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Enrolled SB 113
LAWS OF ALASKA
2025
Source Chapter No.
SB 113 _______
AN ACT
Relating to the Multistate Tax C ompact; relating to apportionme nt of income to the state;
relating to highly digitized businesses subject to the Alaska N et Income Tax Act; and
providing for an effective date.
_______________
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:
THE ACT FOLLOWS ON PAGE 1
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AN ACT
Relating to the Multistate Tax C ompact; relating to apportionme nt of income to the state; 1
relating to highly digitized businesses subject to the Alaska N et Income Tax Act; and 2
providing for an effective date. 3
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* Section 1. AS 43.19.010 is amended to read: 5
Sec. 43.19.010. Compact. The Multistate Tax Compact is hereby enacted into 6
law and entered into with all jurisdictions legally joining in it, in the form substantially 7
as follows: 8
ARTICLE I. 9
PURPOSES. 10
The purposes of this compact are to: 11
1. Facilitate proper determination of state and local tax liabi lity of multistate 12
taxpayers, including the equitable apportionment of tax bases a nd settlement of 13
apportionment disputes. 14
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2. Promote uniformity or compatibility in significant component s of tax 1
systems. 2
3. Facilitate taxpayer convenience and compliance in the filing of tax returns 3
and in other phases of tax administration. 4
4. Avoid duplicative taxation. 5
ARTICLE II. 6
DEFINITIONS. 7
As used in this compact: 8
1. "State" means a state of the United States, the District of Columbia, the 9
Commonwealth of Puerto Rico, or any territory or possession of the United States. 10
2. "Subdivision" means any governmental unit or special district of a state. 11
3. "Taxpayer" means any corporation, partnership, firm, associa tion, 12
governmental unit or agency or person acting as a business enti ty in more than one 13
state. 14
4. "Income tax" means a tax imposed on or measured by net incom e including 15
any tax imposed on or measured by an amount arrived at by deduc ting expenses from 16
gross income, one or more forms of which expenses are not speci fically and directly 17
related to particular transactions. 18
5. "Capital stock tax" means a tax measured in any way by the c apital of a 19
corporation considered in its entirety. 20
6. "Gross receipts tax" means a tax, other than a sales tax, wh ich is imposed on 21
or measured by the gross volume of business, in terms of gross receipts or in other 22
terms, and in the determination of which no deduction is allowe d which would 23
constitute the tax an income tax. 24
7. "Sales tax" means a tax imposed with respect to the transfer f o r a 25
consideration of ownership, possession or custody of tangible personal property or the 26
rendering of services measured by the price of the tangible per sonal property 27
transferred or services rendered and which is required by state or local law to be 28
separately stated from the sales price by the seller, or which is customarily separately 29
stated from the sales price, but does not include a tax imposed exclusively on the sale 30
of a specifically identified commodity or article or class of commodities or articles. 31
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8. "Use tax" means a nonrecurring tax, other than a sales tax, which (a) is 1
imposed on or with respect to the exercise or enjoyment of any right or power over 2
tangible personal property incid ent to the ownership, possessio n or custody of that 3
property or the leasing of that property from another including any consumption, 4
keeping, retention, or other use of tangible personal property and (b) is complementary 5
to a sales tax. 6
9. "Tax" means an income tax, capital stock tax, gross receipts tax, sales tax, 7
use tax, and any other tax which has a multistate impact, excep t that the provisions of 8
Articles III, IV and V of this compact shall apply only to the taxes specifically 9
designated therein and the provisions of Article IX of this com pact shall apply only in 10
respect to determinations pursuant to Article IV. 11
ARTICLE III. 12
ELEMENTS OF INCOME TAX LAWS. 13
TAXPAYERS OPTION, STATE AND LOCAL TAXES. 14
1. Any taxpayer subject to an income tax whose income is subjec t to 15
apportionment and allocation for tax purposes pursuant to the l aws of a party state or 16
pursuant to the laws of subdivisions in two or more party state s may elect to apportion 17
and allocate the taxpayer's income in the manner provided by th e laws of such state or 18
by the laws of such states and subdivisions without reference t o this compact, or may 19
elect to apportion and allocate in accordance with Article IV. This election for any tax 20
year may be made in all party states or subdivisions thereof or in any one or more of 21
the party states or subdivisions thereof without reference to t he election made in the 22
others. For the purposes of this paragraph, taxes imposed by su bdivisions shall be 23
considered separately from stat e taxes and the apportionment an d allocation also may 24
be applied to the entire tax ba se. In no instance wherein Article IV is employed for all 25
subdivisions of a state may the sum of all apportionments and a llocations to 26
subdivisions within a state be greater than the apportionment and allocation that would 27
be assignable to that state if the apportionment or allocation w e r e b e i n g m a d e w i t h 28
respect to a state income tax. 29
TAXPAYER OPTION, SHORT FORM. 30
2. Each party state or any subdivision thereof which imposes an income tax 31
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shall provide by law that any taxpayer required to file a retur n, whose only activities 1
within the taxing jurisdiction consist of sales and do not include owning or renting real 2
estate or tangible personal pr operty, and whose dollar volume o f gross sales made 3
during the tax year within the state or subdivision, as the cas e may be, is not in excess 4
of $100,000 may elect to report a nd pay any tax due on the basi s of a percentage of 5
such volume, and shall adopt rates which shall produce a tax wh ich reasonably 6
approximates the tax otherwise due. The Multistate Tax Commissi on, not more than 7
once in five years, may adjust the $100,000 figure in order to reflect such changes as 8
may occur in the real value of the dollar, and such adjusted fi gure, upon adoption by 9
the commission, shall replace the $100,000 figure specifically provided herein. Each 10
party state and subdivision ther eof may make the same election available to taxpayers 11
