2005-03-23                     Senate Journal                      Page 0673
SB 151                                                                                            
SENATE BILL NO. 151 BY THE SENATE RULES COMMITTEE                                                   
BY REQUEST OF THE GOVERNOR, entitled:                                                               
                                                                                                    
          "An Act excepting from the Alaska Net Income Tax                                          
          Act the federal deduction regarding income                                                
          attributable to certain domestic production activities;                                   
          and providing for an effective date."                                                     
                                                                                                    
was read the first time and referred to the Finance Committee.                                      
                                                                                                    
The following fiscal information was published today:                                               
 Fiscal Note No. 1, indeterminate, Department of Revenue                                            
                                                                                                    
Governor's transmittal letter dated March 22:                                                       
                                                                                                    
Dear President Stevens:                                                                             
                                                                                                    
Under the authority of art. III, sec. 18, of the Alaska Constitution, I am                          
transmitting a bill excepting from the Alaska Net Income Tax Act the                                
federal deduction regarding income attributable to certain domestic                                 
production activities.                                                                              
                                                                                                    
                                                                                                    
                                                                                                    

2005-03-23                     Senate Journal                      Page 0674
Last year Congress passed legislation (American Jobs Creation Act of                                
2004) that created a new federal tax deduction for corporations                                     
regarding income attributable to certain domestic production activities.                            
Alaska tax law automatically adopts such federal tax deductions unless                              
the Legislature explicitly excepts to them (AS 43.20.021(a)).  Because                              
of Alaska's unique reliance on natural resource development, this                                   
particular deduction will have major impacts on the state's revenue                                 
flow.  The Department of Revenue estimates that this federal tax                                    
deduction could cut $100 million from state corporate income tax                                    
revenue over the next decade.                                                                       
                                                                                                    
With the passage of this legislation, Alaska's corporate income tax                                 
structure will stay the same as it is under the current regime.  This will                          
provide continued stability and tax certainty to corporations operating                             
in the State of Alaska.                                                                             
                                                                                                    
Several other states also have introduced legislation to "de-couple"                                
their tax code from this new federal provision, including Montana,                                  
New Jersey, Maryland, North Dakota and West Virginia.                                               
Massachusetts has enacted such legislation.                                                         
                                                                                                    
I urge your prompt and favorable action on this measure.                                            
                                                                                                    
Sincerely yours,                                                                                    
/s/                                                                                                 
Frank H. Murkowski                                                                                  
Governor