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SENATE BILL NO. 154
IN THE LEGISLATURE OF THE STATE OF ALASKA
THIRTY-SECOND LEGISLATURE - SECOND SESSION
BY SENATOR KIEHL
Introduced: 1/18/22
Referred: 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 credit against the individual income tax;
3 repealing tax credits applied against the tax on individuals under the Alaska Net Income
4 Tax Act; and providing for an effective date."
5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:
6 * Section 1. AS 43.05.045(a) is amended to read:
7 (a) Except as provided in AS 43.22.075(h), or unless [UNLESS] an
8 exemption is granted under (b) of this section, a taxpayer required to submit a return
9 or report for a tax levied under this title or for any other tax administered by the
10 department shall submit the return or report electronically in a format prescribed by
11 the department. Failure to comply with this section may result in a civil penalty under
12 AS 43.05.220(f). If a law under this title requires a report or return or a portion of a
13 report or return to be in writing, an electronically filed report or return satisfies this
14 section. A taxpayer shall submit attachments to a report or return required under this
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1 title electronically.
2 * Sec. 2. AS 43 is amended by adding a new chapter to read:
3 Chapter 22. Income Tax.
4 Sec. 43.22.010. Income tax on individuals. (a) Each calendar year or fraction
5 of a calendar year, an income tax is imposed on the income of a
6 (1) resident individual, trust, or estate;
7 (2) nonresident individual, trust, or estate that is derived from or
8 connected with a source in the state.
9 (b) The tax under this section for an individual or individuals filing jointly is
10 (1) 2.75 percent of taxable income for calendar year 2023;
11 (2) three percent of taxable income for calendar year 2024;
12 (3) 3.25 percent of taxable income for calendar year 2025;
13 (4) 3.75 percent of taxable income for calendar years after 2025.
14 (c) Two resident individuals who file a joint federal income tax return may
15 determine the tax imposed by this chapter jointly under this section.
16 (d) Two individuals who file a joint federal income tax return both or one of
17 whom is not a resident may elect to determine the tax imposed by this chapter either
18 (1) individually; or
19 (2) jointly as if both individuals were residents; the income of the
20 individuals filing jointly under this paragraph is not subject to the calculation under
21 AS 43.22.015.
22 Sec. 43.22.015. Calculation of tax on a nonresident individual. (a) Except as
23 otherwise provided in (b) of this section, the tax on a nonresident individual is the
24 product of
25 (1) the tax determined under AS 43.22.010(b) on the nonresident
26 individual's taxable income computed as if the nonresident individual were a resident
27 individual; and
28 (2) a fraction, the
29 (A) numerator of which is the nonresident individual's income
30 taxable under AS 43.22.045; and
31 (B) denominator of which is the nonresident individual's
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1 taxable income computed as if the nonresident individual were a resident
2 individual.
3 (b) If a nonresident individual's taxable income computed under (a)(2)(B) of
4 this section is less than the nonresident individual's income taxable under (a)(2)(A) of
5 this section, the tax imposed by this chapter is on the nonresident individual's taxable
6 income as computed under AS 43.22.045.
7 Sec. 43.22.020. Tax on trusts and estates. (a) A tax is imposed for each
8 taxable year or portion of a taxable year on the taxable income of a resident or
9 nonresident trust or estate. The tax under this section for a trust or estate is
10 (1) 2.75 percent of taxable income for calendar year 2023;
11 (2) three percent of taxable income for calendar year 2024;
12 (3) 3.25 percent of taxable income for calendar year 2025;
13 (4) 3.75 percent of taxable income for calendar years after 2025.
14 (b) In this section, the taxable income of a nonresident trust or estate is the
15 income of the trust or estate that is derived from or connected with a source in the
16 state.
17 (c) A trust is not subject to tax under this chapter if
18 (1) all of the trustees of the trust are nonresidents;
19 (2) the entire corpus of the trust, including real, tangible, and
20 intangible property, is located outside the state; and
21 (3) no income or gains of the trust are derived from or connected with
22 a source in the state.