additional to those specified in this paragraph. 12
COVERAGE. 13
3. Nothing in this Article relates to the reporting or payment of any tax other 14
than an income tax. 15
ARTICLE IV. 16
DIVISION OF INCOME. 17
1. As used in this Article, unless the context otherwise requires: 18
(a) "Apportionable income" means: 19
(i) all income that is apportionable under the Constitution of the 20
United States and is not allocated under the laws of this state, including: 21
(A) ["BUSINESS INCOME" MEANS] income arising from 22
transactions and activity in the regular course of the taxpayer ' s t r a d e o r 23
business; and 24
(B) [INCLUDES] income arising from tangible and intangible 25
property if the acqui sition, management, employment, development, or 26
[AND] disposition of the property is or was related to the operation 27
[CONSTITUTE INTEGRAL PARTS] of the taxpayer's [REGULAR] trade o r 28
business; and 29
(ii) any income that would be allocable to this state under th e 30
Constitution of the United States, but that is apportioned rath er than allocated 31
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pursuant to the laws of this state [OPERATIONS]. 1
(b) "Commercial domicile" means the principal place from which the trade or 2
business of the taxpayer is directed or managed. 3
(c) "Compensation" means wages, salaries, commissions and any other form 4
of remuneration paid to employees for personal services. 5
(d) "Financial organization" means any bank, trust company, sa vings bank, 6
industrial bank, land ba nk, safe deposit company, private banke r , s a v i n g s a n d l o a n 7
association, credit union, coope rative bank, small loan company , sales finance 8
company, investment company, or any type of insurance company. 9
(e) " Non-apportionable [NONBUSINESS] income" means all income other 10
than apportionable [BUSINESS] income. 11
(f) "Public utility" means any business entity (1) which owns or operates any 12
plant, equipment, property, franc hise, or license for the trans mission of 13
communications, transportation of goods or persons, except by p ipe line, or the 14
production, transmission, sale, delivery, or furnishing of elec tricity, water or steam; 15
and (2) whose rates of charges for goods or services have been established or 16
approved by a federal, state or local government or governmental agency. 17
(g) "sales" means all gross receipts of the taxpayer that are not allocated 18
under paragraphs of this Article , and that are received from transactions and 19
activity in the regular course of the taxpayer's trade or business; except that sales 20
of a taxpayer from hedging transactions and from the maturity, redemption, 21
exchange, loan, or other disposition of cash or securities, shall be excluded. 22
(h) "State" means any state of the United States, the District of Columbia, the 23
Commonwealth of Puerto Rico, an y territory or possession of the United States, and 24
any foreign country or political subdivision thereof. 25
(i) "This state" means the state in which the relevant tax ret urn is filed or, in 26
the case of application of this Article to the apportionment an d allocation of income 27
for local tax purposes, the subdi vision or local taxing district in which the relevant tax 28
return is filed. 29
2. Any taxpayer having income from business activity which is t axable both 30
within and outside this state, other than activity as a financi al organization or public 31
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utility or the rendering of purely personal services by an indi vidual, shall allocate and 1
apportion net income as provided in this Article. If a taxpayer h a s i n c o m e f r o m 2
business activity as a public utility but derives the greater p ercentage of income from 3
activities subject to this Article, the taxpayer may elect to a llocate and apportion the 4
taxpayer's entire net income as provided in this Article. 5
3. For purposes of allocation and apportionment of income under this Article, a 6
taxpayer is taxable in another state if (1) in that state the t axpayer is subject to a net 7
income tax, a franchise tax measured by net income, a franchise tax for the privilege 8
of doing business, or a corporate stock tax, or (2) that state has jurisdiction to subject 9
the taxpayer to a net income tax regardless of whether, in fact , the state does or does 10
not. 11
4. Rents and royalties from real or tangible personal property, capital gains, 12
interest, dividends or patent or copyright royalties, to the ex tent that they constitute 13
nonapportionable [NONBUSINESS] income, shall be allocated as provided in 14
paragraphs 5 through 8 of this Article. 15
5.(a) Net rents and royalties from real property located in thi s state are 16
allocable to this state. 17
(b) Net rents and royalties from tangible personal property are allocable to this 18
state: (1) if and to the extent that the property is utilized i n this state, or (2) in their 19
entirety if the taxpayer's commercial domicile is in this state and the taxpayer is not 20
organized under the laws of or taxable in the state in which the property is utilized. 21
(c) The extent of utilization of tangible personal property in a s t a t e i s 22
determined by multiplying the rents and royalties by a fraction , the numerator of 23
which is the number of days of physical location of the property in the state during the 24
rental or royalty period in the taxable year and the denominator of which is the number 25
of days of physical location of the property everywhere during all rental or royalty 26
periods in the taxable year. If the physical location of the pr operty during the rental or 27
royalty period is unknown or unascertainable by the taxpayer, t angible personal 28
property is utilized in the state in which the property was loc ated at the time the rental 29
or royalty payer obtained possession. 30
6.(a) Capital gains and losses from sales of real property loca ted in this state 31
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are allocable to this state. 1
(b) Capital gains and losses from sales of tangible personal p roperty are 2
allocable to this state if (1) the property had a situs in this state at the time of the sale, 3
or (2) the taxpayer's commercial domicile is in this state and the taxpayer is not 4
taxable in the state in which the property had a situs. 5
(c) Capital gains and losses fro m sales of intangible personal property are 6
allocable to this state if the taxpayer's commercial domicile is in this state. 7
7. Interest and dividends are allocable to this state if the ta xpayer's commercial 8
domicile is in this state. 9
8.(a) Patent and copyright royalties are allocable to this stat e: (1) if and to the 10
