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SENATE BILL NO. 122
IN THE LEGISLATURE OF THE STATE OF ALASKA
THIRTY-THIRD LEGISLATURE - FIRST SESSION
BY THE SENATE RULES COMMITTEE
Introduced: 4/3/23
Referred: Finance
A BILL
FOR AN ACT ENTITLED
1 "An Act relating to the Multistate Tax Compact; relating to apportionment of income to
2 the state; relating to highly digitized businesses subject to the Alaska Net Income Tax
3 Act; and providing for an effective date."
4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:
5 * Section 1. AS 43.19.010 is amended to read:
6 Sec. 43.19.010. Compact. The Multistate Tax Compact is hereby enacted into
7 law and entered into with all jurisdictions legally joining in it, in the form substantially
8 as follows:
9 ARTICLE I.
10 PURPOSES.
11 The purposes of this compact are to:
12 1. Facilitate proper determination of state and local tax liability of multistate
13 taxpayers, including the equitable apportionment of tax bases and settlement of
14 apportionment disputes.
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1 2. Promote uniformity or compatibility in significant components of tax
2 systems.
3 3. Facilitate taxpayer convenience and compliance in the filing of tax returns
4 and in other phases of tax administration.
5 4. Avoid duplicative taxation.
6 ARTICLE II.
7 DEFINITIONS.
8 As used in this compact:
9 1. "State" means a state of the United States, the District of Columbia, the
10 Commonwealth of Puerto Rico, or any territory or possession of the United States.
11 2. "Subdivision" means any governmental unit or special district of a state.
12 3. "Taxpayer" means any corporation, partnership, firm, association,
13 governmental unit or agency or person acting as a business entity in more than one
14 state.
15 4. "Income tax" means a tax imposed on or measured by net income including
16 any tax imposed on or measured by an amount arrived at by deducting expenses from
17 gross income, one or more forms of which expenses are not specifically and directly
18 related to particular transactions.
19 5. "Capital stock tax" means a tax measured in any way by the capital of a
20 corporation considered in its entirety.
21 6. "Gross receipts tax" means a tax, other than a sales tax, which is imposed on
22 or measured by the gross volume of business, in terms of gross receipts or in other
23 terms, and in the determination of which no deduction is allowed which would
24 constitute the tax an income tax.
25 7. "Sales tax" means a tax imposed with respect to the transfer for a
26 consideration of ownership, possession or custody of tangible personal property or the
27 rendering of services measured by the price of the tangible personal property
28 transferred or services rendered and which is required by state or local law to be
29 separately stated from the sales price by the seller, or which is customarily separately
30 stated from the sales price, but does not include a tax imposed exclusively on the sale
31 of a specifically identified commodity or article or class of commodities or articles.
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1 8. "Use tax" means a nonrecurring tax, other than a sales tax, which (a) is
2 imposed on or with respect to the exercise or enjoyment of any right or power over
3 tangible personal property incident to the ownership, possession or custody of that
4 property or the leasing of that property from another including any consumption,
5 keeping, retention, or other use of tangible personal property and (b) is complementary
6 to a sales tax.
7 9. "Tax" means an income tax, capital stock tax, gross receipts tax, sales tax,
8 use tax, and any other tax which has a multistate impact, except that the provisions of
9 Articles III, IV and V of this compact shall apply only to the taxes specifically
10 designated therein and the provisions of Article IX of this compact shall apply only in
11 respect to determinations pursuant to Article IV.