23 (d) For purposes of (c)(1) of this section, a trustee that is a nonresident
24 banking corporation at the time the banking corporation becomes a trustee is a
25 nonresident trustee even if the banking corporation later becomes a resident trustee
26 because it is acquired by or becomes an office or branch of a resident trustee.
27 (e) A trust that is exempt from federal income tax because of its purpose or
28 activities is not subject to tax under this chapter.
29 (f) A special needs trust or other trust established to provide solely for the
30 housing, living expenses, or medical care of a disabled beneficiary is not subject to tax
31 under this chapter. In this subsection,
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1 (1) "disabled beneficiary" means an individual who has
2 (A) a physical or mental impairment that substantially limits
3 one or more major life activities; or
4 (B) a condition that may require the use of a prosthesis, special
5 equipment for mobility, or a service animal;
6 (2) "special needs trust" has the meaning given in AS 13.36.215(b).
7 Sec. 43.22.025. Credit for income taxes imposed by other jurisdictions. (a)
8 A resident individual, trust, or estate or part-year resident individual, trust, or estate is
9 allowed a credit against the tax due under this chapter for an income tax that was
10 imposed on the resident or part-year resident for the taxable year by another state or
11 the political subdivision of another state on income derived from or connected with
12 that state or political subdivision.
13 (b) A credit allowed under (a) of this section
14 (1) for a resident individual, trust, or estate may not exceed the
15 individual's, trust's, or estate's tax due under this chapter before credits are applied,
16 multiplied by a fraction, the numerator of which is the portion of the individual's,
17 trust's, or estate's taxable income that is derived from or connected with a source in
18 another state or the political subdivision of another state and the denominator of which
19 is the resident individual's, trust's, or estate's taxable income;
20 (2) for a part-year resident individual, trust, or estate may not exceed
21 the individual's, trust's, or estate's tax due for the period of state residency before
22 credits are applied, multiplied by a fraction, the numerator of which is the individual's,
23 trust's, or estate's taxable income derived from or connected with a source in another
24 state or the political subdivision of another state during the period of state residency
25 and the denominator of which is the part-year resident individual's, trust's, or estate's
26 taxable income during the period of state residency;
27 (3) may not reduce the tax due under this chapter to less than the tax
28 that would have been due if the income derived from or connected with a source in
29 another state or the political subdivision of another state and subject to taxation by the
30 other state or political subdivision had been excluded from the resident or part-year
31 resident individual's, trust's, or estate's taxable income during the calculation of tax
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1 under this chapter before the application of credits.
2 (c) If the tax administration of another state or a political subdivision of
3 another state determines that a taxpayer has overpaid tax, affecting the computation of
4 the credit allowed under this section for any taxable year, the taxpayer shall file an
5 amended return with the department not later than 90 days after the final determination
6 by the state or political subdivision that the tax was overpaid. The department may
7 assess a taxpayer additional tax, proportional to the amount overpaid in the other state
8 or political subdivision.
9 (d) A taxpayer is not allowed a credit under this section for taxes paid to
10 another jurisdiction if the taxpayer claims a credit against the income tax imposed by
11 the other jurisdiction for the tax payable under this chapter.
12 (e) Income tax imposed on a partner or the shareholder of an S corporation on
13 the income of the partnership or S corporation, including tax paid by the partnership or
14 S corporation to satisfy the tax liability of the partner or shareholder, may be included
15 in the calculation of a credit under this section. Tax imposed on the partnership or S
16 corporation that is the direct liability of the partnership or S corporation and not that of
17 the partner or shareholder may not be included in the calculation of a credit under this
18 section.
