Alaska bill would tax oil income, wages, and production

Certain oil and gas businesses would pay state tax on income from Alaska production or pipeline transport. It covers sole proprietors, partnerships, limited liability companies, and certain entities that elected federal S corporation tax treatment, when their income comes from oil or gas produced or transported by pipeline in Alaska. The tax does not apply to corporations already subject to Alaska corporate income tax or entities in the same business group with those corporations. Rates range from zero below $1 million in taxable income to 9.4 percent on income above $5 million. Most federal tax credits and deductions cannot reduce this tax. The tax applies to tax years beginning on or after January 1, 2026. The tax provisions would take effect immediately if enacted and apply back to that date.

Workers would pay a yearly education tax, with employers withholding the tax from wages and self-employed people paying it directly. It covers resident individuals and nonresidents or part-year residents with income from an Alaska source. The tax is $20, $30, $40, or $60 a year, based on wages and self-employment earnings. Residents are taxed on their total earnings; nonresidents and part-year residents are taxed on Alaska-source earnings. Employers withhold the estimated tax from later-year paychecks. Legislative intent is that lawmakers set aside the proceeds for public education each year. The tax provisions would take effect immediately if enacted and apply back to January 1, 2026. Any balance for a tax year ending before January 1, 2027, would be due by January 1, 2027.

Oil producers would pay a 15-cent surcharge for each taxable barrel produced in Alaska. It covers oil producers and oil from Alaska leases or properties, except oil exempt from tax. The surcharge is on top of other oil taxes and surcharges, and tax credits cannot reduce it. The money would go to the general fund. Legislative intent is that lawmakers set it aside each year for state upkeep and operations along the pipeline corridor. The surcharge would take effect January 1, 2027. Payment would be due on the last day of each month for oil produced in the prior month.

Certain businesses would use Alaska sales alone to divide their income for state tax purposes. It covers taxpayers with Alaska sales that meet the bill's test for a highly digitized business. The rule applies when at least half of a taxpayer's Alaska sales are in specified digital goods, electronically delivered services, technology services, or certain internet sales. The Department of Revenue may require this method if it determines that a business may otherwise qualify. Public utilities and telecommunications providers are excluded. The rule would apply to tax returns for tax years beginning on or after January 1, 2026. The section would take effect January 1, 2027.