Jon Iversen Discusses Alaska’s Proposed 2025 Budget and Ongoing Tax Tug of War

In his most recent column for State Tax Notes, tax partner Jonathan Iversen looks at Alaska Governor Mike Dunleavy’s proposed fiscal 2025 budget, which he introduced on December 14, 2023, and at a variety of tax bills from the state’s first regular legislative session that have carried over for consideration in the second regular session, which started on January 16, 2024.

Based on Department of Revenue forecasts of oil prices and production, the governor’s budget of $13.9 billion would lead to a $987 million shortfall, which would need to be covered by withdrawals from state savings accounts. Though DOR predicts higher per-barrel oil prices in fiscal years 2024 and 2025 than it did for fiscal year 2023, the department forecasts that daily oil production will be lower in fiscal years 2024 and 2025 in comparison to its spring 2023 forecast.

Bills the legislature is reconsidering include:

• H.B. 84 and S.B. 77: Would allow municipalities to fully exempt economic development properties from property taxes and to levy a tax on blighted properties of up to 50% of the property’s assessed value.
• H.B. 142: Would impose a 2% tax on all sales of goods and services purchased in Alaska and allow the legislature to share half of the tax revenue with municipalities meeting specific criteria.
• H.B. 156: Would impose an income tax of 2% of an individual’s taxable income over $200,000 on the income of resident and nonresident individuals, trusts, and estates on income derived from or connected with a source in the state.
• H.B. 176 and S.B. 89: Would establish a sales tax on electronic smoking products of 25% of the retail sales price.

Iversen notes that Alaska is nearing its goal of fulfilling its credit payment obligations for rebatable tax credits: “…the total amount of credits purchased by the state in fiscal 2024 was $22.7 million, which at long last took care of all but one potential credit payment obligation. The remaining one is the result of a DOR audit that is now on appeal to the Alaska Supreme Court.”

The full article can be read at: https://www.stoel.com/media/publication/30_2024tns3-Iversen.pdf