extent that the patent or copyright is utilized by the payer in this state, or (2) if and to 11
the extent that the patent or copyright is utilized by the paye r in a state in which the 12
taxpayer is not taxable and the taxpayer's commercial domicile is in this state. 13
(b) A patent is utilized in a state to the extent that it is employed in production, 14
fabrication, manufacturing, or ot her processing in the state or to the extent that a 15
patented product is produced in the state. If the basis of rece ipts from patent royalties 16
does not permit allocation to states or if the accounting procedures do not reflect states 17
of utilization, the patent is utili zed in the state in which th e taxpayer's commercial 18
domicile is located. 19
(c) A copyright is utilized in a state to the extent that prin ting or other 20
publication originates in the state. If the basis of receipts from copyright royalties does 21
not permit allocation to states or if the accounting procedures do not reflect states of 22
utilization, the copyright is utilized in the state in which th e taxpayer's commercial 23
domicile is located. 24
9. All apportionable [BUSINESS] income shall be apportioned to this state by 25
multiplying the income by a fraction, the numerator of which is the property factor 26
plus the payroll factor plus the sales factor, and the denominator of which is three. 27
10. The property factor is a fraction, the numerator of which i s the average 28
value of the taxpayer's real and tangible personal property owned or rented and used in 29
this state during the tax period and the denominator of which i s the average value of 30
all the taxpayer's real and tangible personal property owned or rented and used during 31
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the tax period. 1
11. Property owned by the taxpayer is valued at its original co st. Property 2
rented by the taxpayer is valu ed at eight times the net annual rental rate. Net annual 3
rental rate is the annual rental r ate paid by the taxpayer less any annual rental rate 4
received by the taxpayer from subrentals. 5
12. The average value of property shall be determined by averag ing the values 6
at the beginning and ending of the tax period but the tax admin istrator may require the 7
averaging of monthly values during the tax period if reasonably required to reflect 8
properly the average value of the taxpayer's property. 9
13. The payroll factor is a fraction, the numerator of which is the total amount 10
paid in this state during the tax period by the taxpayer for co mpensation and the 11
denominator of which is the total compensation paid everywhere during the tax period. 12
14. Compensation is paid in this state if: 13
(a) the individual's service is performed entirely within the state; 14
(b) the individual's service is performed both inside and outs ide the state, but 15
the service performed outside the state is incidental to the in dividual's service within 16
this state; or 17
(c) some of the service is performed in the state and (1) the base of operations 18
or, if there is no base of operations, the place from which the service is directed or 19
controlled is in the state, or (2) the base of operations or th e place from which the 20
service is directed or controlled is not in any state in which some part of the service is 21
performed, but the individual's residence is in this state. 22
15. The sales factor is a fracti on, the numerator of which is t he total sales of 23
the taxpayer in this state dur ing the tax period, and the denom inator of which is the 24
total sales of the taxpayer everywhere during the tax period. 25
16. Sales of tangible personal property are in this state if: 26
(a) the property is delivered o r shipped to a purchaser, other than the United 27
States Government, within this state regardless of the f.o.b. p oint or other conditions 28
of the sale; or 29
(b) the property is shipped from an office, store, warehouse, factory, or other 30
place of storage in this state and (1) the purchaser is the Uni ted States Government or 31
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(2) the taxpayer is not taxable in the state of the purchaser. 1
17.(a) Sales, other than sales described in Section 16 [ O F T A N G I B L E 2
PERSONAL PROPERTY], are in this state if the taxpayer's market for the sales is 3
in this state. The taxpayer's market for sales is in this state: 4
(1) in the case of sale, rental, lease, or license of real pro perty, if 5
and to the extent the property is located in this state; 6
(2) in the case of rental, lease, or license of tangible perso nal 7
property, if and to the extent the property is located in this state; 8
(3) in the case of sale of a service, if and to the extent the service is 9
delivered to a location in this state; and 10
(4) in the case of intangible property, 11
(i) that is rented, leased, or licensed, if and to the extent the 12
property is used in this state, p rovided that intangible property utilized in 13
marketing a good or service to a c onsumer is "used in this stat e" if that 14
good or service is purchased by a consumer who is in this state; and 15
(ii) that is sold, if and to the extent the property is used i n 16
this state, provided that: 17
(A) a contract right, gov ernment license, or similar 18
intangible property that authorizes the holder to conduct a 19
business activity in a specific geographic area is "used in this state" 20
if the geographic area includes all or part of this state; 21
(B) sales from intangible property sales that are 22
contingent on the productivity, use, or disposition of the inta ngible 23
property shall be treated as a sal e of the rental, lease, or li censing 24
of such intangible property under subsection (a)(4)(i); and 25
(C) all other sales of int angible property shall be 26
excluded from the numerator and denominator of the sales factor . 27
[: (a) THE INCOME-PRODUCING ACTIVITY IS PERFORMED IN 28
THIS STATE; OR] 29
(b) If the state or states of assignment under subsection (a) canno t be 30
determined, the state or states of assignment shall be reasonably approximated. 31
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(c) If the taxpayer is not taxab le in a state to which a sale is assigned 1
under subsection (a) or (b), or i f the state of assignment cann ot be determined 2
under subsection (a) or reasonably approximated under subsectio n (b), such a 3
sale shall be excluded from the denominator of the sales factor. 4
(d) The tax administrator may adopt regulation s as necessary o r 5
appropriate to carry out the purposes of this section [ T H E I N C O M E -6
PRODUCING ACTIVITY IS PERFORMED BOTH IN AND OUTSIDE THIS 7
