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HOUSE BILL NO. 9
IN THE LEGISLATURE OF THE STATE OF ALASKA
THIRTY-SECOND LEGISLATURE - FIRST SESSION
BY REPRESENTATIVE HANNAN
Introduced: 2/18/21
Referred: State Affairs, Labor and Commerce, Finance
A BILL
FOR AN ACT ENTITLED
1 "An Act relating to the taxation of income of individuals, partners, shareholders in S
2 corporations, trusts, and estates; relating to a payment against the individual income tax
3 from the permanent fund dividend disbursement; repealing tax credits applied against
4 the tax on individuals under the Alaska Net Income Tax Act; and providing for an
5 effective date."
6 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:
7 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section
8 to read:
9 SHORT TITLE. This Act may be known as the Education Funding Act.
10 * Sec. 2. The uncodified law of the State of Alaska is amended by adding a new section to
11 read:
12 LEGISLATIVE INTENT. It is the intent of the legislature that, under this Act,
13 (1) income up to $14,300 for an individual, plus income from permanent fund
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1 dividends, will not be subject to income tax under AS 43.22;
2 (2) income up to $28,600 for two individuals filing jointly who do not have
3 dependents, plus income from permanent fund dividends, will not be subject to the income tax
4 under AS 43.22;
5 (3) an individual, or two individuals filing jointly, will receive an additional
6 $4,000 deduction for each dependent, resulting in an increase in the amounts stated in (1) and
7 (2) of this section of $4,000 for each dependent.
8 * Sec. 3. AS 43.05.045(a) is amended to read:
9 (a) Except as provided in AS 43.22.075(i), or unless [UNLESS] an
10 exemption is granted under (b) of this section, a taxpayer required to submit a return
11 or report for a tax levied under this title or for any other tax administered by the
12 department shall submit the return or report electronically in a format prescribed by
13 the department. Failure to comply with this section may result in a civil penalty under
14 AS 43.05.220(f). If a law under this title requires a report or return or a portion of a
15 report or return to be in writing, an electronically filed report or return satisfies this
16 section. A taxpayer shall submit attachments to a report or return required under this
17 title electronically.
18 * Sec. 4. AS 43 is amended by adding a new chapter to read:
19 Chapter 22. Individual Income Tax.
20 Sec. 43.22.010. Income tax on individuals. (a) Each calendar year or fraction
21 of a calendar year, an income tax is imposed on the income of a
22 (1) resident;
23 (2) nonresident that is derived from or connected with a source in the
24 state.
25 (b) The tax under this section for an individual is determined as follows:
26 If the taxable income is Then the tax is
27 Less than $10,300 $0
28 $10,300 but less than $50,000 2.5 percent of the amount in
29 excess of $10,300
30 $50,000 but less than $100,000 $992.50 plus 4 percent of the amount
31 in excess of $50,000
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1 $100,000 but less than $200,000 $2,992.50 plus 5 percent of the
2 amount in excess of $100,000
3 $200,000 but less than $250,000 $7,992.50 plus 6 percent of the
4 amount in excess of $200,000
5 $250,000 or more $10,992.50 plus 7 percent of the
6 amount in excess of $250,000.
7 (c) Except as otherwise provided in this section, the tax under this section for
8 two individuals who file a joint federal income tax return is determined as follows:
9 If the taxable income is Then the tax is
10 Less than $20,600 $0
11 $20,600 but less than $100,000 2.5 percent of the amount in
12 excess of $20,600
13 $100,000 but less than $200,000 $1,985 plus 4 percent of the amount in
14 excess of $100,000
15 $200,000 but less than $400,000 $5,985 plus 5 percent of the amount in
16 excess of $200,000
17 $400,000 but less than $500,000 $15,985 plus 6 percent of the amount
18 in excess of $400,000
19 $500,000 or more $21,985 plus 7 percent of the amount
20 in excess of $500,000.
21 (d) An individual who is eligible to file a joint federal income tax return but
22 who files an individual federal income tax return shall determine the tax imposed by
23 this chapter under (b) of this section.
24 (e) Two resident individuals who are eligible to file a joint federal income tax
25 return but who do not, individually or jointly, file a federal income tax return may
26 elect to determine the tax imposed by this chapter either
27 (1) individually under (b) of this section; or
28 (2) jointly under (c) of this section.
29 (f) Two individuals who file a joint federal income tax return one or both of
30 whom is not a resident may elect to determine the tax imposed by this chapter either
31 (1) individually under (b) of this section; or
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1 (2) jointly under (c) of this section, as if both individuals were
2 residents; the income of the individuals filing jointly under this paragraph is not
3 subject to the calculation under AS 43.22.015.
4 Sec. 43.22.015. Calculation of tax on a nonresident individual. (a) Except as
5 otherwise provided in AS 43.22.010(f)(2) or (b) of this section, the tax on a
6 nonresident individual is the product of
7 (1) the tax determined under AS 43.22.010(b) on the nonresident
8 individual's taxable income computed as if the nonresident individual were a resident
9 individual but taking a reduction under AS 43.22.030(b)(2); and
10 (2) a fraction, the
11 (A) numerator of which is the nonresident individual's income
12 taxable under AS 43.22.045; and
13 (B) denominator of which is the nonresident individual's
14 taxable income computed as if the nonresident individual were a resident
15 individual.
