EDUCATION TAX

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CS FOR HOUSE BILL NO. 152(STA)

IN THE LEGISLATURE OF THE STATE OF ALASKA

THIRTY-FOURTH LEGISLATURE - SECOND SESSION

BY THE HOUSE STATE AFFAIRS COMMITTEE

Offered: 3/25/26
Referred: Finance

Sponsor(s): REPRESENTATIVES GALVIN, Mina, Himschoot, Gray, Fields
A BILL

FOR AN ACT ENTITLED

"An Act establishing taxes on the income of individuals, partners, shareholders in S 1
corporations, trusts, and estates; repealing tax credits applied against the tax on 2
individuals under the Alaska Net Income Tax Act; and providing for an effective date." 3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 4
* Section 1. AS 43.05.045(a) is amended to read: 5
(a) Except as provided in AS 43.22.075(h), unless [UNLESS] an exemption 6
is granted under (b) of this section, a taxpayer required to submit a return or report for 7
a tax levied under this title or for any other tax administered by the department shall 8
submit the return or report electronically in a format prescribed by the department. 9
Failure to comply with this section may result in a civil penalty under 10
AS 43.05.220(f). If a law under this title requires a report or return or a portion of a 11
report or return to be in writing, an electronically filed report or return satisfies this 12
section. A taxpayer shall submit attachments to a report or return required under this 13
title electronically. 14
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* Sec. 2. AS 43 is amended by adding a new chapter to read: 1
Chapter 22. Individual Income Taxes. 2
Sec. 43.22.010. Income tax on individuals. (a) Each calendar year or fraction 3
of a calendar year, a tax is imposed on the income of a 4
(1) resident individual, trust, or estate; 5
(2) nonresident individual, trust, or estate that is derived from or 6
connected with a source in the state. 7
(b) The tax under this section is four percent of taxable income over $150,000 8
for an individual who files a separate federal income tax return or four percent of 9
taxable income over $300,000 for individuals who file a joint federal income tax 10
return. 11
(c) Two individuals who file a joint federal income tax return when both or 12
one of whom is not a resident may elect to determine the tax imposed by this section 13
either 14
(1) individually; or 15
(2) jointly as if both individuals were residents; the income of the 16
individuals filing jointly under this paragraph is not subject to the calculation under 17
AS 43.22.015. 18
Sec. 43.22.012. Annual education tax. In addition to the tax under 19
AS 43.22.010, each individual who has wages, net earnings from self-employment, or 20
combined wages and net earnings from self-employment in the state shall pay a tax of 21
$150 each year. In this section, "net earnings from self-employment" has the meaning 22
given in 26 U.S.C. 1402. 23
Sec. 43.22.015. Calculation of tax on a nonresident individual. (a) Except as 24
otherwise provided in (b) of this section, the tax on a nonresident individual is the 25
product of 26
(1) the tax determined under AS 43.22.010(b) on the nonresident 27
individual's taxable income computed as if the nonresident individual were a resident 28
individual; and 29
(2) a fraction, the 30
(A) numerator of which is the nonresident individual's income 31
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taxable under AS 43.22.045; and 1
(B) denominator of which is the nonresident individual's 2
taxable income computed as if the nonresident individual were a resident 3
individual. 4
(b) If a nonresident individual's taxable income computed under (a)(2)(B) of 5
this section is less than the nonresident individual's income taxable under (a)(2)(A) of 6
this section, the tax imposed by AS 43.22.010 is on the nonresident individual's 7
taxable income as computed under AS 43.22.045. 8
Sec. 43.22.020. Income tax on trusts and estates. (a) A tax is imposed for 9
each taxable year or portion of a taxable year on the taxable income of a resident or 10
nonresident trust or estate. The tax under this section for a trust or estate is four 11
percent of taxable income over $150,000. 12
(b) In this section, the taxable income of a nonresident trust or estate is the 13
income of the trust or estate that is derived from or connected with a source in the 14
state. 15
(c) A trust is not subject to tax under this chapter if 16
(1) all of the trustees of the trust are nonresidents; 17
(2) the entire corpus of the trust, including real, tangible, and 18
intangible property, is located outside the state; and 19
(3) no income or gains of the trust are derived from or connected with 20
a source in the state. 21
(d) For purposes of (c)(1) of this section, a trustee that is a nonresident 22
banking corporation at the time the banking corporation becomes a trustee is a 23
nonresident trustee even if the banking corporation later becomes a resident trustee 24
because it is acquired by or becomes an office or branch of a resident trustee. 25
(e) A trust that is exempt from federal income tax because of its purpose or 26
activities is not subject to tax under this chapter. 27
(f) A special needs trust or other trust established to provide solely for the 28
housing, living expenses, or medical care of a disabled beneficiary is not subject to tax 29
under this chapter. In this subsection, 30
(1) "disabled beneficiary" means an individual who has 31
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(A) a physical or mental impairment that substantially limits 1
one or more major life activities; or 2
(B) a condition that may require the use of a prosthesis, special 3
equipment for mobility, or a service animal; 4
(2) "special needs trust" has the meaning given in AS 13.36.215(b). 5
Sec. 43.22.022. Annual education tax on trusts. In addition to the tax under 6
AS 43.22.020, each resident or nonresident trust or estate shall pay an annual tax of 7
$150. 8
Sec. 43.22.025. Credit for taxes imposed by other jurisdictions. (a) A 9
resident individual, trust, or estate or part-year resident individual, trust, or estate is 10
allowed a credit against the taxes due under this chapter for an income tax that was 11
imposed on the resident or part-year resident for the taxable year by another state or 12
the political subdivision of another state on income derived from or connected with 13
that state or political subdivision. 14
(b) A credit allowed under (a) of this section 15