STATE AND A GREATER PROPORTION OF THE INCOME-PRODUCING 8
ACTIVITY IS PERFORMED IN THIS STATE THAN IN ANY OTHER STATE, 9
BASED ON COSTS OF PERFORMANCE]. 10
18. If the allocation and apporti onment provisions of this Arti cle do not fairly 11
represent the extent of the taxpayer's business activity in thi s state, the taxpayer may 12
petition for or the tax administrator may require, in respect t o all or any part of the 13
taxpayer's business activity, if reasonable: 14
(a) separate accounting; 15
(b) the exclusion of any one or more of the factors; 16
(c) the inclusion of one or more additional factors which will fairly represent 17
the taxpayer's business activity in this state; or 18
(d) the employment of any other method to effectuate an equita ble allocation 19
and apportionment of the taxpayer's income. 20
ARTICLE V. 21
ELEMENTS OF SALES AND USE TAX LAWS. 22
TAX CREDIT. 23
1. Each purchaser liable for a use tax on tangible personal pro perty shall be 24
entitled to full credit for the combined amount or amounts of l egally imposed sales or 25
use taxes paid by the purchaser with respect to the same proper ty to another state and 26
any subdivision thereof. The credit shall be applied first agai nst the amount of any use 27
tax due the state, and any unused portion of the credit shall t hen be applied against the 28
amount of any use tax due a subdivision. 29
EXEMPTION CERTIFICATES, VENDORS MAY RELY. 30
2. Whenever a vendor receives and accepts in good faith from a purchaser a 31
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resale or other exemption certificate or other written evidence of exemption authorized 1
by the appropriate state or subdivision taxing authority, the vendor shall be relieved of 2
liability for a sales or use tax with respect to the transaction. 3
ARTICLE VI. 4
THE COMMISSION. 5
ORGANIZATION AND MANAGEMENT. 6
1.(a) The Multistate Tax Commission is hereby established. It s hall be 7
composed of one "member" from each party state who shall be the head of the state 8
agency charged with the administration of the types of taxes to which this compact 9
applies. If there is more than one such agency the state shall provide by law for the 10
selection of the commission member from the heads of the releva nt agencies. State 11
law may provide that a member o f the commission be represented by an alternate but 12
only if there is on file with the commission written notificati on of the designation and 13
identity of the alternate. The attorney general of each party s tate or the designee of the 14
attorney general, or other counsel if the laws of the party sta te specifically provide, 15
shall be entitled to attend the meetings of the commission, but shall not vote. Such 16
attorneys general, designees, or other counsel shall receive al l notices of meetings 17
required under paragraph 1(e) of this Article. 18
(b) Each party state shall provide by law for the selection of representatives 19
from its subdivisions affected by this compact to consult with the commission member 20
from that state. 21
(c) Each member shall be entitled to one vote. The commission shall not act 22
unless a majority of the members are present, and no action sha ll be binding unless 23
approved by a majority of the total number of members. 24
(d) The commission shall adopt an official seal to be used as it may provide. 25
(e) The commission shall hold an annual meeting and such other regular 26
meetings as its bylaws may provide and such special meetings as its executive 27
committee may determine. The commission bylaws shall specify th e dates of the 28
annual and any other regular mee tings, and shall provide for th e giving of notice of 29
annual, regular and special meetings. Notices of special meetin gs shall include the 30
reasons therefor and an agenda of the items to be considered. 31
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(f) The commission shall elect annually, from among its members, a chairman, 1
a vice-chairman and a treasurer . The commission shall appoint a n executive director 2
who shall serve at its pleasure, and it shall fix the duties an d compensation of the 3
executive director. The executive director shall be secretary o f the commission. The 4
commission shall make provision for the bonding of such of its officers and employees 5
as it may deem appropriate. 6
(g) Irrespective of the civil service, personnel or other meri t system laws of 7
any party state, the executive director shall appoint or discha rge such personnel as 8
may be necessary for the performance of the functions of the co mmission and shall fix 9
their duties and compensation. The commission bylaws shall prov ide for personnel 10
policies and programs. 11
(h) The commission may borrow, accept or contract for the serv ices of 12
personnel from any state, the United States, or any other governmental entity. 13
(i) The commission may accept for any of its purposes and func tions any and 14
all donations and grants of money, equipment, supplies, materia l s a n d s e r v i c e s , 15
conditional or otherwise, from any governmental entity, and may utilize and dispose 16
of the same. 17
(j) The commission may establish one or more offices for the t ransacting of its 18
business. 19
(k) The commission shall adopt b ylaws for the conduct of its b usiness. The 20
commission shall publish its bylaws in convenient form, and sha ll file a copy of the 21
bylaws and any amendments thereto with the appropriate agency o r officer in each of 22
the party states. 23
(l) The commission annually shall make to the governor and legis lature of 24
each party state a report covering its activities for the preceding year. Any donation or 25
grant accepted by the commission or services borrowed shall be reported in the annual 26
report of the commission, and sha ll include the nature, amount and conditions, if any, 27
of the donation, gift, grant or services borrowed and the ident ity of the donor or 28
lender. The commission may make additional reports as it may deem desirable. 29
COMMITTEES. 30
2.(a) To assist in the conduct of its business when the full co mmission is not 31
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meeting, the commission shall have an executive committee of se ven members, 1
including the chairman, vice-chairman, treasurer and four other members elected 2
annually by the commission. The executive committee, subject to the provisions of 3
this compact and consistent with the policies of the commission , shall function as 4
provided in the bylaws of the commission. 5
(b) The commission may establish advisory and technical commit tees, 6
membership on which may include private persons and public offi cials, in furthering 7
