Legislation sponsors say Senate Bill 7 brings certain corporate tax brackets in line with inflation; the bill is in its final reading on the Senate floor. Senators could cast votes on the bill as early as Friday.
SB 7 is sponsored by Sen. Giessel, R-Anchorage, and supported by Southeast Sen. Dennis Egan, D-Juneau. The companion House Bill 68 is sponsored by Reps. Shelley Hughes, R-Palmer, and Scott Kawasaki, D-Fairbanks. The two bills have moved through their respective bodies without remarkable opposition. On its first reading on the Senate floor, Sen. Bill Wielechowski, D-Anchorage, introduced two amendments to SB 7 — one successful and one not. An attempt to shrink the number of tax brackets for Alaska’s C corporations from the current 10 down to five was unsuccessful.
Approximately 5,000 type C corporations are registered in Alaska. The legislation would not affect limited liability corporations or type S corporations.
Higher income companies would save larger dollar amounts while lower income corporations would save a larger percent of taxable income, according to bill sponsors.
An Alaska company making $550,000 currently pays about $47,000 in taxes while a smaller company making $45,000 pays about $1,250. Under the new tax structure, the former company saves about $6,000 and the latter cuts its tax burden in half.
Though the bill has a zero fiscal note — it does not require the state to hire new employees, etc. — though it is expected to cut $3.8 million from the state tax revenue. Of this, about $100,000 in savings would go to oil and gas companies.
Juneau’s Chamber of Commerce submitted letters of support for HB 68 and SB 7.
“It is a clean up bill,” Cathie Roemmich CEO of the Juneau Chamber of Commerce said. Tax brackets for C corporations haven’t changed since the early 1980s. “That is the perfect job that the chamber should be doing for business. The chambers are the guardians of our business communities. Any time we see, especially small to medium businesses, (paying) more than they should have to pay … we just want them to get a fair shake.”
Roemmich said easing the tax burden might encourage new, younger businesses to open up.
“And they’ll save quite a bit,” Roemmich said.
Roemmich said the chamber relies on the deep bench of its board of directors.
“We have incredible accountant firms in Juneau that are on the [Chamber] board,” Roemmich said. “We have an incredible network on the chamber board.”
Max Mertz, principle at Elgee Rehfeld Mertz, is a member of the chamber board.
Mertz said the legislation make sense.
“The increase in thresholds are really inflation adjustments since the statute was last adjusted in, I believe, the 1980s,” Mertz said in a recent email interview.
Up until 1980 small businesses had one option to incorporate and pay taxes in the state — Subchapter C of the Internal Revenue Code.
S corporations and LLCs do not pay corporate income tax in Alaska. C corporations do.
“So, from this standpoint it is advantageous to be formed under S or as an LLC,” Mertz said. “By adjusting the thresholds under the proposed bills the legislature is bringing tax relief to those businesses.”
Senate Bill 7 is scheduled to be heard on the Senate floor at 10 a.m. March 1.
• Contact reporter Russell Stigall at 523-2276 or at email@example.com