Committee opens hearing on HB 280, a market-based sourcing and 'highly digitized' apportionment bill

The House Finance Committee received a presentation and opened questions on House Bill 280 on Feb. 13, a proposal to update corporate apportionment rules for Alaska in the digital economy.

Bridal Anderson, staff to Representative Neil Foster, introduced HB 280 and said the bill has two reforms: adopting market-based sourcing for the Multistate Tax Compact portion of Alaska law and creating a single-sales apportionment method for "highly digitized" businesses in state corporate income tax. Anderson told the committee the proposal is substantially similar to components of a prior vetoed measure (Senate Bill 113) and does not change corporate tax rates or brackets.

Under the bill, a business would be "highly digitized" if 50% or more of its Alaska sales are from: tangible property purchased by internet, intangible property delivered electronically, or services delivered electronically (services related to computing/electronic transmission). For those businesses the apportionment would be a single-sales factor; traditional brick-and-mortar and other businesses would continue to use Alaska's existing three-factor apportionment (sales, property, payroll).

Michael Williams, corporate tax manager at the Alaska Department of Revenue, said departmental modeling suggests market-based sourcing could yield roughly $15 million in net revenue while the highly digitized component could contribute around $50 million (ranges emphasized). "Market based sourcing probably is about a $15,000,000 net revenue impact, and then the, highly digitized component has roughly about a another $50,000,000," he said.

Members asked detailed implementation questions. Topics included whether the 50% threshold could create incentives for tax planning; how companies with a small Alaska physical footprint (for example, an Amazon distribution center) would be treated; whether companies would stop shipping to Alaska or pass tax costs to consumers; and the time needed for the Department of Revenue to draft implementing regulations. Anderson and Williams said further analysis and follow-up would be provided on company-level impacts, regulatory timelines, and modeling assumptions.

Anderson also alerted members that sections 8 and 9 address transition and include a retroactive clause (section 9) establishing an effective date of Jan. 1, 2026, a point several members flagged as complicating implementation and enforcement. Williams noted the Multistate Tax Commission has model regulations for market-based sourcing that could be adapted but agreed that administrative work would be needed if the committee advances the bill.

The department's fiscal-note range discussed in the hearing (roughly $25 million to $65 million) was reiterated in committee Q&A and remains the working estimate; committee staff said more detailed modeling and examples would be provided to members as the bill moves forward. The hearing concluded with the committee signaling more questions and follow-up would be accepted as staff and DOR prepare supplemental materials.