any of its activities. Such committees may consider any matter of concern to the 8
commission, including problems of s pecial interest to any party s t a t e a n d p r o b l e m s 9
dealing with particular types of taxes. 10
(c) The commission may establish such additional committees as its bylaws 11
may provide. 12
POWERS. 13
3. In addition to powers conferred elsewhere in this compact, t he commission 14
shall have power to: 15
(a) Study state and local tax systems and particular types of state and local 16
taxes. 17
(b) Develop and recommend proposals for an increase in uniform ity or 18
compatibility of state and local tax laws with a view toward en couraging the 19
simplification and improvement of state and local tax law and administration. 20
(c) Compile and publish information as in its judgment would a ssist the party 21
states in implementation of the compact and taxpayers in comply ing with state and 22
local tax laws. 23
(d) Do all things necessary and incidental to the administrati on of its functions 24
pursuant to this compact. 25
FINANCE. 26
4.(a) The commission shall submit to the governor or designated o f f i c e r o r 27
officers of each party state a budget of its estimated expendit ures for such period as 28
may be required by the laws of that state for presentation to the legislature thereof. 29
(b) Each of the commission's budgets of estimated expenditures shall contain 30
specific recommendations of the amounts to be appropriated by e ach of the party 31
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states. The total amount of appropriations requested under any such budget shall be 1
apportioned among the party states as follows: one-tenth in equ a l s h a r e s ; a n d t h e 2
remainder in proportion to the a mount of revenue collected by e ach party state and its 3
subdivisions from income taxes, capital stock taxes, gross receipts, taxes, sales and use 4
taxes. In determining such am ounts, the commission shall employ such available 5
public sources of information as, in its judgment, present the most equitable and 6
accurate comparisons among the party states. Each of the commis sion's budgets of 7
estimated expenditures and requests for appropriations shall in dicate the sources used 8
in obtaining information employed in applying the formula conta ined in this 9
paragraph. 10
(c) The commission shall not pledge the credit of any party st ate. The 11
commission may meet any of its obligations in whole or in part with funds available to 12
it under paragraph 1(i) of this A rticle: provided that the comm ission takes specific 13
action setting aside such funds prior to incurring any obligati on to be met in whole or 14
in part in such manner. Except where the commission makes use o f funds available to 15
it under paragraph 1(i), the commission shall not incur any obl igation prior to the 16
allotment of funds by the party states adequate to meet the same. 17
(d) The commission shall keep accurate accounts of all receipt s and 18
disbursements. The receipts and disbursements of the commission shall be subject to 19
the audit and accounting procedures established under its bylaw s. All receipts and 20
disbursements of funds handled b y the commission shall be audit ed yearly by a 21
certified or licensed public acc ountant and the report of the a udit shall be included in 22
and become part of the annual report of the commission. 23
(e) The accounts of the commissi on shall be open at any reason able time for 24
inspection by duly constituted officers of the party states and by any persons 25
authorized by the commission. 26
(f) Nothing contained in this Ar ticle shall be construed to pr event commission 27
compliance with laws relating to audit or inspection of accounts by or on behalf of any 28
government contributing to the support of the commission. 29
ARTICLE VII. 30
UNIFORM REGULATIONS AND FORMS. 31
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1. Whenever any two or more party states, or subdivisions of pa rty states, have 1
uniform or similar provisions of law relating to an income tax, capital stock tax, gross 2
receipts tax, sales or use tax, the commission may adopt unifor m regulations for any 3
phase of the administration of s uch law, including assertion of jurisdiction to tax, or 4
prescribing uniform tax forms. The commission may also act with r e s p e c t t o t h e 5
provisions of Article IV of this compact. 6
2. Prior to the adoption of any regulation, the commission shall: 7
(a) As provided in its bylaws, hold at least one public hearing on due notice to 8
all affected party states and subdivisions thereof and to all taxpayers and other persons 9
who have made timely request of the commission for advance noti ce of its regulation-10
making proceedings. 11
(b) Afford all affected party states and subdivisions and inte rested persons an 12
opportunity to submit relevant written data and views, which sh all be considered fully 13
by the commission. 14
3. The commission shall submit any regulations adopted by it to the 15
appropriate officials of all part y states and subdivisions to w hich they might apply. 16
Each such state and subdivision shall consider any such regulat ions for adoption in 17
accordance with its own laws and procedures. 18
ARTICLE VIII. 19
INTERSTATE AUDITS. 20
1. This Article shall be in force only in those party states th at specifically 21
provide therefor by statute. 22
2. Any party state or subdivision thereof desiring to make or p articipate in an 23
audit of any accounts, books, pape rs, records or other document s may request the 24
commission to perform the audit on its behalf. In responding to the request, the 25
commission shall have access to and may examine, at any reasona ble time, such 26
accounts, books, papers, records, and other documents and any r elevant property or 27
stock of merchandise. The commi ssion may enter into agreements with party states or 28
their subdivisions for assistance in performance of the audit. The commission shall 29
make charges, to be paid by the state or local government or go vernments for which it 30
performs the service, for any audits performed by it in order t o reimburse itself for the 31
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actual costs incurred in making the audit. 1
3. The commission may require the attendance of any person with in the state 2
where it is conducting an audit or part thereof at a time and p lace fixed by it within 3
such state for the purpose of giving testimony with respect to any account, book, 4
paper, document, other record, pr operty or stock of merchandise b e i n g e x a m i n e d i n 5
connection with the audit. If the person is not within the juri sdiction, the person may 6