(1) for a resident individual, trust, or estate may not exceed the 16
individual's, trust's, or estate's taxes due under this chapter before credits are applied, 17
multiplied by a fraction, the numerator of which is the portion of the individual's, 18
trust's, or estate's taxable income that is derived from or connected with a source in 19
another state or the political subdivision of another state and the denominator of which 20
is the resident individual's, trust's, or estate's taxable income; 21
(2) for a part-year resident individual, trust, or estate may not exceed 22
the individual's, trust's, or estate's tax due for the period of state residency before 23
credits are applied, multiplied by a fraction, the numerator of which is the individual's, 24
trust's, or estate's taxable income derived from or connected with a source in another 25
state or the political subdivision of another state during the period of state residency 26
and the denominator of which is the part-year resident individual's, trust's, or estate's 27
taxable income during the period of state residency; 28
(3) may not reduce the taxes due under this chapter to less than the 29
taxes that would have been due if the income derived from or connected with a source 30
in another state or the political subdivision of another state and subject to taxation by 31
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the other state or political subdivision had been excluded from the resident or part-year 1
resident individual's, trust's, or estate's taxable income during the calculation of taxes 2
under this chapter before the application of credits. 3
(c) If the tax administration of another state or a political subdivision of 4
another state determines that a taxpayer has overpaid tax, affecting the computation of 5
the credit allowed under this section for any taxable year, the taxpayer shall file an 6
amended return with the department not later than 90 days after the final determination 7
by the state or political subdivision that the tax was overpaid. The department may 8
assess a taxpayer additional tax, proportional to the amount overpaid in the other state 9
or political subdivision. 10
(d) A taxpayer is not allowed a credit under this section for taxes paid to 11
another jurisdiction if the taxpayer claims a credit against the income tax imposed by 12
the other jurisdiction for the tax payable under this chapter. 13
(e) Income tax imposed on a partner or the shareholder of an S corporation on 14
the income of the partnership or S corporation, including tax paid by the partnership or 15
S corporation to satisfy the tax liability of the partner or shareholder, may be included 16
in the calculation of a credit under this section. Tax imposed on the partnership or S 17
corporation that is the direct liability of the partnership or S corporation and not that of 18
the partner or shareholder may not be included in the calculation of a credit under this 19
section. 20
Sec. 43.22.030. Taxable income; general rule. (a) In this chapter, taxable 21
income is the taxpayer's federal adjusted gross income for the taxable year 22
(1) plus, if not already included in federal adjusted gross income, 23
(A) interest on obligations of another state, a political 24
subdivision of another state, the public instrumentality of another state, or the 25
local authority of another state; 26
(B) a loss on the sale or exchange of an obligation issued by or 27
on behalf of 28
(i) the state; 29
(ii) a municipality of the state; or 30
(iii) a public instrumentality, public authority, or public 31
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corporation created under state law; 1
(C) a loss from the sale or exchange of shares in a unit 2
investment trust if the loss is attributable to an obligation issued by or on 3
behalf of 4
(i) the state; 5
(ii) a municipality of the state; or 6
(iii) a public instrumentality, public authority, or public 7
corporation created under state law; 8
(D) interest or dividends on obligations or securities issued by 9
the United States, or an authority, commission, or instrumentality of the United 10
States, that the Internal Revenue Code exempts from federal income tax; 11
(E) taxes under this chapter; 12
(F) a gain realized but not recognized under 26 U.S.C. 1031 13
(Internal Revenue Code); 14
(G) a deduction allowed in the determination of federal 15
adjusted gross income that is directly or indirectly related to income that is not 16
taxable under this chapter; and 17
(H) income of an incomplete gift nongrantor trust to which a 18
taxpayer transferred property, less deductions of the trust, if 19
(i) the income and deductions of the trust would be 20
taken into account in computing the taxpayer's federal taxable income 21
if the trust in its entirety was treated as a grantor trust under the Internal 22
Revenue Code; 23
(ii) the trust is a resident trust; 24
(iii) the trust does not qualify as a grantor trust under 26 25
U.S.C. 671 - 679 (Internal Revenue Code); and 26
(iv) the grantor's transfer of assets to the trust is treated 27
as an incomplete gift under 26 U.S.C. 2511 (Internal Revenue Code); 28
(2) minus, if included in federal adjusted gross income, 29
(A) interest income or a dividend from an obligation that is 30
exempt from taxation by a state under federal law; 31
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(B) a refund or credit for the overpayment of an income tax; 1
(C) an ordinary and necessary expense, including an interest 2
expense, paid or incurred during the taxable year, that is directly or indirectly 3
related to income exempt under the Internal Revenue Code but taxable by the 4
state; 5
(D) a gain recognized under 26 U.S.C. 1031 (Internal Revenue 6
Code) that was included in federal adjusted gross income under (1) of this 7
subsection; 8
(E) income exempt under 4 U.S.C. 114; 9
(F) compensation prohibited from state taxation by 50 U.S.C. 10
3901 - 4043 (Servicemembers Civil Relief Act); 11
(G) a gain from the sale or exchange of an obligation issued by 12
or on behalf of 13
(i) the state; 14
(ii) a municipality of the state; or 15
(iii) a public instrumentality, public authority, or public 16
corporation created under state law; 17
(H) a permanent fund dividend received by the taxpayer or the 18
taxpayer's dependent under AS 43.23; 19
(I) the amount of state or municipal real property tax paid by an 20
individual on the individual's primary residence in the state. 21
(b) When calculating taxable income, a taxpayer 22
