The bill amends the Alaska Net Income Tax Act to incorporate provisions related to the Multistate Tax Compact, specifically focusing on the apportionment of income for highly digitized businesses. It introduces new definitions, such as "apportionable income," which refers to income subject to apportionment under the U.S. Constitution. Taxpayers are allowed to elect to apportion their income based on the laws of the states where they operate, with specific criteria for various types of income, including rents and royalties. Additionally, taxpayers whose activities consist solely of sales can report and pay taxes based on a percentage of their gross sales, with a threshold of $100,000 that the Multistate Tax Commission can adjust every five years.

The bill also establishes the Multistate Tax Commission, which will consist of representatives from each party state and is tasked with studying tax systems, recommending uniformity in tax laws, and conducting audits. It removes the previous requirement that income-producing activities must be performed in a greater proportion within the state than in any other state based on costs of performance. Key changes include replacing the term "business" with "apportionable" in various sections and defining how income from highly digitized businesses should be apportioned, emphasizing the sales factor. The new provisions will take effect on January 1, 2026, and apply to tax returns for tax years beginning on or after that date, aiming to modernize Alaska's tax framework in response to evolving digital business practices.

Statutes affected:
SB0113A, AM SB 113, introduced 02/26/2025: 43.19.010, 43.20.143, 43.20.144, U.S.C, 43.20.145, 43.20.142, 43.20.148, 43.20.146
SB0113Z, AM Enrolled SB 113, introduced 05/07/2025: 43.19.010, 43.20.143, 43.20.144, U.S.C, 43.20.145, 43.20.142, 43.20.148, 43.20.146