12 ARTICLE III.
13 ELEMENTS OF INCOME TAX LAWS.
14 TAXPAYERS OPTION, STATE AND LOCAL TAXES.
15 1. Any taxpayer subject to an income tax whose income is subject to
16 apportionment and allocation for tax purposes pursuant to the laws of a party state or
17 pursuant to the laws of subdivisions in two or more party states may elect to apportion
18 and allocate the taxpayer's income in the manner provided by the laws of such state or
19 by the laws of such states and subdivisions without reference to this compact, or may
20 elect to apportion and allocate in accordance with Article IV. This election for any tax
21 year may be made in all party states or subdivisions thereof or in any one or more of
22 the party states or subdivisions thereof without reference to the election made in the
23 others. For the purposes of this paragraph, taxes imposed by subdivisions shall be
24 considered separately from state taxes and the apportionment and allocation also may
25 be applied to the entire tax base. In no instance wherein Article IV is employed for all
26 subdivisions of a state may the sum of all apportionments and allocations to
27 subdivisions within a state be greater than the apportionment and allocation that would
28 be assignable to that state if the apportionment or allocation were being made with
29 respect to a state income tax.
30 TAXPAYER OPTION, SHORT FORM.
31 2. Each party state or any subdivision thereof which imposes an income tax
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1 shall provide by law that any taxpayer required to file a return, whose only activities
2 within the taxing jurisdiction consist of sales and do not include owning or renting real
3 estate or tangible personal property, and whose dollar volume of gross sales made
4 during the tax year within the state or subdivision, as the case may be, is not in excess
5 of $100,000 may elect to report and pay any tax due on the basis of a percentage of
6 such volume, and shall adopt rates which shall produce a tax which reasonably
7 approximates the tax otherwise due. The Multistate Tax Commission, not more than
8 once in five years, may adjust the $100,000 figure in order to reflect such changes as
9 may occur in the real value of the dollar, and such adjusted figure, upon adoption by
10 the commission, shall replace the $100,000 figure specifically provided herein. Each
11 party state and subdivision thereof may make the same election available to taxpayers
12 additional to those specified in this paragraph.
13 COVERAGE.
14 3. Nothing in this Article relates to the reporting or payment of any tax other
15 than an income tax.
16 ARTICLE IV.
17 DIVISION OF INCOME.
18 1. As used in this Article, unless the context otherwise requires:
19 (a) "Apportionable income" means:
20 (i) all income that is apportionable under the Constitution of the
21 United States and is not allocated under the laws of this state, including:
22 (A) ["BUSINESS INCOME" MEANS] income arising from
23 transactions and activity in the regular course of the taxpayer's trade or
24 business; and
25 (B) [INCLUDES] income arising from tangible and intangible
26 property if the acquisition, management, employment, development, or
27 [AND] disposition of the property is or was related to the operation
28 [CONSTITUTE INTEGRAL PARTS] of the taxpayer's [REGULAR] trade or
29 business; and
30 (ii) any income that would be allocable to this state under the
31 Constitution of the United States, but that is apportioned rather than allocated
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1 pursuant to the laws of this state [OPERATIONS].
2 (b) "Commercial domicile" means the principal place from which the trade or
3 business of the taxpayer is directed or managed.
4 (c) "Compensation" means wages, salaries, commissions and any other form
5 of remuneration paid to employees for personal services.
6 (d) "Financial organization" means any bank, trust company, savings bank,
7 industrial bank, land bank, safe deposit company, private banker, savings and loan
8 association, credit union, cooperative bank, small loan company, sales finance
9 company, investment company, or any type of insurance company.
10 (e) "Non-apportionable [NONBUSINESS] income" means all income other
11 than apportionable [BUSINESS] income.
12 (f) "Public utility" means any business entity (1) which owns or operates any
13 plant, equipment, property, franchise, or license for the transmission of
14 communications, transportation of goods or persons, except by pipe line, or the
15 production, transmission, sale, delivery, or furnishing of electricity, water or steam;
16 and (2) whose rates of charges for goods or services have been established or
17 approved by a federal, state or local government or governmental agency.
18 (g) "sales" means all gross receipts of the taxpayer that are not allocated
19 under paragraphs of this Article, and that are received from transactions and
20 activity in the regular course of the taxpayer's trade or business; except that sales
21 of a taxpayer from hedging transactions and from the maturity, redemption,
22 exchange, loan, or other disposition of cash or securities, shall be excluded.
23 (h) "State" means any state of the United States, the District of Columbia, the
24 Commonwealth of Puerto Rico, any territory or possession of the United States, and
25 any foreign country or political subdivision thereof.