(1) may not carry back a net operating loss under 26 U.S.C. 23
172(b)(1)(A)(i) (Internal Revenue Code); 24
(2) may carry over a net operating loss under 26 U.S.C. 25
172(b)(1)(A)(ii) (Internal Revenue Code), except that a loss may not be carried over 26
for more than five years; for a taxpayer subject to AS 43.19 (Multistate Tax Compact), 27
the amount of a net operating loss allowed to be carried over is limited to the amount 28
apportioned to the state in the taxable year in which the loss was generated under 29
AS 43.19 (Multistate Tax Compact); 30
(3) shall include the modifications required by AS 43.20.144(b)(2), 31
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concerning intangible drilling and development costs, AS 43.20.144(b)(3), concerning 1
percentage depletion, and AS 43.20.144(b)(4), concerning depreciation. 2
Sec. 43.22.035. Taxable income from partnerships and S corporations. (a) 3
A partner or shareholder shall make an adjustment described in AS 43.22.030 to 4
income or a gain, loss, or deduction from a partnership or S corporation in proportion 5
to a partner's distributive share of a partnership or a shareholder's pro rata share of an 6
S corporation. If a partner's distributive share or a shareholder's pro rata share of an 7
adjustment is not required to be accounted for separately for federal income tax 8
purposes, the partner's or shareholder's share of the adjustment must be determined in 9
proportion to the partner's or shareholder's share of partnership or S corporation 10
income or losses for federal income tax purposes. 11
(b) In determining taxable income, a partner or shareholder shall treat income 12
or a gain, loss, or deduction from a partnership or S corporation as if it has the same 13
character as it does for federal income tax purposes. If income or a gain, loss, or 14
deduction from a partnership or S corporation is not accounted for separately for 15
federal income tax purposes, a partner or shareholder shall treat the income, gain, loss, 16
or deduction as if it were realized directly from the source from which it was realized 17
by the partnership or S corporation or incurred in the same manner it was incurred by 18
the partnership or S corporation. 19
(c) If the principal purpose of a special allocation of partnership income or a 20
gain, loss, or deduction is the evasion of tax under this chapter, the partner's 21
distributive share is determined as if the partnership agreement did not have the 22
special allocation. In this subsection, "special allocation" means an allocation of the 23
distributive share of partnership income or a gain, loss, or deduction made under the 24
partnership agreement to a partner in a proportion different than the partner's 25
partnership interest. 26
Sec. 43.22.040. Taxable income of an estate, trust, or beneficiary. (a) The 27
taxable income of an estate or trust is determined as if the estate or trust were an 28
individual and is subject to adjustments under AS 43.22.030 and reduction under 26 29
U.S.C. 661 (Internal Revenue Code). The department may establish in regulation the 30
method for determining the taxable income of an estate or trust, including the manner 31
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in which the adjustments under AS 43.22.030 will be allocated between the estate's or 1
trust's taxable share and a beneficiary's distributive share. Unless otherwise provided 2
by the department in regulation, an allocation must be made in proportion to the 3
estate's or trust's taxable share or the beneficiary's distributive share of the trust or 4
estate for federal income tax purposes. 5
(b) If the principal purpose of a provision of an instrument directing the 6
distribution of income or a gain, loss, or deduction of an estate or trust is the evasion 7
of tax under this chapter, the taxable income of the estate, trust, or beneficiary shall be 8
determined as if the instrument did not contain the provision. 9
Sec. 43.22.045. Nonresident individuals; income derived from or 10
connected with a source in the state. (a) The taxable income of a nonresident 11
individual is the nonresident individual's income derived from or connected with a 12
source in the state, as adjusted under AS 43.22.030. The taxable income of a 13
nonresident individual includes 14
(1) a partner's distributive share of income or a gain, loss, or deduction 15
of the partnership, as determined under AS 43.22.050; 16
(2) a shareholder's pro rata share of an S corporation's income or loss, 17
increased by the reductions for taxes described in 26 U.S.C. 1366(f)(2) and (3) 18
(Internal Revenue Code), as determined under AS 43.22.050; 19
(3) income or loss of a business conducted by a nonresident individual, 20
nonresident estate, or nonresident trust, other than income or loss from a partnership or 21
S corporation, as determined under AS 43.22.050; 22
(4) estate or trust income or a gain, loss, or deduction of the estate or 23
trust, as determined under AS 43.22.055; 24
(5) income or a gain, loss, or deduction from the sale or assignment of 25
a beneficial interest, or other disposition of an interest in tangible personal property in 26
the state, or rental income or loss from the use of tangible personal property in the 27
state; if the income, gain, loss, or deduction is from tangible personal property used or 28
employed both in and outside the state, the amount included in taxable income is 29
determined by multiplying the income, gain, loss, or deduction by a fraction, the 30
numerator of which is the number of days during which the property was used or 31
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employed to earn, accrue, or incur the income, gain, loss, or deduction in the state and 1
the denominator of which is the total number of days during the taxable year that the 2
property was used or employed to earn, accrue, or incur the income, gain, loss, or 3
deduction; 4
(6) income or a gain, loss, or deduction from the sale, assignment, or 5
other disposition of an interest in real property in the state, or rental income or loss 6
from the use of real property in the state, including the percentage of ordinary and 7
capital gains received from a real estate investment trust, as defined in 26 U.S.C. 856 8
(Internal Revenue Code), that is attributable to rents from or sale or other disposition 9
of real property located in the state; in this paragraph, income or a gain, loss, or 10
