Alaska House Passes Corporate Tax Update

The Alaska House of Representatives narrowly approved a revised version of a corporate tax bill on Wednesday. The vote was 22-17, falling short of the veto-proof majority needed to override potential opposition from Governor Mike Dunleavy.

What the Bill Changes

The legislation focuses on updating the state’s corporate income tax system through a method called market-based sourcing. This approach calculates taxes based on where the customer is located, rather than the company’s physical location. The aim is to capture more revenue from companies selling goods and services to Alaskans online.

Reallocating Existing Tax Revenue

Rep. Calvin Schrage, an Anchorage independent, explained that the bill doesn’t create new taxes. Instead, it reallocates taxes companies are already paying to their home states to Alaska, recognizing that the business activity is occurring within the state. “That business is taking place here. We should recognize that the business activity is taking place here, and we should get our fair share of that corporate income tax,” Schrage stated.

Revenue Projections and Impact

Supporters of the bill believe it will have minimal impact on Alaska-based businesses. The anticipated revenue will come from out-of-state C corporations. While the exact amount is uncertain, the Department of Revenue previously estimated a similar proposal could generate approximately $15 million annually.

Governor’s Opposition Remains

Governor Mike Dunleavy continues to oppose the bill, according to his spokesperson, Jeff Turner. Turner emphasized the need for a “complete and durable fiscal plan,” stating, “Alaska needs a complete and durable fiscal plan. Not just additional taxes.”

Veto-Proof Majority Unlikely

Achieving a veto-proof majority – requiring a three-quarters supermajority in both chambers – appears unlikely. House Minority Leader DeLena Johnson, a Palmer Republican, indicated her caucus generally aligns with the governor’s position, advocating for a comprehensive fiscal plan before implementing new taxes. “The idea is, if we're going to implement a tax … we need to have a fiscal plan,” she said.

Next Steps: Senate Consideration

The bill now moves to the Senate, which previously supported a similar measure last year. Rep. Schrage expressed hope for increased bipartisan support as the bill progresses towards the governor’s desk. Legislators had previously considered a similar tax change as part of a broader package of bills earlier this year, including a statewide sales tax and adjustments to the Permanent Fund dividend.