be required to attend for such purpose at any time and place fi xed by the commission 7
within the state of which the person is a resident: provided th at such state has adopted 8
this Article. 9
4. The commission may apply to any court having power to issue compulsory 10
process for orders in aid of its powers and responsibilities pu rsuant to this Article and 11
any and all such courts shall ha ve jurisdiction to issue such o rders. Failure of any 12
person to obey any such order shall be punishable as contempt o f the issuing court. If 13
the party or subject matter on account of which the commission seeks an order is 14
within the jurisdiction of the c ourt to which application is ma de, such application may 15
be to a court in the state or subdivision on behalf of which the audit is being made or a 16
court in the state in which the object of the order being sough t is situated. The 17
provisions of this paragraph apply only to courts in a state th at has adopted this 18
Article. 19
5. The commission may decline to perform any audit requested if it finds that 20
its available personnel or other resources are insufficient for the purpose or that, in the 21
terms requested, the audit is impracticable of satisfactory per formance. If the 22
commission, on the basis of its experience, has reason to belie ve that an audit of a 23
particular taxpayer, either at a particular time or on a partic ular schedule, would be of 24
interest to a number of party states or their subdivisions, it may offer to make the audit 25
or audits, the offer to be contingent on sufficient participation therein as determined by 26
the commission. 27
6. Information obtained by any a udit pursuant to this Article s hall be 28
confidential and available only for tax purposes to party state s, their subdivisions or 29
the United States. Availability of information shall be in acco rdance with the laws of 30
the states or subdivisions on whose account the commission perf orms the audit, and 31
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only through the appropriate agencies or officers of such state s or subdivisions. 1
Nothing in this Article shall be construed to require any taxpa yer to keep records for 2
any period not otherwise required by law. 3
7. Other arrangements made or authorized pursuant to laws for c ooperative 4
audit by or on behalf of the party states or any of their subdi visions are not superseded 5
or invalidated by this Article. 6
8. In no event shall the commission make any charge against a t axpayer for an 7
audit. 8
9. As used in this Article, "tax ," in addition to the meaning a scribed to it in 9
A r t i c l e I I , m e a n s a n y t a x o r l i c e n s e f e e i m p o s e d i n w h o l e o r i n part for revenue 10
purposes. 11
ARTICLE IX. 12
ARBITRATION. 13
1. Whenever the commission finds a need for settling disputes c oncerning 14
apportionments and allocations b y arbitration, it may adopt a r egulation placing this 15
Article in effect, notwithstanding the provisions of Article VII. 16
2. The commission shall select and maintain an arbitration pane l composed of 17
officers and employees of state and local governments and priva te persons who shall 18
be knowledgeable and experienced in matters of tax law and administration. 19
3. Whenever a taxpayer who has elected to employ Article IV, or whenever the 20
laws of the party state or subdivision thereof are substantiall y identical with the 21
relevant provisions of Article IV, the taxpayer, by written not ice to the commission 22
and to each party state or subdivision thereof that would be af fected, may secure 23
arbitration of an apportionment or allocation, if the taxpayer is dissatisfied with the 24
final administrative determination of the tax agency of the sta te or subdivision with 25
respect thereto on the ground that it would subject the taxpaye r to double or multiple 26
taxation by two or more party s tates or subdivisions thereof. E a c h p a r t y s t a t e a n d 27
subdivision thereof hereby consents to the arbitration as provided herein, and agrees to 28
be bound thereby. 29
4. The arbitration board shall be composed of one person select ed by the 30
taxpayer, one by the agency or agencies involved, and one membe r of the 31
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commission's arbitration panel. I f the agencies involved are un able to agree on the 1
person to be selected by them, such person shall be selected by lot from the total 2
membership of the arbitration pa n e l . T h e t w o p e r s o n s s e l e c t e d for the board in the 3
manner provided by the foregoing provisions of this paragraph s hall jointly select the 4
third member of the board. If they are unable to agree on the s election, the third 5
member shall be selected by lot from among the total membership of the arbitration 6
panel. No member of a board selected by lot shall be qualified to serve if the member 7
is an officer or employee or is otherwise affiliated with any p arty to the arbitration 8
proceeding. Residence within the jurisdiction of a party to the arbitration proceeding 9
shall not constitute affiliation within the meaning of this paragraph. 10
5. The board may sit in any state or subdivision party to the p roceeding, in the 11
state of the taxpayer's incorpor ation, residence or domicile, i n any state where the 12
taxpayer does business, or in any place that it finds most appr opriate for gaining 13
access to evidence relevant to the matter before it. 14
6. The board shall give due notice of the times and places of i ts hearings. The 15
parties shall be entitled to be heard, to present evidence, and to examine and cross-16
examine witnesses. The board shall act by majority vote. 17
7. The board shall have power to administer oaths, take testimo ny, subpoena 18
and require the attendance of witnesses and the production of accounts, books, papers, 19
records, and other documents, and issue commissions to take tes timony. Subpoenas 20
may be signed by any member of the board. In case of failure to obey a subpoena, and 21
upon application by the board, an y judge of a court of competen t jurisdiction of the 22
state in which the board is sitting or in which the person to w hom the subpoena is 23
directed may be found may make an order requiring compliance wi th the subpoena, 24
and the court may punish failure to obey the order as a contemp t. The provisions of 25
this paragraph apply only in states that have adopted this Article. 26
8. Unless the parties otherwise agree the expenses and other co sts of the 27
arbitration shall be assessed and allocated among the parties b y the board in such 28
manner as it may determine. The commission shall fix a schedule of compensation for 29