deduction from the sale, assignment of a beneficial interest, or other disposition of real 11
property in the state includes income or a gain, loss, or deduction derived from the sale 12
or assignment of a beneficial interest in a partnership, S corporation, nonpublicly 13
traded C corporation with 100 or fewer shareholders, estate, or trust, if the entity owns 14
real property in the state that has a fair market value equal to or exceeding 50 percent 15
of all assets of the entity on the date of sale, assignment, or other disposition of the 16
taxpayer's interest in the entity; for purposes of this paragraph, 17
(A) only assets owned for at least two years before the date of 18
the sale, assignment, or other disposition of an interest in the entity shall be 19
used to determine the fair market value of all of the assets of the entity on the 20
date of sale, assignment, or other disposition; and 21
(B) the amount of income or a gain, loss, or deduction derived 22
from or connected with a source in the state from the sale, assignment, or other 23
disposition of an interest in an entity that is subject to the provisions of this 24
paragraph is the amount recognized for federal income tax purposes related to 25
the sale, assignment, or disposition, multiplied by a fraction, the numerator of 26
which is the fair market value of the real property located in the state on the 27
date of sale, assignment, or disposition and the denominator of which is the fair 28
market value of all of the assets of the entity on the date of the sale, 29
assignment, or disposition; 30
(7) compensation, salary, or wages for personal services rendered or 31
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performed in the state that are derived from a business, trade, profession, occupation, 1
or employment carried on in the state; for purposes of this paragraph, personal 2
services 3
(A) except as otherwise provided in (B) of this paragraph, 4
include services performed 5
(i) in connection with presenting or receiving 6
employment-related training or education in the state; 7
(ii) in connection with a site inspection, review, 8
analysis, or management or any other supervision of a facility located 9
in the state; 10
(iii) in connection with research and development at a 11
facility located in the state or in connection with the installation of new 12
or upgraded equipment or systems at that facility; 13
(iv) as part of a project team working on the attraction 14
or implementation of new investment in a facility located or planned to 15
be located in the state; 16
(v) in connection with fishing, farming, or agriculture in 17
the state; or 18
(vi) for the federal government; 19
(B) do not include services that are casual, isolated, 20
inconsequential, or ancillary to out-of-state services; 21
(8) income derived from a business, trade, profession, occupation, or 22
employment carried on in the state, including income 23
(A) received under a covenant not to compete, a severance 24
agreement, a termination agreement, or unemployment compensation 25
insurance attributable to a business, trade, profession, occupation, or 26
employment previously carried on in the state, regardless of when received; 27
(B) derived from a business, trade, profession, occupation, or 28
employment carried on in the state by an individual who maintains or operates 29
an office, shop, store, warehouse, boat, plane, factory, agency, or other place 30
where the individual's affairs are systematically and regularly carried on, 31
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regardless of other transactions carried on outside the state; this subparagraph 1
does not include income from an activity of an individual whose presence in 2
the state is casual, isolated, inconsequential, or ancillary to out-of-state 3
activities, except that, if a business, trade, profession, occupation, or 4
employment is carried on partly in and partly outside the state, other than for 5
the rendering of purely personal services by the individual, the taxable income 6
derived from or connected with a source in the state is determined under 7
AS 43.19 (Multistate Tax Compact) and AS 43.22.030; 8
(9) income from the management or investment function or activities 9
conducted in the state from intangible property; 10
(10) dividends, interest, payments received under an annuity, gains, or 11
other intangible income received from, or attributable to, intangible personal property, 12
including stock, bonds, notes, bank deposits, or annuities, if the intangible personal 13
property is employed in a business, trade, profession, occupation, or employment 14
carried on in the state; 15
(11) a gain derived from a statutory stock option, restricted stock, 16
nonstatutory stock option, or stock appreciation right by a nonresident individual who, 17
at the time the gain is received, performs services in the state for or is employed in the 18
state by the corporation granting the option, stock, or right, as determined in 19
regulations adopted by the department; 20
(12) income from nonqualified deferred compensation plans 21
attributable to services performed in the state, including compensation included in 22
federal gross income under 26 U.S.C. 457A (Internal Revenue Code); 23
(13) proceeds from a gambling activity conducted in the state or lottery 24
tickets purchased in the state, including payments received from a third party for the 25
transfer of the rights to future proceeds related to a gambling activity in the state or 26
lottery tickets purchased in the state; 27
(14) for an S corporation that terminates its taxable status in the state 28
during the tax year, income or a gain recognized on the receipt of payments from an 29
installment sale contract entered into at the time the S corporation was subject to tax in 30
the state, allocated in a manner consistent with the applicable methods and rules under 31
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this chapter; 1
(15) royalties or other compensation received for the use of a patent, 2
copyright, secret process or formula, good will, mark, trade brand, franchise, or other 3
property having a taxable or business situs in the state; 4
(16) royalties or other compensation received for the use of a patent if 5
the patent is employed in production, fabrication, manufacturing, or other process in 6
the state; 7
(17) income or a gain from the disposition of an asset if the 8
