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Corporate tax break bill moves in House

House Bill 68 restructures tax brackets for small, medium corporations

Posted: February 21, 2013 - 1:16am

A bill written to reduce state corporate taxes for certain small- and medium-sized businesses moved out of House Labor and Commerce Committee on Thursday.

House Bill 68 Corporate Income Tax is sponsored by Rep. Shelley Hughes, R-Palmer. She presented her bill to the House Committee on Labor and Commerce.

If passed, the bill would change the ranges of the state’s 10 corporate tax brackets for type C corporations — the change would not affect limited liability corporations or S corporations.

“We have about 5,000 C corps that this would apply to,” Hughes said.

C corporations were the only option for incorporating in Alaska up to 1980. All of the 5,000 C corporations that could benefit from this tax were incorporated before then. C corporations include mom-and-pop restaurants, airlines, retailers and tourism companies.

Currently the highest tax bracket for C corps at 9.5 percent kicks in at $90,000 in tax income. The bill would move this top tax bracket to corporate incomes over $222,000. The bottom tax bracket of 1 percent was moved up from incomes of less than $10,000 to incomes of less than $25,000.

“Basically it expands the brackets,” Hughes said.

Higher income companies would save larger dollar amounts while lower income corporations would save a larger percent of taxable income.

An Alaskan company making $550,000 currently pays about $47,000 in taxes, Hughes said as an example. A smaller company making $45,000 pays $1,250, she said.

Under the new tax structure the former company saves about $6,000, Hughes said. The latter business “would pay about half that.”

Though the bill has a zero fiscal note — it does not require the state to hire new employees, etc. — it is expected to cut $3.8 million from state tax revenues.

Hughes said she adheres to the conservative belief that lower taxes help businesses grow, resulting eventually in larger tax revenues for the state.

“Hopefully we would have more taxes with,” Hughes said.

The state needs to tighten its belt anyway, Hughes said. She said legislators should be able to find the lost revenue in state’s budget.

Hughes said, “$3.8 million in the overall state budget is quite small and doable.”

House Bill 68 was moved out of committee without amendment or objection. It is also referred to the House Finance Committee. Sen. Cathy Giessel, R-Anchorage, introduced a companion bill, Senate Bill 7 Corporate Income Tax. Juneau Sen. Dennis Egan added his name in support of the bill. SB 7 is scheduled to be heard in Senate Finance Committee today, Feb. 21 at 9:30 a.m. in room 532.

• Contact reporter Russell Stigall at 523-2276 or at russell.stigall@juneauempire.com.

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