members of arbitration boards a nd of other allowable expenses a nd costs. No officer 30
or employee of a state or local government who serves as a member of a board shall be 31
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entitled to compensation therefor unless the member is required on account of the 1
service as a board member to forego the regular compensation at taching to the public 2
employment, but any such board member shall be entitled to expenses. 3
9. The board shall determine the disputed apportionment or allo cation and any 4
matters necessary thereto. The determinations of the board shal l be final for purposes 5
of making the apportionment or allocation, but for no other purpose. 6
10. The board shall file with the commission and with each tax agency 7
represented in the proceeding: t he determination of the board; the board's written 8
statement of its reasons therefor; the record of the board's pr oceedings; and any other 9
documents required by the arbitration rules of the commission to be filed. 10
11. The commission shall publish the determinations of boards t ogether with 11
the statements of the reasons therefor. 12
12. The commission shall adopt and publish rules of procedure a nd practice 13
and shall file a copy of such ru les and of any amendment theret o with the appropriate 14
agency or officer in each of the party states. 15
13. Nothing contained herein shall prevent at any time a written compromise of 16
any matter or matters in dispute, if otherwise lawful, by the p arties to the arbitration 17
proceedings. 18
ARTICLE X. 19
ENTRY INTO FORCE AND WITHDRAWAL. 20
1. This compact shall enter into force when enacted into law by a n y s e v e n 21
states. Thereafter, this compact shall become effective as to a ny other state upon its 22
enactment thereof. The commission shall arrange for notificatio n of all party states 23
whenever there is a new enactment of the compact. 24
2. Any party state may withdraw from this compact by enacting a statute 25
repealing the same. No withdrawal shall affect any liability al ready incurred by or 26
chargeable to a party state prior to the time of such withdrawal. 27
3. No proceeding commenced before an arbitration board prior to the 28
withdrawal of a state and to which the withdrawing state or any subdivision thereof is 29
a party shall be discontinued or terminated by the withdrawal, nor shall the board 30
thereby lose jurisdiction over any of the parties to the procee ding necessary to make a 31
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binding determination therein. 1
ARTICLE XI. 2
EFFECT ON OTHER LAWS AND JURISDICTION. 3
Nothing in this compact shall be construed to: 4
(a) Affect the power of any state or subdivision thereof to fix rates of taxation, 5
except that a party state shall be obligated to implement Article III 2 of this compact. 6
( b ) A p p l y t o a n y t a x o r f i x e d f e e i m p o s e d f o r t h e r e g i s t r a t i o n of a motor 7
vehicle or any tax on motor fuel , other than a sales tax: provi ded that the definition of 8
"tax" in Article VIII 9 may apply for the purposes of that Arti cle and the commission's 9
powers of study and recommendation pursuant to Article VI 3 may apply. 10
(c) Withdraw or limit the jurisdiction of any state or local c ourt or 11
administrative officer or body with respect to any person, corp oration or other entity 12
or subject matter, except to the extent that such jurisdiction is expressly conferred by 13
or pursuant to this compact upon another agency or body. 14
(d) Supersede or limit the jurisdiction of any court of the United States. 15
ARTICLE XII. 16
CONSTRUCTION AND SEVERABILITY. 17
This compact shall be liberally construed so as to effectuate t he purposes 18
thereof. The provisions of this c ompact shall be severable and if any phrase, clause, 19
sentence, or provision of this co mpact is declared to be contra ry to the constitution of 20
any state or of the United States or the applicability thereof to any government, 21
agency, person or circumstance is held invalid, the validity of the remainder of this 22
compact and the applicability thereof to any government, agency , person or 23
circumstance shall not be affected thereby. If this compact shall be held contrary to the 24
constitution of any state participating therein, the compact sh all remain in full force 25
and effect as to the remaining party states and in full force a nd effect as to the state 26
affected as to all severable matters. 27
* Sec. 2. AS 43.20.143(a) is amended to read: 28
(a) All apportionable [BUSINESS] income of water transportation carriers 29
shall be apportioned to this state in accordance with AS 43.19 (Multistate Tax 30
Compact) as modified by the following: 31
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(1) the numerator of the property factor is the sum of the val ue for 1
property in a fixed location, including buildings and land used in the business, and 2
intrastate equipment and personal property determined according to AS 43.19 3
(Multistate Tax Compact), and the value of interstate mobile pr operty determined on a 4
days-spent-in-ports basis as provided in (4) of this subsection ; the denominator of the 5
property factor is determined according to AS 43.19 (Multistate Tax Compact); 6
(2) the numerator of the payroll factor is the sum of the wage s and 7
salaries of employees assigned to fixed locations determined ac cording to AS 43.19 8
(Multistate Tax Compact) and the wages and salaries of employee s assigned to 9
interstate mobile property determined on a days-spent-in-ports basis as provided in (4) 10
of this subsection; the denominator of the payroll factor is de termined in accordance 11
with AS 43.19 (Multistate Tax Compact); 12
(3) the numerator of the sales factor is the sum of all revenu es from 13
intrastate activities and revenues from interstate activities d etermined on a days-spent-14
in-ports basis as provided in ( 4) of this subsection; the denom inator is determined in 15
accordance with AS 43.19 (Multistate Tax Compact); 16
(4) the portions of the numerator of the property, payroll, an d sales 17
factors which are directly related to interstate mobile propert y operations are 18
determined by a ratio which the number of days spent in ports i nside the state bears to 19
the total number of days spent in ports inside and outside the s t a t e ; t h e t e r m " d a y s 20
spent in ports" does not include periods when ships are tied up because of strikes or 21
withheld from Alaska service for repairs, or because of seasona l reduction of service; 22
days in port are computed by dividing the total number of hours in all ports by 24. 23