26 (i) "This state" means the state in which the relevant tax return is filed or, in
27 the case of application of this Article to the apportionment and allocation of income
28 for local tax purposes, the subdivision or local taxing district in which the relevant tax
29 return is filed.
30 2. Any taxpayer having income from business activity which is taxable both
31 within and outside this state, other than activity as a financial organization or public
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1 utility or the rendering of purely personal services by an individual, shall allocate and
2 apportion net income as provided in this Article. If a taxpayer has income from
3 business activity as a public utility but derives the greater percentage of income from
4 activities subject to this Article, the taxpayer may elect to allocate and apportion the
5 taxpayer's entire net income as provided in this Article.
6 3. For purposes of allocation and apportionment of income under this Article, a
7 taxpayer is taxable in another state if (1) in that state the taxpayer is subject to a net
8 income tax, a franchise tax measured by net income, a franchise tax for the privilege
9 of doing business, or a corporate stock tax, or (2) that state has jurisdiction to subject
10 the taxpayer to a net income tax regardless of whether, in fact, the state does or does
11 not.
12 4. Rents and royalties from real or tangible personal property, capital gains,
13 interest, dividends or patent or copyright royalties, to the extent that they constitute
14 nonapportionable [NONBUSINESS] income, shall be allocated as provided in
15 paragraphs 5 through 8 of this Article.
16 5.(a) Net rents and royalties from real property located in this state are
17 allocable to this state.
18 (b) Net rents and royalties from tangible personal property are allocable to this
19 state: (1) if and to the extent that the property is utilized in this state, or (2) in their
20 entirety if the taxpayer's commercial domicile is in this state and the taxpayer is not
21 organized under the laws of or taxable in the state in which the property is utilized.
22 (c) The extent of utilization of tangible personal property in a state is
23 determined by multiplying the rents and royalties by a fraction, the numerator of
24 which is the number of days of physical location of the property in the state during the
25 rental or royalty period in the taxable year and the denominator of which is the number
26 of days of physical location of the property everywhere during all rental or royalty
27 periods in the taxable year. If the physical location of the property during the rental or
28 royalty period is unknown or unascertainable by the taxpayer, tangible personal
29 property is utilized in the state in which the property was located at the time the rental
30 or royalty payer obtained possession.
31 6.(a) Capital gains and losses from sales of real property located in this state
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1 are allocable to this state.
2 (b) Capital gains and losses from sales of tangible personal property are
3 allocable to this state if (1) the property had a situs in this state at the time of the sale,
4 or (2) the taxpayer's commercial domicile is in this state and the taxpayer is not
5 taxable in the state in which the property had a situs.
6 (c) Capital gains and losses from sales of intangible personal property are
7 allocable to this state if the taxpayer's commercial domicile is in this state.
8 7. Interest and dividends are allocable to this state if the taxpayer's commercial
9 domicile is in this state.
10 8.(a) Patent and copyright royalties are allocable to this state: (1) if and to the
11 extent that the patent or copyright is utilized by the payer in this state, or (2) if and to
12 the extent that the patent or copyright is utilized by the payer in a state in which the
13 taxpayer is not taxable and the taxpayer's commercial domicile is in this state.
14 (b) A patent is utilized in a state to the extent that it is employed in production,
15 fabrication, manufacturing, or other processing in the state or to the extent that a
16 patented product is produced in the state. If the basis of receipts from patent royalties
17 does not permit allocation to states or if the accounting procedures do not reflect states
18 of utilization, the patent is utilized in the state in which the taxpayer's commercial
19 domicile is located.
20 (c) A copyright is utilized in a state to the extent that printing or other
21 publication originates in the state. If the basis of receipts from copyright royalties does
22 not permit allocation to states or if the accounting procedures do not reflect states of
23 utilization, the copyright is utilized in the state in which the taxpayer's commercial
24 domicile is located.
25 9. All apportionable [BUSINESS] income shall be apportioned to this state by
26 m