acquisition, management, or disposition of the asset constitutes an integral part of the 9
nonresident individual's regular trade or business operation; 10
(18) income from the transmission, broadcast, distribution, or 11
dissemination of a service directly or indirectly attributable to the performance in the 12
state of an athlete, entertainer, singer, musician, dancer, comedian, magician, 13
performing artist, actor, actress, or similar person, including syndication fees. 14
(b) A deduction included in taxable income that results from a capital loss, 15
passive activity loss, or net operating loss must be based solely on income or a gain, 16
loss, or deduction derived from or connected with a source in the state. A nonresident 17
individual shall treat a deduction under this subsection in the same manner as the 18
corresponding federal deduction, unless the department requires otherwise in 19
regulation. 20
Sec. 43.22.050. Business conducted by a nonresident individual, trust, or 21
estate; income derived from or connected with a source in the state. (a) The 22
department shall adopt regulations governing the amount of income or the amount of a 23
gain, loss, or deduction from a business conducted by a nonresident individual, trust, 24
or estate that is derived from or connected with a source in the state for purposes of 25
determining taxable income. Regulations adopted under this subsection must be 26
consistent with AS 43.19 (Multistate Tax Compact) and AS 43.22.045 and include 27
adjustments under AS 43.22.030. 28
(b) The department shall adopt regulations governing the amount of income or 29
the amount of a gain, loss, or deduction that is derived from or connected with a 30
source in the state and is included in a nonresident 31
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(1) partner's distributive share for purposes of taxation under this 1
chapter; 2
(2) shareholder's pro-rata share of an S corporation for purposes of 3
taxation under this chapter. 4
(c) The department may by regulation require a taxpayer to allocate rather 5
than apportion income or a gain, loss, or deduction under this section. 6
Sec. 43.22.055. Nonresident trust, estate, or beneficiary; income derived 7
from or connected with a source in the state. (a) The department shall adopt 8
regulations governing whether income or a gain, loss, or deduction of a nonresident 9
estate or nonresident trust is included in taxable income derived from or connected 10
with a source in the state. Regulations adopted under this subsection must be 11
consistent with the remainder of this section and AS 43.22.045. 12
(b) A nonresident beneficiary shall include in taxable income derived from or 13
connected with a source in the state a distribution from an estate or trust as if the 14
nonresident beneficiary earned or incurred the income or a gain, loss, or deduction 15
attributable to the distribution directly from the source. For purposes of this 16
subsection, the department may establish one or more methods for a nonresident 17
beneficiary to determine whether income or a gain, loss, or deduction is attributable to 18
a distribution. The department shall consistently apply a method from year to year and 19
apply the same method to other nonresident beneficiaries of the same trust or estate. 20
Nothing in this subsection requires the department to give effect to a provision of an 21
instrument creating an estate or trust if the department reasonably believes that the 22
principal purpose of the provision is to evade the tax imposed under this chapter. 23
Sec. 43.22.060. Part-year resident individual, trust, or estate; residency 24
income; income derived from or connected with a source in the state. (a) Except as 25
otherwise provided in this section, the taxable income of a part-year resident 26
individual, trust, or estate is the sum of 27
(1) the taxable income of the part-year resident individual, trust, or 28
estate during the period of residency; and 29
(2) the taxable income derived from or connected with a source in the 30
state for the period of nonresidency of the individual, trust, or estate. 31
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(b) The department shall adopt regulations to determine the taxable income of 1
a part-year resident taxpayer who is granted a statutory stock option, restricted stock, 2
nonstatutory stock option, or a stock appreciation right and who, during the grant 3
period, performs services in the state for, or is employed in the state by, the 4
corporation granting the option, stock, or right. 5
Sec. 43.22.065. Personal service corporations and S corporations formed 6
or used to evade tax. (a) The department may allocate all income, deductions, credits, 7
exclusions, and other allowances between a personal service corporation or S 8
corporation and its employee-owners if the 9
(1) personal service corporation or S corporation performs 10
substantially all of its services for or on behalf of another corporation, partnership, or 11
other entity and the effect is the evasion of the tax under this chapter; and 12
(2) allocation is necessary to reflect the source and amount of the 13
income, regardless of whether the corporation is otherwise taxable. 14
(b) For purposes of this section, evasion of the tax under this chapter occurs 15
when a personal service corporation or S corporation is used to 16
(1) reduce the taxable income of a resident or the taxable income of a 17
nonresident derived from or connected with a source in the state; or 18
(2) secure the benefit of an expense, deduction, credit, exclusion, or 19
other allowance for any employee-owner that would not otherwise apply under this 20
chapter. 21
(c) The constructive ownership of stock rules under 26 U.S.C. 318 (Internal 22
Revenue Code) apply to this section, except that "5 percent" shall be substituted for 23
"50 percent" in 26 U.S.C. 318(a)(2)(C) (Internal Revenue Code). 24
(d) In this section, all persons specified in 26 U.S.C. 267(b) (Internal Revenue 25
Code) shall be treated as one entity. 26
(e) In this section, 27
(1) "employee-owner" means any employee who owns, on any day 28
during the taxable year, more than 10 percent of the outstanding stock of a personal 29
service corporation or S corporation; 30
(2) "personal service corporation" means a corporation whose principal 31
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activity is the performance of personal services that are substantially performed by the 1
employee-owners of the corporation. 2
