taxable under this chapter; 26 (9) "taxable year" means the calendar year or a fiscal year ending 27 during the calendar year; 28 (10) "taxpayer" means an individual subject to a tax imposed by this 29 chapter. 30 * Sec. 3. AS 43.05.085; AS 43.20.012(b), and 43.20.013 are repealed. 31 * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to
01 read: 02 APPLICABILITY. AS 43.22, added by sec. 2 of this Act, applies to income received 03 on or after the effective date of sec. 2 of this Act. 04 * Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 05 read: 06 TRANSITION: REGULATIONS. The Department of Revenue may adopt regulations 07 necessary to implement this Act. The regulations take effect under AS 44.62 (Administrative 08 Procedure Act), but not before the effective date of the law implemented by the regulation. 09 * Sec. 6. Section 5 of this Act takes effect immediately under AS 01.10.070(c). 10 * Sec. 7. Except as provided in sec. 6 of this Act, this Act takes effect January 1, 2022.