House Finance panel adopts substitute for HB 280, removes 'highly digitized' tax and sets Jan. 1, 2027 effective date

Juneau — The Alaska House Finance Committee adopted a committee substitute for House Bill 280 on March 19, removing the portions of the draft that would have created a "highly digitized" business tax and instead keeping a market-based sourcing provision aligned with the multistate compact.

"This version of the bill takes it back to just the market-based sourcing component," Brody Anderson, staff to Cochair Foster, told the committee as he reviewed the work draft. Anderson said the CS removes all portions referencing the highly digitized business tax and also eliminates the bill's retroactive application: "The tax will no longer be retroactive. And the new effective date is 01/01/2027."

Why it matters: the removal narrows the bill's scope and cuts the Department of Revenue's midpoint fiscal estimate in half. "The previous fiscal note ... estimated 30,000,000," Anderson said; with the highly digitized component removed, "the fiscal impact would now be at a maximum of an estimated 15,000,000." Dan Stickel, chief economist with the Department of Revenue, told the panel, "I think we'd still be looking at the $15,000,000 per year, for our fiscal note."

Committee members asked how the change would affect existing taxpayers. Representative Scott asked whether higher collections in the spring revenue forecast would alter the expected impact on corporate taxpayers. Stickel said the spring forecast would not likely change the estimate, and explained that "switching to the market-based sourcing ... is going to increase the sales allocated to Alaska and, therefore, the corporate income tax for some companies ... largely who are based outside of Alaska and selling certain goods and services into Alaska." He added that the shift tends to "put Alaska's companies on a little bit more of an even playing field."

On implementation, Michael Williams, corporate income tax manager at the Department of Revenue, told members there is adequate time to write regulations ahead of the Jan. 1, 2027 effective date: "That is plenty of time for the department to develop regulations, error model MPC regulations for market based sourcing."

Committee process and next steps: Representative Josephson moved to adopt the committee substitute work draft (34 LS1349 I dated 03/12/26) as the committee's working document; Cochair Foster removed his procedural objection during the meeting, and the CS became the working document. Foster set an amendment deadline of Tuesday, March 24 at 5 p.m., asking members to submit amendments to Alan Phillips or to Anderson's office. The panel adjourned at 9:31 a.m.; it is scheduled to reconvene at 1:30 p.m. the same day for a presentation from the Alaska Energy Authority and a first hearing on House Bill 210 (the Peace Officers and Firefighters Disability Bill).

What was not decided: Anderson told the committee that industry-recommended changes from telecommunications firms, the Motion Picture Association and bankers were not incorporated into this CS because members had not reached consensus; he said individual representatives could file amendments to address those concerns. The Department of Revenue's fiscal note remains the committee's chief source for estimated revenue impact; Anderson said the department does not always issue an updated fiscal note until a bill moves from committee, though staff can request a courtesy update.

The committee will consider any filed amendments by the March 24 deadline; the CS as adopted would take effect Jan. 1, 2027 if enacted.