Sec. 43.22.070. Determination of taxable year and method of accounting. 3
(a) For purposes of the taxes imposed under this chapter, a taxpayer's 4
(1) taxable year is the same as the taxpayer's taxable year for federal 5
income tax purposes; and 6
(2) method of accounting is the same as the taxpayer's method of 7
accounting for federal income tax purposes. 8
(b) The department shall adopt regulations to determine the taxable income of 9
a taxpayer whose method of accounting changes during a taxable year or between 10
taxable years. 11
Sec. 43.22.075. Returns and payment of taxes. (a) A taxpayer shall file with 12
the department a return setting out 13
(1) the amount of tax due under this chapter; and 14
(2) other information necessary to carry out this chapter, as required by 15
the department in regulation. 16
(b) A person required to file a return under this chapter shall file the return on 17
a form or in a format prescribed by the department. The return is due to the department 18
at the same time and in the same manner, including extensions, as the taxpayer's 19
federal income tax return to the United States Internal Revenue Service. A return filed 20
under this chapter must be made under oath and on penalty of perjury. 21
(c) The total amount of tax imposed by this chapter is due and payable to the 22
department at the same time and in the same manner as the federal individual income 23
tax payable to the United States Internal Revenue Service. 24
(d) A taxpayer, upon request by the department, shall furnish to the 25
department a true and correct copy of a return that the taxpayer has filed with the 26
United States Internal Revenue Service. 27
(e) A taxpayer shall notify the department in writing of an alteration in, or 28
modification of, the taxpayer's federal income tax return and of a recomputation of tax 29
or determination of deficiency, whether with or without assessment. A full statement 30
of the facts must accompany the notice. A taxpayer shall file the notice not later than 31
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60 days after the final determination of the alteration, modification, recomputation, or 1
deficiency and shall pay any additional tax due under this chapter at that time. In this 2
subsection, "final determination" means the time that an amended federal return is 3
filed, a notice of deficiency or an assessment is mailed to the taxpayer by the Internal 4
Revenue Service, and the taxpayer has exhausted rights of appeal under federal law. 5
(f) The department may credit or refund overpayments of taxes, taxes 6
erroneously or illegally assessed or collected, penalties collected without authority, 7
and taxes that are found unjustly assessed or excessive in amount, or otherwise 8
wrongfully collected. The department shall, in regulation, set limitations, specify the 9
manner in which claims for credits or refunds are made, and give notice of allowance 10
or disallowance. When a refund is allowed to a taxpayer, the refund may be paid out 11
of the general fund on a warrant issued under a voucher approved by the department. 12
(g) A partnership, S corporation, estate, or trust shall provide to its partners, 13
beneficiaries, or shareholders, and to the department, all information necessary for its 14
partners, beneficiaries, and shareholders to comply with this chapter. 15
(h) An individual is not required to file a return under this section 16
electronically, but a person employed to prepare and file a tax return under this section 17
for an individual shall file the return for that individual electronically. 18
(i) The department shall adopt regulations that set out requirements for a 19
spouse, upon request, to be partially or fully relieved from joint and several liability 20
resulting from the joint filing of a tax return. 21
Sec. 43.22.080. Tax withholding on wages of individuals. (a) Every 22
employer making payment of wages or salaries 23
(1) shall, except as provided in (c) of this section, deduct and withhold 24
an amount of tax computed in a manner to approximate the amount of tax due on those 25
wages and salaries under this chapter for that taxable year; 26
(2) shall remit the tax withheld to the department accompanied by a 27
return on a form prescribed by the department at the times required by the department 28
by regulation; 29
(3) is liable for the payment of the tax required to be deducted and 30
withheld under this section but is not liable to any individual for the amount of the 31
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payment; and 1
(4) shall furnish to an employee on or before January 31 of the 2
succeeding year, or within 30 days after a request by the employee after an employee's 3
or individual's termination if the 30-day period ends before January 31, a written 4
statement on a form prescribed by the department showing 5
(A) the name and taxpayer identification number of the 6
employer; 7
(B) the name and social security number of the employee; 8
(C) the total amount of wages and salary for the taxable year; 9
and 10
(D) the total amount deducted and withheld as tax under this 11
chapter for the taxable year. 12
(b) The department shall publish the rate of withholding required by this 13
section. 14
(c) An employer shall deduct and withhold the tax due under AS 43.22.012 15
from an employee's wages subject to withholding from the first regular payroll of the 16
calendar year. If the employee's first payroll is insufficient to cover the estimated tax 17
due, the employer shall continue to deduct and withhold from subsequent payrolls 18
until the tax due under this subsection is fully withheld. A self-employed individual 19
shall remit to the department the tax due under this subsection in accordance with 20
regulations adopted by the department. 21
Sec. 43.22.085. Withholding on nonresident partners; composite returns. 22
(a) Unless otherwise provided by this section, a partnership that is required to file an 23
annual information return under subchapter K of the Internal Revenue Code (26 24
U.S.C. 701 - 761) shall file a partnership return as prescribed by the department and 25
shall report any income, gains, losses, or deductions that are derived from or 26
connected with a source in the state, as determined under this chapter. 27
(b) A partnership that is required to file a return under (a) of this section shall 28
withhold tax from a nonresident partner's distributive share of the partnership's income 29