* Sec. 3. AS 43.20.144(a) is amended to read: 24
(a) All apportionable [BUSINESS] income of a taxpayer engaged in the 25
production of oil or gas from a lease or property in this state or engaged in the 26
transportation of oil or gas by pipeline in this state shall be apportioned to this state in 27
accordance with AS 43.19 (Multistate Tax Compact) as modified by this section. 28
* Sec. 4. AS 43.20.144(b) is amended to read: 29
(b) A taxpayer's apportionable [BUSINESS] income to be apportioned under 30
t h i s s e c t i o n t o t h e s t a t e s h a l l b e t h e f e d e r a l t a x a b l e i n c o m e of the taxpayer's 31
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consolidated business for the tax period, except that 1
(1) taxes based on or measured by net income that are deducted in the 2
determination of the federal taxable income shall be added back ; the tax levied and 3
paid under AS 43.55 may not be added back; 4
(2) intangible drilling and development costs that are deducte d as 5
expenses under 26 U.S.C. 263(c) (Internal Revenue Code) in the determination of the 6
federal taxable income shall be capitalized and depreciated as if the option to treat 7
them as expenses under 26 U.S.C. 263(c) (Internal Revenue Code) h a d n o t b e e n 8
exercised; 9
(3) depletion deducted on the pe rcentage depletion basis under 2 6 10
U.S.C. 613 (Internal Revenue Code) in the determination of the federal taxable income 11
shall be recomputed and deducte d on the cost depletion basis un der 26 U.S.C. 612 12
(Internal Revenue Code); and 13
(4) depreciation shall be computed on the basis of 26 U.S.C. 1 67 14
(Internal Revenue Code) as that section read on June 30, 1981. 15
* Sec. 5. AS 43.20.144(c) is amended to read: 16
(c) A taxpayer's apportionable [BUSINESS] income shall be apportioned to 17
this state by multiplying the ta xpayer's income determined under (b) of this section by 18
the apportionment factor applicable to the taxpayer among the following factors: 19
(1) the apportionment factor of a taxpayer subject to this sec tion but 20
not engaged in the production of oil and gas, or of gas only, a s appropriate, from a 21
lease or property in this state during the tax period is a frac tion, the numerator of 22
which is the sum of the property factor under AS 43.19 (Multist ate Tax Compact) and 23
the sales factor under (d) of this section for the taxpayer for that tax period, and the 24
denominator of which is two; 25
(2) the apportionment factor of a taxpayer subject to this sec tion but 26
not engaged in the pipeline transportation of oil or gas in thi s state during the tax 27
period is a fraction, the numerato r of which is the sum of the property factor under (e) 28
of this section and the extraction factor under (f) of this section for the taxpayer for the 29
tax period, and the denominator of which is two; 30
(3) the apportionment factor of a taxpayer engaged both in the 31
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production of oil or gas from a lease or property in this state and in the pipeline 1
transportation of oil or gas in this state during the tax perio d is a fraction, the 2
numerator of which is the sum of the sales factor under (d) of this section, the property 3
factor under (e) of this section, and the extraction factor und er (f) of this section for 4
the taxpayer for the tax period, and the denominator of which is three. 5
* Sec. 6. AS 43.20.145(e) is amended to read: 6
(e) The department may require a corporation that files under (a) of this 7
section to file a report under AS 43.20.142, [AND] 43.20.143, and 43.20.148 prepared 8
without regard to this section if the corporation or an affiliated corporation 9
(1) fails to comply with regulations adopted under this chapte r, 10
including domestic disclosure spread sheet filing requirements; or 11
(2) does not provide informati on that is requested by the depa rtment 12
that is necessary for the department to audit the taxpayer's co rporate return in a 13
reasonable period of time. 14
* Sec. 7. AS 43.20 is amended by adding a new section to article 2 to read: 15
Sec. 43.20.148. Highly digitized businesses. (a) All apportionable income of a 16
taxpayer engaged in a highly digitized business in the state sh all be apportioned to this 17
state in accordance with AS 43.19 (Multistate Tax Compact) as m odified by this 18
section. 19
(b) The apportionment factor of a taxpayer subject to this sec tion is the sales 20
factor. The sales factor is determined in accordance with AS 43 .19 (Multistate Tax 21
Compact). 22
(c) A taxpayer is engaged in a highly digitized business in th is state when 50 23
percent or more of the taxpayer's sales in this state consist o f any combination of sales 24
of 25
(1) intangible property deliver ed by electronic transmission i n this 26
state; 27
(2) services delivered by electronic transmission in this state; 28
(3) services related to computer s, electronic transmissions, o r Internet 29
technology delivered in this state; or 30
(4) tangible personal property delivered in this state from In ternet 31
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sales, if the Internet is the primary mode of customer access in this state. 1
(d) The department may require a taxpayer to apportion income under this 2
section if the department determines that the taxpayer's busine ss activity in this state 3
may be otherwise characterized as a highly digitized business. 4
(e) This section does not apply to a 5
(1) public utility allocating a nd apportioning income under 6
AS 43.20.146; or 7
(2) utility furnishing telecommunications services. 8
(f) In this section, 9
(1) "delivered" includes delivered to or on behalf of a custom er or 10
delivered through a customer; 11
(2) "electronic transmission" i ncludes transmission by wire, l ines, 12
cable, fiber optics, electronic signals, satellite transmission , audio or radio waves, or 13
similar means, whether or not the provider owns, leases, or oth erwise controls the 14
transmission equipment; 15
(3) "intangible property" includes licenses and sublicenses fo r data 16
access, streaming or other electronic transmission of music, vi deos, books, games, or 17
other digital goods, and remote access software; 18
(4) "Internet sales" includes sales through an Internet websit e, 19
application, or other electronic means, including sales made by computer, tablet, 20
telephone, or other similar device. 21
* Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to 22
read: 23
APPLICABILITY. AS 43.20.148, added by sec. 7 of this Act, appli es to a taxpayer 24
that is filing a return for a tax year beginning on or after January 1, 2026. 25
* Sec. 9. This Act takes effect January 1, 2026. 26