19 Sec. 43.22.030. Taxable income; general rule. (a) In this chapter, taxable
20 income is the taxpayer's federal adjusted gross income for the taxable year
21 (1) plus, if not already included in federal adjusted gross income,
22 (A) interest on obligations of another state, a political
23 subdivision of another state, the public instrumentality of another state, or the
24 local authority of another state;
25 (B) a loss on the sale or exchange of an obligation issued by or
26 on behalf of
27 (i) the state;
28 (ii) a municipality of the state; or
29 (iii) a public instrumentality, public authority, or public
30 corporation created under state law;
31 (C) a loss from the sale or exchange of shares in a unit
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1 investment trust if the loss is attributable to an obligation issued by or on
2 behalf of
3 (i) the state;
4 (ii) a municipality of the state; or
5 (iii) a public instrumentality, public authority, or public
6 corporation created under state law;
7 (D) interest or dividends on obligations or securities issued by
8 the United States, or an authority, commission, or instrumentality of the United
9 States, that the Internal Revenue Code exempts from federal income tax;
10 (E) income taxes under this chapter;
11 (F) a gain realized but not recognized under 26 U.S.C. 1031
12 (Internal Revenue Code);
13 (G) a deduction allowed in the determination of federal
14 adjusted gross income that is directly or indirectly related to income that is not
15 taxable under this chapter; and
16 (H) income of an incomplete gift nongrantor trust to which a
17 taxpayer transferred property, less deductions of the trust, if
18 (i) the income and deductions of the trust would be
19 taken into account in computing the taxpayer's federal taxable income
20 if the trust in its entirety was treated as a grantor trust under the Internal
21 Revenue Code;
22 (ii) the trust is a resident trust;
23 (iii) the trust does not qualify as a grantor trust under 26
24 U.S.C. 671 - 679 (Internal Revenue Code); and
25 (iv) the grantor's transfer of assets to the trust is treated
26 as an incomplete gift under 26 U.S.C. 2511 (Internal Revenue Code);
27 (2) minus, if included in federal adjusted gross income,
28 (A) interest income or a dividend from an obligation that is
29 exempt from taxation by a state under federal law;
30 (B) a refund or credit for the overpayment of an income tax;
31 (C) an ordinary and necessary expense, including an interest
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1 expense, paid or incurred during the taxable year, that is directly or indirectly
2 related to income exempt under the Internal Revenue Code but taxable by the
3 state;
4 (D) a gain recognized under 26 U.S.C. 1031 (Internal Revenue
5 Code) that was included in federal adjusted gross income under (1) of this
6 subsection;
7 (E) income exempt under 4 U.S.C. 114;
8 (F) compensation prohibited from state taxation by 50 U.S.C.
9 3901 - 4043 (Servicemembers Civil Relief Act);
10 (G) a gain from the sale or exchange of an obligation issued by
11 or on behalf of
12 (i) the state;
13 (ii) a municipality of the state; or
14 (iii) a public instrumentality, public authority, or public
15 corporation created under state law.
16 (b) When calculating taxable income, a taxpayer
17 (1) may not carry back a net operating loss under 26 U.S.C.
18 172(b)(1)(A)(i) (Internal Revenue Code);
19 (2) may carry over a net operating loss under 26 U.S.C.
20 172(b)(1)(A)(ii) (Internal Revenue Code), except that a loss may not be carried over
21 for more than five years; for a taxpayer subject to AS 43.19 (Multistate Tax Compact),
22 the amount of a net operating loss allowed to be carried over is limited to the amount
23 apportioned to the state in the taxable year in which the loss was generated under
24 AS 43.19 (Multistate Tax Compact);
25 (3) shall include the modifications required by AS 43.20.144(b)(2),
26 concerning intangible drilling and development costs, AS 43.20.144(b)(3), concerning
27 percentage depletion, and AS 43.20.144(b)(4), concerning depreciation.
28 Sec. 43.22.035. Taxable income from partnerships and S corporations. (a)
29 A partner or shareholder shall make an adjustment described