or a gain, loss, or deduction derived from or connected with a source in the state at the 30
highest marginal tax rate applicable under this chapter to individuals for the taxable 31
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year. 1
(c) Withholding under this section is not required by a partnership that 2
(1) is a publicly traded partnership, as defined in 26 U.S.C. 7704(b) 3
(Internal Revenue Code); and 4
(2) files with the department an annual information return reporting the 5
name, address, taxpayer identification number, and other information requested by the 6
department concerning each unitholder whose distributive share of partnership 7
income, regardless of source, is more than $1,000. 8
(d) The department shall adopt regulations that allow a partnership subject to 9
withholding under this section to file a composite return. 10
Sec. 43.22.090. Permanent fund tax payment. The department shall adopt 11
regulations establishing procedures for an individual eligible for a dividend under 12
AS 43.23.005 to direct the department to hold all or a part of the amount of the 13
dividend to pay the tax due under this chapter. The amount held under this section 14
may not exceed the dividend amount after contributions, garnishments, levies, fees, 15
attachments, assignments, or other reductions or donations allowed under AS 43.23. 16
The department shall apply the amount held under this section to tax owed in the 17
taxable year in which the taxpayer applies for the dividend. The department shall 18
refund the amount of the dividend not applied against taxes under this section to the 19
individual who appears on the application for the dividend. 20
Sec. 43.22.095. Administration. (a) The department shall adopt necessary 21
regulations and forms to implement and interpret this chapter, including regulations 22
and forms for the electronic filing and payment of taxes due under this chapter. 23
Federal regulations issued under the Internal Revenue Code shall be considered 24
persuasive authority in interpreting any provision of the Internal Revenue Code on 25
which the taxes imposed by this chapter relies, whether or not a federal regulation has 26
been specifically incorporated into a department regulation, unless the federal 27
regulation 28
(1) conflicts with a provision of this chapter; 29
(2) conflicts with a regulation adopted by the department; or 30
(3) is inconsistent with the purposes of this chapter. 31
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(b) A transaction or payment between related persons must have economic 1
substance, must serve a bona fide business purpose, and may not have occurred for the 2
primary purpose of lowering the tax due under this chapter. The department, after 3
review or audit of a taxpayer's return, may determine whether there is sufficient 4
documentation or whether a transaction or payment meets the requirements of this 5
subsection. If the department determines that the documentation, transaction, or 6
payment fails to meet the requirements of this subsection, the department may adjust 7
the amount of a payment or transaction, disregard the payment or transaction, or make 8
another adjustment necessary for determining the tax under this chapter. If a payment 9
in an amount greater than $500,000 is made or required to be made from one person to 10
a related person, the related persons shall submit documentation substantiating that the 11
amount of the payment is consistent with 26 U.S.C. 482 (Internal Revenue Code). 12
Payments subject to this subsection include payments for interest, royalties, 13
management fees, services, inventory, tangible personal property, intangible property, 14
and real property. 15
(c) A tax deficiency assessed by the department under this section is assumed 16
to be correct. A taxpayer has the burden of proving that the tax deficiency is 17
erroneous. 18
(d) The tax collected by the department under AS 43.22.010 and 43.22.020 19
shall be deposited into the general fund and accounted for separately. 20
Sec. 43.22.100. References to Internal Revenue Code. (a) Sections 26 U.S.C. 21
6654, 6662, 6664, 6694, 6695, 6700 - 6702, 6707, 6713, 7201, 7202, 7206, 7207, 22
7216, 7407, and 7408 (Internal Revenue Code), as those sections read on January 1, 23
2026, are incorporated by reference as a part of this chapter and, if conflicting, 24
supersede provisions in AS 43.05 and AS 43.10. 25
(b) When provisions of the Internal Revenue Code incorporated by reference 26
under (a) of this section refer to rules and regulations adopted by the United States 27
Commissioner of Internal Revenue, they are regarded as regulations adopted by the 28
department under this chapter, unless the department adopts specific regulations in 29
their place. 30
Sec. 43.22.105. Information released to a banking institution. 31
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Notwithstanding AS 43.05.230, information on an individual tax return filed under 1
this chapter may be released to a banking institution to verify the direct deposit of a 2
tax refund or correct an error in that deposit. 3
Sec. 43.22.110. Early education and technical and vocational education 4
fund. (a) The early education and technical and vocational education fund is 5
established in the state treasury. The department shall separately account for the taxes 6
collected under AS 43.22.012 and 43.22.022 and deposit the taxes into the early 7
education and technical and vocational education fund. 8
(b) The legislature may use the annual estimated balance in the fund to make 9
appropriations for 10
(1) kindergarten through grade 12 education and early learning 11
programs, including the parents as teachers program established under AS 14.03.420; 12
and 13
(2) technical and vocational education programs. 14
(c) Nothing in this section creates a dedicated fund. 15
Sec. 43.22.150. Definitions. In this chapter, 16
(1) "domicile" means an individual's true, fixed, principal, and 17
permanent home, to which the individual intends to return even if currently living 18
elsewhere; if an individual has two or more homes, "domicile" means the home that 19
the individual regards and uses as the individual's more permanent home; once 20
established, a domicile remains the individual's domicile until the individual 21
demonstrates a real change of intent and moves to a new domicile; indications of 22
domicile include the 23
(A) location of the place of employment of the individual; 24