16 (b) If a nonresident individual's taxable income computed under (a)(2)(B) is
17 less than the nonresident individual's income taxable under (a)(2)(A), the tax imposed
18 by this chapter is on the nonresident individual's taxable income as computed under
19 AS 43.22.045.
20 Sec. 43.22.020. Tax on trusts and estates. (a) A tax is imposed for each
21 taxable year or portion of a taxable year on the taxable income of a resident or
22 nonresident trust or estate. Except as provided in (b) of this section, the tax under this
23 section for a trust or estate is determined as follows:
24 If the taxable income is Then the tax is
25 Less than $50,000 2.5 percent of the amount in excess of
26 $0
27 $50,000 but less than $100,000 $1,250 plus 4 percent of the amount in
28 excess of $50,000
29 $100,000 but less than $200,000 $3,250 plus 5 percent of the amount in
30 excess of $100,000
31 $200,000 but less than $250,000 $8,250 plus 6 percent of the amount in
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1 excess of $200,000
2 $250,000 or more $11,250 plus 7 percent of the amount
3 in excess of $250,000.
4 (b) A tax of 2.5 percent is imposed on the taxable income of a resident or
5 nonresident Alaska Native Settlement Trust that has elected for alternative federal tax
6 treatment under 26 U.S.C. 646 (Internal Revenue Code).
7 (c) In this section, the taxable income of a nonresident trust or estate is the
8 income of the trust or estate that is derived from or connected with a source in the
9 state.
10 (d) A trust is not subject to tax under this chapter if
11 (1) all of the trustees of the trust are nonresidents;
12 (2) the entire corpus of the trust, including real, tangible, and
13 intangible property, is located outside the state; and
14 (3) no income or gains of the trust are derived from or connected with
15 a source in the state.
16 (e) For purposes of (d)(1) of this section, a trustee that is a nonresident
17 banking corporation at the time the banking corporation becomes a trustee is a
18 nonresident trustee even if the banking corporation later becomes a resident trustee
19 because it is acquired by or becomes an office or branch of a resident trustee.
20 (f) A trust that is exempt from federal income tax because of its purpose or
21 activities is not subject to tax under this chapter.
22 (g) A special needs trust or other trust established to provide solely for the
23 housing, living expenses, or medical care of a disabled beneficiary is not subject to tax
24 under this chapter. In this subsection,
25 (1) "disabled beneficiary" means an individual who has
26 (A) a physical or mental impairment that substantially limits
27 one or more major life activities; or
28 (B) a condition that may require the use of a prosthesis, special
29 equipment for mobility, or a service animal;
30 (2) "special needs trust" has the meaning given in AS 13.36.215(b).
31 Sec. 43.22.025. Credit for income taxes imposed by other jurisdictions. (a)
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1 A resident individual, trust, or estate or part-year resident individual, trust, or estate of
2 the state is allowed a credit against the tax due under this chapter for an income tax
3 that was imposed on the resident or part-year resident for the taxable year by another
4 state or the political subdivision of another state on income derived from or connected
5 with that state or political subdivision.
6 (b) A credit allowed under (a) of this section
7 (1) for a resident individual, trust, or estate may not exceed the
8 individual's, trust's, or estate's tax due under this chapter before credits are applied,
9 multiplied by a ratio, the numerator of which is the portion of the individual's, trust's,
10 or estate's taxable income that is derived from or connected with a source in another
11 state or the political subdivision of another state and the denominator of which is the
12 resident individual's, trust's, or estate's taxable income;
13 (2) for a part-year resident individual, trust, or estate may not exceed
14 the individual's, trust's, or estate's tax due for the period of state residency before
15 credits are applied, multiplied by a ratio, the numerator of which is the individual's,
16 trust's, or estate's taxable income derived from or connected with a source in another
17 state or the political subdivision of another state during the period of state residency
18 and the denominator of which is the part-year resident individual's, trust's, or estate's
19 taxable income during the period of state residency;
20 (3) may not reduce the tax due under this chapter to less than the tax
21 that would have been due if the income derived from or connected with a source in
22 another state or the political subdivision of another state and subject to taxation by the
23 other state or political subdivision had been excluded from the resident or part-year
24 resident individual's, trust's, or estate's taxable income during the calculation of tax
25 under this chapter before the application of credits.
26 (c) If the tax administration of another state or a political subdivision of
27 another state determines that a taxpayer has overpaid tax, affecting the computation of
28 the credit allowed under this section for any taxable year, the taxpayer shall file an
29 amended return with the department not later than 90 days after the final determination
30 by the state or political subdivision that the tax was overpaid. The department may
31 assess a taxpayer additional tax, proportional to the amount overpaid in the other state
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1 or political subdivision.
2 (d) A taxpayer is not allowed a credit under this section for taxes paid to
3 another jurisdiction if the taxpayer claims a credit against the income tax imposed by
4 the other jurisdiction for the tax payable under this chapter.
5 (e) Income tax imposed on a partner or the shareholder of an S corporation on
6 the income of the partnership or S corporation, including tax paid by the partnership or
7 S corporation to satisfy the tax liability of the partner or shareholder, may be included
8 in the calculation of a credit under this section. Tax imposed on the partnership or S
9 corporation that is the direct liability of the partnership or S corporation and not that of
10 the partner or shareholder may not be included in the calculation of a credit under this
11 section.
12 Sec. 43.22.030. Taxable income; general rule. (a) In this chapter, taxable
13 income is the taxpayer's federal adjusted gross income for the taxable year
14 (1) plus, if not already included in federal adjusted gross income,
15 (A) interest on obligations of another state, a political
16 subdivision of another state, the public instrumentality of another state, or the
17 local authority of another state;
18 (B) a loss on the sale or exchange of an obligation issued by or
19 on behalf of
20 (i) the state;
21 (ii) a municipality of the state; or
22 (iii) a public instrumentality, public authority, or public
23 corporation created under state law;
24 (C) a loss from the sale or exchange of shares in a unit
25 investment trust if the loss is attributable to an obligation issued by or on
26 behalf of
27 (i) the state;
28 (ii) a municipality of the sta