The bill amends the Multistate Tax Compact to improve the apportionment of income for businesses operating across multiple states, with a particular emphasis on highly digitized businesses under the Alaska Net Income Tax Act. Key changes include the introduction of new definitions for "apportionable income," which now includes all income that is apportionable under the U.S. Constitution and not allocated under Alaska law. Taxpayers are given the option to apportion their income based on the laws of the states where they operate, enhancing flexibility in tax reporting. The bill also modifies existing definitions related to income tax laws, introduces a new framework for determining the sales factor based on market criteria, and excludes certain sales from the denominator of the sales factor for taxpayers not taxable in the state of assignment.

Additionally, the bill establishes the Multistate Tax Commission, composed of one member from each party state, tasked with studying tax systems, recommending uniformity proposals, and conducting audits. It also 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. The bill specifies that new provisions for highly digitized businesses will take effect for tax years beginning on or after January 1, 2026, and includes amendments requiring corporations to file reports if they fail to comply with regulations. Overall, the bill aims to modernize Alaska's tax framework to better align with contemporary business models and ensure equitable tax 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