(B) location of real property owned by the individual; 25
(C) registration and physical location of motor vehicles, planes, 26
boats, and snow machines owned by the individual; 27
(D) location of a bank account or active checking account of 28
the individual; 29
(E) address where the individual receives mail; 30
(F) location of a school where the individual or a member of 31
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the individual's immediate family 1
(i) attends; or 2
(ii) receives resident tuition; 3
(G) location of an organization of which the individual is a 4
member; 5
(H) location of a parent, child, grandchild, or great-grandchild; 6
(I) location of dental and medical personnel that provide 7
services to the individual on a regular or consistent basis; 8
(J) filing of a prior year tax return by the individual as a 9
resident or nonresident; 10
(K) location where an individual is registered to vote; 11
(L) location where an individual holds a resident fishing, 12
hunting, or trapping license; 13
(2) "employee" has the meaning given in 26 U.S.C. 3401; 14
(3) "employer" has the meaning given in 26 U.S.C. 3401; 15
(4) "federal adjusted gross income" has the meaning given to "adjusted 16
gross income" in 26 U.S.C. 62; 17
(5) "fiduciary" means a guardian, trustee, executor, administrator, 18
receiver, or conservator or a person, whether individual or corporate, acting in a 19
similar position of special confidence toward another; 20
(6) "head of household" means a single taxpayer, or married taxpayer 21
where both spouses file separate returns, with a qualified dependent living in the same 22
home for more than half the taxable year; 23
(7) "Internal Revenue Code" means the Internal Revenue Code (26 24
U.S.C. 1 et seq.), as amended; 25
(8) "irrevocable trust" means a trust or portion of a trust that is not 26
subject to a power to revest title in a person whose property constitutes the trust or a 27
portion of the trust; 28
(9) "nonresident estate" means an estate other than a resident estate or 29
part-year resident estate; 30
(10) "nonresident individual" means an individual who is not a resident 31
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of the state for any portion of the taxable year; 1
(11) "nonresident trust" means a trust other than a resident trust or 2
part-year resident trust; 3
(12) "partner" means a partner as defined in 26 U.S.C. 7701(a) 4
(Internal Revenue Code) and includes a member of a limited liability company or 5
similar entity that is treated as a partnership for federal income tax purposes; 6
(13) "partnership" means an entity as defined in 26 U.S.C. 7701(a) 7
(Internal Revenue Code) and includes a limited liability company and a similar entity 8
treated as a partnership for federal income tax purposes; 9
(14) "part-year resident estate" means an estate that is a resident of the 10
state for a portion of but not the entire taxable year; 11
(15) "part-year resident individual" means an individual who is a 12
resident of the state for a portion of but not the entire taxable year; 13
(16) "part-year resident trust" means a trust that is a resident of the 14
state for a portion of but not the entire taxable year; 15
(17) "related person" means a person that satisfies the definition of 16
"related persons" in 26 U.S.C. 144 or 147 or a person in a relationship as described in 17
26 U.S.C. 267(b) (Internal Revenue Code); 18
(18) "resident estate" means the estate of a 19
(A) decedent who at the time of death was a resident of the 20
state, regardless of the residence of the fiduciary or beneficiary, if the 21
disposition or administration of the estate is subject to state law; or 22
(B) person who, at the time of commencement of a bankruptcy 23
proceeding under Title 11 of the United States Code, was a resident of the 24
state; 25
(19) "resident individual" means an individual who 26
(A) receives a permanent fund dividend under AS 43.23.005; 27
(B) receives a tax benefit available only to an individual 28
domiciled in the state; or 29
(C) is domiciled in the state for the entire taxable year unless 30
the individual maintains a permanent place of abode outside the state and 31
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spends, in the aggregate, not more than 30 days during the taxable year in the 1
state; 2
(20) "resident trust" means a trust or a portion of a trust consisting of 3
property 4
(A) transferred by will of a decedent who at the time of death 5
was a resident of the state if the disposition or administration of the property is 6
subject to state law; or 7
(B) of a person who was a resident at the time the property was 8
transferred to the trust if, at the time of the transfer, the trust was 9
(i) an irrevocable trust; 10
(ii) a revocable trust and the trust has not become 11
irrevocable; or 12
(iii) a revocable trust and the trust later became 13
irrevocable at a time the person transferring property to the trust was a 14
resident; 15
(21) "revocable trust" means a trust or portion of a trust that is subject 16
to a power, exercisable immediately or at a future time, to revest title in a person 17
whose property constitutes the trust or portion of the trust; 18
(22) "S corporation" means a corporation that has elected to file a 19
federal income tax return under 26 U.S.C. 1361 - 1379 (Internal Revenue Code); 20
(23) "taxable income" means income taxable under this chapter; 21
(24) "taxable year" means the calendar year or a fiscal year ending 22
during the calendar year; 23
(25) "taxpayer" means a person subject to a tax imposed by this 24
chapter; 25
(26) "wages" has the meaning given in 26 U.S.C. 3401. 26
* Sec. 3. AS 43.23 is amended by adding a new section to read: 27
Sec. 43.23.092. Permanent fund dividend individual tax payment. In 28
accordance with AS 43.22.090, the department shall prepare the Alaska permanent 29
fund dividend application to allow an applicant to direct the department to hold all or 30
part of the amount of the individual's permanent fund dividend for application against 31
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the taxes imposed under AS 43.22. 1
* Sec. 4. AS 43.05.085; AS 43.20.012(b), and 43.20.013 are repealed January 1, 2027. 2
* Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 3
read: 4
APPLICABILITY. AS 43.22, added by sec. 2 of this Act, applies to income received 5
on or after the effective date of sec. 2 of this Act. 6
* Sec. 6. This Act takes effect January 1, 2027. 7